-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KPEQiSzBsLjTJOlAf42S0xN7Fx19FxlNRsc8NqnXvrjvWBVnFAyHJ7borHP8jcR2 ghZITlXH7saIRzmCNVnylg== 0000950007-96-000041.txt : 19960311 0000950007-96-000041.hdr.sgml : 19960311 ACCESSION NUMBER: 0000950007-96-000041 CONFORMED SUBMISSION TYPE: N-30D/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960308 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FUNDAMENTAL FIXED INCOME FUND CENTRAL INDEX KEY: 0000811668 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-05063 FILM NUMBER: 96533002 BUSINESS ADDRESS: STREET 1: 90 WASHINGTON ST - 19TH FL CITY: NEW YORK STATE: NY ZIP: 10006 BUSINESS PHONE: 2126353005 FORMER COMPANY: FORMER CONFORMED NAME: FUNDAMENTAL PORTFOLIO ADVISORS FIXED INCOME FUND DATE OF NAME CHANGE: 19870715 N-30D/A 1 SEMI-ANNUAL 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. 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 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. 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. 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. 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. 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 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 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. 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 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. 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. NOTES TO FINANCIAL STATEMENTS Note 6. Selected Financial Information Per share operating performance (for a share outstanding throughout the year):
Years Ended December 31, ------------------------------------------------- 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ 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 * 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.
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 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 -----END PRIVACY-ENHANCED MESSAGE-----