CALIFORNIA MUNI FUND, N-30D, 1998-09-17

CALIFORNIA MUNI FUND
N-30D, 1998-09-17

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(left column)

NEW YORK MUNI FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investment in securities at value
(Note 4) (cost $115,673,095)......... $109,253,516
Cash............................... 2,738,187
Receivables:
Interest............................. 2,535,099
Fund shares sold..................... 8,852,366
------------
Total assets....................... 123,379,168
------------
LIABILITIES
Payables:
Fund shares redeemed.................. 61,499
Dividend declared..................... 36,115
Due to advisor........................ 98,337
Accrued expenses...................... 578,622
------------
Total liabilities................... 774,573
------------
NET ASSETS consisting of:
Distributions in excess of net
investment income......... $ (27,444)
Accumulated net realized loss (22,988,897)
Unrealized depreciation of
securities ............... (6,419,579)
Paid-in-capital applicable to
148,441,499 shares of $.01
par value capital stock.... 152,040,515
-----------
$122,604,595
============

NET ASSET VALUE PER SHARE................. $.83
====

(right column)

STATEMENT OF OPERATIONS
Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income........................... $ 3,266,313
EXPENSES (Notes 2 and 3)
Management fee................. $261,782
Custodian and accounting fees.. 67,128
Transfer agent fees............ 117,263
Professional fees.............. 220,099
Directors' fees................ 10,823
Printing and postage........... 50,459
Interest....................... 518,778
Distribution expenses.......... 183,315
Operating expenses on
defaulted bonds.............. 60,758
Other.......................... 93,297
---------
1,583,702

Expenses waived................ (51,200)
---------
Total expenses........................ 1,532,502
----------
Net investment income................. 1,733,811
----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on investments.1,295,863

Net unrealized depreciation of
investments..................(1,745,720)
---------
Net gain (loss) on investments .......... (449,857)
----------
NET INCREASE IN NET ASSETS
FROM OPERATIONS........................... $1,283,954
==========

(double column)

<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>

Six Months
Ended Year Ended
June 30, 1998 December 31,
(Unaudited) 1997
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
<S> <C> <C>
Net investment income...................................................... $ 1,733,811 $ 2,899,806
Net realized gain on investments........................................... 1,295,863 (2,367,322)
Unrealized appreciation (depreciation) on investments ..................... (1,745,720) 5,608,133
------------ ------------
Net (decrease) increase in net assets from operations................ 1,283,954 6,140,617
DISTRIBUTIONS:
Distributions from investment income....................................... (1,733,811) (2,899,806)
Distributions in excess of net investment income........................... -- (27,444)
Return of capital distribution............................................. -- (551,666)
Distributions from net realized gain from investments...................... -- (24,556)
CAPITAL SHARE TRANSACTIONS (Note 5)........................................ (11,540,955) (64,787,531)
------------ ------------
Total decrease....................................................... (11,990,812) (62,150,386)
NET ASSETS:
Beginning of period........................................................ 134,595,407 196,745,793
------------ ------------
End of period.............................................................. $122,604,595 $134,595,407
============ ============

</TABLE>

See Notes to Financial Statements.

1
<PAGE>

<TABLE>
NEW YORK MUNI FUND

STATEMENT OF CASH FLOWS
Six Months Ended June 30, 1998 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------

CASH PROVIDED (USED) BY FINANCING ACTIVITIES:
<S> <C> <C>
Sales of capital shares.................................................... $945,287,186
Repurchase of capital shares............................................... (957,884,541)
------------
Cash provided by capital share transactions ............................... (12,597,355)

Cash provided by borrowings................................................ (38,177,582)
Distributions paid in cash ................................................ (677,411) ($51,452,348)
------------ -----------

CASH (USED) PROVIDEDBYOPERATIONS:
Purchases of investments................................................... (250,545,693)
Net proceeds from short-term investments................................... (4,000,000)
Proceeds from sales of investments......................................... 258,752,820
------------
4,207,127
------------

Increase in deposit at brokers and custodian for short sales............... 0
Net investment income...................................................... 1,733,811
Net change in receivables/payables related to operations................... 48,249,597
------------
49,983,408 54,190,535
------------ -----------
Net Increase in Cash....................................................... 2,738,187
Cash, Beginning of Period.................................................. 0
-----------
Cash, End of Period........................................................ $ 2,738,187
</TABLE>

See Notes to Financial Statements.

2
<PAGE>

<TABLE>

NEW YORK MUNI FUND

STATEMENT OF INVESTMENTS
June 30, 1998 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
Principal
Amount Issue Type Rating Value
-------- ----- ---- ----- -----
<S> <C> <C> <C>
$ 1,000,000 Amherst NY Industrial Development Agency Lease Rev, SurfaceRink Complex,
LOC Keyhawk, 5.65%, 10/01/22................................................... FCLT A $ 1,025,876

5,200,000 First Albany Corporation Municipal Trust Certificate Series 98-2,
IFRN*, AMBAC, 6.60%, 07/01/28.................................................. LRIB NR 4,966,607

(Trust Certificates relating to PR Comwlth Ser B, AMBAC, 5.00%, 07/01/28)

8,650,000 First Albany Corporation Municipal Trust Certificate Series 98-1,
IFRN*, AMBAC, 6.87%, 07/01/24.................................................. LRIB NR 8,541,271

(Trust Certificates relating to NY MTA Ser B, AMBAC, 5.13%, 07/01/24)

500,000 Long Island Power Authority, New York Electrical Systems Revenue Bond,
Series A, 5.25%, 12/01/26...................................................... FCLT A 494,878

5,500,000 Long Island Power Authority, New York Electrical Systems Revenue Bond,
Series A, 5.50%, 12/01/29...................................................... FCLT A 5,567,908

5,955,000 MTA, NY Commuter Facilities Revenue Bond, Series A, 5.25%, 07/01/28............... FCLT A- 5,884,052

300,000 MTA, NY Transportation Facilities Rev SVC Contract, Series 8, 5.375%, 07/01/21 ... FCLT A- 302,231

14,600,000x New York NY Inverse Floating Rate Notes*, 3.48%, 08/15/17......................... INLT A- 14,618,104

2,100,000 New York NY GO, Series F-4, Credit Facility with Landesbank Hessen,
3.35%, 02/15/20................................................................ FCSI Aaa 2,100,000

500,000 New York NY Series B, 5.25%, 08/01/15............................................. FCLT A- 502,481

4,000,000 New York City, MWFA, Water &Sewer Systems Rev Floating Rate Tr Rcpts,
Series 29, 3.70%, 06/15/30..................................................... LRIB Aaa 4,000,000

6,700,000 New York City, MWFA, Water &Sewer Systems Rev Residual Int Tr Rcpts,
Series 29, FGIC Insured, 6.89%, 06/15/30....................................... LRIB Aaa 6,498,804

6,000,000 New York City Transitional Finance Authority Revenue Bond Future Tax Secured,
Ser B, 4.75%, 11/15/18......................................................... LRIB Aa 5,764,871

3,970,000 New York State, DAR, City University Systems Series C, 5.00%, 07/01/17 ........... FCLT Baa1 3,851,558

850,000 New York State, DAR, City University Series F, FGIC TCRS Insured,
5.00%, 07/01/20................................................................ FCLT Aaa 833,329

2,000,000 New York State, DAR, Mental Health Series E, AMBAC, 5.25%, 02/15/18............... FCLT Aaa 2,014,456

1,950,000 New York State, DAR, St. Vincent DePaul Residence, LOC Allied Banks PLC,
5.30%, 07/01/18................................................................ FCLT Aa3 1,977,686

1,900,000 New York State, DAR, TRS 27, 3.70%, 07/01/24, City University, Floating Rate Trust
Receipts 27, MBIA Insured, Liquidity The Bank of New York...................... LRIB Aaa 1,900,000

4,500,000 New York State, DAR, City University System Residual Int Tr Recpts 27,
MBIA Insured, Liquidity The Bank of New York, 8.79%, 07/01/24.................. LRIB Aaa 4,939,006

13,460,000 New York State, DAR, City University System Residual Int Tr Recpts 28,
AMBAC Insured, Liquidity The Bank of New York, 8.16%, 07/01/25................. LRIB Aaa 14,179,543

500,000 New York State, DAR, Eger Health Care Center, FHA 232, 5.10%, 02/01/28............ FCLT Aaa 489,509

2,000,000 New York State, DAR, FHA, Highland Hospital Rochester Series A,
MBIA Insured, 5.45%, 08/01/37.................................................. FCLT Aaa 2,034,292

9,805,000x# Niagara County, NY, IDA, Falls Street Faire Project AMT, 10.00%, 09/01/06
(see Note 4 to Financial Statements)........................................... FCSI NR 3,509,700

5,870,000x# Niagara Falls, NY, URA, Old Falls Street Improvement Project, 11.00%, 05/01/99
(see Note 4 to Financial Statements)........................................... FCSI NR 2,101,167

</TABLE>

<PAGE>

<TABLE>

NEW YORK MUNI FUND

STATEMENT OF INVESTMENTS (continued)
June 30, 1998 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
Principal
Amount Issue Type Rating Value
-------- ----- ---- ----- -----
<S> <C> <C> <C>
$ 1,370,000 Otsego County, NY Industrial Development Agency, Civic Facility Revenue, MBIA,
Bassett Healthcare Project Series A, 5.35%, 11/01/20........................... FCLT Aaa $ 1,389,684

1,280,000 Otsego County, NY Industrial Development Agency, Civic Facility Revenue, MBIA,
Bassett Healthcare Project Series B, 5.38%, 11/01/20........................... FCLT Aaa 1,294,881

6,500,000 Puerto Rico Commonwealth GO, Capital Appreciation, Public Improvement,
07/01/16....................................................................... FCLT A 2,676,439

3,000,000 Puerto Rico Commonwealth GO, Capital Appreciation, Public Improvement,
4.50%, 07/01/23................................................................ FCLT A 2,719,719

3,000,000 Puerto Rico Electric Power Authority Revenue Bond, MBIA, 5.25%, 07/01/16.......... FCLT AAA 3,075,248
------------
Total Investments (Cost $115,673,095)**................... $109,253,516
============
* Inverse Floating Rate Notes (IFRN) are instruments whose interest rates bear
an inverse relationship to the interest rate on another security or the
value of an index. Rates shown are at June 30, 1998.
** Cost is approximately the same for income tax purposes.
# The value of these non-income producing securities has been estimated by
persons designated by the Fund's Board of Directors using methods the
Director's believe reflect fair value. See Note 4 to the financial
statements.
x The Fund, or its affiliates, own 100% of the security. See Note 4 to the
financial statements.

Legend
oType FCLT --Fixed Coupon Long Term
FCSI --Fixed Coupon Short or Intermediate Term
LRIB --Residual Interest Bond Long Term
INLT --Indexed Inverse Floating Rate Bond Long Term
Ratings If a security has a split rating the highest applicable rating
is used, including published ratings on identical credits for
individual ecurities not individually rated.
NR--Not Rated
ooolssue AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
CAB Capital Appreciation Bond
CFR Civic Facility Revenue
COP Certificates of Participation
DAR Dormitory Authority Revenue
ECF Educational Construction Fund
EFC Environmental Facilities Corp.
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corporation
FHA Federal Housing Administration
FSA Financial Security Association
GO General Obligation
HDA Housing Development Agency
HFA Housing Finance Agency
HIC Hospital Improvement Corporation
IDA Industrial Development Authority
ITEMECF Industrial, Tourist, Education, Medical and Environmental Control Facilities
LOC Letter of Credit
MBIA Municipal Bond Insurance Assurance Corp.
MCF Medical Care Facilities
MCFFA Medical Care Facilities Finance Agency
MTA Metropolitan Transit Authority
MWFA Municipal Water Finance Authority
NHRB Nursing Home Revenue Bond
RB Revenue Bond
RDA Research and Development Authority
SWMA Solid Waste Management Authority
URA Urban Renewal Authority

</TABLE>

See Notes to Financial Statements.

<PAGE>

NEW YORK MUNI FUND

NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies

New York Muni Fund (the Fund) is a series of Fundamental Funds, Inc. (the
"Company"). The Company is an open-end management investment company registered
under the Investment Company Act of 1940. The Fund seeks to provide a high level
of income that is excluded from gross income for Federal income tax purposes and
exempt from New York State and New York City personal income taxes. The Fund
intends to achieve its objective by investing substantially all of its total
assets in municipal obligations of New York State, its political subdivisions
and its duly constituted authorities and corporations. The Fund employs leverage
in attempting to achieve this objective. The following is a summary of
significant accounting policies followed in the preparation of its financial
statements:

Valuation of Securities--The Fund's portfolio securities are valued on
the basis of prices provided by an independent pricing service when, in the
opinion of persons designated by the Fund's directors, such prices are
believed to reflect the fair market value of such securities. Prices of
non-exchange traded portfolio securities provided by independent pricing
services are generally determined without regard to bid or last sale prices
but take into account institutional size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. Securities traded or dealt in upon a
securities exchange and not subject to restrictions against resale as well
as options and futures contracts listed for trading on a securities
exchange or board of trade are valued at the last quoted sales price, or,
in the absence of a sale, at the mean of the last bid and asked prices.
Options not listed for trading on a securities exchange or board of trade
for which over-the-counter market quotations are readily available are
valued at the mean of the current bid and asked prices. Money market and
short-term debt instruments with a remaining maturity of 60 days or less
will be valued on an amortized cost basis. Municipal daily or weekly
variable rate demand instruments will be priced at par value plus accrued
interest. Securities not priced in a manner described above and other
assets are valued by persons designated by the Fund's directors using
methods which the directors believe reflect fair value.

Futures Contracts and Options Written on Future Contracts--Initial
margin deposits with respect to these contracts are maintained by the
Fund's custodian in segregated asset accounts. Subsequent changes in the
daily valuation of open contracts are recognized as unrealized gains or
losses. Variation margin payments are made or received as daily
appreciation or depreciation in the value of these contracts occurs.
Realized gains or losses are recorded when a contract is closed.

Federal Income Taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to "regulated
investment companies" and to distribute all of its taxable and tax exempt
income to its shareholders. Therefore, no provision for federal income tax
is required.

Distributions--The Fund declares dividends daily from its net
investment income and pays such dividends on the last business day of each
month. Distributions of net capital gains, if any, realized on sales of
investments are made annually, as declared by the Fund's Board of
Directors. Dividends are reinvested at the net asset value unless
shareholders request payment in cash.

General--Securities transactions are accounted for on a trade date
basis. Interest income is accrued as earned. Premiums and original issue
discount on securities purchased are amortized over the life of the
respective securities. Realized gains and losses from the sale of
securities are recorded on an identified cost basis. Net operating expenses
incurred on properties collateralizing defaulted bonds are charged to
operating expenses as incurred. Costs incurred to restructure defaulted
bonds are charged to realized loss as incurred.

Accounting Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.

<PAGE>

NEW YORK MUNI FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
2. Investment Advisory Fees and Other Transactions with Affiliates

Management Agreement
The Series had a Management Agreement with Fundamental Portfolio Advisors
("FPA") until May 31, 1998. Effective June 1, 1998, the Board of Directors
terminated the agreement with FPA, and selected Tocqueville Asset Management
L.P. ("TAM") as interim manager until a permanent manager is selected. Pursuant
to the agreement the investment adviser to the Series is responsible for the
overall management of the business affairs and assets of the Series subject to
the authority of the Fund's Board of Directors. In consideration for the
services provided under the agreement, the Series will pay an annual management
fee in an amount equal to .50% of the Series' average daily net assets up to
$100 million, and decreasing by .02% of each $100 million increase in net assets
down to 0.4% of net assets in excess of $500 million. During its tenure as
manager, FPA waived fees and reimbursed expenses of $51,200 for the five month
period ended May 31, 1998. TAM earned fees of $49,810 for the one month ended
June 30, 1998. Total management fees for the six months ended June 30, 1998 are
set forth in the Statement of Operations.

Plan of Distribution
The Series has adopted a Distribution and Marketing Plan, pursuant to Rule
12b-1, promulgated under the Investment Company Act of 1940, under which the
Series paid Fundamental Shareholder Services, Inc. ("FSC"), an affiliate of FPA,
the former manager, a fee which accrued daily and paid monthly at an annual rate
of .25% of the Series' average daily net assets. Amounts paid under the plan
were to compensate FSC for the services it provided and the expenses it bore in
distributing the Series' shares to investors. On June 1, 1998 the Board of
Directors ceased authorizing payments to be paid pursuant to the plan. The
amount incurred by the Series pursuant to the agreement for the six months ended
June 30, 1998 is set forth in the Statement of Operations.

Regulatory Proceedings Against The Former Manager And Other Affiliates
On September 30, 1997, the Securities &Exchange Commission announced that
it instituted public administrative and cease-and-desist proceedings against
FPA, the former portfolio manager of the Fund, the former president of FPA and
FSC, the Series' distributor until May 31, 1998. The proceeding arises for the
alleged failure of the Series to disclose the risks of the Series portfolio
strategy, and of FPA's failure to disclose its soft dollar arrangements to the
Fund's Board of Directors. On July 7, 1998, FPA's former president settled the
administrative proceeding instituted by the Securities & Exchange Commission.
Without admitting to or denying the allegations made pursuant to the
administrative proceeding, FPA's former president consented to a fine of $25,000
and a bar from the industry for a period of one year. A hearing has been
scheduled with respect to the other parties named in the proceedings with an
administrative law judge to determine whether the allegations are true, and if
so, what remedial action, if any, is appropriate.

On February 19, 1998 FSC and two of its executives, without admitting or
denying guilt entered into an agreement with the National Association of
Securities Dealers, Inc. ("NASD") whereby they accepted fines totaling $125,000
and other stipulated sanctions as well as a result of the NASD's findings that
they had distributed advertising materials relating to the Series which violated
NASD rules governing advertisements.

Indemnification Payments to Affiliates
FPA and FSC (on behalf of certain of their directors, officers,
shareholders, employees and control persons) (the "Indemnitees") received
payment during the fiscal year ended December 31, 1997 from the Fund in the
amount of $50,230. Upon learning of the payments, the Independent Board Members
of the Fund directed that the Indemnitees return all of the payments to the Fund
or place them in escrow pending their receipt of an opinion of an independent
legal counsel to the effect that the Indemnitees are entitled to receive them.
The Articles of Incorporation and contracts that call for indemnification
specify that no indemnification shall be provided to a person who shall be found
to have engaged in "disabling conduct" as defined by applicable law. The
Indemnities have undertaken to reimburse the Fund for any indemnification
expenses for which it is determined that they were not entitled to as a result
of "disabling conduct" net of any reimbursements already made to the fund in the
form of fees forgone or other similar payments. FSC waived fees in the amount of
$51,200 for the year ended December 31, 1997. FSC has asserted that they elected
to forgo these fees because the Fund was paying legal expenses pursuant to
indemnification. The independent Directors instructed FPA to escrow the full
amount incurred by the Series of $50,230. In addition the Board of Directors has
not authorized the payment of management fees in the amount of $48,528 for
services rendered prior to the termination of the management agreement.

<PAGE>

NEW YORK MUNI FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
3. Directors' Fees
All of the Directors of the Fund are also directors or trustees of two
other affiliated mutual funds for which the Manager acts as investment adviser.
For services and attendance at Board meetings and meetings of committees which
are common to each Fund, each Director who is not affiliated with the Manager is
compensated at the rate of $6,500 per quarter pro rated among the funds based on
their respective average net assets. The Directors also receive additional
compensation for special services as requested by the Board.

4.Complex Securities, Concentrations of Credit Risk, and Investment Transactions

Inverse Floating Rate Notes (IFRN):
The Fund invests in variable rate securities commonly called "inverse
floaters". The interest rates on these securities have an inverse relationship
to the interest rate of other securities or the value of an index. Changes in
interest rate on the other security or index inversely affect the rate paid on
the inverse floater, and the inverse floater's price will be more volatile than
that of a fixed-rate bond. Additionally, some of these securities contain a
"leverage factor"whereby the interest rate moves inversely by a "factor" to the
benchmark rate. For example, the rates on the inverse floating rate note may
move inversely at three times the benchmark rate. Certain interest rate
movements and other market factors can substantially affect the liquidity of
IFRN's.

Concentration of Credit Risk and Transactions in Defaulted Bonds:
The Fund owned 100% of two Niagara Falls Industrial Development Agency
bonds ("IDA Bonds") due to mature on September 1, 2006, and 98.3% of a Niagara
Falls New York Urban Renewal Agency 11% bond ("URA Bond") due to mature on May
1, 2009 which are in default. The IDA Bonds are secured by commercial retail and
office buildings known as the Falls Street Faire and Falls Street Station
Projects ("Projects"). The URA Bond is secured by certain rental payments from
the Projects.

The Fund, through its investment banker and manager, negotiated the sale of
the Falls Street Station project. The net proceeds received on the sale of
approximately $2,800,000 were accounted for as a pro rata recovery of principal
of each of the bonds. The remaining principal value of the Fall Street Station
IDA Bond of approximately $3,887,000 was charged to realized loss on
investments.

The remaining two securities are being valued under methods approved by the
Board of Directors. The aggregate value of these securities is $5,610,867 (35.8%
to their aggregate face value of $15,675,000). There is uncertainty as to the
timing of events and the subsequent ability of the Projects to generate cash
flows sufficient to provide repayment of the bonds. No interest income was
accrued on these bonds during the six months ended June 30, 1998. The Fund
through its investment banker, engaged a property manager to maintain the
Projects on its behalf, and the Fund is paying the net operating expenses of the
Project. Net operating expenses related to the Projects for the six months ended
June 30, 1998 are disclosed in the statement of operations, and cumulatively
from October 6, 1992 to June 30, 1998 totaled approximately $745,387.

Additionally, the Fund owns 100% of several securities as indicated in the
Statement of Investments. As a result of its ownership position there is no
active trading in these securities. Valuations of these securities are provided
by a pricing service and are believed by the Manager to reflect fair value. The
market value of securities owned 100% by the Fund was approximately $20,229,187
(16% of net assets) at June 30, 1998.

Other Investment Transactions:
During the six months ended June 30, 1998, purchases and sales of
investment securities, other than short-term obligations, were $241,479,852 and
$258,868,098, respectively.

<PAGE>

NEW YORK MUNI FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
As of June 30, 1998 net unrealized depreciation of portfolio securities on
a federal income tax basis amounted to $6,419,579 composed of unrealized
appreciation of $3,073,454 and unrealized depreciation of $9,493,033.

The Fund has capital loss carryforwards available to offset future capital
gains as follows:
Amount Expiration
------- ---------
$18,503,000 December 31, 2002
3,430,000 December 31, 2004
2,214,000 December 31, 2005
-----------
$24,147,000
===========

5. Capital Stock

As of June 30, 1998 there were 500,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital stock were as follows:

<TABLE>

<CAPTION>
Six Months Year Ended
June 30, 1998 December 31, 1997
-------------------------- --------------------------
Shares Amount Shares Amount
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Shares sold......................... 1,134,645,381 $ 945,287,186 2,692,167,470 $2,280,916,160
Shares issued on reinvestment
of dividends........................ 1,269,328 1,056,400 3,788,810 3,223,013
Shares redeemed .................... (1,144,309,582) (957,884,541) (2,765,077,644) (2,348,926,704)
------------- ------------- ------------- --------------
Net (decrease) ..................... (8,394,873) $ (11,540,955) (69,121,364) $ (64,787,531)
============= ============= ============= ==============

</TABLE>

6.Line of Credit

The Fund has line of credit agreements with banks collateralized by cash
and portfolio securities. Borrowings under these agreements bear interest linked
to the banks' prime rate.

The maximum month end and the average borrowings outstanding during the six
months ended June 30, 1998 were $35,000,000 and $14,728,177, respectively.

7. Agreement and Plan of Reorganization

On July 16, 1997 each of Fundamental's mutual funds (consisting of: New
York Muni Fund, 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 Series) have adopted, subject to shareholder
approval, an Agreement and Plan of Reorganization (the "Plan") under which each
fund (the "Fundamental Fund") will transfer all of its assets and liabilities to
a newly-created corresponding series of The Tocqueville Trust (the "Tocqueville
Fund") in exchange for shares of the Tocqueville Fund. Shareholders of each
Fundamental Fund will receive shares of the corresponding Tocqueville Fund equal
in value to their shares in the Fundamental Fund. Shareholders will not have to
pay a sales load upon receiving shares of the Tocqueville Fund.

The corresponding Tocqueville Fund will have investment objectives, polices
and restrictions substantially identical to those of the Fundamental Fund. The
Board of Trustees of the Tocqueville Funds is comprised of individuals other
than those who currently serve as Directors (Trustees) of the Fundamental Funds.
Tocqueville Asset Management L.P. is the investment adviser to the Tocqueville
Funds.

A majority of Fundamental's Board Members determined that the Plan would be
in the best interests of shareholders of the Fundamental Funds and recommended
that shareholders of each of the Fundamental Funds approve the Plan at a meeting
anticipated to be held in the Spring of 1998.

8. Subsequent Event

On July 10, 1998 the Board of Directors of the Fund adopted resolutions
authorizing the Fund to terminate and abandon the Agreement and Plan of
Reorganization adopted by the Board of Directors on July 16, 1997.

<PAGE>

NEW YORK MUNI FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
9. Selected Financial Information

<TABLE>

Six Months
Ended
June 30, Years Ended December 31,
1998 ------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net Asset Value, Beginning of Period .......................... $0.86 $0.87 $0.98 $0.88 $1.18 $1.21
---- ---- ---- ---- ---- ----
Income from investment operations:
Net investment income ......................................... .013 .021 .035 .035 .056 .065
Net realized and unrealized gains (losses)
on investments .............................................. (.030) (.009) (.110) .101 (.290) .082
---- ---- ---- ---- ---- ----
Total from investment operations ........................ (.017) .012 (.075) .136 (.234) .147
---- ---- ---- ---- ---- ----
Less Distributions:
Dividends from net investment income .......................... (.013) (.019) (.035) (.035) (.056) (.065)
Return of capital distributions ............................... - (.003) - - - -
Dividends from net realized gains ............................. - - - (.001) (.010) (.112)
---- ---- ---- ---- ---- ----
Total distributions ..................................... (.013) (.022) (.035) (.036) (.066) (.177)
---- ---- ---- ---- ---- ----
Net Asset Value, End of Period ................................ $0.83 $0.86 $0.87 $0.98 $0.88 $1.18
==== ==== ==== ==== ==== ====
Total Return .................................................. 1.26% 1.46% (7.73%) 15.67% (20.47%) 12.58%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) .............................. $122,605 $134,595 $196,746 $226,692 $212,665 $275,552
Ratios to Average Net Assets:
Interest expense ........................................... .98% 1.10% 2.11% 2.09% 1.59% .61%
Operating expenses .......................................... 1.92% 2.64% 1.66% 1.55% 1.62% 1.44%
---- ---- ---- ---- ---- ----
Total expenses .......................................... 2.90%+ 3.74%+ 3.77% 3.64% 3.21% 2.05%
==== ==== ==== ==== ==== ====
Net investment income ................................... 3.29%+ 2.23%+ 3.89% 3.81% .34% 5.20%
Portfolio turnover rate ...................................... 206.67% 399.38% 347.44% 347.50% 289.69% 404.05%
BANK LOANS
Amount outstanding at end of period
(000 omitted) .............................................. $ 0 $ 38,178 $ 1,200 $ 64,575 $ 20,000 $ 20,873
Average amount of bank loans outstanding during the period
(000 omitted) .............................................. $ 14,728 $ 20,631 $ 49,448 $ 49,603 $ 54,479 $ 24,100
Average number of shares outstanding during the period
(000 omitted) ............................................... 127,017 153,535 178,456 191,692 206,323 184,664
Average amount of debt per share during the period ............ $ .116 $ .134 $ .277 $ .259 $ .264 $ .131

</TABLE>

+These ratios are after expense reimbursement of .03% for the year ended
December 31, 1997 and .11% for the six month period ended June 30, 1998.

<PAGE>

(left column)

THE CALIFORNIA MUNI FUND

STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS

Investment in securities
at value (cost $15,070,542) ............................ $15,296,078
Interest receivable ...................................... 465,498
-----------
Total assets ....................................... 15,761,576
-----------
LIABILITIES
Bank overdraft ........................................... 1,888,878
Dividend Payable ......................................... 51,597
Due to Advisor ........................................... 12,229
Accrued expenses ......................................... 69,227
-----------
Total liabilities .................................. 2,021,931
-----------

NET ASSETS consisting of:
Accumulated net realized gain .............. $ 219,191
Unrealized appreciation of
securities ............................... 225,536
Paid-in-capital applicable to
1,705,639 shares of beneficial
interest (Note 4) ........................ 13,294,918
----------- -----------
$13,739,645
===========
NET ASSET VALUE PER SHARE .................................. $8.06
=====

(right column)

STATEMENT OF OPERATIONS
Six Months Ended June 30, 1998 (Unaudited)

INVESTMENT INCOME
Interest income .................................. $483,555
EXPENSES (Notes 2 and 3)
Management fee ................................. $31,027
Custodian and accounting fees .................. 14,565
Transfer agent fees ............................ 13,110
Professional fees .............................. 64,801
Printing and postage ........................... 12,377
Distribution expenses .......................... 25,259
Trustees' fees ................................. 1,264
Other .......................................... 10,109
-------
Total expenses ........................... 172,512
------- --------
Net investment income .................... 311,043
--------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized loss on investments ............... (1,598)
Unrealized depreciation of
investments for the year ..................... (40,611)
--------
Net loss on investments . ................ (42,209)
--------
NET INCREASE IN NET ASSETS FROM
OPERATIONS ....................................... $268,834
========

(two column)

STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>

Six Months
Ended Year Ended
June 30, 1998 December 31,
(Unaudited) 1997
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income ................................................. $ 311,043 $ 580,253
Net realized gain (loss) on investments ............................... (1,598) 493,308
Unrealized appreciation (depreciation) of investments for the year .... (40,611) 374,518
----------- -----------
Net increase (decrease) in net assets from operations ............. 268,834 1,448,079

DIVIDENDS PAID TO SHAREHOLDERS FROM
Net investment income ................................................. (311,043) (580,253)

CAPITAL SHARE TRANSACTIONS (Note 4) ..................................... (50,150) (3,287,401)
----------- -----------
Total increase (decrease) ....................................... (92,359) (2,419,575)

NET ASSETS:
Beginning of year ..................................................... 13,832,004 16,251,579
----------- -----------
End of year ........................................................... $13,739,645 $13,832,004
=========== ===========

</TABLE>

See Notes to Financial Statements.

<PAGE>

THE CALIFORNIA MUNI FUND

STATEMENT OF CASH FLOWS
Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
CASH PROVIDED (USED) BY FINANCING ACTIVITIES:
<S> <C> <C>
Sales of capital shares ........................................... $93,166,980
Repurchase of capital shares ...................................... (93,348,180)
-----------
Cash provided by capital share transactions ....................... (181,200)
Cash provided by borrowings ....................................... 1,385,860
Distributions paid in cash ........................................ (179,993) $1,024,667
----------- ----------

CASH (USED) PROVIDED BY OPERATIONS:
Purchases of investments .......................................... (25,807,868)
Net proceeds from short-term investments .......................... 0
Proceeds from sales of investments ................................ 19,653,412
-----------
(6,154,456)
Increase in deposit at brokers and custodian for short sales ...... 0
Net investment income ............................................. 311,043
Net change in receivables/payables related to operations .......... 4,818,746
-----------
5,129,789 (1,024,667)
----------- ----------
Net Increase/Decrease in Cash ..................................... 0
Cash, Beginning of Year ........................................... 0
----------
Cash, End of Year ................................................. $ 0
==========

</TABLE>

See Notes to Financial Statements.

<PAGE>

<TABLE>

Principal
Amount Issue Type Rating Value
--------- ----- ---- ------ -----
<S> <C> <C> <C> <C>
$ 100,000# Arvin, Development Corporation, COP, RB, 8.75%, 09/01/18 ............... FCLT NR $ 24,505
200,000 Beverly Hills, PFA, RB, IFRN*, MBIA Insured, 7.32%, 06/01/15 ........... LRIB AAA 210,928
100,000 CSAC Finance Corp, COP, Sutter County Health Facilities Project,
7.80%, 01/01/21 ...................................................... FCLT Baa1 101,973
70,000 California, HFA, Home Mortgage, RB, Series A, MBIA Insured,
5.70%, 08/01/10 ...................................................... FCSI Aaa 74,012
300,000 California Statewide Communities Development Authority, Cedars
Sinai Medical Project, COP, RB, IFRN*, 6.87%, 11/01/15 ............... LRIB A1 303,044
300,000 East Bay, Wastewater System Project, RB, Refunding, AMBAC
Insured, IFRN*, 6.87%, 06/01/20 ...................................... LRIB AAA 313,133
3,550,000 First Albany Corporation Trust Certificate Series 98-2, IFRN*,
AMBAC, 3.95%, 07/01/28 ............................................... LRIB NR 3,550,000
(Trust Certificates relating to PR Comwlth Ser B, AMBAC, 5.00,
07/01/28)
1,500,000 First Albany Corporation Municipal Trust Certificate Series 98-2,
IFRN*, AMBAC, 6.60%, 07/01/28 ........................................ LRIB NR 1,432,675
(Trust Certificates relating to PR Comwlth Ser B, AMBAC, 5.00,
07/01/28)
220,000 Hawthorne, CRA, TAR, 6.75%, 09/01/24 ................................... FCLT Baa 242,459
170,000 Lake Elsinore, USD, Refunding, COP, 6.90%, 02/01/20 .................... FCLT BBB 184,698
10,000 Los Angeles, Home Mortgage, RB, 9.00%, 06/15/18 ........................ FCLT A 10,043
1,505,192 Los Angeles, HFA, MFH Project C, CAB, RB, 12.00%, 12/01/29 ............. FCLT NR 1,114,034
250,000 Northern California Power Agency, Multiple Capital Facilities, RB,
MBIA Insured, IFRN*, 8.89%, 08/01/25 ................................. LRIB AAA 289,705
250,000 Northern California Transmission Agency, CA-ORE Transmission
Project, RB, MBIA Insured, IFRN*, 6.78%, 04/29/24 .................... LRIB AAA 250,737
500,000 Orange County Airport, RB, Refunding, MBIA Insured, 5.63%,
07/01/12 ............................................................. FCLT Aaa 534,730
250,000 Orange County, LTA, RB, IFRN*, 8.27%, 02/14/11 ......................... LRIB AA 297,642
250,000 Orange County, LTA, RB, IFRN*, 7.91%, 02/14/11 ......................... LRIB AAA 285,441
185,000 Panoche, Water District, COP, 7.50%, 12/01/08 .......................... FCSI BBB 198,283
3,000,000 Puerto Rico Commonwealth GO, CAB, 07/01/17 ............................. LRIB A 1,169,348
250,000 Rancho, Water District Financing Authority, RB, Prerefunded @
104, AMBAC Insured, IFRN*, 9.07%, 08/17/21 ........................... LRIB AAA 298,892
250,000 Redding, Electric System, COP, Series A, FGIC Insured, IFRN*,
7.08%, 06/01/19 ...................................................... LRIB AAA 263,494
175,000 Riverside, HFA, Riverside Apartment Project, RB, 7.88%, 11/01/19 ....... FCLT BB- 179,549
500,000 San Bernardino, COP, Series B. MBIA Insured, IFRN*, 7.45%,
07/01/16 ............................................................. INLT AAA 529,656
900,000 San Bernardino, COP, Series PA38, IFRN*, 14.42%, 07/01/16,
Rule 144A Security (restricted as to resale except to qualified
institutions) ........................................................ LRIB NR 1,023,154
200,000 San Diego Water Authority, COP, FGIC Insured, IFRN*, 7.40%,
04/22/09 ............................................................. LRIB AAA 238,325

</TABLE>

<PAGE>

<TABLE>

Principal
Amount Issue Type Rating Value
--------- ----- ---- ------ -----
<S> <C> <C> <C> <C>
$1,440,000x San Jose, CRA, Series PA-38, TAB, MBIA Insured, IFRN*, 8.51%,
08/01/16, Rule 144A Security (restricted as to resale except to
qualified institutions) .............................................. LRIB NR $ 1,477,541
250,000 Southern California Public Power Authority, FGIC Isured, IFRN*,
6.62%, 07/01/17 ...................................................... LRIB AAA 241,119
45,000 Tri City, HFA, FNMA/GNMA Collateralized, AMT, 6.45%, 12/01/28 .......... FCLT AAA 48,657
30,000 Tri City, HFA, FNMA/GNMA Collateralized, AMT, Series B, 6.30%,
12/01/28 ............................................................. FCLT AAA 32,477
250,000 Tri City, HFA, FNMA/GNMA Collateralized, AMT, Series E, 6.40%,
12/01/28 ............................................................. FCLT AAA 271,979
100,000 Upland, HFA, RB, 7.85%, 07/02/20 ....................................... FCLT BBB 103,845
Total Investments (Cost $15,070,542**) ........................... $15,296,078

<FN>

*Inverse Floating Rate Notes (IFRN) are instruments whose interest rates bear
an inverse relationship to the interest rate on another security or the value
of an index. Rates shown are at June 30, 1998.
**Cost is the same for Federal income tax purposes.
#Denotes non-income producing security: Security is in default.
xThe Fund owns 100% of the security and therefore there is no trading in the
security.

</FN>

(left column)
Legend

Type FCLT -Fixed Coupon Long Term
FCSI -Fixed Coupon Short or Intermediate Term
LRIB -Residual Interest Bond Long Term
INLT -Indexed Inverse Floating Rate Bond Long Term
Ratings If a security has a split rating the highest applicable
rating is used, including published ratings on identicial
credits for individual securities not individually rated.
Ratings are unaudited.
NR -Not Rated
Issue AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
CAB Capital Appreciation Bond
CGIC Capital Guaranty Insurance Company

(right column)

COP Certificate of Participation
CRA California Redevelopment Agency
FGIC Financial Guaranty Insurance Corporation
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
HFA Housing Finance Authority
LTA Local Transportation Authority
MBIA Municipal Bond Insurance Assurance Corporation
MFH Multi Family Housing
PFA Public Financing Authority
RB Revenue Bond
TAB Tax Allocation Bond
TAR Tax Allocation Refunding
USD Unified School District

</TABLE>

See Notes to Financial Statements.

<PAGE>

THE CALIFORNIA MUNI FUND

NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

(left column)

1. Significant Accounting Policies
The California Muni Fund (the Fund) was organized as a Massachusetts
business trust and is registered as an open end management investment company
under the Investment Company Act of 1940. The Fund's objective is to provide as
high a level of income that is excluded from gross income for Federal income tax
purposes and exempt from California personal income tax as is consistent with
the preservation of capital. The Fund employs leverage in attempting to achieve
its objective. The following is a summary of significant accounting policies
followed in the preparation of its financial statements:

Valuation of Securities-The Fund's portfolio securities are valued on the
basis of prices provided by an independent pricing service when, in the opinion
of persons designated by the Fund's trustees, such prices are believed to
reflect the fair market value of such securities. Prices of non-exchange traded
portfolio securities provided by independent pricing services are generally
determined without regard to bid or last sale prices but take into account
institutional size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. Securities traded or dealt in upon a securities exchange and not subject
to restrictions against resale as well as options and futures contracts listed
for trading on a securities exchange or board of trade are valued at the last
quoted sales price, or, in the absence of a sale, at the mean of the last bid
and asked prices. Options not listed for trading on a securities exchange or
board of trade for which over-the-counter market quotations are readily
available are valued at the mean of the current bid and asked prices. Money
market and short-term debt instruments with a remaining maturity of 60 days or
less will be valued on an amortized cost basis. Securities not priced in a
manner described above and other assets are valued by persons designated by the
Fund's trustees using methods which the trustees believe accurately reflects
fair value.

Federal Income Taxes-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to "regulated investment companies" and
to distribute all of its taxable and tax exempt income to its shareholders.
Therefore, no provision for federal income tax is required.

(right column)

Distributions-The Fund declares dividends daily from its net investment
income and pays such dividends on the last business day of each month.
Distributions of net capital gains, if any, realized on sales of investments are
made annually, as declared by the Fund's Board of Trustees. Dividends are
reinvested at the net asset value unless shareholders request payment in cash.

General-Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and original issue discount on
securities purchased are amortized over the life of the respective securities.
Realized gains and losses from the sale of securities are recorded on an
identified cost basis.

Accounting Estimates-The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.

2. Investment Advisory Fees and Other
Transactions With Affiliates

Management Agreement
The Series had a Management Agreement with Fundamental Portfolio Advisors
("FPA") until May 31, 1998. Effective June 1, 1998, the Board of Trustees
terminated the agreement with FPA, and selected Tocqueville Asset Management
L.P. ("TAM") as interim manager until a permanent manager is selected. Pursuant
to the agreement the investment adviser to the Series is responsible for the
overall management of the business affairs and assets of the Series subject to
the authority of the Fund's Board of Trustees. In consideration for the services
provided under the agreement, the Series will pay an annual management fee in an
amount equal to .50% of the Series' average daily net assets up to $100 million,
and decreasing by .02% of each $100 million increase in net assets down to 0.4%
of net assets in excess of $500 million. TAM earned fees of $5,768 for the one
month ended June 30, 1998. Total management fees for

<PAGE>

THE CALIFORNIA MUNI FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

(left column)

the six months ended June 30,1998 are set forth in the Statement of Operations.

Plan of Distribution
The Series has adopted a Distribution and Marketing Plan, pursuant to Rule
12b-1, promulgated under the Investment Company Act of 1940, under which the
Series paid Fundamental Shareholder Services, Inc. ("FSC"), an affiliate of FPA,
the former manager, a fee which accrued daily and paid monthly at an annual rate
of .25% of the Series' average daily net assets. Amounts paid under the plan
were to compensate FSC for the services it provided and the expenses it bore in
distributing the Series' shares to investors. On June 1,1998 the Board of
Trustees ceased authorizing payments to be paid pursuant to the plan. The amount
incurred by the Series pursuant to the agreement for the six months ended June
30,1998 is set forth in the Statement of Operations.

Regulatory Proceedings Against The
Former Manager And Other Affiliates
On September 30,1997, the Securities & Exchange Commission announced that it
instituted public administrative and cease-and-desist proceedings against FPA,
the former portfolio manager of the Fund, the former president of FPA and FSC,
the Series' distributor until May 31, 1998. The proceeding arises for the
alleged failure of the Series to disclose the risks of the Series portfolio
strategy, and of FPA's failure to disclose its soft dollar arrangements to the
Fund's Board of Trustees. On July 7, 1998, FPA's former president settled the
administrative proceeding instituted by the Securities & Exchange Commission.
Without admitting to or denying the allegations made pursuant to the
administrative proceeding, FPA's former president consented to a fine of $25,000
and a bar from the industry for a period of one year. A hearing has been
scheduled with respect to the other parties named in the proceedings with an
administrative law judge to determine whether the allegations are true, and if
so, what remedial action, if any, is appropriate.

(right column)

$125,000 and other stipulated sanctions as well as a result of the NASD's
findings that they had distributed advertising materials relating to the Series
which violated NASD rules governing advertisements.

Indemnification Payments to Affiliates
FPA and FSC (on behalf of certain of their directors, officers,
shareholders, employees and control persons) (the "Indemnitees") received
payment during the fiscal year ended December 31, 1997 from the Fund in the
amount of approximately $4,000. Upon learning of the payments, the Independent
Board Members of the Fund directed that the Indemnitees return all of the
payments to the Fund or place them in escrow pending their receipt of an opinion
of an independent legal counsel to the effect that the Indemnitees are entitled
to receive them. The Declaration of Trust and contracts that call for
indemnification specify that no indemnification shall be provided to a person
who shall be found to have engaged in "disabling conduct" as defined by
applicable law. The Indemnities have undertaken to reimburse the Fund for any
indemnification expenses for which it is determined that they were not entitled
to as a result of "disabling conduct" net of any reimbursements already made to
the fund in the form of fees forgone or other similar payments. Pending
clarification of the legal issues involved, the Indemnitees have placed into an
escrow account $4,000 as of April 30, 1998.

3. Trustees' Fees
All of the Trustees of the Fund are also directors or trustees of two other
affiliated mutual funds for which the Manager acts as investment adviser. For
services and attendance at Board meetings and meetings of committees which are
common to each Fund, each Trustee who is not affiliated with the Manager is
compensated at the rate of $6,500 per quarter pro rated among the funds based on
their respective average net assets. The Trustees also receive additional
compensation for special services as requested by the Board.

4. Shares of Beneficial Interest
As of June 30, 1998 there were an unlimited number of shares of beneficial
interest (no par value) authorized and capital paid in which amounted to
$13,294,918. Transactions in shares were as follows:

<PAGE>

THE CALIFORNIA MUNI FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

(left column)

Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
------------- -----------------
(Unaudited)
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 11,599,347 $ 93,166,981 32,632,214 $256,708,018

Shares issued
on
reinvest-
ment of
dividends 16,268 131,049 51,101 419,765
Shares
redeemed (11,542,892) (93,348,180) (33,097,092) (260,415,184)
---------- ------------ ---------- ------------
Net increase
(decrease) 32,722 (50,150) (413,777) (3,287,401)
========== ============ ========== ============

5. Complex Securities and Investment
Transactions

Inverse Floating Rate Notes:
The Fund invests in variable rate securities commonly called "inverse
floaters". The interest rates on these securities have an inverse relationship
to the interest rate of other securities or the value of an index. Changes in
interest rate on the other security or index inversely affect the rate paid on
the inverse floater, and the inverse floater's price will be more volatile than
that of a fixed rate bond. Certain interest rate movements and other market
factors can substantially affect the liquidity of IFRN's.

Investment Transactions:

During the six months ended June 30, 1998, the cost of purchases and
proceeds from sales of investment securities, other than short-term obligations,
were $25,807,869 and $19,653,000, respectively.

As of June 30, 1998 the net unrealized appreciation of portfolio securities
amounted to $225,536 composed of unrealized
appreciation of $770,048 and unrealized depreciation of $544,512.

(right column)

6. Line of Credit
The Fund has a line of credit agreement with a bank collateralized by
portfolio securities. Borrowings under this agreement bear interest linked to
the bank's prime rate.

7. Agreement and Plan of Reorganization
On July 16, 1997 each of Fundamental's mutual funds (consisting of: New York
Muni Fund, 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 Series) have adopted, subject to shareholder
approval, an Agreement and Plan of Reorganization (the "Plan") under which each
fund (the "Fundamental Fund") will transfer all of its assets and liabilities to
a newly-created corresponding series of The Tocqueville Trust (the "Tocqueville
Fund") in exchange for shares of the Tocqueville Fund. Shareholders of each
Fundamental Fund will receive shares of the corresponding Tocqueville Fund equal
in value to their shares in the Fundamental Fund. Shareholders will not have to
pay a sales load upon receiving shares of the Tocqueville Fund.

16
<PAGE>

8. Subsequent Event
On July 10, 1998 the Board of Trustees of the Fund adopted resolution
authorizing the Fund to terminate and abandon the agreement and plan of
reorganization adopted by the Board of Trustees on July 16, 1997.

9. Selected Financial Information

<TABLE>

Six Months
Ended
June 30, Years Ended December 31,
1998 ------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net Asset Value, Beginning of Year .............................. $ 8.27 $ 7.79 $ 8.91 $ 7.10 $ 9.49 $ 8.81
Income from investment operations:
Net investment income ........................................... .218 .376 .409 .419 .553 .563
Net realized and unrealized gains (losses)
on investments ................................................ (.210) .480 (1.120) 1.810 (2.390) .876
Total from investment operations ........................ .008 .856 (.711) 2.229 (1.837) 1.439
Less Distributions:
Dividends from net investment income ............................ (.218) (.376) (.409) (.419) (.553) (.563)
Dividends from net realized gains ............................... - - - - - (.196)
Total distributions ..................................... (.218) (.376) (.409) (.419) (.553) (.759)
Net Asset Value, End of Year .................................... $ 8.06 $ 8.27 $ 7.79 $ 8.91 $ 7.10 $ 9.49
Total Return .................................................... 6.41% 11.33% (8.01%) 32.02% (19.89%) 16.80%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) ................................... 13,740 13,832 16,252 12,622 10,558 16,280
Ratios to Average Net Assets:
Interest expense .............................................. 0 .42 .45% .39% .98% .39%
Operating expenses ............................................ 2.78% 2.95* 2.81% 2.81% 2.50% 1.77%*
Total expenses .......................................... 2.78% 3.37* 3.26% 3.20% 3.48% 2.16%*
Net investment income ................................... 5.01% 4.55%* 4.88% 5.02% 6.80% 6.04%*
Portfolio turnover rate ......................................... 152.70% 70.86% 89.83% 53.27% 15.88% 51.26%

BANK LOANS
Amount outstanding at end of year (000 omitted) ................. $ 0 $ 503 $ 0 $ 0 $1,292 $3,714
Average amount of bank loans outstanding during the
period (000 omitted) .......................................... $ 0 $ 664 $ 823 $ 642 $1,620 $ 958
Average number of shares outstanding during the period
(000 omitted) ................................................. 1,550 1,609 1,768 1,635 1,711 1,517
Average amount of debt per share during the period .............. $ 0 $ .41 $ .47 $ .39 $ .95 $ .63

<FN>
**These ratios are after expense reimbursement of .03%, and .50% for the years ended December 31, 1997 and 1993.
</FN>
</TABLE>

<PAGE>

(left column)

FUNDAMENTAL FIXED-INCOME FUND
TAX-FREE MONEY MARKET SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investment in securities at value
(cost $12,050,000) $12,050,000
Receivables:
Fund shares sold 38,320
Interest 191,987
-----------
Total assets 12,280,307
-----------

LIABILITIES
Fund shares redeemed 8,880,153
Dividends 599
Due to advisor 10,487
Accrued expenses 24,598
Other liabilities 198,122
-----------
Total liabilities 9,113,959
-----------

NET ASSETS equivalent to $1.00 per share on
3,172,207 shares of beneficial interest
outstanding (Note 4) $ 3,166,348
===========

(right column)

STATEMENT OF OPERATIONS
Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income ................................... $623,224
EXPENSES (Notes 2 and 3)
Investment advisory fees .......................... $ 92,445
Custodian and accounting fees ..................... 31,632
Transfer agent fees ............................... 44,131
Trustees' fees .................................... 12,181
Professional fees ................................. 12,391
Distribution fees ................................. 90,267
Postage and printing .............................. 3,315
Other ............................................. 29,060
--------
Total expenses .............................. 315,422
Less:
Expenses paid indirectly (Note 6) ............... (3,888)
--------
Net expenses ................................ 311,534
--------

NET INCREASE IN NET ASSETS FROM
OPERATIONS ........................................ $311,690
========

(two column)

STATEMENTS OF CHANGES IN NET ASSETS

Six Months
Ended Year Ended
June 30, 1998 December 31,
(Unaudited) 1997
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 311,690 $ 1,025,345
----------- -----------
Net increase in net assets from operations 311,690 1,025,345
DIVIDENDS PAID TO SHAREHOLDERS FROM
Investment income (311,690) (1,025,345)
CAPITAL SHARE TRANSACTIONS (Note 4) (10,096,820) 8,642,404
----------- -----------
Total (decrease) increase (10,096,820) 8,642,404
NET ASSETS:
Beginning of period 13,263,168 4,620,764
----------- -----------
End of period $ 3,166,348 $13,263,168
=========== ===========

See Notes to Financial Statements.

<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
TAX-FREE MONEY MARKET SERIES

STATEMENT OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>

Principal
Amount Issue Value
--------- ----- -----
<S> <C> <C>
$ 75,000 Cuyahoga County, OH, IDR S & R Playhouse Realty, VRDN*, LOC Marine
Midland Bank, 4.00%, 12/01/09 ............................................... $ 75,000
200,000 Delaware County, PA, SWDF, Scott Paper Project, Kimberly-Clark Corp.
Guaranty, VRDN*, 3.45%, 12/01/18 ............................................ 200,000
450,000 First Albany Corporation Municipal Trust Certificate Series 98-2, IFRN*,
AMBAC, 3.95%, 07/01/28 ...................................................... 450,000
(Trust Certificates relating to PR Comwlth Ser B, AMBAC, 5.00, 07/01/28)
200,000 Fulton County, GA, PCR, General Motors Project, VRDN*,
3.60%, 04/01/10 ............................................................. 200,000
200,000 Garfield County, OK, PCR, Oklahoma Gas & Electric Co. Project A, VRDN*,
3.60%, 01/01/25 ............................................................. 200,000
300,000 Illinois HFAR, Franciscan Sisters Project, LOC Toronto Dominion Bank,
VRDN*, 3.55%, 09/01/15 ...................................................... 300,000
200,000 Jasper County, IN, PCR, Northern Indiana Public Service, 3.80%, 08/01/10 ...... 200,000
200,000 McIntosh, AL, PCR, Ciba Geigy Project, LOC Swiss Bank Corp. VRDN*,
3.60%, 12/01/03 ............................................................. 200,000
300,000 Missouri, PCR, Monsanto Project, VRDN*, 3.70%, 02/01/09 ....................... 300,000
200,000 Missouri, Third Street Building Project, SPA First Chicago, VRDN*, 3.60%,
08/01/99 .................................................................... 200,000
200,000 Nebraska Higher Education Loan Program, SPA, SLMA, MBIA Insured,
VRDN*, 3.70%, 12/01/15 ...................................................... 200,000
400,000 New York NY GO, Series F-4, Credit Facility with Landesbank Hessen,
3.35%, 02/15/20 ............................................................. 400,000
8,800,000x New York State, DAR, TRS 27, 3.70%, 07/01/24, City University, Floating
Rate Trust Receipts 27, MBIA Insured, Liquidity The Bank of New York ........ 8,800,000
125,000 Scioto County, OH, HFR, VHA, Central Capital Project, AMBAC Insured,
VRDN*, 3.50%, 12/01/25 ...................................................... 125,000
200,000 University of Michigan Rev, Ser A, University of Michigan Hospital, VRDN*,
3.80%, 12/01/27 ............................................................. 200,000
-----------
Total Investments (Cost $12,050,000**) ........................................ $12,050,000
===========
<FN>
*Variable Rate Demand Notes (VRDN) are instruments whose interest rate changes
on a specific date and/or whose interest rates vary with changes in a
designated base rate.
**Cost is the same for Federal income tax purposes.
xThe Fund, or its affiliates, own 100% of the security and therefore there is
no trading in the security.
</FN>
</TABLE>

19
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
TAX-FREE MONEY MARKET SERIES

STATEMENT OF INVESTMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

Legend
Issue AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
GO General Obligation
ETM Escrowed to Maturity
HFAR Health Facilities Authority Revenue
HFR Hospital Facilities Revenue
IDB Industrial Development Bond
IDR Industrial Development Revenue
LOC Letter of Credit
MBIA Municipal Bond Insurance Assurance Corporation
PCR Pollution Control Revenue
PHA Public Housing Authority
RB Revenue Bond
SLMA Student Loan Marketing Association
SPA Stand By Bond Purchase Agreement
SWDF Solid Waste Disposal Facility
TRANS Tax Revenue Anticipation Notes

See Notes to Financial Statements.

<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
TAX-FREE MONEY MARKET SERIES

NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies

Fundamental Fixed-Income Fund (the Fund) is an open-end management
investment company registered under the Investment Company Act of 1940. The Fund
acts as a series company currently issuing three classes of shares of beneficial
interest, the Tax-Free Money Market Series, the High-Yield Municipal Bond Series
and the Fundamental U.S. Government Strategic Income Fund Series. Each series is
considered a separate entity for financial reporting and tax purposes. The
Tax-Free Money Market Series (the Series') investment objective is to provide as
high a level of current income exempt from federal income tax as is consistent
with the preservaton of capital and liquidity. The following is a summary of
significant accounting policies followed in the preparation of the Series'
financial statements:

Valuation of Securities:
Investments are stated at amortized cost. Under this valuation method, a
portfolio instrument is valued at cost and any premium or discount is
amortized on a constant basis to the maturity of the instrument.
Amortization of premium is charged to income, and accretion of market
discount is credited to unrealized gains. The maturity of investments is
deemed to be the longer of the period required before the Fund is entitled
to receive payment of the principal amount or the period remaining until
the next interest adjustment.

Federal Income Taxes:
It is the Series' policy to comply with the requirements of the Internal
Revenue Code applicable to "regulated investment companies" and to
distribute all of its taxable and tax exempt income to its shareholders.
Therefore, no provision for federal income tax is required.

Distributions:
The Series declares dividends daily from its net investment income and
pays such dividends on the last business day of each month. Distributions
of net capital gains are made annually, as declared by the Fund's Board of
Trustees. Dividends are reinvested at the net asset value unless
shareholders request payment in cash.

General:
Securities transactions are accounted for on a trade date basis. Interest
income is accrued as earned. Realized gains and losses from the sale of
securities are recorded on an identified cost basis.

Accounting Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases
in net assets from operations during the reporting period. Actual results
could differ from those estimates.

21
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
TAX-FREE MONEY MARKET SERIES

Management Agreement
The Series had a Management Agreement with Fundamental Portfolio Advisors
("FPA") until May 31, 1998. Effective June 1, 1998, the Board of Trustees
terminated the agreement with FPA, and selected Tocqueville Asset Management
L.P. ("TAM") as interim manager until a permanent manager is selected. Pursuant
to the agreement the investment adviser to the Series is responsible for the
overall management of the business affairs and assets of the Series subject to
the authority of the Fund's Board of Trustees. In consideration for the services
provided under the agreement, the Series will pay an annual management fee in an
amount equal to .50% of the Series' average daily net assets up to $100 million,
and decreasing by .02% of each $100 million increase in net assets down to 0.4%
of net assets in excess of $500 million. TAM earned fees of $2,177 for the one
month ended June 30, 1998. Total management fees for the six months ended June
30,1998 are set forth in the Statement of Operations.

Plan of Distribution
The Series has adopted a Distribution and Marketing Plan, pursuant to Rule
12b-1, promulgated under the Investment Company Act of 1940, under which the
Series paid Fundamental Shareholder Services, Inc. ("FSC"), an affiliate of FPA,
the former manager, a fee which accrued daily and paid monthly at an annual rate
of .25% of the Series' average daily net assets. Amounts paid under the plan
were to compensate FSC for the services it provided and the expenses it bore in
distributing the Series' shares to investors. On June 1,1998 the Board of
Trustees ceased authorizing payments to be paid pursuant to the plan. The amount
incurred by the Series pursuant to the agreement for the six months ended June
30,1998 is set forth in the Statement of Operations.

Regulatory Proceedings Against The Former Manager And Other Affiliates
On September 30,1997, the Securities & Exchange Commission announced that it
instituted public administrative and cease-and-desist proceedings against FPA,
the former portfolio manager of the Fund, the former president of FPA and FSC,
the Series' distributor until May 31, 1998. The proceeding arises for the
alleged failure of the Series to disclose the risks of the Series portfolio
strategy, and of FPA's failure to disclose its soft dollar arrangements to the
Fund's Board of Trustees. On July 7, 1998, FPA's former president settled the
administrative proceeding instituted by the Securities & Exchange Commission.
Without admitting to or denying the allegations made pursuant to the
administrative proceeding, FPA's former president consented to a fine of $25,000
and a bar from the industry for a period of one year. A hearing has been
scheduled with respect to the other parties named in the proceedings with an
administrative law judge to determine whether the allegations are true, and if
so, what remedial action, if any, is appropriate.

On February 19,1998 FSC and two of its executives, without admitting or
denying guilt entered into an agreement with the National Association of
Securities Dealers, Inc. ("NASD") whereby they accepted fines totaling $125,000
and other stipulated sanctions as well as a result of the NASD's findings that
they had distributed advertising materials relating to the Series which violated
NASD rules governing advertisements.

Indemnification Payments to Affiliates
FPA and FSC (on behalf of certain of their directors, officers,
shareholders, employees and control persons) (the "Indemnitees") received
payment during the fiscal year ended December 31, 1997 from three of the
Fundamental Funds for attorneys' fees incurred by them in defending certain
proceedings. Upon learning of the payments, the Independent Board Members of the
Fundamental Funds directed that the Indemnitees return all of the payments to
the Funds or place them in escrow pending their receipt of an opinion of an
independent legal counsel to the effect that the Indemnitees are entitled to
receive them. The charter documents and contracts that call for

<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
TAX-FREE MONEY MARKET SERIES

NOTES TO FINANCIAL STATEMENTS (continued) June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
indemnification specify that no indemnification shall be provided to a person
who shall be found to have engaged in "disabling conduct" as defined by
applicable law. The Indemnities have undertaken to reimburse the Fundamental
Funds for any indemnification expenses for which it is determined that they were
not entitled to as a result of "disabling conduct" net of any reimbursements
already made to the Fund in the form of fees forgone or other similar payments.
FPA and FSC waived fees during the year ended December 31, 1997, and have
asserted that they elected to forgo these fees because the Fundamental Funds
were paying legal expenses pursuant to indemnification. Pending clarification of
the legal issues involved, the Indemnitees have placed into an escrow account
$106,863 as of April 30, 1998. The independent trustees instructed FPA to escrow
the full amount incurred by the Fundamental Funds of approximately $287,000. In
addition the Board of Trustees has not authorized the payment of management fees
to the amount of $8,310 prior to the termination of the management agreement.

4. Shares of Beneficial Interest
As of June 30, 1998 there were an unlimited number of shares of beneficial
interest (no par value) authorized and capital paid in amounted to $3,172,207.
Transactions in shares of beneficial interest, all at $1.00 per share were as
follows:

Six Months
Ended Year ended
June 30, 1998 December 31,
(Unaudited) 1997
------------- -----------
Shares sold $1,039,649,010 $2,566,332,934
Shares issued on reinvestment of dividends 36,506 1,048,578
Shares redeemed (1,049,782,336) (2,558,739,108)
-------------- --------------
Net (decrease) increase (10,096,820) $ 8,642,404
============== ==============

5. Line of Credit
The Fund has a line of credit agreement with its custodian bank
collateralized by cash and portfolio securities for $500,000. Borrowings under
this agreement bear interest linked to the bank's prime rate. The Series had no
borrowing under the line of credit agreement as of or during the six months
ended June 30, 1998.

6. Expenses Paid Indirectly
The Fund has an arrangement with its custodian whereby credits earned on
cash balances maintained at the custodian are used to offset custody charges.
These credits amounted to approximately $3,888 for the six months ended June 30,
1998.

<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
TAX-FREE MONEY MARKET SERIES

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
(the "Tocqueville Fund") in exchange for shares of the Tocqueville Fund.
Shareholders of each Fundamental Fund will receive shares of the corresponding
Tocqueville Fund equal in value to their shares in the Fundamental Fund.
Shareholders will not have to pay a sales load upon receiving shares of the
Tocqueville Fund.

A majority of Fundamentals' Board Members determined that the Plan would be
in the best interests of shareholders of the Fundamental Funds and recommended
that shareholders of each of the Fundamental Funds approve the Plan at a meeting
anticipated to be held in the Spring of 1998.

8. Subsequent Event

On July 10, 1988 the Board of Trustees of the Fund adopted resolutions
authorizing the Fund to terminate and abandon the Agreement and Plan of
Reorganization adopted by the Board of Trustees on July 16, 1997.

9. Selected Financial Information

<TABLE>

Six Months
Ended Years Ended December 31,
June 30, 1998 -------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA AND RATIOS
(for a share outstanding throughout the period)
Net Asset Value, Beginning of Year ............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income ............................ 0.022 0.022 0.023 0.026 0.017 0.014
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income ............. (0.022) (0.022) (0.023) (0.026) (0.017) (0.014)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ======
Total Return ..................................... 1.85% 2.19% 2.28% 2.60% 1.69% 1.62%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000 omitted) ............ 3,166 13,263 4,621 11,251 9,004 5,830
Ratios to Average Net Assets
Expenses ..................................... 1.69% 1.52%#+ 1.54%# 1.53%# 0.91%+ .95%+
Net investment income ........................ 1.69% 2.10% 2.04% 2.43% 1.55% 1.25%

BANK LOANS
Amount outstanding at end of period
(000 omitted) .................................. $ - $ - $ 218 $ - $ 451 $ 290
Average amount of bank loans outstanding
during the period (000 omitted) ................ $ - $ - $ - $ 41 $ 53 $ 111
Average number of shares outstanding during
the period (000 omitted) ....................... 37,284 48,801 56,876 44,432 56,267 25,786
Average amount of debt per share during
the period ..................................... $ - $ - $ - $ .001 $ .001 $.004

<FN>
+These ratios are after expense reimbursement of .02%, .44% and .67%, for each of the years ended December 31,
1997, 1994 and 1993, respectively.
#These ratios would have been 1.44%, 1.40% and 1.35% net of expense offsets of .08%, .14% and .18% for the years
ended December 31, 1997, 1996 and 1995, respectively.
</FN>
</TABLE>

24
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES

(LEFT COLUMN)

STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
- -------------------------------------------------------------
ASSETS
Investment in securities at value (Note 5)
(cost $2,358,739) .......................... $2,414,086
Interest receivable .......................... 47,032
----------
Total assets ......................... 2,461,118
----------
LIABILITIES
Due to advisor ............................... 8,731
Accrued expenses ............................. 14,115
Bank overdraft payable ....................... 119,692
Dividend payable ............................. 4,578
----------
Total liabilities .................... 147,116
----------
NET ASSETS consisting of:
Accumulated net realized
loss .......................... $ (147,351)
Unrealized appreciation
of securities ................. 55,347
Paid-in-capital applicable to
315,190 shares of
beneficial interest
(Note 4) ...................... 2,406,006
----------
$2,314,002
==========
NET ASSET VALUE PER SHARE ..................... $ 7.34
==========

(RIGHT COLUMN)

STATEMENT OF OPERATIONS
Six Months Ended June 30, 1998 (Unaudited)
- -------------------------------------------------------------
INVESTMENT INCOME
Interest income ............................. $86,295

EXPENSES (Notes 2 and 3)
Investment advisory fees ........ $ 8,730
Custodian and accounting fees ... 5,646
Transfer agent fees ............. 5,255
Trustee fees .................... 278
Distribution fees ............... 4,503
Professional fees ............... 3,558
Postage and printing ............ 12,469
Other ........................... 4,331
-------
Total expenses ......... 44,770
--------
Net investment income .............. 41,525

REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on investments . 11,363
Change in unrealized appreciation of
investments for the year ....... (37,390)
-------
Net loss on investments ............ (26,027)
--------

NET INCREASE IN NET ASSETS FROM
OPERATIONS .................................. $15,498
========

STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 1998 December 31,
(Unaudited) 1997
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income .......................... $ 41,525 $ 93,414
Net realized gain on investments ............... 11,363 17,891
Unrealized (depreciation) appreciation of
investments for the year ..................... (37,390) 166,782)
---------- ----------
Net increase in net assets from operations 15,498 278,087
DIVIDENDS PAID TO SHAREHOLDERS FROM
Net investment income .......................... (41,525) (93,414)
CAPITAL SHARE TRANSACTIONS (Note 4) .............. 85,044 212,100
---------- ----------
Total increase ......................... 59,017 396,773
NET ASSETS:
Beginning of year .............................. 2,254,985 1,858,212
---------- ----------
End of year .................................... $2,314,002 $2,254,985
========== ==========

See Notes to Financial Statements.

25
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES

STATEMENT OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Issue(d) Value
--------- -------- -----
$ 40,000 Brookhaven, NY, IDA, CFR, Dowling College,
6.75%, 03/01/23 ...................................... $ 42,703
300,000 Burke County GA Development Authority, PCR,
3.95%, 07/01/24 ...................................... 300,000
250,000 Colorado Health Facilities Authority, RHR, Liberty
Heights Project, ETM CAB, 07/15/24 ................... 60,856
100,000 Corona, CA, COP, Vista Hospital Systems Inc.,
8.38%, 07/01/11 ...................................... 110,487
100,000 Escambia, FL, Housing Corporation, Royal Arms Project,
Series B, 9.00%, 07/01/16 ............................ 103,816
100,000 First Albany Corporation Municipal Trust Certificate
Series 98-1, IFRN*, AMBAC 6.60%, 01/01/22 ............ 95,512
(Trust Certificates relating to NY MTA Ser B,
AMBAC, 5.13%, 07/01/24)
100,000 First Albany Corporation Municipal Trust Certificate
Series 98-2, IFRN*, AMBAC 6.87%, 07/01/24 ............ 98,743
(Trust Certificates relating to PR Comwlth Ser B,
AMBAC, 5.00, 07/01/28)
500,000 Foothill/Eastern TCA, Toll Road Revenue, CAB, 01/01/26 113,950
25,000 Hidalgo County, TX, Health Services, Mission Hospital
Inc. Project 6.88%, 08/15/26 ........................ 26,630
50,000+ Illinois Development Financial Authority, Solid Waste
Disposal, RB, Ford Heights Waste Tire Project,
7.88%, 04/01/11 ..................................... 10,577
45,000 Illinois Health Facilities Authority, Midwest Physician
Group Ltd Project, RB 8.13%, 11/15/19 ............... 55,435
35,000 Indianapolis, IN, RB, Robin Run Village Project,
7.63%, 10/01/22 ..................................... 38,331
50,000 Joplin, MO, IDA, Hospital Facilities Revenue, Tri State
Osteopathic 8.25%, 12/15/14 ......................... 57,618
630,000 Marengo County, AL, Port Authority Facilities, RB, CAB,
Series A, 03/01/19 .................................. 151,352
85,000 Montgomery County, TX, Health Facilities Development
Corp., The Woodlands Medical Center, 8.85%, 08/15/14 91,455
100,000 New York City, NY, Municipal Water Finance Authority,
Water & Sewer RB TR Receipts Series 29,
6.89%, 06/15/30 ..................................... 96,997
100,000 New York State, DAR, City University System Residual
Int Tr Recpts 27 MBIA Insured, Liquidity The Bank
of New York, 8.79%, 07/01/24 ........................ 109,756
100,000 New York State, DAR, City University System Residual
Int Tr Recpts 28 AMBAC Insured, Liquidity The Bank
of New York, 8.16%, 07/01/25 ........................ 105,346
100,000#x Niagara Falls, NY, URA, Old Falls Street Improvement
Project, 11.00%, 05/01/09 ........................... 35,795
50,000 Northeast, TX, Hospital Authority Revenue, Northeast
Medical Center 7.25%, 07/01/22 ...................... 57,049
75,000 Perdido, FL, Housing Corporation, RB, Series B,
9.25%, 11/01/16 ..................................... 74,992
30,000 Philadelphia, PA, HEHA, Graduate Health Systems Project,
7.25%, 07/01/18 ..................................... 31,089
60,000 Port Chester, NY, IDA, Nadal Industries Inc. Project,
7.00%, 02/01/16 ..................................... 62,327
75,000 San Antonio, TX, HFC, Multi Family Housing, RB, Agape
Metro Housing Project Series A, 8.63%, 12/01/26 ..... 76,005
75,000 San Bernadino, CA, San Bernadino Community Hospital,
RB 7.88%, 12/01/19 .................................. 77,016
100,000 San Bernadino County, CA, COP, Series PA-38, MBIA
Insured, IFRN* 14.42%, 07/01/16, Rule 144A
Security (restricted as to resale except to
qualified institutions) ............................. 113,684
60,000x San Jose, CA, Redevelopment Agency, Tax Allocation
Bonds, IFRN*, MBIA Insured 8.51%, 08/01/16, MBIA
Insured, Rule 144A Security (restricted as to
resale except to qualified institutions) ............ 61,564

26
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES

STATEMENT OF INVESTMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Issue(d) Value
--------- -------- -----
$ 150,000 Savannah, GA Economic Development Authority Revenue,
ETM, CAB, 12/01/21 ...................................$ 41,898
40,000 Schuylkill County, PA, IDA Resource Recovery, Schuykill
Energy Res Inc. AMT, 6.50%, 01/01/10 ................. 40,235
15,000#+ Troy, NY, IDA, Hudson River Project, 11.00%, 12/01/04 .. 6,150
75,000@+ Villages at Castle Rock, CO, Metropolitan District #4,
8.50%, 06/01/31 ...................................... 39,148
25,000 Wayne, MI, AFR, Northwest Airlines Inc. 6.75%, 12/01/15 27,570
----------
3,640,000 Total Investments (Cost $2,358,739**) ..................$2,414,086
==========

** Cost is approximately the same for income tax purposes.

# The value of this non-income producing security has been estimated by
persons designated by the Fund's Board of Trustees using methods the
Trustees believe reflect fair value. See note 5 to the financial statements.

+ Denotes non-income producing security.

@ Security in default. Interest paid on cash flow basis. Rate shown as of
June 30, 1998.

x The Fund, or its affiliates, own 100% of the security and therefore there
is no trading in this security.

Legend

(d)Issue AFR Airport Facilities Revenue
AMBAC American Municipal Bond Assurance Corporation
AMT Subject to Alternative Minimum Tax
CAB Capital Appreciation Bond
COP Certificate of Participation
CFR Civic Facility Revenue
DAR Dorm Authority Revenue
ETM Escrowed to Maturity
FHA Federal Housing Administration
HEHA Higher Education and Health Authority
HFC Housing Finance Corporation
IDA Industrial Development Authority
MBIA Municipal Bond Insurance Assurance Corporation
RB Revenue Bond
RHR Retirement Housing Revenue
TCA Transportation Corridor Agency
URA Urban Renewal Agency

See Notes to Financial Statements.

27
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES

NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies

Fundamental Fixed-Income Fund (the Fund) is an open-end management
investment company registered under the Investment Company Act of 1940. The Fund
operates as a series company currently issuing three classes of shares of
beneficial interest, the Tax-Free Money Market Series, the High-Yield Municipal
Bond Series and the Fundamental U.S. Government Strategic Income Fund Series
(the Series). Each series is considered a separate entity for financial
reporting and tax purposes. The High-Yield Municipal Bond Series (the Series)
seeks to provide a high level of current income exempt from federal income tax
through investment in a portfolio of lower quality municipal bonds, generally
referred to as "junk bonds." These bonds are considered speculative because they
involve greater price volatility and risk than higher rated bonds. The following
is a summary of significant accounting policies followed in the preparation of
the Series' financial statements:

Valuation of Securities: The Fund's portfolio securities are valued on the basis
of prices provided by an independent pricing service when, in the opinion of
persons designated by the Fund's trustees, such prices are believed to reflect
the fair market value of such securities. Prices of non-exchange traded
portfolio securities provided by independent pricing services are generally
determined without regard to bid or last sale prices but take into account
institutional size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. Securities traded or dealt in upon a securities exchange and not subject
to restrictions against resale as well as options and futures contracts listed
for trading on a securities exchange or board of trade are valued at the last
quoted sales price, or, in the absence of a sale, at the mean of the last bid
and asked prices. Options not listed for trading on a securities exchange or
board of trade for which over-the-counter market quotations are readily
available are valued at the mean of the current bid and asked prices. Money
market and short-term debt instruments with a remaining maturity of 60 days or
less will be valued on an amortized cost basis. Securities not priced in a
manner described above and other assets are valued by persons designated by the
Fund's trustees using methods which the trustees believe accurately reflects
fair value.

Federal Income Taxes: It is the Series' policy to comply with the requirements
of the Internal Revenue Code applicable to "regulated investment companies" and
to distribute all of its taxable and tax exempt income to its shareholders.
Therefore, no provision for federal income tax is required.

Distributions: The Series declares dividends daily from its net investment
income and pays such dividends on the last business day of each month.
Distributions of net capital gain, if any, realized on sales of investments are
anticipated to be made before the close of the Series' fiscal year, as declared
by the Board of Trustees. Dividends are reinvested at the net asset value unless
shareholders request payment in cash.

General: Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Realized gain and loss from the sale of
securities are recorded on an identified cost basis. Original issue discounts
and premiums are amortized over the life of the respective securities. Premiums
are amortized and charged against interest income and original issue discounts
are accreted to interest income.

28
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Accounting Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.

2. Investment Advisory Fees and Other Transactions with Affiliates

Management Agreement
The Series had a Management Agreement with Fundamental Portfolio Advisors
("FPA") until May 31, 1998. Effective June 1, 1998, the Board of Trustees
terminated the agreement with FPA, and selected Tocqueville Asset Management
L.P. ("TAM") as interim manager until a permanent manager is selected. Pursuant
to the agreement the investment adviser to the Series is responsible for the
overall management of the business affairs and assets of the Series subject to
the authority of the Fund's Board of Trustees. In consideration for the services
provided under the agreement, the Series will pay an annual management fee in an
amount equal to .80% of the Series' average daily net assets up to $100 million,
and decreasing by .02% of each $100 million increase in net assets down to .70%
of net assets in excess of $500 million. TAM earned fees of $1,526 for the one
month ended June 30, 1998. Total management fees for the six months ended June
30,1998 are set forth in the Statement of Operations.

Plan of Distribution
The Series has adopted a Distribution and Marketing Plan, pursuant to Rule
12b-1, promulgated under the Investment Company Act of 1940, under which the
Series paid Fundamental Shareholder Services, Inc. ("FSC"), an affiliate of FPA,
the former manager, a fee which accrued daily and paid monthly at an annual rate
of .25% of the Series' average daily net assets. Amounts paid under the plan
were to compensate FSC for the services it provided and the expenses it bore in
distributing the Series' shares to investors. On June 1,1998 the Board of
Trustees ceased authorizing payments to be paid pursuant to the plan. The amount
incurred by the Series pursuant to the agreement for the six months ended June
30,1998 is set forth in the Statement of Operations.

Regulatory Proceedings Against The Former Manager And Other Affiliates
On September 30,1997, the Securities & Exchange Commission announced that it
instituted public administrative and cease-and-desist proceedings against FPA,
the former portfolio manager of the Fund, the former president of FPA and FSC,
the Series' distributor until May 31, 1998. The proceeding arises for the
alleged failure of the Series to disclose the risks of the Series portfolio
strategy, and of FPA's failure to disclose its soft dollar arrangements to the
Fund's Board of Trustees. On July 7, 1998, FPA's former president settled the
administrative proceeding instituted by the Securities & Exchange Commission.
Without admitting to or denying the allegations made pursuant to the
administrative proceeding, FPA's former president consented to a fine of $25,000
and a bar from the industry for a period of one year. A hearing has been
scheduled with respect to the other parties named in the proceedings with an
administrative law judge to determine whether the allegations are true, and if
so, what remedial action, if any, is appropriate.

29
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

On February 19,1998 FSC and two of its executives, without admitting or
denying guilt entered into an agreement with the National Association of
Securities Dealers, Inc. ("NASD") whereby they accepted fines totaling $125,000
and other stipulated sanctions as well as a result of the NASD's findings that
they had distributed advertising materials relating to the Series which violated
NASD rules governing advertisements.

Indemnification Payments to Affiliates

FPA and FSC (on behalf of certain of their directors, officers,
shareholders, employees and control persons) (the "Indemnitees") received
payment during the fiscal year ended December 31, 1997 from three of the
Fundamental Funds for attorneys' fees incurred by them in defending certain
proceedings. Upon learning of the payments, the Independent Board Members of the
Fundamental Funds directed that the Indemnitees return all of the payments to
the Funds or place them in escrow pending their receipt of an opinion of an
independent legal counsel to the effect that the Indemnitees are entitled to
receive them. The charter documents and contracts that call for indemnification
specify that no indemnification shall be provided to a person who shall be found
to have engaged in "disabling conduct" as defined by applicable law. The
Indemnities have undertaken to reimburse the Fundamental Funds for any
indemnification expenses for which it is determined that they were not entitled
to as a result of "disabling conduct" net of any reimbursements already made to
the Funds in the form of fees forgone or other similar payments. FPA and FSC
waived fees during the year ended December 31, 1997, and have asserted that they
elected to forgo these fees because the Fundamental Funds were paying legal
expenses pursuant to indemnification. Pending clarification of the legal issues
involved, the Indemnitees have placed into an escrow account $106,863 as of
April 30, 1998. The independent trustees instructed FPA to escrow the full
amount incurred by the Fundamental Funds of approximately $287,000.

3. Trustees' Fees

All of the Trustees of the Fund are also directors or trustees of two other
affiliated mutual funds for which the Manager acts as investment adviser. For
services and attendance at Board meetings and meetings of committees which are
common to each fund, each Trustee who is not affiliated with the Manager is
compensated at the rate of $6,500 per quarter pro rated among the funds based on
their respective average net assets. The Trustees also receive additional
compensation for special services as requested by the Board.

4. Shares of Beneficial Interest

As of June 30, 1998, there were an unlimited number of shares of beneficial
interest (no par value) authorized and capital paid in amounted to $2,406,006.
Transactions in shares of beneficial interest were as follows:

Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
------------------- -------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold .................. 1,121,245 $8,335,346 2,941,324 $20,530,136
Shares issued on reinvestment
of dividends ............... 3,488 26,039 11,426 79,995
Shares redeemed .............. (1,109,015) (8,276,341) (2,924,097) (20,398,031)
--------- --------- --------- -----------
Net increase ............. 15,718 $ 85,044 28,653 $ 212,100
========= ========= ========= ===========

30
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

5. Investment Transactions
The Fund invests in variable rate securities commonly called "inverse
floaters." The interest rates on these securities have an inverse relationship
to the interest rate of other securities or the value of an index. Changes in
interest rate on the other security or index inversely affect the rate paid on
the inverse floater, and the inverse floater's price will be more volatile than
that of a fixed-rate bond. Certain interest rate movements and other market
factors can substantially affect the liquidity of IFRN's.

The Fund invests in lower rated or unrated ("junk") securities which are
more likely to react to developments affecting market risk and credit risk than
would higher rated securities which react primarily to interest rate
fluctuations. The Fund held securities in default with an aggregate value of
$91,670 at June 30, 1998 (4.0% of net assets). As indicated in the Statement of
Investments, the Troy, NY Industrial Revenue Bond, 11% due December 1, 2014 with
a par value of $15,000 and a value of $6,150 at June 30, 1998 has been estimated
in good faith under methods determined by the Board of Trustees.

The Fund owns 1.7% of a Niagara Falls New York Urban Renewal Agency 11% Bond
("URA Bond") due to mature on May 1, 2009 which has missed interest and sinking
fund payments. An affiliated investment company owns 98.3% of this bond issue.
The Fund was party to an agreement whereby certain related bonds owned by an
affiliate were to be subject to repayment under a debt assumption agreement. The
agreement allowed the affiliate to allocate a portion of the debt services it
receives to the URA Bond. In exchange the Fund forfeited certain rights it had
as holder of the URA bond. The debt assumption was not completed and the timing
and amount of debt service payments is uncertain. The value of this bond is
$35,795 and is valued at 35.80% of face value at June 30, 1998 under methods
determined by the Board of Trustees.

During the six months ended June 30, 1998, the cost of purchases and
proceeds from sales of investment securities, other than short-term obligations,
were $200,119 and $910,363, respectively.

As of June 30, 1998 net unrealized appreciation of portfolio securities
amounted to $55,347, composed of unrealized appreciation of $194,096 and
unrealized depreciation of $138,749.

The Fund has capital loss carryforwards to offset future capital gains as
follows:
Amount Expiration
------- ----------
$23,500 12/31/1998
22,200 12/31/1999
20,500 12/31/2000
54,300 12/31/2002
40,000 12/31/2003
--------
$160,500
========

6. Agreement and Plan of Reorganization
On July 16, 1997 each of Fundamental's mutual funds (consisting of: New York
Muni Fund, 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 Series) have adopted, subject to shareholder
approval, an Agreement and Plan of Reorganization (the "Plan") under which each
fund (the "Fundamental Fund") will transfer all of its assets and liabilities to
a newly-created corresponding series of The Tocqueville Trust (the "Tocqueville
Fund") in exchange for shares of the Tocqueville Fund. Shareholders of each
Fundamental Fund will receive shares of the corresponding Tocqueville Fund equal
in value to their shares in the Fundamental Fund. Shareholders will not have to
pay a sales load upon receiving shares of the Tocqueville Fund.

31
<PAGE>

FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

A majority of Fundamental's Board members determined that the Plan would be
in the best interests of shareholders of the Fundamental Funds and recommended
that shareholders of each of the Fundamental Funds approve the Plan at a meeting
anticipated to be held in the Spring of 1998.

7. Subsequent Event
On July 10, 1998 the Board of Trustees of the Fund adopted resolutions
authorizing the Fund to terminate and abandon the
Agreement and Plan of Reorganization adopted by the Board of Trustees on July
16, 1997.

8. Selected Financial Information

Six Months
Ended Years Ended December 31,
June 30, 1998 -------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $7.53 $6.86 $7.07 $5.92 $7.27 $7.30
----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income .......................... 0.15 0.37 0.47 0.34 0.43 0.39
Net realized and unrealized gains (losses) on
investments .................................. (0.19) 0.67 (0.21) 1.15 (1.35) (0.03)
----- ----- ----- ----- ----- -----
Total from investment operations ............... (0.04) 1.04 0.26 1.49 (0.92) 0.36
----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income ............. (0.15) (0.37) (0.47) (0.34) (0.43) (0.39)
----- ----- ----- ----- ----- -----
Net asset value, end of period ................... $7.34 $7.53 $6.86 $7.07 $5.92 $7.27
===== ===== ===== ===== ===== =====
Total Return .....................................10.16% 15.71% 4.05% 25.70% (12.92%) 5.11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) .......... 2,314 2,255 1,858 1,457 979 1,087
Ratios to average net assets:
Expenses* .................................... 4.10% 2.58% 2.49% 2.50% 2.50% 2.50%
Net investment income* ....................... 3.80% 5.12% 6.85% 5.15% 6.70% 5.40%
Portfolio turnover rate .......................... 8.02% 133.79% 139.26% 43.51% 75.31% 84.89%
BANK LOANS
Amount outstanding at end of period
(000 omitted) .................................. $ - $ - 228 379 $ - $ -
Average amount of bank loans outstanding
during the period (000 omitted) ................ $ - $ - $ - 61 $ - $ -
Average number of shares outstanding during
the period (000 omitted) ....................... 296 260 237 183 156 145
Average amount of debt per share during the
period ......................................... $ - $ - $ - $0.33 $ - $ -
<FN>

**These ratios are after expense reimbursements of 3.52%, 4.59%, 6.22%, 6.20%
and 5.76%, for each of the years ended December 31, 1997, 1996, 1995, 1994
and 1993, respectively.
</FN>
</TABLE>

32
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

(LEFT COLUMN)

STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------
ASSETS
Investment in securities, at value
(cost $7,575,429) (Notes 5 and 6) ............... $7,850,987
Cash .............................................. 397,242
Receivables:
Interest ........................................ 14,985
----------
Total assets .............................. 8,263,214
----------

LIABILITIES
Payables:
Due to advisor .................................. 11,245
Dividends declared .............................. 11,538
Accrued expenses ............................... 51,176
----------
Total liabilities ......................... 73,959
----------

NET ASSETS consisting of:
Accumulated net realized loss ...... $(16,947,949)
Unrealized appreciation
of securities .................... 275,558
Paid-in-capital applicable to
6,311,587 shares of beneficial
interest ......................... 24,861,646
-----------
$8,189,255
==========

NET ASSET VALUE PER SHARE ........................... $1.30
=====

(RIGHT COLUMN)

STATEMENT OF OPERATIONS
Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------
INVESTMENT INCOME
Interest income, net of $101,589
of interest expense ............................. $ 494,662
EXPENSES (Notes 2, 3 and 6)
Investment advisory fees ........... 35,223
Custodian and accounting fees ...... 11,354
Transfer agent fees ................ 17,308
Professional fees .................. 73,842
Trustees' fees ..................... 1,454
Printing and postage ............... 14,931
Interest on bank borrowing ......... 1,006
Distribution expenses .............. 9,991
Other .............................. 7,662
---------
Total expense .............. 172,771
Net investment income ..................... 321,891
---------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on:
Investments ...................... 1,125,973
Futures and options on futures ... (240,362) 885,611
---------
Change in unrealized appreciation
(depreciation) of investments,
options and futures contracts
For the period:
Investments .................... (1,724,395)
Option contracts ............... (8,176)
Futures contracts .............. 103,270 (1,629,301)
--------- ---------
Net loss on investments ......................... (743,690)
---------

NET DECREASE IN NET ASSETS
FROM OPERATIONS ................................... $(421,799)
=========

STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 1998 December 31,
(Unaudited) 1997
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income ........................... $ 321,891 $ 807,458
Net realized gain on investments, options
and futures contracts ......................... 885,611 71,015
Unrealized (depreciation) on investments,
options and futures contracts ................. (1,629,301) (273,480)
----------- -----------
Net (decrease) increase in net
assets from operations ............ (421,799) 604,993
DIVIDENDS PAID TO SHAREHOLDERS FROM
Investment income ............................... (321,891) (807,458)
CAPITAL SHARE TRANSACTIONS (Note 4) ............... (1,097,401) (2,991,556)
----------- -----------
Total decrease ........................ (1,841,091) (3,194,021)
NET ASSETS
Beginning of period ............................. 10,030,346 13,224,367
----------- -----------
End of period ...................................$ 8,189,255 $10,030,346
=========== ===========

See Notes to Financial Statements.

33
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

STATEMENT OF CASH FLOWS
Six Months Ended June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------

CASH PROVIDED (USED) BY FINANCING ACTIVITIES:
Sales of capital shares ......................... $ 301,890
Repurchase of capital shares .................... (1,629,288)
-----------
Cash provided by capital share transactions ..... (1,327,398)
Cash provided by borrowings ..................... (225,907)
Distributions paid in cash ...................... (91,894) $(1,645,199)
----------- -----------

CASH (USED) PROVIDED BY OPERATIONS:
Purchases of investments ........................ (53,701,743)
Net proceeds from short-term investments ........ 0
Proceeds from sales of investments .............. 55,376,179
-----------
1,674,436
-----------
Increase in deposit at brokers and
custodian for short sales ..................... 0
Net investment income ........................... 321,891
Net change in receivables/payables
related to operations ......................... 46,114
-----------
368,005 2,042,441
----------- -----------
Net Increase in Cash ............................ 397,242
Cash, Beginning of Year ......................... 0
-----------
Cash, End of Year ............................... $ 397,242
===========

See Notes to Financial Statements.

34
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

STATEMENT OF INVESTMENTS
June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------

Principal Interest Maturity
Amount Rate(d) Date Value
-------- -------- -------- -----
United States Treasury Securities-100.0%
United States Treasury Bills
500,000 4.81% ZCS 09/03/98 $ 495,653
1,000,000 5.00% ZCS 12/03/98 978,343
1,000,000 5.04% ZCS 03/04/99 965,423
1,000,000 5.07% ZCS 05/27/99 953,342

United States Treasury Notes
1,000,000 4.75% 09/30/98 999,063
1,000,000 5.13% 12/31/98 999,063

United States Treasury Bonds
3,900,000 0.00% PS 11/15/06 2,460,100
----------
Total Investments (Cost $7,575,429*) $7,850,987
==========

*Cost is the same for Federal income tax purposes

(d)Legend-ZCS: Zero Coupon Securities are instruments whose interest and
principal are paid at maturity.

PS: Principal Stripped Bonds are instruments whose principle and
coupon have been separated and sold separately.

See Notes to Financial Statements.

35
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------

1. Significant Accounting Policies

Fundamental Fixed-Income Fund (the Fund) is an open-end management
investment company registered under the Investment Company Act of 1940. The Fund
operates as a series company currently issuing three classes of shares of
beneficial interest, the Tax-Free Money Market Series, the High-Yield Municipal
Bond Series and the Fundamental U.S. Government Strategic Income Fund Series
(the Series). The objective of the Series is to provide high current income with
minimum risk of principal and relative stability of net asset value. The Series
seeks to achieve its objective by investing primarily in U.S. Government
Obligations. U.S. Government Obligations consist of marketable securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities
(hereunder collectively referred to as "Government Securities"). The Series also
uses leverage in seeking to achieve its investment objective.
Each series is considered a separate entity for financial reporting and tax
purposes.

Valuation of Securities-The Series portfolio securities are valued on
the basis of prices provided by an independent pricing service when, in the
opinion of persons designated by the Fund's trustees, such prices are
believed to reflect the fair market value of such securities. Prices of
non-exchange traded portfolio securities provided by independent pricing
services are generally determined without regard to bid or last sale prices
but take into account institutional size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. Securities traded or dealt in upon a
securities exchange and not subject to restrictions against resale as well
as options and futures contracts listed for trading on a securities
exchange or board of trade are valued at the last quoted sales price, or,
in the absence of a sale, at the mean of the last bid and asked prices.
Options not listed for trading on a securities exchange or board of trade
for which over-the-counter market quotations are readily available are
valued at the mean of the the current bid and asked prices. Money market
and short-term debt instruments with a remaining maturity of 60 days or
less will be valued on an amortized cost basis. Securities not priced in a
manner described above and other assets are valued by persons designated by
the Fund's trustees using methods which the trustees believe reflect fair
value.

Futures Contracts-Initial margin deposits with respect to these
contracts are maintained by the Fund's custodian in segregated asset
accounts. Subsequent changes in the daily valuation of open contracts are
recognized as unrealized gains or losses. Variation margin payments are
made or received as daily appreciation or depreciation in the value of
these contracts occurs. Realized gains or losses are recorded when a
contract is closed.

Repurchase Agreements-The Series may invest in repurchase agreements,
which are agreements pursuant to which securities are acquired from a third
party with the commitment that they will be repurchased by the seller at a
fixed price on an agreed upon date. The Series may enter into repurchase
agreements with banks or lenders meeting the creditworthiness standards
established by the Board of Trustees. 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.
The Series' repurchase agreements will at all times be fully collateralized
in an amount equal to the purchase price including accrued interest earned
on the underlying security.

36
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------

Reverse Repurchase Agreements-The Series may enter into reverse
repurchase agreements with the same parties with whom it may enter into
repurchase agreements. Under a reverse repurchase agreement, the Series
sells securities and agrees to repurchase them at a mutually agreed upon
date and price. Under the Investment Company Act of 1940 reverse repurchase
agreements are generally regarded as a form of borrowing. At the time the
Series enters into a reverse repurchase agreement it will establish and
maintain a segregated account with its custodian containing securities from
its portfolio having a value not less than the repurchase price including
accrued interest.

Federal Income Taxes-It is the Series' policy to comply with the
requirements of the Internal Revenue Code applicable to "regulated
investment companies" and to distribute all of its taxable and tax exempt
income to its shareholders. Therefore, no provision for federal income tax
is required.

Distributions-The Series declares dividends daily from its net
investment income and pays such dividends on the last business day of each
month. Distributions of net capital gain, if any, realized on sales of
investments are anticipated to be made before the close of the Series'
fiscal year, as declared by the Board of Trustees. Dividends are reinvested
at the net asset value unless shareholders request payment in cash.

General-Securities transactions are accounted for on a trade date
basis. Interest income is accrued as earned. Realized gain and loss from
the sale of securities are recorded on an identified cost basis. Discounts
and premiums are amortized over the life of the respective securities.
Premiums are charged against interest income and discounts are accreted to
interest income.

Accounting Estimates-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.

2. Investment Advisory Fees and Other Transactions With Affiliates

Management Agreement

The Series had a Management Agreement with Fundamental Portfolio Advisors
("FPA") until May 31, 1998. Effective June 1, 1998, the Board of Trustees
terminated the agreement with FPA, and selected Tocqueville Asset Management
L.P. ("TAM") as interim manager until a permanent manager is selected. Pursuant
to the agreement the investment adviser to the Series is responsible for the
overall management of the business affairs and assets of the Series subject to
the authority of the Fund's Board of Trustees. In consideration for the services
provided under the respective agreements, the Series will pay an annual
management fee in an amount equal to .75% of the Series' average daily net
assets up to $500 million, .725% on the next $500 million, and .70% per annum on
assets over $1 billion. TAM earned fees of $5,250 for the one month ended June
30, 1998. Total management fees for the six months ended June 30,1998 are set
forth in the Statement of Operations.

37
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------

Plan of Distribution

The Series has adopted a Distribution and Marketing Plan, pursuant to Rule
12b-1, promulgated under the Investment Company Act of 1940, under which the
Series paid Fundamental Shareholder Services, Inc. ("FSC"), an affiliate of FPA,
the former manager, a fee which accrued daily and paid monthly at an annual rate
of .25% of the Series' average daily net assets. Amounts paid under the plan
were to compensate FSC for the services it provided and the expenses it bore in
distributing the Series' shares to investors. On June 1,1998 the Board of
Trustees ceased authorizing payments to be paid pursuant to the plan. The amount
incurred by the Series pursuant to the agreement for the six months ended June
30,1998 is set forth in the Statement of Operations.

Regulatory Proceedings Against The Former Manager And Other Affiliates

On September 30,1997, the Securities & Exchange Commission announced that it
instituted public administrative and cease-and-desist proceedings against FPA,
the former portfolio manager of the Fund, the former president of FPA and FSC,
the Series' distributor until May 31, 1998. The proceeding arises for the
alleged failure of the Series to disclose the risks of the Series portfolio
strategy, and of FPA's failure to disclose its soft dollar arrangements to the
Fund's Board of Trustees. On July 7, 1998, FPA's former president settled the
administrative proceeding instituted by the Securities & Exchange Commission.
Without admitting to or denying the allegations made pursuant to the
administrative proceeding, FPA's former president consented to a fine of $25,000
and a bar from the industry for a period of one year. A hearing has been
scheduled with respect to the other parties named in the proceedings with an
administrative law judge to determine whether the allegations are true, and if
so, what remedial action, if any, is appropriate.

On February 19,1998, FSC and two of its executives, without admitting or
denying guilt entered into an agreement with the National Association of
Securities Dealers, Inc. ("NASD") whereby they accepted fines totaling $125,000
and other stipulated sanctions as well as a result of the NASD's findings that
they had distributed advertising materials relating to the Series which violated
NASD rules governing advertisements.

Indemnification Payments to Affiliates

FPA and FSC (on behalf of certain of their directors, officers,
shareholders, employees and control persons) (the "Indemnitees") received
payment during the fiscal year ended December 31, 1997 from the Fund in the
amount of approximately $232,500. Upon learning of the payments, the Independent
Board Members of the Fund directed that the Indemnitees return all of the
payments to the Fund or place them in escrow pending their receipt of an opinion
of an independent legal counsel to the effect that the Indemnitees are entitled
to receive them. The Declaration of Trust, and contracts that call for
indemnification specify that no indemnification shall be provided to a person
who shall be found to have engaged in "disabling conduct" as defined by
applicable law. The Indemnities have undertaken to reimburse the Fund for any
indemnification expenses for which it is determined that they were not entitled
to as a result of "disabling conduct" net of any reimbursements already made to
the fund in the form of fees forgone or other similar payments. FPA and FSC
waived fees in the amount of $96,077 and $29,560, respectively for the year
ended December 31, 1997. FPA and FSC have asserted that they elected to forgo
these fees because the Fund was paying legal expenses pursuant to
indemnification. Pending clarification of the legal issues involved, the
Indemnitees have placed into an escrow account $102,863 as of April 30, 1998.
The independent trustees instructed FPA to escrow the full amount incurred by
the Series of approximately $232,500. In addition the Board of Trustees has not
authorized the payment of management fees to the amount of $5,996 prior to the
termination of the management agreement.

38
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------

Commissions Paid to Affiliate

The Series effects a significant portion of its futures and options
transactions through LAS Investments, Inc. (LAS), an affiliated broker-dealer.
Commissions paid to LAS amounted to approximately $6,752 for the six months
ended June 30, 1998.

3. Trustees' Fees

4. Shares of Beneficial Interest

As of June 30, 1998 there were an unlimited number of shares of beneficial
interest (no par value) authorized and capital paid-in amounted to $24,861,646.
Transactions in shares of beneficial interest were as follows:

Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
---------------- -----------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold ................ 217,007 $ 301,890 521,491 $ 732,057
Shares issued on
reinvestment of dividends 164,781 229,997 457,380 642,058
Shares redeemed ............ (1,186,889) (1,629,288) (3,119,211) (4,365,671)
--------- ---------- --------- ---------
Net decrease ............... (805,101) ($1,097,401) (2,140,340)($2,991,556)
========= ========== ========= ==========

5. Complex Services, Off Balance Sheet Risks and Investment Transactions
Two-Tiered Index Floating Rate Bonds (TTIB):
The Fund invests in Two-Tiered Index Floating Rate Bonds. The term
two-tiered refers to the two coupon levels that the TTIB's coupon can reset to.
The "first tier" is the TTIB's fixed rate coupon, effective as long as the
underlying index is at or below the strike level. Above the strike, the TTIB
coupon resets to a formula similar to an inverse floating rate note. See
discussion of inverse floating rate notes below. Changes in interest rate on the
underlying security or index affect the rate paid on the TTIB, and the TTIB's
price will be more volatile than that of a fixed-rate bond.

39
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
Futures Contracts and Options on Futures Contracts:
The Fund invests in futures contracts consisting primarily of US Treasury
Bond Futures. A futures contract is an agreement between two parties to buy and
sell a security for a set price on a future date. Futures contracts are traded
on designated "contract markets" which through their clearing corporations,
guarantee performance of the contracts. In addition the fund invests in options
on US Treasury Bond Futures which gives the holder a right to buy or sell
futures contracts in the future. Unlike a futures contract which requires the
parties to the contract to buy and sell a security on a set date, an option on a
futures contract entitles its holder to decide before a future date whether to
enter into such a futures contract. Both types of contracts are marked to market
daily and changes in valuation will affect the net asset value of the Fund.

The Fund's principal objective in holding or issuing derivative financial
instruments is as a hedge against interest-rate fluctuations in its US
Government bond portfolio, and to enhance its total return. The Fund's principal
objective is to maximize the level of interest income while maintaining
acceptable levels of interest-rate and liquidity risk. To achieve this
objective, the Fund uses a combination of derivative financial instruments
principally consisting of US Treasury Bond Futures and Options on US Treasury
Bond Futures. Typically the Fund sells treasury bond futures contracts or writes
treasury bond option contracts. These activities create off balance sheet risk
since the Fund may be unable to enter into an offsetting position and under the
terms of the contract deliver the security at a specified time at a specified
price. The cost to the Fund of acquiring the security to deliver may be in
excess of recorded amounts and result in a loss to the Fund.

The following table summarizes option contracts written by the Series for
the six months ended June 30, 1998:

Number of Premiums Realized
Contracts Received Cost Gain
--------- -------- ---- --------
Contracts outstanding
December 31, 1997 .............. 40 $ 18,801
Options written .................. 315 162,717
Contracts closed or expired ...... (355) (181,518) $135,070 $46,448
--- --------
Contracts outstanding
June 30, 1998 .................. 0 $ 0
=== ========

Other Investment Transactions
For the six months ended June 30, 1998, the cost of purchases and proceeds
from sales of investment securities, other than short-term obligations, were
$7,806 and $12,043,063, respectively.

As of June 30, 1998, the Fund had no unrealized appreciation or depreciation
for tax purposes since it has elected to recognize market value changes each day
for tax purposes.

40
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------

The Fund has capital loss carryforwards to offset future capital gains as
follows:

Amount Expiration
------ ----------
$15,000,500 12/31/2002
588,100 12/31/2004
202,500 12/31/2005
-----------
$15,791,100
===========

6. Borrowing

The Fund has line of credit agreements with banks collateralized by cash and
portfolio securities to the extent of the amounts borrowed. Borrowings under
this agreement bear interest linked to the bank's prime rate.

The Series enters into reverse repurchase agreements collateralized by
portfolio securities equal in value to the repurchase price.

The maximum month-end and the average amount of borrowing outstanding under
these arrangements during the six months ended June 30, 1998 were approximately
$4,140,000 and $4,083,750.

7. Agreement and Plan of Reorganization

On July 16, 1997 each of Fundamental's mutual funds (consisting of: New York
Muni Fund, 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 Series) have adopted, subject to shareholder
approval, an Agreement and Plan of Reorganization (the "Plan") under which each
fund (the "Fundamental Fund") will transfer all of its assets and liabilities to
a newly-created corresponding series of The Tocqueville Trust (the "Tocqueville
Fund") in exchange for shares of the Tocqueville Fund. Shareholders of each
Fundamental Fund will receive shares of the corresponding Tocqueville Fund equal
in value to their shares in the Fundamental Fund. Shareholders will not have to
pay a sales load upon receiving shares of the Tocqueville Fund.

8. Subsequent Event

On July 10, 1998 the Board of Trustees of the Fund adopted resolutions
authorizing the Fund to terminate and abandon the
Agreement and Plan of Reorganization adopted by the Board of Trustees on July
16, 1997.

41
<PAGE>

FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------

9. Selected Financial Information

<TABLE>
<CAPTION>
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
June 30,1998 December 31, December 31, December 31, December 31, December 31,
Unaudited 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.41 $ 1.43 $ 1.49 $ 1.37 $ 2.01 $ 2.02
------ ------ ------ ------ ------ ------
Income from investment operations
Net investment income 0.05 0.10 0.13 0.08 0.14 0.16
Net realized and unrealized gain/(loss)
on investments (0.11) (0.02) (0.06) 0.12 (0.64) -
------ ------ ------ ------ ------ ------
Total from investment operations (0.06) 0.08 0.07 0.20 (0.50) 0.16
------ ------ ------ ------ ------ ------
Less distributions
Dividends from net investment income (0.05) (0.10) (0.13) (0.08) (0.14) (0.16)
Dividends from net realized gains - - - - - (0.01)
------ ------ ------ ------ ------ ------
Net asset value, end of period $ 1.30 $ 1.41 $ 1.43 $ 1.49 $ 1.37 $ 2.01
====== ====== ====== ====== ====== ======
Total return (1.08%) 5.51% 5.02% 15.43% (25.57%) 8.14%

Ratios/supplemental data:
Net assets, end of period (000 omitted) $8,189 $10,030 $13,224 $15,194 $19,020 $63,182
Ratios to average net assets
Interest expense (a) 0% 2.75% 2.61% 3.00% 2.01% 1.54%
Operating expenses 3.66% 5.75% 3.41% 3.05% 2.16% 1.39%
------ ------ ------ ------ ------ ------
Total expenses+ (a) 3.66% 8.50% 6.02% 6.05% 4.17% 2.93%
====== ====== ====== ====== ====== ======
Net investment income+ 6.86% 6.83% 9.01% 5.91% 8.94% 7.85%
Portfolio turnover rate 0.06% 12.55% 12.65% 114.36% 60.66% 90.59%
Borrowings
Amount outstanding at end of period
(000 omitted) - $ 4,969 $ 6,610 $ 7,481 $ 9,674 $31,072
Average amount of debt outstanding
during the period (000 omitted) - $ 5,967 $ 6,577 $ 7,790 $16,592 $28,756
Average number of shares outstanding
during the period (000 omitted) 6,833 8,433 9,764 11,571 21,436 28,922
Average amount of debt per share
during the period - $ .71 $ .67 $ .67 $ .77 $ .99

<FN>

+These ratios are after expense reimbursement of 1.37%, 2.02%, 1.0% and .13%
for the years ended December 31, 1997, 1996, 1995 and 1993, respectively.

(a)The ratios for each of the years in the four year period ending December 31,
1996 have been reclassified to conform with the 1997 presentations.
</FN>
</TABLE>

42
<PAGE>

(left colmun)

Interim
Investment Adviser
Tocqueville Asset Management L.P.
1675 Broadway
New York, New York 10019

Independent Auditors
McGladrey & Pullen, LLP
New York, New York 10017

Legal Counsel
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022

These reports and the financial statements contained herein are submitted for
the general information of the shareholders of the Fund. These reports are not
authorized for distribution to prospective investors in the Funds unless
preceded or accompanied by an effective prospectus.

(right column)

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

Semi-Annual Report
June 30, 1998

NEW YORK MUNI FUND(R)

THE CALIFORNIA MUNI FUND

FUNDAMENTAL
FIXED-INCOME FUND

TAX-FREE
MONEY MARKET SERIES

HIGH-YIELD
MUNICIPAL MARKET SERIES

FUNDAMENTAL
U.S. GOVERNMENT
STRATEGIC INCOME FUND

FUNDAMENTAL

Fundamental Family of Funds

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