Rule 497(e)
Registration No. 2-82710
FUNDAMENTAL FAMILY OF FUNDS
CONSISTING OF:
FUNDAMENTAL FUNDS, INC.:
NEW YORK MUNI FUND SERIES
THE CALIFORNIA MUNI FUND
FUNDAMENTAL FIXED INCOME FUND:
TAX-FREE MONEY MARKET SERIES
HIGH-YIELD MUNICIPAL BOND SERIES
AND
FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND
SUPPLEMENT DATED OCTOBER 6, 1997 TO EACH FUND'S
PROSPECTUS
DATED APRIL 30, 1997
On September 30, 1997, the Securities and Exchange Commission (the
"Commission") instituted administrative proceedings against the Manager,
Fundamental Service Corporation, and Drs. Lance M. Brofman and Vincent J.
Malanga (the "Parties"). The Commission's Order instituting the proceedings
alleges, among other things, certain violations of the federal securities laws,
including the antifraud provisions, for failing to disclose the risks associated
with investments in inverse floating rate notes made on behalf of the
Fundamental U.S. Government Strategic Income Fund (the "Fund") in 1993 and 1994,
marketing the Fund in a way that was contrary to the administration of the Fund,
exceeding the Fund's portfolio duration of three years or less as stated in its
prospectus, and failing to disclose the Manager's soft dollar practices to the
Fundamental Fund Boards. A hearing will be scheduled to determine whether the
allegations against the Parties are true, and if so, whether remedial action is
appropriate. Counsel to the Parties have indicated that the Parties intend to
vigorously contest the charges. The Manager has indicated that the institution
of the proceedings against the Parties has not adversely affected the ability of
the Manager or Fundamental Service Corporation to continue to perform the
day-to-day affairs of the Fundamental Funds. The proposed reorganizations,
pursuant to which Tocqueville Asset Management L.P. would serve as successor
investment adviser to the Fundamental Funds, are proceeding.
