NICHOLAS APPLEGATE MUTUAL FUNDS, N-14, 1998-03-03

NICHOLAS APPLEGATE MUTUAL FUNDS
N-14, 1998-03-03

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As filed with the Securities and Exchange Commission on March 3, 1998

Securities Act Registration No. 33-56094
Investment Company Act Registration No. 811-7428

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

NICHOLAS-APPLEGATE MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)

600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(Address of Principal Executive Offices:
Number, Street, City, State, Zip Code)

(818) 852-1000
(Area Code and Telephone Number)

ARTHUR E. NICHOLAS
C/O NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(Name and Address of Agent for Service)

Copies to:
Jane A. Kanter, Esq. Charles Field, Esq.
Dechert Price & Rhoads Vice President
1775 Eye Street, N.W. Nicholas-Applegate Capital Management
Washington, D.C. 20006 600 West Broadway, 30th Floor
San Diego, California 92101

Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.

No filing fee is required because an indefinite number of shares have
previously been registered pursuant to Rule 24f-2 under the Investment Company
Act of 1940, as amended. The Registrant's Rule 24f-2 Notice for the fiscal year
ended March 31, 1997 was filed on or about May 30, 1997. Pursuant to Rule 429
under the Securities Act of 1933, this Registration Statement relates to shares
previously registered on the aforesaid Registration Statement.

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NICHOLAS-APPLEGATE MUTUAL FUNDS
FORM N-14
Cross Reference Sheet
Pursuant to Rule 481(a) under the Securities Act of 1933

Item No. Location in Combined Proxy Statement and
- -------- ----------------------------------------
Prospectus
----------
Part A
1. Cover Page Cover Page

2. Beginning and Outside Table of Contents
Back Coverage Page

3. Synopsis and Risk Factors Summary; Risk Considerations

4. Information About the Summary; 1. To Approve or Disapprove of
Transaction the Reorganization Agreement; 2. To
Approve or Disapprove of the Proposed
Amendment; Comparison of (1) The Fontaine
Trust Capital Appreciation Fund and the
Nicholas-Applegate Balanced Growth Fund -
Class A shares; (2) The Fontaine Trust
Global Growth Fund and the Nicholas-
Applegate Worldwide Growth Fund - Class A
shares; and (3) The Fontaine Trust Global
Income Fund and the Nicholas-Applegate
Worldwide Growth Fund - Class A shares

5. Information About the Summary; 1. To Approve or Disapprove of
Registrant the Reorganization Agreement; Additional
Information About Each Fund

6. Information About the Summary; 1. To Approve or Disapprove of
Company Being Acquired the Reorganization Agreement; 2. To
Approve or Disapprove of the Proposed
Amendment; Additional Information About
Each Fund

7. Voting Information Summary; Information Relating to Voting
Matters

8. Interest of Certain Additional Information About Each Fund
Persons and Experts

9. Additional Information Not Applicable
Required for Reoffering
by Persons Deemed to be
Underwriters

Part B

10. Cover Page Cover Page

11. Table of Contents Cover Page

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12. Additional Information Statement of Additional Information of
About the Registrant the Nicholas-Applegate Funds, dated July
16, 1997, incorporated by reference

13. Additional Information Statement of Additional Information of
About the Company Being The Fontaine Trust, dated May 1, 1997,
Acquired incorporated by reference

14. Financial Statements Annual Report of the Funds, incorporated
by reference

Part C

15. Indemnification Indemnification

16. Exhibits Exhibits

17. Undertakings Undertakings

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PARTS A and B

Pursuant to Rule 411 under the Securities Act of 1933, as amended, and Rules 0-4
and 8b-23 under the Investment Company Act of 1940, as amended, the information
required to be included in Part A and Part B of this Form N-14 Registration
Statement is incorporated by reference to the Registrant's Prospectus and
Statement of Additional Information included in Post-Effective Amendment No. 52
as filed in electronic format via EDGAR with the Securities and Exchange
Commission on February 19, 1998 (File Nos. 33-56094 and 811-7428). The
Registrant's Annual Report to Shareholders dated March 31, 1997 and Semi-Annual
Report to Shareholders dated September 30, 1997, as filed in electronic format
via EDGAR with the Securities and Exchange Commission (File No. 811-7428) are
incorporated by reference into Part A and Part B of this Form N-14 Registration
Statement as specified in those documents. The Annual Report of The Fontaine
Trust dated December 31, 1997 as filed in electronic format via EDGAR with the
Securities and Exchange Commission (File No. 811-05835) is incorporated by
reference into Part B of this Form N-14 Registration Statement.

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Dear Shareholder:

I invite you to attend a Special Meeting of Shareholders of The Fontaine Trust's
three series: the Capital Appreciation Fund, the Global Growth Fund, and the
Global Income Fund (the "Funds") to be held on Monday, April 20, 1998, at 10:00
a.m. The meeting will be held at the offices of The Fontaine Trust, 210 West
Pennsylvania Avenue, Suite 240, Towson, Maryland.

The accompanying Combined Proxy Statement/Prospectus contains an important
proposal for your consideration as a shareholder of one or more of the Funds.
Your Board of Trustees has proposed that the Funds be merged into certain series
of Nicholas-Applegate Mutual Funds (the "Nicholas-Applegate Funds"). If
approved by the shareholders of the Funds, following the Special Meeting of
Shareholders, on April 20, 1998 substantially all of the assets of each of the
Funds (less a reserve for liabilities) will be exchanged for shares of the
series of the Nicholas-Applegate Funds described in the accompanying Notice and
Combined Proxy Statement/Prospectus. On that same date, your Fund shares will
be exchanged for an equal dollar amount of Nicholas-Applegate Fund shares with
no tax effect to you.

In light of the comparatively small asset size, lack of expected asset growth,
and lack of economies of scale of each of the Funds, the Board of Trustees of
The Fontaine Trust has determined that it is in the best interests of the
shareholders to reorganize each of the Funds into larger funds having, in most
cases, similar investment objectives, policies and restrictions, and employing
similar investment strategies. The Board has determined that the series of the
Nicholas-Applegate Funds described in the accompanying Combined Proxy Statement
and Prospectus meet those criteria. The series of the Nicholas-Applegate Funds
also offer superior historical returns and more favorable expense ratios than
the corresponding series of The Fontaine Fund. In addition, the
Nicholas-Applegate Funds currently consist of __ series, which provide an
abundance of investment alternatives to investors.

ACCORDINGLY, THE BOARD OF TRUSTEES STRONGLY URGES YOU TO VOTE FOR THE PROPOSED
REORGANIZATION.

The enclosed materials provide more information about the proposed
reorganization.

Your vote is important. We urge you to complete, SIGN AND RETURN THE ENCLOSED
PROXY VOTING CARD FOR EACH FUND IN WHICH YOU ARE A SHAREHOLDER so that your
shares will be represented. EVERYTHING YOU NEED IS ENCLOSED. By promptly
returning the proxy, you help avoid the necessity and expense of follow-up
mailings and telephone solicitations to assure a quorum. If you later

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decide to attend the meeting, you may revoke your proxy and vote your shares in
person. If you have any questions, please call us at 1-800-247-1550.

Sincerely,

Richard H. Fontaine
Chairman
The Fontaine Trust
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THE FONTAINE TRUST:

CAPITAL APPRECIATION FUND
GLOBAL GROWTH FUND
GLOBAL INCOME FUND

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of The
Fontaine Trust's three series: the Capital Appreciation Fund, the Global Growth
Fund, and the Global Income Fund (the "Funds") will be held at 210 West
Pennsylvania Avenue, Suite 240, Towson, Maryland on Monday, April 20, 1998, at
10:00 a.m., Eastern time to consider and act on the proposals noted below and to
transact such other business as may properly come before the Special Meeting or
any adjournments of the Special Meeting.

ITEM 1. To approve or disapprove an Agreement and Plan of Reorganization
by and between The Fontaine Trust on behalf of the Capital Appreciation
Fund and the Nicholas-Applegate Mutual Funds on behalf of the Balanced
Growth Fund - Class A shares, and the transactions contemplated thereby.

ITEM 2. To approve or disapprove an Agreement and Plan of Reorganization
by and between The Fontaine Trust on behalf of the Global Growth Fund and
the Nicholas-Applegate Mutual Funds on behalf of the Worldwide Growth Fund
- Class A shares, and the transactions contemplated thereby.

ITEM 3. To approve or disapprove an Agreement and Plan of Reorganization
by and between The Fontaine Trust on behalf of the Global Income Fund and
the Nicholas-Applegate Mutual Funds on behalf of the Worldwide Growth
Fund - Class A shares, and the transactions contemplated thereby.

Only shareholders of record at the close of business on ________ ___, 1998,
the record date for this Special Meeting, shall be entitled to vote at the
Special Meeting or any adjournments of the Special Meeting.

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YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD PROMPTLY.

______________________________________________________________________________

AS A SHAREHOLDER OF ONE OR MORE OF THE FUNDS, YOU ARE ASKED TO ATTEND THE
SPECIAL MEETING EITHER IN PERSON OR BY PROXY. IF YOU ARE UNABLE TO ATTEND THE
SPECIAL MEETING IN PERSON, WE URGE YOU TO COMPLETE, SIGN, DATE, AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. YOUR PROMPT RETURN OF
THE PROXY WILL HELP ASSURE A QUORUM AT THE SPECIAL MEETING AND AVOID ADDITIONAL
EXPENSES ASSOCIATED WITH FURTHER SOLICITATION. SENDING IN YOUR PROXY WILL NOT
PREVENT YOU FROM VOTING YOUR SHARES IN PERSON AT THE SPECIAL MEETING AND YOU
MAY REVOKE YOUR PROXY BY ADVISING THE SECRETARY OF THE FONTAINE TRUST IN
WRITING (BYSUBSEQUENT PROXY OR OTHERWISE) OF SUCH REVOCATION AT ANY TIME
BEFORE IT IS VOTED.
______________________________________________________________________________

By Order of the Board of Trustees,

KIMBERLY A. MALKOWSKI
SECRETARY
The Fontaine Trust

Towson, Maryland
March __, 1998

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THE FONTAINE TRUST: NICHOLAS-APPLEGATE MUTUAL FUNDS:
------------------- --------------------------------

CAPITAL APPRECIATION FUND BALANCED GROWTH PORTFOLIO -
GLOBAL GROWTH FUND CLASS A SHARES
GLOBAL INCOME FUND WORLDWIDE GROWTH PORTFOLIO -
CLASS A SHARES

210 West Pennsylvania Avenue, Suite 240 600 West Broadway, 30th Floor
Towson, Maryland 21204 San Diego, California 92101
Telephone: (410) 825-7890 Telephone: (818) 852-1000
Toll Free: (800) 247-1550 Toll Free: (800) 551-8043

COMBINED PROXY STATEMENT AND PROSPECTUS
Dated March __, 1998

This Combined Proxy Statement and Prospectus ("Statement") is furnished in
connection with the solicitation of proxies by the Board of Trustees of The
Fontaine Trust in connection with the Special Meeting of Shareholders (the
"Special Meeting") of the Capital Appreciation Fund, Global Growth Fund and
Global Income Fund to be held on Monday, April 20, 1998, at 10:00 a.m., Eastern
time. The meeting will be held at the offices of The Fontaine Trust, 210 West
Pennsylvania Avenue, Suite 240, Towson, Maryland 21204. At the Special
Meeting, the shareholders of each of the three series of The Fontaine Trust will
be asked to approve the following proposals, as appropriate:

1. To approve or disapprove an Agreement and Plan of Reorganization by
and between The Fontaine Trust on behalf of the Capital Appreciation
Fund (an "Acquired Fund"), the Nicholas-Applegate Mutual Funds ("NA
Funds") on behalf of the Balanced Growth Fund (an "Acquiring Fund"),
and the transactions contemplated thereby.

2. To approve or disapprove an Agreement and Plan of Reorganization by
and between The Fontaine Trust on behalf of the Global Growth Fund (an
"Acquired Fund"), the NA Funds on behalf of the Worldwide Growth Fund
(an "Acquiring Fund"), and the transactions contemplated thereby.

3. To approve or disapprove an Agreement and Plan of Reorganization by
and between The Fontaine Trust on behalf of the Global Income Fund (an
"Acquired Fund"), the NA Funds on behalf of the Worldwide Growth Fund
(an "Acquiring Fund"), and the transactions contemplated thereby.

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(The Agreement and Plan of Reorganization noted above in 1, 2, and 3 is
referred to herein as the "Reorganization Agreement" and the transactions
contemplated thereby are referred to herein as the "Reorganization.")

The Fontaine Trust and NA Funds are open-end management investment
companies. The Board of Trustees of The Fontaine Trust, including the
non-interested Trustees, has determined that it is in the best interests of
each Acquired Fund and its shareholders to be reorganized into the Acquiring
Funds, as indicated in Items 1, 2 and 3 above. In reaching that
determination, the Board of Trustees considered the small asset size, the
lack of expected asset growth of the Acquired Funds, and the problems related
to the lack of economies of scale. The Board of Trustees concluded that each
of these disadvantages would be addressed by the Reorganization as a result
of combining the assets of each Acquired Fund with the assets of the
Acquiring Funds. Further, the Board of Trustees concluded that, among other
advantages, the Reorganization will provide Acquired Fund shareholders with
an investment vehicle that in most cases, has similar investment objectives,
policies, restrictions, and strategies as the Acquired Fund, while offering
superior historical returns and more favorable expense ratios than the
Acquired Funds.

The Reorganization Agreement provides that, on the closing date for the
Reorganization (the "Closing Date"), which is currently scheduled to take
place on [__________, 1998,] substantially all of the property, assets and
goodwill of each Acquired Fund (except a reserve for certain expenses and
liabilities) will be transferred to the designated Acquiring Fund. In
exchange, each Acquiring Fund will simultaneously issue its Class A shares
("Acquiring Fund Shares") to the corresponding Acquired Fund. Each Acquiring
Fund will then make a liquidating distribution of the Acquiring Fund Shares
so received to the shareholders of the corresponding Acquired Fund, so that a
holder of shares of the Acquired Fund ("Acquired Fund Shares") on the Closing
Date will receive that number of full and fractional Acquiring Fund Shares
having a value equal to the value of the shareholder's Acquired Fund Shares
immediately prior to the Closing Date. Following the Reorganization, The
Fontaine Trust and each of its series will be deregistered as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").

This Statement sets forth concisely the information that shareholders of
each Acquired Fund should know before voting on the Reorganization Agreement
(and the Reorganization contemplated thereby) and should be retained for
future reference. The Reorganization Agreement is attached to this Statement
as Exhibit A and is incorporated herein by reference.

A Prospectus for NA Funds dated July 16, 1997, which describes the
investment objectives, program, policies and risks of each Acquiring Fund,
accompanies this Statement. (A Prospectus for The Fontaine Trust, dated May 1,
1997, was previously provided to each Acquired Fund shareholder.) Additional
information concerning the Acquiring Funds is set forth in their Statement of
Additional Information dated July 16, 1997, and additional information
concerning the Acquired Funds is set forth in their Statement of Additional
Information dated

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May 1, 1997. Moreover, further information concerning the matters considered
in this Statement is set forth in the Statement of Additional Information to
this Statement, dated March __, 1998. Each of these documents is on file
with the Securities and Exchange Commission ("SEC"), and is available without
charge upon oral or written request by writing or calling The Fontaine Trust
or NA Funds at the address and telephone numbers shown above. The Prospectus
for the NA Funds is also available on its website at http:\\www.__________.com.
The SEC maintains a website at http:\\www.sec.gov that contains the
Prospectuses, Statements of Additional Information, material incorporated by
reference and other information regarding The Fontaine Trust, the NA Funds,
and other registrants that file electronically with the SEC. The information
contained in each of these Prospectuses and Statements of Additional
Information is incorporated into this Statement by reference.

The Statement constitutes (i) the proxy statement of the Acquired Funds
for the Special Meeting of Shareholders and (ii) the Prospectuses for each of
the Acquiring Fund Shares, which have been registered with the SEC and are to
be issued in connection with the Reorganization.

The Notice, this Statement, and the accompanying proxy are expected to
first be sent to shareholders of the Acquired Funds on or about March __,
1998.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS STATEMENT AND IN THE
MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN
AUTHORIZED BY THE FONTAINE TRUST OR NA FUNDS, OR THEIR RESPECTIVE INVESTMENT
ADVISERS OR DISTRIBUTORS.

VOTE REQUIRED: EACH PROPOSAL FOR EACH FUND MUST BE APPROVED BY THE AFFIRMATIVE
VOTE OF A MAJORITY OF THE OUTSTANDING ACQUIRED FUND SHARES FOR THAT FUND.

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TABLE OF CONTENTS

PAGE
----
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Proposed Reorganization and Reorganization Agreement. . . . . . . 6
Reasons for Reorganization. . . . . . . . . . . . . . . . . . . . 7
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . 7
Overview of the Acquired Funds and the Acquiring Funds. . . . . . 8
Comparative Fee Table. . . . . . . . . . . . . . . . . . . . 8
Capital Appreciation and Balanced Growth . . . . . . . . . . 10
Global Growth and Worldwide Growth . . . . . . . . . . . . . 10
Global Income and Worldwide Growth . . . . . . . . . . . . . 10
RISK CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Balanced Growth . . . . . . . . . . . . . . . . . . . . . . . . . 11
Worldwide Growth. . . . . . . . . . . . . . . . . . . . . . . . . 11
Differences in Risk Considerations Between the Acquired
Funds and the Acquiring Funds . . . . . . . . . . . . . . . . . . 12
COMPARISON OF THE ACQUIRED FUNDS AND THE ACQUIRING FUNDS . . . . . . . 13
Investment Objectives, Policies and Restrictions. . . . . . . . . 14
Capital Appreciation and Balanced Growth . . . . . . . . . . 14
Global Growth and Worldwide Growth . . . . . . . . . . . . . 15
Global Income and Worldwide Growth . . . . . . . . . . . . . 17
Fundamental Versus Nonfundamental Investment Limitations. . . . . 19
Purchase and Redemption Information, Exchange Privileges,
Distributions and Pricing . . . . . . . . . . . . . . . . . . . . 19
The Trusts: Massachusetts Business Trust versus Delaware
Business Trust. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Liability of Shareholders. . . . . . . . . . . . . . . . . . 21
Election of Trustees; Shareholder Meetings . . . . . . . . . 21
Terms of Trustees. . . . . . . . . . . . . . . . . . . . . . 21
Removal of Trustees. . . . . . . . . . . . . . . . . . . . . 22
Special Meetings of Shareholders . . . . . . . . . . . . . . 22
Liability of Trustees and Officers; Indemnification. . . . . 23
Termination. . . . . . . . . . . . . . . . . . . . . . . . . 24
Voting Rights of Shareholders. . . . . . . . . . . . . . . . 24
Certain Service Provider Arrangements . . . . . . . . . . . . . . 25
Investment Advisory Fees . . . . . . . . . . . . . . . . . . 25
Transfer Agents. . . . . . . . . . . . . . . . . . . . . . . 25
Custodial Services . . . . . . . . . . . . . . . . . . . . . 26
VOTING ITEMS - APPROVAL OR DISAPPROVAL OF THE AGREEMENT AND PLAN OF
REORGANIZATION AS TO:. . . . . . . . . . . . . . . . . . . . . . . . . 26
1. The proposed Reorganization of The Fontaine Trust
Capital Appreciation Fund into Nicholas-Applegate
Mutual Funds Balanced Growth Fund. . . . . . . . . . . . . . 26
2. The proposed Reorganization of The Fontaine Trust
Global Growth Fund into

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Nicholas-Applegate Mutual Funds Worldwide Growth Fund. . . . 26
3. The proposed Reorganization of The Fontaine Trust
Global Income Fund into Nicholas-Applegate Mutual
Funds Worldwide Growth Fund. . . . . . . . . . . . . . . . . 26
Description of the Reorganization Agreement . . . . . . . . . . . 26
Board Consideration . . . . . . . . . . . . . . . . . . . . . . . 28
Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . 31
INFORMATION RELATING TO VOTING MATTERS . . . . . . . . . . . . . . . . 32
General Information . . . . . . . . . . . . . . . . . . . . . . . 32
Shareholder and Board Approvals . . . . . . . . . . . . . . . . . 32
Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ADDITIONAL INFORMATION ABOUT EACH FUND . . . . . . . . . . . . . . . . 34
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . 34
Financial Information for the Acquired Funds. . . . . . . . . . . 35
Financial Information for the Acquiring Funds . . . . . . . . . . 35
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 38
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SHAREHOLDER INQUIRIES. . . . . . . . . . . . . . . . . . . . . . . . . 38

Exhibit A: Agreement and Plan of Reorganization. . . . . . . . . . . . A-1
Exhibit B: NACM Investment Review for the Acquiring Funds. . . . . . . B-1

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SUMMARY

The following is a summary of certain background information relating to
the proposed Reorganization, the parties thereto and the transactions
contemplated thereby, and is qualified by reference to the more complete
information contained elsewhere in this Statement and the Statement of
Additional Information with respect to this Statement, the Prospectus and
Statement of Additional Information of each Acquired Fund and each Acquiring
Fund, and the Reorganization Agreement dated February ___, 1998, attached to
this Statement as Exhibit A.

PROPOSED REORGANIZATION AND REORGANIZATION AGREEMENT

Based on their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the Board
of Trustees of The Fontaine Trust, including all of the non-interested
Trustees, have determined that the proposed Reorganization is in the best
interests of the shareholders of each Acquired Fund. The Board of Trustees
of The Fontaine Trust recommends the approval of the Reorganization Agreement
and related transactions by the shareholders of each Acquired Fund at the
Special Meeting.

Subject to shareholder approval, the Reorganization Agreement provides
for: (a) the transfer to the corresponding Acquiring Fund of substantially
all of the property, assets and goodwill of each Acquired Fund (except a
reserve for certain expenses and liabilities) (the "Acquired Fund Net
Assets") in exchange for Acquiring Fund Shares equal in value to the Acquired
Fund Net Assets; (b) the distribution of Acquiring Fund Shares to the
shareholders of each Acquired Fund in liquidation of the Acquired Funds; (c)
the cancellation of all outstanding Acquired Fund Shares; and (d) the
deregistration of The Fontaine Trust and each of its series as an investment
company under the 1940 Act.

As a result of the proposed Reorganization, each shareholder of each
Acquired Fund will become a shareholder of the corresponding Acquiring Fund
and will hold, immediately after the Closing Date, Acquiring Fund Shares
having a net asset value equal to the net asset value of the Acquired Fund
Shares held by the shareholder immediately before the Closing Date with no
tax effect.

The investment adviser to the Acquired Funds, Richard Fontaine
Associates, Inc. ("Fontaine Associates") and the investment adviser to the
Acquiring Funds, Nicholas-Applegate Capital Management ("NACM"), have entered
into an Asset Purchase Agreement that, in addition to the duties and
responsibilities described in the Reorganization Agreement also memorializes
the proposed remuneration to be received by Fontaine Associates in connection
with the proposed transaction.

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For further information, see the discussion below on whether to approve
or disapprove the Reorganization, which includes a description of the
Reorganization Agreement.

REASONS FOR THE REORGANIZATION

In light of certain potential benefits and other factors, the Board of
Trustees of The Fontaine Trust, including the non-interested Trustees, has
determined that it is in the best interests of each of the Acquired Funds and
its shareholders to reorganize into each of the Acquiring Funds specified on
the first page of this Statement. In making that determination, the Board of
Trustees considered, among other things, the small asset size and lack of
expected asset growth of each of the Acquired Funds, and the resulting
problems associated with the inability to achieve adequate economies of
scale, including relatively high expense ratios, as described more fully
below under "Voting Items" -- "Board Consideration." The Board of Trustees
believes that each of these problems would be addressed by the proposed
Reorganization.

In addition, among other advantages, the Board of Trustees of The
Fontaine Trust believes that the Reorganization with respect to each Acquired
Fund in most cases will: (a) provide Acquired Fund shareholders with an
Acquiring Fund that has similar investment objectives, investment policies,
restrictions, and investment strategies as the corresponding Acquired Fund;
(b) provide Acquired Fund shareholders with an Acquiring Fund that has
provided superior historical returns; and (c) provide Acquired Fund
shareholders with overall expense ratios that are more favorable than those
of the Acquired Funds. The Reorganization would be a tax-free event. In
addition, the Board of Trustees of The Fontaine Trust noted that the NA Funds
currently consent of ___ series, which provide an abundance of investment
alternatives to investors.

The Board of Trustees also considered the possible risks and
disadvantages of the Reorganization and determined that the Reorganization is
likely to provide benefits to the Acquired Funds and their shareholders that
outweigh any possible risks and disadvantages of the Reorganization.
Finally, the Board of Trustees concluded that there are no significant risks
or disadvantages to the Acquired Funds or their shareholders from the
Reorganization and that the interests of each Acquired Fund's shareholders
would not be diluted.

Similarly, the Board of Trustees of NA Funds, in approving the
Reorganization, determined that it would be advantageous for each of the
Acquiring Funds and its current shareholders to acquire the Acquired Fund Net
Assets of each of the corresponding Acquired Funds in exchange for Acquiring
Fund Shares and that the interests of each of the Acquiring Fund's existing
shareholders would not be diluted.

FEDERAL INCOME TAX CONSEQUENCES

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Counsel for this transaction will issue an opinion as of the Closing
Date to the effect that the Reorganization will not give rise to the
recognition of income, gain, or loss for federal income tax purposes to any
of the Acquired Funds, any of the Acquiring Funds, or their respective
shareholders. See the discussion below on whether to approve or disapprove
the Reorganization, which includes a description of the Reorganization
Agreement.

OVERVIEW OF THE ACQUIRED FUNDS AND THE ACQUIRING FUNDS

The investment objectives, investment policies and restrictions of the
Acquired Funds and the corresponding Acquiring Funds are in many respects
similar. The investment objectives of each of the Acquired Funds and each of
the Acquiring Funds are fundamental, meaning that they may not be changed
without a vote of the holders of a majority of the particular Fund's
outstanding shares.

Acquired Fund Shares are sold on a 100% no-load basis, meaning that such
shares may be purchased, redeemed, or exchanged at their net asset value
without payment of a sales charge. In addition, the Acquired Funds do not
charge any redemption fees or Rule 12b-1 fees. Conversely, a sales charge of
up to 5.25% in most instances is imposed on purchases of Acquiring Fund
Shares. However, Acquiring Fund Shares acquired by shareholders of each
Acquired Fund as a result of the Reorganization and additional purchases of
Acquiring Fund Shares by Acquired Fund Shareholders will not be subject to
any sales charge. The Acquiring Fund shares are subject to an annual Rule
12b-1 expense of 0.25% of the average daily net assets of each Acquiring
Fund's Class A shares.

Each Fund's policies, procedures, and restrictions concerning share
redemption and exchange, dividend payment, and the determination of net asset
value are identical, as set forth in the Prospectus for each Fund.

A more detailed description of each of the Funds appears below in the
section entitled "Comparison of the Acquired Funds and the Acquiring Funds."

COMPARATIVE FEE TABLE

The following table sets forth the current fees and expenses of the
Acquired Funds as of December 31, 1997, and of the Acquiring Funds as of
March __, 1997. Excluding extraordinary expenses, the current fees and
expenses of the Acquiring Funds are expected to remain unchanged as a result
of the Reorganization.

<PAGE>

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

Capital Global Global Balanced Worldwide
Appreciation Growth Income Growth Growth
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Management Fees 0.95% 0.80% 0.75% .75% 1.00%
- --------------------------------------------------------------------------------------
12b-1 Fees None None None 0.25% 0.25%
- --------------------------------------------------------------------------------------
Other Operating Expenses 1.04% 1.57% 2.15% 0.60% 0.60%

Total Fund Operating 1.99% 2.37% 2.90% 1.60%** 1.85%**
Expenses*
</TABLE>

*Effective May 1, 1997, the Expense Limitation Agreements with the
Acquired 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.

**NACM has agreed to waive or defer its management fees and to absorb
other operating expenses payable by Balanced Growth and Worldwide Growth.
Total operating expenses would have been 3.00% and 2.17%, and Other Operating
Expenses would have been 2.00% and 0.92%, respectively, absent the deferral.

Example: An investor in an Acquired Fund or an Acquiring Fund would pay the
following expenses on a $1,000 investment, assuming (1) 5% annual return, and
(2) redemption at the end of the following periods.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>

The Fontaine Trust:
Capital Appreciation $___ $___ $___ $___
Global Growth $___ $___ $___ $___
Global Income $___ $___ $___ $___
NA Funds:
Balanced Growth $___ $___ $___ $___
Worldwide Growth $___ $___ $___ $___
</TABLE>

The Example is based on each Fund's "Total Fund Operating Expenses"
before any waivers and absorptions, as described above. PLEASE REMEMBER THAT
THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF PAST OR FUTURE
EXPENSES AND THAT ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
The assumption in the Example of 5% annual return is required by regulations
of the SEC applicable to all mutual Funds. The assumed 5% annual return is
not a prediction of, and does not represent, the projected or actual
performance of a Fund's shares.

<PAGE>
CAPITAL APPRECIATION FUND ("CAPITAL APPRECIATION") AND BALANCED GROWTH FUND
- CLASS A SHARES ("BALANCED GROWTH")

Both Funds seek long-term capital appreciation and current income,
though current income is a secondary objective of Capital Appreciation.
Capital Appreciation employs a "valuation" discipline to identify stocks for
its portfolio, and Balanced Growth focuses on a "bottom-up" growth analysis.
Both Funds may invest up to 20% of their total assets in the securities of
foreign issuers. The primary distinction between the Acquired Fund and the
Acquiring Fund is that, under normal market conditions, Capital Appreciation
invests up to 80% of the Fund's total assets in common stocks (which are
expected to be traded on the New York Stock Exchange, the American Stock
Exchange, the NASDAQ National Market, and certain foreign stock exchanges),
while Balanced Growth allocates about 60% of its total assets (but no more
than 70% and no less than 50%) to equity securities, and invests about 40% of
its total assets in debt securities issued by corporations and the U.S.
Government, its agencies and instrumentalities.

GLOBAL GROWTH FUND ("GLOBAL GROWTH") AND WORLDWIDE GROWTH FUND - CLASS A
SHARES ("WORLDWIDE GROWTH")

Both Funds seek long-term capital appreciation by investing primarily in
equity and equity-related securities of domestic and foreign issuers such as
common stocks, preferred stocks, securities convertible into or exchangeable
for common stocks, and warrants. Global Growth employs a "valuation"
discipline to identify stock for its portfolio and Worldwide Growth focuses
on a "bottom-up" growth analysis. Under normal market conditions Global
Growth invests 65% of its total assets in equity and equity-related
securities of established medium and large capitalization issuers in at least
three different countries, one of which may be the United States. Global
Growth invests in the 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. Under normal conditions Worldwide Growth invests
at least 65% of its total assets in securities of issuers located in at least
three different countries, one of which may be the United States. Worldwide
Growth may invest up to 50% of its total assets in United States issuers.
Global Growth may invest 65% of its total assets in equity and equity-related
securities, while Worldwide Growth may invest at least 75% of its total
assets in such instruments.

GLOBAL INCOME FUND ("GLOBAL INCOME") AND WORLDWIDE GROWTH FUND - CLASS A
SHARES ("WORLDWIDE GROWTH")

Global Income seeks a high level of current income, with a secondary
objective of capital appreciation. Worldwide Growth seeks maximum long-term
capital appreciation. Under normal market conditions, Global Income invests
65% of its total assets in high and medium quality bonds, debentures and
notes of issuers in at least three different countries, one of which may be

<PAGE>
the United States. Global Income is 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. Worldwide Growth is a diversified investment
company under the 1940 Act. Under normal conditions, Worldwide Growth
invests at least 65% of its total assets in securities of issuers located in
at least three different countries, one of which may be the United States.
Worldwide Growth may invest up to 50% of its total assets in United States
issuers, and invests at least 75% of its total assets in equity and
equity-related securities.

Global Income may invest anywhere in the world, but normally most of its
investments are made in securities of issuers located in developed countries
in North America, Western Europe, and the Pacific Basin. In selecting
companies within those countries and geographic regions, Global Income's
investment adviser, Fontaine Associates, considers certain factors, such 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. NACM, as investment adviser
for Worldwide Growth, focuses on a "bottom-up" growth analysis that evaluates
the financial condition and competitiveness of individual companies
worldwide.

RISK CONSIDERATIONS

The permitted investments of the Acquired Funds and the Acquiring Funds
are similar. The following is an overview of the risks involved in investing
in the Acquiring Funds. In addition, there are certain risk considerations
that differ from those of the Acquired Funds, as described below. A detailed
description of the risks involved in investing in the Acquiring Funds is
contained in each Acquiring Fund's Prospectus and Statement of Additional
Information.

BALANCED GROWTH

The value of an investment in Balanced Growth will fluctuate in response
to movements in the stock and bond markets. The equity and equity-related
securities of the companies in which Balanced Growth invests may be more
volatile than securities of larger, more established companies. The values
of Balanced Growth's debt securities will change as interest rates fluctuate:
if rates go up, the values of debt securities fall; if rates go down, the
values of debt securities go up. In addition, the lower rated debt
securities in which Balanced Growth may invest are considered speculative and
are subject to greater volatility and risk of loss than investment grade
securities, particularly in deteriorating economic periods.

WORLDWIDE GROWTH

The value of an investment in Worldwide Growth varies from day to day in
response to the activities of individual companies, and general market and
economic conditions. The securities of small, less well-known companies in
which the Fund may invest may be more

<PAGE>

volatile than the securities of larger companies. As with any international
fund, performance also depends on changing currency values, different
political and regulatory environments, and other overall economic factors in
the countries where Worldwide Growth invests. The risks are magnified in
countries with emerging markets, since those countries may have unstable
governments and less-established markets.

DIFFERENCES IN RISK CONSIDERATIONS BETWEEN THE ACQUIRED FUNDS AND THE
ACQUIRING FUNDS

There are additional risks associated with investing in the Acquiring
Funds of which investors should be aware. For example, while the Acquired
Funds may invest in options, the current operating policies of the Acquired
Funds precludes them from doing so. The Acquiring Funds are permitted to
invest in options. In addition, the Acquired Funds may not invest in
futures, but Worldwide Growth may do so. When a fund uses options, futures,
and options on futures as hedging devices, there is a risk that the prices of
the hedging vehicles may not correlate perfectly with the prices of the
securities in the fund. This may cause the futures contract or the options
to react differently than the fund's portfolio securities to market changes.
In addition, the investment adviser could be incorrect in its expectations
about the direction or the extent of market movements. In these events, a
fund could lose money on the futures contracts or options. It is not certain
that a secondary market for positions in futures contracts or for options
will exist at all times. Although NACM will consider liquidity before
entering into these transactions, there is no assurance that a liquid
secondary market will exist for these instruments.

Worldwide Growth is permitted to maintain short positions in securities,
which means that the Fund may sell a security that has been borrowed from a
third party on the expectation that the market price will drop. (Neither
Global Growth nor Global Income may engage in this strategy.) If Worldwide
Growth has sold a security short and the price of the security drops,
Worldwide Growth will make a profit by purchasing the security in the open
market at a lower price than it sold the security. Conversely, if the price
of the security rises in such circumstance, Worldwide Growth may have to
cover its short position at a higher price than the short sale price,
resulting in a loss. The use of an uncovered short sale, where Worldwide
Growth does not already own the security it sells short or have the value of
the security covered in a segregated account, is a speculative investment
technique and has potentially unlimited risk. Accordingly, Worldwide Growth
will not make uncovered short sales in an amount exceeding the lesser of 2%
of Worldwide Growth's net assets or 2% of the securities of the class of the
issuer. The NA Funds Board of Trustees has determined that Worldwide Growth
will not make short sales if to do so would create liabilities or require
collateral deposits of more than 25% of its total assets to be segregated.

Global Income 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 Global Income is non-diversified for

<PAGE>
securities law purposes, it intends to qualify as a regulated investment
company ("RIC") for purposes of Subchapter M of the Internal Revenue Code of
1986, as amended ("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, Global Income 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 that is more broadly diversified. Worldwide Growth, the
Acquiring Fund into which Global Income is being reorganized, is a
diversified fund. As such, it has a fundamental policy that limits its
investments so that, with respect to 75% of its assets, (i) no more than 5%
of the Fund's total assets will be invested in the securities of a single
issuer, and (ii) the 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.

COMPARISON OF THE ACQUIRED FUNDS AND THE ACQUIRING FUNDS

The Acquired Funds are each series of The Fontaine Trust, a
Massachusetts business trust. The Acquiring Funds are each series of NA
Funds, which is a Delaware business trust. Until recently, NA Funds was
structured as a master-feeder fund, with NA Funds investing all of the assets
of each of its series in the Nicholas-Applegate Investment Trust, a separate
Delaware business trust operating as a master fund. However, pursuant to a
Special Meeting of Shareholders of NA Funds scheduled to be held on March 20,
1998, NA Funds was restructured so that it could manage its assets directly
rather than through the master fund, and each of the separate series,
including the Acquiring Funds (previously Balanced Growth Portfolio A and
Worldwide Growth Portfolio A), were reorganized as separate series of NA
Funds having separate "classes of shares." The class of shares of each of the
Acquiring Funds that will be exchanged for the Acquired Fund Net Assets of
the corresponding Acquired Funds will be the Class A shares of each Acquiring
Fund.

The investment objectives, investment policies and restrictions of the
Acquired Funds and the corresponding Acquiring Funds are in many respects
similar. There are, however, some noteworthy differences between the
Acquired Funds and the Acquiring Funds. The following discusses some of the
more significant similarities and differences in the investment objectives
and policies of each of the Acquired Funds and each of the Acquiring Funds
and is qualified in its entirety by the discussion elsewhere in this
Statement, and in the Prospectus and Statement of Additional Information of
each Acquired Fund and each Acquiring Fund, which are incorporated into this
Statement by reference.
13

<PAGE>

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

- -------------------------------------------------------------------------------
THE FONTAINE TRUST: NICHOLAS-APPLEGATE MUTUAL FUNDS:
CAPITAL APPRECIATION FUND AND BALANCED GROWTH FUND
- -------------------------------------------------------------------------------

The investment objectives of the Capital Appreciation Fund ("Capital
Appreciation") and the Balanced Growth Fund ("Balanced Growth") are
fundamental, meaning that they may not be changed without a vote of the
holders of a majority of the particular Fund's outstanding shares. This
section describes certain policies that are common to Capital Appreciation
and Balanced Growth and certain noteworthy differences.

Both Funds seek long-term capital appreciation and current income.
(Current income is a secondary objective of Capital Appreciation.) Capital
Appreciation employs a "valuation" discipline to identify stocks that are
undervalued or out of favor with investors, have prospects for price
appreciation, and that the Fund's investment adviser, Fontaine Associates,
believes will exceed the risk of loss of market value over time. Similarly,
NACM, as investment adviser for Balanced Growth, focuses on a "bottom-up"
analysis that evaluates the financial condition and competitiveness of
individual companies. In doing so, it primarily uses computer intensive
systematic disciplines to uncover "change at the margin" -- positive business
developments that are not yet fully reflected in a company's stock price.

Both Funds may invest up to 20% of their total assets in the securities
of foreign issuers. Capital Appreciation invests only in equity and debt
securities of foreign issuers in developed countries, such as those in North
America, Western Europe and the Pacific Basin, and in investment-grade debt
securities rated by any nationally recognized statistical rating organization
("NRSRO") Baa or higher, or, if unrated, of comparable investment quality as
determined by Fontaine Associates.

The primary distinction between the Funds is that Capital Appreciation
invests up to 80% of its total assets in common stocks (which are expected to
be traded on the New York Stock Exchange, the American Stock Exchange, the
NASDAQ National Market, and certain foreign stock exchanges), while Balanced
Growth allocates about 60% of its total assets (but no more than 70% and no
less than 50%) to equity securities, and invests about 40% of its total
assets in debt securities issued by corporations and the U.S. Government, its
agencies and instrumentalities. The equity securities of Balanced Growth
will be issued primarily by companies with market capitalizations over $100
million.

The assets of Capital Appreciation that are not invested in common
stocks may be invested in: (i) privately places 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).
Capital Appreciation's investment in privately placed securities, convertible
securities, and preferred stocks is limited in

<PAGE>

each case to 10% of its total assets. However, as an operating policy
Capital Appreciation does not invest more than 5% of its total assets in
illiquid securities. Balanced Growth may invest up to 15% of its net assets
in illiquid securities.

In addition to foreign debt securities, as described above, Capital
Appreciation may also use U.S. dollar-denominated high-quality money market
instruments and short-term debt securities that are rated within the two
highest credit categories by any NRSRO or, if unrated, are of comparable
investment quality as determined by Fontaine Associates in order to reduce
downside exposure to uncertain or declining market conditions. For temporary
or defensive purposes, Capital Appreciation may invest without limitation in
high-quality U.S. dollar-denominated money market instruments and short-term
debt securities. Balanced Growth, on the other hand, may invest up to 35% of
its assets in debt securities rated below investment grade.

Each Fund may invest in warrants, bank certificates of deposit, commercial
paper, short-term notes, repurchase agreements, banker's acceptances, and other
short-term fixed income securities, and Balanced Growth may invest in zero
coupon securities issued or guaranteed by the U.S. Government and its agencies
and instrumentalities. Each Fund may also borrow funds for emergency purposes,
and may invest in securities purchased on a when-issued or delayed delivery
basis. While both Funds may lend portfolio securities, Capital Appreciation
does not currently engage in that activity. Both Funds may engage in options
and futures transactions, but Capital Appreciation has no current intention of
doing so.

- -------------------------------------------------------------------------------
THE FONTAINE TRUST: NICHOLAS-APPLEGATE MUTUAL FUNDS:
GLOBAL GROWTH FUND and WORLDWIDE GROWTH FUND
- -------------------------------------------------------------------------------

The investment objectives of the Global Growth Fund ("Global Growth") and
the Worldwide Growth Fund ("Worldwide Growth") are fundamental, meaning that
they may not be changed without a vote of the holders of a majority of the
particular Fund's outstanding shares. This section describes certain policies
that are common to Global Growth and Worldwide Growth and certain noteworthy
differences.

Both Funds seek long-term capital appreciation by investing primarily in
equity and equity-related securities of domestic and foreign issuers. Under
normal market conditions Global Growth invests 65% of its total assets in equity
and equity-related securities of established medium and large capitalization
issuers in at least three different countries, one of which may

<PAGE>

be the United States. Global Growth invests in the 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. Under normal
conditions Worldwide Growth invests at least 65% of its total assets in
securities of issuers located in at least three different countries, one of
which may be the United States. Worldwide Growth may invest up to 50% of its
total assets in United States issuers.

In selecting companies within those countries and geographic regions,
Global Growth's investment adviser, Fontaine Associates, seeks to identify those
companies that are best positioned and managed to benefit from certain factors,
such as: relative economic growth; expected levels of inflation; government
policies affecting business conditions; and market trends throughout the world.
Fontaine Associates will not normally emphasize dividend income in choosing
securities for Global Growth, unless it believes the income will contribute to
the securities' investment return. NACM, as investment adviser for Worldwide
Growth, focuses on a "bottom-up" analysis that evaluates the financial condition
and competitiveness of individual companies worldwide. In doing so, it uses a
blend of both traditional fundamental research, calling on the expertise of many
external analysts in different countries throughout the world, and systematic
disciplines to uncover "change at the margin" -- positive business developments
that are not yet fully reflected in a company's stock price. NACM gathers
financial data on 20,000 companies in 52 countries, and searches for successful,
growing companies managing change advantageously and poised to exceed growth
expectations.

Both Funds invest in equity and equity-related securities such as common
stocks, preferred stocks, securities convertible into or exchangeable for common
stocks, and warrants. Global Growth invests 65% of its total assets in such
instruments, while Worldwide Growth invests at least 75% of its total assets in
such instruments.

The assets of Global Growth not invested in common stocks may be invested
in: (i) investment grade debt securities rated at least Baa by any NRSRO or
unrated securities of comparable quality issued by domestic and foreign
corporations, governments, governmental entities, and supranational entities;
and (ii) short-term debt securities rated within the two highest credit
categories by any NRSRO, or unrated securities of comparable investment quality
as determined by Fontaine Associates. Global Growth's use of money market
instruments and short-term debt securities generally tend to reflect Fontaine
Associates' overall measure of valuation relating to the global equity markets,
and Fontaine Associates uses such securities to reduce downside exposure to
uncertain or declining market conditions.

The assets of Worldwide Growth not invested in equity and equity-related
stocks may be invested primarily in investment-grade debt securities rated at
least Baa by any NRSRO or unrated securities of comparable quality of foreign
companies and foreign governments and their agencies and instrumentalities. For
temporary or defensive purposes, each Fund may invest without limitation in
high-quality domestic money market instruments and short-term debt securities.

Each Fund may invest in warrants, may also borrow funds for emergency
purposes and may invest in securities purchased on a when-issued or delayed
delivery basis. Both Funds may

<PAGE>

invest in Eurodollars, and Worldwide Growth may invest in securities swaps and
may sell short. While both Funds may lend portfolio securities, Global Growth
does not currently engage in that activity. Both Funds may engage in options
and futures transactions, although Global Growth has no current intention of
doing so.

- -------------------------------------------------------------------------------
THE FONTAINE TRUST: NICHOLAS-APPLEGATE MUTUAL FUNDS:
GLOBAL INCOME FUND and WORLDWIDE GROWTH FUND
- -------------------------------------------------------------------------------

The investment objectives of the Global Income Fund ("Global Income") and
the Worldwide Growth Fund ("Worldwide Growth") are fundamental, meaning that
they may not be changed without a vote of the holders of a majority of the
particular Fund's outstanding shares. This section describes certain policies
that are common to the Acquired Fund and the Acquiring Fund and certain
noteworthy differences.

Global Income, a nondiversified fund, seeks a high level of current income
with a secondary objective of capital appreciation. Worldwide Growth seeks
maximum long-term capital appreciation. Under normal market conditions, Global
Income invests 65% of its total assets in debt securities of domestic and
foreign issuers in at least three different countries, one of which may be the
United States. Under normal conditions Worldwide Growth, a diversified fund,
invests at least 65% of its total assets in securities of issuers located in at
least three different countries, one of which may be the United States.
Worldwide Growth may invest up to 50% of its total assets in United States
issuers.

Global Income may invest anywhere in the world, but expects that most of
its investments will be made in debt securities of issuers located in developed
countries in North America, Western Europe and the Pacific Basin. In selecting
companies within those countries and geographic regions, Global Income's
investment adviser, Fontaine Associates, considers certain factors, such 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.

NACM, as investment adviser for Worldwide Growth, focuses on a
"bottom-up" analysis that evaluates the financial condition and
competitiveness of individual companies worldwide. In doing so, it uses a
blend of both traditional fundamental research, calling on the expertise of
many external analysts in different countries throughout the world and
systematic disciplines to uncover "change at the margin" -- positive business
developments that are not yet fully reflected in a company's stock price.
NACM gathers financial data on 20,000 companies in 52 countries, and searches
for successful, growing companies managing change advantageously and poised
to exceed growth expectations. Worldwide Growth invests at least 75% of its
total assets in equity and equity-related securities such as common stocks,
preferred stocks, securities convertible into

<PAGE>

or exchangeable for common stocks, and warrants of companies throughout the
world. The assets of the Worldwide Growth not invested in equity and
equity-related securities will be invested in investment-grade debt
securities rated at least Baa or its equivalent by any NRSRO or unrated
securities of comparable quality as determined by NACM. Such debt securities
may include securities issued by foreign companies and foreign governments
and their agencies and instrumentalities.

The debt securities purchased by Global Income are investment-grade bonds,
debentures and notes that are rated, for example, at least Baa or its equivalent
by any NRSRO or, if unrated, are of comparable investment quality as determined
by Fontaine Associates. Global Income 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 Global Income may invest
in debt securities of domestic and foreign corporations and financial
institutions, its investments in issuers located outside the United States have
been principally in government and quasi-governmental issuers in order to
maintain liquidity and reduce credit risk.

The assets of Global Income not invested in debt securities may be invested
in: (i) equity and equity-related securities of domestic and foreign issuers;
and (ii) high-quality money market instruments of domestic and foreign issuers
that are 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, each Fund may invest without
limitation 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.

Each Fund may invest in warrants, may also borrow funds for emergency
purposes and may invest in securities purchased on a when-issued or delayed
delivery basis. Both Funds may also invest in Eurodollars, and Worldwide Growth
may invest in securities swaps and may sell its securities short. While both
Funds may lend portfolio securities, Global Income does not currently engage in
that activity. Both Funds may engage in options and futures transactions, but
Global Income has no current intention of doing so.

* * *

PLEASE SEE THE PROSPECTUS FOR EACH FUND FOR FURTHER INFORMATION CONCERNING
EACH FUND'S INVESTMENT POLICIES AND RISKS. PLEASE ALSO REFER TO THE SECTION OF
THE STATEMENT ENTITLED "RISK CONSIDERATIONS."

* * *

<PAGE>

FUNDAMENTAL VERSUS NONFUNDAMENTAL INVESTMENT LIMITATIONS

None of the Acquired Funds or Acquiring Funds may change its fundamental
investment limitations without the affirmative vote of the holders of a majority
of its outstanding shares (as defined in the 1940 Act). However, investment
limitations that are (i) not fundamental or (ii) "operating" policies of the
Acquired Funds or Acquiring Funds may be changed by their respective Boards of
Trustees without shareholder approval.

PURCHASE AND REDEMPTION INFORMATION, EXCHANGE PRIVILEGES, DISTRIBUTIONS AND
PRICING

Acquired Fund Shares are sold on a continuous basis by The Fontaine Trust.
Acquired Fund Shares are sold on a 100% no-load basis, meaning that shares may
be purchased, redeemed, and exchanged directly at net asset value without paying
a sales charge. The Acquired Funds do not charge any redemption fees or Rule
12b-1 fees. Broker-dealers, financial institutions, and other service
providers, however, may charge an administrative fee on the purchase or
redemption of Acquired Fund Shares. The purchase price for Acquired Fund Shares
will be the net asset value next determined after the Acquired Fund receives the
shareholder's request in proper form.

Acquiring Fund Shares are sold on a continuous basis by NA Funds'
distributor, Nicholas-Applegate Securities. As previously noted, Class A shares
are generally subject to a sales charge of up to 5.25% of the offering price.
However, shareholders of each Acquired Fund becoming shareholders of the
Acquiring Fund as a result of the Reorganization are entitled to receive
Acquiring Fund Shares and may continue to purchase Acquiring Fund Shares without
paying a sales charge. Acquiring Fund Shares are subject to an annual Rule 12b-1
expense of 0.25% of each Acquiring Fund's average net assets attributable to
such shares. The purchase price for Acquiring Fund Shares will be net asset
value next determined after the Acquiring Fund receives the shareholder's
request in proper form.

NO SALES CHARGE WILL BE IMPOSED ON THE ISSUANCE OF ACQUIRING FUND SHARES IN
CONNECTION WITH THE REORGANIZATION.

The minimum initial investment for each Acquired Fund is $1,000 and for
each Acquiring Fund is $2,000 per account and $250 for UGMA/UTMA Accounts. The
minimum initial investment amount is waived for shareholders who enroll in an
Acquiring Fund's automatic investment plan. The minimum subsequent investment
for each Acquired Fund and each Acquiring Fund is $100 per account. Purchase
orders for shares of each Fund are effected on any "business day;" I.E., any day
on which the New York Stock Exchange is open for trading. Each Acquiring Fund
offers an automatic investment plan, payroll direct deposit plan, automatic
exchange plan, and systematic withdrawal plan in connection with the purchase
and redemption of its shares.

<PAGE>

Each Fund's policies, procedures, and restrictions concerning share
redemption and dividend payment, exchange of shares, and the determination of
net asset value are identical, as set forth in the Prospectus for each Fund.
Please refer to each Prospectus for further information on these subjects.
Please note that Acquiring Fund Shares may be exchanged for shares in any of the
other NA Funds.

THE TRUSTS: MASSACHUSETTS BUSINESS TRUST VERSUS DELAWARE BUSINESS TRUST

The Fontaine Trust is a Massachusetts business trust, and NA Funds is
organized as a Delaware business trust. The two forms of organization are very
similar. For example, the responsibilities, powers and fiduciary duties of the
Board of Trustees of NA Funds are substantially the same as those of the Board
of Trustees of The Fontaine Trust. However, the Delaware Business Trust Act
("DBTA") affords business trusts definable right and protections by virtue of
its terms having been set forth in the statute, and in some important respects
is deemed to have expanded the protections afforded by the business trust.

For example, if the Reorganization is approved and the transfer of assets
takes place, shareholders of the Acquired Funds will have the benefit of various
provisions that either do not exist or are not explicit under the laws governing
entities organized as Massachusetts business trusts. For example, while the
risk of shareholder liability is not great, the DBTA appears to provide
shareholders with greater protection from liabilities incurred by a business
trust organized under the DBTA. In addition, there are provisions of the DBTA
that may serve to reduce costs of operation as new technologies become
available, such as electronic communications. Other provisions of the DBTA
include the ability of an investment company or its series to merge or
consolidate with other entities and to deal with noninvestment-related
operational issues without a shareholder vote, which may afford enhanced
flexibility and may save an investment company substantial resources.

The specific differences between The Fontaine Trust and NA Funds are
discussed below. The operations of The Fontaine Trust, as a Massachusetts
business, are governed by its Declaration of Trust and Bylaws ("The Fontaine
Trust's Declaration of Trust") and Massachusetts law, while the operations of NA
Funds are governed by its Amended and Restated Declaration of Trust and Bylaws
("NA Funds' Declaration of Trust") and Delaware law.

<PAGE>

LIABILITY OF SHAREHOLDERS

Under Massachusetts law, shareholders of The Fontaine Trust may, under
certain circumstances, be held personally liable as partners for The Fontaine
Trust's obligations. However, the risk of a shareholder incurring financial
loss as a result of shareholder liability is limited to circumstances in which
both inadequate insurance exists and The Fontaine Trust, itself, is unable to
meet its obligations. The Fontaine Trust's Declaration of Trust specifically
states that no shareholder shall be subject to any personal liability whatsoever
to any person in connection with The Fontaine Trust's property or the acts,
obligations or affairs of The Fontaine Trust. The Fontaine Trust's Declaration
of Trust further states that The Fontaine Trust shall indemnify and hold each
shareholder harmless from and against all claims and liabilities to which the
shareholder may become subject by reason of his being or having been a
shareholder, and shall reimburse the shareholder out of The Fontaine Trust's
property for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability.

Under the DBTA, on the other hand, shareholders of a Delaware business
trust are entitled to the same limitations of liability extended to shareholders
of private for-profit corporations. As such, there is a possibility, albeit
remote, that under certain circumstances shareholders of a Delaware business
trust may be held personally liable for a Delaware business trust's obligations.
This might occur if the courts of another state not recognizing the limitation
on liability were to apply the laws of the state to a controversy involving the
Delaware business trust's obligations. To protect against such an occurrence,
the NA Funds' Declaration of Trust provides that NA Funds shall indemnify and
hold each of NA Funds' shareholders harmless from and against any claim or
liability to which the shareholder may become subject solely by reason of his or
her being or having been a shareholder, and that was not due to the
shareholder's acts or omissions or for some other reason. In such an instance,
NA Funds will reimburse the shareholder for all legal and other expenses
reasonably incurred by him or her in connection with any such claim or
liability. Thus, the risk of a shareholder incurring financial loss beyond his
or her investment due to shareholder liability is limited to circumstances in
which NA Funds itself is unable to meet its obligations.

ELECTION OF TRUSTEES; SHAREHOLDER MEETINGS

Neither Massachusetts business trust law nor the DBTA require investment
companies to hold annual meetings of shareholders. The shareholders of both the
Acquired Funds and the Acquiring Funds may, from time to time, be entitled to
vote for the election of trustees in elections that are held as required by the
1940 Act, the Declaration of Trust or the Bylaws.

TERMS OF TRUSTEES

The Fontaine Trust's Declaration of Trust provides that, except in the
event of resignation or removal by the other trustees or shareholders of The
Fontaine Trust, each trustee shall hold

<PAGE>

office until such time as less than a majority of the trustees holding office
have been elected by shareholders. At that time, The Fontaine Trust's
Declaration of Trust states that the trustees then in office will call a
shareholders' meeting for the election of trustees. The Declaration of Trust
also provides that the term of office of a trustee shall terminate and a
vacancy shall occur in the event of his death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a trustee.

The NA Funds' Declaration of Trust provides that the trustees of NA Funds
shall hold office during the lifetime of NA Funds and until its termination as
provided for in the NA Fund's Declaration of Trust, unless the trustee resigns
or is removed by the other trustees or shareholders of NA Funds (as discussed
below). The NA Funds' Declaration of Trust also provides that the term of
office of a trustee shall terminate and a vacancy shall occur in the event of
the death, resignation, adjudicated incompetence or other incapacity to perform
the duties of the office, or removal, of a trustee.

REMOVAL OF TRUSTEES

A trustee of The Fontaine Trust may be removed from office for cause, at a
meeting duly called, by the action of two-thirds of the remaining trustees or by
action of two-thirds of the outstanding shares of beneficial interest of The
Fontaine Trust. The Fontaine Trust's Declaration of Trust provides that in the
case of a vacancy, subject to the provisions of the 1940 Act, the remaining
trustees shall fill the vacancy by the appointment of such other person as they
in their sole discretion shall see fit and such appointment shall be made by a
written instrument signed by a majority of the trustees then in office.

A trustee of NA Funds may be removed from office with or without cause by
the affirmative vote of the shareholders of two-thirds of the shares of
beneficial interest of NA Funds, or may be removed for cause by the action of
two-thirds of the remaining trustees. The NA Funds' Declaration of Trust
provides that in the case of a vacancy, the shareholders of at least a majority
of the shares of beneficial interest entitled to vote or, to the extent
permitted by the 1940 Act, a majority vote of the trustees continuing in office
may fill the vacancy.

SPECIAL MEETINGS OF SHAREHOLDERS

The Fontaine Trust's Declaration of Trust provides that shareholders'
meetings may be called at any time by the President of The Fontaine Trust, and
shall be called by the President or the Secretary of The Fontaine Trust at the
request, in writing or by resolution, of a majority of the trustees, or at the
written request of the shareholders of 10% or more of the total number of shares
then issued and outstanding of The Fontaine Trust entitled to vote at the
shareholders' meeting. The Fontaine Trust's Declaration of Trust further
provides that meetings of the shareholders of any series of The Fontaine Trust
shall be called by the President or the Secretary of The Fontaine Trust at the
written request of the shareholders of 10% or more of the total

<PAGE>

number of shares then issued and outstanding of the series of The Fontaine
Trust entitled to vote at the meeting. Any request for a shareholder meeting
shall state the purpose or purposes of the proposed meeting.

The NA Funds' Declaration of Trust provides that shareholders' meetings may
be called at any time by a majority of the trustees and shall be called by any
trustee upon written request of shareholders holding, in the aggregate, not less
than 10% of the issued and outstanding shares of beneficial interest.
Shareholder requests for a meeting must specify the purpose or purposes for
which the meeting is to be called.

LIABILITY OF TRUSTEES AND OFFICERS; INDEMNIFICATION

The Fontaine Trust's Declaration of Trust provides that trustees, officers,
employees or agents of The Fontaine Trust shall not be liable to The Fontaine
Trust, its shareholders, or to any shareholder, trustee, officer, employee or
agent of The Fontaine Trust or its shareholders for any action or failure to
act, except for his or her own bad faith, willful misfeasance, gross negligence
or reckless disregard of the duties involved in the conduct of his or her
office. The Fontaine Trust's Declaration of Trust further provides that a
trustee or officer of The Fontaine Trust shall be indemnified by The Fontaine
Trust or by one or more series of The Fontaine Trust, as appropriate, to the
fullest extent permitted by law against all liability and against all expenses
reasonably incurred or paid by him or her in connection with any claim, action,
suit or proceeding in which he or she becomes involved as a party or otherwise
by virtue of his or her being or having been a trustee or officer and against
amounts paid or incurred by him or her in a settlement. Under The Fontaine
Trust's Declaration of Trust, no indemnification shall be provided to a trustee
or officer: (i) against any liability to The Fontaine Trust, a series of The
Fontaine Trust, or its shareholders by reason of a final adjudication by a court
or other body before which a proceeding was brought that he or she engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office; (ii) with respect to any
matter as to which he or she shall have been finally adjudicated not to have
acted in good faith in the reasonable belief that his or her action was in the
best interest of The Fontaine Trust or a series of The Fontaine Trust; or (iii)
in the event of a settlement or other disposition not involving a final
adjudication as provided in subparagraph (ii) above resulting in a payment by a
trustee or officer, unless there has been a determination that the trustee or
officer did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.

Under the NA Funds' Declaration of Trust, trustees, officers, employees or
agents of NA Funds when acting in those capacities shall not be subject to any
personal liability whatsoever, in his or her individual capacity, to any person,
other than to NA Funds or its shareholders. In addition, the NA Funds'
Declaration of Trust provides that the trustees, officers, employees or agents
of the NA Funds shall not be liable to NA Funds, its shareholders, or to any
trustee,

<PAGE>

officer, employee, or agent of NA Funds for any action or failure to act
except for his or her own bad faith, willful misfeasance, gross negligence,
or reckless disregard of his or her duties.

Delaware law allows a business trust to indemnify and hold harmless any
trustee or other person from and against all claims and demands. The NA Funds'
Declaration of Trust allows, under certain circumstances, for the
indemnification of NA Funds' trustees, officers, employees, and agents against
all liabilities and expenses reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he or she may be involved or with which he or she
may be threatened, while in office or thereafter, by reason of his or her being
or having been a trustee, officer, employee or agent, except with respect to any
matter as to which he or she shall have been adjudicated to have acted in bad
faith, willful misfeasance, gross negligence or reckless disregard of his or her
duties.

TERMINATION

The Fontaine Trust's Declaration of Trust provides that The Fontaine Trust
or any series of The Fontaine Trust may be terminated by: (i) the affirmative
vote of the shareholders of not less than two-thirds of the shares outstanding
and entitled to vote at any meeting of shareholders of The Fontaine Trust or the
appropriate series of The Fontaine Trust; or (ii) an instrument in writing
signed by a majority of the trustees, stating that a majority of the trustees
has determined that the continuation of The Fontaine Trust or a series of The
Fontaine Trust is not in the best interest of the series, The Fontaine Trust, or
their respective shareholders as a result of factors or events adversely
affecting the ability of the series or The Fontaine Trust to conduct its
business and operations in an economically viable manner.

The NA Funds' Declaration of Trust provides that NA Funds may be terminated
(i) by the affirmative vote of the shareholders of not less that two-thirds of
the shares of beneficial interests in The Fontaine Trust at any meeting of the
shareholders, or (ii) by an instrument in writing, without a meeting, signed by
a majority of the trustees and consented to by the shareholders of not less than
two-thirds of such shares of beneficial interests, or (iii) by the trustees by
written notice to the shareholders.

VOTING RIGHTS OF SHAREHOLDERS

The Fontaine Trust's Declaration of Trust grants shareholders the power to
vote only with respect to: (i) the election of trustees; (ii) approval of any
investment advisory contract; (iii) the termination of The Fontaine Trust or any
series of The Fontaine Trust; (iv) any amendment of The Fontaine Trust's
Declaration of Trust, (v) approval of any merger, consolidation or sale of
assets, (vi) the incorporation of The Fontaine Trust; (vii) whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of The Fontaine Trust or a series of
The Fontaine Trust or the shareholders of either to the same extent as such
action would require shareholder approval by a Massachusetts

<PAGE>

business corporation; (viii) any plan adopted pursuant to Rule 12b-1 (or any
successor rule) under the 1940 Act, and related matters; and (ix) additional
matters relating to The Fontaine Trust as may be required by The Fontaine
Trust's Declaration of Trust or any registration of The Fontaine Trust as an
investment company under the 1940 Act with the SEC (or any successor agency)
or as the trustees may consider necessary or desirable.

The NA Funds' Declaration of Trust grants shareholders the power to vote
only with respect to: (i) the election of trustees; (ii) approval of any
investment advisory contract; (iii) the termination of NA Funds; (iv) any
merger, consolidation or sale of assets; (v) the incorporation of NA Funds; and
(vi) additional matters relating to NA Funds as may be required by the 1940 Act,
the DBTA or any other applicable law, the NA Funds' Declaration of Trust or any
registration of NA Funds with the SEC (or any successor agency) or any state, or
as and when the trustees may consider necessary or desirable.

CERTAIN SERVICE PROVIDER ARRANGEMENTS

INVESTMENT ADVISORY FEES

Fontaine Associates serves as investment adviser to the Acquired Funds and
NACM serves as investment adviser to the Acquiring Funds. Each is entitled to
receive a monthly advisory fee from the Funds it manages, computed on the basis
of each Fund's average daily net asset value at the following annual rates:

Management Fee Management Fee
Acquired Fund (% of Average Acquiring (% of Average
Daily Net Asset Fund Daily Net Asset
Value) Value)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>

Capital 0.95% Balanced Growth 0.75% first $500 million
Appreciation 0.675% next $500 million
0.65% over $1 billion

Global Growth 0.85% Worldwide Growth 1.00% first $500 million
0.90% next $500 million
0.85% over $1 billion

Global Income 0.75% Worldwide Growth 1.00% first $500 million
0.90% next $500 million
0.85% over $1 billion
</TABLE>

TRANSFER AGENTS

Richard Fontaine and Company, Incorporated serves as the transfer agent and
dividend disbursing agent for The Fontaine Trust. State Street Bank and Trust
Company serves as the transfer agent and dividend disbursing agent for NA Funds.

<PAGE>

CUSTODIAL SERVICES

Custodial services are provided to The Fontaine Trust by Chase Manhattan
Bank, 270 Park Avenue, New York, NY 10017. Custodial services are provided to
NA Funds by PNC Bank, 2 Heritage Drive, 7th Floor, North Quincy, Massachusetts
02171.

VOTING ITEMS
------------

APPROVAL OR DISAPPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION
AS TO:

1. THE PROPOSED REORGANIZATION OF THE FONTAINE TRUST CAPITAL APPRECIATION
FUND INTO NICHOLAS-APPLEGATE MUTUAL FUNDS BALANCED GROWTH FUND

2. THE PROPOSED REORGANIZATION OF THE FONTAINE TRUST GLOBAL GROWTH FUND
INTO NICHOLAS-APPLEGATE MUTUAL FUNDS WORLDWIDE GROWTH FUND

3. THE PROPOSED REORGANIZATION OF THE FONTAINE TRUST GLOBAL INCOME FUND
INTO NICHOLAS-APPLEGATE MUTUAL FUNDS WORLDWIDE GROWTH FUND

The terms and conditions under which the Reorganization may be consummated
are set forth in the Agreement and Plan of Reorganization (the "Reorganization
Agreement"). Significant provisions of the Reorganization Agreement are
summarized below. However, this summary is qualified in its entirety by
reference to the Reorganization Agreement, a copy of which is attached as
Exhibit A to this Statement and incorporated by reference into this Statement.

DESCRIPTION OF THE REORGANIZATION AGREEMENT

The Reorganization Agreement provides that at the Closing Date
substantially all of the property and assets of each Acquired Fund will be
transferred to each corresponding Acquiring Fund free and clear of all liens,
encumbrances, and claims, except for a reserve for certain expenses and
liabilities (the "Reserve Account") in an amount necessary: (a) to pay its
costs and expenses of carrying out this Agreement (including but not limited to
fees of counsel and accountants, its income dividend payable prior to the
Closing Date, and expenses of its deregistration contemplated under the
Reorganization Agreement); (b) to discharge all of its unpaid liabilities on its
books and records at the Closing Date; and (c) to pay any contingent
liabilities, if any, that the Board of Trustees of The Fontaine Trust may
reasonably deem to exist against any of the Acquired Funds at the Closing Date.
(As previously noted, the property and

<PAGE>

assets to be transferred to the Acquiring Funds are referred to herein as the
"Acquired Fund Net Assets.") Upon the satisfaction or other resolution of
all such liabilities and obligations, any amount remaining from the Reserve
Account will be transferred to the Acquiring Funds.

In exchange for the transfer to the Acquiring Funds of the Acquired Fund
Net Assets as described, the Acquiring Funds will simultaneously issue at the
Closing Date full and fractional Acquiring Fund Shares to each Acquired Fund for
distribution PRO RATA by each Acquired Fund to its shareholders. The number of
Acquiring Fund Shares so issued by each Acquiring Fund will have an aggregate
net asset value equal to the value of the corresponding Acquired Fund Net Assets
on the Closing Date.

Following the close of business on the Closing Date, each Acquired Fund
will distribute PRO RATA to its shareholders the Acquiring Fund Shares received
by the Acquired Fund in liquidation thereof. Each shareholder owning Acquired
Fund Shares at the Closing Date will receive an amount of the corresponding
Acquiring Fund Shares equal to the value of their Acquired Fund Shares, plus the
right to receive any dividends or distributions that were declared before the
Closing Date but that remained unpaid at that time on the Acquired Fund Shares.
In connection with the Reorganization, The Fontaine Trust will be deregistered
as an investment company under the 1940 Act.

The stock transfer books of each Acquired Fund will be permanently closed
as of the close of business on the day immediately preceding the Closing Date.
Redemption requests received thereafter will be deemed to be redemption requests
for Acquiring Fund Shares. If any Acquired Fund Shares held by a former
Acquired Fund shareholder are represented by a share certificate, the
certificate must be surrendered to the Acquiring Fund's transfer agent for
cancellation, or verification of such certificate's loss and indemnification
with respect to such loss must be established, before the Acquiring Fund Shares
issued to the shareholder in the Reorganization can be redeemed or transferred.

The Reorganization with respect to each Acquired Fund is subject to a
number of conditions, including, among other things: (a) approval of the
Reorganization Agreement and the transactions contemplated thereby, as described
in this Statement, by such Acquired Fund's shareholders; (b) the receipt of
certain legal opinions described in Sections 7 and 8 of the Reorganization
Agreement (which include a legal opinion that the Acquiring Fund Shares issued
to Acquired Fund shareholders in accordance with the terms of the Reorganization
Agreement will be validly issued, fully paid, and non-assessable and a legal
opinion that the Reorganization will not give rise to the recognition of income,
gain, or loss for federal income tax purposes to any Acquired Fund, Acquiring
Fund, or their respective shareholders); (c) the receipt of certain certificates
from the parties concerning the continuing accuracy of the representations and
warranties in the Reorganization Agreement and other matters; and (d) the
parties' performance of their respective agreements and undertakings in the
Reorganization Agreement. Assuming

<PAGE>

satisfaction of the conditions in the Reorganization Agreement, the Closing
Date will be on _________ ___, 1998, or such other date as is agreed to by
the parties.

The Reorganization Agreement provides that NACM or the Acquiring Funds
shall be responsible for the payment of all reasonable expenses incurred in
connection with entering into and carrying out the Reorganization (which
expenses include the fees and disbursements of attorneys and auditors and proxy
printing and solicitation expenses) and any related transfer fees and brokerage
fees, unless the failure to consummate the transactions results from a breach by
Fontaine Associates or an Acquired Fund, except that Fontaine Associates shall
pay: (i) the costs and expenses of preparing all necessary supplements for each
Acquired Fund's Prospectus or Statement of Additional Information to be filed
prior to the Closing Date and (ii) the costs and expenses of preparing and
filing with the SEC the Form N-8F exemptive application and any amendments
thereto with respect to the deregistration of The Fontaine Trust and other
related state filings. As between NACM and the Acquiring Funds, the Acquiring
Funds will pay normal expenses associated with the transactions relating to the
Agreement, and NACM will pay extraordinary or unusual expenses. Any such
expenses that are so borne by NACM or the Acquiring Funds shall be solely and
directly related to the Reorganization within the meaning of Revenue Ruling
73-54, 1973-1 C.B. 187.

The Reorganization Agreement and the Reorganization described herein may be
abandoned at any time prior to the Closing Date by the mutual consent of the
parties to the Reorganization Agreement. In such event, there shall be no
liability for damages on the part of any Fund, or its respective Board of
Trustees or officers but NACM or the Acquiring Funds shall bear all expenses
incidental to the preparation and carrying out of the Reorganization Agreement.
The Reorganization Agreement provides further that at any time prior to or after
approval of the Reorganization Agreement by each Acquired Fund's shareholders,
the Funds, by written agreement, may amend, modify, or supplement the
Reorganization Agreement. The Reorganization Agreement further provides that no
such amendment, modification, or supplement may have the effect of changing the
provisions for determining the number of Acquiring Fund Shares to be distributed
to Acquired Fund shareholders under the Reorganization Agreement to the
detriment of the Acquired Fund shareholders, unless the Acquired Fund
shareholders approve such change or unless the amendment merely changes the
Closing Date.

BOARD CONSIDERATION

Based on their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the Board of
Trustees of The Fontaine Trust has unanimously determined that the proposed
Reorganization is in the best interest of the shareholders of each of the
Acquired Funds, and recommends the approval of the Reorganization Agreement by
such shareholders at the Special Meeting. The following is a summary of the
information that was considered by the Board of Trustees in making their
determination.

<PAGE>

Initially, the Board of Trustees, including the non-interested Directors,
reviewed several areas of concern regarding the Acquired Funds. The Board of
Trustees considered that the relatively small asset size of each of the Acquired
Funds had prevented each Acquired Fund from realizing significant economies of
scale in reducing its expense ratio. The Board of Trustees also considered that
there was little expectation that the assets of any of the Acquired Funds would
increase significantly, thereby reducing its expense ratio.

The Board of Trustees also considered as an alternative the complete
liquidation and dissolution of the Acquired Funds. The Board of Trustees
carefully considered the advantages and disadvantages of that alternative and
the effect that the alternative would have on each Acquired Fund's shareholders.

The alternative that the Board of Trustees believed offered the greatest
likelihood of addressing the asset size and growth problem faced by each
Acquired Fund and the alternative the Board considered would be most beneficial
to the Acquired Fund shareholders was the reorganization of the Acquired Funds
into a larger and more well established investment company with similar
investment objectives, investment policies and restrictions. At meetings of the
Board of Trustees of the Funds held on [November __, 1997 and on February __,
1998] the Board of Trustees of The Fontaine Fund considered the available
alternatives and the proposed Reorganization. During the course of their review
and deliberation, the Trustees evaluated the potential benefits and detriments
to the Acquired Funds and their shareholders. The Trustees requested and
received from NACM written materials containing relevant information about the
Acquired Funds and the proposed Reorganization, including fee structure and
expense information, and comparative performance data. Fontaine Associates also
provided the Trustees with historical asset growth information, comparative
expense ratio information, analyses of the benefits to the shareholders of the
Acquired Funds resulting from the proposed Reorganization, and a variety of
other information relevant to the consideration of the proposed Reorganization.
In this regard, the Board of Trustees evaluated the current actual and
contractual expense levels of each Acquiring Funds and compared such expense
levels with the current actual and contractual expense levels of the
corresponding Acquired Fund and considered the anticipated expenses and charges
of the Acquiring Funds after the Reorganization that would be borne directly and
indirectly by the shareholders of the Acquired Funds.

The Board of Trustees also considered the additional efficiencies and
benefits for shareholders of the Acquired Funds that are expected to result from
the Reorganization. These benefits include potential asset growth with
resulting economies of scale. The Board of Trustees considered the investment
objectives and policies and restrictions of the Acquired and the Acquiring
Funds. In this regard, the Board of Trustees specifically considered the
potential additional risks that shareholders of the Acquired Funds would be
subject to as shareholders of the Acquiring Funds. The Board of Trustees also
considered those provisions of the Reorganization Agreement relating to the
price of shares to be exchanged.

<PAGE>

Finally, the Board of Trustees of The Fontaine Trust reviewed the terms of
the Reorganization Agreement. The Board of Trustees noted that the Acquired
Funds would be provided with an opinion of counsel with respect to the tax-free
treatment of the Reorganization.

Based on their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the Acquired
Funds' Board of Trustees unanimously determined that the proposed Reorganization
would be in the best interests of each of the Acquired Funds and their
shareholders, and that the interests of the Acquired Funds' shareholders will
not be diluted as a result of the proposed Reorganization, and recommended the
approval of the Reorganization Agreement by shareholders of each of the Acquired
Funds at the Special Meeting.

Similarly, at meetings of the Board of Trustees of NA Funds held on January
__, 1998 and February ___, 1998, the Board of Trustees of the Acquiring Fund
considered the proposed Reorganization with respect to the Acquiring Funds.
Based on their evaluation of the relevant information provided to them, and in
light of their fiduciary duties under federal and state law, the Board of
Trustees unanimously determined that (a) the proposed Reorganization would be in
the best interests of the Acquiring Funds and their shareholders, and (b) the
interests of the existing Acquiring Fund shareholders will not be diluted as a
result of the proposed Reorganization.

CAPITALIZATION

Because each of the Acquired Funds will be combined in the Reorganization
with the corresponding Acquiring Funds, the total capitalization of each of the
Acquiring Funds after the Reorganization is expected to be greater than the
current capitalization of each of the Acquired Funds. The following table sets
forth as of January 31, 1998: (i) the capitalization of each of the Acquired
Funds; (ii) the capitalization of each of the Acquiring Funds; and (iii) the pro
forma capitalization of the Acquiring Funds as adjusted to give effect to the
Reorganization. If the Reorganization is consummated, the capitalization of the
Acquiring Funds is likely to be different at the Closing Date as a result of
daily share purchase and redemption activity in the Acquired Funds and the
Acquiring Funds.

<TABLE>
<CAPTION>
CAPITAL PRO FORMA
APPRECIATION BALANCED GROWTH COMBINED
<S> <C> <C> <C>
Total Net Assets $________ $________ $________
Shares Outstanding
Net Asset Value Per $________ $________ $________
Share
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
GLOBAL GROWTH WORLDWIDE GROWTH COMBINED
<S> <C> <C> <C>
Total Net Assets $________ $________ $________
Shares Outstanding
Net Asset Value Per $________ $________ $________
Share

<CAPTION>
PRO FORMA
GLOBAL INCOME WORLDWIDE GROWTH COMBINED
<S> <C> <C> <C>
Total Net Assets $________ $________ $________
Shares Outstanding
Net Asset Value Per $________ $________ $________
Share
</TABLE>

FEDERAL INCOME TAX CONSEQUENCES

Consummation of the Reorganization is subject to the condition that the
Funds receive an opinion from counsel, substantially to the effect that, based
upon certain facts, assumptions and representations, the transactions
contemplated by the Reorganization Agreement with respect to each Acquired Fund
and corresponding Acquiring Fund constitute a tax-free reorganization for
federal income tax purposes. The delivery of such opinion is conditioned upon
receipt by counsel of representations it shall request of The Fontaine Trust and
the NA Funds.

The Funds have not sought a tax ruling from the Internal Revenue Service
("IRS"). The opinion of counsel is not binding on the IRS and does not preclude
the IRS from adopting a contrary position. Shareholders should consult their
own tax advisers concerning the potential tax consequences to them, including
state and local income tax consequences.
- -------------------------------------------------------------------------------
THE BOARD OF TRUSTEES OF THE FONTAINE TRUST WITH RESPECT TO EACH OF ITS SERIES
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF PROPOSALS 1, 2
AND/OR 3, AS APPLICABLE
- -------------------------------------------------------------------------------

<PAGE>

INFORMATION RELATING TO VOTING MATTERS

GENERAL INFORMATION

This Statement is being furnished in connection with the solicitation of
proxies by The Fontaine Trust's Board of Trustees in connection with the Special
Meeting. It is expected that the solicitation of proxies will be primarily by
mail. Officers and service contractors of The Fontaine Trust and NA Funds may
also solicit proxies by telephone, fax, or personal interview. Any shareholder
giving a proxy may revoke it at any time before it is exercised by submitting to
the appropriate Acquired Fund a written notice of revocation or a subsequently
executed proxy or by attending the Special Meeting and voting in person.

Only shareholders of record at the close of business on February ___, 1998,
will be entitled to vote at the Special Meeting. On that date there were
outstanding and entitled to be voted __________ shares of the Capital
Appreciation, ________ shares of Global Growth, and __________ shares of Global
Income. Each share or fraction thereof is entitled to one vote or fraction
thereof.

If the accompanying proxy is executed and returned in time for the Special
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Special Meeting or any
adjournment of the Special Meeting. For information on adjournment of the
Special Meeting, see "Quorum" below.

SHAREHOLDER AND BOARD APPROVALS

The Reorganization Agreement (and the transactions contemplated thereby) is
being submitted at the Special Meeting for approval by the shareholders of each
of the Acquired Funds. The approval of the holders of a majority of the
outstanding Acquired Fund Shares of each Acquired Fund is required for the
approval of the Proposal with respect to each Acquired Fund, in accordance with
the provisions of the Declaration of Trust of The Fontaine Trust. Abstentions
will have the same effect as casting a vote against the relevant Proposal.

The vote of the shareholders of the Acquiring Funds is not being solicited
because their approval or consent is not required for the Reorganization to be
consummated.

On January 31, 1998, the name, address, and share ownership of the persons
who beneficially owned 5% or more of any of the Acquired Fund's outstanding
shares, and the percentage of shares that would be owned by such persons upon
consummation of the Reorganization based upon their holdings and outstanding
shares at January 31, 1998 are as follows:

Name/ Address Share Ownership Share Ownership Share Ownership Share Ownership Share Ownership Share Ownership
of Capital of Balanced Growth of Global Growth of Worldwide Growth of Global Income of Worldwide Growth
Appreciation After Reorganization After Reorganization After Reogranization
Chemical Bank C/F 16.8% [to be provided]
the IRA R/O of
Richard H. Fontaine
3 Hollins Avenue
Baltimore, MD 21210

Chase Manhattan Bank
C/F the IRA of
Lawrence N. Boyd 5% [to be provided]
152 Long Hill Road
Franklin, MA 02038

Harold Blank 13.5% [to be provided]
6801 Tildenwood Lane
Rockville, MD 20852

Richard H. Fontaine 9.8% [to be provided]
3 Hollins Avenue
Baltimore, MD 21210

Frank N. Milewski & Margaret 6.1% [to be provided]
J. Milewski Jt Ten
50 Chestnut Ave.
Floral Park, NY 11001

Citicorp Sec. Serv Inc. Special 13.8% [to be provided]
Custody Acct. For the
Exclusive Benefit of Customers
111 Wall Street 11th Flr.
New York, NY 10005
</TABLE>

32
<PAGE>

On January 30, 1998, the name, address, and share ownership of the
persons who beneficially owned 5% or more of the outstanding shares of any of
the Acquiring Funds and the percentage of shares what would be owned by such
persons upon consummation of the Reorganization based upon their holdings and
outstanding shares at January 31, 1998, are as follows:

<TABLE>
<CAPTION>
Share Ownership of Share Ownership of
Share Ownership of Balanced Growth After Share Ownership of Worldwide Growth After
Name/Address Balanced Growth Reorganization Worldwide Growth Reorganization
- -------------- ----------------- ---------------------- ------------------ ----------------------
<S> <C> <C> <C> <C>

Merrill Lynch Price 66.76% [to be provided]
Fenner & Smith, Mutual
Fund Operations, Attn:
Bank Reconciliations
4800 Dear Lake Drive
East
Jacksonville, Florida
32246

Yield Enhancement 5.14% [to be provided]
Partners
Washington Mall West
Reid Streed 4th Floor
Hamilton HM 11 Bermuda

Merrill Lynch Price 64.22% [to be provided]
Fenner & Smith, Mutual
Fund Operations, Attn:
Bank Reconciliations
4800 Dear Lake Drive
East
Jacksonville, Florida
32246
</TABLE>

On January 31, 1998, the trustees and officers of NA Funds, as a group,
owned less than 1% of the outstanding shares of any of the Acquiring Funds.
As of January 31, 1998, the trustees and officers of The Fontaine Trust, as
a group, beneficially owned 81,144.66 shares of the Capital Appreciation,
1,137.388 shares of Global Growth and 6,303.678 shares of Global Income which
were approximately 20.41%, 0.57% and 11.75% of each Fund's then outstanding
shares.

<PAGE>

Shareholders have the right to redeem their Acquired Fund Shares at net
asset value until the Closing Date, and thereafter former Acquired Fund
shareholders may redeem their Acquiring Fund Shares acquired in the
Reorganization at net asset value, subject to the forward pricing requirements
of Rule 22c-1 under the 1940 Act.

QUORUM

In the event that a quorum is not present at the Special Meeting, or in the
event that a quorum is present at the Special Meeting but sufficient votes to
approve the Reorganization Agreement and the transactions contemplated thereby
are not received, the persons named as proxies may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of a majority of those
shares affected by the adjournment that are represented at the Special Meeting
in person or by proxy. If a quorum is present, the persons named as proxies
will vote those proxies that they are entitled to vote FOR the Reorganization
Agreement in favor of such adjournments, and will vote those proxies required to
be voted AGAINST such proposal against any adjournment. A quorum is constituted
by the presence in person or by proxy of the holders of more than 50% of the
outstanding shares of each Acquired Fund. Proxies properly executed and marked
with a negative vote or an abstention, or broker non-votes, will be considered
to be present at the Special Meeting for the purposes of determining the
existence of a quorum for the transaction of business. Broker non-votes exist
where a broker proxy indicates that the broker is not authorized to vote on a
particular proposal.

ADDITIONAL INFORMATION ABOUT EACH FUND

The Acquired Funds and the Acquiring Funds are each subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and the 1940 Act, as applicable, and, in accordance with such requirements,
files proxy materials, reports, and other information with the SEC. These
materials can be inspected and copied at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the offices of the Acquired Funds and the Acquiring Funds listed on the first
page of this Statement. Copies of such materials can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed
rates, or at no charge from the EDGAR database on the SEC's website at
"www.sec.gov."

TRUSTEES AND OFFICERS

The current trustees and officers of NA Funds will continue as trustees and
officers of NA Funds following the Reorganization. The current trustees and
officers of The Fontaine Trust will not continue in such positions following the
Reorganization, except to the extent that any action may be required of them in
connection with the winding up and deregistration of the Acquired

<PAGE>

Funds and the filing of Form N-8F on behalf of The Fontaine Trust.
Information concerning such persons is contained in the Statement of
Additional Information for each Fund.

FINANCIAL INFORMATION FOR THE ACQUIRED FUNDS

Financial information about the Acquired Funds for the fiscal year ended
December 31, 1997 is contained in the Annual Report to Shareholders that was
recently distributed to shareholders of each of The Acquired Funds.

The Annual Report to Shareholders is incorporated by reference into the
Statement of Additional Information to the Statement dated March __, 1998.

FINANCIAL INFORMATION FOR THE ACQUIRING FUNDS

Below is financial information about the Acquiring Funds for the fiscal year
ended March 31, 1997. It is based on a single share outstanding through such
period. This information is derived from financial statements for such period
audited by Ernest & Young, independent accountants to the NA Funds. The data
should be read in conjunction with the financial statements, related notes, and
Ernest & Young's report on those items, which are included in the Annual Report
to Shareholders which is incorporated by reference in the Statement of
Additional Information to this Statement.

<PAGE>

BALANCED GROWTH
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>

PER SHARE DATA:
4/19/93 TO 4/1/94 TO 4/1/95 TO 4/1/96 TO 4/1/97 TO
3/31/94 3/31/95 3/31/96 3/31/97 9/30/97
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD............................ $12.50 $13.52 $13.74 $16.16 $15.54

INCOME FROM INVESTMENT
- ----------------------
OPERATIONS:
- ------------
Net investment income
(deficit).......................... 0.15 0.21 0.34 0.32 0.23

Net realized and unrealized gains
(losses) on securities and
foreign currency................... 1.02 0.22 2.42 0.84 4.27

TOTAL FROM INVESTMENT
OPERATIONS.......................... 1.17 0.43 2.76 1.16 4.50

LESS DISTRIBUTIONS
- ------------------
Dividends from net
investment income................. (0.15) (0.21) (0.34) (0.32) (0.11)

Distributions from capital
gains............................. -- -- -- (1.46) --

NET ASSET VALUE, END OF
PERIOD.............................. $13.52 $13.74 $16.16 $15.54 $19.92
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN+:...................... (9.35%) 3.22% 20.16% 6.74% 28.98%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period........... $6,446 $4,980 $5,902 $4,898 $6,230

Ratio of expenses to average
net assets, after expense
reimbursement++................... 1.59%* 1.60% 1.60% 1.60% 1.61%*

Ratio of expenses to average
net assets, before expense
reimbursement+.................... 3.28%* 2.78% 3.30% 3.00% 2.64%*

Ratio of net investment income
(deficit) to average net
assets, after expense
reimbursement++................... 1.30%* 1.44% 2.16% 1.87% 1.26%*

Ratio of net investment income
(deficit) to average net
assets, before expense
reimbursement++..................... (0.39%)* 0.26% 0.88% 0.73% 0.22%*

Portfolio turnover**.................. 85.43% 110.40% 197.19% 212.95%

Average commission rate paid**........ N/A N/A $0.0594 $0.0586
</TABLE>

- ------------------------
* Annualized.
** For corresponding Series of the Master Trust.
+ Computations do not reflect the Portfolio's sales charges.
++ Includes expenses allocated from Master Trust.

36
<PAGE>

WORLDWIDE GROWTH
FINANCIAL HIGHLIGHTS

INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(deficit)............................ (0.07) (0.05) (0.07) (0.16) (0.01)

Net realized and unrealized
gains (losses) on securities
and foreign currency................. 2.51 (0.09) 2.86 2.20 4.38

TOTAL FROM INVESTMENT
OPERATIONS............................. 2.44 (0.14) 2.79 2.04 4.39

LESS DISTRIBUTIONS:
Dividends from net investment
income............................... -- (0.02) (0.12) -- --

Distributions from capital
gains................................ -- (0.49) (0.39) (1.73) --

NET ASSET VALUE, END OF
PERIOD................................. $14.94 $14.29 $16.57 $16.88 $21.27
------ ------ ------ ------ ------
------ ------ ------ ------ ------

TOTAL RETURN+.......................... 19.52% (0.90%) 19.79% 12.51% 26.01%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period.............. $20,194 $22,208 $23,481 $24,022 $33,337

Ratio of expenses to average net
assets, after expense
reimbursement++...................... 1.85%* 1.85% 1.85% 1.85% 1.86%*

Ratio of expenses to average net
assets, before expense
reimbursement+....................... 2.23%* 2.18% 2.17% 2.17% 2.11%*

Ratio of net investment income
(deficit) to average net
assets, after expense
reimbursement++...................... (0.69%)* (0.42%) (0.35%) (0.93%) (0.35%)*

Ratio of net investment income
(deficit) to average net
assets, before expense
reimbursement++...................... (1.07%)* (0.75%) (0.61%) (1.18%) (0.60%)*

Portfolio turnover**................... 95.09% 98.54% 132.20% 181.81% 132.20%

Average commission rate paid**.......... N/A N/A $0.0187 $0.0078
</TABLE>

- ----------------------
* Annualized.
** For corresponding Series of the Master Trust.
+ Computations do not reflect the Portfolio's sales charges.
++ Includes expenses allocated from Master Trust.

<PAGE>

FINANCIAL STATEMENTS

The financial statements of the each of the Acquired Funds and the
Acquiring Funds for their most recent fiscal year ends, which are included in
their respective Prospectuses and Statements of Additional Information and in
the Statement of Additional Information related to this Statement have been
audited by Sanville & Company, independent accountants for the Acquired Funds
and Ernst & Young L.L.P. for the Acquiring Funds, to the extent indicated in
their respective reports thereon, incorporated by reference or included in such
Prospectuses and Statements of Additional Information. Such financial
statements included in such Prospectuses and Statements of Additional
Information have been included in reliance upon such reports given upon the
authority of each such firm as an expert in accounting and auditing.

OTHER BUSINESS

The Board of Trustees of The Fontaine Trust knows of no other business to
be brought before the Special Meeting. However, if any other matters come
before the Special Meeting, it is the intention that proxies that do not contain
specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named in the enclosed form of proxy.

SHAREHOLDER INQUIRIES

Shareholder inquiries may be addressed to any of the Acquired Funds in
writing at the address on page 1 of this Statement or by telephoning
1-800-24-1550.

* * *

SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING ARE URGED TO
DATE AND SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES. IN ORDER TO AVOID THE EXPENSE OF FURTHER SOLICITATION, WE ASK
YOUR COOPERATION IN COMPLETING AND RETURNING YOUR PROXY PROMPTLY.

By Order of the Board of Directors

Kimberly A. Malkowski
SECRETARY

Towson, Maryland
March __, 1998

<PAGE>
EXHIBIT A:

AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this _____ day of __________, 1998, by and between The Fontaine Trust, a
Massachusetts business trust (the "Fontaine Trust"), on behalf of each of its
series (each an "Acquired Fund"), and the Nicholas-Applegate Mutual Funds, a
Delaware business trust (the "NA Funds"), on behalf of the series described
below (the "Acquiring Funds"). (The Acquiring Funds and the Acquired Funds are
sometimes referred to collectively as the "Funds" and individually as a "Fund".)

Each of the Acquired Funds will, as of the closing date for the
reorganization (the "Closing Date"), transfer substantially all of its property,
assets and goodwill to the specified Acquiring Fund, as described below.

The Fontaine Trust's Capital Appreciation Fund ("Capital Appreciation") will
transfer substantially all of its property, assets and goodwill to the NA
Fund's Balanced Growth Fund - Class A shares ("Balanced Growth");

The Fontaine Trust's Global Growth Fund ("Global Growth") will transfer
substantially all of its property, assets and goodwill to the NA Fund's
Worldwide Growth Fund - Class A shares ("Worldwide Growth"); and

The Fontaine Trust's Global Income Fund ("Global Income") will transfer
substantially all of its property, assets and goodwill to Worldwide Growth.

This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"). THE REORGANIZATION ("REORGANIZATION") will consist of the
transfer of substantially all of the property, assets, and goodwill of each of
the Acquired Funds to each of the Acquiring Funds in exchange solely for Class A
shares of beneficial interest of the respective Acquiring Fund ("Acquiring Fund
Shares"), followed by the distribution by each Acquired Fund, on or promptly
after the Closing Date, of the Acquiring Fund Shares to the shareholders of the
respective Acquired Fund, the cancellation of all of the outstanding shares of
each Acquired Fund ("Acquired Fund Shares"), and the liquidation of each
Acquired Fund, and the termination of each Acquired Fund as a series of the
Fontaine Trust, as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.

In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:

A-1

<PAGE>

TRANSFER OF ASSETS OF EACH ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND SHARES
AND LIQUIDATION OF EACH ACQUIRED FUND

No later than the time of the closing of the Reorganization as provided in
Section 3.1 of this Agreement (the "Closing Time") on the Closing Date, each
Acquired Fund shall transfer substantially all of its property and assets
(consisting, without limitation, of portfolio securities and instruments,
dividends and interest receivables, claims, cash, cash equivalents, deferred or
prepaid expenses shown as assets on each Acquired Fund's books, goodwill and
intangible property, books and records, and other assets), as set forth in the
statement of assets and liabilities referred to in Section 8.2 hereof (the
"Statement of Assets and Liabilities"), to the respective Acquiring Fund free
and clear of all liens, encumbrances, and claims, except for cash or bank
deposits in an amount necessary: (a) to discharge all of the unpaid liabilities
reflected on its books and records at the Closing Date; and (b) to pay such
contingent liabilities, if any, as the Board of Trustees of the Acquired Funds
shall reasonably deem to exist against each Acquired Fund at the Closing Date,
for which contingent and other appropriate liability reserves shall be
established on the Acquired Funds' books. Any unspent portion of such cash or
bank deposits retained shall be delivered by the Fontaine Trust to the Acquiring
Funds, as appropriate, upon the satisfaction of all of the foregoing
liabilities, costs, and expenses of the Acquired Funds. (The property and
assets to be transferred to each Acquiring Fund under this Agreement are
referred to herein as the "Acquired Fund Net Assets".) In exchange for the
transfer of the Acquired Fund Net Assets, each Acquiring Fund shall deliver to
the respective Acquired Fund, for distribution PRO RATA by the Acquired Fund to
its shareholders as of the close of business on the Closing Date, a number of
the Acquiring Fund Shares having an aggregate net asset value equal to the value
of the Acquired Fund Net Assets, all determined as provided in Section 2 of this
Agreement and as of the date and time specified in that section. The Acquiring
Funds are not assuming any liabilities of the Acquired Funds. Following the
closing, the Fontaine Trust shall not be responsible for the liabilities, costs
and expenses of the Acquired Funds, and recourse for such liabilities shall be
limited to the cash or bank deposits retained to satisfy such liabilities, costs
and expenses, as provided for above in this Section 1.1.

Each Acquired Fund reserves the right to purchase or sell any of its
portfolio securities prior to the Closing Date, except to the extent such
purchases or sales may be limited by the representations made in connection with
issuance of the tax opinion described in Section 8.9 hereof.

On or promptly after the Closing Date, each Acquired Fund shall liquidate
and distribute PRO RATA to its shareholders of record at the Closing Time on the
Closing Date (the "Acquired Fund Shareholders") the Acquiring Fund Shares
received by each Acquired Fund pursuant to Section 1.1 of this Agreement. (The
date of such liquidation and distribution is referred to as the "Liquidation
Date.") In addition, each Acquired Fund Shareholder shall have the right to
receive any dividends or other distributions that were declared prior to the
Closing Date, but unpaid at that time, with respect to the respective Acquired
Fund Shares that are held by such Acquired Fund Shareholders on the Closing
Date. Such liquidation and distribution shall be accomplished by State Street
Bank and Trust Company, in its capacity as transfer agent for the Acquiring
Funds, by opening accounts on the share records of each Acquiring Fund in the
names of the

A-2

<PAGE>

Acquired Fund Shareholders and transferring to each such Acquired Fund
Shareholder account the PRO RATA number of the Acquiring Fund Shares due each
such Acquired Fund Shareholder from the Acquiring Fund Shares then credited
to the account of each Acquired Fund on the Acquiring Fund's books and
records. The Acquiring Funds shall not issue certificates representing
Acquiring Fund Shares in connection with such exchange.

The Acquired Fund Shareholders holding certificates representing their
ownership of Acquired Fund Shares may be requested to surrender such
certificates or deliver an affidavit with respect to lost certificates, in such
form and accompanied by such surety bonds as each Acquired Fund may require
(collectively, an "Affidavit"), to the respective Acquired Fund prior to the
Closing Date. On the Closing Date, any Acquired Fund Share certificates that
remain outstanding shall be deemed to be canceled. The Fontaine Trust's
transfer books with respect to each Acquired Fund's shares shall be closed
permanently as of the close of business on the day immediately preceding the
Closing Date. All unsurrendered Acquired Fund Share certificates shall no
longer evidence ownership of beneficial interest of the Acquired Funds and shall
be deemed for all purposes to evidence ownership of the number of Acquiring Fund
Shares into which the Acquired Fund Shares were effectively converted. Unless
and until any such certificate shall be so surrendered or an Affidavit relating
thereto shall be delivered to the Acquiring Funds, dividends and other
distributions payable by an Acquiring Fund subsequent to the Liquidation Date
with respect to such Acquiring Fund Shares shall be paid to the holders of such
certificate(s), but such Shareholders may not redeem or transfer Acquiring Fund
Shares received in the Reorganization with respect to unsurrendered Acquired
Fund Share certificates.

Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name
other than the registered holder of the Acquiring Fund Shares on the books of an
Acquired Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Acquiring Fund Shares are to be
issued and transferred.

As soon as practicable following the Liquidation Date, the Fontaine Trust
shall take all steps necessary to terminate the existence of each Acquired Fund
and the Fontaine Trust, including (a) the payment or other satisfaction of the
Acquired Funds' remaining outstanding liabilities, costs and expenses, from the
cash and bank deposits retained for that purpose pursuant to Section 1.1 hereof,
and (b) the deregistration of the Fontaine Trust as a registered investment
company, including the filing with the Securities and Exchange Commission
("SEC") of an application pursuant to Section 8(f) of the Investment Company Act
of 1940, as amended ("1940 Act").

VALUATION

The net asset value of the Acquiring Fund Shares and the value of the
Acquired Fund Net Assets shall in each case be determined as of the close of
regular trading on the New York Stock Exchange ("NYSE") and after the
declaration of any dividends on the Closing Date unless on such date (a) the
NYSE is not open for unrestricted trading or (b) the reporting of trading on the
NYSE or elsewhere is disrupted or (c) any other extraordinary financial event or
market condition occurs (all such events described in (a), (b) and (c) are each
referred to as a "Market

A-3

<PAGE>

Disruption"). The net asset value per share of Acquiring Fund Shares shall
be computed in accordance with the policies and procedures set forth in the
then current Prospectus and Statement of Additional Information of the
Acquiring Funds, and shall be computed to not fewer than two (2) decimal
places. The value of the Acquired Fund Net Assets shall be computed in
accordance with the policies and procedures set forth in the then current
Prospectus and Statement of Additional Information of the Acquired Funds.

In the event of a Market Disruption on the proposed Closing Date so that
accurate appraisal of the net asset value of an Acquiring Fund or the value of
the Acquired Fund Net Assets is impracticable, the Closing Date shall be
postponed until the first business day when regular trading on the NYSE shall
have been fully resumed and reporting shall have been restored and other trading
markets are otherwise stabilized.

The number of Acquiring Fund Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Fund Net Assets shall be determined
by dividing the value of the Acquired Fund Net Assets by the respective
Acquiring Fund's net asset value per share, both as determined in accordance
with Section 2.1 of this Agreement.

All computations of value regarding each Acquiring Fund shall be made by
agreement between Nicholas-Applegate Capital Management, the investment adviser
to each Acquiring Fund ("NACM") or the administrator for each of the NA Funds
and Richard Fontaine Associates, Inc. ("Fontaine Associates") and shall be
certified by the Treasurer for each Fund.

CLOSING AND CLOSING DATE

The Closing Date shall be March 30, 1998 or such earlier or later date as
the parties may agree. The Closing Time shall be at 4:30 p.m., Eastern time.
The closing ("Closing") shall be held at the offices of Dechert Price & Rhoads,
located at 1775 Eye1500 K Street, N.W., Washington, D.C. 200065, or at such
other time and/or place as the parties may agree.

At least five (5) business days prior to the Closing Date, each Acquired
Fund will provide the respective Acquiring Fund with a list of its assets,
including all of its portfolio securities, and a list of its outstanding
liabilities, costs and expenses. No later than five (5) business days prior to
the Closing Date, PNC Bank, as the custodian of the Acquiring Funds, shall be
given access to any portfolio securities of the Acquired Funds not held in book
entry form for the purpose of examination. Such portfolio securities (together
with any cash or other assets) shall be delivered by each Acquired Fund to such
custodian for the account of the respective Acquiring Fund on the Closing Date,
in accordance with applicable custody provisions under the 1940 Act, and duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. Such portfolio securities shall be accompanied by any
necessary federal and state stock transfer stamps or a check for the appropriate
purchase price of such stamps. The cash delivered shall be in any form as is
reasonably directed by the Acquiring Funds or their custodian. Portfolio
securities held of record by each Acquired Fund in book entry form shall be
transferred to the respective Acquiring Fund by an appropriate officer of the
Acquired Funds instructing their custodian to deliver such portfolio securities
to the custodian of the Acquiring Funds for the

A-4

<PAGE>

account of the respective Acquiring Fund and by the custodian of the Acquired
Funds executing such instructions through an appropriate clearing agency or
as the Funds may otherwise agree.

If any of the Acquired Fund Net Assets, for any reason, are not transferred
on the Closing Date, each Acquired Fund shall cause such Acquired Fund Net
Assets to be transferred to the respective Acquiring Fund in accordance with
this Agreement at the earliest practicable date thereafter.

Richard Fontaine and Company, Incorporated ("Fontaine and Company"), in its
capacity as transfer agent for the Acquired Funds, shall deliver to each
Acquiring Fund prior to the Closing Time a list of the names, addresses, federal
taxpayer identification numbers, and backup withholding and nonresident alien
withholding status of Acquired Fund Shareholders and the number and aggregate
net asset value of outstanding shares of aneach Acquired Fund owned by each such
Acquired Fund Shareholder (the "Shareholder List"), all as of the close of
regular trading on the NYSE on the Closing Date, certified by an appropriate
officer of Fontaine and Company. State Street Bank and Trust Company, in its
capacity as transfer agent for the Acquiring Funds, shall issue and deliver to
each Acquired Fund, a confirmation evidencing the Acquiring Fund Shares to be
credited to each Acquired Fund Shareholder on the Liquidation Date, or provide
evidence satisfactory to each Acquired Fund that such Acquiring Fund Shares have
been credited to each Acquired Fund Shareholder's account on the books of the
respective Acquiring Fund. At the Closing, each Fund shall deliver to the other
Fund such bills of sale, checks, assignments, certificates, receipts, or other
documents as the other Fund or its counsel may reasonably request.

REPRESENTATIONS AND WARRANTIES OF THE FONTAINE TRUST AND EACH ACQUIRED FUND

The Fontaine Trust, on behalf of each Acquired Fund, represents and
warrants to the NA Funds, on behalf of each Acquiring Fund, as follows:

The Fontaine Trust is a business trust duly organized, validly existing,
and in good standing under the laws of the State of Massachusetts and has the
power to own all of its properties and assets and, subject to approval of the
Acquired Fund Shareholders, to perform its obligations under this Agreement and
to consummate the transactions contemplated by this Agreement. The Fontaine
Trust is not required to qualify to do business in any jurisdiction in which it
is not so qualified or where failure to qualify would not subject it to any
material liability or disability. The Fontaine Trust has all necessary federal,
state, and local authorizations, consents, and approvals required to own all of
its properties and assets and to carry on its business as now being conducted
and to consummate the transactions contemplated by this Agreement.
The Fontaine Trust is a registered investment company classified as a
management company of the open-end diversified type, and its registration with
the SEC as an investment company under the Investment Company Act of 1940, as
amended, (the "1940 Act") is in full force and effect. Each Acquired Fund is a
separate series of the Fontaine Trust for purposes of the 1940 Act.

A-5

<PAGE>

The execution, delivery, and performance of this Agreement have been duly
authorized by all necessary action on the part of the Fontaine Trust's Board of
Trustees on behalf of each Acquired Fund. Subject to the approval of the
Acquired Fund Shareholders, this Agreement constitutes a valid and binding
obligation of the Fontaine Trust, enforceable according to the terms of the
Agreement, subject as to enforcement to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

The Fontaine Trust is not, and the execution, delivery, and performance of
this Agreement by the Fontaine Trust will not result, in violation of any
provision of the Declaration of Trust or By-Laws of the Fontaine Trust or of any
agreement, indenture, instrument, contract, lease, or other arrangement or
undertaking to which the Fontaine Trust or an Acquired Fund is a party or by
which it is bound.

Each Acquired Fund has elected to be treated as a regulated investment
company ("RIC") for federal income tax purposes under Part I of Subchapter M of
the Code, has qualified as a RIC and has been eligible to and has computed its
federal income tax under Section 852 of the Code for each taxable year of its
operations, and will continue to so qualify as a RIC and be eligible to and
compute its income tax as of the Closing Date and with respect to its final
taxable year ending upon its liquidation, and will have distributed all of its
investment company taxable income and net capital gain (as defined in the Code)
that has accrued through the Closing Date.

The financial statements of each Acquired Fund for the fiscal year ended
December 31, 1997, and each of the previous two fiscal years, which were audited
by the independent accountants for the Acquired Funds (copies of which have been
furnished to the Acquiring Funds), and any interim unaudited Financial
Statements that the Acquired Funds may furnish to the Acquiring Funds prior to
the Closing Date, present fairly the financial position of each Acquired Fund as
of the dates indicated and the results of operations and changes in net assets
for the respective stated periods (in accordance with generally accepted
accounting principles ("GAAP") consistently applied).

The Prospectus of the Acquired Funds, dated May 1, 1997, and the
corresponding Statement of Additional Information, dated May 1, 1997, and any
supplements thereto do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and any amended, revised, or new Prospectus or Statement
of Additional Information of each Acquired Fund or any supplement thereto, that
is hereafter filed with the SEC (copies of which documents shall be provided to
the NA Funds promptly after such filing), shall not contain any untrue statement
of a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

No material legal or administrative proceeding or investigation of or
before any court or governmental body is currently pending or, to its knowledge,
threatened as to the Fontaine Trust or an Acquired Fund or any of their
properties or assets. The Fontaine Trust and each Acquired

A-6

<PAGE>

Fund know of no facts that might form the basis for the institution of such
proceedings. Neither The Fontaine Trust nor any Acquired Fund is party to or
subject to the provisions of any order, decree, or judgment of any court or
governmental body which materially and adversely affects their business or
their ability to consummate the transactions herein contemplated.

The Fontaine Trust has furnished the NA Funds and NACM with copies or
descriptions of all agreements or other arrangements to which an Acquired Fund
is a party. Each Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase of securities entered
into in the ordinary course of business and consistent with its obligations
under this Agreement) which will not be terminated by the Acquired Funds in
accordance with their terms at or prior to the Closing Date.

Each Acquired Fund does not have any known liabilities, costs or expenses
of a material amount, contingent or otherwise, other than those reflected in the
financial statements referred to in Section 4.6 hereof and those incurred in the
ordinary course of business as an investment company since the dates of those
financial statements. On the Closing Date, the Fontaine Trust shall advise the
NA Funds and NACM in writing of all of each Acquired Fund's known liabilities,
contingent or otherwise, whether or not incurred in the ordinary course of
business, existing or accrued at such time.

Since December 31, 1997, there has not been any material adverse change in
an Acquired Fund's financial condition, assets, liabilities, or business other
than changes occurring in the ordinary course of its business.

At the date hereof and by the Closing Date, all federal, state, and other
tax returns and reports, including information returns and payee statements, of
the Fontaine Trust and each Acquired Fund required by law to have been filed or
furnished by such dates shall have been filed or furnished and shall be correct
in all material respects, or extensions concerning such tax returns and reports
shall have been obtained, and all federal, state, and other taxes, interest, and
penalties shall have been paid so far as due, or adequate provision shall have
been made on the Fontaine Trust's and each Acquired Fund's books for the payment
thereof, and to the best of the Fontaine Trust's and each Acquired Fund's
knowledge no such tax return is currently under audit and no tax deficiency or
liability has been asserted with respect to such tax returns or reports by the
Internal Revenue Service or any state or local tax authority.
At the Closing Date, each Acquired Fund will have good and marketable title
to the Acquired Fund Net Assets, and subject to approval by the Acquired Fund
Shareholders, full right, power and authority to sell, assign, transfer, and
deliver such assets hereunder, and upon delivery and in payment for such assets,
each Acquiring Fund will acquire good and marketable title thereto subject to no
liens or encumbrances of any nature whatsoever or restrictions on the ownership
or transfer thereof, except (a) such imperfections of title or encumbrances as
do not materially detract from the value or use of the assets subject thereto,
or materially affect title thereto; or (b) such restrictions as might arise
under federal or state securities laws or the rules and regulations thereunder.

A-7

<PAGE>

No consent, approval, authorization, or order of any court or governmental
authority is required for the consummation by an Acquired Fund or the Fontaine
Trust of the transactions contemplated by this Agreement, except such as may be
required under the federal or state securities laws or the rules and regulations
thereunder.

The Combined Proxy Statement/Prospectus of the Funds referred to in Section
6.7 hereof ("Proxy Statement/Prospectus) and any Prospectus or Statement of
Additional Information of an Acquired Fund contained or incorporated by
reference into the Form N-14 Registration Statement, referred to in Section 6.7
hereof, and any supplement or amendment to such documents, on the effective and
clearance dates of the Form N-14 Registration Statement, on the date of the
Special Meeting of Acquired Fund Shareholders, and on the Closing Date, and only
insofar as such Proxy Statement/Prospectus and the Prospectus and Statement of
Additional Information relate to the Fontaine Trust, an Acquired Fund or to the
transactions contemplated by this Agreement and is based on information
furnished by the Fontaine Trust or an Acquired Fund for inclusion therein: (a)
shall comply in all material respects with the provisions of the Securities
Exchange Act of 1934 (the "1934 Act"), the 1940 Act, the rules and regulations
thereunder, and all other applicable federal securities laws and rules and
regulations thereunder; and (b) shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which such statements were made, not misleading.

All of the issued and outstanding shares of beneficial interest of each
Acquired Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable. All of the issued and outstanding
shares of each Acquired Fund will, at the time of Closing, be held by the
persons and in the amounts set forth in the Shareholder List.

All of the issued and outstanding shares of beneficial interest of each
Acquired Fund have been offered for sale and sold in conformity, in all material
respects, with all applicable federal and state securities laws, including the
registration or exemption from registration of such shares, except as may have
been previously disclosed in writing to the NA Funds and NACM.

The Fontaine Trust and each Acquired Fund are not under the jurisdiction of
a Court in Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.

The information to be furnished by the Fontaine Trust or each Acquired Fund
for use in preparing any application for orders, the Form N-14 Registration
Statement referred to in Section 6.7 hereof, and the Combined Proxy
Statement/Prospectus to be included in the Form N-14 Registration Statement,
proxy materials, and other documents which may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete and shall
comply in all material respects with federal securities and other laws and
regulations thereunder applicable thereto.

There is no intertrust indebtedness existing between an Acquired Fund and
the Acquiring Fund that was issued, acquired, or will be settled at a discount.

A-8

<PAGE>

Each Acquired Fund does not have any unamortized or unpaid organizational
fees or expenses.

Each Acquired Fund has valued and will continue to value its portfolio
securities and other assets in accordance with material applicable legal
requirements.

REPRESENTATIONS AND WARRANTIES OF THE NA FUNDS AND EACH ACQUIRING FUND

The NA Funds, on behalf of each Acquiring Fund, represents and
warrants to the Fontaine Trust, on behalf of each Acquired Fund, as follows:

The NA Funds is a business trust duly organized, validly existing, and in
"good standing" under the laws of the State of Delaware and has the power to own
all of its properties and assets and, to perform its obligations under this
Agreement and to consummate the transactions contemplated herein. The NA Funds
is not required to qualify to do business in any jurisdiction in which it is not
so qualified or where failure to qualify would not subject it to any material
liability or disability. The NA Funds has all necessary federal, state, and
local authorizations, consents, and approvals required to own all of its
properties and assets and to carry on its business as now being conducted and to
consummate the transactions contemplated herein.

The NA Funds is a registered investment company classified as a management
company of the open-end diversified type and its registration with the SEC as an
investment company under the 1940 Act is in full force and effect. Each
Acquiring Fund is a separate series of the NA Funds for purposes of the 1940
Act.

The execution, delivery, and performance of this Agreement have been duly
authorized by all necessary action on the part of the NA Fund's Board of
Trustees, on behalf of each Acquiring Fund, and this Agreement constitutes a
valid and binding obligation of the NA Funds, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

The NA Funds is not, and the execution, delivery, and performance of this
Agreement by the NA Funds will not result, in violation of any provisions of the
Declaration of Trust or By-Laws of the NA Funds or of any agreement, indenture,
instrument, contract, lease, or other arrangement or undertaking to which the NA
Funds or an Acquiring Fund is a party or by which it is bound.

Each Acquiring Fund has elected to be treated as a RIC for federal income
tax purposes under Part I of Subchapter M of the Code, has qualified as a RIC
and has been eligible to and has computed its federal income tax under Section
852 of the Code for each taxable year since its inception, and will so qualify
as a RIC as of and be eligible to and compute its income tax for its taxable
year including the Closing Date.

A-9

<PAGE>

The financial statements of Worldwide Growth and Balanced Growth, the
Acquiring Funds, for the period from each Acquiring Fund's inception on April
19, 1993 and April 19, 1993, respectively, to March 31, 1997 (which were audited
by its independent accountants) (copies of which have been furnished to the
Acquired Funds), and any interim unaudited financial statements that the
Acquiring Funds may furnish to the Acquired Funds prior to the Closing Date,
present fairly the financial position of each Acquiring Fund as of the dates
indicated and the results of its operations and changes in net assets for the
respective stated periods (in accordance with GAAP consistently applied).

The Prospectus of the Acquiring Funds, dated July 16, 1997, and the
corresponding Statement of Additional Information, dated July 16, 1997, do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and any
amended, revised, or new Prospectus or Statement of Additional Information of
the Acquiring Funds or any supplement thereto, that is hereafter filed with the
SEC (copies of which documents shall be provided to the Fontaine Trust promptly
after such filing), shall not contain any untrue statement of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

No material legal or administrative proceeding, or investigation of or
before any court or governmental body is currently pending or, to its knowledge,
threatened as to the NA Funds or an Acquiring Fund or any of their properties or
assets. The NA Funds and each Acquiring Fund know of no facts which might form
the basis for the institution of such proceedings. The NA Funds and each
Acquiring Fund are not a party to or subject to the provisions of any order,
decree, or judgment of any court or governmental body which materially and
adversely affects the Acquiring Funds' business or their ability to consummate
the transactions herein contemplated.

Each Acquiring Fund does not have any known liabilities, costs or expenses
of a material amount, contingent or otherwise, other than those reflected in the
financial statements referred to in Section 5.6 hereof and those incurred in the
ordinary course of business as an investment company since the date of those
financial statements. On the Closing Date, the NA Funds shall advise the
Fontaine Trust and Richard Fontaine Associates, Inc. in writing of all of each
Acquiring Fund's known liabilities, contingent or otherwise, whether or not
incurred in the ordinary course of business, existing or accrued at such time.

Since September 30, 1997, there has not been any material adverse change in
an Acquiring Fund's financial condition, assets, liabilities, or business other
than changes occurring in the ordinary course of its business.

At the date hereof and by the Closing Date, all federal, state, and other
tax returns and reports, including information returns and payee statements, of
the NA Funds and each Acquiring Fund required by law to have been filed or
furnished by such dates shall have been filed or furnished and shall be correct
in all material respects, or extensions concerning such tax returns and reports
shall have been obtained, and all federal, state, and other taxes, interest, and
penalties shall have been paid so far as due, or adequate provision shall have
been made on the

A-10

<PAGE>

NA Fund's and each Acquiring Fund's books for the payment thereof, and to the
best of the NA Fund's and each Acquiring Fund's knowledge no such tax return
is currently under audit and no tax deficiency or liability has been asserted
with respect to such tax returns or reports by the Internal Revenue Service
or any state or local tax authority.

No consent, approval, authorization, or order of any court or governmental
authority is required for the consummation by an Acquiring Fund or the NA Funds
of the transactions contemplated by the Agreement, except for the registration
of the Acquiring Fund Shares under the Securities Act of 1933 (the "1933 Act"),
the 1940 Act, or as may otherwise be required under the federal or state
securities laws or the rules and regulations thereunder.

The Form N-14 Registration Statement and the Proxy Statement/Prospectus
referred to in Section 6.7 hereof (other than the portions of such documents
based on information furnished by or on behalf of the Fontaine Trust for
inclusion or incorporation by reference therein as covered by the Fontaine
Trust's warranty in Sections 4.15 and 4.19 hereof) and any Prospectus or
Statement of Additional Information of an Acquiring Fund contained or
incorporated therein by reference, and any supplement or amendment to the Form
N-14 Registration Statement or any such Prospectus or Statement of Additional
Information, on the effective and clearance dates of the Form N-14 Registration
Statement, on the date of the Special Meeting of Acquired Fund Shareholders, and
on the Closing Date: (a) shall comply in all material respects with the
provisions of the 1934 Act, the 1940 Act, the rules and regulations thereunder,
and all other applicable federal securities laws and the rules and regulations
thereunder; and (b) shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which the
statements were made, not misleading.

All of the issued and outstanding shares of beneficial interest of each
Acquiring Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable.

All of the issued and outstanding shares of beneficial interest of each
Acquiring Fund have been offered for sale and sold in conformity, in all
material respects, with all applicable federal and state securities laws,
including the registration or exemption from registration of such shares, except
as may previously have been disclosed in writing to the Fontaine Trust and
Richard Fontaine Associates, Inc.

The Acquiring Fund Shares to be issued and delivered to the Fontaine Trust
pursuant to the terms of this Agreement, when so issued and delivered, will be
duly and validly issued shares of beneficial interest of each Acquiring Fund,
will be fully paid and nonassessable by the NA Funds, and will be duly
registered in conformity with all applicable federal and state securities laws,
and no shareholder of the Acquiring Funds shall have any option, warrant, or
preemptive right of subscription or purchase with respect thereto.

The NA Funds and each Acquiring Fund are not under the jurisdiction of a
Court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.

A-11

<PAGE>

All information to be furnished by the NA Funds to the Fontaine Trust for
use in preparing any prospectus, proxy materials, and other documents which may
be necessary in connection with the transactions contemplated hereby shall be
accurate and complete and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.

There is no intertrust indebtedness existing between an Acquired Fund and
an Acquiring Fund that was issued, acquired, or will be settled at a discount.

Each Acquiring Fund does not own, directly or indirectly, nor has it owned
during the past five (5) years, directly or indirectly, any shares of the
respective Acquired Fund.

Each Acquiring Fund has valued and will continue to value its portfolio
securities and other assets in accordance with material applicable legal
requirements.

COVENANTS OF THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS

Except as expressly contemplated herein to the contrary, each Fund shall
operate its business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of business will
include customary dividends and distributions and any other distribution
necessary or desirable to avoid federal income or excise taxes.

After the effective date of the Form N-14 Registration Statement referred
to in Section 6.7 hereof, and before the Closing Date and as a condition
thereto, the Board of Trustees of the Fontaine Trust shall call, and the
Fontaine Trust shall hold, a Special Meeting of the Acquired Fund Shareholders
to consider and vote upon this Agreement and the transactions contemplated
hereby and the Fontaine Trust shall take all other actions reasonably necessary
to obtain approval of the transactions contemplated herein.

The Fontaine Trust and each Acquired Fund covenant that they shall not sell
or otherwise dispose of any of the Acquiring Fund Shares to be received in the
transactions contemplated herein, except in distribution to the Acquired Fund
Shareholders as contemplated herein.

The Fontaine Trust shall provide such information within its possession or
reasonably obtainable as the NA Funds or NACM may reasonably request concerning
the beneficial ownership of the Acquired Fund Shares.

Subject to the provisions of this Agreement, the NA Funds and the Fontaine
Trust each shall take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper, or advisable to consummate the
transactions contemplated by this Agreement.

The Fontaine Trust shall furnish to the NA Funds on the Closing Date the
Statement of the Assets and Liabilities of each Acquired Fund as of the Closing
Date, which statement shall be prepared in accordance with GAAP consistently
applied and shall be certified by the Fontaine Trust's Treasurer or Assistant
Treasurer. As promptly as practicable, but in any case within

A-12

<PAGE>

forty-five (45) days after the Closing Date, the Fontaine Trust shall furnish
to the NA Funds, in such form as is reasonably satisfactory to the NA Funds,
a statement of the earnings and profits of each Acquired Fund for federal
income tax purposes, and of any capital loss carryovers and other items that
will be carried over to each Acquiring Fund as a result of Section 381 of the
Code, which statement shall be certified by the Fontaine Trust's Treasurer or
Assistant Treasurer. The Fontaine Trust covenants that each Acquired Fund
has no earnings and profits that were accumulated by it or any acquired
entity during a taxable year when it or such entity did not qualify as a RIC
under the Code or, if it has such earnings and profits, shall distribute them
to its shareholders prior to the Closing Date.

The NA Funds, with the cooperation of the Fontaine Trust and its counsel,
shall prepare and file with the SEC a Registration Statement on Form N-14 (the
"Form N-14 Registration Statement") which shall include the Proxy
Statement/Prospectus, as promptly as practicable in connection with the issuance
of the Acquiring Fund Shares and the holding of the Special Meeting of the
Acquired Fund Shareholders to consider approval of this Agreement as
contemplated herein and transactions contemplated thereunder. The NA Funds
shall prepare any pro forma financial statement that may be required under
applicable law to be included in the Form N-14 Registration Statement. The
Fontaine Trust shall provide the NA Funds with all information about each
Acquired Fund that is necessary to prepare the pro forma financial statements.
The NA Funds and the Fontaine Trust shall cooperate with each other and shall
furnish each other with any information relating to itself or its related series
that is required by the 1933 Act, the 1934 Act, and the 1940 Act, the rules and
regulations thereunder, and applicable state securities laws, to be included in
the Form N-14 Registration Statement and the Proxy Statement/Prospectus.

The Fontaine Trust shall deliver to the NA Funds at the Closing Date
confirmation or other adequate evidence as to the tax costs and holding periods
of the assets and property of each Acquired Fund delivered to the respective
Acquiring Fund in accordance with the terms of this Agreement.

CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FONTAINE TRUST AND EACH ACQUIRED FUND

The obligations of the Fontaine Trust and each Acquired Fund hereunder
shall be subject to the following conditions precedent:

This Agreement and the transactions contemplated by this Agreement shall
have been approved by the Board of Trustees of the NA Funds in the manner
required by the NA Funds' Declaration of Trust and applicable law, and this
Agreement and the transactions contemplated by this Agreement shall have been
approved by the Acquired Fund Shareholders in the manner required by the
Acquired Funds' Declaration of Trust and By-Laws and applicable law.

As of the Closing Date, there shall have been no material adverse change in
the financial position, assets, or liabilities of each Acquiring Fund since the
dates of the most recent financial statements furnished to the Fontaine Trust in
accordance with Section 5.6 hereof. For purposes of this Section 7.2, a decline
in the net asset value per share of each Acquiring Fund due to the

A-13

<PAGE>

effect of normal market conditions on liquid securities shall not constitute
a material adverse change.

All representations and warranties of the NA Funds and each Acquiring Fund
made in this Agreement, except as they may be affected by the transactions
contemplated by this Agreement, shall be true and correct in all material
respects as if made at and as of the Closing Date.

The NA Funds and each Acquiring Fund shall have performed and complied in
all material respects with each of their obligations, agreements, and covenants
required by this Agreement to be performed or complied with by each of them
prior to or at the Closing Date.

The NA Funds shall have furnished the Fontaine Trust at the Closing Date
with a certificate or certificates of its President (or any Vice President)
and/or Treasurer or Assistant Treasurer as of the Closing Date to the effect
that the conditions precedent set forth in the Sections 7.2, 7.3, 7.4, and 7.10,
and 7.15 hereof have been fulfilled.

The Fontaine Trust shall have received an legal opinion or opinions from
Paul, Hastings, Janofsky & Walkerof counsel to the NA Funds, in form
reasonably satisfactory to the Fontaine Trust or its counsel, and dated as of
the Closing Date, to the effect that: (a) the NA Funds is a business trust
duly organized and validly existing under the laws of the State of Delaware;
(b) the shares of each Acquiring Fund issued and outstanding at the Closing
Date are duly authorized, validly issued, fully paid, and nonassessable by
the NA Funds, and the Acquiring Fund Shares to be delivered to the Fontaine
Trust, as provided for by this Agreement, are duly authorized and upon
delivery pursuant to the terms of this Agreement will be validly issued,
fully paid and nonassessable by the NA Funds, and to such counsel's
knowledge, no shareholder of either Acquiring Fund has any option, warrant,
or preemptive right to subscription or purchase in respect thereof; (c) this
Agreement has been duly authorized, executed, and delivered by the NA Funds
and represents a valid and binding contract of the NA Funds, enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and similar laws relating
to or affecting creditors' rights generally and court decisions with respect
thereto and to the exercise of judicial discretion in accordance with general
principles of equity, whether in a proceeding at law or in equity; provided,
however, that no opinion need be expressed with respect to provisions of this
Agreement relating to indemnification; (d) the execution and delivery of this
Agreement did not, and the consummation of the transactions contemplated by
this Agreement will not, violate the Declaration of Trust or By-Laws of the
NA Funds or any material agreement known to such counsel to which the NA
Funds or an Acquiring Fund is a party or by which it is bound; (e) to the
knowledge of such counsel, no consent, approval, authorization, or order of
any court or governmental authority is required for the consummation by the
NA Funds of the transactions contemplated by this Agreement, except such as
have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules
and regulations under those statutes, and such as may be required by state
securities laws, rules and regulations; and (f) the NA Funds is registered as
an investment company under the 1940 Act and each Acquiring Fund is a
separate series thereof and such registration with the SEC under the 1940 Act
is in full force and effect. Such opinion: (a) shall state that while such
counsel have

A-14

<PAGE>

not verified, and are not passing upon and do not assume responsibility for, the
accuracy, completeness, or fairness of any portion of the Form N-14 Registration
Statement or any amendment thereof or supplement thereto, they have generally
reviewed and discussed certain information included therein with respect to the
NA Funds and each Acquiring Fund with certain of its officers and that in the
course of such review and discussion no facts came to the attention of such
counsel which caused them to believe that, on the respective effective or
clearance dates of the Form N-14 Registration Statement and any amendment
thereof or supplement thereto and only insofar as they relate to information
with respect to the NA Funds and each Acquiring Fund, the Form N-14 Registration
Statement or any amendment thereof or supplement thereto contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; (b)
shall state that such counsel does not express any opinion or belief as to the
financial statements, other financial data, statistical data, or information
relating to the NA Funds or the Acquiring Fund contained or incorporated by
reference in the Form N-14 Registration Statement or any exhibits or attachments
to the text thereof; (c) may rely on the opinion of other counsel to the extent
set forth in such opinion, provided such other counsel is reasonably acceptable
to the Fontaine Trust; and (d) shall state that such opinion is solely for the
benefit of the Fontaine Trust and its Board of Trustees and officers.

The Fontaine Trust shall have received an legal from Dechert Price &
Rhoadsopinion of counsel to the NA Funds addressed to the Funds in form
reasonably satisfactory to them and dated as of the Closing Date, with respect
to the matters specified in Section 8.9 hereof.

The Form N-14 Registration Statement shall have become effective under the
1933 Act, and no stop order suspending the effectiveness shall have been
instituted, or to the knowledge of the Funds, contemplated by the SEC.

The parties shall have received a memorandum, in form reasonably
satisfactory to each of them, prepared by counsel to the NA Funds or another
person approved by the parties, containing assurance reasonably satisfactory to
them that all authorizations necessary under state securities laws to consummate
the transactions contemplated herein have been obtained.

No action, suit, or other proceeding shall be threatened or pending before
any court or governmental agency in which it is sought to restrain or prohibit,
or obtain damages or other relief in connection with, this Agreement or the
transactions contemplated herein.
The SEC shall not have issued any unfavorable advisory report under Section
25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin
consummation of the transactions contemplated by this Agreement under Section
25(c) of the 1940 Act.

The Fontaine Trust shall have received from the NA Funds all such documents
which the Fontaine Trust or its counsel may reasonably request.

The NA Funds shall have furnished the Fontaine Trust on the Closing Date
with a certificate or certificates of its President (or any Vice President)
and/or Treasurer or Assistant Treasurer dated as of said date to the effect
that: (a) each Acquiring Fund has no plan or

A-15

<PAGE>

intention to reacquire any of the Acquiring Fund Shares to be issued in the
Reorganization, except in the ordinary course of business; (b) each Acquiring
Fund has no plan or intention to sell or otherwise dispose of any of the
assets of the respective Acquired Fund acquired in the Reorganization, except
for dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Code; and (c) following the Closing,
each Acquiring Fund will continue the historic business of the respective
Acquired Fund or use a significant portion of the respective Acquired Fund's
assets in a business.

State Street Bank and Trust Company, Inc., in its capacity as transfer
agent for the Acquiring Funds, shall issue and deliver to the Fontaine Trust a
confirmation statement evidencing the Acquiring Fund Shares to be credited at
the Closing Date or provide evidence satisfactory to the Fontaine Trust that the
Acquiring Fund Shares have been credited to the accounts of each of the Acquired
Fund Shareholders on the books of the respective Acquiring Fund.

At the Closing Date, the registration of the NA Funds with the SEC with
respect to each Acquiring Fund will be in full force and effect.

CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NA FUNDS AND EACH ACQUIRING FUND

The obligations of the NA Funds and each Acquiring Fund hereunder
shall be subject to the following conditions precedent:

This Agreement and the transactions contemplated by this Agreement shall
have been approved by the Board of Trustees of the Fontaine Trust and the
Acquired Fund Shareholders, and the termination of each Acquired Fund as a
series of the Fontaine Trust and the deregistration of the Fontaine Trust as a
registered investment company shall have been approved by the Board of Trustees
of the Fontaine Trust, in the manner required by the Fontaine Trust's
Declaration of Trust and By-Laws and applicable law.

The Fontaine Trust shall have furnished the NA Funds with the Statement of
Assets and Liabilities of each Acquired Fund, with values determined as provided
in Section 2 hereof, with their respective dates of acquisition and tax costs,
all as of the Closing Date, certified on the Fontaine Trust's behalf by its
Treasurer or Assistant Treasurer. The Statement of Assets and Liabilities shall
list all of the securities owned by each Acquired Fund as of the Closing Date
and a final statement of assets and liabilities of each Acquired Fund prepared
in accordance with GAAP consistently applied.

As of the Closing Date, there shall have been no material adverse change in
the financial position, assets, or liabilities of an Acquired Fund since the
dates of the financial statements referred to in Section 4.6 hereof. For
purposes of this Section 8.3, a decline in the value of the Acquired Fund Net
Assets due to the effect of normal market conditions on liquid securities shall
not constitute a material adverse change.

A-16

<PAGE>

All representations and warranties of the Fontaine Trust and each Acquired
Fund made in this Agreement, except as they may be affected by the transactions
contemplated by this Agreement, shall be true and correct in all material
respects as if made at and as of the Closing Date.

The Fontaine Trust and each Acquired Fund shall have performed and complied
in all material respects with each of their obligations, agreements, and
covenants required by this Agreement to be performed or complied with by each of
them prior to or at the Closing Date.

The Fontaine Trust shall have furnished the NA Funds at the Closing Date
with a certificate or certificates of its President and/or Treasurer, dated as
of the Closing Date, to the effect that the conditions precedent set forth in
Sections 8.1, 8.3, 8.4, 8.5, 8.13, 8.15 and 8.19 hereof have been fulfilled.

The Fontaine Trust shall have duly executed and delivered to the NA Funds
(a) bills of sale, assignments, certificates and other instruments of transfer
("Transfer Documents") as the NA Funds may deem necessary or desirable to
transfer all of each Acquired Fund's right, title, and interest in and to the
Acquired Fund Net Assets; and (b) all such other documents, including but not
limited to, checks, share certificates, if any, and receipts, which the NA Funds
may reasonably request. Such assets of the Acquired Funds shall be accompanied
by all necessary state stock transfer stamps or cash for the appropriate
purchase price therefor.

The NA Funds shall have received an opinion or opinions of counsel to the
Fontaine Trustfrom Dechert Price & Rhoads, in form reasonably satisfactory to
the NA Funds and its counsel, and dated as of the Closing Date, to the effect
that: (a) the Fontaine Trust is a business trust duly organized and validly
existing under the laws of The Commonwealth of Massachusetts; (b) the shares of
each Acquired Fund issued and outstanding at the Closing Date are duly
authorized, validly issued, fully paid and non-assessable by the Fontaine Trust;
(c) this Agreement and the Transfer Documents have been duly authorized,
executed, and delivered by the Fontaine Trust and represent valid and binding
contracts of the Fontaine Trust, enforceable in accordance with their terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto and to the exercise of
judicial discretion in accordance with general principles of equity, whether in
a proceeding at law or in equity; provided, however, that no opinion need be
expressed with respect to provisions of this Agreement relating to
indemnification; (d)the execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated by this Agreement will not,
violate the Declaration of Trust or By-Laws of the Fontaine Trust or any
material agreement known to such counsel to which the Fontaine Trust or any
Acquired Fund is a party or by which it is bound; (e) to the knowledge of such
counsel, no consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Fontaine Trust or
an Acquired Fund of the transactions contemplated by this Agreement, except such
as have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules
and regulations under those statutes, and such as may be required under state
securities laws, rules, and regulations; and (f) the Fontaine Trust is
registered as an investment company under the 1940 Act and each Acquired Fund is
a separate series thereof and such registration with the SEC

A-17

<PAGE>

is in full force and effect. Such opinion: (a) shall state that while such
counsel have not verified, and are not passing upon and do not assume
responsibility for, the accuracy, completeness, or fairness of any portion of
the Form N-14 Registration Statement or any amendment thereof or supplement
thereto, they have generally reviewed and discussed certain information
included therein with respect to the Fontaine Trust and each Acquired Fund
with certain officers of the Fontaine Trust and that in the course of such
review and discussion no facts came to the attention of such counsel which
caused them to believe that, on the respective effective or clearance dates
of the Form N-14 Registration Statement, and any amendment thereof or
supplement thereto and only insofar as they relate to information with
respect to the Fontaine Trust and each Acquired Fund, the Form N-14
Registration Statement or any amendment thereof or supplement thereto
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; (b) shall state that such counsel does not
express any opinion or belief as to the financial statements, other financial
data, statistical data, or any information relating to the Fontaine Trust or
the Acquired Funds contained or incorporated by reference in the Form N-14
Registration Statement; (c) may rely upon the opinion of other counsel to the
extent set forth in the opinion, provided such other counsel is reasonably
acceptable to the NA Funds; and (d) shall state that such opinion is solely
for the benefit of the NA Funds and its Board of Trustees and officers.

The NA Funds shall have received an legal opinion of counsel to the NA
Funds from Dechert Price & Rhoads, addressed to the Funds and in form
reasonably satisfactory to them, and dated as of the Closing Date,
substantially to the effect that, based upon certain facts, assumptions and
representations, the transactions contemplated by this Agreement with respect
to each Acquired Fund and corresponding Acquiring Fund constitute a tax-free
reorganization for federal income tax purposes. The delivery of such opinion
is conditioned upon receipt by Dechert Price & Rhoads of representations it
shall request of The Fontaine Trust and the NA Funds.

The property and assets to be transferred to each Acquiring Fund under this
Agreement shall include no assets that the respective Acquiring Fund may not
properly acquire.

The Form N-14 Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of the Funds, contemplated by the SEC.

The SEC shall not have issued any unfavorable advisory report under Section
25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this Agreement under Section
25(c) of the 1940 Act.

A-18

<PAGE>

The NA Funds shall have received from The Fontaine Trust all such documents
which the NA Funds or its counsel may reasonably request.

Prior to the Closing Date, each Acquired Fund shall have declared a
dividend or dividends, which, together with all previous dividends, shall have
the effect of distributing to its shareholders all of its net investment company
income, if any, for each taxable period or year ending prior to the Closing Date
and for the periods from the end of each such taxable period or year to and
including the Closing Date (computed without regard to any deduction for
dividends paid), and all of its net capital gain, if any, realized in each
taxable period or year ending prior to the Closing Date and in the periods from
the end of each such taxable period or year to and including the Closing Date.

The Fontaine Trust shall have furnished the NA Funds at the Closing Date
with a certificate or certificates of its President and/or Treasurer dated as of
said date to the effect that: (a) each Acquired Fund will tender for
acquisition by the respective Acquiring Fund its assets consisting of at least
ninety percent (90%) of the fair market value of the Acquired Fund's net assets
and at least seventy percent (70%) of the fair market value of its gross assets
immediately prior to the Closing Date. For purposes of this certification, all
of the following shall be considered as assets of an Acquired Fund held
immediately prior to the Closing Date: (i) amounts used by the Acquired Fund to
pay its expenses in connection with the transactions contemplated hereby or
retained by an Acquired Fund to pay its liabilities; and (ii) all amounts used
to make redemptions of or distributions on the Acquired Fund Shares (except for
redemptions in the ordinary course of its business as required by Section 22(e)
of the 1940 Act pursuant to a demand for redemption by an Acquired Fund
Shareholder and not in connection with the Reorganization, and distributions of
net investment income and net capital gains in the ordinary course to maintain
its status and avoid Fund-level taxes); (b) the Fontaine Trust will distribute
to Acquired Fund Shareholders in complete liquidation of each Acquired Fund the
Acquiring Fund Shares that it will receive in the transactions contemplated
hereby on or as promptly as practicable after the Closing Date and in pursuance
of the plan contemplated by this Agreement and having made such distributions
will take all necessary steps to liquidate and terminate each Acquired Fund as
a series of the Fontaine Trust; and (c) to the best knowledge of the Fontaine
Trust, after reasonable inquirywith respect to each Acquired Fund, there is no
current plan or intention of any of its shareholders who own five percent (5%)
or more of the Acquired Fund Shares, and to the best of the Fontaine Trust's
knowledge, there is no current plan or intention on the part of the remaining
shareholders of the Acquired Funds to sell, exchange, or otherwise dispose of a
number of shares of the Acquiring Funds received in the Reorganization that
would reduce the Acquired Fund Shareholders ownership of the Acquired Fund
Shareholder of Acquiring Fund Shares to a number of shares having a value, as of
the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding Acquired Fund Shares with respect to each Acquired Fund as
of the Closing Date. For purposes of this certification: (i) Acquired Fund
Shares surrendered by dissenters will be treated as outstanding Acquired Fund
Shares at the Closing Date; and (ii) Acquired Fund Shares and the Acquiring Fund
Shares held by Acquired Fund Shareholders and otherwise sold, redeemed, or
disposed of prior to or subsequent toin anticipation of the Reorganization, or
subsequent to the Closing Date pursuant to a current plan or intention that
existed as of the Closing Date, also will be taken into account, except for
redemptions of Acquired Fund Shares or Acquiring Fund Shares occurring in the
ordinary course of the respective business of Acquired Fund and Acquiring Fund

A-19

<PAGE>

as series of an open-end investment company, as required by Section 22(e) of the
1940 Act, and not in connection with the Reorganization.

Richard Fontaine and Company, Incorporated, in its capacity as transfer
agent for each Acquired Fund, shall have furnished, to the NA Funds immediately
prior to the Closing Date a list of the names and addresses of the Acquired Fund
Shareholders and the number and percentage ownership of outstanding Acquired
Fund Shares owned by each such shareholder as of the close of regular trading on
the NYSE on the Closing Date, certified on behalf of each Acquired Fund by the
Fontaine Trust's President.

At the Closing Date, the registration of the Fontaine Trust with the SEC
with respect to each Acquired Fund shall be in full force and effect.

FINDER'S FEES AND OTHER EXPENSES

Each Fund represents and warrants to the other that there is no person or
entity entitled to receive any finder's fees or other similar fees or commission
payments in connection with the transactions provided for herein.

NACM or the Acquiring Funds shall be liable for all reasonable expenses
incurred by the Funds in connection with entering into and carrying out the
transactions contemplated by this Agreement, whether or not the transactions
contemplated hereby are consummated, unless the failure to consummate the
transactions results from a breach by Fontaine Associates or an Acquired Fund,
except that Richard Fontaine Associates, Inc. shall pay (i) the costs and
expenses of preparing all necessary supplements for each Acquired Fund's
prospectus or SAI to be filed after the date of this Agreement and prior to the
Closing Date, and (ii) the costs and expenses of preparing the Form N-8F
exemptive application and any amendments thereto. As between NACM and the
Acquiring Funds, the Acquiring Funds will pay normal expenses associated with
the transactions relating to the Agreement, and NACM will pay extraordinary or
unusual expenses. Any such expenses that are so borne by NACM or the Acquiring
Funds shall be solely and directly related to the Reorganization within the
meaning of Revenue Ruling 73-54, 1973-1 C.B. 187.

ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES

The Fontaine Trust and the NA Funds each agree that no Fund has made any
representation, warranty, or covenant not set forth herein or referred to in
Sections 4, 5, and 6 hereof, and that this Agreement constitutes the entire
agreement between the parties and supersedes any and all prior agreements,
arrangements, and undertakings relating to the matters provided for herein.

The representations, warranties, and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder for a period
of three (3) years following the Closing Date. In the event of a breach by the
Fontaine Trust or an Acquired Fund of any such representation, warranty, or
covenant, each Acquired Fund, until the time of its liquidation and

A-20

<PAGE>

termination as a series of the Fontaine Trust, and Richard Fontaine
Associates, Inc. jointly and severally shall be liable to the NA Funds and
the respective Acquiring Fund for any such breach.

TERMINATION

This Agreement may be terminated by the mutual agreement of the Funds. In
addition, either Fund may at its option terminate this Agreement at or prior to
the Closing Date because of:

11.1(a) a material breach by the other Fund of any representation,
warranty, or agreement contained herein to be performed at or prior to the
Closing Date; or

11.1(b) a condition precedent to the obligations of either Fund
which the Board of Trustees of the terminating Fund determines has not been
met and which reasonably appears will not or cannot be met.

11.1(c) a determination by the Board of Trustees of the Fontaine
Trust or the NA Funds that the Reorganization, either as a whole or with
respect to any Fund, will not be in the best interest of the Trust, any of
the Trust's funds, or its shareholders.

In the event of any such termination, there shall be no liability for
damages on the part of either any Fund, the Fontaine Trust, or the NA Funds, or
their respective Boards of Trustees or officers, but all expenses incidental to
the preparation and carrying out of this Agreement shall be paid as provided in
Section 9.2 hereof.

INDEMNIFICATION

The NA Funds and each Acquiring Fund shall indemnify, defend, and hold
harmless each the Acquired Fund, the Fontaine Trust, its Board of Trustees,
officers, employees, and agents (collectively "Acquired Fund Indemnified
Parties") against all losses, claims, demands, liabilities, and expenses,
including reasonable legal and other expenses incurred in defending third party
claims, actions, suits, or proceedings, whether or not resulting in any
liability to such Acquired Fund Indemnified Parties and including amounts paid
by any one or more of the Acquired Fund Indemnified Parties in a compromise or
settlement of any such claim, action, suit, or proceeding, or threatened third
party claim, suit, action, or proceeding, made with the consent of the NA Funds
and the respective Acquiring Fund, arising from any untrue statement or alleged
untrue statement of a material fact contained in the Form N-14 Registration
Statement, as filed and in effect with the SEC, or any exemptive application
("Application") prepared by the NA Funds and an Acquiring Fund with any
regulatory agency in connection with the transactions contemplated by this
Agreement under the securities laws thereof; or which arises out of or is based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the NA Funds and each Acquiring Fund shall only be
liable in such case to the extent that any such loss, claim, demand, liability,
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission about the NA Funds and/or an Acquiring
Fund or the transactions contemplated by this Agreement made in the Form N-14
Registration Statement or any Application.

A-21

<PAGE>

The Fontaine Trust and each Acquired Fund, until the time of its
liquidation, and Richard Fontaine Associates, Inc. on a joint and several basis
shall indemnify, defend, and hold harmless each Acquiring Fund, the NA Funds,
its Board of Trustees, officers, employees and agents ("Acquiring Fund
Indemnified Parties") against all losses, claims, demands, liabilities, and
expenses, including reasonable legal and other expenses incurred in defending
third party claims, actions, suits, or proceedings, whether or not resulting in
any liability to such Acquiring Fund Indemnified Parties and including amounts
paid by any one or more of the Acquiring Fund Indemnified Parties in a
compromise or settlement of any such claim, suit, action, or proceeding, made
with the consent of the Fontaine Trust and the respective Acquired Fund (if it
still exists) or Richard Fontaine Associates, Inc.'s, arising from any untrue
statement or alleged untrue statement of a material fact contained in the Form
N-14 Registration Statement, as filed and in effect with the SEC or any
Application; or which arises out of or is based upon any omission or alleged
omission to state therein a material fact required to be stated therein and
necessary to make the statements therein not misleading; provided, however, that
the Fontaine Trust and any Acquired Fund and Richard Fontaine Associates, Inc.
shall only be liable in such case to the extent that any such loss, claim,
demand, liability, or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission about the Fontaine
Trust and/or an Acquired Fund or about the transactions contemplated by this
Agreement made in the Form N-14 Registration Statement or any Application.

A party seeking indemnification hereunder is hereinafter called the
"indemnified party" and the party from whom the indemnified party is seeking
indemnification hereunder is hereinafter called the "indemnifying party." Each
indemnified party shall notify the indemnifying party in writing within ten (10)
days of the receipt by one or more of the such indemnified partyies of any
notice of legal process of any suit brought against or claim made against such
indemnified party as to any matters covered by this Section 12, but the failure
to notify the indemnifying party shall not relieve the indemnifying party from
any liability which it may have to any indemnified party otherwise than under
this Section 12. The indemnifying party shall be entitled to participate at its
own expense in the defense of any claim, action, suit, or proceeding covered by
this Section 12, or, if it so elects, to assume at its own expense the defense
thereof with counsel reasonably satisfactory to the indemnified parties;
provided, however, if the defendants in any such action include both the
indemnifying party and any indemnified party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it which
are different from or additional to those available to the indemnifying party,
the indemnified party shall have the right to select separate counsel to assume
such legal defense and to otherwise participate in the defense of such action on
behalf of such indemnified party.

Upon receipt of notice from the indemnifying party to the indemnified
parties of the election by the indemnifying party to assume the defense of such
action, the indemnifying party shall not be liable to such indemnified parties
under this Section 12 for any legal or other expenses subsequently incurred by
such indemnified parties in connection with the defense thereof unless (i) the
indemnified parties shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the provision of the immediately
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel); (ii)
the indemnifying party does not employ counsel reasonably satisfactory

A-22

<PAGE>

to the indemnified parties to represent the indemnified parties within a
reasonable time after notice of commencement of the action; or (iii) the
indemnifying party has authorized the employment of counsel for the
indemnified parties at its expenses.

This Section 12 shall survive the termination of this Agreement and for a
period of three (3) years following the Closing Date.

LIABILITY OF THE NA FUNDS AND THE FONTAINE TRUST

Each party acknowledges and agrees that: (a) all obligations of the NA
Funds under this Agreement are binding only with respect to each Acquiring Fund;
(b) any liability of the NA Funds under this Agreement with respect to an the
Acquiring Fund, or in connection with the transactions contemplated herein with
respect to the Acquiring Funds, shall be discharged only out of the assets of
the respective Acquiring Fund; and (c) no other series of the NA Funds shall be
liable with respect to this Agreement or in connection with the transactions
contemplated herein.

Each party acknowledges and agrees that all: (a) obligations of the
Fontaine Trust under this Agreement are binding only with respect to each
Acquired Fund; and (b) that any liability of the Fontaine Trust under this
Agreement with respect to an Acquired Fund, or in connection with the
transactions contemplated herein with respect to the Acquired Funds, shall be
discharged only out of the assets of the respective Acquired Fund.

AMENDMENTS

This Agreement may be amended, modified, or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the NA
Funds and the Fontaine Trust; provided, however, that following the Special
Meeting of Acquired Fund Shareholders called by the Board of Trustees of the
Fontaine Trust pursuant to Section 6.2 hereof, no such amendment may have the
effect of changing the provisions for determining the number of Acquiring Fund
Shares to be issued to Acquired Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval, provided that
nothing contained in this Section 14 shall be construed to prohibit the parties
from amending this Agreement to change the Closing Date or any other provision
of this Agreement (to the fullest extent permitted by law).

NOTICES

Any notice, report, statement, or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed to be
properly given when delivered personally or by telecopier to the party entitled
to receive the notice or when sent by certified or registered mail, postage
prepaid, or delivered to a recognized overnight courier service, in each case
properly addressed to the party entitled to receive such notice or communication
at the following address or such other address as may hereafter be furnished in
writing by notice similarly given by one party to the other.

If to an Acquired Fund:

A-23

<PAGE>

The Fontaine Trust
210 West Pennsylvania Avenue
Suite 240
Towson, Maryland 21204
Attention: Richard H. Fontaine

with copies to:

If to an Acquiring Fund:

Nicholas-Applegate Mutual Funds
600 West Broadway
San Diego, CA 92101
Attention: Charles Field

with copies to:

Paul, Hastings, Janofsky & Walker
Twenty-Third Floor
555 South Flower Street
Los Angeles, CA 90071-2371
Attention: Michael Glazer

FAILURE TO ENFORCE

The failure of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Agreement or any
part hereof as the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.

HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT

The article and Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

A-24

<PAGE>

This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.

This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to principles of conflicts of law.

This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any party
without the written consent of the other party. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any person,
firm, or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.

It is expressly understood and agreed that the obligations of the Fontaine
Trust and the NA Funds under this Agreement, including but not limited to any
liability as a result of the breach of any of their respective representations
and warranties, are not binding on their respective Boards of Trustees,
shareholders, nominees, officers, agents, or employees individually, but bind
only the respective assets of each Acquiring Fund and each Acquired Fund.

A-25

<PAGE>

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President and its seal to be affixed thereto and attested by
its Secretary.

Attest: NICHOLAS-APPLEGATE MUTUAL FUNDS
on behalf of the Nicholas-Applegate
Worldwide Growth Fund - Class A
Shares, and Nicholas-Applegate Balanced
Growth Fund - Class A Shares

_________________________ By:_________________________

Attest: THE FONTAINE TRUST, on behalf of Fontaine
Capital Appreciation Fund, Fontaine
Global Growth Fund and Fontaine Global
Income Fund

__________________________ By:_________________________

Richard Fontaine Associates, Inc. hereby joins in this Agreement with
respect to and agrees to the matters described in Sections 10.2 and 12.

Attest: FONTAINE ASSOCIATES, INC.

________________________ By:___________________________

A-26

<PAGE>

EXHIBIT B
BALANCED GROWTH FUND - CLASS A SHARES
- --------------------------------------------------------------------------------
MANAGEMENT TEAM

Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management

Lawrence S. Speidell, CFA,
Partner, Director of Global/Systematic
Portfolio Management

John J. Kane,
Partner, Senior Portfolio Manager

Fred S. Robertson,
Partner, Chief Investment Officer,
Fixed Income Management

GOAL: The Nicholas-Applegate Balance Growth Fund seeks to provide capital
appreciation and current income by investing approximately 60% of total assets
in equity and convertible securities primarily of U.S. companies and 40% of
total assets in debt securities, money market instruments and other short-term
investments.

REVIEW AND OUTLOOK: Early in the Fund's fiscal year, strong performance by
smaller-company growth stocks contributed to gains. However, after a summer
sell-off in the technology sector, cautious investors favored larger-company
stocks.

During the 12-month period ending March 31, 1997, the Nicholas-Applegate
Balanced Growth Fund achieved more modest returns than a composite index
comprised of 60% of the S&P 500 Index and 40% of the Lehman Government/Corporate
Index.

The Fund's overweighting within the technology sector relative to the
benchmark contributed to gains. Disappointing returns in the consumer services
and consumer non-durables sectors negatively impacted returns.

One of the Fund's best performers during the period was Western Digital
Corp., a manufacturer of disk drives for personal computers. While the company
benefited from strong demand, competitive pressures threatened the
sustainability of earnings growth and prompted us to reduce our position. Ross
Stores, Inc., the nation's third largest off-price retailer, also performed
well.

The Federal Reserve Board raised short-term interest rates in March. The Fed
cited persisting economic strength as one reason for the action, which prompted
a quarter-end sell-off.

Our long-term outlook for bonds remains positive. However, with little slack
in the economy, short periods of accelerating economic activity may prompt the
Fed to raise rates again. Thus, we believe the risk of higher near-term rates
makes a neutral stance on interest rates appropriate.

We are optimistic that the combination of our disciplined approach to
selecting dynamic growth stocks and the diversification benefits of fixed
income securities will continue to deliver solid long-term returns.

REPRESENTATIVE HOLDINGS

United States Treasury Note 7.500 5-15-02
United States Treasury Note 7.000 7-15-06
Unites States Treasury Note 6.250 8-31-00
Advanced Micro Devices 11.000 8-1-03
Dell Computer
TJX
Intel
Miller Herman
Jabil Circuit
Burlington Coat Factory

B-1
<PAGE>

[graphic depicting annualized total return]

<TABLE>
<CAPTION>
<S> <C>
------------------------------------------------ ----------------------------------------------
ANNUALIZED TOTAL RETURNS Balanced Growth Fund-Class A Shares = $13,716
AS OF 03/31/97
1 Year 5 Years Since Inception Balanced 60/40 Index = $15,904
1.14% 7.84% 8.33%
------------------------------------------------- ---------------------------------------------

</TABLE>

The graph compares a $10,000 investment in the Balanced Growth Fund - Class A
shares (front load) with a similar investment in a model index consisting of
60% Standard & Poor's 500 Index ("S&P 500") and 40% Lehman Brothers
Government/Corporate Bond Index, on a cumulative and average total return basis.
Returns reflect the reinvestment of income dividends and capital gains
distributions, if any, as well as all fees and expenses. Performance figures
include the maximum applicable sales charge of 5.25% for Class A shares of the
Fund. Performance is affected by a 12b-1 Plan which commenced at inception of
the Class A shares of the Fund.

Total returns reflect the fact that fees and expenses in excess of certain
expense limitations specified in the investment management agreement have been
deferred by the Adviser. Total returns results would have been lower had there
been no deferral.

The S&P 500 Index is an unmanaged index containing 500 industrial, utility and
financial companies regarded as generally representative of the U.S. stock
market.

The Lehman Brothers Government/Corporate Bond Index is an unmanaged
market-weighted index consisting of all public obligations of the U.S.
Government, its agencies and instrumentalities and all corporation issuers of
fixed rate, non-convertible, investment grade U.S. dollar denominated bonds
having maturities of greater than one year. It is generally regarded as
representative of the market for domestic bonds.

Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.

Past performance is no indication of future performance. Investment returns and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.

B-2
<PAGE>
WORLDWIDE GROWTH FUND - CLASS A SHARES
- -------------------------------------------------------------------------------
Management Team
----------------
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management

Lawrence S. Speidell, CFA,
Partner, Director of Global/Systematic
Portfolio Management

John J. Kane,
Partner, Senior Portfolio Manager

Loretta J. Morris,
Senior Portfolio Manager

Alex Muromcew,
Portfolio Manager

Melisa Grigolite,
Portfolio Manager

Ernesto Ramos, Ph.D,
Senior Portfolio Manager

GOAL: The Nicholas-Applegate Worldwide Growth Fund seeks to maximize
long-term capital appreciation through investment in a portfolio of growth
stocks of U.S. and international companies.

REVIEW AND OUTLOOK: The Worldwide Growth Fund delivered solid performance
on the strength of superior stock selection this year, outperforming its
respective benchmark, the MSCI World Index.

With approximately 25% of holdings in the United States, the Fund benefitted
form such holdings as Merck & Co. The pharmaceuticals company continues to add
breakthrough drugs, such as Aggrastat, which treats coronary syndromes, and
Propecia, which treats male baldness, leading it to hold one of the strongest
product lines in the industry.

Superior stock selection, including our underweighting of Japanese stocks,
and investment in stocks of emerging markets countries, contributed to the
Fund's performance relative to the MSCI World Index for the period.

Throughout the world, we found excellent opportunities in the stocks of
manufacturers and exporters, which benefitted from increased sales as a result
of a stronger U.S. dollar. A stronger dollar makes foreign-produced goods more
affordable to U.S. consumers.

In Europe, the Fund benefitted from pent up demand for new cars, which
translated into rising shares for such holdings as Porsche. The company's
cost-cutting program has resulted in a ten-fold increase in profits. The new
Boxster model is expected to contribute to a doubling of the firm's orders.

The Fund has extensive holdings in the technology sector, which is fueling
productivity and efficiency gains abroad.

Cap Gemini, a French computer services firm, continues to show solid
prospects for growth based on their potential to provide advisory services in a
changing marketplace.

Improving economic conditions and political stability make us optimistic
about the prospects of investing in stocks worldwide.

REPRESENTATIVE HOLDINGS
-------------------------
Volkswagen, Germany
ASE Test, Taiwan
Intel, United States
Merck & Co., United States
Ares-Serono, Switzerland
Novo-Nordisk, Denmark
TDK, Japan
Petroleum Geo-Services, Norway
Travelers Group, United States
Telecomunicacoes Brasileires, Brazil

B-3
<PAGE>

[graphs depicting Annualized Total Returns As of 03/31/97]

<S> <C>
----------------------------------- -------------------------------------------------
ANNUALIZED TOTAL RETURNS Worldwide Growth Fund - Class A Shares = $15,126
AS OF 03/31/97
1 Year 3 Years Since Inception MSCI World Index = $15,751
6.61% 8.17% 11.05%
------------------------------------ --------------------------------------------------

</TABLE>

The graph compares a $10,000 investment in the Worldwide Growth Fund - Class A
shares (front load) with a similar investment in the Morgan Stanley Capital
International ("MSCI") World Index, on a cumulative and average annual total
return basis. Performance returns within are calculated on a total return basis
and reflect all fees and expenses of the Class A shares of the Fund with
reinvestment of dividends and capital gains, if any. Performance figures
include the maximum applicable sales charge of 5.25% for Class A shares of the
Fund. Performance is affected by a 12b-1 Plan which commenced at inception of
the Class A shares of the Fund.

Total returns reflect the fact that fees and expenses in excess of certain
expense limitations specified in the investment management agreement have been
deferred by the Adviser. Total return results would have been lower had there
been no deferral.

The MSCI World Index consists of more than 1,400 securities listed on exchanges
in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The
Index is a market-value weighted combination of countries and is unmanaged.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.

B-4

<PAGE>

THE FONTAINE TRUST: NICHOLAS-APPLEGATE MUTUAL FUNDS:

CAPITAL APPRECIATION FUND BALANCED GROWTH PORTFOLIO -
GLOBAL GROWTH FUND CLASS A SHARES
GLOBAL INCOME FUND WORLDWIDE GROWTH PORTFOLIO -
CLASS A SHARES

STATEMENT OF ADDITIONAL INFORMATION

(Relating to the 1998 Special Meeting of Shareholders of The Fontaine Trust)

This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement and Prospectus, dated
March __, 1998, for the Special Meeting of Shareholders of series of The
Fontaine Trust to be held on April 20, 1998. Copies of the Combined Proxy
Statement and Prospectus may be obtained at no charge by writing or calling the
Nicholas-Applegate Mutual Funds ("NA Funds") at the address or telephone numbers
shown above.

Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined Proxy
Statement and Prospectus.

Further information about the Acquiring Funds and the Acquired Funds is
contained in their respective Statements of Additional Information dated July
16, 1997 and May 1, 1997, the Acquiring Funds' Semi-Annual Report to
Shareholders dated September 30, 1997 and Annual Report to Shareholders dated
March 31, 1997, and the Acquired Funds' Annual Report to Shareholders dated
December 31, 1997, all of which are incorporated by reference into this
Statement of Additional Information. Any of the documents referenced may be
obtained without charge by writing to the addresses or calling the telephone
numbers shown above.

The date of this Statement of Additional Information is March __, 1998.

<PAGE>

GENERAL INFORMATION

The shareholders of the Acquired Funds are being asked to approve or
disapprove the Reorganization Agreement dated February ___, 1998 by and between
The Fontaine Trust on behalf of the Acquired Funds and NA Funds on behalf of the
Acquiring Funds, and the transactions contemplated thereby. The Reorganization
Agreement contemplates the transfer of substantially all of the property, assets
and good will of each Acquired Fund in exchange for corresponding Acquiring Fund
Shares. Following the exchange, each Acquired Fund will make a liquidating
distribution of the Acquiring Shares to the Acquired Fund's shareholders, such
that an Acquired Fund shareholder at the Closing Date will receive full and
fractional Acquiring Fund Shares having an aggregate net asset value equal to
the aggregate net asset value of the shareholder's Acquired Fund Shares. In
connection with the Reorganization, following the Closing Date The Fontaine
Trust will file an application on Form N-8F in order to deregister as an
investment company under the 1940 Act.

A Special Meeting of Shareholders of the Acquired Fund to consider the
Reorganization Agreement and the transactions contemplated thereby will be held
at 210 West Pennsylvania Avenue, Suite 240, Towson, Maryland 21204 on Monday,
April 20, 1998, at 10:00 a.m. Eastern time, or at such other location, date, or
time as may be selected by the Chairman of the Board or the President of the
Acquired Fund, or at any adjournment of the Special Meeting. For further
information about the transaction, see the Combined Proxy Statement and
Prospectus.

<PAGE>

PART C. OTHER INFORMATION

Item 15. INDEMNIFICATION

Registrant's trustees, officers, employees and agents are indemnified
against liabilities incurred by them in connection with the defense or
disposition of any action or proceeding in which they may be involved or with
which they may be threatened, while in office or thereafter, by reason of being
or having been in such office, except with respect to matters as to which it has
been determined that they acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
office ("Disabling Conduct").

Section 8 of Registrant's Administration Agreement, filed as Exhibit 9.1 to
Amendment No. 52 to Registrant's Form N-1A Registration Statement on February
19, 1998 and incorporated herein by reference, provides for the indemnification
of Registrant's Administrator against all liabilities incurred by it in
performing its obligations under the Agreement, except with respect to matters
involving its Disabling Conduct. Section 9 of Registrant's Distribution
Agreement, filed as Exhibit 6 to Amendment No. 52 to Registrant's Form N-1A
Registration Statement on February 19, 1998 and incorporated herein by
reference, provides for the indemnification of Registrant's Distributor against
all liabilities incurred by it in performing its obligations under the
Agreement, except with respect to matters involving its Disabling Conduct.
Section 4 of the Shareholder Service Agreement, filed as Exhibit 9.3 to
Amendment No. 52 to Registrant's Form N-1A Registration Statement on February
19, 1998 and incorporated herein by reference, provides for the indemnification
of Registrant's Distributor against all liabilities incurred by it in performing
its obligations under the Agreement, except with respect to matters involving
its Disabling Conduct.

Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to trustees, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
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 the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and will be governed by the final adjudication of such
issue.

Article V. of NA Fund's Amended and Restated Declaration of Trust provides
as

C-1

<PAGE>

follows:

5.2 INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS. The
Trust shall indemnify each of its Trustees, officers, employees, and agents
(including Persons who serve at its request as directors, officers or
trustees of another organization in which it has any interest, as a
shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred by him or her
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he or she may be involved
or with which he or she may be threatened, while in office or thereafter,
by reason of his or her being or having been such a Trustee, officer,
employee or agent, except with respect to any matter as to which he or she
shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided; however, that as to any matter disposed of by a compromise
payment by such Person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless there has been a determination that such Person did not
engage in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office by the
court or other body approving the settlement or other disposition or by a
reasonable determination, based upon review of readily available facts (as
opposed to a full trial-type inquiry), that he or she did not engage in
such conduct by written opinion from independent legal counsel approved by
the Trustees. The rights accruing to any Person under these provisions
shall not exclude any other right to which he or she may be lawfully
entitled; provided that no Person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he or she may be
otherwise entitled except out of the Trust Property. The Trustees may make
advance payments in connection with indemnification under this Section 5.2,
provided that the indemnified Person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he
or she is not entitled to such indemnification.

Item 16. EXHIBITS.

(1) Amended and Restated Declaration of Trust of Registrant. (1)

(2) Amended Bylaws of Registrant. (1)

(3) None.

(4) Agreement and Plan of Reorganization. (See Exhibit A to the Combined
Proxy Statement and Prospectus.)

C-2

<PAGE>

(5) None.

(6)(A) Form of Investment Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management. (5)

(6)(B) Amended Form of Letter Agreement between Registrant and Nicholas-
Applegate Capital Management adding the Class A, B, C, Q and I shares
of Registrant's additional Funds to the Investment Advisory Agreement.
(6)

(7)(A) Distribution Agreement between Registrant and Nicholas-Applegate
Securities. (1)

(7)(B) Amended Form of Letter Agreement between Registrant and
Nicholas-Applegate Securities adding the Class A, B, C, Q and I shares
of Registrant's additional Funds to the Distribution Agreement. (6)

(7)(C) Amended Distribution Plan of Registrant. (1)

(7)(D) Form of further Amendment to Distribution Plan of Registrant. (7)

(8) None.

(9)(A) Custodian Services Agreement between Registrant and PNC Bank. (1)

(9)(B) Form of Letter Agreement between Registrant and PNC Bank, adding the
Class A, B, C, Q and I shares of Registrant's additional Funds to
Custodian Services Agreement. (7)

(10) None.

(11) Opinion of counsel that shares of Registrant are validly issued, fully
paid, and non-assessable (including consent of such firm). [to be
filed by amendment]

(12) Opinion of counsel as to tax matters and consequences to shareholders
(including consent of such firm). [to be filed by amendment]

(13)(A) Administration Agreement, as amended, between Registrant and
Investment Company Administration Corporation. (1)

(13)(B) Form of amended Administration Agreement between Registrant and
Investment Company Administration Corporation. (8)

C-3

<PAGE>

(13)(C) Administrative Services Agreement between Registrant and
Nicholas-Applegate Capital Management. (2)

(13)(D) Transfer Agency and Service Agreement between Registrant and State
Street Bank and Trust Company. (1)

(13)(E) Amended Form of Letter Agreement between Registrant and State Street
Bank and Trust Company, adding the Class A, B, C, Q and I shares of
Registrant's additional Funds to Transfer Agency and Service
Agreement. (6)

(13)(F) Form of amended Shareholder Service Plan between Registrant and
Nicholas-Applegate Securities. (7)

(13)(G) License Agreement between Registrant and Nicholas-Applegate Capital
Management. (1)

(13)(H) Accounting Services Agreement between Registrant and PFPC Inc. (1)

(13)(I) Amended Form of Letter Agreement between Registrant and PFPC Inc.,
adding the Class A, B, C, Q and I shares of Registrant's additional
Funds to the Accounting Services Agreement. (6)

(13)(J) Letter Agreement between Registrant and Nicholas-Applegate Capital
Management regarding expense reimbursements. (1)

(13)(K) Amended Form of Letter Agreement between Registrant and
Nicholas-Applegate Capital Management, adding the Class A, B, C, Q and
I shares of Registrant's additional Funds to agreement regarding
expense reimbursement. (6)

(13)(L) Credit Agreement among Registrant, Chemical Bank and certain other
banks. (1)

(13)(M) First Amendment Agreement to Credit Agreement among Registrant, The
Chase Manhattan Bank, and certain other banks. (4)

(13)(N) Form of Second Amendment Agreement to Credit Agreement among
Registrant, The Chase Manhattan Bank, and certain other banks. (5)

(14)(A) Consent of Ernst & Young L.L.P. [to be filed by amendment]

(14)(B) Consent of Sanville & Company. [to be filed by amendment]

(15) None.

C-4

<PAGE>

(16) Powers of Attorney.

(17) (a) Form of Proxy.

(b) Prospectus and Statement of Additional Information of Registrant,
included in Post-Effective Amendment No. 52, dated February 19,
1998. (9)

(c) Prospectus and Statement of Additional Information of The Fontaine
Trust, filed on or about May 1, 1997, incorporated herein by
reference. (10)

- --------------------------------------------------
Key to Exhibit Reference Numbers

(1) Incorporated herein by reference to Post-Effective Amendment No. 32 to the
Registration Statement on Form N-1A of Registrant, dated as of June 3,
1996.

(2) Incorporated herein by reference to Post-Effective Amendment No. 40 to the
Registration Statement on Form N-1A of Registrant, dated as of January 3,
1997.

(3) Incorporated herein by reference to Post-Effective Amendment No. 42 to the
Registration Statement on Form N-1A of Registrant, dated May 1, 1997

(4) Incorporated herein by reference to Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A of Registrant, dated July 14, 1997

(5) Incorporated herein by reference to Post-Effective Amendment No. 49 to the
Registration Statement on Form N-1A of Registrant, dated September 2, 1997.

(6) Incorporated herein by reference to Post-Effective Amendment No. 52 to the
Registration Statement on Form N-1A of Registrant, dated December 29, 1997.

(7) Incorporated herein by reference to an exhibit to Registrant's Form N-14
Registration Statement on December 5, 1997.

(8) Filed as an Exhibit to Registrant's Form N-14 Registration Statement on
December 5, 1997 and incorporated herein by reference.

(9) Incorporated herein by reference to Post-Effective Amendment No. 52 to the
Registration Statement on Form N-1A of Registrant, dated February 19,
1998.

(10) Incorporated herein by reference to Post-Effective Amendment No. 10 to the
Registration Statement for the Fontaine Trust as filed with the Securities
and Exchange Commission on May 2, 1997.

C-5

<PAGE>

Item 17. UNDERTAKINGS

(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, as amended, the reoffering prospectus will
contain the information called for by the applicable registration form
for reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable
form.

(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment shall be deemed
to be a new registration statement for the securities offered therein,
and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.

C-6

<PAGE>

SIGNATURE

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
Registration Statement on Form N-14 to be signed on behalf of the Registrant in
the City of San Diego, State of California, on the 2nd day of March, 1998.

NICHOLAS-APPLEGATE MUTUAL FUNDS
(Registrant)

By: /s/ John D. Wylie
-----------------------------------
John D. Wylie, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the date indicated:

Name Title Date
---- ----- ----

/s/ John D. Wylie* Principal Executive March 2, 1998
- ------------------------- Officer
John D. Wylie

/s/ Thomas Pindelski* Principal Financial and March 2, 1998
- ------------------------- Accounting Officer)
Thomas Pindelski

/s/ Fred C. Applegate* Trustee March 2, 1998
- -------------------------
Fred C. Applegate

/s/ Arthur B. Laffer* Trustee March 2, 1998
- -------------------------
Arthur B. Laffer

/s/ Charles E. Young* Trustee March 2, 1998
- -------------------------
Charles E. Young

/*s/ Charles Field
- -------------------------
By: Charles Field
Attorney in Fact

*Charles Field signs this document on behalf of each trustee marked with
an asterisk pursuant to powers of attorney filed as Exhibits to this
Registration Statement.

By: /s/ Charles Field
----------------------------------------
Charles Field

<PAGE>

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------

(16) Power of Attorney

(17) Form of Proxy

<PAGE>

POWERS OF ATTORNEY

The undersigned Officers and Trustees of the Nicholas-Applegate Mutual Funds,
and nominees for Trustees of the Nicholas-Applegate Mutual Funds, whose
signatures appear below hereby make, constitute and appoint Charles H. Field to
be their true and lawful attorney and agent with the power to act without any
other and with full power of substitution in connection with the proposed
Reorganization of each series of The Fontaine Trust into the Nicholas-Applegate
Mutual Funds to execute, deliver and file in each of the undersigned Officers'
and Trustees' capacity or capacities as shown below, any and all instruments
that said attorneys and agents may deem necessary or advisable to enable the
Nicholas-Applegate Mutual Funds to comply with the Securities Act of 1933, as
amended, including any and all registration statements including, but not
limited to, a registration statement on Form N-14, and any and all post-
effective amendments to the Nicholas-Applegate Mutual Funds' registration
statement, and any rules, regulations, orders or other requirement of shares or
additional shares of the Nicholas-Applegate Mutual Funds or any of its series or
classes thereof, and the registration of the Nicholas-Applegate Mutual Funds or
any of its series under the Investment Company Act of 1940, as amended,
including any and all amendments to the Nicholas-Applegate Mutual Funds'
registration statement; and without limitation of the foregoing, the power and
authority to sign the name of the Nicholas-Applegate Mutual Funds on its behalf,
and to sign the names of each of such Trustees and Officers on their behalf, and
said Officers and Trustees hereby grant to said attorney full power and
authority to do and perform each and every act and thing whatsoever as said
attorney may deem necessary or advisable to carry out fully the intent of this
Power of Attorney to the same extent and with the same effect as each of said
Officers and Trustees might or could do personally in his capacity or capacities
as aforesaid and each of said Officer and Trustees ratifies, confirms and
approves all acts and things which said attorney might do or cause to be done by
virtue of this Power of Attorney and his signature as the same may be signed by
said attorney.

Signature Title Date
--------- ----- ----

/s/ John D. Wylie President January 26, 1998
- -----------------
John D. Wylie

/s/ Thomas Pindelski Chief Financial Officer January 26, 1998
- --------------------
Thomas Pindelski

/s/ Fred C. Applegate Trustee and Chairman January 26, 1998
- ---------------------

<PAGE>

Signature Title Date
--------- ----- ----

Fred C. Applegate

/s/ Arthur B. Laffer Trustee January 26, 1998
- --------------------
Arthur B. Laffer

/s/ Charles E. Young Trustee January 26, 1998
- --------------------
Charles E. Young

/s/ Arthur E. Nichols Nominee January 26, 1998
- ---------------------
Arthur E. Nichols

/s/ Dann V. Angeloff Nominee January 26, 1998
- --------------------
Dann V. Angeloff

/s/ Walter E. Auch Nominee January 26, 1998
- ------------------
Walter E. Auch

/s/ Theodore J. Coburn Nominee January 26, 1998
- ----------------------
Theodore J. Coburn

/s/ Darlene DeRemer Nominee January 26, 1998
- -------------------
Darlene DeRemer

/s/ George F. Keane Nominee January 26, 1998
- -------------------
George F. Keane

<PAGE>

WE NEED YOUR VOTE BEFORE APRIL 20, 1998
- --------------------------------------------------------------------------------
PLEASE, your vote is important and, as a shareholder, you are asked to be at the
Special Meeting either in person or by proxy. If you are unable to attend the
Special Meeting in person, WE URGE YOU TO COMPLETE, SIGN, DATE, AND PROMPTLY
RETURN THIS PROXY USING THE ENCLOSED POSTAGE PREPAID ENVELOPE. Your prompt
return of the Proxy will help assure a quorum at the Special Meeting and avoid
additional expenses associated with further solicitation. Sending in your Proxy
will not prevent you from personally voting your shares at the Special Meeting
and you may revoke your Proxy by advising the Secretary of The Fontaine Trust in
writing (by subsequent proxy or otherwise) of such revocation at any time before
it is voted.
- --------------------------------------------------------------------------------
THANK YOU FOR YOUR TIME

- Please fold and detach card at perforation before mailing -

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES

THE FONTAINE TRUST PROXY FOR SPECIAL MEETING
CAPITAL APPRECIATION FUND ("FUND") OF SHAREHOLDERS

The undersigned hereby constitutes and appoints Richard H. Fontaine and
_________ as proxies, each with power to appoint his substitute and hereby
authorizes them to represent and to vote, as designated on the reverse side, all
shares of stock of the Fund, which the undersigned is entitled to vote at the
Special Meeting of Shareholders to be held as The Fontaine Trust, 210 West
Pennsylvania Avenue, Suite 240, Towson, Maryland 21204 on April 20, 1998 at
10:00 a.m., local time, and any adjournments thereof, with respect to the
matters set forth on the reverse side and described in the Notice of Special
Meeting and Combined Proxy Statement and Prospectus dated March ___, 1998,
receipt of which is hereby acknowledged.

DATE:
----------------------------------------
NOTE: Please sign exactly as your name(s)
appear(s) on this Proxy. If joint owners,
EITHER may sign this Proxy. When signing as
attorney, executor, administrator, trustee,
guardian or corporate officer, please give
your full title as such. If a corporation,
please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name
by authorized person.
---------------------------------------------

---------------------------------------------
Signature(s) (Title(s), if applicable) 034

<PAGE>

WE NEED YOUR VOTE BEFORE APRIL 20, 1998
- --------------------------------------------------------------------------------

- Please fold and detach card at perforation before mailing -

THIS PROXY WILL VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED IN FAVOR OF THE PROPOSAL AND IN THE DISCRETION OF THE PROXIES UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. Please indicate by
filling in the appropriate boxes below, as shown, using blue or black ink or
dark pencil. / /

FOR AGAINST ABSTAIN

To approve or disapprove an Agreement / / / / / /
and Plan of Reorganization by and
among, and, with respect to certain
matters, and the transactions
contemplated thereby, and the
termination of the Fontaine Trust as
a registered investment company and
the deregistration of the Fontaine
Trust under all applicable laws.

TO BE COMPLETED AND SIGNED ON REVERSE SIDE OF CARD.
<PAGE>

- Please fold and detach card at perforation before mailing -

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES

THE FONTAINE TRUST PROXY FOR SPECIAL MEETING
GLOBAL GROWTH FUND ("FUND") OF SHAREHOLDERS

---------------------------------------------
Signature(s) (Title(s), if applicable) 034

<PAGE>

WE NEED YOUR VOTE BEFORE APRIL 20, 1998
- --------------------------------------------------------------------------------

- Please fold and detach card at perforation before mailing -

FOR AGAINST ABSTAIN

TO BE COMPLETED AND SIGNED ON REVERSE SIDE OF CARD.
<PAGE>

- Please fold and detach card at perforation before mailing -

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES

THE FONTAINE TRUST PROXY FOR SPECIAL MEETING
GLOBAL INCOME FUND ("FUND") OF SHAREHOLDERS

---------------------------------------------
Signature(s) (Title(s), if applicable) 034

<PAGE>

WE NEED YOUR VOTE BEFORE APRIL 20, 1998
- --------------------------------------------------------------------------------

- Please fold and detach card at perforation before mailing -

FOR AGAINST ABSTAIN

TO BE COMPLETED AND SIGNED ON REVERSE SIDE OF CARD.