FAIRMONT FUND TRUST, 485APOS, 1996-02-29

FAIRMONT FUND TRUST
485APOS, 1996-02-29

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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

Pre-Effective Amendment No. / /
-----

Post-Effective Amendment No. 22 /X/

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/

Amendment No. 23 /X/

(Check appropriate box or boxes.)

THE FAIRMONT FUND TRUST (formerly The Fairmont Fund)
FILE NOS. 2-70825 and 811-3139
(Exact Name of Registrant as Specified in Charter)

1346 South Third Street, Louisville, Kentucky 40208
(Address of Principal Executive Offices) Zip Code

Registrant's Telephone Number, including Area Code: (502) 636-5633

Morton H. Sachs, 1346 South Third Street, Louisville, Kentucky 40208
(Name and Address of Agent for Service)

Release Date: April 30, 1996

It is proposed that this filing will become effective (check appropriate box):

/ / immediately upon filing pursuant to paragraph (b)
/ / on _____________ pursuant to paragraph (b)
/x/ 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485

Registrant continues its election, made by the filing of its Initial
Registration Statement, effective September 2, 1981, to register an indefinite
number and amount of securities under Rule 24f-2. Pursuant to paragraph (b)(1)
of Rule 24f-2, Registrant filed a Form 24F-2 for the fiscal year ended
December 31, 1995, on February 26, 1996.

TOTAL NUMBER OF PAGES:
-----
EXHIBIT INDEX ON PAGE:
-----
<PAGE> 2
THE FAIRMONT FUND
CROSS REFERENCE SHEET FORM N-1A

<TABLE>
<CAPTION>
ITEM NO. SECTION IN PROSPECTUS
- -------- ---------------------
<S> <C>
1 Cover Page
2 Fund Expenses
3 Financial Highlights, Performance Information
4 Operation of The Trust, Investment Objective,
Strategy and Risk Factors, Investment
Techniques
5 Operation of The Trust, Financial Highlights
5A Operation of The Trust
6 Investment Techniques, How to Withdraw
(Redeem) an Investment, Cover Page, Dividends,
Distributions and Taxes
7 How to Invest in The Fund, Determination of
Net Asset Value, Operation of The Trust
8 How to Withdraw (Redeem) an Investment
9 None
14 The Trustees and Executive Officers
16 The Trustees and Executive Officers

ITEM NO. SECTION IN STATEMENT OF ADDITIONAL INFORMATION
- -------- ----------------------------------------------

10 Cover Page
11 Table of Contents
12 None
13 Investment Policies, Other Restrictions, U.S.
Government Obligations
14 Trustee Compensation
15 Description of The Trust
16 Investment Advisory Agreement, Custodian,
Auditors, Transfer Agent
17 Portfolio Transactions and Brokerage
18 Description of The Trust
19 Determination of Net Asset Value
20 Taxes
21 None
22 Performance Information
23 Report of Independent Auditors, Financial
Statements
</TABLE>
<PAGE> 3
THE FAIRMONT FUND

1346 South Third Street
Louisville, Kentucky 40208
(502) 636-5633
(800) 262-9936

PROSPECTUS

May 1, 1996

The Fairmont Fund (The Fund) is a no-load, diversified series of The
Fairmont Fund Trust (The Trust), an open-end investment company seeking capital
appreciation by investing in equity securities that the Adviser of The Trust
believes are undervalued.

This prospectus sets forth concisely the information about The Fund
that you ought to know before investing. Please retain this prospectus for
future reference. A Statement of Additional Information dated May 1, 1996 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement can be
obtained at no charge by calling the number listed above.

For information or assistance, write to The Fund at the address listed
above or call The Fund at the number listed above.

You should read and retain this prospectus for future reference.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 4
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 3

PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 5

PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

INVESTMENT OBJECTIVE, STRATEGY AND RISK FACTORS . . . . . . . . . . . . . 9

HOW TO INVEST IN THE FUND . . . . . . . . . . . . . . . . . . . . . . . . 9

Investments by Mail . . . . . . . . . . . . . . . . . . . . . . 9
Investments by Wire . . . . . . . . . . . . . . . . . . . . . . 10
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . . 10
Other Purchase Information . . . . . . . . . . . . . . . . . . . 11
Tax Sheltered Retirement Plans . . . . . . . . . . . . . . . . . 11

HOW TO WITHDRAW (REDEEM) AN INVESTMENT . . . . . . . . . . . . . . . . . 11

OPERATION OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 12

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . 13

DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . 13

Dividends and Distributions . . . . . . . . . . . . . . . . . . 13
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

INVESTMENT TECHNIQUES . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . 14
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . 15
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . 15
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

THE TRUSTEES AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . 16
</TABLE>

- 2 -
<PAGE> 5
FUND EXPENSES
The following table illustrates all expenses and fees that a
shareholder of The Fund will incur. The operating expense information is based
upon operating expenses for the fiscal year ended December 31, 1995, expressed
as a percentage of average daily net assets.

<TABLE>
<S> <C>
Shareholder Transaction Expenses
Sales Load Imposed on Purchases...................... None
Sales Load Imposed on Reinvested Dividends........... None
Redemption Fees...................................... None

Annual Fund Operating Expenses
Management Fees...................................... 1.70%
12b-1 Fees........................................... None
Other Expenses....................................... None
Total Fund Operating Expenses........................ 1.70%
</TABLE>

Example

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the
following expenses on
a $1,000 investment,
assuming (1) 5% annual
return and (2) redemp-
tion at the end of
each time period: $17 $53 $92 $200
</TABLE>

The purpose of the table above is to assist shareholders in
understanding the costs and expenses that shareholders in The Fund will bear
directly or indirectly. The Fund's Adviser pays all of the operating expenses
of The Fund. For a more complete description of The Fund's expenses and its
management fee structure, see "Operation of The Trust." The Example should not
be considered a representation of past or future expenses and actual expenses
may be greater or lesser than those shown.

Shareholders should note that The Fund is a no-load fund and has no
distribution expense plan. Accordingly, a shareholder does not pay any sales
charge or commission upon purchase or redemption of shares of The Fund and does
not pay any expenses with respect to the distribution of the shares of The
Fund.

FINANCIAL HIGHLIGHTS

The following condensed financial information for The Fairmont Fund is
derived from The Fund's financial statements. The financial statements for the
years ended December 31, 1995, 1994, 1993 and 1992 have been audited by McCurdy
& Associates

- 3 -
<PAGE> 6
CPA's, Inc., independent auditors. The financial statements for the remaining
periods have been audited by other independent auditors whose reports for those
years were unqualified. The financial statements of The Fund for the year
ended December 31, 1995 and the independent auditors' report thereon are
included in the Statement of Additional Information.

<TABLE>
<CAPTION>
Years Ended Ten
Months Ended
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
31 31 31 31 31 31 31 31 31 31
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 24.06 22.43 19.41 17.02 12.17 16.02 15.19 14.96 16.50 17.88

Income From Investment
Operations
Net Investment Income (.08) (.16) (.14) (.17) .09 .30 .21 .24 .17 .11
Net Gains or Losses on
Securities (both realized
and unrealized) 6.80 1.79 3.16 2.56 4.85 (3.85) .83 .23 (1.47) .69
Total From Investment
Operations 6.72 1.63 3.02 2.39 4.94 (3.55) 1.04 .47 (1.30) .80

Less Distributions
Dividends (from net
investment income) .00 .00 .00 .00 .09 .30 .21 .24 .17 .11
Distributions (from
capital gains) 3.76 .00 .00 .00 .00 .00 .00 .00 .07 2.07
Returns of Capital .00 .00 .00 .00 .00 .00 .00 .00 .00 .00
Total Distributions 3.76 .00 .00 .00 .09 .30 .21 .24 .24 2.18

Net Asset Value, End
of Period $ 27.02 24.06 22.43 19.41 17.02 12.17 16.02 15.19 14.96 16.50

Total Return 27.92 7.27 15.56 14.04 40.56 (22.13) 6.84 3.12 (7.77) 3.87(a)

Ratios/Supplemental Data
Net Assets, End of
Period (in 000s) $28,191 22,195 18,884 16,788 17,385 15,859 42,511 64,145 79,008 79,636
Ratio of Expenses to
Average Net Assets 1.70% 1.74% 1.78% 1.79% 1.79% 1.68% 1.37% 1.25% 1.18% 1.26%(a)
Ratio of Net Income to
Average Net Assets (.55)% (.79)% (.66)% (.85)% .51% 1.53% 1.01% 1.30% .91% .71%(a)
Portfolio Turnover Rate 2.47 2.75 1.55 1.32 1.15 1.28% .90% 1.58% 1.45% 1.24%(a)
<FN>
(a) Computed on an annualized basis
(b) All per share amounts have been restated to reflect a
three-for-one share split which became effective February 15,
1990, and all per share amounts prior to November 30, 1986,
have been restated to reflect a four-for-one share split which
became effective at that date.
(c) Per share information for periods prior to 1988 has been
calculated based on the weighted average number of shares
outstanding.
(d) The Adviser has reimbursed certain operating expenses of The
Fund in order to comply with state limitations. Had the
Adviser not undertaken such action, the ratios indicated above
would be as follows:

</TABLE>
<TABLE>
<CAPTION>
Years Ended Ten
Months Ended
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
31 31 31 31 31 31 31 31 31 31
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of Expenses to
Average Net Assets(d) 1.70% 1.74% 1.78% 1.79% 1.79% 1.68% 1.37% 1.25% 1.22% 1.28%(a)

Ratio of Net Income to
Average Net Assets(d) (.55)% (0.79)% (.66)% (.85)% .51% 1.53% 1.01% 1.30% .87% .70%(a)
</TABLE>

- 4 -
<PAGE> 7
PERFORMANCE INFORMATION

Average Annual Total Return. From time to time, The Fund advertises
its "average annual total return" for one, five and ten year periods, and for
the period since inception (September 2, 1981). Average annual total return
figures are based on historical performance and are not intended to indicate
future performance. The "total return" of The Fund refers to the dividends and
distributions generated by an investment in The Fund plus the change in the
value of the investment from the beginning of the period to the end of the
period. The "average annual total return" of The Fund refers to the rate of
total return for each year of the period which, when compounded over the
period, would be equivalent to the cumulative total return for the period. The
dividends and distributions earned on the investment are assumed to be
reinvested. The dividends and distributions and the principal value of an
investment in The Fund will fluctuate so that a shareholder's shares, when
redeemed, may be worth more or less than the shareholder's original investment.

AVERAGE ANNUAL TOTAL RETURN:
<TABLE>
<S> <C>
For the one year period ended December 31, 1995 . . . . . . . . . . . . 27.92%
For the five year period ended December 31, 1995 . . . . . . . . . . . 20.51%
For the ten year period ended December 31, 1995 . . . . . . . . . . . . 8.66%
For the period since inception as of December 31, 1995 . . . . . . . . 13.84%
</TABLE>

Other Performance Information. From time to time The Fund also
advertises its rates of total return for specified periods, including the period
from September 2, 1981 (date of initial public offering of shares), through a
specified month end. It also advertises the value of a $10,000 investment made
on September 2, 1981, as of a specified month end.

<TABLE>
<CAPTION>
Year End Value of
Net Asset Dividends $10,000 Total Return
Year Ended Value(a) Paid (a) Investment (b) One Year Since Inception (c)
- ---------- -------- --------- -------------- -------- -------------------
<S> <C> <C> <C> <C> <C>
12/31/81(c) $ 8.74 $ .00 $10,484 4.84%(c) 4.84%
12/31/82 11.02 .60 14,072 34.23% 40.72%

12/31/83 14.07 .74 19,093 35.68% 90.93%

12/31/84 14.76 .74 21,148 10.76% 111.48%
12/31/85 18.08 1.18 27,940 32.12% 179.40%

12/31/86 16.50 4.05 31,865 14.05% 218.65%
12/31/87 14.96 .26 29,388 -7.77% 193.88%

12/31/88 15.19 .24 30,306 3.12% 203.06%
</TABLE>

- 5 -
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C> <C>
12/31/89 16.02 .21 32,379 6.84% 223.79%

12/31/90 12.17 .30 25,212 -22.13% 152.12%
12/31/91 17.02 .09 35,439 40.56% 254.39%

12/31/92 19.41 .00 40,415 14.04% 304.15%

12/31/93 22.43 .00 46,704 15.56% 367.04%

12/31/94 24.06 .00 50,098 7.27% 400.98%

12/31/95 27.02 3.76 64,085 27.92% 540.85%
<FN>
(a) Per share data has been restated to reflect a three-for-one share
split on February 15, 1990 and a four-for-one share split on November
30, 1986.
(b) Value at end of calendar year of $10,000 investment made on September
2, 1981.
(c) Not annualized and from the date of the initial offering of shares
(September 2, 1981).
</TABLE>

The Fund's advertised rates of total return for specified periods and
the value of a $10,000 investment at the end of a specified period are based on
historical performance and are not intended to indicate future performance.
The rates of total return are calculated as indicated above for "total return"
and represent the cumulative total return for the specified period. For
example, for the one and two year periods, and for the period since inception,
the cumulative total returns through December 31, 1995 were, respectively:
27.92%, 37.22% and 540.85%. The dividends and distributions and the principal
value of an investment in The Fund will fluctuate so that a shareholder's
shares, when redeemed, may be worth more or less than the shareholder's
original investment.

The Fund's Annual Report contains additional performance information
and will be made available upon request and without charge.

The Fund may also include in advertisements data comparing performance
with other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Money, Investor's
Business Daily, Barron's, Fortune or Business Week). Performance information
may be quoted numerically or may be presented in a table, graph or other
illustration. In addition, Fund performance may be compared to well-known
indices of market

- 6 -
<PAGE> 9
performance including the Standard & Poor's (S&P) 500 Index or the Dow Jones
Industrial Average.

PORTFOLIO

The Fund's portfolio of investments as of December 31, 1995 is set forth below:

<TABLE>
<CAPTION>
Investments in Securities
Common Stocks (Shares) Value Percent
<S> <C> <C>
Automobile Insurance
50,000 Integon Corporation $1,031,250 3.66%

Banking
55,000 Center Financial Corporation 962,500
20,000 Imperial Bancorp (a) 480,000
70,000 North Fork Bancorporation, Inc. 1,767,500
75,000 Riggs National Corporation (a) 975,000
75,000 UST Corporation 1,087,500
5,272,500 18.70
Business Services
125,000 Butler International, Inc. (a) 671,875
100,000 Employee Solutions, Inc. (a) 3,400,000
30,000 Kelly Services, Inc. Class A 832,500
4,904,375 17.40
Casualty Insurance
65,000 USF&G Company 1,096,875 3.89

Computer and Computer Equipment Manufacturers
110,000 Gandalf Technologies, Inc. (a) 1,870,000
10,000 Silicon Graphics, Inc. (a) 275,000
100,000 Tandem Computers, Inc. (a) 1,062,500
3,207,500 11.38
Dental Products
50,000 Sullivan Dental Products, Inc. 475,000 1.69

Electrical Apparatus
65,000 American Power Conversion Corp(a) 617,500 2.19

Electromedical Apparatus
250,000 Imatron, Inc. (a) 500,000 1.77

Grain Mill Products
10,000 International Multifoods
Corporation 201,250 0.71

Health Care Management
100,000 Staff Builders, Inc. (a) 293,750 1.04

Life Insurance
65,000 John Alden Financial Corporation 1,356,875
10,000 Life Re Corporation 250,000
</TABLE>

- 7 -
<PAGE> 10

<TABLE>
<S> <C> <C>
55,000 Pioneer Financial Services, Inc. 1,017,500
2,624,375 9.31

Oil and Gas Exploration
40,000 Oryx Energy Company (a) 535,000 1.90

Paper Products
10,000 Tambrands, Inc. 477,500 1.69

Pharmaceuticals
250,000 Pharmos Corporation (a) 367,188
18,750 Pharmos Corp Warrants Exp.
9/15/00(a)(b) 5,273
30,000 Sandoz Ltd. ADR 1,376,250
1,748,711 6.20
Savings Institutions
25,000 Interwest Bancorp, Inc. 509,375
45,000 St. Paul Bancorp, Inc. 1,147,500
1,656,875 5.88
Shoes
55,000 Timberland Company (a) 1,093,125 3.88

Transportation
200,000 Greyhound Lines Inc. (a) 862,500 3.06

Wholesale Groceries
50,000 International Dairy Queen,
Cl A (a) 1,137,500 4.04

Total Common Stocks (Cost $23,492,129) 27,735,586 98.39

Bank Repurchase Agreement
With Star Bank NA of Cincinnati, issued 12/29/95
due 1/2/96, fully collateralized by Government
National Mortgage Association, 6.00% due 5/22/22
(Cost $674,000) 674,000 2.39

Total Investments (Cost $24,166,129) 28,409,586 100.78

Other Assets Less Liabilities (218,585) (0.78)

Net Assets $28,191,001 100.00%

<FN>

(a) Common stocks which did not declare a dividend in 1995.
(b) There are restrictions on these warrants which will limit The Fund's ability
to convert them to stock until September 14, 1996.

</TABLE>

- 8 -
<PAGE> 11
INVESTMENT OBJECTIVE, STRATEGY AND RISK FACTORS

The investment objective of The Fund is capital appreciation. The
investment objective of The Fund may be changed by the Board of Trustees
without shareholder approval.

The Fund seeks to achieve its objective by investing in equity
securities that its Adviser believes are undervalued and therefore represent
basic investment value. The Adviser believes that this objective may be
realized by using a strategy of investing in carefully selected, reasonably
priced securities rather than in securities whose prices reflect a premium
attributable to their current market popularity. The Fund seeks special
opportunities for capital appreciation in securities that are selling at a
discount from historical prices and/or at below average price-earnings ratios.
The investment strategy of The Fund is based upon the belief that favorable
changes in market prices for specific securities are more likely to begin once
securities are out of favor, price-earnings ratios are relatively low,
investment expectations are limited, and there is little investor interest in
the particular security or industry involved.

Fund investments primarily will be in equity securities of seasoned,
established companies which appear to have appreciation potential. Emphasis
will be placed on issues listed on national exchanges. As all investments are
subject to inherent market risks and fluctuations in value due to earnings,
economic conditions and other factors, The Fund cannot give assurance that its
investment objective will be achieved. Income will not be a factor in the
selection of The Fund's portfolio. For a more detailed discussion of The
Fund's investment practices, see "Investment Techniques."

HOW TO INVEST IN THE FUND

Shares of The Fund may be purchased directly from The Fund. The
minimum initial investment is $1,000. Investments by related parties may be
aggregated for purposes of meeting minimum investment requirements. Contact
The Fund for additional information. Additional purchases may be made by a
shareholder in any amount. No commission or sales fee is charged in connection
with purchases of The Fund's shares made directly from The Fund.

Investments by Mail. An investor may purchase shares of The Fund by
mailing the attached application, with a check made payable to The Fairmont Fund
in the amount of the purchase price, to the following address:

- 9 -
<PAGE> 12
The Fairmont Fund Trust
1346 South Third Street
Louisville, KY 40208

Investments in Fund shares will be credited to a shareholder's account at the
net asset value next determined after receipt by The Fund of the shareholder's
check (in U.S. dollars) and completed application.

Investments by Wire. An investor may purchase shares of The Fund by
wiring federal funds directly to The Fund's custodian. Prior to an investment
by wire, the investor should telephone The Fund (502-636-5633) to advise it of
the investment and to obtain an account number and instructions. The investor
is required to mail a completed application to The Fund in order to make a wire
purchase. There is presently no fee for receipt of wired funds, but the right
to charge shareholders for this service is reserved by the custodian and The
Fund.

Exchange Privilege. The Fund has made arrangements to enable a
shareholder, if his investment objectives change, to exchange shares of The
Fund without sales charge for shares of the Kentucky Tax-free Income Series or
the Kentucky Tax-Free Short to Medium Series of Dupree Mutual Funds. Shares of
the above series of Dupree Mutual Funds may also be exchanged without sales
charge for The Fund. Exchanges may be made only by Kentucky residents.
Exchanges may be made by sending a written request to The Sachs Company, which
acts as agent for shareholders making these exchanges. Subsequent exchanges
involving Dupree Mutual Funds may be made by telephone. Contact The Sachs
Company for additional information and instructions for exchanges with the
Dupree Mutual Funds.

The Fund has also made arrangements to enable a shareholder to
exchange shares of The Fund without sales charge for shares of the Fixed Income
Fund of Bartlett Capital Trust or the Bartlett Cash Reserves Fund of Bartlett
Management Trust. Shares of Bartlett Fixed Income Fund and Bartlett Cash
Reserves Fund may also be exchanged without sales charge for shares of The
Fairmont Fund. Exchanges may be made only for shares of funds registered for
sale in the shareholder's state of residence and are subject to the applicable
minimum initial investment requirement. Exchanges may be made by sending a
written request to The Fund. The exchange will be effected at the net asset
value next determined after receipt of the request.

A shareholder is required to obtain the appropriate prospectus and
complete the appropriate application to exchange shares. Contact The Fund for
additional information. Use of the exchange privilege is generally a taxable
event, and shareholders should consult their tax advisers about the tax effect
of an exchange.

- 10 -
<PAGE> 13
Other Purchase Information. The Fund's shares are offered for sale on
a continuous basis at the net asset value next determined after the receipt of a
shareholder's check (in U.S. dollars) and application in proper form. Purchase
requests not in proper form will be returned to the investor within seven
business days. The Fund will accept requests to purchase its shares on any day
that the New York Stock Exchange is open for trading. The Fund reserves the
right in its sole and absolute discretion to reject any purchase request in
whole or in part. Requests received subsequent to the close of trading on the
New York Stock Exchange on any day will be treated as if received on the next
business day. No request will be binding until accepted. Any request may be
withdrawn by an investor until accepted by The Fund. The Fund does not issue
share certificates unless requested, but will mail each shareholder a statement
after each transaction and a statement quarterly.

Tax Sheltered Retirement Plans. Since The Fund seeks capital
appreciation, shares of The Fund may be an appropriate investment medium for
tax sheltered retirement plans, including: (a) Keogh (HR-10) Plans (for
self-employed individuals); (b) qualified corporate pension and profit sharing
plans (for employees); (c) individual retirement accounts (IRAs); and (d) tax
deferred investment plans (for employees of public school systems and certain
types of charitable organizations). Consultation with an attorney or tax
adviser regarding these plans is advisable. Contact The Fund for information
on the procedure to open an IRA. Custodial fees for an IRA will be paid by
redemption of sufficient shares of The Fund from the IRA unless the fees are
paid directly to the IRA custodian.

HOW TO WITHDRAW (REDEEM) AN INVESTMENT

The Fund will redeem for cash all full and fractional shares of The
Fund upon receipt of a written request in proper form. Although requests for
redemption usually must be in writing, you may make arrangements for redemption
by telephone under certain circumstances. Contact The Fund for additional
information. The redemption price is the next determined net asset value. The
net asset value received by a shareholder upon the redemption of his shares of
The Fund may be more or less than the price paid by such shareholder for his
shares depending upon the market value of the securities owned by The Fund at
the time of the redemption.

Shareholders have the right to request a redemption on any day on
which the New York Stock Exchange is open for trading and also on any other day
in which there is significant trading in The Fund's portfolio securities which
might cause a material change in its net asset value. All requests for
redemption must be accompanied by certificates, if issued, for the shares to be
redeemed. A written request must contain the signatures of all persons in
whose names the shares are registered, signed as their

- 11 -
<PAGE> 14
names appear on the original application or on the certificate, as the case may
be. In certain instances, The Fund may require additional documents to insure
proper authorization. Contact The Fund for additional information and
additional documents required to redeem tax sheltered retirement plans.

The Fund will make payment within seven days (normally five business
days) after a request is received in the form described above, except under
unusual circumstances as determined by the Securities and Exchange Commission.
However, redemption proceeds will not be mailed to an investor until the check
used for investment has cleared the investor's bank for payment, which normally
takes place within seven days of the date of purchase.

Because The Fund incurs certain fixed costs in maintaining shareholder
accounts, The Fund reserves the right to acquire any shareholder to redeem all
of his shares after sixty days notice, if redemptions cause the value of his
account to fall below $500 (or such other minimum amount as The Fund may
determine from time to time). A shareholder will be given an opportunity to
increase the value of his shares to the minimum amount within that sixty day
period in order to avoid a mandatory redemption of his shares. Each share of
The Fund is also subject to redemption at any time if the Board of Trustees
determines in its sole discretion that failure to so redeem may have materially
adverse consequences to all or any of the shareholders of The Fund.

OPERATION OF THE TRUST

The Fund is a no-load, diversified series of The Fairmont Fund Trust,
an open-end management investment company established as a business trust under
Kentucky law on December 29, 1980. The Board of Trustees supervises the
business activities of The Trust. The Trust retains The Sachs Company, 1346
South Third Street, Louisville, Kentucky (the Adviser) to manage The Trust's
investments and its business affairs. The Adviser is an investment manager
which has provided investment advice to individuals, corporations, pension and
profit sharing plans, and trust accounts since 1974. Morton H. Sachs, Trustee,
Chairman of the Board and Chief Executive Officer of The Fund, and President,
sole Director and Shareholder of the Adviser, is responsible for the day-to-day
management of The Fund's portfolio and has been since The Fund's inception.
The Trust acts as its own transfer agent and dividend paying agent.

For the year ended December 31, 1995, The Fund paid the Adviser a fee
equal to 1.70% of its average daily net assets. The rate of the fee paid by
The Fund is higher than that paid by most other mutual funds; however such
funds directly pay their own operating expenses, while all of The Fund's
operating expenses (except brokerage fees and commissions, taxes, interest and
extraordinary expenses) are paid by the Adviser. The Adviser

- 12 -
<PAGE> 15
is also a registered broker-dealer and, in that capacity, receives brokerage
commissions from The Trust.

Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to its objective of seeking best
qualitative execution of portfolio transactions, the Adviser may give
consideration to sale of shares of The Trust as a factor in the selection of
brokers and dealers to execute portfolio transactions for each series of The
Trust.

DETERMINATION OF NET ASSET VALUE

The net asset value of the shares of The Fund is determined as of 4:00
p.m. Eastern time on each day The Fund is open for business. The Fund is open
for business on any day that the New York Stock Exchange is open for trading.
The net asset value per share is computed by dividing the sum of the value of
the securities held by The Fund plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares outstanding at such
time, rounded to the nearest cent. The management fee payable to the Adviser
is accrued daily.

Portfolio securities which are traded on stock exchanges or in
over-the-counter markets are valued at the last sale price as of 4:00 p.m.
Eastern time on the day the securities are being valued or, lacking any sales,
at the mean between closing bid and asked prices. Portfolio securities which
are traded both on the over-the-counter market and on a stock exchange or on
more than one stock exchange are valued according to the broadest and most
representative market. Fixed income securities are valued by using market
quotations, or independent pricing services which use prices provided by market
makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Securities and other
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends and Distributions. It is The Fund's intention to distribute
substantially all of its net investment income, if any, in the form of
dividends to The Fund's shareholders. It is contemplated that net investment
income and net realized long or short term capital gains, if any, reduced by
any capital loss carryovers, will be distributed to The Fund's shareholders
annually. Such distributions from investment income and capital gains are
automatically reinvested, unless otherwise instructed by the shareholder, in
additional Fund shares at the net asset value next determined after the
distributions are paid.

- 13 -
<PAGE> 16
Shareholders may obtain such distributions in cash by requesting cash
distributions on the application accompanying this prospectus or by sending a
written request to The Fund.

Taxes. Dividends paid by The Fund from its ordinary income and
distributions of The Fund's net realized short term capital gains are taxable
to shareholders as ordinary income. However, dividends paid by The Fund may be
eligible in part for the dividends received deduction for corporations. Any
distributions of The Fund's net realized long term capital gains are taxable to
shareholders as long term capital gains regardless of the holding period of
such shareholder.

The Fund will mail to each shareholder a statement setting forth the
federal income tax status of all distributions made during the year.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes and the tax effect of
distributions, exchanges and redemptions from The Fund. The tax consequences
described in this section apply whether distributions are taken in cash or
reinvested in additional shares.

INVESTMENT TECHNIQUES

Subjective judgment will be exercised in selecting securities for
investment, and it is the intention of The Fund's management to use economic
projections, technical analysis and earnings projections for market timing
purposes and for individual stock selection. In seeking The Fund's objective
of capital appreciation, reliance will be placed primarily upon common stocks.

For temporary defensive purposes, or when investment opportunities are
limited, The Fund may at times hold all or a portion of its assets in cash, in
securities of other investment companies or in obligations of the U.S.
Government or its agencies or instrumentalities, and may enter into repurchase
agreements fully collateralized as to principal and interest by such
obligations.

Foreign Securities. The Fund may invest in foreign securities through
the purchase of American Depositary Receipts. American Depositary Receipts are
certificates of ownership issued by a U.S. bank as a convenience to the
investors in lieu of the underlying shares which it holds in custody. The Fund
will not invest in American Depositary Receipts if, immediately after a
purchase and as a result of the purchase, the total value of foreign securities
owned by The Fund would exceed 25% of the value of the total assets of The
Fund. To the extent that The Fund does invest in foreign securities, such
investments may be subject to special risks, such as changes in restrictions on
foreign currency transactions and rates of exchange, and changes

- 14 -
<PAGE> 17
in the administrations or economic and monetary policies of foreign
governments.

Repurchase Agreements. Repurchase transactions are transactions by
which The Fund purchases a U.S. Government obligation and simultaneously
commits to resell that obligation to the seller at an agreed upon price and
date. The resale price reflects the purchase price plus an agreed upon market
rate of interest which is unrelated to the coupon rate or maturity of the
purchased obligation. A repurchase transaction involves the obligation of the
seller to pay the agreed upon price, which obligation is in effect secured by
the value of the underlying U.S. Government obligation. In the event of a
bankruptcy or other default of the seller of a repurchase agreement, The Fund
could experience both delays in liquidating the underlying U.S. Government
obligation and losses. To minimize these possibilities, The Fund intends to
enter into repurchase agreements only with its custodian, banks having assets
in excess of $1 billion and the largest and most creditworthy (as determined by
the Board of Trustees and the Adviser) securities dealers. In addition, the
repurchase agreements will be fully collateralized by the underlying U.S.
Government obligations. The Fund will not engage in a repurchase transaction
maturing in more than seven days if as a result thereof more than 10% of its
total assets would be invested in such transactions and in other illiquid
investments.

Portfolio Turnover. It is the policy of The Fund not to engage in
trading for short term profits and The Fund intends to limit its portfolio
turnover to the extent practicable. Nevertheless, changes in the portfolio
will be made promptly when determined to be advisable by reason of developments
not foreseen at the time of the investment decision, and usually without
reference to the length of time a security has been held. Accordingly,
portfolio turnover rate will not be considered a limiting factor in the
implementation of investment decisions. The turnover rate may vary from year
to year or during periods within a year. A high rate of portfolio turnover
results in correspondingly greater brokerage commission expenses and may result
in the realization of additional capital gains for tax purposes.

General. Any investment policy, strategy, technique or practice that
is not labelled fundamental in this Prospectus or the Statement of Additional
Information may be changed by the Board of Trustees without the vote of The
Fund's shareholders. For additional information concerning The Fund's
investment practices, including the risks involved in such practices, see
"Investment Techniques" and "Investment Policies" in the Statement of Additional
Information.

Any Trustee may be removed by vote of the shareholders holding not
less than two-thirds of the outstanding shares of The Trust. The Trust does
not hold annual meetings of shareholders. When matters are submitted to
shareholders for a vote, each

- 15 -
<PAGE> 18
shareholder is entitled to one vote for each whole share he owns and fractional
votes for fractional shares he owns. All shares have equal voting rights and
liquidation rights.

THE TRUSTEES AND EXECUTIVE OFFICERS

The Trustees and Executive Officers of The Trust and their principal
occupations during the last five years are set forth below.

<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name and Address With Trust During Past Five Years
- ---------------- -------------- ----------------------
<S> <C> <C>
*Morton H. Sachs Trustee He is the President and sole
1346 South Third St. Chairman of the Board Director and shareholder of The
Louisville, KY 40208 Chief Executive Officer Sachs Company, The Trust's
Adviser.

*Oscar S. Bryant, Jr. Trustee He is the Executive Vice
1346 South Third St. President President of The Trust's Adviser.
Louisville, KY 40208 Prior to 1981, he was Executive
Vice President, Secretary to the
Board and member of the Executive
Committee of Liberty National
Bank and Trust Company of
Louisville.

*Jennifer S. Dobbins Vice President She is a Vice President and a
1346 South Third St. Assistant Secretary Registered Principal of The
Louisville, KY 40208 Trust's Adviser.

*Inda M. Wangerin Secretary She is a Vice President and
1346 South Third St. Accountant of The Trust's
Louisville, KY 40208 Adviser.

*Louis T. Young Treasurer He is an employee of The Trust's
1346 South Third St. Adviser.
Louisville, KY 40208

O. Grant Bruton Trustee He is an Attorney at Law and a
2500 Brown & Director of Porcelain Metals
Williamson Tower Corporation, a fabricator of
Louisville, KY 40202 enameled parts.
</TABLE>

- 16 -
<PAGE> 19
<TABLE>
<S> <C> <C>
Carl T. Fischer, Jr. Trustee He is a self-employed farmer and
1041 Alta Vista Road horsebreeder and former President
Louisville, KY 40205 of Fischer Packing Co., a meat
packing company. He is a
Director of Stock Yards Bank &
Trust Co. located in Louisville.

Raphael O. Nystrand Trustee Since 1978, he has been a
3015 Springcrest Drive Professor and Dean of the School
Louisville, KY 40241 of Education, University of
Louisville. He was on leave from
this position to serve as
Secretary of Education and
Humanities for the Commonwealth
of Kentucky during calendar year
1984.
</TABLE>

- ----------------------------------
*Interested person of The Trust and affiliated person of The Trust and the
Adviser, both as defined by the Investment Company Act of 1940. Mr. Sachs is a
Trustee of The Trust and a controlling person of the Adviser, as such term is
defined by the Securities and Exchange Commission. Mr. Bryant is a Trustee and
Officer of the Trust and an Officer of the Adviser. Ms. Dobbins is an Officer
of both The Trust and the Adviser and a daughter of Morton H. Sachs. Ms.
Wangerin is an Officer of both The Trust and the Adviser. Mr. Young is an
Officer of The Trust and an employee of the Adviser.

- 17 -
<PAGE> 20
THE FAIRMONT FUND

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1996

This Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Prospectus of The Fairmont Fund dated
May 1, 1996. A copy of the Prospectus can be obtained by writing The Fund at
1346 South Third Street, Louisville, Kentucky 40208 or by calling The Fund at
(502) 636-5633.
<PAGE> 21
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . 3

INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

OTHER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

U.S. GOVERNMENT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . 7

INVESTMENT ADVISORY AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 8

TRUSTEE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 9

PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . 9

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . 12

TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 13

INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . 14

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>

- 2 -
<PAGE> 22
DESCRIPTION OF THE TRUST

The Fairmont Fund Trust (The Trust) is an open-end investment company
established as a business trust under Kentucky law by Declaration of Trust
dated December 29, 1980. The Declaration of Trust permits the Trustees to
issue an unlimited number of full and fractional shares of separate series.
This Statement of Additional Information provides information relating to The
Fairmont Fund series (The Fund).

Each share of a series represents an equal proportional interest in
the assets and liabilities belonging to the series. Upon liquidation of a
series, shareholders are entitled to share pro rata in the net assets of the
series available for distribution to shareholders. Shares of each series are
fully paid and have no preemptive or conversion rights. Kentucky law provides
that no assessment shall be made against the interest of any shareholder and no
shareholder shall be personally liable for any debts or liabilities incurred by
the Trustees or by The Trust.

Shareholders are entitled to one (1) vote for each full share held and
fractional votes for fractional shares held and may vote in the election of
Trustees and on other matters submitted to the vote of shareholders. Voting
rights are cumulative, which means that each shareholder has the right to
cumulate the voting power he possesses and to give one (1) nominee for Trustee
as many votes as the number of Trustees to be elected multiplied by the number
of his shares, or to distribute his votes on the same principle among two or
more candidates, as the shareholder desires. Shares are voted in the aggregate
and not by series, except when the matter to be voted upon affects only the
interest of a particular series. For information concerning the purchase and
redemption of shares of The Fund, see "How to Invest in The Fund" and "How to
Withdraw (Redeem) An Investment" in the Prospectus.

As of February 13, 1996, the Trustees and Officers of The Trust as a
group owned of record and beneficially 64,148 shares of The Fund, or 6.0% of
the outstanding shares of The Fund. As of that date, The Courier Journal TIP
Fund, Louisville, Kentucky, owned of record 10.5% of the outstanding shares of
The Fund.

INVESTMENT POLICIES

The Fund has adopted the following investment policies, which may be
changed only with approval of a majority of the outstanding shares of The Fund.
As used in this Statement of Additional Information, the term "majority" of the
outstanding shares of The Fund means the lesser of (1) 67% or more of the
outstanding shares of The Fund present at a meeting, if the holders of more
than 50% of the outstanding shares of The Fund are present or represented at
such meeting; or (2) more than 50% of the outstanding shares of The Fund.

1. Borrowing Money. The Fund may borrow money, if it borrows
money (a) from a bank, provided that immediately after such borrowing

- 3 -
<PAGE> 23
there is an asset coverage of 300% for all borrowings of The Fund; or (b) from
a bank or other persons for temporary purposes only, provided that such
temporary borrowings are in an amount not exceeding 5% of The Fund's total
assets at the time when the borrowing is made. The Fund may enter into reverse
repurchase transactions and any other transactions which may be deemed to be
borrowings, provided that The Fund has an asset coverage of 300% for all
borrowings and commitments of The Fund pursuant to reverse repurchase and other
such transactions.

2. Pledging. The Fund may mortgage, pledge, hypothecate or in
any manner transfer, as security for indebtedness, any assets of The Fund if it
is necessary in connection with borrowings described in policy (1) above. For
purposes of the Statement of Intention below, margin deposits, security
interests, liens and collateral arrangements with respect to permitted
investments and techniques are not deemed to be a mortgage, pledge or
hypothecation of assets.

3. Underwriting. The Fund may act as underwriter of securities
issued by other persons if immediately thereafter the amount of its outstanding
underwriting commitments, plus the value of its investments in securities of
issuers (other than investment companies) of which it owns more than 10% of the
outstanding voting securities, does not exceed 25% of its total assets. This
limitation and the Statement of Intention are not applicable to the extent
that, in connection with the disposition of portfolio securities (including
restricted securities), The Fund may be deemed an underwriter under certain
federal securities laws.

4. Real Estate. The Fund may purchase, hold or deal in real
estate, and may invest in securities which are secured by or represent
interests in real estate, mortgage-related securities or directly in mortgages.

5. Loans. The Fund may make loans to other persons, including
(a) loaning portfolio securities, (b) engaging in repurchase agreements, (c)
purchasing debt securities, and (d) making direct investments in mortgages.
For purposes of the Statement of Intention below, the term "loans" shall not
include the purchase of a portion of an issue of publicly distributed bonds,
debentures or other securities.

6. Margin Purchases. The Fund may not purchase securities or
evidences of interest thereon on "margin." For purposes of this limitation and
the Statement of Intention below, (a) short term credit obtained by The Fund
for the clearance of purchases and sales or redemption of securities and (b)
margin deposits and collateral arrangements with respect to permitted
investments and techniques are not considered to be purchases on "margin."
This limitation is not applicable to activities that may be deemed to involve
purchases on "margin" by The Fund, provided that The Fund's engagement in such
activities is consistent with or permitted by the Investment Company Act of
1940, the rules and regulations promulgated thereunder or

- 4 -
<PAGE> 24
interpretations of the Securities and Exchange Commission, its staff or other
legal authority.

7. Senior Securities. The Fund may not issue senior securities.
This limitation is not applicable to activities that may be deemed to involve
the issuance or sale of a senior security by The Fund, provided that The Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, the rules and regulations promulgated thereunder or
interpretations of the Securities and Exchange Commission, its staff or other
legal authority.

8. Short Sales. The Fund may not effect short sales of
securities.

9. Options. The Fund may not purchase or sell put or call
options.

10. Commodities. The Fund may not purchase, hold or deal in
commodities or commodities futures contracts.

11. Concentration. The Fund will not invest 25% or more of its
total assets in a particular industry. This limitation is not applicable to
investments in obligations issued or guaranteed by the U.S. Government, its
agencies and instrumentalities or repurchase agreements with respect thereto.

12. Diversification. As a diversified series of The Trust, The
Fund will not purchase the securities of any issuer if such purchase at the
time thereof would cause less than 75% of the value of the total assets of The
Fund to be invested in cash and cash items (including receivables), securities
issued by the U.S. Government, its agencies or instrumentalities and repurchase
agreements with respect thereto, securities of other investment companies, and
other securities for the purposes of this calculation limited in respect of any
one issuer to an amount not greater in value than 5% of the value of the total
assets of The Fund and to not more than 10% of the outstanding voting
securities of such issuer.

Statement of Intention. It is The Fund's intention (which may be
changed by the Board of Trustees without shareholder approval) that it will not
engage in any of the investment practices permitted by (1)-(7) above in the
coming year, except borrowing for temporary purposes and repurchase
transactions. If the Board of Trustees determines that it would be appropriate
for The Fund to employ any of the other investment practices permitted by
(1)-(7) above, The Fund's Prospectus or Statement of Additional Information
will be amended with appropriate disclosure prior to The Fund engaging in the
practice.

With respect to the percentages adopted by The Fund as maximum
limitations in its investment policies, an excess above the fixed percentage
(except for the percentage limitation relative to the borrowing of money) shall
not be a violation of the policy or

- 5 -
<PAGE> 25
limitation unless the excess results immediately and directly from the
acquisition of any security or the action taken.

Notwithstanding any of the foregoing policies or limitations, any
investment company, whether organized as a trust, association or corporation,
or a personal holding company, may be merged or consolidated with or acquired
by The Fund, provided that if such merger, consolidation or acquisition results
in an investment in the securities of any issuer prohibited by said paragraphs,
The Fund shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer
so acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.

OTHER RESTRICTIONS

State Restrictions. To comply with the current regulations of the
states of California, Missouri, Ohio and Texas, The Fund presently intends to
observe the following restrictions, which may be changed by the Board of
Trustees without shareholder approval.

California Restrictions. The Fund will not invest directly in real
estate, will not engage in underwriting and will not invest in other open-end
investment companies without obtaining the prior approval of the California
Department of Corporations to engage in the particular activity. In addition,
The Fund will not engage in margin purchases, unless such transactions are
consistent with applicable requirements of the California Blue Sky Regulations.

Missouri Restriction. The Fund will not invest in securities of
issuers which, together with any predecessors, have a record of less than three
years continuous operation.

Ohio Restrictions. The Fund will not purchase or retain securities of
any issuer if the Trustees and Officers of The Trust and the Directors and
Officers of the Adviser, who individually own beneficially more than 0.5% of
the outstanding securities of such issuer, together own beneficially more than
5% of such securities. The Fund will not purchase securities issued by other
investment companies except by purchase in the open market where no commission
or profit to a sponsor or dealer results from such purchase other than
customary broker's commission or except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition. The Fund will not borrow
(other than by entering into reverse repurchase agreements), pledge, mortgage
or hypothecate more than one-third of its total assets. In addition, The Fund
will engage in borrowing (other than reverse repurchase agreements) only for
emergency or extraordinary purposes and not for leverage. The Fund will not
invest more than 10% of its total assets in securities of issuers which,
together with any predecessors, have a record of less than three years
continuous operation or securities of issuers which are restricted as to
disposition.

- 6 -
<PAGE> 26
Texas Restrictions. The Fund will lend portfolio securities only if
collateral values are continuously maintained at no less than 100% by "marking
to market" daily and the practice is fair, just, and equitable, as determined
by a finding that adequate provision has been made for margin calls,
termination of the loan, reasonable servicing fees (including finder's fees),
voting rights, dividend rights, shareholder approval and disclosure. The Fund
will not invest more than 5% of the value of its net assets in warrants, valued
at the lower of cost or market, of which amount not more than 2% of the value
of its net assets may be warrants that are not listed on the New York or
American Stock Exchange. The Fund will not invest in oil, gas, or other
mineral leases, nor will it purchase or sell real property (including limited
partnership interests, but excluding readily marketable interests in real
estate investment trusts or readily marketable securities of companies which
invest in real estate).

Restrictions Due to Regulatory Positions. It is the current position
of the staff of the Securities and Exchange Commission that The Trust may not
invest more than 25% of its total assets in securities as to which The Trust
owns more than 10% of the outstanding voting securities of the issuer. The
Trust has made a commitment, which may be changed by the Board of Trustees
without shareholder approval, to comply with the above restriction.

It is the current position of the staff of the Securities and Exchange
Commission that The Fund may not invest more than 15% of its net assets in
illiquid securities, including restricted securities, real estate, mortgages
and nonpublicly offered debt securities.

U.S. GOVERNMENT OBLIGATIONS

The Fund may invest in "U.S. Government obligations," which term
refers to a variety of securities which are issued or guaranteed by the United
States Treasury, by various agencies of the United States Government, and by
various instrumentalities which have been established or sponsored by the
United States Government. The term is also deemed by The Fund to include
participation interests in U.S. Government obligations. Participation
interests are pro-rata interests in U.S. Government obligations held by others.
Certificates of deposit or safekeeping are documentary receipts for U.S.
Government obligations held in custody by others.

U.S. Treasury securities are backed by the "full faith and credit" of
the United States Government. Other U.S. Government obligations may or may not
be backed by the "full faith and credit" of the United States. In the case of
securities not backed by the "full faith and credit" of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim
against the United States itself in the event the agency or instrumentality
does not meet its commitments. Furthermore, there can be no assurance that the
United States Government will provide financial support if not obligated to do
so by law.

- 7 -
<PAGE> 27
Treasury securities include Treasury bills, Treasury notes, and
Treasury bonds. Government agencies which issue or guarantee securities backed
by the "full faith and credit" of the United States include the Government
National Mortgage Association and the Small Business Administration.
Government agencies and instrumentalities which issue or guarantee securities
not backed by the "full faith and credit" of the United States include the Farm
Credit System, the Federal Home Loan Banks, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. The Fund may
invest in securities issued or guaranteed by any of the entities listed above
or by any other agency or instrumentality established or sponsored by the
United States Government.

INVESTMENT ADVISORY AGREEMENT

The Trust has entered into a Management Agreement (the Agreement) with
The Sachs Company, 1346 South Third Street, Louisville, Kentucky (the Adviser),
under which the Adviser manages The Trust's portfolios of investments subject
to the approval of the Board of Trustees.

The Adviser is an investment manager which has provided investment
advice to individuals, corporations, pension and profit sharing plans and trust
accounts since 1974, when it was formed as a Kentucky proprietorship. The
Adviser was incorporated in Kentucky in 1975, and its principal place of
business is in Louisville, Kentucky. The Adviser is a broker-dealer registered
under the Securities Exchange Act of 1934, and as a broker operates on a
fully-disclosed basis through Legg Mason Wood Walker, Inc. or Conners & Co.,
Inc.

Under the terms of the Agreement, The Fund pays the Adviser a fee
computed and accrued daily and paid monthly at an annual rate of 2% of the
average value of the daily net assets of The Fund up to and including
$10,000,000, 1-1/2% of such assets of The Fund from $10,000,000 to and
including $30,000,000 and 1% of such assets of The Fund in excess of
$30,000,000; provided, however, that the total fees paid during the first and
second halves of each fiscal year of The Trust shall not exceed the semiannual
total of the daily fee accruals requested by the Adviser during the applicable
six month period. Pursuant to the Agreement, the Adviser pays all operating
expenses of The Trust except brokerage fees and commissions, taxes, interest,
expenses incurred by The Trust in connection with the organization and
registration of shares of any series of The Trust established after May 7,
1987, and such extraordinary or nonrecurring expenses as may arise, including
litigation to which The Trust may be a party and indemnification of The Trust's
Trustees and Officers with respect to the litigation.

State securities administrators may impose limitations on the annual
expenses of The Trust or The Fund. The most restrictive state expense
limitation applicable to The Trust is presently 2-1/2% of the first $30 million
of average net assets of a series, 2% of the next $70 million and 1-1/2% of
average net assets of a series in excess of $70 million. Certain expenses such
as brokerage commissions, if any, taxes, interest and extraordinary items are
excluded from the

- 8 -
<PAGE> 28
limitation. If the expenses of The Trust or a series approach the applicable
limitation in any state, The Trust will consider the various actions that are
available to it, including suspension of sales to residents of that state.

For the fiscal years ended December 31, 1995, 1994, and 1993, the
Adviser received advisory fees of $421,935, $371,862 and $305,708,
respectively.

The Trust pays no direct remuneration to any Officer of The Trust,
although Morton H. Sachs, by reason of his affiliation with the Adviser, will
receive benefits from the advisory fees and brokerage commissions paid to The
Trust's Adviser, The Sachs Company.

TRUSTEE COMPENSATION

The compensation paid to the Trustees of The Trust for the year ended
December 31, 1995 is set forth in the following table:

<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT ACCRUED ESTIMATED ANNUAL FROM TRUST (THE
COMPENSATION FROM AS PART OF FUND BENEFITS UPON TRUST IS NOT IN
NAME, AGE TRUST(1) EXPENSES RETIREMENT A FUND COMPLEX)(1)
<S> <C> <C> <C> <C>
O. Grant Bruton, 64 3,000 0 0 3,000
Oscar S. Bryant, Jr., 75 0 0 0 0
Carl T. Fischer, Jr., 63 4,000 0 0 4,000
Raphael O. Nystrand, 58 4,000 0 0 4,000
Morton H. Sachs, 61 0 0 0 0
<FN>

(1) Trustee fees are Trust expenses. However, the Adviser makes the actual
payment because the management agreement obligates the Adviser to pay (with
limited exceptions) all of the operating expenses of the Trust.
</TABLE>

The ages of the officers of The Trust are as follows: Jennifer S.
Dobbins, 37; Inda M. Wangerin, 74; Louis T. Young, 47.
PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to policies established by the Board of Trustees of The Trust,
the Adviser is responsible for The Fund's portfolio decisions and the placing
of The Fund's portfolio's transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for The Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.

The Adviser is specifically authorized to select brokers or dealers
who also provide brokerage and research services to The Fund and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser

- 9 -
<PAGE> 29
determines in good faith that the commission is reasonable in relation to the
value of the brokerage and research services provided. The determination may
be viewed in terms of a particular transaction or the Adviser's overall
responsibilities with respect to The Fund and to other accounts over which it
exercises investment discretion.

Research services include supplemental research, securities and
economic analysis, and statistical services and information with respect to the
availability of securities or purchasers or sellers of securities. Although
this information is useful to The Fund and the Adviser, it is not possible to
place a dollar value on it. It is the opinion of the Board of Trustees and the
Adviser that the review and study of this information will not reduce the
overall cost to the Adviser of performing its duties to The Fund under the
Agreement. Research services furnished by brokers or dealers through whom The
Fund effects securities transactions may be used by the Adviser in servicing
all of its accounts and not all such services may be used by the Adviser in
connection with The Fund.

While The Fund does not deem it practicable and in its best interests
to solicit competitive bids for commission rates on each transaction,
consideration is regularly given to posted commission rates as well as other
information concerning the level of commissions charged on comparable
transactions by qualified brokers.

The Fund has no obligation to deal with any broker or dealer in the
execution of its transactions. However, it is contemplated that the Adviser,
in its capacity as a registered broker-dealer, will effect substantially all
securities transactions which are executed on a national securities exchange
and over-the-counter transactions conducted on an agency basis. Such
transactions will be executed at competitive commission rates through Legg
Mason Wood Walker, Inc. or Conners & Co., Inc.

Transactions in the over-the-counter market can be placed directly
with market makers who act as principals for their own account and include
mark-ups in the prices charged for over-the-counter securities. Transactions
in the over-the-counter market can also be placed with broker-dealers who act
as agents and charge brokerage commissions for effecting over-the-counter
transactions. The Fund may place its over-the-counter transactions either
directly with principal market makers, or with broker-dealers if that is
consistent with the Adviser's obligation to obtain best qualitative execution.
Under the Investment Company Act of 1940, persons affiliated with The Fund such
as the Adviser are prohibited from dealing with The Fund as a principal in the
purchase and sale of securities. Therefore, The Sachs Company will not serve
as The Fund's dealer in connection with over-the-counter transactions.
However, The Sachs Company may serve as The Fund's broker in over-the-counter
transactions conducted on an agency basis and will receive brokerage
commissions in connection with such transactions. Such agency transactions
will be executed through Legg Mason Wood Walker, Inc. or Conners & Co., Inc.

- 10 -
<PAGE> 30
The Fund will not effect any brokerage transactions in its portfolio
securities with the Adviser if such transactions would be unfair or
unreasonable to Fund shareholders, and the commissions will be paid solely for
the execution of trades and not for any other services. The Agreement provides
that the Adviser may receive brokerage commissions in connection with effecting
such transactions for The Fund. In determining the commissions to be paid to
The Sachs Company, it is the policy of The Fund that such commissions will, in
the judgment of The Trust's Board of Trustees, be (a) at least as favorable to
The Fund as those which would be charged by other qualified brokers having
comparable execution capability and (b) at least as favorable to The Fund as
commissions contemporaneously charged by The Sachs Company on comparable
transactions for its most favored unaffiliated customers, except for customers
of The Sachs Company considered by a majority of The Trust's disinterested
Trustees not to be comparable to The Fund. The disinterested Trustees from
time to time review, among other things, information relating to the
commissions charged by The Sachs Company to The Fund and its other customers,
and rates and other information concerning the commissions charged by other
qualified brokers.

Any profits from brokerage commissions earned by The Sachs Company as
a result of portfolio transactions for The Fund will accrue to Morton H. Sachs
who is the sole shareholder of The Sachs Company. The Agreement does not
provide for a reduction of the Adviser's fee by the amount of any profits
earned by The Sachs Company from brokerage commissions generated from portfolio
transactions of The Fund. For the fiscal years ended December 31, 1995, 1994
and 1993, the Fund's portfolio transactions generated total brokerage
commissions of $528,313, $510,558 and $272,404, respectively. For the fiscal
year ended December 31, 1995, The Sachs Company was paid $393,234 or 74% of the
total brokerage commission for effecting (through Bartlett & Co. or Conners &
Co.) 93% of The Fund's commission transactions. For the fiscal year ended
December 31, 1994, The Sachs Company was paid $371,077 or 73% of the total
brokerage commissions for effecting (through Bartlett & Co. or Conners & Co.)
92% of The Fund's commission transactions. For the fiscal year ended December
31, 1993, The Sachs Company was paid $185,660 or 68% of the total brokerage
commissions for effecting (through Bartlett & Co. or Conners & Co.) 92% of The
Fund's commission transactions.

While The Fund contemplates no ongoing arrangements with any other
brokerage firms, brokerage business may be given from time to time to other
firms. The Sachs Company will not receive reciprocal brokerage business as a
result of the brokerage business placed by The Fund with others.

To the extent that The Fund and another of the Adviser's clients seek
to acquire the same security at about the same time, The Fund may not be able
to acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, The Fund may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio

- 11 -
<PAGE> 31
security at the same time. On the other hand, if the same securities are
bought or sold at the same time by more than one client, the resulting
participation in volume transactions could produce better executions for The
Fund. In the event that more than one client purchases or sells the same
security on a given date, the purchases and sales will normally be made as
nearly as practicable on a pro rata basis in proportion to the amounts desired
to be purchased or sold by each.

DETERMINATION OF NET ASSET VALUE

The net asset value of the shares of The Fund is determined as of 4:00
p.m. Eastern time on each day The Fund is open for business. The Fund is open
for business on every day except Saturdays, Sundays and the following holidays:
New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas. For a description of the methods used
to determine the net asset value, see "Determination of Net Asset Value" in the
Prospectus.

TAXES

The Fund has qualified for the last twelve (12) fiscal periods, and
intends to continue to qualify, under Subchapter M of the Internal Revenue
Code. By so qualifying, The Fund will not be liable for federal income taxes
to the extent its taxable net investment income and net realized capital gains
are distributed to shareholders. The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion (31%) of the dividend income
and capital gains distributions of any account unless the shareholder provides
a taxpayer identification number and certifies that the taxpayer identification
number is correct and that the shareholder is not subject to backup
withholding.

CUSTODIAN

Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202 has been
retained to act as Custodian of The Trust's investments. The Custodian acts as
The Trust's depository, safekeeps its portfolio securities and investments,
collects all income and other payments with respect thereto, disburses funds at
The Fund's request and maintains records in connection with its duties.
Certain investments may be held by a depository in the United States.

TRANSFER AGENT

The Trust acts as its own transfer agent and dividend paying agent.
To enable The Trust to perform these functions, the Adviser provides computer
services and personnel to The Trust.

- 12 -
<PAGE> 32
AUDITORS

The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road,
Westlake, Ohio 44145 has been selected as independent auditors for The Trust
for the year ending December 31, 1996. McCurdy & Associates CPA's, Inc.
performs an annual audit of The Trust's financial statements and provides
financial, tax and accounting consulting services as requested.

PERFORMANCE INFORMATION

Average annual total return is computed by finding the average annual
compounded rates of return (over one, five and ten year periods, and since
inception) that would equate the initial amount invested to the ending
redeemable value, according to the following formula:

n
P(1+T) = ERV

Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable period of
the hypothetical $1,000 investment made at the beginning of
the applicable period

The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.

From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of The Fund
may be compared to indices of broad groups of unmanaged securities considered
to be representative of or similar to the portfolio holdings of The Fund or
considered to be representative of the stock market in general. For example,
The Fund's performance may be compared to that of the Standard & Poor's 500
Stock Index and the Dow Jones Industrial Average. The investment performance
figures for The Fund and the indices will include reinvestment of dividends and
capital gains distributions.

In addition, the performance of The Fund may be compared to other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm which ranks mutual funds by overall performance,
investment objectives and assets. Performance rankings and ratings reported
periodically in national financial publications such as Barron's may also be
used.

- 13 -
<PAGE> 33
INDEPENDENT AUDITOR'S REPORT

To the Shareholders and
Board of Directors:
Fairmont Fund

We have audited the accompanying statement of assets and liabilities of
Fairmont Fund, including the schedule of investments, 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 in the period then ended,
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights 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 and
financial highlights are free of materials misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received. 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 financial highlights referred to
above present fairly, in all material respects, the financial position of
Fairmont Fund as of December 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.

/s/
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
January 16, 1996

- 14 -
<PAGE> 34
FINANCIAL STATEMENTS

The Fairmont Fund
Statement of Assets and Liabilities
December 31, 1995

<TABLE>
<S> <C> <C>
ASSETS
INVESTMENTS IN SECURITIES, At Value (Note 2)
Common stocks (Cost $23,492,129) $27,735,586
Bank repurchase agreement 674,000
-----------
Total investments in securities $28,409,586

CASH 1,495

RECEIVABLES
Investment securities sold 2,200,449
Dividends 13,900
Interest 298
-----------
Total receivables 2,214,647
-----------
Total assets 30,625,728

LIABILITIES
PAYABLES
Investment securities purchased $ 2,250,178
Distributions to shareholders (Note 4) 141,060
Management fee (Note 3) 39,769
Shares redeemed 3,140
Other 580
-----------
Total liabilities 2,434,727
-----------
NET ASSETS $28,191,001

NET ASSETS CONSIST OF
Capital stock (1,043,270 shares outstanding) (Note 8) $24,505,746
Accumulated net realized losses on investments (Note 6) ( 558,202)
Net unrealized appreciation on investments (Note 5) 4,243,457
-----------
NET ASSETS $28,191,001

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
($28,191,001 divided by 1,043,270 shares) $ 27.02
</TABLE>

- 15 -
<PAGE> 35
The Fairmont Fund
Statement of Operations
Year Ended December 31, 1995

<TABLE>
<S> <C>
INVESTMENT INCOME (Note 2)

Dividends $ 220,482
Interest 51,438
Other 13,750
-----------
Total investment income 285,670

EXPENSES
Management fee (Note 3) 421,935
-----------
Net investment loss (136,265)

NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS (Note 2)

Net realized gains from investment transactions 3,460,455

Net change in unrealized appreciation on investments 2,774,041

Net realized and unrealized gains on investments 6,234,496
-----------
Net increase in net assets resulting from operations $ 6,098,231
</TABLE>

- 16 -
<PAGE> 36
The Fairmont Fund
Statement of Changes in Net Assets
Years Ended December 31, 1995 and December 31, 1994

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
FROM OPERATIONS

Net investment loss $ (136,265) $ (168,798)
Net realized gains on investments 3,460,455 3,196,379
Net change in unrealized
appreciation on investments 2,774,041 (1,742,141)

Net increase in net assets
resulting from operations 6,098,231 1,285,440

DISTRIBUTIONS TO SHAREHOLDERS (Note 4)

Distributions from net realized
gains on investments (3,458,598) 0
</TABLE>

<TABLE>
<CAPTION>
FROM CAPITAL SHARE
TRANSACTIONS (Note 8) Shares Shares
<S> <C> <C> <C> <C>
Proceeds from sale of
shares 106,454 2,870,723 278,757 6,824,928

Shares issued in reinvest
ment of distributions 122,781 3,317,538 0 0

Payments for shares
redeemed (108,307) (2,831,640) (198,262) (4,799,611)

Net increase or decrease
in net assets from capital
share transactions 120,928 3,356,621 80,495 2,025,317

Net increase in net assets 5,996,254 3,310,757

NET ASSETS

Beginning of year 22,194,747 18,883,990

End of period $28,191,001 $22,194,747
</TABLE>

- 17 -
<PAGE> 37

Schedule of Investments
December 31, 1995

<TABLE>
<CAPTION>
Investments in Securities
Common Stocks (Shares) Value Percent
<S> <C> <C>
Automobile Insurance
50,000 Integon Corporation $1,031,250 3.66%

Electrical Apparatus
65,000 American Power Conversion Corp(a) 617,500 2.19

Electromedical Apparatus
250,000 Imatron, Inc. (a) 500,000 1.77

Grain Mill Products
10,000 International Multifoods Corporation 201,250 0.71

Health Care Management
100,000 Staff Builders, Inc. (a) 293,750 1.04

Life Insurance
65,000 John Alden Financial Corporation 1,356,875
10,000 Life Re Corporation 250,000
55,000 Pioneer Financial Services, Inc. 1,017,500
2,624,375 9.31

Oil and Gas Exploration
40,000 Oryx Energy Company (a) 535,000 1.90

Paper Products
</TABLE>

- 18 -
<PAGE> 38

<TABLE>

<S> <C> <C>
10,000 Tambrands, Inc. 477,500 1.69

Pharmaceuticals
250,000 Pharmos Corporation (a) 367,188
18,750 Pharmos Corp Warrants Exp. 9/15/00(a)(b) 5,273
30,000 Sandoz Ltd. ADR 1,376,250
1,748,711 6.20
Savings Institutions
25,000 Interwest Bancorp, Inc. 509,375
45,000 St. Paul Bancorp, Inc. 1,147,500
1,656,875 5.88
Shoes
55,000 Timberland Company (a) 1,093,125 3.88

Transportation
200,000 Greyhound Lines Inc. (a) 862,500 3.06

Wholesale Groceries
50,000 International Dairy Queen, Cl A (a) 1,137,500 4.04

Total Common Stocks (Cost $23,492,129) 27,735,586 98.39

Bank Repurchase Agreement
With Star Bank NA of Cincinnati, issued 12/29/95
due 1/2/96, fully collateralized by Government
National Mortgage Association, 6.00% due 5/22/22
(Cost $674,000) 674,000 2.39

Total Investments (Cost $24,166,129) 28,409,586 100.78

Other Assets Less Liabilities (218,585) (0.78)

Net Assets $28,191,001 100.00%

<FN>
(a) Common stocks which did not declare a dividend in 1995.
(b) There are restrictions on these warrants which will limit The Fund's ability
to convert them to stock until September 14, 1996.
</TABLE>

- 19 -
<PAGE> 39
The Fairmont Fund
Financial Highlights

(For a Share Outstanding Throughout Each Period)

<TABLE>
<CAPTION>
Years Ended
Dec Dec Dec Dec Dec
31 31 31 31 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 24.06 22.43 19.41 17.02 12.17

Income From Investment
Operations
Net Investment Income (.08) (.16) (.14) (.17) .09
Net Gains or Losses on
Securities (both realized
and unrealized) 6.80 1.79 3.16 2.56 4.85
Total From Investment
Operations 6.72 1.63 3.02 2.39 4.94

Less Distributions
Dividends (from net
investment income) .00 .00 .00 .00 .09
Distributions (from
capital gains) 3.76 .00 .00 .00 .00
Returns of Capital .00 .00 .00 .00 .00
Total Distributions 3.76 .00 .00 .00 .09

Net Asset Value, End
of Period $ 27.02 24.06 22.43 19.41 17.02

Total Return 27.92% 7.27% 15.56% 14.04% 40.56%

Ratios/Supplemental Data
Net Assets, End of
Period (in 000s) $28,191 22,195 18,884 16,788 17,385
Ratio of Expenses to
Average Net Assets 1.70% 1.74% 1.78% 1.79% 1.79%
Ratio of Net Income to
Average Net Assets (.55)% (.79)% (.66)% (.85)% .51%
Portfolio Turnover Rate 2.47 2.75 1.55 1.32 1.15
</TABLE>

- 20 -
<PAGE> 40
The Fairmont Fund
Notes to Financial Statements
December 31, 1995

(1) Organization

The Fairmont Fund (The Fund) is a no-load, diversified series of The Fairmont
Fund Trust (The Trust), which is a Kentucky Business Trust and an open-end
investment company registered under the Investment Company Act of 1940. The
Fund was established under a declaration of trust dated December 29, 1980 and
began offering its shares publicly on September 2, 1981.

(2) Summary of Significant Accounting Policies

(a) Valuation of Investment Securities - Purchases and sales of securities are
recorded on a trade date basis. Portfolio securities which are traded on stock
exchanges or in the over-the-counter markets are valued at the last sale price
as of 4:00 P.M. Eastern time on the day the securities are being valued or,
lacking any sales, at the mean between the closing bid and asked prices. Fixed
income securities are valued by using market quotations, or independent pricing
services which use prices provided by market makers or estimates of market
values obtained from yield data relating to instruments or securities with
similar characteristics. Securities and other assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Board of Trustees. Dividend income
is recorded on the ex-dividend date and interest income is recorded on the
accrual basis.

(b) Gains and Losses on Investment Securities - Gains and losses from sales of
investments are calculated on the "identified cost" method. Upon disposition
of a portion of the investment in a particular security, it is The Fund's
general practice to first select for sale those securities which qualify for
long-term capital gain or loss treatment for tax purposes.

(c) Repurchase Agreements - The Fund may acquire repurchase agreements from
banks or security dealers (the Seller) which the Board of Trustees and the
Adviser have determined creditworthy. The Seller of the repurchase agreement
is required to maintain the value of collateral at not less than the repurchase
price, including accrued interest. Securities pledged as collateral for
repurchase agreements are held by The Fund's custodian in the Federal
Reserve/Treasury book-entry system.

(d) Capital Shares - The Fund records purchases of its capital shares at the
daily net asset value next determined after receipt of a shareholder's check or
wire and application in proper form. Redemptions are recorded at the net asset
value next determined following receipt of a shareholder's written request in
proper form.

- 21 -
<PAGE> 41
(3) Investment Advisory Agreement, Commissions and Related Party Transactions

The Investment Advisory Agreement (the Agreement) provides that The Sachs
Company (the Adviser) will pay all of The Trust's operating expenses, including
fees to disinterested trustees, but excluding brokerage fees and commissions,
taxes, interest and extraordinary expenses. The Adviser also pays The Fund's
officers' salaries. Under the terms of the Agreement, The Fund pays the
Adviser a fee at the rate of 2% of the first $10,000,000 of average daily net
assets, 1-1/2% of the next $20,000,000, and 1% of the average daily net assets
over $30,000,000. The management fee is accrued daily and paid monthly. The
Adviser received management fees of $421,935 for the year ended December 31,
1995.

Morton H. Sachs, a trustee of The Fund, is the president and sole shareholder
of the Adviser. The Adviser, as a registered broker-dealer of securities,
effected substantially all of the investment portfolio transactions for The
Fund. For this service the Adviser received commissions of $393,234 for the
year ended December 31, 1995.

Certain officers and/or Trustees of The Fund are officers of the Adviser.

(4) Distributions to Shareholders

The following is a summary of distributions to shareholders for the year ended
December 31, 1995. No distributions were declared for the year ended December
31, 1994.

<TABLE>
<CAPTION>
Period Date Paid Per Share
Ended Declared In Cash Reinvested Total Amount
<S> <C> <C> <C> <C> <C>
12/31/95 12/29/95 $141,060 $3,317,538 $3,458,598 $3.76
</TABLE>

(5) Investments

For the year ended December 31, 1995, the cost of purchases and proceeds from
sales of investments, other than temporary cash investments, were $60,325,933
and $59,103,278, respectively.

Following is information regarding unrealized appreciation (depreciation) and
aggregate cost of securities based upon federal income tax cost at December 31,
1995:
<TABLE>
<S> <C>
Tax Cost
Aggregate gross unrealized appreciation for
all securities with value in excess of cost $ 4,965,190

Aggregate gross unrealized depreciation for
all securities with cost in excess of value
</TABLE>
[/R]

- 22 -
<PAGE> 42

<TABLE>
<S> <C>
Net unrealized appreciation $ 3,685,255

Aggregate cost of securities $24,050,331
</TABLE>

(6) Income Taxes

It is The Fund's policy to comply with the special provisions of the Internal
Revenue Code available to investment companies and, in the manner provided
therein, to distribute substantially all of its income to shareholders.
Therefore no tax provision is required. The accumulated net realized loss is
due only to temporary timing differences caused by wash sales and does not
represent a capital loss carryforward for income tax purposes.

(7) There are no reportable financial instruments which have any off-balance
sheet risk as of December 31, 1995.

(8) At December 31, 1995 an indefinite number of capital shares (no par value)
were authorized, and paid-in capital amounted to $24,505,746. Transactions in
capital shares were as follows:

<TABLE>
<S> <C>
Shares sold 229,235
Shares redeemed (108,307)
Net increase 120,928
Shares outstanding:
Beginning of period 922,342
Ending of period 1,043,270
</TABLE>

(9) In accordance with SOP 93-2, The Fund has recorded a reclassification in
the capital accounts. As of December 31, 1995, The Fund recorded permanent
book/tax differences of $(136,265) from undistributed net investment income to
paid in capital. This reclassification has no impact on the net asset value of
The Fund and is designed generally to present undistributed income and realized
gains on a tax basis which is considered to be more informative to the
shareholder.

- 23 -
<PAGE> 43
THE FAIRMONT FUND TRUST

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(a) Financial Statements:

Included in Part A for The Fairmont Fund series:

Financial Highlights

Included in Part B for The Fairmont Fund series:

Independent Auditor's Report

Statement of Assets and Liabilities December 31, 1995

Statement of Operations Year Ended December 31, 1995

Statement of Changes in Net Assets Years Ended December
31, 1995 and 1994

Schedule of Investments December 31, 1995

Financial Highlights for the Years Ended December 31,
1995, 1994, 1993, 1992 and 1991

Notes to Financial Statements December 31, 1995

(b) Exhibits:

(1) Registrant's Declaration of Trust, which was filed as an
Exhibit to Registrant's Registration Statement on Form
N-1, and the Amendment thereto, which was filed as an
Exhibit to Registrant's Pre-Effective Amendment No. 1,
are hereby incorporated by reference.

Copy of Amendment No. 2 to Registrant's Declaration of
Trust dated May 15, 1984 which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 7, is hereby
incorporated by reference.
<PAGE> 44
Copy of Amendment No. 3 to Registrant's Declaration of
Trust dated October 28, 1986, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 8,
is hereby incorporated by reference.

Copy of Amendment No. 4 to Registrant's Declaration of
Trust dated April 28, 1988, which was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 14, is
hereby incorporated by reference.

Copy of Amendment No. 5 to Registrant's Declaration of
Trust dated September 11, 1990, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 17,
is hereby incorporated by reference.

(2) Registrant's By-Laws, which were filed as an Exhibit to
Registrant's Registration Statement on Form N-1, and the
Amendment thereto, which was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1, are hereby
incorporated by reference.

Copy of Amendment No. 2 to Registrant's By-laws dated
october 28, 1986, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8, is hereby
incorporated by reference.

Copy of Amendment No. 3 to Registrant's By-Laws dated
April 28, 1988, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 14, is hereby
incorporated by reference.

(3) Voting Trust Agreements - None.

(4) Specimen of each security issued and each security being
registered by the Registrant for The Fairmont Fund
series, which was filed as an Exhibit to Registrant's
Pre-Effective Amendment No. 1, are hereby incorporated by
reference.

(5) Registrant's Management Agreement for The Fairmont Fund
series with The Sachs Company (formerly Morton H. Sachs &
Co.), which was filed as an Exhibit to Registrant's

- 2 -
<PAGE> 45
Post-Effective Amendment No. 11, is hereby incorporated
by reference.

(6) Underwriting Agreements - None

(7) Bonus, Profit Sharing, Pension or Similar Contracts for
the benefit of directors or officers - None.

(8) Registrant's agreement with the Custodian, Start Bank,
N.A., Cincinnati, Ohio is filed herewith.

(9) Other Material Contracts - None.

(10) (i) Opinion and Consent of Brown, Cummins & Brown,
which was filed with Registrant's Form 24F-2
for the fiscal year ended December 31, 1995,
is hereby incorporated by reference.

(ii) Opinion and Consent of John S. Greenebaum,
which was filed with Registrant's Form 24F-2
for the fiscal year ended December 31, 1995,
is hereby incorporated by reference.

(11) Consent of McCurdy & Associates CPA's, Inc. is filed
herewith.

(12) Financial Statements Omitted from Item 23, Part B -
None.

(13) Copies of Letters of Initial Stockholders of The
Fairmont Fund series, which were filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1, are hereby
incorporated by reference.

(14) Model Plan Used in Establishment of any Retirement
Plan - The Liberty-Fairmont IRA Master Plan,
Liberty-Fairmont IRA Adoption Agreement and
Liberty-Fairmont IRA Fact Book and Disclosure which were
filed as Exhibits to Registrant's Post-Effective
Amendment No. 1, are hereby incorporated by reference.

(15) Rule 12b-1 Plan and Implementation Agreements- None.

- 3 -
<PAGE> 46
(16) Schedule for Computation of Each Performance Quotation,
which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 13, is hereby incorporated
by reference.

(17) Powers of Attorney for the Registrant and its Trustees
and Officers are filed herewith.

Item 25. Persons Controlled by or Under Common Control with Registrant.

None.

Item 26. Number of Holders of Securities (as of January 31, 1996)

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
The Fairmont Fund 1,148
</TABLE>

Item 27. Indemnification

Article VI of the Registrant's Declaration of Trust provides for
indemnification of officers and trustees to the extent permitted by
applicable law. The indemnification provisions are in accordance
with Investment Company Act Release No. 11330 (September 2, 1980).

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the provisions of
Kentucky law and the Registrant's Declaration of Trust and By Laws,
or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant
of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act

- 4 -
<PAGE> 47
and will be governed by the final adjudication of such issue.

Item 28. Business and Other Connections of Investment Adviser

(a) The Sachs Company (the "Adviser") is a registered
investment adviser and a registered broker-dealer. It has
engaged in no other business during the past two fiscal
years.

(b) Morton H. Sachs is the President and sole director of the
Adviser. The following list sets forth the business and
other connections of Mr. Sachs:

(1) Partner, Windhurst Farm, 1346 South Third Street,
Louisville, Kentucky 40208.

(2) Shareholder and officer of Premier Care, Inc., 1346
South Third Street, Louisville, Kentucky 40208.

(d) Inda M. Wangerin is a Vice President of the Adviser.

(e) Mary S. Sachs is a Vice President of the Adviser.

(f) Christopher A. Nunnelly is a Vice President of the Adviser.

(g) Jennifer E. Sachs Dobbins is a Vice President of the
Adviser.

(h) Roy P. Durham is a Vice President of the Adviser.

Item 29. Principal Underwriters

None.

Item 30. Location of Accounts and Records

The Registrant will maintain physical possession of the Declaration
of Trust, By-Laws and minute books. All other accounts, books and
other documents required to be maintained by section 31(a) of the
Investment Company Act of 1940 and the rules promulgated thereunder
will be maintained by the Registrant or

- 5 -
<PAGE> 48
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202 as
Custodian for the Registrant.

Item 31. Management Services Not Discussed in Parts A or B

None.

Item 32. Undertakings

(a) Not applicable.

(b) Not applicable.

(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.

- 6 -
<PAGE> 49
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cincinnati, State of Ohio on the 29th day of
February, 1996.

THE FAIRMONT FUND TRUST

By: /s/
-------------------------------
DONALD S. MENDELSOHN
Attorney-in-Fact

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<S> <C> <C>
MORTON H. SACHS Chairman of the
Board & Trustee
By: /s/
----------------------
LOUIS YOUNG Treasurer DONALD S. MENDELSOHN
Attorney-in-Fact
RAPHAEL O. NYSTRAND Trustee
February 29, 1996
O. GRANT BRUTON Trustee

CARL T. FISCHER, JR. Trustee

OSCAR S. BRYANT, JR. President and
Trustee
</TABLE>

- 7 -
<PAGE> 50
EXHIBIT INDEX

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
99.8 Custodian Agreement . . . . . . . . . . . . . . . . . . . . . 49

99.B11 Consent of McCurdy & Associates CPA's, Inc. . . . . . . . . . 89

99.POA Powers of Attorney for the Registrant, its Trustees
and its Officers . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>

- 8 -

<PAGE> 1

[TYPE] EX-99.8
[DESCRIPTION] CUSTODIAN AGREEMENT

CUSTODY AGREEMENT
BETWEEN
STAR BANK, N.A.
AND
THE FAIRMONT FUND

- 9 -
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<S> <C>
Definitions 1.00

ARTICLE II - Appointment; Acceptance; and Furnishing of Documents
II. A. Appointment of Custodian. 5.00

II. B. Acceptance of Custodian. 5.00

II. C. Documents to be Furnished. 5.00
II. D. Notice of Appointment of Dividend and Transfer Agent. 5.00

ARTICLE III - Receipt of Trust Assets
III. A. Delivery of Moneys. 6.00

III. B. Delivery of Securities. 6.00

III. C. Payments for Shares. 6.00
III. D. Duties Upon Receipt. 6.00

ARTICLE IV - Disbursement of Trust Assets
IV. A. Declaration of Dividends by Trust. 7.00

IV. B. Segregation of Redemption Proceeds. 7.00

IV. C. Disbursements of Custodian. 8.00
IV. D. Payment of Custodian Fees. 8.00

ARTICLE V - Custody of Trust Assets
V. A. Separate Accounts for Each Fund. 8.00

V. B. Segregation of Non-Cash Assets. 9.00

V. C. Securities in Bearer and Registered Form. 9.00
V. D. Duties of Custodian as to Securities. 9.00

V. E. Certain Actions Upon Written Instructions. 10.00
V. F. Custodian to Deliver Proxy Materials. 11.00

V. G. Custodian to Deliver Tender Offer Information. 11.00

V. H. Custodian to Deliver Security and Transaction Information. 11.00
ARTICLE VI - Purchase and Sale of Securities

VI. A. Purchase of Securities. 12.00
</TABLE>

- 10 -
<PAGE> 3

<TABLE>
<S> <C>
VI. B. Sale of Securities. 13.00

VI. C. Delivery Versus Payment for Purchases and Sales. 14.00
VI. D. Payment on Settlement Date. 14.00

VI. E. Segregated Accounts. 15.00

VI. F. Advances for Settlement. 16.00
ARTICLE VII - Trust Indebtedness

VII. A. Borrowings. 17.00
VII. B. Advances. 18.00

ARTICLE VIII - Concerning the Custodian

VIII. A. Limitations on Liability of Custodian. 18.00
VIII. B. Actions not Required by Custodian. 20.00

VIII. C. No Duty to Collect Amounts Due From Dividend and Transfer Agent. 21.00
VIII. D. No Enforcement Actions. 21.00

VIII. E. Authority to Use Agents and Sub-Custodians. 21.00

VIII. F. No Duty to Supervise Investments. 22.00
VIII. G. All Records Confidential. 22.00

VIII. H. Compensation of Custodian. 22.00
VIII. I. Reliance Upon Instructions. 23.00

VIII. J. Books and Records. 23.00

VIII. K. Internal Accounting Control Systems. 24.00
VIII. L. No Management of Assets by Custodian. 24.00

VIII. M. Assistance to Trust. 24.00
ARTICLE IX - Termination

IX. A. Termination. 26.00

IX. B. Failure to Designate Successor Trustee. 27.00
ARTICLE X - Force Majeure

ARTICLE XI - Miscellaneous
XI. A. Designation of Authorized Persons. 28.00
</TABLE>

- 11 -
<PAGE> 4
<TABLE>
<S> <C>
XI. B. Limitation of Personal Liability. 28.00

XI. C. Authorization By Board. 28.00
XI. D. Custodian's Consent to Use of Its Name. 29.00

XI. E. Notices to Custodian. 29.00

XI. F. Notices to Trust. 29.00
XI. G. Amendments In Writing. 29.00

XI. H. Successors and Assigns. 30.00
XI. I. Governing Law. 30.00

XI. J. Jurisdiction. 30.00

XI. K. Counterparts. 30.00
XI. L. Headings. 30.00

APPENDIX A
APPENDIX B

APPENDIX C

APPENDIX D
APPENDIX E
</TABLE>

- 12 -
<PAGE> 5
CUSTODY AGREEMENT

This agreement (the "Agreement") is entered into as of the _____ day
of __________, 1995, by and between THE FAIRMONT FUND, a Kentucky business
trust (the "Trust") and Star Bank, National Association, (the "Custodian"), a
national banking association having its principal office at 425 Walnut Street,
Cincinnati, Ohio, 45202.

WHEREAS, the Trust and the Custodian desire to enter into this
Agreement to provide for the custody and safekeeping of the assets of the Trust
as required by the Act (as hereafter defined).

THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Trust and the Custodian agree as follows: DEFINITIONS

The following words and phrases, when used in this Agreement, unless
the context otherwise requires, shall have the following meanings:

Act - the Investment Company Act of 1940, as amended.

1934 Act - the Securities and Exchange Act of 1934, as amended.

Authorized Person - any person, whether or not any such person is an
officer or employee of the Trust, who is duly authorized by the Board of
Trustees of the Trust to give Oral Instructions and Written Instructions on
behalf of the Trust or any Fund, and named in Appendix A attached hereto and as
amended from time to time by

- 13 -
<PAGE> 6
resolution of the Board of Trustees, certified by an Officer, and received by
the Custodian.

Board of Trustees - the Trustees from time to time serving under the
Trust's Agreement and Declaration of Trust, as from time to time amended.

Book-Entry System - a federal book-entry system as provided in Subpart
O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFT Part 350, or
in such book-entry regulations of federal agencies as are substantially in the
form of Subpart O.

Business Day - any day recognized as a settlement day by The New York
Stock Exchange, Inc. and any other day for which the Trust computes the net
asset value of Shares of any fund.

Depository - The Depository Trust Company ("DTC"), a limited purpose
trust company, its successor(s) and its nominee(s). Depository shall include
any other clearing agency registered with the SEC under Section 17A of the 1934
Act which acts as a system for the central handling of Securities where all
Securities of any particular class or series of an issuer deposited within the
system are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of the Securities provided that the Custodian
shall have received a copy of a resolution of the Board of Trustees, certified
by an Officer, specifically approving the use of such clearing agency as a
depository for the Funds.

- 14 -
<PAGE> 7
Dividend and Transfer Agent - the dividend and transfer agent
appointed, from time to time, pursuant to a written agreement between the
dividend and transfer agent and the Trust.

Foreign Securities - a) securities issued and sold primarily outside
of the United States by a foreign government, a national of any foreign
country, or a trust or other organization incorporated or organized under the
laws of any foreign country or; b) securities issued or guaranteed by the
government of the United States, by any state, by any political subdivision or
agency thereof, or by any entity organized under the laws of the United States
or of any state thereof, which have been issued and sold primarily outside of
the United States.

Fund - each series of the Trust listed in Appendix B and any
additional series added pursuant to Proper Instructions. A series is
individually referred to as a "Fund" and collectively referred to as the
"Funds."

Money Market Security - debt obligations issued or guaranteed as to
principal and/or interest by the government of the United States or agencies or
instrumentalities thereof, commercial paper, obligations (including certificates
of deposit, bankers' acceptances, repurchase agreements and reverse repurchase
agreements with respect to the same), and time deposits of domestic banks and
thrift institutions whose deposits are insured by the Federal Deposit Insurance
Corporation, and short-term corporate obligations where the purchase and sale of
such securities normally

- 15 -
<PAGE> 8
require settlement in federal funds or their equivalent on the same day as such
purchase and sale, all of which mature in not more than thirteen (13) months.

NASD - the National Association of Securities Dealers, Inc.

Officer - the Chairman, President, Secretary, Treasurer, any Vice
President, Assistant Secretary or Assistant Treasurer of the Trust.

Oral Instructions - instructions orally transmitted to and received by
the Custodian from an Authorized Person (or from a person that the Custodian
reasonably believes in good faith to be an Authorized Person) and confirmed by
Written Instructions in such a manner that such Written Instructions are
received by the Custodian on the Business Day immediately following receipt of
such Oral Instructions.

Proper Instructions - Oral Instructions or Written Instructions.
Proper Instructions may be continuing Written Instructions when deemed
appropriate by both parties.

Prospectus - the Trust's then currently effective prospectus and
Statement of Additional Information, as filed with and declared effective from
time to time by the Securities and Exchange Commission.

Security or Securities - Money Market Securities, common stock,
preferred stock, options, financial futures, bonds, notes, debentures,
corporate debt securities, mortgages, bank certificates of deposit, bankers'
acceptances, mortgage-backed securities or

- 16 -
<PAGE> 9
other obligations and any certificates, receipts, warrants, or other
instruments or documents representing rights to receive, purchase, or subscribe
for the same or evidencing or representing any other rights or interest
therein, or any similar property or assets, including securities of any
registered investment company, that the Custodian has the facilities to clear
and to service.

SEC - the Securities and Exchange Commission of the United States of
America.

Shares - with respect to a Fund, the units of beneficial interest
issued by the Trust on account of such Fund.

Trust - the BUSINESS TRUST organized under the laws of KENTUCKY which
is an OPEN-END investment company registered under the Act.

Written Instructions - communications in writing actually received by
the Custodian from an Authorized Person. A communication in writing includes a
communication by facsimile, telex or between electro-mechanical or electronic
devices (where the use of such devices have been approved by resolution of the
Board of Trustees and the resolution is certified by an Officer and delivered
to the Custodian). All written communications shall be directed to the
Custodian, attention: Mutual Fund Custody Department.

- 17 -
<PAGE> 10
ARTICLE II

APPOINTMENT; ACCEPTANCE; AND FURNISHING OF DOCUMENTS

II. A. Appointment of Custodian. The Trust hereby constitutes and
appoints the Custodian as custodian of all Securities and cash owned by the
Trust at any time during the term of this Agreement.

II. B. Acceptance of Custodian. The Custodian hereby accepts
appointment as such custodian and agrees to perform the duties thereof as
hereinafter set forth.

II. C. Documents to be Furnished. The following documents, including
any amendments thereto, will be provided contemporaneously with the execution
of the Agreement, to the Custodian by the Trust:

1. A copy of the Declaration of Trust of the Trust
certified by the Secretary.

2. A copy of the By-Laws of the Trust certified by the
Secretary.

3. A copy of the resolution of the Board of Trustees of
the Trust appointing the Custodian, certified by the Secretary.

4. A copy of the then current Prospectus.

5. A Certificate of the President and Secretary of the
Trust setting forth the names and signatures of all Authorized Persons.

II. D. Notice of Appointment of Dividend and Transfer Agent. The
Trust agrees to notify the Custodian in writing of the appointment, termination
or change in appointment of any Dividend and Transfer Agent.

- 18 -
<PAGE> 11
ARTICLE III

RECEIPT OF TRUST ASSETS

III. A. Delivery of Moneys. During the term of this Agreement, the
Trust will deliver or cause to be delivered to the Custodian all moneys to be
held by the Custodian for the account of any Fund. The Custodian shall be
entitled to reverse any deposits made on any Fund's behalf where such deposits
have been entered and moneys are not finally collected within 30 days of the
making of such entry.

III. B. Delivery of Securities. During the term of this Agreement,
the Trust will deliver or cause to be delivered to the Custodian all Securities
to be held by the Custodian for the account of any Fund. The Custodian will
not have any duties or responsibilities with respect to such Securities until
actually received by the Custodian. The Custodian is hereby authorized by the
Trust, acting on behalf of the Fund, to actually deposit any assets of the Fund
in the Book-Entry System or in a Depository, provided, however, that the
Custodian shall always be accountable to the Trust for the assets of the Fund
so deposited. Assets deposited in the Book-Entry System or the Depository will
be represented in accounts which include only assets held by the Custodian for
customers, including but not limited to accounts in which the Custodian acts in
a fiduciary or representative capacity.

III. C. Payments for Shares. As and when received, the Custodian
shall deposit to the account(s) of a Fund any and all

- 19 -
<PAGE> 12
payments for Shares of that Fund issued or sold from time to time as they are
received from the Trust's distributor or Dividend and Transfer Agent or from
the Trust itself.

III. D. Duties Upon Receipt. The Custodian shall not be responsible
for any Securities, moneys or other assets of any Fund until actually received.

ARTICLE IV

DISBURSEMENT OF TRUST ASSETS

IV. A. Declaration of Dividends by Trust. The Trust shall furnish to
the Custodian a copy of the resolution of the Board of Trustees of the Trust,
certified by the Trust's Secretary, either (i) setting forth the date of the
declaration of any dividend or distribution in respect of Shares of any Fund of
the Trust, the date of payment thereof, the record date as of which the Fund
shareholders entitled to payment shall be determined, the amount payable per
share to Fund shareholders of record as of that date, and the total amount to
be paid by the Dividend and Transfer Agent on the payment date, or (ii)
authorizing the declaration of dividends and distributions in respect of Shares
of a Fund on a daily basis and authorizing the Custodian to rely on Written
Instructions setting forth the date of the declaration of any such dividend or
distribution, the date of payment thereof, the record date as of which the Fund
shareholders entitled to payment shall be determined, the amount payable per
share to Fund shareholders of

- 20 -
<PAGE> 13
record as of that date, and the total amount to be paid by the Dividend and
Transfer Agent on the payment date.

On the payment date specified in the resolution or Written
Instructions described above, the Custodian shall segregate such amounts from
moneys held for the account of the Fund so that they are available for such
payment.

IV. B. Segregation of Redemption Proceeds. Upon receipt of Proper
Instructions so directing it, the Custodian shall segregate amounts necessary
for the payment of redemption proceeds to be made by the Dividend and Transfer
Agent from moneys held for the account of the Fund so that they are available
for such payment.

IV. C. Disbursements of Custodian. Upon receipt of a Certificate
directing payment and setting forth the name and address of the person to whom
such payment is to be made, the amount of such payment, the name of the Fund
from which payment is to be made, and the purpose for which payment is to be
made, the Custodian shall disburse amounts as and when directed from the assets
of that Fund. The Custodian is authorized to rely on such directions and shall
be under no obligation to inquire as to the propriety of such directions.

IV. D. Payment of Custodian Fees. Upon receipt of Written
Instructions directing payment, the Custodian shall disburse moneys from the
assets of the Trust in payment of the Custodian's fees and expenses as provided
in Article VIII hereof.

- 21 -
<PAGE> 14
ARTICLE V

CUSTODY OF TRUST ASSETS

V. A. Separate Accounts for Each Fund. As to each Fund, the
Custodian shall open and maintain a separate bank account or accounts in the
United States in the name of the Trust coupled with the name of such Fund,
subject only to draft or order by the Custodian acting pursuant to the terms of
this Agreement, and shall hold all cash received by it from or for the account
of the Fund, other than cash maintained by the Fund in a bank account
established and used by the Fund in accordance with Rule 17f-3 under the Act.
Moneys held by the Custodian on behalf of a Fund may be deposited by the
Custodian to its credit as Custodian in the banking department of the
Custodian. Such moneys shall be deposited by the Custodian in its capacity as
such, and shall be withdrawable by the Custodian only in such capacity.

V. B. Segregation of Non-Cash Assets. All Securities and non-cash
property held by the Custodian for the account of a Fund (other than Securities
maintained in a Depository or Book-entry System) shall be physically segregated
from other Securities and non-cash property in the possession of the Custodian
(including the Securities and non-cash property of the other Funds) and shall
be identified as subject to this Agreement.

V. C. Securities in Bearer and Registered Form. All Securities held
which are issued or issuable only in bearer form, shall be held by the
Custodian in that form; all other Securities

- 22 -
<PAGE> 15
held for the Fund may be registered in the name of the Custodian, any
sub-custodian appointed in accordance with this Agreement, or the nominee of
any of them. The Trust agrees to furnish to the Custodian appropriate
instruments to enable the Custodian to hold, or deliver in proper form for
transfer, any Securities that it may hold for the account of any Fund and which
may, from time to time, be registered in the name of a Fund.

V. D. Duties of Custodian as to Securities. Unless otherwise
instructed by the Trust, with respect to all Securities held for the Trust, the
Custodian shall on a timely basis (concerning items 1 and 2 below, as defined
in the Custodian's Standards of Service Guide, as amended from time to time,
annexed hereto as Appendix D):

1.) Collect all income due and payable with respect to such
Securities;

2.) Present for payment and collect amounts payable upon
all Securities which may mature or be called, redeemed, or retired, or
otherwise become payable;

3.) Surrender interim receipts or Securities in temporary
form for Securities in definitive form; and

4.) Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income tax laws or the laws
or regulations of any other taxing authority, including any foreign
taxing authority, now or hereafter in effect.

- 23 -
<PAGE> 16
V. E. Certain Actions Upon Written Instructions. Upon receipt of a
Written Instructions and not otherwise, the Custodian shall:

1.) Execute and deliver to such persons as may be
designated in such Written Instructions proxies, consents,
authorizations, and any other instruments whereby the authority of the
Trust as beneficial owner of any Securities may be exercised;

2.) Deliver any Securities in exchange for other Securities
or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation, or recapitalization
of any corporation, or the exercise of any conversion privilege;

3.) Deliver any Securities to any protective committee,
reorganization committee, or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization,
or sale of assets of any corporation, and receive and hold under the
terms of this Agreement such certificates of deposit, interim receipts
or other instruments or documents as may be issued to it to evidence
such delivery;

4.) Make such transfers or exchanges of the assets of any
Fund and take such other steps as shall be stated in the Written
Instructions to be for the purpose of effectuating

- 24 -
<PAGE> 17
any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Trust; and

5.) Deliver any Securities held for any Fund to the
depository agent for tender or other similar offers.

V. F. Custodian to Deliver Proxy Materials. The Custodian shall
promptly deliver to the Trust all notices, proxy material and executed but
unvoted proxies pertaining to shareholder meetings of Securities held by any
Fund. The Custodian shall not vote or authorize the voting of any Securities
or give any consent, waiver or approval with respect thereto unless so directed
by Written Instructions.

V. G. Custodian to Deliver Tender Offer Information. The Custodian
shall promptly deliver to the Trust all information received by the Custodian
and pertaining to Securities held by any Fund with respect to tender or
exchange offers, calls for redemption or purchase, or expiration of rights as
described in the Standards of Service Guide attached as Appendix D. If the
Trust desires to take action with respect to any tender offer, exchange offer
or other similar transaction, the Trust shall notify the Custodian at least
five Business Days prior to the date on which the Custodian is to take such
action. The Trust will provide or cause to be provided to the Custodian all
relevant information for any Security which has unique put/option provisions at
least five Business Days prior to the beginning date of the tender period.

- 25 -
<PAGE> 18
V. H. Custodian to Deliver Security and Transaction Information. On
each Business Day that the Federal Reserve Bank is open, the Custodian shall
furnish the Trust with a detailed statement of monies held for the Fund under
this Agreement and with confirmations and a summary of all transfers to or from
the account of the Fund. At least monthly and from time to time, the Custodian
shall furnish the Trust with a detailed statement of the Securities held for
the Fund under this Agreement. Where Securities are transferred to the account
of the Fund without physical delivery, the Custodian shall also identify as
belonging to the Fund a quantity of Securities in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Book-Entry System or the Depository.
With respect to information provided by this section, it shall not be necessary
for the Custodian to provide notice as described by Article XI Section F.
Notices to Trust; it shall be sufficient to communicate by such means as shall
be mutually agreeable to the Trust and the Custodian.

ARTICLE VI

PURCHASE AND SALE OF SECURITIES

VI. A. Purchase of Securities. Promptly after each purchase of
Securities by the Trust, the Trust shall deliver to the Custodian (i) with
respect to each purchase of Securities which are not Money Market Securities,
Written Instructions, and (ii) with

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<PAGE> 19
respect to each purchase of Money Market Securities, Proper Instructions,
specifying with respect to each such purchase the;

1.) name of the issuer and the title of the Securities,

2.) the number of shares, principal amount purchased (and
accrued interest, if any) or other units purchased,

3.) date of purchase and settlement,

4.) purchase price per unit,

5.) total amount payable,

6.) name of the person from whom, or the broker through
which, the purchase was made,

7.) the name of the person to whom such amount is payable,
and

8.) the Fund for which the purchase was made.

The Custodian shall, against receipt of Securities purchased by or for the
Trust, pay out of the moneys held for the account of such Fund the total amount
specified in the Written Instructions, or Oral Instructions, if applicable, to
the person named therein. The Custodian shall not be under any obligation to
pay out moneys to cover the cost of a purchase of Securities for a Fund, if in
the relevant Fund custody account there is insufficient cash available to the
Fund for which such purchase was made. With respect to any repurchase
agreement transaction for the Funds, the Custodian shall

- 27 -
<PAGE> 20
assure that the collateral reflected on the transaction advice is received by
the Custodian.

VI. B. Sale of Securities. Promptly after each sale of Securities by
a Fund, the Trust shall deliver to the Custodian (i) with respect to each sale
of Securities which are not Money Market Securities, Written Instructions, and
(ii) with respect to each sale of Money Market Securities, Proper Instructions,
specifying with respect to each such sale the:

1.) name of the issuer and the title of the Securities,

2.) number of shares, principal amount sold (and accrued
interest, if any) or other units sold,

3.) date of sale and settlement,

4.) sale price per unit,

5.) total amount receivable,

6.) name of the person to whom, or the broker through
which, the sale was made,

7.) name of the person to whom such Securities are to be
delivered, and

8.) Fund for which the sale was made.

The Custodian shall deliver the Securities against receipt of the total amount
specified in the Written Instructions, or Oral Instructions, if applicable.

VI. C. Delivery Versus Payment for Purchases and Sales. Purchases
and sales of Securities effected by the Custodian will be

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<PAGE> 21
made on a delivery versus payment basis. The Custodian may, in its sole
discretion, upon receipt of Written Instructions, elect to settle a purchase or
sale transaction in some other manner, but only upon receipt of acceptable
indemnification from the Fund.

VI. D. Payment on Settlement Date. On contractual settlement date,
the account of the Fund will be charged for all purchased Securities settling
on that day, regardless of whether or not delivery is made. Likewise, on
contractual settlement date, proceeds from the sale of Securities settling that
day will be credited to the account of the Fund, irrespective of delivery.

VI. E. Segregated Accounts. The Custodian shall, upon receipt of
Proper Instructions so directing it, establish and maintain a segregated account
or accounts for and on behalf of a Fund. Cash and/or Securities may be
transferred into such account or accounts for specific purposes, to-wit:

1.) in accordance with the provision of any agreement among
the Trust, the Custodian, and a broker-dealer registered under the 1934
Act, and also a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance
with the rules of the Options Clearing Corporation and of any
registered national securities exchange, the Commodity Futures Trading
Commission, any registered contract market, or any similar organization
or organizations requiring escrow or other

- 29 -
<PAGE> 22
similar arrangements in connection with transactions by the Fund;

2.) for purposes of segregating cash or Securities in
connection with options purchased, sold, or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the
Fund;

3.) for the purpose of compliance by the Fund with the
procedures required for reverse repurchase agreements, firm commitment
agreements, standby commitment agreements, short sales, or any other
securities by Act Release No. 10666, or any subsequent release or
releases or rule of the SEC relating to the maintenance of segregated
accounts by registered investment companies;

4.) for the purpose of segregating collateral for loans of
Securities made by the Fund; and

5.) for other proper corporate purposes, but only upon
receipt of, in addition to Proper Instructions, a copy of a resolution
of the Board of Trustees, certified by an Officer, setting forth the
purposes of such segregated account.

Each segregated account established hereunder shall be established and
maintained for a single Fund only. All Proper Instructions relating to a
segregated account shall specify the Fund involved.

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<PAGE> 23
VI. F. Advances for Settlement. Except as otherwise may be agreed
upon by the parties hereto, the Custodian shall not be required to comply with
any Written Instructions to settle the purchase of any Securities on behalf of
a Fund unless there is sufficient cash in the account(s) pertaining to such
Fund at the time or to settle the sale of any Securities from such an
account(s) unless such Securities are in deliverable form. Notwithstanding the
foregoing, if the purchase price of such Securities exceeds the amount of cash
in the account(s) at the time of such purchase, the Custodian may, in its sole
discretion, advance the amount of the difference in order to settle the
purchase of such Securities. The amount of any such advance shall be deemed a
loan from the Custodian to the Trust payable on demand and bearing interest
accruing from the date such loan is made up to but not including the date such
loan is repaid at the rate per annum customarily charged by the Custodian on
similar loans.

ARTICLE VII

TRUST INDEBTEDNESS

VII. A. Borrowings. In connection with any borrowings by the Trust,
the Trust will cause to be delivered to the Custodian by a bank or broker
requiring Securities as collateral for such borrowings (including the Custodian
if the borrowing is from the Custodian), a notice or undertaking in the form
currently employed by such bank or broker setting forth the amount of
collateral. The Trust shall promptly deliver to the Custodian Written
Instructions

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<PAGE> 24
specifying with respect to each such borrowing: (a) the name of the bank or
broker, (b) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note duly endorsed by the
Trust, or a loan agreement, (c) the date, and time if known, on which the loan
is to be entered into, (d) the date on which the loan becomes due and payable,
(e) the total amount payable to the Trust on the borrowing date, and (f) the
description of the Securities securing the loan, including the name of the
issuer, the title and the number of shares or other units or the principal
amount. The Custodian shall deliver on the borrowing date specified in the
Written Instructions the required collateral against the lender's delivery of
the total loan amount then payable, provided that the same conforms to that
which is described in the Written Instructions. The Custodian shall deliver,
in the manner directed by the Trust, such Securities as additional collateral,
as may be specified in Written Instructions, to secure further any transaction
described in this Article VII. The Trust shall cause all Securities released
from collateral status to be returned directly to the Custodian and the
Custodian shall receive from time to time such return of collateral as may be
tendered to it.

The Custodian may, at the option of the lender, keep such collateral
in its possession, subject to all rights therein given to the lender because of
the loan. The Custodian may require such

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<PAGE> 25
reasonable conditions regarding such collateral and its dealings with
third-party lenders as it may deem appropriate.

VII. B. Advances. With respect to any advances of cash made by the
Custodian to or for the benefit of a Fund for any purpose which results in the
Fund incurring an overdraft at the end of any Business Day, such advance shall
be repayable immediately upon demand made by the Custodian at any time.

ARTICLE VIII

CONCERNING THE CUSTODIAN

VIII. A. Limitations on Liability of Custodian. Except as otherwise
provided herein, the Custodian shall not be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act or
otherwise, except for any such loss or damage arising out of its negligence or
willful misconduct. The Trust, on behalf of the Fund and only from assets of
the Fund (or insurance purchased by the Trust with respect to its liabilities on
behalf of the Fund hereunder), shall defend, indemnify and hold harmless the
Custodian and its directors, officers, employees and agents with respect to any
loss, claim, liability or cost (including reasonable attorneys' fees) arising or
alleged to arise from or relating to the Trust's duties hereunder or any other
action or inaction of the Trust or its Trustees, officers, employees or agents,
except such as may arise from the negligent action, omission, willful misconduct
or breach of this Agreement by the Custodian, its directors, officers, employees
or agents.. The

- 33 -
<PAGE> 26
Custodian shall defend, indemnify and hold harmless the Trust and its trustees,
officers, employees or agents with respect to any loss, claim, liability or
cost (including reasonable attorneys' fees) arising or alleged to arise from or
relating to the Custodian's duties as specifically set forth in this agreement
with respect to the Fund hereunder or any other action or inaction of the
Custodian or its directors, officers, employees, agents, nominees, or
Sub-Custodians as to the Fund, except such as may arise from the negligent
action, omission or willful misconduct of the Trust, its trustees, officers,
employees, or agents. The Custodian may, with respect to questions of law
apply for and obtain the advice and opinion of counsel to the Trust at the
expense of the Fund, or of its own counsel at its own expense, and shall be
fully protected with respect to anything done or omitted by it in good faith in
conformity with the advice or opinion of counsel to the Trust, and shall be
similarly protected with respect to anything done or omitted by it in good
faith in conformity with advice or opinion of its counsel, unless counsel to
the Fund shall, within a reasonable time after being notified of legal advice
received by the Custodian, have a differing interpretation of such question of
law. The Custodian shall be liable to the Trust for any proximate loss or
damage resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence, misfeasance or misconduct on the part of
the Custodian or any of its employees, agents, nominees or Sub-Custodians, but

- 34 -
<PAGE> 27
not for any special, incidental, consequential, or punitive damages; provided,
however, that nothing contained herein shall preclude recovery by the Trust, on
behalf of the Fund, of principal and of interest to the date of recovery on
Securities incorrectly omitted from the Fund's account or penalties imposed on
the Trust, in connection with the Fund, for any failures to deliver Securities.

In any case in which one party hereto may be asked to indemnify the
other or hold the other harmless, the party from whom indemnification is sought
(the "Indemnifying Party") shall be advised of all pertinent facts concerning
the situation in question, and the party claiming a right to indemnification
(the "Indemnified Party") will use reasonable care to identify and notify the
Indemnifying Party promptly concerning any situation which presents or appears
to present a claim for indemnification against the Indemnifying Party. The
Indemnifying Party shall have the option to defend the Indemnified Party
against any claim which may be the subject of the indemnification, and in the
event the Indemnifying Party so elects, such defense shall be conducted by
counsel chosen by the Indemnifying Party and satisfactory to the Indemnified
Party and the Indemnifying Party will so notify the Indemnified Party and
thereupon such Indemnifying Party shall take over the complete defense of the
claim and the Indemnifying Party shall sustain no further legal or other
expenses in such situation for which indemnification has been sought under this
paragraph,

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<PAGE> 28
except the expenses of any additional counsel retained by the Indemnified
Party. In no case shall any party claiming the right to indemnification
confess any claim or make any compromise in any case in which the other party
has been asked to indemnify such party (unless such confession or compromise is
made with such other party's prior written consent. The provisions of this
section VIII. A. shall survive the termination of this Agreement.

VIII. B. Actions not Required by Custodian. Without limiting the
generality of the foregoing, the Custodian, acting in the capacity of Custodian
hereunder, shall be under no obligation to inquire into, and shall not be liable
for:

1.) The validity of the issue of any Securities purchased
by or for the account of any Fund, the legality of the purchase
thereof, or the propriety of the amount paid therefor;

2.) The legality of the sale of any Securities by or for
the account of any Fund, or the propriety of the amount for which the
same are sold;

3.) The legality of the issue or sale of any Shares of
any Fund, or the sufficiency of the amount to be received therefor;

4.) The legality of the redemption of any Shares of any
Fund, or the propriety of the amount to be paid therefor;

5.) The legality of the declaration or payment of any
dividend by the Trust in respect of Shares of any Fund;

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<PAGE> 29
6.) The legality of any borrowing by the Trust on behalf
of the Trust or any Fund, using Securities as collateral;

7.) Whether the Trust or a Fund is in compliance with the
1940 Act, the regulations thereunder, the provisions of the Trust's
charter documents or by-laws, or its investment objectives and policies
as then in effect.

VIII. C. No Duty to Collect Amounts Due From Dividend and Transfer
Agent. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Trust from any Dividend and
Transfer Agent of the Trust nor to take any action to effect payment or
distribution by any Dividend and Transfer Agent of the Trust of any amount paid
by the Custodian to any Dividend and Transfer Agent of the Trust in accordance
with this Agreement.

VIII. D. No Enforcement Actions. Notwithstanding Section D of Article
V, the Custodian shall not be under any duty or obligation to take action, by
legal means or otherwise, to effect collection of any amount, if the Securities
upon which such amount is payable are in default, or if payment is refused after
due demand or presentation, unless and until (i) it shall be directed to take
such action by Written Instructions and (ii) it shall be assured to its
satisfaction (including prepayment thereof) of reimbursement of its costs and
expenses in connection with any such action.

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<PAGE> 30
VIII. E. Authority to Use Agents and Sub-Custodians. The Trust
acknowledges and hereby authorizes the Custodian to hold Securities through its
various agents described in Appendix C annexed hereto.

In addition, the Trust acknowledges that the Custodian may appoint one
or more financial institutions, as agent or agents or as sub-custodian or
sub-custodians, including, but not limited to, banking institutions located in
foreign countries, for the purpose of holding Securities and moneys at any time
owned by the Fund. The Custodian shall not be relieved of any obligation or
liability under this Agreement in connection with the appointment or activities
of such agents or sub-custodians. Any such agent or sub-custodian shall be
qualified to serve as such for assets of investment companies registered under
the Act. The Funds shall reimburse the Custodian for all costs incurred by the
Custodian in connection with opening accounts with any such agents or
sub-custodians. Upon request, the Custodian shall promptly forward to the
Trust any documents it receives from any agent or sub-custodian appointed
hereunder which may assist trustees of registered investment companies to
fulfill their responsibilities under Rule 17f-5 of the Act.

VIII. F. No Duty to Supervise Investments. The Custodian shall not be
under any duty or obligation to ascertain whether any Securities at any time
delivered to or held by it for the account

- 38 -
<PAGE> 31
of the Trust are such as properly may be held by the Trust under the provisions
of the Declaration of Trust and the Trust's By-Laws.

VIII. G. All Records Confidential. The Custodian shall treat all
records and other information relating to the Trust and the assets of all Funds
as confidential and shall not disclose any such records or information to any
other person unless (i) the Trust shall have consented thereto in writing or
(ii) such disclosure is compelled by law.

VIII. H. Compensation of Custodian. The Custodian shall be entitled
to receive and the Trust agrees to pay to the Custodian, for the Fund's account
from the Fund's assets only, such compensation as shall be determined pursuant
to Appendix E attached hereto, or as shall be determined pursuant to amendments
to Appendix E as approved by the Custodian and the Trust. The Custodian shall
be entitled to charge against any money held by it for the accounts of the Fund
the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement as determined by agreement of the Custodian and the Trust or by the
final order of any court or arbitrator having jurisdiction and as to which all
rights of appeal shall have expired. The expenses which the Custodian may charge
against the account of a Fund include, but are not limited to, the expenses of
agents or Sub-Custodians incurred in settling transactions involving the
purchase and sale of Securities of the Fund.

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<PAGE> 32
VIII. I. Reliance Upon Instructions. The Custodian shall be entitled
to rely upon any Proper Instructions if such reliance is made in good faith. The
Trust agrees to forward to the Custodian Written Instructions confirming Oral
Instructions in such a manner so that such Written Instructions are received by
the Custodian, whether by hand delivery, telex, facsimile or otherwise, on the
same Business Day on which such Oral Instructions were given. The Trust agrees
that the failure of the Custodian to receive such confirming instructions shall
in no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Trust. The Trust agrees that the
Custodian shall incur no liability to the Trust for acting upon Oral
Instructions given to the Custodian hereunder concerning such transactions.

VIII. J. Books and Records. The Custodian will (i) set up and
maintain proper books of account and complete records of all transactions in
the accounts maintained by the Custodian hereunder in such manner as will meet
the obligations of the Fund under the Act, with particular attention to Section
31 thereof and Rules 3la-1 and 3la-2 thereunder and those records are the
property of the Trust, and (ii) preserve for the periods prescribed by
applicable Federal statute or regulation all records required to be so
preserved. All such books and records shall be the property of the Trust, and
shall be available, upon request, for inspection by duly authorized officers,
employees or agents of the Trust and employees of the SEC.

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<PAGE> 33
VIII. K. Internal Accounting Control Systems. The Custodian shall
send to the Trust any report received on the systems of internal accounting
control of the Custodian, or its agents or sub-custodians, as the Trust may
reasonably request from time to time.

VIII. L. No Management of Assets by Custodian. The Custodian performs
only the services of a custodian and shall have no responsibility for the
management, investment or reinvestment of the Securities or other assets from
time to time owned by any Fund. The Custodian is not a selling agent for Shares
of any Fund and performance of its duties as custodian shall not be deemed to be
a recommendation to any Fund's depositors or others of Shares of the Fund as an
investment. The Custodian shall have no duties or obligations whatsoever except
such duties and obligations as are specifically set forth in this Agreement, and
no covenant or obligation shall be implied in this Agreement against the
Custodian.

VIII. M. Assistance to Trust. The Custodian shall take all reasonable
action, that the Trust may from time to time request, to assist the Trust in
obtaining favorable opinions from the Trust's independent accountants, with
respect to the Custodian's activities hereunder, in connection with the
preparation of the Fund's Form N-IA, Form N-SAR, or other annual reports to the
SEC.

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<PAGE> 34
ARTICLE IX

TERMINATION

IX. A. Termination. Either party hereto may terminate this
Agreement for any reason by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than ninety
(90) days after the date of giving of such notice. If such notice is given by
the Trust, it shall be accompanied by a copy of a resolution of the Board of
Trustees of the Trust, certified by the Secretary of the Trust, electing to
terminate this Agreement and designating a successor custodian or custodians
each of which shall be a bank or trust company having not less than
$100,000,000 aggregate capital, surplus, and undivided profits. In the event
such notice is given by the Custodian, the Trust shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees of the Trust, certified by the Secretary, designating a successor
custodian or custodians to act on behalf of the Trust. In the absence of such
designation by the Trust, the Custodian may designate a successor custodian
which shall be a bank or trust company having not less than $100,000,000
aggregate capital, surplus, and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian, provided that it
has received a notice of acceptance by the successor custodian, shall deliver,
on that date, directly to the successor custodian all Securities and monies
then owned by the Fund and held

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<PAGE> 35
by it as Custodian. Upon termination of this Agreement, the Trust shall pay to
the Custodian on behalf of the Trust such compensation as may be due as of the
date of such termination. The Trust agrees on behalf of the Trust that the
Custodian shall be reimbursed for its reasonable costs in connection with the
termination of this Agreement.

IX. B. Failure to Designate Successor Trustee. If a successor
custodian is not designated by the Trust, or by the Custodian in accordance
with the preceding paragraph, or the designated successor cannot or will not
serve, the Trust shall, upon the delivery by the Custodian to the Trust of all
Securities (other than Securities held in the Book-Entry System which cannot be
delivered to the Trust) and moneys then owned by the Trust, be deemed to be the
custodian for the Trust, and the Custodian shall thereby be relieved of all
duties and responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book-Entry System, which cannot be
delivered to the Trust, which shall be held by the Custodian in accordance with
this Agreement.

ARTICLE X

FORCE MAJEURE

Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without

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<PAGE> 36
limitation, acts of God; earthquakes; fires; floods; wars; civil or military
disturbances; sabotage; strikes; epidemics; riots; labor disputes; acts of
civil or military authority; governmental actions; or inability to obtain
labor, material, equipment or transportation; provided, however, that the
Custodian, in the event of a failure or delay, shall use its best efforts to
ameliorate the effects of any such failure or delay.

ARTICLE XI

MISCELLANEOUS

XI. A. Designation of Authorized Persons. Appendix A sets forth the
names and the signatures of all Authorized Persons as of this date, as
certified by the Secretary of the Trust. The Trust agrees to furnish to the
Custodian a new Appendix A in form similar to the attached Appendix A, if any
present Authorized Person ceases to be an Authorized Person or if any other or
additional Authorized Persons are elected or appointed. Until such new
Appendix A shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the then current Authorized Persons as set forth in the last delivered Appendix
A.

XI. B. Limitation of Personal Liability. No recourse under any
obligation of this Agreement or for any claim based thereon shall be had
against any organizer, shareholder, officer, trustee, past, present or future
as such, of the Trust or of any predecessor or successor, either directly or
through the Trust or any such

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<PAGE> 37
predecessor or successor, whether by virtue of any constitution, statute or
rule of law or equity, or by the enforcement of any assessment or penalty or
otherwise; it being expressly agreed and understood that this Agreement and the
obligations thereunder are enforceable solely against the assets of the Trust,
and that no such personal liability whatever shall attach to, or is or shall be
incurred by, the organizers, shareholders, officers, or trustees of the Trust
or of any predecessor or successor, or any of them as such, because of the
obligations contained in this Agreement or implied therefrom and that any and
all such liability is hereby expressly waived and released by the Custodian as
a condition of, and as a consideration for, the execution of this Agreement.

XI. C. Authorization By Board. The obligations set forth in this
Agreement as having been made by the Trust have been made by the Board of
Trustees, acting as such Trustees for and on behalf of the Trust, pursuant to
the authority vested in them under the laws of the State of KENTUCKY, the
Declaration of Trust and the By-Laws of the Trust. This Agreement has been
executed by Officers of the Trust as officers, and not individually, and the
obligations contained herein are not binding upon any of the Trustees,
Officers, agents or holders of shares, personally, but bind only the Trust and
then only to the extent of the assets of the Trust.

XI. D. Custodian's Consent to Use of Its Name. The Trust shall
obtain the Custodian's consent prior to the publication and/or dissemination or
distribution, of the Prospectus and any

- 45 -
<PAGE> 38
other documents (including advertising material) specifically mentioning the
Custodian (other than merely by name and address).

XI. E. Notices to Custodian. Any notice or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian,
shall be sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at Star Bank Center, 425 Walnut Street, M. L.
6118, Cincinnati, Ohio 45202, attention Mutual Fund Custody Department, or at
such other place as the Custodian may from time to time designate in writing.

XI. F. Notices to Trust. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Trust shall be
sufficiently given when delivered to the Trust or on the second Business Day
following the time such notice is deposited in the U.S. mail postage prepaid
and addressed to the Trust at its office at 1340 SOUTH 3RD STREET, LOUISVILLE,
KENTUCKY 40208 or at such other place as the Trust may from time to time
designate in writing.

XI. G. Amendments In Writing. This Agreement, with the exception of
the Appendices, may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement, and authorized and approved by a resolution of the Board of Trustees
of the Trust.

XI. H. Successors and Assigns. This Agreement shall extend to and
shall be binding upon the parties hereto, and their respective successors and
assigns; provided, however, that this

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<PAGE> 39
Agreement shall not be assignable by the Trust or by the Custodian, and no
attempted assignment by the Trust or the Custodian shall be effective without
the written consent of the other party hereto.

XI. I. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Ohio.

XI. J. Jurisdiction. Any legal action, suit or proceeding to be
instituted by either party with respect to this Agreement shall be brought by
such party exclusively in the courts of the State of Ohio or in the courts of
the United States for the Southern District of Ohio, and each party, by its
execution of this Agreement, irrevocably (i) submits to such jurisdiction and
(ii) consents to the service of any process or pleadings by first class U.S.
mail, postage prepaid and return receipt requested, or by any other means from
time to time authorized by the laws of such jurisdiction.

XI. K. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.

XI. L. Headings. The headings of paragraphs in this Agreement are
for convenience of reference only and shall not affect the meaning or
construction of any provision of this Agreement.

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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective Officers, thereunto duly authorized as of the
day and year FIRST above written.

ATTEST: TRUST: THE FAIRMONT FUND
/s/ Louis T. Young By:/s/ Morton H. Sachs
Treasurer Title: Chairman

ATTEST: CUSTODIAN: STAR BANK, N.A.
/s/ Mark J. Dowling By:/s/ Nancy V. Kelly
Title: Vice President & Trust Officer

- 48 -

<PAGE> 1

EXHIBIT 99.B11

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the use in this Post-Effective Amendment Number 22 to The
Fairmont Fund's Registration Statement on Form N-1A of our report dated January
16, 1996 on the financial statements of The Fairmont Fund and the Summary
Financial Information included in the Prospectus and to the references made to
us under the caption "Condensed Financial Information" included in the
Prospectus and under the caption "Auditor" included in the Statement of
Additional Information.

/s/
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
February 12, 1996

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<PAGE> 1
EXHIBIT 99.POA
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, THE FAIRMONT FUND TRUST, a business trust organized under the
laws of the Commonwealth of Kentucky (hereinafter referred to as the "Trust"),
proposes to file with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of
1940, as amended, Post-Effective Amendment No. 22 to its Registration
Statement; and

NOW, THEREFORE, the Trust hereby constitutes and appoints JAMES R.
CUMMINS and DONALD S. MENDELSOHN, and each of them, its attorneys for it and in
its name, place and stead, to execute and file such Post-Effective Amendment
No. 22, hereby giving and granting to said attorneys full power and authority
to do and perform all and every act and thing whatsoever requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as it might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the Trust has caused its name to be subscribed by
the President this 27th day of February, 1996.

ATTEST: THE FAIRMONT FUND TRUST

/s/ By: /s/
- ---------------------------- -----------------------------
INDA M. WANGERIN, Secretary MORTON H. SACHS, Chairman
of the Board

COMMONWEALTH OF KENTUCKY )
) ss:
COUNTY OF JEFFERSON )

Before me, a Notary Public, in and for said county and state,
personally appeared MORTON H. SACHS, Chairman of the Board and INDA M.
WANGERIN, Secretary, who represented that they are duly authorized in the
premises, and who are known to me to be the persons described in and who
executed the foregoing instrument, and they duly acknowledged to me that they
executed and delivered the same for the purposes therein expressed.

WITNESS my hand and official seal this 27th day of February, 1996.

/s/
------------------------------
Notary Public

My Commission Expires:
---------------------

- 50 -
<PAGE> 2
CERTIFICATE

The undersigned, Secretary of THE FAIRMONT FUND TRUST, hereby
certifies that the following resolution was duly adopted by a majority of the
Board of Trustees at the meeting held on February 27, 1996, and is in full
force and effect:

"WHEREAS, THE FAIRMONT FUND TRUST, a business trust organized under
the laws of the Commonwealth of Kentucky (hereinafter referred to as
the "Trust"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, Post-Effective Amendment
No. 22 to its Registration Statement;

NOW, THEREFORE, the Trust hereby constitutes and appoints JAMES R.
CUMMINS and DONALD S. MENDELSOHN, and each of them, its attorneys for
it and in its name, place and stead, to execute and file such
Post-Effective Amendment No. 22, hereby giving and granting to said
attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite and necessary to be done in and about
the premises as fully to all intents and purposes as it might or could
do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do or cause
to be done by virtue hereof."

Dated: February 27, 1996 /s/
-----------------------------------
INDA M. WANGERIN, Secretary
The Fairmont Fund Trust

- 51 -
<PAGE> 3
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned are Trustees and/or an officer of the Trust;

NOW, THEREFORE, the undersigned hereby constitutes and appoints JAMES
R. CUMMINS and DONALD S. MENDELSOHN, and each of them, their attorneys for them
and in their name, place and stead, and in their office and capacity in the
Trust, to execute and file such Post-Effective Amendment No. 22, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully to all intents and purposes as he might or could do
if personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.

IN WITNESS WHEREOF, the undersigned have hereunto set their hand this
27th day of February, 1996.

/s/ /s/
- ---------------------------------- ----------------------------------
MORTON H. SACHS, Chairman of the LOUIS YOUNG, Treasurer
Board and Trustee

COMMONWEALTH OF KENTUCKY )
) ss:
COUNTY OF JEFFERSON )

Before me, a Notary Public, in and for said county and state,
personally appeared MORTON H. SACHS and LOUIS YOUNG, known to me to be the
persons described in and who executed the foregoing instrument, and who
acknowledged to me that they executed and delivered the same for the purposes
therein expressed.

WITNESS my hand and official seal this 27th day of February, 1996.

/s/
-------------------------------
Notary Public

My Commission Expires:
---------------------

- 52 -
<PAGE> 4
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a Trustee of the Trust;

NOW, THEREFORE, the undersigned hereby constitutes and appoints JAMES
R. CUMMINS and DONALD S. MENDELSOHN, and each of them, his attorneys for him
and in his name, place and stead, and in his office and capacity in the Trust,
to execute and file such Post-Effective Amendment No. 22, hereby giving and
granting to said attorneys full power and authority to do and perform all and
every act and thing whatsoever requisite and necessary to be done in and about
the premises as fully to all intents and purposes as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
27th day of February, 1996.

/s/
-----------------------------------
RAPHAEL O. NYSTRAND, Trustee

COMMONWEALTH OF KENTUCKY )
) ss:
COUNTY OF JEFFERSON )

Before me, a Notary Public, in and for said county and state,
personally appeared RAPHAEL O. NYSTRAND, known to me to be the person described
in and who executed the foregoing instrument, and who acknowledged to me that
he executed and delivered the same for the purposes therein expressed.

WITNESS my hand and official seal this 27th day of February, 1996.

/s/
------------------------------
Notary Public

My Commission Expires:
---------------------

- 53 -
<PAGE> 5
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a Trustee of the Trust;

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
27th day of February, 1996.

/s/
-----------------------------------
O. GRANT BRUTON, Trustee

COMMONWEALTH OF KENTUCKY )
) ss:
COUNTY OF JEFFERSON )

Before me, a Notary Public, in and for said county and state,
personally appeared O. GRANT BRUTON, known to me to be the person described in
and who executed the foregoing instrument, and who acknowledged to me that he
executed and delivered the same for the purposes therein expressed.

WITNESS my hand and official seal this 27th day of February, 1996.

/s/
-----------------------------
Notary Public

My Commission Expires:
---------------------

- 54 -
<PAGE> 6
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a Trustee of the Trust;

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
27th day of February, 1996.

/s/
-----------------------------------
CARL T. FISCHER, Trustee

COMMONWEALTH OF KENTUCKY )
) ss:
COUNTY OF JEFFERSON )

Before me, a Notary Public, in and for said county and state,
personally appeared CARL T. FISCHER, known to me to be the person described in
and who executed the foregoing instrument, and who acknowledged to me that he
executed and delivered the same for the purposes therein expressed.

WITNESS my hand and official seal this 27th day of February, 1996.

/s/
------------------------------
Notary Public

My Commission Expires:
---------------------

- 55 -

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> THE FAIRMONT FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 24,166,129
<INVESTMENTS-AT-VALUE> 28,409,586
<RECEIVABLES> 2,214,647
<ASSETS-OTHER> 1,495
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,625,728
<PAYABLE-FOR-SECURITIES> 2,250,178
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 184,549
<TOTAL-LIABILITIES> 2,434,727
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,505,746
<SHARES-COMMON-STOCK> 1,043,270
<SHARES-COMMON-PRIOR> 922,342
<ACCUMULATED-NII-CURRENT> (136,265)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (558,202)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,243,457
<NET-ASSETS> 28,191,001
<DIVIDEND-INCOME> 220,482
<INTEREST-INCOME> 51,438
<OTHER-INCOME> 13,750
<EXPENSES-NET> 421,935
<NET-INVESTMENT-INCOME> (136,265)
<REALIZED-GAINS-CURRENT> 3,460,455
<APPREC-INCREASE-CURRENT> 2,744,041
<NET-CHANGE-FROM-OPS> 6,098,231
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,458,598
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 106,454
<NUMBER-OF-SHARES-REDEEMED> 108,307
<SHARES-REINVESTED> 122,781
<NET-CHANGE-IN-ASSETS> 5,996,254
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (560,059)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 421,935
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 421,935
<AVERAGE-NET-ASSETS> 24,792,687
<PER-SHARE-NAV-BEGIN> 24.06
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 6.80
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 3.76
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.02
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>