<PAGE> 1
THE FAIRMONT FUND
Financial Statements
Year Ended December 31, 1995
with Report of Independent Auditors
<PAGE>
Comments from Morton H. Sachs, Chairman
No doubt about it -- 1995 was a banner year for the stock market. The
combination of lower interest rates and unflagging corporate profits made for a
great year. The Fairmont Fund closed the year up 27.92%. Overweighting the
portfolio with regional bank stocks proved fortuitous as lower rates and
continued consolidation buoyed the group. Otherwise, performance was tied more
to the success of individual stock selections than to any broad themes.
In characteristic fashion, our portfolio continues to be populated with a
diverse group of stocks that have been selected for their individual potential.
Most often they are stocks that have exhibited technical weakness and are now
poised for significant appreciation. If we believe a company is fundamentally
sound and that the causes of its recent weakness have passed, we think it
merits a closer look. Since we tend to steer away from Wall Street's
favorites, our performance may not coincide with the major indexes.
Nonetheless, it is a strategy that has worked well for us in the past and we
believe will continue to do so in 1996.
On a different note, we used up the last of our tax loss carryforwards and
expect to continue a policy of annual dividend payments. At year-end, we
declared a capital gain distribution of $3.76 per share.
FIVE YEAR COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE FAIRMONT FUND AND THE S&P 500
<TABLE>
<CAPTION>
FAIRMONT FUND S&P 500
<S> <C> <C>
1990 10,000 10,000
1991 14,056 13,040
1992 16,029 14,032
1993 18,524 15,444
1994 19,870 15,646
1995 25,418 21,520
</TABLE>
Past performance is not predictive of future performance.
<PAGE> 2
TEN YEAR COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE FAIRMONT FUND AND THE S&P 500
<TABLE>
<CAPTION>
FAIRMONT FUND S&P 500
<S> <C> <C>
1985 10,000 10,000
1986 11,405 11,862
1987 10,519 12,487
1988 10,847 14,555
1989 11,589 19,159
1990 9,024 18,563
1991 12,685 24,207
1992 14,465 26,047
1993 16,716 28,668
1994 17,932 29,043
1995 22,938 39,949
</TABLE>
Past performance is not predictive of future performance.
FAIRMONT FUND AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<C> <C>
1 year 27.92%
5 year 20.51%
10 year 8.66%
</TABLE>
<PAGE> 3
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
<PAGE> 4
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>
<PAGE> 5
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>
<PAGE> 6
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>
<PAGE> 7
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%
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
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>
<PAGE> 8
<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>
<PAGE> 9
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>
<PAGE> 10
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.
<PAGE> 11
(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 (1,279,935)
</TABLE>
<PAGE> 12
<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.
