Registration Nos: 33-29678
811-5835
As filed with the Securities and Exchange Commission on May 1, 1996.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Post-Effective Amendment No. 9
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 12
THE FONTAINE TRUST
(Exact name of Registrant as Specified in Charter)
210 West Pennsylvania Avenue, Suite 240
Towson, Maryland 21204
(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code: (410) 825-7890
Richard H. Fontaine, The Fontaine Trust,
210 West Pennylvania Avenue, Suite 240
Towson, Maryland 21204
(Name and Address of Agent for Service)
Copies to:
Jane A. Kanter, Esq.
Katten Muchin & Zavis
1025 Thomas Jefferson Street, N.W., East Lobby, Suite 700
Washington, D.C. 20007-5201
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box):
Immediately upon filing pursuant to Paragraph (b) of Rule 485
X On May 1, 1996 pursuant to Paragraph (b) of Rule 485
60 days after filing pursuant to Paragraph (a) of Rule 485
On ______________ pursuant to Paragraph (a) of Rule 485
The Fontaine Trust has registered an indefinite number of its shares.
A Rule 24f-2 Notice for the fiscal period ended December 31, 1995 was
filed on February 29, 1996.
Page 1 of ______. Exhibit List appears on Page _____.
<PAGE>
THE FONTAINE TRUST
CROSS REFERENCE SHEET
Form N-1A Item No. Caption in Prospectus
1. Cover Page Cover Page
2. Synopsis Introduction
3. Condensed Financial Information Condensed Financial Information
4. General Description of Registrant Introduction; Capital Appreciation
Fund; Global Growth Fund; Global
Income Fund; Organization of the
Trust
5. Management of the Fund Management of the Trust
6. Capital Stock and Other Securities Dividends, Distributions, and Taxes;
Determination of Net Asset Value;
Shareholder Services
7. Purchase of Securities Being Purchase of Shares
Offered
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information and History
13. Investment Objectives and Description of Certain Investments
Policies
14. Management of the Fund Management
<PAGE>
15. Control Persons and Principal Management
Holders of Securities
16. Investment Advisory and Other Management; Custodian, Transfer
Services Agent and Dividend Disbursing
Agent
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other Shares of Beneficial Interest and
Securities Related Matters
19. Purchase, Redemption and Pricing Purchase and Redemptions of
of Securities Being Offered Securities Being Offered
20. Tax Status Federal Income Taxes
21. Underwriters Not Applicable
22. Calculation of Performance Data Performance Information
23. Financial Statements Independent Accountants
<PAGE>
THE FONTAINE TRUST
210 West Pennsylvania Avenue
Suite 240
Towson, Maryland 21204
PROSPECTUS - May 1, 1996
The Fontaine Trust consists of three portfolios, the Fontaine
Capital Appreciation Fund, the Fontaine Global Growth Fund, and the
Fontaine Global Income Fund. The Fontaine Capital Appreciation Fund
is a stock fund which seeks to provide investors with long-term
capital appreciation by investing primarily in common stocks which
are considered to be undervalued. The Fontaine Global Growth Fund is
an international stock fund which seeks to provide investors with
long-term growth of capital by investing primarily in high-quality
global growth stocks. The Fontaine Global Income Fund is an
international income fund which seeks to provide investors with a
high level of current income and capital appreciation by investing
primarily in fixed income securities of domestic and foreign issuers.
This Prospectus sets forth concisely the information about each
Fund that you should know before investing. It should be retained
for future reference. A Statement of Additional Information, dated
May 1, 1996 , for each Fund has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. You may
obtain a copy of the Statement of Additional Information at no charge
by writing The Fontaine Trust at the address noted above.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
Introduction 2
Condensed Financial Information 4
Capital Appreciation Fund 6
Global Growth Fund 7
Global Income Fund 8
Risk Factors and Certain Investment Practices 10
Dividends, Distributions, and Taxes 12
Management of the Trust 14
Purchase of Shares 16
Determination of Net Asset Value 18
Redemption of Shares 18
Shareholder Services 20
Organization of the Trust 20
Other Information 22
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
INTRODUCTION
The Fontaine Trust ("Trust") was organized in 1989 as a
Massachusetts business trust and is registered with the Securities
and Exchange Commission ("SEC") as an open-end management investment
company, commonly known as a mutual fund. The Trust currently
consists of three Funds: the Capital Appreciation Fund, the Global
Growth Fund, and the Global Income Fund ("Fund" or "Funds"). Each
Fund is a separate investment portfolio of the Trust having distinct
investment objectives, investment programs, policies, and
restrictions. Each Fund is advised by Richard Fontaine Associates,
Inc. ("Fontaine Associates"), which manages the day-to-day operations
of each Fund and the investment of each Fund's assets. The Capital
Appreciation Fund and the Global Growth Fund are diversified
investment companies under the Investment Company Act of 1940 ("1940
Act"). The Global Income Fund is registered as a non-diversified
investment company under the 1940 Act to enable it to invest more
than 5% of its total assets in securities of one issuer, including,
in particular, securities of foreign governments.
<TABLE>
Fee Table
The Fee Table, including the Examples below, is included to assist
your understanding of the various costs and expenses to which an
investment in each Fund would be subject. The Capital Appreciation
Fund commenced operations on September 28, 1989. The Global Growth
Fund and the Global Income Fund both commenced operations on May 1,
1992. The figures shown below reflect all the fees and expenses
incurred by the Capital Appreciation Fund, the Global Growth Fund
and the Global Income Fund for the year ended December 31, 1995 .
Actual fees and expenses for each of the Funds for the current year
may be greater or less than those stated below. A more complete
description of all fees and expenses is included in the Prospectus on
page 3.
<CAPTION>
Shareholder Transaction Expenses Capital Global Global
Appreciation Growth Income
Fund Fund Fund
<S> <C> <C> <C>
Sales Load Imposed on Purchase None None None
Sales Load Imposed on
Reinvested Dividends None None None
Deferred Sales Load Imposed None None None
on Redemptions
Redemption Fee None None None
Exchange Fee None None None
</TABLE>
<PAGE>
<TABLE>
Annual Fund Operating Expenses After Waiver or Assumption
(as a percentage of average daily net assets)
<CAPTION>
Capital Global Global
Appreciation Growth Income
Fund Fund Fund
<S> <C> <C> <C>
Investment Management Fee .95%<F1> .85<F1> .75%<F1>
12b-1 Fees None None None
Other Expenses
Custodial, accounting sevices,
and shareholder servicing costs .25% .35% .18%
Professional fees and expenses .66% .72% .74%
Miscellaneous .24% .12% .07%
Fund Operating Expenses aussumed
by Richard Fontaine Associates<F1> (.60%) (.60%) (.53%)
Total Fund Operating Expenses<F1> 1.50% 1.44% 1.21%
<F1>
Fontaine Associates has agreed to assume and reimburse all annual Fund
operating expenses of each Fund (other than certain expenses that are
capitalized and certain other non-recurring expenses) ("Fund Operating
Expenses") which in any year exceed 1.50% of the average daily net assets
for the Capital Appreciation Fund and the Global Growth Fund and 1.25% of
the average daily net assets for the Global Income Fund. Absent such
assumption of expenses by Fontaine Associates the Total Fund Operating
Expenses for the Capital Appreciation Fund, Global Growth Fund and Global
Income Fund for the year ended December 31, 1995 , would have been
2.10%, 2.04%, and 1.74% , respectively. In addition, Fontaine
Associates has assumed the costs of organization for the Global Growth Fund
and Global Income Fund. The costs of organization are not included in the
Global Growth Fund and Global Income Funds' expenses for the period.
Examples
</TABLE>
<TABLE>
The table below shows the cumulative expenses attributable to a
hypothetical $1,000 investment for the period specified, assuming (1)
5% annual return and (2) redemption at the end of each time period<F1>:
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Capital Appreciation Fund $ 15 $ 47 $ 82 $179
Global Growth Fund $ 15 $ 46 $ 79 $172
Global Income Fund $ 12 $ 38 $ 67 $147
<F1>
There are no charges imposed upon redemption.
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in a Fund will bear directly or
indirectly. These Examples should not be considered to be a representation
of past or future expenses for each Fund. Actual expenses may be greater or
less than those shown above. Similarly, the annual rate of return assumed in
the Example is not an estimate or guarantee of future investment performance,
but is included for illustrative purposes.
<PAGE>
<TABLE>
CONDENSED FINANCIAL INFORMATION
The following information is part of the Trust's financial statements which have been audited by Coopers & Lybrand, L.L.P.,
independent accountants, whose report appears in the Trust's Annual Report to Shareholders for the year ended December 31, 1995.
The table below represents a condensed financial history of the operations of the Capital Appreciation Fund, the Global Growth
Fund and the Global Income Fund, and expresses the information for each Fund in terms of a single share outstanding through each
period. Additional information about each Fund's performance is contained in the Trust's Annual Report, which may be obtained
without charge by calling 1-800-247-1550.
<CAPTION>
Capital
Appreciation
------------------------------------------------------------------------------------------
Year Year Year Year Year From From
Ended Ended Ended Ended Ended 9/1/90 to 9/28/89<F2>
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90<F1> to 8/31/90
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.75 $10.75 $ 9.60 $10.78 $10.40 $10.44 $10.00
Investment Activities
Net Investment Income<F4> 0.26 0.07 0.135 0.33 0.65 0.08 0.44
Net Realized and Unrealized
Gain/(Loss) on Investments 1.42 0.18 1.215 (0.76) 0.57 0.32 0.20
Total From Investment Activities 1.68 0.25 1.35 (0.43) 1.22 0.40 0.64
Distributions
Net Investment Income (0.26) (0.18) (0.135) (0.12) (0.64) (0.40) (0.13)
Net Realized Gains (1.50) (0.07) (0.065) (0.63) (0.20) (0.04) (0.07)
Total Distributions (1.76) (0.25) (0.20) (0.75) (0.84) (0.44) (0.20)
NET ASSET VALUE,
END OF PERIOD $10.67 $10.75 $10.75 $ 9.60 $10.78 $10.40 $10.44
Ratio of Expenses to
Average Net Assets <F4> 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of Net Investment Income
to Average Net Assets 2.16% 1.41% 1.15% 3.12% 4.14% 5.10%<F3> 5.26%<F3>
Total Investment Return 15.49% 2.34% 14.09% (3.94%) 11.81% 3.82% 6.45%
Portfolio Turnover Rate 96.00% 135.55% 131.73% 129.16% 79.40% 273.86%<F3> 288.00%<F3>
Net Assets,
End of Period (000'S) $5,282 $5,679 $8,903 $14,902 $15,950 $6,459 $4,486
<F1>
Transition Period
<F2>
Commencement of Operations
<F3>
Annualized
<F4>
Excludes investment management fees and other expenses in excess of voluntary expense limitation of 1.50% for Capital
Appreciation. Without fees waived or reimbursed by the adviser (see Note 5), the annualized expense ratios would have
been: 2.10%, 2.28%, 1.81%, 1.94%, 1.95%, 3.43% and 3.43%.
<FN>
This per share information and other information should be read in conjunction with the financial statements and related notes
included in the Trust's Annual Report to Shareholders for the year ended December 31, 1995, which, except for pages 1 through 5
thereof, is incorporated by reference in the Trust's Statement of Additional Information.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
THE FONTAINE TRUST (Cont'd)
<CAPTION>
Global Global
Growth Income
------------------------------------------- --------------------------------------------
Year Year Year From Year Year Year From
Ended Ended Ended 5/1/92<F1> Ended Ended Ended 5/1/92<F1>
12/31/95 12/31/94 12/31/93 to 12/31/92 12/31/95 12/31/94 12/31/93 to 12/31/92
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.61 $10.34 $ 9.33 $10.00 $10.16 $10.78 $ 9.37 $10.00
Investment Activities
Net Investment Income<F2> 0.21 0.16 0.14 0.07 0.36 0.29 -- 0.14
Net Realized and Unrealized
Gain/(Loss) on Investments 1.14 (0.20) 1.11 (0.41) 0.91 (0.13) 1.92 (0.48)
Total From Investment Activities 1.35 (0.04) 1.25 (0.34) 1.27 0.16 1.92 (0.34)
Distributions
Net Investment Income (0.22) (0.16) (0.11) (0.08) (0.35) (0.39) -- (0.21)
Net Realized Gains (0.71) (0.53) (0.13) (0.25) (0.62) (0.39) (0.51) (0.08)
Total Distributions (0.93) (0.69) (0.24) (0.33) (0.97) (0.78) (0.51) (0.29)
NET ASSET VALUE,
END OF PERIOD $10.03 $ 9.61 $10.34 $ 9.33 $10.46 $10.16 $10.78 $ 9.37
Ratio of Expenses to
Average Net Assets<F3> 1.44% 1.45% 1.50% 1.50% 1.21% 1.21% 1.25% 1.25%
Ratio of Net Investment Income
to Average Net Assets 2.36% 1.69% 1.15% 1.23%<F2> 3.35% 2.49% 2.13% 2.47%<F2>
Total Investment Return 13.97% -0.35% 13.39% -3.37% 12.62% 1.49% 20.53% -3.47%
Portfolio Turnover Rate 101.48% 114.14% 263.84% 348.51%<F2> 95.89% 129.89% 171.45% 189.60%<F2>
Net Assets,
End of Period(000'S) $700 $341 $349 $335 $1,060 $683 $849 $1,384
<F1>
Commencement of Operations
<F2>
Annualized
<F3>
Excludes investment management fees and other expenses in excess of voluntary expense limitation of 1.50% for Global
Growth and 1.25% for Global Income. Without fees waived or reimbursed by the adviser (see Note 5), the annualized expense
ratios would have been: Global Growth: 2.04%, 1.45%, 3.62% and 7.19%; Global Income: 1.74%, 1.98%, 2.32% and 3.05%.
Please see "Management of the Trust-Expenses" for information about fee waivers and reimbursements.
<FN>
This per share information and other information should be read in conjunction with the financial statements and related notes
included in the Trust's Annual Report to Shareholders for the year ended December 31, 1995, which, except for pages 1 through 5
thereof, is incorporated by reference in the Trust's Statement of Additional Information.
</TABLE>
<PAGE>
CAPITAL APPRECIATION FUND
Investment Objectives
The Capital Appreciation Fund seeks to maximize long-term capital
appreciation by investing primarily in common stocks which are
considered by the Fund's investment adviser, Fontaine Associates, to
be undervalued or out of favor with investors and which are expected
to increase in price over the long-term. The production of current
income is a secondary objective of the Fund.
Investment Program
The investment program of the Capital Appreciation Fund is based on
the belief of Fontaine Associates that significant capital
appreciation may be achieved by investment in securities of companies
that are temporarily undervalued in relation to the company's assets,
earnings, or long-term growth potential. As a matter of fundamental
policy, during normal market conditions, substantially all of the
Fund's assets (i.e., 80% of the Fund's total assets) will be invested
in common stocks.
In selecting investments for the Fund, Fontaine Associates uses a
"valuation" discipline to identify stocks whose prospects for price
appreciation, over time, are believed to exceed the risk of loss of
market value. This approach is based on the belief that the
securities of certain companies may sell at a discount from their
fundamental value. Fontaine Associates looks for stocks that, for
one reason or another, are relatively inexpensively priced today
compared to their historical average. In evaluating potential
investments, Fontaine Associates looks at the range of each
security's market price as compared to its stated book value over the
past 10 to 15 years. Fontaine Associates also looks for catalysts
that may increase the value of potential investments, such as an
improvement in a company's financial fundamentals, a structural
reorganization, or the potential for a significant acquisition or
merger by a company.
Although the Fund will ordinarily invest at least 80% of its total
assets in common stocks, to the extent not so invested, it may invest
in: (i) privately placed securities; (ii) equity-related securities
(i.e., preferred stocks, securities convertible into or exchangeable
for common stocks, and warrants); and (iii) foreign equity and debt
securities (limited to 20% of the Fund's total assets). The Fund's
investment in privately placed securities, convertible securities,
and preferred stocks is limited in each case to 10% of the Fund's
total assets.
As noted above, the Fund may invest up to 20% of its total assets
in debt and equity securities principally traded in markets outside
the United States in order to further diversify its portfolio. The
Fund will invest only in foreign securities of developed countries,
such as those in Western Europe and the Pacific Basin and will invest
in only high and medium quality debt securities, as described more
fully in the discussion concerning the Global Income Fund. While
investments in foreign securities are intended to reduce risk, such
investments involve risks and disadvantages not typically associated
with investment in domestic issuers. (Please see "Global Growth
Fund," "Global Income Fund," and "Risk Factors and Certain Investment
Practices" -- "Foreign Securities" for more information about such
securities.)
The Fund may also use U. S. dollar-denominated high-quality money
market instruments and short-term debt securities to reduce downside
exposure to uncertain or declining market conditions. Such
securities will be rated within the two highest credit categories by
any nationally recognized statistical rating organization ("NRSRO")
or, if unrated, are of comparable investment quality as determined by
Fontaine Associates. For temporary or defensive purposes, the Fund
may invest in high-quality domestic money market instruments, high-
quality domestic short-term debt securities or may hold the Fund's
assets in cash or cash equivalents without limitation. (Please see
"Risk Factors and Certain Investment Practices" -- "Cash Reserves and
Repurchase Agreements" for further information about these money
market instruments.)
The equity securities purchased by the Fund are expected to be
traded on the New York Stock Exchange ("NYSE"), the American Stock
Exchange, the NASDAQ National Market, and certain foreign stock
exchanges.
There is no assurance that the fund will achieve its investment
objective.
GLOBAL GROWTH FUND
Investment Objective
The Global Growth Fund seeks long-term growth of capital by
investing primarily in equity and equity-related securities of
domestic and foreign issuers.
Investment Program
To achieve its objective, the Global Growth Fund will under normal
market conditions invest primarily (i.e., 65% of its total assets) in
equity and equity-related securities of established medium and large
capitalization domestic and foreign issuers. Such equity and equity-
related investments by the Fund will be limited to common stocks,
preferred stocks, securities convertible into or exchangeable for
common stocks, and warrants. The Fund will invest in such equity and
equity-related securities of foreign issuers primarily through the
purchase of American Depository Receipts ("ADRs") as well as
securities traded on foreign stock exchanges and established foreign
over-the-counter markets.
The Fund intends to broadly diversify its holdings among developed
countries having strong and stable national financial markets.
Fontaine Associates believes that broad diversification provides a
prudent means of reducing volatility while permitting the Fund to
take advantage of the potentially different movements of major equity
markets. While the Fund may invest anywhere in the world, it expects
that most of its investments will be made in securities of issuers
located in developed countries in North America, Western Europe, and
the Pacific Basin. In allocating the Fund's investments among
different countries and geographic regions, Fontaine Associates will
consider such factors as: relative economic growth, expected levels
of inflation, government policies affecting business conditions, and
market trends throughout the world. Under normal conditions, the
Fund expects to have at least 65% of its assets invested in at least
three different countries (one of which may be the United States).
For temporary or defensive purposes, the Fund may invest
substantially all its assets in one or two countries. In selecting
companies within those countries and geographic regions, Fontaine
Associates seeks to identify those companies that are best positioned
and managed to benefit from the factors listed above. Fontaine
Associates will not normally emphasize dividend income in choosing
securities, unless Fontaine Associates believes the income will
contribute to the securities' investment return.
Although under normal market conditions at least 65% of the Fund's
total assets may be invested in equity, equity-related securities, to
the extent not so invested, the Fund may invest in: (i) high and
medium quality debt securities issued by domestic and foreign
corporations, governments, governmental entities, and supranational
entities, as described more fully in the discussion concerning the
Global Income Fund, or (ii) short-term debt securities rated within
the two highest credit categories by any NRSRO or, if unrated, of
comparable investment quality as determined by Fontaine Associates.
The Fund's use of money market instruments and short-term debt
securities will generally reflect Fontaine Associates' overall
measure of valuation relating to the global equity markets, and the
Fund will use such securities to reduce downside exposure to
uncertain or declining market conditions. For temporary or defensive
purposes, the Fund may invest in high-quality domestic money market
instruments, high-quality domestic short-term debt securities, or may
hold the Fund's assets in cash or cash equivalents without limita-
tion. (Please see "Risk Factors and Certain Investment Practices" --
"Foreign Securities", "Debt Securities" and "Cash Reserves and
Repurchase Agreements" for further information about such securi-
ties.)
There is no assurance that the Fund will achieve its investment
objective.
GLOBAL INCOME FUND
Investment Objectives
The Global Income Fund seeks a high level of current income and,
secondarily, capital appreciation by investing primarily in fixed
income securities of domestic and foreign issuers.
Investment Program
To achieve its objectives, the Global Income Fund will under normal
market conditions invest primarily (i.e., 65% of its total assets) in
debt securities of domestic and foreign issuers. All debt securities
purchased by the Fund will be high and medium quality bonds,
debentures, and notes rated, for example, at least Baa or its
equivalent by any NRSRO or, if unrated, of comparable investment
quality as determined by Fontaine Associates. The Fund may invest in
debt securities issued by: (i) domestic and foreign governments and
their agencies and political subdivisions, (ii) corporations and
financial institutions, and (iii) supranational entities such as the
International Bank for Reconstruction and Development ("World Bank"),
the Asian Development Bank, the European Investment Bank, and the
European Community. Although the Fund may invest in debt securities
of domestic and foreign corporations and financial institutions, it
currently anticipates that its investments in issuers located outside
the United States will be principally in government and quasi-
governmental issuers in order to maintain liquidity and reduce credit
risk.
The Global Income Fund may invest anywhere in the world, but
expects that most of its investments will be made in securities of
issuers located in developed countries in North America, Western
Europe, and the Pacific Basin. In allocating the Fund's investments
among countries, geographic regions, and currency denominations,
Fontaine Associates will consider such factors as: fundamental
market attractiveness, the outlook for currency relationships,
current and anticipated interest rates, levels of inflation in
various countries, and local market factors including government
policies influencing currency exchange rates and business conditions.
Under normal conditions, the Fund expects to have at least 65% of
its assets in at least three different countries (one of which may be
the United States). For temporary or defensive purposes, the Fund
may invest substantially all its assets in one or two countries.
The Global Income Fund may invest a significant portion of its
assets in securities denominated in currencies other than the U. S.
dollar, may temporarily hold funds in bank deposits or money market
instruments denominated in foreign currencies, and may receive
interest, dividends, and sale proceeds in foreign currencies. The
value of the Fund's debt securities denominated in foreign currencies
may be significantly affected by changes in foreign interest rate
levels and foreign currency exchange rates. Fontaine Associates will
attempt to reduce these risks through portfolio diversification,
active management of the Fund's maturity structure, and the use of
currency exchange transactions to convert currencies to or from U. S.
dollars. These currency exchange transactions will be on a spot
(i.e., cash) basis only at the spot rate prevailing in the foreign
exchange market.
As noted above, Fontaine Associates will actively manage the Fund's
portfolio maturity and, generally, will increase the average maturity
of the Fund's portfolio when it expects interest rates worldwide or
in a particular country to decline, and conversely, will decrease
such maturity when it expects interest rates worldwide or in a
particular country to rise. There are no restrictions on the Fund's
average portfolio maturity and the Fund expects that its average
maturity will vary depending on interest rates and market conditions.
(Please see "Risk Factors and Certain Investment Practices" -- "Debt
Securities" for further information about such securities.)
Although under normal market conditions at least 65% of the Fund's
total assets may be invested in debt securities of domestic and
foreign issuers, to the extent not so invested, the Fund may invest
in: (i) equity and equity-related securities of domestic and foreign
issuers, as described more fully in the discussion concerning the
Global Growth Fund, and (ii) high-quality money market instruments of
domestic and foreign issuers, rated within the two highest credit
categories by an NRSRO or, if unrated, are of comparable investment
quality as determined by Fontaine Associates. For temporary or
defensive purposes, the Fund may invest in high-quality domestic
money market instruments, high-quality domestic short-term debt
securities, or may hold the Fund's assets in cash or cash equivalents
without limitation. (Please see "Risk Factors and Certain Investment
Practices" -- "Foreign Securities" and "Cash Reserves and Repurchase
Agreements" for further information about such securities.)
Investors should note that if the Fund were to invest in lower
quality securities its income might be higher; however such
investments also entail greater credit risk.
There is no assurance that the Fund will achieve its investment
objective.
RISK FACTORS AND CERTAIN INVESTMENT PRACTICES
A number of the investment policies and techniques referred to
below are subject to certain additional risks described more fully in
the Statement of Additional Information.
Cash Reserves and Repurchase Agreements
The Funds may use U. S. dollar denominated money market instruments
to reduce downside exposure to uncertain or declining market
conditions. Such money market instruments will be limited to high
quality securities rated within the two highest credit categories by
any NRSRO or, if not rated, of comparable investment quality as
determined by Fontaine Associates. Such domestic money market
instruments may include: obligations of the U. S. Government (such
as U. S. Treasury bills), its agencies (such as the Federal Housing
Administration) or instrumentalities (such as the U. S. Postal
Service), certificates of deposit, banker's acceptances, bank time
deposits, commercial paper, short-term corporate debt securities and
repurchase agreements with a securities dealer or bank. In these
repurchase transactions, the underlying security, which is held by
the custodian through the federal book-entry system for a Fund as
collateral, will be marked to market on a daily basis to ensure full
collateralization of the repurchase agreement. In the event of a
bankruptcy or default of certain sellers of repurchase agreements, a
Fund could experience costs and delays in liquidating the underlying
security and might incur a loss if such collateral held declines in
value during this period. For temporary or defensive purposes each
Fund may invest in such money market instruments without limitation.
Convertible Securities and Preferred Stock
Each Fund may invest in debt securities or preferred stock
convertible into or exchangeable for common stock. Preferred stocks
are securities that represent an ownership interest in a corporation
providing the owner with claims on the company's earnings and assets
before common stock owners, but after bond owners. Each Fund will
only purchase convertible securities and preferred stocks that are
listed on the NYSE or the American Stock Exchange.
Debt Securities
Debt securities are considered high-quality if they are rated at
least Aa or its equivalent by any NRSRO or, if unrated, are
determined to be of comparable investment quality by Fontaine
Associates. High-quality debt securities are considered to have a
very strong capacity to pay principal and interest. Debt securities
are considered medium quality if they are rated, for example, at
least Baa or its equivalent by any NRSRO or, if not rated, are
determined to be of comparable investment quality by Fontaine
Associates. Medium quality debt securities are regarded as having an
adequate capacity to pay principal and interest. See the Appendix to
the Statement of Additional Information regarding "Description of
Corporate Bond Ratings."
The maturity of debt securities may be considered long (ten plus
years), intermediate (one to ten years), or short-term (thirteen
months or less). In general, the principal values of longer-term
securities fluctuate more widely in response to changes in interest
rates than those of shorter-term securities, providing greater
opportunity for capital gain or risk of capital loss. A decline in
interest rates usually produces an increase in the value of debt
securities, while an increase in interest rates generally reduces
their value.
Forward Commitments and When-Issued Securities
Each Fund may purchase securities on a when-issued, delayed
delivery, or forward commitment basis. When such transactions are
negotiated the price of such securities is fixed at the time of the
commitment, but delivery and payment for the securities may take
place up to 90 days after the date of the commitment to purchase.
The securities so purchased are subject to market fluctuation, and no
interest accrues to the purchaser during this period. When-issued
securities or forward commitments involve a risk of loss if the value
of the security to be purchased declines prior to the settlement
date. Fontaine Associates does not believe that the net asset value
or income of the Funds will be adversely affected by the purchase of
securities on a when-issued or forward commitment basis. No Fund
will enter into such transactions for leverage purposes.
Foreign Securities
Investments in foreign securities involve certain risks that are
not typically associated with investing in domestic issuers,
including: (i) less publicly available information about the
securities and about the foreign company or government issuing them;
(ii) less comprehensive accounting, auditing, and financial reporting
standards, practices, and requirements; (iii) stock markets outside
the United States may be less developed or efficient than those in
the United States and government supervision and regulation of those
stock markets and brokers and the issuers in those markets is less
comprehensive than that in the United States; (iv) the securities of
some foreign issuers may be less liquid and more volatile than
securities of comparable domestic issuers; (v) settlement of
transactions with respect to foreign securities may sometimes be
delayed beyond periods customary in the United States; (vi) fixed
brokerage commissions on certain foreign stock exchanges and
custodial costs with respect to securities of foreign issuers
generally exceed domestic costs; (vii) with respect to some countrie-
s, there is the possibility of unfavorable changes in investment or
exchange control regulations, expropriation, or withholding or
confiscatory taxation, taxation at the source of the income payment
or dividend distribution, limitations on the removal of funds or
other assets of each Fund, political or social instability, or
diplomatic developments that could adversely affect United States
investments in those countries; (viii) difficulties in obtaining and
enforcing a judgment against a foreign issuer or enterprise; (ix)
restrictions on foreign investment in some countries; and (x) foreign
securities denominated in foreign currencies may be affected
favorably or unfavorably by changes in currency exchange rates and
exchange control regulations and each Fund may incur costs in
connection with conversions between various currencies. Specifi-
cally, to facilitate each Fund's purchase of securities denominated
in foreign securities, the Funds may engage in currency exchange
transactions to convert currencies to or from U. S. dollars. The
Funds do not intend to hedge their foreign currency risks and will
engage in currency exchange transactions on a spot (i.e., cash) basis
only at the spot rate prevailing in the foreign exchange market.
With respect to equity securities, each Fund may purchase ADRs.
ADRs are U. S. dollar-denominated certificates issued by a United
States bank or trust company and represent the right to receive
securities of a foreign issuer deposited in a domestic bank or
foreign branch of a United States bank and traded on a United States
exchange or in an over-the-counter market. Generally, ADRs are in
registered form. There are no fees imposed on the purchase or sale
of ADRs when purchased from the issuing bank or trust company in the
initial underwriting, although the issuing bank or trust company may
impose charges for the collection of dividends and the conversion of
ADRs into the underlying securities. Investment in ADRs has certain
advantages over direct investment in the underlying foreign
securities since: (i) ADRs are U. S. dollar-denominated investments
that are registered domestically, easily transferable and for which
market quotations are readily available; and (ii) issuers whose
securities are represented by ADRs are subject to the same auditing,
accounting and financial reporting standards as domestic issuers.
Diversification
The Capital Appreciation Fund and the Global Growth Fund are
diversified investment companies under the 1940 Act. As such, each
of these Funds has a fundamental policy that limits its investments
so that, with respect to 75% of its assets, (i) no more than 5% of
each Fund's total assets will be invested in the securities of a
single issuer and (ii) each Fund will purchase no more than 10% of
the outstanding voting securities of a single issuer. These
limitations do not apply to obligations issued or guaranteed by the
U. S. Government, its agencies or instrumentalities or repurchase
agreements fully collateralized by U. S. Government securities.
The Global Income Fund is registered as a non-diversified
investment company under the 1940 Act to enable it to invest more
than 5% of its total assets in securities of one issuer, including,
in particular, securities of foreign governments. While the Global
Income Fund is non-diversified for securities law purposes, it
intends to qualify as a RIC for purposes of Subchapter M of the Code.
Such qualification requires the Fund to limit its investment so
that, among other things, at least 50% of its total assets is
comprised of cash, cash items, U. S. Government securities,
securities of RICs and other securities, limited so that the
securities of a single issuer (other than U. S. Government securi-
ties) do not comprise more than 5% of the value of the Fund's total
assets. Since, as a non-diversified investment company, the Global
Income Fund is permitted to invest a greater proportion of its assets
in the securities of a smaller number of issuers, the Fund may be
subject to greater risk with respect to its portfolio securities than
an investment company which is more broadly diversified.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
Each Fund intends to elect to be treated and to qualify as a
"regulated investment company" ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended, (the "Code") in which case
it will not be subject to federal income tax on any ordinary income
and capital gains distributed to its shareholders. As a result, it
is the policy of each Fund to declare and distribute to its
shareholders as income dividends or capital gains distributions, at
least annually, substantially all of its ordinary income and capital
gains realized from the sale of its portfolio securities, if any.
Income dividends for the Capital Appreciation Fund and for the
Global Growth Fund, will be declared and distributed no less
frequently than annually. Income dividends for the Global Income
Fund will be declared and paid quarterly, if applicable. All
distributions of capital gains income of each Fund, if any, realized
during the fiscal year, will be declared and distributed no less
frequently than annually. Income dividends are derived from each
Fund's net investment income, and net short-term capital gains, if
any, and are taxable to you as ordinary income. Because some gains
and losses from currency fluctuations are characterized as ordinary
income for tax purposes, income dividends for the Global Growth Fund
and the Global Income Fund may be more or less than the net
investment income earned by each Fund. Corporate shareholders may be
entitled to take a deduction for income dividends received by them
that are attributable to dividends received from a domestic
corporation, provided that both the corporate shareholder retains its
shares in the applicable Fund for more than 45 days and the Fund
retains its shares in the issuer from whom it received the income
dividend for more than 45 days. Distributions of capital gains by a
Fund are derived from that Fund's long-term capital gains and are
taxable to you as long-term capital gains, regardless of how long you
have held your shares. Income dividends and distributions of capital
gains income declared in October, November, or December and paid in
January are taxable in the year they are declared. Each Fund will
mail you a Form 1099 by the end of January indicating the federal tax
status of your income dividends and capital gains distributions.
If, as anticipated, the Global Growth Fund and the Global Income
Fund each pay withholding or other taxes to any foreign government
during the year with respect to its investment in foreign securities,
such taxes paid, net of amounts to be reclaimed, will reduce that
Fund's dividends. If each Fund satisfies certain requirements of the
Code, it may elect to pass through to its shareholders its
proportionate share of such foreign taxes, which would then be
included in your taxable income. However, you may be able to claim
an offsetting credit or itemized deduction on your tax return subject
to certain limitations under the Code. The Form 1099 you receive
will indicate the amount of foreign tax for which a credit or
deduction may be available. Please consult your tax adviser if you
have any questions.
Backup Withholding
Each Fund is required by federal law to withhold 31% of reportable
payments (which may include income dividends, capital gains
distributions, and share redemption proceeds) paid to shareholders
(other than participants in qualified retirement accounts) who have
not complied with IRS regulations. To avoid this backup withholding
requirement, you must certify on your purchase Application or on a
separate W-9 Form supplied by the Trust's transfer and dividend
disbursing agent, that your Social Security or Taxpayer Identifi-
cation Number is correct (or that you have applied for such a number
and are waiting for it to be issued) and that you are not currently
subject to backup withholding, or you are exempt from backup
withholding.
Receipt of Income Dividends and Capital Gains Distributions
Unless you elect otherwise, as permitted on the Application, income
dividends and distributions of capital gains income with respect to a
particular Fund will be reinvested in additional shares of that Fund
and will be credited to your account with that Fund at the net asset
value per share for that Fund next computed as of the ex-
dividend/reinvestment date.
Both income dividends and distributions of capital gains income are
paid by the Funds on a per-share basis. As a result, at the time of
such payment, the net asset value per share of each Fund will be
reduced by the amount of such payment. Payments from each Fund to
its shareholders of income dividends and capital gains distributions
are taxable to shareholders of each Fund when such dividends and
distributions are declared, regardless of whether they are taken in
cash or reinvested in shares of the Funds, unless the accounts of
such shareholders are used to fund tax-qualified retirement plans,
including Individual Retirement Account Plans ("IRAs"), Simplified
Employee Pensions ("SEP-IRAs"), and other tax-deferred plans or
accounts. Participants in such plans or accounts will be taxed when
they begin receiving distributions from such plans or accounts.
Depending on the residence of the shareholder(s) for tax purposes,
distributions may also be subject to state and local taxes.
Shareholders should consult their own tax advisers as to the federal,
state, and local tax consequences of ownership of Fund shares in
their particular circumstances.
MANAGEMENT OF THE TRUST
Board of Trustees
The management of the Trust's business and affairs is the responsi-
bility of its Board of Trustees. Although the Board is not involved
in the day-to-day operations of each Fund, the Board has the
responsibility for establishing broad corporate policies and
supervising the overall operations of each Fund.
Investment Adviser
Fontaine Associates, located at 210 West Pennsylvania Avenue, Suite
240, Towson, Maryland 21204, is the investment adviser for each Fund
and in that capacity is responsible for the selection and management
of each Fund's portfolio investments in accordance with that Fund's
investment objectives, investment program, policies, and restric-
tions. Fontaine Associates, a Delaware corporation, is wholly-owned
by Richard H. Fontaine, one of the Trustees of the Trust. Mr.
Fontaine served as portfolio manager for the T. Rowe Price Capital
Appreciation Fund from its inception on June 30, 1986 to December 31,
1988, when Mr. Fontaine resigned in order to establish his own
investment management firm. Mr. Fontaine is President, Director and
Chief Executive Officer of Fontaine Associates and has been the
portfolio manager of the Capital Appreciation Fund, the Global Growth
Fund, and the Global Income Fund since each Fund's inception. At
December 31, 1995 , Fontaine Associates, a registered investment
adviser, managed over $100.0 million of assets for pension plans,
corporations, individuals, and institutions.
Fontaine Associates furnishes each Fund with continuous investment
advice consistent with that Fund's investment objectives, investment
program, policies and restrictions, and provides administrative
personnel, certain portfolio valuation services, office space, and
other necessary facilities in connection with the operation of each
Fund. The Trust pays Fontaine Associates as compensation for its
advisory and management services, on a monthly basis, an investment
advisory fee based on each Fund's average daily net assets at the
following annualized rates: with respect to the Capital Appreciation
Fund, .95% of average daily net assets; with respect to the Global
Growth Fund, .85% of average daily net assets; and, with respect to
the Global Income Fund, .75% of average daily net assets. The
investment advisory fees for the Funds are higher than those for
mutual funds investing only in securities of larger capitalization
domestic issuers.
The Master Advisory Contract and Advisory Contract Supplements,
with respect to the Capital Appreciation Fund, the Global Growth
Fund, and the Global Income Fund were most recently approved by the
Board of Trustees at a meeting held on March 4, 1996 .
Transfer and Dividend Disbursing Agent
Pursuant to a Master Agency Agreement and Agency Agreement
Supplements, with respect to each Fund, Richard Fontaine and Company,
Incorporated acts as the Trust's transfer and dividend disbursing
agent ("Transfer Agent") and is responsible for maintaining account
records, detailing ownership of shares for each Fund and for
crediting income, capital gains, and other changes in share ownership
to shareholder accounts. Fontaine and Company is located at 210 West
Pennsylvania Avenue, Suite 240, Towson, Maryland 21204.
Custodian
Chemical Bank is the Trust's custodian. Pursuant to a Custodian
Contract, Chemical Bank is responsible for maintaining the books and
records of each Fund's portfolio transactions and holding each Fund's
cash and portfolio securities.
Expenses
The Trust bears all expenses of its operations other than expenses
assumed by Fontaine Associates under its Master Advisory Contract and
Advisory Contract Supplements, on behalf of each Fund, or assumed by
Fontaine Associates under the Expense Limitation Agreements with
respect to each Fund, as described below. In particular, absent such
assumption of expenses, Trust expenses include: investment advisory
fees; shareholder servicing fees and expenses; custodian and transfer
agent expenses; legal, accounting, and auditing fees and expenses;
expenses of preparing, printing, and distributing Prospectuses,
Statements of Additional Information, and shareholder communications
and reports, except as used to market each Fund's shares; expenses of
computing each Fund's net asset value per share; charges for
communications equipment or services used for communication with
agents of the Trust; federal and state registration fees and
expenses; proxy and shareholder meeting expenses; expenses of issuing
and redeeming shares of the Funds; independent Trustees' fees and
expenses; expenses of fidelity bond, liability, and other insurance
coverage; brokerage commissions; taxes; and certain nonrecurring and
extraordinary expenses. In addition, the expense of organizing the
Capital Appreciation Fund and registering and qualifying its initial
shares under federal and state securities laws has been charged to
that Fund's operations, as an expense, over a period of 60 months.
Fontaine Associates has assumed the expense of organizing the Global
Growth Fund and the Global Income Fund and of registering and
qualifying their initial shares under federal and state securities
laws. That expense is not reimbursable by the Funds to Fontaine
Associates. For the year ended December 31, 1995 , the annualized
ratios of operating expenses to average net assets for the Capital
Appreciation Fund, the Global Growth Fund, and the Global Income Fund
after waiver or assumption of certain expenses by Fontaine Associates
as described directly below, were 1.50%, 1.44% , and 1.21%,
respectively.
Fontaine Associates has agreed, as part of the Expense Limitation
Agreements entered into with the Trust, with respect to each Fund, to
assume as its own expense and reimburse each Fund for all Fund
Operating Expenses which in any year exceed 1.50% of the average
daily net assets of the Capital Appreciation Fund; 1.50% of the
average daily net assets of the Global Growth Fund; and 1.25% of the
average daily net assets of the Global Income Fund ("Operating
Expense Limits"). If the Fund Operating Expenses for a particular
Fund are less than the Operating Expense Limit for that Fund and the
assets of that Fund exceed $20 million, the Fund Operating Expenses
assumed and paid by Fontaine Associates on behalf of a particular
Fund could be reimbursed by that Fund, provided that in doing so the
Operating Expense Limit for that Fund was not exceeded and the period
over which such reimbursements are made does not exceed five years
from the date of the first such payment. The amounts, if any, that
may be reimbursed by a particular Fund will not include any
additional charges or fees, including interest accruable on amounts
waived, assumed, or reimbursed by Fontaine Associates.
PURCHASE OF SHARES
The minimum initial investment required per Fund is $1,000 ($250
for spousal IRA accounts). The minimum subsequent investment
required per Fund is $100. These minimum investment requirements, in
certain cases, may be waived or lowered by the Trust or Fontaine
Associates.
100% NO LOAD
The Trust does not charge a sales load, redemption fee, or 12b-1
fees. This means that all of the money you invest in any of the
Funds will be credited in full to your account.
Opening an Account
You may make an initial purchase of shares of each Fund by mail or
wire when accompanied by a completed and signed Application. Shares
of each Fund may be purchased on any day the Trust is open for
business.
YOU WILL FIND AN APPLICATION INCLUDED WITH THIS PROSPECTUS. A
COMPLETED AND SIGNED APPLICATION IS REQUIRED FOR EACH NEW ACCOUNT YOU
OPEN WITH EACH FUND REGARDLESS OF HOW YOU CHOOSE TO MAKE YOUR INITIAL
PURCHASE OF SHARES.
By Mail
You may purchase shares of each Fund by mailing the completed and
signed Application, with your check made payable to The Fontaine
Trust or the name of the particular Fund, to Richard Fontaine and
Company, Incorporated, 210 West Pennsylvania Avenue, Suite 240,
Towson, Maryland 21204.
By Wire
You may also purchase shares of each Fund by wiring funds to the
bank wire account for each Fund, upon prior approval by the Trust.
Please call toll free 1-800-247-1550, before wiring funds, to advise
the Trust of your intention to invest in one of the Funds and to
receive instructions as to how and where to wire your investment.
Please remember to mail your completed and signed Application to
Fontaine and Company, as described in the prior paragraph. Your bank
may charge you a fee for the wire.
Through Broker-Dealers and Other Financial Institutions
You may purchase shares of each Fund through certain broker-dealers
and other financial institutions that are authorized to sell you
shares of the Fund. Such financial institutions may charge you a fee
for this service.
NOT ALL FUNDS ARE AVAILABLE FOR SALE IN ALL STATES.
Subsequent Investments: Minimum $100
Subsequent purchases of shares of each Fund may be made by mail or
by wire (see instructions -- "By Wire") or through means of the
Exchange Privilege described below under "Shareholder Services".
Share Price
Your shares in each Fund will be priced at the net asset value per
share of that Fund next computed after your purchase order has been
received by the Transfer Agent in "good order". To be in good order,
an initial purchase order must include a completed and executed
Application. In order for your purchase order to be effective on the
day you place your order with your broker-dealer or other financial
institution, such broker-dealer or other financial institution (i)
must receive your order before 4:00 p.m. Eastern Time, and (ii)
promptly transmit the order to the Transfer Agent. See "Determination
of Net Asset Value" below. The financial institution is responsible
for promptly transmitting purchase orders to the Transfer Agent so that
you may receive the same day's NAV.
Conditions of Your Purchase
The Trust reserves the right to reject any purchase for any reason
and to cancel any purchase due to nonpayment. Purchases are not
binding on any Fund or considered received until such purchase orders
are received by the Transfer Agent in "good order". All purchases
must be made in United States dollars and, to avoid fees and delays,
all checks must be drawn only on United States banks. No cash will
be accepted. As a condition of this offering, if your purchase is
canceled due to nonpayment or because your check does not clear (and,
therefore, your account is required to be redeemed), you will be
responsible for any loss or fee the Trust incurs.
Stock Certificates
Stock certificates will not be issued for your shares except upon
written request. Certificates for full shares only will be issued.
If you lose a stock certificate you may incur an expense to replace
it.
Retirement Plan Accounts
If you are a participant in a corporate or institutional retirement
plan account (including any deferred compensation plan), you must
contact your Plan Administrator regarding purchase and redemption
procedures, including limitations thereon, contained in your
retirement plan. Requests for redemptions from retirement plan
accounts (including IRAs) must be in writing.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund is normally calculated
daily as of the close of regular trading on the NYSE, currently 4:00
p.m. Eastern Time, every day the NYSE is open for trading The per
share net asset value, calculated as described below, is effective
for all orders received prior to the close of regular trading on the
NYSE for that day. Orders received after the close of regular
trading on the NYSE or on a day when the NYSE is not open for
business will be priced at the per share net asset value next
computed.
The net asset value of each Fund's shares is determined by dividing
the total current market value of all the assets of the particular
Fund, less its liabilities (including accrued expenses and dividends
payable), by the total number of each Fund's shares outstanding at
the time of valuation. Each Fund's portfolio securities are valued
primarily based on market quotations, or, if quotations are not
available, by a method that the Board of Trustees believes accurately
reflects fair value. In accordance with guidelines approved by the
Board of Trustees, a pricing service, bank, or broker-dealer
experienced in such matters may be used to perform the above-
described valuation functions.
REDEMPTION OF SHARES
You have the right to redeem (subject to the restrictions outlined
below) all or any part of your shares in any of the Funds at a price
equal to the net asset value of such shares next computed following
receipt and acceptance of the redemption request by the Transfer
Agent for the Funds. In order to redeem shares in the Funds, you
must submit a written request in "proper form" (as explained below)
directly to the Transfer Agent, Richard Fontaine and Company,
Incorporated, 210 West Pennsylvania Avenue, Suite 240, Towson,
Maryland 21204. We cannot accept requests that specify a particular
date for redemption or that specify any other special conditions.
Through Broker-Dealers and Other Financial Institutions
You may redeem shares of each Fund through certain broker-dealers and
other financial institutions at which you maintain an account. Such
financial institutions may charge you a fee for this service. In
order for your redemption order to be effective on the day you place
your order with your broker-dealer or other financial institution,
such broker-dealer or other financial institution must (i) receive
your order before 4:00 p.m. Eastern Time and (ii) promptly transmit
the order to the Transfer Agent. See "Determination of Net Asset
Value" above. The financial institution is responsible for promptly
transmitting redemption orders to the Transfer Agent so that your
shares are redeemed at the same day's NAV.
Proper Form for All Redemption Requests
Your redemption request must be in proper form. To be in proper
form, your redemption request must include: (i) your share
certificates, if any, endorsed by all registered shareholders for the
account exactly as the shares are registered; (ii) a "letter of
instruction," which is a letter specifying the name of the Fund, the
number of shares to be sold, the name(s) in which the account is
registered, and your account number. The letter of instruction must
be signed by all registered shareholders for the account using the
exact names in which the account is registered; (iii) other
supporting legal documents, as may be necessary, for redemption
requests by corporations, estates, trusts, guardianships, cus-
todianships, partnerships, and pension and profit sharing plans; and
(iv) signature guarantees with respect to the letter of instruction
for all registered shareholder(s) of the account only where the value
of the shares being redeemed is $10,000 or greater or where the
redemption proceeds are to be sent to an address other than the
address of record or to a person other than one of the registered
shareholder(s) of the account. Signature guarantees must be obtained
from any one of the following institutions: a bank; a securities
broker or dealer, including a government or municipal securities
broker or dealer, that is a member of a clearing corporation or has
net capital of at least $100,000; a credit union having authority to
issue signature guarantees; a savings and loan association, a
building and loan association, a cooperative bank, or a federal
savings bank or association; or a national securities exchange, a
registered securities exchange, or a clearing agency. A notary
public is not an acceptable guarantor.
Your request for redemption may not be processed and may be held
until your request for redemption is in proper form, as described
above.
Receiving Your Redemption Payment
Except under certain emergency conditions, your redemption payment
will be sent to you within seven days after receipt of your written
redemption request, in proper form, by the Transfer Agent. No charge
is imposed on any redemption request. A redemption is a taxable
transaction on which gain or loss may be recognized for federal
income tax purposes.
If your redemption request is with respect to shares purchased by a
personal, corporate, or government check within ten days of the
purchase date, the redemption payment will be held until the purchase
check has cleared (which usually takes up to seven days), although
the shares redeemed will be priced for redemption upon receipt of
your redemption request. You can avoid the inconvenience of this
seven day check clearing period by purchasing shares with a
certified, treasurer's, or cashier's check, or with a federal funds
or bank wire.
SHAREHOLDER SERVICES
Shareholder Inquiries
If you have any questions relating to your investment in any of the
Funds, or to obtain each Fund's net asset value, please call the
Trust's General Information Line at 410-825-7890 (in Baltimore,
Maryland) or if outside of Maryland, please call toll free, 1-800-
247-1550. You may also write the Transfer Agent at 210 West
Pennsylvania Avenue, Suite 240, Towson, Maryland 21204.
Shareholder Statements and Reports
Each time you buy or sell shares or reinvest a dividend or
distribution in any Fund, you will receive a statement confirming
such transaction and listing your current share balance with that
Fund. In addition, the Trust will send you annual and semi-annual
reports, and year-end tax information on Form 1099 for each
account(s) in each Fund.
Exchange Privilege
The exchange privilege is a convenient way to buy shares in each
Fund in response to changes in your investment goals or in market
conditions. Shareholders in each Fund may exchange their shares for
shares in the other Funds by submitting a written request, in proper
form, to the Transfer Agent. Not all Funds are available in all
states. Please call 1-410-825-7890 or 1-800-247-1550 (toll free) for
further information. Such shares exchanged will be valued at their
respective net asset values next computed after the receipt of the
written exchange request. When making a written exchange request,
please provide your current Fund's name, your account name(s) and
number(s), the name of the Fund(s) into which you wish to exchange
your investment, and the dollar or share amount(s) you wish to
exchange. The signatures of all registered owners are required on
all exchange requests. Signature guarantees are also required if the
accounts will not be identically registered. No sales charge,
redemption fee or penalty is imposed on exchanges. In order to
prevent excessive transaction activity and to protect shareholders,
the Capital Appreciation Fund and the Global Growth Fund each may, in
its discretion, limit your exchanges to one exchange every calendar
quarter into and out of that Fund. If you exceed this limit, your
future purchases of or exchanges into the particular Fund may be
permanently refused. The minimum initial investment in each Fund,
whether by exchange or purchase, is $1,000 ($250 for spousal IRA
accounts). All subsequent amounts exchanged must be $100 or more per
Fund. Please note that, for tax purposes, an exchange may involve a
taxable transaction. The exchange privilege is available to
shareholders in all states where it is legally permitted. Currently
all states permit such exchanges.
ORGANIZATION OF THE TRUST
The Capital Appreciation Fund, the Global Growth Fund, and the
Global Income Fund are each separate investment portfolios of the
Trust. Each Fund in the Trust represents a separate series of shares
in the Trust having different objectives, programs, policies, and
restrictions. The Trust was organized under the laws of the
Commonwealth of Massachusetts as a Massachusetts business trust
pursuant to a Declaration of Trust, dated April 20, 1989. The Trust
is authorized to issue an unlimited number of full and fractional
shares of beneficial interest, having a par value of $.001 per share,
in one or more series. The Trustees of the Trust currently have
authorized the issuance of three series of shares representing
interests in each of the Funds and may, in the future, authorize the
issuance of additional series of shares of beneficial interest
representing interests in other investment portfolios of the Trust.
Each share of beneficial interest of each Fund represents an equal
proportionate interest in that Fund with each other share, and each
share is entitled to such dividends and distributions of income
belonging to that Fund as are declared by the Board of Trustees. In
the event of the liquidation of a Fund, each share of beneficial
interest of that Fund is entitled to a pro rata share of the net
assets of that Fund. Each share of beneficial interest is entitled
to one vote on all matters submitted to a vote of all shareholders of
the Trust. The Trust does not routinely hold annual meetings of
shareholders. Fractional shares, when issued, have the same rights,
proportionately, as full shares. Shares of a particular Fund will be
voted separately from shares of the other Funds on matters affecting
only that Fund, including approval of that Fund's investment advisory
agreements and changes in the fundamental objectives, policies or
restrictions of that Fund. All shares are fully paid and
nonassessable when issued and have no preemptive, conversion or
cumulative voting rights. For more details concerning the voting
rights of shareholders see the Statement of Additional Information.
Normally, there will be no meetings of shareholders for the purpose
of electing Trustees unless and until such time as less than a
majority of the Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Pursuant to
Section 16(c) of the 1940 Act, holders of record of not less than
two-thirds of the outstanding shares of the Trust may remove a
Trustee by a vote cast in person or by proxy at a meeting called for
that purpose at the request of holders of 10% or more of the
outstanding shares of the Trust. The Trust has the obligation to
assist in such shareholder communications.
Under Massachusetts law, it is possible that shareholders of a Mas-
sachusetts business trust might, under certain circumstances, be held
personally liable for acts or obligations of the Trust. The Trust's
Declaration of Trust contains an express disclaimer of shareholder
liability for acts, obligations, or affairs of the Trust. The
Declaration of Trust also provides for indemnification out of the
Trust's assets for all loss and expense of any shareholder held
personally liable by reason of being or having been a shareholder of
the Trust. Thus, the risk that a shareholder of any of the Funds
could incur financial loss on account of shareholder liability is
considered remote since it is limited to circumstances in which the
disclaimer is inoperative and the Fund itself would be unable to meet
its obligations.
As of April 1, 1996 , Richard H. Fontaine and Anne D. Fontaine owned
or had a beneficial interest in 68.4% of the shares in the Global
Income Fund. As a result of such ownership, Mr. and Mrs. Fontaine
may be deemed to be control persons of this Fund. Mr. and Mrs.
Fontaine also owned or had a beneficial interest in 44.6% of the
shares in the Global Growth Fund and may be deemed to be control
persons of this Fund.
OTHER INFORMATION
Certain Policies to Reduce Risk
As a matter of fundamental policy, no Fund will: (i) purchase the
securities of issuers conducting their principal business activity in
the same industry if, immediately after the purchase and as a result
thereof, the value of the investments of the Fund in that industry
would exceed 25% of the current value of the total assets of the
Fund; and (ii) borrow money except temporarily from banks to
facilitate redemption requests in amounts not exceeding 15% of the
Fund's total assets. No Fund will purchase securities while
borrowings exceed 5% of the Fund's total assets. Investment
restriction (i) above does not apply to securities issued by the U.
S. Government, its agencies or instrumentalities. The investment
restrictions referred to above are fundamental for each Fund and may
be changed for a Fund only when approved by a majority of the
outstanding voting securities of that Fund.
Portfolio Turnover
Although the Funds do not purchase securities with a view to rapid
turnover, there is no limitation on the length of time securities
must be held by a Fund and changes will be made whenever Fontaine
Associates believes such changes are advisable, consistent with that
Fund's investment objectives. For the year ended December 31, 1995 ,
the portfolio turnover rate for the Capital Appreciation Fund was
96%, the Global Growth Fund was 101%, and the Global Income Fund was
96%. A portfolio turnover rate of greater than 100% may result in a
Fund paying higher transaction costs, including higher brokerage
expenses. In addition, excessive short-term trading may result in
excessive "short-short income" under the Code which, in turn, would
affect such Fund's status as a RIC. See the Trust's Statement of
Additional Information for more information regarding the trading
practices of the Funds.
Each Fund's Investment Performance
Each Fund may illustrate in advertisements its average annual total
return, which is the rate of growth of a Fund that would be necessary
to achieve the ending value of an investment kept in the Fund for the
period specified and is based on the following assumptions: (i) all
dividends and distributions by the Fund are reinvested in shares of
the Fund at net asset value, and (ii) all recurring fees are included
for applicable periods.
Each Fund may also illustrate in advertisements its cumulative
total return for several time periods throughout the Fund's life
based on an assumed initial investment of $10,000. Any such
cumulative total return for a Fund will assume the reinvestment of
all income dividends and capital gains distributions for the
indicated periods and will include all recurring fees.
The Global Income Fund may also illustrate in advertisements and
sales literature its yield and effective yield. Yield for the Global
Income Fund is based on income generated by an investment in the Fund
during a 30-day (or one month) period. To calculate yield, this
income is annualized, that is, the amount of income generated during
the 30-day (or one month) period is assumed to be generated each 30-
day (or one month) period over a one year period, and expressed as an
annual percentage rate. Effective yield for the Global Income Fund
is calculated in a similar manner but, when annualized, the income
earned from an investment is assumed to be reinvested. Effective
yield for the Global Income Fund will be slightly higher than its
yield because of the compounding effect of this assumed reinvestment.
Further information about each Fund's performance is contained in
the Trust's Annual Report to Shareholders dated December 31, 1995 ,
which may be obtained without charge by writing Fontaine Associates
at the address noted on the cover.
Further Information
Each Fund's investment program is subject to further restrictions
as described in the Statement of Additional Information. The
investment objective(s) of each Fund are fundamental. Fundamental
objectives, policies and restrictions may be changed only with the
approval of a majority of the outstanding voting securities of that
Fund. Each Fund's investment program, unless otherwise specified, is
not fundamental and may be changed without shareholder approval by
the Board of Trustees.
<PAGE>
THE FONTAINE TRUST
210 West Pennsylvania Avenue
Suite 240
Towson, Maryland 21204
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Prospectus for
The Fontaine Trust, dated May 1, 1996 . This Statement of Additional
Information contains additional and more detailed information than that set
forth in the Prospectus and should be read in conjunction with the Prospectus,
additional copies of which may be obtained without charge from The Fontaine
Trust.
For more information please call: 1-410-825-7890 or 1-800-247-1550
(toll-free).
The date of this Statement of Additional Information is May 1, 1996 .
<TABLE>
TABLE OF CONTENTS
<CAPTION>
ITEM PAGE
<S> <C>
General Information and History 2
Investment Restrictions 2
Description of Certain Investments 4
Management 7
Portfolio Transactions 10
Purchase and Redemptions of Securities Being Offered 11
Determination of Net Asset Value 12
Federal Income Taxes 12
Shares of Beneficial Interest and Related Matters 14
Custodian, Transfer Agent and Dividend Disbursing Agent 14
Independent Accountants 14
Legal Matters 15
Performance Information 15
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
The Fontaine Trust (the "Trust") is a Massachusetts business trust registered
with the Securities and Exchange Commission ("SEC") under the Investment
Company Act of 1940 ("1940 Act") as a no-load, open-end management investment
company.
The Trust currently consists of three portfolios, the Fontaine Capital
Appreciation Fund ("Capital Appreciation Fund"), the Fontaine Global Growth
Fund ("Global Growth Fund"), and the Fontaine Global Income Fund ("Global
Income Fund"), each of which represents a separate series of shares of
beneficial interest in the Trust having different investment objectives,
investment programs, policies and restrictions. The Capital Appreciation
Fund, the Global Growth Fund and the Global Income Fund are sometimes referred
to individually as the "Fund" and collectively as the "Funds".
Each Fund is advised and managed by Richard Fontaine Associates, Inc.
("Fontaine Associates"), which directs the day-to-day operations of each Fund
and the investment of each Fund's assets.
INVESTMENT RESTRICTIONS
In addition to the restrictions set forth in the Prospectus, with respect to
each Fund, which are described therein as fundamental policies, investment
restrictions (1) through (9), (13) and (14) have been adopted as fundamental
policies of the Capital Appreciation Fund, and investment restrictions (1)
through (4), (13) and (14) have been adopted as fundamental policies of the
Global Growth Fund and the Global Income Fund. Such fundamental policies can
be changed only with the consent of a "majority of the outstanding voting
securities" of the particular Fund. As used in the Prospectus and in this
Statement of Additional Information, "majority of the outstanding voting
securities" means the lesser of (i) 67% of the shares of a Fund represented at
a meeting at which more than 50% of the outstanding shares of a Fund are
represented in person or by proxies or (ii) more than 50% of the outstanding
shares of a Fund.
The following investment restrictions apply to each Fund except as otherwise
indicated.
A Fund will not:
(1)Margin, Real Estate, Commodities, and Loans:
(a)purchase securities on margin, but may make margin deposits in connection
with futures contracts and related options;
(b)purchase real estate or interests therein, except that the Global Growth
Fund and the Global Income Fund each may, as appropriate and consistent with
its investment objectives, investment program, policies and other investment
restrictions, buy securities of issuers that engage in real estate operations
and securities that are secured by interests in real estate (including shares
of real estate investment trusts, mortgage pass-through securities,
mortgage-backed securities, and collateralized mortgage obligations) and may
hold and sell real estate acquired as a result of ownership of such
securities. As a matter of operating policy, no Fund will invest in real
estate limited partnerships;
(c)purchase or sell commodities or invest in commodity contracts, except stock
index futures contracts and related options and, with respect to the Global
Growth Fund and the Global Income Fund, interest rate futures contracts and
currency futures contracts and related options. As a matter of operating
policy, each Fund may enter into only those futures contracts that are listed
on a national securities or commodities exchange where, as a result thereof,
no more than 5% of the total assets of the Fund (taken at market value at the
time of entering into the futures contracts) would be committed to initial
margin deposits on such futures contracts and premiums paid for unexpired
options on such futures contracts; provided that, in the case of an option
that is "in-the-money" at the time of purchase, the "in-the-money" amount, as
defined by the Commodity Futures Trading Commission regulations, may be
excluded in computing such 5% limit; or
(d)make loans, except that each Fund may (i) make loans of portfolio
securities, and (ii) may purchase or hold short-term debt securities described
in the Prospectus under "Cash Reserves." For this purpose, repurchase
agreements are not considered loans. As a matter of operating policy, no Fund
will make loans of its portfolio securities.
(2)Underwriting: engage in the underwriting of securities of other issuers,
except to the extent that each Fund may be deemed to be an underwriter in
selling, as part of an offering registered under the Securities Act of 1933,
as amended, securities which it has acquired; or participate on a joint or
joint-and-several basis in any securities trading account. The "bunching" of
orders of a Fund with other client accounts under the management of Fontaine
Associates to save commissions or to average prices among them is not deemed
to result in a securities trading account;
(3)Short Sales and Senior Securities: effect a short sale of any security or
issue senior securities except as permitted in investment restriction (1).
For purposes of this restriction, the purchase and sale of stock index futures
contracts and related options by any Fund and the purchase of interest rate
futures contracts and currency futures contracts and related options by the
Global Growth Fund and the Global Income Fund does not constitute the issuance
of a senior security. Both the Global Growth Fund and the Global Income Fund
may make short sales against the box;
(4)Borrowing, Pledging, Mortgaging and Hypothecating: borrow money, except
that each Fund may borrow from banks as a temporary measure for emergency
purposes where such borrowings would not exceed 15% of that Fund's total
assets (including the amount borrowed) taken at market value; or pledge,
mortgage or hypothecate its assets, except to secure indebtedness permitted by
this paragraph and then only if such pledging, mortgaging or hypothecating
does not exceed 15% of the Fund's total assets taken at market value. No Fund
will purchase securities while borrowings exceed 5% of the Fund's total
assets. Such restrictions will not be considered to impede the Fund's ability
to make use of options and futures contracts subject to investment
restrictions (1) and (11) hereof;
(5)Unseasoned Issuers: purchase securities of any company with a record of
less than three years' continuous operation if such purchase would cause a
Fund's investments in all such companies, taken at cost, to exceed 25% of the
Fund's total assets, taken at market value; as a matter of operating policy,
in order to comply with the securities laws of certain states, each Fund will
invest no more than 5% of its total assets in such unseasoned issuers;
(6)Control of Portfolio Companies: invest for the purpose of exercising
control over or management of any company;
(7)Investment Companies: invest more than 5% of its total assets in the
securities of other investment companies, except that the Global Growth Fund
and the Global Income Fund may invest in other investment companies to the
extent permitted by Section 12(d)(1)(A) of the 1940 Act;
(8)Securities Not Readily Marketable and Illiquid Securities: invest in any
security, including repurchase agreements maturing in more than seven days or
other illiquid investments which are subject to legal or contractual delays on
resale or which are not readily marketable, if as a result more than 10% of
the market value of the Fund's total assets would be so invested; as a matter
of operating policy, in order to comply with the securities laws of certain
states, each Fund will invest no more than 5% of its total assets in illiquid
securities;
(9)Oil and Gas Programs: purchase interests in oil, gas, or other mineral
exploration programs; however, this policy will not prohibit the acquisition
of securities of companies engaged in the production or transmission of oil,
gas or other materials. As a matter of operating policy, no Fund will invest
in oil, gas or mineral leases.
(10)Ownership of Portfolio Securities by Officers and Trustees: purchase or
retain the securities of any issuer if, to the knowledge of the Trust, those
officers and Trustees of the Trust, or Fontaine Associates, who own
individually more than 1/2 of 1% of the securities of such issuer,
collectively own more than 5% of the securities of such issuer;
(11)Options, Straddles and Spreads: invest in puts, calls, straddles, spreads
or any combination thereof, except that each Fund may invest in and commit its
assets to writing and purchasing put and call options that are listed on a
national securities exchange and issued by the Options Clearing Corporation to
the extent permitted by the Prospectus and this Statement of Additional
Information; provided, however, that as matter of operating policy, the
Capital Appreciation Fund will not write a covered call or put option if, as a
result, the aggregate fair market value of that Fund's portfolio securities
covering call options or subject to put options would exceed 10% of the Fund's
net assets; and provided, however, that as a matter of operating policy,
neither the Global Growth Fund nor the Global Income Fund will write a covered
call or put option if, as a result, the aggregate fair market value of each
Fund's portfolio securities covering call options or subject to put options
would exceed 25% of each Fund's net assets;
(12)Warrants: invest more than 5% of its total assets, valued at the lower of
cost or market value, in warrants attached to portfolio securities and will
further limit its investment in unlisted warrants to no more than 2% of its
net assets;
(13)Diversification: in the case of the Capital Appreciation Fund and the
Global Growth Fund, with respect to 75% of the Fund's net assets (a) invest
more than 5% of the Fund's total assets in the securities of any one issuer or
(b) invest in more than 10% of the outstanding voting securities of any one
issuer and, in the case of the Global Income Fund, with respect to 50% of the
Fund's net assets, invest more than 5% of the Fund's total assets in the
securities of any one issuer. (This limitation does not apply to obligations
issued or guaranteed by the U. S. Government, its agencies, and
instrumentalities); and
(14)Concentration: purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately after the
purchase and as a result thereof, the value of the investments of a Fund in
that industry would exceed 25% of the current value of the total assets of the
Fund. (For purposes of this limitation supranational entities are considered
to be one industry.)
No investment restriction will be considered to be violated, provided that the
restriction is complied with at the time the relevant action is taken,
notwithstanding a later change in the market value of an investment, in the
net or total assets of a Fund, in the securities rating of the investment, or
any other later change.
DESCRIPTION OF CERTAIN INVESTMENTS
Certain Money Market Instruments and Fixed Income Securities
Each of the Funds may invest in the following money market instruments and
fixed income securities.
United States Government Obligations: These consist of various types of
marketable securities issued by the United States Treasury, i.e., bills,
notes, and bonds. Such securities are direct obligations of the United States
Government and differ mainly in the length of their maturity. Treasury bills,
the most frequently issued marketable government security, have a maturity of
up to one year and are issued on a discount basis.
United States Government Agency Securities: These consist of debt securities
issued by agencies and instrumentalities of the United States Government,
including the various types of instruments currently outstanding or which may
be offered in the future. Agencies include, among others, the Federal Housing
Administration, Government National Mortgage Association, Farmer's Home
Administration, Export-Import Bank of the United States, Maritime
Administration, and General Services Administration. Instrumentalities
include, for example, each of the Federal Home Loan Banks, the National Bank
for Cooperatives, the Federal Home Loan Mortgage Corporation, the Farm Credit
Banks, the Federal National Mortgage Association, and the United States Postal
Service. These securities are either; (i) backed by the full faith and credit
of the United States Government (e.g., United States Treasury Bills); (ii)
guaranteed by the United States Treasury (e.g., Government National Mortgage
Association mortgage-backed securities); (iii) supported by the issuing
agency's or instrumentality's right to borrow from the United States Treasury
(e.g., Federal National Mortgage Association Discount Notes); or (iv)
supported only by the issuing agency's or instrumentality's own credit (e.g.,
each of the Federal Home Loan Banks).
Bank and Savings and Loan Obligations: These include certificates of deposit,
bankers' acceptances, and time deposits. Certificates of deposit generally are
short-term, interest-bearing negotiable certificates issued by commercial
banks or savings and loan associations against funds deposited in the issuing
institution. Bankers' acceptances are time drafts drawn on a commercial bank
by a borrower, usually in connection with an international commercial
transaction (e.g., to finance the import, export, transfer, or storage of
goods). With a bankers' acceptance, the borrower is liable for payment as is
the bank, which unconditionally guarantees to pay the draft at its face amount
on the maturity date. Most bankers' acceptances have maturities of six months
or less and are traded in secondary markets prior to maturity. Time deposits
are generally short-term, interest-bearing negotiable obligations issued by
commercial banks against funds deposited in the issuing institutions. The
Funds will not invest in time-deposits maturing in more than seven days.
Commercial Paper and Other Short-Term Corporate Debt Instruments: These
include commercial paper (i.e., short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs). Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance
not exceeding nine months. Also included are non-convertible corporate debt
securities (e.g., bonds and debentures). Corporate debt securities with a
remaining maturity of less than 13 months are liquid (and tend to become more
liquid as their maturities lessen) and are traded as money market securities.
Repurchase Agreements: A repurchase agreement is an instrument under which
the investor (such as the Fund) acquires ownership of a security (known as the
"underlying security") and the seller (i.e., a bank or primary dealer) agrees,
at the time of the sale, to repurchase the underlying security at a mutually
agreed upon time and price, thereby determining the yield during the term of
the agreement. This results in a fixed rate of return insulated from market
fluctuations during such period, unless the seller defaults on its repurchase
obligations. The underlying securities will consist only of high grade money
market instruments (i.e., money market instruments rated within the two
highest credit categories by a nationally recognized statistical rating
organization ("NRSRO") or, if not rated, are of equivalent investment quality
in the judgment of Fontaine Associates). Repurchase agreements are, in
effect, collateralized by such underlying securities, and, during the term of
a repurchase agreement, the seller will be required to mark-to-market such
securities every business day and to provide such additional collateral as is
necessary to maintain the value of all collateral at a level at least equal to
the repurchase price. Repurchase agreements usually are for short periods,
often under one week, and will not be entered into by any Fund for a duration
of more than seven days if, as a result, more than 10% of the value of that
Fund's total assets would be invested in such agreements or other securities
which are not readily marketable.
Each Fund will seek to assure that the amount of collateral with respect to
any repurchase agreement is adequate. As with a true extension of credit,
however, there is risk of delay in recovery or the possibility of inadequacy
of the collateral should the seller of the repurchase agreement fail
financially. In addition, a Fund could incur costs in connection with
disposition of the collateral if the seller were to default. Each Fund will
enter into repurchase agreements only with sellers deemed to be creditworthy
by the Trust's Board of Trustees and only when the economic benefit to a Fund
is believed to justify the attendant risks. The Funds have adopted standards
for the sellers with whom they will enter into repurchase agreements. The
Board of Trustees believes these standards are designed to reasonably assure
that such sellers present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the repurchase agreement.
In accordance with such standards, the Board of Trustees has approved Fontaine
Associates' list of approved repurchase agreement issuers. The Funds may
enter into repurchase agreements only with member banks of the Federal Reserve
System or primary dealers in United States Government securities who are on
Fontaine Associates' approved list of repurchase agreement issuers.
When-Issued Securities
Each Fund may, from time to time, purchase securities on a "when-issued"
basis. The price of such securities, which may be expressed in yield terms,
is fixed at the time the commitment to purchase is made, but delivery and
payment for the when-issued securities take place at a later date. Normally,
the settlement date occurs within one month of the purchase, but may take up
to three months. During the period between purchase and settlement, no
payment is made by a Fund to the issuer and no interest accrues to a Fund.
While when-issued securities may be sold prior to the settlement date, each
Fund intends to purchase such securities with the purpose of actually
acquiring them, unless a sale appears to be desirable for investment reasons.
At the time a Fund makes the commitment to purchase a security on a
when-issued basis, it will record the transaction and reflect the value of the
security in determining its net asset value. Each Fund will maintain, in a
segregated account with the custodian, cash and liquid high-quality debt
securities equal in value to commitments for when-issued securities.
Warrants
Warrants are securities that give the holder the right to purchase equity
securities from the issuer at a specific price (the "strike price") for a
limited period of time. The strike price of warrants typically is higher than
the prevailing market price of the underlying security at the time the warrant
is issued, while the market value of the warrant is typically much lower than
the current market price of the underlying securities. Warrants are generally
considered to be more risky investments than the underlying securities, but
may offer greater potential for capital appreciation than the underlying
securities.
Warrants do not entitle a holder to dividends or voting rights with respect to
the underlying securities and do not represent any rights in the assets of the
issuing company. Also, the value of the warrant does not necessarily change
with the value of the underlying securities, and a warrant ceases to have
value if it is not exercised prior to the expiration date. These factors can
make warrants more speculative than other types of investments. Each Fund
will limit its investment in warrants to no more than 5% of its net assets,
valued at the lower of cost or market value, and will further limit its
investment in unlisted warrants to no more than 2% of its net assets.
U. S. Dollar-Denominated Securities of Foreign Issuers
Subject to each Fund's investment objectives, investment program, policies,
and restrictions, each Fund may invest in certain types of U. S.
dollar-denominated securities of foreign issuers. As described in the
Prospectus, with respect to equity securities, the Funds may purchase American
Depository Receipts ("ADRs"). Each Fund also may purchase U. S.
dollar-denominated money market instruments and longer-term debt securities of
foreign issuers. Such money market instruments and debt securities of foreign
issuers may be issued and traded domestically (i.e., Yankee securities), or
traded exclusively in foreign markets (e.g., Eurodollar securities).
Yankee securities include money market instruments and bonds of foreign
issuers who register customarily such with the SEC and borrow U. S. dollars by
underwritings of securities intended for delivery in the United States.
Although the principal trading market for Yankee securities is the United
States, foreign buyers can and do participate in the Yankee securities market.
Interest on such Yankee bonds is customarily paid on a semi-annual basis.
The marketability of these "foreign bonds" in the United States is in many
cases better than that for foreign bonds in foreign markets, but is, of
course, dependent upon the quality of the issuer.
Eurodollar securities include money market instruments and bonds underwritten
by an international syndicate and sold "at issue" to non-U. S. investors.
Such securities are not registered with the SEC or issued domestically and
generally may only be sold to U. S. investors after the initial offering and
cooling-off periods. The market for Eurodollar securities is dominated by
foreign-based investors and the primary trading market for these securities is
London.
Foreign Currency Transactions
Since investments in foreign issuers (other than U. S. dollar-denominated
securities of foreign issuers) and ADRS will usually involve currencies of
foreign countries, and since the Funds may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs,
the value of such assets of the Funds, as measured in U. S. dollars, may be
affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. In addition, the Funds may incur costs
in connection with conversions between currencies. Each Fund intends to
conduct its foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market at
the time of such transaction.
Depository Receipts
Each Fund may invest in ADRs and in European Depository Receipts ("EDRs").
ADRs are certificates issued by a U. S. bank or trust company and represent
the right to receive securities of a foreign issuer deposited in a domestic
bank or foreign branch of a U. S. bank and traded on a U. S. exchange or in
the over-the-counter ("OTC") securities market. EDRs are receipts issued in
Europe generally by a foreign bank or trust company that evidence ownership of
foreign or domestic securities. Generally, ADRs are in registered form and
EDRs are in bearer form. There are no fees imposed on the purchase or sale of
ADRs or EDRs during an initial public offering, although the issuing bank or
trust company may impose charges for the collection of dividends and the
conversion of ADRs or EDRs into the underlying securities. Investment in ADRs
has certain advantages over direct investment in the underlying non-U. S.
securities, since (i) ADRs are U. S. dollar-denominated investments which are
easily transferable and for which market quotations are readily available, and
(ii) issuers whose securities are represented by ADRs are subject to the same
auditing, accounting and financial reporting standards as domestic issuers.
EDRs are not necessarily denominated in the currency of the underlying
security.
Foreign Securities
Each Fund may invest in both debt and equity securities of foreign issuers in
developed nations, such as those in Western Europe and the Pacific Basin.
Because each Fund may invest in foreign securities, each Fund may be subject
to risks that are different, in some respects, from the risks associated with
an investment in a mutual fund that invests only in securities of domestic
issuers. These risks include, among others, potential adverse changes in
currency exchange rates and exchange control regulations, as well as potential
social, economic, or political instability. In addition, certain foreign
securities and stock markets outside the United States are not as liquid as
their United States counterparts. Issuers of foreign securities are also
subject to different accounting, reporting, and disclosure requirements than
those applicable to domestic issuers and less reliable public information may
be available about such foreign securities. Further, foreign brokerage
commissions and custodian fees are generally higher than in the United States.
In addition, government restrictions in certain countries and other
limitations on investment may affect the maximum percentage of equity
ownership in any one company by a Fund. Moreover, in some countries, only
special classes of securities may be purchased by external investors and the
price, liquidity, and rights with respect to such securities may differ from
those relating to shares owned by nationals. In addition, there may also be
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property.
As a result, the selection of securities of foreign issuers may be more
difficult and subject to greater risks than investment in domestic issuers.
Options and Futures Contracts
The Capital Appreciation Fund may write covered call and put options and may
purchase put and call options that are listed on a national securities
exchange and issued by the Options Clearing Corporation. The aggregate market
value of the Capital Appreciation Fund's portfolio securities covering call
options or subject to put options written by the Fund will not exceed 10% of
the Fund's net assets. The Capital Appreciation Fund will limit its purchase
of put options to 10% of its net assets. The Global Growth Fund and the Global
Income Fund each may invest in and commit its assets to writing and purchasing
only put and call options that are listed on a national securities exchange
and issued by the Options Clearing Corporation. In order to comply with the
securities laws of several states, neither the Global Growth Fund nor the
Global Income Fund (as a matter of operating policy) will write a covered call
or put option if, as a result, the aggregate market value of all portfolio
securities covering call options or subject to put options for that Fund
exceeds 25% of the market value of that Fund's net assets.
None of the Funds has any current intention, in the foreseeable future (i.e.,
the next year), of investing in options, straddles and spreads.
The Capital Appreciation Fund, in accordance with its investment objectives,
investment program, policies, and restrictions may purchase and sell futures
contracts on stock indices to protect against anticipated changes in
prevailing overall stock prices, or to efficiently and in a less costly manner
implement either increases or decreases in exposure to the equity markets.
Such futures contracts must be listed on a national securities or commodities
exchange. The Capital Appreciation Fund will not enter into any stock index
futures contract if immediately thereafter (i) the total amount of its assets
required to be on deposit as initial margin to secure its obligations under
stock index futures contracts exceeds 5% of the market value of its total
assets, and (ii) the then current aggregate futures market prices of
securities to be delivered under open futures sale contracts plus the then
current aggregate purchase prices of securities required to be purchased under
open futures purchase contracts would exceed 10% of the Capital Appreciation
Fund's total assets.
The Global Growth Fund and the Global Income Fund may each purchase and sell
stock index futures contracts, interest rate futures contracts and currency
futures contracts, and write and purchase put and call options on such
futures contracts, provide
Neither the Global Growth Fund nor the Global Income Fund will enter into
any stock index futures contract, if, as a result thereof, more than 5% of
the total assets of that Fund (taken at market value at the time of entering
into the futures contracts) would be committed to margin deposits on such
futures contracts and premiums paid for unexpired options on such futures
contracts. In the case of an option that is "in-the-money" at the time of
purchase, the "in-the-money" amount, as defined under Commodity Futures
Trading Commission regulations, may be excluded in computing such 5% limit.
None of the Funds has any current intention, in the foreseeable future
(i.e., the next year), of entering into futures contracts or options
thereon.
<PAGE>
MANAGEMENT
The principal occupations of the Trustees and executive officers of the
Trust for the past five years are described below. The address of each,
unless otherwise indicated, is 210 West Pennsylvania Avenue, Suite 240,
Towson, Maryland 21204. An asterisk indicates that a Trustee is deemed to
be an "interested person" of the Trust for purposes of the 1940 Act.
Trustees
*RICHARD H. FONTAINE, 44 Chairman, Trustee and President - President,
Director, and Chief Executive Officer of Fontaine
Associates and Richard Fontaine and Company, Inc.
DANA R. BARROWS, 44 Trustee - Director, Hampden County Estate
Northwestern Mutual Life Planning Council; Director, Special Agents, Inc.
Insurance Company of Northwestern Mutual Life Insurance Company.
1351 Main Street
Springfield, MA 01103
LESTER M. BRADSHAW, JR., 41 Trustee - Director, President, and Treasurer of
L.M. Bradshaw Contracting, L. M. Bradshaw Contracting, Inc.; Director,
Inc. National Acssociation of Utilities Contactors.
3600-B St. Johns Lane
Ellicott City, MD 21043
LUCAS L. GODINEZ, 44 Trustee - President, Cummings Engine Co., Brazil,
Cummins Engine Co. March, 1993 through present; Vice President and
P.O. Box 3005 General Manager, Fleetguard International
Columbus, IN 47202 (European Division), January, 1991 through March,
1993.
Officers
*ANNE DYER FONTAINE Vice President & Treasurer - Vice President of
Fontaine Associates. Ms. Fontaine is married
to Mr. Richard H. Fontaine.
*KIMBERLY A. MALKOWSKI Secretary - Vice President and Secretary of
Fontaine Associates.
<PAGE>
<TABLE>
The following table lists the current Trustees of the Fund who are expected to
receive compensation for each regular meeting of the Board during the fiscal
year ending December 31, 1995, and the amount of such compensation:
<CAPTION>
Pension or Esitmated Total
Retirement Annual Compensation
Aggregate Benefits Accrued Benefits From Registrant
Name, Compensation as Part of Fund Upon and Fund Complex
Position From Registrant Expenses Retirement Paid to Directors
<S> <C> <C> <C> <C>
Richard A.
Fontaine, $0.00 N/A N/A $0.00
Trustee <F1>
Dana R.
Barrows, $0.00 N/A N/A $0.00
Trustee
Lester M.
Bradshaw, $0.00 N/A N/A $0.00
Trustee
Lucas L.
Godinez, $0.00 N/A N/A $0.00
Trustee
<F1>
Mr. Fontaine is a Trustee who may be deemed to be an "interested person" of
the Fund as that term is defined in the 1940 Act.
</TABLE>
Committees Of the Board of Trustees
The Trust has an Audit Committee and a Finance Committee. The duties of
these two Committees and their present membership are as follows:
Audit Committee: The members of the Audit Committee consult with the
Trust's independent accountants, if the accountants deem it desirable,
and meet with the Trust's independent accountants at least once annually
to discuss the scope and results of the annual audit of the Trust and
such other matters as the Committee members deem appropriate or
desirable. Messrs. Dana R. Barrows and Lester M. Bradshaw, Jr. are
members of the Audit Committee.
Finance Committee: During intervals between Board Meetings, the Finance
Committee monitors all major financial obligations of the Trust and
makes recommendations for change as appropriate. Messrs. Richard H.
Fontaine, Dana R. Barrows and Lester M. Bradshaw, Jr. are members of the
Finance Committee.
Principal Holders of Shares
As of April 1, 1996 , the Trustees and officers of the Trust as a group
owned approximately 45.0% of the outstanding shares of the
Global Growth Fund, and 68.5% of the outstanding shares of the Global
Income Fund. In addition, Richard H. Fontaine and Anne D. Fontaine owned or
had a beneficial interest in 68.4% of the shares in the Global Income
Fund. As a result of such ownership, Mr. and Mrs. Fontaine may be deemed to
be control persons of this Fund. Mr. and Mrs. Fontaine also owned or had a
beneficial interest in 44.6% of the shares in the Global Growth Fund
and may be deemed to be control persons of this Fund. Such control may
dilute the effect of the votes of other shareholders in those funds.
Investment Adviser
Fontaine Associates, located at 210 West Pennsylvania Avenue, Suite 240,
Towson, Maryland 21204, serves as the investment adviser for the Capital
Appreciation Fund pursuant to a Master Advisory Contract and Advisory
Contract Supplement dated September 15, 1989, that was approved by the
shareholders of that Fund at a Special Meeting of Shareholders held on
July 18, 1990. Fontaine Associates also serves as the investment
adviser for the Global Growth Fund and the Global Income Fund pursuant
to a Master Advisory Contract, dated September 15, 1989, and Advisory
Contract Supplements, with respect to each of those Funds, dated
February 28, 1992.
The Master Advisory Contract and Advisory Contract Supplements, with
respect to each Fund ("Advisory Contract"), provides that Fontaine
Associates will manage the portfolio of each Fund and will provide each
Fund with investment guidance and policy direction in connection
therewith, including oral and written research, analysis, advice,
statistical and economic data and information and judgments, of both a
macroeconomic and microeconomic character, concerning, among other
things, interest rate trends, portfolio composition, and credit
conditions of both a general and specific nature. As manager of the
assets of each Fund, Fontaine Associates will make investments for the
account of each Fund in accordance with Fontaine Associates' best
judgment and within the investment objectives and restrictions of each
Fund set forth in the Trust's Declaration of Trust, the Trust's By-Laws,
the Prospectus and Statement of Additional Information for the Trust,
the 1940 Act and the provisions of the Internal Revenue Code of 1986, as
amended ("Code"), relating to regulated investment companies ("RICs"),
subject to policy decisions adopted by the Trust's Board of Trustees.
Fontaine Associates is authorized, in its discretion and without prior
consultation with each Fund, among other things, to buy, sell, and
otherwise trade in any stocks, bonds, options, and other securities and
investment instruments on behalf of each Fund, to purchase or sell
futures contracts on behalf of each Fund, and to execute any and all
agreements and instruments and to do any and all things incidental
thereto in connection with the management of each Fund. Should the
Trustees at any time make any specific determination as to the
investment policy of a Fund and notify Fontaine Associates thereof in
writing, Fontaine Associates will be bound by such determination for the
period, if any, specified in such notice or until similarly notified
that such determination has been revoked. Fontaine Associates will
advise the Trust's officers and Board of Trustees, at such times as the
Trust's Board of Trustees may specify, of investments made for each Fund
and will, when requested by the Trust's officers or Board of Trustees,
supply the reasons for making particular investments. Fontaine
Associates will also furnish to the Board of Trustees periodic reports
on the investment performance of each Fund and its performance under the
Advisory Contract and will supply such additional reports and
information as the Trust's officers or Board of Trustees may reasonably
request.
Fontaine Associates has also agreed in the Advisory Contract to provide
administrative assistance in connection with the operation of each Fund.
Administrative services provided by Fontaine Associates include, among
other things, (i) data processing, fund accounting, clerical and
bookkeeping services required in connection with maintaining the
financial accounts and records for each Fund, (ii) compiling statistical
and research data required for the preparation of reports and statements
which are periodically distributed to the Trust's officers and Trustees,
(iii) handling shareholder relations with investors, such as advice as
to the status of their accounts, the current yield and dividends
declared to date and assistance with other questions related to their
accounts, (iv) shareholder accounting, and (v) compiling information
required in connection with the Trust's filings with the SEC. Fontaine
Associates also provides the Trust with accounting, administrative
personnel, office space, and other facilities in connection with
operation of each Fund, as necessary or useful to the administration of
the Trust and each Fund.
The Advisory Contract will continue in effect with respect to each Fund
from year to year provided such continuance is approved annually (i) by
the holders of a majority of the outstanding voting securities of each
Fund or by the Board of Trustees of the Trust or (ii) by a majority of
the Trustees who are not parties to such Advisory Contract or
"interested persons" (as defined in the 1940 Act) of any such party.
The Advisory Contract may be terminated with respect to any Fund at any
time, without payment of any penalty, by a vote of a majority of the
outstanding voting securities of that Fund (as defined in the 1940 Act)
or by a vote of a majority of the Trustees. The Advisory Contract will
terminate automatically in the event of its assignment (as defined in
the 1940 Act).
As compensation for its services and for the expenses which it assumes,
the Trust pays Fontaine Associates, on a monthly basis, an investment
management fee based on each Fund's average daily net assets at the
following annualized rates: with respect to the Capital Appreciation
Fund, .95% of average daily net assets; with respect to the Global
Growth Fund, .85% of average daily net assets; and with respect to the
Global Income Fund, .75% of average daily net assets. As a result of
the Expense Limitation Agreements with Fontaine Associates (as described
directly below), for the fiscal year ended December 31, 1993, Fontaine
Associates received from the Trust $36,375 in management fees; for the
fiscal year ended December 31, 1994, Fontaine Associates received from
the Trust $12,247 in management fees; and for the fiscal year ended
December 31, 1995, Fontaine Associates received from the Trust $18,591
in management fees, with respect to the Capital Appreciation Fund. In
addition, as a result of the Expense Limitation Agreement with Fontaine
Associates, for the fiscal years ended December 31, 1993, and December
31, 1994, Fontaine Associates received from the Trust no management fees
with respect to the Global Growth Fund and the Global Income Fund; and
for the fiscal year ended December 31, 1995, Fontaine Associates
received from the Trust $1,004 in management fees with respect to the
Global Growth Fund, and $1,707 in management fees with respect to the
Global Income Fund.
Expense Limitations
The Trust and Fontaine Associates have entered into Expense Limitation
Agreements, with respect to each Fund ("Expense Limitation Agreements").
Each Expense Limitation Agreement provides that to the extent that the
aggregate expenses of every character incurred by a Fund in any fiscal
year, including but not limited to fees of Fontaine Associates, computed
as hereinabove set forth (but excluding independent Trustee fees and
expenses, interest, taxes, brokerage commissions, and other expenditures
which are capitalized in accordance with generally accepted accounting
principles, and other extraordinary expenses not incurred in the
ordinary course of the Fund's business) (hereinafter referred to as
"Fund Operating Expenses"), exceed the lowest applicable limit actually
enforced by any state in which a Fund's shares are qualified for sale
("State Expense Limit"), such excess amount ("Excess Amount") will be
the liability of Fontaine Associates.
To determine Fontaine Associates' liability for the Excess Amount, the
Fund Operating Expenses will be annualized monthly as of the last day of
the month. If the annualized Fund Operating Expenses for any month
exceed the State Expense Limit, Fontaine Associates will first waive or
reduce its investment advisory fee for such month, as appropriate, to
the extent necessary to pay such Excess Amount. In the event the Excess
Amount exceeds the amount of the investment advisory fee for such month,
Fontaine Associates, in addition to waiving its entire investment
advisory fee for such month, will also remit to the applicable Fund the
difference between the Excess Amount and the amount due as the
investment advisory fee; provided, however, that an adjustment will be
made on or before the last day of the first month of the next succeeding
fiscal year if the aggregate Fund Operating Expenses for that Fund for
the fiscal year do not exceed the State Expense Limit.
In addition, Fontaine Associates is also liable for any other Fund
Operating Expenses which in any year exceed: 1.50% of the Capital
Appreciation Fund's average daily net assets; 1.50% of the Global Growth
Fund's average daily net assets; and 1.25% of the Global Income Fund's
average daily net assets (each referred to as the "Operating Expense
Limit"). To determine Fontaine Associates' liability for each Fund's
expenses, the expenses of each Fund will be annualized monthly as of the
last day of the month. If the annualized expenses for any month exceed
the Operating Expense Limit, for a Fund, such excess amount ("Excess
Operating Amount") will be the liability of Fontaine Associates. To pay
such liability, Fontaine Associates will first waive or reduce its
investment advisory fee for such month, as appropriate, and, if
necessary, will also assume as its own expense and reimburse that Fund
for the difference between the Excess Operating Amount and the
investment advisory fee up to the amount of the State Expense Limit;
provided, however, that an adjustment, if necessary, will be made on or
before the last day of the first month of the next succeeding fiscal
year, if the aggregate Fund Operating Expenses for that Fund for the
fiscal year do not exceed the Operating Expense Limit. For the fiscal
years ended December 31, 1993, 1994, and 1995, Fontaine Associates
reimbursed the Trust, with respect to Fund Operating Expenses for the
Capital Appreciation Fund, the sum of $-0-, $-0-, and $-0-, respectively,
and waived $36,590, $46,521, and $32,246 in advisory fees,
respectively. For the fiscal years ended December 31, 1993, 1994, and
1995, Fontaine Associates reimbursed the Trust with respect to the Fund
Operating Expenses for the Global Growth Fund and the Global Income
Fund, $8,120, $-0-, and $-0-, and $3,719, $174, and $-0-, respectively,
and waived advisory fees of $5,691, $2,918 and $2,506, and $8,846,
$5,678 and $4,109 , respectively.
Fontaine Associates will be entitled to reimbursement from the Funds for
any amounts waived or assumed by Fontaine Associates if, in any year
during which total assets of a Fund are greater than $20,000,000 (and in
which the Advisory Contract is still in effect), the aggregate Fund
Operating Expenses for that Fund for the fiscal year are less than the
Operating Expense Limit for that Fund for that year after payment of the
Reimbursement Amount described below. The Funds will be obligated to
pay to Fontaine Associates a Reimbursement Amount, or any portion
thereof, equal to the sum of (i) all investment advisory fees previously
waived or reduced by Fontaine Associates during any preceding year and
(ii) all Excess Operating Amounts paid by Fontaine Associates
attributable to any preceding year that have been previously reflected
in a payment received by Fontaine Associates pursuant to (i) above. The
Reimbursement Amount will not, however, include any additional charges
or fees whatsoever, including, e.g., interest accruable on such
Reimbursement Amount. The period during which such Reimbursement Amount
may be paid by a Fund to Fontaine Associates will not exceed five years
from the date on which the first payment, if any, of the Reimbursement
Amount is made by that Fund.
Except for the expenses borne by Fontaine Associates, each Fund bears
all costs related to its operations. Expenses attributable to a Fund
are charged against the assets of that Fund. Fontaine Associates may
agree in advance not to impose all or a portion of its fees. Fontaine
Associates has assumed the expense of organizing the Global Growth Fund
and the Global Income Fund and the costs of registering and qualifying
their initial shares under Federal and state securities laws. These
expenses are not reimbursable by the Funds to Fontaine Associates.
PORTFOLIO TRANSACTIONS
Subject to any policy established by the Trustees, Fontaine Associates
is primarily responsible for portfolio decisions and the placing of
portfolio transactions. Purchases and sales of common stock and other
equity securities are effected on an exchange through brokers who charge
a commission. The purchase of money market instruments and other debt
securities traded in the OTC market usually will be on a principal basis
directly from issuers or dealers serving as primary market makers. The
price of such money market instruments and debt securities is usually
negotiated, on a net basis, and no brokerage commissions are paid.
Although no stated commissions are paid for securities traded in the OTC
market, transactions in such securities with dealers usually include the
dealer's "mark-up" or "mark-down." Money market instruments and other
debt securities may also be purchased in underwritten offerings, which
include a fixed amount of compensation to the underwriter, generally
referred to as the underwriting discount or concession.
In selecting brokers and dealers to execute transactions for each Fund,
Fontaine Associates' primary consideration is to seek to obtain the best
execution of the transactions, at the most favorable overall price, and
in the most effective manner possible, considering all the
circumstances. Such circumstances include: the price of the security;
the rate of the commission or broker-dealer's "spread"; the size and
difficulty of the order; the reliability, integrity, financial
condition, general execution, and operational capabilities of competing
broker-dealers; and the value of research and other services provided by
the broker-dealer. Fontaine Associates may also rank broker-dealers
based on the value of their research services and may use this ranking
as one factor in its selection of broker-dealers.
Fontaine Associates will place all orders for the purchase or sale of
portfolio securities for the account of each Fund with brokers or
dealers selected by Fontaine Associates, and to that end Fontaine
Associates is authorized as the agent of the Funds to give instructions
to the custodian as to deliveries of securities and payments of cash for
the account of each Fund. In connection with the selection of such
brokers or dealers and the placing of such orders, Fontaine Associates
will use its best efforts to seek to execute portfolio security
transactions at prices which are advantageous to each Fund and (when a
disclosed commission is being charged) at reasonably competitive
commission rates. In selecting brokers qualified to execute a
particular transaction, Fontaine Associates may select brokers who also
provide brokerage and research services and products (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) to
Fontaine Associates. Fontaine Associates is expressly authorized to
cause each Fund to pay any broker who provides such brokerage and
research services and products a commission for executing a security
transaction which is in excess of the amount of commission another
broker would have charged for effecting that transaction if Fontaine
Associates determines, in good faith, that such amount of commission is
reasonable in relation to the value of the brokerage and research
services and products provided by such broker, viewed in terms of either
that particular transaction or the overall responsibilities that
Fontaine Associates has with respect to accounts over which it exercises
investment discretion. Subject to seeking best execution of portfolio
transactions, Fontaine Associates is authorized to consider, as a factor
in the selection of any broker or dealer with whom purchase or sale
orders may be placed, the fact that such broker or dealer has sold or is
selling shares of a Fund. By allocating transactions in this manner,
Fontaine Associates is able to supplement its research and analysis with
the views and information of securities firms.
Under the 1940 Act, persons affiliated with Fontaine Associates or the
Funds are prohibited from dealing with the Funds as a principal in the
purchase and sale of securities except in accordance with regulations
adopted by the SEC.
During the fiscal years ended December 31, 1993, 1994, and 1995, total
brokerage commissions paid by the Trust amounted to $25,567, $25,567,
and $22,718 , respectively, all of which was paid to brokers that
provided research and other brokerage services.
Fontaine Associates currently provides investment advice to and
supervision and monitoring of various counsel accounts. Many of these
counsel accounts have investment objectives and programs similar to
those of the Funds. Accordingly, occasions may arise when Fontaine
Associates may engage in simultaneous purchase and sale transactions of
securities that are consistent with the investment objectives and
programs of both the Funds and counsel accounts. On those occasions
when such simultaneous investment decisions are made, Fontaine
Associates will allocate purchase and sale transactions for the Funds
and the counsel accounts in an equitable manner according to written
procedures approved by the Trust's Board of Trustees. Specifically,
such written procedures provide that, in allocating purchase and sale
transactions made on a combined basis, Fontaine Associates will seek to
achieve the same average unit price of securities for each entity and
will seek to allocate, as nearly as practicable, such transactions on a
pro-rata basis substantially in proportion to the amounts ordered to be
purchased or sold by each entity. Such procedures may, in certain
instances, be either advantageous or disadvantageous to the Funds.
PURCHASE AND REDEMPTION OF SECURITIES BEING OFFERED
The shares of each Fund are offered to the public for purchase directly
by the Trust itself.
The offering and redemption price of the shares of each Fund is based
upon that Fund's net asset value per share next determined after a
purchase order or redemption request has been received in good order by
the transfer agent for the Trust. See "Determination of Net Asset Value"
below. Each Fund intends to pay all redemptions of its shares in cash.
However, each Fund may make full or partial payment of any redemption
request by the payment to shareholders of portfolio securities of the
applicable Fund (i.e., by redemption-in-kind), at the value of such
securities used in determining the redemption price. The Trust,
nevertheless, pursuant to Rule 18f-1 under the 1940 Act, has filed a
notification of election under which each Fund is committed to pay in
cash to any shareholder of record, all requests for redemption made by
such shareholder during any 90-day period, up to the lesser of $250,000
or 1% of the applicable Fund's net asset value at the beginning of such
period. The securities to be paid in-kind to any shareholders will be
readily marketable securities selected in such manner as the Board of
Trustees of the Trust deems fair and equitable. If shareholders were to
receive redemptions-in-kind, they would incur brokerage costs should
they wish to liquidate the portfolio securities received in such payment
of their redemption request. The Trust does not anticipate making
redemptions-in-kind.
The right to redeem shares or to receive payment with respect to any
redemption of shares of the Funds may only be suspended (i) for any
period during which trading on the New York Stock Exchange ("NYSE") is
restricted or the NYSE is closed, other than customary weekend and
holiday closings, (ii) for any period during which an emergency exists
as a result of which disposal of securities or determination of the net
asset value of the Funds is not reasonably practicable, or (iii) for
such other periods as the SEC may by order permit for protection of
shareholders of the Funds.
Shareholders should be aware that the proceeds of a redemption may be
more or less than the amount invested by them and, therefore, a
redemption may result in a gain or loss for Federal income tax purposes.
For your convenience, your account with each Fund will remain open for
at least one year following a complete redemption and all costs during
such maintenance period will be borne by that Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value of shares of each Fund is normally calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m. Eastern
Time, on every day the NYSE is open for trading, except on days where
both (i) the degree of trading in a Fund's portfolio securities would
not materially affect the net asset value of that Fund's shares and (ii)
no shares of a Fund were tendered for redemption or no purchase order
was received. The NYSE is open Monday through Friday except on the
following national holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The assets of the Funds are valued as follows:
Common Stocks, preferred stocks, and convertible preferred stocks of
domestic issuers listed on national securities exchanges and certain OTC
issues traded on the NASDAQ national market system are valued at the
last quoted sale price at the close of the NYSE. OTC issues not quoted
on the NASDAQ system and other equity securities for which no sale price
is available, are valued at the last bid price as obtained from
published sources (including Quotron), where available, and otherwise
from brokers who are market makers for such securities.
Short-term debt instruments with a remaining maturity of 60 days or less
are valued on an amortized cost basis.
Bonds, convertible bonds, and other debt securities are generally valued
at prices obtained from a bond pricing service. Where such prices are
not available, valuations will be obtained from brokers who are market
makers for such securities. However, in circumstances where Fontaine
Associates deems it appropriate to do so, the mean of the bid and ask
prices for OTC securities or the last available sale price for exchange
traded debt securities may be used. Where no last sale price for
exchange traded debt securities is available, the mean of the bid and
ask prices may be used.
Foreign securities primarily traded on foreign securities exchanges are
generally valued at the preceding closing value of such security on the
exchange where they are primarily traded. A foreign security that is
listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security by
the Board of Trustees or its delegates. If no closing price is
available, then such security is valued first by using the mean between
the last current bid and asked prices or, second, by using the last
available closing price.
All foreign securities traded in the OTC securities market are valued at
the last sale quote, if market quotations are available, or the last
closing bid price, if there is no active trading in a particular
security for a given day. Where market quotations are not readily
available for such foreign OTC securities, then such securities will be
valued in good faith by a method that the Board of Trustees, or its
delegates, believes accurately reflects fair value.
Because of the need to obtain prices as of the close of trading on
various exchanges throughout the world, the calculation of net asset
value does not take place contemporaneously with the determination of
the prices of the foreign portfolio securities of the Capital
Appreciation Fund and the majority of the portfolio securities of the
Global Growth Fund and the Global Income Fund. If an event were to
occur after the value of an instrument was established, but before the
net asset value per share was determined, which was likely to materially
change the net asset value of a particular Fund, then that instrument
would be valued using fair value considerations by the Board of Trustees
or its delegates. For purposes of determining each Fund's net asset
value, all assets and liabilities initially expressed in foreign
currency values will be converted into U. S. dollar values at the spot
price of such currencies against U. S. dollars as last quoted by any
recognized broker-dealer.
Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided, as described above,
are valued in good faith by the Trust's Board of Trustees using its best
judgment.
FEDERAL INCOME TAXES
Each Fund intends to qualify as a RIC under Subchapter M of the Code.
As such, each Fund must meet the requirements of Subchapter M,
including the requirements involving character and source of income,
investments in each Fund, investment diversification, and distribution.
In general, to qualify as a RIC, at least 90% of the gross income of a
Fund for the taxable year must be derived from dividends, interest, and
gains from the sale or other disposition of securities, and less than
30% of the gross income for the taxable year can be attributable to
gains (without deductions for losses) from the sale or other disposition
of securities held for less than three months. Each Fund must also
distribute to its shareholders 90% of its ordinary income and net
short-term capital gains. Moreover, undistributed net income may be
subject to tax at the RIC level. Dividends attributable to a Fund's
ordinary income are taxable as such to shareholders in the year in which
they are received.
In addition, each Fund must declare and distribute dividends equal to at
least 98% of its ordinary income (as of the twelve months ended December
31) and distributions of at least 98% of its capital gains net income
(as of the twelve months ended October 31), in order to avoid a federal
excise tax. Each Fund intends to make the required distributions, but
they cannot guarantee that they will do so.
A corporate shareholder may be entitled to take a deduction for income
dividends received by them that are attributable to dividends received
from a domestic corporation, provided that both the corporate
shareholder retains its shares in the applicable Fund for more than 45
days and the Fund retains its shares in the issuer from whom it received
the income dividends for more than 45 days. A dividend of capital gains
net income reflects the Fund's excess of net long-term gains over its
net short-term losses. Each Fund must designate which dividends are
dividends of capital gains net income and must notify shareholders of
this designation within sixty days after the close of the Fund's taxable
year. A corporate shareholder of a Fund cannot use a dividends received
deduction for these dividends.
If, in any taxable year, a Fund should not qualify as a RIC under the
Code: (i) that Fund would be taxed at normal corporate rates on the
entire amount of its taxable income without deduction for dividends or
other distributions to its shareholders; (ii) that Fund's distributions
to the extent made out of the Fund's current or accumulated earnings and
profits would be taxable to its shareholders (other than shareholders in
tax deferred accounts) as ordinary dividends (regardless of whether they
would otherwise have been considered capital gains dividends), and may
qualify for the partial deduction for dividends received by
corporations; and (iii) foreign tax credits, if applicable, would not
"pass through" to its shareholders.
Certain foreign currency gains or losses realized on disposition of
foreign currencies and debt securities by the Funds, called "Section 988
Transactions," must be calculated separately. Such gains or losses are
generally treated as ordinary income unless certain elections are made
by a Fund. Such gains or losses will be included in each Fund's annual
income dividend, as appropriate.
Income received by the Funds from sources within various foreign
countries will be subject to foreign income taxes withheld at the
source. Under the Code, if more than 50% of the value of a Fund's total
assets at the close of its taxable year comprise securities issued by
foreign corporations, that Fund may file an election with the Internal
Revenue Service to "pass through" to the Fund's shareholders the amount
of foreign income taxes paid by that Fund. Pursuant to this election,
shareholders will be required to: (i) include in gross income, even
though not actually received, their respective pro-rata share of foreign
taxes paid by the Fund; (ii) treat as gross income from foreign sources
their pro-rata share of foreign taxes as paid by them and the portion of
any dividends paid by the Fund attributable to foreign sources; and
(iii) either deduct their pro-rata share of foreign taxes in computing
their taxable income, or use it as a foreign tax credit against U. S.
income taxes (but not both). No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions.
The Global Growth Fund and the Global Income Growth Fund intend to meet
the requirements of the Code to "pass through" to their shareholders
foreign income taxes paid, but there can be no assurance that either
Fund will be able to do so. Each shareholder of the Funds will be
notified, within 60 days after the close of each taxable year of the
Funds, whether the foreign taxes paid by the Funds will "pass through"
for that year, and, if so, the amount of each shareholder's pro-rata
share (by country) of (i) the foreign taxes paid, and (ii) each Fund's
gross income from foreign sources. Of course, shareholders who are not
liable for federal income taxes, such as retirement plans qualified
under the Code, will not be affected by any such "pass through" of
foreign tax credits.
Taxation of Foreign Shareholders
The Code generally provides that distributions of ordinary income (which
are deemed to include for this purpose each shareholder's pro-rata share
of foreign taxes paid by a Fund - see discussion of "pass through" of
the foreign tax credit to U. S. shareholders above) to foreign
shareholders will be subject to U. S. taxes. Foreign persons who are
engaged in a business in the U. S. and resident aliens are generally
taxed like U. S. citizens. For other foreign shareholders, a tax would
be imposed at the rate of 30% upon the gross amount of the distribution,
in the absence of a Tax Treaty or an exemption providing for a reduced
rate of taxation. Also, for those foreign shareholders, distributions
of net long-term capital gains realized by a Fund are generally not
subject to tax unless the foreign shareholder is a nonresident alien
individual who was physically present in the U. S. during the tax year
for more than 182 days. The determination of whether a corporation or
individual qualifies as a foreign shareholder is a complex one that must
be reviewed on an individual basis.
The preceding is a brief summary of the relevant tax considerations. It
is not intended as a complete explanation or a substitute for careful
tax planning and consultation with individual tax advisers.
SHARES OF BENEFICIAL INTEREST AND RELATED MATTERS
As a Massachusetts business trust, the Trust need not hold regular
annual shareholder meetings and, in the normal course, does not expect
to hold such meetings. The Trust, however, must hold shareholder
meetings for such purposes as, for example: (i) electing the initial
Board of Trustees; (ii) approving certain agreements as required by the
1940 Act; (iii) changing fundamental investment objectives, policies,
and restrictions of the Funds; and (iv) filling vacancies on the Board
of Trustees in the event that less than a majority of the Trustees were
elected by shareholders. The Trust expects that there will be no
meetings of shareholders for the purpose of electing Trustees unless and
until such time as less than a majority of the Trustees holding office
have been elected by shareholders. At such time, the Trustees then in
office will call a shareholders meeting for the election of Trustees.
In addition, holders of record of not less than two thirds of the
outstanding shares of the Trust may remove a Trustee from office by a
vote cast in person or by proxy at a shareholder meeting called for that
purpose at the request of holders of 10% or more of the outstanding
shares of the Trust. The Trust has the obligation to assist in such
shareholder communications. Except as set forth above, Trustees will
continue in office and may appoint successor Trustees.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chemical Bank, 270 Park Avenue, New York, NY 10017, has been retained
to act as custodian for the Trust pursuant to a Custodian Contract.
Under the Custodian Contract, Chemical Bank maintains a custody account
or accounts in the name of each Fund; receives and delivers all assets
for each Fund upon purchase and upon sale or maturity; collects and
receives all income and other payments and distributions on account of
the assets of each Fund; pays all expenses of each Fund as directed by
Fontaine Associates; receives and pays out cash for purchases and
redemptions of shares of each Fund and pays out cash if requested for
dividends on shares of each Fund; and maintains records for the
foregoing services. Under the Custodian Contract, the Trust, on behalf
of each Fund, has agreed to pay Chemical Bank transaction-based fees for
furnishing custodian services.
Richard Fontaine and Company, Incorporated ("Fontaine and Company") has
been retained to act as transfer agent and dividend disbursing agent for
the Trust. Under the Master Agency Agreement and Agency Agreement
Supplements, with respect to each Fund, Fontaine and Company performs
general transfer agency and dividend disbursing services. It maintains
an account in the name of each shareholder of record in each Fund
reflecting purchases, redemptions, daily dividend accruals, and monthly
dividend disbursements. In addition, Fontaine and Company processes
purchase and redemption requests, issues and redeems shares of the
Funds, addresses and mails all communications by each Fund to its
shareholders, including financial reports, other reports to
shareholders, dividend and distribution notices, tax notices and proxy
material for its shareholder meetings, and maintains records for the
foregoing services. For the year ended December 31, 1995, Fontaine and
Company received $9,268 in transfer agency fees from the Trust for its
services.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P., located at 217 East Redwood Street,
Baltimore, Maryland 21202, serves as the independent accountants for
the Trust. Coopers & Lybrand, L.L.P. provides audit services, tax
return preparation and assistance and consultation in connection with
review of SEC filings.
The financial statements for the year ended December 31, 1995 , and the
report of the independent accountants for the year, are included in the
Trust's Annual Report to Shareholders dated December 31, 1995 . The
Annual Report, except for pages one through five thereof, is incorporated
herein by reference and accompanies this Statement of Additional Information.
These financial statements have been audited by Coopers & Lybrand, L.L.P. and
have been included in the Prospectus or incorporated by reference into the
Statement of Additional Information in reliance on the report of Coopers &
Lybrand, L.L.P., independent accountants, given on the authority of that firm
as experts in auditing and accounting.
LEGAL MATTERS
The legal validity of the shares described in the Prospectus and this
Statement of Additional Information have been passed upon by Katten
Muchin & Zavis, 1025 Thomas Jefferson Street, N.W., Washington, D.C.
20007, which serves as Special Counsel to the Trust.
PERFORMANCE INFORMATION
From time to time each Fund may advertise total return figures
calculated according to a formula prescribed by the SEC. According to
that formula, average annual total return figures represent the average
annual compounded rate of return for the stated period. Average annual
total return quotations reflect the percentage change between the
beginning value of a static account in a Fund and the ending value of
that account measured by the then current net asset value of that Fund,
assuming that all dividends and capital gains distributions during the
stated period were reinvested in shares of the Fund when paid and all
recurring fees are included for the applicable period. Total return is
calculated by finding the average annual compounded rates of return of a
hypothetical investment that would equate the initial amount invested to
the ending redeemable value of such investment, according to the
following formula:
T = [(ERV/P)1/n] - 1
where
T = average annual total return
ERV = the ending redeemable value: the value at the end of the
applicable period of a hypothetical $1,000 payment made at the beginning
of the applicable period
P = a hypothetical initial payment of $1,000
n = the number of years.
The average annual total returns for the year ended December 31, 1995
for the Capital Appreciation Fund, the Global Growth Fund, and the
Global Income Fund were 15.5%, 14.0% and 12.6% , respectively.
<TABLE>
Average Annual Total Return of a Hypothetical $1,000 Investment
<CAPTION>
12 Months Five Years
Ended Ended Since
12/31/95 12/31/95 Inception
--------- ---------- ---------
<S> <C> <C> <C>
Fontaine Capital
Appreciation Fund +15.5% + 7.7% + 7.8%
(Inception on 9/28/89)
S&P "500" Index <F1> +37.4% +16.5% +12.8%
Fontaine Global
Growth Fund +14.0% N/A + 6.1%
(Inception on 5/1/92)
Lipper Global
Fund Index <F1> +14.0% N/A +11.5%
Fontaine Global
Income Fund +12.6% N/A + 8.1%
(Inception on 5/1/92)
Merrill Lynch Global
Bond Index <F1> +18.5% N/A +11.1%
<F1>
The S&P "500" Index is an unmanaged index of 500 industrial,
transportation, utility and financial companies, generally regarded as
representative of the U. S. equity market. The Lipper Global Fund Index
is an unmanaged index of the 30 largest funds in Lipper Analytical
Services' Global Funds objective. The Merrill Lynch Global Bond Index
is an unmanaged index of over 8400 medium to long term global bonds
generally regarded as representative of the global bond market.
</TABLE>
Each Fund, from time to time, also may advertise its cumulative total
return figures. Cumulative total return is the compound rate of return
on a hypothetical initial investment of $1,000 for a specified period.
Cumulative total return quotations reflect the change in the price of a
Fund's shares and assume that all dividends and capital gains
distributions during the period were reinvested in shares of that Fund.
Cumulative total return is calculated by finding the compound rates of
return of a hypothetical investment over such period, according to the
following formula (cumulative total return is then expressed as a
percentage):
C = (ERV/P) - 1
where
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = Ending Redeemable Value: ERV is the value, at the end of
the applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
The cumulative total returns since inception for the period ended December 31,
1995 for the Capital Appreciation Fund, the Global Growth Fund, and
the Global Income Fund were 60.0%, 24.4% and 33.0% , respectively.
The table below illustrates the method of calculating cumulative total
return.
<TABLE>
Cumulative Total Return of a Hypothetical $1,000 Investment
<CAPTION>
Since
Inception
---------
<S> <C>
Fontaine Capital
Appreciation Fund + 60.0%
(Inception on 9/28/89)
S&P "500" Index <F1> +112.1%
Fontaine Global
Growth Fund + 24.4%
(Inception on 5/1/92)
Lipper Global
Fund Index <F1> + 48.9%
Fontaine Global
Income Fund + 33.0%
(Inception on 5/1/92)
Merrill Lynch Global
Bond Index <F1> + 47.1%
<F1>
The S&P "500" Index is an unmanaged index of 500 industrial,
transportation, utility and financial companies, generally regarded as
representative of the U. S. equity market. The Lipper Global Fund Index
is an unmanaged index of the 30 largest funds in Lipper Analytical
Services' Global Funds objective. The Merrill Lynch Global Bond Index
is an unmanaged index of over 8400 medium to long term global bonds
generally regarded as representative of the global bond market.
</TABLE>
In addition to providing average annual total return information, the
Global Income Fund may also advertise its performance by providing
information concerning its yield. The Global Income Fund's yield is
based on a specified 30-day (or one month) period and is computed by
dividing the net investment income per share earned during the specified
period by the maximum offering price (i.e., net asset value) per share
on the last day of the specified period, and annualizing the net results
according to the following formula:
YIELD =2[((a-b)/cd + 1)6-1]
where
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period.
Yield fluctuations may reflect changes in the Global Income Fund's net
income, and portfolio changes resulting from net purchases or net
redemptions of the Fund's shares may affect its yield. Accordingly, the
Global Income Fund's yield may vary from day to day, and the yield
stated for a particular past period is not necessarily representative of
the Global Income Fund's future yield. For the 30 days ended December
31, 1995 the Global Income Fund's yield was 4.12%.
From time to time, in marketing pieces and other literature, each
Fund's performance may be compared to the performance of broad groups of
comparable funds or unmanaged indices of comparable securities.
Evaluations of each Fund's performance made by independent sources may
also be used in advertisements concerning the Funds. Sources for
performance information may include, but are not limited to, the
following:
Barron's, a Dow Jones and Company, Inc. business and financial weekly
that periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds
investing abroad.
Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
CDA/Wiesenberger's Mutual Fund Update, a monthly publication including
articles on investment trends and updates performance, risks and
ratings on mutual, money-market, and closed-end funds.
CDA/Wiesenberger's Investment Companies, an annual hardbound volume
providing a textbook on the fund industry and investing, tables and
charts on current and historical performance, and profiles of over
4,500 investment companies.
CDA/Wiesenberger's Mutual Fund Report, a monthly publication detailing
the performance, risk posture, pricing and distribution profile of
2,000 mutual funds, with rates of return calculated for 22 time
periods, including bull and bear markets.
Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money
market fund activity, and including certain averages as performance
benchmarks, specifically "Donoghue's Money Fund Average," and
"Donoghue's Government Money Fund Average."
Financial Times, Europe's business newspaper, which features from time
to time articles on international or country-specific funds.
Forbes, a national business publication that from time to time reports
the performance of specific investment companies in the mutual fund
industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.
Global Investor, a European publication that periodically reviews the
performance of U. S. mutual funds investing internationally.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of
fund.
Money, a monthly magazine that from time to time features both specific
funds and the mutual fund industry as a whole.
Morningstar Mutual Funds, a bi-weekly mutual fund analysis update
summarizing the performance of 6,200 funds and providing updated,
single-page reports on approximately 120 (each update) which include
information on the fund's investment philosophy and management style
and comparative information on the fund's performance and risk.
New York Times, a nationally distributed newspaper which regularly
covers financial news.
Personal Investor, a monthly investment advisory publication that
includes a "Mutual Funds Outlook" section reporting on mutual fund
performance measures, yields, indices and portfolio holdings.
Sylvia Porter's Personal Finance, a monthly magazine focusing on
personal money management that periodically rates and ranks mutual
funds by performance.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
Description of Moody's Investors Service, Inc.'s corporate bond ratings:
Aaa--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa--Bonds which are rated Aa are judged to be a high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa--Bonds rated Baa are considered medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative
characteristics as well.
Description of Standard & Poor's Corporation's corporate bond ratings:
AAA--Highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from AAA issues only in small degree.
A--Bonds rated A have strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in the
A Category.
Description of Fitch Investor's Service, Inc.'s corporate bond ratings:
AAA--Bonds of this rating are regarded as strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary
institutions, and liable to but slight market fluctuation other than
through changes in the money rate. The factor last named is of
importance, varying with the length of maturity. Such bonds are mainly
senior issues of strong companies, and are most numerous in the railway
and public utility fields, though some industrial obligations have this
rating. The prime feature of an AAA bond is a showing of earnings
several times or many times interest requirements with such stability of
applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Other features may enter, such as a wide
margin of protection through collateral security or direct lien on
specific property as in the case of high-class equipment certificates or
bonds that are first mortgages on valuable real estate. Sinking funds
or voluntary reduction of the debt, by call or purchase are often
factors, while guarantee or assumption by parties other than the
original debtor may influence the rating.
AA--Bonds in this group are of safety virtually beyond question, and as
a class are readily salable while many are highly active. Their merits
are not greatly unlike those of the "AAA" class, but a bond so rated may
be of junior though strong lien--in many cases directly following an AAA
bond--or the margin of safety is strikingly broad. The issue may be the
obligation of a small company, strongly secured but influenced as to
rating by the lesser financial power of the enterprise and more local
type of market.
Description of Duff & Phelps Inc.'s corporate bond ratings:
Duff 1--Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U. S. Treasury debt.
Duff 2,3,4--High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
<PAGE>
ANNUAL REPORT
THE FONTAINE TRUST
FONTAINE CAPITAL APPRECIATION FUND
FONTAINE GLOBAL GROWTH FUND
FONTAINE GLOBAL INCOME FUND
DECEMBER 31, 1996
<PAGE>
FELLOW SHAREHOLDERS OF
THE FONTAINE TRUST
FONTAINE CAPITAL APPRECIATION FUND
PORTFOLIO REVIEW
For the twelve months ended December 31, 1995, the Fontaine Capital
Appreciation Fund posted a positive total return of 15.5%. This satisfied our
expectations for our long term objectives, and with the fund's equity
investments averaging only 45% of assets, this return was achieved with an
overall lower level of risk than the market as a whole.
Over the last six years we have pursued a cautious path while the stock market
has moved higher and higher. Last year we adopted a tactical approach to
investing that allowed us to maintain our defensive posture and still achieve
double digit returns. Early in the year, we were heavily invested in
undervalued technology stocks such as IBM and Digital Equipment, both of which
almost doubled in value over the course of 1995. In the summer and fall we
reduced and then eventually eliminated these holdings, repositioning ourselves
in mineral and mining companies such as Echo Bay Mines, Newmont Mining and
Barrick Gold. We believe that the strong demand for gold in the emerging
economies of Asia and the Far East will push gold prices higher, significantly
increasing the value of our gold investments. This started to occur in the
first quarter of 1996, with the price of gold rising through $400 per ounce,
and the Capital Appreciation Fund has appreciated over 10% as of the date of
this letter.
With the Dow Jones Industrial Average well over 5600, gold and commodity
prices rising, and interest rates rising off of their low levels of just a
month ago, many long term danger signals are flashing. We believe that this
market has been overvalued for several years. In this light, we have
continued to invest in our shareholder's best interests as described above,
trying to provide acceptable returns while investing in a risky market. As
1996 progresses, this is becoming increasingly difficult as each day seems to
bring a new record and with it, more and more speculation.
Buy low and sell high is the most basic of investment rules. Because so many
new investors have been attracted into mutual funds in the past few years,
many have had no experience with prolonged down markets. It is difficult to
predict whether they will stay the course of a downturn or attempt to get out
on the way down. If these investors, who have added hundreds of billions of
dollars to the market, try to protect their capital by selling into a decline
and inadvertently add to it, the risks to all investors will be greatly
increased. Now may be a good time to reevaluate your investment strategy and
position yourselves accordingly.
Your loyalty is greatly appreciated, and we will do everything to both enhance
our long term returns and grow our capital over time.
Sincerely,
/s/
Richard H. Fontaine
President and Chairman of the
Investment Advisory Committee
February 22, 1996
<PAGE>
FONTAINE CAPITAL APPRECIATION FUND
PORTFOLIO REVIEW (Cont'd)
FONTAINE CAPITAL APPRECIATION FUND
CUMULATIVE PERFORMANCE COMPARISON*
$10,000 INVESTMENT SINCE INCEPTION
[Graph illustrates cumulative performance comparison of $10,000 invested in
Capital Appreciation Fund and S&P 500 Index since Fund Inception on September
28, 1989.]
<TABLE>
Average Annual Total Return Perfromance
<CAPTION>
Periods Ended 12/31/95
One Year Three Year Five Year Since Inception on
One Year (Annualized) (Annualized) 9/28/89 (Annualized)
<S> <C> <C> <C> <C>
Fontaine Capital
Appreciation Fund +15.5% +10.5% +7.7% +7.8%
S&P 500 Index +37.4% +15.3% +16.5% +12.8%
<FN>
Please refer to the footnote to Portfolio Review (Page 5) for explanation of index
information.
</TABLE>
<PAGE>
FONTAINE GLOBAL GROWTH FUND
PORTFOLIO REVIEW
The Fontaine Global Growth Fund appreciated 14.0% in 1995. The Fund's
performance was attributable largely to significant appreciation in our
technology holdings and the successful merger of Upjohn Pharmaceuticals and
Swedish drug maker Pharmacia. In addition, we also benefited from a rise in
paper stocks and international oils.
Our gold mining and mineral exploration holdings have been considerably
increased over the past six months. We have added positions in such companies
as Dayton Mining, Echo Bay Mines, Freeport McMoran, FMC Gold and Golden Star
Resources. We believe that these issues, as well as additional positions
added in early 1996, offer significant appreciation potential through
exploration opportunities throughout the world. These include sites in
Indonesia, Africa, Canada and Latin America. By investing in these holdings,
we are building a portfolio of junior mining and exploration companies that we
feel will increase in value by locating additional reserves and benefit from
rising commodity prices.
The risks in the global markets are significant in both emerging and mature
economies. Market valuations vary from country to country, and our strategy
is to try to find compelling values that deliver positive investment returns
over the long term. Currently, we feel that the best values lie in those
companies that stand to benefit from the improving fundamentals in the
commodity markets as described above.
With the price of gold rising in early 1996, the Global Growth Fund has
appreciated an additional 15% year to date as of the writing of this letter,
and assets under management have doubled in the last twelve months.
FONTAINE GLOBAL GROWTH FUND
CUMULATIVE PERFORMANCE COMPARISON*
$10,000 INVESTMENT SINCE INCEPTION
[Graph illustrates cumulative performance comparison of $10,000 invested in
Global Growth Fund, S&P 500 Index and Lipper Global Fund Index since Fund
Inception on May 1, 1992.]
<TABLE>
Average Annual Total Return Performance
<CAPTION>
Periods Ended 12/31/95
Three Year Since Inception
One Year (Annualized) on 5/01/92 (Annualized)
<S> <C> <C> <C>
Fontaine Global Growth Fund +14.0% +8.8% +6.1%
Lipper Global Fund Index +14.0% +14.2% +11.5%
S&P 500 Index +37.4% +15.3% +14.4%
</TABLE>
[FN]
Please refer to the footnote to Portfolio Review (Page 5) for explanation of
index information.
<PAGE>
FONTAINE GLOBAL INCOME FUND
PORTFOLIO REVIEW
The Fontaine Global Income Fund achieved a total return of 12.6% during 1995,
having paid $0.35 in interest and dividend income and $0.62 in realized
capital gains. The primary contributors to our capital gains were our
technology holdings that were sold for significant profits. International oil
and paper companies also added to our realized gains.
The largest holdings of the Fund coming into 1996 are our investments in
international exploration companies and commodity producers such as Golden
Star Resources, Battle Mountain Gold, Echo Bay Mines and Newmont Gold. We feel
that these issues will benefit from improving world wide demand and higher
prices for commodities during the next several years. During the fourth
quarter of 1995, we purchased for the Fund German deutsche mark denominated
bonds which we hope will provide a high current rate of return and the
potential for appreciation over the next several years.
The global bond and equity markets are currently quite attractive to United
States investors. The recent strength of the U. S. dollar against other major
currencies makes the purchase of foreign denominated investments less
expensive than they were a year ago. We do feel, however, that over the next
several quarters interest rates will rise world wide. As a result, our
strategy is to keep our fixed income investments at relatively short
maturities.
The Global Income Fund has benefited considerably from our equity holdings
during the first two months of 1996, and as of the date of this letter, the
Fund has appreciated over 9% year to date.
FONTAINE GLOBAL INCOME FUND
CUMULATIVE PERFORMANCE COMPARISON*
$10,000 INVESTMENT SINCE INCEPTION
[Graph illustrates cumulative performance comparison of $10,000 invested in
Global Income Fund and Merrill Lynch Global Bond Index since Fund Inception on
May 1, 1992.]
<TABLE>
Average Annual Total Return Performance
<CAPTION>
Periods Ended 12/31/95
Three Year Since Inception
One Year (Annualized) on 5/01/92 (Annualized)
<S> <C> <C> <C>
Fontaine Global Income Fund +12.6% +11.3% +8.1%
Merrill Lynch Global Bond Index +18.5% +10.4% +11.1%
Lipper World Income Fund Universe +15.7% +7.1% +6.5%
</TABLE>
[FN]
Please refer to the footnote to Portfolio Review (Page 5) for explanation of
index information.
<PAGE>
DIVIDEND AND CAPITAL GAINS DISTRIBUTION INFORMATION
Fontaine Capital Appreciation Fund went ex-dividend on December 22, 1995 for
holders of record on December 21, 1995. Capital Appreciation declared an
income dividend of $0.26 per share, a short-term capital gains distribution of
$0.51 per share, and a long-term capital gains distribution of $0.99 per
share. The reinvestment price on December 22, 1995 was $10.76.
Fontaine Global Growth Fund went ex-dividend on December 22, 1995 for holders
of record on December 21, 1995. Global Growth declared an income dividend of
$0.22 per share, a short-term capital gains distribution of $0.45 per share,
and a long-term capital gains distribution of $0.26 per share. The
reinvestment price on December 22, 1995 was $10.11.
Fontaine Global Income Fund went ex-dividend on September 28, 1995 for holders
of record on September 27, 1995. Global Income declared an income dividend of
$0.09 per share. The reinvestment price on September 28, 1995 was $10.95.
Fontaine Global Income Fund also went ex-dividend on December 22, 1995 for
holders of record on December 21, 1995. Global Income declared an income
dividend of $0.10 per share, a short-term capital gains distribution of $0.46
per share, and a long-term capital gains distribution of $0.16 per share. The
reinvestment price on December 22, 1995 was $10.46.
______________________________________________________________________________
All performance is historical. The returns for each Fund and those for the
funds included in each Lipper category include changes in share price and
reinvestment of all dividends and capital gains distributions. Calculations
of return by Lipper Analytical Services, Inc. do not reflect the effect of
sales loads charged by other mutual funds in each Lipper category. Each
Fund's returns and principal will vary, and you may have a gain or loss when
you sell Fund shares. Fontaine Associates is currently absorbing certain
expenses of each Fund, which has increased each Fund's returns for the periods
noted. The S&P 500 Index is an unmanaged index of 500 companies generally
regarded as representative of the U. S. stock market. The Lipper Global Fund
Index is an unmanaged index of the 30 largest funds in Lipper Analytical
Services' Global Funds objective. The Merrill Lynch Global Bond Index is an
unmanaged index of over 8400 medium to long term global bonds generally
regarded as representative of the global bond market. There were 215 funds in
the Lipper Universe of World Income Funds for the period ended 12/31/95.
Please read the Prospectus, which has preceded or accompanies this Report,
before you invest or send money. Past performance is not indicative of future
results.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
December 31, 1995
Fontaine Capital Appreciation Fund
<CAPTION>
Shares/ Value
Par (000) (000)
<S> <C> <C>
COMMON STOCKS -- 45.2%
Apparel and Shoes -- 2.5%
Stride Rite Corporation 17,300 $ 130
Food Processing -- 3.6%
McCormick & Company, Inc. 8,000 193
Gold Mining -- 14.8%
Battle Mountain Gold Company 10,000 84
Dayton Mining Corporation<F1> 13,600 54
FMC Gold Company 38,000 157
Homestake Mining Company 14,100 220
Newmont Gold Company 5,500 240
Placer Dome Inc. 1,000 24
---
779
Integrated Petroleum -- 2.0%
Pennzoil Company 2,500 106
Metals & Mining - General -- 12.1%
Cambior, Inc. 17,200 187
Echo Bay Mines Ltd. 15,000 156
Hecla Mining Company<F1> 9,400 65
Newmont Mining Corporation 5,117 231
---
639
Mineral Exploration -- 10.2%
Atna Resources Ltd. (Can.)<F1> 45,000 114
Golden Star Resources Ltd.<F1> 36,000 184
Westmin Resources Ltd. (Can.) 45,600 242
---
540
-------
TOTAL COMMON STOCKS (Cost - $2,471) $ 2,387
LONG-TERM GOVERNMENT
OBLIGATIONS -- 37.7%
U. S. Government Obligations -- 37.7%
U. S. Treasury Note,
6.00%, Due 06/30/96 $1,000 $ 1,004
U. S. Treasury Note,
6.50%, Due 09/30/96 300 303
U. S. Treasury Note,
6.875%, Due 10/31/96 75 76
U. S. Treasury Note,
7.25%, Due 11/30/96 25 25
U. S. Treasury Note,
7.50%, Due 12/31/96 75 77
U. S. Treasury Note,
6.00%, Due 8/31/97 500 506
-----
1,991
TOTAL LONG-TERM GOVERNMENT -------
OBLIGATIONS (Cost - $1,974) $ 1,991
TOTAL INVESTMENTS IN SECURITIES - -------
% OF NET ASSETS - 82.9% (Cost - $4,445) $ 4,378
<F1>
Non-income producing
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
December 31, 1995
Fontaine Global Growth Fund
<CAPTION>
Shares/ Value
Par (000) (000)
<S> <C> <C>
COMMON STOCKS -- 35.9%
Apparel and Shoes -- 3.9%
Charming Shoppes, Inc. 2,000 $ 6
Stride Rite Corporation 2,900 21
--
27
Food Processing -- 3.4%
McCormick & Company, Inc. 1,000 24
Gold Mining -- 9.0%
Dayton Mining Corporation<F1> 3,000 12
FMC Gold Corporation 4,300 18
Homestake Mining Company 1,000 16
Newmont Gold Company 400 17
--
63
Integrated Petroleum -- 0.6%
Elf Aquitaine ADR 100 4
Metals & Mining - General -- 7.5%
Cambior, Inc. 1,000 11
Echo Bay Mines Ltd. 2,000 21
Hecla Mining Company<F1> 600 4
Newmont Mining Corporation 374 17
--
53
Mineral Exploration -- 9.1%
Atna Resources Ltd. (Can.)<F1> 12,000 30
Golden Star Resources Ltd.<F1> 6,500 33
--
63
Real Estate -- 2.4%
Consolidated-Tomoka Land Company 1,000 17
-------
TOTAL COMMON STOCKS (Cost - $262) $ 251
PREFERRED STOCKS -- 6.5%
Battle Mountain Gold Preferred 800 $ 40
Freeport McMoran Preferred "A" 200 5
--
45
-------
TOTAL PREFERRED STOCKS (Cost - $43) $ 45
LONG-TERM GOVERNMENT
OBLIGATIONS -- 29.5%
U. S. Government Obligations -- 22.4%
U. S. Treasury Note,
5.50%, Due 04/30/96 $ 50 $ 50
U. S. Treasury Note,
7.25%, Due 11/30/96 50 51
U. S. Treasury Note,
7.50%, Due 12/31/96 25 26
U. S. Treasury Note,
6.00%, Due 8/31/97 30 30
------
157
World Bank Obligations -- 7.1%
World Bank Note,
6.125%, Due 9/27/02 (Par = DM70) 49 50
TOTAL LONG-TERM GOVERNMENT -------
OBLIGATIONS (Cost - $205) $ 207
TOTAL INVESTMENTS IN SECURITIES -------
% OF NET ASSETS - 71.9% (Cost - $510) $ 503
<F1>
Non-income producing
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
December 31, 1995
Fontaine Global Income Fund
<CAPTION>
Shares/ Value
Par (000) (000)
<S> <C> <C>
COMMON STOCKS -- 23.8%
Apparel and Shoes -- 3.0%
Stride Rite Corporation 4,300 $ 32
Food Processing -- 2.3%
McCormick & Company, Inc. 1,000 24
Gold Mining -- 5.8%
Homestake Mining Company 1,700 27
Newmont Gold Company 800 35
--
62
Integrated Petroleum -- 2.3%
Elf Aquitaine ADR 200 7
Pennzoil Company 400 17
--
24
Metals & Mining - General -- 6.0%
Cambior, Inc. 800 9
Echo Bay Mines Ltd. 2,000 21
Newmont Mining Corporation 748 34
--
64
Mineral Exploration -- 4.4%
Golden Star Resources Ltd.<F1> 9,000 46
-------
TOTAL COMMON STOCKS (Cost - $258) $ 252
PREFERRED STOCKS -- 8.2%
Battle Mountain Gold Preferred 1,100 $ 54
Freeport McMoran Preferred "A" 1,200 33
--
87
-------
TOTAL PREFERRED STOCKS (Cost - $81) $ 87
LONG-TERM GOVERNMENT
OBLIGATIONS -- 51.7%
German Government Obligations -- 13.0%
Bundes Obligations,
5.875%, Due 5/15/00 (Par = DM190) $ 132 $ 138
U. S. Government Obligations -- 32.0%
U. S. Treasury Note,
6.50%, Due 09/30/96 200 202
U. S. Treasury Note,
6.875%, Due 10/31/96 10 10
U. S. Treasury Note,
7.25%, Due 11/30/96 25 25
U. S. Treasury Note,
7.50%, Due 12/31/96 50 51
U. S. Treasury Note,
6.00%, Due 8/31/97 50 51
------
339
World Bank Obligations -- 6.7%
World Bank Note,
6.125%, Due 9/27/02 (Par = DM100) 70 71
TOTAL LONG-TERM GOVERNMENT -------
OBLIGATIONS (Cost - $544) $ 548
TOTAL INVESTMENTS IN SECURITIES -------
% OF NET ASSETS - 83.7% (Cost - $883) $ 887
<F1>
Non-income producing
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
THE FONTAINE TRUST / December 31, 1995
<CAPTION>
Capital Global Global
Appreciation Growth Income
(amounts are actual)
<S> <C> <C> <C>
ASSETS
Investments at Market Value:
Capital Appreciation (Cost $4,444,600) 4,378,264
Global Growth (Cost $509,658) 503,342
Global Income (Cost $883,425) 886,985
Cash & Cash Equivalents 750,416 252,939 225,293
Dividends and Interest Receivable 57,314 4,038 13,126
Receivable for Investments Sold 144,040 -- --
Receivable for Fund Shares Sold 3,796 -- 3,050
Prepaid Expenses 3,678 50 50
TOTAL ASSETS 5,337,508 760,369 1,128,504
LIABILITIES
Payable for Investments Purchased -- 48,435 53,927
Payable for Shareholder Distributions 35,760 2,610 3,859
Accrued Expenses 19,363 4,762 6,745
Due To Manager -- 4,433 4,430
TOTAL LIABILITIES 55,123 60,240 68,961
NET ASSETS 5,282,385 700,129 1,059,543
ANALYSIS OF NET ASSETS:
Paid-in-capital applicable to shares outstanding;
$.001 par value, unlimited number of shares authorized:
Capital Appreciation: 495,226 shares 5,409,019
Global Growth: 69,788 shares 706,597
Global Income: 101,297 shares 1,055,859
Undistributed net investment income/(loss) -- (143) 205
Accumulated net realized (loss) (60,298) -- --
Unrealized appreciation/(depreciation) of investments (66,336) (6,325) 3,479
NET ASSETS 5,282,385 700,129 1,059,543
NET ASSET VALUE PER SHARE $10.67 $10.03 $10.46
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
THE FONTAINE TRUST/For The Year Ended December 31, 1995
<CAPTION>
Capital Global Global
Appreciation Growth Income
(amounts are actual)
<S> <C> <C> <C>
INVESTMENT INCOME
Income
Dividends $ 29,009 $ 2,298 $ 3,498
Interest 167,053 13,559 31,921
Total Income 196,062 15,857 35,419
Expenses
Investment Management Fees 50,837 3,510 5,816
Shareholder Servicing Fees 9,024 882 831
Custodian and Accounting Fees 4,351 571 582
Legal & Auditing Fees 35,478 3,027 5,776
Prospectus & Shareholder Reports 1,885 21 22
Registration Fees 4,997 489 483
Insurance/Miscellaneous Costs 5,942 11 13
Total Expenses Before Waivers
And Reimbursement From Adviser 112,514 8,511 13,523
Less: Waivers And Reimbursement From Adviser (32,246) (2,506) (4,109)
Net Expenses 80,268 6,005 9,414
NET INVESTMENT INCOME 115,794 9,852 26,005
REALIZED AND UNREALIZED GAIN /
(LOSS) FROM INVESTMENTS
Net Realized Gain From Investments 658,080 38,241 49,011
Unrealized Appreciation/(Depreciation) on Investments (21,365) (1,296) 15,550
NET GAIN ON INVESTMENTS 636,715 36,945 64,561
INCREASE IN NET ASSETS FROM
OPERATIONS $752,509 $46,797 $90,566
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
THE FONTAINE TRUST
<CAPTION>
Capital Global
Appreciation Growth
Year Year Year Year
Ended Ended Ended Ended
12/31/95 12/31/94 12/31/95 12/31/94
(amounts are actual)
<S> <C> <C> <C> <C>
CHANGE IN NET ASSETS
Operations
Net investment income $ 115,794 $ 86,938 $ 9,852 $ 5,285
Net realized gain from investments 658,080 154,787 38,241 11,617
Change in unrealized (depreciation) from investments (21,365) (99,428) (1,296) (17,370)
Change in Net Assets from Operations 752,509 142,297 46,797 (468)
Distributions to Shareholders
Net investment income (114,581) (91,754) (10,148) (5,468)
Net realized gain on investments (636,829) (37,686) (32,736) (17,384)
Change in Net Assets From Distributions to Shareholders (751,410) (129,440) (42,884) (22,852)
Net Equalization (3,159) (53,381) -- --
Capital Share Transactions
Capital Appreciation
Sold 43,751 and 31,077 shares 523,058 327,187
Distributions reinvested of 66,510 and 11,488 shares 715,650 122,577
Redeemed 143,398 and 342,520 shares (1,633,412) (3,633,189)
Global Growth
Sold 31,410 and 10,973 shares 326,304 112,822
Distributions reinvested of 3,984 and 2,388 shares 40,274 22,826
Redeemed 1,113 and 11,605 shares (11,777) (119,773)
Change in Net Assets from Capital Share Transactions (394,704) (3,183,425) 354,801 15,875
CHANGE IN NET ASSETS (396,764) (3,223,949) 358,714 (7,445)
NET ASSETS
Beginning of period 5,679,149 8,903,098 341,415 348,860
End of period $5,282,385 $5,679,149 $700,129 $341,415
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
THE FONTAINE TRUST (Cont'd)
<CAPTION>
Global
Income
Year Year
Ended Ended
12/31/95 12/31/94
(amounts are actual)
<S> <C> <C>
CHANGE IN NET ASSETS
Operations
Net investment income $ 26,005 $ 18,872
Net realized gain from investments 49,011 31,222
Change in unrealized appreciation/
(depreciation) from investments 15,550 (39,621)
Change in Net Assets From Operations 90,566 10,473
Distributions to Shareholders
Net investment income (25,618) (25,653)
Net realized gain on investments (48,877) (25,037)
Change in Net Assets From Distributions
to Shareholders (74,495) (50,690)
Capital Share Transactions
Global Income
Sold 29,366 and 5,117 shares 310,821 54,089
Distributions reinvested of 6,704 and 4,866 shares 70,618 50,413
Redeemed 2,002 and 21,564 shares (21,149) (230,447)
Change in Net Assets from
Capital Share Transactions 360,290 (125,945)
CHANGE IN NET ASSETS 376,361 (166,162)
NET ASSETS
Beginning of period 683,182 849,344
End of period $1,059,543 $683,182
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
THE FONTAINE TRUST
<CAPTION>
Capital
Appreciation
------------------------------------------------------------------------------------------
Year Year Year Year Year From From
Ended Ended Ended Ended Ended 9/1/90 to 9/28/89<F2>
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90<F1> to 8/31/90
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.75 $10.75 $ 9.60 $10.78 $10.40 $10.44 $10.00
Investment Activities
Net Investment Income<F4> 0.26 0.07 0.135 0.33 0.65 0.08 0.44
Net Realized and Unrealized
Gain/(Loss) on Investments 1.42 0.18 1.215 (0.76) 0.57 0.32 0.20
Total From Investment Activities 1.68 0.25 1.35 (0.43) 1.22 0.40 0.64
Distributions
Net Investment Income (0.26) (0.18) (0.135) (0.12) (0.64) (0.40) (0.13)
Net Realized Gains (1.50) (0.07) (0.065) (0.63) (0.20) (0.04) (0.07)
Total Distributions (1.76) (0.25) (0.20) (0.75) (0.84) (0.44) (0.20)
NET ASSET VALUE,
END OF PERIOD $10.67 $10.75 $10.75 $ 9.60 $10.78 $10.40 $10.44
Ratio of Expenses to
Average Net Assets <F4> 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of Net Investment Income
to Average Net Assets 2.16% 1.41% 1.15% 3.12% 4.14% 5.10%<F3> 5.26%<F3>
Total Investment Return 15.49% 2.34% 14.09% (3.94%) 11.81% 3.82% 6.45%
Portfolio Turnover Rate 96.00% 135.55% 131.73% 129.16% 79.40% 273.86%<F3> 288.00%<F3>
Net Assets,
End of Period (000'S) $5,282 $5,679 $8,903 $14,902 $15,950 $6,459 $4,486
<F1>
Transition Period
<F2>
Commencement of Operations
<F3>
Annualized
<F4>
Excludes investment management fees and other expenses in excess of voluntary expense limitation of 1.50% for Capital
Appreciation. Without fees waived or reimbursed by the adviser (see Note 5), the annualized expense ratios would have
been: 2.10%, 2.28%, 1.81%, 1.94%, 1.95%, 3.43% and 3.43%.
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
THE FONTAINE TRUST (Cont'd)
<CAPTION>
Global Global
Growth Income
------------------------------------------- --------------------------------------------
Year Year Year From Year Year Year From
Ended Ended Ended 5/1/92<F1> Ended Ended Ended 5/1/92<F1>
12/31/95 12/31/94 12/31/93 to 12/31/92 12/31/95 12/31/94 12/31/93 to 12/31/92
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.61 $10.34 $ 9.33 $10.00 $10.16 $10.78 $ 9.37 $10.00
Investment Activities
Net Investment Income<F2> 0.21 0.16 0.14 0.07 0.36 0.29 -- 0.14
Net Realized and Unrealized
Gain/(Loss) on Investments 1.14 (0.20) 1.11 (0.41) 0.91 (0.13) 1.92 (0.48)
Total From Investment Activities 1.35 (0.04) 1.25 (0.34) 1.27 0.16 1.92 (0.34)
Distributions
Net Investment Income (0.22) (0.16) (0.11) (0.08) (0.35) (0.39) -- (0.21)
Net Realized Gains (0.71) (0.53) (0.13) (0.25) (0.62) (0.39) (0.51) (0.08)
Total Distributions (0.93) (0.69) (0.24) (0.33) (0.97) (0.78) (0.51) (0.29)
NET ASSET VALUE,
END OF PERIOD $10.03 $ 9.61 $10.34 $ 9.33 $10.46 $10.16 $10.78 $ 9.37
Ratio of Expenses to
Average Net Assets<F3> 1.44% 1.45% 1.50% 1.50% 1.21% 1.21% 1.25% 1.25%
Ratio of Net Investment Income
to Average Net Assets 2.36% 1.69% 1.15% 1.23%<F2> 3.35% 2.49% 2.13% 2.47%<F2>
Total Investment Return 13.97% -0.35% 13.39% -3.37% 12.62% 1.49% 20.53% -3.47%
Portfolio Turnover Rate 101.48% 114.14% 263.84% 348.51%<F2> 95.89% 129.89% 171.45% 189.60%<F2>
Net Assets,
End of Period(000'S) $700 $341 $349 $335 $1,060 $683 $849 $1,384
<F1>
Commencement of Operations
<F2>
Annualized
<F3>
Excludes investment management fees and other expenses in excess of voluntary expense limitation of 1.50% for Global
Growth and 1.25% for Global Income. Without fees waived or reimbursed by the adviser (see Note 5), the annualized expense
ratios would have been: Global Growth: 2.04%, 1.45%, 3.62% and 7.19%;
Global Income: 1.74%, 1.98%, 2.32% and 3.05%.
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
THE FONTAINE TRUST / December 31, 1995
Note 1 -- Organization
The Fontaine Trust ("Trust") was organized as a Massachusetts business trust
and is registered with the Securities and Exchange Commission ("SEC") as a no-
load open-end management investment company. The Trust currently consists of
three Funds: Fontaine Capital Appreciation Fund ("Capital Appreciation
Fund"), Fontaine Global Growth Fund ("Global Growth Fund") and Fontaine Global
Income Fund ("Global Income Fund") ("Fund" or "Funds"). Each Fund is a
separate investment portfolio of the Trust having distinct investment
objectives, investment programs, policies, and restrictions. Capital
Appreciation Fund and Global Growth Fund are diversified investment companies
under the Investment Company Act of 1940 ("1940 Act"). Global Income Fund is
registered as a non-diversified investment company under the 1940 Act to
enable it to invest more than 5% of its total assets in securities of one
issuer, including, in particular, securities of foreign governments.
The Trust was organized on April 20, 1989 and had no operations prior to
September 28, 1989, other than those relating to organizational matters
including the sale of 33,073 shares of beneficial interest of Capital
Appreciation Fund at $10.00 per share to Richard H. Fontaine. During 1990,
Capital Appreciation Fund changed its fiscal year-end from August 31 to
December 31, resulting in a four month transition period. Global Growth Fund
and Global Income Fund each commenced operations on May 1, 1992, with an
initial stock subscription of 10,000 shares and 40,000 shares, respectively,
of beneficial interest at $10.00 per share to Richard H. Fontaine.
The investment objectives of each Fund as well as the nature and risks of
their investment activities are set forth more fully in the Trust's Prospectus
and Statement of Additional Information, dated May 1, 1995.
Note 2 -- Significant Accounting Policies
A -- Security Valuation--Investments in securities traded on a national
securities exchange and securities traded on over-the-counter markets are
valued at the last sale price on the day of valuation. Securities for which
no sale price is available are valued at the last bid price. Investments in
securities for which no market quotations are available are valued based on
quotations provided by broker-dealers or by such other method approved by the
Board of Trustees. Short-term investments are stated at cost, which when
combined with accrued interest receivable, approximates market value.
B -- Security Transactions and Investment Income--Income and expenses are
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded by each Fund on the ex-dividend date. Investment
transactions are accounted for on the trade date. Realized gains and losses
from investment transactions and unrealized appreciation and depreciation of
investments are reported on an identified cost basis.
C -- Equalization--Capital Appreciation Fund uses the accounting practice of
equalization, by which a portion of the proceeds from sales and costs of
redemption of capital shares, equivalent on a per share basis to the amount of
undistributed net investment income on the date of the transactions, is
credited or charged to undistributed income. As a result, undistributed net
investment income per share is unaffected by sales or redemptions of capital
shares.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Cont'd)
D -- Foreign Currency--Amounts denominated in or expected to settle in foreign
currencies (FC) are translated into United States dollars (US$) at rates
reported by a major New York City broker on the following basis:
a. Market value of investment securities, other assets and
liabilities---at the closing rate of exchange as of the date of the
statement of assets and liabilities.
b. Purchases and sales of investment securities, income and expenses-
--at the rate of exchange prevailing on the respective dates of such
transactions (or at an average rate if significant rate fluctuations
have not occurred.)
c. The Fund isolates that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates
on securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Funds' books, and the
U. S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities including investments in securities at fiscal year
end, resulting from changes in the exchange rate.
E -- Cash and Cash Equivalents--The Trust considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. This balance represents money market Deposit Accounts held with
the Custodian.
F -- Concentration of Credit--The Trust maintains cash balances in money
market accounts of the Custodian. At December 31, 1995, money market balances
held by Capital Appreciation Fund, Global Growth Fund and Global Income Fund
were $750,416, $252,939, and $225,293, respectively. These accounts are
overnight money market sweep accounts with a variable interest rate (5.22% as
of December 31, 1995).
Note 3 -- Federal Income Taxes
No provision for federal income taxes is required since each Fund intends to
qualify as a regulated investment company and distribute all of its taxable
income.
<TABLE>
At December 31, 1995, the aggregate cost of securities for federal income tax
purposes for Capital Appreciation Fund, Global Growth Fund and Global Income
Fund were $4,483,961, $509,658, and $883,425, respectively. Net unrealized
appreciation/(depreciation) of investments for each Fund were as follows:
<CAPTION>
Capital Global Global
Appreciation Growth Income
<S> <C> <C> <C>
Appreciated Investments $ 133,642 $ 11,337 $ 20,453
Depreciated Investments $(199,978) $(17,654) $(16,893)
Net Unrealized Appreciation $ (66,336) $ (6,317) $ 3,560
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Cont'd)
<TABLE>
Note 4 -- Investment Transactions
<CAPTION>
Capital Global Global
Appreciation Growth Income
<S> <C> <C> <C>
U. S. Government Securities:
Purchases $ 499,165 $ 29,950 $ 74,875
Sales 1,085,485 49,156 173,433
Securities Other Than Short-Term
and U. S. Government Securities:
Purchases $3,563,868 $465,947 $739,419
Sales 5,184,560 310,795 473,714
</TABLE>
Note 5 -- Related Parties
A -- Investment Adviser--The investment management agreements ("Advisory
Contracts") between Richard Fontaine Associates, Inc. ("Adviser") and Capital
Appreciation Fund, Global Growth Fund and Global Income Fund, provide for an
annual investment management fee, computed daily and paid monthly, at a rate
equal to 0.95%, 0.85%, and 0.75%, of average daily net assets, respectively.
Under the terms of the Advisory Contracts, the Adviser is required to bear any
expenses of each Fund which exceed the expense limitations applicable to each
Fund as imposed by the securities regulations of any state in which the fund
is registered. Additionally, in accordance with the Expense Limitation
Agreements between each Fund and the Adviser, the Adviser has agreed to bear
any expenses of each Fund which exceed the voluntary, Adviser-imposed expense
limitation of 1.50% of average daily net assets for Capital Appreciation Fund
and Global Growth Fund and 1.25% of average daily net assets for Global Income
Fund. The expense limitation agreements under the Master Advisory Contracts
by and between the Funds and Richard Fontaine Associates are reviewed for
renewal by the Board of Trustees on an annual basis.
Capital Appreciation Fund: Pursuant to this agreement, $32,246 of management
fees were waived by the Adviser which exceeded the 1.50% expense limitation
for the year ended December 31, 1995. In addition, $305,452 of fees and
expenses were waived or reimbursed by the Adviser in prior periods. As of
December 31, 1995, the Fund owed $1,646 to the Adviser for management fees
payable.
Global Growth Fund: Pursuant to this agreement, $2,506 of management fees were
waived by the Adviser which exceeded the 1.50% expense limitation for the year
ended December 31, 1995. In addition, $20,900 of fees and expenses were
waived or reimbursed by the Adviser in prior periods. As of December 31,
1995, the Fund owed $337 to the Adviser for management fees payable.
Global Income Fund: Pursuant to this agreement, $4,109 of management fees
were waived by the Adviser which exceeded the 1.25% expense limitation for the
year ended December 31, 1995. In addition, $32,252 of fees and expenses were
waived or reimbursed by the Adviser in prior periods. As of December 31, 1995,
the Fund owed $413 to the Adviser for management fees payable.
If the Fund Operating Expenses for a particular Fund are less than the
Operating Expense Limit for that Fund and the assets of that Fund exceed $20
Million, the Fund Operating Expenses assumed and paid by Fontaine Associates
in prior periods on behalf of a particular Fund could be reimbursed by that
Fund, provided that in doing so the Operating Expense Limit for that Fund was
not exceeded and the period over which such reimbursements are made does not
exceed five years from the date of the first such payment. (Please refer to
the Prospectus for more information on Expenses.)
NOTES TO FINANCIAL STATEMENTS (Cont'd)
B -- Transfer Agent--During the year ended December 31, 1995, Capital
Appreciation Fund, Global Growth Fund and Global Income Fund, incurred
transfer agent fees and expenses of approximately $7,560, $880, and $830,
respectively, for shareholder and accounting services provided by Richard
Fontaine and Company, Inc., an affiliate of the Adviser. As of December 31,
1995, transfer agent fees payable by Capital Appreciation Fund, Global Growth
Fund and Global Income Fund were $829, $128 and $112, respectively.
C -- Board of Trustees--At the June 24, 1994, meeting of the Board of
Trustees, it was unanimously agreed upon that the Board would temporarily
waive the trustees fees normally charged each Fund, thus reducing each Fund's
expense.
D -- Ownership of Fund Shares--Certain related parties investing in the Funds
hold positions representing 5% or more of total net assets. These parties may
include employees and Trustees of the Trust, Transfer Agent, and/or Adviser.
The Adviser also manages separate accounts apart from its investment
management activities to the Trust. At certain times during the year, the
manager may transact with the Funds on behalf of these separate accounts. As
of December 31, 1995, these balances were as follows:
<TABLE>
Capital Appreciation Fund
<CAPTION>
Shares Dollar Amount % Net Assets
<S> <C> <C> <C>
Richard H. Fontaine and Members
of the Board of Trustees 28,266.864 $301,607.44 5.71%
Private Accounts under
Adviser Management 25,844.444 $275,760.22 5.22%
TOTAL 54,111.308 $577,367.66 10.93%
</TABLE>
<TABLE>
Global Growth Fund
<CAPTION>
Shares Dollar Amount % Net Assets
<S> <C> <C> <C>
Richard H. Fontaine and Members
of the Board of Trustees 40,329.999 $404,509.89 57.78%
Private Accounts under
Adviser Management 14,397.003 $144,401.94 20.63%
TOTAL 54,727.002 $548,911.83 78.41%
</TABLE>
<TABLE>
Global Income Fund
<CAPTION>
Shares Dollar Amount % Net Assets
<S> <C> <C> <C>
Richard H. Fontaine and Members
of the Board of Trustees 80,368.416 $840,653.63 79.34%
Private Accounts under
Adviser Management 7,731.178 $ 80,868.12 7.63%
TOTAL 88,099.594 $921,521.75 86.97%
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of The Fontaine Trust, comprised of:
Fontaine Capital Appreciation Fund,
Fontaine Global Growth Fund, and
Fontaine Global Income Fund
We have audited the accompanying statement of assets and liabilities,
including the schedule of portfolio investments, for the Fontaine Capital
Appreciation Fund, Fontaine Global Growth Fund, and Fontaine Global Income
Fund as of December 31, 1995 and the related statements of operations for the
year then ended, the statement of changes in net assets for the two years in
the period then ended, and the financial highlights for each of the five
years in the period then ended (Fontaine Capital Appreciation Fund) and for
the three years then ended (Fontaine Global Growth Fund and Fontaine Global
Income Fund), and for the periods September 1, 1990 to December 31, 1990 and
September 28, 1989 (commencement of operations) to August 31, 1990 (Fontaine
Capital Appreciation Fund), and for the period May 1, 1992 (commencement of
operations) to December 31, 1992 (Fontaine Global Growth Fund and Fontaine
Global Income Fund). These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to
express an opinion on the 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 material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments held by the custodian and brokers as of December 31, 1995. 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 aspects, the financial position of
Fontaine Capital Appreciation Fund, Fontaine Global Growth Fund and Fontaine
Global Income Fund as of December 31, 1995, and the results of its
operations, changes in net assets and financial highlights for the respective
periods as stated in the first paragraph, in conformity with generally
accepted accounting principles.
Coopers & Lybrand, L.L.P.
Baltimore, Maryland
February 19, 1996
<PAGE>
Fontaine Trust
210 W. Pennsylvania Avenue, Suite 240
Towson, Maryland 21204
General/Account Information:
Baltimore Area: (410) 825-7890
Toll Free: 1-800-247-1550
Investment Adviser:
Richard Fontaine Associates, Incorporated
210 W. Pennsylvania Avenue, Suite 240
Towson, Maryland 21204
Transfer Agent and
Dividend Disbursing Agent:
Richard Fontaine and Company
210 W. Pennsylvania Avenue, Suite 240
Towson, Maryland 21204
Custodian:
Chemical Bank
270 Park Avenue
New York, NY 10017
Independent Accountants:
Coopers & Lybrand, L.L.P.
217 East Redwood Street
Baltimore, Maryland 21202
Legal Counsel:
Katten, Muchin & Zavis
1025 Thomas Jefferson Street, N. W., Suite 700
Washington, D. C. 20007-5201
OFFICERS AND TRUSTEES
Richard H. Fontaine, Chairman and President
Dana R. Barrows, Trustee
Lester M. Bradshaw, Trustee
Lucas L. Godinez, Trustee
Anne Dyer Fontaine, Vice President, Treasurer
Kimberly A. Malkowski, Secretary
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements In Prospectus:
Financial Highlights for the Fontaine Capital Appreciation Fund
for the fiscal periods September 28, 1989 (commencement of
operations) to August 31, 1990 and September 1, 1990 to December
31, 1990 (transition period), and for the years ended December 31,
1991, 1992, 1993, 1994 and 1995 .
Financial Highlights for the Fontaine Global Growth Fund and the
Fontaine Income Fund for the period May 1, 1992 (commencement of
operations) to December 31, 1992, and for the years ended December
31, 1993, 1994 and 1995 .
Financial Statements Incorporated In The Statement of
Additional Information:
Portfolio of Investments as of December 31, 1995 for the
Fontaine Capital Appreciation Fund, the Fontaine Global Growth
Fund, and the Fontaine Global Income Fund.
Statements of Assets and Liabilities as of December 31, 1995 for
the Fontaine Capital Appreciation Fund, the Fontaine Global Growth
Fund, and the Fontaine Global Income Fund.
Statements of Operations for the year ended December 31, 1995
for the Fontaine Capital Appreciation Fund, the Fontaine Global
Growth Fund, and the Fontaine Global Income Fund.
Statements of Changes in Net Assets for the years ended December
31, 1994 and 1995 for the Fontaine Capital Appreciation Fund, the
Fontaine Global Growth Fund and the Fontaine Global Income Fund.
Financial Highlights for the periods September 28, 1989
(commencement of operations) to August 31, 1990 and September 1,
1990 to December 31, 1990 (transition period), and for the years
ended December 31, 1991, 1992, 1993, 1994 and 1995 for the
Fontaine Capital Appreciation Fund, and for the period May 1, 1992
(commencement of operations) to December 31, 1992 and for the year
ended December 31, 1993, 1994 and 1995 for the Fontaine Global
Growth Fund and the Fontaine Global Income Fund.
Notes to Financial Statements for the year ended December 31,
1995 for the Fontaine Capital Appreciation Fund, the Fontaine
Global Growth Fund and the Fontaine Global Income Fund.
(b) Exhibits:
1(a) Declaration of Trust<F1>
(b) Amendment No. 1 to Declaration of Trust<F7>
2 By-Laws<F1>
3 Not Applicable
4(a) Specimen Share Certificate for the Fontaine Capital Appreciation Fund
<F6>
(b) Specimen Share Certificate for the Fontaine Global Growth Fund<F7>
(c) Specimen Share Certificate for the Fontaine Global Income Fund<F7>
5(a) Master Advisory Contract Between Registrant and Richard Fontaine
Associates, Inc.<F3>
(b) Advisory Contract Supplement relating to the Fontaine Capital
Appreciation Fund<F3>
(c) Advisory Contract Supplement relating to the Fontaine Global Growth
Fund<F7>
(d) Advisory Contract Supplement relating to the Fontaine Global Income
Fund<F7>
6 Not Applicable
7 Not Applicable
8 Custodian Agreement Between Registrant and Chemical Bank<F9>
9(a)(1) Master Agency Agreement Between Registrant and Richard Fontaine and
Company, Incorporated<F2>
(a)(2) Amended and Restated Agency Agreement Supplement Between Registrant
and Richard Fontaine and Company, Incorporated, relating to the Fontaine
Capital Appreciation Fund<F7>
(a)(3) Agency Agreement Supplement Between Registrant and Richard Fontaine
and Company, Incorporated, relating to the Fontaine Global Growth Fund<F7>
(a)(4) Agency Agreement Supplement Between Registrant and Richard Fontaine
and Company, Incorporated, relating to the Fontaine Global Income Fund<F7>
9(b)(1) Expense Limitation Agreement By and Between Registrant, on behalf of
the Fontaine Capital Appreciation Fund, and Richard Fontaine Associates,
Inc.<F5>
(b)(2) Expense Limitation Agreement By and Between Registrant, on behalf of
the Fontaine Global Growth Fund, and Richard Fontaine Associates, Inc.<F7>
(b)(3) Expense Limitation Agreement By and Between Registrant, on behalf of
the Fontaine Global Income Fund, and Richard Fontaine Associates, Inc.<F7>
9(c) Joint Services Agreement between Richard Fontaine Associates, Inc. and
Richard Fontaine and Company, IncorporateD<F6>
10(a) Opinion and Consent of Gaston & Snow<F2>
(b) Opinion and Consent of Freedman, Levy, Kroll & Simonds<F7>
11 Consent of Coopers & Lybrand, independent accountants
12 Not Applicable
13(a) Subscription Agreement relating to the Fontaine Capital Appreciation
Fund<F2>
(b) Subscription Agreement relating to the Fontaine Global Growth Fund and
the Fontaine Global Income Fund<F7>
(c) Amended Subscription Agreement relating to the Fontaine Global
Growth Fund and the Fontaine Global Income Fund<F8>
14 Not Applicable
15 Not Applicable
16(a)(1) Computations of a $1,000 Hypothetical Investment in the Fontaine
Capital Appreciation Fund, set forth in the Prospectus Fee Table
(a)(2) Computations of a $1,000 Hypothetical Investment in the Fontaine
Global Growth Fund, set forth in the Prospectus Fee Table
(a)(3) Computations of a $1,000 Hypothetical Investment in the Fontaine
Global Income Fund, set forth in the Prospectus Fee Table
16(b)(1) Computations of the SEC's Standardized Average Annual Total Return
for the Fontaine Capital Appreciation Fund for the one year and five years
ended December 31, 1995 and since inception
(b)(2) Computations of the SEC's Standardized Average Annual Total Return
for The Fontaine Global Growth Fund for the one year ended December 31,
1995 and since inception
(b)(3) Computations of the SEC's Standardized Average Annual Total Return
for The Fontaine Global Income Fund for the one year ended December 31,
1995 and since inception
16(c)(1) Computations of cumulative total return for the Fontaine Capital
Appreciation Fund since inception
(c)(2) Computations of cumulative total return for the Fontaine Global
Growth Fund since inception
(c)(3) Computations of cumulative total return for the Fontaine Global
Income Fund since inception
16(d) Computations of 30 day yield for the Global Income Fund for the 30 day
period ended December 31, 1995
17 Financial Data Schedule
18 Not Applicable
19 Specimen Price Make-up Sheet
20(a) Powers of Attorney<F4>
20(b) Powers of Attorney<F5>
20(c) Power of Attorney<F6>
__________________________________
<F1>
Incorporated herein by reference to the Registrant's original Form N-1A
Registration Statement filed on June 30, 1989.
<F2>
Incorporated herein by reference to Pre-Effective Amendment No. 2 of the
Registrant's Form N-1A Registration Statement filed on September 25, 1989.
<F3>
Incorporated herein by reference to Pre-Effective Amendment No. 3 of the
Registrant's Form N-1A Registration Statement filed on September 27, 1989.
<F4>
Incorporated herein by reference to Post-Effective Amendment No. 1 of the
Registrant's Form N-1A Registration Statement filed on March 28, 1990.
<F5>
Incorporated herein by reference to Post-Effective Amendment No. 2 of the
Registrant's Form N-1A Registration Statement filed on January 2, 1991.
<F6>
Incorporated herein by reference to Post-Effective Amendment No. 3 of the
Registrant's Form N-1A Registration Statement filed on April 29, 1991.
<F7>
Incorporated herein by reference to Post-Effective Amendment No. 4 of the
Registrant's Form N-1A Registration Statement filed on March 2, 1992.
<F8>
Incorporated herein by reference to Post-Effective Amendment No. 5 of the
Registrant's Form N-1A Registration Statement filed on September 1, 1992.
<F9>
Incorporated herein by reference to Post-Effective Amendment No. 8 of the
Registrant's Form N-1A Registration Statement filed on May 1, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities, as of March 31, 1996
<TABLE>
<CAPTION>
Number of
Title of Series Recordholders
<S> <C>
Fontaine Capital Appreciation Fund 365
Fontaine Global Growth Fund 65
Fontaine Global Income Fund 54
</TABLE>
Item 27. Indemnification
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant understands that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities 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 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, 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
Securities Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Richard Fontaine Associates, Inc. ("Fontaine Associates"), 210 W.
Pennsylvania Avenue, Suite 240, Towson, Maryland 21204, serves as investment
adviser to Registrant. Fontaine Associates is primarily engaged in the
business of furnishing investment advisory services to individuals, corpora-
tions, partnerships, charitable institutions, trusts, and other entities.
Fontaine Associates' sole shareholder is Richard H. Fontaine. Mr. Fontaine is
also the sole shareholder of Richard Fontaine and Company, Incorporated, which
serves as Registrant's transfer agent.
As of the date of the filing of this post-effective amendment to Registrant's
registration statement, the directors and officers of Fontaine Associates are
the persons listed below, who have held, during the past two fiscal years, the
positions of a substantial nature described below.
Fontaine Associates
Name Company Office
Richard H. Fontaine Richard Fontaine President, Director
Associates, Inc. and CEO
Richard Fontaine President, Director
and Company, and CEO
Incorporated
The Fontaine Trust Chairman, Trustee,
and President
Anne Dyer Fontaine Richard Fontaine Vice President and
Associates, Inc. Director of Research
The Fontaine Trust Vice President and
Treasurer
Legg Mason Wood Vice President
Walker, Inc. (From 1983 through
1991)
Kimberly A. Malkowski Richard Fontaine Vice President and
Associates, Inc. Secretary
The Fontaine Trust Secretary
Item 29. Principal Underwriter
(a) Pursuant to Rule 3a4-1 under the Securities Exchange Act of 1934,
Registrant and its associated persons (as defined in that Rule) participate in
the sale of Registrant's securities.
(b) Not applicable
(c) Not applicable
Item 30. Location of Accounts and Records
The following entities prepare, maintain and preserve the records required by
Section 31(a) of the 1940 Act for Registrant. These services are provided to
Registrant through written agreements between the parties to the effect that
such services will be provided to Registrant for such periods prescribed by
the rules and regulations of the Securities and Exchange Commission under the
1940 Act and such records are the property of the entity required to maintain
and preserve such records and will be surrendered promptly on request.
Chemical Bank, 270 Park Avenue, New York, New York, serves as custodian for
Registrant and in such capacity keeps records regarding securities in
transfer, bank statements, and canceled checks. Richard Fontaine and Company,
Incorporated, 210 W. Pennsylvania Avenue, Suite 240, Towson, Maryland 21204,
serves as the transfer agent and dividend disbursing agent for the Registrant
and in such capacities, keeps records regarding all shareholder account
records, disbursements, and canceled stock certificates required pursuant to
the Master Agency Agreement. Fontaine Associates serves as the investment
adviser of Registrant and, in such capacity, will maintain all accounts and
records required pursuant to its Master Advisory Contract with Registrant.
Item 31. Management Services
Not applicable
Item 32. Undertakings
(a) Registrant undertakes to call a meeting of shareholders for the purpose
of voting upon the question of removal of a Trustee or Trustees when requested
to do so by the holders of at least 10% of the Registrant's outstanding common
shares and in connection with such meeting to comply with provisions of
Section 16(c) of the Investment Company Act of 1940.
(b) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Registrant certifies that this filing meets all of the
requirements for effectiveness pursuant to Rule 485(b) under the Securities
Act of 1933 and Registrant has duly caused this Post-Effective Amendment No. 8
to the registration statement to be signed on its behalf by the undersigned,
thereto duly authorized in the County of Baltimore and the State of Maryland,
on the 29 day of April, 1996.
THE FONTAINE TRUST
Registrant
By: /s/ Richard H. Fontaine
Richard H. Fontaine
President and Trustee
Pursuant to the requirements by the Securities Act of 1933, this Post-
Effective Amendment No. 8 to the registration statement has been signed below
by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Richard H. Fontaine President and Trustee April 29, 1996
Richard H. Fontaine
<F1>___________________ Trustee April 29, 1996
Dana R. Barrows
<F1>___________________ Trustee April 29, 1996
Lester Bradshaw, Jr.
<F1>___________________ Trustee April 29, 1996
Lucas L. Godinez
/s/ Anne D. Fontaine Chief Financial April 29, 1996
Anne D. Fontaine Officer
<F1>
By: /s/ Richard H. Fontaine April 29, 1996
Richard H. Fontaine Date
(Attorney-in-Fact)
<PAGE>
EXHIBIT LIST
Exhibit
Number Description
11 Consent of Coopers & Lybrand, independent accountants
16(a)(1) Computations of a $1,000 Hypothetical Investment in the
Fontaine Capital Appreciation Fund, set forth in the
Prospectus Fee Table
16(a)(2) Computations of a $1,000 Hypothetical Investment in the
Fontaine Global Growth Fund, set forth in the Prospectus Fee
Table
16(a)(3) Computations of a $1,000 Hypothetical Investment in the
Fontaine Global Income Fund, set forth in the Prospectus Fee
Table
16(b)(1) Computations of the SEC's Standardized Average Annual Total
Return for the Fontaine Capital Appreciation Fund for the
one year and five years ended December 31, 1995 and since
inception
16(b)(2) Computations of the SEC's Standardized Average Annual Total
Return for The Fontaine Global Growth Fund for the one year
ended December 31, 1995 and since inception
16(b)(3) Computations of the SEC's Standardized Average Annual Total
Return for The Fontaine Global Income Fund for the one year
ended December 31, 1995 and since inception
16(c)(1) Computations of cumulative total return for the Fontaine
Capital Appreciation Fund since inception
16(c)(2) Computations of cumulative total return for the Fontaine
Global Growth Fund since inception
16(c)(3) Computations of cumulative total return for the Fontaine
Global Income Fund since inception
16(d) Computations of 30 day yield for the Global Income Fund for
the 30 day period ended December 31, 1995
17 Financial Data Schedules
19 Specimen Price Make-up Sheet
Exhibit 11
[Coopers & Lybrand L.L.P. Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The Fontaine Trust
We consent to the incorporation by reference in Post-Effective
Amendment No. 9 to the Registration Statement of the Fontaine Trust on
Form N-1A (File No. 33-29678) of our report dated February 19, 1996 on
our audits of the financial statements and financial highlights of the
Fontaine Capital Appreciation Fund, Fontaine Global Growth Fund, and
Fontaine Global Income Fund, three of the portfolios included in the
Fontaine Trust, which report is included in the Annual Report to the
Shareholders for the year ended December 31, 1995, which is incorporated
by reference in the Registration Statement. We also consent to the
reference to our Firm under the captions "Financial Highlights" in the
Prospectus and "Independent Accountants" in the Statement of Additional
Information.
/s/
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
April 24, 1996
Part C--Other Information
Item 24(b)(16)(a)
THE FONTAINE TRUST
FONTAINE CAPITAL APPRECIATION FUND
FONTAINE GLOBAL GROWTH FUND
FONTAINE GLOBAL INCOME FUND
Computations of a $1,000 Hypothetical Investment in each of
Fontaine Capital Appreciation Fund, Fontaine Global Growth Fund and Fontaine
Global Income Fund and set forth in the Prospectus Fee Table
<TABLE>
The table below shows the cumulative expenses attributable to a
hypothetical $1,000 investment for the period specified, assuming (1)
5% annual return and (2) redemption at the end of each time period<F1>:
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Capital Appreciation Fund $ 15 $ 47 $ 82 $179
Global Growth Fund $ 15 $ 46 $ 79 $172
Global Income Fund $ 12 $ 38 $ 67 $147
<F1>
There are no charges imposed upon redemption.
</TABLE>
Capital Appreciation Fund
Year 1 : $1,000 + ($1,000 x 5% = $50) = $1,050
$1,050 - ($1,000 x 1.5% = $15) = $1,035
$1,000 + $1,035 = $2,035 / 2 = $1,017.50
$1,017.50 x 1.5% = $15.26
Rounds to $15
Year 2: $1,035 + ($1,035 x 5% = $51.75) = $1,086.75
$1,086.75 - ($1,035 x 1.5% = $15.53) = $1,071.22
$1,035 + $1,071.22 = $2,106.22 / 2 = $1,053.11
$1,053.11 x 1.5% = $15.80
Year 3: $1,071.22 + ($1,071.22 x 5% = $53.56) = $1,124.78
$1,124.78 - ($1,071.22 x 1.5% = $16.07) = $1,108.71
$1,071.22 + $1,108.71 = $2,179.93 / 2 = $1,089.97
$1,089.97 x 1.5% = $16.35
$(15.26 + 15.80 + 16.35) = $47.41
Rounds to $47
Year 4: $1,108.71 + ($1,108.71 x 5% = $55.44) = $1,164.15
$1,164.15 - ($1,108.71 x 1.5% = $16.63) = $1,147.52
$1,108.71 + $1,147.52 = $2256.23 / 2 = $1,128.12
$1,128.12 x 1.5% = $16.92
Year 5: $1,147.52 + ($1,147.52 x 5% = $57.38) = $1,204.90
$1,204.90 - ($1,147.52 x 1.5% = $17.21) = $1,187.69
$1,147.52 + $1,187.69 = $2,335.21 / 2 = $1,167.61
$1,167.61 x 1.5% = $17.51
$(15.26 + 15.80 + 16.35 + 16.92 + 17.51) = $81.84
Rounds to $82
<PAGE>
Part C--Other Information
Item 24(b)(16)(a)
Page 2
Capital Appreciation Fund
Year 6: $1,187.69 + ($1,187.69 x 5% = $59.38) = $1,247.07
$1,247.07 - ($1,187.69 x 1.5% = $17.82) = $1,229.25
$1,187.69 + $1,229.25 = $2,416.94 / 2 + $1,208.47
$1,208.47 x 1.5% = $18.13
Year 7: $1,229.25 + ($1,229.25 x 5% = $61.46) = $1,290.71
$1,290.71 - ($1,229.25 x 1.5% = $18.44) = $1,272.27
$1,229.25 + $1,272.27 = $2,501.52 / 2 = $1,250.76
$1,250.76 x 1.5% = $18.76
Year 8: $1,272.27 + ($1,272.27 x 5% = $63.61) = $1,335.88
$1,335.88 - ($1,272.27 x 1.5% = $19.08) = $1,316.80
$1,272.27 + $1,316.80 = $2,589.07 / 2 = $1,294.54
$1,294.54 x 1.5% = $19.42
Year 9: $1,316.80 + ($1,316.80 x 5% = $65.84) = $1,382.64
$1,382.64 - ($1,316.80 x 1.5% = $19.75) = $1,362.89
$1,316.80 + $1,362.89 = $2,679.69 / 2 = $1,339.85
$1,339.85 x 1.5% = $20.10
Year 10: $1,362.89 + ($1,362.89 x 5% = $68.14) = $1,431.03
$1,431.03 - ($1,362.89 x 1.5% = $20.44) = $1,410.59
$1,362.89 + $1,410.59 = $2,773.48 / 2 = $1,386.74
$1,386.74 x 1.5% = $20.80
$(15.26 + 15.80 + 16.35 + 16.92 + 17.51 + 18.13 +
18.76 + 19.42 + 20.10 + 20.80) = $179.05
Rounds to $179
Global Growth Fund
Year 1 : $1,000 + ($1,000 x 5% = $50) = $1,050
$1,050 - ($1,000 x 1.44% = $14.40) = $1,035.60
$1,000 + $1,035.60 = $2,035.60 / 2 = $1,017.80
$1,017.80 x 1.44% = $14.66
Rounds to $15
Year 2: $1,035.60 + ($1,035.60 x 5% = $51.78) = $1,087.38
$1,087.38 - ($1,035.60 x 1.44% = $14.91) = $1,072.47
$1,035.60 + $1,072.47 = $2,108.07 / 2 = $1,054.03
$1,054.03 x 1.44% = $15.18
Year 3: $1,072.47 + ($1,072.47 x 5% = $53.62) = $1,126.09
$1,126.09 - ($1,072.47 x 1.44% = $15.44) = $1,110.65
$1,072.47 + $1,110.65 = $2,183.11 / 2 = $1,091.56
$1,091.56 x 1.44% = $15.72
$(14.66 + 15.18 + 15.72) = $45.55
Rounds to $46
<PAGE>
Part C--Other Information
Item 24(b)(16)(a)
Page 3
Global Growth Fund (cont'd)
Year 4: $1,110.65 + ($1,110.65 x 5% = $55.53) = $1,166.18
$1,166.18 - ($1,110.65 x 1.44% = $15.99) = $1,150.19
$1,110.65 + $1,150.19 = $2,260.83 / 2 = $1,130.42
$1,130.42 x 1.44% = $16.28
Year 5: $1,150.19 + ($1,150.19 x 5% = $57.51) = $1,207.70
$1,207.70 - ($1,150.19 x 1.44% = $16.56) = $1,191.13
$1,150.19 + $1,191.13 = $2,341.32 / 2 = $1,170.66
$1,170.66 x 1.44% = $16.86
$(14.66 + 15.18 + 15.72 + 16.28 + 16.86) = $78.69
Rounds to $79
Year 6: $1,191.13 + ($1,191.13 x 5% = $59.56) = $1,250.69
$1,250.69 - ($1,191.13 x 1.44% = $17.15) = $1,233.54
$1,191.13 + $1,233.54 = $2,424.67 / 2 = $1,212.34
$1,212.34 x 1.44% = $17.46
Year 7: $1,233.54 + ($1,233.54 x 5% = $61.68) = $1,295.21
$1,295.21 - ($1,233.54 x 1.44% = $17.76) = $1,277.45
$1,233.54 + $1,277.45 = $2,510.99 / 2 = $1,255.49
$1,255.49 x 1.44% = $18.08
Year 8: $1,277.45 + ($1,277.45 x 5% = $63.87) = $1,341.32
$1,341.32 - ($1,277.45 x 1.44% = $18.40)= $1,322.93
$1,277.45 + $1,322.93 = $2,600.38 / 2 = $1,300.19
$1,300.19 x 1.44% = $18.72
Year 9: $1,322.93 + ($1,322.93 x 5% = $66.15) = $1,389.07
$1,389.07 - ($1,322.93 x 1.44% = $19.05) = $1,370.02
$1,322.93 + $1,370.02 = $2,692.95 / 2 = $1,346.48
$1,346.48 x 1.44% = $19.39
Year 10: $1,370.02 + ($1,370.02 x 5% = $68.50) = $1,438.53
$1,438.53 - ($1,370.02 x 1.44% = $19.73) = $1,418.80
$1,370.02 + $1,418.80 = $2,788.82 / 2 = $1,394.41
$1,394.41 x 1.44% = $20.08
$(14.66 + 15.18 + 15.72 + 16.28 + 16.86 + 17.46 +
18.08 + 18.72 + 19.39 + 20.08) = $172.42
Rounds to $172
Global Income Fund
Year 1 : $1,000 + ($1,000 x 5% = $50) = $1,050
$1,050 - ($1,000 x 1.21% = $12.10) = $1,037.90
$1,000 + $1,037.90 = $2,037.90 / 2 = $1,018.95
$1,018.95 x 1.21% = $12.33
Rounds to $12
Year 2: $1,037.90 + ($1,037.90 x 5% = $51.90) = $1,089.80
$1,089.80 - ($1,037.90 x 1.21% = $12.56) = $1,077.24
$1,037.90 + $1,077.24 = $2,115.14 / 2 = $1,057.57
$1,057.57 x 1.21% = $12.80
<PAGE>
Part C--Other Information
Item 24(b)(16)(a)
Page 4
Global Income Fund (cont'd)
Year 3: $1,077.24 + ($1,077.24 x 5% = $53.86) = $1,131.10
$1,131.10 - ($1,077.24 x 1.21% = $13.03) = $1,118.06
$1,077.24 + $1,118.06 = $2,195.30 / 2 = $1,097.65
$1,097.65 x 1.21% = $13.28
$(12.33 + 12.80 + 13.28) = $38.41
Rounds to $38
Year 4: $1,118.06 + ($1,118.06 x 5% = $55.90) = $1,173.97
$1,173.97 - ($1,118.06 x 1.21% = $13.53) = $1,160.44
$1,118.06 + $1,160.44 = $2,278.50 / 2 = $1,139.25
$1,139.25 x 1.21% = $13.78
Year 5: $1,160.44 + ($1,160.44 x 5% = $58.02) = $1,218.46
$1,218.46 - ($1,160.44 x 1.21% = $14.04) = $1,204.42
$1,160.44 + $1,204.42 = $2,364.86 / 2 = $1,182.43
$1,182.43 x 1.21% = $14.31
$(12.33 + 12.80 + 13.28 + 13.78 + 14.31) = $66.50
Rounds to $67
Year 6 $1,204.42 + ($1,204.42 x 5% = $60.22) = $1,264.64
$1,264.64 - ($1,204.42 x 1.21% = $14.57) = $1,250.07
$1,204.42 + $1,250.07 = $2,454.49 / 2 = $1,227.24
$1,227.24 x 1.21% = $14.85
Year 7 $1,250.07 + ($1,250.07 x 5% = $62.50) = $1,312.57
$1,312.57 - ($1,250.07 x 1.21% = $15.13) = $1,297.44
$1,250.07 + $1,297.44 = $2,547.51 / 2 = $1,273.76
$1,273.76 x 1.21% = $15.41
Year 8 $1,297.44 + ($1,297.44 x 5% = $64.87) = $1,362.32
$1,362.32 - ($1,297.44 x 1.21% = $15.70) = $1,346.62
$1,297.44 + $1,346.62 = $2,644.06 / 2 = $1,322.03
$1,322.03 x 1.21% = $16.00
Year 9 $1,346.62 + ($1,346.62 x 5% = $67.33) = $1,413.95
$1,413.95 - ($1,346.62 x 1.21% = $16.29) = $1,397.65
$1,346.62 + $1,397.65 = $2,744.27 / 2 = $1,372.14
$1,372.14 x 1.21% = $16.60
Year 10 $1,397.65 + ($1,397.65 x 5% = $69.88) = $1,467.54
$1,467.54 - ($1,397.65 x 1.21% = $16.91) = $1,450.62
$1,397.65 + $1,450.62 = $2,848.28 / 2 = $1,424.14
$1,424.14 x 1.21% = $17.23
$(12.33 + 12.80 + 13.28 + 13.78 + 14.31 + 14.85 +
15.41 + 16.00 + 16.60 + 17.23) = $146.59
Rounds to $147
<PAGE>
Part C--Other Information
Item 24(b)(16)(b)
THE FONTAINE TRUST
FONTAINE CAPITAL APPRECIATION FUND
Computations of the SEC's Standarized Average Annual Return for the period
December 31, 1994 to December 31, 1995 as set forth in the Statement of
Additional Information.
Average Annual Total Return of a Hypothetical $1,000 Investment in the Fund
T = (ERV/P)1/n - 1
where,
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period December 31, 1994 to December 31, 1995:
Calculation of ERV:
(12/31/94) $1,000 @ $10.75/sh = 93.023 shares
(12/22/95) 93.023 shares @ $1.76/sh (dividend
distribution) = $163.72
$163.72 @ $10.76 (reinvest price) = 15.216 shares
93.023 shares + 15.216 shares = 108.239 shares
(12/31/95) 108.239 shares @ $10.67/sh = $1,154.91
T = ($1,154.91/$1,000)1/1 - 1
= 1.15491 - 1
= +.15491
= + 15.5%
<PAGE>
Part C--Other Information
Item 24(b)(16)(b)
Page 2
Computations of the SEC's Standarized Average Annual Return for the period
December 31, 1990 to December 31, 1995 as set forth in the Statement of
Additional Information.
Average Annual Total Return of a Hypothetical $1,000 Investment in the Fund
T = (ERV/P)1/n - 1
where,
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period December 31, 1990 to December 31, 1995:
Calculation of ERV:
(12/31/90) $1,000 @ $10.40/sh = 96.154 shares
(12/23/91) 96.154 shares @ $0.84/sh (dividend
distribution) = $80.77
$80.77 @ $10.67 (reinvest price) = 7.570 shares
96.154 shares + 7.570 shares = 103.724 shares
(12/23/92) 103.724 shares @ $0.75/sh (dividend
distribution) = $77.79
$77.79 @ $9.53 (reinvest price) = 8.163 shares
103.724 shares + 8.163 shares = 111.887 shares
(8/30/93) 111.887 shares @ $0.075/sh (dividend
distribution) = $8.39
$8.39 @ $10.39 (reinvest price) = .808 shares
111.887 shares + .808 shares = 112.695 shares
(12/23/93) 112.695 shares @ $0.125/sh (dividend
distribution) = $14.09
$14.09 @ $10.80 (reinvest price) = 1.304 shares
112.695 shares + 1.304 shares = 113.999 shares
(12/27/94) 113.999 shares @ $0.25/sh (dividend
distribution) = $28.50
$28.50 @ $10.67 (reinvest price) = 2.671 shares
113.999 shares + 2.671 shares = 116.670 shares
(12/22/95) 116.670 shares @ $1.76/sh (dividend
distribution) = $205.34
$205.34 @ $10.76 (reinvest price) = 19.084 shares
116.670 shares + 19.084 shares = 135.754 shares
(12/31/95) 135.754 shares @ $10.67/sh = $1,448.50
T = ($1,448.50/$1,000)1/5 - 1
= 1.07692 - 1
= +0.07692
= + 7.7
<PAGE>
Part C--Other Information
Item 24(b)(16)(b)
Page 3
Computations of the SEC's Standarized Average Annual Return for the period
September 28, 1989 (Since Inception) to December 31, 1995 as set forth in the
Statement of Additional Information.
Average Annual Total Return of a Hypothetical $1,000 Investment in the Fund
T = (ERV/P)1/n - 1
where,
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period September 28, 1989 (Inception) to December 31, 1995:
Calculation of ERV:
(9/28/89) $1,000 @ $10.00/sh = 100.000 shares
(12/19/89) 100.000 shares x $0.20/sh (dividend/
distribution) = $20.00
$20.00 @ $10.19 (reinvest price) = 1.963 shares
100.000 shares + 1.963 shares = 101.963 shares
(12/19/90) 101.963 shares x $0.437/sh (dividend/
distribution) = $44.56
$44.56 @ 10.42 (reinvest price) = 4.276 shares
101.963 shares + 4.276 shares = 106.239 shares
(12/23/91) 106.239 shares @ $0.84/sh (dividend/
distribution) = $89.24
$89.24 @ $10.67 (reinvest price) = 8.364 shares
106.236 shares + 8.364 shares = 114.603 shares
(12/23/92) 114.603 shares @ $0.75/sh (dividend/
distribution) = $85.95
$85.95 @ $9.53 (reinvest price) = 9.019 shares
114.603 shares + 9.019 shares = 123.622 shares
(8/30/93) 123.622 shares x $0.075/sh (dividend/
distribution) = $9.27
$9.27 @ 10.39 (reinvest price) = .892 shares
123.622 shares + .892 shares = 124.514 shares
(12/23/93) 124.514 shares @ $0.125/sh (dividend/
distribution) = $15.56
$15.56 @ $10.80 (reinvest price) = 1.441 shares
124.514 shares + 1.441 shares = 125.955 shares
(12/27/94) 125.955 shares @ $0.25/sh (dividend/
distribution) = $31.49
$31.49 @ $10.67 (reinvest price) = 2.951 shares
125.955 shares + 2.951 shares = 128.906 shares
(12/22/95) 128.906 shares @ $1.76/sh (dividend/
distribution) = $226.88
$226.88 @ $10.76 (reinvest price) = 21.085 shares
128.906 shares + 21.085 shares = 149.991 shares
(12/31/95) 149.991 shares @ $10.67/sh = $1,600.40
T = ($1,600.40/$1,000)1/6.26301 - 1
= (1.60040).15967 - 1
= +0.077976
= + 7.8%
<PAGE>
Part C--Other Information
Item 24(b)(16)(b)
Page 4
THE FONTAINE TRUST
FONTAINE GLOBAL GROWTH FUND
Computations of the SEC's Standarized Average Annual Return for the period
December 31, 1994 to December 31, 1995 as set forth in the Statement of
Additional Information.
Average Annual Total Return of a Hypothetical $1,000 Investment in the Fund
T = (ERV/P)1/n - 1
where,
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period December 31, 1994 to December 31, 1995:
Calculation of ERV:
(12/31/94) $1,000 @ $9.61 = 104.058 shares
(12/22/95) 104.058 shares @ $0.93/sh (dividend
distribution) = $96.77
$96.77 @ $10.11 (reinvest price) = 9.572 shares
104.058 shares + 9.572 shares = 113.630 shares
(12/31/95) 113.630 shares @ $10.03/sh = $1,139.71
T = ($1,139.71/$1,000)1/1 - 1
= 1.13971 - 1
= +.13971
= + 14.0%
<PAGE>
Part C--Other Information
Item 24(b)(16)(b)
Page 5
Computations of the SEC's Standarized Average Annual Return for the period
May 1, 1992 (Inception) to December 31, 1995 as set forth in the Statement
of Additional Information.
Average Annual Total Return of a Hypothetical $1,000 Investment in the Fund
T = (ERV/P)1/n - 1
where,
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period May 1, 1992 (Inception) to December 31, 1995:
Calculation of ERV:
(5/01/92) $1,000 @ $10.00/sh = 100.000 shares
(12/23/92) 100.000 shares @ $0.33/sh (dividend/
distribution) = $33.00
$33.00 @ $9.25 (reinvest price) = 3.568 shares
100.000 shares + 3.568 shares = 103.568 shares
(12/23/93) 103.568 shares @ $0.24/SH (dividend/
distribution = $24.86
$24.86 @ $10.39 (reinvest price) = 2.392 shares
103.568 shares + 2.392 shares = 105.960 shares
(12/27/94) 105.960 shares @ $0.69/SH (dividend/
distribution = $73.11
$73.11 @ $9.56 (reinvest price) = 7.648 shares
105.960 shares + 7.648 shares = 113.608 shares
(12/22/95) 113.608 shares @ $0.93/SH (dividend/
distribution = $105.66
$105.66 @ $10.11 (reinvest price) = 10.451 shares
113.608 shares + 10.451 shares = 124.059 shares
(12/31/95) 124.059 shares @ $10.03 = $1,244.31
T = ($1,244.31/$1,000)1/3.67123 - 1
= (1.24431).27239 - 1
= +.061347
= + 6.1%
<PAGE>
Part C--Other Information
Item 24(b)(16)(b)
Page 6
THE FONTAINE TRUST
FONTAINE GLOBAL INCOME FUND
Computations of the SEC's Standarized Average Annual Return for the period
December 31, 1994 to December 31, 1995 as set forth in the Statement of
Additional Information.
Average Annual Total Return of a Hypothetical $1,000 Investment in the Fund
T = (ERV/P)1/n - 1
where,
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period December 31, 1994 to December 31, 1995:
Calculation of ERV:
(12/31/94) $1,000 @ $10.16/sh = 98.425 shares
(3/27/95) 98.425 shares x $0.07/sh (dividend
distribution) = $6.89
$6.89 @ $10.54 (reinvest price) = .654 shares
98.425 shares + .654 shares = 99.079 shares
(6/28/95) 99.079 shares x $0.09/sh (dividend
distribution) = $8.92
$8.92 @ $10.74 (reinvest price) = .830 shares
99.079 shares + .830 shares = 99.909 shares
(9/28/95) 99.909 shares x $0.09/sh (dividend
distribution) = $8.99
$8.99 @ $10.95 (reinvest price) = .821 shares
99.909 shares + .821 shares = 100.730 shares
(12/22/95) 100.730 shares @ $0.72/sh (dividend
distribution) = $72.53
$72.53 @ $10.46 (reinvest price) = 6.934 shares
100.730 shares + 6.934 shares = 107.664 shares
(12/31/95) 107.664 shares @ $10.46/sh = $1,126.17
T = ($1,126.17/$1,000)1/1 - 1
= 1.12617 - 1
= +.12617
= + 12.6%
<PAGE>
Part C--Other Information
Item 24(b)(16)(b)
Page 7
Computations of the SEC's Standarized Average Annual Return for the period
May 1, 1992 (Inception) to December 31, 1995 as set forth in the Statement
of Additional Information.
Average Annual Total Return of a Hypothetical $1,000 Investment in the Fund
T = (ERV/P)1/n - 1
where,
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period May 1, 1992 (Inception) to December 31, 1995:
Calculation of ERV:
(5/01/92) $1,000 @ $10.00/sh = 100.000 shares
(6/26/92) 100.000 shares @ $0.04/sh (dividend/
distribution) = $4.00
$4.00 @ $10.16 (reinvest price) = 0.394 shares
100.000 shares + 0.394 shares = 100.394 shares
(9/28/92) 100.394 shares @ $0.07/sh (dividend/
distribution) = $7.03
$7.03 @ $10.36 (reinvest price) = 0.679 shares
100.394 shares + 0.679 shares = 101.073 shares
(12/23/92) 101.073 shares @ $0.18/sh (dividend/
distribution) = $18.19
$18.19 @ $9.32 (reinvest price) = 1.952 shares
101.073 shares + 1.952 shares = 103.025 shares
(3/29/93) 103.025 shares @ $0.05/sh (dividend/
distribution) = $5.15
$5.15 @ $9.77 (reinvest price) = 0.527 shares
103.025 shares + .527 shares = 103.552 shares
(12/23/93) 103.552 shares @ $0.46/sh (dividend/
distribution) = $47.63
$47.63 @ $10.87 (reinvest price) = 4.382 shares
103.552 shares + 4.382 shares = 107.934 shares
(3/29/94) 107.934 shares x $0.04/sh (dividend/
distribution) = $4.32
$4.32 @ $10.58 (reinvest price) = .408 shares
107.934 shares + .408 shares = 108.342 shares
(6/29/94) 108.342 shares x $0.07/sh (dividend/
distribution) = $7.58
$7.58 @ $10.46 (reinvest price) = .725 shares
108.342 shares + .725 shares = 109.067 shares
(9/29/94) 109.067 shares x $0.19/sh (dividend/
distribution) = $20.72
$20.72 @ $10.96 (reinvest price) = 1.891 shares
109.067 shares + 1.891 shares = 110.958 shares
(12/27/94) 110.958 shares @ $0.48/sh (dividend/
distribution) = $53.26
$53.26 @ $10.11 (reinvest price) = 5.268 shares
110.958 shares + 5.268 shares = 116.226 shares
(3/27/95) 116.226 shares x $0.07/sh (dividend
distribution) = $8.14
$8.14 @ $10.54 (reinvest price) = .772 shares
116.226 shares + .772 shares = 116.998 shares
<PAGE>
Part C--Other Information
Item 24(b)(16)(b)
Page 8
(6/28/95) 116.998 shares x $0.09/sh (dividend
distribution) = $10.53
$10.53 @ $10.74 (reinvest price) = .980 shares
116.998 shares + .980 shares = 117.978 shares
(9/28/95) 117.978 shares x $0.09/sh (dividend
distribution) = $10.62
$10.62 @ $10.95 (reinvest price) = .970 shares
117.978 shares + .970 shares = 118.948 shares
(12/22/95) 118.948 shares @ $0.72/sh (dividend
distribution) = $85.64
$85.64 @ $10.46 (reinvest price) = 8.188 shares
118.948 shares + 8.188 shares = 127.136 shares
(12/31/95) 127.136 shares @ $10.46/sh = $1,329.84
T = ($1,329.84/$1,000)1/3.671233 - 1
= (1.32984).27239 - 1
= +0.080741
= + 8.1%
<PAGE>
Part C--Other Information
Item 24(b)(16)(c)
Cumulative Total Return of a Hypothetical $1,000 Investment
in the Fontaine Capital Appreciation Fund for the period September 28, 1989
(Inception) to December 31, 1995
C = (ERV/P) - 1
where,
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period (Inception) September 28, 1989 to December 31, 1995
Calculation of ERV:
(9/28/89) $1,000 @ $10.00/sh = 100.000 shares
(12/19/89) 100.000 shares x $0.20/sh (dividend/
distribution) = $20.00
$20.00 @ $10.19 (reinvest price) = 1.963 shares
100.000 shares + 1.963 shares = 101.963 shares
(12/19/90) 101.963 shares x $0.437/sh (dividend/
distribution) = $44.56
$44.56 @ 10.42 (reinvest price) = 4.276 shares
101.963 shares + 4.276 shares = 106.239 shares
(12/23/91) 106.239 shares x $0.84/sh (dividend/
distribution) = $89.24
$89.24 @ $10.67 (reinvest price) = 8.364 shares
106.239 shares + 8.364 shares = 114.603 shares
(12/23/92) 114.603 shares x $0.75/sh (dividend/
distribution) = $85.95
$85.95 @ $9.53 (reinvest price) = 9.019 shares
114.603 shares + 9.019 shares = 123.622 shares
(8/30/93) 123.622 shares x $0.075/sh (dividend/
distribution) = $9.27
$9.27 @ $10.39 (reinvest price) = .892 shares
123.622 shares + .892 shares = 124.514 shares
(12/23/93) 124.514 shares x $0.125/sh (dividend/
distribution) = $15.56
$15.56 @ $10.80 (reinvest price) = 1.441 shares
124.514 shares + 1.441 shares = 125.955 shares
(12/27/94) 125.955 shares @ $0.25/sh (dividend/
distribution) = $31.49
$31.49 @ $10.67 (reinvest price) = 2.951 shares
125.955 shares + 2.951 shares = 128.906 shares
(12/22/95) 128.906 shares @ $1.76/sh (dividend/
distribution) = $226.88
$226.88 @ $10.76 (reinvest price) = 21.085 shares
128.906 shares + 21.085 shares = 149.991 shares
(12/31/95) 149.991 shares @ $10.67/sh = $1,600.40
C = ($1,600.40/$1,000) - 1
= 1.60040 - 1
= 0.60040
= +60.0%
<PAGE>
Part C--Other Information
Item 24(b)(16)(c)
Page 2
Cumulative Total Return of a Hypothetical $1,000 Investment in the Fontaine
Global Growth Fund for the period May 1, 1992 (Inception) to December 31, 1995
C = (ERV/P) - 1
where,
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period (Inception) May 1, 1992 to December 31, 1995
Calculation of ERV:
(5/01/92) $1,000 @ $10.00/sh = 100.000 shares
(12/23/92) 100.000 shares @ $0.33/sh (dividend/
distribution) = $33.00
$33.00 @ $9.25 (reinvest price) = 3.568 shares
100.000 shares + 3.568 shares = 103.568 shares
(12/23/93) 103.568 shares @ $0.24/sh (dividend/
distribution = $24.86
$24.86 @ $10.39 (reinvest price) = 2.392 shares
103.568 shares + 2.392 shares = 105.960 shares
(12/27/94) 105.960 shares @ $0.69/SH (dividend/
distribution = $73.11
$73.11 @ $9.56 (reinvest price) = 7.648 shares
105.960 shares + 7.648 shares = 113.608 shares
(12/22/95) 113.608 shares @ $0.93/SH (dividend/
distribution = $105.66
$105.66 @ $10.11 (reinvest price) = 10.451 shares
113.608 shares + 10.451 shares = 124.059 shares
(12/31/95) 124.059 shares @ $10.03 = $1,244.31
C = ($1,244.31/$1,000) - 1
= 1.24431 - 1
= .24431
= +24.4%
<PAGE>
Part C--Other Information
Item 24(b)(16)(c)
Page 3
Cumulative Total Return of a Hypothetical $1,000 Investment in the Fontaine
Global Income Fund for the period May 1, 1992 (Inception) to December 31, 1995
C = (ERV/P) - 1
where,
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
For the period (Inception) May 1, 1992 to December 31, 1995:
Calculation of ERV:
(5/01/92) $1,000 @ $10.00/sh = 100.000 shares
(6/26/92) 100.000 shares @ $0.04/sh (dividend/
distribution) = $4.00
$4.00 @ $10.16 (reinvest price) = 0.394 shares
100.000 shares + 0.394 shares = 100.394 shares
(9/28/92) 100.394 shares @ $0.07/sh (dividend/
distribution) = $7.03
$7.03 @ $10.36 (reinvest price) = 0.679 shares
100.394 shares + 0.679 shares = 101.073 shares
(12/23/92) 101.073 shares @ $0.18/sh (dividend/
distribution) = $18.19
$18.19 @ $9.32 (reinvest price) = 1.952 shares
101.073 shares + 1.952 shares = 103.025 shares
(3/29/93) 103.025 shares @ $0.05/sh (dividend/
distribution) = $5.15
$5.15 @ $9.77 (reinvest price) = .527 shares
103.025 shares + .527 shares = 103.552 shares
(12/23/93) 103.552 shares @ $0.46/sh (dividend/
distribution) = $47.63
$47.63 @ $10.87 (reinvest price) = 4.382 shares
103.552 shares + 4.382 shares = 107.934 shares
(3/29/94) 107.934 shares x $0.04/sh (dividend/
distribution) = $4.32
$4.32 @ $10.58 (reinvest price) = .408 shares
107.934 shares + .408 shares = 108.342 shares
(6/29/94) 108.342 shares x $0.07/sh (dividend/
distribution) = $7.58
$7.58 @ $10.46 (reinvest price) = .725 shares
108.342 shares + .725 shares = 109.067 shares
(9/29/94) 109.067 shares x $0.19/sh (dividend/
distribution) = $20.72
$20.72 @ $10.96 (reinvest price) = 1.891 shares
109.067 shares + 1.891 shares = 110.958 shares
(12/27/94) 110.958 shares @ $0.48/sh (dividend/
distribution) = $53.26
$53.26 @ $10.11 (reinvest price) = 5.268 shares
110.958 shares + 5.268 shares = 116.226 shares
<PAGE>
Part C--Other Information
Item 24(b)(16)(c)
Page 4
(3/27/95) 116.226 shares x $0.07/sh (dividend
distribution) = $8.14
$8.14 @ $10.54 (reinvest price) = .772 shares
116.226 shares + .772 shares = 116.998 shares
(6/28/95) 116.998 shares x $0.09/sh (dividend
distribution) = $10.53
$10.53 @ $10.74 (reinvest price) = .980 shares
116.998 shares + .980 shares = 117.978 shares
(9/28/95) 117.978 shares x $0.09/sh (dividend
distribution) = $10.62
$10.62 @ $10.95 (reinvest price) = .970 shares
117.978 shares + .970 shares = 118.948 shares
(12/22/95) 118.948 shares @ $0.72/sh (dividend
distribution) = $85.64
$85.64 @ $10.46 (reinvest price) = 8.188 shares
118.948 shares + 8.188 shares = 127.136 shares
(12/31/95) 127.136 shares @ $10.46/sh = $1,329.84
C = ($1,329.84/$1,000) - 1
= 1.32984 - 1
= +.32984
= + 33.0%
<PAGE>
Part C--Other Information
Item 24(b)(16)(d)
Fontaine Global Income Fund
Sec 30-day Yield Calculation
12/31/95
Yield = 2[((((a-b)/cd)+1)^6)-1]
where:
a=dividends and interest earned during the period
b=expenses accrued during the period, net of reimbursements
c=average daily number of shares oustanding during the
period entitled to receive dividends
d=maximum offering price per share on the last day of the
month
a = $3,924.29
b = $962.75
c = 83,153.693
d = $10.46
Yield = 4.12%
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> FONTAINE CAPITAL APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 5,195,016
<INVESTMENTS-AT-VALUE> 5,128,680
<RECEIVABLES> 205,150
<ASSETS-OTHER> 3,678
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,337,508
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55,123
<TOTAL-LIABILITIES> 55,123
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,409,019
<SHARES-COMMON-STOCK> 495,226
<SHARES-COMMON-PRIOR> 528,362
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (60,298)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (66,336)
<NET-ASSETS> 5,282,385
<DIVIDEND-INCOME> 29,009
<INTEREST-INCOME> 167,053
<OTHER-INCOME> 0
<EXPENSES-NET> 80,268
<NET-INVESTMENT-INCOME> 115,794
<REALIZED-GAINS-CURRENT> 658,080
<APPREC-INCREASE-CURRENT> (21,365)
<NET-CHANGE-FROM-OPS> 752,509
<EQUALIZATION> (3,159)
<DISTRIBUTIONS-OF-INCOME> (114,581)
<DISTRIBUTIONS-OF-GAINS> (636,829)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,751
<NUMBER-OF-SHARES-REDEEMED> 143,398
<SHARES-REINVESTED> 66,510
<NET-CHANGE-IN-ASSETS> (396,764)
<ACCUMULATED-NII-PRIOR> (1,213)
<ACCUMULATED-GAINS-PRIOR> (81,549)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 50,837
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 112,514
<AVERAGE-NET-ASSETS> 5,350,138
<PER-SHARE-NAV-BEGIN> 10.75
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> 1.42
<PER-SHARE-DIVIDEND> (.26)
<PER-SHARE-DISTRIBUTIONS> (1.50)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> FONTAINE GLOBAL GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 762,597
<INVESTMENTS-AT-VALUE> 756,281
<RECEIVABLES> 4,038
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 760,369
<PAYABLE-FOR-SECURITIES> 48,435
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,805
<TOTAL-LIABILITIES> 60,240
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 706,597
<SHARES-COMMON-STOCK> 69,788
<SHARES-COMMON-PRIOR> 35,507
<ACCUMULATED-NII-CURRENT> (143)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,325)
<NET-ASSETS> 700,129
<DIVIDEND-INCOME> 2,298
<INTEREST-INCOME> 13,559
<OTHER-INCOME> 0
<EXPENSES-NET> 6,005
<NET-INVESTMENT-INCOME> 9,852
<REALIZED-GAINS-CURRENT> 38,241
<APPREC-INCREASE-CURRENT> (1,296)
<NET-CHANGE-FROM-OPS> 46,797
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,148)
<DISTRIBUTIONS-OF-GAINS> (32,736)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,410
<NUMBER-OF-SHARES-REDEEMED> 1,113
<SHARES-REINVESTED> 3,984
<NET-CHANGE-IN-ASSETS> 358,714
<ACCUMULATED-NII-PRIOR> 153
<ACCUMULATED-GAINS-PRIOR> (5,505)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,510
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,511
<AVERAGE-NET-ASSETS> 418,045
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> .21
<PER-SHARE-GAIN-APPREC> 1.14
<PER-SHARE-DIVIDEND> (.22)
<PER-SHARE-DISTRIBUTIONS> (.71)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.03
<EXPENSE-RATIO> 1.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> FONTAINE GLOBAL INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,108,718
<INVESTMENTS-AT-VALUE> 1,112,278
<RECEIVABLES> 16,176
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,128,504
<PAYABLE-FOR-SECURITIES> 53,927
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,034
<TOTAL-LIABILITIES> 68,961
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,055,859
<SHARES-COMMON-STOCK> 101,297
<SHARES-COMMON-PRIOR> 67,229
<ACCUMULATED-NII-CURRENT> 205
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,479
<NET-ASSETS> 1,059,543
<DIVIDEND-INCOME> 3,498
<INTEREST-INCOME> 31,921
<OTHER-INCOME> 0
<EXPENSES-NET> 9,414
<NET-INVESTMENT-INCOME> 26,005
<REALIZED-GAINS-CURRENT> 49,011
<APPREC-INCREASE-CURRENT> 15,550
<NET-CHANGE-FROM-OPS> 90,566
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (25,618)
<DISTRIBUTIONS-OF-GAINS> (48,877)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,366
<NUMBER-OF-SHARES-REDEEMED> 2,002
<SHARES-REINVESTED> 6,704
<NET-CHANGE-IN-ASSETS> 376,361
<ACCUMULATED-NII-PRIOR> (181)
<ACCUMULATED-GAINS-PRIOR> (135)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,816
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,523
<AVERAGE-NET-ASSETS> 776,562
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> .36
<PER-SHARE-GAIN-APPREC> .91
<PER-SHARE-DIVIDEND> (.35)
<PER-SHARE-DISTRIBUTIONS> (.62)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.46
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 19
<TABLE>
THE FONTAINE TRUST
SPECIMEN PRICE MAKE-UP SHEET
December 31, 1995
<CAPTION>
Value of Registrant's
Portfolio Securities Outstanding Total Offering
and Other Assets Securities Price Per Share
<S> <C> <C> <C>
THE FONTAINE CAPITAL
APPRECIATION FUND
$5,282,385 495,226 $10.67
THE FONTAINE GLOBAL
GROWTH FUND
$700,129 69,788 $10.03
THE FONTAINE GLOBAL
INCOME FUND
$1,059,543 101,297 $10.46
</TABLE>
