THE FAIRMONT FUND
UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1998
<PAGE>
THE FAIRMONT FUND
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
INVESTMENTS IN SECURITIES
COMMON STOCKS (SHARES) VALUE PERCENT
----- -------
<S> <C> <C>
AUTOMOBILE PARTS
15,000 TBC Corporation (a) ...................... $ 99,375 0.34%
----------
BANKING
10,000 J. P. Morgan and Co. ..................... 1,170,625
60,030 Peoples Heritage Financial Group, Inc. ... 1,418,209
50,000 UST Corporation .......................... 1,325,000
----------
3,913,834 13.48
----------
BIOPHARMACEUTICALS
5,000 EntreMed, Inc. (a) ....................... 166,250 0.57
----------
BROADCASTING
105,000 TCI Satellite Entertainment, Inc. (a) .... 616,875 2.13
----------
BUSINESS SERVICES
118,000 Butler International Inc (a) ............. 3,082,750 10.62
----------
CHEMICALS
33,000 Pioneer Companies, Inc. Cl A (a) ......... 268,125 0.92
----------
CHILD DAY CARE SERVICES
30,000 Youth Services International, Inc. (a) ... 224,062 0.77
----------
COMPUTER PERIPHERALS
45,000 Madge N.V. (a) ........................... 213,750 0.74
----------
COMPUTER SOFTWARE
50,000 Computer Learning Center, Inc. (a) ....... 1,243,750
65,000 Software Spectrum (a) .................... 1,316,250
----------
2,560,000 8.82
----------
ELECTRONIC COMPONENTS
45,000 MRV Communications, Inc. (a) ............. 933,750 3.22
----------
ENGINES AND TURBINES
10,000 Cummins Engine Co., Inc. ................. 512,500 1.77
----------
FIRE AND CASUALTY INSURANCE
40,002 St. Paul Companies, Inc. ................. 1,682,584 5.80
----------
HEALTH CARE SERVICES
35,000 Sunrise Assisted Living, Inc. (a) ........ 1,203,125 4.15
----------
HEAVY CONSTRUCTION
25,000 Foster Wheeler Corporation ............... 535,937 1.85
----------
HELP SUPPLY SERVICES
30,000 Volt Information Sciences, Inc. (a) ...... 813,750 2.80
----------
</TABLE>
See accompanying notes.
-1-
<PAGE>
THE FAIRMONT FUND
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
INVESTMENTS IN SECURITIES (CONTINUED)
COMMON STOCKS (SHARES) VALUE PERCENT
----- -------
<S> <C> <C>
HOSPITALS
50,000 Vencor, Inc. (a) ......................... $ 362,500 1.25%
----------
INFORMATION STORAGE
20,000 Imation Corporation (a) .................. 331,250 1.14
----------
MARINE SUPPORT SERVICES
50,000 Hvide Marine, Inc. (a).................... 678,125
40,000 Trico Marine Services (a)................. 547,500
----------
1,225,625 4.22
----------
PERSONAL SERVICES
45,000 Regis Corporation ........................ 1,330,313 4.58
----------
PHARMACEUTICALS
30,000 Novartis AG .............................. 2,497,500 8.61
----------
REAL ESTATE INVESTMENT TRUSTS
50,000 RFS Hotel Investors, Inc. ................ 950,000 3.27
----------
RETAIL CLOTHING
30,000 Talbots, Inc. ............................ 785,625 2.71
----------
RETAIL FURNITURE
20,000 Heilig-Meyers Company ..................... 246,250 0.85
----------
SAVINGS INSTITUTIONS
15,000 Crestar Financial Corporation ............. 818,438
50,000 MECH Financial, Inc. ...................... 1,450,000
----------
2,268,438 7.82
----------
WATER SUPPLY
5,000 California Water Service Group Holdings... 125,625 0.43
---------- ------
TOTAL COMMON STOCKS (COST $22,809,213) ........... 26,949,793 92.86
BANK REPURCHASE AGREEMENT
With Star Bank NA of Cincinnati, issued 6/30/97 due 7/1/98,
fully collateralized by GNMA, 6.50%
due 5/20/24 (Cost $2,030,000) .................. 2,030,000 6.99
----------- -------
TOTAL INVESTMENTS (Cost $24,839,213) ............. 28,979,793 99.85
OTHER ASSETS LESS LIABILITIES .................... 43,030 0.15
----------- -------
NET ASSETS ............................... $29,022,823 100.00%
=========== ========
<FN>
(a) Common stocks which have not declared a dividend in 1998.
</FN>
</TABLE>
See accompanying notes.
-2-
<PAGE>
THE FAIRMONT FUND
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
INVESTMENTS IN SECURITIES, AT VALUE (NOTE 2)
Common stocks (Cost $22,809,213)................. $26,949,793
Bank repurchase agreement ....................... 2,030,000
----------
Total investments in securities.......................... $28,979,793
CASH ............................................................. 1,335
RECEIVABLES
Investment securities sold ...................... 663,265
Dividends ....................................... 33,603
Interest ........................................ 293
----------
Total receivables ....................................... 697,161
-----------
Total assets ....................................... 29,678,289
LIABILITIES
PAYABLES
Investment securities purchased.................. $ 605,250
Management fee (Note 3) ......................... 39,459
Shares redeemed ................................. 10,186
Other ........................................... 571
----------
Total liabilities ....................................... 655,466
-----------
NET ASSETS ....................................................... $29,022,823
===========
NET ASSETS CONSIST OF
Capital stock (990,890 shares outstanding) (Note 8).......... 22,931,611
Undistributed net investment income - prior years ........... 413
Accumulated net realized gains on investments ............... 2,008,814
Net unrealized appreciation on investments (Note 5) ......... 4,140,580
Undistributed net investment loss ........................... (58,595)
-----------
NET ASSETS ....................................................... $29,022,823
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
($29,022,823 divided by 990,890 shares)...................... $ 29.29
===========
</TABLE>
See accompanying notes.
-3-
<PAGE>
THE FAIRMONT FUND
STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
INVESTMENT INCOME (NOTE 2)
<S> <C>
Dividends .................................................... $ 138,012
Interest ..................................................... 45,983
Other ........................................................ 803
----------
Total investment income .................................. 184,798
EXPENSES
Management fee (Note 3) ...................................... 243,393
----------
Net investment loss ................................. (58,595)
----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS (NOTE 2)
Net realized gains from investment transactions .............. 2,521,006
Net change in unrealized appreciation on investments ......... (895,238)
----------
Net realized and unrealized gains on investments ......... 1,625,768
----------
Net increase in net assets resulting from operations $ 1,567,173
===========
</TABLE>
See accompanying notes.
-4-
<PAGE>
THE FAIRMONT FUND
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 AND YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
-------------- ---------
FROM OPERATIONS
<S> <C> <C> <C> <C>
Net investment loss.................................... $ (58,595) $ (180,971)
Net realized gains on investments ..................... 2,521,006 2,995,502
Net change in unrealized appreciation
on investments .................................... (895,238) 1,557,794
---------- ------------
Net increase in net assets
resulting from operations ......................... 1,567,173 4,372,325
---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 4)
Distributions from net investment income ......... 0 (2,953,085)
---------- ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 8) .............. SHARES SHARES
------ ------
Proceeds from sale of shares ..................... 24,214 708,223 52,488 1,494,130
Shares issued in reinvestment
of distributions ............................. 0 0 99,733 2,760,610
Payments for shares redeemed ..................... (184,008) (5,108,313) (163,215) (4,549,244)
---------- ----------- -------- ----------
Net decrease in net assets
from capital share transactions ............. (159,794) (4,400,090) (10,994) (294,504)
============ ------------ ========= ----------
Net increase or decrease in net assets ............ (2,832,917) 1,124,736
NET ASSETS
Beginning of year ..................................... 31,855,740 30,731,004
------------ ------------
End of period.......................................... $29,022,823 $31,855,740
=========== ===========
</TABLE>
See accompanying notes.
-5-
<PAGE>
THE FAIRMONT FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED
ENDED DECEMBER DECEMBER DECEMBER DECEMBER
JUNE 30 31 31 31 31
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 27.68 26.45 27.02 24.06 22.43
INCOME FROM INVESTMENT OPERATIONS
---------------------------------
Net Investment Income ........................ (.19) (.16) (.10) (.08) (.16)
Net Gains or Losses on Securities
(both realized and unrealized) ........... 1.80 4.20 2.67 6.80 1.79
------- ------ ------ ------ -----
Total From Investment Operations ........... 1.61 4.04 2.57 6.72 1.63
LESS DISTRIBUTIONS
------------------
Dividends (from net investment income) ....... .00 .00 .00 .00 .00
Distributions (from capital gains) ........... .00 2.81 3.14 3.76 .00
Returns of Capital ........................... .00 .00 .00 .00 .00
------- ------ ------ ------ -----
Total Distributions ........................ .00 2.81 3.14 3.76 .00
Net Asset Value, End of Period................. $ 29.29 27.68 26.45 27.02 24.06
======= ====== ======= ====== ======
TOTAL RETURN..................................... 11.63%(a) 15.27% 9.52% 27.92% 7.27%
- ------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000s).............. $ 29,023 $ 31,856 $ 30,731 $ 28,191 $ 22,195
Ratio of Expenses to Average Net Assets.......... 1.63%(a) 1.63% 1.66% 1.70% 1.74%
Ratio of Net Income to Average Net Assets........ (.39)%(a) (.57)% (.59)% (.55)% (.79)%
Portfolio Turnover Rate.......................... 3.89 (a) 1.83 2.37 2.47 2.75
Average Commission Rate.......................... .068 .057 .057
<FN>
(a) Computed on an annualized basis.
</FN>
</TABLE>
See accompanying notes.
-6-
<PAGE>
THE FAIRMONT FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
(1) ORGANIZATION
The Fairmont Fund (The Fund) is a noload, diversified series of The
Fairmont Fund Trust (The Trust), which is a Kentucky Business Trust and an
openend 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. The Fund's
objective is capital appreciation.
(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 overthecounter 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 exdividend 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
longterm 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 bookentry 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.
(e) Estimates and Assumptions The preparation of financial statements in
conformity with generally accepted accounting principles requires The Fund to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(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,
11/2% 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 $243,393 for the six months ended June 30, 1998.
-7-
<PAGE>
THE FAIRMONT FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
Morton H. Sachs, a trustee of The Fund, is the president and sole
shareholder of the Adviser. The Adviser, as a registered brokerdealer of
securities, effected substantially all of the investment portfolio transactions
for The Fund. For this service the Adviser received commissions of $397,877 for
the six months ended June 30, 1998.
Certain officers and/or Trustees of The Fund are officers of the Adviser.
(4) DISTRIBUTIONS TO SHAREHOLDERS
No distributions to shareholders were declared for the six months ended June 30,
1998. The following is a summary of distributions to shareholders for the year
ended December 31, 1997.
<TABLE>
<CAPTION>
PERIOD PAID PER SHARE
ENDED DATE DECLARED IN CASH REINVESTED TOTAL AMOUNT
----- ------------- ------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/97 December 31, 1997 $192,475 $2,760,610 $2,953,085 $2.81
</TABLE>
(5) INVESTMENTS
For the six months ended June 30, 1998, the cost of purchases and proceeds from
sales of investments, other than temporary cash investments, were $53,529,705
and $58,951,430, respectively.
Following is information regarding unrealized appreciation (depreciation) and
aggregate cost of securities based upon federal income tax cost at June 30,
1998:
TAX COST
--------
Aggregate gross unrealized appreciation for all securities with
value in excess of cost.......................................$ 5,487,024
Aggregate gross unrealized depreciation for
all securities with cost in excess of value...................( 1,482,627)
----------
Net unrealized appreciation.....................................$ 4,004,397
===========
Aggregate cost of securities.................................. $22,945,396
(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.
(7) There are no reportable financial instruments which have any off-balance
sheet risk as of June 30, 1998.
(8) At June 30, 1998 an indefinite number of capital shares (no par value) were
authorized, and paid-in capital amounted to $22,931,611. Transactions in capital
shares were as follows:
Shares sold..................................... 24,214
Shares redeemed................................. ( 184,008)
----------
Net decrease.................................... ( 159,794)
Shares outstanding:
Beginning of period.................... 1,150,684
-----------
Ending of period....................... 990,890
===========
