SAMCO FUND INC, 485APOS, 2000-10-10

SAMCO FUND INC
485APOS, 2000-10-10

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<PAGE>

As filed with the Securities and Exchange Commission on
OCTOBER 10, 2000
FILE NOS. 333-33365, 811-8323
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. 8 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. _11_ [X]
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SAMCO FUNDS, INC.
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(Exact name of registrant as specified in charter)

200 Clarendon Street
Boston, MA 02116, 9130
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(Address of principal executive offices)
Registrant's telephone number: 800-247-0473
Christina Seix
Seix Investment Advisors Inc.
300 Tice Boulevard
Woodcliff Lake, NJ 07675-7633
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(Name and address of agent for service)
With a copy to:
Jack Murphy, Esq.
Dechert Price & Rhoads
1775 Eye Street,
N.W., Washington, D.C. 20006-2401

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Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.

It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/ / On ___________, pursuant to paragraph (b)
/ / 60 days after filing, pursuant to paragraph (a)(1)
/ / On ____, pursuant to paragraph (a) (1)
/ / 75 days after filing, pursuant to paragraph (a) (2)
/X/ On December 28, 2000, pursuant to paragraph (a) (2) of Rule 485.

<PAGE>

SAMCO FUNDS, INC.

SAMCO HIGH YIELD FUND CLASS A SHARES

The SAMCO High Yield Fund (the "Portfolio") is a diversified investment
portfolio of SAMCO Funds, Inc. (the "Fund"), an open-end management investment
company.

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 DECEMBER 28, 2000.

<PAGE>

TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
RISK/RETURN SUMMARY 1
PRINCIPAL INVESTMENT RISKS 2
RISK/RETURN SUMMARY: FEE TABLE 3
FUND MANAGEMENT 4
PURCHASE OF SHARES 5
REDEMPTION OF SHARES 5
ADDITIONAL INFORMATION 6
APPENDIX A: DESCRIPTION OF INVESTMENTS 8
</TABLE>

<PAGE>

RISK/RETURN SUMMARY

The following is a summary of certain key information about the Portfolio,
including investment objectives, principal investment strategies and principal
investment risks. A more detailed description of certain allowable investments
is included in Appendix A.

INVESTMENT OBJECTIVES: The Portfolio's investment objective is to provide
investors with a high income and, secondarily, capital appreciation. The
performance goal is to outperform the Merrill Lynch High Yield Index. The
Portfolio's investment objectives may be changed without shareholder approval.

PRINCIPAL INVESTMENT STRATEGIES: The Portfolio seeks to achieve its objective
primarily through investment in various types of lower rated, higher yielding
bonds. At least 65% of total assets will be invested in the broad universe of
available United States dollar denominated high yield corporate securities.
Although the Portfolio seeks to achieve its investment objective primarily
through investment in high yield corporate securities, the Portfolio may invest
up to 35% of its total assets in high yield mortgage back securities and
investment grade securities.

INVESTMENT MANAGEMENT APPROACH: Due to the complexity of the high yield
bond market, Seix Investment Advisors Inc. (the "Investment Adviser") uses
multiple systems and analytics which it developed internally, to attempt to
identify value and adequately control risk. The Investment Adviser will
manage the Portfolio based upon the following criteria:

PORTFOLIO CONSTRUCTION: In deciding which securities to buy and sell, the
portfolio managers will emphasize securities, which are within a targeted
segment of the high yield market (BB/B). The Portfolio's construction is
generally determined through a research driven process designed to identify
value areas within the high yield market. The portfolio managers will focus
on the following:
- industries with strong fundamentals
- companies with good business prospects and gaining credit strength
- companies with stable or growing free cash flows and effective
management

DURATION/MATURITY: Duration measures the expected life of a debt security
on a present value basis. In general, duration rises with maturity,
therefore the greater the duration of a bond, the greater its percentage
volatility. The Portfolio will be managed with a duration that is close to
the duration of the Merrill Lynch High Yield Index, which is generally
between three to six years.

CREDIT QUALITY: The Portfolio normally invests at least 65% of total assets in
U.S. high yield bonds (commonly known as junk bonds), which are those below the
fourth credit grade (i.e., securities rated below BBB by Standard & Poor's
Corporation (S&P) and below Baa by Moody's Investors Service, Inc. (Moody's). If
the security is unrated, it must meet, in the judgment of the Investment
Adviser, comparable credit quality standards.

PRINCIPAL INVESTMENTS: The Portfolio will invest at least 65% of its total
assets in high yield debt obligations of domestic corporations or other
entities.

OTHER INVESTMENTS: The Portfolio may invest up to 35% of its total assets in
non-high yield securities such as investment grade bonds, obligations issued or
guaranteed by the United States Government, obligations of domestic banks,
obligations backed by the full faith and credit of the United States,
obligations issued or guaranteed by United States Government Agencies, and
Government-Sponsored Enterprises (GSE's), Asset backed Securities (ABS),
Mortgage Backed Securities (MBS) or instrumentalities where the Portfolio must
look principally to the issuing or guaranteeing agency for ultimate repayment.

The Portfolio may take a temporary defensive position that departs from its
principal investment strategies in response to adverse market, economic,
political or other conditions. During these times, the Portfolio may not be
actively pursuing its investment goals or achieving its investment objectives
and may have up to 100% of its assets in U.S. Treasuries, Agencies, investment
grade securities or cash.

<PAGE>

PRINCIPAL INVESTMENT RISKS

A loss of money on your investment in the Portfolio, or the
under-performance of the Portfolio relative to other investments could occur due
to certain risks. In general, the greater the risk, the greater the possibility
of losing money. The possibility exists that the investment decisions made by
the portfolio managers of the Portfolio will not accomplish what they are
designed to achieve. No assurance can be given that the Portfolio's investment
objective will be achieved. For more information about these and other types of
investments and risks to the Fund, see the Statement of Additional Information.

The principal risks associated with the Portfolio's investment policies and
strategies are as follows:

HIGH YIELD Debt securities that are rated below the four highest categories
SECURITIES (or unrated securities of comparable quality determined by the
RISK: Investment Adviser) are known as High Yield bonds or junk bonds.
High Yield bonds are considered to be predominantly speculative
with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations.
Accordingly, they present considerable risk of issuer default.
High Yield bonds may also be subject to substantial market
fluctuations and may be less liquid, than securities in the
higher rating categories. They are subject to greater risk of
loss of income and principal than investment grade securities.

CREDIT Debt securities are subject to credit risk. Credit risk is the
RISK: possibility that an issuer will fail to make timely payments of
interest or principal. The lower the ratings of such debt
securities, the greater their risks. In addition, lower rated
securities have higher risk characteristics and changes in
economic conditions are more likely to cause issuers of these
securities to be unable to make payments.

INABILITY High Yield Securities may be less liquid than higher quality
TO SELL investments. The Portfolio could lose money if it cannot sell a
SECURITIES: security at the time and price that would be most beneficial to
the Portfolio. A security whose credit rating has been lowered
may be particularly difficult to sell.

INTEREST Investing in debt securities will subject the Portfolio to the
RATE RISK: risk that the market value of the debt securities will decline
because of rising interest rates. A rise in interest rates
generally means a fall in bond prices and, in turn, a fall in the
value of your investment. As a general rule, a 1% rise in
interest rates means a 1% fall in value for every year of
duration, although with high yield bond investments the
correlation is not as exact. For a 5 year duration security, the
1% rise in interest rates would mean a 5% fall in value. An
increase in its duration would make the fund more sensitive to
this risk.

PREPAYMENT Payments from the pool of loans underlying mortgage or
RISK: asset-backed securities may not be enough to meet the monthly
payments of the mortgage or asset-backed security. If this occurs
such securities will lose value. Also, prepayments of loans or
mortgage foreclosures will shorten the life of these securities.
Prepayments vary based on several factors, including the level of
interest rates, general economic conditions, the location and age
of the mortgage and other demographic conditions. When interest
rates are declining, there are usually more prepayments. The
reinvestment of cash received from prepayments will, therefore,
usually be at a lower interest rate than the original investment,
lowering a Portfolio's yield.

PORTFOLIO The Investment Adviser may engage in active and frequent trading
TURNOVER of portfolio securities without regard to the effect on portfolio
turnover. Higher portfolio turnover (e.g., 100% or more per year)
would cause the Portfolio to incur additional transaction costs
on the sale of securities and reinvestment in other securities.
<PAGE>

RISK/RETURN SUMMARY: FEE TABLE

This table describes the fees and expenses that you may pay if you buy and hold
Class A shares of the Portfolio.

<TABLE>
<CAPTION>
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SHAREHOLDER FEES High Yield Fund
(Fees Paid Directly From Your Investment)
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<S> <C>
Sales Loads None
Redemption Fees None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(Expenses Deducted From Fund Assets)
Management Fees [0.50%]
Other Expenses (a) [%]
Total Annual Fund Operating Expenses (b) [%]
--------------------------------------------------------------------------
</TABLE>

(a) Other expenses are estimated based upon the expected expenses that the
Portfolio would incur in the initial fiscal year. Other Expenses include fees
for shareholder services, custodial, administration, dividend disbursing and
transfer agency fees, legal and auditing fees, printing costs and registration
fees.

(b) The Investment Adviser has voluntarily agreed to limit the total expenses
for the Portfolio (excluding interest, taxes, brokerage and extraordinary
expenses) to annual rates of [0.55%] of their average daily net assets. 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 Portfolio's expenses and increase
its total returns.

EXAMPLE. This example is intended to help you compare the estimated cost of
investing in the Portfolio with the cost of investing in other mutual funds.

The example assumes that:
- You invest $10,000 in the Portfolio for the time periods indicated;
- Your investment has a 5% return each year; and
- 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:

<TABLE>
<CAPTION>
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High Yield Fund
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<S> <C>
1 Year
3 Years
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</TABLE>

<PAGE>

FUND MANAGEMENT

BOARD OF DIRECTORS

The Board of Directors of the Fund consists of six 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 Investment Company Act of 1940, as amended (the "1940 Act"). The Fund's
Directors are Christina Seix, John G. Talty, Peter J. Bourke, C. Alan MacDonald,
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 $7.2 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. As compensation for the services rendered by the Investment Adviser
under the Advisory Agreement, the Portfolio pays the Investment Adviser a
monthly advisory fee. This advisory fee is calculated by applying the following
annual percentage rate to the Portfolio's average daily net assets for the
month.

<TABLE>
<CAPTION>
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FUND NAME RATE
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<S> <C>
High Yield Fund 0.50%
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</TABLE>

PORTFOLIO MANAGERS

The Portfolio will be managed using a team approach. The team includes both
Senior Investment Managers and experienced High Yield Analysts. The Senior
Portfolio Managers at the firm are:

CHRISTINA SEIX, CFA, CHAIRMAN, CEO & CHIEF INVESTMENT OFFICER
Formerly, Chairman & CEO, Head of Investment Policy, MacKay-Shields
Total Investment Experience: 25 years
B.A., 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: 17 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: 19 years
B.S., University of Maine, Education/Mathematics

<PAGE>

MICHAEL MCEACHERN, CFA, DIRECTOR AND SENIOR PORTFOLIO MANAGER
Formerly, Vice President, Fixed Income, American General Corp., June 1997
Total Investment Experience: 14 years
B.A., University of California, Operations Research; MBA, Rice University,
Accounting/Public Administration

JOSEPH CALABRESE, CFA, DIRECTOR AND SENIOR PORTFOLIO MANAGER
Formerly, Director, Fixed Income at Metropolitan Life Insurance Company
Total Investment Experience: 13 years
B.A., New Jersey Institute of Technology, 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 the 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 Portfolio is continuous and purchases of
shares of the Portfolio 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 Portfolio'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 Investors Bank & Trust
Company (Transfer Agent) at (800) 247-0473 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 may 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 Portfolio are:

Investors Bank & Trust Company
Boston, MA
ABA # 011-001-438
[Acct: 303030303]
Benf: SAMCO High Yield Fund
F/F/C (Shareholder's Account at Fund)

You may also buy shares of the Portfolio "in-kind" through a transfer of
securities to the Portfolio as payment for the shares, if the purchase is
approved in advance by the Investment Adviser. Securities used to purchase
Portfolio shares must be determined by the Investment Adviser to be appropriate
investments for the Portfolio, to be consistent with that Portfolio's investment
objectives and policies, and to have readily available market quotations. The
securities will be valued in accordance with the Fund's policy for calculating
net asset value, determined as of the close of business the day on which the
securities are received by the Fund. The minimum investment amount for in-kind
purchases of Portfolio shares is $1,000,000, or such other amount as may be
appropriate in light of applicable regulations. The minimum investment may be
waived at any time at the discretion of the Investment Adviser. Whether the
Portfolio will accept particular securities as payment will be decided in the
sole discretion of the Investment Adviser. If you are considering buying shares
in this manner, please call the Investment Adviser at 201-391-0300.

REDEMPTION OF SHARES

The Fund will redeem all full and fractional shares of the Portfolio
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 that Business Day. If such notice of redemption is received by the Transfer
Agent after 4:00 p.m. Eastern time, the

<PAGE>

redemption 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 a Portfolio;
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 Portfolio.

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, the address of record or the
account designated to receive redemption proceeds at any time by writing to the
Transfer Agent with a signature guaranteed by a national bank, which is a member
firm of any national or regional securities exchange (a Signature Guarantee). If
the guarantor institution belongs to one of the Medallion Signature Programs, it
must use the Medallion "Guaranteed" stamp. Notarized signatures are not
sufficient. 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.

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.

ADDITIONAL INFORMATION

DIVIDENDS AND DISTRIBUTIONS

Dividends are automatically reinvested in additional Class A shares of the
Portfolio 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 Portfolio realizes
net long-term capital gains (I.E., with respect to assets held more than 12
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 Portfolio 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 Portfolio
will be declared as a dividend payable monthly to shareholders of record as of
the last Business Day of each month. The Portfolio 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 Portfolio 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 Portfolio is computed
by dividing the sum of the value of the securities held by the Portfolio 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.

<PAGE>

The following methods are used to calculate the value of the Portfolio's
assets: (1) all portfolio securities for which over-the-counter market
quotations are readily available 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
Portfolio 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 the Portfolio 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 the Portfolio 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 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 the
Portfolio's shares. The Portfolio 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 the Portfolio will be taxed as capital gain or loss if the shares are capital
assets in the shareholder's hands. Generally, a shareholder's gain or loss will
be a long-term gain or loss if the shares have been held for more than one year.
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 the Portfolio 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 the Portfolio on December 31
of such year in the event such dividends are actually paid during January of the
following year.

The Portfolio may be required to withhold federal income tax at a rate of
31% ("backup withholding") from dividends and redemption proceeds paid to
taxable shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to furnish the Portfolio with the shareholder's correct
taxpayer identification number, (ii) the Internal Revenue Service ("IRS")
notifies the Portfolio 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.

<PAGE>

APPENDIX A

DESCRIPTION OF INVESTMENTS

THE PORTFOLIO WILL PRIMARILY INVEST IN THE SECURITIES DEFINED BELOW IN
ACCORDANCE WITH THEIR PRINCIPAL INVESTMENT STRATEGIES AND ANY QUALITY OR POLICY
CONSTRAINTS. ADDITIONAL INFORMATION REGARDING THE ASSOCIATED RISKS ACCOMPANYING
THE SECURITIES DEFINED BELOW IS LOCATED IN THE FUND'S STATEMENT OF ADDITIONAL
INFORMATION.

CORPORATE ISSUES
The Portfolio may invest in corporate issues, 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 Portfolio will
buy corporate issues subject to any quality constraints. If a security held by a
Portfolio is downgraded, the Portfolio may retain the security if the Investment
Adviser deems retention of the security to be in the best interests of the
Portfolio.

HIGH YIELD SECURITIES
The Portfolio may invest in below investment-grade securities (rated below Baa
by Moody's and below BBB by S&P) or unrated securities of equivalent quality
(commonly referred to as "junk bonds"), which may carry a high degree of risk
(including the possibility of default or bankruptcy of the issuers of such
securities), generally involve greater volatility of price and risk of principal
and income, and may be less liquid, than securities in the higher rating
categories and are considered speculative. The lower the ratings of such debt
securities, the greater their risks. A discussion of the ratings services
appears in an Appendix to the Statement of Additional Information.

<PAGE>

THE PORTFOLIO MAY ALSO INVEST IN THE SECURITIES DEFINED BELOW IN ACCORDANCE WITH
THEIR ALLOWABLE INVESTMENTS AND ANY QUALITY OR POLICY CONSTRAINTS. ADDITIONAL
INFORMATION REGARDING THE ASSOCIATED RISKS ACCOMPANYING THE SECURITIES DEFINED
BELOW IS LOCATED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION.

BANK OBLIGATIONS
The Portfolio may invest in obligations of domestic banks, including time
deposits, certificates of deposit, bankers' acceptances, bank notes, deposit
notes, 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). A Portfolio 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 s, 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 Portfolio.

CONVERTIBLES
The Portfolio may invest in securities with equity conversion features. While it
will not generally be the policy of the Fund to invest in convertible
securities, the presence of a conversion feature would not rule out their use in
the Fund. So-called "busted convertibles," where no equity conversion premium
exists could be an appropriate Fund investment.

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.

INVESTMENT FUNDS
The Portfolio is permitted to invest in investment funds and will make such only
where appropriate given that the Portfolio'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 Portfolio.

INVESTMENT GRADE DEBT SECURITIES
The Portfolio 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, or 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. 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 Portfolio. The Portfolio 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
investment grade securities.

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 Portfolio will purchase only asset-backed securities
that the Investment Adviser determines to be liquid. The Portfolio will not
purchase mortgage-backed or asset-backed securities that do not meet the above
minimum credit standards.

<PAGE>

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.

PIK BONDS
The Portfolio may invest in Payment In Kind (PIK) Securities. These securities
effect coupon payments through the issuance of an additional incremental par
amount of securities in lieu of cash. It is not anticipated that the Fund will
hold significant amounts of these issues.

PREFERRED STOCK
The Portfolio 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 Portfolio 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 Portfolio 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 and that transactions are only entered into with approved
counterparties.

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 NOTE
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, Standard & Poor's, Fitch, or Duf & Phelps.

WHEN-LSSUED AND FORWARD COMMITMENT SECURITIES
The Portfolio 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
of 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
Portfolio 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 Portfolio and maintained in the Portfolio 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.

<PAGE>

YANKEE OBLIGATIONS
Yankee bank obligations are dollar-denominated obligations issued in the U.S.
capital markets by foreign banks

ZERO COUPON DEBT SECURITIES
The Portfolio 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.

<PAGE>

This Prospectus contains a concise statement of information investors should
know before they invest in the Portfolio. Please retain this Prospectus for
future reference. Additional information about The Portfolio'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
information about the Portfolio, including their operations and investment
policies. A current SAI is on file with the Securities and Exchange Commission
and is incorporated by reference, meaning it 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
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 First Fund Distributors at
their toll free telephone number (800) 247-0473.

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 202-942-8090. Reports and other information about the Fund may be obtained 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. 20549-0102 or by electronic
request at the following e-mail address: [email protected].

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

<PAGE>

SAMCO FUNDS, INC.

SAMCO HIGH YIELD FUND CLASS B SHARES

The SAMCO High Yield Fund (the "Portfolio") is a diversified investment
portfolio of SAMCO Funds, Inc. (the "Fund"), an open-end management investment
company.

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 DECEMBER 28, 2000.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE

<S> <C>
RISK/RETURN SUMMARY 1
PRINCIPAL INVESTMENT RISKS 2
RISK/RETURN SUMMARY: FEE TABLE 3
FUND MANAGEMENT 4
PURCHASE OF SHARES 5
REDEMPTION OF SHARES 5
ADDITIONAL INFORMATION 6
APPENDIX A: DESCRIPTION OF INVESTMENTS 8
</TABLE>
<PAGE>

RISK/RETURN SUMMARY

PRINCIPAL INVESTMENTS: The Portfolio will invest at least 65% of its total
assets in high yield debt obligations of domestic corporations or other
entities.

1
<PAGE>

PRINCIPAL INVESTMENT RISKS

A loss of money on your investment in the Portfolio, or the
under-performance of the Portfolio relative to other investments could occur
due to certain risks. In general, the greater the risk, the greater the
possibility of losing money. The possibility exists that the investment
decisions made by the portfolio managers of the Portfolio will not accomplish
what they are designed to achieve. No assurance can be given that the
Portfolio's investment objective will be achieved. For more information about
these and other types of investments and risks to the Fund, see the Statement
of Additional Information.

The principal risks associated with the Portfolio's investment policies and
strategies are as follows:

HIGH YIELD Debt securities that are rated below the four highest
SECURITIES categories (or unrated securities of comparable quality
RISK: determined by the Investment Adviser) are known as "High
Yield" bonds or "junk bonds". High Yield bonds are
considered to be predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations. Accordingly,
they present considerable risk of issuer default. High Yield
bonds may also be subject to substantial market fluctuations
and may be less liquid, than securities in the higher rating
categories. They are subject to greater risk of loss of
income and principal than investment grade securities.

CREDIT RISK: Debt securities are subject to credit risk. Credit risk is
the possibility that an issuer will fail to make timely
payments of interest or principal. The lower the ratings of
such debt securities, the greater their risks. In addition,
lower rated securities have higher risk characteristics and
changes in economic conditions are more likely to cause
issuers of these securities to be unable to make payments.

INABILITY TO High Yield Securities may be less liquid than higher quality
SELL investments. The Portfolio could lose money if it cannot
SECURITIES: sell a security at the time and price that would be most
beneficial to the Portfolio. A security whose credit rating
has been lowered may be particularly difficult to sell.

INTEREST RATE Investing in debt securities will subject the Portfolio to
RISK: the risk that the market value of the debt securities will
decline because of rising interest rates. A rise in interest
rates generally means a fall in bond prices and, in turn, a
fall in the value of your investment. As a general rule, a
1% rise in interest rates means a 1% fall in value for every
year of duration, although with high yield bond investments
the correlation is not as exact. For a 5 year duration
security, the 1% rise in interest rates would mean a 5% fall
in value. An increase in its duration would make the fund
more sensitive to this risk.

PREPAYMENT Payments from the pool of loans underlying mortgage or
RATE asset-backed securities may not be enough to meet the
monthly payments of the mortgage or asset-backed security.
If this occurs such securities will lose value. Also,
prepayments of loans or mortgage foreclosures will shorten
the life of these securities. Prepayments vary based on
several factors, including the level of interest rates,
general economic conditions, the location and age of the
mortgage and other demographic conditions. When interest
rates are declining, there are usually more prepayments. The
reinvestment of cash received from prepayments will,
therefore, usually be at a lower interest rate than the
original investment, lowering a Portfolio's yield.

PORTFOLIO The Investment Adviser may engage in active and frequent
TURNOVER trading of portfolio securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., 100%
or more per year) would cause the Portfolio to incur
additional transaction costs on the sale of securities and
reinvestment in other securities.

2
<PAGE>

RISK/RETURN SUMMARY: FEE TABLE

This table describes the fees and expenses that you may pay if you buy and hold
Class B shares of the Portfolio.

<TABLE>
<CAPTION>
================================================================================
SHAREHOLDER FEES High Yield Fund
(Fees Paid Directly From Your Investment)
--------------------------------------------------------------------------------
<S> <C>
Sales Loads None
Redemption Fees None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(Expenses Deducted From Fund Assets)
Management Fees [0.50%]
Distribution (12b-1) and/or Service Fees 0.25%
Other Expenses (a) [%]
Total Annual Fund Operating Expenses (b) [%]
================================================================================
</TABLE>

(b) The Investment Adviser has voluntarily agreed to limit the total expenses
for the Portfolio (excluding interest, taxes, brokerage and extraordinary
expenses) to annual rates of [0.80%] of their average daily net assets. 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 Portfolio's expenses and increase
its total returns.

EXAMPLE. This example is intended to help you compare the estimated cost of
investing in the Portfolio with the cost of investing in other mutual funds.

The example assumes that:
- You invest $10,000 in the Portfolio for the time periods indicated;
- Your investment has a 5% return each year; and
- 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:

<TABLE>
<CAPTION>
================================================
High Yield Fund
------------------------------------------------
<S> <C>
1 Year
3 Years
================================================
</TABLE>

3
<PAGE>

FUND MANAGEMENT

BOARD OF DIRECTORS

INVESTMENT ADVISER

PAYMENT OF FUND EXPENSES

PORTFOLIO MANAGERS

The Portfolio will be managed using a team approach. The team includes both
Senior Investment Managers and experienced High Yield Analysts. The Senior
Portfolio Managers at the firm are:

4
<PAGE>

PURCHASE OF SHARES

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

Investors Bank & Trust Company
Boston, MA
ABA # 011-001-438
[Acct: 303030303]
Benf: SAMCO High Yield Fund
F/F/C (Shareholder's Account at Fund)

REDEMPTION OF SHARES

The Fund will redeem all full and fractional shares of the Portfolio 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 that Business Day. If such notice of redemption is received by the Transfer
Agent after 4:00 p.m. Eastern time, the

5
<PAGE>

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 B shares of the
Portfolio 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 Portfolio realizes
net long-term capital gains (I.E., with respect to assets held more than 12
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 Portfolio at the net asset value on the date the
distribution is declared.

6
<PAGE>

RULE 12b-1 PLAN

The Portfolio has adopted a Distribution Plan with respect to its Class B
shares pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Portfolio
may pay a quarterly distribution related fee in an amount not to exceed 0.25% of
the average daily value of the net assets attributable to Class B shares of the
Portfolio. Such amounts received under the Plan are to be used for payments to
qualifying dealers for their assistance in the distribution of the Portfolio'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
Portfolio'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.

DETERMINATION OF NET ASSET VALUE

TAXES

7
<PAGE>

notifies the Portfolio 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.

APPENDIX A

DESCRIPTION OF INVESTMENTS

8
<PAGE>

9
<PAGE>

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

10
<PAGE>

YANKEE OBLIGATIONS
Yankee bank obligations are dollar-denominated obligations issued in the U.S.
capital markets by foreign banks

11
<PAGE>

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

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

SAMCO FUNDS, INC.
SAMCO HIGH YIELD FUND
200 Clarendon Street
Boston, MA 02116
(800) 247-0473

SAMCO High Yield Fund (the "Portfolio") is a diversified investment
portfolio of SAMCO Funds, Inc. (the "Fund"), an open-end management investment
company. Shares of the Portfolio may be purchased through First Fund
Distributors, Inc. (the "Distributor").

This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of the Portfolio, dated December 31,
2000 (the "Prospectus"), which has been filed with the Securities and Exchange
Commission (the "Commission") and can be obtained, without charge, by calling
Investors Bank and Trust Company (the "Administrator") at 800-247-0473.

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

DISTRIBUTED BY: FIRST FUND DISTRIBUTORS, INC.
4455 EAST CAMELBACK ROAD
SUITE 261 E
PHOENIX, AZ 85018

STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 28, 2000

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
MANAGEMENT OF THE FUND 3
INVESTMENT ADVISER AND ADVISORY AGREEMENTS 4
CODE OF ETHICS 5
ADMINISTRATOR 6
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 6
DISTRIBUTION OF FUND SHARES 6
SUPPLEMENTAL DESCRIPTION OF INVESTMENTS 7
SUPPLEMENTAL DESCRIPTIONS OF RISKS 11
INVESTMENT RESTRICTIONS 15
PORTFOLIO TURNOVER 16
PORTFOLIO TRANSACTIONS 17
TAX CONSIDERATIONS 17
SHAREHOLDER INFORMATION 19
SERVICE PROVIDERS 21
ORGANIZATION OF THE FUND AND DESCRIPTION OF CAPITAL STOCK 21
CALCULATION OF PERFORMANCE DATA 22
FINANCIAL STATEMENTS 22
QUALITY RATING DESCRIPTIONS 22
</TABLE>

2
<PAGE>

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

The Fund is managed by its Board of Directors. The Board of Directors
is generally responsible for management of the business and affairs of the Fund.
The Board of Directors formulates the general policies of the Fund, approves
contracts and authorizes Fund officers to carry out the decisions of the Board.
The Board of Directors and principal officers of the Fund are listed below
together with information on their positions with the Fund, address, age,
principal occupations during the past five years and other principal business
affiliations. 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 such
person's affiliation with the Fund or the Fund's investment adviser, Seix
Investment Advisors Inc. (the "Investment Adviser").

<TABLE>
<CAPTION>
Name, Address and Age Office Principal Occupation During Past Five Years
--------------------- ------ -------------------------------------------
<S> <C> <C>
*Christina Seix Director and Seix Investment Advisors Inc., Chairman and
300 Tice Blvd. Chairman Chief Investment Officer 1992-Present
Woodcliff Lake, NJ 07675
Age: 50
*John G. Talty Director and Seix Investment Advisors Inc., Managing Director,
300 Tice Blvd. President President 1993-Present
Woodcliff Lake, NJ 07675
Age: 42
*Peter J. Bourke Director and Seix Investment Advisors Inc., Managing Director,
300 Tice Blvd. Vice President 1993-Present
Woodcliff Lake, NJ 07675
Age: 49
C. Alan MacDonald Director Consultant, 1999 - present; Managing Director of
415 Round Hill Road The Directorship Inc., a consultancy in board
Greenwich,CT 06831 management and corporate governance, 1997-1999;
Age: 67 General Partner of the Marketing Partnership, Inc.,
a full service marketing consulting firm, 1994 - 1997.
John E. Manley, Sr. Director Retired, (Formerly Consultant to Mutual of America
86505 Holmes April 1996 - March 1997)
Chapel Hill, NC 27514
Age: 66
John O'Brien Director Retired
466 Fairfield Road
Wyckoff, New Jersey 07481
Age: 68
</TABLE>

3
<PAGE>

<TABLE>
<S> <C> <C>
William E. Vastardis Treasurer Investors Capital Services, Inc., (Formerly AMT
Investors Capital Services, Inc. Capital Services, Inc.), Managing Director 1992 - present.
600 Fifth Avenue, 26th Floor
New York, NY 10020
Age: 43

Timothy Osborne Assistant Treasurer Investors Bank & Trust Company, Director, 1997- present;
Investors Bank & Trust Company Manager, 1995 -1997.
200 Clarendon Street
Boston, MA 02116
Age: 34
Cynthia Surprise Secretary Investors Bank & Trust Company, Director and Counsel
Investors Bank & Trust Company 1999 - present; State Street Bank and Trust Company,
200 Clarendon Street Vice President, 1994-1999.
Boston, MA 02116
Age: 54
Sandra I. Madden Assistant Secretary Investors Bank & Trust Company, Associate Counsel,
Investors Bank & Trust Company 1999 -present; Associate at Scudder Kemper Investments,
200 Clarendon Street Inc. 1996 - 1999.
Boston, MA 02116
Age: 34
</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. Each
Independent Director receives an annual retainer of $2,000 which is paid in
quarterly installments, a fee of $1,000 for each board meeting attended and a
fee of $1,000 for each committee meeting attended plus out of pocket expenses.

DIRECTOR'S COMPENSATION TABLE FOR SAMCO FUNDS, INC.*
FISCAL YEAR ENDED OCTOBER 31, 2000**

<TABLE>
<CAPTION>
Director Aggregate Pension or Estimated Total
Compensation From Retirement Benefits Annual Compensation
Registrant Accrued As Part of benefits Upon From Registrant
Fund Expenses Retirement and Fund Complex
Paid to Directors
<S> <C> <C> <C> <C>
John E. Manley, Sr. $ $0 $0 $
John R. O'Brien $ $0 $0 $
C. Alan MacDonald $ $0 $0 $
</TABLE>
* The Directors' fees paid for the fiscal year ended October 31, 2000 are
calculated using an annual retainer of $2,000, payable quarterly and a fee of
$1,000 per board or committee meeting attended.

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 ___, 2000.

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 agreement between the Fund on
behalf of the Portfolio and the Investment Adviser (the "Advisory Agreement"),
the Investment Adviser, subject to the control and supervision of the Fund's
Board of Directors and in

4
<PAGE>

conformance with the stated investment objectives and policies of the
Portfolio, shall manage the investment and reinvestment of the assets of the
Portfolio. In this regard, it is the responsibility of the Investment Adviser
to make investment decisions for the Portfolio and to place the Portfolio's
purchase and sales orders for investment securities.

The Advisory Agreement dated [December 14, 2000] was approved on
December 14, 2000 by the Board of Directors of the Fund, including a majority of
the Directors who are not "interested persons", as defined in the 1940 Act and
by the initial sole shareholder of the Portfolio on [December xx, 2000]. The
Advisory Agreement 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 the 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 Agreement is 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 Agreement
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 Agreement, 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 "Risk/Return Summary: Fee Table," other expenses incurred in
the operation of the Fund are borne by the Portfolio of the Fund, including,
without limitation, 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 [0.50%] of the average daily net
assets of the 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 the 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 has voluntarily agreed to limit the total
expenses of Class A Shares of the Portfolio and Class B Shares of the Portfolio
of the Fund (excluding taxes, interest, brokerage, and extraordinary expenses)
to an annual rate of 0.55% and [ ] respectively, of the Portfolio's average
daily net assets for an indefinite time period however, such waivers may be
terminated at any time. As long as this temporary expense limitation continues,
it may lower the Portfolio's expenses and increase its total return. In the
event the Investment Adviser removes the expense cap, the Portfolio's expenses
may increase and its total return may be reduced depending on the total assets
of the Portfolio of the Fund.

CODE OF ETHICS

Rule 17j-1 of the 1940 Act, as amended, addresses conflicts of interest
that arise from personal trading activities of investment company personnel. The
rule requires funds and their investment advisers to adopt a code of ethics and
to report periodically to the board on issues raised under its code of ethics.
To assure compliance with these restrictions, the Fund and the Adviser adopted
and agreed to be governed by a joint code of ethics (the "Code of Ethics")
containing provisions reasonably necessary to prevent fraudulent, deceptive or
manipulative acts with regard to the personal securities transactions of their
employees. The Code of Ethics permits personal investing transactions of the
Fund's and the Adviser's employees which avoid conflicts of interest with the
Fund.

Information about these codes of ethics may be obtained by calling
the Commission's Public Reference Room at 1-202-942-8090. Copies of the codes
of ethics may also be obtained on the EDGAR Database on the Commission's
Internet site at http://www.sec.gov. Alternatively, this information may be
obtained, upon payment of a duplicating fee, by writing the Public Reference
Section of the Commission, Washington D.C. 20549-0102 or by electronic
request at the following e-mail address:

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[email protected].

ADMINISTRATOR

The administration agreement dated November 1, 1999 (the
"Administration Agreement") between the Fund on behalf of its portfolios and
Investors Bank and Trust Company, (the "Administrator"), will remain in effect
until November 3, 2002. After the expiration date, the Administration Agreement
shall automatically be renewed annually thereafter, and may be terminated
thereafter, by either party on 120 days prior written notice. Upon termination
of the Administration Agreement, the Fund shall pay to the Administrator such
compensation as may be due under the terms of the Agreement on the date of such
termination. 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 is subject to an administration fee of
seven (7) basis points, which will be applied to all assets for which Investors
Bank and Trust Company acts as Administrator. The Fund pays the Administrator a
minimum annual fee of $50,000 for the first year of the Administration Agreement
(11/1/99-10/31/00). In the second year of the relationship, the minimum for the
two Funds will increase to $62,500 and in the third year to $75,000. The
Administrator is entitled to reimbursement from the Fund for its out-of-pocket
expenses incurred under the Administration Agreement. Prior to November 1, 1999,
the administrator of the Fund was Investors Capital Services, Inc. The Fund paid
Investors Capital Services, Inc. a monthly fee at an annual rate of 0.15% of the
Fund's average daily net assets.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of December 15, 2000, there were no shareholders deemed to be a
"control person" in either the Class A or the Class B shares of the Portfolio as
that term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act").

As of December 15, 2000, there were no persons who held 5% or more of
the outstanding shares of the Class A or the Class B shares of the Portfolio.

As of December 15, 2000, the amount of shares owned by all the
officers, directors, and members of the advisory board of the Fund as a group
is less than 1% of the Class A or the Class B shares of the Portfolio's
outstanding securities.

DISTRIBUTION OF FUND SHARES

DISTRIBUTION AGREEMENT. The distribution agreement (the "Distribution
Agreement") among the Fund on behalf of its portfolios, the Administrator and
First Fund Distributors, Inc., (the "Distributor") became effective January 1,
2000. The Distributor shall receive compensation in the amount of $25,000 per
annum, to be paid no less frequently than monthly by the Administrator. In
addition, the Distributor will be entitled to reimbursement of reasonable
out-of-pocket expenses incurred (including but not limited to NASD filing fees
incurred pursuant to the Distribution Agreement) within ten days of delivery of
a valid invoice. Prior to First Fund Distributors, Inc., the distributor of the
Fund was AMT Capital Securities, L.L.C.

The Distribution Agreement, dated January 1, 2000, will remain in
effect for an initial two-year period. The Distribution Agreement will continue
in effect for successive one-year periods, provided that each such continuance
is specifically approved (i) by the vote of a majority of the Directors or by a
vote of a majority of the shares of the Fund; and (ii) by a majority of the
Directors who are not parties to the Distribution Agreement or interested
persons (as defined in the 1940 Act) of any such person, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement was last approved by the Fund's Board of Directors on December 14,
2000 and became effective January 1, 2000.

DISTRIBUTION PLAN. The Fund on behalf of the Class B Shares of the
Portfolio 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. The
Distribution Plan dated [December 14, 2000] was approved on December 14, 2000 by
the Board of Directors of the Fund, including a majority of the Directors who
are not "interested persons", as defined in the 1940 Act and by the initial sole
shareholder of the Portfolio on [December xx, 2000]. Under the Distribution
Plan, Class B Shares of the 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

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<PAGE>

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 the 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 the Portfolio of the Fund by increasing assets under management and
reducing expense ratios and the cost to the Class B Shares of the Portfolio
of the Fund if such services were provided directly by the Class B Shares of
the 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 the
Portfolio of the Fund and an increase in the expense ratio for the Class B
Shares of the 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 the Portfolio of the Fund and its shareholders.

Under the Distribution Plan, the Fund's Treasurer reports quarterly to
the Board of Directors regarding 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 holders of the Class B shares shall have the exclusive voting
rights with respect to provisions of a distribution plan, if any, adopted by
the Corporation pursuant to Rule 12b-1 under the Investment Company Act of
1940 (a "Plan") applicable to the Class B shares and no voting rights with
respect to the provisions of any Plan applicable to the Class A shares; and
the holders of the Class A shares shall have exclusive voting rights with
respect to the provisions of any Plan applicable to the Class A shares and no
voting rights with respect to the provisions of any Plan applicable to the
Class B shares.

SUPPLEMENTAL DESCRIPTIONS OF INVESTMENTS

The Portfolio's investment objective is to provide investors with a high income
and, secondarily, capital appreciation. The performance goal is to outperform
the Merrill Lynch High Yield Index. The Portfolio's investment objectives may be
changed without shareholder approval. The Portfolio seeks to achieve its
objective primarily through investment in various types of lower rated, higher
yielding bonds. At least 65% of total assets will be invested in the broad
universe of available United States dollar denominated high yield corporate
securities. Although the Portfolio seeks to achieve its investment objective
primarily through investment in high yield corporate securities, the Portfolio
may invest up to 35% of its total assets in High Yield Mortgage Back Securities
and investment grade securities.

Due to the complexity of the high yield bond market, Seix Investment Advisors
Inc. (the "Investment Adviser") uses multiple systems and analytics which it
developed internally, to attempt to identify value and adequately control risk.
In deciding which securities to buy and sell, the portfolio managers will
emphasize securities, which are within a targeted segment of the High Yield
market (BB/B). The Portfolio's construction is generally determined through a
research driven process designed to identify value areas within the high yield
market. The portfolio managers will focus on the following:

- industries with strong fundamentals
- companies with good business prospects and gaining credit strength
- companies with stable or growing free cash flows and enlightened management

Duration measures the expected life of a debt security on a present value basis.
In general, duration rises with maturity, therefore the greater the duration of
a bond, the greater its percentage volatility. The Portfolio will be managed
with a duration that is close to the duration of the Merrill Lynch High Yield
Index, which is generally between three and six years. The Portfolio normally
invests at least 65% of total assets in U.S. High Yield bonds (commonly known as
junk bonds), which are those below the fourth credit grade (i.e., securities
rated below BBB by Standard & Poor's Corporation (S&P) and below Baa by Moody's
Investors Service, Inc. (Moody's). If the security is unrated, it must meet, in
the judgment of the Investment Adviser, comparable credit quality standards. The
Portfolio may invest up to 35% of its total assets in non-High Yield securities
such as investment grade bonds, obligations issued or guaranteed by the United
States Government, obligations of domestic banks, obligations backed by the full
faith and credit of the United States, obligations issued or guaranteed by
United States Government Agencies, and Government-Sponsored Enterprises (GSE's),
Asset backed Securities (ABS), Mortgage Backed Securities (MBS) or
instrumentalities where the Portfolio must look principally to the issuing or
guaranteeing agency for ultimate repayment.

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<PAGE>

AGENCIES

The Portfolio 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 Portfolio 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 Portfolio 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.

The Portfolio 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 Portfolio 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.

CONVERTIBLES

The Portfolio may invest in securities with equity conversion
features. While it will not generally be the policy of the Fund to invest in
convertible securities, the presence of a conversion feature would not rule
out their use in the Fund. So-called "busted convertibles," where no equity
conversion premium exists could be an appropriate Fund investment.

CORPORATE ISSUES

The Portfolio may invest in corporate issues, 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 Portfolios will buy corporate issues subject to any quality constraints. If
a security held by the Portfolio is downgraded, the Portfolio may retain the
security if the Investment Adviser deems retention of the security to be in the
best interests of the Portfolio.

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.

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<PAGE>

HIGH YIELD SECURITIES

The Portfolio may invest in below investment-grade securities (rated
below Baa by Moody's and below BBB by S&P) or unrated securities of
equivalent quality (commonly referred to as "junk bonds"), which may carry a
high degree of risk (including the possibility of default or bankruptcy of
the issuers of such securities), generally involve greater volatility of
price and risk of principal and income, and may be less liquid, than
securities in the higher rating categories and are considered speculative.
The lower the ratings of such debt securities, the greater their risks.

Economic downturns may disrupt the high yield market and impair the
ability of issuers to repay principal and interest. Also, an increase in
interest rates would likely have an adverse impact on the value of such
obligations. During an economic downturn or period of rising interest rates,
highly leveraged issues may experience financial stress, which could
adversely affect their ability to service their principal and interest
payment obligations. Prices and yields of high yield securities will
fluctuate over time and, during periods of economic uncertainty, volatility
of high yield securities may adversely affect the Portfolio's net asset
value. In addition, investments in high yield zero coupon or pay-in-kind
bonds, rather than income-bearing high yield securities, may be more
speculative and may be subject to greater fluctuations in value due to
changes in interest rates.

The trading market for high yield securities may be thin to the
extent that there is no established retail secondary market or because of a
decline in the value of such securities. A thin trading market may limit the
ability of the Portfolio to accurately value high yield securities in the
Fund's Portfolio and to dispose of those securities. Adverse publicity and
investor perceptions may decrease the values and liquidity of high yield
securities. These securities may also involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties.

Credit quality in the high yield securities market can change
suddenly and unexpectedly, and even recently issued credit ratings may not
fully reflect the actual risks posed by a particular high yield security. For
these reasons, it is the policy of the Adviser not to rely exclusively on
ratings issued by established credit rating agencies, but to supplement such
ratings with its own independent and on-going review of credit quality. The
achievement of the Portfolio's investment objective by investment in such
securities may be more dependent on the Adviser's credit analysis than is the
case for higher quality bonds. Should the rating of a Portfolio security be
downgraded after being purchased by the Portfolio, the Adviser will determine
whether it is in the best interests of the Fund to retain or dispose of such
security.

Prices for below investment-grade securities may be affected by legislative and
regulatory developments. For example, federal rules require savings and loan
institutions to gradually reduce their holdings of this type of security. Also,
Congress has from time to time considered legislation, which would restrict or
eliminate the corporate tax deduction for interest payments in these securities
and regulate corporate restructurings. Such legislation may significantly
depress the prices of outstanding securities of this type.

INVESTMENT GRADE DEBT SECURITIES

The Portfolio may invest in investment grade debt 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, Duff &
Phelps, or Fitch 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 Portfolio) 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 Portfolio. The
Portfolio 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 a investment grade debt securities.

INVESTMENT FUNDS

The Portfolio is permitted to invest in investment funds and will make
such investments only where appropriate given that the Portfolio'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 Portfolio.

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<PAGE>

PIK BONDS

The Portfolio may invest in Payment In Kind (PIK) Securities. These
securities effect coupon payments through the issuance of an additional
incremental par amount of securities in lieu of cash. It is not anticipated that
the Fund will hold significant amounts of these issues.

PREFERRED STOCK

The Portfolio 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 Portfolio 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 Portfolio 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 and that transactions are only entered into with approved
counterparties.

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.

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, Standard & Poor's, Fitch, or Duff & Phelps.

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES

The Portfolio 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

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<PAGE>

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 of
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
Portfolio 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 Portfolio and maintained in the Portfolio 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.

YANKEE OBLIGATIONS

Yankee bank obligations are dollar-denominated obligations issued in the
U.S. capital markets by foreign banks.

ZERO COUPON DEBT SECURITIES

The Portfolio 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.

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. Additional information
concerning risks associated with certain of the Portfolio's investments is set
forth below. There can be no assurance that the Portfolio will achieve its
investment objective.

YANKEE OBLIGATIONS. Yankee obligations are subject to the same risks that
pertain to domestic issues, notably credit risk, market risk and liquidity risk.
Additionally, to a limited extent, Yankee obligations are subject to certain
sovereign risks. One such risk is the

11
<PAGE>

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
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 Commodity Futures Trading Commission ("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.

Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is fulfilled
before the date of the contract without having to make or take delivery of the
securities. 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. 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 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.

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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.

ILLIQUID AND RESTRICTED SECURITIES. Under the 1940 Act, the Fund may invest
up to 15% of the value of its net 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. 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 net assets in these securities; the
Investment Adviser does not anticipate investing over 5% of the Fund's assets in
these securities.

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.

The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security 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 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 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.

<PAGE>

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.

The Fund may purchase and sell both exchange-traded and Over-the-Counter
("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 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 until the option expires or delivery of the underlying
security is exercised or otherwise covered 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.

<PAGE>

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.

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 or security at the put exercise price, regardless
of a decline in the underlying security's market price below the exercise price.
This right limits the Fund's losses from the 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 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 security, the time remaining until
expiration, the relationship of the exercise price to the market price, the
historical price volatility of the underlying 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 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 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 in anticipation of market 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 as indicated 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).

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<PAGE>

As a fundamental investment policy 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);
(8) purchase or sell physical commodities or related commodity contracts;
(9) 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
(10) invest the cash securing a forward commitment in mortgage backed
securities in investments that have a duration exceeding 180 days

The Portfolio's investment policies, including its investment objective,
are not fundamental and may be changed by the Board of Directors of the Fund
without the approval of shareholders.

Whenever an investment policy or limitation states a maximum percentage of
the Portfolio'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
Portfolio'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 Portfolio's investment policies and
limitations.

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 a Portfolio, the market value of the underlying
securities covered by OTC call options currently outstanding that were sold by
the Portfolio and margin deposits on the Portfolio's existing OTC options on
futures contracts exceed 15% of the net assets of the Portfolio, taken at market
value, together with all other assets of the Portfolio that are illiquid or are
not otherwise readily marketable. This investment policy applies to all the
Portfolios of the Fund. This policy as to OTC options is not a fundamental
policy of the Portfolio and may be amended by the Directors of the Fund without
the approval of the Portfolio'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

The 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. 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 100%, and short-term trading generally involve correspondingly greater
commission expenses and transactions costs. Further, high turnover rates, such
as rates in excess of 100%, 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."

<PAGE>

PORTFOLIO TRANSACTIONS

The debt securities in which the 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. The
Portfolio of the Fund may enter 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 the 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 the 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.

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 Portfolio intends to qualify to be treated as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the "CODE"). In
order for the 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 the 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.

17
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<PAGE>

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

DISTRIBUTIONS
The dividends and distributions of investment income and capital gains with
respect to the Class A shares and the Class B shares, respectively, shall be in
such amount as may be declared from time to time by the Board of Directors, and
such dividends and distributions may vary as between the Class A shares and the
Class B shares to reflect differing allocations of the expenses of the
Corporation between the holders of the Class A shares and the holders of the
Class B shares to such extent and for such purposes as the Board of Directors
may deem appropriate. 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. The
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 the 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. The 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 the 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.

ZERO COUPON SECURITIES
The 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
The 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 or,
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.

18
<PAGE>

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, including net short-term capital gains, 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 the Portfolio.

OTHER TAXES
The 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 the 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 the 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.

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 Class B shares is
$1,000. The minimum initial investment in Class A shares is $1,000,000. In Class
A shares, the minimum investment may be waived at any time at the discretion of
the Investment Adviser. Additional purchases of Class A or Class B shares may be
of any amount.

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 Investors Bank & Trust
Company at (800) 247-0473 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.

19
<PAGE>

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

DETERMINATION OF NET ASSET VALUE

The net asset value of Class A shares and the net asset value of Class
shares shall be separately computed, and may vary from one another, in order to
reflect any differences in the undistributed investment income or capital gains
allocated to each such class, or in the capital account of each such class,
resulting from differing allocations of the expenses of the Corporation between
the holders of the Class A shares and the holders of the Class B shares.

REDEMPTION OF SHARES

The Fund will redeem all full and fractional shares of the 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 Portfolio;
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 Portfolio.

A shareholder may change its authorized agent, the address of record or the
account designated to receive redemption proceeds

20
<PAGE>

at any time by writing to the Transfer Agent with a signature guaranteed by a
national bank, which is a member firm of any national or regional securities
exchange (a Signature Guarantee). If the guarantor institution belongs to one of
the Medallion Signature Programs, it must use the Medallion "Guaranteed" stamp.
Notarized signatures are not sufficient. Further documentation may be required
when deemed appropriate by the Transfer Agent.

SERVICE PROVIDERS

CUSTODIAN AND ACCOUNTING AGENT
Investors Bank & Trust Company, 200 Clarendon Street, P.O. Box 9130, 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 shares of the Fund, and Dividend Disbursing
Agent for the Fund.

LEGAL COUNSEL
Dechert, 1775 Eye Street, N.W., Washington, D.C. 20006, is legal counsel for the
Fund.

INDEPENDENT AUDITORS
Deloitte & Touche LLP, Two World Financial Center, New York, New York
10281-1414, is the independent auditor for the Fund's 2000 fiscal year end.

ORGANIZATION OF THE FUND 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 consists of three portfolios: the SAMCO Aggregate Fixed Income Fund,
the SAMCO Intermediate Fixed Income Fund and the SAMCO High Yield Bond Fund. For
the Aggregate Fixed Income Fund and the Intermediate Fixed Income Fund
350,000,000 shares are authorized as Class A shares and 150,000,000 shares are
authorized as Class B shares. For the High Yield Fund _____ shares are
authorized as Class A shares and _____ shares are authorized as Class B shares.
Prior to June 10, 1999 the name of the SAMCO Aggregate Fixed Income Fund was the
SAMCO Fixed Income Portfolio and the name of the Fund was "SAMCO Fund, Inc." The
Fund's shares have no preemptive, conversion, exchange or redemption rights.
Each share of the Fund has equal voting, dividend, distribution and liquidation
rights. 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. The shares of the Fund have non-cumulative voting rights, 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 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. 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.

21
<PAGE>

The Portfolio currently offers two classes of shares, which may have
different operating and other expenses. For more information about other classes
of the Portfolio's shares, investors should contact the Administrator at the
phone number set forth on the cover of this Statement of Additional Information.

CALCULATION OF PERFORMANCE DATA

The Portfolio may, from time to time, include the yield and total return in
reports to shareholders or prospective investors. Quotations of yield for the
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:

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

Where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of Shares of the Fund
outstanding during the 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
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:

n
P(1 + T) = 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.

FINANCIAL STATEMENTS

The Portfolio's balance sheet dated [December 2000] audited by Deloitte and
Touche LLP, independent auditors, is included herein.

QUALITY RATING DESCRIPTIONS

DESCRIPTION OF COMMERCIAL PAPER RATINGS

The following descriptions of short-term debt ratings have been published by
Standard & Poor's Ratings Service ("Standard & Poor's"), Moody's Investors
Service ("Moody's"), Fitch's IBCA Investors Service ("Fitch"), and Duff and
Phelps ("Duff"), respectively. These obligations have an original maturity not
exceeding thirteen months, unless explicitly noted.

A -- Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. Commercial paper issues rated A-1 by Standard & Poor's reflect a very
strong degree of safety of timely payment. Commercial paper issues rated A-2
reflect a strong degree of safety of timely payment but not as strong as for
issues designated A-1.

Commercial paper issues rated Prime-1 by Moody's are judged by Moody's to be of
the "highest" quality on the basis of relative

22
<PAGE>

repayment capacity with a superior ability for repayment of senior short-term
debt obligations. Commercial paper issues rated Prime-2 are judged by Moody's to
be of the "second highest" quality with a strong ability for repayment of senior
short-term debt obligations.

The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. Commercial paper issues rated Fitch-2 are regarded
as having only a slightly less assurance of timely payment than those issues
rated Fitch-1.

The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors that are supported by ample asset protection. Risk
factors are minor. The rating Duff-2 is regarded as having good certainty of
timely payment with sound liquidity factors supported by good asset protection.
Risk factors are small.

BANK WATCH SHORT-TERM DEBT RATINGS

THOMSON BANK WATCH ratings represent an assessment of the likelihood of an
untimely payment of principal and interest. Important factors that may influence
this assessment are the overall financial health of the particular company, and
the probability that the government will come to the aid of a troubled
institution in order to avoid a default or failure. The probability of
government intervention stems from four primary factors:

- Government Guarantees

- Government Or Quasi-Government Ownership Or Control

- The Degree Of Concentration In The Banking System

- Government Precedent

As with the Issuer Ratings, the Short-Term Debt Ratings incorporate both
qualitative and quantitative factors. The ratings are not meant to be
"pass/fail" but rather to provide a relative indication of creditworthiness.
Therefore, obligations rated TBW-3 are still considered investment-grade.

These Short-Term Debt Ratings can also be restricted to local currency
instruments. In such cases, the ratings will be preceded by the designation LC
for Local Currency. Short-Term Debt Ratings are based on the following scale and
the definitions are:

TBW-1 LC-1
The highest category; indicates a very high likelihood that principal and
interest will be paid on a timely basis.

TBW-2 LC-2
The second-highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated TBW-1.

TBW-3 LC-3
The lowest investment-grade category; indicates that while the obligation
is more susceptible to adverse developments (both internal and external)
than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.

TBW-4 LC-4
The lowest rating category; this rating is regarded as non-investment grade
and therefore speculative.

23
<PAGE>

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.

24
<PAGE>

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.

NON-INVESTMENT GRADE - MAY BE SPECULATIVE IN THE LIKELIHOOD OF TIMELY REPAYMENT
OF PRINCIPAL AND INTEREST.

BB LC-BB
While not investment grade, the BB rating suggests that the likelihood of
default is considerably less than for lower-rated issues. However, there
are significant uncertainties that could affect the ability to adequately
service debt obligations.

B LC-B
Issues rated B show a higher degree of uncertainty and therefore greater
likelihood of default than higher-rated issues. Adverse developments could
negatively affect the payment of interest and principal on a timely basis.

CCC LC-CCC
Issues rated CCC clearly have a high likelihood of default, with little
capacity to address further adverse changes in financial circumstances.

CC LC-CC
CC is applied to issues that are subordinate to other obligations rated CCC
and are afforded less protection in the event of bankruptcy or
reorganization.

D LC-D
Default

25
<PAGE>

PART C. OTHER INFORMATION

ITEM 24. EXHIBITS.
--------

EXHIBIT
NUMBER DESCRIPTION
------ -----------

a(1) -- Registrant's Articles of Incorporation
(previously filed in the Registrant's Registration Statement on August 4, 1997)
are incorporated herein by reference.

a(2) -- Articles Supplementary to the Articles of
Incorporation, effective October 16, 1997 (previously filed in the Registrant's
Post-Effective Amendment No. 6 to the Registration Statement on December 28,
1999) are incorporated herein by reference.

a(3) -- Articles Supplementary to the Articles of
Incorporation, effective June 16, 1999 (previously filed in the Registrant's
Post-Effective Amendment No. 6 to the Registration Statement on December 28,
1999) are incorporated herein by reference.

b(1) -- By-Laws (previously filed in the
Registrant's Registration Statement on August 4, 1997) are incorporated herein
by reference.

c -- None.

d(1) -- Advisory Agreement between the Registrant,
on behalf of SAMCO Fixed Income Portfolio and Seix Investment Advisors Inc.,
dated November 3, 1997, (previously filed in the Registrant's Post-Effective
Amendment No.6 to the Registration Statement on December 28, 1999) is
incorporated herein by reference.

d(2) -- Advisory Agreement between the Registrant,
on behalf of SAMCO Intermediate Fixed Income Fund and Seix Investment Advisors
Inc., dated June 14, 1999, (previously filed in the Registrant's Post-Effective
Amendment No.6 to the Registration Statement on December 28, 1999) is
incorporated herein by reference.

d(3) -- Form of Advisory Agreement between the
Registrant, on behalf of SAMCO High Yield Fund and Seix Investment Advisors
Inc., dated December 14, 2000 is filed herein.

e(1) -- Distribution Agreement between the
Registrant, First Fund Distributors, Inc. and Investors Bank & Trust Company
dated January 1, 2000 is filed herein.

f -- None.

g -- Custodian Agreement between the Registrant
and Investors Bank & Trust Company (previously filed in the Pre-Effective
Amendment No. 2 to the Registrant's Registration Statement on October 20, 1997)
is incorporated herein by reference.

h(1) -- Transfer Agency and Service Agreement
between Registrant and Investors Bank & Trust Company (previously filed in the
Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on
October 20, 1997) is incorporated herein by reference.

h(2) -- Administration Agreement between the
Registrant and Investors Bank & Trust Company dated November 1, 1999 is filed
herein.

<PAGE>

h(3) -- Registrant's Code of Ethics is filed herein.

i(1) -- Opinion and Consent of Dechert
Price & Rhoads (previously filed to the Pre-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A on October 29, 1997) is
incorporated herein by reference.

i(2) -- Consent of Dechert Price & Rhoads dated
February 25, 2000 (previously filed in the Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form N-1A on February 29, 2000) is
incorporated by reference.

j(1) -- Consent of Auditors to be filed by amendment.

j(2) -- Powers of Attorney is filed herein.

k -- None.

l(1) -- Share Purchase Agreement between Registrant
and Seix Investment Advisors Inc. (previously filed in the Pre-Effective
Amendment No. 2 to the Registrant's Registration Statement on October 20, 1997)
is incorporated herein by reference.

m(1) -- Form of Services and Distribution Plan
between the Registrant on behalf of SAMCO Aggregate Fixed Income Portfolio Class
B dated March 9, 2000 is filed herein.

m(2) -- Form of Services and Distribution Plan
between the Registrant on behalf of SAMCO Intermediate Fixed Income Fund Class B
dated March 9, 2000 is filed herein.

m(3) -- Form of Services and Distribution Plan on
behalf of SAMCO High Yield Fund Class B dated December 14, 2000 is filed
herein.

n -- Inapplicable.

o(1) -- Multiple Class Plan for SAMCO Funds, Inc. on
behalf of its portfolios, dated March 9, 2000, is filed herein.

<PAGE>

ITEM 24
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

As of September 29, 2000, the following shareholders were deemed to be a
"control person" of the Fund as such term is defined in the 1940 Act.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OF PORTFOLIO
-------------- ------------------- OWNERSHIP ------------
----------
<S> <C> <C> <C>
Class A Shares of American College of Cardiology Direct Ownership 38.41%
SAMCO Aggregate 911 Old Georgetown Road
Fixed Income Fund Bethesda, MD 20814

Class A Shares of Noitu Insurance Trust Fund Direct Ownership 100%
SAMCO Intermediate H&W Plan (501) CA 148-06
Fixed Income Fund Hillside Avenue
Jamaica, NY 11435
</TABLE>

ITEM 25
INDEMNIFICATION.

The Registrant shall indemnify directors, officers, employees and
agents of the Registrant against judgments, fines, settlements and expenses to
the fullest extent allowed, and in the manner provided, by applicable Federal
and Maryland law, including Section 17(h) and (i) of the Investment Company Act
of 1940. In this regard, the Registrant undertakes to abide by the provisions of
Investment Company Act Releases No. 11330 and 7221 until amended or superseded
by subsequent interpretation of legislative or judicial action.

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

<PAGE>

ITEM 26
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Seix Investment Advisors Inc. (the "Investment Adviser") is a company
organized under the laws of New Jersey and an investment adviser registered
under the Investment Advisers Act of 1940 (the "Advisers Act").

The list required by this Item 26 of officers and directors of the
Investment Adviser, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by the Investment Adviser pursuant to the
Advisers Act (SEC File No. 801-42070).

ITEM 27
PRINCIPAL UNDERWRITER.
(a) The Registrant's principal underwriter also acts as principal underwriter
for the following investment companies:

Guiness Flight Investment Funds
Fleming Capital Mutual Fund Group, Inc.
Fremont Mutual Funds, Inc.
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
The Purisima Funds
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
Brandes Investment Trust
Allegiance Investment Trust
The Dessauer Global Equity Fund
Puget Sound Alternative Investment Trust

(b) The following information is furnished with respect to the officers and
directors of First Fund Distributors, Inc.:

<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS & OFFICES POSITIONS & OFFICES
WITH DISTRIBUTOR WITH DISTRIBUTOR WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>
Robert H. Wadsworth President & Treasurer None
4455 E. Camelback Road
Suite 261E
Phoenix, AZ 85018

Eric M. Banhazl Vice President None
2020 E. Financial Way
Suite 100

<PAGE>

Glendora, CA 91741

Steven J. Paggioli Vice President & Secretary None
915 Broadway
Suite 1605
New York, NY 10010
</TABLE>

ITEM 28
LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended (the "1940
Act"), and the rules thereunder will be maintained at the offices of the
Investment Adviser, the Custodian and the Administrator.

ADVISOR: Seix Investment Advisors Inc.
300 Tice Boulevard
Woodcliff Lake, NJ 07675-7633

CUSTODIAN/ADMINISTRATOR: Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116-9130

ITEM 29
MANAGEMENT SERVICES.

Not applicable.

ITEM 30
UNDERTAKINGS.

Not applicable.

<PAGE>

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirement for effectiveness of this registration statement under rule
485(a) under the Securities Act of 1933 and has duly caused this registration
statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Woodcliff Lake and State of New Jersey on the 9th day of October, 2000.

SAMCO FUNDS, INC.

By: /s/ Christina Seix
-------------------------
Christina Seix
Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated on the 9th day of October, 2000.

SIGNATURE TITLE

/S/ CHRISTINA SEIX Director
--------------------------
Christina Seix

/S/ JOHN G. TALTY Director, President
--------------------------
John G. Talty

/S/ PETER J. BOURKE Director
--------------------------
Peter J. Bourke

/S/ C. ALAN MACDONALD Director
--------------------------
C. Alan MacDonald

/S/ JOHN E. MANLEY, SR. Director
--------------------------
John E. Manley, Sr.

/S/ JOHN R. O'BRIEN Director
--------------------------
John R. O'Brien

/S/ WILLIAM E. VASTARDIS Treasurer
-------------------------- (Principal Financial and
William E. Vastardis Accounting Officer)

<PAGE>

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

EXHIBITS

FORM N-1A

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AND THE

INVESTMENT COMPANY ACT OF 1940

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

SAMCO FUNDS, INC.

<PAGE>

SAMCO FUNDS, INC.
INDEX TO EXHIBITS

d(3)
e(1)
h(2)
h(3)
j(2)
m(1)
m(2)
m(3)
o(1)