Rule 497(e)
                                                        Registration No. 2-82710

                           FUNDAMENTAL FAMILY OF FUNDS
                                 CONSISTING OF:
                            FUNDAMENTAL FUNDS, INC.:
                            NEW YORK MUNI FUND SERIES
                            THE CALIFORNIA MUNI FUND
                         FUNDAMENTAL FIXED INCOME FUND:
                          TAX-FREE MONEY MARKET SERIES
                        HIGH-YIELD MUNICIPAL BOND SERIES
                                       AND
                FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND

                 SUPPLEMENT DATED OCTOBER 6, 1997 TO EACH FUND'S
                                   PROSPECTUS
                              DATED APRIL 30, 1997


         On September 30, 1997,  the  Securities  and Exchange  Commission  (the
"Commission")  instituted   administrative   proceedings  against  the  Manager,
Fundamental  Service  Corporation,  and Drs.  Lance M.  Brofman  and  Vincent J.
Malanga (the  "Parties").  The  Commission's  Order  instituting the proceedings
alleges,  among other things, certain violations of the federal securities laws,
including the antifraud provisions, for failing to disclose the risks associated
with  investments  in  inverse  floating  rate  notes  made  on  behalf  of  the
Fundamental U.S. Government Strategic Income Fund (the "Fund") in 1993 and 1994,
marketing the Fund in a way that was contrary to the administration of the Fund,
exceeding the Fund's portfolio  duration of three years or less as stated in its
prospectus,  and failing to disclose the Manager's soft dollar  practices to the
Fundamental  Fund Boards.  A hearing will be scheduled to determine  whether the
allegations  against the Parties are true, and if so, whether remedial action is
appropriate.  Counsel to the Parties have  indicated  that the Parties intend to
vigorously  contest the charges.  The Manager has indicated that the institution
of the proceedings against the Parties has not adversely affected the ability of
the  Manager or  Fundamental  Service  Corporation  to  continue  to perform the
day-to-day  affairs of the  Fundamental  Funds.  The  proposed  reorganizations,
pursuant to which  Tocqueville  Asset  Management  L.P. would serve as successor
investment adviser to the Fundamental Funds, are proceeding.