Prospectus
Fremont Mutual Funds, Inc.
Prospectus
o U.S. Micro-Cap Fund
February 20, 1996
Revised September 27, 1996
Table of Contents
Item Page No.
Summary of Fees and Expenses 3
Financial Highlights 4
The Advisor, The Sub-Advisor and the Fund 5
Investment Objective, Policies and Risk Considerations 6
General Investment Policies 8
Investment Results 16
How to Invest 17
Shareholder Account Services and Privileges 18
How to Redeem Shares 19
Retirement Plans 22
Dividends, Distributions and Federal Income Taxation 22
Calculation of Net Asset Value and Public Offering Price 24
Execution of Portfolio Transactions 24
General Information 26
Telephone Numbers and Addresses 27
Prospectus
FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the Fremont U.S. Micro-Cap Fund ("the Fund").
FREMONT U.S. MICRO-CAP FUND seeks to achieve long-term capital appreciation by
investing primarily in equity securities of micro-cap companies domiciled
within the United States.
There can be no assurance that the Fund will achieve its investment objective.
The Fund is a diversified fund as defined by the Investment Company Act of
1940.
Shares of the Fund are offered without a sales charge.
This Prospectus, which should be retained for future reference, sets forth
concisely the information an investor should know before investing. Should
more detailed information be desired, a Statement of Additional Information,
which is incorporated by reference into this Prospectus, is available without
charge by calling toll-free 800-548-4539 (press 1) or by writing to Fremont
Mutual Funds, Inc., 50 Beale Street, Suite 100, San Francisco, California
94105.
<PAGE>
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR ARE SHARES INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 20, 1996 as revised on September 27,
1996.
FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
SUMMARY OF FEES AND EXPENSES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(a) None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fee(b) 1.98%
12b-1 Expenses None
Other Expenses None
Total Fund Operating Expenses 1.98%
Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
1 Year 3 Years 5 Years 10 Years
U.S. Micro-Cap Fund $20 $62 $107 $231
This example should not be considered as representative of future expenses
or annual returns. Actual expenses and annual returns may be greater or less
than those shown above.
The purpose of the above tables is to give you information and assistance
in understanding the various costs and expenses of the Fund that an
<PAGE>
investor may bear directly or indirectly. The management fee of the Fund has
been restated to reflect the management fee currently being charged
to the Fund.
See "The Advisor, the Sub-Advisor and the Fund."
(a) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is currently $8.
See "How to Redeem Shares."
(b) The Fund is obligated, under the terms of the management agreement, to pay
the Advisor an annual management fee of 2.5% of average net assets with
respect to the first $30 million, 2.0% with respect to the next $70 million
and 1.5% thereafter. However, the Advisor is obligated to pay all of the
Fund's other ordinary operating expenses. The Advisor has currently limited
the annual management fee of the Fund to 1.98% of average net assets.
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand, L.L.P.,
independent accountants, whose unqualified opinion is included in the Fund's
Annual Report. Further information about the Fund's performance is contained
in the Annual Report, which is included in the Fund's Statement of Additional
Information and which may be obtained without charge.
<TABLE>
<CAPTION>
U.S. MICRO-CAP FUND
Year Period from
Ended June 30, 1994 to
October 31, 1995 October 31, 1994
---------------- ----------------
<S> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $10.34 $10.00
Income from Investment Operations
Net investment income (loss)(a) (.05) .02
Net realized and unrealized gain 4.05 .34
---- ---
Total investment operations 4.00 .36
---- ---
Less Distributions
From net investment income -- (.02)
Total distributions -- (.02)
-- -----
Net asset value, end of period $14.34 $10.34
Total Return(b) 38.68% 10.69%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $7,792 $2,052
<PAGE>
Ratio of expenses to average net assets(a) 2.04% 2.50%*
Ratio of net investment income (loss) to
average net assets(a) -.67% -.68%*
Portfolio Turnover Rate 144% 129%
<FN>
*Annualized
(a) Management fees have been voluntarily waived for the period February 1,
1995 to October 31, 1995. If fees had been charged fully, net investment
income per share, ratio of expenses to average net assets and ratio of net
investment income to average net assets would have been $.08, 2.50% and
- -1.13%, respectively, for the year ended October 31, 1995.
(b) Total return would have been lower had the Advisor not waived expenses.
</FN>
</TABLE>
THE ADVISOR, THE SUB-ADVISOR AND THE FUND
Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end
investment company which under this Prospectus is offering shares in the
Fremont U.S. Micro-Cap Fund. The Investment Company has other series offered
with a different prospectus, and the Board of Directors of the Investment
Company is permitted to create additional funds at any time. The Fund has its
own investment objective and policies and operates as a separate mutual fund.
The management of the business and affairs of the Investment Company is the
responsibility of the Board of Directors. Fremont Investment Advisors, Inc.
(the "Advisor") provides the Fund with investment management and
administrative services under an Investment Advisory and Administrative
Agreement (the "Advisory Agreement") with the Investment Company. The Advisory
Agreement provides that the Advisor shall furnish advice to the Fund with
respect to its investments and shall, to the extent authorized by the Board of
Directors, determine what securities shall be purchased or sold by the Fund.
As described more fully below, the Advisor has retained an investment
management firm (the "Sub-Advisor") to provide the Fund with portfolio
management services. The Advisor's Investment Committee oversees the portfolio
management of the Fund, including the services provided by the Sub-Advisor.
The professional staff of the Advisor has offered professional investment
management services regarding asset allocation in connection with securities
portfolios to the Bechtel Group, Inc. Retirement Plan and the Bechtel
Foundation since 1978 and to Fremont Investors, Inc. (formerly Fremont Group,
Inc.) since 1987. The Advisor also provides investment advisory services
regarding asset allocation, investment manager selection and portfolio
diversification to a number of large Bechtel-related investors. The Investment
Company is one of its clients.
The Advisor will provide direct portfolio management services to the extent
that a Sub-Advisor does not provide those services. In the future, the Advisor
may propose to the Investment Company that different or additional
sub-advisor(s) be engaged to provide investment advisory or portfolio
management services to the Fund. Prior to such engagement, any agreement with
a sub-advisor would be submitted to a vote of the Board of Directors and if
required by law, by the shareholders of the Fund. The Advisor may in its
discretion manage all or a portion of the Fund's portfolio directly with or
without the use of a sub-advisor.
For additional information about the Advisor and the Sub-Advisor,
<PAGE>
see "Investment Advisory and Other Services" in the Statement of Additional
Information.
Under the terms of the Advisory Agreement, the Fund pays the Advisor a fee,
computed daily and paid monthly, of 2.50% per annum of the Fund's average net
assets with respect to the first $30 million, 2.00% with respect to the next
$70 million of such assets, and 1.50% of such assets in excess of $100
million. Under this agreement the Advisor has agreed to bear all of the Fund's
expenses, except extraordinary expenses (as designated by a majority of the
Investment Company's disinterested directors) and interest, brokerage
commissions and other transaction charges relating to the investing activities
of the Fund.
The Advisor currently intends to limit the Fund's management fee to 1.98% of
average net assets.
Morgan Grenfell Capital Management, Inc. ("Morgan Grenfell"), 885 Third
Avenue, New York, New York 10022, currently serves as Sub-Advisor to the Fund
pursuant to a Portfolio Management Agreement. Morgan Grenfell manages over
$500 million in small and micro-cap stocks. Morgan Grenfell is a U.S.
investment advisory subsidiary of London-based Morgan Grenfell Group PLC.
Morgan Grenfell Group PLC is owned by Deutsche Bank AG. Within Morgan
Grenfell, the Smaller Capitalization Equities team, headed by Mr. Robert E.
Kern, has managed the Fund since inception. Bob has over 30 years of
investment management experience and has been employed by Morgan Grenfell
since 1986. The Smaller Capitalization Equities team is comprised of
experienced professionals each having investment research/portfolio management
responsibility within a specialized economic sector. Investment research
specialization by economic sectors is designed to create an advantage by
providing an in-depth understanding of each economic sector and of the
industries within these sectors. This knowledge provides the team with the
ability to make individual company investment decisions. Each team member
works with the team's specialist small cap trader to determine execution
strategy. This approach, designed specifically for smaller company investing,
provides each member of the team with beginning-to-end involvement in the
investment process.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Fund), the Advisor and Morgan Grenfell provides
that Morgan Grenfell will manage the investment and reinvestment of the assets
of the Fund and continually review, supervise, and administer the Fund's
investments. Morgan Grenfell pays all expenses of its staff and their
activities in connection with its portfolio management activities. As
compensation for its services, the Advisor (not the Fund) pays Morgan Grenfell
a fee equal to 1.50% per annum of the first $30 million of the Fund's average
net assets, 1.00% of the next $70 million of such assets and .75% of such
assets in excess of $100 million. The Portfolio Management Agreement with
Morgan Grenfell may be terminated by the Advisor or the Investment Company
upon 30 days' written notice. The Advisor has day-to-day authority to increase
or decrease the amount of the Fund's assets under management by Morgan
Grenfell.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The investment objective and policies of the Fund is stated below. The Fund is
intended for long-term investors, not for those who may wish to redeem their
shares after a short period of time.
All investments, including mutual funds, have risks, and no investment is
suitable for all investors. Investors should consult with their financial and
other advisors concerning the suitability of this investment for their own
<PAGE>
particular circumstances. Accordingly, there is no assurance that the Fund
will achieve its investment objective.
The Fund seeks to achieve long-term capital appreciation by investing
primarily in a diversified portfolio of common stocks and securities
convertible into common stock. Under normal market conditions, at least 65% of
the total assets of the Fund will be invested in equity securities of U.S.
micro-cap companies (described below). These securities will trade on a U.S.
exchange or in the over-the-counter (OTC) market. However, up to 25% of the
Fund's total assets, at the time of purchase, may be invested in securities of
micro-cap companies domiciled outside the United States, including sponsored
and unsponsored American Depository Receipts ("ADRs") and European Depository
Receipts ("EDRs"). See "General Investment Policies" for a discussion of ADRs.
EDRs are similar to ADRs but are designed for use in the European securities
market. The Fund may also invest in stock index futures contracts, options on
index futures and options on portfolio securities and stock indices.
The Fund generally selects its portfolio securities among micro-cap companies,
which the Fund defines as companies whose individual market capitalizations
would place them in the smallest 10% of market capitalization of companies in
the United States as measured by the Wilshire 5000 Index. Currently, these
companies have a market capitalization of about $425 million or less. Under
normal market conditions, the weighted average capitalization of the portfolio
will be less than the market capitalization of the largest company in the
bottom 5% of the market value of all U.S. equities as measured by the Wilshire
5000 Index. Currently, this company has a market capitalization of about $277
million.
Many micro-cap companies in which the Fund is likely to invest may be more
vulnerable than larger companies to adverse business or market developments,
may have limited product lines, markets or financial resources and may lack
management depth. In addition, many micro-cap companies are not well-known to
the investing public, do not have significant institutional ownership and are
followed by relatively few securities analysts, with the result that there may
tend to be less publicly available information concerning such companies
compared to what is available for larger capitalization securities. Finally,
the securities of micro-cap companies traded in the OTC market may have fewer
market makers, wider spreads between their quoted bid and asked prices and
lower trading volumes, resulting in comparatively greater price volatility and
less liquidity than the securities of companies that have larger market
capitalizations and/or that are traded on the New York or American Stock
Exchanges or the market averages in general. Thus, the Fund may involve
considerably more risk than an investment company investing in the more liquid
equity securities of companies traded on the New York or American Stock
Exchanges.
The Advisor and Sub-Advisor believe that an investment in shares of the Fund
provides an opportunity for greater rewards but will involve more risk than an
investment in a fund which seeks capital appreciation from investment in
common stocks of larger, better-known companies. This is due to greater
opportunities for superior returns from companies with small stock market
capitalizations which are not as well-known to the general public. These
shares may have less investor following, and, therefore, may provide
opportunities for investment gains due to the inefficiencies in this sector of
the marketplace.
The Fund seeks to invest in those companies which are in the early stages of
an emerging growth cycle, where the Advisor and Sub-Advisor believe earnings
will grow faster than both inflation and the economy in general and where it
believes such
<PAGE>
growth has not yet been fully reflected in the market price of these stocks.
In seeking investments, the Advisor and Sub-Advisor will give weight to
companies possessing a variety of characteristics including quality of
management, companies which have gone public in recent years, an
entrepreneurial management team, a narrow product line focus, or established
companies where the growth potential has been significantly enhanced by new
product developments, new market opportunities, mergers or divestitures, or
new management. The investable universe provides what the Advisor and
Sub-Advisor believe is a broad range of stock selection opportunities.
Although the Fund invests primarily in common stocks and securities
convertible into common stock, for liquidity purposes it will normally invest
a portion of its assets in high quality debt securities and money market
instruments with remaining maturities of one year or less, including
repurchase agreements. Whenever in the judgment of the Advisor or Sub-Advisor
market or economic conditions warrant, the Fund may, for temporary defensive
purposes, invest without limitation in these instruments. During times that
the Fund is investing defensively, the Fund will not be pursuing its stated
investment objective. The Fund may also hold other types of securities from
time to time, including non-convertible bonds and preferred stocks, in an
amount not exceeding 5% of its net assets. Preferred stocks and bonds will be
rated at the time of purchase in the top two categories of Moody's (Aaa or Aa)
or S&P (AAA or AA) or be of comparable quality as determined by the Advisor or
Sub-Advisor.
GENERAL INVESTMENT POLICIES
Money Market Instruments. The Fund may invest in any of the following "money
market" instruments: certificates of deposit, time deposits, commercial paper,
bankers' acceptances and Eurodollar certificates of deposit; U.S.
dollar-denominated money market instruments of foreign financial institutions,
corporations and governments; U.S. Government and agency securities; money
market mutual funds; and other debt securities which are not specifically
named but which meet the Fund's quality guidelines. The Fund also may enter
into repurchase agreements as described below and may purchase variable and
floating rate debt securities.
At the time of purchase, short-term securities must be rated in the top rating
category by at least two nationally recognized statistical rating
organizations ("NRSROs") or by a single NRSRO in the case of a security rated
by only one NRSRO, or, if not rated by an NRSRO, must be of comparable quality
as determined by the Advisor or the Sub-Advisor. Generally, high quality
short-term securities must be issued by an entity with an outstanding debt
issue rated A or better by an NRSRO, or an entity of comparable quality as
determined by the Advisor or the Sub-Advisor. Obligations of foreign banks,
foreign corporations and foreign branches of domestic banks must be payable in
U.S. dollars. See Appendix A to the Statement of Additional information for a
description of rating categories.
U.S. Government Securities. The Fund may invest in U.S. Government securities,
which are obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities. Some U.S. Government securities, such as Treasury bills,
notes and bonds and Government National Mortgage Association certificates, are
supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Mortgage Corporation, are supported by the
right of the issuer to borrow from the Treasury; others, such as those of the
Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and
still others, such as those of the Student Loan Marketing Association, are
supported only by the credit of the instrumentality.
<PAGE>
No assurance can be given that the U.S. Government will provide financial
support to U.S. Government agencies or instrumentalities as described above in
the future, other than as set forth above, since it is not obligated to do so
by law.
When-Issued Securities and Firm Commitment Agreements. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and
interest rate are fixed at the time of the transaction, but the settlement is
delayed). The Fund will not purchase securities the value of which is greater
than 5% of its net assets on a when-issued basis. The Fund, as purchaser,
assumes the risk of any decline in value of the security beginning on the date
of the agreement or purchase, and no interest accrues to the Fund until it
accepts delivery of the security. The Fund will not use such transactions for
leveraging purposes, and accordingly will segregate cash, cash equivalents or
high quality debt securities or hold a covered position in an amount
sufficient to meet its payment obligations thereunder.
There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount
set aside for such transaction in the segregated asset account. Settlements in
the ordinary course of business, which may take substantially more than three
business days for non-U.S. securities, are not treated by the Fund as
when-issued or forward commitment transactions and, accordingly, are not
subject to the foregoing limitations, even though some of the risks described
above may be present in such transactions.
Shares of Investment Companies. The Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
investment companies to the extent that they may facilitate achieving the
objective of the Fund or to the extent that they afford the principal or most
practical means of access to a particular market or markets or they represent
attractive investments in their own right. Pursuant to the 1940 Act, the
percentage of Fund assets which may be so invested is not limited, provided
that the Fund and its affiliates do not acquire more than 3% of the shares of
any such investment company. The provisions of the 1940 Act may also impose
certain restrictions on redemption of the Fund's shares in other investment
companies. The Fund's purchase of shares of investment companies may result in
the payment by a shareholder of duplicative management fees. The Advisor
and/or Sub-Advisor will consider such fees in determining whether to invest in
other mutual funds. The Fund will invest only in investment companies which do
not charge a sales load; however, the Fund may invest in such companies with
distribution plans and fees under Rule 12b-1 of the 1940 Act, and may pay
customary brokerage commissions to buy and sell shares of closed-end
investment companies.
The return on the Fund's investments in investment companies will be reduced
by the operating expenses, including investment advisory and administrative
fees, of such companies. The Fund's investment in a closed-end investment
company may require the payment of a premium above the net asset value of the
investment company's shares, and the market price of the investment company
thereafter may decline without any change in the value of the investment
company's assets. The Fund, however, will not invest in any investment company
or trust unless it is believed that the potential benefits of such investment
are sufficient to warrant the payment of any such premium.
As an exception to the above 1940 Act restrictions, the Fund does have the
authority to invest all of its assets in the securities of a single open-end
investment company with substantially the same fundamental investment
objectives, restrictions and policies as that of the Fund. The Fund will
notify its shareholders prior to initiating such an arrangement.
<PAGE>
Repurchase Agreements. As part of its cash reserve position, the Fund may
enter into repurchase agreements through which the Fund acquires a security
(the "underlying security") from the seller, a well-established securities
dealer or a bank that is a member of the Federal Reserve System. At that time,
the bank or securities dealer agrees to repurchase the underlying security at
the same price, plus a specified amount of interest. Repurchase agreements are
generally for a short period of time, often less than a week. The seller must
maintain with the Fund's custodian collateral equal to at least 100% of the
repurchase price, including accrued interest, as monitored daily by the
Advisor and/or Sub-Advisor. The Fund will not enter into a repurchase
agreement with a maturity of more than seven business days if, as a result,
more than 15% of the value of its net assets, would then be invested in such
repurchase agreements. The Fund will only enter into repurchase agreements
where (1) the underlying securities are issued or guaranteed by the U.S.
Government, (2) the market value of the underlying security, including accrued
interest, will be at all times equal to or in excess of the value of the
repurchase agreement, and (3) payment for the underlying securities is made
only upon physical delivery or evidence of book-entry transfer to the account
of the custodian or a bank acting as agent. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the Fund could experience
both delays in liquidating the underlying securities and losses, including:
(1) a possible decline in the value of the underlying security during the
period in which the Fund seeks to enforce its rights thereto; (2) possible
subnormal levels of income and lack of access to income during this period;
and (3) expenses of enforcing the Fund's rights.
Portfolio Turnover. The Fund expects to trade in securities for short-term
gain whenever deemed advisable by the Advisor and/or Sub-Advisor in order to
take advantage of anomalies occurring in general market, economic or political
conditions. Therefore, the Fund may have a higher portfolio turnover rate than
that of some other investment companies, but it is anticipated that the annual
portfolio turnover rate of the Fund will not exceed 200%. The portfolio
turnover rate is calculated by dividing the lesser of sales or purchases of
long-term portfolio securities by the Fund's average month-end long-term
investments. High portfolio turnover involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions and
other costs that the Fund will bear directly, and may result in the
realization of net capital gains, which are generally taxable whether or not
distributed to shareholders.
Loans of Portfolio Securities. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in
an amount not exceeding 33-1/3% of its net assets. The borrower must maintain
with the Fund's custodian collateral consisting of cash, cash equivalents or
U.S. Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities, or possible loss
of rights in the collateral should the borrower fail financially. The lender
also may bear the risk of capital loss on investment of the cash collateral,
which must be returned in full to the borrower when the loan is terminated.
Loans will be made only to firms deemed by the Advisor to be of good standing
and will not be made unless, in the judgment of the Advisor, the consideration
to be earned from such loans would justify the associated risk.
<PAGE>
Borrowing. The Fund may borrow from banks an amount not exceeding 30% of the
value of its total assets for temporary or emergency purposes and enter into
reverse repurchase agreements. If the income and gains on securities purchased
with the proceeds of borrowings or reverse repurchase agreements exceed the
cost of such borrowings or agreements, the Fund's earnings or net asset value
will increase faster than otherwise would be the case; conversely, if the
income and gains fail to exceed the cost, earnings or net asset value would
decline faster than otherwise would be the case. If the 300% asset coverage
required by the 1940 Act should decline as a result of market fluctuation or
other reasons, the Fund may be required to sell some of its portfolio
securities within three days to reduce the borrowings and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time.
Restricted Securities. The Fund may purchase securities that are not
registered ("restricted securities") under the 1933 Act, but can be offered
and sold to "qualified institutional buyers" under Rule 144A of the 1933 Act.
However, the Fund will not invest more than 15% of its assets in illiquid
investments, which includes repurchase agreements and fixed time deposits
maturing in more than seven days, and securities that are not readily
marketable and restricted securities, unless the Board of Directors
determines, based upon a continuing review of the trading markets for the
specific restricted security, that such restricted securities are liquid. The
Board of Directors may adopt guidelines and delegate to the Advisor or
Sub-Advisor the daily function of determining and monitoring liquidity of
restricted securities. The Board, however, will retain sufficient oversight
and be ultimately responsible for the determinations.
Warrants or Rights. Warrants or rights may be acquired by the Fund in
connection with other securities or separately and provide the Fund with the
right to purchase other securities of the issuer at a later date. As a
condition of its continuing registration in certain states, the Fund's
investments in warrants or rights, valued at the lower of cost or market, will
not exceed 5% of the value of its net assets, and not more than 2% of such
assets will be invested in warrants and rights which are not listed on the
American or New York Stock Exchanges. Warrants or rights acquired by the Fund
in units or attached to securities will be deemed to be without value for
purposes of this restriction. These limits are not fundamental policies of the
Fund and may be changed by the Board of Directors without shareholder
approval.
Options and Futures Contracts. When the Fund is not fully invested, strategies
such as buying calls, writing puts, and buying futures may be used to increase
its exposure to price changes in stocks or debt securities. When the Advisor
and/or Sub-Advisor wishes to hedge against market fluctuations, strategies
such as buying puts, writing calls, and selling futures may be used to reduce
market exposure. Since most stock index futures and options are based on broad
stock market indices, their performance tends to track the performance of
common stocks generally - which may or may not correspond to the types of
securities in which the Fund invests. The Fund will maintain segregated
accounts consisting of liquid assets, such as cash, U.S. Government securities
or other high quality debt securities (or, as permitted by applicable
regulations, enter into certain offsetting positions) to cover its obligations
under options and futures contracts to avoid leveraging.
In seeking appreciation or to reduce principal volatility, the Fund may also
(1) enter into futures contracts -- contracts for the future delivery of debt
securities, stock, stock index futures contracts with respect to the S&P 500
Index, small capitalization stock market indices or other similar broad-based
stock market indices, the initial margins of which are limited to 5% of the
Fund's assets; and
<PAGE>
(2) purchase put and call options on portfolio securities, stock indices or
stock index futures contracts-- the premiums of which are limited to 5% of the
Fund's assets.
The Fund may write put and call options. It will only do so by writing covered
put or call options, and the aggregate value of the securities underlying put
options, as of the date of sale of the options, will not exceed 50% of the net
assets of the Fund.
The Fund will set aside cash, cash equivalents, or high quality debt
securities, or hold a covered position against any potential delivery or
payment obligations under any outstanding option or futures contracts.
Options and futures can be volatile investments. If the Advisor and/or
Sub-Advisor applies a hedge at an inappropriate time or evaluates market
conditions incorrectly, options and futures strategies may lower the Fund's
return. The Fund could also experience a loss if the prices of its options or
futures positions were poorly correlated with its other investments, or if it
could not close out its positions because of an illiquid secondary market.
Although these investment practices will be used primarily to generate income
or to minimize the fluctuation of principal, they do involve risks which are
different in some respects from the investment risks associated with similar
funds which do not engage in such activities. These risks may include the
following: futures contracts -- no assurance that closing purchase
transactions will be available at favorable prices, possible reduction of the
Fund's income due to the use of hedging, the possible reduction in value of
both the securities hedged and the hedging instrument, and possible loss in
excess of the initial margin payment; options and futures contracts --
imperfect correlation between the contract and the underlying security,
commodity or index and unsuccessful hedging transactions due to incorrect
forecasts of market trends; writing covered call options -- the inability to
effect closing transactions at favorable prices and the inability to
participate in the appreciation of the underlying securities above the
exercise price; and purchasing or selling put and call options -- possible
loss of the entire premium. A more thorough description of these investment
practices and their associated risks is contained in the Statement of
Additional Information.
Risk Factors and Special Considerations for International Investing.
Investment in securities of foreign entities and securities denominated in
foreign currencies involves risks typically not present to the same degree in
domestic investments. Likewise, investment in ADRs and EDRs presents similar
risks, even though the Fund will purchase, sell and be paid dividends on ADRs
in U.S. dollars. These risks include fluctuations in currency exchange rates,
which are affected by international balances of payments and other economic
and financial conditions; government intervention; speculation; and other
factors. With respect to certain foreign countries, there is the possibility
of expropriation or nationalization of assets, confiscatory taxation and
political, social or economic instability. The Fund may be required to pay
foreign withholding or other taxes on certain of its foreign investments, but
investors may or may not be able to deduct their pro rata shares of such taxes
in computing their taxable income, or take such shares as a credit against
their U.S. income taxes. See "Dividends, Distributions and Federal Income
Taxation."
There may be less publicly available information about foreign issuers or
securities than about U.S. issuers or securities, and foreign issuers may not
be subject to accounting, auditing and financial reporting standards and
requirements comparable
<PAGE>
to those of U.S. entities. With respect to unsponsored ADRs, these programs
cover securities of companies which are not required to meet either the
reporting or accounting standards of the United States. Many foreign financial
markets, while generally growing in volume, continue to have substantially
less volume than domestic markets, and securities of many foreign companies
are less liquid and their prices are more volatile than are securities of
comparable U.S. companies. Such markets may have longer settlement periods
than markets in the United States. In addition, brokerage commissions,
custodial services and other costs related to investment in foreign markets
generally are more expensive than in the United States, particularly with
respect to emerging markets. Such markets have different settlement and
clearance procedures. In certain markets, there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. The inability
of the Fund to make intended securities purchases due to settlement problems
could cause the Fund to miss attractive investment opportunities. Inability to
dispose of a portfolio security caused by settlement problems could result
either in losses to the Fund due to subsequent declines in value of a
portfolio security or, if the Fund had entered into a contract to sell the
security, could result in possible liability to the purchaser. Settlement
procedures in certain emerging markets also carry with them a heightened risk
of loss due to the failure of the broker or other service provider to deliver
cash or securities.
The risks of foreign investing are of greater concern in the case of
investments in emerging markets which may exhibit greater price volatility,
have less liquidity and have settlement arrangements which are less efficient
than in developed markets. Furthermore, the economies of emerging market
countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, managed adjustments in relative currency values, and other
protectionist measures imposed or negotiated by the countries with which they
trade. These emerging market economies also have been and may continue to be
adversely affected by economic conditions in the countries with which they
trade.
The value of the Fund's portfolio securities computed in U.S. dollars will
vary with increases and decreases in the exchange rate between the currencies
in which the Fund has invested and the U.S. dollar. A decline in the value of
any particular currency against the U.S. dollar will cause a decline in the
U.S. dollar value of the Fund's holdings of securities denominated in such
currency and, therefore, will cause an overall decline in the Fund's net asset
value and net investment income and capital gains, if any, to be distributed
in U.S. dollars to shareholders by the Fund.
The rate of exchange between the U.S. dollar and other currencies is
influenced by many factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the
movement of interest rates, the price of oil, the pace of activity in the
industrial countries, including the United States, and other economic and
financial conditions affecting the world economy.
The Fund will not invest in a foreign currency or in securities denominated in
a foreign currency if such currency is not at the time of investment
considered by the Advisor or Sub-Advisor to be fully exchangeable into U.S.
dollars without legal restriction. The Fund may purchase securities that are
issued by the government or a corporation or financial institution of one
nation but denominated in the currency of another nation. To the extent that
the Fund invests in ADRs, the depository bank generally pays cash dividends in
U.S. dollars regardless of the currency in which such dividends originally are
paid by the issuer of the underlying security.
<PAGE>
The operating expense ratio of the Fund when investing in foreign securities
may be higher than that of an investment company investing exclusively in U.S.
securities because certain expenses, such as custodial costs, may be higher.
Several of the countries in which the Fund may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital
gains), (ii) prohibitions or substantial restrictions on foreign investment in
certain industries or market sectors, such as defense, energy and
transportation, (iii) restrictions (whether contained in the charter of an
individual company or mandated by the government) on the percentage of
securities of a single issuer which may be owned by a foreign investor, (iv)
limitations on the types of securities which a foreign investor may purchase
and (v) restrictions on a foreign investor's right to invest in companies
whose securities are not publicly traded. In some circumstances, these
restrictions may limit or preclude investment in certain countries. Therefore,
the Fund intends to invest in such countries through the purchase of shares of
investment companies organized under the laws of such countries.
The Fund's interest and dividend income from foreign issuers may be subject to
non-U.S. withholding taxes. The Fund also may be subject to taxes on trading
profits in some countries. In addition, many of the countries in the Pacific
Basin have a transfer or stamp duties tax on certain securities transactions.
The imposition of these taxes will increase the cost to the Fund of investing
in any country imposing such taxes. For United States tax purposes, United
States shareholders may be entitled to a credit or deduction to the extent of
any foreign income taxes paid by the Fund. See "Dividends, Distributions and
Federal Income Taxation."
American Depository Receipts. American Depository Receipts ("ADRs") are
negotiable receipts issued by a United States bank or trust to evidence
ownership of securities in a foreign company which have been deposited with
such bank or trust's office or agent in a foreign country. Investing in ADRs
presents risks not present to the same degree as investing in domestic
securities even though the Fund will purchase, sell and be paid dividends on
ADRs in U.S. dollars. These risks include fluctuations in currency exchange
rates, which are affected by international balances of payments and other
economic and financial conditions; government intervention; speculation; and
other factors. With respect to certain foreign countries, there is the
possibility of expropriation or nationalization of assets, confiscatory
taxation and political, social and economic instability. The Fund may be
required to pay foreign withholding or other taxes on certain of its ADRs, but
investors may or may not be able to deduct their pro rata shares of such taxes
in computing their taxable income, or take such shares as a credit against
their U.S. income taxes. See "Dividends, Distributions and Federal Income
Taxation." Unsponsored ADRs are offered by companies which are not prepared to
meet either the reporting or accounting standards of the United States. While
readily exchangeable with stock in local markets, unsponsored ADRs may be less
liquid than sponsored ADRs. Additionally, there generally is less publicly
available information with respect to unsponsored ADRs.
Investment Restrictions. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating the
Fund's investments in issuers conducting their principal business activities
in a single industry
<PAGE>
(except that this limitation does not apply with respect to U.S. Government
securities). These investment restrictions and the Fund's investment objective
cannot be changed without the approval of shareholders of the Fund; all other
investment practices described in this Prospectus and in the Statement of
Additional Information can be changed by the Board of Directors without
shareholder approval.
INVESTMENT RESULTS
The Fund may from time to time include information on its investment results
and/or comparisons of its investment results to various unmanaged indices or
results of other mutual funds or groups of mutual funds in advertisements,
sales literature or reports furnished to present or prospective shareholders.
All such figures are based on historical performance data and are not intended
to be indicative of future performance. The investment return and principal
value of an investment in the Fund will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The Fund may calculate performance on an average annual total return basis for
1-, 5- and 10-year periods and over the life of the Fund, after such periods
have elapsed. Average annual total return will be computed by determining the
average annual compounded rate of return over the applicable period that would
equate the initial amount invested to the ending redeemable value of the
investment. Ending redeemable value includes dividends and capital gain
distributions, reinvested at net asset value at the reinvestment date
determined by the Board of Directors. The resulting percentages indicate the
positive or negative investment results that an investor would have
experienced from reinvested dividends and capital gain distributions and
changes in share price during the period. The average annual compounded rate
of return over various periods may also be computed by utilizing ending
redeemable values as determined above.
The Fund's investment results will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio, and operating
expenses of the Fund, so that any investment results reported by the Fund
should not be considered representative of what an investment in the Fund may
earn in any future period. When utilized, total return for the unmanaged
indices described in the Statement of Additional Information will be
calculated assuming reinvestment of dividends and interest, but will not
reflect any deductions for recurring expenses such as advisory fees, brokerage
costs or administrative expenses. These factors and possible differences in
calculation methods should be considered when comparing the Fund's investment
results with those published for other investment companies, other investment
vehicles and unmanaged indices. The comparison of the Fund to an alternative
investment should be made with consideration of differences in features and
expected performance. The Fund may also be mentioned in newspapers, magazines,
or other media from time to time. The Fund assumes no responsibility for the
accuracy of such data. The Fund's results also should be considered relative
to the risks associated with its investment objective and policies. See
"Investment Results" in the Statement of Additional Information.
Additional performance information regarding the Fund will be included in its
annual report, which will be mailed to shareholders without charge upon
request.
HOW TO INVEST
Shares of the Fund may be purchased through the Transfer Agent by submitting
payment by check, bank wire or electronic (Automated Clearing House or "ACH")
transfer and, in the case of new accounts, a completed account application
form. There is no
<PAGE>
sales load or contingent deferred sales load charged to purchase shares of the
Fund. All orders for the purchase of shares are subject to acceptance or
rejection by the Board of Directors or the Advisor. Purchases of shares are
made at the current public offering price next determined after the purchase
order is received. A minimum initial investment of $2,000 is required to open
a shareholder account, except for retirement plans such as Individual
Retirement Accounts (IRAs) and Keogh Plans. Retirement plans are subject to a
$1,000 minimum initial investment. The minimum initial investment is waived
for accounts opened with the Automatic Investment Plan and may be waived in
other instances at the sole discretion of the Advisor. (See "Automatic
Investment Plan.") Each subsequent investment in the Fund must be $200 or more
except in the case of retirement plans or Automatic Investment Plans. There is
a minimum continuing balance of $1,500 required for non-retirement accounts
(calculated on the basis of original investment value). In some cases, the
minimum balance requirement may be waived.
Investors wishing to open a new account by bank wire must call the Transfer
Agent at 800-548-4539 to obtain an account number and detailed wire
instructions. Bank wire instructions are also provided in the last section of
this Prospectus. All bank wire investments received before 4:00 p.m., Eastern
time, will be credited the same day. Bank wire investments received after 4:00
p.m., Eastern time, will be credited the next business day. A bank wire
investment is considered received when the Transfer Agent is notified that the
bank wire has been credited to its account.
Shares of the Fund may also be purchased through a broker-dealer that has
signed a dealer agreement with the Fund or has made similar arrangements with
the Fund. Brokers who process orders on behalf of their customers are
responsible for ensuring that the account documentation is complete and that
timely payment is made for the Fund shares purchased pursuant to such orders.
Brokers may charge an investor a reasonable transaction fee as determined by
the broker, no part of which will be paid to the Fund or the Advisor. In some
instances, all or a portion of the transaction fee or shareholder servicing
fee charged by a broker may be paid by the Advisor.
From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor to do so.
As a condition of this offering, if an order to purchase shares is cancelled
due to nonpayment (for example, a check returned for "insufficient funds"),
the person who made the order will be subject to a $20 charge and must
reimburse the Fund for any loss incurred by reason of such cancellation. For
more information, see "Other Investment and Redemption Services" in the
Statement of Additional Information.
Funds Distributor, Inc., Sixty State Street, Boston, MA 02109, is the
principal underwriter for the Fund.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
Statements and Reports. When a shareholder makes an initial investment in the
Fund, a shareholder account is opened in accordance with registration
instructions. Each time there is a transaction, such as an additional
investment, a dividend or other distribution, or a redemption, the shareholder
will receive from the Transfer Agent a confirmation statement showing the
current transaction in the account and the transaction date. Shareholders of
the Fund will receive statements as of the end of March, June, September and
December.
Shares are issued only in book-entry form (without certificates).
<PAGE>
The fiscal year of the Fund ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which
contain a schedule of the Fund's portfolio securities and financial
statements. Annual reports will include audited financial statements. The
federal income tax status of shareholder distributions also will be reported
to the Fund's shareholders after the end of the calendar year on Form
1099-DIV.
Exchanges Between Funds. Shares of one Fremont Fund may be exchanged for
shares of another Fremont Fund at their respective net asset values, provided
that the account registration remains identical. Exchanges may only be made
for shares of a Fremont Fund then offered for sale in your state of residence.
It is required that (1) all shares in one Fund must be exchanged or (2) the
remaining balance must be at least $1,500. This minimum balance requirement
may be waived. These exchanges are not tax-free and will result in a
shareholder realizing a gain or loss for tax purposes, except in the case of
tax-deferred retirement accounts or other tax-exempt shareholders.
Exchanges by mail should be sent to the Transfer Agent at the address set
forth in the last section of this Prospectus.
Purchases, redemptions and exchanges should be made for investment purposes
only. A pattern of frequent exchanges, purchases and sales is not acceptable
and, at the discretion of the Board of Directors, can be limited by the
Investment Company's refusal to accept further purchase and exchange orders
from the shareholder.
The Investment Company reserves the right to modify or eliminate the exchange
privilege upon 60 days' written notice to shareholders.
Telephone Exchange Privilege. An investor may elect on the account application
to authorize exchanges by telephone. A shareholder may give instructions
regarding exchanges by calling 800-548-4539. A shareholder wishing to initiate
the telephone exchange privilege should contact the Fund. This privilege will
not be added to an account without written instruction to do so from the
shareholder. Telephone requests received by 4:00 p.m., Eastern time, will be
processed the same day. During times of drastic economic or market conditions,
the telephone exchange privilege may be difficult to implement. The Transfer
Agent will make its best effort to accommodate shareholders when its telephone
lines are used to capacity. Under these circumstances, a shareholder should
consider using overnight mail to send a written exchange request.
See "Telephone Redemption Privilege" in the next section of this Prospectus.
Automatic Investment Plan. A shareholder may authorize a withdrawal to be made
automatically once or twice each month from a credit balance in the
shareholder's bank checking, savings, negotiable on withdrawal (NOW) or
similar account, with the proceeds to be used to purchase shares of the Fund.
The minimum initial investment is waived for accounts opened with the
Automatic Investment Plan. The amount of the monthly investment must be at
least $50, and is not otherwise subject to the $200 minimum for subsequent
investments. There is no obligation to make additional payments, and the plan
may be terminated by the shareholder at any time. Termination requests must be
received in writing at least 5 days prior to the regular draft date, or the
drafts will not cease until the next cycle. The Transfer Agent may impose a
charge for this service, although no such charge currently is contemplated. If
a shareholder's order to purchase shares is cancelled due to nonpayment (for
example, "insufficient funds"), the shareholder's account will be subject to a
$20 charge and the shareholder will be responsible for reimbursing the
<PAGE>
Fund for any loss incurred by reason of such cancellation. A shareholder
wishing to initiate the plan on a new or existing account must fill out an
Automatic Investment Plan form. The form is available on request.
HOW TO REDEEM SHARES
Shares are redeemed at no charge (other than wire transfer fees, if any) at
the net asset value next determined after receipt by the Transfer Agent of
proper written redemption instructions. The current charge for a wire transfer
is $8 per wire. This is subject to change by the Transfer Agent at any time,
without prior notification. See "Calculation of Net Asset Value and Public
Offering Price."
Redemption orders received in proper form by the Transfer Agent before 4:00
p.m., Eastern time, will be priced at the net asset value determined on that
day (with certain limited exceptions discussed in the Statement of Additional
Information). Orders received by the Transfer Agent after 4:00 p.m., Eastern
time, will be entered at the next calculated net asset value.
Redemption proceeds can be sent by check, electronic transfer, or bank wire.
An electronic transfer can be processed only to bank checking and savings
accounts. Before requesting an electronic transfer, shareholders should
confirm that their financial institution can receive an electronic transfer.
Currently, there is no charge to shareholders for processing an electronic
transfer.
Shareholders may have redemption proceeds sent by bank wire, electronic
transfer, or check to a designated bank account by providing in writing the
appropriate bank information to the Transfer Agent at the time of original
application. If the investor wishes to change the predesignated account, this
must be requested in writing with a signature guarantee (see "Signature
Guarantee" below).
Redemptions from retirement accounts require a written request, with a
signature guarantee, unless authorized under the Systematic Withdrawal Plan.
Call the Transfer Agent for specific instructions on redemptions.
For written redemption requests for an amount greater than $25,000, or a
redemption request that directs proceeds to a party other than the registered
account owner(s), all signatures must be guaranteed (see "Signature Guarantee"
below.)
Because of market fluctuations, the amount a shareholder receives for shares
redeemed may be more or less than the amount paid for them.
Redemption of shares, exchanges and redemptions under a Systematic Withdrawal
Plan may result in taxable capital gains or losses in non-retirement accounts.
Telephone Redemption Privilege. An investor may elect on the regular account
application to authorize redemptions by telephone. This privilege will not be
added to an account without written authorization to do so from the
shareholder. A shareholder may then give instructions regarding redemptions by
calling 800-548-4539. (The Telephone Redemption Privilege is not available for
IRA or other retirement accounts.) Telephone requests received by 4:00 p.m.,
Eastern time, will be processed at the net asset value calculated that same
day. During times of drastic economic or market conditions, the telephone
redemption privilege may be difficult to implement. The Transfer Agent will
make its best effort to accommodate shareholders when its telephone lines are
used to capacity. Under these circumstances, a shareholder should consider
using overnight mail to send a written redemption request.
<PAGE>
Neither the Investment Company, nor the Transfer Agent, nor their respective
affiliates, will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost or expense in
acting on such telephone instructions. The affected shareholder(s) will bear
the risk of any such loss. The Investment Company, or the Transfer Agent, or
both, will employ reasonable procedures to determine that telephone
instructions are genuine. If the Investment Company and/or the Transfer Agent
do not employ such procedures, they may be liable for losses due to
unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions,
and/or tape recording telephone instructions.
Systematic Withdrawal Plan. A shareholder may request redemptions of a
specified dollar amount (minimum of $100) on either a monthly, quarterly, or
yearly basis. Currently, there is no charge for this service. Redemptions will
be made on the last business day of the month. Because a redemption
constitutes a liquidation of shares, the number of shares owned in the account
will be reduced. Systematic redemptions should not reduce the account below
the minimum balance required (currently $1,500). Shareholders may terminate
the Systematic Withdrawal Plan at any time, but not less than five days before
a scheduled payment date. When an exchange is made between Funds, shareholders
must specify if they desire the systematic withdrawal option to be transferred
to a new account opened by the exchange. As an account balance declines to the
minimum permitted, the shareholder must advise the Transfer Agent if the
systematic withdrawal feature is to be transferred to another account of the
shareholder. Shareholders should note that if there is a Systematic Withdrawal
Plan established for an account and the entire account is exchanged into
another Fremont Fund, the systematic withdrawal option must be renewed by
written request to the Transfer Agent. A shareholder wishing to initiate
systematic redemptions must complete a Systematic Withdrawal Plan form
available from the Transfer Agent.
Signature Guarantee. To better protect the Fund and shareholders' accounts, a
signature guarantee is required for certain transactions. Signatures must be
guaranteed by an "eligible guarantor institution" as defined in applicable
regulations. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Signature guarantees
will be accepted from any eligible guarantor institution which participates in
a signature guarantee program. A notary public is not an acceptable guarantor.
Other Important Redemption Information. A request for redemption will not be
processed until all of the documentation described above has been received by
the Transfer Agent in proper form. A shareholder in doubt about what documents
are required should contact the Transfer Agent.
Payment in redemption of shares is normally made within three business days
after receipt by the Transfer Agent of a request in proper form, provided that
payment in redemption of shares purchased by check or draft will be effected
only after such check or draft has been collected. Although it is anticipated
that this process will be completed in less time, it may take up to 15 days.
Redemption proceeds will not be delayed when shares have been paid for by bank
wire or where the account holds a sufficient number of shares already paid for
with collected funds.
Except in extraordinary circumstances and as permissible under the 1940 Act,
payment for shares redeemed will be made promptly after receipt of a
redemption request, if in good order, but not later than seven days after the
redemption request is
<PAGE>
received in proper form. Requests for redemption which are subject to any
special conditions or which specify an effective date other than as provided
herein cannot be accepted.
The Investment Company reserves the right to redeem mandatorily the shares in
a shareholder's account (other than a retirement plan account) if the balance
is reduced to less than $1,500 in net asset value through redemptions or other
action by the shareholder. Notice will be given to the shareholder at least 30
days prior to the date fixed for such redemption, during which time the
shareholder may increase its holdings to an aggregate amount of $1,500 or more
(with a minimum purchase of $200 or more.) This minimum balance may be waived.
Redemption-in-Kind. The Investment Company reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for
redemption or repurchase order by making payment in whole or in part in
readily marketable securities chosen by the Fund and valued as they are for
purposes of computing the Fund's net asset value (a redemption-in-kind). If
payment is made in securities, a shareholder may incur transaction expenses in
converting these securities into cash.
Transfer Agent. MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio 45201-5354,
has been retained by the Advisor to serve as the Fund's transfer agent,
dividend paying and shareholder service agent. In addition, MGF Service Corp.
has been retained by the Advisor to assist in providing certain administrative
services to the Fund. MGF Service Corp. is a subsidiary of Leshner
Financial, Inc., of which Robert H. Leshner is the controlling shareholder.
RETIREMENT PLANS
Shares of the Fund may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs);
Qualified Retirement Plans for self-employed persons and their employees;
corporate pension and profit-sharing plans; Simplified Employee Pension (SEP)
IRAs. Forms for establishing IRAs, SEP-IRAs, and Qualified Retirement Plans
are available through the Investment Company, as are forms for corporate
Pension and Profit-Sharing plans. Please contact the Investment Company for
more information about establishing these accounts. In accordance with
industry practice, there may be an annual account charge for participation in
these plans. Information regarding these charges is available from the
Investment Company.
Retirement plan participants may receive additional services related to their
plan at no extra cost to any shareholder. The Advisor is responsible under the
terms of the Advisory Agreement to pay any compensation due to organizations
hired for sub-transfer agency services where such services are specific to
retirement plans using the Fund as an investment option.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION
The Fund has qualified, and intends to continue to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code (the
"Code"). For any tax year in which the Fund so qualifies and meets certain
other distribution requirements, it will not incur a federal tax liability.
The Fund intends to distribute substantially all of its net investment income
once each year in September.
The Fund intends to distribute substantially all of its net realized capital
gains, if any, at the end of the calendar year (on or about December 15).
Dividend and capital gains distributions, if any, may be reinvested in
additional shares at net
<PAGE>
asset value on the day of reinvestment, or may be received in cash. All
dividends and distributions are taxable to a shareholder (except tax-exempt
shareholders) whether or not they are reinvested in shares of the Fund. Any
long-term capital gains distributions are taxable to shareholders as long-term
capital gains, regardless of how long shareholders have held Fund shares.
Shareholders may elect:
o to have all dividends and capital gain distributions automatically
reinvested in additional shares; or
o to receive the income dividends and short-term capital gain
distributions in cash and accept the long-term capital gains distributions
in additional shares; or
o to receive all distributions of income dividends and capital
gains in cash.
Automatic reinvestments will be at net asset value on the day of reinvestment.
If no election is made by a shareholder, all dividends and capital gain
distributions will be automatically reinvested. These elections may be changed
by the shareholder at any time, but to be effective for a particular dividend
or capital gain distribution, the election must be received by the Transfer
Agent approximately 5 business days prior to the payment date to permit the
change to be entered into the shareholder account. The federal income tax
status of dividends and capital gains distributions is the same whether taken
in cash or reinvested in shares.
Dividends and capital gains generally are taxable to shareholders at the time
they are paid. However, dividends or capital gains declared in December by the
Fund and paid in January are taxable as if paid in December. The Fund will
provide to its shareholders federal tax information annually by January 31,
including information about dividends and distributions paid during the year.
If a shareholder has not furnished a certified correct taxpayer identification
number (generally a Social Security number) and has not certified that
withholding does not apply, or if the Internal Revenue Service has notified
the Fund that the taxpayer identification number listed on the account is
incorrect according to their records or that the shareholder is subject to
backup withholding, federal law generally requires the Fund to withhold 31%
from any dividends and/or redemptions (including exchange redemptions).
Amounts withheld are applied to the shareholder's federal tax liability; a
refund may be obtained from the Internal Revenue Service if withholding
results in overpayment of taxes. A shareholder should contact the Transfer
Agent if the shareholder is uncertain whether a proper taxpayer identification
number is on file with the Transfer Agent. Federal law also requires the Fund
to withhold 30%, or the applicable tax treaty rate, from dividends paid to
certain nonresident alien, non-U.S. partnership and non-U.S. corporation
shareholder accounts.
Dividends and interest from foreign issuers earned by the Fund may give rise
to withholding and other taxes imposed by foreign countries, generally at
rates from 10% to 40%. Tax conventions between certain countries and the
United States may reduce or eliminate these taxes. Foreign countries generally
do not impose taxes on capital gains with respect to investments by
non-resident investors. Except as indicated below, to the extent that the Fund
does pay foreign withholding or other foreign taxes on certain of its
investments, investors will not be able to deduct their pro rata shares of
such taxes in computing their taxable income nor be able to take their shares
of such taxes as a credit against U.S. income taxes.
If more than 50% of the Fund's total assets at the close of its fiscal year
consist of securities of foreign corporations, the Fund will be eligible
<PAGE>
to file, and will file, elections with the Internal Revenue Service pursuant
to which shareholders of the Fund will be required to include in their
federal income tax returns as gross income their respective pro rata portions
of foreign taxes paid by the Fund, to treat such amounts as foreign taxes
paid by them, and to deduct such respective pro rata portions in computing
their taxable incomes, or, alternatively, to use them as foreign tax credits
against their U.S. income taxes. The Fund will report annually to its
shareholders the amount per share of such withholding, if any.
The foregoing is a brief discussion of certain federal income tax
considerations. Please see "Taxes - Mutual Funds" in the Statement of
Additional Information for further information regarding the tax implications
of an investment in the Fund.
CALCULATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE
The Fund's net asset value per share is computed by dividing the value of the
securities held by the Fund, plus any cash or other assets (including interest
accrued and dividends declared but not yet received) minus all liabilities
(including accrued expenses), by the total number of shares outstanding at
such time. There is no sales charge in connection with purchases or
redemptions of Fund shares.
The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. The Fund's portfolio
may include securities which trade primarily on non-U.S. exchanges or
otherwise in non-U.S. markets. Because of time zone differences, the prices of
these securities, as used for net asset value calculations, may be established
substantially in advance of the close of the New York Stock Exchange. Foreign
securities may also trade on days when the New York Stock Exchange is closed
(such as a Saturday). The net asset value and public offering price of the
Fund, to the extent that it holds securities valued on foreign markets, may
vary during periods when the New York Stock Exchange is closed. As a result,
the value of the Fund's portfolio may be affected significantly by such
trading on days when a shareholder has no access to the Fund. For further
information, see "How to Invest," "How to Redeem Shares" and "Exchanges
Between Funds" in this Prospectus, and "How to Invest" and "Other Investment
and Redemption Services" in the Statement of Additional Information.
The net asset value and public offering price of the Fund will be determined
as of the close of the regular session of the New York Stock Exchange. The
shares of the Fund are offered at net asset value without a sales charge.
Purchase, redemption and exchange orders received in proper form by the
Transfer Agent before 4:00 p.m., Eastern time, will be priced at the net asset
value next determined on that day (with certain limited exceptions discussed
in the Statement of Additional Information). Orders received by the Transfer
Agent after 4:00 p.m., Eastern time, will be entered at the next calculated
net asset value.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the Fund's portfolio securities transactions are placed by the
Advisor or Sub-Advisor, as applicable. The Advisor and Sub-Advisor strive to
obtain the best available prices in the Fund's portfolio transactions, taking
into account the costs and promptness of executions. Subject to this policy,
transactions may be directed to those broker-dealers who provide research,
statistical and other information to the Fund, the Advisor or the Sub-Advisor
or who provide assistance with respect to the distribution of Fund shares.
There is no agreement or commitment to place orders with any broker-dealer.
<PAGE>
Debt securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price
of the security usually includes a profit to the dealer. government securities
issued by the United States and other countries, and money market securities
in which the Fund may invest, are generally traded in the over-the-counter
(OTC) markets. In underwritten offerings, securities usually are purchased at
a fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On
occasion, securities may be purchased directly from an issuer, in which case
no commissions or discounts are paid. Dealers may receive commissions on
futures, currency and options transactions. Commissions or discounts in
foreign securities exchanges or OTC markets typically are fixed and generally
are higher than those in U.S. securities exchanges or OTC markets. There is
generally less government supervision and regulation of foreign exchanges and
brokers than in the United States. Foreign security settlements may, in some
instances, be subject to delays and related administrative uncertainties.
Subject to the requirements of the Investment Company Act of 1940 and
procedures adopted by the Board of Directors, the Fund may execute portfolio
transactions through any broker or dealer and pay brokerage commissions to a
broker which is an affiliated person of the Investment Company, the Advisor or
the Sub-Advisor, or an affiliated person of such person.
GENERAL INFORMATION
The Investment Company, organized as a Maryland corporation on July 13, 1988,
is a fully managed open-end investment company. Currently, the Investment
Company has authorized several series of capital stock with equal dividend and
liquidation rights within each series. Investment Company shares are entitled
to one vote per share (with proportional voting for fractional shares) and are
freely transferable. Shareholders have no preemptive or conversion rights.
Shares may be voted in the election of directors and on other matters
submitted to the vote of shareholders. As permitted by Maryland law, there
normally will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. The 1940 Act requires that a meeting be held
within 60 days in the event that less than a majority of the directors holding
office has been elected by shareholders. Directors shall continue to hold
office until their successors are elected and have qualified. Investment
Company shares do not have cumulative voting rights, which means that the
holders of a majority of the shares voting for the election of directors can
elect all of the directors. Shareholders holding 10% of the outstanding shares
may call a meeting of shareholders for any purpose, including that of removing
any director. A director may be removed upon a majority vote of the
shareholders qualified to vote in the election. The 1940 Act requires the
Investment Company to assist shareholders in calling such a meeting.
On any matter submitted to a vote of shareholders, such matter shall be voted
by the Fund's shareholders separately when the matter affects the specific
interest of the Fund (such as approval of the Advisory Agreement with the
Advisor and the Portfolio Management Agreement with the Sub-Advisor) except in
matters where a vote of all Fremont Funds in the aggregate is required by the
1940 Act or otherwise.
Pursuant to the Articles of Incorporation, the Investment Company may issue
ten billion shares. This amount may be increased or decreased from time to
time in the discretion of the Board of Directors. Each share of a series
represents an interest in that series only, has a par value of $0.0001 per
share, represents an equal
<PAGE>
proportionate interest in that series with other shares of that series and is
entitled to such dividends and distributions out of the income earned on the
assets belonging to that series as may be declared at the discretion of the
Board of Directors. Shares of a series when issued are fully paid and are
non-assessable. The Board of Directors may, at its discretion, establish and
issue shares of additional series of the Investment Company.
Stephen D. Bechtel, Jr., and members of his family, including trusts for
family members, due to their shareholdings, may be considered controlling
persons of the Fund under applicable Securities and Exchange Commission
regulations.
Telephone Numbers and Addresses
To make an initial purchase:
1. By mail:
Fremont Mutual Funds, Inc.
c/o MGF Service Corp.
P.O. Box 5354
Cincinnati, OH 45201-5354
Street address:
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
2. By wire: Via the Federal Reserve
Bank Wire System to:
FIFTH CIN
(Fifth Third Bank)
ABA No. 042000314
Credit to: Fremont Mutual Funds, Inc.
Account No. 999-36844
Further Credit to: Fremont Fund name, shareholder name, and account
number
To make a subsequent purchase:
Include shareholder name and account number. Use the same instructions for
initial purchase.
To redeem shares:
1. By mail: same instructions as above for purchase by mail.
Redemptions greater than $25,000 or payments to a party or address other than
registered on the account require a signature guarantee. See "Signature
Guarantees."
2. By telephone: 800-548-4539
Requires prior selection of telephone redemption option.
For further copies of this Prospectus, the Statement of Additional
Information, and details of automatic investment, retirement and systematic
withdrawal plans, please contact:
Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
800-548-4539 or 415-284-8900
Fremont Mutual Funds, Inc.
Fremont Money Market Fund
Fremont California Intermediate
Tax-Free Fund
Fremont Bond Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
<PAGE>
Fremont International Small Cap Fund
Fremont Emerging Markets Fund
Fremont U.S. Micro-Cap Fund
For more information on the Fremont Mutual Funds please call 800-548-4539 or
write to:
Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
Advisor/Transfer Agent
Fremont Investment Advisors, Inc.
333 Market Street, Suite 2600
San Francisco, CA 94105
Sub-Transfer Agent
Mailing Address:
MGF Service Corp.
P.O. Box 5354
Cincinnati, OH 45201-5354
800-548-4539
Street Address:
MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
Custodian
The Northern Trust Company
50 South Lasalle Street
Chicago, IL 60675
Legal Counsel
Morrison & Foerster, L.L.P
345 California Street
San Francisco, CA 94104
Auditors
Coopers & Lybrand, L.L.P.
333 Market Street
San Francisco, CA 94105
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE ADVISOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
NOTES:
50 Beale Street, Suite 100, San Francisco, CA 94105 o 800-548-4539 (press 1)
9801 Washingtonian Blvd., Suite 105, Gaithersburg, MD 20878 o 888-373-6684
3000 Post Oak Blvd., Suite 100, Houston, TX 77056 o 800-735-2705
Distributed by Funds Distributor, Inc., 50 Beale Street, Suite 100,
San Francisco, CA 94105
To Invest in the Fund, fill out this application and return in the
enclosed postage-paid envelope.
<PAGE>
Account Application
Shareholder Services
P.O. Box 5354, Cincinnati, OH 45201-5354
800-548-4539
Please Print in capital letters
To open an IRA, please call for an Individual Retirement Account application.
1. Please Provide Some Basic Information
Type of Account: o Individual o Joint Tenants o Gift to Minor o Trust
o Corporation, Partnership or Entity
(Complete A only)(Complete A&B)(Complete C only)(Complete D only)
(Complete E only)
A.
Name First MI Last Social Security Number Date of
Birth (M-D-Y)
B.
Name First MI Last Social Security Number Date of
Birth (M-D-Y)
(Joint Tenants with Rights of Survivorship assumed unless otherwise stated)
C.
Minor's Name First MI Last
Minor's Social Security Number Minor's Date of Birth (M-D-Y)
Custodian Name First MI Last
Minor's State of Residence
(only one permitted)
D.
Trustee Name First MI Last Name of Trust
Second Trustee First MI Last Date of Trust (M-D-Y)
Taxpayer ID Number (if any)
E.
Corporation or Entity Name Taxpayer ID Number
2. Please Provide Account Mailing Address
<PAGE>
( ) ( )
Street and Apartment Number, or P.O. Box Home Phone Business Phone
City State Zip Citizenship: o U.S. o Other:
3. Please Make Initial Investment Selection ($2,000.00 minimum)
U.S. Equity Stock:
o U.S. Micro-Cap Fund (48) $
To invest in another Fremont Fund, please call 800-548-4539 (press 1) to
request a combined fund family prospectus and application. Please read the
prospectus carefully before you invest or send money.
4. Method of Investment
o Check: Please attach check to application. Please make check payable to
Fremont Mutual Funds. Payment in redemption of shares purchased by check will
normally not be made until after the check clears, which may take up to 15
days.
o Wire: Send date: . For wire instructions please call 800-548-4539.
5. Please Select Your Dividends and Capital Gain Distribution Method
Income dividends and capital gain distributions will be automatically
reinvested unless you check one of the following: If selected, cash payments
will be made by check and mailed to the account mailing address, unless
otherwise instructed.
o Both Income Dividends and Capital Gain Distributions are to be reinvested.
o Only Income Dividends are to be paid in cash.
o Both Income Dividends and Capital Gain Distributions are to be paid
in cash.
Continued On Back
6. Consider Convenient Telephone Exchange and Redemption Privileges
Telephone Exchange Privilege (If box below is not checked, telephone exchange
privilege will not be added to your account.)
o I would like the telephone exchange privilege. I authorize the Transfer
Agent to honor telephonic exchange requests believed by it to be authentic. I
agree that I will not request an exchange until I have read the Prospectus of
any Fund into which I wish to exchange.
Telephone Redemption Privilege (If box below is not checked, telephone
redemption privilege will not be added to your account.)
o I would like the telephone redemption privilege. I authorize the Transfer
Agent to honor telephonic redemption requests believed by it to be authentic.
Note: Neither the Fund, nor the Transfer Agent, nor their respective
affiliates, will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost or expense in
acting on such telephone instructions. The affected shareholder(s) will bear
the risk of any such loss.
<PAGE>
The Fund, or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Fund and/or the
Transfer Agent do not employ such procedures, they may be liable for losses
due to unauthorized or fraudulent instructions. These procedures may include,
among others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transaction,
and/or tape recording telephone instructions.
7. Pre-Authorize Transfers to Your Checking Account
o I may request a direct deposit or bank wire when making a withdrawal. I
understand that there is no charge for a direct deposit and that there is an
$8.00 fee per bank wire. (Please attach a voided check.)
Please attach voided check here
8. Convenient Automatic Money Transfer Options
Fremont also offers automatic money transfer options for investments and
withdrawals.
Automatic Investment Plan: for regular interval purchases from your bank
checking account to Fremont.
Automatic Withdrawals: for regular interval withdrawals from your
Fremont account.
Please call 800-548-4539 (press 1) to request the appropriate forms.
9. Signature of all Holders and Taxpayer Certification
The undersigned certifies that I am of legal age and have full authority and
legal capacity to purchase shares of the Fremont U.S. Micro-Cap Fund and
affirm that I have read the Prospectus, agree to its terms and understand that
by signing below: (a) all information provided in the above items (if
applicable) will apply to any Fund into which my shares may be exchanged now
or in the future; (b) I hereby ratify any instructions given on this account
and any account into which I exchange relating to the above items and agree
that neither the Fund nor the Transfer Agent will be liable for any loss, cost
or expense for acting upon such instructions (by telephone or in writing)
believed by it to be genuine and in accordance with the procedures described
in the Prospectus; (c) my responsibility is to read the Prospectus of any Fund
into which I exchange; and (d) as required by federal law, I certify under
penalty of perjury (1) that the Social Security or Taxpayer Identification
Number(s) provided on this form is/are correct and (2) that the Internal
Revenue Service has never notified me that I am subject to 31% backup
withholding, and/or has notified me that I am no longer subject to such backup
withholding. (Please cross out item (2) if this statement does not apply to
you.) The Internal Revenue Service does not require my consent to any
provision of this document other than the certifications to avoid backup
withholding.
(X) Signature Date (X) Signature Date
(X) Signature Date (X) Signature Date
Distributed by Funds Distributor, Inc., 50 Beale Street, Suite 100,
San Francisco, CA 94105
