          
          
          
                               Mutual Funds
          
               Mutual funds offer the investor immediate
          diversification into carefully selected and managed
          securities.  An investment program can be started for a
          small amount of money (typically $500-$1,000) and
          subsequent purchases can be as small as $50.
          Automatic reinvesting of capital gains and dividends
          will speed up the growth of the investment.
               A mutual fund is a professionally managed,
          diversified portfolio of securities, such as stocks or
          bonds.  The great appeal of mutual funds is that the
          investor shoulders none of the investment decisions or
          timing decisions required by individual stock
          investing.
               Mutual fund portfolio managers are trained in
          finance and have years of experience managing
          portfolios.  Many funds have in-house analysts and
          research staffs to review financial and economic data
          and to select securities that represent the best values
          for capital appreciation or income.
               A diversified portfolio of stocks or bonds reduces
          risk.  Financial research has shown, for example, that
          60 percent of the time a stock's price moves in tandem
          with the overall market.  That movement represents
          market risk.  Twenty to thirty percent of the time, a
          security's price is determined by specific information
          about a company and/or its industry's outlook.  Luck is
          the final factor that can influence a stock's price.
               Portfolio managers have little control over market
          risk or the vagaries of the financial markets.  If the
          stock market is moving higher, portfolios will
          generally register gains.  Diversification, however,
          will protect investors against non-market risk.
               Most well-diversified mutual funds with asset
          values of more than $200 million hold from 50 to
          several hundred issues.  As a result, by holding a
          large number of issues and maintaining a portfolio that
          tracks the broad market, a few poorly performing issues
          should not hurt the overall performance of the fund.
               The majority of investment companies have a group
          of mutual funds with different investment objectives
          from which to choose, and over the past two decades the
          number of mutual funds to choose from has increased
          dramatically.  Generally, investors have the option to
          make a telephone call and switch out of their existing
          funds into other funds as their financial needs or
          investment conditions change.  (Switching some funds
          may incur a charge.)  Once an investor account has been
          established, future investments can be made by
          telephone directives.
               In addition, mutual funds represent a low cost way
          to invest in the financial markets, as opposed to
          frequent trading on the major exchanges.  Management
          fees for running the portfolio are usually 0.5 percent
          or less, depending on the total assets of the fund. 
          Fund performance can be tracked easily, and historic
          information is readily available.
               Mutual funds can be purchased with or without
          sales charges.  These are referred to as "load" and
          "no-load" funds respectively.  No-load funds have no
          sales representatives, and, therefore, no commissions
          need to be paid.  (This does not mean, however, that
          there will never be any fees charged to the investor on
          a long-term basis.)  An investor must carefully choose
          a fund; often a load fund may outperform a no-load
          fund, thus equalizing any initial sales charges paid. 
          There is no guarantee that either a load or a no-load
          fund will outperform the other during an extended
          investment cycle.
               Investors should not expect to get rich quickly
          from mutual fund investments, nor should they
          experience high losses.  Overall, however, the
          opportunities for the individual investor may be
          greater with mutual funds than with individual stock or
          bond issues.  Long-term planning is the key and, as
          with other investments, patience is a virtue.
          
          
                              Family of Funds
          
               Many mutual funds have a broad spectrum of funds
          to meet the
          needs and temperaments of various investors.  A typical
          family of funds might include the following:
          
          MONEY MARKET FUNDS                 SECTOR FUNDS
          - Invest in short-term money       - Concentrate on a
          particular
            market instruments.                area of the
          economy.
          - Yields fluctuate daily.          - Typical areas
          include:
          - Good during periods of             technology,
          health, energy,
            high interest rates.               utilities,
          precious metals,
                                               etc.
          MUNICIPAL BONDS FUNDS
          - Invest only in Muni. Bonds       AGGRESSIVE GROWTH
          FUNDS
          - Provide TAX-FREE Income          - Very volatile.
          - May be state tax exempt          - Invest in high-
          performing
          - May be subject to Alter-           stocks.
            native Minimum Tax               - High risk/high
          return
                                               potential.
          BONDS FUNDS
          - Invest in debt-type              GROWTH FUNDS
            instruments.                     - Invest mainly for
          capital
          - Relatively high yield.             growth.
          - Market value fluctuates          - Vary greatly -
          read offering
            inversely to interest              prospectus to
          establish
            rates.                             objectives of
          fund.
          
          INCOME FUNDS                       GROWTH & INCOME
          FUNDS
          - Seek maximum income.             - Also called
          Balanced Funds.
          - Invest in bonds,                 - Seek capital
          appreciation
            preferred or high yield            and income from
          dividends
            stocks.                            or fixed income
          investments.
          
          
                            Exchange Privilege
          
               Exchange from one fund to another may be allowed
          at any time
          for a nominal fee (usually $5) and no commission
          charge.  There
          will be tax consequences at the time of exchange if
          there is a
          profit or a loss.
          
          
                        Load Funds Can Be a Bargain
          
               When it comes to investing in mutual funds, one of
          the choices investors must make is whether to select a
          "load fund" or a "no-load fund."  To make the right
          decision, it's important to understand the differences
          between the two types of funds.  
               A load mutual fund charges an up-front sales fee,
          or load, when you buy it.  A portion of the sales
          charge goes to the broker/dealer who represents the
          fund.  For that fee, the broker/dealer explains the
          fund and is obligated to see that it meets your
          objectives.  The load further obligates the
          broker/dealer to continue servicing your account for as
          long as you own the fund.
               No-load funds, on the other hand, charge no
          up-front sales fee.  This can be an enticing feature
          for many investors.  When comparing mutual fund costs,
          however, it is not only important to consider the
          up-front costs of buying the fund, but also to
          understand the fund's ongoing annual expenses.  
               For example, rather than paying registered
          investment representatives to offer their shares and
          service your account, no-load funds offer their shares
          through ongoing advertising. One example of this was
          the 1993 Forbes Mutual Fund edition, in which about 83
          percent of the mutual fund advertisements were bought
          by no-load funds. The cost of all that advertising is
          paid by the no-load fund before any of the earnings get
          to you.
               To illustrate this, let's look at a $100,000
          investment in two hypothetical funds, each compounding
          at the same 12 percent gross annual return (Table 1). 
          Fund A is a load fund with a 3.5 percent up-front
          charge and annual expenses of 0.6 percent.  Fund B is a
          no-load fund with no up-front charge and annual
          expenses of 1.8 percent.
               The load fund charges $3,500 up front.  However,
          because of lower ongoing expenses, the value of the
          load fund surpasses that of the no-load fund in four
          short years.  After 20 years, Fund A is $138,407 ahead
          of Fund B.  Kiplinger's Personal Finance Magazine
          summed up this example in an article that stated,
          "Front-end loads are a pittance when spread over many
          years."
               The debate over load and no-load funds will
          undoubtedly continue with valid arguments on both
          sides.  As with any investment, however, it's up to you
          to make an informed decision before you write your
          check.
          
          TABLE 1
          $100,000 Investment
          
                    Fund A                   Fund B
                    3.5% Load                No Load
                    12% Gross Annual Return       12% Gross
          Annual Return
                    0.6% Annual Fee               1.8% Annual Fee
                    11.4% Actual Annual Return    10.2% Actual
          Annual Return
          Start          $96,500                   $100,000
          Year 1         107,501                    110,200
          Year 2         119,756                    121,440
          Year 3         133,408                    133,827
          Year 4         148,616                    147,477
          Year 5         165,559                    162,520
          Year 6         184,432                    179,097
          Year 7         205,458                    197,365
          Year 8         228,880                    217,496
          Year 9         254,972                    239,681
          Year 10        284,039                    264,128
          Year 15        487,309                    429,263
          Year 20        836,047                    697,640
          
          
          
                   Chasing Winners Can Make You a Loser
          
               Serious investing is done with the future in mind;
          yet, some investors are tempted to look only at the
          current hot performers when picking stocks.  After all,
          because we can't predict the future, going with today's
          best-performing investment may seem to make sense,
          right?  Wrong.  One way to illustrate the folly of this
          practice is by looking at what happens when you always
          follow last year's top-performing mutual fund.
               Let's assume that on Jan. 1, 1973, you invested
          $10,000 in the best-performing fund of 1972.  On Jan. 1
          for the next 20 years, you moved your investment to the
          best-performing fund of the previous year.  Assuming
          all capital gains and dividends were reinvested, and
          allowing for all sales and redemption charges, Table 1
          shows, year by year, what would have accumulated by
          switching to each year's top performer.  By Dec. 31,
          1992, your original $10,000 would have grown to
          $95,571.  That's not a bad return, even considering
          these were good years for stocks.  It even beat the
          market as a whole by about 10 percent.
               But what would have happened if you had made a
          one-time, $10,000 investment on Jan. 1, 1973, in a
          conservatively managed growth-and-income fund, and you
          let it compound undisturbed for the same 20-year
          period?  The table shows the results of three such
          funds -- Fund A grew to $107,915, Fund B to $122,724
          and Fund C to $126,109.  All three outperformed the
          investor who switched to the best performer of each
          year.
               None of these three funds was ever recognized as
          the top performer in any of those 20 years.  In fact,
          they seldom or never even made the top performance
          lists of financial publications that rate mutual funds
          annually.  The secret of their success was to
          consistently aim for reasonable investment results,
          total return or a combination of growth and income.
               The examples show that consistent results without
          big surprises can put you ahead over the long haul.  It
          beats trying to chase winners.
          
                                  TABLE 1
               
               $10,000 Investment Moving          $10,000
          One-Time to    Previous Year's Top Fund           
          Investment in One Fund
          Year                      Fund A    Fund B    Fund C
          1973       $8,501         $7,842    $8,417    $8,572
          1974        8,729          6,435     7,076     7,091
          1975       10,509          8,712     9,563    10,257
          1976       15,396         11,290    12,838    13,457
          1977       18,460         11,000    13,088    12,919
          1978       23,555         12,616    14,748    13,937
          1979       16,961         15,035    17,926    15,947
          1980       27,256         18,227    22,471    19,716
          1981       23,658         18,387    24,227    21,204
          1982       40,426         24,597    31,504    28,564
          1983       50,300         29,557    39,110    36,037
          1984       38,653         31,528    41,594    39,100
          1985       49,206         42,056    54,317    51,660
          1986       80,759         51,197    64,392    63,283
          1987       85,825         53,981    67,239    64,167
          1988       77,661         61,180    75,879    75,496
          1989       102,434        79,170    95,041    97,362
          1990       67,402         79,710    93,499    93,601
          1991      130,106        100,867   113,809   115,593
          1992       95,571        107,915   122,724   126,109
          
          
          
                   Interesting Facts About Mutual Funds
          
               Mutual funds are a relatively straightforward
          investment; however, individual investors may not be
          aware of a lot of the interesting trivia concerning
          mutual funds. The Investment Company Institute (ICI),
          the Washington, D.C.-based voice of the mutual fund
          industry, recently sent out a list of interesting facts
          about mutual funds, including:  
               *  The term "mutual fund" is not synonymous with
          the stock market.  The almost $2 trillion invested in
          mutual funds is almost evenly divided among stock, bond
          and money-market funds. 
               *  Contrary to popular belief, the "boom" in
          mutual funds did not begin in the 1990s.  Rather,
          during the decade of the 1980s, fund assets increased
          from $95 billion to $1 trillion.
               *  An increase in mutual fund assets is not the
          same as an increase in cash flow.  For example,
          combined assets of stock and bond funds have increased
          by $776 billion since 1990.  However, only $446 billion
          of that represents new investments.  The remaining $330
          billion comes from the earnings and appreciation
          (rising values) of existing stock and bond portfolios.
               *  Most of the "new" money being invested into
          mutual funds is not from bank CDs or unsophisticated
          "savers" who have never invested.  Recent studies
          indicate that most new mutual fund money is being
          invested by people who are already mutual fund
          shareholders.
               *  There were no massive liquidations by stock
          mutual fund managers on Oct. 19, 1987, the day the
          stock market crashed more than 500 points.  On that
          day, only 2 percent of stock fund assets were redeemed
          by shareholders.  Two-thirds of those redemptions were
          taken from the funds' existing cash positions, which
          served as a buffer and prevented greater selling in a
          falling market.
               *  Although mutual funds are not guaranteed or
          insured, they are heavily regulated under federal and
          state securities laws.  No mutual funds have
          "collapsed" or "gone bankrupt" since the Investment
          Company Act was passed in 1940.
               *  A substantial amount of mutual fund assets are
          in the form of municipal bond funds, which invest in
          the debt offerings of state and local governments. 
          These funds play a vital role in paying for public
          services and infrastructure.
               *  Of the total assets invested in mutual funds,
          about $390.5 billion is long-term money in retirement
          plans.
               *  Factors contributing to the mutual fund
          industry's current success include the maturing of 77
          million baby boomers, declining interest rates, the
          growth of defined contribution retirement plans, the
          massive refinancing of home mortgages and the large
          number of involuntary lump-sum distributions to
          participants in pension plans.
               *  Mutual fund shareholders are not the "rich."
          The median household income of mutual fund shareholders
          is $50,000, meaning that one-half have incomes below
          that figure.
          
          
                  Regulation of the Mutual Fund Industry
          
               The first mutual fund began in the United States
          in 1924, and in the years that followed, the demand for
          securities grew at an unprecedented rate.  Then, in
          1929, the U.S. stock market crashed, followed by a
          worldwide depression.  These events signaled the need
          for federal control of securities, including mutual
          funds.
               Today, mutual funds are among the most strictly
          regulated investments under federal securities laws. 
          They are regulated by five major statutes:
               The Securities Act of 1933.  This act established
          a number of filing requirements for all mutual funds,
          including the filing of detailed registration
          statements with the Securities and Exchange Commission
          (SEC).  It also requires funds to regularly disclose
          detailed information about their operations to the SEC,
          state securities boards and shareholders.  Further,
          this disclosure must be uniform, providing the same
          information to all audiences.  Under this act, funds
          also must provide potential investors with current
          prospectuses (updated annually) describing each fund's
          management, objectives, risks, investment policies and
          other essential data.  The act also approved but
          limited all mutual fund advertising.  The provisions of
          the act are still in effect.
               The Securities Exchange Act of 1934.  This
          legislation regulates the purchase and sale of mutual
          fund shares.  It subjects distributors to anti-fraud
          provisions that are monitored and enforced by the SEC
          and National Association of Securities Dealers (NASD).
               The Investment Advisers Act of 1940.  This act
          regulates the activities of mutual fund advisers. 
          Specifically, it focuses on self-dealing and conflicts
          of interest within mutual funds, and it guards against
          charging shareholders excessive fees.  In 1992, the SEC
          prepared a 500-page document with recommendations for
          updating this act; some changes may be forthcoming.
               The Insider Trading and Securities Fraud
          Enforcement Act of 1988.  This law requires investment
          advisers and broker/dealers to develop and enforce
          strict procedures to prevent insider trading.  Insider
          trading occurs when people with access to information
          not available to the general public use that
          information for their own benefit.  The act also
          expanded the SEC's authority to regulate insider
          trading.
               The Market Reform Act of 1990.  This latest
          securities act gives the SEC authority to halt
          securities trading and/or restrict program trading, or
          automated computer trading, usually of huge blocks of
          securities.  This law was brought about by the
          500-point decline in the Dow Jones Industrial Average
          on October 19, 1987; its purpose is to prevent such
          drastic drops from occurring again.
               In addition to these federal laws, each state has
          its own securities regulations pertaining to mutual
          funds.  Federal and state laws are all designed to
          ensure that mutual funds are operated and managed in an
          open, consistent way so that investors receive the
          information they need to make investment decisions.
               The first mutual fund began in the United States
          in 1924, and in the years that followed, the demand for
          securities grew at an unprecedented rate.  Then, in
          1929, the U.S. stock market crashed, followed by a
          worldwide depression.  These events signaled the need
          for federal control of securities, including mutual
          funds.
               Today, mutual funds are among the most strictly
          regulated investments under federal securities laws. 
          They are regulated by five major statutes:
               The Securities Act of 1933.  This act established
          a number of filing requirements for all mutual funds,
          including the filing of detailed registration
          statements with the Securities and Exchange Commission
          (SEC).  It also requires funds to regularly disclose
          detailed information about their operations to the SEC,
          state securities boards and shareholders.  Further,
          this disclosure must be uniform, providing the same
          information to all audiences.  Under this act, funds
          also must provide potential investors with current
          prospectuses (updated annually) describing each fund's
          management, objectives, risks, investment policies and
          other essential data.  The act also approved but
          limited all mutual fund advertising.  The provisions of
          the act are still in effect.
               The Securities Exchange Act of 1934.  This
          legislation regulates the purchase and sale of mutual
          fund shares.  It subjects distributors to anti-fraud
          provisions that are monitored and enforced by the SEC
          and National Association of Securities Dealers (NASD).
               The Investment Advisers Act of 1940.  This act
          regulates the activities of mutual fund advisers. 
          Specifically, it focuses on self-dealing and conflicts
          of interest within mutual funds, and it guards against
          charging shareholders excessive fees.  In 1992, the SEC
          prepared a 500-page document with recommendations for
          updating this act; some changes may be forthcoming.
               The Insider Trading and Securities Fraud
          Enforcement Act of 1988.  This law requires investment
          advisers and broker/dealers to develop and enforce
          strict procedures to prevent insider trading.  Insider
          trading occurs when people with access to information
          not available to the general public use that
          information for their own benefit.  The act also
          expanded the SEC's authority to regulate insider
          trading.
               The Market Reform Act of 1990.  This latest
          securities act gives the SEC authority to halt
          securities trading and/or restrict program trading, or
          automated computer trading, usually of huge blocks of
          securities.  This law was brought about by the
          500-point decline in the Dow Jones Industrial Average
          on October 19, 1987; its purpose is to prevent such
          drastic drops from occurring again.
               In addition to these federal laws, each state has
          its own securities regulations pertaining to mutual
          funds.  Federal and state laws are all designed to
          ensure that mutual funds are operated and managed in an
          open, consistent way so that investors receive the
          information they need to make investment decisions.
          
          
                Mutual Funds Offer Many Convenient Services
          
               In addition to the benefit of professional money
          management, mutual funds offer a variety of services,
          usually at no cost to their shareholders.  These
          services are outlined in the fund's prospectus and can
          mean lifelong investing without ever having to sell
          your fund or move from the mutual fund group.  Of
          course, to fully benefit, you must understand and
          properly utilize these services.
               One common service is the exchange privilege.  If
          your financial circumstances change and you want to
          adjust your portfolio, the exchange privilege allows
          you to easily move your mutual fund investment to
          another fund managed by the same "family of funds." 
          Because of this service, it is important to examine all
          the funds offered by a mutual fund family before you
          invest.
               Another shareholder service, called automatic
          reinvestment, allows all dividends and capital gains to
          be reinvested automatically, providing additional
          growth potential through compounding.  Reinvestment
          also can be used to make automatic monthly investments
          by authorizing the fund to draw a specified sum from
          your checking account each month.
               To help with record-keeping, mutual funds provide
          a confirmation statement every time activity occurs
          within your account.  At the end of the year, funds
          also provide 1099-DIVs, which show the amount and tax
          status of distributions paid during the year.  And, to
          eliminate the problem of lost or destroyed
          certificates, mutual funds can have certificates held
          by a custodian bank at no cost.
               Most mutual funds also offer IRS-approved,
          trusteed prototype retirement plans for Individual
          Retirement Accounts (IRAs), Simplified Employee Pension
          Plans (SEPs), retirement plans for employees of
          non-profit organizations (403(b)s), and retirement
          plans for the self-employed.
               Load funds -- funds that charge up-front fees --
          often offer discounts for larger investments, whether
          made at one time or over a period of time.  Discounts
          typically apply to investments of $10,000 or more in
          one fund or a combination of funds within a family. 
          The "right of accumulation" service allows you to
          qualify for the discount by adding any new purchase
          within a family to the value of your existing shares. 
          Or, if you plan to make a sizable deposit over a
          13-month period, you can sign a statement of intention,
          without obligation, entitling you to the maximum
          discount applicable to the total amount you plan to
          invest.
               Mutual funds offer a wide range of services in
          addition to professional money management.  If you own
          mutual funds now or plan to invest in them in the
          future, ask your representative about shareholder
          services.  They can offer substantial benefits at a
          price you can't refuse.
          
             What You Should Know About Systematic Withdrawal
          
               Systematic withdrawal is a service offered by many
          mutual funds.  At your request, the fund will send you
          regular checks for a specified amount.  This can be a
          real benefit to individuals who need monthly checks to
          help meet living expenses.
               Most mutual funds with a growth-and-income
          objective pay quarterly dividends and annual capital
          gain distributions.  With systematic withdrawal, you
          can have part of the total return (dividends plus
          capital gains) distributed to you each month.
               For example, assume a fund has historically
          averaged a total annual return of 12 percent,
          consisting of a 4 percent average annual dividend and
          an 8 percent  average annual gain.  You set up an
          annual systematic withdrawal of 10 percent, leaving
          your principal undisturbed as well as adding about 2
          percent a year to its value.  As long as the fund
          continues to earn 12 percent or more, your investment
          is working as planned.
               However, what if the mutual fund has an unusually
          bad year?  Suppose the fund is able to maintain its
          regular 4 percent dividend, but due to a declining
          market, there are no capital gains.  If you continue to
          withdraw the same amount, the fund will be required to
          return part of your principal, and eventually you could
          run out of money.
               To use systematic withdrawal properly, think of
          your fund as a bucket full of water.  At the bottom is
          a faucet from which you regularly draw a cup of water. 
          As long you replace this with as much or more water
          than you withdraw, you will continue to have plenty of
          water.  But if you continue to withdraw more than you
          replace, your water level will decrease, and your
          bucket may eventually run dry.  The same happens if you
          systematically withdraw more than your fund is earning
          -- your principal will decrease, and your investment
          may eventually run dry.
               Does this mean you should avoid systematic
          withdrawal?  Not at all.  It just means that
          flexibility is the key.  If total return decreases,
          decrease your withdrawal.  By taking smaller
          withdrawals, you can monitor your investments until the
          principal begins to grow and builds a cushion.  Or you
          can delay beginning withdrawals until the initial
          investment has grown.
               Systematic withdrawal from carefully selected
          mutual funds can be an excellent way to receive regular
          income and still allow your investments to grow.  But
          it requires understanding, monitoring and the
          flexibility to adjust to economic changes.
          
            Mutual Funds May Not Be What You Thought You Bought
          
               Did you know that your U.S. government bond fund
          could invest as much as 35% of its assets in junk
          bonds?  Or that your global equity portfolio includes
          U.S. stocks?
               A mutual fund can use a certain name if, under
          normal market conditions, at least 65% of its assets
          are invested in that category, according to Securities
          and Exchange Commission guidelines.
               For funds that call themselves tax-exempt, the
          minimum mix is 80% tax-exempt and 20% other assets.  If
          a fund uses the term municipal, the requirement drops
          back down to 65%.
               Confused?  How about the terms "global" and
          "international"?
               The dictionary defines global as involving the
          world and international as reaching beyond national
          boundaries.  So it should come as no surprise to the
          literally minded that global funds include U.S. stocks
          or bonds, while international funds don't?  But many
          people don't realize this.
               It is not the intention of the SEC to give license
          for funds to mislead investors, but to allow those
          funds the ability to have good management.
               An investor can find out generally what a fund can
          invest in by consulting its prospectus, and can
          discover exactly what a mutual fund owns at a
          particular point in time by consulting its annual or
          semiannual report.
               The report will list all the holdings as of a
          certain date, including complicated assets like
          derivative securities and forward currency positions
          that might never get mentioned in the fund's
          prospectus.  If you want to find out what the fund is
          investing in, the annual report is critical.
               Such a snapshot report is not perfect, but it
          gives investors a better understanding of a fund.  If
          you want a current portfolio mix, call the fund sponsor
          to ask for a fax of the fund's current portfolio.
               Finding out exactly what a mutual fund owns as
          well as what it could buy is crucial information for
          investors.  It strikes at the heart of what is
          happening with your money and what could happen to the
          money, including the risks that are taken.
               The prospectus, often a drab legalistic document,
          lays out the parameters of the fund's investment
          policies, objectives and possible practices, including
          most expenses, but it is not nearly the whole story. 
          The prospectus establishes the rules of the game, but
          it doesn't necessarily establish what the practice is.
               Many funds have elastic investment objectives. 
          These can be wild card risks.
               Under SEC rules that took effect July 1, 1993, new
          prospectuses will be more informative, including, for
          example, the name of the portfolio manager.
               Total fund returns for the last 10 years, a
          discussion of the factors and strategies that affected
          the prior year's performance, and a chart illustrating
          how a $10,000 investment would have fared compared to a
          broad-based market index will also be included in the
          new prospectus or annual report.
               The new guidelines don't require funds to list
          winners and losers among their investments, or how the
          use of futures contracts, derivatives or forward
          currency contracts affect performance.  But some mutual
          funds may choose to divulge such information in keeping
          with the spirit of the guidelines.
               One piece of information they won't have to
          disclose in the prospectus is an asset class that
          comprises less than 5% of the total portfolio.  That's
          the current rule and it isn't about to change.
               While the performance of 5% of a fund's assets
          generally does not have a dramatic impact on the
          performance of the overall fund, its effect can be
          multiplied substantially if the asset is used for
          leverage.  Some extraordinarily powerful residual bond
          can create as much as four times the leverage of a
          traditional bond.
               If interest rates rise, the value of the residual
          bond -- a popular derivative also known as an inverse
          floater -- will drop almost four times as much as a
          regular bond.
               The investor may discover in the fund's Statement
          of Additional Information that the fund can invest in
          such a complicated product but the disclosure won't be
          easy to find.  this document is usually lengthier and
          more turgid than the prospectus.
               Another piece of information not required in a
          mutual fund prospectus or in the annual report is the
          cost of brokerage commissions, which could add up in
          funds with a hefty turnover rate.
               Given current low interest rates and low
          inflation, investors have to be attuned to every cost a
          fund incurs.  They have to be conscious of how much it
          costs to get their money managed.  If a fund has 2% of
          assets in brokerage costs, that may adversely affect
          performance -- or it may not if the portfolio manager
          is skilled at taking short term profits.
               The issue of disclosure about mutual fund
          activities is probably as old as the business itself. 
          But recently it has received more attention because of
          the new SEC rules and other developments.
               In mid-1993 the New York City Department of
          Consumer Affairs charged the Dreyfus Corp. and the
          Franklin Advisers for engaging in deceptive advertising.
               Dreyfus was cited for claiming in a brochure that
          its Growth and Income Fund does not invest in junk
          bonds even though its prospectus states that up to 35%
          of its assets may be invested in convertible debt
          securities deemed to be junk bonds.  This is the
          portion of the fund left over after 65% is invested in
          securities that resemble the name of the fund.
               Franklin was cited for claiming in an ad that its
          Valuemark II fund guaranteed retirement income for life
          even though the fund pays an annuity issued by an
          insurance company that is only as secure as the
          insurance company itself.
          
          
                 Index Funds -- And Why You Don't Want One
          
               Mutual fund companies now offer index mutual funds
          designed to mirror the make-up and performance of a
          particular stock market index.  Although the Standard &
          Poor's (S&P) 500 is the most popular model for index
          funds, other indices are used, with over 60 index
          mutual funds offered.
               Index mutual funds tend to have lower management
          fees than other funds for two reasons:  1) Since the
          fund invests only in stocks represented in the index,
          management does not need to analyze or select stocks. 
          2) Index funds tend to have lower turnover, resulting
          in lower transaction costs and minimal capital gains
          distributions to investors.  Index funds are often
          almost fully invested in the stock market, keeping very
          low cash reserves.  There is no guarantee that an index
          fund's performance will mimic the performance of the
          actual index.
               Investing in an index mutual fund requires careful
          analysis.  Index funds are modeled after different
          indices, and it is important to decide which is
          appropriate for your investment objectives.  Different
          funds modeled after the same index will experience
          different results and will charge different management
          fees and sales charges, making it important to
          carefully review the performance of a fund you are
          interested in.
               Pay particularly close attention to the investment
          strategies of the fund.  Some index funds will buy
          stocks in all companies represented in the index, in
          proportion to each stock's market capitalization in the
          index.  Other funds purchase all of the stocks in the
          index but in different proportions, while others will
          purchase only some of the stocks in the index.  With
          all these variations, the idea of buying an index fund
          isn't as pure and simple as most people are led to
          believe.  Brokers and salesmen love these funds,
          because the performance will always be exactly what
          they promised -- an approximate tracking of the index.
               But fundamentally there is one major thing wrong
          with index funds -- it is an attempt to sell average
          performance with unthinking management.  You should be
          looking for superior performance with intelligent
          management.  Yet lots of brokers will try hard to sell
          you an index fund as if it was an acceptable standard
          of performance.  It is not even a measure of
          performance -- it is merely an average price of a long
          list of stocks.  Don't be fooled.
          
          
           You Can Have a Full Team of Managers Even for a Small
          Nestegg
          
               Many investors haven't the time, experience or
          inclination to choose and supervise their investments. 
          Family and business might be taking every possible
          moment, and many can't or won't take the time to invest
          properly.  This is where an investment manager can
          help.  Of course it will cost, but if you don't have
          the time and experience to do the job, right, a
          professionally managed portfolio is likely to give you
          a better return than a self-managed portfolio that you
          don't devote time to supervise regularly.
               The Investment Monitor Service is an investment
          management system that uses top institutional money
          managers with proven track records.  Each manager stays
          within his specialty, such as blue chip stocks,
          international stocks, corporate bonds, etc.  The
          monitoring service shifts funds between managers based
          on changing market conditions.  This allows for
          multiple levels of management -- the managers, who are
          constantly managed for performance, and the allocation
          process.  As many as 12 different portfolio models are
          available from the Capital Preservation model to the
          Global Aggressive Growth, depending upon your
          investment needs and goals.  Each model utilizes eight
          to twelve managers, all working on your behalf. 
               All this might sound expensive, but it actually
          costs no more than the management fee in a typical
          mutual fund, while giving you much greater
          diversification than being invested in just one mutual
          fund.  The average management fee is 1.75%, and the
          minimum account size is $25,000.  No opening fees, no
          closing fees, no transaction costs.  The service is
          also available for pension plans, IRAs, and 401K
          rollovers.
               Don't let that management fee put you off. 
          Popular money magazines -- who get most of their money
          from running mutual fund advertising -- have done a
          good job of convincing the public that investment
          management comes free because of all the ads for "no-
          load" mutual funds.  But all "no-load" really means is
          that there is no sales charged added on to the purchase
          price.  There is a management fee, but they don't make
          it visible, and most people don't read the fine print. 
          So you're not getting free management by using a mutual
          fund.
               For more information and a brochure, write
          Investment Monitor Service, 705 Melvin Avenue, Suite
          102, Annapolis MD 21401 or call (800) 545-8972.
          
          
          
          
