<PAGE>
Dear Fellow Shareholder:
Financial assets scored remarkable gains in 1995. For
example, the Dow Jones Industrial Average ended the year above
5000, for a gain of about 33%. The Treasury bellweather thirty-
year "long" bond finished 1995 with a yield less than 6%, and the
Bond Buyer index of forty actively traded municipal bonds
increased by 15%.
A plethora of favorable developments were behind these
gains. The economic fundamentals of modest growth and low
inflation not only remained intact, but actually began to be
thought of as an enduring phenomenon. And rhetoric flowing from
the White House and Congress seemed to indicate that genuine
progress could be made toward erasing the federal budget deficit.
Finally, the Federal Reserve began to reverse its tightfisted
policy of 1994 by modestly reducing short-term interest rates,
for the first time in July, and then again in December. In this
environment saving and investment seemed to become fashionable
again, as wage earners poured record sums into IRA and 401(k)
retirement plans.
Importantly, unlike 1993 when the Federal Reserve actively
lowered interest rates to stimulate business activity, the Fed
pursued a different strategy in 1995. Indeed, throughout the
year the Central Bank was being accused of being too stringent
rather than too lenient. The upshot was that market interest
rates fell faster than the Federal Reserve's own rate cuts, such
that the spread between short- and long-term interest rates
narrowed dramatically throughout the year.
This is important for 1996 in two respects. First, the
narrowness of the interest rate spread discourages speculation
and leverage. Second, since the spread itself is a reflection of
a stringent monetary policy, it is highly unlikely that either
economic activity or inflation will get off the ground. Indeed,
while the economy may well skirt a recession in 1996, the
downside risks to the economy seem greater than the upside
potential.
Thus, the credit easing that began in 1995 is likely to
continue in 1996, in our view, and as a result interest rates are
likely to continue to trend down while bond prices trend up.
Unlike 1995, though, we would expect short-term interest rates to
begin falling somewhat faster than long-term rates in 1996.
The municipal bond market began 1995 on a strong note as it
benefitted from the positive fundamentals of slow growth and low
inflation, as well as from a reduction in the issuance of state
and local bonds that began in 1994. By late spring, however,
municipals began to underperform Treasuries as discussions about
a reform of the tax system, and specifically a flat tax, received
attention.
<PAGE>
In a pure flat tax system all incomes would be taxed at the
same rate, and in its most extreme form all deductions would be
eliminated, including those for real estate taxes, mortgage
interest, municipal bond interest, and state and local income
taxes.
The flat tax is a long way from being enacted, and even if
it ever is enacted, it will be significantly amended. In our
view it is unlikely to ever be enacted, and indeed, the Clinton
Administration has already come out squarely against it.
Nevertheless, the mere mention of eliminating the interest
deduction on municipal bonds hurt the market such that by autumn,
yields on municipal bonds were about comparable to the yield on
Treasury bonds, instead of being lower, as is normal.
In our view this anomaly is presenting municipal bond
investors with a unique opportunity. As this tax hysteria
subsides, munis will once again sell at a premium relative to
Treasuries, meaning that municipal bond prices will rise to
Treasuries. And in the worst case, munis will yield on a par
with Treasuries, which is practically the case currently.
Investors in Fundamental's High-Yield Municipal Bond Fund
were handsomely rewarded in 1995. Net Asset Value rose from
$5.92 per share at the end of 1994 to $7.07 at the end of 1995
for a hefty 25.7% total return. As a result, the High-Yield
Municipal Bond Fund was the year's highest ranking High-Yield
Municipal Bond Fund.
The High-Yield Municipal Bond Fund is particularly sensitive
to fluctuations in short-term interest rates, so as the Federal
Reserve began to ease credit around mid-year, the Fund was
positively affected. Moreover, because we were generally
constructive on the interest rate outlook for 1995, the Fund's
portfolio maintained a long duration. If in fact the Federal
Reserve continues gradually lowering short-term interest rates in
1996, the High-Yield Municipal Bond Fund will further benefit.
Nonetheless, returns such as those generated in 1995 should
not be expected to recur. Interest rates will probably not fall
as sharply in 1996 as they did in 1995. However, as discussions
about the flat tax are clarified, or more likely terminated,
municipal bonds will outperform Treasuries, and this will be
positive for the High-Yield Municipal Bond Fund.
Of course, interest rates and bond prices will always
fluctuate, so investors are urged to undertake an investment
program over time rather than in one lump sum. Meanwhile, we
thank you for your continued trust, and we look forward to
continuing to serve you in the future.
Sincerely,
Dr. Vincent J. Malanga
<PAGE>
FUNDAMENTAL FIXED INCOME FUND
HIGH YIELD MUNICIPAL BOND SERIES
(chart material)
- ----------------------------------------------------------
FFIF High Yield Municipal Bond Series
Avg Annual Total Return Thru 12/31/95
- ----------------------------------------------------------
1 Year 5 Year Since Inception (10/1/87)
25.70% 6.13% 2.75%
- ----------------------------------------------------------
$25,000
$20,000
$15,000
$10,000
$5,000
9/30/87
12/31/88
12/31/89
12/31/90
12/31/91
12/31/92
12/31/93
12/31/94
12/31/95
Lehman Brothers
Index $20,873
Consumer Price
Index $13,380
FFIF High Yield
Series $12,507
Past performance is not predictive of future performance.
The above illustration compares a $10,000 investment made in the Fund on 10/1/87
(Inception Date) to a $10,000 investment made in the Lehman Brothers Municipal
Bond Index on that date. For comparative purposes the value of the index on
9/30/87 is used as the beginning value on 10/1/87. All dividends and capital
gain distributions are reinvested.
The Fund invests primarily in lower grade municipal securities and its
performance takes into account fees and expenses. Unlike the Fund, the Lehman
Brothers Municipal Bond Index is an unmanaged total return performance benchmark
for the long-term, investment-grade tax exempt bond market calculated by using
municipal bonds selected to be representative of the market. The Index does not
take into account fees and expenses. Further information relating to the Fund's
performance, including expense reimbursements, if applicable, is contained in
the Fund's Prospectus and elsewhere in this report.
Lehman Index Source: Lehman Brothers
The Consumer Price Index is a commonly used measure of inflation; it does not
represent an investment return.
<PAGE>
FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS
Investment in securities at value (Note 5)
(cost $1,879,365) $1,828,053
Interest receivable 31,848
Receivable for shares sold 16,000
----------
Total assets $1,875,901
----------
LIABILITIES
Bank overdraft payable $ 378,766
Payable for shares redeemed 26,658
Dividend payable 1,162
Accrued expenses 11,880
----------
Total liabilities $ 418,466
----------
Net assets consisting of:
Accumulated net realized loss $ (198,899)
Unrealized depreciation of securities (51,312)
Paid-in-capital applicable to 206,234
shares of beneficial interest 1,707,646
----------
$1,457,435
==========
Net asset value per share $ 7.07
==========
See Notes to Financial Statements.
<PAGE>
FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
Investment income:
Interest income $ 91,471
Expenses (Notes 2, 3 and 6):
Investment advisory fees $ 9,569
Custodian and accounting fees 28,192
Transfer agent fees 6,011
Trustee fees 707
Distribution fees 5,981
Professional fees 40,715
Printing and postage 6,170
Other 6,904
--------
104,249
Less expenses waived or reimbursed by
the manager and affiliate (74,369)
--------
Total expenses 29,880
---------
Net investment income 61,591
Realized and unrealized gain (loss)
on investments:
Net realized loss on investments (39,968)
Change in unrealized appreciation of
investments for the year 253,452
--------
Net gain on investments 213,484
---------
Net increase in net assets
from operations $ 275,075
=========
See Notes to Financial Statements.
<PAGE>
FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 1995 and 1994
1995 1994
---------- ----------
Increase (decrease) in net assets from:
Operations:
Net investment income $ 61,591 $ 68,184
Net realized loss on investments (39,968) (54,302)
Unrealized appreciation (depreciation)
of investments for the year 253,452 (161,607)
---------- ----------
Net increase (decrease) in net
assets from operations 275,075 (147,725)
Dividends paid to shareholders from net
investment income (61,591) (68,184)
Capital share transactions (Note 4) 264,793 108,138
---------- ----------
Total increase (decrease) 478,277 (107,771)
Net assets:
Beginning of year 979,158 1,086,929
---------- ----------
End of year $1,457,435 $ 979,158
========== ==========
See Notes to Financial Statements.
<PAGE>
FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES
STATEMENT OF INVESTMENTS
December 31, 1995
Par Value Security Description Value
- --------- -------------------- -----
$ 40,000 Allegheny County, PA, IDA, AFR, USAir Inc.,
8.875%, 3/1/21 $ 42,118
50,000 Angels, CA, Improvement Bond Act of 1915,
Greenhorn Creek Association, 7.300%, 9/2/21 52,371
75,000 Apple Valley, MN, IDR, K-Mart Corporation
Project, 6.000%, 4/1/01 66,822
35,000++ Babylon, NY, IDA, RFR, Babylon Recycling
Center, 8.875%, 3/1/11 17,549
40,000 Brookhaven, NY, IDA, CFR, Dowling College,
6.750%, 3/1/23 42,060
75,000 California Alternative Energy & Advanced
Transmission Finance Authority, SRI
International Project, 8.000%, 12/1/20 72,562
60,000 California Health Facilities Authority,
Valley Presbyterian Hospital Project, RB,
Series A, 9.000%, 5/1/12 60,076
35,000 Cass County, MO, IDA, 7.375%, 10/1/22 37,483
250,000 Colorado Health Facilities Authority, RHR,
Liberty Heights Project, ETM, CAB, 7/15/24 38,955
50,000 Decatur, GA, Downtown Development Authority,
IDR, Decatur Hotel Project, AMT, 8.750%, 11/1/16 50,880
500,000 Foothill/Eastern TCA, Toll Road Revenue, CAB,
1/1/26 74,410
50,000 Illinois Development Financial Authority, Solid
Waste Disposal, RB, Ford Heights Waste Tire
Project, 7.875%, 4/1/11 50,410
45,000 Illinois Health Facilities Authority, Midwest,
Physician Group Ltd. Project, RB, 8.125%, 11/15/19 48,361
35,000 Indianapolis, IN, RB, Robin Run Village Project,
7.625%, 10/1/22 38,576
50,000 Joplin, MO, IDA, Hospital Facilities Revenue,
Tri State Osteopathic, 8.250%, 12/15/14 53,013
50,000 Los Angeles, CA, Regional Airport, Continental
Airlines, AMT, 9.250%, 8/1/24 56,951
35,000 Maine Finance Authority, Solid Waste RFR, Bowater
Inc. Project, 7.750%, 10/1/22 38,723
35,000 Montgomery County, PA, HEHA, Hospital Revenue,
Series A, 8.375%, 11/1/11 37,037
95,000 Montgomery County, TX, Health Facilities Development
Corp., The Woodlands Medical Center, 8.850%, 8/15/14 104,448
25,000' New York, NY, GO, IFRN, 10/1/03 40,827
100,000+ Niagara Falls, NY, URA, Old Falls Street Improvement
Project, 11.00%, 5/1/99 49,336
50,000 Northeast, TX, Hospital Authority Revenue, Northeast
Medical Center, 7.250%, 7/1/22 52,910
30,000 Philadelphia, PA, HEHA, Graduate Health Systems
Project, 7.250%, 7/1/18 32,556
75,000 San Bernardino, CA, San Bernardino Community Hospital,
RB, 7.875%, 12/1/19 75,000
<PAGE>
FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES
STATEMENT OF INVESTMENTS
December 31, 1995
Par Value Security Description Value
- --------- -------------------- -----
$100,000' San Bernardino, CA, COP, IFRN, 7/1/16 $ 104,168
40,000 San Joaquin Hills, CA, TCA, Toll Road Revenue,
7.000%, 1/1/30 42,609
60,000' San Jose, CA, Redevelopment Agency, Tax Allocation
Bonds, IFRN, MBIA Insured, 8/1/16 55,216
250,000 Savannah, GA, Economic Development Authority
Revenue, ETM, CAB, 12/1/21 45,977
50,000 Schuylkill County, PA, IDA Resource Recovery,
Schuylkill Energy Res. Inc., AMT, 6.500%, 1/1/10 51,937
50,000 Tomball, TX, Hospital Authority Revenue,
Refunding, 6.125%, 7/1/23 49,280
20,000++ Tri-State Health Care Corp., PA, First Humanics
Corp., Henry Clay Project, 13.75%, 12/1/14 4,019
15,000+ Troy,NY, IDA, Hudson River Project, 11.00%,
12/1/14 11,250
75,000++ Villages at Castle Rock, CO, Metropolitan
District #4, 8.500%, 6/1/31 19,501
100,000 Wayne MI, AFR, Northwest Airlines Inc. 6.750%,
12/1/15 103,134
50,000 Wisconsin Health & Educational Facilities
Authority, National Agency of New Berlin Project,
RB, 8.000%, 8/15/25 49,489
75,000 York County, VA, IDA, K-Mart Corp. Project, RB,
5.750%, 12/1/09 58,039
----------
Total investments (cost $1,879,365") $1,828,053
==========
" Cost is approximately the same for income tax purposes.
' Inverse Floating Rate Notes (IFRN) are instruments whose rates bear an
inverse relationship to the interest rate on another security or the
value of an index.
+ The value of this non-income producing security has been estimated in
good faith under methods determined by the Fund's Board of Trustees
(Note 5).
++ Non-income producing security (Note 5).
* Description:
AFR Airport Facilities Revenue
AMT Subject to Alternative Minimum Tax
CAB Capital Appreciation Bond
COP Certificate of Participation
CFR Civic Facility Revenue
ETM Escrowed to Maturity
GO General Obligation
HEHA High Education and Health Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Insurance Assurance Corporation
RFR Recycling Facility Revenue
RHR Retirement Housing Revenue
RB Revenue Bond
TCA Transportation Corridor Agency
URA Urban Renewal Agency
IFRN Inverse Floating Rate Note
<PAGE>
FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES
NOTES TO FINANCIAL STATEMENTS
Note 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 U.S. Government Strategic
Income Fund (the Series). Each series is considered a
separate entity for financial reporting and tax purposes.
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 do higher rated bonds. 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 value based on prices provided by
a pricing service which takes into account appropriate
factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type
of issue, trading characteristics and other market data,
without exclusive reliance upon exchange or over-the-
counter prices, because such valuations are believed to
reflect more accurately the fair value of such securities.
Securities not priced in this manner are valued in good
faith by the Board of Trustees.
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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
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.
Note 2. Investment Advisory Fees and Other Transactions With
Affiliates
The Fund has a Management Agreement with Fundamental
Portfolio Advisors, Inc. (the Manager). Pursuant to the
agreement, the Manager serves as investment adviser to the
High-Yield Municipal Bond Series and is responsible for the
overall management of the business affairs and assets of the
Series subject to the authority of the Funds' Board of
Trustees. In compensation for the services provided by the
Manager, the Series will pay an annual management fee in an
amount equal to 0.8% of the Series' average daily net assets
up to $100 million and decreasing by.02% for each $100
million increase in net assets down to 0.7% of net assets in
excess of $500 million. The Manager is required to reimburse
the Series on a monthly basis for its expenses (exclusive of
interest, taxes, brokerage fees and expenses paid pursuant to
the Plan of Distribution, and extraordinary expenses) to the
extent that such expenses, including the management fee,
exceed the limits on investment company expenses prescribed
in any state in which the Series' shares are qualified for
sale. The Manager voluntarily waived fees and reimbursed
expenses of $57,191 for the year ended December 31, 1995.
The Fund has adopted a Plan of Distribution, pursuant to Rule
12b-1 promulgated under the Investment Company Act of 1940,
under which the Series pays to Fundamental Service
Corporation (FSC), an affiliate of the Manager, a fee, which
is accrued daily and paid monthly, at an annual rate of 0.5%
of the Series' average daily net assets. Amounts paid under
the plan are to compensate FSC for the services it provides
<PAGE>
and the expenses it bears in distributing the Series' shares
to investors. FSC has waived all fees and reimbursed certain
expenses in the amount of $11,167 for the year ended
December 31, 1995.
The Fund compensates Fundamental Shareholder Services, Inc.
(FSSI), an affiliate of the Manager, for the services it
provides under a Transfer Agent and Service Agreement. FSSI
has waived all fees in the amount of $6,011 for the year
ended December 31, 1995.
Note 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.
Note 4. Shares of Beneficial Interest
As of December 31, 1995, there were an unlimited number of
shares of beneficial interest (no par value) authorized and
capital paid in amounted to $1,707,646. Transactions in
shares of beneficial interest were as follows:
Year Ended Year Ended
December 31, 1995 December 31, 1994
----------------- -----------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 137,251 $921,557 82,599 $534,554
Shares issued on
reinvestment of
dividends 8,305 54,195 7,829 50,715
Shares redeemed (104,760) (710,959) (74,527) (477,131)
------- -------- ------ --------
Net increase 40,796 $264,793 15,901 $108,138
======= ======== ====== ========
Note 5. Complex Securities 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 the 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.
<PAGE>
Investments transactions:
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 $101,655 at December 31, 1995 (5.42% of
total 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
$11,250 at December 31, 1995 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 ability of this bond issue to make
future payments is dependent on the ability of the
underlying projects making certain rental payments. There
is uncertainty as to the timing of events and the
subsequent ability of this bond issue to make service debt
payments. The value of this bond was $49,336. The bond is
valued at 49.3% of face value at December 31, 1995 under
methods determined by the Board of Trustees.
During the year ended December 31, 1995, the cost of
purchases and proceeds from sales of investment securities,
other that short-term obligations, were $1,158,619 and
$536,639, respectively. Accumulated undistributed net
realized loss as of December 31, 1995 was $198,899. This
capital loss carry forward may be used to offset future
capital gains for tax purposes, and expires in varying
amounts between December 31, 1998 and December 31, 2004.
As of December 31, 1995, net unrealized depreciation of
portfolio securities amounted to $51,312 composed of
unrealized appreciation of $105,513 and unrealized
depreciation of $156,825.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 6. Selected Financial Information
Per share operating performance (for a share outstanding
throughout the year):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 5.92 $ 7.27 $ 7.30 $ 7.29 $ 7.02
------ ------ ------ ------ ------
Income from investment
operations:
Net investment income $ .34 $ .43 $ .39 $ .43 $ .42
Net realized and
unrealized gains
(losses) on
investments 1.15 (1.35) (.03) .01 .27
------ ------ ------ ------ ------
Total from investment
operations 1.49 (0.92) 0.36 0.44 0.69
------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (.34) (.43) (.39) (.43) (.42)
------ ------ ------ ------ ------
Net asset value,
end of year $ 7.07 $ 5.92 $ 7.27 $ 7.30 $ 7.29
====== ====== ====== ====== ======
Total return 25.70% (12.92)% 5.11% 6.26% 10.14%
Ratios/supplemental data:
Net assets, end of
year (000's) 1,457 979 1,087 1,050 1,176
Ratios to average net
assets:
Expenses* 8.72% 2.50% 2.50% 2.87% 2.63%
Net investment income* 3.85% 6.70% 5.40% 5.89% 5.93%
Portfolio turnover rate 43.51% 75.31% 84.89% 100.21% 15.78%
Bank loans:
Amount outstanding at
end of year (000
omitted) $ 379 $ - $ - $ 20 $ 103
Average amount of
bank loans
outstanding during
the year (000 omitted) 61 - - 57 29
Average number of
shares outstanding
during the year
(000 omitted) 183 156 145 144 188
Average amount of debt
per share during the
year $.33 $ - $ - $ 0.40 $0.15
<FN>
* These ratios are after expense reimbursements of 3.8%, 6.20%, 5.76%,
4.83%, and .11% for each of the years ended December 31, 1995,
1994, 1993, 1992 and 1991, respectively.
</FN>
</TABLE>
<PAGE>
Independent Auditor's Report
To the Board of Trustees and Shareholders
Fundamental Fixed-Income Fund
High-Yield Municipal Bond Series
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Fundamental Fixed-Income
Fund High-Yield Municipal Bond Series as of December 31, 1995, and the
related statements of operations for the year then ended, the
statement of changes in net assets for each of the two years then
ended and the selected financial information for each of the five
years then ended. These financial statements and selected financial
information are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected financial
information referred to above present fairly, in all material
respects, the financial position of Fundamental Fixed-Income Fund
High-Yield Municipal Bond Series as of December 31, 1995, and the
results of its operations, changes in net assets, and selected
financial information for the periods indicated, in conformity with
generally accepted accounting principles.
New York, New York
February 13, 1996
<PAGE>
Left Col.
FUNDAMENTAL FIXED-INCOME FUND
90 Washington Street
New York, New York 10006
1-800-322-6864
Independent Auditors
McGladrey & Pullen, LLP
New York, NY 10017
Attorney
Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel
919 Third Avenue
New York, NY 10022
This report and the financial statements contained
herein are submitted for the general information of
the shareholders of the Fund. The report is not
authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an
effective prospectus.
Right Col.
Annual Report
December 31, 1995
FUNDAMENTAL
FIXED-INCOME FUND
High Yield
Municipal Bond Series
FUNDAMENTAL
