Registration Nos: 33-29678
811-5835
As filed with the Securities and Exchange Commission on May 1, 1997.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Post-Effective Amendment No. 10
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 13
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, 1997 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, 1996 was
filed on February 27, 1997
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
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, 1997
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, 1997 ,
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 calling 1-800-247-1550 or 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...........................................7
Global Growth Fund..................................................8
Global Income Fund..................................................9
Risk Factors and Certain Investment Practices......................10
Dividends, Distributions, and Taxes................................13
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..........................................21
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.
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.
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, 1996 . 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 on page 3.
Capital Global Global
Appreciation Growth Income
Shareholder Transaction Expenses Fund Fund Fund
Sales Load Imposed on Purchase None None None
Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load Imposed on Redemptions None None None
Redemption Fee None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
<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> .80<F1> .75%<F1>
12b-1 Fees None None None
Other Expenses
Custodial, accounting sevices,
and shareholder servicing costs .38% .59% .36%
Professional fees and expenses .39% .31% .27%
Miscellaneous .17% .12% .13%
Total Fund Operating Expenses<F1> 1.89% 1.82% 1.51%
<F1> Effective May 1, 1997, the Expense Limitation Agreements with the
Funds, under which Fontaine Associates had 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)
which in any year exceeded 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, were discontinued.
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 $19 $59 $102 $221
Global Growth Fund $18 $57 $98 $214
Global Income Fund $15 $48 $82 $180
<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.
<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, 1996.
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.
Capital
Appreciation
------------------------------------------------------------------------------------------
Year Year Year Year Year Year From From
Ended Ended Ended Ended Ended Ended 9/1/90 to 9/28/89<F2>
12/31/96 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> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.67 $ 10.75 $ 10.75 $ 9.60 $ 10.78 $ 10.40 $ 10.44 $ 10.00
Investment Activities
Net Investment Income<F4> 0.01 0.26 0.07 0.135 0.33 0.65 0.08 0.44
Net Realized and Unrealized
Gain/(Loss) on Investments 1.59 1.42 0.18 1.215 (0.76) 0.57 0.32 0.20
Total From Investment Activities 1.60 1.68 0.25 1.35 (0.43) 1.22 0.40 0.64
Distributions
Net Investment Income (0.01) (0.26) (0.18) (0.135) (0.12) (0.64) (0.40) (0.13)
In Excess of Net Investment Income (0.22) -- -- -- -- -- -- --
Net Realized Gains (2.15) (1.50) (0.07) (0.065) (0.63) (0.20) (0.04) (0.07)
In Excess of Net Realized Gains (0.52) -- -- -- -- -- -- --
Total Distributions (2.90) (1.76) (0.25) (0.20) (0.75) (0.84) (0.44) (0.20)
-------- -------- -------- -------- -------- -------- -------- -------
NET ASSET VALUE,
END OF PERIOD $ 9.37 $ 10.67 $ 10.75 $ 10.75 $ 9.60 $ 10.78 $ 10.40 $ 10.44
Ratio of Expenses to
Average Net Assets<F4> 1.49% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of Net Investment Income
to Average Net Assets 0.09% 2.16% 1.41% 1.15% 3.12% 4.14% 5.10%<F3> 5.26%<F3>
Total Investment Return 15.00% 15.49% 2.34% 14.09% -3.94% 11.81% 3.82% 6.45%
Portfolio Turnover Rate 372.7% 96.0% 135.6% 131.7% 129.2% 79.4% 273.9%<F3> 288.0%<F3>
Average Commission Paid $0.0195 -- -- -- -- -- -- --
Net Assets End of Period (000's) $6,405 $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 , the annualized expense ratios would have been:
1.89%, 2.10%, 2.23%, 1.81%, 1.94%, 1.95% , 3.43% and 3.43%. 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, 1996, which, except for pages 1 through 5
thereof, is incorporated by reference in the Trust's Statement of Additional Information.
</TABLE>
<TABLE>
CONDENSED FINANCIAL INFORMATION (Cont'd)
Global
Growth
---------------------------------------------------
Year Year Year Year From
Ended Ended Ended Ended 5/1/92<F1>
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.03 $ 9.61 $ 10.34 $ 9.33 $ 10.00
Investment Activities
Net Investment Income<F3> 0.06 0.21 0.16 0.14 0.07
Net Realized and Unrealized
Gain/(Loss) on Investments 3.65 1.14 (0.20) 1.11 (0.41)
Total From Investment Activities 3.71 1.35 (0.04) 1.25 (0.34)
Distributions
Net Investment Income (0.02) (0.22) (0.16) (0.11) (0.08)
In Excess of Net Investment Income (0.10) -- -- -- --
Net Realized Gains (1.09) (0.71) (0.53) (0.13) (0.25)
In Excess of Net Realized Gains (0.03) -- -- -- --
Total Distributions (1.24) (0.93) (0.69) (0.24) (0.33)
NET ASSET VALUE,
END OF PERIOD $ 12.50 $ 10.03 $ 9.61 $ 10.34 $ 9.33
Ratio of Expenses to
Average Net Assets<F3> 1.46% 1.44% 1.45% 1.50% 1.50%
Ratio of Net Investment Income
to Average Net Assets 0.36% 2.36% 1.69% 1.15% 1.23%<F2>
Total Investment Return 37.10% 13.97% -0.35% 13.39% -3.37%
Portfolio Turnover Rate 252.8% 101.5% 114.1% 263.8% 348.5%<F2>
Average Commission Paid $0.0144 -- -- -- --
Net Assets End of Period (000's) $4,803 $700 $341 $349 $335
<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. Without fees waived or reimbursed by the adviser, the annualized expense ratios would have been:
1.82%, 2.04%, 1.45%, 3.62% and 7.19%. Please see "Management of the Trust - Expenses" for information about
fee waivers and reimbursements.
</TABLE>
<TABLE>
CONDENSED FINANCIAL INFORMATION (Cont'd)
Global
Income
-----------------------------------------------------
Year Year Year Year From
Ended Ended Ended Ended 5/1/92<F1>
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.46 $ 10.16 $ 10.78 $ 9.37 $ 10.00
Investment Activities
Net Investment Income<F3> 0.26 0.36 0.29 -- 0.14
Net Realized and Unrealized
Gain/(Loss) on Investments 1.33 0.91 (0.13) 1.92 (0.48)
Total From Investment Activities 1.59 1.27 0.16 1.92 (0.34)
Distributions
Net Investment Income (0.30) (0.35) (0.39) -- (0.21)
In Excess of Net Investment Income (0.07) -- -- -- --
Net Realized Gains (0.79) (0.62) (0.39) (0.51) (0.08)
Total Distributions (1.16) (0.97) (0.78) (0.51) (0.29)
NET ASSET VALUE,
END OF PERIOD $ 10.89 $ 10.46 $ 10.16 $ 10.78 $ 9.37
Ratio of Expenses to
Average Net Assets<F3> 1.24% 1.21% 1.21% 1.25% 1.25%
Ratio of Net Investment Income
to Average Net Assets 2.30% 3.35% 2.49% 2.13% 2.47%<F2>
Total Investment Return 15.21% 12.62% 1.49% 20.53% -3.47%
Portfolio Turnover Rate 222.2% 95.9% 129.9% 171.5% 189.6%<F2>
Average Commission Paid $0.0264 -- -- -- --
Net Assets End of Period (000's) $2,759 $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 1.25% for
Global Income. Without fees waived or reimbursed by the adviser, the annualized expense ratios would have been:
1.51%, 1.74%, 1.98%, 2.32% and 3.05%. Please see "Management of the Trust - Expenses" for information about
fee waivers and reimbursements.
</TABLE>
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 North
America , 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 and 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 limitation. (Please see "Risk Factors and Certain
Investment Practices" -- "Foreign Securities", "Debt Securities" and "Cash
Reserves and Repurchase Agreements" for further information about such
securities.)
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
countries, 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 distribu-
tion, 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. Specifically, 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 securities) 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 distribu-
tions, 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 out a Form 1099 by January 31st, 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
Identification 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 responsibility
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 restrictions. 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, 1996 ,
Fontaine Associates, a registered investment adviser, managed approximately
$50 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 February 5, 1997.
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
Chase Manhattan Bank is the Trust's custodian. Pursuant to a Custodian
Contract, Chase Manhattan 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 under its Master Advisory
Contract and Advisory Contract Supplements, on behalf of each Fund. In
particular, 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,
1996 , the annualized ratios of operating expenses to average net
assets for the Capital Appreciation Fund, the Global Growth Fund, and the
Global Income Fund were 1.49%, 1.46%, and 1.24%, respectively.
At the February 5, 1997 meeting of the Board of Trustees, Fontaine
Associates announced its determination to discontinue its voluntary Expense
Limitation Agreements with the Funds, effective May 1, 1997, under which
Fontaine Associates had agreed, with respect to each Fund, to assume as its
own expense and reimburse each Fund for all Fund Operating Expenses which in
any year exceeded 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.
PURCHASE OF SHARES
The minimum initial investment required per Fund is $1,000. 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 redeem-
ed), 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 redemp-
tions 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. Facsimile transmissions are not acceptable. 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, custodianships, 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 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 i-
nvestment, 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 identical-
ly 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. 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.
Telephone Transactions
Broker-dealers or other financial institutions, on behalf of their
customers, may purchase, redeem or exchange shares of the Funds by calling
1-800-247-1550 between 9:00 a.m. and 4:00 p.m. Eastern Time, Monday through
Friday, except on days when the NYSE is closed. During times of drastic or
unusual market volatility, it may be difficult to exercise the telephone
transaction privileges. The Transfer Agent reserves the right to refuse
any telephone transaction when, in its sole discretion, it is unable to
confirm to its own satisfaction that a caller is the proper representative
of the broker-dealer or financial institution placing the order.
Persons utilizing telephone transactions through broker-dealers or
other financial institutions should be aware that neither the Funds nor the
Transfer Agent will be liable for the authenticity of instructions received
by telephone that the Funds or the Transfer Agent reasonably believe to be
delivered by a proper representative of a broker-dealer or financial
institution, provided that the Funds or Transfer Agent follow reasonable
procedures designed to make sure that telephone instructions are genuine.
Such procedures may include requiring the broker-dealer or financial
institution to select the telephone privileges in writing prior to first
use and to designate in writing the person or persons authorized to provide
telephone instructions on their behalf. The Transfer Agent may tape-record
telephone transactions and may request certain identifying information from
the caller.
The telephone transaction privileges may be suspended, limited,
modified or terminated at any time without prior notice by the Funds or the
Transfer Agent.
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.
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. Govern-
ment, 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, 1996 , the portfolio
turnover rate for the Capital Appreciation Fund was 373%, the Global Growth
Fund was 253%, and the Global Income Fund was 222%. 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, 1996 , which
may be obtained without charge by writing Fontaine Associates at the address
noted on the cover.
Fund Counsel and Accountants
Katten Muchin & Zavis serves as Special Counsel to the Trust. Sanville
& Company serves as the independent accountant for the Trust.
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, 1997 . 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, 1997 .
<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 13
Shares of Beneficial Interest and Related Matters 14
Custodian, Transfer Agent and Dividend Disbursing Agent 14
Independent Accountants 15
Legal Matters 15
Performance Information 15
</TABLE>
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), (11) and (12) have been adopted as
fundamental policies of the Capital Appreciation Fund, and investment
restrictions (1) through (4), (11) and (12) 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) 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;
(11) 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
(12) 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, provided such futures contracts and options thereon are listed on a
national securities or commodities exchange. 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.
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, 45 Chairman, Trustee and President - President,
Director, and Chief Executive Officer of Fontaine
Associates and Richard Fontaine and Company, Inc.
DANA R. BARROWS, 45 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., 42 Trustee - Director, President, and Treasurer of
L.M. Bradshaw Contracting, L. M. Bradshaw Contracting, Inc.; Director,
Inc. 3600-B St. Johns Lane National Acssociation of Utilities Contactors.
Ellicott City, MD 21043
LUCAS L. GODINEZ, 45 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, 43 Vice President & Treasurer - Vice President of
Fontaine Associates. Ms. Fontaine is married
to Mr. Richard H. Fontaine.
KIMBERLY A. MALKOWSKI, 43 Secretary - Vice President and Secretary of
Fontaine Associates.
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, 1996 , and the amount of such compensation:
<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, 1996 , 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, 1997, the Trustees and officers of the Trust as a group
owned approximately 16.1% of the outstanding shares of the Capital
Appreciation Fund, 6.2% of the outstanding shares of the Global Growth Fund,
and 8.1% of the outstanding shares of the Global Income Fund.
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 an expense Limitation Agreement with Fontaine
Associates , for the fiscal year ended December 31, 1994, Fontaine
Associates received from the Trust $12,247 in management fees; for the fiscal
year ended December 31, 1995, Fontaine Associates received from the Trust
$18,591 in management fees; and for the fiscal year ended December 31,
1996, Fontaine Associates received from the Trust $35,383 in management
fees, with respect to the Capital Appreciation Fund. In addition, as a result
of Expense Limitation Agreements with Fontaine Associates, for the fiscal year
ended 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 years ended December 31, 1995 and December 31,
1996, Fontaine Associates received from the Trust $1,004 and $13,234 in
management fees with respect to the Global Growth Fund, and $1,707 and
$8,710 in management fees with respect to the Global Income Fund.
Expense Limitations
At the February 5, 1997 meeting of the Board of Trustees, Fontaine
Associates announced its determination to discontinue the voluntary Expense
Limitation Agreements with the Funds effective May 1, 1997, under which
Fontaine Associates had 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 exceeded 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. Effective with
this discontinuance, expense waivers and reimbursements through April 30,
1997 will no longer be permitted to be recapturable by 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, 1994, 1995, and 1996 , total
brokerage commissions paid by the Trust amounted to $25,567, $22,718, and
$228,523 , 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
Chase Manhattan 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, Chase Manhattan 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 Chase Manhattan
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, 1996, Fontaine and Company received $17,111
in transfer agency fees from the Trust for its services.
INDEPENDENT ACCOUNTANTS
Sanville & Company, located at 1514 Old York Road, Abington, PA 19001,
serves as the independent accountants for the Trust. Sanville & Company
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, 1996 , and the
report of the independent accountants for the year, are included in the
Trust's Annual Report to Shareholders dated December 31, 1996 . 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, 1996 for
the Capital Appreciation Fund, the Global Growth Fund, and the Global Income
Fund were 15.0%, 37.1% and 15.2%, respectively.
<TABLE>
Average Annual Total Return of a Hypothetical $1,000 Investment
<CAPTION>
12 Months Five Years
Ended Ended Since
12/31/96 12/31/96 Inception
--------- ---------- ---------
<S> <C> <C> <C>
Fontaine Capital
Appreciation Fund +15.0% + 8.3% + 8.8%
(Inception on 9/28/89)
S&P "500" Index <F1> +22.8% +15.1% +14.2%
Fontaine Global
Growth Fund +37.1% N/A +12.1%
(Inception on 5/1/92)
Lipper Global
Fund Index <F1> +16.3% N/A +12.8%
Fontaine Global
Income Fund +15.2% N/A + 9.6%
(Inception on 5/1/92)
Merrill Lynch Global
Bond Index <F1> + 4.0% N/A + 9.5%
<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 7,100 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,
1996 for the Capital Appreciation Fund, the Global Growth Fund, and the
Global Income Fund were 84.0%, 70.6% and 53.2%, 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 + 84.0%
(Inception on 9/28/89)
S&P "500" Index <F1> +160.5%
Fontaine Global
Growth Fund + 70.6%
(Inception on 5/1/92)
Lipper Global
Fund Index <F1> + 75.5%
Fontaine Global
Income Fund + 53.2%
(Inception on 5/1/92)
Merrill Lynch Global
Bond Index <F1> + 53.0%
<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 7,100 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, 1996 the Global Income Fund's
yield was 3.16%.
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.
<PAGE>
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>
<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
INVESTMENT OVERVIEW
As our long term shareholders know, we have been fairly cautious over the
last several years due to what we perceive to be the overvaluation in the
U. S. and other global stock markets. During this time, we have seen
tremendous liquidity pumped into world markets by various governments in an
attempt to increase economic growth. We believed that this would cause a
liquidity bubble in global markets, and sooner or later, we felt that the
flow of liquidity would move out of financial assets into tangible assets.
Because of this belief, we decided to invest in commodity-related stock
investments. It is a strategy that worked very well for us in 1996 and one
we continue to implement as we head into 1997.
One of our major investment themes attempts to capitalize on the
globalization of markets and sources of production worldwide. The end of
the Cold War seven years ago resulted in an opening up of new investment
opportunities for foreign capital-especially in the mining industry.
Investors are now able to bring capital to countries that formerly did not
allow foreign investment. This results in the development of natural
resources that can be sold at world prices, benefiting those shareholders
who are willing to take the required risk.
The recent weakness in the price of gold has allowed us to add to our
investments in mining and mineral exploration companies at very favorable
prices, similar to the values we were able to obtain in late 1995 before
gold rose above $400 per ounce. In addition, the break in the price of
copper and nickel during the third quarter of 1996 allowed us to establish
several investments in fast growing copper producers and add to existing
positions in nickel producers. These investments, along with our holdings
of international oil companies, have become the primary focus of our equity
portfolios as we enter 1997. For investors such as ourselves who are
skeptical of the current market mania, companies with strong and growing
underlying asset values are especially attractive.
I would like to welcome those shareholders who have joined us recently.
We are pleased that the Fontaine Global Growth Fund ("FONGX") and Fontaine
Global Income Fund ("FOGIX") have joined the Capital Appreciation Fund
("FAPPX") with listings on the NASDAQ quotation system. Also, both the
Fontaine Global Growth and Capital Appreciation Funds are now listed in
most national newspapers. Please feel free to call me if you have any
questions about your investments in our Funds.
Sincerely,
/s/ Richard H. Fontaine
Richard H. Fontaine
President and Chairman of the
Investment Advisory Committee
February 20, 1997
<PAGE>
FONTAINE CAPITAL APPRECIATION FUND
PORTFOLIO SUMMARY
<TABLE>
TOP 10 HOLDINGS
<CAPTION>
Primary
Security Country/Region
<S> <C> <C>
1 U.S. Treasury Note, 10/99 United States
2 U.S. Treasury Note, 5/97 United States
3 Stride Rite Corp. United States
4 Expatriate Resources Ltd. (Can.) Canada
5 Guyanor Resources S. A. (Can.) South America
6 Golden Star Resources South America
7 Southwestern Gold Corp. (Can.) South America
8 Sea Containers Ltd. - Class "A" United States
9 Echo Bay Mines Ltd. United States
10 Pan African Resources Corp. (Can.) Africa
</TABLE>
ASSET MIX AS OF 12/31/96
[Pie Chart detailing asset breakdown by class: Common Stocks-43.2%, Bonds-
11.4%, and Cash<includes cash equivalents and other net assets>-45.4%]
CUMULATIVE PERFORMANCE COMPARISON*
$10,000 INVESTMENT SINCE INCEPTION
[Line Chart detailing growth of a $10,000 investment in Fontaine Capital
Appreciation Fund and S&P "500" Index since Capital Appreciation Fund
inception on September 28, 1989 through December 31, 1996]
<TABLE>
Average Annual Total Return Performance<F1> Periods Ended 12/31/96
<CAPTION>
Three Year Five Year Since Inception on
One Year (Annualized) (Annualized) 9/28/89 (Annualized)
<S> <C> <C> <C> <C>
Fontaine Capital
Appreciation Fund + 15.0% + 10.8% + 8.3% + 8.8%
S&P "500" Index<F1> + 22.8% + 19.5% + 15.1% + 14.2%
<F1>
Please refer to the footnote on Page 8 for explanation of index information.
</TABLE>
<PAGE>
FONTAINE CAPITAL APPRECIATION FUND
PORTFOLIO REVIEW
The Fontaine Capital Appreciation Fund's performance was strong in 1996.
The Fund's performance was driven by its investments in three major
investment sectors: 1) U.S. based mining companies, 2) international oil
stocks, and 3) medical testing and drug development companies.
The U.S. based mining companies such as Golden Star Resources, Getchell
Gold, FMC Gold, and Stillwater Mining were all major contributors during
the first half of 1996. During the second half of 1996, the oil
investments in Exxon, Chevron and Texaco made significant headway.
Holdings in Agouron Pharmaceuticals and Self-Care also made positive
contributions in the second half of the year.
KEY INVESTMENTS
Stride Rite - A leading marketer of children's shoes, athletic footwear and
recreational shoes for adults. New designer lines are adding sales momentum
to existing lines, and a long planned turnaround appears to be underway.
Expatriate Resources Ltd. - This Canadian Exploration company is well
financed and currently focusing on activities in the Yukon Territory,
where its management has unparalleled expertise. In late 1996, a major
discovery was made at the ICE Property in the Finlayson Lake area that
is rapidly developing into an exciting new copper discovery.
Golden Star Resources - Denver based mineral and diamond exploration
company has extensive holdings in Guyana, Suriname, French Guiana,
Brazil, and five African countries.
INVESTMENT STRATEGY
We continue to seek out new investments that might achieve the level of
returns we have enjoyed over the last year without exposure to an
unnecessary level of risk. Over 40% of fund assets have been invested
in shorter term U.S. Treasury securities to provide additional
protection of principal.
<PAGE>
FONTAINE GLOBAL GROWTH FUND
PORTFOLIO SUMMARY
<TABLE>
TOP 10 HOLDINGS
<CAPTION>
Primary
Security Country/Region
<S> <C> <C>
1 Battle Mountain Gold Preferred United States
2 Guyanor Resources S. A. (Can.) South America
3 Expatriate Resources Ltd. (Can.) Canada
4 Westmin Resources Ltd. (Can.) Canada
5 Carolina Power & Light Co. United States
6 Santa Cruz Gold, Inc. (Can.) Central America
7 German Unity Bond, 1/02 Western Europe
8 Delmarva Power & Light United States
9 Inco Ltd. - Class ''VBN'' (Can.) Canada
10 Golden Star Resources South America
</TABLE>
ASSET MIX AS OF 12/31/96
[Pie Chart detailing asset breakdown by class: Common Stocks-78.7%, Bonds-
9.2%, Cash<includes cash equivalents and other net assets>-4.2%, and
Preferred Stocks-7.9%]
CUMULATIVE PERFORMANCE COMPARISON*
$10,000 INVESTMENT SINCE INCEPTION
[Line Chart detailing growth of a $10,000 investment in Fontaine Global
Growth Fund, Lipper Global Fund Index, and S&P "500" Index since Global
Growth Fund inception on May 1, 1992 through December 31, 1996]
<TABLE>
Average Annual Total Return Performance<F1> Periods Ended 12/31/96
<CAPTION>
Three Year Since Inception
One Year (Annualized) on 5/01/92 (Annualized)
<S> <C> <C> <C>
Fontaine Global Growth Fund + 37.1% + 15.9% + 12.1%
Lipper Global Fund Index<F1> + 16.3% + 9.2% + 12.8%
S&P "500" Index<F1> + 22.8% + 19.5% + 16.1%
<F1>
Please refer to the footnote on Page 8 for explanation of index information.
</TABLE>
<PAGE>
FONTAINE GLOBAL GROWTH FUND
PORTFOLIO REVIEW
The Fontaine Global Growth Fund had an excellent year in 1996, finishing
with a 37.1% gain. Global Growth ranked second of 182 funds in
Morningstar's World Stock objective for one year total return as of
December 31, 1996, and the fund ranked eighth of 99 funds for three year
annualized return.
During 1996, the fund benefited from its focused strategy in natural
resource and commodity related investments. Greenstone Resources
reported significant additions to its gold reserves in Central America,
resulting in a tripling in its share price. Golden Star Resources
continued to develop significant gold and diamond properties throughout
the Guyana Shield region of South America, which resulted in a threefold
increase in the value of our interest in the company.
Three small companies delivered significant returns to the portfolio
when new discoveries dramatically enhanced their share price: Indomin
Resources in Indonesia, Asquith Resources in Central African Republic,
and Black Swan Gold in Brazil. We also experienced good returns from
our retail, oil, and depressed value investments.
KEY INVESTMENTS
Inco - Class "VBN" - This company has 25% ownership of the mining
operation that will be constructed over the next three years on the
nickel deposit in Voisey Bay, Labrador. This facility should be one of
the lowest cost producers of nickel, cobalt and copper over the next two
decades and should provide strong investment returns as the company
moves through development and into production.
Pan African Resources - Its highly experienced geologists are currently
pursuing gold exploration properties in Mali, Ethiopia, and Kenya. It
represents outstanding value as a portfolio of mineral prospects in a
largely undeveloped continent.
Madison Enterprises Corp. - A very well financed mineral exploration
company with rights to the Mount Kare prospect in Papua New Guinea. The
property is adjacent to the Pogera Mine of Placer Dome and offers
significant potential for new discoveries over the next several years.
INVESTMENT STRATEGY
The Fontaine Global Growth Fund pursues investments in small, fast
growing companies wherever we can find them. In the last year, we have
developed a portfolio of stocks that we feel have significant upside
potential. This fund establishes large positions in these companies and
pursues concentrated investment themes to maximize future growth of
capital. Many of the ideas that drove our investments during 1996 are
continuing to provide good opportunities in 1997. We are aggressively
pursuing these opportunities and searching out new investment themes
that fit our overall strategy.
<PAGE>
FONTAINE GLOBAL INCOME FUND
PORTFOLIO SUMMARY
<TABLE>
TOP 10 HOLDINGS
<CAPTION>
Primary
Security Country/Region
<S> <C> <C>
1 U.S. Treasury Note, 12/98 United States
2 Bundes Obligation, 5/00 Western Europe
3 World Bank Note, 9/02 Western Europe
4 U.S. Treasury Bill, 6/97 United States
5 German Unity Bond, 1/02 Western Europe
6 Inco Ltd. Preferred - Series "E" Canada
7 Battle Mountain Gold Preferred United States
8 Westmin Resources Ltd. (Can.) Canada
9 Carolina Power & Light United States
10 Dayton Mining South America
</TABLE>
ASSET MIX AS OF 12/31/96
[Pie Chart detailing asset breakdown by class: Common Stocks-25.3%, Bonds-
52.6%, Cash<includes cash equivalents and other net assets>-13.3%, and
Preferred Stocks-8.8%]
CUMULATIVE PERFORMANCE COMPARISON*
$10,000 INVESTMENT SINCE INCEPTION
[Line Chart detailing growth of a $10,000 investment in Fontaine Global
Income Fund, Merrill Lynch Global Bond Index since Global Income Fund
inception on May 1, 1992 through December 31, 1996]
<TABLE>
Average Annual Total Return Performance<F1> Periods Ended 12/31/96
<CAPTION>
Three Year Since Inception
One Year (Annualized) on 5/01/92 (Annualized)
<S> <C> <C> <C>
Fontaine Global Income Fund + 15.2% + 9.6% + 9.6%
Merrill Lynch Global Bond Index<F1> + 4.0% + 7.6% + 9.5%
Lipper World Income Fund Index<F1> + 10.0% + 6.3% + 8.3%
<F1>
Please refer to the footnote on Page 8 for explanation of index information.
</TABLE>
<PAGE>
FONTAINE GLOBAL INCOME FUND
PORTFOLIO REVIEW
The Fontaine Global Income Fund performed very well during 1996,
appreciating 15.2% during the year. The Fund had a successful equity
strategy that complemented our fixed income positions during the period
and resulted in significant equity returns. The primary contributors in
this area were our holdings in international gold mining and mineral
exploration companies, and positions in international petroleum stocks.
KEY INVESTMENTS
Battle Mountain Gold Preferred - A high coupon, convertible preferred
stock that should benefit from the recent merger with Hemlo Gold.
Significant upside potential exists if gold moves higher over the next
few years.
Inco Preferred Series "E" - A holding that resulted from the takeover by
Inco of Diamond Fields Resources. The high current coupon provides
income and stability while allowing conservative exposure to the upside
potential of Inco's nickel properties by its convertibility feature.
Westmin Resources - A well financed Canadian natural resource company
that produces zinc and copper. The company offers considerable growth
potential from several new discoveries and the recent acquisition of a
low cost Chilean copper producer. Westmin offers a growth component to
the portfolio, and some diversification for our bond investments.
INVESTMENT STRATEGY
We have added to our holdings of German Deutsche Mark denominated fixed
income investments to provide both a significant level of current income
as well as the possibility of capital gains should the level of the U.S.
dollar decline over the next several years. We also will continue to
search out the most aggressive, value oriented equity investments to
provide superior returns within the context of a conservative fixed
income strategy.
<PAGE>
FUND COMPARISON
All three Funds of the Fontaine Trust were up strongly during 1996.
Capital Appreciation Fund was up 15%, Global Income up 15%, and Global
Growth up 37%. All three funds benefited from our common investment
strategy, and their different performance for the period reflected their
different implementation of the common strategy.
Fontaine Global Growth Fund is the most aggressive portfolio of the
Fontaine Trust. Its assets are allocated in small to medium capitalization
companies with an aggressive allocation to stocks.
Fontaine Capital Appreciation Fund is more defensive in nature. It is more
domestically oriented, and tends to own larger capitalization common
stocks. This fund also utilizes cash, preferred stocks and bond positions
to preserve capital.
Fontaine Global Income Fund makes use of the same stock selections as the
other portfolios, but less aggressively. The majority of the Fund's assets
are invested in U.S. Treasury securities, high-quality foreign government
bonds, and money market instruments.
DIVIDEND INFORMATION
Fontaine Capital Appreciation Fund went ex-dividend on December 23, 1996
for holders of record on December 20, 1996. Capital Appreciation declared
an income dividend of $0.23 per share, a short-term capital gains
distribution of $2.38 per share, and a long-term capital gains distribution
of $0.29 per share. The reinvestment price on December 23, 1996 was $9.37.
Fontaine Global Growth Fund went ex-dividend on December 23, 1996 for
holders of record on December 20, 1996. Global Growth declared an income
dividend of $0.12 per share, a short-term capital gains distribution of
$1.11 per share, and a long-term capital gains distribution of $0.01 per
share. The reinvestment price on December 23, 1996 was $12.39.
Fontaine Global Income Fund went ex-dividend on September 26, 1996 for
holders of record on September 25, 1996. Global Income declared an income
dividend of $0.05 per share. The reinvestment price on September 26, 1995
was $11.89. Fontaine Global Income Fund also went ex-dividend on December
23, 1996 for holders of record on December 20, 1996. Global Income
declared an income dividend of $0.22 per share, a short-term capital gains
distribution of $0.74 per share, and a long-term capital gains distribution
of $0.05 per share. The reinvestment price on December 23, 1996 was $10.88.
- ----------------------------------------------------------------------------
* All performance is historical. Past performance is not indicative of
future results. 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. 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 Fund objective. The Merrill
Lynch Global Bond Index is an unmanaged index of over 7100 short to long
term global bonds generally regarded as representative of the global bond
market. The Lipper Global Income Fund Index is an unmanaged index of the
30 largest funds in Lipper Analytical Services' Global Income Fund
objective. Please read the Prospectus, which has preceded or accompanies
this Report, before you invest or send money.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
December 31, 1996
Fontaine Capital Appreciation Fund
<CAPTION>
Shares/ Value
Par (000) (000)
<S> <C> <C>
COMMON STOCKS -- 43.2%
Apparel & Shoes -- 3.4%
Stride Rite Corp. 22000 $ 220
Diamonds & Gemstones -- 0.1%
<F2>Diamondco Note (Can.) 5900 2
Entertainment & Leisure -- 1.2%
<F2>Hollywood Park, Inc. 5000 75
Food Processing -- 1.9%
McCormick & Company, Inc. 5000 118
Gold Exploration -- 4.4%
<F2>Madison Enterprises Corp. (Can.) 46000 134
<F2>Pan African Resources Corp. (Can.) 291600 149
-----
283
Gold Mining -- 11.8%
<F2>Dayton Mining Company 2400 16
Echo Bay Mines Ltd. 22702 150
<F2>Golden Star Resources Ltd. 13100 170
<F2>Guyanor Resources S. A. (Can.) 28000 189
<F2>Metallica Resources, Inc. (Can.) 42700 143
Newmont Gold Company 2000 88
-----
756
Insurance -- 1.6%
USF&G Corp. 5000 104
Metals & Mining - General -- 4.2%
Inco Ltd. - Class "VBN" (Can.) 3000 73
Southern Peru Copper Corp. 9100 133
<F2>Westmin Resources Ltd. (Can.) 13700 66
-----
272
Mineral Exploration -- 10.4%
<F2>Cambiex Exploration, Inc. - Wts. (Can.) 85000 71
<F2>Expatriate Resources Ltd. (Can.) 89500 192
<F2>Santa Cruz Gold, Inc. (Can.) 116300 115
<F2>Southwestern Gold Corp. (Can.) 13600 166
<F2>X-Cal Resources Ltd. (Can.) 196000 122
-----
666
Retail/Department Stores -- 1.8%
Wal-Mart Stores, Inc. 5000 115
Transportation Services -- 2.4%
Sea Containers Ltd. - Class "A" 10000 156
TOTAL COMMON STOCKS (Cost - $3,132) $ 2,767
LONG-TERM GOVERNMENT
OBLIGATIONS -- 11.4%
U. S. Government Obligations -- 11.4%
U.S. Treasury Note,
6.00%, Due 10/15/99 330 330
U.S. Treasury Note,
6.25%, Due 5/31/00 100 101
U.S. Treasury Note,
6.50%, Due 5/15/97 300 301
-----
732
TOTAL LONG-TERM GOVERNMENT
OBLIGATIONS (Cost - $732) $ 732
TOTAL INVESTMENTS IN SECURITIES
% OF NET ASSETS - 54.6% (Cost - $3,864) $ 3,499
<F1>
(Can.) = Canadian Traded Security
<F2>
Non-income producing
<F3>
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
December 31, 1996
Fontaine Global Growth Fund
<CAPTION>
Shares/ Value
Par (000) (000)
<S> <C> <C>
PREFERRED STOCKS -- 7.9%
Battle Mountain Gold Preferred 7600 $ 380
TOTAL PREFERRED STOCKS (Cost - $380) $ 380
COMMON STOCKS -- 78.7%
Airlines -- 1.8%
Southwest Airlines Co. 4000 $ 88
Apparel & Shoes -- 0.5%
Stride Rite Corporation 2600 26
Diamonds & Gemstones -- 0.1%
<F3>Diamondco Note (Can.) 1000 1
Electric Utilities -- 10.9%
Carolina Power & Light Co. 6000 219
Delmarva Power & Light Co. 10100 206
Oklahoma Gas & Electric Co. 2000 84
Rochester Gas & Electric Corp. 700 13
-----
522
Gold Exploration -- 6.8%
<F3>Madison Enterprises Corp. (Can.) 29000 85
<F3>Meridian Gold Inc. 16800 69
<F3>Pan African Resources Corp. (Can.) 337050 172
-----
326
Gold Mining -- 22.7%
<F3>Ambrex Mining Corp. (Can.) 275000 70
<F3>Bre-X Minerals Ltd. (Can.) 10000 158
Echo Bay Mines Ltd. 9010 60
<F3>Eden Roc Mineral Corp. (Can.) 126800 165
<F3>El Callao Mining Corp. (Can.) 63800 61
<F3>Golden Star Resources Ltd. 14000 182
<F3>Guyanor Resources S. A. (Can.) 36700 248
<F3>Metallica Resources, Inc. (Can.) 39000 131
<F3>Nevsun Resources Ltd. (Can.) 2200 13
-----
1,088
Metals & Mining - General -- 12.5%
<F3><F4><F5>African Selection Mining 50000 37
Asarco, Inc. 2100 52
<F3>Hecla Mining Co. 15000 84
Inco Ltd. - Class "VBN" (Can.) 7750 188
<F3>Westmin Resources Ltd. (Can.) 49700 241
-----
602
Mineral Exploration -- 20.0%
<F3>Asquith Resources, Inc. (Can.) 37000 49
<F3>Cambiex Exploration, Inc. (Can.) 5200 4
<F3>Expatriate Resources Ltd. (Can.) 115100 248
<F3>Santa Cruz Gold, Inc. (Can.) 212400 209
<F3>Southwestern Gold Corp. (Can.) 9500 116
<F3>Tombstone Exploration Co. Ltd. (Can. 73100 115
<F3>Triton Mining Corp.(Can.) 54000 165
<F3>X-Cal Resources Ltd. (Can.) 89900 56
-----
962
Oil & Gas Exploration -- 3.4%
Chevron Corp. 1000 65
Texaco, Inc. 1000 98
-----
163
TOTAL COMMON STOCKS (Cost - $4,224) $ 3,778
LONG-TERM GOVERNMENT
OBLIGATIONS -- 9.2%
German Government Obligations -- 5.7%
Bundes Obligations,
5.875%, Due 5/15/00 (Par = DM100) $ 68 $ 68
German Federation Unity Bonds,
8.00%, Due 1/21/02 (Par = DM280) 205 207
-----
275
U. S. Government Obligations -- 1.1%
U.S. Treasury Note,
6.00%, Due 10/15/99 50 50
World Bank Obligations -- 2.4%
World Bank Note,
6.125%, Due 9/27/02 (Par = DM170) 118 116
TOTAL LONG-TERM GOVERNMENT
OBLIGATIONS (Cost - $440) $ 441
TOTAL INVESTMENTS IN SECURITIES
% OF NET ASSETS - 95.8% (Cost - $5,044) $ 4,599
<F1>
(Can.) = Canadian Traded Security
<F2>
DM = Deutsche Mark
<F3>
Non-income producing
<F4>
Board Valued
<F5>
Security contains some restrictions as to public resale.
Cost basis $37
<F6>
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
December 31, 1996
Fontaine Global Income Fund
<CAPTION>
Shares/ Value
Par (000) (000)
<S> <C> <C>
PREFERRED STOCKS -- 8.8%
Battle Mountain Gold Preferred 2100 $ 105
Freeport McMoran Preferred "A" 1200 33
Inco Ltd. Preferred - Series "E" 2045 106
-----
244
TOTAL PREFERRED STOCKS (Cost - $242) $ 244
COMMON STOCKS -- 25.3%
Airlines -- 1.6%
Southwest Airlines Co. 2000 $ 44
Diamonds & Gemstones -- 0.1%
<F3>Diamondco Note (Can.) 500 1
Electric Utilities -- 2.6%
Carolina Power & Light Co. 2000 73
Gold Exploration -- 0.5%
<F3>Madison Enterprises Corp. (Can.) 5000 14
Gold Mining -- 6.7%
<F3>Ambrex Mining Corp. (Can.) 21000 5
<F3>Dayton Mining Corp. 10700 72
Echo Bay Mines Ltd. 1500 10
<F3>Golden Star Resources Ltd. 4500 59
<F3>Guyanor Resources S. A. (Can.) 5600 38
-----
184
Metals & Mining - General -- 8.4%
<F3>Hecla Mining Co. 5000 28
Inco Ltd. - Class "VBN" (Can.) 2200 53
Southern Peru Copper Corp. 3600 53
<F3>Westmin Resources Ltd. (Can.) 20100 97
-----
231
Mineral Exploration -- 4.6%
<F3>Expatriate Resources Ltd. (Can.) 2600 6
<F3>Santa Cruz Gold Inc. (Can.) 35000 34
<F3>Southwestern Gold Corp. (Can.) 3900 48
<F3>X-Cal Resources Ltd. (Can.) 64600 40
-----
128
Retail/Department Stores -- 0.8%
Wal-Mart Stores, Inc. 1000 23
TOTAL COMMON STOCKS (Cost - $760) $ 698
LONG-TERM GOVERNMENT
OBLIGATIONS -- 52.6%
German Government Obligations -- 17.6%
Bundes Obligations,
5.875%, Due 5/15/00 (Par = DM440) $ 307 $ 300
German Federation Unity Bonds,
8.00%, Due 1/21/02 (Par = DM250) 183 185
-----
485
U. S. Government Obligations -- 26.4%
U.S. Treasury Note,
5.125%, Due 6/30/98 70 69
U.S. Treasury Note,
5.50%, Due 2/28/99 70 70
U.S. Treasury Note,
5.75%, Due 12/31/98 400 399
U.S. Treasury Note,
6.00%, Due 8/31/97 50 50
U.S. Treasury Note,
6.00%, Due 10/15/99 70 70
U.S. Treasury Note,
6.25%, Due 5/31/00 70 70
-----
728
World Bank Obligations -- 8.6%
World Bank Note,
6.125%, Due 9/27/02 (Par = DM350) 241 239
TOTAL LONG-TERM GOVERNMENT
OBLIGATIONS (Cost - $1,457) $ 1,452
SHORT-TERM GOVERNMENT
OBLIGATIONS -- 8.2%
U. S. Government Obligations -- 8.2%
U.S. Treasury Bills,
5.244%, Due 6/5/97 230 225
TOTAL SHORT-TERM GOVERNMENT
OBLIGATIONS (Cost - $225) $ 225
TOTAL INVESTMENTS IN SECURITIES
% OF NET ASSETS - 94.9% (Cost - $2,684) $ 2,619
<F1>
(Can.) = Canadian Traded Security
<F2>
DM = Deutsche Mark
<F3>
Non-income producing
<F4>
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
THE FONTAINE TRUST / December 31, 1996
<CAPTION>
Capital Global Global
Appreciation Growth Income
(amounts are actual)
<S> <C> <C> <C>
ASSETS
Investments at Market Value:
Capital Appreciation (Cost $3,864,335) 3,499,069
Global Growth (Cost $5,043,930) 4,599,121
Global Income (Cost $2,684,007) 2,618,566
Cash & Cash Equivalents 797,923 360,281 1,379,812
Dividends and Interest Receivable 12,236 20,428 34,068
Receivable for Investments Sold 1,614,782 713,191 135,830
Receivable for Fund Shares Sold 918,498 21,580 21,973
Prepaid Expenses 4,177 5,061 3,465
--------- --------- ---------
TOTAL ASSETS 6,846,685 5,719,662 4,193,714
LIABILITIES
Payable for Investments Purchased 344,250 834,804 547,775
Payable for Fund Shares Redeemed 5,394 35,994 832,902
Payable for Shareholder Distributions 75,829 34,809 47,938
Accrued Expenses 16,413 11,168 6,310
TOTAL LIABILITIES 441,886 916,775 1,434,925
--------- --------- ---------
NET ASSETS 6,404,799 4,802,887 2,758,789
ANALYSIS OF NET ASSETS:
Paid-in-capital applicable to shares outstanding;
$.001 par value, unlimited number of shares authorized:
Capital Appreciation: 683,834 shares 7,100,185
Global Growth: 384,149 shares 5,304,321
Global Income: 253,409 shares 2,839,176
Undistributed net investment income (2,502) (13,189) (9,715)
Accumulated net realized loss (326,795) (40,316) --
Unrealized depreciation of investments (366,089) (447,929) (70,672)
---------- ---------- ----------
NET ASSETS 6,404,799 4,802,887 2,758,789
NET ASSET VALUE PER SHARE 9.37 12.50 10.89
<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 31,1996
<CAPTION>
Capital Global Global
Appreciation Growth Income
(amounts are actual)
<S> <C> <C> <C>
INVESTMENT INCOME
Income
Dividends 51,853 31,024 20,440
Interest 50,536 23,085 43,586
------- ------ ------
Total Income 102,389 54,109 64,026
Expenses
Investment Management Fees 61,135 23,702 13,185
Shareholder Servicing Fees 11,066 9,252 3,187
Custodian and Accounting Fees 6,700 3,437 1,407
Legal & Auditing Fees 25,259 9,204 4,823
Prospectus & Shareholder Reports 6,889 4,661 1,918
Registration Fees 7,399 2,489 1,503
Insurance/Miscellaneous Costs 3,833 987 875
------- ------- -------
Total Expenses Before Waivers
And Reimbursement From Adviser 122,281 53,732 26,898
Less: Waivers And Reimbursement From Adviser (25,752) (10,468) (4,475)
------ ------ ------
Net Expenses 96,529 43,264 22,423
-------- -------- --------
NET INVESTMENT INCOME 5,860 10,845 41,603
REALIZED AND UNREALIZED GAIN /
(LOSS) FROM INVESTMENTS
Net Realized Gain From Investments 1,025,313 354,248 184,770
Unrealized Depreciation on Investments (299,752) (441,604) (74,151)
---------- --------- --------
NET GAIN/(LOSS) ON INVESTMENTS 725,561 (87,356) 110,619
INCREASE/(DECREASE) IN NET ASSETS FROM
OPERATIONS 731,421 (76,511) 152,222
<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
12/31/96 12/31/95 12/31/96 12/31/95
---------- ---------- ---------- ---------
CHANGE IN NET ASSETS (amounts are actual)
<S> <C> <C> <C> <C>
Operations
Net investment income $ 5,860 $ 115,794 $ 10,845 $ 9,852
Net realized gain from investments 1,025,313 658,080 354,248 38,241
Change in unrealized depreciation from investments (299,752) (21,365) (441,604) (1,296)
--------- ------- ------- ------
Change in Net Assets from Operations 731,421 752,509 (76,511) 46,797
Distributions to Shareholders
Net investment income (5,861) (114,581) (10,701) (10,148)
In excess of net investment income (97,256) -- (42,145) --
Net realized gain on investments (965,016) (636,829) (354,247) (32,736)
In excess of net realized gain on investments (232,041) -- (11,362) --
--------- ------- ------- ------
Change in Net Assets From Distributions to Shareholders (1,300,174) (751,410) (418,455) (42,884)
Net Equalization 55 (3,159) -- --
Capital Share Transactions
Capital Appreciation
Sold 251,892 and 43,751 shares 2,900,335 523,058
Distributions reinvested of 130,666 and 66,510 shares 1,224,345 715,650
Redeemed 193,950 and 143,398 shares (2,433,568) (1,633,412)
Global Growth
Sold 530,302 and 31,410 shares 7,702,621 326,304
Distributions reinvested of 30,964 and 3,984 shares 383,646 40,274
Redeemed 246,905 and 1,113 shares (3,488,543) (11,777)
--------- --------- --------- -------
Change in Net Assets from Capital Share Transactions 1,691,112 (394,704) 4,597,724 354,801
--------- ------- --------- -------
CHANGE IN NET ASSETS 1,122,414 (396,764) 4,102,758 358,714
NET ASSETS
Beginning of period 5,282,385 5,679,149 700,129 341,415
End of period $6,404,799 $5,282,385 $4,802,887 $700,129
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
THE FONTAINE TRUST (Cont'd)
<CAPTION>
Global
Income
Year Year
Ended Ended
12/31/96 12/31/95
--------- ---------
CHANGE IN NET ASSETS (amounts are actual)
<S> <C> <C>
Operations
Net investment income $ 41,603 $ 26,005
Net realized gain from investments 184,770 49,011
Change in unrealized appreciation/(depreciation) from investments (74,151) 15,550
------- ------
Change in Net Assets From Operations 152,222 90,566
Distributions to Shareholders
Net investment income (41,808) (25,618)
In excess of net investment income (9,715) --
Net realized gain on investments (184,770) (48,877)
------- ------
Change in Net Assets From Distributions to Shareholders (236,293) (74,495)
Capital Share Transactions
Global Income
Sold 235,669 and 29,366 shares 2,715,884 310,821
Distributions reinvested of 16,818 and 6,704 shares 184,487 70,618
Redeemed 100,375 and 2,002 shares (1,117,054) (21,149)
--------- -------
Change in Net Assets from Capital Share Transactions 1,783,317 360,290
--------- --------
CHANGE IN NET ASSETS 1,699,246 376,361
NET ASSETS
Beginning of period 1,059,543 683,182
End of period $2,758,789 $1,059,543
<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
Ended Ended Ended Ended Ended
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.67 $ 10.75 $ 10.75 $ 9.60 $ 10.78
Investment Activities
Net Investment Income<F1> 0.01 0.26 0.07 0.14 0.33
Net Realized and Unrealized
Gain/(Loss) on Investments 1.59 1.42 0.18 1.22 (0.76)
Total From Investment Activities 1.60 1.68 0.25 1.35 (0.43)
Distributions
Net Investment Income (0.01) (0.26) (0.18) (0.135) (0.12)
In Excess of Net Investment Income (0.22) -- -- -- --
Net Realized Gains (2.15) (1.50) (0.07) (0.065) (0.63)
In Excess of Net Realized Gains (0.52) -- -- -- --
Total Distributions (2.90) (1.76) (0.25) (0.20) (0.75)
NET ASSET VALUE,
END OF PERIOD $ 9.37 $ 10.67 $ 10.75 $ 10.75 $ 9.60
Ratio of Expenses to
Average Net Assets <F1> 1.49% 1.50% 1.50% 1.50% 1.50%
Ratio of Net Investment Income
to Average Net Assets 0.09% 2.16% 1.41% 1.15% 3.12%
Total Investment Return 15.00% 15.49% 2.34% 14.09% -3.94%
Portfolio Turnover Rate 372.7% 96.0% 135.6% 131.7% 129.2%
Average Commission Paid $0.0195 -- -- -- --
Net Assets End of Period (000's) $6,405 $5,282 $5,679 $8,903 $14,902
<F1>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:
1.89%, 2.10%, 2.23%, 1.81% and 1.94%.
<F2>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
THE FONTAINE TRUST (Cont'd)
<CAPTION>
Global
Growth
Year Year Year Year From
Ended Ended Ended Ended 5/1/92<F1>
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.03 $ 9.61 $ 10.34 $ 9.33 $ 10.00
Investment Activities
Net Investment Income<F3> 0.06 0.21 0.16 0.14 0.07
Net Realized and Unrealized
Gain/(Loss) on Investments 3.65 1.14 (0.20) 1.11 (0.41)
Total From Investment Activities 3.71 1.35 (0.04) 1.25 (0.34)
Distributions
Net Investment Income (0.02) (0.22) (0.16) (0.11) (0.08)
In Excess of Net Investment Income (0.10) -- -- -- --
Net Realized Gains (1.09) (0.71) (0.53) (0.13) (0.25)
In Excess of Net Realized Gains (0.03) -- -- -- --
Total Distributions (1.24) (0.93) (0.69) (0.24) (0.33)
NET ASSET VALUE,
END OF PERIOD $ 12.50 $ 10.03 $ 9.61 $ 10.34 $ 9.33
Ratio of Expenses to
Average Net Assets<F3> 1.46% 1.44% 1.45% 1.50% 1.50%
Ratio of Net Investment Income
to Average Net Assets 0.36% 2.36% 1.69% 1.15% 1.23%<F2>
Total Investment Return 37.10% 13.97% -0.35% 13.39% -3.37%
Portfolio Turnover Rate 252.8% 101.5% 114.1% 263.8% 348.5%<F2>
Average Commission Paid $0.0144 -- -- -- --
Net Assets End of Period (000's) $4,803 $700 $341 $349 $335
<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. Without fees waived or reimbursed by the adviser (see Note 5), the annualized expense ratios would have been:
1.82%, 2.04%, 1.45%, 3.62% and 7.19%.
<F4>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
THE FONTAINE TRUST (Cont'd)
<CAPTION>
Global
Income
Year Year Year Year From
Ended Ended Ended Ended 5/1/92<F1>
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.46 $ 10.16 $ 10.78 $ 9.37 $ 10.00
Investment Activities
Net Investment Income<F3> 0.26 0.36 0.29 -- 0.14
Net Realized and Unrealized
Gain/(Loss) on Investments 1.33 0.91 (0.13) 1.92 (0.48)
Total From Investment Activities 1.59 1.27 0.16 1.92 (0.34)
Distributions
Net Investment Income (0.30) (0.35) (0.39) -- (0.21)
In Excess of Net Investment Income (0.07) -- -- -- --
Net Realized Gains (0.79) (0.62) (0.39) (0.51) (0.08)
Total Distributions (1.16) (0.97) (0.78) (0.51) (0.29)
NET ASSET VALUE,
END OF PERIOD $ 10.89 $ 10.46 $ 10.16 $ 10.78 $ 9.37
Ratio of Expenses to
Average Net Assets<F3> 1.24% 1.21% 1.21% 1.25% 1.25%
Ratio of Net Investment Income
to Average Net Assets 2.30% 3.35% 2.49% 2.13% 2.47%<F2>
Total Investment Return 15.21% 12.62% 1.49% 20.53% -3.47%
Portfolio Turnover Rate 222.2% 95.9% 129.9% 171.5% 189.6%<F2>
Average Commission Paid $0.0264 -- -- -- --
Net Assets End of Period (000's) $2,759 $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 1.25% for Global
Income. Without fees waived or reimbursed by the adviser (see Note 5), the annualized expense ratios would have been:
1.51%, 1.74%, 1.98%, 2.32% and 3.05%.
<F4>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Fontaine Trust / December 31, 1996
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 $10.00 per share to Richard H.
Fontaine.
The investment objectives of each Fund as well as the nature and risks of
their investment activities are set forth more fully in the Trust's
Prospectus and Statement of Additional Information, dated May 1, 1996.
Note 2 -- Significant Accounting Policies
A -- Security Valuation--Investments in securities traded on a national
securities exchange and securities traded on over-the-counter markets are
valued at the last sale price on the day of valuation. Securities for which
no sale price is available are valued at the last bid price. Investments in
securities for which no market quotations are available are valued based on
quotations provided by broker-dealers or by such other method approved by
the Board of Trustees. Short-term investments are stated at cost, which
when combined with accrued interest receivable, approximates market value.
B -- Security Transactions and Investment Income--Income and expenses are
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded by each Fund on the ex-dividend date. Investment
transactions are accounted for on the trade date. Realized gains and losses
from investment transactions and unrealized appreciation and depreciation of
investments are reported on an identified cost basis.
C -- Equalization--Capital Appreciation Fund uses the accounting practice of
equalization, by which a portion of the proceeds from sales and costs of
redemption of capital shares, equivalent on a per share basis to the amount
of undistributed net investment income on the date of the transactions, is
credited or charged to undistributed income. As a result, undistributed net
investment income per share is unaffected by sales or redemptions of capital
shares.
D -- Foreign Currency--Amounts denominated in or expected to settle in
foreign currencies (FC) are translated into United States dollars (US$) 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.)
Notes to Financial Statements (Cont'd)
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. The effect of
changes in foreign exchange rates on realized and unrealized security gains
and losses is reflected as a component of such gains and losses.
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, 1996, money market
balances held by Capital Appreciation Fund, Global Growth Fund and Global
Income Fund were $891,735, $360,281, and $1,379,812, respectively. These
accounts are overnight money market sweep accounts with a variable interest
rate (4.90% as of December 31, 1996).
G -- Use of Estimates--The preparation of the financial statements in
accordance with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from
those estimates.
H -- Restricted Securities--Investments in restricted securities cannot be
resold or transferred unless they are subsequently registered under the
Securities Act of 1933 or registered under state security laws.
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.
At December 31, 1996, the aggregate cost of securities for federal income
tax purposes for Capital Appreciation Fund, Global Growth Fund and Global
Income Fund were $3,921,776, $5,093,048, and $2,694,339, respectively. Net
unrealized appreciation/(depreciation) of investments for each Fund were as
follows:
<TABLE>
<CAPTION>
Capital Appreciation Global Growth Global Income
<S> <C> <C> <C>
Appreciated Investments $ 61,721 $ 87,383 $ 35,123
Depreciated Investments (426,987) (532,191) (100,563)
--------- --------- ---------
Net Unrealized Depreciation $(365,266) $(444,808) $(65,440)
Net Unrealized Depreciation-
Tax Basis $(367,768) $(457,998) $(75,772)
</TABLE>
The Distributions in Excess of Net Investment Income per the Statement of
Changes in Net Assets for the Global Growth Fund and Capital Appreciation
Fund are due to the reclassification of capital gains on the sale of
securities identified as Passive Foreign Investment Companies (PFICs) from
capital gains to net investment income and to the inclusion of unrealized
gains on PFICs held in the portfolios at December 31, 1996 in net investment
income.
The Distributions in Excess of Net Realized Gain on the Statement of Changes
in Net Assets for these funds are due to the postponement of capital loss
recognition due to wash sales and to the funds' election to push capital
losses incurred post October 31, 1996 to the next fiscal year.
Notes to Financial Statements (Cont'd)
Note 4 -- Investment Transactions
<TABLE>
<CAPTION>
Capital Appreciation Global Growth Global Income
<S> <C> <C> <C>
U. S. Government Securities:
Purchases $968,934 $147,828 $675,642
Sales 2,229,030 255,435 286,227
Securities Other Than Short-Term
and U. S. Government Securities:
Purchases $19,613,025 $10,884,812 $4,233,381
Sales 20,260,548 6,597,572 3,232,414
</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, $25,752 of
management fees were waived by the Adviser which exceeded the 1.50% expense
limitation for the year ended December 31, 1996. In addition, $337,698 of
fees and expenses were waived or reimbursed by the Adviser in prior periods.
As of December 31, 1996, the Fund owed $1,928 to the Adviser for management
fees payable.
Global Growth Fund: Pursuant to this agreement, $10,468 of management fees
were waived by the Adviser which exceeded the 1.50% expense limitation for
the year ended December 31, 1996. In addition, $23,406 of fees and expenses
were waived or reimbursed by the Adviser in prior periods. As of December
31, 1996, the Fund owed $449 to the Adviser for management fees payable.
Global Income Fund: Pursuant to this agreement, $4,475 of management fees
were waived by the Adviser which exceeded the 1.25% expense limitation for
the year ended December 31, 1996. In addition, $36,361 of fees and expenses
were waived or reimbursed by the Adviser in prior periods. As of December
31, 1996, the Fund owed $754 to the Adviser for management fees payable.
B -- Transfer Agent--During the year ended December 31, 1996, Capital
Appreciation Fund, Global Growth Fund and Global Income Fund, incurred
transfer agent fees and expenses of approximately $8,097, $6,446, and
$2,569, respectively, for shareholder and accounting services provided by
Richard Fontaine and Company, Inc., an affiliate of the Adviser. As of
December 31, 1996, transfer agent fees payable by Capital Appreciation Fund,
Global Growth Fund and Global Income Fund were $1,235, $1,863 and $559,
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.
Notes to Financial Statements (Cont'd)
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, 1996, balances held by these parties 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 112,125.826 $1,050,619 16.40%
Private Accounts under
Adviser Management 34,350.995 321,869 5.03%
----------- ---------- ------
TOTAL 146,476.821 $1,372,488 21.43%
</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 28,208.177 $ 352,602 7.34%
</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 20,881.558 $ 227,400 8.24%
Private Accounts under
Adviser Management 150,577.254 1,639,786 59.44%
----------- ---------- ------
TOTAL 171,458.812 $1,867,186 67.68%
</TABLE>
E -- Related Party Transactions--As an investment practice in the interest
of minimizing transaction expenses, the Adviser may trade securities between
the three Funds in the Trust and between the Funds and the separate accounts
also under Adviser management. These transactions are affected at the
prevailing market price and, where applicable, the prevailing foreign
exchange rate obtained from an independent source and are an alternative to
each fund undertaking the transaction with a third party. No interfund
charges are made for these transfers.
Note 6 -- Subsequent Event
At the February 5, 1997 meeting of the Board of Trustees, it was unanimously
agreed upon that Richard Fontaine Associates would discontinue the Expense
Limitation Agreements with the Funds effective May 1, 1997. 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 is not exceeded
and the period over which such reimbursements are made does not exceed five
years from the date of the first such payment. Effective with this
discontinuance, expense waivers and reimbursements through April 30, 1997
will no longer be recapturable by Richard Fontaine Associates. (Please refer
to the Prospectus for more information on Expenses.)
<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, 1996 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 four years then ended 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 owned as of December 31, 1996 by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material respects, the
financial position of Fontaine Capital Appreciation Fund, Fontaine Global
Growth Fund and Fontaine Global Income Fund as of December 31, 1996, and the
results of their operations, their 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 20, 1997
<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:
Chase Manhattan 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, 1995 and 1996 .
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, 1995 and 1996 .
Financial Statements Incorporated By Reference Into The Statement of
Additional Information:
Portfolio of Investments as of December 31, 1996 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, 1996 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, 1996
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, 1995 and 1996 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, 1995 and 1996 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, 1995 and 1996 for the Fontaine Global
Growth Fund and the Fontaine Global Income Fund.
Notes to Financial Statements for the year ended December 31,
1996 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 Chase Manhattan 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
(a)(3) Agency Agreement Supplement Between Registrant and Richard Fontaine
and Company, Incorporated, relating to the Fontaine Global Growth Fund
(a)(4) Agency Agreement Supplement Between Registrant and Richard Fontaine
and Company, Incorporated, relating to the Fontaine Global Income Fund
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>
(c) Opinion and Consent of Katten Muchin & Zavis
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, 1996 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,
1996 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,
1996 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, 1996
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 530
Fontaine Global Growth Fund 934
Fontaine Global Income Fund 235
</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.
Chase Manhattan 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.
<PAGE>
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. 9
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, 1997.
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. 9 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, 1997
Richard H. Fontaine
<F1>___________________ Trustee April 29, 1997
Dana R. Barrows
<F1>___________________ Trustee April 29, 1997
Lester Bradshaw, Jr.
<F1>___________________ Trustee April 29, 1997
Lucas L. Godinez
/s/ Anne D. Fontaine Chief Financial April 29, 1997
Anne D. Fontaine Officer
<F1>
By: /s/ Richard H. Fontaine April 29, 1997
Richard H. Fontaine Date
(Attorney-in-Fact)
<PAGE>
EXHIBIT LIST
Exhibit
Number Description
9(a)(2) Amended and Restated Agency Agreement Supplement Between
Registrant and Richard Fontaine and Company, Incorporated,
relating to the Fontaine Capital Appreciation Fund
9(a)(3) Agency Agreement Supplement Between Registrant and Richard
Fontaine and Company, Incorporated, relating to the
Fontaine Global Growth Fund
9(a)(4) Agency Agreement Supplement Between Registrant and Richard
Fontaine and Company, Incorporated, relating to the
Fontaine Global Income Fund
10(c) Opinion and Consent of Katten Muchin & Zavis
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, 1996 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,
1996 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,
1996 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, 1996
17 Financial Data Schedule
19 Specimen Price Make-up Sheet
<PAGE>
Exhibits 9(a)(2),
9(a)(3) and 9(a)(4)
<PAGE>
FONTAINE CAPITAL APPRECIATION FUND
A Fund of The Fontaine Trust
210 W. Pennsylvania Avenue, Suite 240
Towson, MD 21204
January 1, 1997
Richard Fontaine and Company, Incorporated
210 W. Pennsylvania Avenue, Suite 240
Towson, MD 21204
Amended and Restated
Agency Agreement Supplement
Dear Sirs:
This will confirm the agreement between the Fontaine Trust (the "Trust")
and Richard Fontaine and Company, Incorporated (the "Company") as follows:
Fontaine Global Income Fund (the "Fund") is a series portfolio of the Trust
which has been organized as a business trust under the laws of the
Commonwealth of Massachusetts and is an open-end management investment
company. The Trust and the Company have entered into a Master Agency
Agreement, dated September 15, 1989 (as from time to time amended and
supplemented, the "Master Agency Agreement"), pursuant to which the Company
has undertaken to provide certain transfer agent series identified therein.
Certain capitalized terms used without definition in this Amended and
Restated Agency Agreement Supplement have the meaning specified in the
Master Agency Agreement.
The Trust agrees with the Company as follows:
1. Adoption of Master Agency Agreement - The Master Agency Agreement
is hereby adopted for the Fund. The Fund shall be one of the "Funds"
referred to in the Master Agency Agreement; and its shares shall be a
"Series" of shares as referred to therein.
2. Payment of Fees - For all services to be rendered, facilities
furnished and expenses paid or assumed by the Company as provided in the
Master Agency Agreement and herein, the Fund shall pay the following fees:
<PAGE>
FEE SCHEDULE
Annual Fee for Fund: $21.00
Shareholder Transaction Fees:
1. New Subscription $ 5.00
2. Manual Transactions - includes purchase of shares,
redemption of shares, exchanges and cutting dividend
checks. $ 1.50
3. Telephone Calls $ 2.50
4. Dividend Distributions $ .75
5. Close Account $ 2.00
Out of Pocket Expenses:
A billing of the recovery of out-of pocket expenses will be made monthly as
of the end of each month. These include but are not limited to the
following: telephone, telex, telecopier, postage, insurance, legal fees,
courier service, duplicating, stationary and forms.
If the foregoing correctly sets forth the agreement and understanding
between the Trust and the Company, please so indicate by signing this
Amended and Restated Agency Agreement Supplement and returning it to the
Trust.
Very truly yours,
ATTEST: THE FONTAINE TRUST,
ON BEHALF OF THE
FONTAINE CAPITAL APPRECIATION FUND
/s/ Kimberly A. Malkowski By: /s/ Richard H. Fontaine
Secretary Title: President
Name: Richard H. Fontaine
ATTEST: RICHARD FONTAINE AND COMPANY,
INCORPORATED
/s/ Kimberly A. Malkowski By: /s/ Richard H. Fontaine
Secretary Title: President
Name: Richard H. Fontaine
<PAGE>
FONTAINE GLOBAL INCOME FUND
A Fund of The Fontaine Trust
210 W. Pennsylvania Avenue, Suite 240
Towson, MD 21204
January 1, 1997
Richard Fontaine and Company, Incorporated
210 W. Pennsylvania Avenue, Suite 240
Towson, MD 21204
Amended and Restated
Agency Agreement Supplement
Dear Sirs:
This will confirm the agreement between the Fontaine Trust (the "Trust")
and Richard Fontaine and Company, Incorporated (the "Company") as follows:
Fontaine Global Income Fund (the "Fund") is a series portfolio of the Trust
which has been organized as a business trust under the laws of the
Commonwealth of Massachusetts and is an open-end management investment
company. The Trust and the Company have entered into a Master Agency
Agreement, dated September 15, 1989 (as from time to time amended and
supplemented, the "Master Agency Agreement"), pursuant to which the Company
has undertaken to provide certain transfer agent series identified therein.
Certain capitalized terms used without definition in this Amended and
Restated Agency Agreement Supplement have the meaning specified in the
Master Agency Agreement.
The Trust agrees with the Company as follows:
1. Adoption of Master Agency Agreement - The Master Agency Agreement
is hereby adopted for the Fund. The Fund shall be one of the "Funds"
referred to in the Master Agency Agreement; and its shares shall be a
"Series" of shares as referred to therein.
2. Payment of Fees - For all services to be rendered, facilities
furnished and expenses paid or assumed by the Company as provided in the
Master Agency Agreement and herein, the Fund shall pay the following fees:
<PAGE>
FEE SCHEDULE
Annual Fee for Fund: $21.00
Shareholder Transaction Fees:
1. New Subscription $ 5.00
2. Manual Transactions - includes purchase of shares,
redemption of shares, exchanges and cutting dividend
checks. $ 1.50
3. Telephone Calls $ 2.50
4. Dividend Distributions $ .75
5. Close Account $ 2.00
Out of Pocket Expenses:
A billing of the recovery of out-of pocket expenses will be made monthly as
of the end of each month. These include but are not limited to the
following: telephone, telex, telecopier, postage, insurance, legal fees,
courier service, duplicating, stationary and forms.
If the foregoing correctly sets forth the agreement and understanding
between the Trust and the Company, please so indicate by signing this
Amended and Restated Agency Agreement Supplement and returning it to the
Trust.
Very truly yours,
ATTEST: THE FONTAINE TRUST,
ON BEHALF OF THE
FONTAINE GLOBAL INCOME FUND
/s/ Kimberly A. Malkowski By: /s/ Richard H. Fontaine
Secretary Title: President
Name: Richard H. Fontaine
ATTEST: RICHARD FONTAINE AND COMPANY,
INCORPORATED
/s/ Kimberly A. Malkowski By: /s/ Richard H. Fontaine
Secretary Title: President
Name: Richard H. Fontaine
<PAGE>
FONTAINE GLOBAL GROWTH FUND
A Fund of The Fontaine Trust
210 W. Pennsylvania Avenue, Suite 240
Towson, MD 21204
January 1, 1997
Richard Fontaine and Company, Incorporated
210 W. Pennsylvania Avenue, Suite 240
Towson, MD 21204
Amended and Restated
Agency Agreement Supplement
Dear Sirs:
This will confirm the agreement between the Fontaine Trust (the "Trust")
and Richard Fontaine and Company, Incorporated (the "Company") as follows:
Fontaine Global Income Fund (the "Fund") is a series portfolio of the Trust
which has been organized as a business trust under the laws of the
Commonwealth of Massachusetts and is an open-end management investment
company. The Trust and the Company have entered into a Master Agency
Agreement, dated September 15, 1989 (as from time to time amended and
supplemented, the "Master Agency Agreement"), pursuant to which the Company
has undertaken to provide certain transfer agent series identified therein.
Certain capitalized terms used without definition in this Amended and
Restated Agency Agreement Supplement have the meaning specified in the
Master Agency Agreement.
The Trust agrees with the Company as follows:
1. Adoption of Master Agency Agreement - The Master Agency Agreement
is hereby adopted for the Fund. The Fund shall be one of the "Funds"
referred to in the Master Agency Agreement; and its shares shall be a
"Series" of shares as referred to therein.
2. Payment of Fees - For all services to be rendered, facilities
furnished and expenses paid or assumed by the Company as provided in the
Master Agency Agreement and herein, the Fund shall pay the following fees:
<PAGE>
FEE SCHEDULE
Annual Fee for Fund: $21.00
Shareholder Transaction Fees:
1. New Subscription $ 5.00
2. Manual Transactions - includes purchase of shares,
redemption of shares, exchanges and cutting dividend
checks. $ 1.50
3. Telephone Calls $ 2.50
4. Dividend Distributions $ .75
5. Close Account $ 2.00
Out of Pocket Expenses:
A billing of the recovery of out-of pocket expenses will be made monthly as
of the end of each month. These include but are not limited to the
following: telephone, telex, telecopier, postage, insurance, legal fees,
courier service, duplicating, stationary and forms.
If the foregoing correctly sets forth the agreement and understanding
between the Trust and the Company, please so indicate by signing this
Amended and Restated Agency Agreement Supplement and returning it to the
Trust.
Very truly yours,
ATTEST: THE FONTAINE TRUST,
ON BEHALF OF THE
FONTAINE GLOBAL GROWTH FUND
/s/ Kimberly A. Malkowski By: /s/ Richard H. Fontaine
Secretary Title: President
Name: Richard H. Fontaine
ATTEST: RICHARD FONTAINE AND COMPANY,
INCORPORATED
/s/ Kimberly A. Malkowski By: /s/ Richard H. Fontaine
Secretary Title: President
Name: Richard H. Fontaine
<PAGE>
Exhibit 10(c
<PAGE>
[Katten Muchin & Zavis Letterhead]
Washington, D.C. (202) 625-3781
April 25, 1997
The Fontaine Trust
210 W. Pennsylvania Avenue
Towson, MD 21204-9456
Re: Consent of Counsel
Dear Gentlemen:
This consent is given in connection with the filing by The Fontaine Trust (the
"Trust"), a Massachusetts business trust, of Post-Effective Amendment No. 10
to its Registration Statement (File No. 33-29678/811-5835) on Form N1-A (the
"Registration Statement") under the Securities Act of 19343, as amended, and
the Investment Company Act of 1940, as amended. We consent to the reference
to Katten Muchin & Zavis under the caption "Counsel and Independent Public
Accountants" in the prospectus and under the caption "Legal Matters" in the
Statement of Additional Information comprising a part of the Registration
Statement.
Very truly yours,
/s/ Katten Muchin & Zavis
KATTEN MUCHIN & ZAVIS
<PAGE>
Exhibit 11
<PAGE>
[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. 10 to the Registration Statement of the Fontaine Trust on
Form N-1A (File No. 33-29678) of our report dated February 20, 1997 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, 1996, 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.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
April 25, 1997
<PAGE>
Exhibits 16(a)(1),
16(a)(2) and 16(a)(3)
<PAGE>
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
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**:
1 year 3 years 5 years 10 years
Capital Appreciation Fund $19 $59 $102 $221
Global Growth Fund $18 $57 $98 $214
Global Income Fund $15 $48 $82 $180
*The minimum initial investment for each Fund is $1,000.
**There are no charges imposed upon redemption.
Capital Appreciation Fund
Year 1 : $1,000 + ($1,000 x 5% = $50) = $1,050
$1,050 - ($1,000 x 1.89% = $18.90) = $1,031.10
$1,000 + $1,031.10 = $2,031.10 / 2 = $1,015.55
$1,015.55 x 1.89% = $19.19
Rounds to $19
Year 2: $1,031.10 + ($1,031.10 x 5% = $51.56) = $1,082.66
$1,082.66 - ($1,031.10 x 1.89% = $19.49) = $1,063.17
$1,031.10 + $1,063.17 = $2,094.27 / 2 = $1,047.13
$1,047.13 x 1.89% = $19.79
Year 3: $1,063.17 + ($1,063.17 x 5% = $53.16) = $1,116.33
$1,116.33 - ($1,063.17 x 1.89% = $20.09) = $1,096.23
$1,063.17 + $1,096.23 = $2,159.40 / 2 = $1,079.70
$1,079.70 x 1.89% = $20.41
$(19.19 + 19.79 + 20.41) = $59.39
Rounds to $59
Year 4: $1,096.23 + ($1,096.23 x 5% = $54.81) = $1,151.04
$1,151.04 - ($1,096.23 x 1.89% = $20.72) = $1,130.32
$1,096.23 + $1,130.32 = $2,226.56 / 2 = $1,113.28
$1,113.28 x 1.89% = $21.04
Year 5: $1,130.32 + ($1,130.32 x 5% = $56.52) = $1,186.84
$1,186.84 - ($1,130.32 x 1.89% = $21.36) = $1,165.48
$1,130.32 + $1,165.48 = $2,295.80 / 2 = $1,147.90
$1,147.90 x 1.89% = $21.70
$(19.19 + 19.79 + 20.41 + 21.04 + 21.70) = $102.13
Rounds to $102
Part C--Other Information
Item 24(b)(16)(a)
Capital Appreciation Fund
Year 6: $1,165.48 + ($1,165.48 x 5% = $58.27) = $1,223.75
$1,223.75 - ($1,165.48 x 1.89% = $22.03) = $1,201.72
$1,165.48 + $1,201.72 = $2,367.20 / 2 + $1,183.60
$1,183.60 x 1.89% = $22.37
Year 7: $1,201.72 + ($1,201.72 x 5% = $60.09) = $1,261.81
$1,261.81 - ($1,201.72 x 1.89% = $22.71) = $1,239.10
$1,201.72 + $1,239.10 = $2,440.82 / 2 = $1,220.41
$1,220.41 x 1.89% = $23.07
Year 8: $1,239.10 + ($1,239.10 x 5% = $61.95) = $1,301.05
$1,301.05 - ($1,239.10 x 1.89% = $23.42) = $1,277.63
$1,239.10 + $1,277.63 = $2,516.73 / 2 = $1,258.37
$1,258.37 x 1.89% = $23.78
Year 9: $1,277.63 + ($1,277.63 x 5% = $63.88) = $1,341.52
$1,341.52 - ($1,277.63 x 1.89% = $24.15) = $1,317.37
$1,277.63 + $1,317.37 = $2,595.00 / 2 = $1,297.50
$1,297.50 x 1.89% = $24.52
Year 10: $1,317.37 + ($1,317.37 x 5% = $65.87) = $1,383.34
$1,383.34 - ($1,317.37 x 1.89% = $24.90) = $1,358.34
$1,317.37 + $1,358.34 = $2,675.71 / 2 = $1,337.85
$1,337.85 x 1.89% = $25.29
$(19.19 + 19.79 + 20.41 + 21.04 + 21.70 +
22.37 + 23.07 + 23.78 + 24.52 + 25.29) = $221.15
Rounds to $221
Global Growth Fund
Year 1 : $1,000 + ($1,000 x 5% = $50) = $1,050
$1,050 - ($1,000 x 1.82% = $18.18) = $1,031.82
$1,000 + $1,031.82 = $2,031.82 / 2 = $1,015.91
$1,015.91 x 1.82% = $18.47
Rounds to $18
Year 2: $1,031.82 + ($1,031.82 x 5% = $51.59) = $1,083.41
$1,083.41 - ($1,031.82 x 1.82% = $18.76) = $1,064.65
$1,031.82 + $1,064.65 = $2,096.47 / 2 = $1,048.24
$1,048.24 x 1.82% = $19.06
Year 3: $1,064.65 + ($1,064.65 x 5% = $53.23) = $1,117.89
$1,117.89 - ($1,064.65 x 1.82% = $19.36) = $1,098.53
$1,064.65 + $1,098.53 = $2,163.18 / 2 = $1,081.59
$1,081.59 x 1.82% = $19.66
$(18.47 + 19.06 + 19.66) = $57.19
Rounds to $57
Part C--Other Information
Item 24(b)(16)(a)
Global Growth Fund (cont'd)
Year 4: $1,098.53 + ($1,098.53 x 5% = $54.93) = $1,153.46
$1,153.46 - ($1,098.53 x 1.82% = $19.97) = $1,133.48
$1,098.53 + $1,133.48 = $2,232.01 / 2 = $1,116.01
$1,116.01 x 1.82% = $20.29
Year 5: $1,133.48 + ($1,133.48 x 5% = $56.67) = $1,190.16
$1,190.16 - ($1,133.48 x 1.82% = $20.61) = $1,169.55
$1,133.48 + $1,169.55 = $2,303.04 / 2 = $1,151.52
$1,151.52 x 1.82% = $20.93
$(18.47 + 19.06 + 19.66 + 20.29 + 20.93) = $98.41
Rounds to $98
Year 6: $1,169.55 + ($1,169.55 x 5% = $58.48) = $1,228.03
$1,228.03 - ($1,169.55 x 1.82% = $21.26) = $1,206.77
$1,169.55 + $1,206.77 = $2,376.32 / 2 = $1,188.16
$1,188.16 x 1.82% = $21.60
Year 7: $1,206.77 + ($1,206.77 x 5% = $60.34) = $1,267.11
$1,267.11 - ($1,206.77 x 1.82% = $21.94) = $1,245.17
$1,206.77 + $1,245.17 = $2,451.93 / 2 = $1,225.97
$1,225.97 x 1.82% = $22.29
Year 8: $1,245.17 + ($1,245.17 x 5% = $62.26) = $1,307.43
$1,307.43 - ($1,245.17 x 1.82% = $22.64)= $1,284.79
$1,245.17 + $1,284.79 = $2,529.96 / 2 = $1,264.98
$1,264.98 x 1.82% = $23.00
Year 9: $1,284.79 + ($1,284.79 x 5% = $64.24) = $1,349.03
$1,349.03 - ($1,284.79 x 1.82% = $23.36) = $1,325.67
$1,284.79 + $1,325.67 = $2,610.46 / 2 = $1,305.23
$1,305.23 x 1.82% = $23.73
Year 10: $1,325.67 + ($1,325.67 x 5% = $66.28) = $1,391.95
$1,391.95 - ($1,325.67 x 1.82% = $24.10) = $1,367.85
$1,325.67 + $1,367.85 = $2,693.52 / 2 = $1,346.76
$1,346.76 x 1.82% = $24.48
$(18.47 + 19.06 + 19.66 + 20.29 + 20.93 +
21.60 + 22.29 + 23.00 + 23.73 + 24.48) = $213.51
Rounds to $214
Global Income Fund
Year 1 : $1,000 + ($1,000 x 5% = $50) = $1,050
$1,050 - ($1,000 x 1.51% = $15.10) = $1,034.90
$1,000 + $1,034.90 = $2,034.90 / 2 = $1,017.45
$1,017.45 x 1.51% = $15.36
Rounds to $15
Year 2: $1,034.90 + ($1,034.90 x 5% = $51.75) = $1,086.65
$1,086.65 - ($1,034.90 x 1.51% = $15.63) = $1,071.02
$1,034.90 + $1,071.02 = $2,105.92 / 2 = $1,052.96
$1,052.96 x 1.51% = $15.90
Part C--Other Information
Item 24(b)(16)(a)
Global Income Fund (cont'd)
Year 3: $1,071.02 + ($1,071.02 x 5% = $53.55) = $1,124.57
$1,124.57 - ($1,071.02 x 1.51% = $16.17) = $1,108.40
$1,071.02 + $1,108.40 = $2,179.41 / 2 = $1,089.71
$1,089.71 x 1.51% = $16.45
$(12.33 + 15.90 + 16.45) = $47.72
Rounds to $47
Year 4: $1,108.40 + ($1,108.40 x 5% = $55.42) = $1,163.82
$1,163.82 - ($1,108.40 x 1.51% = $16.74) = $1,147.08
$1,108.40 + $1,147.08 = $2,255.48 / 2 = $1,127.74
$1,127.74 x 1.51% = $17.03
Year 5: $1,147.08 + ($1,147.08 x 5% = $57.35) = $1,204.43
$1,204.43 - ($1,147.08 x 1.51% = $17.32) = $1,187.11
$1,147.08 + $1,187.11 = $2,334.19 / 2 = $1,167.10
$1,167.10 x 1.51% = $17.62
$(15.36 + 15.90 + 16.45 + 17.03 + 17.62) = $82.37
Rounds to $82
Year 6 $1,187.11 + ($1,187.11 x 5% = $59.36) = $1,246.47
$1,246.47 - ($1,187.11 x 1.51% = $17.93) = $1,228.54
$1,187.11 + $1,228.54 = $2,415.66 / 2 = $1,207.83
$1,207.83 x 1.51% = $18.24
Year 7 $1,228.54 + ($1,228.54 x 5% = $61.43) = $1,289.97
$1,289.97 - ($1,228.54 x 1.51% = $18.55) = $1,271.42
$1,228.54 + $1,271.42 = $2,499.96 / 2 = $1,249.98
$1,249.98 x 1.51% = $18.87
Year 8 $1,271.42 + ($1,271.42 x 5% = $63.57) = $1,334.99
$1,334.99 - ($1,271.42 x 1.51% = $19.20) = $1,315.79
$1,271.42 + $1,315.79 = $2,587.21 / 2 = $1,293.61
$1,293.61 x 1.51% = $19.53
Year 9 $1,315.79 + ($1,315.79 x 5% = $65.79) = $1,381.58
$1,381.58 - ($1,315.79 x 1.51% = $19.87) = $1,361.71
$1,315.79 + $1,361.71 = $2,677.50 / 2 = $1,338.75
$1,338.75 x 1.51% = $20.22
Year 10 $1,361.71 + ($1,361.71 x 5% = $68.09) = $1,429.80
$1,429.80 - ($1,361.71 x 1.51% = $20.56) = $1,409.24
$1,361.71 + $1,409.24 = $2,770.95 / 2 = $1,385.47
$1,385.47 x 1.51% = $20.92
$(15.36 + 15.90 + 16.45 + 17.03 + 17.62 +
18.24 + 18.87 + 19.53 + 20.22 + 20.92) = $180.15
Rounds to $180
<PAGE>
Exhibits 16(b)(1),
16(b)(2) and 16(b)(3)
<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, 1995 to December 31, 1996 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, 1995 to December 31, 1996:
Calculation of ERV:
(12/31/95) $1,000 @ $10.67/sh = 93.721 shares
(12/22/96) 93.721 shares @ $2.90/sh (dividend
distribution) = $271.79
$271.79 @ $9.37 (reinvest price) = 29.006 shares
93.721 shares + 29.006 shares = 122.727 shares
(12/31/96) 122.727 shares @ $9.37/sh = $1,149.95
T = ($1,149.95/$1,000)1/1 - 1
= 1.14995 - 1
= +.14995
= + 15.0%
Part C--Other Information
Item 24(b)(16)(b)
Computations of the SEC's Standarized Average Annual Return for the period
December 31, 1991 to December 31, 1996 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, 1991 to December 31, 1996:
Calculation of ERV:
(12/31/91) $1,000 @ $10.78/sh = 92.764 shares
(12/23/92) 92.764 shares @ $0.75/sh (dividend
distribution) = $69.57
$69.57 @ $9.53 (reinvest price) = 7.300 shares
92.764 shares + 7.300 shares = 100.065 shares
(8/30/93) 100.065 shares @ $0.075/sh (dividend
distribution) = $7.50
$7.50 @ $10.39 (reinvest price) = .722 shares
100.065 shares + .722 shares = 100.787 shares
(12/23/93) 100.787 shares @ $0.125/sh (dividend
distribution) = $12.60
$12.60 @ $10.80 (reinvest price) = 1.167 shares
100.787 shares + 1.167 shares = 101.954 shares
(12/27/94) 101.954 shares @ $0.25/sh (dividend
distribution) = $25.49
$25.49 @ $10.67 (reinvest price) = 2.389 shares
101.954 shares + 2.389 shares = 104.342 shares
(12/22/95) 104.342 shares @ $1.76/sh (dividend
distribution) = $183.64
$183.64 @ $10.76 (reinvest price) = 17.067 shares
104.342 shares + 17.067 shares = 121.410 shares
(12/23/96) 121.410 shares @ $2.90/sh (dividend
distribution) = $352.09
$352.09 @ $9.37 (reinvest price) = 37.576 shares
121.410 shares + 37.576 shares = 158.986 shares
(12/31/96) 158.986 shares @ $9.37/sh = $1,489.70
T = ($1,489.70/$1,000)1/5 - 1
= 1.08298 - 1
= +0.08298
= + 8.3
Part C--Other Information
Item 24(b)(16)(b)
Computations of the SEC's Standarized Average Annual Return for the period
September 28, 1989 (Since Inception) to December 31, 1996 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, 1996:
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
(12/23/96) 149.991 shares @ $2.90/sh (dividend/
distribution) = $434.97
$434.97 @ $9.37 (reinvest price) = 46.422 shares
149.991 shares + 46.422 shares = 196.413 shares
Part C--Other Information
Item 24(b)(16)(b)
(12/31/96) 196.413 shares @ $9.37/sh = $1,840.39
T = ($1,840.39/$1,000)1/7.2685 - 1
= (1.84039).1376 - 1
= +0.08756
= + 8.8%
Part C--Other Information
Item 24(b)(16)(b)
THE FONTAINE TRUST
FONTAINE GLOBAL GROWTH FUND
Computations of the SEC's Standarized Average Annual Return for the period
December 31, 1995 to December 31, 1996 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, 1995 to December 31, 1996:
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%
Part C--Other Information
Item 24(b)(16)(b)
Computations of the SEC's Standarized Average Annual Return for the period
May 1, 1992 (Inception) to December 31, 1996
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, 1996:
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%
Part C--Other Information
Item 24(b)(16)(b)
THE FONTAINE TRUST
FONTAINE GLOBAL INCOME FUND
Computations of the SEC's Standarized Average Annual Return for the period
December 31, 1995 to December 31, 1996 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, 1995 to December 31, 1996:
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%
Part C--Other Information
Item 24(b)(16)(b)
Computations of the SEC's Standarized Average Annual Return for the period
May 1, 1992 (Inception) to December 31, 1996
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, 1996:
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
Part C--Other Information
Item 24(b)(16)(b)
(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
T = ($1,329.84/$1,000)1/3.671233 - 1
= (1.32984).27239 - 1
= +0.080741
= + 8.1%
<PAGE>
Exhibits 16(c)(1), 16(c)(2)
and 16(c)(3)
<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, 1996
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, 1996
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%
Part C--Other Information
Item 24(b)(16)(c)
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, 1996
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, 1996
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%
Part C--Other Information
Item 24(b)(16)(c)
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, 1996
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, 1996:
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
Part C--Other Information
Item 24(b)(16)(c)
(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>
Exhibit 16(d)
<PAGE>
Part C--Other Information
Item 24(b)(16)(d)
Fontaine Global Income Fund
Sec 30-day Yield Calculation
12/31/96
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 = $8,936.50
b = $2,550.07
c = 224,301.419
d = $10.89
Yield = 3.16%
<PAGE>
Exhibit 17
<PAGE>
[NAME] FONTAINE TRUST
[SERIES]
[NUMBER] 1
[NAME] FONTAINE CAPITAL APPRECIATION FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 4,662,258
[INVESTMENTS-AT-VALUE] 4,296,992
[RECEIVABLES] 2,545,516
[ASSETS-OTHER] 4,177
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 6,846,685
[PAYABLE-FOR-SECURITIES] 344,250
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 97,636
[TOTAL-LIABILITIES] 441,886
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 7,100,185
[SHARES-COMMON-STOCK] 683,834
[SHARES-COMMON-PRIOR] 495,226
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 2,502
[ACCUMULATED-NET-GAINS] (326,795)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (366,089)
[NET-ASSETS] 6,404,799
[DIVIDEND-INCOME] 51,853
[INTEREST-INCOME] 50,536
[OTHER-INCOME] 0
[EXPENSES-NET] 96,529
[NET-INVESTMENT-INCOME] 5,860
[REALIZED-GAINS-CURRENT] 1,025,313
[APPREC-INCREASE-CURRENT] (299,752)
[NET-CHANGE-FROM-OPS] 731,421
[EQUALIZATION] 55
[DISTRIBUTIONS-OF-INCOME] 5,861
[DISTRIBUTIONS-OF-GAINS] 965,016
[DISTRIBUTIONS-OTHER] 329,297
[NUMBER-OF-SHARES-SOLD] 251,892
[NUMBER-OF-SHARES-REDEEMED] 193,950
[SHARES-REINVESTED] 130,666
[NET-CHANGE-IN-ASSETS] 1,122,414
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (60,298)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 61,135
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 122,281
[AVERAGE-NET-ASSETS] 6,437,697
[PER-SHARE-NAV-BEGIN] 10.67
[PER-SHARE-NII] .01
[PER-SHARE-GAIN-APPREC] 1.59
[PER-SHARE-DIVIDEND] .01
[PER-SHARE-DISTRIBUTIONS] 2.89
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 9.37
[EXPENSE-RATIO] 1.49
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[NAME] THE FONTAINE TRUST
[SERIES]
[NUMBER] 2
[NAME] FONTAINE GLOBAL GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 5,404,211
[INVESTMENTS-AT-VALUE] 4,959,402
[RECEIVABLES] 755,199
[ASSETS-OTHER] 5,061
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 5,719,662
[PAYABLE-FOR-SECURITIES] 834,804
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 81,971
[TOTAL-LIABILITIES] 916,775
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 5,304,321
[SHARES-COMMON-STOCK] 384,149
[SHARES-COMMON-PRIOR] 69,788
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 13,189
[ACCUMULATED-NET-GAINS] (40,316)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (447,929)
[NET-ASSETS] 4,802,887
[DIVIDEND-INCOME] 31,024
[INTEREST-INCOME] 23,085
[OTHER-INCOME] 0
[EXPENSES-NET] 43,264
[NET-INVESTMENT-INCOME] 10,845
[REALIZED-GAINS-CURRENT] 354,248
[APPREC-INCREASE-CURRENT] (441,604)
[NET-CHANGE-FROM-OPS] (76,511)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 10,701
[DISTRIBUTIONS-OF-GAINS] 354,247
[DISTRIBUTIONS-OTHER] 53,507
[NUMBER-OF-SHARES-SOLD] 530,302
[NUMBER-OF-SHARES-REDEEMED] 246,905
[SHARES-REINVESTED] 30,964
[NET-CHANGE-IN-ASSETS] 4,102,758
[ACCUMULATED-NII-PRIOR] (143)
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 23,702
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 53,732
[AVERAGE-NET-ASSETS] 2,955,571
[PER-SHARE-NAV-BEGIN] 10.03
[PER-SHARE-NII] .06
[PER-SHARE-GAIN-APPREC] 3.65
[PER-SHARE-DIVIDEND] .02
[PER-SHARE-DISTRIBUTIONS] 1.22
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 12.5
[EXPENSE-RATIO] 1.46
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[NAME] THE FONTAINE TRUST
[SERIES]
[NUMBER] 3
[NAME] FONTAINE GLOBAL INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 4,063,819
[INVESTMENTS-AT-VALUE] 3,998,378
[RECEIVABLES] 191,871
[ASSETS-OTHER] 3,465
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 4,193,714
[PAYABLE-FOR-SECURITIES] 547,775
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 887,150
[TOTAL-LIABILITIES] 1,434,925
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,839,176
[SHARES-COMMON-STOCK] 253,409
[SHARES-COMMON-PRIOR] 101,297
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (9,715)
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (70,672)
[NET-ASSETS] 2,758,789
[DIVIDEND-INCOME] 20,440
[INTEREST-INCOME] 43,586
[OTHER-INCOME] 0
[EXPENSES-NET] 22,423
[NET-INVESTMENT-INCOME] 41,603
[REALIZED-GAINS-CURRENT] 184,770
[APPREC-INCREASE-CURRENT] (74,151)
[NET-CHANGE-FROM-OPS] 152,222
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 41,808
[DISTRIBUTIONS-OF-GAINS] 184,770
[DISTRIBUTIONS-OTHER] 9,715
[NUMBER-OF-SHARES-SOLD] 235,669
[NUMBER-OF-SHARES-REDEEMED] 100,375
[SHARES-REINVESTED] 16,818
[NET-CHANGE-IN-ASSETS] 1,699,246
[ACCUMULATED-NII-PRIOR] 205
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 13,185
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 26,898
[AVERAGE-NET-ASSETS] 1,787,241
[PER-SHARE-NAV-BEGIN] 10.46
[PER-SHARE-NII] .26
[PER-SHARE-GAIN-APPREC] 1.33
[PER-SHARE-DIVIDEND] .30
[PER-SHARE-DISTRIBUTIONS] .86
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.89
[EXPENSE-RATIO] 1.24
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
Exhibit 19
<PAGE>
THE FONTAINE TRUST
SPECIMEN
PRICE MAKE-UP SHEET
December 31, 1996
Value of Registrant's
Portfolio Securities Outstanding Total Offering
and Other Assets Securities Price Per Share
________________________________________________________________________
THE FONTAINE CAPITAL APPRECIATION FUND
$6,404,799 683,834 $9.37
THE FONTAINE GLOBAL GROWTH FUND
$4,802,887 384,149 $12.50
THE FONTAINE GLOBAL INCOME FUND
$2,758,789 253,409 $10.89
