File Nos. 33-23453
811-5632
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE / x/
SECURITIES ACT OF 1933
Post-Effective Amendment No. 21
REGISTRATION STATEMENT UNDER THE /.x/
INVESTMENT COMPANY ACT OF 1940
Amendment No. 24
FREMONT MUTUAL FUNDS, INC.
(Exact Name of Registration as Specified in Charter)
50 Fremont Street, Suite 3600
SAN FRANCISCO, CALIFORNIA 94105
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(415) 284-8500
Albert W. Kirschbaum, Secretary
Fremont Mutual Funds, Inc.
50 Fremont Street, Suite 3600
SAN FRANCISCO, CALIFORNIA 94105
(Name and Address of Agent for Service)
copy to:
Cary I. Klafter
Morrison & Foerster
345 California Street
SAN FRANCISCO, CA 94104-2675
The Registrant has filed a declaration pursuant
to Rule 24f-2. On December 28, 1995, it
filed its Rule 24f-2 Notice for fiscal 1995.
It is proposed that this filing will become effective (check
appropriate box)
--
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485
<PAGE>
FREMONT MUTUAL FUNDS, INC.
CROSS-REFERENCE SHEET
Between Items Enumerated in Form N-1A and
this Registration Statement
Item No. of
PART A OF FORM N-1A CAPTIONS IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Summary of Fees and Expenses
3. Financial Highlights Financial Highlights
4. General Description of The Advisor, the Sub-Advisors
Registrant and the Funds; Investment
Objectives, Policies and Risk
Considerations; General
Investment Policies
5. Management of the Fund The Advisor, the Sub-Advisors
and the Funds; Execution of
Portfolio Transactions;
General Information
6. Capital Stock and Other Shareholder Account Services
Securities and Privileges; Dividends,
Distributions and Federal
Income Taxation; General
Information
7. Purchase of Securities How to Invest; Calculation of
Being Offered Net Asset Value and
Public Offering Price
8. Redemption or Repurchase How to Redeem Shares;
Calculation of Net Asset Value
and Public Offering Price
9. Pending Legal Proceedings Inapplicable
<PAGE>
Item No. of Captions in Statement of
PART B OF FORM N-1A ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Investment Objectives,
History Policies and Risk
Considerations
13. Investment Objectives and Investment Objectives,
Policies Policies and Risk
Considerations; Investment
Restrictions; Appendix A:
Description of Securities
Ratings
14. Management of the Funds Investment Company Directors
and Officers; Investment
Advisory and Other Services
15. Control Persons and Investment Company Directors
Principal Holders of and Officers; Investment
Securities Advisory and Other Services
16. Investment Advisory and Investment Advisory and Other
Other Services Services; Additional
Information
17. Brokerage Allocation and Execution of Portfolio
Other Practices Transactions
18. Capital Stock and Other Additional Information
Securities
19. Purchase, Redemption and How to Invest; Other
Pricing of Securities Investment and Redemption
Being Offered Services
20. Tax Status Taxes -- Mutual Funds; Special
Tax Considerations
21. Underwriters Investment Advisory and Other
Services
22. Calculation of Performance Investment Results
Data
23. Financial Statements Appendix B: Audited Financial
Statements as of October 31,
1995
<PAGE>
ITEMS IN PART C
24. Financial Statements and Exhibits
25. Persons Controlled by or Under
Common Control
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections
of Investment Advisors
29. Principal Underwriter
30. Location of Accounts and Records
31. Management Services
32. Undertakings
<PAGE>
FREMONT
MUTUAL
FUNDS
Prospectus
n Money Market Fund
n Bond Fund
n Global Fund
n Growth Fund
n International Growth Fund
n International Small Cap Fund
n U.S. Micro-Cap Fund
February 20, 1996
Table of Contents
Item Page No.
Summary of Fees and Expenses 3
Financial Highlights 4
The Advisor, The Sub-Advisors and the Funds 8
Investment Objectives, Policies and Risk Considerations 11
General Investment Policies 20
Investment Results 27
How to Invest 28
Shareholder Account Services and Privileges 28
How to Redeem Shares 29
Retirement Plans 31
Dividends, Distributions and Federal Income Taxation 32
Calculation of Net Asset Value and Public Offering Price 33
Execution of Portfolio Transactions 33
General Information 34
Telephone Numbers and Addresses 35
Prospectus
<PAGE>
FREMONT MUTUAL FUNDS, INC. is an open-end,
diversified investment company which under this Prospectus
is offering shares in seven series, or Funds:
FREMONT MONEY MARKET FUND seeks to maximize
current income to the extent consistent with preservation of capital and
liquidity by investing in short-term money market instruments. AN INVESTMENT IN
THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT
OR ANY OTHER ENTITY. THE FUND WILL ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE, BUT THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
DO SO.
FREMONT BOND FUND seeks to realize maximum total return consistent with the
preservation of capital and prudent investment management by investing primarily
in bonds, notes, bills and money market instruments of U.S. and foreign issuers.
FREMONT GLOBAL FUND seeks to maximize total return (including income and
capital gains) while reducing risk by investing in multiple categories of U.S.
and foreign securities.
FREMONT GROWTH FUND seeks to provide growth of capital over the long term by
investing primarily in common stocks of companies domiciled within the United
States.
FREMONT INTERNATIONAL GROWTH FUND seeks to achieve long-term growth of
capital by investing primarily in equity securities of issuers domiciled outside
the United States.
FREMONT INTERNATIONAL SMALL CAP FUND seeks to achieve long-term capital
appreciation by investing primarily in equity securities of small cap companies
domiciled outside the United States.
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 any Fund will achieve its investment
objective.
Shares of each Fund are offered without 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 1-800-548-4539 (press 1) or by
writing to Fremont Mutual Funds, Inc., 50 Beale Street, Suite 100, San
Francisco, California 94105.
SHARES OF THE FUNDS 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.
FOR FURTHER INFORMATION OR TO REQUEST A COPY
OF THE STATEMENT OF ADDITIONAL INFORMATION, CALL
1-800-548-4539.
Please read this Prospectus carefully. It is designed to provide you with
information and to help you decide which of the Funds' objectives meets your
own goals.
<TABLE>
<CAPTION>
SUMMARY OF FEES AND EXPENSES
<S> <C>
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
<CAPTION>
Annual Fund Operating Expenses (as a percentage of average net assets)
Total Fund
Management 12b-1 Other Operating
FEE FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
Money Market Fund(b) .22% None .08% .30%
Bond Fund(c) .40% None .20% .60%
Global Fund .60% None .28% .88%
Growth Fund .50% None .51% 1.01%
International Growth Fund(d) 1.50% None None 1.50%
International Small Cap Fund(e) 2.06% None None 2.06%
U.S. Micro-Cap Fund(e) 2.04% None None 2.04%
Example: You would pay the following total expenses on a $1,000 investment in
each Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund $ 3 $10 $17 $39
Bond Fund 6 20 34 77
Global Fund 9 29 50 111
Growth Fund 11 33 57 127
International Growth Fund 16 49 84 184
International Small Cap Fund 22 67 114 246
U.S. Micro-Cap Fund 21 66 113 244
</TABLE>
The purpose of the above table is to give you information and assistance in
understanding the various costs and expenses of the Funds that an investor may
bear directly or indirectly. The percentages expressing annual fund operating
expenses are based on actual expenses incurred during the most recent fiscal
year, except that Other Expenses of the Growth Fund have been restated to
reflect the amount of administrative fees currently being charged to the Fund.
THESE EXAMPLES 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.
(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) Administrative fees of .15% have been waived by the
Advisor. Absent such waiver, other expenses and total fund operating expenses of
the Money Market Fund would have been .23% and .45%, respectively, for the
fiscal year ended October 31, 1995. (c) Administrative fees of .15% have been
waived by the Advisor. Absent such waiver, other expenses and total operating
expenses of the Bond Fund would have been .35% and .75%, respectively, for the
fiscal year ended October 31, 1995. (d) The International Growth Fund is
obligated, under the terms of the management agreement, to pay the Advisor an
annual management fee of 1.5% of average net assets. This fee is higher than
that paid by most investment companies. However, the Advisor is obligated to pay
all of the Fund's other ordinary operating expenses. See "The Advisor, The
Sub-Advisors and the Funds." (e) The International Small Cap Fund and the U.S.
Micro-Cap Fund are each 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. This fee is higher than that paid by most investment companies.
However, the Advisor is obligated to pay all of the Funds' other ordinary
operating expenses. The Advisor has currently limited the management fee for
each Fund to 1.98% of average net assets. See "The Advisor, The Sub-Advisors and
the Funds."
FINANCIAL HIGHLIGHTS
The financial highlights of the Funds are presented below. The information for
each of the five fiscal years in the period ended October 31, 1995 has been
audited by Coopers & Lybrand, L.L.P., independent accountants, whose unqualified
opinion is included in the Funds' Annual Report. The remaining figures, which
are also audited, are not covered by the accountants' current report. Further
information about the Funds' performance is contained in the Annual Report,
which is included in the Funds' Statement of Additional Information and which
may be obtained without charge.
<TABLE>
MONEY MARKET FUND
<CAPTION>
Period from
Years ended October 31 November 18, 1988
1995 1994 1993 1992 1991 1990 to October 31, 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations
Net investment income(a) .06 .03 .03 .04 .06 .08 .08
Total investment operations .06 .03 .03 .04 .06 .08 .08
Less Distributions
From net investment income (.06) (.03) (.03) (.04) (.06) (.08) (.08)
Total distributions (.06) (.03) (.03) (.04) (.06) (.08) (.08)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total Return# 5.84% 3.49% 2.66% 3.73% 6.51% 7.99% 8.96%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $299,312 $224,439 $24,207 $31,832 $33,814 $62,599 $56,477
Ratio of expenses to average net assets(a) .30% .46% .67% .70% .51% .60% .65%*
Ratio of net investment income to
average net assets(a) 5.70% 4.02% 2.62% 3.70% 6.44% 7.66% 8.04%*
<FN>
* Annualized
(a) Administrative fees have been voluntarily waived for the period from April
1, 1990 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 $.06, 0.45% and 5.55%,
respectively, for the year ended October 31, 1995; $.03, .61% and 3.87%,
respectively, for the year ended October 31, 1994; $.03, .82% and 2.47%,
respectively, for the year ended October 31, 1993; $.04, .85% and 3.55%,
respectively, for the year ended October 31, 1992; $.06, .66% and 6.29%,
respectively, for the year ended October 31, 1991; and $.08, .69% and 7.57%,
respectively, for the year ended October 31, 1990. # Total return would have
been lower had the Advisor not waived expenses.
</TABLE>
<TABLE>
BOND FUND
<CAPTION>
Period from
Years ended October 31 April 30, 1993
1995 1994 to October 31, 1993
<S> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $9.29 $10.27 $10.04
Income from Investment Operations
Net investment income(a) .65 .53 .27
Net realized and unrealized gain (loss) .83 (.98) .24
Total investment operations 1.48 (.45) .51
Less Distributions
From net investment income (.64) (.53) (.27)
From net realized gains -- -- (.01)
Total distributions (.64) (.53) (.28)
Net asset value, end of period $10.13 $9.29 $10.27
Total Return# 16.49% -4.42% 10.21%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $86,343 $64,244 $11,738
Ratio of expenses to average net assets(a) .60% .66% .50%*
Ratio of net investment income to average net assets(a)6.69% 5.76% 5.35%*
Portfolio Turnover Rate 21% 205% 13%*
<FN>
*Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased in over time. 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 $.64, .75%, and 6.54%,
respectively, for the year ended October 31, 1995; $.50, 1.04% and 5.38%,
respectively, for the year ended October 31, 1994; and $.23, 1.23% and 4.62%,
respectively, for the period ended October 31, 1993. # Total return would have
been lower had the Advisor not waived expenses.
</TABLE>
<TABLE>
GLOBAL FUND
<CAPTION>
Period from
Years ended October 31 November 18, 1988
1995 1994 1993 1992 1991 1990 to October 31, 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $13.13 $13.17 $11.52 $11.25 $9.93 $10.77 $10.00
Income from Investment Operations
Net investment income .40 .26 .32 .39 .47 .54 .57
Net realized and unrealized gain (loss) 1.24 (.03) 1.67 .40 1.34 (.82) (.79)
Total investment operations 1.64 .23 1.99 0.79 1.81 (.28) 1.36
Less Distributions
From net investment income (.50) (.14) (.26) (.40) (.45) (.54) (.45)
From net realized gains (.03) (.13) (.08) (.11) (.04) (.02) (.14)
Return of capital -- -- -- (.01) -- -- --
Total distributions (.53) (.27) (.34) (.52) (.49) (.56) (.59)
Net asset value, end of period $14.24 $13.13 $13.17 $11.52 $11.25 $9.93 $10.77
Total Return 12.78% 1.74% 17.51% 7.10% 18.38% -2.64% 14.42%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $482,355 $453,623 $186,325 $101,839 $74,502 $55,028 $43,918
Ratio of expenses to average net assets .88% .95% .99% 1.09% 1.12% 1.10% 1.02%*
Ratio of net investment income to
average net assets 2.98% 2.47% 2.89% 3.41% 4.34% 5.01% 5.30%*
Portfolio Turnover Rate 83% 52% 40% 50% 81% 36% 51%*
<FN>
*Annualized
</TABLE>
<TABLE>
GROWTH FUND
<CAPTION>
Period from
Years ended October 31 August 14, 1992
1995 1994 1993 to October 31, 1992
<S> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $10.46 $11.25 $10.08 $ 9.92
Income from Investment Operations
Net investment income(a) .13 .21 .13 .02
Net realized and unrealized gain (loss) 2.74 (.02) 1.16 .18
Total investment operations 2.87 .19 1.29 .20
Less Distributions
From net investment income (.17) (.18) (.12) (.04)
From net realized gains (.10) (.80) -- --
Total distributions (.27) (.98) (.12) (.04)
Net asset value, end of period $13.06 $10.46 $11.25 $10.08
Total Return # 28.12% 1.72% 12.80% 9.35%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $59,632 $27,244 $42,306 $32,388
Ratio of expenses to average net assets(a) .97% .94% .87% .94%*
Ratio of net investment income to average net assets(a) 1.02% 1.31% 1.19% 1.08%*
Portfolio Turnover Rate 108% 55% 44% 49%*
<FN>
*Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. 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 $.12, 1.01% and .98%, respectively,
for the year ended October 31, 1995; $.19, 1.08% and 1.17%, respectively, for
the year ended October 31, 1994; $.11, 1.02% and 1.04%, respectively, for the
year ended October 31, 1993; and $.02, 1.18% and .84%, respectively, for the
period from August 14, 1992 to October 31, 1992. # Total return would have been
lower had the Advisor not waived expenses.
</TABLE>
<TABLE>
INTERNATIONAL GROWTH FUND
<CAPTION>
Year Period from
Ended March 1, 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 $9.79 $9.57
Income from Investment Operations
Net investment income .10 .02
Net realized and unrealized gain (loss) (.09) .20
Total investment operations .01 .22
Less Distributions
From net investment income (.08) --
Total distributions (.08) --
Net asset value, end of period $9.72 $9.79
Total Return 0.13% 3.44%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $32,156 $29,725
Ratio of expenses to average net assets 1.50% 1.50%*
Ratio of net investment income to average net assets 1.19% .35%*
Portfolio Turnover Rate 32% 44%*
<FN>
*Annualized
</TABLE>
<TABLE>
INTERNATIONAL SMALL CAPFUND
<CAPTION>
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 $9.86 $10.00
Income from Investment Operations
Net investment income (loss)(a) .10 (.01)
Net realized and unrealized loss (.88) (.13)
Total investment operations (.78) (.14)
Less Distributions
From net investment income (.08) --
Total distributions (.08) --
Net asset value, end of period $9.00 $9.86
Total Return # -7.96% -4.15%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $4,245 $1,768
Ratio of expenses to average net assets (a) 2.06% 2.50%*
Ratio of net investment income (loss) to
average net assets (a) 1.67% -.28%*
Portfolio Turnover Rate 96% --
<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 $.07, 2.50% and 1.23%,
respectively, for the year ended October 31, 1995.
# Total return would have been lower had the Advisor not waived expenses.
</TABLE>
<TABLE>
U.S. MICRO-CAP FUND
<CAPTION>
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 # 38.68% 10.69%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $7,792 $2,052
Ratio of expenses to average net assets (a) 2.04% 2.50%*
Ratio of net investment income (loss) to
average net assets (a) -.67% .68%*
Portfolio Turnover Rate 144% 129%*
<FN>
*Annualized
(a) Management fees have been voluntarily waived for the period February 1, 1995
to October 31, 1995. If fees had been charged fully, net investment income per
share, ratio of expenses to average net assets and ratio of net investment
income to average net assets would have been -$.08, 2.50% and -1.13%,
respectively, for the year ended October 31, 1995.
# Total return would have been lower had the Advisor not waived expenses.
</TABLE>
THE ADVISOR, THE SUB-ADVISORS AND THE FUNDS
Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end,
diversified investment company which under this Prospectus is offering shares
in seven series, or Funds. The Board of Directors of the Investment Company is
permitted to create additional Funds at any time. Each Fund has its own
investment objective and policies and operates as a separate mutual fund.
FREMONT INVESTMENT ADVISORS, INC. PROVIDES INVESTMENT ADVISORY SERVICES TO
THE FREMONT FUNDS.
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 each 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 each 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 investment management firms (the
"Sub-Advisors") to provide certain of the Funds with portfolio management
services. The Advisor's Investment Committee oversees the portfolio management
of the Funds, including the services provided by the Sub-Advisors.
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 The Fremont Group, Inc. (formerly Bechtel Investments, 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
Funds. 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 applicable Fund. The Advisor may in its discretion manage
all or a portion of a Fund's portfolio directly with or without the use of a
sub-advisor.
For additional information about the Advisor and the Sub-Advisors, see
"Investment Advisory and Other Services" in the Statement of Additional
Information.
Money Market Fund
As compensation for its services to the Money Market Fund, the Advisor receives
from the Fund an advisory fee, computed daily and paid monthly, of .30% per
annum of the first $50 million of the Fund's average net assets and .20% of such
assets in excess of $50 million. The Advisory Agreement also provides that the
Fund will pay to the Advisor an administrative fee of .15% per annum of average
net assets. The Advisor is waiving the entire administrative fee with respect to
the Fund until further notice. See "Other Expenses of the Funds" below.
n Norman Gee is the Portfolio Manager for the Money Market Fund and Vice
President of the Advisor. Norman has 18 years' experience in portfolio
management and analysis. He is a graduate of San Francisco State University.
Bond Fund
As compensation for its services to the Bond Fund, the Advisor receives from the
Fund an advisory fee of .40% per annum of the Fund's average net assets,
computed daily and paid monthly. The Advisory Agreement also provides that the
Fund will pay to the Advisor an administrative fee of .15% per annum of average
net assets. The Advisor is waiving the entire administrative fee with respect to
the Fund until further notice. See "Other Expenses of the Funds" below.
PIMCO SERVES AS SUB-ADVISOR FOR THE BOND FUND. PIMCO CURRENTLY MANAGES OVER $75
BILLION AND IS ONE OF THE MOST RECOGNIZED BOND FUND MANAGERS IN THE WORLD.
Pacific Investment Management Company ("PIMCO"), 840 Newport Center Drive, Suite
360, Newport Beach, California 92660, serves as Sub-Advisor for the Bond Fund
pursuant to a Portfolio Management Agreement. PIMCO is an investment counseling
firm founded in 1971, and currently has over $75 billion of assets under
management. The controlling partner of PIMCO is PIMCO Advisors L.P., in which
Pacific Mutual Life Insurance Company indirectly holds an approximate 62.7%
interest and the remaining interest is held indirectly by a group comprised of
the managing directors of PIMCO. PIMCO is registered as an investment advisor
with the Securities and Exchange Commission and as a commodity trading advisor
with the Commodity Futures Trading Commission. William H. Gross, CFA, a managing
director of PIMCO, is the portfolio manager of the Fund and has served in that
capacity since March 1, 1994. A founder of the firm, Bill has been associated
with PIMCO for 23 years. He received his bachelor's degree from Duke University
and his MBA from the UCLA Graduate School of Business.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Bond Fund), the Advisor and PIMCO provides that
PIMCO will manage the investment and reinvestment of the assets of the Fund and
continually review, supervise, and administer the Fund's investments. PIMCO 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 PIMCO a fee equal to .25% per annum of Fund assets managed by PIMCO.
The Portfolio Management Agreement with PIMCO 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 PIMCO.
Global Fund
As compensation for its services to the Global Fund, the Advisor receives from
the Fund an advisory fee of .60% per annum of the Fund's average net assets,
computed daily and paid monthly. The Advisory Agreement also provides that the
Fund will pay to the Advisor an administrative fee of .15% per annum of average
net assets. See "Other Expenses of the Funds" below.
THE ADVISOR'S ASSET ALLOCATION REVIEW IS BASED ON FORECASTS OF RETURNS FOR EACH
ASSET CLASS.
The Advisor will allocate and reallocate the assets of the Global Fund to seek
to achieve the Fund's investment objective. This will involve a periodic review
of the outlook for various securities which may result in reallocation of assets
among the categories. The Advisor's asset allocation review process is based on
forecasts of returns for each asset class. The investment environment is also
analyzed since capital markets often anticipate economic developments.
Given the Advisor's evaluation, an appropriate asset mix is determined for the
Fund.
The Global Fund is managed by the Advisor's Asset Allocation Committee, whose
members are Robert J. Haddick, Alexandra Kinchen, Vincent P. Kuhn, Jr.,
Peter F. Landini, and David L. Redo.
n Robert J. Haddick, CFA, is Vice President of the Advisor and a member of its
Investment and Equity Committees. His primary responsibilities include
developing global asset allocation and investment management strategies.
Bob earned his B.A. and M.B.A. from the University of Illinois.
n Alexandra Kinchen is Vice President of the Advisor and a member of its
Investment and Fixed Income Committees. Sandie earned her B.A. and M.B.A.
from Golden Gate University, San Francisco, California.
n Vincent P. Kuhn is Executive Vice President and Director of Fremont Mutual
Funds and the Advisor. He is Chairman of the Advisor's Fixed Income Committee
and is also a member of the Fremont Investment Committee. Vince received an
undergraduate degree in Finance from Iona College, and an M.B.A. from New York
University.
n Peter F. Landini is Senior Vice President and Director of the Advisor and a
member of its Investment Committee. Pete graduated from the University of
Santa Clara with a degree in Accounting and received an M.B.A. from Golden Gate
University, San Francisco, California. He is Chairman of the Advisor's Equity
Committee.
n David L. Redo is a Director and President of Fremont Mutual Funds and
President, CEO and Chief Investment Officer for the Advisor. He has overall
responsibility for the management of approximately $3.5 billion of marketable
securities portfolios including the Fremont Mutual Funds. Prior to joining the
Advisor's predecessor organization in 1977, Dave was responsible for Pacific
Telesis' Pension Fund Investments. He received a B.S. in Electrical Engineering
from the University of California, Berkeley and an M.B.A. from the University of
Santa Clara.
Growth Fund
As compensation for its services to the Growth Fund, the Advisor receives from
the Fund an advisory fee of .50% per annum of the Fund's average net assets,
computed daily and paid monthly. The Advisory Agreement also provides that the
Fund will pay to the Advisor an administrative fee of .15% per annum of average
net assets. See "Other Expenses of the Funds" below.
The Equity Committee is responsible for managing the mix between the portion of
the Growth Fund's portfolio which is managed directly by the Advisor and the
portion of the Fund's portfolio which is managed by the Fund's Sub-Advisor, and
is responsible for reviewing the securities and overall characteristics of the
Fund's portfolio.
The portfolio managers for the Growth Fund are W. Kent Copa and Peter F.
Landini. Ken has co-managed the Fund since January 1, 1995. Pete has
co-managed the Fund since its inception.
n W. Kent Copa, CFA, is Vice President of the Advisor and a member of its
Equity Committee. Ken earned his B.A. and M.B.A. from Brigham Young University.
For a biography on Peter F. Landini, chairman of the Advisor's Equity Committee,
please refer to the Global Fund section.
Sit Investment Associates, Inc. ("Sit Associates"), 4600 Norwest Center,
Minneapolis, Minnesota 55402, acts as Sub-Advisor to the Growth Fund and manages
a portion of the Fund's assets pursuant to a Portfolio Management Agreement.
Eugene C. Sit, CFA, C.P.A., who has been the Chairman and Chief Executive
Officer of Sit Associates since 1981, serves as portfolio manager for that
portion of the Fund's assets managed by Sit Associates. Gene is a native of
Canton, China, and has been a resident of the United States since 1948. He was
educated at DePaul University in Chicago, where he received his B.S.C. degree in
1960. Sit Associates has been providing investment advice, management and
related services to mutual funds, tax-exempt and taxable institutional
investors, and individuals since 1981, and currently manages assets in excess of
$5 billion. Sit Associates and its affiliates manage both domestic and
international assets and employ a growth-oriented investment management
philosophy which emphasizes investing in growth companies with above-average
earnings growth potential.
Sit Associates is the controlling shareholder of Sit/Kim International
Investment Associates, Inc. ("Sit/Kim International"), which specializes in
global equity investing including emerging economies. The parent company of the
Advisor, The Fremont Group, Inc., owns approximately 17% of Sit/Kim
International and David Redo, the President of the Advisor and the Investment
Company, is a member of the Board of Directors of Sit/Kim International. The
Bechtel Retirement Plan has employed Sit Associates as an investment manager for
over ten years.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Growth Fund), the Advisor and Sit Associates
provides that Sit Associates will manage the investment and reinvestment of a
portion of the Fund's assets and will continually review, supervise and
administer the Fund's equity investments. Sit Associates 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
Sit Associates a fee equal to .40% per annum of Fund assets managed by Sit
Associates. The Portfolio Management Agreement with Sit Associates 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 Sit Associates.
International Growth Fund
Under the terms of the Advisory Agreement, the International Growth Fund pays
the Advisor a fee of 1.50% per annum of the Fund's average net assets, computed
daily and paid monthly. 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. This fee is higher than that paid by most investment
companies, but most other investment companies pay their own ordinary operating
expenses in addition to a management fee.
The portfolio managers for the International Growth Fund since September 1995
are Peter F. Landini, Andrew L. Pang and Robert J. Haddick.
n Andrew L. Pang is Vice President of the Advisor and a member of its
Investment Committee and Equity Committee. Andrew received his degree in
Finance from San Francisco State University and received an M.B.A. from
Golden Gate University, San Francisco, California.
For biographies of Peter F. Landini and Robert J. Haddick, please refer to the
Global Fund section.
International Small Cap Fund
Under the terms of the Advisory Agreement, the International Small Cap 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. This fee is higher than that paid by most investment
companies, but most other investment companies pay their own ordinary operating
expenses in addition to a management fee.
ACADIAN ASSET MANAGEMENT SERVES AS THE SUB-ADVISOR FOR THE INTERNATIONAL SMALL
CAP FUND. ACADIAN MANAGES $2.6 BILLION IN INTERNATIONAL PORTFOLIOS.
The Advisor currently intends to limit the Fund's management fee to 1.98% of
average net assets.
Acadian Asset Management, Inc. ("Acadian"), Two International Place, Boston,
Massachusetts 02110, serves as Sub-Advisor to the International Small Cap Fund
pursuant to a Portfolio Management Agreement. Acadian is an international
investment management firm and currently manages approximately $2.6 billion in
assets. Acadian is a wholly-owned subsidiary of United Asset Management
Corporation and provides investment management services to corporations, pension
and profit-sharing plans, 401(k) and thrift plans, endowments, foundations and
other institutions and individuals. Dr. Gary L. Bergstrom, President of Acadian,
oversees the day-to-day investment decisions for the Fund and has done so since
the Fund's inception. Dr. Bergstrom founded Acadian's predecessor, Acadian
Financial Research, Inc., in 1977.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the International Small Cap Fund), the Advisor and
Acadian provides that Acadian will manage the investment and reinvestment of the
assets of the Fund and continually review, supervise and administer the Fund's
investments. Acadian 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 Acadian a fee equal to .75% per annum
of the first $50 million of the Fund's average net assets, .65% of the next $50
million of such assets, .50% of the next $100 million of such assets and .40% of
such assets in excess of $200 million. The Portfolio Management Agreement with
Acadian 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 Acadian Asset Management.
U.S. Micro-Cap Fund
Under the terms of the Advisory Agreement, the U.S. Micro-Cap 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. This fee is higher than that paid by most investment companies, but
most other investment companies pay their own ordinary operating expenses in
addition to a management fee.
MORGAN GRENFELL CAPITAL MANAGEMENT, INC. SERVES AS THE SUB-ADVISOR FOR THE U.S.
MICRO-CAP FUND. MORGAN MANAGES OVER $500 MILLION IN SMALL- AND
MICRO-CAP STOCKS.
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 U.S. Micro-Cap
Fund pursuant to a Portfolio Management Agreement. 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 U.S. Micro-Cap 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.
Other Expenses of the Funds. In addition to the fees described above, each of
the Money Market Fund, the Bond Fund, the Global Fund and the Growth Fund pays
all expenses not assumed by the Advisor. These expenses include, but are not
limited to, the following: custodian, stock transfer and dividend disbursing
fees and expenses; costs of mailing reports, prospectuses, proxy statements and
notices to existing shareholders; interest, taxes and insurance; expenses of the
issuance and redemptions of shares of the Fund (including registration and
qualification fees); legal and auditing expenses; fees and expenses of the
Directors unaffiliated with the Advisor; and association dues. All general
Investment Company expenses are allocated among and charged to the assets of
each Fund on a basis that the Board of Directors deems fair and equitable. The
Advisory Agreement provides that the Advisor will reimburse each Fund for
expenses in excess of expense limitations imposed by state regulations. The
total expenses of each Fund presently are limited by California securities laws
to 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.
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The investment objective and policies of each Fund are stated below. A broad
range of objectives and policies is offered because the Funds are intended to
offer investment alternatives for a broad range of investors, who are expected
to have a wide and varying range of investment objectives. All of the Funds
(except for the Money Market Fund) are 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
particular circumstances. Accordingly, there is no assurance that any Fund will
achieve its investment objective.
Money Market Fund
THE FREMONT MONEY MARKET FUND SEEKS TO MAXIMIZE CURRENT INCOME TO THE EXTENT
CONSISTENT WITH PRESERVATION OF CAPITAL AND LIQUIDITY.
The investment objective of the Money Market Fund is to maximize current income
to the extent consistent with preservation of capital and liquidity. The Fund
seeks to achieve its objective by investing primarily 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; and other
debt securities having no more than 397 days to maturity as required by the
Investment Company Act of 1940, as amended (the "1940 Act"). The Money Market
Fund also may enter into repurchase agreements. Though it has no current
intention to do so, the Fund may in the future enter into reverse repurchase
agreements.
THE FUND ATTEMPTS TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE.
The Fund attempts to maintain a constant net asset value of $1.00 per share by
valuing its securities using the amortized cost method. To do so, it must invest
only in readily marketable short-term securities with remaining maturities of
not more than 397 days (as allowed by regulations under the 1940 Act) which are
of high quality and present minimal credit risks as determined by the Advisor,
under the direction of the Board of Directors. The portfolio must have a
dollar-weighted average maturity of not more than 90 days. At least 25% of the
Fund's assets will have a maturity of 90 days or less. All portfolio securities
will be denominated in U.S. dollars.
At the time of purchase, short-term securities must be considered "First Tier"
quality: 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 unrated, of comparable quality as
determined specifically by the Advisor, under the direction of the Board of
Directors. There are currently six NRSROs: Standard & Poor's Corporation
("S&P"), Moody's Investor Service, Inc. ("Moody's"), Fitch Investors Services,
Inc. ("Fitch"), Duff & Phelps, Inc. ("D&P"), IBCA Limited and its affiliate
IBCA, Inc. ("IBCA"), and Thomson Bankwatch, Inc. ("TBW"). Generally, high
quality short-term securities must be issued by an entity with an outstanding
debt issue rated single "A" or better by an NRSRO, or if unrated, by an entity
of comparable quality as determined specifically by the Advisor, under the
direction of the Board of Directors. Obligations of foreign banks, foreign
corporations and foreign branches of domestic banks must be payable in U.S.
dollars. See Appendix A of the Statement of Additional Information for a
description of rating categories.
The Fund may invest no more than 5% of its total assets in the securities of any
one issuer, other than U.S. Government securities, except in times of unexpected
shareholder redemptions or purchases. In such circumstances, the Fund may invest
temporarily in the securities of any one issuer in excess of 5% (but not more
than 25%) of the Fund's total assets for up to three business days after the
purchase to allow the Fund to manage its portfolio liquidity. The Fund will not
invest more than 10% of its assets in time deposits with a maturity of greater
than seven days. The Fund may make loans of its portfolio securities and enter
into repurchase agreements as described in the Statement of Additional
Information, except that such repurchase agreements with a maturity of greater
than seven days and other securities and assets that are not readily marketable
shall not exceed 10% of the value of the Fund's net assets. For a description of
these investments, see "General Investment Policies."
Bond Fund
THE FREMONT BOND FUND SEEKS TO REALIZE MAXIMUM TOTAL RETURN CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND PRUDENT INVESTMENT MANAGEMENT.
The investment objective of the Bond Fund is to seek to realize maximum total
return consistent with the preservation of capital and prudent investment
management.
Under normal market conditions, the Fund will invest at least 65% of the value
of its total assets in debt securities, such as obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities; obligations issued or
guaranteed by a foreign government, or any of its political subdivisions,
authorities, agencies or instrumentalities or by supranational organizations
(such as the World Bank); obligations of domestic or foreign corporations and
other entities; and mortgage-related and other asset-backed securities. The
obligations in which the Fund may invest may have fixed, variable or floating
interest rates. Depending upon the level of interest rates, the average maturity
of these securities will vary between 5 and 15 years. In addition, the Fund may
invest in obligations of domestic and foreign commercial banks and bank holding
companies (such as commercial paper, bankers' acceptances, certificates of
deposit and time deposits).
THE FUND'S INVESTMENTS WILL BE CONCENTRATED IN AREAS OF THE BOND MARKET THAT THE
SUB-ADVISOR BELIEVES ARE RELATIVELY UNDERVALUED.
The Fund will invest primarily in securities rated Baa or better by Moody's or
BBB or better by S&P Ratings Group or, if unrated, determined by the Fund's
Sub-Advisor, Pacific Investment Management Company, to be of comparable quality.
The Fund also may invest up to 10% of its assets in corporate debt securities
that are not investment grade but are rated B or higher by Moody's or S&P.
Although long-term securities generally produce higher income than short-term
securities, long-term securities are more susceptible to market fluctuations
resulting from changes in interest rates. When interest rates decline, the value
of a portfolio invested at higher yields can be expected to rise. Conversely,
when interest rates rise, the value of a portfolio invested at lower yields can
be expected to decline. See "Corporate Debt Securities" below for more
information on quality ratings and risks involved with lower rated securities.
The Fund may invest directly in foreign currency denominated debt securities
which meet the credit quality guidelines set forth for U.S. holdings. Under
normal market conditions, at least 60% of the Fund's total assets will be
invested in securities of U.S. issuers and at least 80% of the Fund's total
assets, adjusted to reflect the Fund's net exposure after giving effect to
currency transactions and positions, will be denominated in U.S. dollars. The
Fund may not invest more than 25% of its total assets in the securities of
issuers domiciled in a single country other than the United States.
In selecting securities and currencies for the Fund's portfolio, the Sub-Advisor
utilizes economic forecasting, interest rate expectations, credit and call risk
analysis and other security and currency selection techniques. The proportion of
the Fund's assets invested in securities with particular characteristics (such
as maturity, type, and coupon rate) may vary based on the Sub-Advisor's outlook
for the economy, the financial markets, and other factors. The Fund's
investments will be concentrated in areas of the bond market (based on quality,
sector, coupon or maturity) that the Sub-Advisor believes are relatively
undervalued.
The Fund may also employ certain active currency and interest rate management
techniques. The techniques may be used both to hedge the foreign currency and
interest rate risks associated with the Fund's portfolio securities, and, in the
case of certain techniques, to seek to increase the total return of the Fund.
Such active management techniques include foreign currencies, options on
securities, futures contracts, options on futures contracts and currency, and
swap agreements. See "General Investment Policies" and the Statement of
Additional Information for further information regarding these securities and
other instruments. When the Sub-Advisor deems it advisable because of unusual
economic or market conditions, the Fund may invest all or a portion of its
assets in cash or cash equivalents, such as obligations of banks, commercial
paper and short-term obligations of U.S. or foreign issuers.
In addition, the Fund may purchase securities on a when-issued or forward
commitment basis, engage in portfolio securities lending to the extent permitted
by the 1940 Act and the rules and regulations promulgated thereunder, invest in
reverse repurchase agreements and borrow money for temporary administrative or
emergency purposes. See "General Investment Policies" and the Statement of
Additional Information for more information.
A portion of the Fund's assets may be invested in mortgage-related and other
asset-backed securities. See "General Investment Policies" for a discussion of
these securities.
The Fund may invest in convertible debentures (convertible to equity securities)
and preferred stocks (which may or may not have a dividend yield) using the same
quality and rating criteria noted above.
Fixed income securities of the type held by the Fund generally appreciate in
value when market interest rates decline. If the currency in which a security is
denominated appreciates against the U.S. dollar, the dollar value of the
security will increase. Conversely, a rise in interest rates or a decline in the
exchange rate of the currency would result in a depreciation in value or
adversely affect the value of the security expressed in dollars.
The Fund may participate in the options market, and may enter into futures
contracts and purchase and sell options on such contracts on a non-leveraged
basis. 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. Although these
investment practices will be used primarily to enhance total return 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: the
imperfect correlation between the prices of options and futures contracts and
movement in the price of securities being hedged; the possible absence of a
liquid secondary market; in the case of over-the-counter options, the risk of
default by the counterparty; and the dependence upon the Sub-Advisor's ability
to correctly predict movements in the direction of interest rates and securities
prices. The Fund currently intends to commit no more than 5% of its net assets
to premiums when purchasing options. The Fund currently intends to limit its
writing of options so that the aggregate value of the securities underlying such
options, as of the date of sale of the options, will not exceed 5% of the Fund's
net assets. A more thorough description of these investment practices and their
associated risks is contained in "General Investment Policies" and the Statement
of Additional Information.
Corporate Debt Securities. The Fund's investments in dollar-denominated and
non-dollar denominated corporate debt securities of domestic or foreign issuers
are limited to corporate debt securities (corporate bonds, debentures, notes and
other similar corporate debt instruments) which meet the minimum ratings
criteria set forth for the Fund, or, if unrated, are in the Sub-Advisor's
opinion comparable in quality to corporate debt securities in which the Fund may
invest.
Securities which are rated BBB by S&P or Baa by Moody's are considered
investment grade, but may have speculative characteristics, and changes in
economic conditions may lead to a weakened capacity to make principal and
interest payments than is the case with higher rated securities. The securities
rated below Baa by Moody's or BBB by S&P (sometimes referred to as "junk bonds")
in which the Fund may invest (to a limited extent) will have speculative
characteristics (including the possibility of default or bankruptcy of the
issuers of such securities, market price volatility based upon interest rate
sensitivity, questionable creditworthiness and relative liquidity of the
secondary trading market). Because such lower-rated bonds have been found to be
more sensitive to adverse economic changes or individual corporate developments
and less sensitive to interest rate changes than higher-rated investments, an
economic downturn could disrupt the market for such bonds and adversely affect
the value of outstanding bonds and the ability of issuers to repay principal and
interest. In addition, in a declining interest rate market, issuers of
lower-rated bonds may exercise redemption or call provisions, which may force
the Fund, to the extent it owns such securities, to replace those securities
with lower yielding securities. This could result in a decreased return for
investors. For further information, see the Statement of Additional Information.
Global Fund
THE FREMONT GLOBAL FUND SEEKS TO MAXIMIZE TOTAL RETURN (INCLUDING INCOME AND
CAPITAL GAINS) WHILE REDUCING RISK. THE FUND ALLOCATES ASSETS SO AS TO EMPHASIZE
ASSETS WITH THE MOST FAVORABLE RETURN OUTLOOK.
The investment objective of the Fund is to seek to maximize total return
(including income and capital gains) while reducing risk. In seeking to achieve
this objective, the Fund intends to allocate assets and periodically review the
asset allocation to emphasize assets with the most favorable return outlook. The
Fund may invest in U.S. stocks, U.S. bonds, foreign stocks, foreign bonds, real
estate securities, precious metals and cash equivalents, and adjust the level of
investment maintained in each asset category in response to changing market
conditions. The allocation of assets will be determined by the Advisor based on
its evaluation of projections of risk, market conditions, asset value and
expected return. This evaluation process is described in more detail below. The
Fund seeks to provide a systematic, disciplined approach to reduce overall
portfolio risk through asset diversification and to weight the portfolio toward
asset categories which, at the time of evaluation, appear to have the best
expected return potential. The Fund is designed for investors who wish to accept
the risks entailed in investments in foreign securities and securities
denominated in various currencies. See "General Investment Policies - Special
Considerations for International Investing."
Description of Classes of Assets. Under normal circumstances, the Fund will
invest in securities of issuers located in at least three different countries,
including the United States. The Advisor will allocate the assets of the Fund
among the following categories of assets:
n U.S. Stocks - The Fund may invest in common and preferred stocks of U.S.-based
companies which are traded on a U.S. exchange or in the Over-the-Counter (OTC)
market. The Fund may also invest in stock index futures contracts, options on
index futures and options on stock indexes.
n U.S. Dollar-Denominated Debt Securities - The Fund may invest in the
following: obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities; U.S. dollar-denominated corporate debt securities of
domestic or foreign issuers; mortgage and other asset-backed securities;
variable and floating rate debt securities; convertible bonds; U.S.
dollar-denominated obligations of a foreign government, or any of its political
subdivisions, authorities, agencies or instrumentalities or by supranational
organizations (such as the World Bank); and securities that are eligible as
short-term cash equivalents. The Fund will not invest more than 5% of its net
assets in variable and floating rate debt securities, nor will the Fund invest
more than 5% of its net assets in guaranteed investment contracts. The Fund may
invest in interest rate futures and options on such futures. See "General
Investment Policies" and the Statement of Additional Information for further
information regarding these securities.
Most of the debt securities in which the Fund will invest are rated Baa or
better by Moody's BBB or better by S&P, or, if unrated, determined to be of
comparable quality by the Advisor. Securities rated BBB or Baa are considered
investment grade, but may have speculative characteristics, and changes in
economic conditions may lead to a weakened capacity to make principal and
interest payments than is the case with higher-rated securities. The Fund also
may invest up to 10% of its assets in corporate debt securities that are not
investment grade but are rated Ba by Moody's or BB by S&P. The securities rated
below Baa by Moody's or BBB by S&P (sometimes referred to as "junk bonds") will
have speculative characteristics (including the possibility of default or
bankruptcy of the issuers of such securities, market price volatility based upon
interest rate sensitivity, questionable creditworthiness and relative liquidity
of the secondary trading market). Because such lower-rated bonds have been found
to be more sensitive to adverse economic changes or individual corporate
developments and less sensitive to interest rate changes than higher-rated
investments, an economic downturn could disrupt the market for such bonds and
adversely affect the value of outstanding bonds and the ability of issuers to
repay principal and interest. In addition, in a declining interest rate market,
issuers of lower-rated bonds may exercise redemption or call provisions, which
may force the Fund, to the extent it owns such securities, to replace those
securities with lower yielding securities. This could result in a decreased
return for investors. For further information, see the Statement of Additional
Information.
n Foreign Stocks - The Fund may purchase stock of foreign-based companies,
including securities denominated in foreign currencies and issues of American
Depository Receipts ("ADRs") and European Depository Receipts ("EDRs")
representing shares of foreign companies. See "General Investment Policies" for
a discussion of ADRs. EDRs are similar to ADRs but are designed for use in the
European securities markets. The Fund may invest in foreign stock index futures,
options on index futures and options on foreign stock indexes. The Advisor may
engage in foreign currency hedging for assets in specific countries based on the
outlook for the currencies involved. Hedging may be undertaken through the
purchase of currency futures or otherwise. For a discussion of these
transactions, see "Options and Futures" and "Forward Currency, Futures and
Options Transactions" in the "General Investment Policies" section of this
Prospectus.
n Foreign Bonds - The Fund may invest in non-U.S. dollar denominated bonds,
notes and bills of foreign governments, their agencies and corporations of a
quality comparable to the U.S. dollar-denominated debt securities described
above. The Advisor will invest the assets in this class based on the outlook for
interest rates and currency trends in a particular country. The Advisor may
engage in foreign currency hedging from time to time based on the outlook for
currency values.
For a discussion of the risk factors associated with foreign investing, see
"General Investment Policies -- Special Considerations for International
Investing."
n Real Estate Securities - The Fund may invest in the equity securities of
publicly traded and private real estate investment trusts ("REITs") which invest
in real estate. A REIT is an entity which concentrates its assets in investments
related to equity real estate and/or interests in mortgages on real estate. The
shares of publicly traded REITs are traded on a national securities exchange or
in the OTC market. Private REITs are not publicly traded, and will be treated as
illiquid securities. The Fund will limit its investments in illiquid securities,
including private REITs, to 15% of its net assets.
n Precious Metals and Commodities Futures - The Fund may hold gold, other
precious metals, or commodity futures positions and/or securities of companies
principally engaged in producing or distributing gold, precious metals or
commodities in the United States and/or in foreign countries. Such companies are
defined as those which generate a substantial portion of their gross income or
net profits from gold, precious metals, or commodities activities and/or have a
substantial portion of their assets productively engaged in these activities.
The Fund may purchase and sell futures and options contracts on commodities.
The Fund will maintain the remainder of its assets in cash or cash equivalents.
The objective of the cash equivalent portfolio is to maximize current income to
the extent consistent with preservation of capital and liquidity.
Other Considerations with Respect to the Fund. The Advisor will allocate
investments among securities of particular issuers on the basis of its views as
to the best values then currently available in the marketplace. Such values of
the fixed income portion of the Fund's portfolio are a function of yield,
maturity, issue classification and quality characteristics, coupled with
expectations regarding the economy, movements in the general level and term of
interest rates, currency values, political developments, and variations of the
supply of funds available for investment. Under normal economic and market
conditions, the fixed income portion of the Fund's portfolio will be invested
primarily in debt instruments with short to intermediate maturities (1 to 10
years to maturity). However, there are no restrictions on the maturity
composition of the Fund's portfolio. If market interest rates decline,
fixed-income securities generally appreciate in value. If the currency in which
a security is denominated appreciates against the U.S. dollar, the dollar value
of the security will increase. Conversely, a rise in interest rates or a decline
in the exchange rate of the currency would adversely affect the value of the
security expressed in dollars. In seeking to achieve the Fund's objective of
total return, the Advisor may increase the average maturity of the fixed income
portion of the Fund's portfolio in times of declining interest rates and
decrease such average maturity in times of rising interest rates. The Advisor
generally evaluates currencies on the basis of fundamental economic criteria
(e.g., relative inflation and interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies), as well as
technical and political data.
In seeking current income or to reduce principal volatility, the Fund may also
(1) enter into futures contracts, including contracts for the future delivery of
debt securities of the types described above, stock index futures contracts with
respect to the S&P 500 Index or other similar broad-based stock market indices
and commodities futures, the initial margins of which are limited to 5% of the
Fund's assets; and (2) purchase put and call options on portfolio securities,
indexes, commodities or futures contracts, the premiums of which are limited to
5% of the Fund's assets.
Further information concerning options and futures and their associated risks is
contained in "General Investment Policies -- Options and Futures Contracts" and
in the Statement of Additional Information.
The Fund may enter into forward currency contracts and currency futures
contracts, and may purchase put and call options on currencies. See "General
Investment Policies -- Forward Currency, Futures and Options Transactions." 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 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 country.
A portion of the Fund's assets may be invested in mortgage-related and other
asset-backed securities. See "General Investment Policies" for a discussion of
these securities.
The Fund may invest in convertible debentures (convertible to equity securities)
and preferred stocks (which may or may not have a dividend yield) using the same
quality and rating criteria noted above.
Growth Fund
THE FREMONT GROWTH FUND SEEKS TO PROVIDE GROWTH OF CAPITAL OVER THE LONG TERM
INVESTING PRIMARILY IN U.S. COMMON STOCKS.
The investment objective of the Growth Fund is to provide growth of capital over
the long term. Although not an objective of the Fund, income may accompany
growth of capital. The Fund invests primarily in a diversified portfolio of
common stocks.
Under normal conditions, at least 65% of the total assets of the Fund will be
invested in U.S. common stocks. In addition, the Fund may purchase securities
convertible into common and preferred stocks, and restricted securities. If
the Fund holds preferred stocks, they will have a rating of B or better.
The Fund may invest in common and preferred stocks of U.S. based companies which
are traded on a U.S. exchange or in the over-the-counter (OTC) market and may
invest in stock index futures contracts, options on index futures and options on
stock indexes.
The Fund may invest a portion of its assets in the equity securities of a
diversified group of small, emerging growth companies before they become
well-recognized as well as in the equity securities of larger companies which
offer improved growth possibilities because of rejuvenated management, changes
in product or some other development that might stimulate earnings growth. No
assurance can be given that any of these expectations will be met.
Since the Fund may invest in small, emerging growth companies before they become
well-recognized, investors should realize that the very nature of investing in
smaller companies involves greater risk than is customarily associated with more
established companies. Smaller companies often have limited product lines,
markets or financial resources, and they may be dependent upon one-person
management. The securities of smaller companies may have limited marketability
and may be subject to more abrupt or erratic market movements than securities of
larger companies or the market averages in general.
Although the Fund invests primarily in common stocks, for liquidity purposes it
will normally invest a portion of its assets in high quality, short-term debt
securities and money market instruments, including repurchase agreements. When a
temporary defensive posture in the market is appropriate in the Advisor's
opinion, the Fund may temporarily invest up to 100% of its assets in these
instruments. The Fund may also hold other types of securities from time to time,
including bonds.
The Advisor will determine the percentage of the Fund's assets that will be
allocated from time to time to the Sub-Advisor, Sit Investment Associates, Inc.,
for investment.
The Fund may invest up to 35% of its total assets in stocks of foreign-based
companies denominated in foreign currencies and issues of American Depository
Receipts ("ADRs") and European Depository Receipts ("EDRs") representing shares
of foreign companies. See "General Investment Policies" for a discussion of
ADRs. EDRs are similar to ADRs but are designed for use in the European
securities markets. The Fund may invest in foreign stock index futures, options
on index futures and options on foreign stock indexes. The Advisor or the
Sub-Advisor may engage in foreign currency hedging for assets in specific
countries based on the outlook for the currencies involved. Hedging may be
undertaken through the use of currency futures or otherwise. For a discussion of
the risk factors associated with forward currency, futures and options
transactions, see "General Investment Policies -- Forward Currency, Futures and
Options Transactions" and the Statement of Additional Information.
When the Fund holds bonds, the Fund will be invested primarily in debt
instruments with short to intermediate maturities (1 to 10 years to maturity).
These bonds, including convertibles, will have a S&P or Moody's rating of A or
better. However, there are no restrictions on the maturity composition of the
Fund's portfolio. If market interest rates decline, fixed-income securities
generally appreciate in value. In seeking to achieve the Fund's objective of
growth of capital, the Advisor may increase the average maturity of the fixed
income portion of the Fund's portfolio in times of declining interest rates and
decrease such average maturity in times of rising interest rates.
The Fund may invest in non-U.S. dollar denominated bonds, notes and bills of
foreign governments, their agencies and corporations of a quality comparable to
the U.S. dollar-denominated debt securities described above. The dollar-weighted
average maturity of the Fund's foreign bonds may range from two to eight years.
The Advisor or the Sub-Advisor will invest the assets in this class based on the
outlook for interest rates and currency trends in a particular country. The
Advisor or the Sub-Advisor may engage in foreign currency hedging from time to
time based on the outlook for currency values.
For a discussion of the risk factors associated with foreign investing, see
"General Investment Policies -- Risk Factors and Special Considerations for
International Investing."
The Fund will maintain the remainder of its assets in cash or cash equivalents
and other fixed income securities. Cash and cash equivalents will be denominated
in U.S. dollars. The objective of the cash equivalent portfolio is to maximize
current income to the extent consistent with preservation of capital and
liquidity.
The Advisor and the Sub-Advisor will allocate investments among the securities
of particular issuers on the basis of their views as to the best values then
currently available in the marketplace. Such values are a function of growth
potential, relative valuation yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the economy, movements in
the general level of interest rates, political developments, and variations of
the supply of funds available for investment.
International Growth Fund
THE FREMONT INTERNATIONAL GROWTH FUND SEEKS TO ACHIEVE LONG-TERM GROWTH OF
CAPITAL BY PRIMARILY INVESTING IN EQUITY SECURITIES OF ISSUERS DOMICILED OUTSIDE
THE UNITED STATES.
The Fund seeks to achieve long-term growth of capital by investing primarily in
equity securities of issuers domiciled outside the United States. The Fund is
designed for investors who wish to accept the risks entailed in investments in
foreign securities and securities denominated in various currencies. See
"General Investment Policies - Risk Factors and Special Considerations for
International Investing."
Under normal market conditions, at least 90% of the Fund's assets will be
invested in equity securities of issuers domiciled outside the United States.
The Fund will be invested in a minimum of three countries excluding the United
States. The Fund's portfolio of equity securities consists of common and
preferred stock, warrants and debt securities convertible into common stock.
Included in this 90% total, up to 5% of the Fund's assets may be invested in
rights or warrants to purchase equity securities. For defensive purposes, the
Fund may temporarily have less than 90% of its assets invested in equity
securities domiciled outside the United States.
The Fund's management anticipates that, from time to time, the Fund may have
more than 25% of its assets invested in securities of companies domiciled in the
countries of Japan, the United Kingdom and/or Germany. These are among the
leading industrial economies outside the United States and the values of their
stock markets account for a significant portion of the value of international
markets.
In addition to investing directly in equity securities, the Fund may invest in
instruments such as 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 markets.
THE FUND MAY INVEST UP TO 50% OF ITS TOTAL ASSETS IN EQUITY SECURITIES OF
SMALLER TO MEDIUM SIZED GROWTH COMPANIES IN BOTH DEVELOPED AND EMERGING MARKETS.
The Fund may invest up to 50% of its total assets in equity securities of
smaller to medium sized growth companies in both developed and emerging world
markets. For the developed markets, such investments include equity securities
with market capitalizations of over $200 million but less than $2 billion.
However, market capitalizations of smaller to medium sized company equity
securities in emerging markets are significantly smaller and currently range
between $25 million and $200 million. Emerging growth companies are small- and
medium-sized companies that the Advisor believes often have a potential for
earnings growth over time that is above the growth rate of more established
companies or are early in their life cycles and have the potential to become
major enterprises.
As used in this Prospectus, international emerging markets are countries
categorized as emerging markets by the International Finance Corporation, the
World Bank's private sector division. Such countries currently include but are
not limited to Thailand, Indonesia, the Philippines, South Korea, Taiwan and
certain Latin American countries. Such markets tend to be in the less
economically developed regions of the world. General characteristics of emerging
market countries also include lower degrees of political stability, a high
demand for capital investment, a high dependence on export markets for their
major industries, a need to develop basic economic infrastructures and rapid
economic growth. The Advisor believes that investments in equity securities of
companies in international emerging markets offer the opportunity for
significant long-term investment returns. However, these investments involve
certain risks, as discussed below and in "General Investment Policies - Risk
Factors and Special Considerations for International Investing."
Investing in emerging growth companies involves certain special risks. Emerging
growth companies may have limited product lines, markets, or financial
resources, and their managements may be dependent on a limited number of key
individuals. The securities of emerging growth companies may have limited market
liquidity and may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general.
Whenever in the judgment of the Advisor market or economic conditions warrant,
the Fund may, for temporary defensive purposes, invest without limitation in
U.S. dollar-denominated or foreign currency denominated cash or in high-quality
debt securities with remaining maturities of one year or less. During times that
the Fund is investing defensively, the Fund will not be pursuing its stated
investment objective. For liquidity purposes, the Fund may normally also invest
up to 10% of its assets in U.S. dollar-denominated or foreign
currency-denominated cash or in high quality debt securities with remaining
maturities of one year or less.
Emphasis is placed on identifying securities of companies believed to be
undervalued in the marketplace in relation to factors such as the company's
revenues, earnings, assets and long-term competitive positions which over time
will enhance the equity value of the company. The Fund will not concentrate its
investments in companies of a particular asset size, although, from time to
time, it may emphasize investments in companies within particular industries,
and will select its investments based on the characteristics of the particular
markets and economies of the countries in which it invests.
In selecting portfolio investments, a company's growth prospects will be
considered, including the potential for superior appreciation due to growth in
earnings, relative valuation of its securities, and any risks associated with
such investment; the industry in which the company operates, with a view to
identification of international developments within industries, international
investment trends, and social, economic or political factors affecting a
particular industry; the country in which the company is based, as well as
historical and anticipated foreign currency exchange rate fluctuations; and the
feasibility of gaining access to the securities market in a country and of
implementing the necessary custodial arrangements. The investment program of the
Fund has been developed in the belief that research-based investment in a
portfolio of equity securities of companies in a number of foreign countries
will give shareholders a chance to participate on an international basis in the
opportunities available in the growing foreign securities markets.
Investment will be made in those countries where the Advisor believes that
economic and political factors, including currency movements, are likely to
produce above average long-term investment returns. There is no limitation on
the percentage of the Fund's assets that may be invested at any one time in one
or more countries except that the Fund will normally be invested in at least
three countries outside the United States.
The Fund may enter into forward currency contracts and currency futures
contracts, and may purchase put and call options on currencies.
See "General Investment Policies -- Forward Currency, Futures and Options
Transactions."
International Small Cap Fund
THE FREMONT INTERNATIONAL SMALL CAP FUND SEEKS TO ACHIEVE LONG-TERM CAPITAL
APPRECIATION BY PRIMARILY INVESTING IN SMALL CAP EQUITY SECURITIES OF ISSUERS
DOMICILED OUTSIDE THE UNITED STATES.
The Fund seeks to achieve long-term capital appreciation by investing primarily
in small capitalization ("small cap") equity securities of issuers domiciled
outside the United States. The Fund selects its portfolio securities primarily
from among small cap companies in developed markets whose individual market
capitalizations would place them among the smallest 20% of market capitalization
in their respective markets. Developed markets will generally be defined as
those included in the Morgan Stanley Capital International Europe, Asia and Far
East (EAFE) Index. It is expected that the majority of the companies in which
the Fund invests will have a market capitalization of under $1 billion; however,
the Fund is likely to hold some companies with a market capitalization greater
than $1 billion. The Fund is designed for investors willing to accept the risks
entailed in investments in foreign securities of small companies and securities
denominated in various currencies. See "General Investment Policies - Special
Considerations for International Investing."
Under normal market conditions, at least 65% of the total assets of the Fund
will be invested in small cap equity securities of issuers domiciled outside the
United States with a market capitalization of under $1 billion. The Fund will be
invested in a minimum of three countries excluding the United States. The Fund's
portfolio of equity securities will consist of common and preferred stock,
warrants and debt securities convertible into common stock. Included in this 65%
total, up to 5% of the Fund's assets may be invested in rights or warrants to
purchase equity securities. For defensive purposes, the Fund may temporarily
have less than 65% of its total assets invested in small cap equity issuers
domiciled outside the United States.
In addition to investing directly in equity securities, the Fund may invest in
instruments such as 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 markets.
International small cap companies are smaller sized companies that the Advisor
and Sub-Advisor believe often have a potential for earnings growth over time
that is above the growth rate of more established companies or are early in
their life cycles and have the potential to become major enterprises. In
addition, some smaller companies may be undervalued because they are not as
closely followed by security analysts or institutional investors. 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.
Investing in small companies involves certain special risks. Small companies may
have limited product lines, markets, or financial resources, and their
managements may be dependent on a limited number of key individuals. The
securities of small companies may have limited market liquidity and may be
subject to more abrupt or erratic market movements than securities of larger,
more established companies or the market averages in general.
EMPHASIS IS PLACED ON IDENTIFYING SECURITIES OF COMPANIES BELIEVED TO BE
UNDERVALUED IN THE MARKETPLACE.
Emphasis is placed on identifying securities of companies believed to be
undervalued in the marketplace in relation to factors such as the company's
revenues, earnings, assets and long-term competitive positions which over time
will enhance the equity value of the company. In selecting portfolio
investments, a company's growth prospects will be considered, including the
potential for superior appreciation due to growth in earnings, relative
valuation of its securities, and any risks associated with such investment; the
industry in which the company operates, with a view to identification of
international developments within industries, international investment trends,
and social, economic or political factors affecting a particular industry; the
country in which the company is based, as well as historical and anticipated
foreign currency exchange rate fluctuations; and the feasibility of gaining
access to the securities market in a country and of implementing the necessary
custodial arrangements.
INVESTMENTS WILL BE MADE IN COUNTRIES THAT ARE BELIEVED LIKELY TO PRODUCE ABOVE
AVERAGE INVESTMENT RETURNS.
Investments will be made in those countries where the Advisor and Sub-Advisor
believe that economic and political factors, including currency movements, are
likely to produce above average long-term investment returns. There is no
limitation on the percentage of the Fund's assets that may be invested at any
one time in one or more countries. However, except during times that the Fund is
in a temporary defensive posture, the Fund will invest at least 65% of its total
assets in the securities of issuers domiciled in at least three different
non-U.S. countries.
The Fund may invest up to 35% of its total assets in equity securities of
companies domiciled in emerging markets. See the International Growth Fund
section of this prospectus for more detailed information on emerging markets.
The Fund's management anticipates that, from time to time, the Fund may have
more than 25% of its assets invested in securities of companies domiciled in the
countries of Japan, the United Kingdom and/or Germany. These are among the
leading industrial economies outside the United States and the values of their
stock markets account for a significant portion of the value of international
markets.
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 U.S. dollar-denominated or foreign currency-denominated
cash or in high quality debt securities with remaining maturities of one year or
less. During times that the Fund is investing defensively, the Fund will not be
pursuing its stated investment objective. For liquidity purposes, the Fund may
normally also invest up to 10% of its assets in U.S. dollar-denominated or
foreign currency-denominated cash or in high quality debt securities with
remaining maturities of one year or less. The Fund may also invest in
convertible debentures (convertible to equity securities) and preferred stocks
(which may or may not have a dividend yield). All preferred stocks and debt
securities, both foreign and domestic, in which the Fund invests must, at the
time of acquisition, be rated Aa or better by Moody's or AA or better by S&P, or
be of comparable quality as determined by the Advisor or Sub-Advisor.
The Fund may enter into forward currency contracts and currency futures
contracts, and may purchase put and call options on currencies. See
"General Investment Policies -- Forward Currency, Futures and Options
Transactions."
U.S. Micro-Cap Fund
THE FREMONT U.S. MICRO-CAP FUND SEEKS TO ACHIEVE LONG-TERM CAPITAL
APPRECIATION BY PRIMARILY INVESTING IN A DIVERSIFIED
PORTFOLIO OF COMMON U.S. STOCKS.
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.
UP TO 25% OF THE FUND'S TOTAL ASSETS MAY BE INVESTED IN SECURITIES OF SMALL
COMPANIES DOMICILED OUTSIDE THE UNITED STATES.
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 $200
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.
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 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 Funds 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 a Fund's quality guidelines. The Funds also may enter into
repurchase agreements as described below and may purchase variable and floating
rate debt securities.
SHORT-TERM SECURITIES MUST BE RATED "TIER 1" QUALITY.
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
a 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. Each of the Funds 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. 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. Each 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). A
Fund will not purchase securities the value of which is greater than 5% of its
net assets on a when-issued basis. A 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 Funds 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 a 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. Settlement in the
ordinary course of business, which may take substantially more than five
business days for non-U.S. securities, are not treated by the Funds 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.
Mortgage-Related and Other Asset-Backed Securities. Mortgage pass-through
securities are securities representing interests in "pools" of mortgages in
which payments of both interest and principal on the securities are made
monthly, in effect, "passing through" monthly payments made by the individual
borrowers on the residential mortgage loans which underlie the securities (net
of fees paid to the issuer or guarantor of the securities). The total return on
mortgage-related securities varies with changes in the general level of interest
rates. The maturities of mortgage-related securities are variable and unknown
when issued because their maturities depend on pre-payment rates. Early
repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose a Fund to a
lower rate of return upon reinvestment of principal. Also, if a security subject
to prepayment has been purchased at a premium, in the event of prepayment the
value of the premium would be lost. Mortgage prepayments generally increase with
falling interest rates and decrease with rising interest rates. Like other fixed
income securities, when interest rates rise, the value of a mortgage-related
security generally will decline; however, when interest rates are declining, the
value of mortgage-related securities with prepayment features may not increase
as much as that of other fixed income securities.
A Fund may invest in GNMA certificates, which are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Because both interest and principal payments (including prepayments)
on the underlying mortgage loans are passed through to the holder of the
certificate, GNMA certificates are called "pass-through" securities.
Although most mortgage loans in the pool will have stated maturities of up to 30
years, the actual average life or effective maturity of the GNMA certificates
will be substantially less because the mortgages are subject to normal
amortization of principal and may be repaid prior to maturity. Prepayment rates
may vary widely over time among pools and typically are affected by the
relationship between the interest rates on the underlying loans and the current
rates on new home loans. In periods of falling interest rates, the rate of
prepayment tends to increase, thereby shortening the actual average life of the
GNMA certificates. Conversely, when interest rates are rising, the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
GNMA certificates. Accordingly, it is not possible to predict accurately the
average life of a particular pool. Reinvestment of prepayments may occur at
higher or lower rates than the original yield on the certificates. Due to the
prepayment feature and the need to reinvest prepayments of principal at current
market rates, GNMA certificates can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of declining interest
rates. GNMA certificates may appreciate or decline in market value during
periods of declining or rising interest rates, respectively.
A Fund may invest also in mortgage-related securities issued by the Federal
National Mortgage Association ("FNMA") or by the Federal Home Loan Mortgage
Corporation ("FHLMC"). FNMA, a federally chartered and privately owned
corporation, issues pass-through securities representing interests in a pool of
conventional mortgage loans. FNMA guarantees the timely payment of principal and
interest but this guarantee is not backed by the full faith and credit of the
U.S. Government. FHLMC, a corporate instrumentality of the U.S. Government,
issues participation certificates which represent an interest in a pool of
conventional mortgage loans. FHLMC guarantees the timely payment of interest and
the ultimate collection of principal, and maintains reserves to protect holders
against losses due to default, but the certificates are not backed by the full
faith and credit of the U.S. Government. As is the case with GNMA certificates,
the actual maturity of and realized yield on particular FNMA and FHLMC
pass-through securities will vary based on the prepayment experience of the
underlying pool of mortgages.
A Fund may invest also in mortgage-related securities issued by financial
institutions, such as commercial banks, savings and loan associations, mortgage
bankers and securities broker-dealers (or separate trusts or affiliates of such
institutions established to issue these securities).
Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities.
Real Estate Mortgage Investment Conduits ("REMICs") are CMO vehicles that
qualify for special tax treatment under the Internal Revenue Code and invest in
mortgages principally secured by interests in real property and other
investments permitted by the Internal Revenue Code.
Stripped Mortgage Securities are derivative multiclass mortgage securities
issued by agencies or instrumentalities of the United States Government, or by
private originators of, or investors in, mortgage loans, including savings and
loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. Stripped Mortgage Securities are
usually structured with two classes that receive different proportions of the
interest and principal distributions on a pool of mortgage assets. A common type
of Stripped Mortgage Security will have one class receiving all of the interest
from the mortgage assets (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class). The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
a rapid rate of principal payments may have a material adverse effect on the
securities' yield to maturity. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, a Fund may fail to fully
recoup its initial investment in these securities even if the security is rated
AAA or Aaa, and could even lose its entire investment. Although Stripped
Mortgage Securities are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed for certain Stripped Mortgage Securities. Investments in Stripped
Mortgage Securities for which there is no established market are considered
illiquid and together with other illiquid securities will not exceed 15% of a
Fund's net assets.
Other asset-backed securities (unrelated to mortgage loans) have been offered to
investors, such as Certificates for Automobile ReceivablesSM ("CARSSM") and
interests in pools of credit card receivables. CARSSM represent undivided
fractional interests in a trust whose assets consist of a pool of motor vehicle
retail installment sales contracts and security interests in the vehicles
securing the contracts. CARSSM will be deemed to be illiquid securities and
subject to the limitation on investments in illiquid securities. Certificates
representing pools of credit card receivables have similar characteristics
although the underlying loans are unsecured.
As new types of mortgage-related securities and other asset-backed securities
are developed and offered to investors, the Advisor or Sub-Advisor will,
consistent with a Fund's investment objective, policies and quality standards,
and subject to the review and approval of the Company's Board of Directors,
consider making investments in such new types of securities.
The Funds may invest only in high quality mortgage-related (or other
asset-backed) securities either (i) issued by U.S. Government sponsored
corporations or (ii) rated in one of the three highest categories by Moody's or
S&P, or, if not rated, of equivalent investment quality as determined by the
Advisor or Sub-Advisor. The Advisor or Sub-Advisor will monitor continuously the
ratings of securities held by the Funds and the creditworthiness of their
issuers. An investment-grade rating will not protect a Fund from loss due to
factors such as a change in market interest rate levels or other particular
financial market change that affects the value of or return due on an
instrument.
Shares of Investment Companies. Each 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
a 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 a Fund's shares in other investment companies. A
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
Funds will invest only in investment companies which do not charge a sales load;
however, the Funds 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 a Fund's investments in investment companies will be reduced by
the operating expenses, including investment advisory and administrative fees,
of such companies. A 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
Funds, 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, each 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. A Fund will notify
its shareholders prior to initiating such an arrangement.
Repurchase Agreements. As part of its cash reserve position, each 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. A Fund will not enter into a repurchase agreement with a maturity
of more than seven business days if, as a result, more than 15% (or 10% in the
case of the Money Market Fund) of the value of its net assets, would then be
invested in such repurchase agreements. A 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, a 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. Each Fund (except for the Money Market 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, each 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 each 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 Funds' 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 Funds will bear directly, and may result in the realization
of net capital gains, which are generally taxable whether or not distributed to
shareholders.
EACH FUND MAY LEND UP TO ONE-THIRD OF ITS SECURITIES ONLY IF COVERED BY
COLLATERAL EQUAL TO 100% OF THE VALUE OF SECURITIES BORROWED.
Loans of Portfolio Securities. Each 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 Funds' 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 Funds 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.
Borrowing. Each 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, a 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, a
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. Each 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, a
Fund will not invest more than 15% of its assets (or 10% with respect to the
Money Market Fund) 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 a 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, a 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 Funds 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 Funds and may be changed by the
Board of Directors without shareholder approval.
Options and Futures Contracts. (Except for the Money Market Fund.) When a 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 indexes, 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 Funds invest. Each 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, a 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 (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.
A 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 Funds 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 a Fund's
return. A 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 a 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.
Forward Currency, Futures and Options Transactions. Except for the Money Market
Fund, the Funds may enter into forward currency contracts and currency futures
contracts and may purchase put or call options on currencies (each such
arrangement sometimes referred to as a "currency contract"). Forward contracts
typically will involve the purchase or sale of a foreign currency against the
dollar. These techniques are designed primarily to hedge against future changes
in currency prices which might adversely affect the value of a Fund's portfolio
securities. A Fund may attempt to accomplish objectives similar to those
involved in its use of forward currency contracts by purchasing put or call
options on currencies or currency futures. For a more detailed description of
such arrangements, see the Statement of Additional Information.
A Fund may enter into currency contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. For example,
when the Advisor and/or Sub-Advisor anticipates making a purchase or sale of a
security, the Fund may enter into a currency contract in order to set the rate
(either relative to the U.S. dollar or another currency) at which a currency
exchange transaction related to the purchase or sale will be made. Further, when
it is believed that a particular currency may decline compared to the U.S.
dollar or another currency, a Fund may enter into a currency contract to sell
the currency the Advisor or Sub-Advisor expects to decline in the amount
approximating the value of some or all of the Fund's portfolio securities
denominated in that currency or related currencies that the Advisor and/or
Sub-Advisor feels demonstrate a correlation in exchange rate movements. The
practice of using correlated currencies is known as "cross-hedging." When the
Advisor and/or Sub-Advisor believes that the U.S. dollar may suffer a
substantial decline against a foreign currency or currencies, a Fund may enter
into a currency contract to buy a foreign currency for a fixed dollar amount. By
entering into such transactions, however, the Fund may be required to forego the
benefits of advantageous changes in exchange rates. Currency contracts generally
are traded over-the-counter, and not on organized commodities or securities
exchanges. As a result, such contracts operate in a manner distinct from
exchange-traded instruments, and their use involves certain risks beyond those
associated with transactions in other futures contracts.
While a Fund enters into forward currency contracts and purchases currency
options or currency futures to reduce the risks of fluctuations in exchange
rates, these contracts cannot eliminate all such risks and do not eliminate
fluctuations in the prices of the Fund's portfolio securities. Purchasing
(selling) a currency forward limits the Fund's exposure to risk of loss from a
rise (decline) in the dollar value of the currency, but also limits its
potential for gain from a decline (rise) in the currency's dollar value. While
purchasing options can protect the Fund against certain exchange rate
fluctuations, a Fund is subject to the loss of its entire premium payment where
the option is allowed to expire without exercise.
To avoid leverage in connection with forward currency transactions, a Fund will
set aside with its Custodian cash, cash equivalents or high quality debt
securities, or hold a covered position against any potential delivery or payment
obligations under any outstanding contracts. To the extent a Fund enters into
over-the-counter options, the options and the assets so set aside to cover such
options are considered illiquid assets and, together with other illiquid assets
and securities, will not exceed 15% of the net assets of the Fund. In addition,
premiums paid for currency options held by a Fund may not exceed 5% of the
Fund's net assets.
Although a Fund will enter into currency contracts solely for hedging purposes,
their use does involve certain risks. For example, there can be no assurance
that a liquid secondary market will exist for any currency contract purchased or
sold, and the Fund may be required to maintain a position until exercise or
expiration, which could result in losses.
Currency contracts may be entered into on United States exchanges regulated by
the Securities and Exchange Commission or the Commodity Futures Trading
Commission as well as in the over-the-counter market and on foreign exchanges.
Swap Agreements. (Except for the Money Market Fund.) The Funds may enter into
interest rate, index and currency exchange rate swap agreements for purposes of
attempting to obtain a particular desired return at a lower cost to the Fund
than if the Fund had invested directly in an instrument that yielded that
desired return. Swap agreements are two-party contracts entered into primarily
by institutional investors for periods ranging from a few weeks to more than one
year. In a standard "swap" transaction, two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on
predetermined investments or instruments. The gross returns to be exchanged or
"swapped" between the parties are calculated with respect to a "notional
amount," i.e., the return on or increase in value of a particular dollar amount
invested at a particular interest rate, in a particular foreign currency, or in
a "basket" of securities representing a particular index. Commonly used swap
agreements include interest rate caps, under which, in return for a premium, one
party agrees to make payments to the other to the extent that interest rates
exceed a specified rate; interest rate floors, under which, in return for a
premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level; and interest rate collars, under
which a party sells a cap and purchases a floor or vise versa in an attempt to
protect itself against interest rate movements exceeding minimum or maximum
levels. Whether a Fund's use of swap agreements will be successful in furthering
its investment objective will depend on the Advisor's or Sub-Advisor's ability
to predict correctly whether certain types of investments are likely to produce
greater returns than other investments.
A Fund's obligations under a swap agreement will be accrued daily (offset
against amounts owed to the Fund) and any accrued but unpaid net amounts owed to
a swap counterparty will be covered by the maintenance of a segregated account
consisting of cash, U.S. Government securities or other high quality debt
obligations to avoid any potential leveraging of the Fund's portfolio. Swap
agreements having a term of greater than seven days are considered illiquid
assets and a Fund's obligations under such agreements, together with other
illiquid assets and securities, will not exceed 15% of the net assets of the
Fund.
Risk Factors and Special Considerations for International Investing. (Except for
the Money Market Fund.) 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 Funds 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. A 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 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, non-U.S. stock exchange
transactions may be subject to difficulties associated with the settlement of
such transactions. Such settlement difficulties may result in delays in
reinvestment. The Advisor and/or Sub-Advisor will consider such difficulties
when determining the allocation of a Fund's assets, although they do not believe
that such difficulties will materially adversely affect the Fund's portfolio
trading activities. Costs associated with transactions in foreign securities are
generally higher than those of domestic securities, and there is generally less
governmental supervision and regulation of exchanges, financial institutions and
issuers in foreign countries.
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 a 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 a 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 Funds 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 Funds 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 a 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.
The operating expense ratio of a Fund 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 Funds 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 Funds intend to invest in such
countries through the purchase of shares of investment companies organized under
the laws of such countries.
A Fund's interest and dividend income from foreign issuers may be subject to
non-U.S. withholding taxes. A 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 Funds 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 Funds. See "Dividends, Distributions and
Federal Income Taxation."
American Depository Receipts. (Except for the Money Market Fund.) 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 Funds 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 Funds 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. Each 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 a Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). These investment restrictions and each Fund's investment
objective cannot be changed without the approval of shareholders of that 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.
EACH FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS CANNOT BE CHANGED WITHOUT
SHAREHOLDER APPROVAL
INVESTMENT RESULTS
Each 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 on an investment in the
Funds will fluctuate. With respect to each Fund, except the Money Market Fund,
the principal value of an investment will also fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. The
Money Market Fund attempts to maintain a stable net asset value of $1.00 per
share.
EACH FUND'S "TOTAL RETURN" WILL BE EXPRESSED IN PERIODS OF 1, 5 AND 10 YEARS,
AND FOR THE LIFE OF EACH FUND.
Each Fund except for the Money Market 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.
From time to time, each Fund may advertise its yield. The Funds' yields are
calculated according to methods that are standardized for all mutual funds.
Because yield calculation methods differ from the methods used for other
purposes, a Fund's yield may not equal its distribution rate, the income paid to
a shareholder's account, or the income reported in the Fund's financial
statements. With respect to the Money Market Fund, the yield refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). The Money Market Fund's net income
per share for such period (excluding realized gains and losses, if any) will be
divided by the Fund's constant net asset value of $1.00 and annualized on a
365-day basis. An effective yield quotation, taking into account the effects a
of shareholder's assumed reinvestment of income (compounding), may also be used.
With respect to the Funds other than the Money Market Fund, yield refers to the
income generated by an investment in a Fund over a 30-day period (which period
will be stated in the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during that period is assumed
to be generated each 30 days over a 365-day period and is shown as a percentage
of the investment.
A 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 a Fund's investment results with those published
for other investment companies, other investment vehicles and unmanaged indices.
The comparison of a Fund to an alternative investment should be made with
consideration of differences in features and expected performance. The Funds may
also be mentioned in newspapers, magazines, or other media from time to time.
The Funds assume no responsibility for the accuracy of such data. A Fund's
results also should be considered relative to the risks associated with the
Fund's investment objective and policies. See "Investment Results" in the
Statement of Additional Information.
Additional performance information regarding the Funds will be included in the
Funds' annual report, which will be mailed to shareholders without charge upon
request.
HOW TO INVEST
THERE ARE NO SALES CHARGES ON INVESTMENTS OR REINVESTMENTS, AND THERE ARE NO
REDEMPTION FEES.
The shares of each 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 sales load or contingent deferred sales load
charged to purchase shares of the Funds. 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 Funds 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.
THERE IS AN INITIAL INVESTMENT MINIMUM OF $2,000 PER ACCOUNT OR $1,000 FOR
RETIREMENT ACCOUNTS (IRAS, ETC.) . THE INITIAL MINIMUM IS WAIVED FOR ACCOUNTS
OPENED WITH THE AUTOMATIC INVESTMENT PLAN.
Investors wishing to open a new account by bank wire must call the Transfer
Agent at 1-800-548-4539 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 each Fund may also be purchased through a broker-dealer that has
signed a dealer agreement with the Funds or has made similar arrangements with
the Funds. 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 Funds 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
Funds 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., One Exchange Place, Tenth Floor, Boston, MA 02109, is
the principal underwriter for the Funds.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
Statements and Reports
When a shareholder makes an initial investment in the Funds, 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 Money Market Fund and the Bond
Fund will receive monthly statements. Shareholders of the other Funds will
receive statements as of the end of December, April, July and October.
SHAREHOLDERS RECEIVE AN ACCOUNT STATEMENT FOR EACH TRANSACTION IN THEIR ACCOUNT.
SHAREHOLDERS OF THE MONEY MARKET FUND AND THE BOND FUNDS RECEIVE MONTHLY
STATEMENTS. SHAREHOLDERS OF THE OTHER FUNDS RECEIVE STATEMENTS AS OF THE END OF
DECEMBER, APRIL, JULY AND OCTOBER.
Shares are issued only in book-entry form (without certificates).
The fiscal year of the Funds ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which contain
a schedule of each 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 each Fund's shareholders
after the end of the calendar year on Form 1099-DIV.
Exchanges Between Funds
Shares of one Fund may be exchanged for shares of another 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.
SHAREHOLDERS MAY EXCHANGE SHARES AMONG THE FREMONT FUNDS VIA TELEPHONE.
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
1-800-548-4539. A shareholder wishing to initiate the telephone exchange
privilege should contact the Funds. 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
THE AUTOMATIC INVESTMENT PLAN PERMITS PURCHASES TO BE MADE ONCE OR TWICE EACH
MONTH, DEBITING THE SHAREHOLDER'S BANK ACCOUNT.
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 Funds. 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 Funds 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 1-800-548-4539. (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.
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.
Check Redemption Privilege (Money Market Fund and Bond Fund only)
THE MONEY MARKET FUND AND THE BOND FUND OFFER FREE CHECKWRITING.
The Transfer Agent will, upon request, provide each shareholder of the Money
Market Fund and the Bond Fund (except for retirement accounts) with free checks
which may be made payable by shareholders to the order of anyone in any amount
of at least $250. The Funds will arrange for checks to be honored by The Fifth
Third Bank, Cincinnati, Ohio (the "Bank") for this purpose. The Bank has the
right to refuse any check which does not conform with its requirements. The
shareholder will be subject to the Bank's rules and regulations governing
checking accounts, including a $20 charge for refused checks. This charge may
change without notice. When such a check is presented to the Transfer Agent for
payment, the Transfer Agent, as the shareholder's agent, will cause the
Investment Company to redeem a sufficient number of full and fractional shares
in the shareholder's account to cover the amount of the check. Since it is not
possible to predict the exact value of a shareholder's account when a redemption
check is cleared, shareholders may not close an account with a check.
The Check Redemption Privilege enables the shareholder to continue receiving
dividends on those shares equaling the amount being redeemed by check until such
time as the check is presented to the Transfer Agent for payment. The Check
Redemption Privilege may be modified or terminated by the Investment Company or
the Transfer Agent upon three days' notice to shareholders.
Systematic Withdrawal Plan
THE SYSTEMATIC WITHDRAWAL PLAN ALLOWS SHAREHOLDERS TO RECEIVE REGULAR MONTHLY,
QUARTERLY, OR YEARLY PAYMENTS.
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 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 Funds 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.
The Transfer Agent will not honor checks under the Check Redemption Privilege,
and will reject requests to redeem shares until checks, drafts or Automatic
Investment Plan transfers received for the shares purchased have cleared.
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 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 applicable 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, serves as each
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 Funds. MGF Service Corp.
is a subsidiary of Leshner Financial, Inc., of which Robert H. Leshner is
the controlling shareholder.
RETIREMENT PLANS
Shares of the Funds 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; and
Section 403(b) Plans, which are deferred compensation arrangements for employees
of public schools and certain charitable organizations. 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 Funds as investment options.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION
Each 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 a Fund so qualifies and meets certain other
distribution requirements, it will not incur a federal tax liability. Each Fund
intends to distribute substantially all of its net investment income according
to the following schedule:
The Money Market Fund and the Bond Fund declare dividends daily and will
distribute net investment income monthly.
The Global Fund intends to distribute its net investment income four times a
year, at the end of April, July, October and December.
Each of the Growth Fund, the International GrowthFund, the International Small
Cap Fund and the U.S. Micro-Cap Fund intend to distribute substantially all of
its net investment income at or about the close of the Funds' fiscal year
(October 31).
EACH FUND INTENDS TO DISTRIBUTE SUBSTANTIALLY ALL NET INVESTMENT INCOME AND NET
REALIZED CAPITAL GAINS.
Each Fund intends to distribute substantially all of its net realized capital
gains, if any, at or about the close of the calendar year (December 31).
Dividend and capital gains distributions, if any, may be reinvested in
additional shares at net 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. Corporate investors may be entitled to the dividends received deduction
on all or a portion of the dividends paid by the Global Fund, the Growth Fund,
the International Growth Fund, the International Small Cap Fund and the U.S.
Micro-Cap Fund.
Shareholders may elect:
n to have all dividends and capital gain distributions automatically reinvested
in additional shares; or
n to receive the income dividends and short-term capital gains distributions in
cash and accept the long-term capital gains distributions in additional shares;
or
n to receive all distributions of income dividends and capital gains in cash.
SHAREHOLDERS MAY RECEIVE DIVIDENDS AND DISTRIBUTIONS IN CASH OR MAY HAVE THEM
AUTOMATICALLY REINVESTED AT NO CHARGE.
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
Funds and paid in January are taxable as if paid in December. Each Fund will
provide to its shareholders federal tax information annually by January 31,
including information about dividends and distributions paid during the year.
SOME OF THE FUNDS' NET ASSET VALUES WILL BE PUBLISHED DAILY IN THE PRESS UNDER
MUTUAL FUND QUOTATIONS.
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
Funds 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 Funds 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 Funds 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 a 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 a 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 a Fund's total assets at the close of its fiscal year
consist of securities of foreign corporations, the Fund will be eligible 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 Funds will report annually to its shareholders the amount per share
of such withholding. See "Taxes-Mutual Funds" in the Statement of Additional
Information.
The foregoing is a brief discussion of certain federal income tax
considerations. Please see the Statement of Additional Information for further
information regarding the tax implications of an investment in the Funds.
CALCULATION OF NET ASSET VALUE
AND PUBLIC OFFERING PRICE
Each 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.
Each 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 (excluding banking
holidays, in the case of the Money Market Fund). The Funds' portfolios 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 a 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 a 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 each Fund will be determined as
of the close of the regular session of the New York Stock Exchange. The shares
of each 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.
Amortized Cost Method of Valuation -- Money Market
Fund Only
The Money Market Fund attempts to maintain a stable net asset value of $1.00 per
share by valuing its assets on the basis of amortized cost. This involves
initially valuing a portfolio instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
Although the Money Market Fund attempts to maintain a stable net asset value of
$1.00 per share, there can be no assurance that a stable net asset value will be
maintained.
As is generally the case with other money market funds, on any day that the
Money Market Fund experiences a decline in net asset value below $1.00 per
share, the Fund may offset any such amount against the shareholder dividends
accrued during the month. Alternatively, to maintain the net asset value of its
shares at $1.00, the Money Market Fund may redeem or declare a dividend of
shares. Any such action would not change a shareholder's pro rata share of net
assets, but would reflect the increase or decrease in the value of the
shareholder's holdings which resulted from the change in net asset value.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for each Fund's portfolio securities transactions are placed by the
Advisor or Sub-Advisor, as applicable. The Advisor and Sub-Advisors strive to
obtain the best available prices in the Funds' 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 Funds, the Advisor or the Sub-Advisors
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.
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 Funds 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.
GENERAL INFORMATION
The Investment Company, organized as a Maryland corporation on July 13, 1988, is
a fully managed open-end diversified 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
a 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 a Sub-Advisor) except in matters where a
vote of all 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 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 Funds under applicable Securities and Exchange Commission regulations.
<PAGE>
TELEPHONE NUMBERS AND ADDRESSES
To make an initial purchase:
1. By mail:
Fremont Mutual Funds
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
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: 1-800-548-4539
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
Fremont International Small Cap Fund
Fremont U.S. Micro-Cap Fund
<PAGE>
For more information on the Fremont Mutual Funds please call 1-800-548-4539 or
write to:
Fremont Mutual Funds
50 Beale Street, Suite 100
San Francisco, CA 94105
Advisor
Fremont Investment Advisors, Inc.
50 Fremont Street, Suite 3600
San Francisco, CA 94105
Transfer Agent
Mailing Address:
MGF Service Corp.
P.O. Box 5354
Cincinnati, OH 45201-5354
1-800-548-4539
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 Funds 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.
LOGO:Fremont Funds
50 BEALE STREET, SUITE 100 O SAN FRANCISCO, CA 94105
P.O. BOX 193663 O SAN FRANCISCO, CA 94119-3663
1-800-548-4539 (PRESS 1)
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC., 50 BEALE STREET,
SUITE 100, SAN FRANCISCO, CA 94105
P013-7500-9602
Prospectus
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
FREMONT MUTUAL FUNDS, INC. -end, investment company which under this
Prospectus is offering shares in the Fremont California Intermediate Tax-Free
Fund, investing in tax-exempt securities of the State of California and its
municipalities.
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND seeks to obtain as high a level
of interest income exempt from federal and California income taxes as is
consistent with prudent investment management.
There can be no assurance that the Fund will achieve its investment objective.
Shares of the Fund are offered without 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 1-800-548-4539 (press 1) or by writing to Fremont
Mutual Funds, Inc., 50 Beale Street, Suite 100, San Francisco, California
94105.
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.
PLEASE READ THIS PROSPECTUS CAREFULLY.
IT IS DESIGNED TO PROVIDE YOU WITH INFORMATION AND TO HELP YOU DECIDE IF THE
CALIFORNIA INTERMEDIATE TAX-FREE FUND'S OBJECTIVE MEETS YOUR OWN GOALS.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMIS-SION OR ANY STATE SECURITIES
COM-MISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESEN-TATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 20, 1996.
FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 1-800-548-4539.
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)(b)
Management Fee .30%
12b-1 Fees None
Other Expenses .20%
Total Fund Operating Expenses .50%
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 $ 5
3 Years 16
5 Years 29
10 Years 64
The purpose of the above table is to give you information and assistance in
understanding the various costs and expenses of the Fund that an investor may
bear directly or indirectly. The percentages expressing annual fund operating
expenses are based on actual expenses incurred during the most recent fiscal
year.
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.
(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 Advisor has voluntarily waived management and administrative fees.
Absent such waivers, the management fee, other expenses and total operating
expenses of the Fund would have been .37%, .35%, and .72%, respectively, for
the fiscal year ended October 31, 1995.
FINANCIAL HIGHLIGHTS
The financial highlights have been audited by Coopers & Lybrand, L.L.P,
independent accountants. Their 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>
Period from
Years ended October 31 November 16, 1990
1995 1994 1993 1992 to October 31, 1991
<S> <C> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $10.13 $11.10 $10.55 $10.39 $10.11
Income from Investment Operations
Net investment income(a) .53 .53 .55 .57 .58
Net realized and unrealized gain (loss) .73 (.97) .62 .19 .34
Total investment operations 1.26 (.44) 1.17 .76 .92
Less Distributions
From net investment income (.53) (.53) (.55) (.57) (.58)
From net realized gains -- -- (.07) (.03) (.06)
Total distributions (.53) (.53) (.62) (.60) (.64)
Net asset value, end of period $10.86 $10.13 $11.10 $10.55 $10.39
Total Return # 12.77% -3.94% 11.37% 7.37% 9.78%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $50,313 $58,305 $59,716 $44,305 $33,572
Ratio of expenses to average net assets(a) .50% .51% .50% .54% .36%*
Ratio of net investment income to
average net assets(a) 5.08% 4.94% 5.05% 5.38% 5.88%*
Portfolio Turnover Rate 18% 21% 26% 18% 41%*
<FN>
*Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. 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 $.51, .72% and 4.86%,
respectively, for the year ended October 31, 1995; $.51, .71% and 4.74%,
respectively, for the year ended October 31, 1994; $.53, .71% and 4.84%,
respectively, for the year ended October 31, 1993; $.54, .83% and 5.09%,
respectively, for the year ended October 31, 1992; and $.53, .88% and 5.36%,
respectively, for the period November 16, 1990 to October 31, 1991. # Total
return would have been lower had the advisor not waived expenses.
</FN>
</TABLE>
<PAGE>
THE 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 California Intermediate Tax-Free Fund (the "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.
FREMONT INVESTMENT ADVISORS, INC. PROVIDES INVESTMENT ADVISORY
SERVICES TO THE 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.
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 The Fremont Group, Inc. (formerly Bechtel
Investments, 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.
As compensation for its services to the Fund, the Advisor receives from the
Fund an advisory fee, computed daily and paid monthly, of .40% per annum of
the first $25 million of the Fund's average net assets, .35% of the next $25
million of such assets, .30% of the next $50 million of such assets, .25% of
the next $50 million of such assets and .20% of such assets in excess of $150
million. The Advisory Agreement also provides that the Fund will pay to the
Advisor an administrative fee of .15% per annum of average net assets. The
advisory and administrative fees are currently being charged at voluntarily
reduced rates of .30% and .005%, respectively, of the Fund's average net
assets.
The portfolio manager for the Fund since the Fund's inception is William M.
Feeney, Vice President of the Advisor. Will received his B.A. from the
University of Colorado and his M.B.A. from the University of San Francisco.
For additional information about the Advisor, see "Investment Advisory and
Other Services" in the Statement of Additional Information.
Other Expenses of the Funds. In addition to the fees described above, the Fund
pays all expenses not assumed by the Advisor. These expenses include, but are
not limited to, the following: custodian, stock transfer and dividend
disbursing fees and expenses; costs of mailing reports, prospectuses, proxy
statements and notices to existing shareholders; interest, taxes and
insurance; expenses of the issuance and redemptions of shares of the Fund
(including registration and qualification fees); legal and auditing expenses;
fees and expenses of the Directors unaffiliated with the Advisor; and
association dues. All general Investment Company expenses are allocated among
and charged to the assets of the Fund on a basis that the Board of Directors
deems fair and equitable. The Advisory Agreement provides that the Advisor
will reimburse the Fund for expenses in excess of expense limitations imposed
by state regulations. The total expenses of the Fund presently are limited by
California securities laws to 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.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
THE FUND SEEKS AS HIGH A LEVEL OF INTEREST INCOME EXEMPT FROM FEDERAL AND
CALIFORNIA INCOME TAXES AS IS CONSISTENT WITH PRUDENT INVESTMENT MANAGEMENT.
The investment objective of the Fund is to obtain as high a level of interest
income exempt from federal and California income taxes as is consistent with
prudent investment management. The Fund seeks to achieve its objective by
investing in debt securities, the interest income from which is not includable
in gross income for federal income tax purposes ("exempt from federal income
tax") and is exempt from California personal income taxes. There can be no
guarantee that the Fund's objective will be achieved. A portion of the income
received from the Fund may be included in the calculation of the federal
alternative minimum tax for some taxpayers. The Fund may also invest in
open-end and closed-end investment companies which invest in securities whose
income is exempt from federal and California income taxes. It is the current
intention of the Fund to limit its investments in such investment companies to
not more than 5% of its net assets.
The term "municipal securities" as used in this Prospectus means obligations
issued by or on behalf of states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities. The term "California municipal securities" as used
herein refers to obligations that are issued by or on behalf of the State of
California and its political subdivisions. An opinion as to the tax-exempt
status of a municipal security is rendered to the issuer by the issuer's bond
counsel at the time of the issuance of the security.
THE FUND INVESTS PRIMARILY IN HIGH QUALITY INTERMEDIATE-TERM CALIFORNIA
MUNICIPAL SECURITIES. THE DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY IS
EXPECTED TO RANGE FROM 3 TO 10 YEARS.
The Fund invests primarily in California municipal securities which generally
have 3 to 20 years remaining to maturity at the time of acquisition. The
dollar-weighted average portfolio maturity is expected to range from 3 to 10
years. The Fund restricts its municipal securities investments to those within
or of a quality comparable to the four highest rating classifications of
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P"). Municipal bonds and notes and tax-exempt commercial paper would have,
at the date of purchase by the Fund, Moody's ratings of Aaa, Aa, A or Baa; MIG
1/VMIG1 or MIG2/VMIG2; P-1; or S&P's ratings of AAA, AA, A, or BBB; SP-1+,
SP-1 or SP-2; A-1+ or A-1, respectively. (See Appendix A in the Statement of
Additional Information for a description of these ratings.) The Fund's net
asset value per share will fluctuate as market conditions change.
Securities ratings are the opinions of the rating agencies issuing them and
are not absolute standards of quality. Because of the cost of ratings, certain
issuers do not obtain a rating for each issue. The Fund may purchase unrated
municipal securities which the Advisor determines to have a credit quality
comparable to that required for investment by the Fund (see the discussion of
securities ratings above).
Securities which are rated BBB by S&P or Baa by Moody's are considered
investment grade, but are more likely to have speculative characteristics, and
changes in economic conditions may lead to a weakened capacity to make
principal and interest payments than is the case with higher rated securities.
As a matter of operating policy, not more than 25% of the Fund's investments
(other than those guaranteed by the U.S. Government or any of its agencies or
instrumentalities) may be unrated securities. Such percentage shall apply only
at the time of acquisition of a security. To the extent that unrated municipal
securities may be less liquid, there may be somewhat greater market risk
incurred in purchasing them than in purchasing comparable rated securities.
Any unrated securities deemed to be not readily marketable by the Board of
Directors will be included in the calculation of the limitation of 15% of net
assets which may be invested in illiquid securities and other assets.
The Fund is "non-diversified" for purposes of the Investment Company Act of
1940, as amended (the "1940 Act"), because with respect to all of its assets,
the Fund may invest more than 5% of such assets in the securities of a single
California issuer, such as the State of California. Since the Fund invests
primarily in California municipal securities, it may be advantageous to be
able to invest more than 5% of such assets in the securities of a particular
issuer. This may result in additional risk since changes in the value of the
securities of one issuer may affect the value of the Fund to a greater extent
than would be the case with a diversified fund. See "Special Risk
Considerations In California." The Fund nevertheless intends to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986 and meet the Code's separate requirements for portfolio diversification.
(See discussion of taxes in "Dividends, Distributions and Income Taxation.")
As a fundamental policy (i.e., the policy will not be changed without a
majority vote of its shareholders) the Fund will, under normal circumstances,
invest up to 100%, and not less than 80%, of its net assets in California
municipal securities which are exempt from federal and California state income
taxes and are not subject to the alternative minimum tax. The Fund reserves
the right to invest up to 20% of its net assets in taxable U.S. Treasury
securities which are secured by the "full faith and credit" pledge of the U.S.
Government, and in municipal securities of other states which, although exempt
from federal income taxes, are not exempt from California income taxes. For
temporary defensive purposes the Fund may invest in excess of 20% of its net
assets in these securities.
Description of Municipal Securities. Municipal securities may have fixed,
variable or floating rates of interest. Any variable or floating rate
municipal security not payable on demand within seven days will be deemed
illiquid unless the Advisor determines, according to procedures established by
the Board of Directors, that such securities are liquid. If held by the Fund,
such securities will be included in the calculation of the limitation of 15%
of net assets which may be invested in illiquid securities. Municipal bonds,
which finance long-term capital needs and generally have maturities of more
than one year when issued, are generally classified as either general
obligations bonds or revenue bonds. General obligation bonds are secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
the proceeds of a special excise tax or other specific revenue source. The
Fund may also invest in certificates of participation in general fund
obligation leases of the State of California and its political subdivisions.
The staff of the Securities and Exchange Commission may view such a security
as illiquid. Unless the Board of Directors determines that a particular such
security is not illiquid, the Advisor will limit its investment in such
securities, together with all other illiquid securities and assets, to 15% of
the Fund's net assets.
MUNICIPAL SECURITIES WITH SHORTER MATURITIES GENERALLY HAVE GREATER PRICE
STABILITY AS INTEREST RATES CHANGE.
The securities in which the Fund invests are subject to market and credit
risk. Market risk relates to the changes in market value that occur as a
result of variation in the level of prevailing interest rates and yield
relationships in the municipal securities market. In general, the longer the
maturity of a municipal security, the higher the yield and the greater the
potential for taxable capital appreciation or depreciation. Conversely,
shorter maturities tend to provide lower yields, but greater stability of
principal. An increase in interest rates will normally decrease the value of
these longer-term investments, while a decline in interest rates will normally
increase the value of these investments. Generally, the shorter the average
maturity of the Fund's portfolio, the less its price will be affected by
interest rate fluctuations.
In addition to the market risk of changing interest rates, municipal
securities are subject to credit risk relating to the operations of individual
issuers. The ability of the Fund to achieve its investment objective is
dependent upon the continuing ability of the issuers of municipal securities
in which the Fund invests to meet their obligations for the payment of
principal and interest when due.
Special Risk Considerations in California. The Fund's performance may be
especially affected by factors pertaining to the California economy, as well
as other factors affecting the ability of issuers of California municipal
securities to meet their obligations. As a result, the value of the Fund's
shares may fluctuate more widely than the value of shares of a portfolio
investing in securities relating to a number of different states. The amounts
of tax and other revenues available to issuers of California municipal
securities may be affected from time to time by economic, political,
geographic and demographic conditions.
There are additional risks associated with the Fund's investment in California
municipal obligations. These risks result from certain amendments to the
California Constitution and other statues that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial conditions of the State of California. These may impair the ability
of issuers of California municipal obligations to pay interest and principal
on their obligations.
California constitutional and statutory amendments and initiatives have
imposed certain limitations on taxes that may be levied against real property,
as well as place limits on the annual appropriations of the state and its
political subdivisions. These initiative measures approved by California
voters have resulted in a reduction in state and local government revenues.
The payment of California municipal securities may be dependent on the
appropriations of the California Legislature for the benefit of local
governments or on ad valorem or special taxes collected by local governments
within the state. The continuing ability of the California Legislature to
appropriate aid to local governments, as well as payments in connection with
its own obligations, and the continuing ability of local governments to raise
revenue through taxation may affect the ability of the state and local
governments to pay debt service on these obligations. The payment of
California municipal securities secured by general fund leases of the state
and local governments may depend on continued appropriations of lease payments
and continued use and occupancy of the leased property.
California municipal securities secured by payments from health care
institutions are subject to declining revenues of such institutions resulting
from more stringent cost controls by health insurers and by the federal, state
and local governments which reimburse such health institutions for indigent
and Medicare patients.
California municipal securities that are secured by mortgages or deeds of
trust on real property are subject to certain provisions of California law
which limit the remedies available to creditors in the case of a default and
subsequent foreclosure.
An expanded discussion of investment considerations regarding investment in
California municipal obligations is contained in the Statement of Additional
Information.
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 its
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.
Financial Futures Contracts. The Fund may purchase and sell financial futures
contracts listed on a commodities board of trade to hedge its portfolio
investments against changes in value or as a temporary substitute for
purchases or sales of actual securities. The Fund is not a commodity pool and
will engage in futures transactions only for bona fide hedging purposes.
Futures contracts are agreements to buy or sell underlying securities at a
specific future date and price. The underlying instrument may be a security or
an index of securities. By buying or selling a futures contract, the Fund
agrees to buy or sell the underlying instrument or to deliver or receive cash
settlement. Income from financial futures trading is not exempt from federal
or state income taxes.
Because fixed-income securities fluctuate in value inversely with the movement
of interest rates, a decline in value of a security can be hedged, or offset,
by an increase in value of an interest rate futures contract. Also, if the
Advisor anticipates that the value of a security will decline, it may purchase
a futures contract instead of the security to gain the benefit of the expected
lower price. Different trading strategies for futures have different risk and
return characteristics. The Advisor will choose among futures strategies based
on its judgment of how best to meet the Fund's goals. The judgment will be
based on factors such as current and anticipated interest rates, relative
market liquidity, and price levels in the futures markets compared to the
underlying securities markets. If the Advisor judges these factors
incorrectly, or if price changes in the futures positions are not well
correlated with other investments, the strategies may lower the Fund's return.
These strategies involve the following risks: (1) there is no assurance that
closing purchase transactions will be available at favorable prices, resulting
in possible reduction of the Fund's income due to the use of hedging
instruments, and possible loss in excess of the initial margin; and (2) there
may be imperfect correlation between the contract and the underlying security
and unsuccessful hedging transactions due to incorrect market trend forecasts.
A more thorough description of these investment practices and their associated
risks is contained in the Statement of Additional Information.
When required by Securities and Exchange Commission guidelines, the Fund will
maintain a segregated account with the custodian with sufficient cash, U.S.
Government securities or other highly liquid securities to cover the potential
obligations created by futures. The Fund may invest up to 5% of its assets in
futures transactions represented by the aggregate "initial margin" (down
payment). The aggregate market value of securities underlying futures
contracts will not exceed 25% of the net assets of the Fund.
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 which invest in securities whose income is exempt from
Federal and California state income taxes. 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 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
objective, restrictions and policies as that of the Fund. The Fund will notify
its shareholders prior to initiating such an arrangement.
Portfolio Turnover. The Fund expects to trade in securities for short-term
gain whenever deemed advisable by the 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 100%. 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 up
to 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 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.
THE FUND MAY LEND UP TO ONE-THIRD OF ITS SECURITIES ONLY IF COVERED BY
COLLATERAL EQUAL TO 100% OF THE VALUE OF THE SECURITIES BORROWED.
Borrowing. The Fund may borrow from banks up to 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.
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 (except that this limitation does not apply with respect
to U.S. Government securities). In addition, a minimum of 80% of assets must
be invested in California municipal securities exempt from federal and
California income taxes and not subject to the alternative minimum tax on
individuals. These investment restrictions and the Fund's investment objective
cannot be changed without the approval of shareholders; 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.
THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS CANNOT BE CHANGED 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 on and the
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'S "TOTAL RETURN" WILL BE EXPRESSED IN PERIODS OF 1, 5 AND 10 YEARS,
AND FOR THE LIFE OF THE FUND.
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 values
as determined above.
THE FUND'S QUOTED "YIELD" WILL REFLECT THE INCOME GENERATED BY ITS PORTFOLIO
OF SECURITIES OVER A 30-DAY PERIOD.
From time to time, the Fund may advertise its "yield" and "tax-equivalent
yield." The Fund's yields are calculated according to methods that are
standardized for all mutual funds. Because yield calculation methods differ
from the methods used for other purposes, the Fund's yield may not equal its
distribution rate, the income paid to a shareholder's account, or the income
reported in the Fund's financial statements. The "yield" of the Fund refers to
the income generated by an investment in the Fund over a 30-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that period
is assumed to be generated each 30 days over a 365-day period and is shown as
a percentage of the investment. The Fund may also advertise together with its
yield a tax-equivalent yield which reflects the yield which would be required
of a taxable investment at a stated income tax rate in order to equal the
Fund's yield.
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 the Fund's investment objective and policies. See
"Investment Results" in the Statement of Additional Information.
Additional performance information regarding the Fund is included in the
Fund's annual report, which will be mailed to shareholders without charge upon
request.
HOW TO INVEST
THERE ARE NO SALES CHARGES ON INVESTMENTS OR REINVESTMENTS, AND THERE ARE NO
REDEMPTION FEES.
THERE IS AN INITIAL INVESTMENT MINIMUM OF $2,000 PER ACCOUNT.
The 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 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. The minimum
initial investment is waived for accounts opened with the Automatic Investment
Plan and may be waived in other instances in the sole discretion of the
Advisor. Each subsequent investment must be $200 or more. There is a minimum
continuing balance of $1,500 required (calculated on the basis of original
investment value). In some cases, the initial investment minimum balance
requirement may be waived.
Investors wishing to open a new account by bank wire must call the Transfer
Agent at 1-800-548-4539 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.
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., One Exchange Place, Tenth Floor, Boston,
Massachusetts 02109, is the principal underwriter for
the Fund. The compensation of Funds Distributor, Inc. is paid by the Advisor
(not the Fund).
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
SHAREHOLDERS RECEIVE AN ACCOUNT STATEMENT FOR EACH TRANSACTION PROCESSED IN
THEIR ACCOUNT AS WELL AS A MONTHLY ACCOUNT STATEMENT.
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 monthly
statements.
Shares are issued only in book-entry form (without certificates).
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 the Fund and of any other Fremont Fund may be exchanged for each
other 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. The 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.
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.
SHAREHOLDERS MAY EXCHANGE FUND SHARES WITH THOSE OF OTHER FREMONT FUNDS VIA
TELEPHONE.
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
1-800-548-4539. 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
THE AUTOMATIC INVESTMENT PLAN PERMITS PURCHASES TO BE MADE ONCE OR TWICE A
MONTH, DEBITING THE SHAREHOLDER'S BANK ACCOUNT.
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 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 upon 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 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.
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).
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.
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 1-800-548-4539.
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.
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.
Check Redemption Privilege
THE FUND OFFERS FREE CHECKWRITING.
The Transfer Agent will, upon request, provide each shareholder with free
checks which may be made payable by shareholders to the order of anyone in any
amount of at least $250. The Fund will arrange for checks to be honored by The
Fifth Third Bank, Cincinnati, Ohio (the "Bank") for this purpose. The Bank has
the right to refuse any check which does not conform with its requirements.
The shareholder will be subject to the Bank's rules and regulations governing
checking accounts, including a $20 charge for refused checks. This charge may
change without notice. When such a check is presented to the Transfer Agent
for payment, the Transfer Agent, as the shareholder's agent, will cause the
Investment Company to redeem a sufficient number of full and fractional shares
in the shareholder's account to cover the amount of the check. Since it is not
possible to predict the exact value of a shareholder's account when a
redemption check is cleared, shareholders may not close an account with a
check.
The Check Redemption Privilege enables the shareholder to continue receiving
dividends on those shares equaling the amount being redeemed by check until
such time as the check is presented to the Transfer Agent for payment. The
Check Redemption Privilege may be modified or terminated by the Investment
Company or the Transfer Agent upon three days' notice to shareholders.
Systematic Withdrawal Plan
THE SYSTEMATIC WITHDRAWAL PLAN ALLOWS SHAREHOLDERS TO RECEIVE REGULAR MONTHLY,
QUARTERLY, OR YEARLY PAYMENTS.
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 Fremont 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
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.
The Transfer Agent will not honor checks under the Check Redemption Privilege,
and will reject requests to redeem shares until checks, drafts or Automatic
Investment Plan transfers received for the shares purchased have cleared.
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 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, serves 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.
DIVIDENDS, DISTRIBUTIONS AND 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.
Such qualification under the Code requires the Fund to diversify its
investments so that, at the end of each fiscal quarter, (1) at least 50% of
the market value of the Fund's assets is represented by cash, U.S. Government
securities, securities of other regulated investment companies and other
securities, limited, in respect to any one issuer, to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting securities of
such issuer, and (2) not more than 25% of the value of its assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses.
INCOME DIVIDENDS ACCRUE DAILY AND ARE PAID MONTHLY. CAPITAL GAIN DISTRIBUTIONS
WILL BE MADE ANNUALLY.
The Fund declares dividends daily and will distribute its net investment
income monthly. The Fund intends to distribute substantially all of its net
realized capital gains, if any, at or about the close of the calendar year
(December 31). Dividend and capital gains distributions, if any, may be
reinvested in additional shares at net asset value on the day of reinvestment,
or may be received in cash. All taxable dividends and distributions are
taxable to a shareholder 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:
n to have all dividends and capital gain distributions automatically
reinvested in additional shares; or
n to receive the income dividends and short-term capital gains distributions
in cash and accept the long-term capital gains distributions in additional
shares; or
n to receive all distributions of income dividends and capital gains in cash.
SHAREHOLDERS MAY RECEIVE DIVIDENDS AND DISTRIBUTIONS IN CASH OR MAY HAVE THEM
AUTOMATICALLY REINVESTED AT NO CHARGE.
Automatic reinvestments will be made 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.
The Fund intends to invest in sufficient municipal securities so that it will
qualify to pay "exempt-income dividends" (as defined in the Code) to
shareholders. Exempt-interest dividends distributed to shareholders are not
includable in the shareholder's gross income for federal income tax purposes.
However, this favorable tax treatment may not apply to shareholders who are
"substantial users" (or "related persons" thereto) with respect to facilities
financed by securities held by the Fund.
To the extent that dividends are derived from interest on California municipal
securities, or from interest earnings on certain U.S. Government obligations,
and as long as at least 50% of the value of the total assets of the Fund
consists of bonds on which the interest is exempt from taxation under the laws
of California or the laws of the United States, such dividends will also be
exempt from California personal income taxes. For California income tax
purposes, capital gain distributions and any income from investment in taxable
securities (other than California municipal obligations and direct U.S.
Government obligations) are taxable as ordinary income. The Fund will inform
shareholders annually as to the portion of the distributions which constitutes
dividends exempt from California personal income tax. All distributions
received by a corporation doing business in California may be subject to
California franchise taxes.
Interest income (in the form of dividends) exempt from federal income tax is
not necessarily exempt under the income or other tax laws of state and local
taxing authorities. Shareholders should consult their tax advisors about the
status of distributions from the Fund in this regard.
The Tax Reform Act of 1986 restricts the federal tax exemption for interest
earned on certain municipal obligations. Under that law, interest on "private
activity" municipal bonds (for example, those issued to finance housing
projects) issued after the effective date is an item of "tax preference"
subject to the individual Alternative Minimum Tax. It is the current intention
of the Fund not to purchase bonds that are subject to the individual
Alternative Minimum Tax. Shareholders will be given prior notification if the
Fund intends to change this policy. Corporate shareholders may wish to consult
their tax advisors before investing in the Fund, since some of the interest on
municipal bonds held in the Fund's portfolio may be included in income subject
to the corporate Alternative Minimum Tax.
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 Funds 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.
The foregoing is a brief discussion of certain income tax considerations.
Please see 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. 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.
THE FUND'S NET ASSET VALUE WILL BE PUBLISHED DAILY IN THE PRESS UNDER MUTUAL
FUND QUOTATIONS.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the Fund's portfolio securities transactions are placed by the
Advisor. The Advisor strives 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 or the 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.
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, municipal securities and money market securities
in which the Fund may invest are generally traded in the over-the-counter
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 and options transactions.
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) except in matters where a vote of all series 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 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
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
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: 1-800-548-4539
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
Fremont International Small Cap Fund
Fremont U.S. Micro-Cap Fund
For more information on the Fremont Family of Mutual Funds please call
1-800-548-4539 or write to:
Fremont Mutual Funds
50 Beale Street, Suite 100
San Francisco, CA 94105
Advisor
Fremont Investment Advisors, Inc.
50 Fremont Street, Suite 3600
San Francisco, CA 94105
Transfer Agent
Mailing Address:
MGF Service Corp.
P.O. Box 5354
Cincinnati, OH 45201-5354
1-800-548-4539
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.
TABLE OF CONTENTS
Item Page No.
Summary of Fees and Expenses........................2
Financial Highlights................................3
The Advisor and the Fund............................4
Investment Objective, Policies
and Risk Considerations..........................5
Investment Results.................................10
How to Invest......................................11
Shareholder Account Services and Privileges........12
How to Redeem Shares...............................13
Dividends, Distributions and
Income Taxation.................................16
Calculation of Net Asset Value and
Public Offering Price...........................17
Execution of Portfolio Transactions................18
General Information................................18
Telephone Numbers and Addresses....................20
Logo: Fremont Funds
50 BEALE STREET, SUITE 100 O SAN FRANCISCO, CA 94105
P.O. BOX 193663 O SAN FRANCISCO, CA 94119-3663
1-800-548-4539 (PRESS 1)
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC.,
50 BEALE STREET, SUITE 100, SAN FRANCISCO, CA 94105
P010-1100-9502
FREMONT
MUTUAL
FUNDS
Prospectus
n Fremont
California
Intermediate
Tax-Free Fund
February 20, 1996
FREMONT MUTUAL FUNDS, INC.
FREMONT MONEY MARKET FUND
FREMONT BOND FUND
FREMONT GLOBAL FUND
FREMONT GROWTH FUND
FREMONT INTERNATIONAL GROWTH FUND
FREMONT INTERNATIONAL SMALL CAP FUND
FREMONT U.S. MICRO-CAP FUND
TOLL-FREE: 1-800-548-4539
PART B
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information concerning Fremont Mutual Funds, Inc.
(the "Investment Company") is not a prospectus for the Investment Company.
This Statement supplements the Prospectus for the Funds dated February 20,
1996 and should be read in conjunction with the Prospectus. Copies of the
Prospectus are available without charge by calling the Investment Company at
the phone number printed above.
The date of this Statement of Additional Information is February 20, 1996.
7funds.sai
February 15, 1996
- 1 -
<PAGE>
TABLE OF CONTENTS
PAGE
LETTER FROM THE PRESIDENT....................................... 1
INTRODUCTION TO THE FUNDS....................................... 2
INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS................................................ 9
THE FUNDS (INCLUDING THE FREMONT MONEY MARKET FUND) GENERALLY... 21
INVESTMENT RESTRICTIONS......................................... 26
INVESTMENT COMPANY DIRECTORS AND OFFICERS....................... 28
INVESTMENT ADVISORY AND OTHER SERVICES.......................... 31
EXECUTION OF PORTFOLIO TRANSACTIONS............................. 35
HOW TO INVEST................................................... 37
OTHER INVESTMENT AND REDEMPTION SERVICES........................ 41
TAXES - MUTUAL FUNDS............................................ 42
ADDITIONAL INFORMATION.......................................... 45
INVESTMENT RESULTS.............................................. 49
APPENDIX A: DESCRIPTION OF RATINGS............................. A-1
APPENDIX B: ANNUAL REPORT
(i)
- 2 -
<PAGE>
LETTER FROM THE PRESIDENT
DEAR INVESTOR:
The history of the Fremont Funds is a story of development driven by
customer needs.
In 1978, members of Fremont Investment Advisors took over the asset
allocation services for the retirement plan assets of the Bechtel Group.
Bechtel is a San Francisco-based international construction and engineering
company with more than 18,000 employees throughout the world.
In the years that followed, the participants in the Bechtel Retirement Plan
became accustomed to the performance of their retirement plan investment
options. These investment options featured diversified portfolios, and a
global investment orientation.
As they retired or left the retirement plan, some participants asked if they
could move their plan assets into Individual Retirement Accounts (IRAs) with
similar investment styles -- and the same investment manager -- as the Bechtel
Retirement Plan. To meet this demand, Fremont Investment Advisors (FIA)
introduced the Fremont Mutual Funds at the end of 1988.
Our customers subsequently asked us to introduce more mutual funds and
continue our focus on worldwide investing. Today, the Fremont Family of Funds
has grown to eight 100% no-load funds, which are designed to meet the needs of
virtually every investor.
SPECIALIZED INVESTMENT EXPERTISE
The investment managers at FIA are seasoned professionals who focus their
efforts in areas where they have excelled for many years. To enhance our pool
of internal investment talent, Fremont Funds has formed alliances with an
impressive list of globally-prominent investment management professionals,
providing our investors with access to a level of investment talent usually
reserved for the nation's largest institutional investors.
FOCUS ON CUSTOMER SERVICE
A final element of Fremont Funds' commitment to its investors is our goal of
providing the highest quality service in the industry. We are proud of the
superior level of service we provide. Our Investor Relations Group understands
mutual funds and the investment process, ensuring that you receive quick and
expert access to the information that you need.
This brochure is designed to provide you with an overview of the funds which
today make up the Fremont Family. I encourage you to read it over, and to
learn for yourself what thousands of investors already know -- that the
Fremont Funds deliver a level of service, selection and investment expertise
that other mutual fund companies simply do not.
Sincerely,
/z/ Dave Redo
Dave Redo
President
- 1 -
<PAGE>
INTRODUCTION TO THE FUNDS
CHOOSING YOUR INVESTMENTS
MUTUAL FUNDS GEARED TOWARD A VARIETY OF INVESTMENT NEEDS
Choosing the investments that are "right" for you is no easy task. When
making your choices, you must weigh a number of factors:
o YOUR PERSONAL INVESTMENT OBJECTIVES -- Are you seeking capital growth,
income, total return, safety or liquidity? o YOUR TOLERANCE FOR RISK --
Are you an aggressive or conservative investor?
o YOUR TIME HORIZON -- Are you investing for the short term or the long
haul?
At Fremont Funds, we recognize that every investor has investment needs and
attitudes that are uniquely his or hers. By developing a family of funds that
covers a broad spectrum of investment objectives, Fremont Funds provide you
with the flexibility to choose the combination of funds that is appropriate
for you. The chart below compares the potential return and relative price
volatility of five categories of mutual funds, and shows the Fremont Funds
that fall into each category.
CLASS: MONEY MARKET
VOLATILITY PROFILE: VOLATILITY: LOW
INVESTMENT HORIZON: 0-2 YEARS
RETURN PROFILE: LOW
DESCRIPTION: Money Market Funds provide
liquidity and price stability by
investing in short-term
investments.
FREMONT FUND: FREMONT MONEY MARKET FUND
CLASS: BONDS
VOLATILITY PROFILE: VOLATILITY: MODERATELY LOW
INVESTMENT HORIZON: 2+ YEARS
RETURN PROFILE: MODERATELY LOW
DESCRIPTION: Bond Funds typically have less
price fluctuation than stock funds, with
historically lower total returns.
FREMONT FUND: FREMONT BOND FUND
CLASS: ASSET ALLOCATION
VOLATILITY PROFILE: VOLATILITY: MODERATE
INVESTMENT HORIZON: 3+ YEARS
RETURN PROFILE: MODERATELY HIGH
DESCRIPTION: Asset Allocation Funds invest in more than one
asset class -- stocks, bonds and money market
securities -- and sometimes in more than one
country, which helps lower the overall
volatility of the fund.
FREMONT FUND: FREMONT GLOBAL FUND
CLASS: LARGE COMPANY STOCKS
VOLATILITY PROFILE: VOLATILITY: HIGH
INVESTMENT HORIZON: 4+ YEARS
RETURN PROFILE: HIGH
DESCRIPTION: Domestic and International Large
Company Stock Mutual Funds
provide potentially high long-term returns
with a high level of price volatility.
FREMONT FUND: FREMONT GROWTH FUND
FREMONT INTERNATIONAL GROWTH FUND
CLASS: SMALL COMPANY STOCKS
VOLATILITY PROFILE: VOLATILITY: VERY HIGH INVESTMENT
HORIZON: 5+ YEARS
RETURN PROFILE: VERY HIGH
DESCRIPTION: Domestic and International Small
Company Stock Mutual Funds
provide potentially higher long-term
returns with very high price volatility.
FREMONT FUND: FREMONT INTERNATIONAL SMALL CAP FUND
FREMONT U.S. MICRO-CAP FUND
- 2 -
BUILDING A DIVERSIFIED PORTFOLIO
Pie Charts:
INCOME:
100% Money Market 50% Money Market
50% Bond
INCOME WITH GROWTH: GROWTH WITH INCOME:
25% Money Market 25% Bond
25% Bond 50% Global Stock & Bonds
50% Global Stock & Bonds 25% Large Company Stock
GROWTH: AGGRESSIVE GROWTH:
50% Global Stock & Bonds 25% Global Stock & Bonds
25% Large Company Stock 25% Large Company Stock
25% Small Company Stock 50% Small Company Stock
Professional money managers agree that diversification -- spreading
investments among several different asset classes, countries or individual
securities -- is one of the surest ways to reduce risk in an investment
portfolio.
Because all mutual funds contain a number of different securities, they
provide a level of diversification. Globally diversified funds which invest in
both stocks and bonds, such as the Fremont Global Fund, allow you to further
diversify across a number of asset categories within a single investment.
Many investors use another powerful method of adding diversification to
their port-folio. By investing in several different funds, they create a mix
of investments uniquely suited to their particular investment goals and risk
tolerance. For example, investors whose primary goal is income might invest
50% of their assets in a bond fund and 50% in a money market fund. At the
other end of the spectrum, aggressive investors seeking maximum growth
potential might choose a portfolio comprised of 25% global stocks and bonds,
25% large company stocks and 50% small company stock funds. These and other
examples are illustrated above. They are included for illustration purposes
only, and do not represent a recommended allocation for any particular
investor.
BEFORE MAKING YOUR INVESTMENT DECISIONS
This brochure contains a brief overview of the investment objectives and
strategies for seven of the Fremont Funds. Before deciding which fund or
combination of funds is right for you, be sure to obtain a prospectus by
calling 1-800-548-4539. The prospectus contains more detailed information
about the funds, including charges and expenses.
Please read it carefully before investing or sending money.
- 3 -
GLOBAL AND INTERNATIONAL INVESTMENTS
As the chart below shows, over the past decade at least 12 foreign stock
markets outperformed the U.S. market. For this reason and others, Fremont
approaches investing from a global perspective, offering a choice of funds
that provides U.S.
investors with convenient access to international investments.
Average Annual Returns
of selected stock markets
throughout the world
(1/1/85 to 12/31/94)
in U.S. dollars
GRAPH:
Hong Kong 26%
Belgium 25%
Austria 23%
Netherlands 22%
Sweden 21%
France 21%
Spain 20%
Germany 19%
U.K. 17%
Germany 17%
Italy 17%
Japan 17%
U.S. 15%
SOURCE: Morgan Stanley Capital International. Average annual total return
assuming all income is reinvested. This chart is for illustrative purposes
only and shows the varied performance of these unmanaged indices. Average
returns shown for foreign markets may not reflect significant fluctuations
that may have occurred from year to year. No aspect of this chart is intended
to represent the past or future performance of the any of the Fremont Funds.
Past performance is no guarantee of future results.
THE FREMONT GLOBAL FUND (SIMILAR TO FUND A IN THE BECHTEL RETIREMENT PLAN)
GLOBAL FUND AT A GLANCE:
Inception Date: November 18, 1988
Investment Manager: Fremont Investment Advisors
Objective: Seeks to maximize total return while reducing risk
Invests in: U.S. and foreign stocks, bonds and money market securities
POTENTIAL
RETURN:MODERATELY HIGH
VOLATILITY:MODERATE
INVESTMENT
HORIZON:3+ YEARS
INVESTMENT OBJECTIVE
If a single asset class -- like stocks, bonds or money market investments --
in a single country consistently outperformed all other asset classes
worldwide, your investment decisions would be easy. Unfortunately, no single
asset class or country investment can offer consistently attractive
performance year after year. Investing in international markets also involves
added risk due to political uncertainty and exchange rate fluctuations.
Recognizing these facts, the Fremont Global Fund seeks to maximize total
return while reducing some of these risks by allocating and reallocating its
assets among a range of different asset classes in countries throughout the
world. These asset classes include U.S. stocks and bonds, foreign stocks and
bonds and money market securities.
INVESTMENT STRATEGY
The Fremont Global Fund simplifies your life by putting complex asset
allocation decisions in the hands of professional money managers who have the
experience and resources to track a variety of securities markets and asset
classes worldwide.
The fund managers review the allocations to each asset class on an ongoing
basis and then determine the investment outlook for each class in each
country. The managers then adjust the Fund's asset mix so it will best fit the
Global Fund's objective.
INVESTMENT MANAGEMENT
The Fremont Global Fund is managed by Fremont Investment Advisors, a team of
seasoned professionals who have successfully employed the strategy of global
asset allocation for nearly two decades.
- 4 -
THE FREMONT INTERNATIONAL GROWTH FUND
INTERNATIONAL GROWTH FUND AT A GLANCE:
Inception Date: March 1, 1994
Investment Manager: Fremont Investment Advisors, Inc.
Objective: Long-term capital appreciation
Invests in: The stock of companies outside the U.S.
POTENTIAL
RETURN:HIGH
VOLATILITY:HIGH
INVESTMENT
HORIZON:4+ YEARS
INVESTMENT OBJECTIVE
Today, nearly 60% of the world's stock market opportunities lie outside the
borders of the U.S. The Fremont International Growth Fund pursues long-term
growth of capital by selectively investing in foreign stocks.
INVESTMENT STRATEGY
The International Growth Fund allows U.S. investors to invest in a
diversified pool of stocks issued by companies located in some of the world's
fastest growing regions. At least 90% of the Fund's assets will usually be
invested in the stocks of companies located outside the United States. The
Fund may invest up to 50% of its total assets in small to medium-sized
companies in both developed and emerging international markets.1
INVESTMENT MANAGEMENT
The Fremont International Growth Fund is managed by Fremont Investment
Advisors. Fremont Investment Advisors has used a team approach to manage
international stock portfolios since 1988. This team currently manages over
$200 million in international stock investments.
THE FREMONT INTERNATIONAL SMALL CAP FUND
INTERNATIONAL SMALL CAP FUND AT A GLANCE:
Inception Date: June 30, 1994
Investment Manager: Acadian Asset Management, Inc.
Objective: Long-term capital appreciation
Invests in: The stock of small companies outside the U.S.
POTENTIAL
RETURN:VERY HIGH
VOLATILITY:VERY HIGH
INVESTMENT
HORIZON:5+ YEARS
INVESTMENT OBJECTIVE
The Fremont International Small Cap Fund seeks to provide investors with
long-term capital appreciation by investing primarily in the stocks of small
capitalization ("small cap") companies located outside the United States.
International small cap firms are defined as the smallest 20% of firms in each
of their respective markets worldwide, based on market capitalization.1
INVESTMENT STRATEGY
The subadvisor for the Fremont International Small Cap Fund has compiled a
proprietary database which is used to analyze more than 15,000 small companies
outside the United States. This database helps identify individual stocks
which the fund managers believe may help enhance the Fund's return.
INVESTMENT MANAGEMENT
Acadian Asset Management, Inc., is a Boston-based global investment firm
with over $1.8 billion in assets under management. Acadian has built an
impressive track record managing the assets of some of the largest pension
funds in America.
1 Investing in small companies throughout the world involves additional risk
because of high trading costs, currency exchange rate risks and possible
difficulties with the liquidity of smaller, thinly-traded stocks.
- 5 -
U.S. STOCK MUTUAL FUNDS
For decades, growth-oriented investors have turned repeatedly to the U.S.
stock market in pursuit of long-term capital appreciation. Fremont offers a
choice of two professionally-managed U.S. equity funds, one that invests
primarily in larger companies and one that invests primarily in the nation's
smallest firms.
THE FREMONT GROWTH FUND
GROWTH FUND AT A GLANCE:
Inception Date: August 14, 1992
Investment Manager:Fremont Investment Advisors/Sit Investment Associates, Inc.
Objective: Long-term capital appreciation
Invests in: U.S. stocks
POTENTIAL
RETURN:HIGH
VOLATILITY:HIGH
INVESTMENT
HORIZON:4+ YEARS
INVESTMENT OBJECTIVE
Historically, stocks have produced the best long-term growth for investors.
This time-honored strategy is the oundation for the Fremont Growth Fund --
which pursues long-term growth of capital by investing in a diversified
portfolio of common stocks.
INVESTMENT STRATEGY
Most stock funds follow either a "growth" or "value" management style. The
Fremont Growth Fund diversifies across both styles by dividing its assets into
two separate portfolios. The "growth" portfolio emphasizes the stocks of
companies that are expected to produce significantly higher earnings growth
rates than the stock market as a whole. The "value" portfolio concentrates on
stocks with prices that appear to be low relative to earnings, book value and
dividends.
INVESTMENT MANAGEMENT
With the Fremont Growth Fund, investors enjoy the specialized expertise of
two professional money managers -- Fremont Investment Advisors, which manages
the "value" portfolio, and Sit Investments Associates, which directs the
investments of the Fund's "growth" portfolio.
THE FREMONT U.S. MICRO-CAP FUND
U.S. MICRO-CAP FUND AT A GLANCE:
Inception Date: June 30, 1994
Investment Manager: Morgan Grenfell Capital Management, Inc.
Objective: Long-term capital appreciation
Invests in: The stock of the smallest companies in the U.S.
POTENTIAL
RETURN:VERY HIGH
VOLATILITY:VERY HIGH
INVESTMENT
HORIZON:5+ YEARS
INVESTMENT OBJECTIVE
The history of the U.S. stock market reveals that, while the nation's
smallest companies are more volatile than their larger counterparts, as a
group they have also grown more rapidly. The Fremont U.S. Micro-Cap Fund seeks
to capitalize on the potential of emerging growth companies, and deliver
long-term capital appreciation, by investing in common stocks and convertible
securities.
INVESTMENT STRATEGY
The U.S. Micro-Cap Fund invests in the nation's smallest publicly traded
firms -- primarily companies with market capitalization levels ranging from
$10 million to $225 million. Although there may be liquidity and business
risks associated with investments in these companies, many times they also
have very high revenue and profit growth.
The Fund's sub-advisor uses a "bottom-up" strategy to target companies it
believes will grow more rapidly than the U.S. economy as a whole. To diversify
the portfolio, stocks from a variety of business sectors are purchased.
INVESTMENT MANAGEMENT
Morgan Grenfell Capital Management manages over $500 million in small cap
and micro-cap stocks, primarily for large pension funds.
- 6 -
BOND AND MONEY MARKET FUNDS
Investors seeking income, preservation of capital, or a way to diversify a
portfolio frequently invest in bonds or money market securities. The Fremont
Funds make both of these asset classes readily accessible through two
professionally-managed funds.
THE FREMONT BOND FUND (FUND B IN THE BECHTEL RETIREMENT PLAN) BOND FUND
AT A GLANCE:
Inception Date: March 30, 1993
Investment Manager: Pacific Investment Management Co.
Objective: Total return and preservation of capital
Invests in: Primarily investment-grade, intermediate-term bonds
POTENTIAL
RETURN: MODERATELY LOW
VOLATILITY:MODERATELY
LOW
INVESTMENT
HORIZON:2+ YEARS
INVESTMENT OBJECTIVE
Experienced investors know that there are at least two potential ways to
profit from bond investments: the income that bonds generate, and the net
capital gains that may occur if bonds rise in value. The Fremont Bond Fund
seeks to provide investors with high total returns -- income plus capital
gains -- consistent with preservation of capital and prudent investment
management.
INVESTMENT STRATEGY
The Fremont Bond Fund invests primarily in investment-grade bonds issued by
the U.S. government and domestic corporations, as well as international
governments and corporations. Depending upon market conditions, the average
maturity of these securities will range from 5 to 15 years. Historically,
intermediate-term bonds have produced higher yields than less volatile money
market instruments, without the higher levels of volatility associated with
higher-yielding long-term bonds.
INVESTMENT MANAGEMENT
Investment decisions for the Fremont Bond Fund are made by The Pacific
Investment Management Company (PIMCO), a nationally recognized fixed-income
specialist with more than two decades of experience. PIMCO currently manages
more than $56 billion for large institutional clients.
THE FREMONT MONEY MARKET FUND
(FUND C IN THE BECHTEL RETIREMENT PLAN)
MONEY MARKET FUND
AT A GLANCE:
Inception Date: November 18, 1988
Investment Manager: Fremont Investment Advisors, Inc.
Objective: Current income, capital preservation and liquidity
Invests in: High-quality money market securities
POTENTIAL
RETURN:LOW
VOLATILITY:LOW
INVESTMENT
HORIZON:0-2 YEARS
INVESTMENT OBJECTIVE
If you're like most investors, you want to keep a certain portion of your
assets liquid by investing them in low-risk accounts. The Fremont Money Market
Fund's objective is to maximize current income consistent with preservation of
capital and liquidity.
INVESTMENT STRATEGY
The Fremont Money Market Fund places its emphasis on price stability,
pursuing a stable share price of $1.00.1 To qualify for the Fund's portfolio,
a security must have a maturity of thirteen months or less and be of high
quality -- within Standard & Poor's or Moody's top rating categories (A-1,
P-1, respectively).
INVESTMENT MANAGEMENT
Fremont Investment Advisors, with nearly two decades of professional money
management experience, directs the investments of the Fremont Money Market
Fund.
1The Fund is neither insured nor guaranteed by the U.S. Government or any
other entity and there is no assurance that the stable $1.00 net asset
value objective will be met.
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FEATURES & BENEFITS
INVESTING IN THE FREMONT FUNDS PROVIDES ALL OF THESE BENEFITS:
100% NO-LOAD
Every dollar you invest works to help you achieve your investment goals.
The Fremont Funds have:
o No sales charges on purchases ("front-end" loads)
o No 12b-1 marketing fees
o No redemption charges ("back-end" loads)
o No fees to exchange shares of one Fremont Fund for shares of another.
NO IRA MAINTENANCE FEES
With a Fremont Funds IRA, there are no annual IRA maintenance fees to reduce
your account balance.
AFFORDABLE INVESTMENT MINIMUMS
The minimum initial investment in any Fremont Fund is just $2,000 (only
$1,000 for an IRA).
AUTOMATIC INVESTMENT PLAN
If you wish, you can automatically add to your mutual fund balance. Simply
decide how much you'd like to invest (minimum of $50/month) and that amount
will be automatically transferred from the checking or savings account you
specify.
TAX-DEFERRED RETIREMENT PLANS
Shares of Fremont Funds may be purchased for a variety of tax-deferred
retirement plans, including Individual Retirement Accounts (IRAs), and
Qualified Retirement Plans (Keoghs) or Simplified Employee Pension Plans
(SEPs) for small business owners and employees.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Regular dividends and capital gains distributions may be automatically
reinvested to purchase additional shares of a fund or, if you prefer, may be
paid directly to you in cash.
REDEMPTIONS AND EXCHANGES BY TELEPHONE1
As an added convenience, you can elect to redeem shares by telephone. All
redemptions are at current net asset value (NAV) which may be more or less
than the original cost of the shares.
EASY-TO-READ STATEMENTS
Regular statements keep you informed of the status of your Fremont Funds
investments. You also receive a confirmation statement each time a transaction
occurs in your account.
SYSTEMATIC WITHDRAWAL PLAN
Investors seeking a regular source of income may request withdrawals of $100
or more from the Fremont Funds on a monthly, quarterly or yearly basis.2 There
is no charge for this convenient service.
GIFTS TO MINORS
Investors can give shares of a Fremont Fund to a child and enjoy valuable
tax benefits under the Uniform Gift to Minors Act.
FOR MORE INFORMATION
For more complete information about the Fremont Funds, including charges and
expenses, call 1-800-548-4539 for a free prospectus. Read the prospectus
carefully before investing or sending money.
1Telephone redemption is not available for IRA or other retirement accounts.
2Because systematic withdrawals require a liquidation of shares, the number of
shares owned in the account will be reduced.
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INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The descriptions below are intended to supplement the material in the
Prospectus under "Investment Objectives, Policies and Risk Considerations" and
"General Investment Policies."
FREMONT BOND FUND, FREMONT GLOBAL FUND, FREMONT GROWTH FUND, FREMONT
INTERNATIONAL GROWTH FUND, FREMONT INTERNATIONAL SMALL CAP FUND AND
FREMONT U.S. MICRO-CAP FUND:
WRITING COVERED CALL OPTIONS. The Fremont Bond Fund (formerly the Fremont
Income Fund), the Fremont Global Fund (formerly the Fremont Multi-Asset Fund),
the Fremont Growth Fund (formerly the Fremont Equity Fund), the Fremont
International Growth Fund, the Fremont International Small Cap Fund and the
Fremont U.S. Micro-Cap Fund (collectively, the "Funds") may write (sell)
"covered" call options and purchase options to close out options previously
written by the Funds. The purpose of writing covered call options is to
generate additional premium income for the Funds. This premium income will
serve to enhance the Funds' total returns and will reduce the effect of any
price decline of the security or currency involved in the option. Covered call
options will generally be written on securities and currencies which, in the
opinion of the Advisor or Sub-Advisor, are not expected to make any major
price moves in the near future but which, over the long term, are deemed to be
attractive investments for the Funds.
A call option gives the holder (buyer) the "right to purchase" a security or
currency at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at
which the writer effects a closing purchase transaction by purchasing an
option identical to that previously sold. To secure his obligation to deliver
the underlying security or currency in the case of a call option, a writer is
required to deposit in escrow the underlying security or currency or other
assets in accordance with the rules of the Options Clearing Corporation. The
Funds will write only covered call options. This means that each Fund will
only write a call option on a security, index or currency which that Fund
already owns or has the right to acquire without additional cost.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
each Fund's investment objectives. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk
(in contrast to the writing of naked or uncovered options, which no Fund will
do), but capable of enhancing a Fund's total return. When writing a covered
call option, a Fund, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security or currency above the
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exercise price, but conversely retains the risk of loss should the price of
the security or currency decline. Unlike one who owns securities or currencies
not subject to an option, a Fund has no control over when it may be required
to sell the underlying securities or currencies, since it may be assigned an
exercise notice at any time prior to the expiration of its obligation as a
writer. If a call option which the Fund involved has written expires, that
Fund will realize a gain in the amount of the premium; however, such gain may
be offset by a decline in the market value of the underlying security or
currency during the option period. If the call option is exercised, the Fund
involved will realize a gain or loss from the sale of the underlying security
or currency. The security or currency covering the call will be maintained in
a separate account by that Fund's custodian. No Fund will consider a security
or currency covered by a call to be "pledged" as that term is used in its
policy which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium a Fund will
receive from writing a call option will reflect, among other things, the
current market price of the underlying security or currency, the relationship
of the exercise price to such market price, the historical price volatility of
the underlying security or currency, and the length of the option period. Once
the decision to write a call option has been made, the Advisor or Sub-Advisor,
in determining whether a particular call option should be written on a
particular security or currency, will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will
exist for those options. The premium received by a Fund for writing covered
call options will be recorded as a liability in that Fund's statement of
assets and liabilities. This liability will be adjusted daily to the option's
current market value, which will be the latest sales price at the time at
which the net asset value per share of that Fund is computed (close of the
regular trading session of the New York Stock Exchange), or, in the absence of
such sale, the latest asked price. The liability will be extinguished upon
expiration of the option, the purchase of an identical option in a closing
transaction, or delivery of the underlying security or currency upon the
exercise of the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If a Fund desires to sell
a particular security or currency from its portfolio on which it has written a
call option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security or currency. There is, of course,
no assurance that the Fund involved will be able to effect such closing
transactions at a favorable price. If a Fund cannot enter into such a
transaction, it may be required to hold a security or currency that it might
otherwise have sold, in which case it would continue to be at market risk with
respect to the security or currency. The Fund involved will pay transaction
costs in connection
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with the writing of options to close out previously written options. Such
transaction costs are normally higher than those applicable to purchases and
sales of portfolio securities.
Call options written by the Funds will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may
be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to
time, a Fund may purchase an underlying security or currency for delivery in
accordance with an exercise notice of a call option assigned to it, rather
than delivering such security or currency from its portfolio. In such cases,
additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from the
writing of the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying
security or currency, any loss resulting from the repurchase of a call option
is likely to be offset in whole or in part by appreciation of the underlying
security or currency owned by the Fund involved.
FEDERAL INCOME TAX TREATMENT OF COVERED CALL OPTIONS. Expiration of an option
or entry into a closing purchase transaction will result in capital gain or
loss. If the option was "in-the-money" (i.e., the option strike price was less
than the market value of the security or currency covering the option) at the
time it was written, any gain or loss realized as a result of the closing
purchase transaction will be long-term capital gain or loss if the security or
currency covering the option was held for more than one year prior to the
writing of the option. The holding period of the securities or currencies
covering an "in-the-money" option will not include the period of time the
option is outstanding. If the option is exercised, a Fund will realize a gain
or loss from the sale of the security or currency covering the call option,
and in determining such gain or loss the premium will be included in the
proceeds of the sale.
If a Fund writes options other than "qualified covered call options," as
defined in the Internal Revenue Code of 1986, as amended (the "Code"), any
losses on such options transactions, to the extent they do not exceed the
unrealized gains on the securities or currencies covering the options, may be
subject to deferral until the securities or currencies covering the options
have been sold. In addition, any options written against securities other than
bonds or currencies will be considered to have been closed out at the end of
the Fund's fiscal year and any gains or losses will be recognized for tax
purposes at that time. Under Code Section 1256, such gains or losses would be
characterized as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Code Section 988 may also apply to currency transactions. Under
Section 988, each foreign currency gain or loss is generally computed
separately and treated as ordinary income or loss. In the case of overlap
between Sections 1256 and 988, special provisions determine the character and
timing of any income, gain or
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<PAGE>
loss. Each Fund will attempt to monitor Section 988 transactions to
avoid an adverse tax impact.
WRITING COVERED PUT OPTIONS. The Funds may write covered put options. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) has the obligation to buy, the underlying security or currency at the
exercise price during the option period. So long as the obligation of the
writer continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to make payment of the
exercise price against delivery of the underlying security or currency. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.
The Funds would write put options only on a covered basis, which means that a
Fund would maintain in a segregated account cash and high-grade debt
obligations in an amount not less than the exercise price at all times while
the put option is outstanding. (The rules of the Clearing Corporation
currently require that such assets be deposited in escrow to secure payment of
the exercise price.) A Fund would generally write covered put options in
circumstances where the Advisor or Sub- Advisor wishes to purchase the
underlying security or currency for that Fund's portfolio at a price lower
than the current market price of the security or currency. In such event the
Fund would write a put option at an exercise price which, reduced by the
premium received on the option, reflects the lower price it is willing to pay.
Since a Fund would also receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk
in such a transaction would be that the market price of the underlying
security or currency would decline below the exercise price less the premiums
received.
PURCHASING PUT OPTIONS. The Funds may purchase put options. As the holder of a
put option, a Fund has the right to sell the underlying security or currency
at the exercise price at any time during the option period. Such Fund may
enter into closing sale transactions with respect to such options, exercise
them or permit them to expire. A Fund may purchase put options for defensive
purposes in order to protect against an anticipated decline in the value of
its securities or currencies. An example of such use of put options is
provided below.
The Funds may purchase a put option on an underlying security or currency (a
"protective put") owned as a defensive technique in order to protect against
an anticipated decline in the value of the security or currency. Such hedge
protection is provided only during the life of the put option when a Fund, as
the holder of the put option, is able to sell the underlying security or
currency at the put exercise price regardless of any decline in the underlying
security's market price or currency's exchange value. For example, a put
option may be purchased in order to protect unrealized appreciation of a
security or currency where the Advisor or Sub-Advisor deems it desirable to
continue to hold the security or currency because of tax considerations. The
premium paid for the put option and any
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transaction costs would reduce any capital gain otherwise available for
distribution when the security or currency is eventually sold.
The Funds may also purchase put options at a time when a Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold
when it has remaining value, and if the market price of the underlying
security or currency remains equal to or greater than the exercise price
during the life of the put option, the Fund involved will lose its entire
investment in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale
transaction.
A Fund will commit no more than 5% of its assets to premiums when purchasing
put options. The premium paid by such Fund when purchasing a put option will
be recorded as an asset in that Fund's statement of assets and liabilities.
This asset will be adjusted daily to the option's current market value, which
will be the latest sale price at the time at which that Fund's net asset value
per share is computed (close of trading on the New York Stock Exchange), or,
in the absence of such sale, the latest bid price. The asset will be
extinguished upon expiration of the option, the selling (writing) of an
identical option in a closing transaction, or the delivery of the underlying
security or currency upon the exercise of the option.
PURCHASING CALL OPTIONS. The Funds may purchase call options. As the holder of
a call option, a Fund has the right to purchase the underlying security or
currency at the exercise price at any time during the option period. Each Fund
may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire. A Fund may purchase call options for
the purpose of increasing its current return or avoiding tax consequences
which could reduce its current return. A Fund may also purchase call options
in order to acquire the underlying securities or currencies. Examples of such
uses of call options are provided below.
Call options may be purchased by a Fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund involved to acquire the
securities or currencies at the exercise price of the call option plus the
premium paid. At times the net cost of acquiring securities or currencies in
this manner may be less than the cost of acquiring the securities or
currencies directly. This technique may also be useful to such Fund in
purchasing a large block of securities that would be more difficult to acquire
by direct market purchases. So long as it holds such a call option rather than
the underlying security or currency itself, the Fund involved is partially
protected from any unexpected decline in the market price of the underlying
security or currency and in such event could allow the call option to expire,
incurring a loss only to the extent of the premium paid for the option.
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<PAGE>
Each Fund will commit no more than 5% of its assets to premiums when
purchasing call options. A Fund may also purchase call options on underlying
securities or currencies it owns in order to protect unrealized gains on call
options previously written by it. A call option would be purchased for this
purpose where tax considerations make it inadvisable to realize such gains
through a closing purchase transaction. Call options may also be purchased at
times to avoid realizing losses that would result in a reduction of such
Fund's current return. For example, where a Fund has written a call option on
an underlying security or currency having a current market value below the
price at which such security or currency was purchased by that Fund, an
increase in the market price could result in the exercise of the call option
written by that Fund and the realization of a loss on the underlying security
or currency with the same exercise price and expiration date as the option
previously written.
DESCRIPTION OF FUTURES CONTRACTS. A Futures Contract provides for the future
sale by one party and purchase by another party of a specified amount of a
specific financial instrument (security or currency) for a specified price at
a designated date, time and place. Brokerage fees are incurred when a Futures
Contract is bought or sold and margin deposits must be maintained.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, the Futures Contracts are usually
closed out before the delivery date. Closing out an open Futures Contract sale
or purchase is effected by entering into an offsetting Futures Contract
purchase or sale, respectively, for the same aggregate amount of the identical
type of financial instrument or currency and the same delivery date. If the
offsetting purchase price is less than the original sale price, the Fund
involved realizes a gain; if it is more, that Fund realizes a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, the Fund involved realizes a gain; if it is less, that Fund realizes a
loss. The transaction costs must also be included in these calculations. There
can be no assurance, however, that a Fund will be able to enter into an
offsetting transaction with respect to a particular Futures Contract at a
particular time. If a Fund is not able to enter into an offsetting
transaction, that Fund will continue to be required to maintain the margin
deposits on the Contract.
As an example of an offsetting transaction in which the financial instrument
or currency is not delivered, the contractual obligations arising from the
sale of one Contract of September Treasury Bills on an exchange may be
fulfilled at any time before delivery of the Contract is required (e.g., on a
specified date in September, the "delivery month") by the purchase of one
Contract of September Treasury Bills on the same exchange. In such instance
the difference between the price at which the Futures Contract was sold and
the price paid for the offsetting purchase, after allowance for transaction
costs, represents the profit or loss to the Fund involved.
The Funds may enter into interest rate, S&P Index (or other major market
index) or currency Futures Contracts as a hedge against changes in prevailing
levels of stock values, interest rates, or currency
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exchange rates in order to establish more definitely the effective return on
securities or currencies held or intended to be acquired by such Fund. A
Fund's hedging may include sales of Futures as an offset against the effect of
expected increases in currency exchange rates; purchases of such Futures as an
offset against the effect of expected declines in currency exchange rates and
purchase of Futures in anticipation of purchasing underlying index stocks
prior to the availability of sufficient assets to purchase such stocks or to
offset potential increase in stocks prices. When selling options or Futures
Contracts, a Fund will segregate cash and high-grade debt obligations to cover
any related liability.
The Funds will not enter into Futures Contracts for speculation and will only
enter into Futures Contracts which are traded on national futures exchanges
and are standardized as to maturity date and underlying financial instrument.
The principal Futures exchanges in the United States are the Board of Trade of
the City of Chicago and the Chicago Mercantile Exchange. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission. Futures are also traded in various overseas
markets.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce a Fund's exposure to currency exchange rate fluctuations, a
Fund may be able to hedge its exposure more effectively and perhaps at a lower
cost through using Futures Contracts.
A Fund will not enter into a Futures Contract if, as a result thereof, more
than 5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to "margin" (down payment)
deposits on such Futures Contracts.
A Stock Index contract such as the S&P 500 Stock Index Contract, for example,
is an agreement to take or make delivery at a specified future date of an
amount of cash equal to $500 multiplied by the difference between the value of
the Stock Index at purchase and at the close of the last trading day of the
contract. In order to close long positions in the Stock Index contracts prior
to their settlement date, the Fund will enter into offsetting sales of Stock
Index contracts.
Using Stock Index contracts in anticipation of market transactions involves
certain risks. Although a Fund may intend to purchase or sell Stock Index
contracts only if there is an active market for such contracts, no assurance
can be given that a liquid market will exist for the contracts at any
particular time. In addition, the price of Stock Index contracts may not
correlate perfectly with the movement in the Stock Index due to certain market
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the Stock Index
and movements in the price of Stock Index contracts, a correct forecast of
general market trends may not result in a successful anticipatory hedging
transaction.
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FUTURES CONTRACTS GENERALLY. Persons who trade in Futures Contracts may be
broadly classified as "hedgers" and "speculators." Hedgers, such as the Funds,
whose business activity involves investment or other commitments in debt
securities, equity securities or other obligations, use the Futures markets
primarily to offset unfavorable changes in value that may occur because of
fluctuations in the value of the securities and obligations held or expected
to be acquired by them or fluctuations in the value of the currency in which
the securities or obligations are denominated. Debtors and other obligers may
also hedge the interest cost of their obligations. The speculator, like the
hedger, generally expects neither to deliver nor to receive the financial
instrument underlying the Futures Contract, but, unlike the hedger, hopes to
profit from fluctuations in prevailing interest rates, securities prices or
currency exchange rates.
A public market exists in Futures Contracts covering foreign financial
instruments such as U.K. Pound, Japanese Yen and German Mark, among others.
Additional Futures Contracts may be established from time to time as various
exchanges and existing Futures Contract markets may be terminated or altered
as to their terms or methods of operation.
The Funds' Futures transactions will be entered into for traditional hedging
purposes; that is, Futures Contracts will be sold to protect against a decline
in the price of securities or currencies that such Fund owns, or Futures
Contracts will be purchased to protect that Fund against an increase in the
price of securities or currencies it has a fixed commitment to purchase.
"Margin" with respect to Futures and Futures Contracts is the amount of funds
that must be deposited by the Fund with a broker in order to initiate Futures
trading and to maintain a Fund's open positions in Futures Contracts. A margin
deposit ("initial margin") is intended to assure such Fund's performance of
the Futures Contract. The margin required for a particular Futures Contract is
set by the exchange on which the Contract is traded, and may be significantly
modified from time to time by the exchange during the term of the Contract.
Futures Contracts are customarily purchased and sold on margins that may range
upward from less than 5% of the value of the Contract being traded.
If the price of an open Futures Contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy
margin requirements, the broker will require an increase in the margin deposit
("margin variation"). However, if the value of a position increases because of
favorable price changes in the Futures Contract so that the margin deposit
exceeds the required margin, the broker will pay the excess to that Fund. In
computing daily net asset values, that Fund will mark to market the current
value of its open Futures Contracts. The Fund expects to earn interest income
on its margin deposits.
The prices of Futures Contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates,
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which in turn are affected by fiscal and monetary policies and national and
international political and economic events.
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<PAGE>
At best, the correlation between changes in prices of Futures Contracts and of
the securities or currencies being hedged can be only approximate. The degree
of imperfection of correlation depends upon circumstances such as: variations
in speculative market demand for Futures and for securities or currencies,
including technical influences in Futures trading; and differences between the
financial instruments being hedged and the instruments underlying the standard
Futures Contracts available for trading, with respect to interest rate levels,
maturities, and creditworthiness of issuers. A decision of whether, when, and
how to hedge involves skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of unexpected market behavior or
interest rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss,
as well as gain, to the investor. For example, if at the time of purchase, 10%
of the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Contract were closed out. Thus, a
purchase or sale of a Futures Contract may result in losses in excess of the
amount invested in the Futures Contract. However, a Fund would presumably have
sustained comparable losses if, instead of the Futures Contract, it had
invested in the underlying financial instrument and sold it after the decline.
Furthermore, in the case of a Futures Contract purchase, in order to be
certain that such Fund has sufficient assets to satisfy its obligations under
a Futures Contract, the Fund involved segregates and commits to back the
Futures Contract with money market instruments equal in value to the current
value of the underlying instrument less the margin deposit.
Most United States Futures exchanges limit the amount of fluctuation permitted
in Futures Contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a Futures Contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
Contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of Futures
positions and subjecting some Futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS. Except for transactions the Funds
identified as hedging transactions, each Fund is required for federal income
tax purposes to recognize as income for each taxable year its net unrealized
gains and losses on Futures Contracts as of the end of the year as well as
those actually realized during the year. Identified hedging transactions would
not be subject to the mark to market rules and would result in the recognition
of
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<PAGE>
ordinary gain or loss. Otherwise, unless transactions in Futures Contracts are
classified as part of a "mixed straddle," any gain or loss recognized with
respect to a Futures Contract is considered to be 60% long-term capital gain
or loss and 40% short-term capital gain or loss, without regard to the holding
period of the Contract. In the case of a Futures transaction classified as a
"mixed straddle," the recognition of losses may be deferred to a later taxable
year.
Sales of Futures Contracts which are intended to hedge against a change in the
value of securities or currencies held by a Fund may affect the holding period
of such securities or currencies and, consequently, the nature of the gain or
loss on such securities or currencies upon disposition.
In order for a Fund to continue to qualify for federal income tax treatment as
a regulated investment company, at least 90% of its gross income for a taxable
year must be derived from qualifying income, i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
currencies. In addition, gains realized on the sale or other disposition of
securities or currencies held for less than three months must be limited to
less than 30% of that Fund's annual gross income. It is anticipated that any
net gain realized from the closing out of Futures Contracts will be considered
gain from the sale of securities or currencies and therefore be qualifying
income for purposes of the 90% requirement. In order to avoid realizing
excessive gains on securities or currencies held less than three months, such
Fund may be required to defer the closing out of Futures Contracts beyond the
time when it would otherwise be advantageous to do so. It is anticipated that
unrealized gains on Futures Contracts, which have been open for less than
three months as of the end of the Investment Company's fiscal year and which
are recognized for tax purposes, will not be considered gains on securities or
currencies held less than three months for purposes of the 30% test.
The Funds will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Investment Company's fiscal year) on
Futures transactions. Such distributions will be combined with distributions
of capital gains realized on each Fund's other investments and shareholders
will be advised of the nature of the payments.
OPTIONS ON INTEREST RATE AND/OR CURRENCY FUTURES CONTRACTS, AND WITH RESPECT
TO THE FREMONT GLOBAL FUND, GOLD FUTURES CONTRACTS. Options on Futures
Contracts are similar to options on fixed income or equity securities or
options on currencies except that options on Futures Contracts give the
purchaser the right, in return for the premium paid, to assume a position in a
Futures Contract (a long position if the option is a call and a short position
if the option is a put), rather than to purchase or sell the Futures Contract,
at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the delivery of the Futures position by the
writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin
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<PAGE>
account which represents the amount by which the market price of the Futures
Contract, at exercise, exceeds (in the case of a call) or is less than (in the
case of a put) the exercise price of the option on the Futures Contract. If an
option is exercised on the last trading day prior to the expiration date of
the option, the settlement will be made entirely in cash equal to the
difference between the exercise price of the option and the closing level of
the securities or currencies upon which the Futures Contracts are based on the
expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
As an alternative to purchasing call and put options on Futures, the Funds may
purchase call and put options on the underlying securities or currencies, or
with respect to the Global Fund, on gold or other commodities. Such options
would be used in a manner identical to the use of options on Futures
Contracts.
To reduce or eliminate the leverage then employed by a Fund or to reduce or
eliminate the hedge position then currently held by that Fund, the Fund
involved may seek to close out an option position by selling an option
covering the same securities or contract and having the same exercise price
and expiration date.
FORWARD CURRENCY AND OPTIONS TRANSACTIONS. A forward currency contract is an
obligation to purchase or sell a currency against another currency at a future
date and price as agreed upon by the parties. The Funds may either accept or
make delivery of the currency at the maturity of the forward contract or,
prior to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract. A Fund typically engages in forward currency
transactions in anticipation of, or to protect itself against, fluctuations in
exchange rates. The Fund might sell a particular currency forward, for
example, when it wanted to hold bonds denominated in that currency but
anticipated, and sought to be protected against, a decline in the currency
against the U.S. dollar. Similarly, the Fund might purchase a currency forward
to "lock in" the dollar price of securities denominated in that currency which
it anticipated purchasing.
A put option gives the Fund, as purchaser, the right (but not the obligation)
to sell a specified amount of currency at the exercise price until the
expiration of the option. A call option gives the Fund, as purchaser, the
right (but not the obligation) to purchase a specified amount of currency at
the exercise price until its expiration. The Fund might purchase a currency
put option, for example, to protect itself during the contract period against
a decline in the dollar value of a currency in which it holds or anticipates
holding securities. If the currency's value should decline against the dollar,
the loss in currency value should be offset, in whole or in part, by an
increase in the value of the put.
If the value of the currency instead should rise against the dollar, any gain
to the Fund would be reduced by the premium it had paid for the put option. A
currency call option might be purchased, for example, in anticipation of, or
to protect against, a rise in the
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<PAGE>
value against the dollar of a currency in which the Fund anticipates
purchasing securities.
Currency options may be either listed on an exchange or traded
over-the-counter (OTC). Listed options are third-party contracts (i.e.,
performance of the obligations of the purchaser and seller is guaranteed by
the exchange or clearing corporation), and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. The Funds will not purchase an OTC option unless
they believe that daily valuation for such option is readily obtainable.
SECURITIES IN WHICH FREMONT INTERNATIONAL GROWTH FUND AND FREMONT
INTERNATIONAL SMALL CAP FUND MIGHT INVEST. The countries in which the
International Growth Fund and the International Small Cap Fund will seek
investments include those listed below. The Funds are not obligated and may
not invest in all the countries listed; moreover either Fund may invest in
countries other than those listed below, when such investments are consistent
with the Fund's investment objective and policies.
Pacific Basin: Australia Hong Kong Indonesia Japan Malaysia
New Zealand Philippines Singapore S. Korea Taiwan
Thailand
Europe: Austria Belgium Denmark Finland France
Germany Greece Ireland Italy Luxembourg
Netherlands Norway Portugal Spain Sweden
Switzerland United Kingdom Hungary Czech Republic
Other: Argentina Brazil Canada Chile India
Mexico Peru S. Africa Turkey Venezuela
Under exceptional economic or market conditions abroad, either Fund may
temporarily invest all or a major portion of its assets in United States
government obligations or high grade debt obligations of companies
incorporated in or having their principal activities in the United States.
In certain countries, governmental restrictions and other limitations on
investment may affect the maximum percentage of equity ownership in any one
company. In addition, in some instances only special classes of securities may
be purchased by foreigners, and the market prices, liquidity, and rights with
respect to those securities may vary from shares owned by nationals. The
Advisor and Sub-Advisor are not aware at this time of the existence of any
investment or exchange control regulations which might substantially impair
the operations of either Fund as described in the Prospectus and this
Statement of Additional Information. Although restrictions may in the future
make it undesirable to invest in certain countries, the Advisor and
Sub-Advisor do not believe that any current repatriation restrictions would
affect its decisions to invest in the countries eligible for investment by
either Fund. It should be noted, however, that this situation could change at
any time. Neither Fund intends to make any
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<PAGE>
significant investment in any country or stock market where the political or
economic situation might be considered by the Advisor and Sub-Advisor to be at
risk of substantial or total loss because of such political or economic
situation. See "General Investment Policies Risk Factors and Special
Considerations for International Investing" in the Prospectus.
THE FUNDS (INCLUDING THE FREMONT MONEY MARKET FUND) GENERALLY
DIVERSIFICATION. Each Fund intends to operate as a "diversified" management
investment company, as defined in the Investment Company Act of 1940 (the
"1940 Act"). A "diversified" investment company means a company which meets
the following requirements: At least 75% of the value of the company's total
assets is represented by cash and cash items (including receivables),
"Government Securities," securities of other investment companies, and other
securities for the purposes of this calculation limited in respect of any one
issuer to an amount not greater in value than 5% of the value of the total
assets of such management company and to not more than 10% of the outstanding
voting securities of such issuer. "Government Securities" means securities
issued or guaranteed as to principal or interest by the United States, or by a
person controlled or supervised by and acting as an instrumentality of the
Government of the United States pursuant to authority granted by the Congress
of the United States.
REVERSE REPURCHASE AGREEMENTS AND LEVERAGE. The Funds may enter into reverse
repurchase agreements which involve the sale of a security by a Fund and its
agreement to repurchase the security at a specified time and price. The Fund
involved will maintain in a segregated account with its custodian cash, cash
equivalents or high quality debt securities in an amount sufficient to cover
its obligations under reverse repurchase agreements with broker-dealers (but
not with banks). Under the 1940 Act, reverse repurchase agreements are
considered borrowings by a Fund; accordingly, each Fund will limit its
investments in these transactions, together with any other borrowings, to no
more than one-third of its total assets. The use of reverse repurchase
agreements by a Fund creates leverage which increases such Fund's investment
risk. If the income and gains on securities purchased with the proceeds of
these transactions exceed the cost, a 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 costs, 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, a Fund may be required to sell some of its portfolio securities
within three days to reduce the borrowings (including reverse repurchase
agreements) and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
A Fund intends to enter into a reverse repurchase agreement only if the income
from the investment of the proceeds is greater than the expense of the
transaction, as the proceeds are invested for a period no longer than the term
of the reverse repurchase agreement.
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<PAGE>
FLOATING RATE AND VARIABLE RATE OBLIGATIONS AND PARTICIPATION INTERESTS. The
Funds may purchase floating rate and variable rate obligations, including
participation interests therein. Floating rate or variable rate obligations
provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate at a major commercial bank) or is
reset on a regular basis by a bank or investment banking firm to a market
rate. At specified times, the owner can demand payment of the obligation at
par plus accrued interest. Variable rate obligations provide for a specified
periodic adjustment in the interest rate, while floating rate obligations have
an interest rate which changes whenever there is a change in the external
interest rate. Frequently banks provide letters of credit or other credit
support or liquidity arrangements to secure these obligations. The quality of
the underlying creditor or of the bank, as the case may be, must, as
determined by the Advisor or Sub-Advisor, be equivalent to the quality
standards prescribed for the Funds.
The Funds may invest in participation interests purchased from banks in
floating rate or variable rate obligations owned by banks. A participation
interest gives a Fund an undivided interest in the obligation in the
proportion that the Fund's participation interest bears to the total principal
amount of the obligation, and provides a demand repayment feature. Each
participation is backed by an irrevocable letter of credit or guarantee of a
bank (which may be the bank issuing the participation interest or another
bank). The bank letter of credit or guarantee must meet the prescribed
investment quality standards for the Funds. A Fund has the right to sell the
participation instrument back to the issuing bank or draw on the letter of
credit on demand for all or any part of the Fund's participation interest in
the underlying obligation, plus accrued interest.
SWAP AGREEMENTS. The Funds may enter into interest rate, index and
currency exchange rate swap agreements for purposes of attempting to obtain
a particular desired return at a lower cost to the Fund than
if the Fund had invested directly in an instrument that
yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods
ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the
parties are calculated with respect to a "notional amount," i.e., the return
on or increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of
securities representing a particular index. Commonly used swap agreements
include interest rate caps, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates exceed
a specified rate, or "cap"; interest rate floors, under which, in return for a
premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor"; and interest rate
collars, under which a party sells a cap and purchases a floor or vice versa
in an attempt to protect itself against interest rate movements exceeding
minimum or maximum levels.
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<PAGE>
The "notional amount" of the swap agreement is only a fictive basis on which
to calculate the obligations which the parties to a swap agreement have agreed
to exchange. Most swap agreements entered into by the Funds would calculate
the obligations of the parties to the agreement on a "net basis." Consequently
a Fund's obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based
on the relative values of the positions held by each party to the agreement
(the "net amount"). A Fund's obligations under a swap agreement will be
accrued daily (offset against amounts owed to the Fund) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
securities, or high grade debt obligations, to avoid any potential leveraging
of the Fund's portfolio. A Fund will not enter into a swap agreement with any
single party if the net amount owed or to be received under existing contracts
with that party would exceed 5% of the Fund's net assets.
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the Advisor's or the Sub-Advisor's ability
to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Because they are two-party
contracts and because they may have terms of greater than seven days, swap
agreements will be considered to be illiquid. Moreover, a Fund bears the risk
of loss of the amount expected to be received under a swap agreement in the
event of the default or bankruptcy of a swap agreement counterparty. The
Advisor or Sub-Advisor will cause a Fund to enter into swap agreements only
with counterparties that would be eligible for consideration as repurchase
agreement counterparties under a Fund's repurchase agreement guidelines.
Certain restrictions imposed on the Funds by the Internal Revenue Code may
limit the Funds' ability to use swap agreements. The swaps market is largely
unregulated. It is possible that developments in the swaps market, including
potential government regulation, could adversely affect a Fund's ability to
terminate existing swap agreements or to realize amounts to be received under
such agreements.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. A 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). A Fund will not purchase securities the value of which is greater
than 5% of its net assets on a when-issued or firm commitment basis. A 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. A Fund will not use such
transactions for leveraging purposes, and accordingly will segregate cash,
cash equivalents or high quality debt securities in an amount sufficient to
meet its payment obligations thereunder. Although these transactions will not
be entered into for leveraging purposes, to the extent a Fund's aggregate
commitments under these transactions exceed its holdings of cash and
securities that do not fluctuate in value (such as short-term money market
instruments), the Fund temporarily
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<PAGE>
will be in a leveraged position (i.e., it will have an amount greater than its
net assets subject to market risk). Should market values of a Fund's portfolio
securities decline while the Fund is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. As the Fund's aggregate commitments under these transactions
increase, the opportunity for leverage similarly increases. A Fund will not
borrow money to settle these transactions and, therefore, will liquidate other
portfolio securities in advance of settlement if necessary to generate
additional cash to meet its obligations thereunder.
COMMERCIAL BANK OBLIGATIONS. For the purposes of each Fund's investment
policies with respect to bank obligations, obligations of foreign branches of
U.S. banks and of foreign banks may be general obligations of the parent bank
in addition to the issuing bank, or may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks, and of foreign banks may subject the Funds to investment risks
that are different in some respects from those of investments in obligations
of domestic issuers. Although a Fund will typically acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at
the time of purchase in excess of $1 billion, this $1 billion figure is not a
fundamental investment policy or restriction of any Fund. For the purposes of
calculation with respect to the $1 billion figure, the assets of a bank will
be deemed to include the assets of its U.S. and non-U.S. branches.
ILLIQUID SECURITIES. Each Fund (other than the Money Market Fund) may
invest up to 15% of its net assets in all forms of "illiquid
securities." The Money Market Fund may invest up to 10% of its net
assets in "illiquid securities."
An investment is generally deemed to be "illiquid" if it cannot be disposed of
within seven days in the ordinary course of business at approximately the
amount at which such securities are valued by the Fund. "Restricted"
securities are securities which were originally sold in private placements and
which have not been registered under the Securities Act of 1933 (the "1933
Act"). However, a market exists for certain restricted securities (for
example, securities qualifying for resale to certain "qualified institutional
buyers" pursuant to Rule 144A under the 1933 Act). Additionally, the Advisor
and the Funds believe that a similar market exists for commercial paper issued
pursuant to the private placement exemption of Section 4(2) of the 1933 Act.
The Funds may invest without limitation in these forms of restricted
securities if such securities are determined by the Advisor or Sub-Advisor to
be liquid in accordance with standards established by the Investment Company's
Board of Directors. Under these standards, the Advisor or Sub-Advisor must
consider (a) the frequency of trades and quotes for the security, (b) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers, (c) any dealer undertaking to make a market in the
security, and (d) the nature of the security and the nature of the marketplace
trades (for example, the time needed to dispose of the
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<PAGE>
security, the method of soliciting offers and the mechanics of transfer).
It is not possible to predict with accuracy how the markets for certain
restricted securities will develop. Investing in restricted securities could
have the effect of increasing the level of a Fund's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.
GUARANTEED INVESTMENT CONTRACTS (FREMONT GLOBAL FUND). The Global Fund may
enter into agreements known as guaranteed investment contracts ("GICs") with
banks and insurance companies. GICs provide to the Fund a fixed rate of return
for a fixed period of time, similar to any fixed income security. While there
is no ready market for selling GICs and they typically are not assignable, the
Fund will only invest in GICs if the financial institution permits a
withdrawal of the principal (together with accrued interest) after the Fund
gives seven days' notice. Like any fixed income security, if market interest
rates at the time of such withdrawal have increased from the guaranteed rate,
the Fund would be required to pay a premium or penalty upon such withdrawal.
If market rates declined, the Fund would receive a premium on withdrawal.
Since GICs are considered illiquid, the Fund will not invest more than 15% of
its net assets in GICs and other illiquid assets.
LENDING OF PORTFOLIO SECURITIES.
For the purpose of realizing additional income, a Fund may make
secured loans of portfolio securities amounting to not more than 33-1/3% of
its net assets. Securities loans are made to broker-dealers or institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral at least equal at all times to the value of the
securities lent marked to market on a daily basis. The collateral received
will consist of cash, short-term U.S. Government securities, bank letters of
credit or such other collateral as may be permitted under a Fund's investment
program and by regulatory agencies and approved by the Board of Directors.
While the securities are being lent, a Fund will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities,
as well as interest on the investment of the collateral or a fee from the
borrower. The Funds have a right to call each loan and obtain the securities
on five business days' notice. The Funds will not have the right to vote
equity securities while they are being lent, but it will call a loan in
anticipation of any vote in which it seeks to participate.
REDUCTION IN BOND RATING
(FREMONT GLOBAL FUND AND FREMONT BOND FUND). The Global Fund and
the Bond Fund may each invest up to 10% of its net assets in debt securities
rated below BBB or Baa, but not lower than B. In the event that the rating for
any security held by the Funds drops below the minimum acceptable rating
applicable to that Fund, the Fund's Advisor or Sub-Advisor will determine
whether the Fund should continue to hold such an obligation in its portfolio.
Bonds rated below BBB or Baa are commonly known as "junk bonds." These bonds
are subject to greater fluctuations in value and risk of loss of income and
principal due to default by the issuer than are higher rated bonds. The market
values of junk bonds tend to reflect short-term corporate, economic and market
developments and investor perceptions
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<PAGE>
of the issuer's credit quality to a greater extent than higher rated bonds. In
addition, it may be more difficult to dispose of, or to determine the value
of, junk bonds. See Appendix A for a complete description of the bond ratings.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following fundamental investment policies and
restrictions in addition to the policies and restrictions discussed in its
prospectus. With respect to each Fund, the policies and restrictions listed
below cannot be changed without approval by the holders of a "majority of the
outstanding voting securities" of that Fund (which is defined in the 1940 Act
to mean the lesser of (i) 67% of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented or (ii) more than 50%
of the outstanding shares). These restrictions provide that no Fund may:
1. Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business
activities in the same industry, except that this limitation
shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its
agencies or instrumentalities, to tax exempt securities
issued by state governments or political subdivisions
thereof, or to investments by the Money Market Fund in
securities of domestic banks, of foreign branches of
domestic banks where the domestic bank is unconditionally
liable for the security, and domestic branches of foreign
banks subject to the same regulation of domestic banks.
2. Buy or sell real estate (including real estate limited
partnerships) or commodities or commodity contracts;
however, the Funds may invest in securities secured by real
estate, or issued by companies which invest in real estate
or interests therein, including real estate investment
trusts, and may purchase and sell currencies (including
forward currency exchange contracts), gold, bullion, futures
contracts and related options generally as described in the
Prospectus and Statement of Additional Information.
3. Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an
investment position may technically cause it to be
considered an underwriter as that term is defined under the
Securities Act of 1933.
4. Make loans, except that a Fund may purchase debt securities,
enter into repurchase agreements, and make loans of
portfolio securities amounting to not more than 33 1/3% of
its net assets calculated at the time of the securities
lending.
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<PAGE>
5. Borrow money, except from banks for temporary or emergency
purposes not in excess of 30% of the value of the Fund's
total assets. A Fund will not purchase securities while such
borrowings are outstanding.
6. Change its status as a diversified investment company.
7. Issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and except that
the Investment Company and the Funds may issue shares of
common stock in multiple series or classes.
8. Notwithstanding any other fundamental investment restriction
or policy, each Fund may 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 Fund.
Other current investment policies of the Funds, which are not fundamental and
which may be changed by action of the Board of Directors without shareholder
approval, are as follows. A Fund may not:
9. Invest in companies for the purpose of exercising control or
management.
10. Mortgage, pledge or hypothecate any of its assets, provided
that this restriction shall not apply to the transfer of
securities in connection with any permissible borrowing.
11. Invest in interests in oil, gas or other mineral exploration
or development programs or leases.
12. Invest more than 5% of its total assets in securities of
companies having, together with their predecessors, a record
of less than three years continuous operation.
13. Purchase or retain the securities of any issuer, if those
individual officers and directors of the Investment Company,
its investment advisor, or distributor, each owning
beneficially more than 1/2 of 1% of the securities of such
issuer, together own more than 5% of the securities of such
issuer.
14. Purchase securities on margin, provided that the Fund may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities, except that
the Fund may make margin deposits in connection with futures
contracts.
15. Enter into a futures contract if, as a result thereof, more
than 5% of the Fund's total assets (taken at market value at
the time of entering into the contract) would be committed
to margin on such futures contract.
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<PAGE>
16. Acquire securities or assets for which there is no readily
available market or which are illiquid, if, immediately
after and as a result, the value of such securities would
exceed, in the aggregate, 15% of that Fund's net assets,
except that the value of such securities may not exceed 10%
of the Money Market Fund's net assets.
17. Make short sales of securities or maintain a short position,
except that a Fund may sell short "against the box."
18. Invest in securities of an issuer if the investment would
cause a Fund to own more than 10% of any class of securities
of any one issuer.
19. Acquire more than 3% of the outstanding voting securities of
any one investment company.
20. Invest more than 5% of its net assets in warrants or rights,
or more than 2% of its net assets in warrants and rights
which are not listed on the American or New York Stock
Exchanges.
INVESTMENT COMPANY DIRECTORS AND OFFICERS
<TABLE>
The Bylaws of Fremont Mutual Funds, Inc. (the "Investment Company"), the
Maryland investment company which established the Funds, authorize a Board of
Directors of between three and 15 persons, as fixed by the Board of Directors.
There are presently seven directors, each of whom have been elected by the
shareholders of the Investment Company for an indefinite term of office. A
majority of remaining directors may fill director vacancies caused by
resignation, death or expansion of the Board of Directors. Any director may be
removed by vote of holders of a majority of all outstanding shares of the
Investment Company qualified to vote at the meeting.
<CAPTION>
PRINCIPAL OCCUPATIONS
AND BUSINESS EXPERIENCE
NAME AND ADDRESS AGE POSITIONS HELD FOR PAST FIVE YEARS
<S> <C> <C> <C>
David L. Redo (1)(2)(4) 58 President, Chief Executive President and Director, Fremont
Fremont Investment Officer and Director Investment Advisors, Inc.;
Advisors, Inc. Managing Director, Fremont
50 Beale St., Suite 100 Group, Inc.; Director, Sequoia
San Francisco, CA 94105 Ventures, Sit/Kim International
Investment Associates and J.P.
Morgan Securities Asia.
Vincent P. Kuhn, Jr.(1)(2)(4) 63 Executive Vice President, Executive Vice President and
Fremont Investment Chief Compliance Officer Director, Fremont Investment
Advisors, Inc. and Director Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
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<PAGE>
Albert W. Kirschbaum(1)(2)(4) 57 Senior Vice President, Senior Vice President and
Fremont Investment Secretary and Director Director. Fremont Investment
Advisors, Inc. Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Richard E. Holmes(3) 52 Director Vice President and Director,
P.O. Box 479 BelMar Advisors, Inc.
Sanibel, FL 33957 (marketing firm)
William W. Jahnke(3) 52 Director 3/93 - Present
Jahnke & Associates Principal, Jahnke & Associates
58 Camino del Diablo (Consultants)
Orinda, CA 94563
6/83 - 3/93
Chairman, Board of Directors,
Vestek Systems, Inc.
Donald C. Luchessa(3) 66 Director Principal, DCL Advisory
DCL Advisory (marketer for investment
345 California Street, 10th Fl advisors)
San Francisco, CA 94104
David L. Egan(3) 61 Director President, Fairfield Capital
Fairfield Capital Associates, Inc. Associates, Inc. (an investment
44 Montgomery St., Suite 3085 advisor) and Fairfield Capital
San Francisco, CA 94101 Funding, Inc. (a broker-dealer)
Peter F. Landini(4) 44 Senior Vice President Senior Vice President and
Fremont Investment and Treasurer Director, Fremont Investment
Advisors, Inc. Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
William M. Feeney 39 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Marycatherine Dwyer 32 Vice President, Asst. 10/91 - Present
Fremont Investment Compliance Officer Vice President, Fremont
Advisors, Inc. and Asst. Secretary Investment Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105 6/90 - 10/91
Registered Representative,
Liberty Securities
- 30 -
<PAGE>
Norman Gee 45 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Alexandra W. Kinchen(4) 50 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Andrew L. Pang(4) 46 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Robert J. Haddick(4) 36 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Ian R. Stone 31 Vice President, Asst. Secretary Vice President, Fremont
Fremont Investment and Asst. Treasurer Investment Advisors, Inc.
Advisors, Inc.
50 Beale St., Suite 100
San Francisco, CA 94105
Richard G. Thomas 38 Vice President 11/91 - Present
Fremont Investment Vice President, Fremont
Advisors, Inc. Investment Advisors, Inc.
50 Fremont St., Suite 3500
San Francisco, CA 94105 1/88 - 11/91
Institutional Sales, Charles
Schwab & Co.
Chantal Gaiddon 39 Vice President Controller and Asst. Treasurer,
Fremont Investment and Controller Fremont Investment Advisors,
Advisors, Inc. Inc.
50 Beale St., Suite 100
San Francisco, CA 94105
- -----------------------------
<FN>
(1) Director who is an "interested person" of the Company due to his
affiliation with the Company's investment manager.
(2) Member of the Executive Committee.
(3) Member of the Audit Committee and the Contracts Committee.
(4) Member of the Fremont Investment Committee.
- 31 -
<PAGE>
</FN>
</TABLE>
During the fiscal year ended October 31, 1995, Richard E. Holmes received
$3,000 and William W. Jahnke and Donald C. Luchessa each received $4,500 for
serving as directors of the Investment Company.
As of January 8, 1996 the officers and directors as a group owned in
the aggregate beneficially or of record less than 1% of the
outstanding shares of the Investment Company.
INVESTMENT ADVISORY AND OTHER SERVICES
MANAGEMENT AGREEMENT. The Advisor, in addition to providing investment
management services, furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Investment Company, provides suitable office
space, necessary small office equipment and utilities, and general purpose
accounting forms, supplies, and postage used at the offices of the Investment
Company. The Advisor is responsible to pay sub-transfer agency fees when such
entities are engaged in connection with share holdings in the Funds acquired
by certain retirement plans.
Each Fund (other than the International Growth Fund, the International Small
Cap Fund and the U.S. Micro-Cap Fund) will pay all of its own expenses not
assumed by the Advisor, including, but not limited to, the following:
custodian, stock transfer and dividend disbursing fees and expenses; taxes and
insurance; expenses of the issuance and redemption of shares of the Fund
(including stock certificates, registration or qualification fees and
expenses); legal and auditing expenses; and the costs of stationery and forms
prepared exclusively for the Fund.
With respect to the International Growth Fund, the Advisor has
agreed to bear all of the Fund's ordinary operating expenses in
return for receiving a monthly fee of 1.5% per annum of the Fund's
average daily net assets. With respect to the International Small
Cap Fund and the U.S. Micro-Cap Fund, the Advisor has agreed to bear all of
the Fund's ordinary operating expenses in return for receiving a monthly fee
of 2.5% per annum of a Fund's average daily net assets with respect to the
first $30 million, 2.0% with respect to the next $70 million, and 1.5%
thereafter. Each of these three Funds will bear all expenses relating to
interest, brokerage commissions, other transaction charges relative to
investing activities of the Fund, and extraordinary expenses (including for
example, litigation expenses, if any). Until further notice, the Advisor is
limiting the management fee of the International Small Cap Fund and the U.S.
Micro-Cap Fund to 1.98% of average net assets.
The allocation of general Investment Company expenses among the
Series is made on a basis that the directors deem fair and equitable,
which may be based on the relative net assets of each Series or the
nature of the services performed and relative applicability to each Series.
- 32 -
<PAGE>
The directors of the Advisor are David L. Redo, Vincent P. Kuhn, Jr.,
Jon S. Higgins, Peter F. Landini and Albert W. Kirschbaum.
Under the Investment Advisory and Administration Agreements (the "Advisory
Agreements"), the Advisor has agreed to reimburse each Fund if that Fund's
annual ordinary expenses exceed the most stringent limits prescribed by any
state in which the Fund's shares are offered for sale. This expense limitation
will be calculated and administered separately with respect to each Fund.
Expenses which are not subject to this limitation are interest, taxes, the
amortization of organizational expenses, and extraordinary expenses.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are
accounted for as capital items and not as expenses. Reimbursement, if any,
will be on a monthly basis, subject to year-end adjustment. Reimbursement, if
any, will be on a monthly basis, subject to year-end adjustment. Once waived,
fees will not be recognized in the future.
The Advisory Agreement with respect to each Fund may be renewed annually,
provided that any such renewal has been specifically approved by (i) the Board
of Directors, or by the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of a Fund, and (ii) the vote of a majority of
directors who are not parties to the Advisory Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in person, at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement also provides that either party thereto has the right with respect
to any Fund to terminate it without penalty upon sixty (60) days' written
notice to the other party, and that the Advisory Agreement terminates
automatically in the event of its assignment (as defined in the 1940 Act).
<TABLE>
The following table depicts the advisory fees (net of voluntary
waivers) paid by the Funds to the Advisor for the fiscal years ended October
31, 1995, 1994 and 1993:
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93
<S> <C> <C> <C>
Money Market Fund $ 621,063 $ 332,393 $ 79,620
Bond Fund 274,272 98,252 --
Global Fund 2,734,846 1,881,639 825,741
Growth Fund 195,838 176,971 183,879
- 33 -
<PAGE>
Internat'l Growth Fund 439,970 286,003 --
Internat'l Small Cap Fund 56,539 11,108 --
U.S. Micro-Cap Fund 77,299 14,668 --
</TABLE>
The Advisory Agreements with respect to the Money Market Fund, the Bond Fund,
the Global Fund and the Growth Fund also provide for the payment of an
administrative fee to the Advisor at the annual rate of .15% of average net
assets. With respect to the Money Market Fund and the Bond Fund, the Advisor
has waived and is currently waiving the entire administrative fee until
further notice. For the fiscal years ended October 31, 1995, 1994 and 1993,
the Growth Fund paid to the Advisor administrative fees (net of voluntary
waivers) of $42,633, $3,536 and $3,813, respectively. For the fiscal years
ended October 31, 1995, 1994 and 1993, the Global Fund paid to the Advisor
administrative fees of $683,712, $469,838 and $207,005, respectively.
The Advisor's employees may engage in personal securities transactions.However,
the Investment Company and the Advisor have adopted a Code of Ethics for the
purpose of establishing standards of conduct for the Advisor's employees with
respect to such transactions. The Code of Ethics includes some broad
prohibitions against fraudulent conduct, and also includes specific rules,
restrictions and reporting obligations with respect to personal securities
transactions of the Advisor's employees. Generally, each employee is required
to obtain prior approval of the Advisor's compliance officer in order to
personally purchase or sell a security. Purchases or sales of securities which
are not eligible for purchase or sale by the Funds or any other client of the
Advisor are exempted from the prior approval requirement, as are certain other
transactions which the Advisor believes present no potential conflict of
interest. The Advisor's employees are also required to file with the Advisor
quarterly reports of their securities transactions.
THE SUB-ADVISORS - FREMONT BOND FUND, FREMONT GROWTH FUND, FREMONT
INTERNATIONAL GROWTH FUND, FREMONT INTERNATIONAL SMALL CAP FUND AND FREMONT
U.S. MICRO-CAP FUND.
The Advisory Agreements authorize the Advisor, at its option and at its
sole expense, to appoint a Sub-Advisor, which may assume all or a portion
of responsibilities and obligations of the Advisor pursuant to the Advisory
Agreement as shall be delegated to the Sub-Advisor. Any appointment of a
Sub-Advisor and assumption of responsibilities and obligations of the
Advisor by such Sub-Advisor is subject to approval by the Board of
Directors and, as required by law, the shareholders of the affected Fund.
Pursuant to this authority, Pacific Investment Management Company serves as
the Bond Fund's Sub-Advisor, Sit Investment Associates, Inc. serves as the
Growth Fund's Sub-Advisor, Acadian Asset Management, Inc. serves as the
International Small Cap Fund's Sub-Advisor and Morgan Grenfell Capital
Management, Inc. serves as the U.S. Micro-Cap Fund's Sub-Advisor
(collectively referred to as "the Sub-Advisors"). The Sub-Advisors are
overseen by the members of the Fremont Investment Committee. See
- 34 -
<PAGE>
"Investment Company Directors and Officers." Prior to September 1, 1995,
Sit/Kim International Investment Associates, Inc. served as the
International Growth Fund's Sub-Advisor.
The current Portfolio Management Agreements provide that the Sub-Advisors
agree to manage the investment of the Fund's assets, subject to the applicable
provisions of the Investment Company's Articles of Incorporation, Bylaws and
current registration statement (including, but not limited to, the investment
objective, policies and restrictions delineated in the Funds' current
Prospectus and Statement of Additional Information), as interpreted from time
to time by the Board of Directors.
For their services under the Portfolio Management Agreements, the Advisor has
agreed to pay the Sub-Advisors an annual fee equal to the percentages set
forth below of the value of the applicable Fund's average net assets, payable
monthly:
Bond Fund: .25% to Pacific Investment Management Company
Growth Fund: .40% to Sit Investment Associates, Inc.
Internat'l Small Cap Fund: to Acadian Asset Management, Inc.:
.75% on the first $50
million .65% on the next
$50 million .50% on the
next $100 million .40% on
assets in excess of $200
million
U.S. Micro-Cap Fund: to Morgan Grenfell Capital Management, Inc.:
1.50% on the first $30 million
1.00% on the next $70 million
.75% on assets in excess of $100 million
For the fiscal year ended October 31, 1995, Pacific Investment Management
Company, Sit Investment Associates, Inc. and Sit/Kim International
Investment Associates, Inc. received from the Advisor (not the Funds)
subadvisory fees (net of voluntary waivers) of $181,386, $57,522 and
$165,172, respectively. For the fiscal year ended October 31, 1994,
Pacific Investment Management Company, Sit Investment Associates, Inc. and
Sit/Kim International Investment Associates, Inc. received from the Advisor
net subadvisory fees of $64,792, $73,951 and $9,614, respectively. Sit
Investment Associates, Inc. received from the Advisor net subadvisory fees
of $67,701 with respect to the fiscal year ended October 31, 1993. Acadian
Asset Management, Inc. has agreed to waive its fees until July 1, 1996.
Morgan Grenfell Capital Management, Inc. has agreed to waive its fees for
an indefinite period of time.
The Portfolio Management Agreements for each Fund continue in effect from
year to year only as long as such continuance is specifically approved at
least annually by (i) the Board of Directors of the Investment Company or
by the vote of a majority of the outstanding voting shares of the Fund, and
(ii) by the vote of a majority of the directors of the Investment Company
- 35 -
<PAGE>
who are not parties to the Agreement or interested persons of the Advisor or
the Sub-Advisor or the Investment Company. Each Agreement may be terminated at
any time, without the payment of any penalty, by the Board of Directors of the
Investment Company or by the vote of a majority of the outstanding voting
shares of the Fund, or by the Sub-Advisor or the Advisor, upon 30 days'
written notice to the other party. Additionally, each Agreement automatically
terminates in the event of its assignment.
PRINCIPAL UNDERWRITER. As of May 5, 1995 the Funds' principal underwriter is
Funds Distributor, Inc., One Exchange Place, Tenth Floor, Boston,
Massachusetts (the "Distributor"). The Distributor is engaged on a
non-exclusive basis to assist in the distribution of shares in various
jurisdictions. The Distributor receives compensation from the Advisor and is
not paid either directly or indirectly by the Investment Company. The
Distributor received compensation of $52,018 from the Advisor with respect to
the fiscal year ended October 31, 1995.
TRANSFER AGENT. The Funds' transfer agent, MGF Service Corp., 312 Walnut
Street, Cincinnati, Ohio (the "Transfer Agent"), maintains the records of each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Funds' shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. The Transfer Agent is a subsidiary of Leshner Financial,
Inc., of which Robert H. Leshner is the controlling shareholder.
In addition, the Transfer Agent has been retained by the Advisor to assist the
Advisor in providing administrative services to the Investment Company. In
this capacity, the Transfer Agent supplies non-investment related regulatory
compliance services and executive and administrative services. The Transfer
Agent supervises the preparation of reports to and filings with the Securities
and Exchange Commission and materials for meetings of the Board of Directors.
The Advisor (not the Investment Company) pays the Transfer Agent a monthly fee
of $6,000 for these administrative services. For the fiscal year ended October
31, 1995, the Advisor paid the Transfer Agent $72,000 for administrative
services on behalf of all series of the Investment Company.
EXECUTION OF
PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for a Fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other of the accounts served by the Advisor or Sub-Advisor, including other
series of the Investment Company. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to a Fund, they
will be effected only when the Advisor or Sub-Advisor believes that to do so
will be in the best interest of such Fund. When such concurrent authorizations
occur, the objective will be to allocate the executions in a manner which is
deemed equitable to the accounts involved, including each of the Funds.
- 36 -
<PAGE>
The Bond Fund, the Global Fund, the Growth Fund, the International Growth
Fund, the International Small Cap Fund and the U.S. Micro-Cap Fund contemplate
purchasing foreign equity and/or fixed-income securities in over-the-counter
markets or stock exchanges located in the countries in which the respective
principal offices of the issuers of the various securities are located, if
that is the best available market. Fixed commissions on foreign stock
transactions and transaction costs with respect to foreign fixed-income
securities are generally higher than negotiated commissions on United States
transactions, although these Funds will endeavor to achieve the best net
results on its portfolio transactions. There is generally less government
supervision and regulation of foreign stock exchanges and brokers than in the
United States. Foreign security settlements may in some instances be subject
to delays and related administrative uncertainties.
Foreign equity securities may be held by the Global Fund, the Growth Fund, the
International Growth Fund, the International Small Cap Fund and the U.S.
Micro-Cap Fund in the form of American Depository Receipts ("ADRs") or similar
instruments. ADRs may be listed on stock exchanges, or traded in the
over-the-counter markets in the United States. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates.
The government securities issued by the United States and other countries and
money market securities in which a Fund may invest are generally traded in the
over-the-counter markets.
<TABLE>
No brokerage commissions have been paid by the Money Market Fund during the
last three fiscal years. The aggregate dollar amount of brokerage commissions
paid by the other Funds during the last three years are as follows:
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93
<S> <C> <C> <C>
Bond Fund $ 17,243 $ 4,000 $0
Global Fund 1,545,310 1,357,600 339,700
Growth Fund 102,857 53,700 39,400
Internat'l Growth Fund 99,089 138,200 ---
Internat'l Small Cap Fund 11,850 3,200 ---
U.S. Micro-Cap Fund 4,326 500 ---
</TABLE>
Subject to the requirement of seeking the best available prices and
executions, the Advisor or Sub-Advisor may, in circumstances in which two or
more broker-dealers are in a position to offer comparable prices and
executions, give preference to broker-dealers who have provided investment
research, statistical, and other related services to the Advisor or Sub-
Advisor for the benefit of a Fund and/or of other accounts served by the
Advisor or Sub-Advisor. Such preferences would only be afforded to a
broker-dealer if the Advisor determines that the amount of the commission is
reasonable in relation to the value of the brokerage and research services
provided by that broker-dealer and only to a broker-dealer acting as agent and
not as principal. The Advisor is of the opinion that, while such information
is useful in varying degrees, it is of indeterminable value and does not
reduce the expenses of the Advisor in managing each Fund's portfolio.
As of October 31, 1995, the Money Market Fund owned securities of its
regular brokers or dealers or their parents (as defined in Rule 10b-1
promulgated under the 1940 Act) as follows: American Express Credit Corp.
- - $9,926,106; Goldman, Sachs & Co. - $9,864,311; and Merrill Lynch & Co.,
Inc. - $9,988,878. As of October 31, 1995, the Global Fund owned
securities of its regular brokers or dealers or their parents (as defined
in Rule 10b-1 promulgated under the 1940 Act) as follows: HSBC Holdings
PLC - $2,267,098. As of October 31, 1995, the Growth Fund owned securities
of its regular brokers or dealers or their parents (as defined in Rule 10b-
1 promulgated under the 1940 Act) as follows: Citicorp - $875,812; and
American Express Co. - $487,500.
HOW TO INVEST
PRICE OF SHARES. The price to be paid by an investor for shares of a Fund, the
public offering price, is based on the net asset value per share which is
calculated once daily as of the close of trading (currently 4:00 p.m., Eastern
time) each day the New York Stock Exchange is open as set forth below. The New
York Stock Exchange is currently closed on weekends and on the following
holidays: (i) New Year's Day, Presidents' Day, Good Friday, Memorial Day, July
4th, Labor Day, Thanksgiving, and Christmas Day; and (ii) the preceding Friday
when any one of those holidays falls on a Saturday or the subsequent Monday
when any one of those holidays falls on a Sunday. The Money Market Fund will
also observe additional federal holidays that are not observed by the New York
Stock Exchange: Martin Luther King Day, Columbus Day and Veterans Day.
Each Fund will calculate its net asset value and complete orders to purchase,
exchange or redeem shares only on a Monday-Friday basis (excluding holidays on
which the New York Stock Exchange is closed). The Bond Fund's, the Global
Fund's, the Growth Fund's, the International Growth Fund's, the International
Small Cap Fund's and the U.S. Micro-Cap Fund's portfolio securities may from
time to time be listed on foreign stock exchanges or otherwise traded on
foreign markets which may trade on other days (such as Saturday). As a result,
the net asset value of these Funds may be significantly affected by such
trading on days when a shareholder has no access to the Funds. See also in the
Prospectus at "General Investment Policies - Special Considerations in
International Investing," "Calculation of Net Asset Value and Public Offering
Price," "How to Invest," "How to Redeem Shares," and "Shareholder Account
Services and
- 37 -
<PAGE>
Privileges - Exchanges Between Funds."
FREMONT BOND FUND, FREMONT GLOBAL FUND, FREMONT GROWTH FUND, FREMONT
INTERNATIONAL GROWTH FUND, FREMONT INTERNATIONAL SMALL CAP FUND AND FREMONT
U.S. MICRO-CAP FUND:
1. Fixed-income obligations with original or remaining maturities in
excess of 60 days are valued at the mean of representative quoted
bid and asked prices for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality
and type. However, in circumstances where the Advisor deems it
appropriate to do so, prices obtained for the day of valuation from
a bond pricing service will be used. The Funds amortize to
maturity all securities with 60 days or less remaining to maturity
based on their cost to the Funds if acquired within 60 days of
maturity or, if already held by a Fund on the 60th day, based on
the value determined on the 61st day. Options on currencies
purchased by the Funds are valued at their last bid price in the
case of listed options or at the average of the last bid prices
obtained from dealers in the case of OTC options. Where market
quotations are not readily available, securities are valued at fair
value pursuant to methods approved by the Board of Directors;
2. Equity securities, including ADRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on
which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available mean price. In cases where securities are
traded on more than one exchange, the securities are valued on the
exchange designated by or under the authority of the Board of
Directors as the primary market. Securities traded in the
over-the-counter market are valued at the last available bid price
in the over-the-counter market prior to the time of valuation.
Securities and assets for which market quotations are not readily
available (including restricted securities which are subject to
limitations as to their sale) are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors;
3. Trading in securities on European and Far Eastern securities
exchanges and over-the-counter markets is normally completed well
before the close of the business day in New York. In addition,
European or Far Eastern securities trading may not take place on
all business days in New York. Furthermore, trading takes place in
Japanese markets on certain Saturdays and in various foreign
markets on days which are not business days in New York and on
which the Funds' net asset value is not calculated. The
calculation of net asset value may not take place contemporaneously
with the determination of the prices of securities held by these
Funds used in such calculation. Events affecting the values of
- 38 -
<PAGE>
portfolio securities that occur between the time their prices
are determined and the close of the New York Stock Exchange will
not be reflected in these Funds' calculation of net asset value
unless the Board of Directors deems that the particular event
would materially affect net asset value, in which case an
adjustment will be made;
4. With respect to the Global Fund, gold bullion and bullion-type
coins are valued at the closing price of gold on the New York
Commodity Exchange;
5. The value of each security denominated in a currency other than
U.S. dollars will be translated into U.S. dollars at the prevailing
market rate as determined by the Advisor;
6. Each Fund's liabilities, including proper accruals of taxes and
other expense items, are deducted from total assets; and
7. The net assets so obtained are then divided by the total number
of shares outstanding (excluding treasury shares), and the
result, rounded to the nearest cent, is the net asset value per
share.
FREMONT MONEY MARKET FUND:
It is the Money Market Fund's policy to use its best efforts to maintain a
constant per share price for the Money Market Fund equal to $1.00.
The portfolio instruments of the Money Market Fund are valued on the basis of
amortized cost. This involves valuing an instrument at its cost initially and,
thereafter, assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which the value, as determined by amortized cost,
is higher or lower than the price the Money Market Fund would receive if it
sold the instrument.
The valuation of the Money Market Fund's portfolio instruments based upon
their amortized cost and simultaneous maintenance of a per share net asset
value at $1.00 are permitted by Rule 2a-7 adopted by the Securities and
Exchange Commission ("SEC"). Under this rule, the Money Market Fund must
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of 397 days or less as
allowed by regulations under the 1940 Act, and invest only in securities
determined by the Board of Directors to be of high quality with minimal credit
risks. In accordance with this rule the Board of Directors has established
procedures designed to stabilize, to the extent reasonably practicable, the
Money Market Fund's price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the portfolio holdings
by the Board of Directors at such intervals as it may deem appropriate, to
determine whether the net asset value of the Money Market Fund calculated by
using available market quotations or market equivalents deviates from $1.00
per share based on amortized cost. The
- 39 -
<PAGE>
rule also provides that a deviation between the Money Market Fund's net asset
value based upon available market quotations or market equivalents and $1.00
per share net asset value based on amortized cost exceeding $0.005 per share
must be examined by the Board of Directors. In the event the Board of
Directors determines that the deviation may result in material dilution or is
otherwise unfair to investors or existing shareholders, the Board of Directors
must cause the Money Market Fund to take such corrective action as it regards
as necessary and appropriate, including: selling portfolio instruments prior
to maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or
capital gains; redeeming shares in kind; or establishing a net asset value per
share by using available market quotations.
In the event that a security meeting the Money Market Fund's quality
requirements is acquired and subsequently is assigned a rating below "First
Tier" by one or more of the rating organizations, the Board of Directors
must assess promptly whether the security presents minimal credit risks
and direct the Money Market Fund to take such action as the Board of
Directors determines is in the best interest of the Money Market Fund
and its shareholders. This responsibility cannot be delegated to the
Advisor. However, this assessment by the Board of Directors
is not required if the security is disposed of (by sale or otherwise) or
matures within five Business Days of the time the Advisor learns of the lower
rating. However, in such a case the Board of Directors must be notified
thereafter.
In the event that a security acquired by the Money Market
Fund either defaults (other than an immaterial default unrelated to the
issuer's financial condition), or is determined to no longer present minimal
credit risks, the Money Market Fund must dispose of the security (by sale or
otherwise) as soon as practicable unless the Board of Directors finds that
this would not be in the Money Market Fund's best interest.
OTHER INVESTMENT AND REDEMPTION SERVICES
THE OPEN ACCOUNT. When an investor makes an initial investment in a Fund, a
shareholder account is opened in accordance with the investor's registration
instructions. Each time there is a transaction in a shareholder account, such
as an additional investment, redemption or distribution (dividend or capital
gain), the shareholder will receive from the Transfer Agent a confirmation
statement showing the current transaction in the shareholder account, along
with a summary of the status of the account as of the transaction date.
PAYMENT AND TERMS OF OFFERING. Payment of shares purchased should
accompany the purchase order, or funds should be wired to the Transfer
Agent as described in the Prospectus. Payment, other than by wire
transfer, must be made by check or money order drawn on a U.S. bank.
Checks or money orders must be payable in U.S. dollars.
As a condition of this offering, if an order to purchase shares is cancelled
due to nonpayment (for example, on account of a check returned for "not
sufficient funds"), the person who made the order will be subject
- 40 -
<PAGE>
to a $20 charge and will be responsible for reimbursing the Advisor for any
loss incurred by reason of such cancellation. If such purchaser is a
shareholder, that Fund shall have the authority as agent of the shareholder to
redeem shares in his account for their then-current net asset value per share
to reimburse that Fund for the loss incurred. Such loss shall be the
difference between the net asset value of that Fund on the date of purchase
and the net asset value on the date of cancellation of the purchase. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.
The Investment Company reserves the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent investments with
respect to any person or class of persons. An order to purchase shares is not
binding on the Investment Company until it has been confirmed in writing by
the Transfer Agent (or other arrangements made with the Investment Company, in
the case of orders utilizing wire transfer of funds) and payment has been
received. To protect existing shareholders, the Investment Company reserves
the right to reject any offer for a purchase of shares by any individual.
REDEMPTION IN KIND. The Investment Company may elect to redeem shares in
assets other than cash but must pay in cash all redemptions with respect to
any shareholder during any 90-day period in an amount equal to the lesser of
(i) $250,000 or (ii) 1% of the net asset value of a Fund at the beginning of
such period. SUSPENSION OF REDEMPTION PRIVILEGES. The Investment Company may
suspend redemption privileges with respect to any Fund or postpone the date of
payment for more than seven days after the redemption order is received during
any period (1) when the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the Exchange is restricted as
determined by the SEC, (2) when an emergency exists, as defined by the SEC,
which makes it not reasonably practicable for the Investment Company to
dispose of securities owned by it or to fairly determine the value of its
assets, or (3) as the SEC may otherwise permit.
TAXES - MUTUAL FUNDS
STATUS AS A "REGULATED INVESTMENT COMPANY." Each Fund will be treated under
the Internal Revenue Code (the "Code") as a separate entity, and each Fund
intends to qualify as a separate "regulated investment company" under
Subchapter M of the Code. To qualify for the tax treatment afforded a
regulated investment company under the Code, a Fund must annually distribute
at least 90% of the sum of its investment company taxable income (generally
net investment income and certain short-term capital gains), its tax-exempt
interest income (if any) and net capital gains, and meet certain
diversification of assets and other requirements of the Code. If a Fund
qualifies for such tax treatment, it will not be subject to federal income tax
on the part of its investment company taxable income and its net capital gain
which it distributes to shareholders. To meet the requirements of the Code, a
Fund must (a) derive at least 90% of its gross
- 41 -
<PAGE>
income from dividends, interest, payments with respect to securities loans,
and gains from the sale or other disposition of securities or currencies; (b)
derive less than 30% of its gross income from the sale or other disposition of
securities held less than three months; and (c) diversify its holdings so
that, at the end of each fiscal quarter, (i) at least 50% of the market value
of the Fund's total assets is represented by cash, U.S. Government securities,
securities of other regulated investment companies, and other securities,
limited, in respect of any one issuer, to an amount not greater than 5% of the
Fund's total assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies), or in
two or more issuers which a Fund controls and which are engaged in the same or
similar trades or businesses. Income and gain from investing in gold or other
commodities will not qualify in meeting the 90% gross income test.
Even though a Fund qualifies as a "regulated investment company," it may be
subject to certain federal excise taxes unless that Fund meets certain
additional distribution requirements. Under the Code, a nondeductible excise
tax of 4% is imposed on the excess of a regulated investment company's
"required distribution" for the calendar year over the "distributed amount"
for such calendar year. The term "required distribution" means the sum of (i)
98% of ordinary income (generally net investment income) for the calendar
year, (ii) 98% of capital gain net income (both long-term and short-term) for
the one-year period ending on October 31 of such year and (iii) the sum of any
untaxed, undistributed net investment income and net capital gains of the
regulated investment company for prior periods. The term "distributed amount"
generally means the sum of (i) amounts actually distributed by a Fund from its
current year's ordinary income and capital gain net income and (ii) any amount
on which a Fund pays income tax for the year. Each Fund intends to meet these
distribution requirements to avoid the excise tax liability.
If for any taxable year a Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits.
DISTRIBUTIONS OF NET INVESTMENT INCOME. Dividends from net investment income
(including net short-term capital gains) are taxable as ordinary income.
Shareholders will be taxed for federal income tax purposes on dividends from a
Fund in the same manner whether such dividends are received as shares or in
cash. If a Fund does not receive any dividend income from U.S. corporations,
dividends from that Fund will not be eligible for the dividends received
deduction allowed to corporations. To the extent that dividends received by a
Fund would qualify for the dividends received deduction available to
corporations, the Fund must
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<PAGE>
designate in a written notice to shareholders the amount of the Fund's
dividends that would be eligible for this treatment. In order to qualify for
the dividends received deduction, a corporate shareholder must hold the Fund's
shares paying the dividends, upon which a dividend received deduction would be
based, for at least 46 days.
NET CAPITAL GAINS. Any distributions designated as being made from a Fund's
net capital gains will be taxable as long-term capital gains, regardless of
the holding period of the shareholders of that Fund's shares. Shareholders are
advised to consult their tax advisor regarding application of these rules to
their particular circumstances.
NON-U.S. SHAREHOLDERS. Under the Code, distributions of net investment
income by a Fund to a shareholder who, as to the U.S., is a nonresident
alien individual, nonresident alien fiduciary of a trust or estate, foreign
corporation, or foreign partnership (a "foreign shareholder") will be
subject to U.S. tax withholding (at a 30% or lower treaty rate).
Withholding will not apply if a dividend paid by a Fund to a foreign
shareholder is "effectively connected" with a U.S. trade or business, in
which case the reporting and withholding requirements applicable to U.S.
citizens, U.S. residents or domestic corporations will apply.
Distributions of net long-term capital gains are not subject to tax
withholding, but in the case of a foreign shareholder who is a nonresident
alien individual, such distributions ordinarily will be subject to U.S.
income tax withholding at a rate of 30% if the individual is physically
present in the U.S. for more than 182 days during the taxable year.
OTHER INFORMATION. The amount of any realized gain or loss on closing out a
futures contract such as a forward commitment for the purchase or sale of
foreign currency will generally result in a realized capital gain or loss for
tax purposes. Under Code Section 1256, futures contracts held by a Fund at the
end of each fiscal year will be required to be "marked to market" for federal
income tax purposes, that is, deemed to have been sold at market value. Sixty
percent (60%) of any net gain or loss recognized on these deemed sales and
sixty percent (60%) of any net realized gain or loss from any actual sales
will be treated as long-term capital gain or loss, and the remainder will be
treated as short-term capital gain or loss. Code Section 988 may also apply to
currency transactions. Under Section 988, each foreign currency gain or loss
is generally computed separately and treated as ordinary income or loss. In
the case of overlap between Sections 1256 and 988, special provisions
determine the character and timing of any income, gain or loss. The Funds will
attempt to monitor Section 988 transactions to avoid an adverse tax impact.
See also "Investment Objectives, Policies and Risk Considerations" in this
Statement of Additional Information.
Any loss realized on redemption or exchange of a Fund's shares will be
disallowed to the extent shares are reacquired within the 61 day period
beginning 30 days before and ending 30 days after the shares are disposed of.
- 43 -
<PAGE>
Under the Code, a Fund's taxable income for each year will be computed without
regard to any net foreign currency loss attributable to transactions after
October 31, and any such net foreign currency loss will be treated as arising
on the first day of the following taxable year. A Fund may be required to pay
withholding and other taxes imposed by foreign countries generally at rates
from 10% to 40% which would reduce such Fund's investment income. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is not anticipated that shareholders (except with
respect to the Global Fund, the International Growth Fund and the
International Small Cap Fund) will be entitled to a foreign tax credit or
deduction for such foreign taxes.
With respect to the Global Fund, the International Growth Fund or the
International Small Cap Fund, so long as it (i) qualifies for treatment as a
regulated investment company, (ii) is liable for foreign income taxes, and
(iii) more than 50% of its total assets at the close of its taxable year
consist of stock or securities of foreign corporations, it may elect to "pass
through" to its shareholders the amount of such foreign taxes paid. If this
election is made, information with respect to the amount of the foreign income
taxes that are allocated to the applicable Fund's shareholders will be
provided to them and any shareholder subject to tax on dividends will be
required (i) to include in ordinary gross income (in addition to the amount of
the taxable dividends actually received) its proportionate share of the
foreign taxes paid that are attributable to such dividends, and (ii) either
deduct its proportionate share of foreign taxes in computing its taxable
income or to claim that amount as a foreign tax credit (subject to applicable
limitations) against U.S. income taxes.
The Funds may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies ("PFICs"). Currently, PFICs
are the only or primary means by which these Funds may invest in some
countries. If a Fund invests in PFICs, it may be subject to U.S. federal
income tax on a portion of any "excess distribution" or gain from the
disposition of such shares even if such income is distributed as a taxable
dividend to shareholders. In addition to bearing their proportionate share of
a Fund's expenses, shareholders will also bear indirectly similar expenses of
PFICs in which the Fund has invested. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains. Capital gains on the
sale of such holdings will be deemed to be ordinary income regardless of how
long such PFICs are held. If a Fund were to invest in a PFIC and elect to
treat the PFIC as a "qualified electing fund" under the Code, in lieu of the
foregoing requirements, the Fund might be required to include in income each
year a portion of the ordinary earnings and net capital gains of the qualified
electing fund, even if not distributed to the Fund, and such amounts would be
subject to the 90% and calendar year distribution requirements described
above.
- 44 -
<PAGE>
The foregoing is a general abbreviated summary of present United States
federal income taxes on dividends and distributions by each Fund. Investors
are urged to consult their own tax advisors for more detailed information and
for information regarding any foreign, state and local taxes applicable to
dividends and distributions received.
ADDITIONAL INFORMATION
CUSTODIAN. The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675, acts as Custodian for the Investment Company's assets, and as
such safekeeps the Funds' portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Investment Company's
request and maintains records in connection with its duties.
INDEPENDENT AUDITORS; FINANCIAL STATEMENTS. The Investment Company's
independent auditors are Coopers & Lybrand L.L.P., 333 Market Street, San
Francisco, California 94105. Coopers & Lybrand L.L.P. will conduct an annual
audit of each Fund, assist in the preparation of each Fund's federal and state
income tax returns and consult with the Investment Company as to matters of
accounting, regulatory filings, and federal and state income taxation. The
financial statements of the Funds as of October 31, 1995 included herein are
audited. Such financial statements are included herein in reliance on the
opinion of Coopers & Lybrand L.L.P. given on the authority of said firm as
experts in auditing and accounting.
LEGAL OPINIONS. The validity of the shares offered by the Prospectus has been
passed upon by Morrison & Foerster, 345 California Street, San Francisco,
California 94104. In addition to acting as counsel to the Investment Company,
Morrison & Foerster has acted and may continue to act as counsel to the
Advisor and its affiliates in various matters.
USE OF NAME. The Advisor has granted the Investment Company the right to use
the "Fremont" name and has reserved the rights to withdraw its consent to the
use of such name by the Investment Company at any time, or to grant the use of
such name to any other company, and the Investment Company has granted the
Advisor, under certain conditions, the use of any other name it might assume
in the future, with respect to any other investment company sponsored by the
Advisor.
SHAREHOLDER VOTING RIGHTS. The Investment Company currently issues shares in
eight series and may establish additional classes or series of shares in the
future. When more than one class or series of shares is outstanding, shares of
all classes and series will vote together for a single set of directors, and
on other matters affecting the entire Investment Company, with each share
entitled to a single vote. On matters affecting only one class or series, only
the shareholders of that class or series shall be entitled to vote. On matters
relating to more than one class or series but affecting the classes and series
differently, separate votes by class and series are required. Shareholders
holding 10% of the shares of the Investment Company may call a special meeting
of shareholders.
- 45 -
<PAGE>
LIABILITY OF DIRECTORS AND OFFICERS. The Articles of Incorporation of the
Investment Company provide that subject to the provisions of the 1940 Act, to
the fullest extent permitted under Maryland law, no officer or director of the
Investment Company may be held personally liable to the Investment Company or
its shareholders.
CERTAIN SHAREHOLDERS. As of January 8, 1996, the Advisor owned of
record 15.2% of the outstanding shares of the U.S. Micro-Cap Fund and
20.3% of the outstanding shares of the International Small Cap Fund; BF Fund
Limited, 50 Fremont Street, San Francisco, California 94105, owned of record
8.4% of the outstanding shares of the Global Fund, 66.3% of the outstanding
shares of the Growth Fund, 76.2% of the outstanding shares of the
International Growth Fund and 10.7% of the outstanding shares of the U.S.
Micro-Cap Fund; Bankers Trust Company as Trustee for the Bechtel Master Trust
for Qualified Employees, P.O. Box 1742 Church Street Station, New York, New
York 10008, owned of record 46.1% of the outstanding shares of the Global
Fund, 84.7% of the outstanding shares of the Bond Fund and 50.8% of the
outstanding shares of the Money Market Fund; Fremont Group, Inc., 50 Fremont
Street, San Francisco, California 94105, owned of record 18.1% of the
outstanding shares of the Money Market Fund; the Bank of New York as Trustee
for Various Pension Plans, 1 Wall Street, New York, New York 10286, owned of
record 7.3% of the outstanding shares of the International Growth Fund;
Sequoia Ventures, Inc., 50 Fremont Street, San Francisco, California 94105,
owned of record 6.3% of the outstanding shares of the Bond Fund and 5.1% of
the outstanding shares of the Money Market Fund; Charles Schwab & Co., Inc.,
101 Montgomery Street, San Francisco, California 94104, owned of record 5.7%
of the outstanding shares of the Growth Fund and 43.7% of the outstanding
shares of the International Small Cap Fund; Gary L. Bergstrom, 303 Marsh
Street, Belmont, Massachusetts 02178, owned of record 5.1% of the outstanding
shares of the International Small Cap Fund; and the Don J. & Rosemary T.
Gunther Family Trust, 107 Eaton Square, London, England, owned of record 5.1%
of the outstanding shares of the International Small Cap Fund and 7.6% of the
outstanding shares of the U.S. Micro-Cap Fund.
OTHER INVESTMENT INFORMATION. The Advisor directs the management of over $3.5
billion of assets and internally manages over $1.1 billion of assets for
retirement plans, foundations, private portfolios, and mutual funds. The
Advisor's philosophy is to apply a long-term approach to investing that
balances risk and return potential.
The Global Fund's investment objectives are similar to the objectives
of Bechtel Trust & Thrift Plan, Fund A. The Bond Fund's investment
objectives are the same as the objectives of Bechtel Trust & Thrift Plan,
Fund B. The Money Market Fund's investment objectives are the same as
the objectives of Bechtel Trust & Thrift Plan, Fund
C.
Historical annual returns of various market indices may be used to represent
the returns of various asset classes as follows:
(1) U.S. Stocks: Standard & Poor's 500 Index;
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<PAGE>
(2) Foreign Stocks: Morgan Stanley Europe, Australia and Far East
(EAFE) Index;
(3) Intermediate U.S. Bonds: Lehman Brothers Intermediate
Government/Corporate Bond Index;
(4) Foreign Bonds: Salomon Brothers Non-U.S. Dollar Bond Index;
(5) Money Market Securities: 1980-1986, 90 day U.S. Treasury Bill rate:
1987-1992 Donoghue First Tier Money Market Fund Average;
(6) Real Estate: Frank Russell NCREIF Property Index.
<TABLE>
The total returns for the above indices for the years 1980 through 1995 are
as follows (source: Fremont Investment Advisors, Inc.):
<CAPTION>
U.S. Foreign Intmdte Foreign Money Market
Stocks Stocks U.S.Bonds Bonds Securities Real Estate
<S> <C> <C> <C> <C> <C> <C>
1980 32.4% 24.4% 6.4% 14.2% 11.8% 18.1%
1981 -5.0% -1.0% 10.5% -4.6% 16.1% 16.6%
1982 21.3% -0.9% 26.1% 11.9% 10.7% 9.4%
1983 22.3% 24.6% 8.6% 4.4% 8.6% 13.3%
1984 6.3% 7.9% 14.4% -1.9% 10.0% 13.0%
1985 31.8% 56.7% 18.1% 35.0% 7.5% 10.1%
1986 18.7% 70.0% 13.1% 31.4% 5.9% 6.6%
1987 5.1% 24.9% 3.7% 35.2% 6.0% 5.5%
1988 16.8% 28.8% 6.7% 2.4% 6.9% 7.0%
1989 31.4% 11.1% 12.8% -3.4% 8.5% 6.2%
1990 -3.2% -23.0% 9.2% 15.3% 7.5% 1.5%
1991 30.6% 12.9% 14.6% 16.2% 5.5% -6.1%
1992 7.7% -11.5% 7.2% 4.8% 3.3% -4.3%
1993 10.0% 33.3% 8.8% 15.1% 2.6% 0.6%
1994 1.3% 8.1% -1.9% 6.0% 3.6% 6.5%
1995 37.5% 11.2% 15.3% 19.6% 5.3% 8.9%
</TABLE>
The Bond Fund, the Global Fund, the Growth Fund, the International Growth
Fund, the International Small Cap Fund and the U.S. Micro-Cap Fund are best
suited as long-term investments. While they offer higher potential total
returns than certificates of deposit or money market funds (including the
Money Market Fund), they involve added return volatility or risk. The
prospective investor must weigh this potential for higher return against the
associated higher risk.
The Investment Company offers shares in an additional series under a separate
Prospectus and Statement of Additional Information. This series, the
California Intermediate Tax-Free Fund, offers California residents monthly
income free from federal and state income taxes ("double tax-free income") by
investing primarily in intermediate-term California municipal bonds, as well
as greater price stability relative to mutual funds which invest in
longer-term California municipal bonds.
- 47 -
<PAGE>
ADDITIONAL INFORMATION WITH RESPECT TO THE FREMONT GROWTH FUND. The Growth
Fund is designed to achieve long-term growth of capital by investing in a
diversified portfolio of common stocks.
The majority of stock mutual funds are managed in either a growth or value
investment style. Growth managers invest in companies which are expected to
produce earnings growth rates significantly greater than the overall stock
market. Value managers invest in companies which appear to be low in price
relative to earnings, book value, dividends, and other fundamentals. Growth
stocks and value stocks perform very differently.
Using various analytical techniques, the Advisor attempts to determine which
style should be in favor over a certain period of time. Based on this
analysis, the Advisor can then change the portfolio mix to take advantage of
the investment style believed to be in favor during that time period. A
portion of the Fund's portfolio is allocated to the Fund's sub- advisor, Sit
Investment Associates, Inc., a highly regarded investment management firm
specializing in growth stock investments. Sit Investment Associates currently
manages over $5 billion for many large corporate and government pension funds.
<TABLE>
The total returns for growth stocks and value stocks for the years
1981 through 1995 are as follows (source: Wilshire Associates, Inc.):
<CAPTION>
VALUE INDEX* GROWTH INDEX*
YEAR (% RETURN) (% RETURN)
<S> <C> <C>
1981 10.3% -10.7%
1982 15.8 14.5
1983 25.4 17.4
1984 19.1 3.0
1985 30.2 33.0
1986 22.2 15.5
1987 3.6 4.7
1988 22.8 15.2
1989 25.1 35.2
1990 -7.6 0.3
1991 25.6 46.6
1992 14.4 5.9
1993 13.5 -0.5
1994 -4.3 3.0
1995 43.5 37.9
<FN>
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<PAGE>
* Growth and value indexes represent the 750 largest stocks of the Wilshire
5000 Index separated into growth and value categories.
</FN>
</TABLE>
INVESTMENT RESULTS
The Investment Company may from time to time include information on the
investment results (yield or total return) of a Fund in advertisements or in
reports furnished to current or prospective shareholders.
- 49 -
<PAGE>
Current yield for the Money Market Fund will be calculated based on the net
change, exclusive of capital changes, over a seven-day period, in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7) with the
resulting yield figure carried to at least the nearest hundredth of one
percent. As of October 31, 1995, the seven-day current yield for the Money
Market Fund was 5.56%.
Effective Yield (or 7-day compound yield) for the Money Market Fund
will be calculated based on the net change, exclusive of
capital changes, over a seven-day period, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and then dividing the difference by the value of the
account, at the beginning of the base period to obtain this base period
return, and then compounding the base period return by adding 1, raising the
sum to a power equal to (365/7), and subtracting 1 from the result, according
to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7 -1].
The resulting yield figure is carried to at least the nearest hundredth of
one percent. As of October 31, 1995, the effective yield for the Money
Market Fund was 5.71%.
With respect to the Bond Fund, the Global Fund, the Growth Fund, the
International Growth Fund, the International Small Cap Fund and the U.S.
Micro-Cap Fund, the average annual rate of return ("T") for a given period is
computed by using the redeemable value at the end of the period ("ERV") of a
hypothetical initial investment of $1,000 ("P") over the period in years ("n")
according to the following formula as required by the SEC:
P(1+T)n = ERV.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) reinvestment of dividends and distributions
at net asset value on the reinvestment date determined by the Board of
Directors; and (2) a complete redemption at the end of any period illustrated.
Each Fund will calculate total return for one, five and ten-year periods after
such a period has elapsed, and may calculate total returns for other periods
as well. In addition, each Fund will provide lifetime average annual total
return figures.
<TABLE>
The average annual total returns of the Funds for the
periods ended October 31, 1995 are as follows:
<CAPTION>
- 50 -
<PAGE>
SINCE
1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
Bond Fund 16.49% --- --- 6.50%
Global Fund 12.78% 10.48% 11.32% 9.61%
Growth Fund 28.12% 13.72% --- 13.44%
International Growth Fund 0.13% --- --- 1.45%
International Small Cap Fund -7.96% --- --- -7.01%
U.S. Micro-Cap Fund 38.68% --- --- 31.16%
</TABLE>
The Bond Fund may quote its yield, which is computed by dividing the net
investment income per share earned during a 30-day period by the maximum
offering price per share on the last day of the period, according to the
following formula:
YIELD = 2[((a - b)/cd + 1)6 - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
The Bond Fund's 30-day yield as of October 31, 1995 was 6.17%.
Each Fund's investment results will vary from time to time depending upon
market conditions, the composition of a Fund's portfolio and operating expenses
of a Fund, so that current or past yield or total return should not be
considered representations of what an investment in a Fund may earn in any
future period. These factors and possible differences in the methods used in
calculating investment results should be considered when comparing a Fund's
investment results with those published for other investment companies and
other investment vehicles. A Fund's results also should be considered relative
to the risks associated with such Fund's investment objective and policies.
The Investment Company may from time to time compare the investment results of
a Fund with the following:
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<PAGE>
(1) Average of Savings Accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates (based on
figures supplied by the U.S. League of Savings Institutions).
Savings accounts offer a guaranteed rate of return on principal,
but no opportunity for capital growth. During certain periods,
the maximum rates paid on some savings deposits were fixed by
law.
(2) The Consumer Price Index, which is a measure of the average
change in prices over time in a fixed market basket of goods and
services (e.g., food, clothing, shelter, and fuels,
transportation fares, charges for doctors' and dentists'
services, prescription medicines, and other goods and services
that people buy for day-to-day living).
(3) Statistics reported by Lipper Analytical Services, Inc., which
ranks mutual funds by overall performance, investment objectives
and assets.
(4) Standard & Poor's "500" Index which is a widely recognized index
composed of the capitalization-weighted average of the price of
500 large publicly traded U.S. common stocks.
(5) Russell 1000 Index which reflects the common stock price changes of
the 1,000 largest publicly traded U.S. companies by market
capitalization.
(6) Russell 3000 Index which reflects the common stock price changes of
the 3,000 largest publicly traded U.S. companies by market
capitalization.
(7) Wilshire 5000 Index which reflects the investment return of the
approximately 5,000 publicly traded securities for which daily
pricing is available, weighted by market capitalization,
excluding income.
(8) Salomon Brothers Broad Investment Grade Index which is a widely
used index composed of U.S. domestic government, corporate and
mortgage-backed fixed income securities.
(9) Morgan Stanley Europe, Australia and Far East (EAFE) Index which
is composed of foreign stocks.
(10) IFC Emerging Markets Investables Indices which measure stock
market performance in various developing countries around the
world.
(11) Salomon Brothers World Bond Index which is composed of domestic
and foreign corporate and government fixed income securities.
(12) Lehman Brothers Government/Corporate Bond Index which is a widely
used index composed of investment quality U.S. government and
corporate fixed income securities.
- 52 -
<PAGE>
(13) Lehman Brothers Government/Corporate Intermediate Bond Index
which is a widely used index composed of investment quality U.S.
government and corporate fixed income securities with maturities
between one and ten years.
(14) Salomon Brothers World Government Bond Index which is a widely used
index composed of U.S. and non-U.S. government fixed income
securities of the major countries of the World.
(15) 90-day U.S. Treasury Bills Index which is a measure of the
performance of constant maturity 90-day U.S. Treasury Bills.
(16) Donoghue First Tier Money Fund Average which is an average of
the 30-day yield of approximately 250 major domestic money
market funds.
(17) Salomon Brothers Non-U.S. World Government Bond Index which is the
World Government Bond index excluding its U.S. market component.
(18) Salomon Brothers Non-Dollar Bond Index which is composed of
foreign corporate and government fixed income securities.
(19) National Association of Real Estate Investment Trusts (NAREIT)
Share Price Index is calculated as market value weighted
averages of all actively traded companies, which were
tax-qualified REITs for their most recent fiscal year.
(20) Frank Russell NCREIF Property Index which measures investment
results over time for nonleveraged, investment-grade warehouse
and R&D/office facilities, retail properties, hotels, and
apartment complexes.
(21) Bechtel Trust & Thrift Plan, Fund A (Global Multi-Asset Fund), Fund
B (Bond Fund), Fund C (Money Market Fund), and Fund D (U.S. Stock
Fund).*
Bechtel Trust & Thrift Plan performance results include reinvestment
of dividends, interest and other income, and are net of investment
management fees. Results for Fund A, Fund B and Fund D were in part
achieved through the efforts of investment managers selected by
Fremont Investment Advisors or its predecessor organizations.
- 53 -
<PAGE>
Indices prepared by the research departments of such financial organizations
as Salomon Brothers, Inc.; Merrill Lynch, Pierce, Fenner & Smith, Inc.; Morgan
Stanley; Bear Stearns & Co., Inc.; and Ibbottson Associates may be used, as
well as information provided by the Federal Reserve Board.
Performance rankings and ratings reported periodically in national financial
publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, and BARRON'S may
also be used.
- 54 -
<PAGE>
APPENDIX A: DESCRIPTION OF RATINGS
DESCRIPTION OF COMMERCIAL PAPER RATINGS:
MOODY'S INVESTORS SERVICE, INC. employs the designation "Prime-1" to
indicate commercial paper having the highest capacity for timely repayment.
Issuers rated Prime-1 "have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced
by the following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative
capitalization structures with moderate reliance on debt and ample asset
protections; broad margins in earnings coverage of fixed financial charges and
high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity."
STANDARD & POOR'S RATINGS GROUP'S ratings of commercial paper are graded into
four categories ranging from "A" for the highest quality obligations to "D"
for the lowest. Issues assigned the highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety.
A-1 - "This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation."
FITCH INVESTORS SERVICES, INC.'s short-term ratings apply to debt
obligations that are payable on demand or have original maturities of
generally up to three years, including commercial paper, certificates of
deposit, medium-term notes, and municipal and investment notes. The short-term
rating places greater emphasis than a long-term rating on the existence of
liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+ - "Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment."
F-1 - "Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+."
DUFF & PHELPS CREDIT RATING CO. employs the designation "D-1" to indicate
high-grade short-term debt.
D-1+ - "Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources or funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations."
A-1
<PAGE>
D-1 - "Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor."
D-1- - "High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small."
IBCA LIMITED's short-term ratings range from "A1" for the highest quality
obligation to "C" for the lowest.
A1 - "Obligations supported by the highest capacity for timely repayment.
Where issues possess a particularly strong credit feature, a rating of 'A1+'
is assigned."
THOMSON BANKWATCH assigns short-term debt ratings ranging from "TBW-1" to
"TBW-4." Important factors that may influence its assessment are the overall
financial health of the particular company, and the probability that the
government will come to the aid of a troubled institution in order to avoid a
default or failure.
TBW-1 - "The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis."
DESCRIPTION OF BOND RATINGS:
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued by
various entities from "Aaa" to "C." The ratings from "Aa" through "B" may be
modified by the addition of 1, 2 or 3 to show relative standing within the
major rating categories. Investment ratings are as follows:
Aaa - Best quality. These securities "carry the smallest degree of investment
risk and are generally referred to as `gilt edge.' Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues."
Aa - High quality by all standards. "They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risks appear somewhat
greater."
A - Upper medium grade obligations. These bonds possess many favorable
investment attributes. "Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future."
A-2
Baa - Medium grade obligations. "Interest payments and principal security
appear adequate for the present but certain protective elements may be
<PAGE>
lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and, in fact,
have speculative characteristics as well."
Ba - "Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class."
B - "Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
STANDARD & POOR'S RATINGS GROUP rates the long-term debt securities of various
entities in categories ranging from "AAA" to "D" according to quality. The
ratings from "AA" to "CCC" may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories. Investment
ratings are as follows:
AAA - Highest rating. "Capacity to pay interest and repay principal is
extremely strong."
AA - High grade. "Very strong capacity to pay interest and repay
principal."
A - "Strong capacity to pay interest and repay principal," although "somewhat
more susceptible to the adverse effects of change in circumstances and
economic conditions than debt in higher rated categories."
BBB - "Adequate capacity to pay interest and repay principal." These bonds
normally exhibit adequate protection parameters, but "adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal than for debt in higher rated
categories."
BB, B, CCC, CC - "Debt rated BB, B, CCC, or CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions."
A-3
FITCH INVESTORS SERVICES, INC. rates the long-term debt securities of
various entities in categories ranging from "AAA" to "D." The ratings from
"AA" through "C" may be modified by the addition of a plus or minus sign to
<PAGE>
show relative standing within the major rating categories. Investment
ratings are as follows:
AAA - "Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events."
AA - "Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated `AAA.' Because bonds are rated
`AAA' and `AA' categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
`F-1+'."
A - "Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings."
BBB - "Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings."
BB - "Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified, which could
assist the obligor in satisfying its debt service requirements."
B - "Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue."
DUFF & PHELPS CREDIT RATING CO. rates the long-term debt securities of various
entities in categories ranging from "AAA" to "DD." The ratings from "AA"
through "B" may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
Investment ratings are as follows:
AAA - "Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt."
A-4
AA - "High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions."
<PAGE>
A - "Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress."
BBB - "Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles."
BB - "Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category."
B - "Below investment grade and possessing risk that obligations will not be
met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade."
IBCA LIMITED rates the long-term debt securities of various entities in
categories ranging from "AAA" to "C." The ratings below "AAA" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories. Investment ratings are as follows:
AAA - "Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk substantially."
AA - "Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk, albeit not very significantly."
A - "Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk."
BBB - "Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in other categories."
A-5
BB - "Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest exists,
but is susceptible over time to adverse changes in business, economic or
financial conditions."
<PAGE>
B - "Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse changes
in business, economic or financial conditions."
THOMSON BANKWATCH rates the long-term debt securities of various entities in
categories ranging from "AAA" to "D." The ratings may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories. Investment ratings are as follows:
AAA - "Indicates that the ability to repay principal and interest on a timely
basis is extremely high."
AA - "Indicates a very strong ability to repay principal and interest on a
timely basis, with limited incremental risk compared to issues rated in the
highest category."
A - " Indicates the ability to repay principal and interest is strong. Issues
rated A could be more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings."
BBB - "The lowest investment-grade category; indicates an acceptable capacity
to repay principal and interest. BBB issues are more vulnerable to adverse
developments (both internal and external) than obligations with higher
ratings."
BB - "While not investment grade, the BB rating suggests that the likelihood
of default is considerably less than for lower-rated issues. However, there
are significant uncertainties that could affect the ability to adequately
service debt obligations."
B - "Issues rated B show a higher degree of uncertainty and therefore greater
likelihood of default than higher-rated issues. Adverse developments could
negatively affect the payment of interest and principal on a timely basis."
A-6
FREMONT MUTUAL FUNDS, INC.
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
1-800-548-4539
Part B
Statement of Additional Information
This Statement of Additional Information concerning the Fremont California
Intermediate Tax-Free Fund of Fremont Mutual Funds, Inc. (the "Investment
Company") is not a prospectus for the Fund. This Statement supplements the
Prospectus for the Fund dated February 20, 1996 and should be read in
conjunction with that Prospectus. Copies of the Prospectus are available
without charge by calling the Investment Company at the phone number printed
above.
The date of this Statement of Additional Information is February 20, 1996.
caltfmf.sai
February 20, 1996
1
<PAGE>
TABLE OF CONTENTS
Page
Investment Objective, Policies and Risk
Considerations............................................................ 3
Investment Restrictions.....................................................14
Investment Company Directors and Officers...................................16
Investment Advisory and Other Services......................................19
Execution of Portfolio Transactions.........................................22
How to Invest...............................................................23
Other Investment and Redemption Services....................................24
Special Tax Considerations..................................................25
Taxes - Mutual Funds........................................................28
Additional Information......................................................31
Investment Results......................................................... 33
Appendix A: Description of Ratings.........................................A-1
Appendix B: Annual Report
2
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The descriptions below are intended to supplement the material in the
Prospectus of the Fremont California Intermediate Tax-Free Fund (the "Fund")
under "Investment Objective, Policies and Risk
Considerations."
MUNICIPAL SECURITIES
Municipal securities are issued by or on behalf of states, territories, and
possessions of the United States and the District of Columbia and by their
political subdivisions, agencies, and instrumentalities. The interest on these
obligations is generally not includable in gross income of most investors for
federal income tax purposes. Issuers of municipal obligations do not usually
seek assurances from governmental taxing authorities with respect to the
tax-free nature of the interest payable on such obligations. Rather, issuers
seek opinions of bond counsel as to such tax status. See "Special Tax
Considerations" below.
Municipal issuers of securities are not usually subject to the securities
registration and public reporting requirements of the Securities and Exchange
Commission and state securities regulators. As a result, the amount of
information available about the financial condition of an issuer of municipal
obligations may not be as extensive as that which is made available by
corporations whose securities are publicly traded. The two principal
classifications of municipal securities are general obligation securities and
limited obligation (or revenue) securities. There are, in addition, a variety
of hybrid and special types of municipal obligations as well as numerous
differences in the financial backing for the payment of municipal obligations
(including general fund obligation leases described below), both within and
between the two principal classifications. Long-term municipal securities are
typically referred to as "bonds" and short-term municipal securities are
typically called "notes."
Payments due on general obligation bonds are secured by the issuer's pledge of
its full faith and credit including, if available, its taxing power. Issuers
of general obligation bonds include states, counties, cities, towns and
various regional or
3
<PAGE>
special districts. The proceeds of these obligations are used to fund a wide
range of public facilities such as the construction or improvement of schools,
roads and sewer systems.
The principal source of payment for a limited obligation bond or revenue bond
is generally the net revenue derived from particular facilities financed with
such bonds. In some cases, the proceeds of a special tax or other revenue
source may be committed by law for use to repay particular revenue bonds. For
example, revenue bonds have been issued to lend the proceeds to a private
entity for the acquisition or construction of facilities with a public purpose
such as hospitals and housing. The loan payments by the private entity provide
the special revenue source from which the obligations are to be repaid.
MUNICIPAL NOTES. Municipal notes generally are used to provide short-term
capital funding for municipal issuers and generally have maturities of one
year or less. Municipal notes of municipal issuers include tax anticipation
notes, revenue anticipation notes and bond anticipation notes:
TAX ANTICIPATION NOTES are issued to raise working capital on a short-term
basis. Generally, these notes are issued in anticipation of various seasonal
tax revenues being paid to the issuer, such as property, income, sales, use
and business taxes, and are payable from these specific future taxes.
REVENUE ANTICIPATION NOTES are issued in anticipation of the receipt of
non-tax revenue, such as federal revenues or grants.
BOND ANTICIPATION NOTES are issued to provide interim financing until
long-term financing can be arranged. In most cases, long-term bonds are issued
to provide the money for the repayment of these notes.
COMMERCIAL PAPER. Issues of municipal commercial paper typically represent
short-term, unsecured, negotiable promissory notes. Agencies of state and
local governments issue these obligations in addition to or in lieu of notes
to finance seasonal working capital needs or to provide interim construction
financing and are paid from revenues of the issuer or are refinanced with
long-term debt. In most cases, municipal commercial paper is backed by letters
of credit, lending agreements, note repurchase agreements or other credit
facility agreements offered by banks or other institutions.
4
<PAGE>
PARTICULAR RISK FACTORS RELATING TO CALIFORNIA MUNICIPAL
SECURITIES.
The following describes certain risks with respect to California municipal
securities in which the Fund predominantly will invest. This summarized
information is based on information drawn from official statements and
prospectuses relating to securities offerings of the State of California and
various local agencies in California, available as of the date of this
Statement of Additional Information. While the Advisor has not independently
verified such information, it has no reason to believe that such information
is not correct in all material respects. In addition to this current
information, future California constitutional amendments, legislative
measures, executive orders, administrative regulations and voter initiatives
could have an adverse effect on the debt obligations of California issuers.
Certain debt obligations held by the Fund may be obligations of issuers which
rely in whole or in substantial part on California state revenues for the
continuance of their operations and the payment of their obligations. Whether
and to what extent the California Legislature will continue to appropriate a
portion of the state's general fund to counties, cities and their various
entities, is not entirely certain. To the extent local entities do not receive
money from the state to pay for their operations and services, their ability
to pay debt service on obligations held by the Fund may be impaired.
Certain of the debt obligations may be obligations of issuers who rely in
whole or in part on ad valorem real property taxes as a source of revenue. The
California Constitution limits the taxing and spending powers of the State of
California and its public agencies and, therefore, the ability of California
issuers to raise revenues through taxation, and to spend such revenues over a
predetermined limit.
Certain debt obligations held by the Fund may be obligations payable solely
from lease payments on real property or personal property leased to the state,
cities, counties or their various public entities. California law requires
that the lessee is not required to make lease payments during any period that
it is denied use and occupancy of the property leased in proportion to such
loss. Moreover, the lessee only agrees to include lease payments in its annual
budget for each fiscal year. In case of a default under the lease, the only
remedy available against the
5
<PAGE>
lessee is that of reletting the property; no acceleration of lease payments is
permitted. Each of these factors presents a risk that the lease financing
obligations held by the Fund would not be paid in a timely manner.
Certain debt obligations held by the Fund may be obligations which are payable
solely from the revenues of health care institutions. The method of
reimbursement for indigent care, California's selective contracting with
health care providers for such care, and selective contracting by health
insurers for care of its beneficiaries now in effect under California and
federal law may adversely affect these revenues and, consequently, payment on
those debt obligations.
Debt obligations payable solely from revenues of health care institutions may
also be insured by the State of California pursuant to a mortgage insurance
program operated by the Office of Statewide Health Planning and Development
(the "Office"). If a default occurs on such insured debt obligations, the
Office may either continue to make debt service payments on the obligations,
or foreclose on the mortgage and request the State Treasurer to issue
debentures payable from a reserve fund established under the insurance program
or from unappropriated state funds. At the request of the Office, Arthur D.
Little, Inc., a consulting firm, has prepared reports relating to the reserve
fund. The latest report indicates that the reserve fund is under-funded.
Moreover, moneys in the reserve fund may be and have been reappropriated by
the California Legislature for other purposes. The Company cannot predict
what, if any, impact the underfunding of the reserve fund may have on such
debt obligations.
Certain debt obligations held by the Fund may be obligations which are secured
in whole or in part by a mortgage or deed of trust on real property.
California has five principal statutory provisions which limit the remedies of
a creditor secured by a mortgage or deed of trust. To limit the creditor's
right to obtain a deficiency judgment, one limitation is based on the method
of foreclosure, and the other on the type of debt secured. Under the former, a
deficiency judgment is barred when the foreclosure is accomplished by means of
nonjudicial trustee's sale. Under the latter, a deficiency judgment is barred
when the foreclosed mortgage or deed of trust secures certain purchase money
obligations. Another California statute, commonly known as the "one form of
action" rule, requires creditors secured by real property to exhaust their
real property security by foreclosure
6
<PAGE>
before bringing a personal action against the debtor. Another statutory
provision limits any deficiency judgment obtained by a creditor secured by
real property following a judicial sale of such property to the excess of the
outstanding debt over the fair value of the property at the time of the sale,
thus preventing the creditor from obtaining a large deficiency judgment
against the debtor as a result of low bids at a judicial sale. Another
statutory provision gives the debtor the right to redeem the real property
from any judicial foreclosure sale as to which a deficiency judgment may be
ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to California
real property, the creditor's nonjudicial foreclosure rights under the power
of sale contained in the mortgage or deed of trust are subject to the
constraints imposed by California law upon transfers of title to real property
by private power of sale. During the three-month period beginning with the
filing of a formal notice of default, the debtor is entitled to reinstate the
mortgage by making any overdue payments. Under standard loan servicing
procedures, the filing of the formal notice of default does not occur unless
at least three full monthly payments have become due and remain unpaid. The
power of sale is exercised by posting and publishing a notice of sale for at
least 20 days after expiration of the three-month reinstatement period.
Therefore, the effective minimum period of foreclosing on a mortgage could be
in excess of seven months after the initial default. Such time delays in
collections could disrupt the flow of revenues available to an issuer for the
payment of debt service on the outstanding obligations if such defaults occur
with respect to a substantial number of mortgages or deeds of trust securing
an issuer's obligations.
In addition, a court could find that there is sufficient involvement of the
issuer in the nonjudicial sale of property securing a mortgage for such
private sale to constitute "state action," and could hold that the private
right-of-sale proceedings violate the due process requirements of the federal
or state constitutions, consequently preventing an issuer from using the
nonjudicial foreclosure remedy described above.
Certain debt obligations held by the Fund may be obligations which finance the
acquisition of single-family home mortgages for low and moderate income
mortgagors. These obligations may be payable solely from revenues derived from
the home mortgages, and are subject to California's statutory limitations
described above
7
<PAGE>
applicable to obligations secured by real property. Under California
antideficiency legislation, there is no personal recourse against a mortgagor
of a single family residence purchased with the loan secured by the mortgage,
regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
Under California law, mortgage loans secured by single-family, owner-occupied
dwellings may be prepaid at any time. Prepayment charges on such mortgage
loans may be imposed only with respect to voluntary prepayments made during
the first five years during the term of the mortgage loan, and cannot in any
event exceed six months' advance interest on the amount prepaid in excess of
20% of the original principal amount of the mortgage loan. This limitation
could affect the flow of revenues available to an issuer for debt service on
the outstanding debt obligations which finance such home mortgages.
INTEREST RATE FUTURES CONTRACTS. The Fund may enter into interest rate
contracts ("Futures" or "Futures Contracts") as a hedge against changes in
prevailing levels of interest rates in order to establish more definitely the
effective return on securities held or intended to be acquired by the Fund.
The Fund's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates or purchases of Futures as an
offset against the effect of expected declines in interest rates. (See
"Federal Tax Treatment of Interest Rate Futures Contracts," below.)
The Fund will not enter into Futures Contracts for speculation and will only
enter into Futures Contracts which are traded on national futures exchanges
and are standardized as to maturity date and underlying financial instrument.
The principal interest rate Futures exchanges in the United States are the
Board of Trade of the City of Chicago and the Chicago Mercantile Exchange.
Futures exchanges and trading are regulated under the Commodity Exchange Act
by the Commodity Futures Trading Commission.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce a Fund's exposure to interest rate fluctuations, the Fund
may be able to hedge its exposure more effectively and perhaps at a lower cost
through using Futures Contracts.
8
<PAGE>
The Fund will not enter into a Futures Contract if, as a result thereof, more
than 5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to "margin" (down payment)
deposits on such Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (debt
security or currency) for a specified price at a designated date, time and
place. Brokerage fees are incurred when a Futures Contract is bought or sold
and margin deposits must be maintained.
Although Futures Contracts typically require future delivery of and payment
for financial instruments, the Futures Contracts are usually closed out before
the delivery date. Closing out an open Futures Contract sale or purchase is
effected by entering into an offsetting Futures Contract purchase or sale,
respectively, for the same aggregate amount of the identical type of financial
instrument and the same delivery date. If the offsetting purchase price is
less than the original sale price, the Fund realizes a gain; if it is more,
the Fund realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that a Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to maintain the
margin deposits on the Contract.
As an example of an offsetting transaction in which the financial instrument
is not delivered, the contractual obligations arising from the sale of one
Contract of September Treasury Bills on an exchange may be fulfilled at any
time before delivery of the Contract is required (i.e., on a specified date in
September, the "delivery month") by the purchase of one Contract of September
Treasury Bills on the same exchange. In such instance, the difference between
the price at which the Futures Contract was sold and the price paid for the
offsetting purchase, after allowance for transaction costs, represents the
profit or loss to the Fund.
RISKS IN INTEREST RATE FUTURES CONTRACTS. The prices of Futures Contracts are
volatile and are influenced, among other things, by actual and anticipated
changes in interest rates, which in turn are affected by fiscal and monetary
policies and national and international political and economic events.
9
<PAGE>
At best, the correlation between changes in prices of Futures Contracts and of
the securities being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances such as: variations in
speculative market demand for futures and for debt securities or currencies,
including technical influences in Futures trading; and differences between the
financial instruments being hedged and the instruments underlying the standard
Futures Contracts available for trading, with respect to interest rate levels,
maturities, and creditworthiness of issuers. There are, for example, numerous
such differences between municipal securities and U.S. Treasury Bills. A
decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or interest rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss,
as well as gain, to the investor. For example, if at the time of purchase, 10%
of the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Contract were closed out. Thus, a
purchase or sale of a Futures Contract may result in losses in excess of the
amount invested in the Futures Contract. However, the Fund would presumably
have sustained comparable losses if, instead of the Futures Contract, it had
invested in the underlying financial instrument and sold it after the decline.
Furthermore, in the case of a Futures Contract purchase, in order to be
certain that the Fund has sufficient assets to satisfy its obligations under a
Futures Contract, the Fund segregates and commits to back the Futures Contract
money market instruments equal in value to the current value of the underlying
instrument less the margin deposit.
Most United States Futures exchanges limit the amount of fluctuation permitted
in Futures Contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a Futures Contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular
10
<PAGE>
type of Contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures Contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of Futures
positions and subjecting some Futures traders to substantial losses.
FEDERAL TAX TREATMENT OF INTEREST RATE FUTURES CONTRACTS. Except for
transactions identified as hedging transactions, the Fund is required for
federal income tax purposes to recognize as income for each taxable year its
net unrealized gains and losses on Futures Contracts as of the end of the year
as well as those actually realized during the year. Identified hedging
transactions would not be subject to the mark to market rules and would result
in the recognition of ordinary gain or loss. Otherwise, unless transactions in
Futures Contracts are classified as part of a "mixed straddle," any gain or
loss recognized with respect to a Futures Contract is considered to be 60%
long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the Contract. In the case of a Futures
transaction classified as a "mixed straddle," the recognition of losses may be
deferred to a later taxable year.
Sales of Futures Contracts which are intended to hedge against a change in the
value of securities held by the Fund may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such
securities upon disposition.
In order for the Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities. In addition, gains realized on the sale or other disposition of
securities held for less than three months must be limited to less than 30% of
the Fund's annual gross income. It is anticipated that any net gain realized
from the closing out of Futures Contracts will be considered gain from the
sale of securities and therefore be qualifying income for purposes of the 90%
requirement. In order to avoid realizing excessive gains on securities held
less than three months, the Fund may be required
11
<PAGE>
to defer the closing out of Futures Contracts beyond the time when it would
otherwise be advantageous to do so. It is anticipated that unrealized gains on
Futures Contracts, which have been open for less than three months as of the
end of the Investment Company's fiscal year and which are recognized for tax
purposes, will not be considered gains on securities held less than three
months for purposes of the 30% test.
The Fund will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Investment Company's fiscal year) on
Futures transactions. Such distributions will be combined with distributions
of capital gains realized on the Fund's other investments and shareholders
will be advised of the nature of the payments.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS AND PARTICIPATION INTERESTS. The
Fund may purchase floating rate and variable rate obligations, including
participation interests therein. Floating rate or variable rate obligations
provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate at a major commercial bank) or is
reset on a regular basis by a bank or investment banking firm to a market
rate. At specified times, the owner can demand payment of the obligation at
par plus accrued interest. Variable rate obligations provide for a specified
periodic adjustment in the interest rate, while floating rate obligations have
an interest rate which changes whenever there is a change in the external
interest rate. Frequently, banks provide letters of credit or other credit
support or liquidity arrangements to secure these obligations. The quality of
the underlying creditor or of the bank, as the case may be, must, as
determined by the Advisor, be equivalent to the quality standards prescribed
for the Fund.
The Fund may invest in participation interests purchased from banks in
floating rate or variable rate obligations owned by banks. A participation
interest gives the Fund an undivided interest in the obligation in the
proportion that the Fund's participation interest bears to the total principal
amount of the obligation, and provides a demand repayment feature. Each
participation is backed by an irrevocable letter of credit or guarantee of a
bank (which may be the bank issuing the participation interest or another
bank). The bank letter of credit or guarantee must meet the prescribed
investment quality standards for the Fund. The Fund has the right to sell the
12
<PAGE>
participation instrument back to the issuing bank or draw on the letter of
credit on demand for all or any part of the Fund's participation interest in
the underlying obligation, plus accrued interest.
LENDING OF PORTFOLIO SECURITIES. For the purpose of realizing additional
income, the Fund may make secured loans of portfolio securities amounting to
not more than 33-1/3% of its net assets. Securities loans are made to
broker-dealers or institutional investors pursuant to agreements requiring
that the loans be continuously secured by collateral at least equal at all
times to the value of the securities lent marked to market on a daily basis.
The collateral received will consist of cash, short-term U.S. Government
securities, bank letters of credit or such other collateral as may be
permitted under the Fund's investment program and by regulatory agencies and
approved by the Board of Directors. While the securities are being lent, the
Fund will continue to receive the equivalent of the interest or dividends paid
by the issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower. The Fund has a right to call each loan
and obtain the securities on five business days' notice.
REDUCTION IN BOND RATING. The Fund may invest in debt securities rated at
least BBB or Baa. In the event that the rating for any security held by the
Fund drops below the minimum acceptable rating applicable to the Fund, the
Advisor will determine whether the Fund should continue to hold such an
obligation in its portfolio. Bonds rated below BBB or Baa are commonly known
as "junk bonds." These bonds are subject to greater fluctuations in value and
risk of loss of income and principal due to default by the issuer than are
higher rated bonds. The market value of junk bonds tends to reflect short-term
corporate, economic and market developments and investor perceptions of the
issuer's credit quality to a greater extent than higher rated bonds. In
addition, it may be more difficult to dispose of, or to determine the value
of, junk bonds. See Appendix A for a complete description of the bond ratings.
13
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment policies and
restrictions in addition to the policies and restrictions discussed in its
prospectus. With respect to the Fund, the policies and restrictions listed
below cannot be changed without approval by the holders of a "majority of the
outstanding voting securities" of the Fund (which is defined in the Investment
Company Act of 1940 (the "1940 Act") to mean the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding
shares are represented or (ii) more than 50% of the outstanding shares). These
restrictions provide that the Fund may not:
1. Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business
activities in the same industry, except that this limitation
shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its
agencies or instrumentalities, or to tax exempt securities
issued by state governments or political subdivisions
thereof.
2. Buy or sell real estate (including real estate limited
partnerships) or commodities or commodity contracts;
however, the Fund may invest in securities secured by real
estate, or issued by companies which invest in real estate
or interests therein, including real estate investment
trusts, and may purchase and sell currencies (including
forward currency exchange contracts), gold, bullion, futures
contracts and related options generally as described in the
Prospectus and Statement of Additional Information.
3. Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is
defined under the Securities Act of 1933.
4. Make loans, except that the Fund may purchase debt securities, enter
into repurchase agreements, and make loans of portfolio securities
amounting to not more than 33 1/3% of its net assets calculated at
the time of the securities lending.
14
<PAGE>
5. Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The
Fund will not purchase securities while such borrowings are
outstanding.
6. Change its status as a non-diversified investment company.
7. Issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and except that the Investment
Company and the Fund may issue shares of common stock in multiple
series or classes.
8. Notwithstanding any other fundamental investment restriction or
policy, the Fund may 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 the
Fund.
Other current investment policies of the Fund, which are not
fundamental and which may be changed by action of the Board of
Directors without shareholder approval, are as follows. The Fund
may not:
9. Invest in companies for the purpose of exercising control or
management.
10. Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in
connection with any permissible borrowing.
11. Invest in interests in oil, gas, or other mineral
exploration or development programs or leases.
12. Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three
years of continuous operation.
13. Purchase or retain the securities of any issuer, if those individual
officers and directors of the Investment Company, its investment
advisor, or distributor, each owning beneficially more than 1/2 of 1%
of the securities of such issuer together own more than 5% of the
securities of such issuer.
15
<PAGE>
14. Purchase securities on margin, provided that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities, except that the Fund may make margin
deposits in connection with futures contracts.
15. Enter into a futures contract if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to margin on such
futures contract.
16. Acquire securities or assets for which there is no readily available
market, or which are illiquid, if, immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of
that Fund's net assets.
17. Make short sales of securities or maintain a short position,
except that a Fund may sell short "against the box."
18. Invest in securities of an issuer if the investment would
cause the Fund to own more than 10% of any class of
securities of any one issuer.
19. Acquire more than 3% of the outstanding voting securities of
any one investment company.
INVESTMENT COMPANY DIRECTORS AND OFFICERS
The Bylaws of Fremont Mutual Funds, Inc. (the "Investment Company"), the
Maryland investment company which established the Fund, authorize a Board of
Directors of between three and 15 persons, as fixed by the Board of Directors.
There are presently seven directors, each of whom has been elected by the
shareholders of the Investment Company for an indefinite term of office. A
majority of remaining directors may fill director vacancies caused by
resignation, death or expansion of the Board of Directors. Any director may be
removed by vote of holders of a majority of all outstanding shares of the
Investment Company qualified to vote at the meeting.
16
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
AND BUSINESS EXPERIENCE
NAME AND ADDRESS AGE POSITIONS HELD FOR PAST FIVE YEARS
<S> <C> <C> <C>
David L. Redo (1)(2)(4) 58 President, Chief Executive President and Director, Fremont
Fremont Investment Officer and Director Investment Advisors, Inc.;
Advisors, Inc. Managing Director, Fremont
50 Beale St., Suite 100 Group, Inc.; Director, Sequoia
San Francisco, CA 94105 Ventures, Sit/Kim International
Investment Associates and J.P.
Morgan Securities Asia.
Vincent P. Kuhn, Jr.(1)(2)(4) 63 Executive Vice President, Executive Vice President and
Fremont Investment Chief Compliance Officer Director, Fremont Investment
Advisors, Inc. and Director Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Albert W. Kirschbaum(1)(2)(4) 57 Senior Vice President, Senior Vice President and
Fremont Investment Secretary and Director Director, Fremont Investment
Advisors, Inc. Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Richard E. Holmes(3) 52 Director Vice President and Director,
P.O. Box 479 BelMar Advisors, Inc.
Sanibel, FL 33957 (marketing firm)
William W. Jahnke(3) 52 Director 3/93 - Present
Jahnke & Associates Principal, Jahnke & Associates
58 Camino del Diablo (Consultants)
Orinda, CA 94563
6/83 - 3/93
Chairman, Board of Directors,
Vestek Systems, Inc.
Donald C. Luchessa(3) 66 Director Principal, DCL Advisory
DCL Advisory (marketer for investment
345 California Street, 10th Fl advisors)
San Francisco, CA 94104
David L. Egan(3) 61 Director President, Fairfield Capital
Fairfield Capital Associates, Inc. Associates, Inc. (an investment
44 Montgomery St., Suite 3085 advisor) and Fairfield Capital
San Francisco, CA 94104 Funding, Inc. (a broker-dealer)
17
<PAGE>
Peter F. Landini(4) 44 Senior Vice President Senior Vice President and
Fremont Investment and Treasurer Director, Fremont Investment
Advisors, Inc. Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
William M. Feeney 39 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Marycatherine Dwyer 32 Vice President, Asst. 10/91 - Present
Fremont Investment Compliance Officer Vice President, Fremont
Advisors, Inc. and Asst. Secretary Investment Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105 6/90 - 10/91
Registered Representative,
Liberty Securities
Norman Gee 45 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Alexandra W. Kinchen(4) 50 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Andrew L. Pang(4) 46 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Robert J. Haddick(4) 36 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
18
<PAGE>
Ian R. Stone 31 Vice President, Asst. Vice President, Fremont
Secretary Investment Advisors, Inc.
Fremont Investment and Asst. Treasurer
Advisors, Inc.
50 Beale St., Suite 100
San Francisco, CA 94105
Richard G. Thomas 38 Vice President 11/91 - Present
Fremont Investment Vice President, Fremont
Advisors, Inc. Investment Advisors, Inc.
50 Fremont St., Suite 3500
San Francisco, CA 94105 1/88 - 11/91
Institutional Sales, Charles
Schwab & Co.
Chantal Gaiddon 39 Vice President Controller and Asst. Treasurer,
Fremont Investment and Controller Fremont Investment Advisors,
Advisors, Inc. Inc.
50 Beale St., Suite 100
San Francisco, CA 94105
<FN>
(1) Director who is an "interested person" of the Company due to
his affiliation with the Company's investment manager.
(2) Member of the Executive Committee.
(3) Member of the Audit Committee and the Contracts Committee.
(4) Member of the Fremont Investment Committee.
</FN>
</TABLE>
During the fiscal year ended October 31, 1995, Richard E. Holmes received
$3,000 and William W. Jahnke and Donald C. Luchessa each received $4,500 for
serving as directors of the Investment Company.
As of January 8, 1996 the officers and directors as a group owned in the
aggregate beneficially or of record less than 1% of the outstanding shares of
the Investment Company.
INVESTMENT ADVISORY AND OTHER SERVICES
MANAGEMENT AGREEMENT. The Advisor, in addition to providing investment
management services, furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Investment Company, provides suitable office
space, necessary small office equipment and utilities, and general purpose
accounting forms, supplies, and postage used at the offices of the Investment
Company.
19
<PAGE>
The Fund will pay all of its own expenses not assumed by the Advisor,
including, but not limited to, the following: custodian, stock transfer and
dividend disbursing fees and expenses; taxes and insurance; expenses of the
issuance and redemption of shares of the Fund (including stock certificates,
registration of qualification fees and expenses); legal and auditing expenses;
and the costs of stationery and forms prepared exclusively for the Fund.
The allocation of general Investment Company expenses among the series of the
Investment Company, including the Fund, is made on a basis that the directors
deem fair and equitable, which may be based on the relative net assets of each
series or the nature of the services performed and relative applicability to
each series.
The directors of the Advisor are David L. Redo, Vincent P. Kuhn,
Jr., Jon S. Higgins, Peter F. Landini and Albert W. Kirschbaum.
Under the Investment Advisory and Administration Agreement (the "Advisory
Agreement"), the Advisor has agreed to reimburse the Fund if its annual
ordinary expenses exceed the most stringent limits prescribed by any state in
which the Fund's shares are offered for sale. Expenses which are not subject
to this limitation are interest, taxes, the amortization of organizational
expenses, and extraordinary expenses. Expenditures, including costs incurred
in connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. Reimbursement, if any, will be on a monthly basis, subject to
year-end adjustment. As of March 1, 1992, the Advisor is limiting the
management fee to 0.30% per annum until further notice. Once waived, fees will
not be recouped in the future.
The Advisory Agreement may be renewed annually provided that any such renewal
has been specifically approved by (i) the Board of Directors, or by the vote
of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Fund, and (ii) the vote of a majority of directors who are
not parties to the Advisory Agreement or "interested persons" (as defined in
the 1940 Act) of any such party, cast in person, at a meeting called for the
purpose of voting on such approval. The Advisory Agreement also provides that
either party thereto has the right to terminate it without penalty upon sixty
(60) days' written
20
<PAGE>
notice to the other party, and that the Advisory Agreement terminates
automatically in the event of its assignment (as defined in the 1940 Act).
For the fiscal years ended October 31, 1995, 1994 and 1993, the advisory fees
(net of voluntary waivers) paid by the Fund to the Advisor were $164,416,
$190,766 and $158,328, respectively.
The Advisory Agreement also provides for the payment of an administrative fee
to the Advisor at the annual rate of .15% of average net assets. The Advisor
is limiting the administrative fee to .005% until further notice. For the
fiscal years ended October 31, 1995, 1994 and 1993, the Fund paid to the
Advisor administrative fees (net of voluntary waivers) of $2,741, $3,173 and
$2,648, respectively.
The Advisor's employees may engage in personal securities transactions.
However, the Investment Company and the Advisor have adopted a Code of Ethics
for the purpose of establishing standards of conduct for the Advisor's
employees with respect to such transactions. The Code of Ethics includes some
broad prohibitions against fraudulent conduct, and also includes specific
rules, restrictions and reporting obligations with respect to personal
securities transactions of the Advisor's employees. Generally, each employee
is required to obtain prior approval of the Advisor's compliance officer in
order to personally purchase or sell a security. Purchases or sales of
securities which are not eligible for purchase or sale by the Funds or any
other client of the Advisor are exempted from the prior approval requirement,
as are certain other transactions which the Advisor believes present no
potential conflict of interest. The Advisor's employees are also required to
file with the Advisor quarterly reports of their securities transactions.
PRINCIPAL UNDERWRITER. As of May 5, 1995, the Fund's principal underwriter is
Funds Distributor, Inc., One Exchange Place, Tenth Floor, Boston,
Massachusetts (the "Distributor"). The Distributor is engaged on a
non-exclusive basis to assist in the distribution of shares in various
jurisdictions. The Distributor receives compensation from the Advisor and is
not paid either directly or indirectly by the Investment Company. The
Distributor received compensation of $52,018 with respect to the fiscal year
ended October 31, 1995.
21
<PAGE>
TRANSFER AGENT. The Fund's transfer agent, MGF Service Corp., 312 Walnut
Street, Cincinnati, Ohio (the "Transfer Agent"), maintains the records of each
shareholder's account, answers shareholders' inquiries, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. The
Transfer Agent is a subsidiary of Leshner Financial, Inc., of which Robert H.
Leshner is the controlling shareholder.
In addition, the Transfer Agent has been retained by the Advisor to assist in
providing administrative services to the Investment Company. In this capacity,
the Transfer Agent supplies non-investment related regulatory compliance
services and executive and administrative services. The Transfer Agent
supervises the preparation of reports to and filings with the Securities and
Exchange Commission and materials for meetings of the Board of Directors. The
Advisor (not the Investment Company) pays the Transfer Agent a monthly fee of
$6,000 for these administrative services. For the fiscal year ended October
31, 1995, the Advisor paid the Transfer Agent $72,000 for administrative
services on behalf of all series of the Investment Company.
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the Fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other of the accounts served by the Advisor, including other
series of the Investment Company. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to the Fund, they
will be effected only when the Advisor believes that to do so will be in the
best interest of the Fund. When such concurrent authorizations occur, the
objective will be to allocate the executions in a manner which is deemed
equitable to the accounts involved, including the Fund.
No brokerage commissions have been paid by the Fund during the last three
fiscal years.
22
<PAGE>
Subject to the requirement of seeking the best available prices and
executions, the Advisor may, in circumstances in which two or more
broker-dealers are in a position to offer comparable prices and executions,
give preference to broker-dealers who have provided investment research,
statistical, and other related services to the Advisor for the benefit of the
Fund and/or of other accounts served by the Advisor. Such preferences would
only be afforded to a broker-dealer if the Advisor determines that the amount
of the commission is reasonable in relation to the value of the brokerage and
research services provided by that broker-dealer and only to a broker-dealer
acting as agent and not as principal. The Advisor is of the opinion that,
while such information is useful in varying degrees, it is of indeterminable
value and does not reduce the expenses of the Advisor in managing the Fund's
portfolio.
HOW TO INVEST
PRICE OF SHARES. The price to be paid by an investor for shares of the Fund,
the public offering price, is based on the net asset value per share
calculated once daily as of the close of trading (currently 4:00 p.m., Eastern
time) each day the New York Stock Exchange is open as set forth below. The New
York Stock Exchange is currently closed on weekends and on the following
holidays: (i) New Year's Day, Presidents' Day, Good Friday, Memorial Day, July
4th, Labor Day, Thanksgiving and Christmas Day; and (ii) the preceding Friday
when any of those holidays falls on a Saturday or the subsequent Monday when
any one of those holidays falls on a Sunday.
Portfolio securities with original or remaining maturities in excess of 60
days are valued at the mean of representative quoted bid and asked prices for
such securities or, if such prices are not available, at the equivalent value
of securities of comparable maturity, quality and type. However, in
circumstances where the Advisor deems it appropriate to do so, prices obtained
for the day of valuation from a bond pricing service will be used. The Fund
amortizes to maturity all securities with 60 days or less remaining to
maturity based on their cost to the Fund if acquired within 60 days of
maturity or, if already held by the Fund on the 60th day, based on the value
determined on the 61st day.
23
<PAGE>
The Fund deems the maturities of variable or floating rate instruments, or
instruments which the Fund has the right to sell at par to the issuer or
dealer, to be the time remaining until the next interest rate adjustment date
or until they can be resold or redeemed ar par.
Where market quotations are not readily available, the Fund values securities
(including restricted securities which are subject to limitations as to their
sale) at fair value pursuant to methods approved by the Board of Directors
The fair value of any other assets is added to the value of securities, as
described above to arrive at total assets. The Fund's liabilities, including
proper accruals of taxes and other expense items, are deducted from total
assets and a net asset figure is obtained. The net assets so obtained are then
divided by the total number of shares outstanding (excluding treasury shares),
and the result, rounded to the nearest cent, is the net asset value per share.
OTHER INVESTMENT AND REDEMPTION SERVICES
THE OPEN ACCOUNT. When an investor makes an initial investment in the Fund, a
shareholder account is opened in accordance with the investor's registration
instructions. Each time there is a transaction in a shareholder account, such
as an additional investment, redemption or distribution (dividend or capital
gain), the shareholder will receive from the Transfer Agent a confirmation
statement showing the current transaction in the shareholder account, along
with a summary of the status of the account as of the transaction date.
PAYMENT AND TERMS OF OFFERING. Payment of shares purchased should accompany
the purchase order, or funds should be wired to the Transfer Agent as
described in the Prospectus. Payment, other than by wire transfer, must be
made by check or money order drawn on a U.S. bank. Checks or money orders must
be payable in U.S.
dollars.
As a condition of this offering, if an order to purchase shares is cancelled
due to nonpayment (for example, on account of a check returned for "not
sufficient funds"), the person who made the order will be subject to a $20
charge and will be responsible for reimbursing the Advisor for any loss
incurred by reason of such cancellation. If such purchaser is a shareholder,
the Fund
24
<PAGE>
shall have the authority as agent of the shareholder to redeem shares in his
account for their then-current net asset value per share to reimburse the Fund
for the loss incurred. Such loss shall be the difference between the net asset
value of the Fund on the date of purchase and the net asset value on the date
of cancellation of the purchase. Investors whose purchase orders have been
cancelled due to nonpayment may be prohibited from placing future orders.
The Investment Company reserves the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent investments with
respect to any person or class of persons. An order to purchase shares is not
binding on the Investment Company until it has been confirmed in writing by
the Transfer Agent (or other arrangements made with the Investment Company, in
the case of orders utilizing wire transfer of funds) and payment has been
received. To protect existing shareholders, the Investment Company reserves
the right to reject any offer for a purchase of shares by any individual.
REDEMPTION IN KIND. The Investment Company may elect to redeem shares in
assets other than cash but must pay in cash all redemptions with respect to
any shareholder during any 90-day period in an amount equal to the lesser of
(i) $250,000 or (ii) 1% of the net asset value of the Fund at the beginning of
such period.
SUSPENSION OF REDEMPTION PRIVILEGES. The Investment Company may suspend
redemption privileges with respect to the Fund or postpone the date of payment
for more than seven days after the redemption order is received during any
period (1) when the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the Exchange is restricted as
determined by the Securities and Exchange Commission (the "SEC"), (2) when an
emergency exists, as defined by the SEC, which makes it not reasonably
practicable for the Investment Company to dispose of securities owned by it or
to fairly determine the value of its assets, or (3) as the SEC may otherwise
permit.
SPECIAL TAX CONSIDERATIONS
The percentage of total dividends paid by the Fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest
dividends") will be the same for all shareholders receiving dividends during
such year. In order for the Fund to pay exempt-interest dividends during any
taxable year, at the close of each fiscal quarter at least 50% of the
aggregate value of the Fund's assets must consist of tax-exempt
25
<PAGE>
securities. In addition, the Fund must distribute 90% of the aggregate
interest excludable from gross income and 90% of the investment company
taxable income earned by the Fund during the taxable year. Not later than 60
days after the close of its taxable year, the Fund will notify each
shareholder of the portion of the dividends paid by the Fund to the
shareholder with respect to such taxable year which constitutes
exempt-interest dividends. The aggregate amount of dividends so designated
cannot, however, exceed the excess of the amount of interest excludable from
gross income from tax under Section 103 of the Internal Revenue Code (the
"Code") received by the Fund during the taxable year over any amounts
disallowed as deductions under Sections 265 and 171(a)(2) of the Code.
The Code treats interest on private activity bonds, as defined therein, as an
item of tax preference subject to an Alternative Minimum Tax on individuals at
a rate of 26% on AMT income up to $175,000 over the exemption amount, and 28%
thereafter, and on corporations at a rate of 20%. Further, under the Code
corporate shareholders must include all federal exempt-interest dividends in
their adjusted current earnings for calculation of corporate alternative
minimum taxable income.
Substantially all "investment company taxable income" earned by the Fund will
be distributed to shareholders. In general, the Fund's investment company
taxable income will be its taxable income (for example, its interest income on
taxable securities and any short-term capital gains) subject to certain
adjustments and excluding the excess of any net long-term capital gain for the
taxable year over the net short-term capital loss, if any, for such year. The
Fund would be taxed on any undistributed investment company taxable income.
Since it is intended that any such income will be distributed, it will be
taxable to shareholders as ordinary income. Market discount earned on
tax-exempt obligations will not qualify as tax-exempt income.
Generally, taxable dividends are taxable to shareholders at the time they are
paid. However, such dividends declared in October, November, and December by a
Fund and made payable to shareholders of record in such a month are treated as
paid and are thereby taxable as of December 31, provided that the Fund pays
the dividend during January of the following year. Each January, stockholders
will receive full information, with respect to the previous year on dividends
and capital gain distributions for tax purposes, including information such as
the portion taxable as
26
<PAGE>
ordinary income, the portion taxable as capital gains, and the amount of
dividends eligible for the dividends-received deduction for corporate
taxpayers.
The Fund is subject to tax in California on the same basis as under Subchapter
M of the Code as described above. If, at the close of each quarter of its
taxable year, at least 50% of the value of the total assets of the Fund
consists of securities the interest on which is exempt from taxation under the
Constitution or statutes of California ("California Exempt Securities") or the
laws of the United States, the Fund will be qualified to pay dividends exempt
from California corporate or personal income tax to its shareholders
(hereinafter referred to as "California exempt-interest dividends"). The Fund
intends to qualify under the above requirement so that it can pay California
exempt-interest dividends. If the Fund fails to so qualify, no part of the
Fund's dividends will be exempt from California corporate or personal income
tax. Even if the Fund pays California exempt-interest dividends, those
dividends will nevertheless be subject to franchise taxes in California.
Not later than 60 days after the close of its taxable year, the Fund will
notify each of its shareholders of the portion of the dividends exempt from
California corporate or personal income tax paid by the Fund to the
shareholder with respect to such taxable year. The total amount of California
exempt-interest dividends paid by the Fund to all of its shareholders with
respect to any taxable year cannot exceed the amount of interest earned by the
Fund during such year on California Exempt Securities less any expenses or
expenditures (including any expenditures attributable to the acquisition of
securities of another California tax-exempt fund) that are deemed to have been
paid from such interest.
Dividends paid by the Fund in excess of this limitation will be treated as
ordinary dividends subject to California corporate or personal income tax at
ordinary rates. For purposes of the limitation, expenses paid during any year
generally will be deemed to have been paid with funds attributable to interest
received by the Fund from California municipal securities for such year in the
same ratio as such interest from California Exempt Securities bears to the
total gross income earned by the Fund for the year. The effect of this
accounting convention is that amounts of interest from California Exempt
Securities received by the Fund that would otherwise be available for
distribution as California exempt-interest dividends will be reduced by the
expenses and expenditures deemed to have been paid from such amounts.
27
<PAGE>
In cases where shareholders are "substantial users" or "related persons" with
respect to California Exempt Securities held by the Fund, such shareholders
should consult their tax advisers to determine whether California
exempt-interest dividends paid by the Fund with respect to such obligations
retain their California corporate or personal income tax exclusion. In this
connection, rules similar to those regarding the possible unavailability of
federal exempt-interest dividend treatment to "substantial users" are
applicable for California state tax purposes.
Long-term and/or short-term capital gain distributions do not constitute
California exempt-interest dividends and will be taxable. Moreover, interest
on indebtedness incurred by a shareholder to purchase or carry the Fund's
shares is not deductible for California corporate or personal income tax
purposes if the Fund distributes California exempt-interest dividends during
the shareholder's taxable year.
TAXES -- MUTUAL FUNDS
STATUS AS A "REGULATED INVESTMENT COMPANY." The Fund will be treated under the
Code as a separate entity, and the Fund intends to qualify as a separate
"regulated investment company" under Subchapter M of the Code. To qualify for
the tax treatment afforded a "regulated investment company" under the Code,
the Fund must annually distribute at least 90% of the sum of its investment
company taxable income (generally net investment income and certain short-term
capital gains), its tax-exempt interest income and net capital gains, and meet
certain diversification of assets and other requirements of the Code. If the
Fund qualifies for such tax treatment, it will not be subject to federal
income tax on the part of its investment company taxable income and its net
capital gain which it distributes to shareholders. To meet the requirements of
the Code, the Fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other dispositions of securities; (b) derive less than 30% of its
gross income from the sale or other disposition of securities held less than
three months; and (c) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value of the Fund's total
assets is represented by cash, U.S. Government securities, securities of other
regulated investment companies, and other securities, limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's total assets
and 10% of the
28
<PAGE>
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses.
Even though the Fund qualifies as a "regulated investment company," it may be
subject to certain federal excise taxes unless the Fund meets certain
additional distribution requirements. Under the Code, a nondeductible excise
tax of 4% is imposed on the excess of a regulated investment company's
"required distribution" for the calendar year over the "distributed amount"
for such calendar year. The term "required distribution" means the sum of (i)
98% of ordinary income (generally net investment income) for the calendar
year, (ii) 98% of capital gain net income (both long-term and short-term) for
the one-year period ending on October 31 of such year and (iii) the sum of any
untaxed, undistributed net investment income and net capital gains of the
regulated investment company for prior periods. The term "distributed amount"
generally means the sum of (i) amounts actually distributed by the Fund from
its current year's ordinary income and capital gain net income and (ii) any
amount on which the Fund pays income tax for the year. The Fund intends to
meet these distribution requirements to avoid the excise tax liability.
If for any taxable year the Fund does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable income
will be subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits.
Fund shareholders are required by the Code to report to the Internal Revenue
Service all exempt-interest dividends, and all other tax-exempt interest
received during tax years beginning on or after January 1, 1987.
DISTRIBUTIONS OF NET INVESTMENT INCOME. Dividends from taxable net investment
income (including net short-term capital gains, if any) are taxable as
ordinary income. Shareholders will be taxed for federal income tax purposes on
dividends from the Fund in the same manner whether such dividends are received
as shares or in cash. While the Fund does not anticipate receiving any
dividend
29
<PAGE>
income from U.S. corporations, to the extent that it did receive dividends
that would qualify for the dividends-received deduction available to
corporations, the Fund must designate in a written notice to shareholders the
amount of the Fund's dividends that would be eligible for this treatment.
NET CAPITAL GAINS. Any distributions designated as being made from the Fund's
net capital gains will be taxable as long-term capital gains, regardless of
the holding period of the shareholders of the Fund's shares. Shareholders are
advised to consult their tax advisor regarding application of these rules to
their particular circumstances.
NON-U.S. SHAREHOLDERS. Under the Code, distributions of net
investment income by the Fund to a shareholder who, as to the
U.S., is a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S.
withholding tax (at a 30% or lower treaty rate). Withholding will
not apply if a dividend paid by the Fund to a foreign shareholder
is "effectively connected" with a U.S. trade or business, in
which case the reporting and withholding requirements applicable
to U.S. citizens, U.S. residents or domestic corporations will
apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign
shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a
rate of 30% if the individual is physically present in the U.S.
for more than 182 days during the taxable year.
OTHER INFORMATION. Shares of the Fund would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans and individual retirement accounts.
Such plans and accounts are generally tax-exempt and, therefore, would not
gain any additional benefit from the tax-exempt nature of the Fund's
dividends, and such dividends would be ultimately taxable to the beneficiaries
when distributed to them. In addition, the Fund may not be an appropriate
investment for entities which are "substantial users" of facilities financed
by industrial development bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt
person who regularly uses a part of such facilities in his trade or business
and whose gross revenues derived with respect to the facilities financed by
the issuance of bonds are more than 5% of the total revenues derived by all
users of such facilities, or who occupies more than 5% of the usable area of
such facilities or for whom such facilities or a part thereof
30
<PAGE>
were specifically constructed, reconstructed or acquired.
"Related persons" include certain related natural persons,
affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.
Interest on indebtedness incurred by a shareholder to purchase or carry the
Fund's shares is not deductible for federal income tax purposes if the Fund
distributes exempt-interest dividends during the shareholder's taxable year.
If a shareholder receives an exempt-interest dividend with respect to shares
of the Fund and such shares are held for six months or less, any loss on the
sale or exchange of such shares will be disallowed to the extent of the amount
of such exempt-interest dividend.
Any loss realized on redemption or exchange of the Fund's shares will be
disallowed to the extent shares are reacquired within the 61 day period
beginning 30 days before and ending 30 days after the shares are disposed of.
The foregoing is a general abbreviated summary of present federal income taxes
and California franchise and income taxes on dividends and distribution by the
Fund. Investors are urged to consult their own tax advisors for more detailed
information and for information regarding any foreign, state and local taxes
applicable to dividends and distributions received.
ADDITIONAL INFORMATION
CUSTODIAN. The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675, acts as Custodian for the Investment Company's assets, and as
such safekeeps the Fund's portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Investment Company's
request and maintains records in connection with its duties.
INDEPENDENT AUDITORS; FINANCIAL STATEMENTS. The Investment Company's
independent auditors are Coopers & Lybrand L.L.P., 333 Market Street, San
Francisco, California 94105. Coopers & Lybrand L.L.P. will conduct an annual
audit of the Fund, assist in the preparation of the Fund's federal and state
income tax returns and consult with the Investment Company as to matters of
accounting, regulatory filings, and federal and state income taxation. The
financial statements of the Fund as of October 31, 1995 included herein are
audited. Such financial statements are included herein in reliance on the
opinion of Coopers & Lybrand L.L.P. given on the authority of said firm as
experts in auditing and accounting.
31
<PAGE>
LEGAL OPINIONS. The validity of the shares offered by the Prospectus has been
passed upon by Morrison & Foerster, 345 California Street, San Francisco,
California 94104. In addition to acting as counsel to the Investment Company,
Morrison & Foerster have acted and may continue to act as counsel to the
Advisor and its affiliates in various matters.
USE OF NAME. The Advisor has granted the Investment Company the right to use
the "Fremont" name and has reserved the rights to withdraw its consent to the
use of such name by the Investment Company at any time, or to grant the use of
such name to any other company, and the Investment Company has granted the
Advisor, under certain conditions, the use of any other name it might assume
in the future, with respect to any other investment company sponsored by the
Advisor.
SHAREHOLDER VOTING RIGHTS. The Investment Company currently issues shares in
eight series and may establish additional classes or series of shares in the
future. When more than one class or series of shares is outstanding, shares of
all classes and series will vote together for a single set of directors, and
on other matters affecting the entire Investment Company, with each share
entitled to a single vote. On matters affecting only one class or series, only
the shareholders of that class or series shall be entitled to vote. On matters
relating to more than one class or series but affecting the classes and series
differently, separate votes by class and series are required. Shareholders
holding 10% of the shares of the Investment Company may call a special meeting
of shareholders.
LIABILITY OF DIRECTORS AND OFFICERS. The Articles of Incorporation of the
Investment Company provide that subject to the provisions of the 1940 Act, to
the fullest extent permitted under Maryland law, no officer or director of the
Investment Company may be held personally liable to the Investment Company or
its shareholders.
CERTAIN SHAREHOLDERS. As of January 8, 1996, the following shareholders are
the record owners of more than 5% of the outstanding shares of common stock of
the Fund:
BF Fund Limited 62.27%
50 Fremont Street, #3600
San Francisco, CA 94105
32
<PAGE>
Willis S. & Marian B. Slusser 6.35%
200 Deer Valley Road
San Rafael, CA 94903
Charles Schwab & Co., Inc. 7.78%
101 Montgomery Street
San Francisco, CA 94104
OTHER INVESTMENT INFORMATION. The Fund will generally have lower price
volatility than that of mutual funds which invest in longer-term California
municipal bonds, and it provides immediate diversification and liquidity in
thinly traded municipal bond markets. Hypothetical current yields may be used
to calculate hypothetical tax-equivalent yields based on various combined
marginal federal and state tax rates for given tax brackets of single and
joint filers. The formula used will be as follows: tax equivalent yield =
(current yield)/(1-tax rate). The State of California has one of the highest
personal income tax rates in the United States.
The Advisor's investment philosophy is to apply a long-term approach to
investing that balances risk and return potential.
INVESTMENT RESULTS
The Investment Company may from time to time include information on the
investment results (yield, tax-equivalent yield or total return) of the Fund
in advertisements or in reports furnished to current or prospective
shareholders.
The average annual rate of return ("T") for a given period is computed by
using the redeemable value at the end of the period ("ERV") of a hypothetical
initial investment of $1,000 ("P") over the period in years ("n") according to
the following formula as required by the SEC:
P(1+T)n = ERV
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) reinvestment of dividends and distributions
at net asset value on the reinvestment date determined by the Board of
Directors; and (2) a complete redemption at the end of any period illustrated.
The Fund will calculate total return for one, five and ten-year periods after
such a period has elapsed, and may calculate total returns for other periods
as well. In addition, the Fund will provide lifetime annual average annual
total return figures.
33
<PAGE>
The average annual total return for the Fund for the one-year period ending
October 31, 1995 was 12.77%, and for the three year period ending October 31,
1995 was 6.46%. The lifetime average annual total return for the Fund as of
October 31, 1995 was 7.28%. The Fund will also calculate this return as of the
end of each calendar quarter.
The Fund may quote its yield, which is computed by dividing the net investment
income per share earned during a 30-day period by the maximum offering price
per share on the last day of the period, according to the following formula:
YIELD = 2[((a-b)/cd + 1)6 - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The Fund may also calculate a tax-equivalent yield based on a 30-day period,
computed by dividing that portion of the yield (as computed by the formula
stated above) which is tax-exempt by one minus a stated personal income tax
rate and adding the product to that portion, if any, of the yield that is not
tax-exempt.
The Fund's 30-day yield as of October 31, 1995 was 4.35%. The Fund's
tax-equivalent 30-day yield as of October 31, 1995, using a combined marginal
effective federal and state personal income tax rate of 46.24%, was 8.09%.
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 current or past yield or total return should not
be considered representations of what an investment in the Fund may earn in
any future period. These factors and possible differences in the methods used
in calculating investment results should be considered when comparing the
Fund's investment results with those published for other investment companies
and other investment vehicles. The Fund's results also should be considered
relative to the risks associated with the Fund's investment objective and
policies.
34
<PAGE>
The Investment Company may from time to time compare the investment results of
the Fund with the following:
(1) Average of Savings Accounts, which is a measure of all
kinds of savings deposits, including longer-term
certificates (based on figures supplied by the U.S.
League of Savings Institutions). Savings accounts offer
a guaranteed rate of return on principal, but no
opportunity for capital growth. During certain periods,
the maximum rates paid on some savings deposits were
fixed by law.
(2) The Consumer Price Index, which is a measure of the
average change in prices over time in a fixed market
basket of goods and services (e.g., food, clothing,
shelter, and fuels, transportation fares, charges for
doctors' and dentists' services, prescription
medicines, and other goods and services that people buy
for day-to-day living).
(3) Statistics reported by Lipper Analytical Services, Inc.,
which ranks mutual funds by overall performance, investment
objectives and assets.
(4) Lipper California Short-Term Municipal Funds Average,
which is an average of municipal mutual funds
concentrating their investments in securities which are
exempt from California state income taxes. This average
is compiled from the Lipper Short-Term Municipal Bond
Funds average which restricts inclusion to those funds
with an average weighted maturity of no more than 90
days. Most funds restrict their longest maturity to
thirteen months.
(5) Lipper Intermediate Municipal Average, which is an average
of municipal mutual funds which restricts their holdings to
bonds with maturities between 3 and 10 years.
(6) Lehman Brothers Municipal Bond Index, which is a widely used
index composed of investment quality state and municipal
fixed income securities.
35
<PAGE>
(7) Lehman Brothers Five Year State General Obligation Index,
which is a composite measure of total return performance of
five year state general obligation bonds. It is a component
of the Lehman Brothers Municipal Bond Index.
(8) Lipper Municipal/California Intermediate Bond Index compiled
by Lipper Analytical Services, which is an average of bond
funds which are exempt from California state income taxes.
(9) Salomon Brothers Broad Investment Grade Index which is
a widely used index composed of U.S. domestic
government, corporate and mortgage-back fixed income
securities.
(10) 90-day U.S. Treasury Bills Index which is a measure of
the performance of constant maturity 90-day U.S.
Treasury Bills.
(11) Donoghue First Tier Money Fund Average which is an average
of the 30-day yield of approximately 250 major domestic
money market funds.
(12) Donoghue Tax-Exempt California Money Fund Average, which is
an average of municipal money market funds which concentrate
their investments in securities which are exempt from
California state income taxes.
Indices prepared by the research departments of such financial organizations
as Salomon Brothers, Inc.; Merrill Lynch, Pierce, Fenner & Smith, Inc.;
Morgan, Stanley; Bear Stearns & Co., Inc.; and Ibbottson Associates may be
used, as well as information provided by the Federal Reserve Board.
Performance rankings and ratings reported periodically in national financial
publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, and BARRON'S may
also be used.
36
<PAGE>
APPENDIX A: DESCRIPTION OF RATINGS
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. employs the designations
"Prime-1," "Prime-2" and "Prime-3" to indicate commercial paper
having the highest capacity for timely repayment.
Issuers rated Prime-1 "have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced
by the following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative
capitalization structures with moderate reliance on debt and ample asset
protections; broad margins in earnings coverage of fixed financial charges and
high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity."
Issues rated Prime-2 "have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained."
Issuers rated Prime-3 "have an acceptable capacity for repayment of short-term
promissory obligations. The effect of industry characteristics and market
composition may be more pronounced. Variability in earnings and profitability
may result in changes in the level of debt protection measurements and the
requirement for relatively high financial leverage. Adequate alternate
liquidity is maintained."
STANDARD & POOR'S RATINGS GROUP'S ratings of commercial paper are graded into
four categories ranging from "A" for the highest quality obligations to "D"
for the lowest. "A -- Issues assigned this highest rating are regarded as
having the greatest capacity for timely payment. Issues in this category are
delineated with numbers 1, 2, and 3 to indicate the relative degree of
safety."
A-1 -- "This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation."
A-1
<PAGE>
A-2 -- "Capacity for timely payments on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1."
A-3 -- "Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designation."
B -- "Issues rated B are regarded as having only an adequate capacity for
timely repayment. However, such capacity may be damaged by changing conditions
of short-term adversities."
C -- "This rating is assigned to short-term debt obligations with a doubtful
capacity for repayment."
D -- "This rating indicates that the issue is either in default or is expected
to be in default upon maturity."
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt
securities issued by various entities from "Aaa" to "C." The
ratings may be modified by the addition of 1, 2 or 3 to show
relative standing within the major rating categories. Investment
ratings are as follows:
AAA -- Best quality. These securities "carry the smallest degree of investment
risk and are generally referred to as 'gilt edge.' Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues."
AA -- High quality by all standards. "They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risks appear somewhat
greater."
A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. "Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future."
A-2
<PAGE>
BAA -- Medium grade obligations. "Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well."
BA -- "Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class."
B -- "Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
CAA -- "Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
and interest."
CA -- "Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings."
C -- "Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing."
STANDARD & POOR'S RATINGS GROUP'S rates the long-term securities debt of
various entities in categories ranging from "AAA" to "D" according to quality.
The ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Investment ratings are as follows:
AAA -- Highest rating. "Capacity to pay interest and repay
principal is extremely strong."
AA -- High grade. "Very strong capacity to pay interest and repay
principal."
A-3
<PAGE>
A -- "Strong capacity to pay interest and repay principal," although "somewhat
more susceptible to the adverse effects of change in circumstances and
economic conditions than debt in higher rated categories."
BBB -- "Adequate capacity to pay interest and repay principal." These bonds
normally exhibit adequate protection parameters, but "adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal than for debt in higher rated
categories."
BB, B, CCC, CC -- "Debt rated BB, B, CCC, or CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions."
C -- "This rating is reserved for income bonds on which no
interest is being paid."
D -- "Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears."
A-4
<PAGE>
DESCRIPTION OF RATINGS OF NOTES
MOODY'S INVESTORS SERVICE, INC. ratings for state and municipal and other
short-term obligations will be designated Moody's Investment Grade ("MIG").
This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the
borrower are uppermost in importance in short-term borrowing, while various
factors of the first importance in long-term borrowing risk are of lesser
importance in the short run.
MIG1/VMIG1 -- Notes bearing this description are of the best quality enjoying
strong protection from established cash flow of funds for their servicing or
from established and broad-based access to the market for refinancing, or
both.
MIG2/VMIG2 -- Notes bearing this designation are of high quality, with margins
of protection ample although not so large as in the preceding group.
MIG3/VMIG3 -- Notes bearing this designation are of favorable quality, with
all security elements accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
STANDARD & POOR'S RATINGS GROUP'S ratings for state and municipal notes are
graded into three categories:
SP-1 -- Notes bearing this designation have a very strong or strong capacity
to pay principal and interest.
SP-2 -- Notes bearing this designation have a satisfactory capacity to pay
principal and interest.
SP-3 -- Notes bearing this designation have a speculative capacity to pay
principal and interest.
A-5
<PAGE>
Fremont
Mutual
Funds
Annual Report
October 31, 1995
LOGO:Fremont Funds
A message from David L. Redo - President and CEO of
Fremont Investment Advisors, Inc.
<PAGE>
Dear Fellow Shareholder:
We are pleased to send you this report discussing our eight Fremont
Mutual Funds for the one year period ended October 31, 1995.
The Fremont Funds had an excellent year. Some of the highlights include:
* The Fremont U.S. Micro-Cap Fund produced a total return of 38.68%
during the period, beating the Russell 2000 Index by 20.36%.
* The Fremont Global Fund, with a 12.78% return for the year,
outperformed the average mutual fund in the Lipper Global Flexible
investment category by 3.5%.
* The Fremont Growth Fund outperformed the S&P 500 by nearly 2%. It also
beat the average growth stock fund by nearly 6% for the year.
* The Fremont Money Market Fund remained in the top five percent of all
taxable Money Market Mutual Funds in the country this year.
Assets under management are steadily growing. On September 13, the
Fremont Funds passed the $1 billion mark. I would like to thank each and every
investor who helped us reach this milestone.
Please review the discussion of each of our funds on the following pages.
If you have any questions about the information presented, please call us at
1-800-548-4539 (press 1). We look forward to continuing to serve your
investment needs, and wish you and your family a very prosperous 1996.
Sincerely,
/s/ David L. Redo
David L. Redo
President and CEO
<PAGE>
Table of Contents
Global Fund........................................... 5
International Growth Fund............................. 8
International Small Cap Fund......................... 10
U.S. Micro-Cap Fund.................................. 12
Growth Fund.......................................... 14
Bond Fund............................................ 15
Money Market Fund.................................... 16
California Intermediate Tax-Free Fund................ 17
Report of Independent Accountants.................... 18
Statements of Investments
Global Fund.......................................... 19
International Growth Fund............................ 24
International Small Cap Fund......................... 26
U.S. Micro-Cap Fund.................................. 29
Growth Fund.......................................... 30
Bond Fund............................................ 32
Money Market Fund.................................... 34
California Intermediate Tax-Free Fund................ 35
Combined Financial Statements
Statements of Assets and Liabilities................. 38
Statements of Operations............................. 40
Statements of Changes in Net Assets.................. 42
Financial Highlights................................ 46
Notes To Financial Statements........................ 51
<PAGE>
Questions& ANSWERS
The Fremont Asset Allocation Committee:
Dave Redo, Pete Landini, Bob Haddick, Vince Kuhn
Q: How did the Fremont Global Fund perform for the fiscal year ended October
31, 1995?
A:The Fremont Global Fund produced a total return of 12.78% for fiscal 1995,
on the strength of dramatic U.S. stock and bond performance during the second
half of the fiscal year.
Q: How does this performance compare to other global flexible funds?
A:The Fund's performance was excellent within its peer group. The average
return for the funds making up the Lipper Global Flexible category was 9.27%
for the same period -- 3.51% below the Fremont Global Fund. This difference
can be attributed to smart asset allocation decisions and security selections
made by the Fund over the course of the year.
<PAGE>
Q: What worked well for the Fund during this period?
A:The Global Fund was fully invested in global stocks and bonds for most of
the fiscal year while cash reserves were at a minimum. This strategy proved
very effective, since U.S. stocks and bonds were particularly strong. Q: What
strategies were less successful? A:The Fremont Global Fund maintained a slight
overweighting in international stocks during fiscal 1995. Although
international stocks as a group increased in value, they did not perform as
well as U.S. stocks. We also favored Southeast Asian stocks, based on
expectations that good earnings growth in this region, combined with lower
U.S. interest rates, would boost these stock markets. To date, this has not
occurred, although we remain confident that this strategy will pay off in the
months ahead.
<PAGE>
Questions & ANSWERS
The Fremont Asset Allocation Committee:
Dave Redo, Pete Landini, Bob Haddick, Vince Kuhn
Fremont Global Fund (cont'd.)
Q: What impact did economic developments have upon the Fund this year?
A: The "soft landing" of the U.S. economy during 1995 contributed
significantly to the Fund's results. The rapid economic growth in 1994 created
inflation concerns, driving interest rates upward and pushing the prices of
financial assets downward. In early 1995, however, the U.S. economy
decelerated to a slow, sustainable pace, quieting fears of higher inflation.
Interest rates in most countries fell, while corporate profits continued to
expand. The resulting economic environment has proven very positive for
financial assets.
Q: What is the Fund's latest asset mix?
A: The Fund's asset mix as of October 31, 1995 is shown in the table on the
right. The Fund remains fully invested, with roughly 70% in global
stocks and an underweighting in global bonds. This asset allocation
strategy reflects our expectation that the global economic environment
in the period ahead will be rewarding.
<TABLE>
Fremont Global Fund Asset Mix
<CAPTION>
Asset Mix Asset Mix "Neutral" Long-Term
Asset Class 10/31/95 4/30/95 Mix Asset Mix Ranges
<S> <C> <C> <C> <C>
Stocks
U.S. 35% 27% 32.5%
Foreign 35% 32% 32.5%
Total Stocks 70% 59% 65% 40% - 75%
Bonds
U.S. 10% 20% 13%
Foreign 15% 11% 17%
Total Bonds 25% 31% 30% 12% - 55%
- --------------------------------------------------------------------------------
Cash Reserves 5% 10% 5% 2% - 48%
- --------------------------------------------------------------------------------
TOTAL 100% 100% 100%
</TABLE>
Geographic Diversification as of October 31, 1995
MAP
United States/Canada 53.3%
Emerging Markets: Latin America 2.3%
United Kingdom 2.5%
Continental Europe 21.4%
Hong Kong/Singapore/Malaysia 6.0%
Australia/New Zealand 1.7%
Japan 5.1%
Other Emerging Markets: Including Thailand, Indonesia, The Philippines,
South Korea and Others 7.7%
<PAGE>
Questions & ANSWERS
The Fremont Asset Allocation Committee:
Dave Redo, Pete Landini, Bob Haddick, Vince Kuhn
Fremont Global Fund (cont'd.)
Q: What is your current outlook for the Fund?
A: We anticipate slow economic growth, stable inflation, declining interest
rates, and steady corporate earnings in the coming months -- all of which
should have a positive impact on global financial assets. We believe that
stocks in Southeast Asia and some European markets show the most potential
over the next several months. Southeast Asian markets should eventually
respond to lower U.S. interest rates and rising corporate earnings. In Europe,
corporate earnings should be quite solid and interest rates could continue to
decline. In addition, a degree of pessimism pervades all of these markets, a
factor that indicates that some very good values exist.
Sincerely,
The Fremont Asset Allocation Committee
Dave Redo Vince Kuhn
Pete Landini Bob Haddick
APPENDIX
A representation of the graphic material contained in Fremont Mutual Funds,
Inc.'s October 31, 1995 Annual Report is set forth below.
1. FREMONT GLOBAL FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, November 18, 1988.
<TABLE>
<CAPTION>
Lehman Bros. Intermediate
Fremont Global Fund S&P 500 Index Govt./Corp. Bond Index )
Qtrly Qtrly Qtrly
Return Balance Return Balance Return Balance
<S> <C> <C> <C> <C> <C> <C>
18-Nov-88 $10,000 $10,000 $10,000
30-Nov-88 0.40% $10,040 2.81% $10,281 -0.34% $9,966
31-Dec-88 0.83% $10,123 1.81% $10,467 0.09% $9,975
31-Jan-89 2.88% $10,415 7.22% $11,223 1.05% $10,080
28-Feb-89 -0.87% $10,325 -2.48% $10,944 -0.42% $10,037
31-Mar-89 1.75% $10,506 2.34% $11,201 0.43% $10,081
30-Apr-89 1.63% $10,677 5.15% $11,777 2.00% $10,282
31-May-89 1.41% $10,828 4.05% $12,254 1.98% $10,486
30-Jun-89 0.46% $10,878 -0.55% $12,187 2.52% $10,750
31-Jul-89 4.72% $11,391 8.98% $13,281 2.05% $10,970
31-Aug-89 1.06% $11,512 1.93% $13,538 -1.29% $10,829
30-Sep-89 -0.44% $11,462 -0.39% $13,485 0.47% $10,880
31-Oct-89 -0.79% $11,371 -2.36% $13,167 2.12% $11,110
30-Nov-89 1.30% $11,519 2.07% $13,439 0.95% $11,216
31-Dec-89 1.88% $11,735 2.37% $13,758 0.28% $11,247
31-Jan-90 -3.09% $11,373 -6.71% $12,835 -0.64% $11,175
28-Feb-90 -0.37% $11,331 1.29% $13,000 0.37% $11,217
31-Mar-90 0.38% $11,373 2.62% $13,341 0.13% $11,231
30-Apr-90 -1.50% $11,203 -2.48% $13,010 -0.35% $11,192
31-May-90 5.42% $11,810 9.75% $14,278 2.20% $11,438
30-Jun-90 0.27% $11,842 -0.69% $14,180 1.34% $11,591
31-Jul-90 0.72% $11,927 -0.32% $14,134 1.39% $11,753
31-Aug-90 -4.91% $11,341 -9.04% $12,857 -0.41% $11,704
30-Sep-90 -4.13% $10,873 -4.92% $12,224 0.77% $11,795
31-Oct-90 1.82% $11,070 -0.37% $12,179 1.16% $11,931
30-Nov-90 2.52% $11,349 6.43% $12,961 1.52% $12,112
31-Dec-90 1.57% $11,527 2.75% $13,318 1.37% $12,278
31-Jan-91 2.34% $11,797 4.42% $13,907 1.02% $12,403
28-Feb-91 4.00% $12,270 7.16% $14,902 0.80% $12,501
31-Mar-91 0.37% $12,315 2.37% $15,255 0.68% $12,586
30-Apr-91 0.46% $12,371 0.28% $15,297 1.09% $12,724
31-May-91 1.91% $12,607 4.30% $15,955 0.61% $12,802
30-Jun-91 -2.77% $12,258 -4.56% $15,228 0.07% $12,811
31-Jul-91 2.75% $12,596 4.68% $15,940 1.12% $12,954
31-Aug-91 1.70% $12,810 2.35% $16,315 1.91% $13,202
30-Sep-91 0.79% $12,911 -1.65% $16,046 1.72% $13,429
31-Oct-91 1.50% $13,105 1.33% $16,259 1.14% $13,582
30-Nov-91 -1.78% $12,872 -4.03% $15,604 1.15% $13,738
31-Dec-91 6.24% $13,676 11.42% $17,386 2.44% $14,073
31-Jan-92 -0.59% $13,595 -1.85% $17,064 -0.91% $13,946
29-Feb-92 1.12% $13,747 1.28% $17,282 0.39% $14,001
31-Mar-92 -2.04% $13,466 -1.95% $16,945 -0.39% $13,946
30-Apr-92 0.26% $13,501 2.92% $17,440 0.88% $14,068
31-May-92 2.01% $13,773 0.53% $17,533 1.55% $14,286
30-Jun-92 -0.86% $13,655 -1.46% $17,277 1.48% $14,498
31-Jul-92 1.13% $13,808 4.04% $17,975 1.99% $14,786
31-Aug-92 0.26% $13,844 -2.02% $17,612 1.00% $14,934
30-Sep-92 0.86% $13,964 1.15% $17,815 1.36% $15,138
31-Oct-92 0.51% $14,035 0.36% $17,879 -1.30% $14,941
30-Nov-92 1.30% $14,218 3.37% $18,482 -0.38% $14,884
31-Dec-92 1.20% $14,389 1.30% $18,722 1.34% $15,083
31-Jan-93 0.43% $14,450 0.73% $18,858 1.94% $15,375
28-Feb-93 1.10% $14,609 1.36% $19,115 1.58% $15,618
31-Mar-93 2.10% $14,916 2.15% $19,527 0.40% $15,681
30-Apr-93 0.16% $14,940 -2.45% $19,049 0.80% $15,806
31-May-93 0.99% $15,089 2.67% $19,558 -0.22% $15,771
30-Jun-93 0.82% $15,212 0.33% $19,623 1.57% $16,019
31-Jul-93 1.38% $15,423 -0.49% $19,526 0.24% $16,058
31-Aug-93 3.07% $15,896 3.78% $20,263 1.59% $16,313
30-Sep-93 1.25% $16,095 -0.74% $20,114 0.41% $16,381
31-Oct-93 2.47% $16,493 2.05% $20,527 0.27% $16,425
30-Nov-93 -0.99% $16,330 -0.90% $20,342 -0.56% $16,333
31-Dec-93 5.38% $17,209 1.23% $20,592 0.46% $16,408
31-Jan-94 1.32% $17,436 3.36% $21,284 1.11% $16,590
28-Feb-94 -2.83% $16,944 -2.71% $20,707 -1.48% $16,344
31-Mar-94 -4.10% $16,249 -4.34% $19,808 -1.65% $16,075
30-Apr-94 0.39% $16,312 1.29% $20,064 -0.68% $15,965
31-May-94 0.39% $16,375 1.63% $20,392 0.07% $15,976
30-Jun-94 -1.08% $16,198 -2.47% $19,887 0.01% $15,978
31-Jul-94 1.95% $16,514 3.31% $20,545 1.44% $16,208
31-Aug-94 2.83% $16,982 4.07% $21,381 0.31% $16,259
30-Sep-94 -2.16% $16,615 -2.42% $20,864 -0.92% $16,109
31-Oct-94 0.99% $16,780 2.30% $21,344 -0.01% $16,108
30-Nov-94 -1.98% $16,447 -3.67% $20,560 -0.45% $16,035
31-Dec-94 0.26% $16,491 1.47% $20,862 0.35% $16,091
31-Jan-95 -1.09% $16,310 2.59% $21,403 1.68% $16,362
28-Feb-95 1.26% $16,516 3.87% $22,231 2.07% $16,700
31-Mar-95 2.19% $16,877 2.96% $22,889 0.57% $16,795
30-Apr-95 2.14% $17,238 2.95% $23,564 1.24% $17,004
31-May-95 3.56% $17,851 3.96% $24,498 3.02% $17,517
30-Jun-95 1.17% $18,060 2.35% $25,073 0.67% $17,635
31-Jul-95 3.03% $18,608 3.33% $25,908 0.01% $17,636
31-Aug-95 -0.21% $18,568 0.23% $25,968 0.91% $17,797
30-Sep-95 1.56% $18,858 4.17% $27,051 0.72% $17,925
31-Oct-95 0.35% $18,924 -0.28% $26,975 1.11% $18,124
<CAPTION>
Salomon Non-U.S.
Govt. Bond Index
Fremont Global Fund EAFE Index (Currency Hedged)
Qtrly Qtrly Qtrly
Return Balance Return Balance Return Balance
<S> <C> <C> <C> <C> <C> <C>
18-Nov-88 $10,000 $10,000 $10,000
30-Nov-88 0.40% $10,040 1.61% $10,161 0.11% $10,011
31-Dec-88 0.83% $10,123 0.56% $10,218 0.80% $10,091
31-Jan-89 2.88% $10,415 1.76% $10,398 0.56% $10,148
28-Feb-89 -0.87% $10,325 0.51% $10,451 -0.84% $10,062
31-Mar-89 1.75% $10,506 -1.96% $10,246 0.69% $10,132
30-Apr-89 1.63% $10,677 0.93% $10,341 0.97% $10,230
31-May-89 1.41% $10,828 -5.44% $9,779 0.05% $10,235
30-Jun-89 0.46% $10,878 -1.68% $9,614 0.87% $10,324
31-Jul-89 4.72% $11,391 12.56% $10,822 2.18% $10,549
31-Aug-89 1.06% $11,512 -4.50% $10,335 0.09% $10,559
30-Sep-89 -0.44% $11,462 4.56% $10,806 -0.53% $10,503
31-Oct-89 -0.79% $11,371 -4.02% $10,371 -0.06% $10,497
30-Nov-89 1.30% $11,519 5.03% $10,893 -0.23% $10,472
31-Dec-89 1.88% $11,735 3.69% $11,295 0.33% $10,507
31-Jan-90 -3.09% $11,373 -3.73% $10,874 -1.98% $10,299
28-Feb-90 -0.37% $11,331 -6.97% $10,116 -1.49% $10,145
31-Mar-90 0.38% $11,373 -10.42% $9,062 -0.05% $10,140
30-Apr-90 -1.50% $11,203 -0.79% $8,990 -0.08% $10,132
31-May-90 5.42% $11,810 11.41% $10,016 2.48% $10,384
30-Jun-90 0.27% $11,842 -0.88% $9,928 0.52% $10,438
31-Jul-90 0.72% $11,927 1.41% $10,068 0.39% $10,478
31-Aug-90 -4.91% $11,341 -9.71% $9,090 -1.35% $10,337
30-Sep-90 -4.13% $10,873 -13.94% $7,823 -0.56% $10,279
31-Oct-90 1.82% $11,070 15.59% $9,042 2.87% $10,574
30-Nov-90 2.52% $11,349 -5.90% $8,509 1.64% $10,747
31-Dec-90 1.57% $11,527 1.62% $8,647 1.00% $10,855
31-Jan-91 2.34% $11,797 3.23% $8,926 1.90% $11,061
28-Feb-91 4.00% $12,270 10.72% $9,883 1.47% $11,224
31-Mar-91 0.37% $12,315 -6.00% $9,290 0.05% $11,229
30-Apr-91 0.46% $12,371 0.98% $9,381 0.49% $11,284
31-May-91 1.91% $12,607 1.04% $9,479 0.59% $11,351
30-Jun-91 -2.77% $12,258 -7.35% $8,782 -0.54% $11,290
31-Jul-91 2.75% $12,596 4.91% $9,213 0.91% $11,392
31-Aug-91 1.70% $12,810 -2.03% $9,026 1.29% $11,539
30-Sep-91 0.79% $12,911 5.64% $9,535 1.63% $11,727
31-Oct-91 1.50% $13,105 1.42% $9,671 0.71% $11,811
30-Nov-91 -1.78% $12,872 -4.67% $9,219 0.32% $11,848
31-Dec-91 6.24% $13,676 5.16% $9,695 1.78% $12,059
31-Jan-92 -0.59% $13,595 -2.14% $9,488 0.84% $12,161
29-Feb-92 1.12% $13,747 -3.58% $9,148 0.33% $12,201
31-Mar-92 -2.04% $13,466 -6.60% $8,544 -0.57% $12,131
30-Apr-92 0.26% $13,501 0.48% $8,585 0.31% $12,169
31-May-92 2.01% $13,773 6.69% $9,160 1.08% $12,300
30-Jun-92 -0.86% $13,655 -4.74% $8,726 0.41% $12,351
31-Jul-92 1.13% $13,808 -2.56% $8,502 0.70% $12,437
31-Aug-92 0.26% $13,844 6.27% $9,035 0.32% $12,477
30-Sep-92 0.86% $13,964 -1.98% $8,856 1.64% $12,682
31-Oct-92 0.51% $14,035 -5.25% $8,392 1.71% $12,898
30-Nov-92 1.30% $14,218 0.94% $8,471 0.04% $12,904
31-Dec-92 1.20% $14,389 0.52% $8,515 0.95% $13,026
31-Jan-93 0.43% $14,450 -0.01% $8,514 1.05% $13,163
28-Feb-93 1.10% $14,609 3.02% $8,771 1.83% $13,405
31-Mar-93 2.10% $14,916 8.72% $9,536 -0.28% $13,367
30-Apr-93 0.16% $14,940 9.49% $10,441 -0.05% $13,360
31-May-93 0.99% $15,089 2.11% $10,662 0.48% $13,425
30-Jun-93 0.82% $15,212 -1.56% $10,495 1.86% $13,675
31-Jul-93 1.38% $15,423 3.50% $10,863 1.12% $13,829
31-Aug-93 3.07% $15,896 5.40% $11,449 1.97% $14,101
30-Sep-93 1.25% $16,095 -2.25% $11,192 0.67% $14,195
31-Oct-93 2.47% $16,493 3.08% $11,536 1.30% $14,380
30-Nov-93 -0.99% $16,330 -8.74% $10,528 0.84% $14,500
31-Dec-93 5.38% $17,209 7.22% $11,288 1.88% $14,774
31-Jan-94 1.32% $17,436 8.45% $12,242 -0.77% $14,660
28-Feb-94 -2.83% $16,944 -0.28% $12,208 -1.96% $14,372
31-Mar-94 -4.10% $16,249 -4.31% $11,683 -0.62% $14,283
30-Apr-94 0.39% $16,312 4.24% $12,178 -0.55% $14,204
31-May-94 0.39% $16,375 -0.57% $12,108 -0.77% $14,094
30-Jun-94 -1.08% $16,198 1.41% $12,279 -1.09% $13,940
31-Jul-94 1.95% $16,514 0.96% $12,397 0.69% $14,036
31-Aug-94 2.83% $16,982 2.37% $12,691 -0.95% $13,902
30-Sep-94 -2.16% $16,615 -3.15% $12,291 0.30% $13,944
31-Oct-94 0.99% $16,780 3.33% $12,700 0.34% $13,991
30-Nov-94 -1.98% $16,447 -4.81% $12,089 1.30% $14,173
31-Dec-94 0.26% $16,491 0.63% $12,166 0.04% $14,179
31-Jan-95 -1.09% $16,310 -3.84% $11,699 1.06% $14,329
28-Feb-95 1.26% $16,516 -0.29% $11,665 1.27% $14,511
31-Mar-95 2.19% $16,877 6.24% $12,392 2.21% $14,832
30-Apr-95 2.14% $17,238 3.76% $12,858 1.60% $15,069
31-May-95 3.56% $17,851 -1.19% $12,705 3.20% $15,551
30-Jun-95 1.17% $18,060 -1.75% $12,483 -0.15% $15,528
31-Jul-95 3.03% $18,608 6.23% $13,261 1.19% $15,713
31-Aug-95 -0.21% $18,568 -3.81% $12,756 0.71% $15,824
30-Sep-95 1.56% $18,858 1.95% $13,004 1.64% $16,084
31-Oct-95 0.35% $18,924 -2.69% $12,654 1.04% $16,251
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 12.78%
2 Years 7.12%
3 Years 10.48%
4 Years 9.62%
5 Years 11.32%
Since Inception (11/18/88) 9.61%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
S&P 500 Index, the Morgan Stanley Capital International EAFE Index, the
Salomon Non-U.S. Government Bond Index, or the Lehman Bros. Intermediate
Government/Corporate Index.
<PAGE>
Questions & ANSWERS
Andrew L. Pang, Portfolio Manager
Fremont Investment Advisors, Inc.
Fremont International Growth Fund
Q: How did the Fremont International Growth Fund perform for the fiscal year
ended October 31, 1995?
A: In a difficult year for international markets, the Fremont International
Growth Fund produced a total return of 0.13% for the period ended
October 31, 1995. This performance compares favorably both with the
performance of other international funds and that of the Europe,
Australia, & Far East (EAFE) Index.
During the same period, the average total return for the funds
comprising the Lipper International category was -1.09%, while the EAFE Index
of international stocks returned -0.36%.
Q: What worked well during this period?
A: A number of profitable stock selections helped the Fund's performance.
Roche Holdings AG of Switzerland did very well during the past twelve
months, posting a total return of 65%, and Autoliv AB of Sweden was up
64%. Not far behind was Finland's Nokia AB, with a total return of 55%
for the year ended October 31, 1995. In addition, we reduced the Fund's
cash position by roughly 6% in early April, allowing the Fund to
participate fully in the recoveries of many international stock markets.
Q: What was less successful?
A: The Fund's exposure to the developing markets in Latin America and Asia
added little to performance this past year. Southeast Asian markets rallied
sharply in the spring, only to slip back in the summer and fall.
Our current overweighting in emerging markets is one of the key
strategies used in managing the International Growth Fund. Although the
portfolio will go through cyclical phases as a result of its high
emerging market content, we believe that these markets will produce
superior growth that will drive stock prices much higher in the years
ahead.
Q: What is your current strategy?
A: Our current allocations by region include 21% in Japan, 36% in other
Asian markets, 35% in Europe, 3% in Latin America and 5% in cash.
Compared to the EAFE Index, which does not include the emerging markets,
we are continuing to underweight the Japanese and European markets and
overweight the emerging markets of Southeast Asia. We are especially
enthusiastic about the potential for the Southeast Asian markets where
we are forecasting a long-term growth rate of 6 to 7% -- well beyond the
2 to 3% expected growth rate for the major industrialized countries.
2. FREMONT INTERNATIONAL GROWTH FUND - Growth of $10,000* * Assumes initial
investment of $10,000 on inception date, March 1, 1994.
<TABLE>
<CAPTION>
Fremont International
Growth Fund EAFE Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C> <C>
01-Mar-94 $10,000 $10,000
31-Mar-94 -3.66% $9,634 -4.31% $9,569
30-Apr-94 0.33% $9,666 4.24% $9,975
31-May-94 0.11% $9,767 -0.57% $9,918
30-Jun-94 -1.94% $9,488 1.41% $10,058
31-Jul-94 2.42% $9,718 0.96% $10,155
31-Aug-94 4.73% $10,178 2.37% $10,395
30-Sep-94 -1.44% $10,031 -3.15% $10,068
31-Oct-94 1.98% $10,230 3.33% $10,403
30-Nov-94 -4.80% $9,739 -4.81% $9,903
31-Dec-94 -0.51% $9,689 0.63% $9,965
31-Jan-95 -6.90% $9,020 -3.84% $9,582
28-Feb-95 1.97% $9,198 -0.29% $9,555
31-Mar-95 2.05% $9,386 6.24% $10,151
30-Apr-95 3.34% $9,699 3.76% $10,533
31-May-95 2.59% $9,950 -1.19% $10,407
30-Jun-95 2.10% $10,159 -1.75% $10,225
31-Jul-95 5.66% $10,734 6.23% $10,862
31-Aug-95 -2.43% $10,473 -3.81% $10,448
30-Sep-95 0.70% $10,546 1.95% $10,652
31-Oct-95 -2.87% $10,243 -2.69% $10,366
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 0.13%
Since Inception (3/1/94) 1.45%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Morgan Stanley Capital International EAFE Index.
<PAGE>
Questions & ANSWERS
Andrew L. Pang, Portfolio Manager
Fremont Investment Advisors, Inc.
Fremont International Growth Fund (cont'd.)
Q: What is your current outlook for the Fund?
A: In 1995, interest rates in most countries fell and corporate profits
continued to expand. Slow, non-inflationary growth in the global economy
continues to be a positive market force. As we enter fiscal 1996, we
anticipate a more favorable environment for international financial
assets, and continue to believe that the greatest potential will be
found in Southeast Asian stocks, as well as in some European markets.
While they have been slow to respond to declining U.S. interest rates
and rising international corporate earnings, the markets of Southeast
Asia should eventually react positively. In Europe, solid corporate
earnings and declining interest rates should continue. Finally, we plan
to invest in a number of well-priced stocks as many investors remain on
the sidelines waiting for the markets to rebound.
Sincerely,
Andrew L. Pang
Portfolio Manager
NOTE:
On September 1, 1995, Fremont Investment Advisors replaced Sit/Kim
International Investment Associates, Inc. as the advisor for the Fremont
International Growth Fund.
The Fremont International Growth Fund's
Geographic
Diversification as of October 31, 1995
MAP
United States 5.1% (cash)
Emerging Markets: Latin America 3.4%
United Kingdom 5.0%
Continental Europe 29.7%
Hong Kong/Singapore/Malaysia 14.2%
Australia/New Zealand 3.4%
Japan 21.4%
Other Emerging Markets: Including Thailand, The Philippines, Indonesia,
Taiwan and Others 17.8%
<PAGE>
Questions & ANSWERS
Dr. Gary L. Bergstrom, Portfolio Manager
Acadian Asset Management, Inc.
Fremont International Small Cap Fund
Q: How did the Fremont International Small Cap Fund perform for the fiscal year
ended October 31, 1995?
A: The Fremont International Small Cap Fund produced a total return of
- -7.96% for the fiscal year. During the same twelve months, the Salomon
Brothers Extended Market Index of the Europe and Pacific countries (EMI)
recorded a return of -4.70%. The average for funds comprising the Lipper
International Small Company category was -2.75%.
Q: What worked well for the Fund during this period?
A: The Fund's Japanese investments were limited during the entire period,
which protected investors from the effects of a volatile year. At the
same time, the vast depth and breadth of the Japanese market made it
possible to buy a number of stocks that performed extremely well. Stock
selection also contributed positively to portfolio performance in the
U.K., as this market reached all-time highs and smaller, value-oriented
stocks did well. A relatively strong presence in the Australia and New
Zealand markets, as well as the emerging markets of Turkey, Greece and
Thailand, also contributed to returns.
Q: What strategies were less successful?
A: The weak dollar and Mexican economic crisis shook investor confidence
and resulted in volatile international markets during the first half of
the fiscal year. This hurt the returns of smaller, value-oriented stocks
as investors moved towards larger, growth-oriented stocks. Extremely
small "micro-cap" foreign stocks, like many of those held by the Fund,
proved particularly vulnerable. While this trend reversed itself in the
third quarter, it nevertheless had a substantial negative impact on the
Fund's performance.
In terms of specific portfolio selections, the Fund's relatively strong
presence in France had a mixed effect, adding value in the first half
but detracting from returns later on. Our comparatively light
participation in the German market had a negative effect during the
first three quarters, but has recently begun to pay off. In addition,
some emerging markets investments dampened performance, particularly
during the first half of the year.
3. FREMONT INTERNATIONAL SMALL CAP FUND - Growth of $10,000* * Assumes initial
investment of $10,000 on inception date, June 30, 1994.
<TABLE>
<CAPTION>
Fremont International Salomon Brothers
Small Cap Fund EMI Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
30-Jun-94 $10,000 $10,000
31-Jul-94 1.30% $10,130 1.14% $10,114
31-Aug-94 2.37% $10,370 1.06% $10,221
30-Sep-94 -4.34% $9,920 -2.86% $9,929
31-Oct-94 -0.60% $9,860 1.81% $10,109
30-Nov-94 -5.58% $9,310 -6.24% $9,478
31-Dec-94 -3.11% $9,020 1.34% $9,605
31-Jan-95 -5.32% $8,540 -3.25% $9,293
28-Feb-95 -0.94% $8,460 -1.46% $9,157
31-Mar-95 2.25% $8,650 4.25% $9,546
30-Apr-95 3.47% $8,950 3.00% $9,833
31-May-95 2.57% $9,180 -1.75% $9,660
30-Jun-95 -0.98% $9,090 -1.23% $9,542
31-Jul-95 5.61% $9,600 5.83% $10,098
31-Aug-95 -2.19% $9,390 -2.53% $9,842
30-Sep-95 0.43% $9,430 0.78% $9,919
31-Oct-95 -3.76% $9,075 -2.88% $9,634
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year -7.96%
Since Inception (6/30/94) -7.01%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Salomon Brothers Extended Market Index.
<PAGE>
Questions & ANSWERS
Dr. Gary L. Bergstrom, Portfolio Manager
Acadian Asset Management, Inc.
Fremont International Small Cap Fund (cont'd.)
Q: What changes were made to the country allocations during the year?
A: During the first six months, the most significant changes to the
portfolio involved an increased allocation to emerging markets, which
started at roughly 7% of the portfolio and grew to 28%. In the developed
markets, we reduced our emphasis on Japan during the first half of the
year, but recently increased it again. Allocations in France and Germany
remained fairly steady throughout the year.
Q: What is the Fund's current strategy?
A: While small cap stocks have recently underperformed larger stocks, this
trend may be reversing. Over the long term, smaller cap stocks have
significantly outperformed other sectors, and we believe they will do so
in the future. Based on this belief, the portfolio continues to
emphasize smaller micro-cap stocks, and companies that tend to be either
cyclical or sensitive to economic changes.
The portfolio currently emphasizes a range of attractive developed
markets, such as France, Canada, Hong Kong, the Netherlands and Australia, as
well as relatively liquid markets in expanding economies, such as those of
Brazil, Thailand, and Greece.
Overall, it is our view that a value-oriented small cap approach will
prosper in the coming months. More importantly, we believe the Fund's
investment process, which combines a fundamental value approach with
earnings growth trends and other important data, will be successful in
identifying high-performance small cap companies for the Fund's
portfolio.
Sincerely,
Dr. Gary L. Bergstrom
Portfolio Manager
ABOUT THE SUB-ADVISOR:
Acadian Asset Management Inc. manages over $2 billion in international small
cap portfolios.
The Fremont International Small Cap Fund's
Geographic Diversification as of October 31, 1995
MAP
United States/Canada 3.6%
Emerging Markets: Latin America 11.0%
United Kingdom 5.7%
Continental Europe 28.2%
Hong Kong/Singapore/Malaysia 12.3%
Australia/New Zealand 7.9%
Japan 14.6%
Other Emerging Markets: Including Greece, Thailand, South Africa,
Czech Republic, Turkey and Others 16.7%
<PAGE>
Questions & ANSWERS
Robert E. Kern, Portfolio Manager
Morgan Grenfell Capital Management, Inc.
Fremont U.S. Micro-Cap Fund
Q: How did the Fremont U.S. Micro-Cap Fund perform for the fiscal year
ended October 31, 1995?
A: For the year, the U.S. Micro-Cap Fund posted an impressive return of
38.68%, outperforming the Russell 2000 Index by more than a two-to-one margin.
The Russell 2000 Index, a widely-used gauge of small company performance, rose
a much lower 18.32% over the same period.
Q: Why did the fund perform so well?
A: The overall investment environment for stocks was very favorable
throughout fiscal 1995. A combination of relatively low inflation,
declining interest rates and strong growth in corporate earnings
produced excellent stock market performance. In general, however, larger
company stocks tended to outperform smaller companies, as evidenced by
the 26.39% increase in the S&P 500 Index. The fact that the performance
of the U.S. Micro-Cap Fund outpaced even this figure indicates that
superior stock selection was at the heart of the Fund's success.
Q: How does the Fund's performance compare with that of other micro-cap funds?
A: The Fund's strategy of searching out successful micro-cap companies that
have the potential to develop into tomorrow's small cap, medium cap and,
in some cases, large cap companies proved extremely successful during
the fiscal year. Reliance on this strategy allowed the Fund to
outperform most other micro-cap funds.
Q: What strategies worked well for the Fund?
A: Investments in early-stage emerging growth companies had a dramatic
impact on the Fund's overall success. This was especially true of
technology stocks, which led the market throughout most of the year.
Verity Inc., Garden Ridge Corp., Veritas Software, Delta and Pine Land,
and PRI Automation provided the most substantial gains for the Fund.
Equally important to the Fund's overall success was our ability to
minimize losses. Over the course of the year, gains were roughly three times
greater than losses.
4. FREMONT U.S. MICRO-CAP FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, June 30, 1994.
<TABLE>
<CAPTION>
Fremont U.S.
Micro-Cap Fund Russell 2000 Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
30-Jun-94 $10,000 $10,000
31-Jul-94 2.20% $10,220 1.64% $10,164
31-Aug-94 0.98% $10,320 5.57% $10,730
30-Sep-94 1.45% $10,470 -0.34% $10,694
31-Oct-94 -1.05% $10,360 -0.40% $10,651
30-Nov-94 -3.48% $10,000 -4.04% $10,221
31-Dec-94 1.50% $10,150 2.68% $10,494
31-Jan-95 1.97% $10,350 -1.26% $10,362
28-Feb-95 3.10% $10,671 4.16% $10,793
31-Mar-95 4.23% $11,122 1.71% $10,978
30-Apr-95 2.43% $11,392 2.22% $11,222
31-May-95 4.57% $11,913 1.72% $11,415
30-Jun-95 4.88% $12,495 5.19% $12,007
31-Jul-95 6.82% $13,346 5.76% $12,699
31-Aug-95 6.31% $14,188 2.07% $12,961
30-Sep-95 2.54% $14,549 1.79% $13,193
31-Oct-95 -1.24% $14,368 -4.48% $12,602
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 38.68%
Since Inception (6/30/94) 31.16%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Russell 2000 Index.
<PAGE>
Questions & ANSWERS
Robert E. Kern, Portfolio Manager
Morgan Grenfell Capital Management, Inc.
Fremont U.S. Micro-Cap Fund (cont'd.)
Q: What aspects were less successful?
A: While successful stock selections far outweighed unsuccessful ones,
several disappointing investments prevented the Fund from reaching even
higher levels of performance. The largest loss resulted from an
investment in Vmark Software which experienced problems integrating an
acquisition.
Q: What is your current outlook for U.S. micro-cap stocks?
A: Micro-cap stocks are becoming more widely recognized as a separate asset
class. During the past year, more investment advisers and institutional
investors have recognized the benefits of micro-cap investing -- the
potential of higher long-term rates of return and better diversification
- -- as well as the importance of specialized micro-cap investment
management. The result has been an increase in cash flows into the
micro-cap sector of the market.
We expect the trend toward micro-cap investing to accelerate. With
roughly 4,000 publicly-traded companies having market capitalizations
between $10 million and $225 million, there is a huge opportunity to
find successful micro-cap companies before they become widely recognized
by other investors.
Stock selection is the "key to success" in micro-cap investing, and we
believe that our fundamental approach to investment research --
financial analysis combined with company visits and the discussion of
overall strategies with top management -- provides the Fund with the
opportunity for continued exceptional performance.
As we enter fiscal 1996, we are optimistic that well-selected micro-cap
companies will provide excellent returns to investors in the Fremont U.S.
Micro-Cap Fund.
Sincerely,
Robert E. Kern
Portfolio Manager
ABOUT THE SUB-ADVISOR:
Morgan Grenfell Capital Management, Inc. manages over $500 million in
small- and micro-cap stocks.
<PAGE>
Questions & ANSWERS
Andrew L. Pang, Fremont Investment Advisors, Inc.
Eugene C. Sit, Sit Investment Associates, Inc.
Fremont Growth Fund
Q: How did the Fremont Growth Fund perform for the fiscal year ended
October 31, 1995?
A: The Fremont Growth Fund produced a total return of 28.12% for the fiscal
year ended October 31, 1995. This compares favorably both with the 26.39%
return posted by the S&P 500 Index and the 18.32% return of the Russell 2000
Index.
The Fund also outpaced other growth funds. The average return for the
funds in the Lipper Growth category was 22.14% -- approximately 6% less than
that of the Fremont Growth Fund.
Q: What worked well during this period?
A: Larger companies significantly outperformed smaller companies for the
Fund, during the twelve-month period. Two of the Fund's most heavily
weighted industry groups, technology and health care, performed very
well. Among the top performers were Micron Technology (253%), Cisco
Systems (157%) and Xilinx (137%).
Q: What strategies were less successful?
A: The retail sector was weak throughout the year. Even with only 4% of the
Fund's assets invested in the retail sector, poor performance by such
well-known companies as Toys R Us, Home Depot and Wal-Mart had a negative
impact on overall performance.
Q: What is the Fund's current strategy?
A: Throughout the past year, we slowly moved the Fund toward a more
growth-oriented stance. The fund was fully invested with cash reserves
of only 4% on October 31, 1995. We continue to emphasize technology
stocks (23% of the Fund's portfolio) and health care stocks (16%) based
upon our projections of continued strong earnings growth in these
sectors.
Q: What is your current outlook for the Fund?
A: The Federal Reserve appears to have pulled off the "soft landing" it was
striving for, creating an outstanding environment for stock market
investing. As long as the economy continues to grow at a modest pace and
inflation remains under control, the Fremont Growth Fund should continue
to perform well.
Sincerely,
Andrew L. Pang
Eugene C. Sit
Portfolio Managers
5. FREMONT GROWTH FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, August 14, 1992.
<TABLE>
<CAPTION>
Fremont Growth Fund S&P 500 Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
14-Aug-92 $10,000 $10,000
31-Aug-92 -1.01% $9,899 -1.27% $9,873
30- Sep-92 1.93% $10,091 1.15% $9,987
31-Jan-00 1.08% $10,200 0.36% $10,023
01-Mar-00 4.46% $10,655 3.37% $10,361
01-Apr-00 1.57% $10,822 1.30% $10,495
02-May-00 1.22% $10,954 0.73% $10,572
30-May-00 -1.02% $10,843 1.36% $10,716
30-Jun-00 1.50% $11,005 2.15% $10,947
30-Apr-93 -3.60% $10,609 -2.45% $10,679
31-May-93 2.40% $10,863 2.67% $10,964
30-Jun-93 0.75% $10,945 0.33% $11,000
31-Jul-93 -0.09% $10,935 -0.49% $10,946
31-Aug-93 3.36% $11,302 3.78% $11,359
30-Sep-93 0.99% $11,414 -0.74% $11,276
31-Oct-93 0.80% $11,506 2.05% $11,507
30-Nov-93 -2.04% $11,270 -0.90% $11,404
31-Dec-93 2.18% $11,516 1.23% $11,544
31-Jan-94 3.40% $11,907 3.36% $11,932
28-Feb-94 -3.11% $11,536 -2.71% $11,608
31-Mar-94 -5.27% $10,929 -4.34% $11,104
30-Apr-94 1.13% $11,052 1.29% $11,248
31-May-94 0.37% $11,093 1.63% $11,432
30-Jun-94 -3.35% $10,722 -2.47% $11,149
31-Jul-94 4.04% $11,155 3.31% $11,518
31-Aug-94 5.10% $11,724 4.07% $11,986
30-Sep-94 -2.12% $11,476 -2.42% $11,696
31-Oct-94 1.98% $11,704 2.30% $11,965
30-Nov-94 -3.15% $11,335 -3.67% $11,526
31-Dec-94 2.02% $11,563 1.47% $11,695
31-Jan-95 0.40% $11,609 2.59% $11,998
28-Feb-95 3.25% $11,897 3.87% $12,463
31-Mar-95 2.67% $12,307 2.96% $12,832
30-Apr-95 2.14% $12,570 2.95% $13,210
31-May-95 3.28% $12,982 3.96% $13,733
30-Jun-95 4.93% $13,622 2.35% $14,056
31-Jul-95 4.45% $14,228 3.33% $14,524
31-Aug-95 1.37% $14,423 0.23% $14,557
30-Sep-95 3.89% $14,983 4.17% $15,164
31-Oct-95 0.08% $14,995 -0.28% $15,122
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 28.12%
2 Years 14.17%
3 Years 13.72%
Since Inception (08/14/92) 13.44%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
S&P 500 Index.
<PAGE>
Questions & ANSWERS
Bill Gross, Portfolio Manager
Pacific Investment Management Company
Fremont Bond Fund
Q: How did the Fremont Bond Fund perform for the fiscal year ended
October 31, 1995?
A: The Fremont Bond Fund returned 16.49% for the fiscal year, outpacing the
15.65% performance of the Lehman Brothers Aggregate Bond Index during the same
period.
Q: What strategies worked well for the Fund during this period?
A: Federal Reserve policy played a major role in the bond market and our
portfolio strategy. Early in the year, the Fed raised rates to slow the
rapid economic growth to a more modest pace. The Fed then cut rates in
July. While this environment created turbulence in bond prices, it also
presented opportunities that the Fund was able to capitalize upon.
For much of the year, we maintained relatively long average maturities
within the Fund's portfolio, allowing the Fund to capture more capital
appreciation, which in turn boosted returns. In addition, the Fund
benefitted as we adjusted exposures to emphasize the most attractive
portion of the yield curve. Our allocation to currency-hedged German
bonds was another plus, as these securities outperformed U.S. bonds.
Q: What strategies were less successful?
A: Over most of the year, we de-emphasized corporate bonds, feeling that
their added risk did not justify the additional yields they offered
relative to Treas-ury securities. As it turned out, corporate bonds were
the top performers in the U.S. market, with lower-quality issues posting
the strongest gains.
Q: What is your current strategy for the Fund?
A: We expect interest rates to continue downward over the next several
quarters and will maintain a higher average maturity to take advantage
of capital gains. We will also continue to limit emphasis on
intermediate and long corporate bonds. Within the mortgage sector, we
expect to selectively reduce prepayment exposure. Finally, we will
continue to invest in international bonds, focusing on the core European
markets.
Sincerely,
Bill Gross
Portfolio Manager
ABOUT THE SUB-ADVISOR:
Pacific Investment Management Co. (PIMCO) manages over $50 billion for
institutions and is the sub-advisor for the Bond Fund.
6. FREMONT BOND FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, April 30, 1993.
<TABLE>
<CAPTION>
Lehman Bros.
Fremont Bond Fund Aggregate Bond Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
30-Apr-93 $10,000 $10,000
31-May-93 -0.37% $9,963 0.13% $10,013
30-Jun-93 2.20% $10,182 1.81% $10,194
31-Jul-93 0.16% $10,198 0.57% $10,252
31-Aug-93 2.12% $10,415 1.75% $10,432
30-Sep-93 0.63% $10,481 0.27% $10,460
31-Oct-93 0.32% $10,515 0.37% $10,499
30-Nov-93 -1.41% $10,366 -0.85% $10,410
31-Dec-93 0.68% $10,437 0.54% $10,466
31-Jan-94 1.42% $10,585 1.35% $10,607
28-Feb-94 -1.86% $10,388 -1.74% $10,423
31-Mar-94 -2.32% $10,147 -2.47% $10,166
30-Apr-94 -0.97% $10,049 -0.80% $10,085
31-May-94 -0.89% $9,959 -0.01% $10,083
30-Jun-94 0.66% $10,025 -0.22% $10,061
31-Jul-94 1.79% $10,205 1.99% $10,261
31-Aug-94 0.25% $10,230 0.12% $10,274
30-Sep-94 -1.21% $10,106 -1.47% $10,123
31-Oct-94 -0.55% $10,050 -0.09% $10,114
30-Nov-94 -0.30% $10,020 -0.22% $10,091
31-Dec-94 -0.02% $10,018 0.69% $10,161
31-Jan-95 2.23% $10,242 1.98% $10,362
28-Feb-95 2.74% $10,522 2.38% $10,609
31-Mar-95 0.94% $10,621 0.61% $10,674
30-Apr-95! 1.90% $10,823 1.40% $10,823
31-May-95 3.74% $11,228 3.87% $11,242
30-Jun-95 0.63% $11,299 0.73% $11,324
31-Jul-95! -0.32% $11,263 -0.22% $11,299
31-Aug-95 1.19% $11,397 1.21% $11,436
30-Sep-95 1.16% $11,530 0.97% $11,547
31-Oct-95 1.54% $11,707 1.30% $11,697
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 16.49%
2 Years 5.52%
Since Inception (4/30/93) 6.50%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Lehman Bros. Aggregate Bond Index.
<PAGE>
Questions & ANSWERS
Norman Gee, Portfolio Manager
Fremont Investment Advisors, Inc.
Fremont Money Market Fund
Q: How did the Fremont Money Market Fund perform for the fiscal year ended
October 31, 1995?
A: The Money Market Fund produced a total return of 5.84% for the twelve
months ending October 31, 1995, ranking the Fund among the top 5% of taxable
money market funds for the entire year.
During the fiscal year, the Donoghue First Tier Taxable Average posted a
return of 5.24%.
Q: What worked well for the Fund during this period?
A: We maintained a conservative strategy over the first few months of the
fiscal year, waiting for a clearer picture of which direction the
Federal Reserve would take in adjusting interest rates. Throughout this
period, we kept the Fund's average maturity close to the average of the
money market funds tracked in the Donoghue First Tier Money Market Fund
universe. After rates were lowered in February, we lengthened the
average maturity.
Q: What strategies were less successful?
A: The strength of the U.S. economy was extremely difficult to predict
during fiscal 1995. In hindsight, the Fund would have done better if we had
begun lengthening the average maturity a few weeks earlier.
Q: What is your current strategy?
A: We believe the Federal Reserve has reached its goal of slowing economic
growth to a sustainable rate. As a result, we expect short-term interest
rates to continue downward.
Because the Fund invests in securities with maturities of one year or
less, our current strategy is to keep the Fund's average maturity considerably
longer than that of the Donoghue universe average. This will allow us to
maximize the yields of the Fund.
Sincerely,
Norman Gee
Portfolio Manager
7. FREMONT MONEY MARKET FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, November 18, 1988.
<TABLE>
<CAPTION>
U.S. 91-Day Donoghue First Tier
Fremont Money Market Fund T-Bill Index Taxable Average
Qtrly Qtrly Qtrly
Return Balance Return Balance Return Balance
<S> <C> <C> <C> <C> <C> <C>
18-Nov-88 $10,000 $10,000 $10,000
30-Nov-88 0.27% $10,027 0.26% $10,026 0.25% $10,025
31-Dec-88 0.68% $10,096 0.67% $10,093 0.65% $10,090
31-Jan-89 0.74% $10,170 0.69% $10,163 0.68% $10,159
28-Feb-89 0.65% $10,237 0.72% $10,236 0.68% $10,228
31-Mar-89 0.77% $10,315 0.73% $10,311 0.71% $10,300
30-Apr-89 0.72% $10,389 0.70% $10,383 0.74% $10,377
31-May-89 0.83% $10,475 0.71% $10,457 0.73% $10,452
30-Jun-89 0.74% $10,552 0.66% $10,526 0.72% $10,528
31-Jul-89 0.73% $10,630 0.63% $10,592 0.69% $10,600
31-Aug-89 0.71% $10,705 0.65% $10,661 0.66% $10,670
30-Sep-89 0.65% $10,775 0.66% $10,731 0.66% $10,741
31-Oct-89 0.72% $10,852 0.76% $10,813 0.66% $10,812
30-Nov-89 0.66% $10,924 0.69% $10,887 0.64% $10,881
31-Dec-89 0.63% $10,993 0.62% $10,955 0.63% $10,949
31-Jan-90 0.67% $11,067 0.66% $11,027 0.62% $11,017
28-Feb-90 0.59% $11,132 0.60% $11,093 0.61% $11,084
31-Mar-90 0.63% $11,202 0.67% $11,168 0.61% $11,152
30-Apr-90 0.66% $11,276 0.65% $11,240 0.62% $11,221
31-May-90 0.66% $11,350 0.68% $11,317 0.62% $11,291
30-Jun-90 0.62% $11,420 0.65% $11,390 0.61% $11,360
31-Jul-90 0.68% $11,498 0.66% $11,465 0.61% $11,429
31-Aug-90 0.65% $11,573 0.65% $11,540 0.60% $11,498
30-Sep-90 0.58% $11,640 0.61% $11,610 0.60% $11,567
31-Oct-90 0.68% $11,719 0.62% $11,682 0.60% $11,636
30-Nov-90 0.62% $11,792 0.59% $11,751 0.59% $11,704
31-Dec-90 0.64% $11,867 0.59% $11,821 0.59% $11,773
31-Jan-91 0.62% $11,941 0.57% $11,888 0.56% $11,839
28-Feb-91 0.53% $12,005 0.49% $11,946 0.52% $11,901
31-Mar-91 0.50% $12,065 0.52% $12,008 0.49% $11,959
30-Apr-91 0.57% $12,134 0.48% $12,066 0.47% $12,015
31-May-91 0.50% $12,195 0.48% $12,124 0.44% $12,068
30-Jun-91 0.44% $12,249 0.46% $12,180 0.44% $12,121
31-Jul-91 0.52% $12,312 0.48% $12,238 0.44% $12,174
31-Aug-91 0.46% $12,369 0.47% $12,296 0.43% $12,227
30-Sep-91 0.47% $12,427 0.44% $12,350 0.42% $12,278
31-Oct-91 0.44% $12,482 0.44% $12,404 0.41% $12,328
30-Nov-91 0.39% $12,531 0.40% $12,454 0.39% $12,375
31-Dec-91 0.42% $12,584 0.37% $12,500 0.38% $12,422
31-Jan-92 0.37% $12,630 0.35% $12,543 0.34% $12,464
29-Feb-92 0.30% $12,668 0.31% $12,582 0.31% $12,502
31-Mar-92 0.31% $12,708 0.34% $12,625 0.30% $12,540
30-Apr-92 0.29% $12,744 0.32% $12,666 0.29% $12,576
31-May-92 0.27% $12,779 0.33% $12,707 0.28% $12,612
30-Jun-92 0.30% $12,817 0.30% $12,745 0.28% $12,647
31-Jul-92 0.27% $12,852 0.30% $12,784 0.26% $12,680
31-Aug-92 0.26% $12,885 0.28% $12,819 0.25% $12,711
30-Sep-92 0.24% $12,917 0.25% $12,852 0.24% $12,741
31-Oct-92 0.24% $12,947 0.25% $12,884 0.22% $12,769
30-Nov-92 0.24% $12,978 0.25% $12,916 0.22% $12,798
31-Dec-92 0.23% $13,008 0.27% $12,951 0.23% $12,828
31-Jan-93 0.21% $13,036 0.27% $12,986 0.23% $12,857
28-Feb-93 0.20% $13,062 0.23% $13,016 0.22% $12,885
31-Mar-93 0.24% $13,093 0.25% $13,048 0.21% $12,912
30-Apr-93 0.22% $13,122 0.24% $13,080 0.21% $12,939
31-May-93 0.20% $13,148 0.25% $13,113 0.21% $12,967
30-Jun-93 0.23% $13,178 0.25% $13,147 0.21% $12,994
31-Jul-93 0.22% $13,208 0.26% $13,181 0.21% $13,021
31-Aug-93 0.21% $13,235 0.26% $13,215 0.21% $13,049
30-Sep-93 0.21% $13,263 0.25% $13,248 0.21% $13,076
31-Oct-93 0.22% $13,291 0.26% $13,282 0.21% $13,104
30-Nov-93 0.21% $13,320 0.25% $13,315 0.21% $13,132
31-Dec-93 0.24% $13,351 0.26% $13,351 0.22% $13,161
31-Jan-94 0.21% $13,379 0.26% $13,385 0.22% $13,189
28-Feb-94 0.20% $13,406 0.24% $13,418 0.22% $13,218
31-Mar-94 0.23% $13,437 0.28% $13,455 0.23% $13,248
30-Apr-94 0.25% $13,470 0.30% $13,496 0.25% $13,281
31-May-94 0.31% $13,512 0.33% $13,540 0.27% $13,317
30-Jun-94 0.32% $13,555 0.34% $13,586 0.29% $13,356
31-Jul-94 0.35% $13,603 0.36% $13,636 0.31% $13,397
31-Aug-94 0.36% $13,651 0.37% $13,687 0.32% $13,439
30-Sep-94 0.36% $13,701 0.37% $13,737 0.34% $13,485
31-Oct-94 0.40% $13,755 0.41% $13,794 0.35% $13,532
30-Nov-94 0.41% $13,812 0.42% $13,852 0.37% $13,582
31-Dec-94 0.50% $13,880 0.46% $13,915 0.40% $13,636
31-Jan-95 0.45% $13,943 0.46% $13,979 0.42% $13,694
28-Feb-95 0.45% $14,006 0.44% $14,041 0.44% $13,754
31-Mar-95 0.54% $14,081 0.49% $14,110 0.45% $13,816
30-Apr-95 0.46% $14,145 0.48% $14,177 0.45% $13,877
31-May-95 0.50% $14,216 0.49% $14,247 0.44% $13,939
30-Jun-95 0.51% $14,289 0.47% $14,314 0.44% $14,000
31-Jul-95 0.46% $14,355 0.49% $14,384 0.43% $14,060
31-Aug-95 0.48% $14,423 0.47% $14,452 0.43% $14,120
30-Sep-95 0.47% $14,492 0.45% $14,517 0.42% $14,180
31-Oct-95 0.46% $14,558 0.46% $14,583 0.42% $14,239
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 5.84%
2 Years 4.66%
3 Years 3.99%
4 Years 3.92%
5 Years 4.43%
Since Inception (11/18/88) 5.55%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
U.S. 91-Day T-Bill Index. An investment in the Fund is neither insured nor
guaranteed by the U.S. Government. The Fund seeks to maintain a stable $1.00
share price although there is no assurance that it will be able to do so.
<PAGE>
Questions & ANSWERS
William M. Feeney, Portfolio Manager
Fremont Investment Advisors, Inc.
Q: How did the California Intermediate Tax-Free Fund perform for the fiscal
year ended October 31, 1995?
A: The Fremont California Intermediate Tax-Free Fund returned 12.77% for the
one-year period ended October 31, 1995, performing significantly better than
the Lehman Brothers 5-Year State Government Obligation (G.O.) Index, which
rose 10.37% during the fiscal year.
Q: Why did the fund perform so well?
A: The Fund maintained an average maturity in excess of eight years
throughout the 12-month period. This strategy was designed to take
advantage of two important market predictions. First, we forecasted that
a decrease in interest rates was likely to take place in 1995, which
typically boosts the performance of a portfolio with a longer average
maturity. Second, we anticipated that the California municipal bond
market would be under-supplied, keeping demand and prices at a high
level. In both cases, our predictions were correct.
Q: What impact did economic conditions have upon the Fund's performance?
A: The Fund benefited from the end of the California recession and the
compromise struck in the Orange County bankruptcy. As the state
recovered from the longest recession in its history, investors regained
confidence in California municipal bonds. While the Orange County
bankruptcy had no direct impact on the Fund, its ultimate outcome had a
settling effect on the California municipal bond market.
Q: What is your current strategy for the Fund?
A: Based on current projections, we will continue to maintain an average
maturity of eight years for the remainder of 1995. As the California
economy gains momentum, we expect to move into more general obligation
bonds, and perhaps to a limited number of lower-rated bonds. With a
continued scarcity of new bonds and a strong economy leading the way,
the outlook for the California municipal bond market is very good.
Sincerely,
William M. Feeney
Portfolio Manager
8. FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND - Growth of $10,000 * Assumes
initial investment of $10,000 on inception date, November 16, 1990.
<TABLE>
<CAPTION>
Fremont California Lehman Bros.
Intermediate Tax-Free Fund 5 -Year State G.O. Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
16-Nov-90 $10,000 $10,000
30-Nov-90 0.64% $10,064 0.67% $10,067
31-Dec-90 0.40% $10,105 0.35% $10,102
31-Jan-91 1.67% $10,273 1.46% $10,250
28-Feb-91 0.88% $10,364 0.88% $10,340
31-Mar-91 0.06% $10,370 -0.26% $10,313
30-Apr-91 0.93% $10,467 1.39% $10,456
31-May-91 0.60% $10,530 0.49% $10,508
30-Jun-91 -0.33% $10,496 -0.14% $10,493
31-Jul-91 1.02% $10,603 1.00% $10,598
31-Aug-91 1.26% $10,737 1.26% $10,731
30-Sep-91 1.34% $10,881 1.20% $10,860
31-Oct-91 0.50% $10,936 0.78% $10,945
30-Nov-91 0.16% $10,953 0.31% $10,979
31-Dec-91 2.14% $11,187 2.25% $11,226
31-Jan-92 0.27% $11,218 0.18% $11,246
29-Feb-92 0.04% $11,222 0.06% $11,253
31-Mar-92 -0.30% $11,188 -0.37% $11,211
30-Apr-92 0.73% $11,270 0.85% $11,306
31-May-92 0.91% $11,373 0.94% $11,413
30-Jun-92 1.43% $11,535 1.40% $11,572
31-Jul-92 2.91% $11,871 2.62% $11,876
31-Aug-92 -1.04% $11,747 -0.75% $11,787
30-Sep-92 0.71% $11,831 0.64% $11,862
31-Oct-92 -0.75% $11,741 -0.34% $11,821
30-Nov-92 1.40% $11,906 1.19% $11,962
31-Dec-92 0.82% $12,004 0.73% $12,049
31-Jan-93 1.26% $12,155 1.09% $12,180
28-Feb-93 2.99% $12,518 2.58% $12,495
31-Mar-93 -1.55% $12,325 -1.10% $12,357
30-Apr-93 0.89% $12,434 0.60% $12,432
31-May-93 0.21% $12,460 0.35% $12,475
30-Jun-93 1.66% $12,666 1.33% $12,641
31-Jul-93 -0.30% $12,629 0.01% $12,642
31-Aug-93 2.06% $12,889 1.38% $12,817
30-Sep-93 1.40% $13,069 0.76% $12,915
31-Oct-93 0.06% $13,076 0.12% $12,930
30-Nov-93 -0.86% $12,964 -0.24% $12,899
31-Dec-93 1.81% $13,198 1.39% $13,078
31-Jan-94 1.18% $13,354 0.95% $13,202
28-Feb-94 -2.60% $13,007 -1.97% $12,943
31-Mar-94 -2.63% $12,664 -2.24% $12,653
30-Apr-94 0.41% $12,717 1.00% $12,779
31-May-94 0.62% $12,795 0.58% $12,854
30-Jun-94 -0.63% $12,714 -0.26% $12,820
31-Jul-94 1.58% $12,915 1.04% $12,954
31-Aug-94 0.23% $12,945 0.48% $13,016
30-Sep-94 -1.39% $12,765 -0.74% $12,920
31-Oct-94 -1.60% $12,561 -0.56% $12,847
30-Nov-94 -1.65% $12,354 -0.76% $12,750
31-Dec-94 1.60% $12,552 0.91% $12,866
31-Jan-95 2.22% $12,830 1.05% $13,001
28-Feb-95 2.94% $13,208 1.49% $13,195
31-Mar-95 1.12% $13,356 0.97% $13,323
30-Apr-95! 0.20% $13,382 0.25% $13,356
31-May-95 2.71% $13,745 2.17% $13,646
30-Jun-95 -0.68% $13,652 0.14% $13,665
31-Jul-95 0.87% $13,771 1.40% $13,856
31-Aug-95 1.08% $13,920 0.88% $13,979
30-Sep-95 0.42% $13,978 0.32% $14,023
31-Odt-95 1.34% $14,165 0.41% $14,081
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 12.77%
2 Years 4.08%
3 Years 6.46%
4 Years 6.68%
Since Inception (11/16/90) 7.28%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Lehman Bros. 5-Year State G.O. Index.
<PAGE>
To the Shareholders and Board of Directors of the Fremont Mutual Funds:
We have audited the accompanying statements of assets and liabilities of
the various funds comprising the Fremont Mutual Funds (the Funds) including
each Fund's statement of investments in securities and net assets as of
October 31, 1995, and the related statements of operations for the year then
ended and the statements of changes in net assets and the financial highlights
for each of the periods indicated thereon. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1995 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the various funds comprising the Fremont Mutual Funds as of
October 31, 1995, the results of their operations for the year then ended, and
the changes in their net assets and their financial highlights for each of the
periods indicated thereon in conformity with generally accepted accounting
principles.
/s/ Coopers Lybrand L.L.P.
San Francisco, California December 1, 1995
Global Fund
<TABLE>
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS - 70.0%
BUSINESS EQUIPMENT & SERVICES - 2.7%
6,000 Legrand FR $1,004,955
500,000 Wharf Holdings HK 1,687,944
143,400 Kyowa Exeo Corp. JP 1,249,581
10,000 Securitas AB "B" Free SW 387,486
20,000 Reuters Holdings PLC, ADR UK 1,110,000
13,100 Automatic Data Processing, Inc. US 936,650
20,300 Dun & Bradstreet Corp. US 1,212,925
* 12,900 Federal Express Corp. US 1,059,413
36,531 First Data Corp. US 2,415,658
* 19,200 Office Depot, Inc. US 549,600
52,200 WMX Technologies, Inc. US 1,468,125
-----------
13,082,337
-----------
CAPITAL GOODS - 4.1%
8,044 Lafarge Coppee FR 533,818
1,100 Heidelberger Zement AG GM 476,512
3,000 Mannesmann AG GM 984,270
2,000 Siemens AG GM 1,043,923
1,021,000 PT Dynaplast (Foreign Registered) ID 899,163
8,400 Kyocera Corp., ADR JP 1,390,200
206,000 Mitsubishi Heavy Industries JP 1,591,364
60,000 Cemex SA (Class B), ADR MX 385,710
954,000 IJM Corp. Berhad MY 1,569,969
160,000 Steel & Tube Holdings Ltd. NZ 760,262
30,000 Cementos Lima, ADR PE 417,120
19 Zardoya-Otis SP 1,856
40,000 Autoliv AB SW 2,297,776
14,400 Caterpillar, Inc. US 808,200
24,300 Emerson Electric Co. US 1,731,375
79,900 General Electric Co. US 5,053,675
-----------
19,945,193
-----------
CONSUMER DURABLES - 1.3%
3,160 Daimler-Benz AG GM 1,504,655
28,600 Ek Chor China Motorcycle Co. Ltd. HK 400,400
31,000 Fukoku Co. Ltd. JP 549,371
33,000 Murata Manufacturing Co. Ltd. JP 1,159,935
33,000 Sony Corp., ADR JP 1,509,750
112,000 Suzuki Motor Co. Ltd. JP 1,129,485
-----------
6,253,596
-----------
CONSUMER NON-DURABLES - 9.5%
12,000 BIC FR 1,140,096
6,000 Groupe Danone FR 959,499
10,760 LVMH FR 2,143,716
440 LVMH, ADR FR 17,545
2,880,000 Pacific Andes International
Holdings Ltd. HK 681,696
928,280 PT Mayora Indah (Foreign Registered)ID 664,225
20,000 Coca-Cola Femsa SA de CV ADR MX 360,000
35,000 PanAmerican Beverages, Inc.
(Class A) MX 958,125
10,600 Unilever NV (New York Shares) NL 1,388,600
250,000 Cervecer Backus & Johnston PE 453,944
268,450 San Miguel Corp. (Class B) PH 887,609
90,000 Fraser & Neave Ltd. SG 1,063,318
600 Nestle SA (Registered Shares) SZ 628,521
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER NON-DURABLES (CONTINUED)
100,000 Srithai Superware Co. Ltd.
(Foreign Registered) TH $675,541
*137,619 President Enterprises, GDR TW 1,513,812
23,700 Anheuser Busch Cos., Inc. US 1,564,200
51,238 Archer Daniels Midland Co. US 826,213
20,800 Campbell Soup Co. US 1,089,400
73,700 Coca-Cola Co. US 5,297,188
14,700 Colgate Palmolive Co. US 1,017,975
11,700 CPC International US 776,588
* 20,900 Crown Cork & Seal Co., Inc. US 728,888
28,700 Eastman Kodak Co. US 1,797,338
36,900 Gillette Co. US 1,785,037
21,200 Heinz (H.J.) & Co. US 985,800
18,700 Kellogg Co. US 1,351,075
70,600 Pepsico, Inc. US 3,724,150
63,100 Philip Morris Cos., Inc. US 5,331,950
51,800 Procter & Gamble Co. US 4,195,800
33,900 Sara Lee Corp. US 995,812
35,600 Tyson Foods, Inc. (Class A) US 849,950
-----------
45,853,611
-----------
CONSUMER SERVICES - 5.5%
22,000 News Corp. Ltd., ADR AU 437,250
185,400 Village Roadshow Ltd. (Preferred) AU 530,845
14,000 Societe Television Francaise 1 FR 1,447,643
220,000 PT Modern Photo Film Co.
(Foreign Registered) ID 1,336,856
3,300 H.I.S. Co. Ltd. JP 127,625
35,000 Secom Co. JP 2,282,273
20,000 Sega Enterprises Ltd. JP 1,061,340
10,000 Sega Enterprises Ltd., ADR JP 132,524
145,000 Genting Berhad MY 1,250,197
140,600 Elsevier NV NL 1,815,916
7,813 Wolters Kluwer NV NL 710,318
27,840 Wolters Kluwer NV, ADR NL 2,530,046
280,000 Helicopter Line Ltd. (The) NZ 813,058
110,000 Pearson PLC UK 1,095,278
20,400 Capital Cities/ABC, Inc. US 2,419,950
10,580 CBS, Inc. US 854,335
* 30,300 CUC International, Inc. US 1,049,138
40,700 Disney (Walt) Co. US 2,345,338
23,600 Mattel, Inc. US 678,500
9,500 Tribune Co. US 599,688
* 27,500 Viacom, Inc. (Class B) US 1,375,000
5,000 Washington Post Co. (Class B) US 1,450,000
-----------
26,343,118
-----------
ENERGY - 1.4%
50,000 YPF Sociedad, ADR AR 856,250
* 15 Petrofina SA (Warrants 06/03/97) BE 198
6,787 Societe Nationale Elf Aquintaine SA FR 462,769
17,300 Amoco Corp. US 1,105,037
12,100 Atlantic Richfield Co. US 1,291,675
16,100 Chevron Corp. US 752,675
15,600 Exxon Corp. US 1,191,450
11,400 Mobil Corp. US 1,148,550
-----------
6,808,604
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES - 8.2%
60,000 Lend Lease Corp. Ltd. AU $834,299
200,000 Westpac Banking Corp. Ltd. AU 820,897
7,566 Cetelem FR 1,208,379
8,000 Societe Generale Paris FR 917,318
23,472 Union des Assurances de Paris FR 610,374
4,000 Union des Assurances Federales FR 425,898
228 Allianz AG Holdings GM 419,035
2,200 Commerzbank AG GM 508,227
20,000 Deutsche Bank AG GM 901,893
760,000 Amoy Properties Ltd. HK 732,348
380,000 Cheung Kong (Holdings) Ltd. HK 2,142,977
1,398,000 JCG Holdings Ltd. HK 1,021,652
*495,000 Tian An China Investments Ltd.
(Warrants 01/25/96) HK 832
968,500 PT Lippo Bank (Foreign Registered) ID 1,961,735
150,000 Arab Malaysian Finance Berhad
(Foreign Registered) MY 525,591
200,000 Commerce Asset Holding Berhad MY 992,126
32,467 Aegon NV, ADR NL 1,237,804
289,000 City Developments SG 1,788,999
91,250 Development Bank of Singapore
(Foreign Registered) SG 1,045,808
95,833 Oversea-Chinese Banking Corp. Ltd.
(Foreign Registered) SG 1,125,453
129,899 United Overseas Bank Ltd.
(Foreign Registered) SG 1,139,547
808 Union Bank of Switzerland SZ 874,859
220,900 Bangkok Bank Ltd.
(Foreign Registered) TH 2,282,297
415,000 Bank of Ayudhya Ltd.
(Foreign Registered) TH 2,391,218
600,000 Krung Thai Bank Co. Ltd.
(Foreign Registered) TH 2,372,343
500,000 Siam City Bank Ltd.
(Foreign Registered) TH 531,492
160,000 Siam Commercial Bank
(Foreign Registered) TH 1,869,263
244,280 Thai Farmers Bank Co. Ltd.
(Foreign Registered) TH 2,019,084
155,801 HSBC Holdings PLC
(Hong Kong Shares) UK 2,267,098
44,850 American International Group, Inc. US 3,784,219
6,100 General Re Corp. US 883,737
-----------
39,636,802
-----------
HEALTH CARE - 8.0%
3,000 Gehe AG GM 1,472,144
* 749 Gehe AG, New GM 355,843
* 26,000 Merck KGaA GM 1,085,680
400,250 PT Dankos Laboratories
(Foreign Registered) ID 1,127,961
20,000 Towa Pharmaceutical Co. Ltd. JP 939,932
28,000 Kimberly-Clark de Mexico SA MX 368,181
8,000 Astra AB "A" Free SW 294,308
74,000 Astra AB "B" Free SW 2,677,723
360 Roche Holding AG SZ 2,614,437
61,000 Abbott Laboratories US 2,424,750
23,600 American Home Products Corp. US 2,091,550
38,400 Bristol-Myers Squibb Co. US 2,928,000
13,300 Cardinal Health, Inc. US 683,288
38,000 Columbia HCA Healthcare Corp. US 1,866,750
* 17,000 Forest Laboratories, Inc. (Class A) US 703,375
50,100 Johnson & Johnson US 4,083,150
22,100 Lilly (Eli) & Co. US 2,135,413
21,800 Medtronic, Inc. US 1,258,950
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE (CONTINUED)
89,800 Merck & Co. US $5,163,500
46,200 Pfizer, Inc. US 2,650,725
29,200 Schering Plough Corp. US 1,565,850
-----------
38,491,510
-----------
MISCELLANEOUS - 1.8%
*147,000 India Fund (Class A)
(United Kingdom Shares) IN 693,449
*100,900 BZW Taiwan Index Fund Ltd. TW 949,873
74,600 Inefficient Market Fund, Inc. US 783,300
299,528 Morgan Grenfell Small Cap Fund, Inc.US 3,482,013
122,000 Royce OTC Micro-Cap Trust, Inc. US 945,500
158,857 Royce Value Trust US 2,045,284
-----------
8,899,419
-----------
MULTI-INDUSTRY - 2.7%
35,000 Rhodia-Ster SA, GDR BR 458,500
24,000 Douglas Holding AG GM 864,112
4,800 Viag AG GM 1,942,975
410,000 Hutchison Whampoa HK 2,259,128
3,896,000 Yue Yuen Industrial Holdings HK 1,020,449
540,000 Renong Berhad MY 824,882
1,326,000 JG Summit Holdings - B PH 372,157
963,000 Comfort Group Ltd. SG 803,919
110,000 Cycle & Carriage Ltd. SG 980,545
10,900 ITT Corp. US 1,335,250
41,000 Minnesota Mining & ManufacturingCo. US 2,331,875
-----------
13,193,792
-----------
RAW MATERIALS - 2.3%
18,900 Broken Hill Proprietary Co.
Ltd., ADR AU 1,022,963
* 20,000 Companhia Siderurgica Tubarao, ADR BR 461,640
4,500 Compagnie de Saint-Gobain SA FR 537,184
2,000 Bayer AG GM 528,353
776,000 Asiatic Development Berhad MY 763,780
* 32,109 Hansol Paper Ltd., GDR SK 658,235
* 4,333 Hansol Paper Ltd., GDR SK 88,826
670 Sandoz AG (Registered Shares) SZ 552,632
14,200 Du Pont (E.I.) de Nemours & Co. US 885,725
61,500 Engelhard Corp. US 1,529,812
15,100 FMC Corp. US 1,081,537
11,800 Great Lakes Chemical Corp. US 792,075
7,100 Monsanto Co. US 743,725
18,900 Morton International, Inc. US 576,450
14,500 Nucor Corp. US 697,813
-----------
10,920,750
-----------
RETAIL - 4.5%
* 55,000 Makro Atacadista BR 508,915
2,100 Carrefour Supermarche FR 1,234,940
12,230 Castorama Dubois FR 1,985,829
1,500 AVA AG GM 562,440
300,000 PT Hero Supermarket
(Foreign Registered) ID 614,267
29,000 Ito-Yokado Co. Ltd. JP 1,587,213
41,000 Seven Eleven Japan JP 2,737,749
200,000 Cifra SA de CV MX 209,483
335,000 Cifra SA de CV, ADR MX 358,450
45,642 Ceteco Holdings NV NL 1,488,169
43,200 Home Depot, Inc. US 1,609,200
58,400 McDonalds Corp. US 2,394,400
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
RETAIL (CONTINUED)
* 23,300 Safeway, Inc. US $1,100,925
* 32,700 Stop & Shop Cos., Inc. US 678,525
* 23,400 Toys R Us, Inc. US 511,875
181,000 Wal Mart Stores, Inc. US 3,914,125
-----------
21,496,505
-----------
SHELTER - 2.1%
270,000 Sun Hung Kai Properties Ltd. HK 2,156,494
522,000 PT Jaya Real Property
(Foreign Registered) ID 1,488,309
45,000 Empresas ICA Sociedad Controladora
SA de CV, ADR MX 427,500
750,000 Ayala Land, Inc. PH 865,052
*3,200,000 C & P Homes, Inc. PH 2,060,746
*1,875,000 Filinvest Land, Inc. PH 504,614
17,600 International Paper Co. US 651,200
16,300 Kimberly-Clark Corp. US 1,183,787
14,200 Scott Paper Co. US 756,150
-----------
10,093,852
-----------
TECHNOLOGY - 9.2%
6,500 SAP AG (Preferred) GM 997,053
*1,020,000 Telecom Italia Mobile SPA IT 1,714,151
110,000 Canon, Inc. JP 1,884,760
18,900 Hirose Electronics JP 1,208,371
40,000 Hoya Corp. JP 1,174,916
255 Nippon Telegraph & Telephone JP 2,094,728
14,000 TDK Corp. JP 722,377
250,000 Fisher & Paykel Industries Ltd. NZ 816,688
250,000 CPT Telefonica del Peru SA PE 446,232
*545,486 Tele 2000 PE 536,110
26,000 Samsung Electronics Ltd.,
GDS (1/2 Non-Voting) SK 1,696,500
* 2,392 Samsung Electronics Ltd.,
GDS (1/2 Voting) SK 274,195
5,145 Samsung Electronics Ltd., New GDS
(1/2 Non-Voting) SK 268,569
* 821 Samsung Electronics Ltd., New
GDS (1/2 Voting) SK 94,111
47,250 Advanced Information Services
(Foreign Registered) TH 751,043
* 73,800 AirTouch Communications, Inc. US 2,103,300
23,400 Amp, Inc. US 918,450
* 15,800 Applied Materials, Inc. US 791,975
* 20,900 Cisco Systems, Inc. US 1,619,750
* 21,700 Compaq Computer Corp. US 1,209,775
18,500 Computer Associates
International, Inc. US 1,017,500
40,500 Hewlett-Packard Co. US 3,751,313
62,800 Intel Corp. US 4,388,150
11,500 International Business Machines US 1,118,375
* 25,400 Litton Industries, Inc. US 1,006,475
15,700 Micron Technology, Inc. US 1,108,812
* 44,100 Microsoft Corp. US 4,410,000
46,400 Motorola, Inc. US 3,045,000
* 34,200 Oracle Systems Corp. US 1,491,975
15,000 Texas Instruments, Inc. US 1,023,750
8,100 United Technologies Corp. US 718,875
-----------
44,403,279
-----------
TRANSPORTATION - 0.5%
32,000 Grupo Casa Autrey SP, ADR MX 408,000
125,000 Keppel Corp. SG 1,025,822
8,500 Keppel Corp.(Convertible Loan Stock)SG 13,109
* 8,500 Keppel Corp. (Warrants 06/30/97) SG 34,277
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION (CONTINUED)
11,200 CSX Corp. US $938,000
-----------
2,419,208
-----------
UTILITIES - 6.2%
10,000 Telecom de Argentina, ADR AR 383,750
8,900 Telefonica de Argentina SA, ADR AR 184,675
7,000 Compania Telecomunicacion
Chile, ADR CL 504,000
50,000 Enersis SA, ADR CL 1,256,250
4,000 RWE AG GM 1,428,825
420,480 Hong Kong & China Gas Co. HK 682,553
* 19,200 Hong Kong & China Gas Co.
(Warrants 12/31/95) HK 969
400,000 Hong Kong Telecommunications HK 698,460
37,500 Hong Kong Telecommunications , ADR HK 651,562
28,400 PT Indonesia Satellite, ADR ID 940,750
40,000 Telefonos de Mexico SA
(Class L), ADR MX 1,100,000
27,100 Telecom of New Zealand, ADR NZ 1,798,763
235,365 Manila Electric Co. (Class B) PH 1,755,510
14,900 Philippine Long Distance
Telephone Co. PH 830,642
70,000 Korea Electric Power Corp., ADR SK 1,732,500
30,300 Empresa Nacional de
Electricidad, ADR SP 1,522,575
15,457 British Telecommunications PLC, ADR UK 919,692
100,138 Northern Electric PLC UK 1,407,644
*113,200 Northern Electric PLC (Preferred) UK 177,404
91,807 Powergen PLC UK 825,477
34,000 Powergen PLC, ADR UK 1,262,250
26,000 Ameritech Corp. US 1,404,000
85,300 AT&T Corp. US 5,459,200
17,300 Bell Atlantic Corp. US 1,100,713
14,600 Bellsouth Corp. US 1,116,900
30,000 Frontier Corp. US 810,000
-----------
29,955,064
-----------
TOTAL STOCKS (Cost $297,936,613) 337,796,640
-----------
<CAPTION>
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
BONDS - 24.5%
CORPORATE BONDS - 5.5%
2,000,000 BankAmerica Corp., 8.125%, 08/15/04
(Callable 08/15/99 @ 100) 2,107,178
1,600,000 Chrysler Corp., 10.400%, 08/01/99
(Callable 08/01/97 @ 100) 1,706,784
2,000,000 Costco Wholesale, Inc., 5.750%, 05/15/02
(Convertible Bond) 1,870,000
2,500,000 General Electric Capital Corp., 8.850%, 03/01/07
(Puttable 03/01/97 @ 100) 2,963,400
3,000,000 General Motors Acceptance Corp.,
7.500%, 07/24/00 3,130,680
2,000,000 Great Western Bank, 9.875%, 06/15/01 2,288,300
2,000,000 Inter-American Development Bank,
7.000%, 06/15/25 2,022,060
2,000,000 Pohang Iron & Steel Co., Ltd., 7.375%,
05/15/05 2,070,680
2,000,000 Potomac Electric Power, 5.000%,
09/01/02 (Convertible Bond) 1,820,000
3,000,000 Societe Generale NY, 9.875%, 07/15/03 3,572,820
2,500,000 W.R. Grace, 7.400%, 02/01/00 2,563,975
249,883 Zions Auto Trust, 5.650%, 06/15/99 248,203
-----------
26,364,080
-----------
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
<CAPTION>
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE BACKED SECURITIES - 0.4%
2,020,139 FNMA CMO, 1992-137BA REMIC,
3.500%, 01/25/17 $1,906,506
-----------
1,906,506
-----------
U.S. GOVERNMENT & AGENCY BONDS - 4.0%
Federal Home Loan Mortgage Corp.
3,500,000 6.390%, 07/02/03 (Callable 07/02/96 @ 100) 3,438,190
3,000,000 8.375%, 03/15/10 (Callable 03/15/00 @ 100) 3,207,660
Federal National Mortgage Association
2,000,000 7.700%, 08/10/04 (Callable 08/10/99 @ 100) 2,090,320
3,000,000 8.400%, 10/25/04 (Callable 10/25/99 @ 100) 3,231,570
U.S. Treasury Notes
3,000,000 7.125%, 02/29/00 3,148,110
4,000,000 7.500%, 02/15/05 4,411,240
-----------
19,527,090
-----------
FOREIGN BONDS - 14.6%
European Investment Bank
CAN $2,000,000 6.625%, 09/15/00 1,436,824
4,000,000 7.750%, 04/22/03 2,937,011
Oesterreichische Kontrollbank
CAN $2,000,000 9.000%, 06/19/02 1,564,480
Japan Highway Public Corp.
CAN $2,000,000 7.875%, 09/27/02 1,482,482
Toyko Electric Power
CAN $2,000,000 10.500%, 06/14/01 1,651,137
Republic of Finland
CAN $2,000,000 9.500, 09/15/04 1,596,161
Kingdom of Denmark
DKK 13,000,000 9.000%, 11/15/00 2,578,579
20,000,000 8.000%, 11/15/01 3,797,144
20,000,000 7.000%, 12/15/04 3,476,382
20,000,000 8.000%, 03/15/06 3,683,632
Government of France
FF 10,000,000 8.500%, 11/25/02 2,216,512
15,000,000 8.500%, 04/25/03 3,318,011
10,500,000 6.750%, 10/25/03 2,102,451
10,000,000 7.750%, 10/25/05 2,112,085
Federal Republic of Germany
DM 3,000,000 8.500%, 08/21/00 2,387,388
3,000,000 8.250%, 09/20/01 2,373,966
3,000,000 7.250%, 10/21/02 2,263,182
3,000,000 6.750%, 04/22/03 2,189,042
4,500,000 6.875%, 05/12/05 3,281,327
Treuhandanstalt
DM 3,000,000 7.750%, 10/01/02 2,314,739
4,000,000 6.500%, 04/23/03 2,872,989
World Bank
DM 3,000,000 6.125%, 09/27/02 2,125,129
Government of Netherlands
NLG 6,000,000 6.500%, 04/15/03 3,867,047
5,000,000 6.750%, 11/15/05 3,216,208
European Investment Bank
(pound)2,000,000 8.000%, 06/10/03 3,132,361
<CAPTION>
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
<S> <C> <C>
FOREIGN BONDS (CONTINUED)
Republic of Argentina
US $4,000,000 5.000%, 03/31/23 (Callable Semiannually
in May or November @ 100) $1,892,500
Republic of South Africa
US $2,000,000 9.625%, 12/15/99 2,122,500
United Mexican States
US $4,000,000 6.250%, 12/31/19
(Callable at any time @ 100) 2,340,000
-----------
70,331,269
-----------
TOTAL BONDS (Cost $111,513,470) 118,128,945
-----------
<CAPTION>
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM SECURITIES - 5.5%
24,463,225 Bankers Trust Commingled Trust Fund 24,463,225
t 2,000,000 U.S. Treasury Bill, 5.270%, 12/14/95 1,987,411
-----------
TOTAL SHORT TERM SECURITIES (Cost $26,450,636) 26,450,636
-----------
TOTAL INVESTMENTS (Cost $435,900,719), 100.0% 482,376,221
OTHER ASSETS AND LIABILITIES, NET, (0.0)% (21,365)
-----------
NET ASSETS, 100.0% $482,354,856
============
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
CMO - Collateralized Mortgage Obligation
FNMA - Federal National Mortgage Association
GDR - Global Depository Receipt
GDS - Global Depository Share
REMIC - Real Estate Mortgage Investment Conduit
CURRENCY ABBREVIATIONS:
CAN $-Canadian Dollar
DKK - Danish Kroner
DM - German Deutschemark
FF - French Franc
NLG - Netherlands Guilder
(pound) - British Pound
US $- US Dollar
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION
Country % Of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AR Argentina 0.3%
AU Australia 0.8%
BE Belgium 0.0%
BR Brazil 0.3%
CL Chile 0.4%
CN Canada 2.2%
DK Denmark 2.8%
FR France 5.1%
GM Germany 7.2%
HK Hong Kong 2.9%
ID Indonesia 1.9%
IN India 0.1%
IT Italy 0.4%
JP Japan 5.1%
MX Mexico 0.9%
MY Malaysia 1.2%
NL Netherlands 3.4%
NZ New Zealand 0.9%
PE Peru 0.4%
PH Philippines 1.5%
SG Singapore 1.9%
SK South Korea 1.0%
SP Spain 0.3%
SW Sweden 1.2%
SZ Switzerland 1.0%
TH Thailand 2.7%
TW Taiwan 0.5%
UK United Kingdom 2.5%
US United States 51.1%
------
TOTAL 100.0%
======
<FN>
t On deposit with broker for initial margin on futures contract (Note 1). The
accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont International Growth Fund
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS - 93.8%
BUSINESS EQUIPMENT & SERVICES - 2.5%
41,000 Kyowa Exeo Corp. JP $ 357,272
8,000 Reuters Holdings PLC, ADR UK 444,000
-----------
801,272
-----------
CAPITAL GOODS - 10.8%
9,000 Kyocera Corp. JP 738,435
6,000 Mabuchi Motors Co. JP 363,636
16,000 Raito Kogyo Co. JP 328,976
148,000 IJM Corp. Berhad MY 243,559
158,333 Leader Universal Holdings Berhad MY 427,001
17,000 IHC Caland NL 483,254
15,300 Autoliv AB SW 878,899
-----------
3,463,760
-----------
CONSUMER DURABLES - 3.3%
15,000 Matsushita-Kotobuki Electronics JP 304,009
10,000 Murata Manufacturing Co. Ltd. JP 351,495
17,600 Rinnai Corp. JP 389,445
-----------
1,044,949
-----------
CONSUMER NON-DURABLES - 3.4%
83,550 PT Indofood Sukses Makmur
(Foreign Registered) ID 386,294
11,600 PanAmerican Beverages, Inc.
(Class A) MX 317,550
* 34,245 President Enterprises, GDR TW 376,691
-----------
1,080,535
-----------
CONSUMER SERVICES - 10.8%
50,226 News Corp. Ltd. AU 253,196
25,225 News Corp. Ltd. (Preferred) AU 115,253
41,800 Village Roadshow Ltd. (Preferred) AU 119,683
286,000 Shaw Brothers Ltd. HK 360,677
55,000 PT Modern Photo Film Co.
(Foreign Registered) ID 334,214
8,000 Secom Co. JP 521,663
66,000 Genting Berhad MY 569,055
7,574 Wolters Kluwer NV NL 688,589
105,000 Rentokil Group PLC UK 523,577
-----------
3,485,907
-----------
FINANCIAL SERVICES - 8.7%
90,000 Cheung Kong (Holdings) Ltd. HK 507,547
21,855 Aegon NV, ADR NL 833,222
46,000 Development Bank of Singapore
(Foreign Registered) SG 527,202
42,600 Bangkok Bank Ltd.
(Foreign Registered) TH 440,135
86,000 Bank of Ayudhya Ltd.
(Foreign Registered) TH 495,530
-----------
2,803,636
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE - 11.4%
1,050 Gehe AG GM $ 515,251
* 262 Gehe AG, New GM 124,474
200,000 PT Dankos Laboratories
(Foreign Registered) ID 563,628
40,000 Banyu Pharmaceutical Co. JP 422,970
32,000 Santen Pharmaceutical Co. JP 758,212
20,800 Astra AB "B" Free SW 752,657
73 Roche Holding AG SZ 530,150
-----------
3,667,342
-----------
MISCELLANEOUS - 0.4%
* 80,187 India Fund (Class B)
(United Kingdom Shares) IN 133,283
-----------
133,283
-----------
MULTI-INDUSTRY - 4.8%
98,000 Hutchison Whampoa HK 539,987
1,700,000 Yue Yuen Industrial Holdings HK 445,268
260,000 Renong Berhad MY 397,165
494,000 International UNP Holdings
(Canadian Shares) PO 176,757
-----------
1,559,177
-----------
RAW MATERIALS - 1.5%
* 20,400 Concordia Paper Holdings, Ltd.,ADR HK 183,600
* 15,355 Hansol Paper Ltd., GDR SK 314,778
-----------
498,378
-----------
RETAIL - 9.1%
* 7,600 Santa Isabel SA, ADR CL 171,950
880 Carrefour Supermarche FR 517,499
460 Hornbach Holding AG (Preferred) GM 462,238
3,600 Autobacs Seven JP 340,138
2,200 Ito Yokado Co. Ltd., ADR JP 475,475
6,000 Seven Eleven Japan JP 400,646
16,989 Ceteco Holdings, ADS NL 554,521
-----------
2,922,467
-----------
SHELTER - 1.4%
* 700,000 C & P Homes, Inc. PH 450,788
-----------
450,788
-----------
TECHNOLOGY - 14.1%
11,600 Nokia AB "A" Series FI 663,942
5,500 SAP AG (Preferred) GM 843,660
* 220,000 Telecom Italia Mobile SPA IT 244,636
8,100 Canon, Inc., ADR JP 690,525
51 Nippon Telegraph & Telephone JP 418,946
165,000 CPT Telefonica del Peru SA PE 294,513
* 140,303 Tele 2000 PE 137,892
* 4,348 Samsung Electronics Ltd., GDS
(1/2 Non-Voting) SK 283,707
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY (CONTINUED)
* 65 Samsung Electronics Ltd., New GDS
(1/2 Voting) SK $ 7,451
21,560 Ericsson (L.M.) Telephone Co., ADR SW 460,509
30,900 Advanced Information Services
(Foreign Registered) TH 491,158
-----------
4,536,939
-----------
UTILITIES - 11.6%
8,541 Companhia Energetica de
Minas Gerais, ADR BR 180,428
13,000 VEBA AG GM 533,516
22,000 Hong Kong Telecommunications , ADR HK 382,250
9,200 Telecom of New Zealand, ADR NZ 610,650
69,750 Manila Electric Co. (Class B) PH 520,242
7,100 Philippine Long Distance
Telephone Co. PH 395,809
9,000 Empresa Nacional de
Electricidad, ADR SP 452,250
71,405 Powergen PLC UK 642,034
-----------
3,717,179
-----------
TOTAL STOCKS (Cost $28,032,103) 30,165,612
-----------
<CAPTION>
Country Value
Face Amount/Issuer/Coupon Rate/Stated MaturityCode (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONVERTIBLE BONDS - 1.1%
250,000 United Micro Electronics,
1.250%, 06/08/04 TW 337,500
-----------
TOTAL CONVERTIBLE BONDS (Cost $411,473) 337,500
-----------
<PAGE>
<CAPTION>
Country Value
Face Amount/Issuer Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS - 5.1%
1,652,360 Bankers Trust Commingled Trust Fund US 1,652,360
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $1,652,360) 1,652,360
-----------
TOTAL INVESTMENTS (Cost $30,095,936), 100.0% 32,155,472
-----------
OTHER ASSETS AND LIABILITIES, NET, 0.0% 541
-----------
NET ASSETS, 100.0% $ 32,156,013
============
<FN>
PORTFOLIO ABBREVIATIONS:
ADR -American Depository Receipt
ADS -American Depository Shares
GDR -Global Depository Receipt
GDS -Global Depository Shares
</FN>
</TABLE>
<PAGE>
<TABLE>
COUNTRY DIVERSIFICATION
<CAPTION>
Country % Of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
AU Australia 1.5%
BR Brazil 0.6%
CL Chile 0.5%
FI Finland 2.1%
FR France 1.6%
GM Germany 7.7%
HK Hong Kong 7.5%
IN India 0.4%
ID Indonesia 4.0%
IT Italy 0.8%
JP Japan 21.4%
MY Malaysia 5.1%
MX Mexico 1.0%
NL Netherlands 8.0%
NZ New Zealand 1.9%
PE Peru 1.3%
PH Philippines 4.3%
PO Poland 0.5%
SG Singapore 1.6%
SK South Korea 1.9%
SP Spain 1.4%
SW Sweden 6.5%
SZ Switzerland 1.6%
TW Taiwan 2.3%
TH Thailand 4.4%
UK United Kingdom 5.0%
US United States 5.1%
------
TOTAL 100.0%
======
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont International Small Cap Fund
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS - 98.0%
BUSINESS EQUIPMENT & SERVICES - 1.6%
2,000 Aida Engineering JP $14,060
1,000 Dai-Dan Co. Ltd. JP 11,358
100 Polynorm NV NL 10,516
6,700 Cowie Group PLC UK 31,500
-----------
67,434
-----------
CAPITAL GOODS - 8.2%
7,600,000 CIA Acos Especiais Itabira BR 56,118
356 Skoda Koncern Plzen AS CZ 7,488
400 Labinal SA FR 43,655
* 1,800 Bremer Vulkan Verbund AG GM 55,221
10,000 Bunka Shutter Co. JP 70,299
3,000 Marufuji Sheet Piling JP 18,799
3,000 Seirei Industry JP 12,542
6,700 Steel & Tube Holdings Ltd. NZ 31,836
2,700 Celsius Industrier AB "B" SW 51,089
-----------
347,047
-----------
CONSUMER DURABLES - 1.9%
* 8,799 CIA Interamericana de Automotive AR 32,995
3,000 Tachi-S JP 22,617
58,658 Arcelik AS TU 9,714
6,100 Adwest Group UK 13,712
-----------
79,038
-----------
CONSUMER NON-DURABLES - 11.0%
21,400 Pacific Magazines & Printing Ltd. AU 45,955
*9,800,000 Perdigao SA BR 17,836
100,000 Sao Paulo Alpargatas SA BR 13,676
* 107 Cokoladovny AS CZ 9,452
100 Holsten-Brauerei AG GM 22,015
1,100 Hellenic Sugar Industry SA GR 13,845
7,000 Lai Sun Garment International Ltd. HK 7,379
8,000 PT Chareon Pokphand Indonesia
(Foreign Registered) ID 16,997
17,000 PT Japfa Comfeed Indonesia
(Foreign Registered) ID 8,421
4,000 Daito Gyorui JP 12,297
9,000 Kanematsu Corp. JP 30,753
11,000 Prima Meat Packers JP 37,695
15,000 Rhythm Watch Co. JP 48,465
53,000 Grupo Industrial Maseca SA de CV
Series B MX 34,958
2,000 Dutch Baby Milk Industries Berhad MY 11,024
8,000 Nanyang Press Berhad MY 16,378
14,000 Lion Nathan Ltd. NZ 31,783
11,000 GP Batteries International Ltd. SG 26,840
10,000 Times Publishing Ltd. SG 23,205
900 American Standard Sanitaryware Ltd.
(Foreign Registered) TH 15,379
2,600 Karat Sanitaryware Co. Ltd.
(Foreign Registered) TH 10,228
8,000 Tat Konserve Sanayii AS TU 5,378
3,600 Alexandra Workwear UK 9,517
-----------
469,476
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER SERVICES - 2.8%
450 Gaumont FR $27,182
1,100 Delta Dairy SA GR 20,127
* 8,600 Vard AS NO 11,323
400 Unicer-Uniao Cervejeira SA
(Registered Shares) PT 6,491
2,200 Sun International
Bophuthatswana Ltd. SA 14,175
6,000 Hotel Properties SG 9,084
6,200 Airtours PLC UK 32,290
-----------
120,672
-----------
ENERGY - 5.4%
4,700 CIA Naviera Perez Co. (Class B) AR 20,585
11,400 Caltex Australia Ltd. AU 36,808
30,000 Uniao de Industrias
Petroquimicas SA BR 33,384
1,400 TransCanada Pipelines Ltd. CN 18,654
100 Elf Gabon FR 14,743
2,000 Itochu Fuel Corp. JP 16,684
2,000 Kamei Corp. JP 22,323
* 5,300 Engen Ltd. SA 33,059
74,000 Petrol Ofisi AS TU 17,302
59,000 Turcas Petroculuk AS TU 15,231
-----------
228,773
-----------
FINANCIAL SERVICES (BANKS) - 12.3%
7,400 Advance Bank of Australia Ltd. AU 54,660
6,600 Bank of Melbourne Ltd. AU 33,472
900 Parisienne de Reescompt FR 69,290
1,100 Credit Bank of Athens
(Registered Shares) GR 66,142
1,300 National Bank of Greece
(Registered Shares) GR 64,888
2,000 Chuo Trust & Banking Co. Ltd. JP 17,526
21,000 Affin Holdings Berhad MY 39,685
12,000 MBF Capital Berhad MY 11,339
300 KAS Associatie NV NL 10,161
* 20,580 Union Bank of the Philippines PH 23,341
2,100 Banco Totta & Acores
(Registered Shares) PT 36,412
30 Verwalt & Privat-Bank AG SZ 42,254
27,600 First Bangkok City Bank Ltd.
(Foreign Registered) TH 24,129
418,000 Yapi Ve Kredi Bankasi SA TU 28,912
-----------
522,211
-----------
FINANCIAL SERVICES (OTHER) - 12.4%
* 600 Terca Brick Industries BE 29,002
350 Societe Financiere Interbail SA FR 22,288
500 Sovac FR 62,247
212,400 Century City International
Holdings Ltd. HK 46,154
42,000 Peregrine Investment Holdings Ltd. HK 53,510
27,500 Tai Cheung Holdings HK 23,120
1,600 La Previdente IT 11,027
3,000 Life Co. Ltd. JP 9,370
10,000 Nippon Shinpan Co. JP 62,564
19,000 Rashid Hussein Berhad MY 47,126
2,100 Assurantieconcern Stad Rotterdam NL 57,835
7,600 BNZ Finance Co. Ltd. NZ 8,426
110 Swiss Life Insurance & Pension SZ 42,315
2,800 Phatra Thanakit Co. Ltd.
(Foreign Registered) TH 20,250
8,400 Guardian Royal Exchange PLC UK 30,451
-----------
525,685
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE - 0.7%
90 Galenica Holdings AG
(Registered Shares) SZ $28,125
-----------
28,125
-----------
MULTI-INDUSTRY - 6.8%
* 1,700 Acklands Ltd. CN 15,524
300 Compagnie Generale d'Industrie FR 56,821
800 Marine-Wendel FR 64,704
2,500 Industrie Zignago S. MargheritaSPA IT 11,779
4,000 Yamato International, Inc. JP 15,470
19,000 Bandar Raya Developments Berhad MY 28,425
32,000 Berjaya Group Berhad MY 20,283
600 Internatio-Muller NV NL 42,925
8,900 Goode Durrant PLC UK 34,095
-----------
290,026
-----------
RAW MATERIALS - 15.8%
* 5,600 Aluar Aluminio Argentina SA
(Class B) AR 37,518
18,000 Alcan Australia Ltd. AU 41,121
100 Tessenderlo Chemie BE 34,492
1,400,000 CIA Petroquimica Sul-Copesul BR 59,113
9,300,000 Fertilizantes Fosfatdos
(Preferred) BR 28,048
2,400 Donohue, Inc. (Class A) CN 33,545
* 116 Sepap AS CZ 8,317
* 221 Synthesia AS CZ 6,592
400 Nord Est FR 9,050
150 Saint Louis FR 43,184
100 Sommer Allibert FR 26,475
400 Hellas Can SA GR 8,362
9,000 Chugoku Marine Paints JP 38,772
9,000 Nippon Metal Industry JP 33,133
9,000 Apasco SA de CV MX 33,631
* 6,000 Empaques Ponderosa SA Series B MX 12,739
400 DSM NV NL 29,934
1,800 European Vinyls Corp.
International NV NL 56,410
8,900 Hartebeesfontein Gold Mining
Co. Ltd. SA 22,328
3,000 Randfontein Estates Gold Mining Co.
Witwatersrand Ltd. SA 16,656
500 Western Deep Levels Ltd. SA 13,983
3,600 SSAB Svenskt Stal AB "B" SW 36,095
4,500 National Petrochemical Co. TH 10,640
15,000 Cimentas TU 9,060
2,300 Smith (David S.) Holdings PLC UK 21,044
-----------
670,242
-----------
RETAIL - 2.6%
2,000 Oak & Co. JP 11,534
20,400 Acma Ltd. SG 66,388
12,700 East Asiatic Co. Ltd. TH 16,654
9,100 Saha Pathana Inter-Holding Ltd.
(Foreign Registered) TH 16,815
-----------
111,391
-----------
SHELTER - 9.0%
700 Bau Holding AG AS 32,468
10,400 Leighton Holdings Ltd. AU 23,996
10,900 Pioneer International Ltd. AU 26,727
* 5,000 Brasilit SA BR 9,308
* 56 Inzenyrske a Prumslove Stavby AS CZ 4,711
325 GTM Entrepose SA FR 21,095
450 Societe Generale d'Enterprises SA FR 9,214
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHELTER (CONTINUED)
67,000 Kumagai Gumi HK $50,697
5,000 Daikyo, Inc. JP 33,436
5,000 Daito Trust Construction JP 44,059
9,000 Tokyu Construction Co. JP 40,094
4,800 Vitro SA MX 10,531
7,000 Land & General Berhad MY 16,260
4,400 Boskalis Westminster NL 52,928
12,200 Crest Nicholson PLC UK 8,884
-----------
384,408
-----------
TECHNOLOGY - 1.1%
* 322 SPT Telecom AS CZ 31,831
1,100 Alphatec Electronics Public
Co. Ltd. TH 13,900
45,731
TRANSPORTATION - 0.9%
1,500 Koninklijke Nedlloyd Groep NV NL 38,082
-----------
38,082
-----------
UTILITIES - 5.5%
3,100 Telecom Argentina SA (Class B) AR 11,903
2,500,000 Companhia Energetica de
Minas Gerais BR 54,079
* 741 Ceske Energeticke Zavody AS CZ 28,903
10,000 Boustead Holdings Berhad MY 20,079
1,200 Electra De Viesgo SA SP 23,849
50 Aare-Tessin AG
(Registered Shares) SZ 33,671
3,800 Northumbrian Water Group PLC UK 59,913
-----------
232,397
-----------
TOTAL STOCKS (Cost $4,377,310) 4,160,738
-----------
<PAGE>
<CAPTION>
Country Value
Face Amount/Issuer Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS - 0.2%
7,165 Bankers Trust Commingled Trust FundUS 7,165
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $7,165) 7,165
-----------
TOTAL INVESTMENTS (Cost $4,384,475), 98.2% 4,167,903
OTHER ASSETS AND LIABILITIES, NET, 1.8% 76,956
-----------
TOTAL NET ASSETS, 100.0% $ 4,244,859
===========
</TABLE>
<PAGE>
<TABLE>
COUNTRY DIVERSIFICATION
<CAPTION>
Country % Of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
AR Argentina 2.4%
AS Austria 0.8%
AU Australia 6.2%
BE Belgium 1.5%
BR Brazil 6.4%
CN Canada 1.6%
CZ Czech Republic 2.3%
FR France 11.0%
GM Germany 1.8%
GR Greece 4.1%
HK Hong Kong 4.3%
ID Indonesia 0.6%
IT Italy 0.5%
JP Japan 14.6%
MX Mexico 2.2%
MY Malaysia 5.0%
NL Netherlands 7.0%
NO Norway 0.3%
NZ New Zealand 1.7%
PH Philippines 0.5%
PT Portugal 1.0%
SG Singapore 3.0%
SA South Africa 2.4%
SP Spain 0.6%
SW Sweden 2.1%
SZ Switzerland 3.4%
TH Thailand 3.0%
TU Turkey 2.0%
UK United Kingdom 5.7%
US United States 2.0%
------
TOTAL 100.0%
======
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont U.S. Micro-Cap Fund
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
STOCKS - 88.2%
CONSUMER DURABLES - 5.1%
* 14,550 Leslie's Poolmart $210,975
* 3,000 SCP Pool Corp. 30,375
* 5,200 West Marine, Inc. 158,600
-----------
399,950
-----------
CONSUMER NON-DURABLES - 1.2%
* 2,400 Longhorn Steaks, Inc. 40,200
* 10,000 Mountasia Entertainment International, Inc.56,250
-----------
96,450
-----------
CONSUMER SERVICES - 12.9%
13,600 Barefoot, Inc. 164,900
* 5,600 Damark International, Inc. (Class A) 33,600
* 12,100 Garden Ridge Corp. 432,575
* 4,200 Logan's Roadhouse, Inc. 63,000
* 6,250 Saga Communications, Inc. (Class A) 98,438
* 21,600 Video Sentry Corp. 216,000
-----------
1,008,513
-----------
ENERGY - 7.9%
* 23,500 Core Laboratories NV 240,875
* 14,000 Cairn Energy USA, Inc. 168,000
* 11,000 Lomak Petroleum, Inc. 85,250
* 8,500 Numar Corp. 89,250
* 7,500 Tipperary Corp. 30,000
-----------
613,375
-----------
FINANCIAL SERVICES - 7.7%
* 4,200 Calumet Bancorp, Inc. 114,450
4,500 ISB Financial Corp. 75,375
* 4,500 Imperial Thrift & Loan Association 51,750
4,500 Life Bancorp, Inc. 69,750
* 10,000 PennFed Financial Services, Inc. 145,000
8,000 Sirrom Capital Corp. 141,000
-----------
597,325
-----------
HEALTH CARE - 12.7%
* 14,700 Cytel Corp. 75,338
* 4,500 Enterprise Systems, Inc. 105,187
* 39,000 Gensia, Inc. 165,750
* 9,900 Health Payment Review, Inc. 257,400
* 2,700 Liposome Co., Inc. 41,512
* 15,800 Penederm, Inc. 156,025
* 11,300 Summit Medical Systems, Inc. 186,450
-----------
987,662
-----------
<PAGE>
<CAPTION>
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS - 4.2%
8,500 Delta & Pine Land Co. $329,375
-----------
329,375
-----------
SHELTER - 3.5%
* 21,000 D.R. Horton, Inc. 233,625
4,000 Engle Homes, Inc. 35,000
-----------
268,625
-----------
TECHNOLOGY (EQUIPMENT) - 18.5%
* 12,000 Ade Corp. 180,000
* 24,000 Applied Signal Technology, Inc. 114,000
* 16,000 CEM Corp. 210,000
* 4,000 Computer Management Sciences, Inc. 82,000
* 9,000 Elantec Semiconductor, Inc. 65,250
* 10,300 Hologic, Inc. 267,800
* 10,000 Micrel, Inc. 227,500
* 8,000 PRI Automation, Inc. 296,000
-----------
1,442,550
-----------
TECHNOLOGY (SOFTWARE) - 13.2%
* 12,000 Speedfam International, Inc. 196,500
* 23,700 State of the Art, Inc. 254,775
* 12,700 Truevision 98,425
* 9,000 Verity, Inc. 330,750
* 4,500 Veritas Software Corp. 145,125
-----------
1,025,575
-----------
TRANSPORTATION - 1.3%
* 5,000 RailTex, Inc. 103,750
-----------
103,750
-----------
TOTAL STOCKS (Cost $5,925,270) 6,873,150
-----------
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS- 11.1%
365,479 Bankers Trust Commingled Trust Fund 365,479
500,000 Federal Home Loan Mortgage Corp.,
Discount Note, 5.600%, 11/01/95 500,000
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $865,479) 865,479
-----------
TOTAL INVESTMENTS (Cost $6,790,749), 99.3% 7,738,629
-----------
OTHER ASSETS AND LIABILITIES, NET, 0.7% 53,488
-----------
TOTAL NET ASSETS, 100.0% $ 7,792,117
===========
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Growth Fund
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS - 95.3%
BUSINESS EQUIPMENT & SERVICES - 6.3%
3,600 Automatic Data Processing, Inc. US $257,400
* 14,000 Ceridian Corp. US 609,000
2,600 Dun & Bradstreet Corp. US 155,350
23,301 First Data Corp. US 1,540,798
4,700 General Motors Corp. (Class E) US 221,488
* 14,300 Office Depot, Inc. US 409,338
8,250 Paychex, Inc. US 357,844
8,300 WMX Technologies, Inc. US 233,437
-----------
3,784,655
-----------
CAPITAL GOODS - 3.1%
3,300 Emerson Electric Co. US 235,125
12,900 General Electric Co. US 815,925
3,200 Illinois Tool Works, Inc. US 186,000
* 7,000 Owens-Corning Fiberglass Corp. US 296,625
3,400 PPG Industries, Inc. US 144,500
* 5,000 Varity Corp. US 181,250
-----------
1,859,425
-----------
CONSUMER DURABLES - 1.3%
4,000 Goodyear Tire & Rubber Co. US 152,000
23,000 Harley-Davidson, Inc. US 615,250
-----------
767,250
-----------
CONSUMER NON-DURABLES - 13.6%
3,500 Anheuser Busch Cos., Inc. US 231,000
8,300 Archer Daniels Midland Co. US 133,838
3,200 Campbell Soup Co. US 167,600
17,900 Coca-Cola Co. US 1,286,563
2,400 Colgate Palmolive Co. US 166,200
2,700 ConAgra, Inc. US 104,287
2,000 CPC International US 132,750
* 3,300 Crown Cork & Seal Co., Inc. US 115,087
4,700 Eastman Kodak Co. US 294,337
3,100 General Mills, Inc. US 177,862
18,400 Gillette Co. US 890,100
3,300 Heinz (H.J.) & Co. US 153,450
3,000 Kellogg Co. US 216,750
11,800 Pepsico, Inc. US 622,450
20,200 Philip Morris Cos., Inc. US 1,706,900
16,000 Procter & Gamble Co. US 1,296,000
2,100 Ralston Purina Group US 124,688
5,900 Sara Lee Corp. US 173,313
5,400 Tyson Foods, Inc. (Class A) US 128,925
-----------
8,122,100
-----------
CONSUMER SERVICES - 5.2%
9,000 Loewen Group, Inc. CN 360,422
2,200 Capital Cities/ABC, Inc. US 260,975
2,300 CBS, Inc. US 185,725
* 20,600 CUC International, Inc. US 713,275
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER SERVICES (CONTINUED)
6,900 Disney (Walt) Co. US $397,612
8,500 Marriott International, Inc. US 313,437
6,800 Mattel, Inc. US 195,500
* 10,300 Viacom, Inc. (Class B) US 515,000
600 Washington Post Co. (Class B) US 174,000
-----------
3,115,946
-----------
ENERGY - 2.8%
3,000 Amoco Corp. US 191,625
1,500 Atlantic Richfield Co. US 160,125
2,600 Exxon Corp. US 198,575
1,700 Mobil Corp. US 171,275
6,000 Schlumberger Ltd. US 373,500
11,000 Union Texas Petroleum
Holdings, Inc. US 198,000
13,500 Unocal Corp. US 354,375
-----------
1,647,475
-----------
FINANCIAL SERVICES - 8.6%
12,000 American Express Co. US 487,500
13,000 American International Group, Inc. US 1,096,875
13,500 Citicorp US 875,812
8,000 Exel Ltd. US 428,000
6,500 Federal Home Loan Mortgage Corp. US 450,125
900 General Re Corp. US 130,388
14,000 Mercury Finance Co. US 269,500
10,000 Mercury General Corp. US 420,000
10,000 MGIC Investment Corp. US 568,750
13,000 Norwest Corp. US 383,500
1,000 Progressive Corp. US 41,500
-----------
5,151,950
-----------
HEALTH CARE - 16.1%
10,700 Abbott Laboratories US 425,325
4,600 American Home Products Corp. US 407,675
* 14,000 Amgen, Inc. US 672,000
2,200 Becton Dickinson & Co. US 143,000
* 2,700 Boston Scientific Corp. US 113,737
7,000 Bristol-Myers Squibb Co. US 533,750
6,100 Columbia HCA Healthcare Corp. US 299,662
* 2,500 Forest Laboratories, Inc.
(Class A) US 103,437
7,000 HBO & Co. US 495,250
* 12,500 Healthsouth Rehabilitation Corp. US 326,562
16,800 Johnson & Johnson US 1,369,200
3,900 Lilly (Eli) & Co. US 376,838
13,000 Medtronic, Inc. US 750,750
14,600 Merck & Co. US 839,500
* 15,000 Mid Atlantic Medical Services,Inc. US 298,125
24,100 Pfizer, Inc. US 1,382,738
5,400 Schering Plough Corp. US 289,575
6,000 Stryker Corp. US 270,750
10,000 United Healthcare Corp. US 531,250
-----------
9,629,124
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
MISCELLANEOUS - 3.1%
29,100 Inefficient Market Fund, Inc. US $305,550
56,500 Morgan Grenfell Small Cap Fund,Inc.US 656,813
69,800 Royce Value Trust US 898,675
-----------
1,861,038
-----------
MULTI-INDUSTRY - 1.0%
1,700 ITT Corp. US 208,250
6,800 Minnesota Mining &
Manufacturing Co. US 386,750
-----------
595,000
-----------
RAW MATERIALS - 1.8%
* 4,300 Alumax, Inc. US 126,850
3,500 Du Pont (E.I.) de Nemours & Co. US 218,313
9,400 Engelhard Corp. US 233,825
5,000 Monsanto Co. US 523,750
-----------
1,102,738
-----------
RETAIL - 3.9%
* 4,300 Federated Department Stores, Inc. US 109,112
21,700 Home Depot, Inc. US 808,325
8,800 McDonalds Corp. US 360,800
* 3,700 Safeway, Inc. US 174,825
* 5,300 Stop & Shop Cos., Inc. US 109,975
* 6,300 Toys R Us, Inc. US 137,813
27,800 Wal Mart Stores, Inc. US 601,175
-----------
2,302,025
-----------
SHELTER - 1.1%
3,500 Georgia Pacific Corp. US 288,750
4,200 International Paper Co. US 155,400
2,900 Kimberly-Clark Corp. US 210,613
-----------
654,763
-----------
TECHNOLOGY (COMPONENTS) - 12.1%
* 8,000 3Com Corp. US 376,000
3,200 Amp, Inc. US 125,600
* 9,000 Applied Materials, Inc. US 451,125
* 19,200 Cisco Systems, Inc. US 1,488,000
23,500 Intel Corp. US 1,642,062
* 3,000 Litton Industries, Inc. US 118,875
* 14,000 LSI Logic Corp. US 659,750
2,800 Micron Technology, Inc. US 197,750
16,700 Motorola, Inc. US 1,095,937
* 14,000 Novadigm, Inc. US 287,000
3,800 Raytheon Co. US 165,775
2,700 Texas Instruments, Inc. US 184,275
* 9,000 Xilinx, Inc. US 414,000
----------
7,206,149
-----------
TECHNOLOGY (EQUIPMENT) - 5.4%
* 29,900 AirTouch Communications, Inc. US 852,150
8,700 Boeing Co. US 570,938
* 3,600 Compaq Computer Corp. US 200,700
* 13,500 DSC Communications Corp. US 499,500
6,900 Hewlett-Packard Co. US 639,113
1,800 International Business Machines US 175,050
* 8,000 Silicon Graphics, Inc. US 266,000
----------
3,203,451
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY (SOFTWARE) - 5.6%
9,950 Computer Associates
International, Inc. US $547,250
* 13,500 Microsoft Corp. US 1,350,000
* 22,100 Oracle Systems Corp. US 964,113
* 7,000 Parametric Technology Corp. US 468,125
-----------
3,329,488
-----------
TRANSPORTATION - 0.3%
2,400 Union Pacific Corp. US 156,900
-----------
156,900
-----------
UTILITIES - 4.0%
5,000 Ameritech Corp. US 270,000
13,800 AT&T Corp. US 883,200
3,900 Bell Atlantic Corp. US 248,138
4,200 Century Telephone Enterprises US 121,800
15,100 Enron Corp. US 519,062
6,400 Illinova Corp. US 181,600
3,200 Telephone & Data Systems, Inc. US 128,000
-----------
2,351,800
-----------
TOTAL STOCKS (Cost $47,793,575) 56,841,277
<PAGE>
<CAPTION>
Country Value
Face Amount/Issuer Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS - 4.0%
2,353,577 Bankers Trust Commingled Trust Fund US 2,353,577
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $2,353,577) 2,353,577
-----------
TOTAL INVESTMENTS (Cost $50,147,152), 99.3% 59,194,854
-----------
OTHER ASSETS AND LIABILITIES, NET, 0.7% 437,565
-----------
NET ASSETS, 100.0% $59,632,419
-----------
</TABLE>
<PAGE>
<TABLE>
COUNTRY DIVERSIFICATION
<CAPTION>
Country % Of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
CN Canada 0.6%
US United States 99.4%
------
TOTAL 100.0%
======
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Bond Fund
October 31, 1995
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS - 76.1%
MORTGAGE BACKED SECURITIES - 42.3%
319,720 Collateralized Mortgage Obligation Trust CMO, 5-EZ .............. 9.400% 08/01/16 $ 337,405
488,483 Collateralized Mortgage Securities Corp. CMO, J-5Z, REMIC ....... 7.985% 05/01/17 501,001
793,364 FHLMC AO1007 .................................................... 8.250% 08/01/17 820,997
1,409,404 FHLMC CMO, 1018 0Z, PAC-1 (11) REMIC ............................ 7.000% 11/15/20 1,387,487
1,498,834 FNMA ARM ........................................................ 6.878% 11/01/23 1,535,135
596,490 FNMA CMO, 1990-142J, REMIC ...................................... 9.250% 12/25/03 600,403
1,034,420 FNMA CMO, 1990-53G, PAC REMIC ................................... 8.000% 12/25/18 1,046,378
200,000 FNMA CMO, 1993-11J, PAC REMIC ................................... 7.500% 02/25/08 203,031
6,682,646 GNMA II ARM ..................................................... 7.250% 09/20/24 6,749,472
4,802,570 GNMA II ARM ..................................................... 6.500% 10/20/24 4,850,596
126,980 GNMA II ARM ..................................................... 7.500% 02/20/25 129,889
1,687,127 GNMA II ARM ..................................................... 7.500% 03/20/25 1,725,779
1,613,946 MDC Mortgage Funding Corp. CMO, P-4Z ............................ 9.500% 11/20/17 1,704,408
1,000,000 Morgan Stanley Mortgage Trust CMO, 40-8, PAC (11) REMIC ......... 7.000% 07/20/21 999,150
7,338,223 Prudential Bache CMO Trust, 14-G, REMIC ......................... 8.400% 03/20/21 7,652,390
786,752 Resolution Trust Corp. CMO, 1992-M4 A1 REMIC .................... 8.000% 09/25/21 806,169
1,552,747 Ryland Mortgage Securities Corp. CMO, 1993-8-A, REMIC ........... 7.878% 09/25/23 1,576,039
967,849 Saxon Mortgage Securities Corp. CMO, 1992-1 A1, ARM REMIC ....... 8.169% 09/25/22 987,659
3,000,000 Securitized Asset Sales, lnc. CMO, 1993-2A9, PAC (11) REMIC ..... 6.200% 07/25/08 2,907,180
------------
TOTAL MORTGAGE BACKED SECURITIES 36,520,568
------------
CORPORATE BONDS - 18.2%
1,000,000 Arkla, lnc. ..................................................... 9.200% 12/18/97 1,044,150
500,000 Cleveland Electric Co. .......................................... 9.110% 07/22/96 505,590
260,000 CMS Energy Corp., Deferred Coupon (Callable 10/01/97 @ 101.65) .. 9.875% 10/01/99 274,300
907,000 Delta Air Lines, Inc. (Sinking Fund Bond) ....................... 9.450% 02/14/06 1,028,997
1,825,000 Delta Air Lines, Inc. (Sinking Fund Bond) ....................... 9.450% 02/26/06 2,048,002
3,000,000 General Motors Acceptance Corp. ................................. 6.700% 05/20/96 3,010,170
2,000,000 Long Island Lighting Co. ........................................ 8.750% 05/01/96 2,024,580
1,000,000 Ohio Edison ..................................................... 8.500% 05/01/96 1,009,880
2,000,000 Time Warner, Inc. ............................................... 7.450% 02/01/98 2,041,200
375,000 Time Warner, Inc., FRN (Callable 08/15/96 @ 101.5)............... 6.835% 08/15/00 375,900
225,000 Time Warner, Inc. ............................................... 7.975% 08/15/04 231,140
450,000 Time Warner, Inc. ............................................... 8.110% 08/15/06 462,884
450,000 Time Warner, Inc. ............................................... 8.180% 08/15/07 464,283
1,000,000 United Airlines ................................................. 10.670% 05/01/04 1,161,583
------------
TOTAL CORPORATE BONDS 15,682,659
------------
FOREIGN BONDS - 9.6%
DM 6,800,000 Federal Republic of Germany ..................................... 6.250% 01/04/24 4,259,205
CAN $2,500,000 Government of Canada ............................................ 8.750% 12/01/05 2,022,232
US $3,000,000 United Mexican States (Callable Semiannually in June or December @ 100) 6.875% 12/31/19 2,002,500
------------
TOTAL FOREIGN BONDS 8,283,937
------------
U.S. GOVERNMENT & AGENCY BONDS - 4.4%
290,000 Federal Home Loan Bank (Callable 04/29/96 @ 100)................. 6.380% 04/29/03 285,151
500,000 Federal Home Loan Mortgage Corp. (Callable 07/02/96 @ 100)....... 6.390% 07/02/03 491,170
3,000,000 U.S. Treasury Notes.............................................. 5.785% 07/31/97 3,011,730
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS 3,788,051
------------
<PAGE>
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STRIPPED MORTGAGE SECURITIES - 1.6%
3,596,654 FHLMC Interest Only, 1587HA, PAC-1 REMIC......................... 6.500% 10/15/08 $496,788
5,419,230 FNMA lnterest Only, 1994-27WB, PAC-1 REMIC....................... 6.500% 06/25/14 514,117
390,998 FNMA Principal Only, G93-12B, PAC (11) REMIC.............................. 02/25/23 367,902
------------
TOTAL STRIPPED MORTGAGE SECURITIES 1,378,807
------------
TOTAL BONDS (Cost $64,315,813) 65,654,022
------------
CONVERTIBLE PREFERRED STOCK - 0.5%
20,000 Long Island Lighting Co................................................................... 465,000
------------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost $486,000) 465,000
------------
SHORT TERM SECURITIES - 22.0%
1,700,000 Abbott Laboratories, CP ......................................... 5.710% 11/14/95 1,696,495
3,000,000 AT&T Corp., CP .................................................. 5.710% 11/29/95 2,986,677
717,851 Bankers Trust Commingled Trust Fund ...................................................... 717,851
100,000 Hewlett-Packard Co., CP ......................................... 5.630% 11/21/95 99,687
1,000,000 KFW International Finance, DN ................................... 5.700% 01/17/96 987,808
1,500,000 Kimberly-Clark Corp., CP ........................................ 5.730% 11/14/95 1,496,896
900,000 Mexico Government Bond, Tesobono ................................ 16.407% 01/18/96 884,250
2,000,000 Minnesota Mining & Manufacturing Co., CP ........................ 5.730% 11/01/95 2,000,000
1,000,000 New South Wales Treasury, DN .................................... 5.660% 11/10/95 998,585
3,000,000 Oesterreichische Kontrollbank, DN ............................... 5.700% 11/10/95 2,995,725
3,500,000 Procter & Gamble, CP ............................................ 5.630% 11/17/95 3,491,242
t 10,000 U.S. Treasury Bill .............................................. 5.450% 11/16/95 9,977
t 230,000 U.S. Treasury Bill .............................................. 5.880% 11/16/95 229,437
t 80,000 U.S. Treasury Bill .............................................. 5.280% 02/08/96 78,830
t 50,000 U.S. Treasury Bill .............................................. 5.300% 02/08/96 49,269
t 190,000 U.S. Treasury Bill .............................................. 5.250% 02/15/96 187,025
t 100,000 U.S. Treasury Bill .............................................. 5.290% 02/15/96 98,434
------------
TOTAL SHORT TERM SECURITIES (Cost $18,992,002) 19,008,188
------------
<PAGE>
<CAPTION>
Number of Value
Contracts Description (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PUT OPTIONS - 0.0%
35 CBOT 30 yr. U.S. Treasury Bond Futures, Strike @106, Exp. 11/17/95........................ 547
------------
TOTAL PUT OPTIONS (Cost $705) 547
------------
TOTAL INVESTMENTS (Cost $83,794,520), 98.6% 85,127,757
TOTAL OTHER ASSETS AND LIABILITIES, NET, 1.4% 1,214,914
------------
NET ASSETS, 100.0% $ 86,342,671
===========
<FN>
PORTFOLIO ABBREVIATIONS:
ARM -Adjustable Rate Mortgage
CBOT -Chicago Board of Trade
CMO -Collateralized Mortgage Obligation
CP -Commercial Paper
DN -Discount Note
FHLMC -Federal Home Loan Mortgage Corp.
FNMA -Federal National Mortgage Association
FRN -Floating Rate Note
GNMA -Government National Mortgage Association
REMIC -Real Estate Mortgage Investment Conduit
tOn deposit with broker for initial margin on futures contracts (Note 1). The
accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Money Market Fund
October 31, 1995
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<CAPTION>
Discount Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 82.5%
10,000,000 Abbey National North America Corp. ....................... 5.660% 12/07/95 $ 9,943,400
10,000,000 Alcatel Alsthom, Inc. .................................... 5.700% 01/17/96 9,878,083
10,000,000 American Express Credit Corp. ............................ 5.660% 12/18/95 9,926,106
10,000,000 Ameritech Capital Funding *............................... 5.540% 03/18/96 9,787,633
10,000,000 B.B.V. Finance (Delaware), Inc. .......................... 5.730% 11/03/95 9,996,817
10,000,000 Bausch & Lomb, Inc. ...................................... 5.670% 02/09/96 9,842,500
10,000,000 Boral Industries, Inc. ................................... 5.780% 11/27/95 9,958,256
5,000,000 Cadbury Schweppes Money Management PLC ................... 5.780% 11/15/95 4,988,761
10,000,000 Cargill Financial Services Corp.* ........................ 5.470% 01/12/96 9,890,600
10,000,000 CPC International* ....................................... 5.710% 01/10/96 9,888,972
5,000,000 Ford Motor Credit Corp. .................................. 5.730% 11/14/95 4,989,654
10,000,000 Goldman Sachs & Co. ...................................... 5.680% 01/26/96 9,864,311
10,000,000 Halifax Building Society ................................. 5.690% 01/08/96 9,892,522
10,000,000 Hanson Finance PLC (UK) .................................. 5.730% 11/13/95 9,980,900
10,000,000 Hitachi America Ltd. ..................................... 5.970% 11/03/95 9,996,683
10,000,000 Merrill Lynch & Co., Inc. ................................ 5.720% 11/08/95 9,988,878
10,000,000 Mitsui & Co. ............................................. 5.730% 12/05/95 9,945,883
10,000,000 Rabobank Nederland ....................................... 5.620% 12/06/95 9,945,361
10,000,000 Sandoz Corp. ............................................. 5.700% 01/29/96 9,859,083
10,000,000 Sonoco Products, Inc. .................................... 5.750% 11/07/95 9,990,417
10,000,000 Sony Capital Corp.* ...................................... 5.710% 12/11/95 9,936,556
10,000,000 Sumitomo Corp. of America ................................ 5.700% 12/22/95 9,919,250
10,000,000 Sweden, Kingdom of ....................................... 5.650% 11/27/95 9,959,195
10,000,000 Swedish Export Credit Corp. .............................. 5.670% 11/06/95 9,992,125
8,900,000 Toshiba International Finance PLC (UK) ................... 5.750% 01/03/96 8,810,444
10,000,000 Yale University .......................................... 5.720% 01/31/96 9,855,411
------------
TOTAL COMMERCIAL PAPER 247,027,801
------------
OTHER SHORT TERM SECURITIES - 19.0%
24,778,657 Bankers Trust Commingled Trust Fund .............................................. 24,778,657
10,000,000 Bayerische Vereinsbank AG, Yankee CD t ................. 5.900% 09/12/96 10,000,000
2,105,000 Federal Home Loan Bank, DN ............................. 5.520% 12/26/95 2,087,248
10,000,000 Federal National Mortgage Association, AN t............. 5.660% 03/15/96 10,000,000
10,000,000 Federal National Mortgage Association, MTN t............ 5.710% 06/10/96 9,994,672
------------
TOTAL OTHER SHORT TERM SECURITIES 56,860,577
------------
TOTAL INVESTMENTS (Cost $303,888,378), 101.5% 303,888,378
OTHER ASSETS AND LIABILITIES, NET (1.5)% (4,576,766)
------------
NET ASSETS, 100.0% $299,311,612
===========
<FN>
PORTFOLIO ABBREVIATIONS:
AN - Agency Note
CD - Certificate of Deposit
DN - Discount Note
MTN - Medium Term Note
*These securities are generally issued to institutional investors. Any resale
must be in an exempt transaction pursuant to Section 4(2) of the Securities
Act of 1933. t The rate indicated for these securities is the stated coupon
rate.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont California Intermediate Tax-Free Fund
October 31, 1995
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.1%
1,000,000 California State Dept. of Veterans Affairs, Home Purchase
Revenue 1991 Ser. A................................................. 6.450% 08/01/00 $1,047,250
1,000,000 California State Dept. of Water Resources, Central Valley Project
Revenue Ser. H...................................................... 6.400% 12/01/00 1,099,690
California State GO
1,000,000 Various Purpose .................................................... 6.400% 08/01/96 1,019,120
1,000,000 Various Purpose .................................................... 6.500% 08/01/97 1,042,630
1,000,000 California State Public Works Board, Lease Revenue Dept. of Corrections,
Madera County State Prison 1990 Ser. A .............................. 6.700% 09/01/97 1,046,660
1,000,000 California State Public Works Board, Lease Revenue Refunding, Trustees of
The California State University, 1995 Ser. B ........................ 5.600% 04/01/06 1,010,170
1,000,000 California State Public Works Board, Lease Revenue Dept. of Corrections,
Prison D ............................................................ 5.100% 06/01/06 980,740
1,000,000 Contra Costa Transportation Authority, Sales Tax Revenue 1991 Ser. A 6.400% 03/01/01 1,093,090
1,000,000 Contra Costa Water Authority, Revenue Refunding 1993 Ser. A
(FGIC Insured)...................................................... 5.300% 10/01/05 1,035,520
1,000,000 Contra Costa Water District, Water Revenue Ser. F (FGIC Insured) .... 5.250% 10/01/08 1,003,840
1,000,000 East Bay MUD, Water System Subordinated Revenue Ser. 1994 ........... 8.500% 06/01/98 1,106,370
1,000,000 City of Irvine, Assessment District No. 89-10, Limited Obligation
Refunding Improvement (MBIA Insured)................................. 4.200% 09/02/05 922,900
1,000,000 Los Angeles Dept. of Water & Power, Electric Plant Revenue Refunding 5.500% 09/01/07 1,025,890
1,000,000 Los Angeles Dept. of Water & Power, Electric Plant Revenue .......... 4.700% 10/15/06 962,170
1,000,000 Los Angeles Dept. of Water & Power, Waterworks Revenue Refunding .... 5.625% 04/15/08 1,025,390
1,000,000 City of Los Angeles, 1990 Solid Waste Collection Project, COP Revenue 6.400% 11/01/97 1,045,110
750,000 Los Angeles County Sanitation District Finance Authority, 1993 Ser. A 5.250% 10/01/06 768,315
1,000,000 Los Angeles County Transportation Authority, Sales Tax Revenue Ser. A 6.300% 07/01/01 1,086,480
1,000,000 Metropolitan Water District of Southern California, Waterworks GO Refunding
1993 Ser. A ......................................................... 5.250% 03/01/05 1,038,420
1,000,000 Modesto High School District, 1993 GO Refunding (FGIC Insured) ...... 5.300% 08/01/04 1,042,200
1,000,000 Modesto Irrigation District Finance Authority, Domestic Water Project Revenue
1992 Ser. A (AMBAC Insured) ......................................... 5.650% 09/01/03 1,068,000
500,000 M-S-R Public Power Agency, San Juan Project Revenue Ser. D
(AMBAC Insured)..................................................... 6.300% 07/01/98 521,615
1,000,000 M-S-R Public Power Agency, San Juan Project Revenue Ser. F .......... 5.650% 07/01/03 1,066,790
1,000,000 Northern California Power Agency, Geothermal Project #3 Revenue Ser. A 5.600% 07/01/06 1,024,940
1,000,000 Orange County Local Transportation Authority, Sales Tax Revenue
First Ser. M........................................................ 6.000% 02/15/06 1,036,400
1,000,000 Orange County Transportation Authority, Measure M Sales Tax Revenue Second
Senior Ser. 1994 (FGIC Insured) ..................................... 5.000% 02/15/08 974,840
500,000 Orange County Water District, COP 1990 Project A .................... 6.500% 08/15/98 532,095
500,000 City of Pasadena, Electric Works Revenue 1990 Series ................ 6.500% 08/01/99 540,285
1,500,000 City of Pasadena, GO Refunding Police and Jail Building 1993 ........ 5.000% 06/01/07 1,529,100
1,000,000 Rancho Cucamonga RDA, 1994 Tax Allocation Refunding (MBIA Insured) .. 5.000% 09/01/07 993,320
1,000,000 City of Riverside, Electric Revenue 1991 ............................ 6.100% 10/01/00 1,073,700
1,000,000 City of Riverside, Electric Revenue Refunding 1993 .................. 5.000% 10/01/06 996,210
1,000,000 Sacramento County Sanitation District Finance Authority, Revenue
(MBIA Insured) ...................................................... 5.000% 12/01/08 981,610
1,000,000 Sacramento MUD, Electric Revenue 1991 Ser. Y ........................ 6.250% 09/01/00 1,082,630
1,000,000 San Bernardino County Transportation Authority, Sales Tax Revenue 1992 Ser. A
(FGIC Insured) ...................................................... 6.000% 03/01/03 1,085,910
1,000,000 City and County of San Francisco International Airport Second Series Revenue
Issue 1 (AMBAC Insured) ............................................. 6.100% 05/01/03 1,093,910
1,000,000 City and County of San Francisco RDA, Lease Revenue Ser. 1991
(George R. Moscone Convention Center) (AMBAC Insured)................ 6.200% 10/01/00 1,084,280
1,000,000 City and County of San Francisco, Sewer Revenue Refunding Ser. 1992
(AMBAC Insured) ..................................................... 5.800% 10/01/05 1,071,430
1,000,000 San Francisco, CA Bay Area Rapid Transit, Sales Tax Revenue Refunding 6.400% 07/01/97 1,038,500
1,000,000 San Jose, CA Finance Authority Revenue, Convention Center Refunding
Project Ser. C (MBIA Insured) ....................................... 5.750% 09/01/03 1,060,680
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
1,000,000 Santa Margarita/Dana Point Authority Orange County, Revenue Bond Ser. A 5.375% 08/01/04 $1,041,700
Southern California Public Power Authority
1,000,000 Mead-Phoenix Project Revenue 1994 Ser. A (AMBAC Insured)............ 4.750% 07/01/09 923,090
1,000,000 Mead-Phoenix Project Revenue 1994 Ser. A (AMBAC Insured) ........... 4.750% 07/01/08 946,910
1,000,000 Palo Verde Power Projects Revenue, 1993 Ser. A ..................... 5.100% 07/01/06 1,004,100
500,000 City of Stockton, 1990 Wastewater System Project COP (AMBAC Insured). 6.700% 09/01/98 535,235
500,000 City of Stockton, 1990 Wastewater System Project COP (AMBAC Insured) 6.800% 09/01/99 541,025
1,000,000 University of California, Housing System Revenue Ser. A (MBIA Insured) 5.500% 11/01/08 1,023,560
1,000,000 West & Central Basin Financing Authority, Water Revenue West Basin
Refunding Project (AMBAC Insured) ................................... 5.125% 08/01/06 1,012,170
1,500,000 Yucaipa School Facilities Financing Authority, 1995 Sweetwater Refunding
(MBIA Insured) ...................................................... 6.000% 09/01/10 1,551,105
------------
TOTAL MUNICIPAL BONDS (Cost $46,944,424)......................................................... 48,837,095
------------
SHORT-TERM SECURITIES - 1.6%
816,260 Provident Institutional Fund .................................................................... 816,260
------------
TOTAL SHORT TERM SECURITIES (Cost $816,260)...................................................... 816,260
------------
TOTAL INVESTMENTS (Cost $47,760,684) 98.7%...................................................... 49,653,355
OTHER ASSETS AND LIABILITIES, NET 1.3%.......................................................... 659,846
------------
NET ASSETS, 100.0%.............................................................................. $50,313,201
============
<FN>
PORTFOLIO ABBREVIATIONS:
AMBAC -American Municipal Bond Assurance Corp.
COP -Certificates of Participation
FGIC -Financial Guaranty Insurance Corp.
GO -General Obligation
MBIA -Municipal Bond Investor Assurance Corp.
MUD -Municipal Utility District
RDA -Redevelopment Agency
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
October 31, 1995
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
International International
Global Growth Small Cap
Fund Fund Fund
<S> <C> <C> <C>
Assets:
Investments in securities at cost $435,900,719 $30,095,936 $4,384,475
=========== ========== ==========
Investments in securities at value (Note 1) 482,376,221 32,155,472 4,167,903
Cash -- -- 80,807
Dividends and interest receivable 3,479,812 57,128 15,046
Receivable for securities sold 1,109,860 -- --
Receivable from sale of fund shares 50,857 10,545 19,160
Receivable for variation margin -- -- --
Unrealized appreciation on foreign currency contracts 30,825 -- --
Prepaid expense 23,113 -- --
Unamortized organization costs (Note 3) -- -- --
----------- ---------- ----------
Total assets 487,070,688 32,223,145 4,282,916
----------- ---------- ----------
Liabilities:
Unrealized depreciation on foreign currency contracts -- -- --
Liability for options written -- -- --
Variation margin payable 53,025 -- --
Dividends payable to shareholders 125,057 383 15,458
Payable for securities purchased 3,182,827 26,401 15,640
Payable for fund shares redeemed 895,038 -- --
Accrued expenses:
Investment advisory and administrative fees 307,043 40,348 6,959
Shareholder servicing fees 6,500 -- --
Custody fees 76,603 -- --
Accounting fees 29,822 -- --
Audit and legal fees 31,617 -- --
Other payables 8,300 -- --
----------- ---------- ----------
Total liabilities 4,715,832 67,132 38,057
----------- ---------- ----------
Net assets $482,354,856 $32,156,013 $4,244,859
============ ========== ==========
Net assets consist of:
Paid in capital $416,233,588 $32,362,847 $4,496,814
Undistributed net investment income (loss) 2,004,174 170,045 9,448
Unrealized appreciation (depreciation) on investments 43,682,144 2,059,536 (216,572)
Unrealized appreciation (depreciation) on foreign currency
contracts and other assets and liabilities 38,458 661 (946)
Accumulated net realized gain (loss) 20,396,492 (2,437,076) (43,885)
----------- ---------- ----------
Net assets $482,354,856 $32,156,013 $4,244,859
=========== ========== ==========
Shares of capital stock outstanding 33,873,265 3,309,234 471,446
=========== ========== ==========
Net asset value per share $14.24 $9.72 $9.00
=========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
California
U.S. Money Intermediate
Micro-Cap Growth Bond Market Tax-Free
Fund Fund Fund Fund Fund
<S> <C> <C> <C>
Assets:
Investments in securities at cost $6,790,749 $50,147,152 $83,794,520 $303,888,378 $47,760,684
========== ========== ========== ========== ==========
Investments in securities at value (Note 1) 7,738,629 59,194,854 85,127,757 303,888,378 49,653,355
Cash -- 24,470 213,341 -- 76,349
Dividends and interest receivable 4,148 50,781 1,071,726 447,148 661,237
Receivable for securities sold -- 545,011 -- -- --
Receivable from sale of fund shares 61,518 21,900 1,946 1,380,490 1,650
Receivable for variation margin -- -- 59,813 -- --
Unrealized appreciation on foreign currency contracts -- -- -- -- --
Prepaid expense -- 429 -- 3,163 627
Unamortized organization costs (Note 3) -- 5,278 4,494 -- --
---------- ---------- ---------- ---------- ----------
Total assets 7,804,295 59,842,723 86,479,077 305,719,179 50,393,218
Liabilities:
Unrealized depreciation on foreign currency contracts -- 21,767 -- --
Liability for options written -- 2,188 -- --
Variation margin payable -- -- -- --
Dividends payable to shareholders -- 617 11,941 20,109 26,735
Payable for securities purchased -- 125,579 -- -- --
Payable for fund shares redeemed -- 14,265 38,295 6,283,032 --
Accrued expenses:
Investment advisory and administrative fees 12,178 32,559 28,859 54,800 13,016
Shareholder servicing fees -- 2,000 1,750 2,400 2,100
Custody fees 18,070 10,025 8,325 2,341
Accounting fees -- 4,264 6,231 15,019 5,670
Audit and legal fees -- 12,530 12,000 12,230 17,280
Other payables 420 3,350 11,652 12,875
---------- ---------- ---------- ---------- ----------
Total liabilities 12,178 210,304 136,406 6,407,567 80,017
---------- ---------- ---------- ---------- ----------
Net assets $7,792,117 $59,632,419 $86,342,671 $299,311,612 $50,313,201
========== ========== ========== ========== ==========
Net assets consist of:
Paid in capital $6,526,144 $47,012,251 $82,699,455 $299,311,612 $48,300,312
Undistributed net investment income (loss) -- 9,309 86,546 -- --
Unrealized appreciation (depreciation) on investments 947,880 9,047,702 2,078,249 -- 1,892,671
Unrealized appreciation (depreciation) on foreign currency
contracts and other assets and liabilities -- -- (23,464) -- --
Accumulated net realized gain (loss) 318,093 3,563,157 1,501,885 -- 120,218
========== ========== ========== ========== ==========
Net assets $7,792,117 $59,632,419 $86,342,671 $299,311,612 $50,313,201
---------- ---------- ---------- ---------- ----------
Shares of capital stock outstanding 543,454 4,564,901 8,521,976 299,311,612 4,633,776
========== ========== ========== ========= ==========
Net asset value per share $14.34 $13.06 $10.13 $1.00 $10.86
========== ========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
Year Ended October 31, 1995
STATEMENTS OF OPERATIONS
<CAPTION>
International International
Global Growth Small Cap
Fund Fund Fund
<S> <C> <C> <C>
Investment income:
Interest $12,543,616 $165,307 $16,001
Dividends 5,033,955 623,022 86,278
---------- ---------- ----------
Total income* 17,577,571 788,329 102,279
---------- ---------- ----------
Expenses:
Investment advisory and administrative fees (Note 2) 3,418,558 439,970 68,433
Shareholders servicing fees 66,012 -- --
Custody fees 227,315 -- --
Accounting fees 160,313 -- --
Audit and legal fees 39,967 -- --
Directors' fees (Note 2) 1,936 -- --
Registration fees 25,099 -- --
Other 75,790 -- --
---------- ---------- ----------
Total expenses before reductions 4,014,990 439,970 68,433
Expenses waived by Advisor -- -- (11,894)
---------- ---------- ----------
Total net expenses 4,014,990 439,970 56,539
---------- ---------- ----------
Net investment income (loss) 13,562,581 348,359 45,740
---------- ---------- ----------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) from:
Investments 23,444,879 (948,173) (21,568)
Transactions in written options -- -- --
Foreign currency transactions (435,755) (53,746) (14,440)
Net increase (decrease) in unrealized appreciation (depreciation) on:
Investments 18,907,997 601,879 (203,902)
Translation of assets and liabilities in foreign currencies (44,605) (47) 10,337
---------- ---------- ----------
Net realized and unrealized gain (loss) from investments
and foreign currency 41,872,516 (400,087) (229,573)
---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations $55,435,097 $(51,728) $(183,833)
========== ========== ==========
<FN>
* Net of foreign taxes withheld of $332,410 for the Global Fund, $56,603 for
the International Growth Fund, $9,851 for the International Small Cap Fund,
and $6,417 for the Growth Fund.
</FN>
<PAGE>
<CAPTION>
California
U.S. Money Intermediate
Micro-Cap Growth Bond Market Tax-Free
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Investment income:
Interest $46,139 $146,366 $4,960,774 $17,148,782 $3,057,222
Dividends 5,964 631,693 35,250 -- --
---------- ---------- ---------- ---------- ----------
Total income* 52,103 778,059 4,996,024 17,148,782 3,057,222
Expenses:
Investment advisory and administrative fees (Note 2) 94,198 254,882 377,026 1,049,432 284,195
Shareholders servicing fees -- 21,248 19,824 27,468 22,228
Custody fees -- 44,248 19,251 31,251 9,761
Accounting fees -- 20,169 31,453 86,187 31,515
Audit and legal fees -- 14,841 14,978 17,912 23,437
Directors' fees (Note 2) -- 1,936 1,936 1,936 1,936
Registration fees -- 17,115 19,596 51,707 3,309
Other -- 21,380 28,830 22,361 15,514
---------- ---------- ---------- ---------- ----------
Total expenses before reductions 94,198 395,819 512,894 1,288,254 391,895
Expenses waived by Advisor (16,899) (16,411) (102,754) (428,369) (117,038)
---------- ---------- ---------- ---------- ----------
Total net expenses 77,299 379,408 410,140 859,885 274,857
---------- ---------- ---------- ---------- ----------
Net investment income (loss) (25,196) 398,651 4,585,884 16,288,897 2,782,365
R ---------- ---------- ---------- ---------- ----------
ealized and unrealized gain (loss) from investments
and foreign currency:
Net realized gain (loss) from:
Investments 347,186 3,482,283 1,890,998 -- 119,954
Transactions in written options -- -- 339,267 -- --
Foreign currency transactions -- -- 82,647 -- --
Net increase (decrease) in unrealized appreciation (depreciation) on:
Investments 888,690 6,445,736 3,540,395 -- 3,671,361
Translation of assets and liabilities in foreign currencies -- -- (23,464) -- --
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss) from investments
and foreign currency 1,235,876 9,928,019 5,829,843 -- 3,791,315
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations $1,210,680 $10,326,670 $10,415,727 $16,288,897 $6,573,680
========== ========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
October 31, 1995
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
International
Global Growth
Fund Fund
Year Year Year Period
Ended Ended Ended Ended
10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Net investment income (loss) $13,562,581 $7,743,896 $348,359 $91,239
Net realized gain (loss) from investments and transactions
in written options 23,444,879 6,718,710 (948,173) (1,334,365)
Net realized gain (loss) from foreign currency transactions (435,755) (4,600,634) (53,746) (100,792)
Net unrealized appreciation (depreciation) on investments 18,907,997 (813,173) 601,879 1,457,657
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies (44,605) 83,063 (47) 708
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations 55,435,097 9,131,862 (51,728) 114,447
---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income (16,914,918) (2,968,563) (269,553) --
From net realized gains (1,140,840) (3,909,900) -- --
---------- ---------- ---------- ----------
Total distributions (18,055,758) (6,878,463) (269,553) --
---------- ---------- ---------- ----------
Capital share transactions:
Proceeds from shares sold 110,900,850 309,350,014 4,286,553 32,167,188
Payments for shares redeemed (136,942,988) (51,004,535) (1,803,707) (2,556,349)
Reinvested dividends 17,395,011 6,698,270 269,162 --
---------- ---------- ---------- ----------
Total capital share transactions (8,647,127) 265,043,749 2,752,008 29,610,839
---------- ---------- ---------- ----------
Net increase (decrease) in net assets 28,732,212 267,297,148 2,430,727 29,725,286
Net assets at beginning of period 453,622,644 186,325,496 29,725,286 --
---------- ---------- ---------- ----------
Net assets at end of period** $482,354,856 $453,622,644 $32,156,013 $29,725,286
---------- ---------- ---------- ----------
Capital transactions in shares:
Sold 8,368,781 23,760,853 433,837 3,298,539
Redeemed (10,326,949) (3,868,898) (188,969) (261,900)
Reinvested dividends 1,282,980 505,604 27,727 --
---------- ---------- ---------- ----------
Net increase (decrease) in capital share transactions (675,188) 20,397,559 272,595 3,036,639
========== ========== ========== ==========
<FN>
#Period from February 1, 1994 (commencement of operations) to October 31,
1994. tPeriod from June 30, 1994 (commencement of operations) to October 31,
1994. **Net assets at end of October 31, 1995 and October 31, 1994,
respectively, include undistributed net investment income (loss) of $2,004,174
and $5,356,511 for the Global Fund, $170,045 and $91,239 for the International
Growth Fund, $9,448 and $(1,256) for the International Small Cap Fund,
$(25,253) and $(57) for the U.S. Micro-Cap Fund, $9,309 and $115,797 for the
Growth Fund, and $86,546 and $31,900 for the Bond Fund.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
International U.S.
Small Cap Micro-Cap
Fund Fund
Year Period Year Period
Ended Ended Ended Ended
10/31/95 10/31/94t 10/31/95 10/31/94t
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Net investment income (loss) $45,740 $(1,256) $(25,196) $3,969
Net realized gain (loss) from investments and
transactions in written options (21,568) (3) 347,186 (3,840)
Net realized gain (loss) from foreign currency transactions (14,440) (7,874) -- --
Net unrealized appreciation (depreciation) on investments (203,902) (12,670) 888,690 59,190
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies 10,337 (11,283) -- --
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations (183,833) (33,086) 1,210,680 59,319
---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income (35,036) -- -- (4,026)
From net realized gains -- -- -- --
---------- ---------- ---------- ----------
Total distributions (35,036) -- -- (4,026)
---------- ---------- ---------- ----------
Capital share transactions:
Proceeds from shares sold 2,849,192 2,379,855 6,143,180 2,580,755
Payments for shares redeemed (172,610) (579,201) (1,614,127) (587,625)
Reinvested dividends 19,578 -- -- 3,961
---------- ---------- ---------- ----------
Total capital share transactions 2,696,160 1,800,654 4,529,053 1,997,091
---------- ---------- ---------- ----------
Net increase (decrease) in net assets 2,477,291 1,767,568 5,739,733 2,052,384
Net assets at beginning of period 1,767,568 -- 2,052,384 --
---------- ---------- ---------- ----------
Net assets at end of period** $4,244,859 $1,767,568 $7,792,117 $2,052,38
========== ========== ========== ==========
Capital transactions in shares:
Sold 308,867 237,224 462,168 254,056
Redeemed (18,867) (57,953) (117,136) (56,017)
---------- ---------- ---------- ----------
Reinvested dividends 2,175 -- -- 383
Net increase (decrease) in capital share transactions 292,175 179,271 345,032 198,422
========== ========== ========== ==========
<CAPTION>
Growth Bond
Fund Fund
Year Year Year Year
Ended Ended Ended Ended
10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Net investment income (loss) $398,651 $466,106 $4,585,884 $1,724,273
Net realized gain (loss) from investments and transactions
in written options 3,482,283 2,473,244 2,230,265 (791,756)
Net realized gain (loss) from foreign currency transactions -- -- 82,647 (19,271)
Net unrealized appreciation (depreciation) on investments 6,445,736 (2,336,664) 3,540,395 (1,714,573)
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies -- -- (23,464) --
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations 10,326,670 602,686 10,415,727 (801,327)
---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income (505,139) (392,103) (4,531,238) (1,692,373)
From net realized gains (241,849) (2,111,288) -- --
---------- ---------- ---------- ----------
Total distributions (746,988) (2,503,391) (4,531,238) (1,692,373)
---------- ---------- ---------- ----------
Capital share transactions:
Proceeds from shares sold 32,879,457 6,851,457 25,537,155 66,602,800
Payments for shares redeemed (10,815,329) (22,505,837) (13,731,939) (13,183,239)
Reinvested dividends 744,451 2,493,398 4,408,916 1,579,670
Total capital share transactions 22,808,579 (13,160,982) 16,214,132 54,999,231
---------- ---------- ---------- ----------
Net increase (decrease) in net assets 32,388,261 (15,061,687) 22,098,621 52,505,531
Net assets at beginning of period 27,244,158 42,305,845 64,244,050 11,738,519
---------- ---------- ---------- ----------
Net assets at end of period** $59,632,419 $27,244,158 $86,342,671 $64,244,050
========== ========== ========== ==========
Capital transactions in shares:
Sold 2,872,926 618,873 2,579,889 6,969,743
Redeemed (981,267) (2,009,215) (1,429,749) (1,361,785)
---------- ---------- ---------- ----------
Reinvested dividends 68,568 236,032 454,805 166,041
Net increase (decrease) in capital share transactions 1,960,227 (1,154,310) 1,604,945 5,773,999
========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
October 31, 1995
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
California
Intermediate
Money Tax-Free
Market Fund
Year Year Year Year
Ended Ended Ended Ended
10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Net investment income $16,288,897 $3,377,829 $2,782,365 $3,147,340
Net realized gain from investments -- -- 119,954 38,458
Net unrealized appreciation (depreciation) on investments -- -- 3,671,361 (5,886,267)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations 16,288,897 3,377,829 6,573,680 (2,700,469)
---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income (16,288,897) (3,377,829) (2,782,365) (3,147,340)
From net realized gains -- -- (4,639) (108,666)
---------- ---------- ---------- ----------
Total distributions (16,288,897) (3,377,829) (2,787,004) (3,256,006)
---------- ---------- ---------- ----------
Capital share transactions:
Proceeds from shares sold 297,387,013 260,385,003 2,822,896 15,326,306
Payments for shares redeemed (238,529,846) (63,534,667) (17,111,368) (13,768,196)
Reinvested dividends 16,015,143 3,382,435 2,510,108 2,987,160
---------- ---------- ---------- ----------
Total capital share transactions 74,872,310 200,232,771 (11,778,364) 4,545,270
---------- ---------- ---------- ----------
Net increase (decrease) in net assets 74,872,310 200,232,771 (7,991,688) (1,411,205)
Net assets at beginning of period 224,439,302 24,206,531 58,304,889 59,716,094
Net assets at end of period** $299,311,612 $224,439,302 $50,313,201 $58,304,889
========== ========== ========== ==========
Capital transactions in shares:
Sold 297,387,013 260,385,003 270,058 1,392,273
Redeemed (238,529,846) (63,534,667) (1,629,211) (1,297,341)
Reinvested dividends 16,015,143 3,382,435 239,479 280,888
---------- ---------- ---------- ----------
Net increase (decrease) in capital share transactions 74,872,310 200,232,771 (1,119,674) 375,820
========== ========== ========== ==========
<FN>
**There was no undistributed net investment income for the Money Market Fund
or the California Intermediate Tax-Free Fund at October 31, 1995 nor at
October 31, 1994. The accompanying notes are an integral part of these
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
Financial Highlights - October 31, 1995
GLOBAL FUND
<CAPTION>
Years ended October 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $13.13 $13.17 $11.52 $11.25 $9.93
------ ------ ------ ------ ------
Income from Investment Operations
Net investment income .40 .26 .32 .39 .47
Net realized and unrealized gain (loss) 1.24 (.03) 1.67 .40 1.34
------ ------ ------ ------ ------
Total investment operations 1.64 .23 1.99 0.79 1.81
------ ------ ------ ------ ------
Less Distributions
From net investment income (.50) (.14) (.26) (.40) (.45)
From net realized gains (.03) (.13) (.08) (.11) (.04)
Return of capital -- -- -- (.01) --
------ ------ ------ ------ ------
Total distributions (.53) (.27) (.34) (.52) (.49)
------ ------ ------ ------ ------
Net asset value, end of period $14.24 $13.13 $13.17 $11.52 $11.25
====== ====== ====== ====== ======
Total Return 12.78% 1.74% 17.51% 7.10% 18.38%
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $482,355 $453,623 $186,325 $101,839 $74,502
Ratio of expenses to average net assets .88% .95% .99% 1.09% 1.12%
Ratio of net investment income to average net assets 2.98% 2.47% 2.89% 3.41% 4.34%
Portfolio Turnover Rate 83% 52% 40% 50% 81%
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL GROWTH FUND
<CAPTION>
Year Period from
Ended March 1, 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 $9.79 $9.57
------ ------
Income from Investment Operations
Net investment income .10 .02
Net realized and unrealized gain (loss) (.09) .20
------ ------
Total investment operations .01 .22
------ ------
Less Distributions
From net investment income (.08) --
From net realized gains -- --
------ ------
Total distributions (.08) --
------ ------
Net asset value, end of period $9.72 $9.79
====== ======
Total Return 0.13% 3.44%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $32,156 $29,725
Ratio of expenses to average net assets 1.50% 1.50%*
Ratio of net investment income to average net assets 1.19% .35%*
Portfolio Turnover Rate 32% 44%*
<FN>
*Annualized
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
Financial Highlights - October 31, 1995
INTERNATIONAL SMALL CAPFUND
<CAPTION>
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 $9.86 $10.00
------ ------
Income from Investment Operations
Net investment income (loss)(a) .10 (.01)
Net realized and unrealized loss (.88) (.13)
------ ------
Total investment operations (.78) (.14)
------ ------
Less Distributions
From net investment income (.08) --
From net realized gains -- --
------ ------
Total distributions (.08) --
------ ------
Net asset value, end of period $9.00 $9.86
====== ======
Total Return # -7.96% -4.15%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $4,245 $1,768
Ratio of expenses to average net assets (a) 2.06% 2.50%*
Ratio of net investment income (loss) to average
net assets (a) 1.67% -.28%*
Portfolio Turnover Rate 96% --
<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 $.07, 2.50% and 1.23%,
respectively, for the year ended October 31, 1995.
# Total return would have been lower had the advisor not waived expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
U.S. MICRO-CAP FUND
<CAPTION>
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)
From net realized gains -- --
------ ------
Total distributions -- (.02)
------ ------
Net asset value, end of period $14.34 $10.34
====== ======
Total Return # 38.68% 10.69%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $7,792 $2,052
Ratio of expenses to average net assets (a) 2.04% 2.50%*
Ratio of net investment income (loss) to average
net assets (a) -.67% .68%*
Portfolio Turnover Rate 144% 129%*
<FN>
*Annualized
(a) Management fees have been voluntarily waived for the period February 1,
1995 to October 31, 1995. If fees had been charged fully, net investment
income per share, ratio of expenses to average net assets and ratio of net
investment income to average net assets would have been -$.08, 2.50% and
- -1.13%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the advisor not waived expenses. The
accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
Financial Highlights - October 31, 1995
GROWTH FUND
<CAPTION>
Period from
Years ended October 31 August 14, 1992
1995 1994 1993 to October 31, 1992
<S> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $10.46 $11.25 $10.08 $ 9.92
------ ------ ------ ------
Income from Investment Operations
Net investment income(a) .13 .21 .13 .02
Net realized and unrealized gain (loss) 2.74 (.02) 1.16 .18
------ ------ ------ ------
Total investment operations 2.87 .19 1.29 .20
------ ------ ------ ------
Less Distributions
From net investment income (.17) (.18) (.12) (.04)
From net realized gains (.10) (.80) -- --
------ ------ ------ ------
Total distributions (.27) (.98) (.12) (.04)
------ ------ ------ ------
Net asset value, end of period $13.06 $10.46 $11.25 $10.08
====== ====== ====== ======
Total Return # 28.12% 1.72% 12.80% 9.35%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $59,632 $27,244 $42,306 $32,388
Ratio of expenses to average net assets(a) .97% .94% .87% .94%*
Ratio of net investment income to average net assets(a) 1.02% 1.31% 1.19% 1.08%*
Portfolio Turnover Rate 108% 55% 44% 49%*
<FN>
*Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. 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 $.12, 1.01% and .98%,
respectively, for the year ended October 31, 1995; $.19, 1.08% and 1.17%,
respectively, for the year ended October 31, 1994; $.11, 1.02% and 1.04%,
respectively, for the year ended October 31, 1993; and $.02, 1.18% and 0.84%,
respectively, for the period from August 14, 1992 to October 31, 1992. # Total
return would have been lower had the advisor not waived expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
BOND FUND
Period from
Years ended October 31 April 30, 1993
1995 1994 to October 31, 1993
<S> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $9.29 $10.27 $10.04
------ ------ ------
Income from Investment Operations
Net investment income(a) .65 .53 .27
Net realized and unrealized gain (loss) .83 (.98) .24
------ ------ ------
Total investment operations 1.48 (.45) .51
------ ------ ------
Less Distributions
From net investment income (.64) (.53) (.27)
From net realized gains -- -- (.01)
------ ------ ------
Total distributions (.64) (.53) (0.28)
------ ------ ------
Net asset value, end of period $10.13 $9.29 $10.27
====== ====== ======
Total Return # 16.49% -4.42% 10.21%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $86,343 $64,244 $11,738
Ratio of expenses to average net assets(a) .60% .66% .50%*
Ratio of net investment income to average
net assets(a) 6.69% 5.76% 5.35%*
Portfolio Turnover Rate 21% 205% 13%*
<FN>
*Annualized (a) Management and other expenses charged since the Fund's
inception have been phased in over time. 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 $.64, .75% and
6.54%, respectively, for the year ended October 31, 1995; $.50, 1.04%, and
5.38%, respectively, for the year ended October 30, 1994; and $.23, 1.23% and
4.62%, respectively, for the period ended October 31, 1993. # Total return
would have been lower had the advisor not waived expenses. The accompanying
notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc. Financial Highlights - October 31, 1995
MONEY MARKET FUND
<CAPTION>
Years ended October 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Income from Investment Operations
Net investment income(a) .06 .03 .03 .04 .06
----- ----- ----- ----- -----
Total investment operations .06 .03 .03 .04 .06
----- ----- ----- ----- -----
Less Distributions
From net investment income (.06) (.03) (.03) (.04) (.06)
----- ----- ----- ----- -----
Total distributions (.06) (.03) (.03) (.04) (.06)
----- ----- ----- ----- -----
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return # 5.84% 3.49% 2.66% 3.73% 6.51%
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $299,312 $224,439 $24,207 $31,832 $33,814
Ratio of expenses to average net assets(a) .30% .46% .67% .70% .51%
Ratio of net investment income to average net
assets(a) 5.70% 4.02% 2.62% 3.70% 6.44%
<FN>
(a) Administrative fees have been voluntarily waived for the period from April
1, 1990 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 $.06, .45% and 5.55%,
respectively, for the year ended October 31, 1995; $.03, .61% and 3.87%,
respectively, for the year ended October 31, 1994; $.03, .82% and 2.47%,
respectively, for the year ended October 31, 1993; $.04, .85% and 3.55%,
respectively, for the year ended October 31, 1992; and $.06, .66% and 6.29%,
respectively, for the year ended October 31, 1991. # Total return would have
been lower had the advisor not waived expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
CALIFORNIA INTERMEDIATE TAX-FREE FUND <CAPTION>
Period from
Years ended October 31 November 16, 1990
1995 1994 1993 1992 to October 31, 1991
<S> <C> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $10.13 $11.10 $10.55 $10.39 $10.11
------ ------ ------ ------ ------
Income from Investment Operations
Net investment income(a) .53 .53 .55 .57 .58
Net realized and unrealized gain (loss) .73 (.97) .62 .19 .34
------ ------ ------ ------ ------
Total investment operations 1.26 (.44) 1.17 .76 .92
------ ------ ------ ------ ------
Less Distributions
From net investment income (.53) (.53) (.55) (.57) (.58)
From net realized gains -- -- (.07) (.03) (.06)
------ ------ ------ ------ ------
Total distributions (.53) (.53) (.62) (.60) (.64)
------ ------ ------ ------ ------
Net asset value, end of period $10.86 $10.13 $11.10 $10.55 $10.39
====== ====== ====== ====== ======
Total Return # 12.77% -3.94% 11.37% 7.37% 9.78%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $50,313 $58,305 $59,716 $44,305 $33,572
Ratio of expenses to average net assets(a) .50% .51% .50% .54% .36%*
Ratio of net investment income to average net assets(a) 5.08% 4.94% 5.05% 5.38% 5.88%*
Portfolio Turnover Rate 18% 21% 26% 18% 41%*
<FN>
*Annualized (a) Management and other expenses charged since the Fund's
inception have been phased-in over time. 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 $.51,
.72% and 4.86%, respectively, for the year ended October 31, 1995; $.51, .71%
and 4.74%, respectively, for the year ended October 31, 1994; $.53, .71% and
4.84%, respectively, for the year ended October 31, 1993; and $.54, .83% and
5.09%, respectively, for the year ended October 31, 1992; and $.53, .88% and
5.36%, respectively, for the period November 16, 1990 to October 31, 1991. #
Total return would have been lower had the advisor not waived expenses. The
accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Fremont Mutual Funds, Inc. (the Corporation) is an open-end, diversified
investment company authorized to issue ten billion shares of $.0001 par
value capital stock. These shares are currently offered in eight series:
n the FREMONTGLOBALFUND
n the FREMONTINTERNATIONAL GROWTHFUND
n the FREMONTINTERNATIONAL SMALL CAP FUND
n the FREMONT U.S. MICRO-CAP FUND
n the FREMONTGROWTHFUND
n the FREMONTBONDFUND
n the FREMONTMONEYMARKETFUND
n the FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
(the California Intermediate Tax-Free Fund is available only to
residents of Arizona, California, Colorado, Nevada, New Mexico, Oregon,
Texas, Utah and Washington)
Each of the Funds maintains a totally separate investment portfolio.
Significant accounting policies followed by the Funds are summarized below.
The policies are in conformity with generally accepted accounting principles
for investment companies.
Several funds were offered on a private placement basis to qualified
investors prior to their registration for sale under the Securities Act of
1933 and subsequent offering to the general public. The funds and their
respective registration dates are as follows :
Registration Date Under
Investment Company Securities Act
Act of 1940 of 1933
Fund
International Growth February 1, 1994 March 1, 1994
Growth May 11, 1992 August 14, 1992
Bond March 1, 1993 April 30, 1993
California Tax-Free July 2, 1990 November 16, 1990
Because the dates on which the shares were offered for public sale do not
coincide with the dates these funds began operations, the Financial
Highlights contained in this report for these funds reflect information
only from public offer date as required by the Securities and Exchange
Commission.
A. Security Valuations
Investments, including options, are stated at value based on recorded
closing sales on a national securities exchange or, in the absence of
a recorded sale, at the mean between the last reported bid and asked
prices or at fair value as determined by the Board of Directors.
Short-term notes and similar securities are included in investments
at amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective
exchanges or the most recent price available where no closing value
is available.
Securities in the Money Market Fund have a remaining maturity of not
more than 397 days and its entire portfolio has a weighted average
maturity of not more than 90 days. As such, all of the Fund's
securities are valued at amortized cost, which approximates value. If
the Fund's portfolio had a remaining weighted average maturity of
greater than 90 days the portfolio would be stated at value based on
recorded closing sales on a national securities exchange or, in the
absence of a recorded sale, at the mean between the bid and asked
prices.
B. Security Transactions
Security transactions are accounted for as of trade date. Realized
gains and losses on security transactions are determined on the basis
of specific identification for both financial statement and federal
income tax purposes.
C. Investment Income, Expenses and Distributions
Dividends are recorded on the ex-dividend date, except that certain
dividends from foreign securities in the Global Fund, the
International Growth Fund and the International Small Cap Fund are
recorded when the Fund is informed of the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount and
premium are amortized as required by the Internal Revenue Code.
Distributions to shareholders are recorded on the ex-dividend date.
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
D. Expense Allocation
The Corporation accounts for the assets of each Fund separately and
allocates general expenses of the Corporation to each Fund based upon
the relative net assets of each Fund or the nature of the services
performed and their applicability to each Fund.
E. Income Taxes
The Funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all taxable income and net capital gains, if any, to
shareholders. Therefore, no income tax provision is required. Each
Fund is treated as a separate entity in the determination of
compliance with the Internal Revenue Code and distributes taxable
income and net realized gains, if any, in accordance with schedules
described in their respective Prospectuses. The portfolio of the
California Intermediate Tax-Free Fund is composed solely of issues
that qualify for tax-exempt status for both Federal and State of
California income tax purposes.
Income dividends and capital gain distributions paid to shareholders
are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles and, therefore,
may differ from the information presented in the financial
statements. These differences are generally referred to as "book/tax"
differences and are primarily due to differing treatments for foreign
currency transactions, losses deferred due to wash sale rules,
classification of gains/losses related to paydowns and certain
futures and options transactions.
Permanent book/tax differences causing payments to shareholders of
income dividends which are in excess of the net investment income
reported in the financial statements will result in reclassification
of such excess to paid in capital from undistributed net investment
income. Temporary book/tax differences, which will reverse in
subsequent periods, will not be reclassified and will remain in
undistributed net investment income. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
For Federal income tax purposes, certain funds have capital loss
carryovers at October 31, 1995. Capital loss carryovers result when a
fund has net capital losses during a tax year. These are carried over
to subsequent years and may reduce distributions of realized gains in
those years. Unused capital loss carryovers expire in eight years.
The following funds have capital loss carryovers at October 31, 1995
which expire in the years indicated.
Fund Amount Expires in
International Growth $ 1,334,365 2002
948,173 2003
International Small Cap 21,571 2003
Until such capital loss carryovers are offset or expire, it is
unlikely that the Board of Directors will authorize a distribution of any net
realized gains.
F. Foreign Currency Translation
The market values of foreign securities, currency holdings, and other
assets and liabilities of the Global Fund, the International Growth
Fund, the International Small Cap Fund and the Bond Fund are
translated to U.S. dollars based on the daily exchange rates.
Purchases and sales of securities, income and expenses are translated
at the exchange rate on the transaction date. Income and withholding
taxes are translated at prevailing exchange rates when accrued or
incurred.
For those Funds which are allowed by the terms of their respective
prospectuses to invest in securities and other transactions
denominated in foreign currencies, currency gain(loss) will occur
when such securities and transactions are translated into U.S.
dollars. Such Funds have adopted Statement of Position (SOP) 93-4:
Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies effective November 1, 1993. The key provisions
of the SOP and its impact on the financial statements are summarized
below.
Certain transactions which result in realized currency gain(loss) are
reported on the Statements of Operations as Realized Gain(Loss) from
Foreign Currency Transactions. These are: currency gain(loss) from
the sale or maturity of forward currency contracts and from the
disposition of foreign currency; and the realization of currency
fluctuations between trade and settlement dates on security
transactions and between accrual and receipt dates on net investment
income.
Realized currency gain(loss) from the sale, maturity or disposition
of foreign securities is not separately reported from the economic or
market component of the gain(loss) and is included under the caption
Realized Gain(Loss) from Investments. Activity related to foreign
currency futures and options on foreign currency is, likewise,
reported under this heading, as these instruments are used to hedge
the foreign currency risks associated with investing in foreign
securities. Consistent with the method of reporting realized currency
gain(loss), unrealized currency gain(loss) on investments is not
separately reported from the underlying economic or market component,
but included under the caption Net Unrealized Appreciation
(Depreciation) on Investments. Unrealized currency gain(loss) on
other net assets is reported under Net Unrealized Appreciation
(Depreciation) on Translation of Assets and Liabilities in Foreign
Currencies.
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
G. Forward Foreign Currency Contracts
A forward foreign currency contract is an obligation to purchase or
sell a currency against another currency at a future date and price
as agreed upon by the parties. These contracts are traded
over-the-counter and not on organized commodities or securities
exchanges. Losses may arise due to changes in the value of the
foreign currencies or if the counterparty does not perform under
the contract.
The Funds may and do use forward foreign currency contracts to
facilitate the settlement of foreign securities. A commitment by a
Fund to purchase a currency forward allows the Fund to have the local
currency on hand to settle foreign security purchases on the payment
date. Likewise, a commitment to sell a currency forward allows the
Fund to take the foreign currency proceeds from the sale of foreign
securities and exchange it for U.S. dollars at a predetermined price.
In addition, the Global Fund and the Bond Fund use such contracts
to manage their respective currency exposure. Contracts to receive
generally are used to acquire exposure to foreign currencies,
while contracts to deliver are used to hedge a fund's investments
against currency fluctuations. A contract to receive or deliver
can also be used to offset a previous contract.
The market risk involved in these contracts is in excess of the
amounts reflected in the Funds' Statements of Assets and Liabilities
since only the change in the underlying values is reflected (as an
asset where there is appreciation or as a liability if depreciated)
and not the actual underlying values. At October 31, 1995 the
underlying values for open foreign currency contracts were as
follows:
<TABLE>
<CAPTION>
Net Unrealized
Settlement To Receive Initial Current Appreciation
Date (To Deliver) Value Value (Depreciation)
<S> <C> <C> <C> <C> <C>
Global Fund 11/16/95 NLG5,036,938 $3,164,899 $3,188,944 $ 24,045
11/01/95 DM(1,562,850) (1,116,640) (1,109,860) 6,780
----------
30,825
==========
Bond Fund 11/30/95 DM(6,116,000) $(4,331,123) $(4,348,692) $ (17,569)
12/08/95 DM (591,840) (416,789) (420,987) (4,198)
----------
$ (21,767)
==========
</TABLE>
DM - Deutschemark, NLG - Netherlands Gilder
H. Futures
A futures contract is an agreement between two parties to buy or sell
a security or financial interest at a set price on a future date and
is standardized and exchange-traded. Upon entering into such a
contract, the purchaser is required to pledge to the broker an amount
of cash or securities equal to the minimum "initial margin"
requirements of the exchange on which the contract is traded.
Pursuant to the contract, the purchaser agrees to receive from or pay
to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the purchaser as unrealized
gains or losses. When the contract is closed, the purchaser records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed. The Funds use futures contracts to hedge foreign currency
and interest rate risks.
At October 31, 1995, the following Funds had futures contracts
outstanding:
<TABLE>
<CAPTION>
Net
Contracts Unrealized
To Buy Expiration Initial Current Appreciation
(To Sell) Date Value Value (Depreciation)
<S> <C> <C> <C> <C> <C>
Global Fund
Deutschemark (707) Dec 95 $ (60,111,967) $ (62,905,325) $ (2,793,358)
=========
Bond Fund
5 yr. U.S. Treasury Note 100 Dec 95 $ 10,720,156 $ 10,832,812 $ 112,656
10 yr. U.S. Treasury Note 175 Dec 95 19,288,906 19,517,969 229,063
30 yr. U.S. Treasury Bond 70 Dec 95 7,940,625 8,194,375 253,750
10 yr. Federal Republic of Germany Bond 40 Dec 95 DM 9,474,000 DM 9,663,000* 127,983
----------
$ 723,452
==========
<FN>
DM - Deutschemark
*The current value of these contracts in U.S. dollars is $6,862,195.
</FN>
</TABLE>
At October 31, 1995, $2,000,000 and $660,000 par value of U.S.
Treasury Bills were held by brokers to satisfy the initial margin requirements
related to these contracts for the Global Fund and the Bond Fund,
respectively.
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
I. Securities Lending
All the Funds are authorized to make loans of their portfolio
securities to broker-dealers or to other institutional investors up to
33-1/3% of their respective net assets. The borrower must maintain
with the Funds' 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 but unpaid
distributions. The collateral is invested in a money market fund that
meets the criteria of Section 2(a)-7 of the 1940 Act.
The Funds receive a portion of the income earned on the collateral.
For the year ended October 31, 1995, transactions in securities
lending resulted in fee income to the Global, International Growth,
International Small Cap and Growth Funds of $82,438, $9,361, $244 and
$1,816, respectively.
At October 31, 1995, no Fund had securities out on loan.
2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Investment Advisor
The Funds each have entered into an investment management agreement with
Fremont Investment Advisors, Inc. (the Advisor), a wholly owned
subsidiary of The Fremont Group, Inc. Under these agreements, the Advisor
supervises and implements each Fund's investment activities and provides
administrative services as necessary to conduct Fund business. For its
advisory and administrative services, the Advisor receives a fee based on
the average daily net assets of the Funds as described below.
<TABLE>
<CAPTION>
Advisory Fee Administrative Fee
<S> <C> <C>
Global Fund .60% on all net assets .15% on all net assets
International Growth Fund 1.50% on all net assets --
International Small Cap Fund (*) 2.50% on first $30 million --
2.00% on next $70 million --
1.50% on balance over $100 million --
U.S. Micro-Cap Fund (*) 2.50% on first $30 million --
2.00% on next $70 million --
1.50% on balance over $100 million --
Growth Fund(*) .50% on all net assets .15% on all net assets
Bond Fund(*) .40% on all net assets .15% on all net assets
Money Market Fund(*) .30% on first $50 million .15% on all net assets
.20% on balance over $50 million
California Intermediate Tax-Free Fund(*) .40% on first $25 million .15% on all net assets
.35% on next $25 million
.30% on next $50 million
.25% on next $50 million
.20% on balance over $150 million
<FN>
(*)The Advisor has voluntarily waived some of its fees for these Funds.
All fees waived in the past will not be recouped in the future and,
as these waivers are voluntary, they may be changed in the future.
For the International Small Cap Fund and the U.S. Micro-Cap Fund,
effective February 1, 1995, the Advisor is voluntarily limiting the
advisory fee to a reduced rate of 1.98% of net assets. For the Growth
Fund, the Advisor waived the entire administrative fee until June 26,
1992 when it began charging a voluntarily reduced rate of 0.01% of
net assets. This waiver was eliminated on April 1, 1995. For the
California Intermediate Tax-Free Fund, the Advisor has waived part or
all of the advisory and administrative fees at various times.
Currently, the advisory and administrative fees are charged at
voluntarily reduced rates of .30% and .005% of net assets,
respectively. For the Bond Fund, the Advisor waived its investment
advisory fee until March 1, 1994 when it began charging .25% of net
assets. The advisory fee remained at .25% until June 15, 1994 when it
was charged at the full rate of .40% of net assets. The
administrative fee has been waived in its entirety until further
notice. In addition, the Advisor had limited the other operating
expenses of the Fund to 0.50% of net assets until July 14, 1994 when
the Fund began bearing all of its own expenses.
For the Money Market Fund, the Advisor has waived the administrative
fee in its entirety since April 1, 1990.
</FN>
</TABLE>
Selected per share data and operating ratios have been disclosed both
before and after the impact of these various waivers and expense limitations
under each Fund's Financial Highlights table.
Under the terms of the Advisory agreements, the Advisor receives a single
management fee from the International Growth Fund, the International
Small Cap Fund, and the U.S. Micro-Cap Fund, and is obligated to pay all
expenses of these Funds except extraordinary expenses (as determined by a
majority of the disinterested directors) and interest, brokerage
commissions, and other transaction charges relating to the investing
activities of those Funds.
Each Fund is also required to comply with the limitations set forth in the
laws, regulations, and administrative interpretations of the states in
which it is registered. For the year ended October 31, 1995, no
reimbursements were required or made to any Fund by the Advisor to comply
with these limitations.
Other Related Parties
At October 31, 1995 The Fremont Group, Inc. and its affiliated companies
including their employee retirement plans, its principal shareholder,
Stephen D. Bechtel, Jr., and members of his family, including trusts,
owned directly or indirectly the following approximate percentages of
the various Funds:
% of Shares
Outstanding
Global Fund 65%
International Growth Fund 91%
International Small Cap Fund 21%
U.S. Micro-Cap Fund 31%
Growth Fund 71%
Bond Fund 92%
Money Market Fund 83%
California Intermediate Tax-Free Fund 63%
Additionally, Morgan Grenfell Capital Management, Inc., subadvisor of the
U.S. Micro-Cap Fund, owned approximately 9% of the Fund. Certain officers
and/or directors of the Funds are also officers and/or directors of the
Advisor and/or The Fremont Group, Inc.
3. ORGANIZATION COSTS
Costs incurred by each Fund, if any, in connection with its organization
have been deferred and are amortized on a straight-line basis over a
period of five years (60 months).
4. PURCHASES AND SALES/MATURITIES OF INVESTMENT SECURITIES
Aggregate purchases and aggregate proceeds from sales and maturities of
securities for the year ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
Purchases Proceeds
<S> <C> <C>
Long term securities excluding US Government securities:
Global Fund $ 375,014,303 $ 327,950,059
International Growth Fund 12,325,575 8,485,050
International Small Cap Fund 5,242,125 2,353,699
U.S. Micro-Cap Fund 8,565,687 4,411,818
Growth Fund 60,533,280 40,259,370
Bond Fund 16,907,058 9,337,949
California Intermediate Tax-Free Fund 9,455,820 19,021,435
Long term US Government securities:
Global Fund $ 20,988,232 $ 25,498,348
Bond Fund 10,112,310 2,121,850
</TABLE>
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
Transactions in written put and call options for the year ended
October 31, 1995 for the Bond Fund were as follows:
<TABLE>
<CAPTION>
Amount of Number of
Premiums Contracts
<S> <C> <C>
Options outstanding at October 31, 1994 $20,013 50
Options sold 396,877 710
Options cancelled in closing purchase transactions -- --
Options expired prior to exercise (345,437) (620)
Options exercised (47,705) (70)
------- -------
Options outstanding at October 31, 1995 $23,748 70
======= =======
The following written options were outstanding at October 31, 1995:
<CAPTION>
Number of Exercise Expiration
Name of Issuer Contracts Price Date Value
<S> <C> <C> <C> <C> <C>
Put Options: CBOT 30 yr. U.S. Treasury Bond Futures 70 112 11/17/95 $ 2,188
CBOT - Chicago Board of Trade
</TABLE>
The Bond Fund received premiums of $23,748 on these contracts and has an
unrealized gain of $21,560. The total notional value underlying these
contracts is $7,000,000.
5. PORTFOLIO CONCENTRATIONS
Although each Fund has a diversified investment portfolio, there are
certain investment concentrations of risk which may subject each Fund more
significantly to economic changes occurring in certain segments or industries.
6. UNREALIZED APPRECIATION (DEPRECIATION) - TAXBASIS
At October 31, 1995, the cost of securities for Federal income tax
purposes and the gross aggregate unrealized appreciation and/or depreciation
based on that cost were as follows: <TABLE>
<CAPTION>
Gross Aggregate Unrealized
Cost Appreciation Depreciation Net
<S> <C> <C> <C> <C>
Global Fund $ 436,028,883 $ 56,758,719 $ (10,411,381) $ 46,347,338
International Growth Fund 30,095,936 4,381,143 (2,321,607) 2,059,536
International Small Cap Fund 4,384,475 252,366 (468,938) (216,572)
U.S. Micro-Cap Fund 6,795,869 1,232,783 (290,023) 942,760
Growth Fund 50,189,029 9,921,703 (915,878) 9,005,825
Bond Fund 83,794,520 2,026,421 (693,184) 1,333,237
Money Market Fund 303,888,378 -- -- --
California Intermediate Tax-Free Fund 47,760,684 2,092,397 (199,726) 1,892,671
</TABLE>
<PAGE>
<PAGE>
FREMONT MUTUAL FUNDS, INC.
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
1-800-548-4539
Part B
Statement of Additional Information
This Statement of Additional Information concerning the Fremont California
Intermediate Tax-Free Fund of Fremont Mutual Funds, Inc. (the "Investment
Company") is not a prospectus for the Fund. This Statement supplements the
Prospectus for the Fund dated February 20, 1996 and should be read in
conjunction with that Prospectus. Copies of the Prospectus are available
without charge by calling the Investment Company at the phone number printed
above.
The date of this Statement of Additional Information is February 20, 1996.
caltfmf.sai
February 15, 1996
6
<PAGE>
TABLE OF CONTENTS
Page
Investment Objective, Policies and Risk
Considerations.................................................. 3
Investment Restrictions...........................................14
Investment Company Directors and Officers.........................16
Investment Advisory and Other Services............................19
Execution of Portfolio Transactions...............................22
How to Invest.....................................................23
Other Investment and Redemption Services..........................24
Special Tax Considerations........................................25
Taxes - Mutual Funds..............................................28
Additional Information............................................31
Investment Results............................................... 33
Appendix A: Description of Ratings...............................A-1
Appendix B: Annual Report
7
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The descriptions below are intended to supplement the material in the
Prospectus of the Fremont California Intermediate Tax-Free Fund (the
"Fund") under "Investment Objective, Policies and Risk Considerations."
MUNICIPAL SECURITIES
Municipal securities are issued by or on behalf of states, territories, and
possessions of the United States and the District of Columbia and by their
political subdivisions, agencies, and instrumentalities. The interest on
these obligations is generally not includable in gross income of most
investors for federal income tax purposes. Issuers of municipal obligations
do not usually seek assurances from governmental taxing authorities with
respect to the tax-free nature of the interest payable on such obligations.
Rather, issuers seek opinions of bond counsel as to such tax status. See
"Special Tax Considerations" below.
Municipal issuers of securities are not usually subject to
the securities registration and public reporting requirements
of the Securities and Exchange Commission and state securities
regulators. As a result, the amount of information available about the
financial condition of an issuer of municipal obligations may not be as
extensive as that which is made available by corporations whose securities
are publicly traded. The two principal classifications of municipal
securities are general obligation securities and limited obligation (or
revenue) securities. There are, in addition, a variety of hybrid and
special types of municipal obligations as well as numerous differences in
the financial backing for the payment of municipal obligations (including
general fund obligation leases described below), both within and between
the two principal classifications. Long-term municipal securities are
typically referred to as "bonds" and short-term municipal securities are
typically called "notes."
Payments due on general obligation bonds are secured by the issuer's pledge
of its full faith and credit including, if available, its taxing power.
Issuers of general obligation bonds include states, counties, cities, towns
and various regional or special districts. The proceeds of these
obligations are used to fund a wide range of public
8
<PAGE>
facilities such as the construction or improvement of schools, roads
and sewer systems.
The principal source of payment for a limited obligation bond or revenue
bond is generally the net revenue derived from particular facilities
financed with such bonds. In some cases, the proceeds of a special tax or
other revenue source may be committed by law for use to repay particular
revenue bonds. For example, revenue bonds have been issued to lend the
proceeds to a private entity for the acquisition or construction of
facilities with a public purpose such as hospitals and housing. The loan
payments by the private entity provide the special revenue source from
which the obligations are to be repaid.
MUNICIPAL NOTES. Municipal notes generally are used to provide short-term
capital funding for municipal issuers and generally have maturities of one
year or less. Municipal notes of municipal issuers include tax anticipation
notes, revenue anticipation notes and bond anticipation notes:
TAX ANTICIPATION NOTES are issued to raise working capital on a short-term
basis. Generally, these notes are issued in anticipation of various
seasonal tax revenues being paid to the issuer, such as property, income,
sales, use and business taxes, and are payable from these specific future
taxes.
REVENUE ANTICIPATION NOTES are issued in anticipation of the receipt of
non-tax revenue, such as federal revenues or grants.
BOND ANTICIPATION NOTES are issued to provide interim financing until
long-term financing can be arranged. In most cases, long-term bonds are
issued to provide the money for the repayment of these notes.
COMMERCIAL PAPER. Issues of municipal commercial paper typically represent
short-term, unsecured, negotiable promissory notes. Agencies of state and
local governments issue these obligations in addition to or in lieu of
notes to finance seasonal working capital needs or to provide interim
construction financing and are paid from revenues of the issuer or are
refinanced with long-term debt. In most cases, municipal commercial paper
is backed by letters of credit, lending agreements, note repurchase
agreements or other credit facility agreements offered by banks or other
institutions.
PARTICULAR RISK FACTORS RELATING TO CALIFORNIA MUNICIPAL SECURITIES.
9
<PAGE>
The following describes certain risks with respect to California municipal
securities in which the Fund predominantly will invest. This summarized
information is based on information drawn from official statements and
prospectuses relating to securities offerings of the State of California
and various local agencies in California, available as of the date of this
Statement of Additional Information. While the Advisor has not
independently verified such information, it has no reason to believe that
such information is not correct in all material respects. In addition to
this current information, future California constitutional amendments,
legislative measures, executive orders, administrative regulations and
voter initiatives could have an adverse effect on the debt obligations of
California issuers.
Certain debt obligations held by the Fund may be obligations of issuers
which rely in whole or in substantial part on California state revenues for
the continuance of their operations and the payment of their obligations.
Whether and to what extent the California Legislature will continue to
appropriate a portion of the state's general fund to counties, cities and
their various entities, is not entirely certain. To the extent local
entities do not receive money from the state to pay for their operations
and services, their ability to pay debt service on obligations held by the
Fund may be impaired.
Certain of the debt obligations may be obligations of issuers who rely in
whole or in part on ad valorem real property taxes as a source of revenue.
The California Constitution limits the taxing and spending powers of the
State of California and its public agencies and, therefore, the ability of
California issuers to raise revenues through taxation, and to spend such
revenues over a predetermined limit.
Certain debt obligations held by the Fund may be obligations payable solely
from lease payments on real property or personal property leased to the
state, cities, counties or their various public entities. California law
requires that the lessee is not required to make lease payments during any
period that it is denied use and occupancy of the property leased in
proportion to such loss. Moreover, the lessee only agrees to include lease
payments in its annual budget for each fiscal year. In case of a default
under the lease, the only remedy available against the lessee is that of
reletting the property; no acceleration of lease payments is permitted.
Each of these factors presents a risk that the lease financing obligations
held by the Fund would not be paid in a timely manner.
Certain debt obligations held by the Fund may be obligations which are
payable solely from the revenues of health care institutions. The method of
reimbursement for indigent care, California's selective
10
<PAGE>
contracting with health care providers for such care, and selective
contracting by health insurers for care of its beneficiaries now in effect
under California and federal law may adversely affect these revenues and,
consequently, payment on those debt obligations.
Debt obligations payable solely from revenues of health care institutions
may also be insured by the State of California pursuant to a mortgage
insurance program operated by the Office of Statewide Health Planning and
Development (the "Office"). If a default occurs on such insured debt
obligations, the Office may either continue to make debt service payments
on the obligations, or foreclose on the mortgage and request the State
Treasurer to issue debentures payable from a reserve fund established under
the insurance program or from unappropriated state funds. At the request of
the Office, Arthur D. Little, Inc., a consulting firm, has prepared reports
relating to the reserve fund. The latest report indicates that the reserve
fund is under-funded. Moreover, moneys in the reserve fund may be and have
been reappropriated by the California Legislature for other purposes. The
Company cannot predict what, if any, impact the underfunding of the reserve
fund may have on such debt obligations.
Certain debt obligations held by the Fund may be obligations which are
secured in whole or in part by a mortgage or deed of trust on real
property. California has five principal statutory provisions which limit
the remedies of a creditor secured by a mortgage or deed of trust. To limit
the creditor's right to obtain a deficiency judgment, one limitation is
based on the method of foreclosure, and the other on the type of debt
secured. Under the former, a deficiency judgment is barred when the
foreclosure is accomplished by means of nonjudicial trustee's sale. Under
the latter, a deficiency judgment is barred when the foreclosed mortgage or
deed of trust secures certain purchase money obligations. Another
California statute, commonly known as the "one form of action" rule,
requires creditors secured by real property to exhaust their real property
security by foreclosure before bringing a personal action against the
debtor. Another statutory provision limits any deficiency judgment obtained
by a creditor secured by real property following a judicial sale of such
property to the excess of the outstanding debt over the fair value of the
property at the time of the sale, thus preventing the creditor from
obtaining a large deficiency judgment against the debtor as a result of low
bids at a judicial sale. Another statutory provision gives the debtor the
right to redeem the real property from any judicial foreclosure sale as to
which a deficiency judgment may be ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to California
real property, the creditor's nonjudicial foreclosure
11
<PAGE>
rights under the power of sale contained in the mortgage or deed of trust
are subject to the constraints imposed by California law upon transfers of
title to real property by private power of sale. During the three-month
period beginning with the filing of a formal notice of default, the debtor
is entitled to reinstate the mortgage by making any overdue payments. Under
standard loan servicing procedures, the filing of the formal notice of
default does not occur unless at least three full monthly payments have
become due and remain unpaid. The power of sale is exercised by posting and
publishing a notice of sale for at least 20 days after expiration of the
three-month reinstatement period. Therefore, the effective minimum period
of foreclosing on a mortgage could be in excess of seven months after the
initial default. Such time delays in collections could disrupt the flow of
revenues available to an issuer for the payment of debt service on the
outstanding obligations if such defaults occur with respect to a
substantial number of mortgages or deeds of trust securing an issuer's
obligations.
In addition, a court could find that there is sufficient involvement of the
issuer in the nonjudicial sale of property securing a mortgage for such
private sale to constitute "state action," and could hold that the private
right-of-sale proceedings violate the due process requirements of the
federal or state constitutions, consequently preventing an issuer from
using the nonjudicial foreclosure remedy described above.
Certain debt obligations held by the Fund may be obligations which finance
the acquisition of single-family home mortgages for low and moderate income
mortgagors. These obligations may be payable solely from revenues derived
from the home mortgages, and are subject to California's statutory
limitations described above applicable to obligations secured by real
property. Under California antideficiency legislation, there is no personal
recourse against a mortgagor of a single family residence purchased with
the loan secured by the mortgage, regardless of whether the creditor
chooses judicial or nonjudicial foreclosure.
Under California law, mortgage loans secured by single-family,
owner-occupied dwellings may be prepaid at any time. Prepayment charges on
such mortgage loans may be imposed only with respect to voluntary
prepayments made during the first five years during the term of the
mortgage loan, and cannot in any event exceed six months' advance interest
on the amount prepaid in excess of 20% of the original principal amount of
the mortgage loan. This limitation could affect the flow of revenues
available to an issuer for debt service on the outstanding debt obligations
which finance such home mortgages.
12
<PAGE>
INTEREST RATE FUTURES CONTRACTS. The Fund may enter into interest rate
contracts ("Futures" or "Futures Contracts") as a hedge against changes in
prevailing levels of interest rates in order to establish more definitely
the effective return on securities held or intended to be acquired by the
Fund. The Fund's hedging may include sales of Futures as an offset against
the effect of expected increases in interest rates or purchases of Futures
as an offset against the effect of expected declines in interest rates.
(See "Federal Tax Treatment of Interest Rate Futures Contracts," below.)
The Fund will not enter into Futures Contracts for speculation and will
only enter into Futures Contracts which are traded on national futures
exchanges and are standardized as to maturity date and underlying financial
instrument. The principal interest rate Futures exchanges in the United
States are the Board of Trade of the City of Chicago and the Chicago
Mercantile Exchange. Futures exchanges and trading are regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission.
Although techniques other than sales and purchases of Futures Contracts
could be used to reduce a Fund's exposure to interest rate fluctuations,
the Fund may be able to hedge its exposure more effectively and perhaps at
a lower cost through using Futures Contracts.
13
<PAGE>
The Fund will not enter into a Futures Contract if, as a result thereof,
more than 5% of the Fund's total assets (taken at market value at the time
of entering into the contract) would be committed to "margin" (down
payment) deposits on such Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase
by another party of a specified amount of a specific financial instrument
(debt security or currency) for a specified price at a designated date,
time and place. Brokerage fees are incurred when a Futures Contract is
bought or sold and margin deposits must be maintained.
Although Futures Contracts typically require future delivery of and payment
for financial instruments, the Futures Contracts are usually closed out
before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract
purchase or sale, respectively, for the same aggregate amount of the
identical type of financial instrument and the same delivery date. If the
offsetting purchase price is less than the original sale price, the Fund
realizes a gain; if it is more, the Fund realizes a loss. The transaction
costs must also be included in these calculations. There can be no
assurance, however, that a Fund will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular
time. If the Fund is not able to enter into an offsetting transaction, the
Fund will continue to be required to maintain the margin deposits on the
Contract.
As an example of an offsetting transaction in which the financial
instrument is not delivered, the contractual obligations arising from the
sale of one Contract of September Treasury Bills on an exchange may be
fulfilled at any time before delivery of the Contract is required (i.e., on
a specified date in September, the "delivery month") by the purchase of one
Contract of September Treasury Bills on the same exchange. In such
instance, the difference between the price at which the Futures Contract
was sold and the price paid for the offsetting purchase, after allowance
for transaction costs, represents the profit or loss to the Fund.
RISKS IN INTEREST RATE FUTURES CONTRACTS. The prices of Futures Contracts
are volatile and are influenced, among other things, by actual and
anticipated changes in interest rates, which in turn are affected by fiscal
and monetary policies and national and international political and economic
events.
At best, the correlation between changes in prices of Futures Contracts and
of the securities being hedged can be only approximate.
14
<PAGE>
The degree of imperfection of correlation depends upon circumstances such
as: variations in speculative market demand for futures and for debt
securities or currencies, including technical influences in Futures
trading; and differences between the financial instruments being hedged and
the instruments underlying the standard Futures Contracts available for
trading, with respect to interest rate levels, maturities, and
creditworthiness of issuers. There are, for example, numerous such
differences between municipal securities and U.S. Treasury Bills. A
decision of whether, when, and how to hedge involves skill and judgment,
and even a well-conceived hedge may be unsuccessful to some degree because
of unexpected market behavior or interest rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial
loss, as well as gain, to the investor. For example, if at the time of
purchase, 10% of the value of the Futures Contract is deposited as margin,
a subsequent 10% decrease in the value of the Futures Contract would result
in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease
would result in a loss equal to 150% of the original margin deposit, if the
Contract were closed out. Thus, a purchase or sale of a Futures Contract
may result in losses in excess of the amount invested in the Futures
Contract. However, the Fund would presumably have sustained comparable
losses if, instead of the Futures Contract, it had invested in the
underlying financial instrument and sold it after the decline. Furthermore,
in the case of a Futures Contract purchase, in order to be certain that the
Fund has sufficient assets to satisfy its obligations under a Futures
Contract, the Fund segregates and commits to back the Futures Contract
money market instruments equal in value to the current value of the
underlying instrument less the margin deposit.
Most United States Futures exchanges limit the amount of fluctuation
permitted in Futures Contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a Futures Contract
may vary either up or down from the previous day's settlement price at the
end of a trading session. Once the daily limit has been reached in a
particular type of Contract, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions.
Futures Contract prices have occasionally moved to the daily limit for
several consecutive trading days with
15
<PAGE>
little or no trading, thereby preventing prompt liquidation of Futures
positions and subjecting some Futures traders to substantial losses.
FEDERAL TAX TREATMENT OF INTEREST RATE FUTURES CONTRACTS. Except for
transactions identified as hedging transactions, the Fund is required for
federal income tax purposes to recognize as income for each taxable year
its net unrealized gains and losses on Futures Contracts as of the end of
the year as well as those actually realized during the year. Identified
hedging transactions would not be subject to the mark to market rules and
would result in the recognition of ordinary gain or loss. Otherwise, unless
transactions in Futures Contracts are classified as part of a "mixed
straddle," any gain or loss recognized with respect to a Futures Contract
is considered to be 60% long-term capital gain or loss and 40% short-term
capital gain or loss, without regard to the holding period of the Contract.
In the case of a Futures transaction classified as a "mixed straddle," the
recognition of losses may be deferred to a later taxable year.
Sales of Futures Contracts which are intended to hedge against a change in
the value of securities held by the Fund may affect the holding period of
such securities and, consequently, the nature of the gain or loss on such
securities upon disposition.
In order for the Fund to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross
income for a taxable year must be derived from qualifying income; i.e.,
dividends, interest, income derived from loans of securities, and gains
from the sale of securities. In addition, gains realized on the sale or
other disposition of securities held for less than three months must be
limited to less than 30% of the Fund's annual gross income. It is
anticipated that any net gain realized from the closing out of Futures
Contracts will be considered gain from the sale of securities and therefore
be qualifying income for purposes of the 90% requirement. In order to avoid
realizing excessive gains on securities held less than three months, the
Fund may be required to defer the closing out of Futures Contracts beyond
the time when it would otherwise be advantageous to do so. It is
anticipated that unrealized gains on Futures Contracts, which have been
open for less than three months as of the end of the Investment Company's
fiscal year and which are recognized for tax purposes, will not be
considered gains on securities held less than three months for purposes of
the 30% test.
The Fund will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Investment Company's fiscal year) on
Futures transactions. Such distributions
16
<PAGE>
will be combined with distributions of capital gains realized on the Fund's
other investments and shareholders will be advised of the nature of the
payments.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS AND PARTICIPATION INTERESTS.
The Fund may purchase floating rate and variable rate obligations,
including participation interests therein. Floating rate or variable rate
obligations provide that the rate of interest is set as a specific
percentage of a designated base rate (such as the prime rate at a major
commercial bank) or is reset on a regular basis by a bank or investment
banking firm to a market rate. At specified times, the owner can demand
payment of the obligation at par plus accrued interest. Variable rate
obligations provide for a specified periodic adjustment in the interest
rate, while floating rate obligations have an interest rate which changes
whenever there is a change in the external interest rate. Frequently, banks
provide letters of credit or other credit support or liquidity arrangements
to secure these obligations. The quality of the underlying creditor or of
the bank, as the case may be, must, as determined by the Advisor, be
equivalent to the quality standards prescribed for the Fund.
The Fund may invest in participation interests purchased from banks in
floating rate or variable rate obligations owned by banks. A participation
interest gives the Fund an undivided interest in the obligation in the
proportion that the Fund's participation interest bears to the total
principal amount of the obligation, and provides a demand repayment
feature. Each participation is backed by an irrevocable letter of credit or
guarantee of a bank (which may be the bank issuing the participation
interest or another bank). The bank letter of credit or guarantee must meet
the prescribed investment quality standards for the Fund. The Fund has the
right to sell the participation instrument back to the issuing bank or draw
on the letter of credit on demand for all or any part of the Fund's
participation interest in the underlying obligation, plus accrued interest.
LENDING OF PORTFOLIO SECURITIES. For the purpose of realizing
additional income, the Fund may make secured loans of portfolio securities
amounting to not more than 33-1/3% of its net assets. Securities loans are
made to broker-dealers or institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral at least
equal at all times to the value of the securities lent marked to market on
a daily basis. The collateral received will consist of cash, short-term
U.S. Government securities, bank letters of credit or such other collateral
as may be permitted
17
<PAGE>
under the Fund's investment program and by regulatory agencies and approved
by the Board of Directors. While the securities are being lent, the Fund
will continue to receive the equivalent of the interest or dividends paid
by the issuer on the securities, as well as interest on the investment of
the collateral or a fee from the borrower. The Fund has a right to call
each loan and obtain the securities on five business days' notice.
REDUCTION IN BOND RATING. The Fund may invest in debt securities rated at
least BBB or Baa. In the event that the rating for any security held by the
Fund drops below the minimum acceptable rating applicable to the Fund, the
Advisor will determine whether the Fund should continue to hold such an
obligation in its portfolio. Bonds rated below BBB or Baa are commonly
known as "junk bonds." These bonds are subject to greater fluctuations in
value and risk of loss of income and principal due to default by the issuer
than are higher rated bonds. The market value of junk bonds tends to
reflect short-term corporate, economic and market developments and investor
perceptions of the issuer's credit quality to a greater extent than higher
rated bonds. In addition, it may be more difficult to dispose of, or to
determine the value of, junk bonds. See Appendix A for a complete
description of the bond ratings.
18
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment policies and
restrictions in addition to the policies and restrictions discussed in its
prospectus. With respect to the Fund, the policies and restrictions listed
below cannot be changed without approval by the holders of a "majority of
the outstanding voting securities" of the Fund (which is defined in the
Investment Company Act of 1940 (the "1940 Act") to mean the lesser of (i)
67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares). These restrictions provide that the Fund may not:
1. Invest 25% or more of the value of its total assets in the securities
of issuers conducting their principal business activities in the same
industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S.
Government or any of its agencies or instrumentalities, or to tax
exempt securities issued by state governments or political
subdivisions thereof.
2. Buy or sell real estate (including real estate limited
partnerships) or commodities or commodity contracts; however,
the Fund may invest in securities secured by real estate, or
issued by companies which invest in real estate or interests
therein, including real estate investment trusts, and may
purchase and sell currencies (including forward currency exchange
contracts), gold, bullion, futures contracts and related options
generally as described in the Prospectus and Statement of
Additional Information.
3. Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is
defined under the Securities Act of 1933.
4. Make loans, except that the Fund may purchase debt securities, enter
into repurchase agreements, and make loans of portfolio securities
amounting to not more than 33 1/3% of its net assets calculated at
the time of the securities lending.
5. Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The
Fund will not purchase securities while such borrowings are
outstanding.
19
<PAGE>
6. Change its status as a non-diversified investment company.
7. Issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and except that the Investment
Company and the Fund may issue shares of common stock in multiple
series or classes.
8. Notwithstanding any other fundamental investment restriction or
policy, the Fund may 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 the
Fund.
Other current investment policies of the Fund, which are not fundamental
and which may be changed by action of the Board of Directors without
shareholder approval, are as follows. The Fund may not:
9. Invest in companies for the purpose of exercising control or
management.
10. Mortgage, pledge, or hypothecate any of its assets, provided
that this restriction shall not apply to the transfer of
securities in connection with any permissible borrowing.
11. Invest in interests in oil, gas, or other mineral exploration or
development programs or leases.
12. Invest more than 5% of its total assets in securities of
companies having, together with their predecessors, a record
of less than three years of continuous operation.
13. Purchase or retain the securities of any issuer, if those
individual officers and directors of the Investment Company,
its investment advisor, or distributor, each owning
beneficially more than 1/2 of 1% of the securities of such
issuer together own more than 5% of the securities of such
issuer.
20
<PAGE>
14. Purchase securities on margin, provided that the Fund may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities, except that
the Fund may make margin deposits in connection with futures
contracts.
15. Enter into a futures contract if, as a result thereof, more
than 5% of the Fund's total assets (taken at market value at
the time of entering into the contract) would be committed
to margin on such futures contract.
16. Acquire securities or assets for which there is no readily
available market, or which are illiquid, if, immediately
after and as a result, the value of such securities would
exceed, in the aggregate, 15% of that Fund's net assets.
17. Make short sales of securities or maintain a short position,
except that a Fund may sell short "against the box."
18. Invest in securities of an issuer if the investment would cause
the Fund to own more than 10% of any class of securities of any
one issuer.
19. Acquire more than 3% of the outstanding voting securities of any
one investment company.
INVESTMENT COMPANY DIRECTORS AND OFFICERS
The Bylaws of Fremont Mutual Funds, Inc. (the "Investment Company"), the
Maryland investment company which established the Fund, authorize a Board
of Directors of between three and 15 persons, as fixed by the Board of
Directors. There are presently seven directors, each of whom has been
elected by the shareholders of the Investment Company for an indefinite
term of office. A majority of remaining directors may fill director
vacancies caused by resignation, death or expansion of the Board of
Directors. Any director may be removed by vote of holders of a majority of
all outstanding shares of the Investment Company qualified to vote at the
meeting.
21
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
AND BUSINESS EXPERIENCE
NAME AND ADDRESS AGE POSITIONS HELD FOR PAST FIVE YEARS
<S> <C> <C> <C>
David L. Redo (1)(2)(4) 58 President, Chief Executive President and Director, Fremont
Fremont Investment Officer and Director Investment Advisors, Inc.;
Advisors, Inc. Managing Director, Fremont
50 Beale St., Suite 100 Group, Inc.; Director, Sequoia
San Francisco, CA 94105 Ventures, Sit/Kim International
Investment Associates and J.P.
Morgan Securities Asia.
Vincent P. Kuhn, Jr.(1)(2)(4) 63 Executive Vice President, Executive Vice President and
Fremont Investment Chief Compliance Officer Director, Fremont Investment
Advisors, Inc. and Director Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Albert W. Kirschbaum(1)(2)(4) 57 Senior Vice President, Senior Vice President and
Fremont Investment Secretary and Director Director, Fremont Investment
Advisors, Inc. Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Richard E. Holmes(3) 52 Director Vice President and Director,
P.O. Box 479 BelMar Advisors, Inc.
Sanibel, FL 33957 (marketing firm)
William W. Jahnke(3) 52 Director 3/93 - Present
Jahnke & Associates Principal, Jahnke & Associates
58 Camino del Diablo (Consultants)
Orinda, CA 94563
6/83 - 3/93
Chairman, Board of Directors,
Vestek Systems, Inc.
Donald C. Luchessa(3) 66 Director Principal, DCL Advisory
DCL Advisory (marketer for investment
345 California Street, 10th Fl advisors)
San Francisco, CA 94104
David L. Egan(3) 61 Director President, Fairfield Capital
Fairfield Capital Associates, Inc. Associates, Inc. (an investment
44 Montgomery St., Suite 3085 advisor) and Fairfield Capital
San Francisco, CA 94104 Funding, Inc. (a broker-dealer)
22
<PAGE>
Peter F. Landini(4) 44 Senior Vice President Senior Vice President and
Fremont Investment and Treasurer Director, Fremont Investment
Advisors, Inc. Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
William M. Feeney 39 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Marycatherine Dwyer 32 Vice President, Asst. 10/91 - Present
Fremont Investment Compliance Officer Vice President, Fremont
Advisors, Inc. and Asst. Secretary Investment Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105 6/90 - 10/91
Registered Representative,
Liberty Securities
Norman Gee 45 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Alexandra W. Kinchen(4) 50 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Andrew L. Pang(4) 46 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
Robert J. Haddick(4) 36 Vice President Vice President, Fremont
Fremont Investment Investment Advisors, Inc.
Advisors, Inc.
50 Fremont St., Suite 3600
San Francisco, CA 94105
23
<PAGE>
Ian R. Stone 31 Vice President, Asst. Secretary Vice President, Fremont
Fremont Investment and Asst. Treasurer Investment Advisors, Inc.
Advisors, Inc.
50 Beale St., Suite 100
San Francisco, CA 94105
Richard G. Thomas 38 Vice President 11/91 - Present
Fremont Investment Vice President, Fremont
Advisors, Inc. Investment Advisors, Inc.
50 Fremont St., Suite 3500
San Francisco, CA 94105 1/88 - 11/91
Institutional Sales, Charles
Schwab & Co.
Chantal Gaiddon 39 Vice President Controller and Asst. Treasurer,
Fremont Investment and Controller Fremont Investment Advisors,
Advisors, Inc. Inc.
50 Beale St., Suite 100
San Francisco, CA 94105
<FN>
(1) Director who is an "interested person" of the Company due to his
affiliation with the Company's investment manager.
(2) Member of the Executive Committee.
(3) Member of the Audit Committee and the Contracts Committee.
(4) Member of the Fremont Investment Committee.
</FN>
</TABLE>
During the fiscal year ended October 31, 1995, Richard E. Holmes received
$3,000 and William W. Jahnke and Donald C. Luchessa each received $4,500
for serving as directors of the Investment Company.
As of January 8, 1996 the officers and directors as a group owned in the
aggregate beneficially or of record less than 1% of the outstanding shares
of the Investment Company.
INVESTMENT ADVISORY AND OTHER SERVICES
MANAGEMENT AGREEMENT. The Advisor, in addition to providing investment
management services, furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative,
clerical and bookkeeping functions of the Investment Company, provides
suitable office space, necessary small office equipment and utilities, and
general purpose accounting forms, supplies, and postage used at the offices
of the Investment Company.
24
<PAGE>
The Fund will pay all of its own expenses not assumed by the Advisor,
including, but not limited to, the following: custodian, stock transfer and
dividend disbursing fees and expenses; taxes and insurance; expenses of the
issuance and redemption of shares of the Fund (including stock
certificates, registration of qualification fees and expenses); legal and
auditing expenses; and the costs of stationery and forms prepared
exclusively for the Fund.
The allocation of general Investment Company expenses among the series of
the Investment Company, including the Fund, is made on a basis that the
directors deem fair and equitable, which may be based on the relative net
assets of each series or the nature of the services performed and relative
applicability to each series.
The directors of the Advisor are David L. Redo, Vincent P. Kuhn, Jr.,
Jon S. Higgins, Peter F. Landini and Albert W. Kirschbaum.
Under the Investment Advisory and Administration Agreement (the "Advisory
Agreement"), the Advisor has agreed to reimburse the Fund if its annual
ordinary expenses exceed the most stringent limits prescribed by any state
in which the Fund's shares are offered for sale. Expenses which are not
subject to this limitation are interest, taxes, the amortization of
organizational expenses, and extraordinary expenses. Expenditures,
including costs incurred in connection with the purchase or sale of
portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are
accounted for as capital items and not as expenses. Reimbursement, if any,
will be on a monthly basis, subject to year-end adjustment. As of March 1,
1992, the Advisor is limiting the management fee to 0.30% per annum until
further notice. Once waived, fees will not be recouped in the future.
The Advisory Agreement may be renewed annually provided that any such
renewal has been specifically approved by (i) the Board of Directors, or by
the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Fund, and (ii) the vote of a majority of directors
who are not parties to the Advisory Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, cast in person, at a meeting
called for the purpose of voting on such approval. The Advisory Agreement
also provides that either party thereto has the right to terminate it
without penalty upon sixty (60) days' written notice to the other party,
and that the Advisory Agreement terminates automatically in the event of
its assignment (as defined in the 1940 Act).
25
<PAGE>
For the fiscal years ended October 31, 1995, 1994 and 1993, the advisory
fees (net of voluntary waivers) paid by the Fund to the Advisor were
$164,416, $190,766 and $158,328, respectively.
The Advisory Agreement also provides for the payment of an administrative
fee to the Advisor at the annual rate of .15% of average net assets. The
Advisor is limiting the administrative fee to .005% until further notice.
For the fiscal years ended October 31, 1995, 1994 and 1993, the Fund paid
to the Advisor administrative fees (net of voluntary waivers) of $2,741,
$3,173 and $2,648, respectively.
The Advisor's employees may engage in personal securities transactions.
However, the Investment Company and the Advisor have adopted a Code of
Ethics for the purpose of establishing standards of conduct for the
Advisor's employees with respect to such transactions. The Code of Ethics
includes some broad prohibitions against fraudulent conduct, and also
includes specific rules, restrictions and reporting obligations with
respect to personal securities transactions of the Advisor's employees.
Generally, each employee is required to obtain prior approval of the
Advisor's compliance officer in order to personally purchase or sell a
security. Purchases or sales of securities which are not eligible for
purchase or sale by the Funds or any other client of the Advisor are
exempted from the prior approval requirement, as are certain other
transactions which the Advisor believes present no potential conflict of
interest. The Advisor's employees are also required to file with the
Advisor quarterly reports of their securities transactions. PRINCIPAL
UNDERWRITER. As of May 5, 1995, the Fund's principal underwriter is Funds
Distributor, Inc., One Exchange Place, Tenth Floor, Boston, Massachusetts
(the "Distributor"). The Distributor is engaged on a non-exclusive basis to
assist in the distribution of shares in various jurisdictions. The
Distributor receives compensation from the Advisor and is not paid either
directly or indirectly by the Investment Company. The Distributor received
compensation of $52,018 with respect to the fiscal year ended October 31,
1995.
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TRANSFER AGENT. The Fund's transfer agent, MGF Service Corp., 312 Walnut
Street, Cincinnati, Ohio (the "Transfer Agent"), maintains the records of
each shareholder's account, answers shareholders' inquiries, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent and performs other shareholder service
functions. The Transfer Agent is a subsidiary of Leshner Financial, Inc.,
of which Robert H. Leshner is the controlling shareholder.
In addition, the Transfer Agent has been retained by the Advisor to assist
in providing administrative services to the Investment Company. In this
capacity, the Transfer Agent supplies non-investment related regulatory
compliance services and executive and administrative services. The Transfer
Agent supervises the preparation of reports to and filings with the
Securities and Exchange Commission and materials for meetings of the Board
of Directors. The Advisor (not the Investment Company) pays the Transfer
Agent a monthly fee of $6,000 for these administrative services. For the
fiscal year ended October 31, 1995, the Advisor paid the Transfer Agent
$72,000 for administrative services on behalf of all series of the
Investment Company.
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the Fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other of the accounts served by the Advisor, including other
series of the Investment Company. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to the Fund,
they will be effected only when the Advisor believes that to do so will be
in the best interest of the Fund. When such concurrent authorizations
occur, the objective will be to allocate the executions in a manner which
is deemed equitable to the accounts involved, including the Fund.
No brokerage commissions have been paid by the Fund during the last three
fiscal years.
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Subject to the requirement of seeking the best available prices and
executions, the Advisor may, in circumstances in which two or more
broker-dealers are in a position to offer comparable prices and executions,
give preference to broker-dealers who have provided investment research,
statistical, and other related services to the Advisor for the benefit of
the Fund and/or of other accounts served by the Advisor. Such preferences
would only be afforded to a broker-dealer if the Advisor determines that
the amount of the commission is reasonable in relation to the value of the
brokerage and research services provided by that broker-dealer and only to
a broker-dealer acting as agent and not as principal. The Advisor is of the
opinion that, while such information is useful in varying degrees, it is of
indeterminable value and does not reduce the expenses of the Advisor in
managing the Fund's portfolio.
HOW TO INVEST
PRICE OF SHARES. The price to be paid by an investor for shares of the
Fund, the public offering price, is based on the net asset value per share
calculated once daily as of the close of trading (currently 4:00 p.m.,
Eastern time) each day the New York Stock Exchange is open as set forth
below. The New York Stock Exchange is currently closed on weekends and on
the following holidays: (i) New Year's Day, Presidents' Day, Good Friday,
Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas Day; and (ii)
the preceding Friday when any of those holidays falls on a Saturday or the
subsequent Monday when any one of those holidays falls on a Sunday.
Portfolio securities with original or remaining maturities in excess of 60
days are valued at the mean of representative quoted bid and asked prices
for such securities or, if such prices are not available, at the equivalent
value of securities of comparable maturity, quality and type. However, in
circumstances where the Advisor deems it appropriate to do so, prices
obtained for the day of valuation from a bond pricing service will be used.
The Fund amortizes to maturity all securities with 60 days or less
remaining to maturity based on their cost to the Fund if acquired within 60
days of maturity or, if already held by the Fund on the 60th day, based on
the value determined on the 61st day.
The Fund deems the maturities of variable or floating rate instruments, or
instruments which the Fund has the right to sell at par to the issuer or
dealer, to be the time remaining until the next
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interest rate adjustment date or until they can be resold or redeemed
ar par.
Where market quotations are not readily available, the Fund values
securities (including restricted securities which are subject to
limitations as to their sale) at fair value pursuant to methods approved by
the Board of Directors
The fair value of any other assets is added to the value of securities, as
described above to arrive at total assets. The Fund's liabilities,
including proper accruals of taxes and other expense items, are deducted
from total assets and a net asset figure is obtained. The net assets so
obtained are then divided by the total number of shares outstanding
(excluding treasury shares), and the result, rounded to the nearest cent,
is the net asset value per share.
OTHER INVESTMENT AND REDEMPTION SERVICES
THE OPEN ACCOUNT. When an investor makes an initial investment in the Fund,
a shareholder account is opened in accordance with the investor's
registration instructions. Each time there is a transaction in a
shareholder account, such as an additional investment, redemption or
distribution (dividend or capital gain), the shareholder will receive from
the Transfer Agent a confirmation statement showing the current transaction
in the shareholder account, along with a summary of the status of the
account as of the transaction date.
PAYMENT AND TERMS OF OFFERING. Payment of shares purchased should
accompany the purchase order, or funds should be wired to the Transfer
Agent as described in the Prospectus. Payment, other than by wire
transfer, must be made by check or money order drawn on a U.S. bank.
Checks or money orders must be payable in U.S. dollars.
As a condition of this offering, if an order to purchase shares is
cancelled due to nonpayment (for example, on account of a check returned
for "not sufficient funds"), the person who made the order will be subject
to a $20 charge and will be responsible for reimbursing the Advisor for any
loss incurred by reason of such cancellation. If such purchaser is a
shareholder, the Fund shall have the authority as agent of the shareholder
to redeem shares in his account for their then-current net asset value per
share to reimburse the Fund for the loss incurred. Such loss shall be the
difference between the net asset value of the Fund on the date of purchase
and the net asset value on the date of cancellation of the purchase.
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Investors whose purchase orders have been cancelled due to nonpayment may
be prohibited from placing future orders.
The Investment Company reserves the right at any time to waive or increase
the minimum requirements applicable to initial or subsequent investments
with respect to any person or class of persons. An order to purchase shares
is not binding on the Investment Company until it has been confirmed in
writing by the Transfer Agent (or other arrangements made with the
Investment Company, in the case of orders utilizing wire transfer of funds)
and payment has been received. To protect existing shareholders, the
Investment Company reserves the right to reject any offer for a purchase of
shares by any individual.
REDEMPTION IN KIND. The Investment Company may elect to redeem shares in
assets other than cash but must pay in cash all redemptions with respect to
any shareholder during any 90-day period in an amount equal to the lesser
of (i) $250,000 or (ii) 1% of the net asset value of the Fund at the
beginning of such period.
SUSPENSION OF REDEMPTION PRIVILEGES. The Investment Company may suspend
redemption privileges with respect to the Fund or postpone the date of
payment for more than seven days after the redemption order is received
during any period (1) when the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the Exchange is
restricted as determined by the Securities and Exchange Commission (the
"SEC"), (2) when an emergency exists, as defined by the SEC, which makes it
not reasonably practicable for the Investment Company to dispose of
securities owned by it or to fairly determine the value of its assets, or
(3) as the SEC may otherwise permit.
SPECIAL TAX CONSIDERATIONS
The percentage of total dividends paid by the Fund with respect to any
taxable year which qualify for exclusion from gross income
("exempt-interest dividends") will be the same for all shareholders
receiving dividends during such year. In order for the Fund to pay
exempt-interest dividends during any taxable year, at the close of each
fiscal quarter at least 50% of the aggregate value of the Fund's assets
must consist of tax-exempt securities. In addition, the Fund must
distribute 90% of the aggregate interest excludable from gross income and
90% of the investment company taxable income earned by the Fund during the
taxable year. Not later than 60 days after the close of its taxable year,
the Fund will notify each shareholder of the portion of the dividends paid
by the Fund to the shareholder with respect to such taxable year which
constitutes exempt-interest dividends. The aggregate amount of dividends so
designated cannot, however, exceed the excess of the amount of interest
excludable from
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gross income from tax under Section 103 of the Internal Revenue Code (the
"Code") received by the Fund during the taxable year over any amounts
disallowed as deductions under Sections 265 and 171(a)(2) of the Code.
The Code treats interest on private activity bonds, as defined therein, as
an item of tax preference subject to an Alternative Minimum Tax on
individuals at a rate of 26% on AMT income up to $175,000 over the
exemption amount, and 28% thereafter, and on corporations at a rate of 20%.
Further, under the Code corporate shareholders must include all federal
exempt-interest dividends in their adjusted current earnings for
calculation of corporate alternative minimum taxable income.
Substantially all "investment company taxable income" earned by the Fund
will be distributed to shareholders. In general, the Fund's investment
company taxable income will be its taxable income (for example, its
interest income on taxable securities and any short-term capital gains)
subject to certain adjustments and excluding the excess of any net
long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year. The Fund would be taxed on any undistributed
investment company taxable income. Since it is intended that any such
income will be distributed, it will be taxable to shareholders as ordinary
income. Market discount earned on tax-exempt obligations will not qualify
as tax-exempt income.
Generally, taxable dividends are taxable to shareholders at the time they
are paid. However, such dividends declared in October, November, and
December by a Fund and made payable to shareholders of record in such a
month are treated as paid and are thereby taxable as of December 31,
provided that the Fund pays the dividend during January of the following
year. Each January, stockholders will receive full information, with
respect to the previous year on dividends and capital gain distributions
for tax purposes, including information such as the portion taxable as
ordinary income, the portion taxable as capital gains, and the amount of
dividends eligible for the dividends-received deduction for corporate
taxpayers.
The Fund is subject to tax in California on the same basis as under
Subchapter M of the Code as described above. If, at the close of each
quarter of its taxable year, at least 50% of the value of the total assets
of the Fund consists of securities the interest on which is exempt from
taxation under the Constitution or statutes of California ("California
Exempt Securities") or the laws of the United States, the Fund will be
qualified to pay dividends exempt from California corporate or personal
income tax to its shareholders (hereinafter referred to as "California
exempt-interest dividends"). The Fund
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intends to qualify under the above requirement so that it can pay
California exempt-interest dividends. If the Fund fails to so qualify, no
part of the Fund's dividends will be exempt from California corporate or
personal income tax. Even if the Fund pays California exempt-interest
dividends, those dividends will nevertheless be subject to franchise taxes
in California.
Not later than 60 days after the close of its taxable year, the Fund will
notify each of its shareholders of the portion of the dividends exempt from
California corporate or personal income tax paid by the Fund to the
shareholder with respect to such taxable year. The total amount of
California exempt-interest dividends paid by the Fund to all of its
shareholders with respect to any taxable year cannot exceed the amount of
interest earned by the Fund during such year on California Exempt
Securities less any expenses or expenditures (including any expenditures
attributable to the acquisition of securities of another California
tax-exempt fund) that are deemed to have been paid from such interest.
Dividends paid by the Fund in excess of this limitation will be treated as
ordinary dividends subject to California corporate or personal income tax
at ordinary rates. For purposes of the limitation, expenses paid during any
year generally will be deemed to have been paid with funds attributable to
interest received by the Fund from California municipal securities for such
year in the same ratio as such interest from California Exempt Securities
bears to the total gross income earned by the Fund for the year. The effect
of this accounting convention is that amounts of interest from California
Exempt Securities received by the Fund that would otherwise be available
for distribution as California exempt-interest dividends will be reduced by
the expenses and expenditures deemed to have been paid from such amounts.
In cases where shareholders are "substantial users" or "related persons"
with respect to California Exempt Securities held by the Fund, such
shareholders should consult their tax advisers to determine whether
California exempt-interest dividends paid by the Fund with respect to such
obligations retain their California corporate or personal income tax
exclusion. In this connection, rules similar to those regarding the
possible unavailability of federal exempt-interest dividend treatment to
"substantial users" are applicable for California state tax purposes.
Long-term and/or short-term capital gain distributions do not constitute
California exempt-interest dividends and will be taxable. Moreover,
interest on indebtedness incurred by a shareholder to
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purchase or carry the Fund's shares is not deductible for California
corporate or personal income tax purposes if the Fund distributes
California exempt-interest dividends during the shareholder's taxable year.
TAXES -- MUTUAL FUNDS
STATUS AS A "REGULATED INVESTMENT COMPANY." The Fund will be treated under
the Code as a separate entity, and the Fund intends to qualify as a
separate "regulated investment company" under Subchapter M of the Code. To
qualify for the tax treatment afforded a "regulated investment company"
under the Code, the Fund must annually distribute at least 90% of the sum
of its investment company taxable income (generally net investment income
and certain short-term capital gains), its tax-exempt interest income and
net capital gains, and meet certain diversification of assets and other
requirements of the Code. If the Fund qualifies for such tax treatment, it
will not be subject to federal income tax on the part of its investment
company taxable income and its net capital gain which it distributes to
shareholders. To meet the requirements of the Code, the Fund must (a)
derive at least 90% of its gross income from dividends, interest, payments
with respect to securities loans, and gains from the sale or other
dispositions of securities; (b) derive less than 30% of its gross income
from the sale or other disposition of securities held less than three
months; and (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. Government securities, securities of other
regulated investment companies, and other securities, limited, in respect
of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or
similar trades or businesses.
Even though the Fund qualifies as a "regulated investment company,"
it may be subject to certain federal excise taxes unless
the Fund meets certain additional distribution requirements.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess
of a regulated investment company's "required distribution" for the
calendar year over the "distributed amount" for such calendar year. The
term "required distribution" means the sum of (i) 98% of ordinary income
(generally net investment income) for the calendar year, (ii) 98% of
capital gain net income (both long-term and short-term) for the
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one-year period ending on October 31 of such year and (iii) the sum of any
untaxed, undistributed net investment income and net capital gains of the
regulated investment company for prior periods. The term "distributed
amount" generally means the sum of (i) amounts actually distributed by the
Fund from its current year's ordinary income and capital gain net income
and (ii) any amount on which the Fund pays income tax for the year. The
Fund intends to meet these distribution requirements to avoid the excise
tax liability.
If for any taxable year the Fund does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable
income will be subject to tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of earnings
and profits.
Fund shareholders are required by the Code to report to the Internal
Revenue Service all exempt-interest dividends, and all other tax-exempt
interest received during tax years beginning on or after January 1, 1987.
DISTRIBUTIONS OF NET INVESTMENT INCOME. Dividends from taxable net
investment income (including net short-term capital gains, if any) are
taxable as ordinary income. Shareholders will be taxed for federal income
tax purposes on dividends from the Fund in the same manner whether such
dividends are received as shares or in cash. While the Fund does not
anticipate receiving any dividend income from U.S. corporations, to the
extent that it did receive dividends that would qualify for the
dividends-received deduction available to corporations, the Fund must
designate in a written notice to shareholders the amount of the Fund's
dividends that would be eligible for this treatment.
NET CAPITAL GAINS. Any distributions designated as being made from the
Fund's net capital gains will be taxable as long-term capital gains,
regardless of the holding period of the shareholders of the Fund's shares.
Shareholders are advised to consult their tax advisor regarding application
of these rules to their particular circumstances.
NON-U.S. SHAREHOLDERS. Under the Code, distributions of net investment
income by the Fund to a shareholder who, as to the U.S., is a
nonresident alien individual, nonresident alien fiduciary of a trust
or estate, foreign corporation, or foreign partnership (a "foreign
shareholder") will be subject to U.S. withholding tax (at a 30% or
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lower treaty rate). Withholding will not apply if a dividend paid by
the Fund to a foreign shareholder is "effectively connected" with a
U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains
are not subject to tax withholding, but in the case of a foreign
shareholder who is a nonresident alien individual, such distributions
ordinarily will be subject to U.S. income tax at a rate of 30% if the
individual is physically present in the U.S. for more than 182 days
during the taxable year.
OTHER INFORMATION. Shares of the Fund would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans and individual retirement accounts.
Such plans and accounts are generally tax-exempt and, therefore, would not
gain any additional benefit from the tax-exempt nature of the Fund's
dividends, and such dividends would be ultimately taxable to the
beneficiaries when distributed to them. In addition, the Fund may not be an
appropriate investment for entities which are "substantial users" of
facilities financed by industrial development bonds or "related persons"
thereof. "Substantial user" is defined under U.S. Treasury Regulations to
include a non-exempt person who regularly uses a part of such facilities in
his trade or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such facilities, or who occupies more than
5% of the usable area of such facilities or for whom such facilities or a
part thereof were specifically constructed, reconstructed or acquired.
"Related persons" include certain related natural persons, affiliated
corporations, a partnership and its partners and an S Corporation and its
shareholders.
Interest on indebtedness incurred by a shareholder to purchase
or carry the Fund's shares is not deductible for federal income
tax purposes if the Fund distributes exempt-interest dividends during the
shareholder's taxable year. If a shareholder receives an exempt-interest
dividend with respect to shares of the Fund and such shares are held for
six months or less, any loss on the sale or exchange of such shares will be
disallowed to the extent of the amount of such exempt-interest dividend.
Any loss realized on redemption or exchange of the Fund's shares will be
disallowed to the extent shares are reacquired within the 61 day period
beginning 30 days before and ending 30 days after the shares are disposed
of.
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The foregoing is a general abbreviated summary of present federal income
taxes and California franchise and income taxes on dividends and
distribution by the Fund. Investors are urged to consult their own tax
advisors for more detailed information and for information regarding any
foreign, state and local taxes applicable to dividends and distributions
received.
ADDITIONAL INFORMATION
CUSTODIAN. The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675, acts as Custodian for the Investment Company's assets, and
as such safekeeps the Fund's portfolio securities, collects all income and
other payments with respect thereto, disburses funds at the Investment
Company's request and maintains records in connection with its duties.
INDEPENDENT AUDITORS; FINANCIAL STATEMENTS. The Investment Company's
independent auditors are Coopers & Lybrand L.L.P., 333 Market Street, San
Francisco, California 94105. Coopers & Lybrand L.L.P. will conduct an
annual audit of the Fund, assist in the preparation of the Fund's federal
and state income tax returns and consult with the Investment Company as to
matters of accounting, regulatory filings, and federal and state income
taxation. The financial statements of the Fund as of October 31, 1995
included herein are audited. Such financial statements are included herein
in reliance on the opinion of Coopers & Lybrand L.L.P. given on the
authority of said firm as experts in auditing and accounting.
LEGAL OPINIONS. The validity of the shares offered by the Prospectus has
been passed upon by Morrison & Foerster, 345 California Street, San
Francisco, California 94104. In addition to acting as counsel to the
Investment Company, Morrison & Foerster have acted and may continue to act
as counsel to the Advisor and its affiliates in various matters.
USE OF NAME. The Advisor has granted the Investment Company the right to
use the "Fremont" name and has reserved the rights to withdraw its consent
to the use of such name by the Investment Company at any time, or to grant
the use of such name to any other company, and the Investment Company has
granted the Advisor, under certain conditions, the use of any other name it
might assume in the future, with respect to any other investment company
sponsored by the Advisor.
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SHAREHOLDER VOTING RIGHTS. The Investment Company currently issues shares
in eight series and may establish additional classes or series of shares in
the future. When more than one class or series of shares is outstanding,
shares of all classes and series will vote together for a single set of
directors, and on other matters affecting the entire Investment Company,
with each share entitled to a single vote. On matters affecting only one
class or series, only the shareholders of that class or series shall be
entitled to vote. On matters relating to more than one class or series but
affecting the classes and series differently, separate votes by class and
series are required. Shareholders holding 10% of the shares of the
Investment Company may call a special meeting of shareholders.
LIABILITY OF DIRECTORS AND OFFICERS. The Articles of Incorporation of the
Investment Company provide that subject to the provisions of the 1940 Act,
to the fullest extent permitted under Maryland law, no officer or director
of the Investment Company may be held personally liable to the Investment
Company or its shareholders.
CERTAIN SHAREHOLDERS. As of January 8, 1996, the following
shareholders are the record owners of more than 5% of the outstanding
shares of common stock of the Fund:
BF Fund Limited 62.27%
50 Fremont Street, #3600
San Francisco, CA 94105
Willis S. & Marian B. Slusser 6.35%
200 Deer Valley Road
San Rafael, CA 94903
Charles Schwab & Co., Inc. 7.78%
101 Montgomery Street
San Francisco, CA 94104
OTHER INVESTMENT INFORMATION. The Fund will generally have lower price
volatility than that of mutual funds which invest in longer-term California
municipal bonds, and it provides immediate diversification and liquidity in
thinly traded municipal bond markets. Hypothetical current yields may be
used to calculate hypothetical tax-equivalent yields based on various
combined marginal federal and state tax rates for given tax brackets of
single and joint filers. The formula used will be as follows: tax
equivalent yield = (current yield)/(1-tax rate). The State of California
has one of the highest personal income tax rates in the United States.
The Advisor's investment philosophy is to apply a long-term approach to
investing that balances risk and return potential.
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INVESTMENT RESULTS
The Investment Company may from time to time include information on the
investment results (yield, tax-equivalent yield or total return) of the
Fund in advertisements or in reports furnished to current or prospective
shareholders.
The average annual rate of return ("T") for a given period is
computed by using the redeemable value at the end of the period
("ERV") of a hypothetical initial investment of $1,000 ("P") over the
period in years ("n") according to the following formula as required by the
SEC:
P(1+T)n = ERV
The following assumptions will be reflected in computations made in
accordance with the formula stated above: (1) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board of Directors; and (2) a complete redemption at the end of any period
illustrated. The Fund will calculate total return for one, five and
ten-year periods after such a period has elapsed, and may calculate total
returns for other periods as well. In addition, the Fund will provide
lifetime annual average annual total return figures.
The average annual total return for the Fund for the one-year period ending
October 31, 1995 was 12.77%, and for the three year period ending October
31, 1995 was 6.46%. The lifetime average annual total return for the Fund
as of October 31, 1995 was 7.28%. The Fund will also calculate this return
as of the end of each calendar quarter.
The Fund may quote its yield, which is computed by dividing the net
investment income per share earned during a 30-day period by the maximum
offering price per share on the last day of the period, according to the
following formula:
YIELD = 2[((a-b)/cd + 1)6 - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
The Fund may also calculate a tax-equivalent yield based on a 30-day
period, computed by dividing that portion of the yield (as computed by the
formula stated above) which is tax-exempt by one minus a stated personal
income tax rate and adding the product to that portion, if any, of the
yield that is not tax-exempt.
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The Fund's 30-day yield as of October 31, 1995 was 4.35%. The Fund's
tax-equivalent 30-day yield as of October 31, 1995, using a combined
marginal effective federal and state personal income tax rate of 46.24%,
was 8.09%.
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 current or past yield or total
return should not be considered representations of what an investment in
the Fund may earn in any future period. These factors and possible
differences in the methods used in calculating investment results should be
considered when comparing the Fund's investment results with those
published for other investment companies and other investment vehicles. The
Fund's results also should be considered relative to the risks associated
with the Fund's investment objective and policies.
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The Investment Company may from time to time compare the investment results
of the Fund with the following:
(1) Average of Savings Accounts, which is a measure of all kinds
of savings deposits, including longer-term certificates
(based on figures supplied by the U.S. League of Savings
Institutions). Savings accounts offer a guaranteed rate of
return on principal, but no opportunity for capital growth.
During certain periods, the maximum rates paid on some
savings deposits were fixed by law.
(2) The Consumer Price Index, which is a measure of the average
change in prices over time in a fixed market basket of goods
and services (e.g., food, clothing, shelter, and fuels,
transportation fares, charges for doctors' and dentists'
services, prescription medicines, and other goods and
services that people buy for day-to-day living).
(3) Statistics reported by Lipper Analytical Services, Inc.,
which ranks mutual funds by overall performance, investment
objectives and assets.
(4) Lipper California Short-Term Municipal Funds Average, which
is an average of municipal mutual funds concentrating their
investments in securities which are exempt from California
state income taxes. This average is compiled from the Lipper
Short-Term Municipal Bond Funds average which restricts
inclusion to those funds with an average weighted maturity
of no more than 90 days. Most funds restrict their longest
maturity to thirteen months.
(5) Lipper Intermediate Municipal Average, which is an average
of municipal mutual funds which restricts their holdings to
bonds with maturities between 3 and 10 years.
(6) Lehman Brothers Municipal Bond Index, which is a widely used
index composed of investment quality state and municipal
fixed income securities.
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(7) Lehman Brothers Five Year State General Obligation Index,
which is a composite measure of total return performance of
five year state general obligation bonds. It is a component
of the Lehman Brothers Municipal Bond Index.
(8) Lipper Municipal/California Intermediate Bond Index compiled
by Lipper Analytical Services, which is an average of bond
funds which are exempt from California state income taxes.
(9) Salomon Brothers Broad Investment Grade Index which is a
widely used index composed of U.S. domestic government,
corporate and mortgage-back fixed income securities.
(10) 90-day U.S. Treasury Bills Index which is a measure of the
performance of constant maturity 90-day U.S. Treasury Bills.
(11) Donoghue First Tier Money Fund Average which is an average
of the 30-day yield of approximately 250 major domestic
money market funds.
(12) Donoghue Tax-Exempt California Money Fund Average, which is
an average of municipal money market funds which concentrate
their investments in securities which are exempt from
California state income taxes.
Indices prepared by the research departments of such financial
organizations as Salomon Brothers, Inc.; Merrill Lynch, Pierce, Fenner &
Smith, Inc.; Morgan, Stanley; Bear Stearns & Co., Inc.; and Ibbottson
Associates may be used, as well as information provided by
the Federal Reserve Board.
Performance rankings and ratings reported periodically in national
financial publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, and
BARRON'S may also be used.
41
<PAGE>
APPENDIX A: DESCRIPTION OF RATINGS
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. employs the designations "Prime-1,"
"Prime-2" and "Prime-3" to indicate commercial paper having the
highest capacity for timely repayment.
Issuers rated Prime-1 "have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and
ample asset protections; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established
access to a range of financial markets and assured sources of alternate
liquidity."
Issues rated Prime-2 "have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained."
Issuers rated Prime-3 "have an acceptable capacity for repayment of
short-term promissory obligations. The effect of industry characteristics
and market composition may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt protection
measurements and the requirement for relatively high financial leverage.
Adequate alternate liquidity is maintained."
STANDARD & POOR'S RATINGS GROUP'S ratings of commercial paper are graded
into four categories ranging from "A" for the highest quality obligations
to "D" for the lowest. "A -- Issues assigned this highest rating are
regarded as having the greatest capacity for timely payment. Issues in this
category are delineated with numbers 1, 2, and 3 to indicate the relative
degree of safety."
A-1 -- "This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with
a plus (+) sign designation."
A-1
<PAGE>
A-2 -- "Capacity for timely payments on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1."
A-3 -- "Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designation."
B -- "Issues rated B are regarded as having only an adequate capacity for
timely repayment. However, such capacity may be damaged by changing
conditions of short-term adversities."
C -- "This rating is assigned to short-term debt obligations with a
doubtful capacity for repayment."
D -- "This rating indicates that the issue is either in default or is
expected to be in default upon maturity."
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued
by various entities from "Aaa" to "C." The ratings may be modified by the
addition of 1, 2 or 3 to show relative standing within the major rating
categories. Investment ratings are as follows:
AAA -- Best quality. These securities "carry the smallest degree of
investment risk and are generally referred to as 'gilt edge.' Interest
payments are protected by a large or by an exceptionally stable margin, and
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues."
AA -- High quality by all standards. "They are rated lower than the best
bond because margins of protection may not be as large as in Aaa
securities, or fluctuation of protective elements may be of greater
amplitude, or there may be other elements present which make the long-term
risks appear somewhat greater."
A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. "Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future."
A-2
<PAGE>
BAA -- Medium grade obligations. "Interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and, in fact,
have speculative characteristics as well."
BA -- "Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class."
B -- "Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small."
CAA -- "Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal and interest."
CA -- "Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings."
C -- "Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing."
STANDARD & POOR'S RATINGS GROUP'S rates the long-term securities debt of
various entities in categories ranging from "AAA" to "D" according to
quality. The ratings from "AA" to "CCC" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories. Investment ratings are as follows:
AAA -- Highest rating. "Capacity to pay interest and repay principal is
extremely strong."
AA -- High grade. "Very strong capacity to pay interest and repay
principal."
A-3
<PAGE>
A -- "Strong capacity to pay interest and repay principal," although
"somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated
categories."
BBB -- "Adequate capacity to pay interest and repay principal." These bonds
normally exhibit adequate protection parameters, but "adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal than for debt in higher rated
categories."
BB, B, CCC, CC -- "Debt rated BB, B, CCC, or CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions."
C -- "This rating is reserved for income bonds on which no interest is
being paid."
D -- "Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears."
A-4
<PAGE>
DESCRIPTION OF RATINGS OF NOTES
MOODY'S INVESTORS SERVICE, INC. ratings for state and municipal and other
short-term obligations will be designated Moody's Investment Grade ("MIG").
This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the
borrower are uppermost in importance in short-term borrowing, while various
factors of the first importance in long-term borrowing risk are of lesser
importance in the short run.
MIG1/VMIG1 -- Notes bearing this description are of the best quality
enjoying strong protection from established cash flow of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.
MIG2/VMIG2 -- Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding
group.
MIG3/VMIG3 -- Notes bearing this designation are of favorable quality, with
all security elements accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
STANDARD & POOR'S RATINGS GROUP'S ratings for state and municipal notes are
graded into three categories:
SP-1 -- Notes bearing this designation have a very strong or strong
capacity to pay principal and interest.
SP-2 -- Notes bearing this designation have a satisfactory capacity to pay
principal and interest.
SP-3 -- Notes bearing this designation have a speculative capacity to pay
principal and interest.
A-5
<PAGE>
APPENDIX B
Fremont
Mutual
Funds
Annual Report
October 31, 1995
LOGO:Fremont Funds
A message from David L. Redo - President and CEO of
Fremont Investment Advisors, Inc.
<PAGE>
Dear Fellow Shareholder:
We are pleased to send you this report discussing our eight Fremont
Mutual Funds for the one year period ended October 31, 1995.
The Fremont Funds had an excellent year. Some of the highlights include:
* The Fremont U.S. Micro-Cap Fund produced a total return of 38.68%
during the period, beating the Russell 2000 Index by 20.36%.
* The Fremont Global Fund, with a 12.78% return for the year,
outperformed the average mutual fund in the Lipper Global Flexible
investment category by 3.5%.
* The Fremont Growth Fund outperformed the S&P 500 by nearly 2%. It also
beat the average growth stock fund by nearly 6% for the year.
* The Fremont Money Market Fund remained in the top five percent of all
taxable Money Market Mutual Funds in the country this year.
Assets under management are steadily growing. On September 13, the
Fremont Funds passed the $1 billion mark. I would like to thank each and every
investor who helped us reach this milestone.
Please review the discussion of each of our funds on the following pages.
If you have any questions about the information presented, please call us at
1-800-548-4539 (press 1). We look forward to continuing to serve your
investment needs, and wish you and your family a very prosperous 1996.
Sincerely,
/s/ David L. Redo
David L. Redo
President and CEO
<PAGE>
Table of Contents
Global Fund........................................... 5
International Growth Fund............................. 8
International Small Cap Fund......................... 10
U.S. Micro-Cap Fund.................................. 12
Growth Fund.......................................... 14
Bond Fund............................................ 15
Money Market Fund.................................... 16
California Intermediate Tax-Free Fund................ 17
Report of Independent Accountants.................... 18
Statements of Investments
Global Fund.......................................... 19
International Growth Fund............................ 24
International Small Cap Fund......................... 26
U.S. Micro-Cap Fund.................................. 29
Growth Fund.......................................... 30
Bond Fund............................................ 32
Money Market Fund.................................... 34
California Intermediate Tax-Free Fund................ 35
Combined Financial Statements
Statements of Assets and Liabilities................. 38
Statements of Operations............................. 40
Statements of Changes in Net Assets.................. 42
Financial Highlights................................ 46
Notes To Financial Statements........................ 51
<PAGE>
Questions& ANSWERS
The Fremont Asset Allocation Committee:
Dave Redo, Pete Landini, Bob Haddick, Vince Kuhn
Q: How did the Fremont Global Fund perform for the fiscal year ended October
31, 1995?
A:The Fremont Global Fund produced a total return of 12.78% for fiscal 1995,
on the strength of dramatic U.S. stock and bond performance during the second
half of the fiscal year.
Q: How does this performance compare to other global flexible funds?
A:The Fund's performance was excellent within its peer group. The average
return for the funds making up the Lipper Global Flexible category was 9.27%
for the same period -- 3.51% below the Fremont Global Fund. This difference
can be attributed to smart asset allocation decisions and security selections
made by the Fund over the course of the year.
<PAGE>
Q: What worked well for the Fund during this period?
A:The Global Fund was fully invested in global stocks and bonds for most of
the fiscal year while cash reserves were at a minimum. This strategy proved
very effective, since U.S. stocks and bonds were particularly strong. Q: What
strategies were less successful? A:The Fremont Global Fund maintained a slight
overweighting in international stocks during fiscal 1995. Although
international stocks as a group increased in value, they did not perform as
well as U.S. stocks. We also favored Southeast Asian stocks, based on
expectations that good earnings growth in this region, combined with lower
U.S. interest rates, would boost these stock markets. To date, this has not
occurred, although we remain confident that this strategy will pay off in the
months ahead.
<PAGE>
Questions & ANSWERS
The Fremont Asset Allocation Committee:
Dave Redo, Pete Landini, Bob Haddick, Vince Kuhn
Fremont Global Fund (cont'd.)
Q: What impact did economic developments have upon the Fund this year?
A: The "soft landing" of the U.S. economy during 1995 contributed
significantly to the Fund's results. The rapid economic growth in 1994 created
inflation concerns, driving interest rates upward and pushing the prices of
financial assets downward. In early 1995, however, the U.S. economy
decelerated to a slow, sustainable pace, quieting fears of higher inflation.
Interest rates in most countries fell, while corporate profits continued to
expand. The resulting economic environment has proven very positive for
financial assets.
Q: What is the Fund's latest asset mix?
A: The Fund's asset mix as of October 31, 1995 is shown in the table on the
right. The Fund remains fully invested, with roughly 70% in global
stocks and an underweighting in global bonds. This asset allocation
strategy reflects our expectation that the global economic environment
in the period ahead will be rewarding.
<TABLE>
Fremont Global Fund Asset Mix
<CAPTION>
Asset Mix Asset Mix "Neutral" Long-Term
Asset Class 10/31/95 4/30/95 Mix Asset Mix Ranges
<S> <C> <C> <C> <C>
Stocks
U.S. 35% 27% 32.5%
Foreign 35% 32% 32.5%
Total Stocks 70% 59% 65% 40% - 75%
Bonds
U.S. 10% 20% 13%
Foreign 15% 11% 17%
Total Bonds 25% 31% 30% 12% - 55%
- --------------------------------------------------------------------------------
Cash Reserves 5% 10% 5% 2% - 48%
- --------------------------------------------------------------------------------
TOTAL 100% 100% 100%
</TABLE>
Geographic Diversification as of October 31, 1995
MAP
United States/Canada 53.3%
Emerging Markets: Latin America 2.3%
United Kingdom 2.5%
Continental Europe 21.4%
Hong Kong/Singapore/Malaysia 6.0%
Australia/New Zealand 1.7%
Japan 5.1%
Other Emerging Markets: Including Thailand, Indonesia, The Philippines,
South Korea and Others 7.7%
<PAGE>
Questions & ANSWERS
The Fremont Asset Allocation Committee:
Dave Redo, Pete Landini, Bob Haddick, Vince Kuhn
Fremont Global Fund (cont'd.)
Q: What is your current outlook for the Fund?
A: We anticipate slow economic growth, stable inflation, declining interest
rates, and steady corporate earnings in the coming months -- all of which
should have a positive impact on global financial assets. We believe that
stocks in Southeast Asia and some European markets show the most potential
over the next several months. Southeast Asian markets should eventually
respond to lower U.S. interest rates and rising corporate earnings. In Europe,
corporate earnings should be quite solid and interest rates could continue to
decline. In addition, a degree of pessimism pervades all of these markets, a
factor that indicates that some very good values exist.
Sincerely,
The Fremont Asset Allocation Committee
Dave Redo Vince Kuhn
Pete Landini Bob Haddick
APPENDIX
A representation of the graphic material contained in Fremont Mutual Funds,
Inc.'s October 31, 1995 Annual Report is set forth below.
1. FREMONT GLOBAL FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, November 18, 1988.
<TABLE>
<CAPTION>
Lehman Bros. Intermediate
Fremont Global Fund S&P 500 Index Govt./Corp. Bond Index )
Qtrly Qtrly Qtrly
Return Balance Return Balance Return Balance
<S> <C> <C> <C> <C> <C> <C>
18-Nov-88 $10,000 $10,000 $10,000
30-Nov-88 0.40% $10,040 2.81% $10,281 -0.34% $9,966
31-Dec-88 0.83% $10,123 1.81% $10,467 0.09% $9,975
31-Jan-89 2.88% $10,415 7.22% $11,223 1.05% $10,080
28-Feb-89 -0.87% $10,325 -2.48% $10,944 -0.42% $10,037
31-Mar-89 1.75% $10,506 2.34% $11,201 0.43% $10,081
30-Apr-89 1.63% $10,677 5.15% $11,777 2.00% $10,282
31-May-89 1.41% $10,828 4.05% $12,254 1.98% $10,486
30-Jun-89 0.46% $10,878 -0.55% $12,187 2.52% $10,750
31-Jul-89 4.72% $11,391 8.98% $13,281 2.05% $10,970
31-Aug-89 1.06% $11,512 1.93% $13,538 -1.29% $10,829
30-Sep-89 -0.44% $11,462 -0.39% $13,485 0.47% $10,880
31-Oct-89 -0.79% $11,371 -2.36% $13,167 2.12% $11,110
30-Nov-89 1.30% $11,519 2.07% $13,439 0.95% $11,216
31-Dec-89 1.88% $11,735 2.37% $13,758 0.28% $11,247
31-Jan-90 -3.09% $11,373 -6.71% $12,835 -0.64% $11,175
28-Feb-90 -0.37% $11,331 1.29% $13,000 0.37% $11,217
31-Mar-90 0.38% $11,373 2.62% $13,341 0.13% $11,231
30-Apr-90 -1.50% $11,203 -2.48% $13,010 -0.35% $11,192
31-May-90 5.42% $11,810 9.75% $14,278 2.20% $11,438
30-Jun-90 0.27% $11,842 -0.69% $14,180 1.34% $11,591
31-Jul-90 0.72% $11,927 -0.32% $14,134 1.39% $11,753
31-Aug-90 -4.91% $11,341 -9.04% $12,857 -0.41% $11,704
30-Sep-90 -4.13% $10,873 -4.92% $12,224 0.77% $11,795
31-Oct-90 1.82% $11,070 -0.37% $12,179 1.16% $11,931
30-Nov-90 2.52% $11,349 6.43% $12,961 1.52% $12,112
31-Dec-90 1.57% $11,527 2.75% $13,318 1.37% $12,278
31-Jan-91 2.34% $11,797 4.42% $13,907 1.02% $12,403
28-Feb-91 4.00% $12,270 7.16% $14,902 0.80% $12,501
31-Mar-91 0.37% $12,315 2.37% $15,255 0.68% $12,586
30-Apr-91 0.46% $12,371 0.28% $15,297 1.09% $12,724
31-May-91 1.91% $12,607 4.30% $15,955 0.61% $12,802
30-Jun-91 -2.77% $12,258 -4.56% $15,228 0.07% $12,811
31-Jul-91 2.75% $12,596 4.68% $15,940 1.12% $12,954
31-Aug-91 1.70% $12,810 2.35% $16,315 1.91% $13,202
30-Sep-91 0.79% $12,911 -1.65% $16,046 1.72% $13,429
31-Oct-91 1.50% $13,105 1.33% $16,259 1.14% $13,582
30-Nov-91 -1.78% $12,872 -4.03% $15,604 1.15% $13,738
31-Dec-91 6.24% $13,676 11.42% $17,386 2.44% $14,073
31-Jan-92 -0.59% $13,595 -1.85% $17,064 -0.91% $13,946
29-Feb-92 1.12% $13,747 1.28% $17,282 0.39% $14,001
31-Mar-92 -2.04% $13,466 -1.95% $16,945 -0.39% $13,946
30-Apr-92 0.26% $13,501 2.92% $17,440 0.88% $14,068
31-May-92 2.01% $13,773 0.53% $17,533 1.55% $14,286
30-Jun-92 -0.86% $13,655 -1.46% $17,277 1.48% $14,498
31-Jul-92 1.13% $13,808 4.04% $17,975 1.99% $14,786
31-Aug-92 0.26% $13,844 -2.02% $17,612 1.00% $14,934
30-Sep-92 0.86% $13,964 1.15% $17,815 1.36% $15,138
31-Oct-92 0.51% $14,035 0.36% $17,879 -1.30% $14,941
30-Nov-92 1.30% $14,218 3.37% $18,482 -0.38% $14,884
31-Dec-92 1.20% $14,389 1.30% $18,722 1.34% $15,083
31-Jan-93 0.43% $14,450 0.73% $18,858 1.94% $15,375
28-Feb-93 1.10% $14,609 1.36% $19,115 1.58% $15,618
31-Mar-93 2.10% $14,916 2.15% $19,527 0.40% $15,681
30-Apr-93 0.16% $14,940 -2.45% $19,049 0.80% $15,806
31-May-93 0.99% $15,089 2.67% $19,558 -0.22% $15,771
30-Jun-93 0.82% $15,212 0.33% $19,623 1.57% $16,019
31-Jul-93 1.38% $15,423 -0.49% $19,526 0.24% $16,058
31-Aug-93 3.07% $15,896 3.78% $20,263 1.59% $16,313
30-Sep-93 1.25% $16,095 -0.74% $20,114 0.41% $16,381
31-Oct-93 2.47% $16,493 2.05% $20,527 0.27% $16,425
30-Nov-93 -0.99% $16,330 -0.90% $20,342 -0.56% $16,333
31-Dec-93 5.38% $17,209 1.23% $20,592 0.46% $16,408
31-Jan-94 1.32% $17,436 3.36% $21,284 1.11% $16,590
28-Feb-94 -2.83% $16,944 -2.71% $20,707 -1.48% $16,344
31-Mar-94 -4.10% $16,249 -4.34% $19,808 -1.65% $16,075
30-Apr-94 0.39% $16,312 1.29% $20,064 -0.68% $15,965
31-May-94 0.39% $16,375 1.63% $20,392 0.07% $15,976
30-Jun-94 -1.08% $16,198 -2.47% $19,887 0.01% $15,978
31-Jul-94 1.95% $16,514 3.31% $20,545 1.44% $16,208
31-Aug-94 2.83% $16,982 4.07% $21,381 0.31% $16,259
30-Sep-94 -2.16% $16,615 -2.42% $20,864 -0.92% $16,109
31-Oct-94 0.99% $16,780 2.30% $21,344 -0.01% $16,108
30-Nov-94 -1.98% $16,447 -3.67% $20,560 -0.45% $16,035
31-Dec-94 0.26% $16,491 1.47% $20,862 0.35% $16,091
31-Jan-95 -1.09% $16,310 2.59% $21,403 1.68% $16,362
28-Feb-95 1.26% $16,516 3.87% $22,231 2.07% $16,700
31-Mar-95 2.19% $16,877 2.96% $22,889 0.57% $16,795
30-Apr-95 2.14% $17,238 2.95% $23,564 1.24% $17,004
31-May-95 3.56% $17,851 3.96% $24,498 3.02% $17,517
30-Jun-95 1.17% $18,060 2.35% $25,073 0.67% $17,635
31-Jul-95 3.03% $18,608 3.33% $25,908 0.01% $17,636
31-Aug-95 -0.21% $18,568 0.23% $25,968 0.91% $17,797
30-Sep-95 1.56% $18,858 4.17% $27,051 0.72% $17,925
31-Oct-95 0.35% $18,924 -0.28% $26,975 1.11% $18,124
<CAPTION>
Salomon Non-U.S.
Govt. Bond Index
Fremont Global Fund EAFE Index (Currency Hedged)
Qtrly Qtrly Qtrly
Return Balance Return Balance Return Balance
<S> <C> <C> <C> <C> <C> <C>
18-Nov-88 $10,000 $10,000 $10,000
30-Nov-88 0.40% $10,040 1.61% $10,161 0.11% $10,011
31-Dec-88 0.83% $10,123 0.56% $10,218 0.80% $10,091
31-Jan-89 2.88% $10,415 1.76% $10,398 0.56% $10,148
28-Feb-89 -0.87% $10,325 0.51% $10,451 -0.84% $10,062
31-Mar-89 1.75% $10,506 -1.96% $10,246 0.69% $10,132
30-Apr-89 1.63% $10,677 0.93% $10,341 0.97% $10,230
31-May-89 1.41% $10,828 -5.44% $9,779 0.05% $10,235
30-Jun-89 0.46% $10,878 -1.68% $9,614 0.87% $10,324
31-Jul-89 4.72% $11,391 12.56% $10,822 2.18% $10,549
31-Aug-89 1.06% $11,512 -4.50% $10,335 0.09% $10,559
30-Sep-89 -0.44% $11,462 4.56% $10,806 -0.53% $10,503
31-Oct-89 -0.79% $11,371 -4.02% $10,371 -0.06% $10,497
30-Nov-89 1.30% $11,519 5.03% $10,893 -0.23% $10,472
31-Dec-89 1.88% $11,735 3.69% $11,295 0.33% $10,507
31-Jan-90 -3.09% $11,373 -3.73% $10,874 -1.98% $10,299
28-Feb-90 -0.37% $11,331 -6.97% $10,116 -1.49% $10,145
31-Mar-90 0.38% $11,373 -10.42% $9,062 -0.05% $10,140
30-Apr-90 -1.50% $11,203 -0.79% $8,990 -0.08% $10,132
31-May-90 5.42% $11,810 11.41% $10,016 2.48% $10,384
30-Jun-90 0.27% $11,842 -0.88% $9,928 0.52% $10,438
31-Jul-90 0.72% $11,927 1.41% $10,068 0.39% $10,478
31-Aug-90 -4.91% $11,341 -9.71% $9,090 -1.35% $10,337
30-Sep-90 -4.13% $10,873 -13.94% $7,823 -0.56% $10,279
31-Oct-90 1.82% $11,070 15.59% $9,042 2.87% $10,574
30-Nov-90 2.52% $11,349 -5.90% $8,509 1.64% $10,747
31-Dec-90 1.57% $11,527 1.62% $8,647 1.00% $10,855
31-Jan-91 2.34% $11,797 3.23% $8,926 1.90% $11,061
28-Feb-91 4.00% $12,270 10.72% $9,883 1.47% $11,224
31-Mar-91 0.37% $12,315 -6.00% $9,290 0.05% $11,229
30-Apr-91 0.46% $12,371 0.98% $9,381 0.49% $11,284
31-May-91 1.91% $12,607 1.04% $9,479 0.59% $11,351
30-Jun-91 -2.77% $12,258 -7.35% $8,782 -0.54% $11,290
31-Jul-91 2.75% $12,596 4.91% $9,213 0.91% $11,392
31-Aug-91 1.70% $12,810 -2.03% $9,026 1.29% $11,539
30-Sep-91 0.79% $12,911 5.64% $9,535 1.63% $11,727
31-Oct-91 1.50% $13,105 1.42% $9,671 0.71% $11,811
30-Nov-91 -1.78% $12,872 -4.67% $9,219 0.32% $11,848
31-Dec-91 6.24% $13,676 5.16% $9,695 1.78% $12,059
31-Jan-92 -0.59% $13,595 -2.14% $9,488 0.84% $12,161
29-Feb-92 1.12% $13,747 -3.58% $9,148 0.33% $12,201
31-Mar-92 -2.04% $13,466 -6.60% $8,544 -0.57% $12,131
30-Apr-92 0.26% $13,501 0.48% $8,585 0.31% $12,169
31-May-92 2.01% $13,773 6.69% $9,160 1.08% $12,300
30-Jun-92 -0.86% $13,655 -4.74% $8,726 0.41% $12,351
31-Jul-92 1.13% $13,808 -2.56% $8,502 0.70% $12,437
31-Aug-92 0.26% $13,844 6.27% $9,035 0.32% $12,477
30-Sep-92 0.86% $13,964 -1.98% $8,856 1.64% $12,682
31-Oct-92 0.51% $14,035 -5.25% $8,392 1.71% $12,898
30-Nov-92 1.30% $14,218 0.94% $8,471 0.04% $12,904
31-Dec-92 1.20% $14,389 0.52% $8,515 0.95% $13,026
31-Jan-93 0.43% $14,450 -0.01% $8,514 1.05% $13,163
28-Feb-93 1.10% $14,609 3.02% $8,771 1.83% $13,405
31-Mar-93 2.10% $14,916 8.72% $9,536 -0.28% $13,367
30-Apr-93 0.16% $14,940 9.49% $10,441 -0.05% $13,360
31-May-93 0.99% $15,089 2.11% $10,662 0.48% $13,425
30-Jun-93 0.82% $15,212 -1.56% $10,495 1.86% $13,675
31-Jul-93 1.38% $15,423 3.50% $10,863 1.12% $13,829
31-Aug-93 3.07% $15,896 5.40% $11,449 1.97% $14,101
30-Sep-93 1.25% $16,095 -2.25% $11,192 0.67% $14,195
31-Oct-93 2.47% $16,493 3.08% $11,536 1.30% $14,380
30-Nov-93 -0.99% $16,330 -8.74% $10,528 0.84% $14,500
31-Dec-93 5.38% $17,209 7.22% $11,288 1.88% $14,774
31-Jan-94 1.32% $17,436 8.45% $12,242 -0.77% $14,660
28-Feb-94 -2.83% $16,944 -0.28% $12,208 -1.96% $14,372
31-Mar-94 -4.10% $16,249 -4.31% $11,683 -0.62% $14,283
30-Apr-94 0.39% $16,312 4.24% $12,178 -0.55% $14,204
31-May-94 0.39% $16,375 -0.57% $12,108 -0.77% $14,094
30-Jun-94 -1.08% $16,198 1.41% $12,279 -1.09% $13,940
31-Jul-94 1.95% $16,514 0.96% $12,397 0.69% $14,036
31-Aug-94 2.83% $16,982 2.37% $12,691 -0.95% $13,902
30-Sep-94 -2.16% $16,615 -3.15% $12,291 0.30% $13,944
31-Oct-94 0.99% $16,780 3.33% $12,700 0.34% $13,991
30-Nov-94 -1.98% $16,447 -4.81% $12,089 1.30% $14,173
31-Dec-94 0.26% $16,491 0.63% $12,166 0.04% $14,179
31-Jan-95 -1.09% $16,310 -3.84% $11,699 1.06% $14,329
28-Feb-95 1.26% $16,516 -0.29% $11,665 1.27% $14,511
31-Mar-95 2.19% $16,877 6.24% $12,392 2.21% $14,832
30-Apr-95 2.14% $17,238 3.76% $12,858 1.60% $15,069
31-May-95 3.56% $17,851 -1.19% $12,705 3.20% $15,551
30-Jun-95 1.17% $18,060 -1.75% $12,483 -0.15% $15,528
31-Jul-95 3.03% $18,608 6.23% $13,261 1.19% $15,713
31-Aug-95 -0.21% $18,568 -3.81% $12,756 0.71% $15,824
30-Sep-95 1.56% $18,858 1.95% $13,004 1.64% $16,084
31-Oct-95 0.35% $18,924 -2.69% $12,654 1.04% $16,251
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 12.78%
2 Years 7.12%
3 Years 10.48%
4 Years 9.62%
5 Years 11.32%
Since Inception (11/18/88) 9.61%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
S&P 500 Index, the Morgan Stanley Capital International EAFE Index, the
Salomon Non-U.S. Government Bond Index, or the Lehman Bros. Intermediate
Government/Corporate Index.
<PAGE>
Questions & ANSWERS
Andrew L. Pang, Portfolio Manager
Fremont Investment Advisors, Inc.
Fremont International Growth Fund
Q: How did the Fremont International Growth Fund perform for the fiscal year
ended October 31, 1995?
A: In a difficult year for international markets, the Fremont International
Growth Fund produced a total return of 0.13% for the period ended
October 31, 1995. This performance compares favorably both with the
performance of other international funds and that of the Europe,
Australia, & Far East (EAFE) Index.
During the same period, the average total return for the funds
comprising the Lipper International category was -1.09%, while the EAFE Index
of international stocks returned -0.36%.
Q: What worked well during this period?
A: A number of profitable stock selections helped the Fund's performance.
Roche Holdings AG of Switzerland did very well during the past twelve
months, posting a total return of 65%, and Autoliv AB of Sweden was up
64%. Not far behind was Finland's Nokia AB, with a total return of 55%
for the year ended October 31, 1995. In addition, we reduced the Fund's
cash position by roughly 6% in early April, allowing the Fund to
participate fully in the recoveries of many international stock markets.
Q: What was less successful?
A: The Fund's exposure to the developing markets in Latin America and Asia
added little to performance this past year. Southeast Asian markets rallied
sharply in the spring, only to slip back in the summer and fall.
Our current overweighting in emerging markets is one of the key
strategies used in managing the International Growth Fund. Although the
portfolio will go through cyclical phases as a result of its high
emerging market content, we believe that these markets will produce
superior growth that will drive stock prices much higher in the years
ahead.
Q: What is your current strategy?
A: Our current allocations by region include 21% in Japan, 36% in other
Asian markets, 35% in Europe, 3% in Latin America and 5% in cash.
Compared to the EAFE Index, which does not include the emerging markets,
we are continuing to underweight the Japanese and European markets and
overweight the emerging markets of Southeast Asia. We are especially
enthusiastic about the potential for the Southeast Asian markets where
we are forecasting a long-term growth rate of 6 to 7% -- well beyond the
2 to 3% expected growth rate for the major industrialized countries.
2. FREMONT INTERNATIONAL GROWTH FUND - Growth of $10,000* * Assumes initial
investment of $10,000 on inception date, March 1, 1994.
<TABLE>
<CAPTION>
Fremont International
Growth Fund EAFE Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C> <C>
01-Mar-94 $10,000 $10,000
31-Mar-94 -3.66% $9,634 -4.31% $9,569
30-Apr-94 0.33% $9,666 4.24% $9,975
31-May-94 0.11% $9,767 -0.57% $9,918
30-Jun-94 -1.94% $9,488 1.41% $10,058
31-Jul-94 2.42% $9,718 0.96% $10,155
31-Aug-94 4.73% $10,178 2.37% $10,395
30-Sep-94 -1.44% $10,031 -3.15% $10,068
31-Oct-94 1.98% $10,230 3.33% $10,403
30-Nov-94 -4.80% $9,739 -4.81% $9,903
31-Dec-94 -0.51% $9,689 0.63% $9,965
31-Jan-95 -6.90% $9,020 -3.84% $9,582
28-Feb-95 1.97% $9,198 -0.29% $9,555
31-Mar-95 2.05% $9,386 6.24% $10,151
30-Apr-95 3.34% $9,699 3.76% $10,533
31-May-95 2.59% $9,950 -1.19% $10,407
30-Jun-95 2.10% $10,159 -1.75% $10,225
31-Jul-95 5.66% $10,734 6.23% $10,862
31-Aug-95 -2.43% $10,473 -3.81% $10,448
30-Sep-95 0.70% $10,546 1.95% $10,652
31-Oct-95 -2.87% $10,243 -2.69% $10,366
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 0.13%
Since Inception (3/1/94) 1.45%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Morgan Stanley Capital International EAFE Index.
<PAGE>
Questions & ANSWERS
Andrew L. Pang, Portfolio Manager
Fremont Investment Advisors, Inc.
Fremont International Growth Fund (cont'd.)
Q: What is your current outlook for the Fund?
A: In 1995, interest rates in most countries fell and corporate profits
continued to expand. Slow, non-inflationary growth in the global economy
continues to be a positive market force. As we enter fiscal 1996, we
anticipate a more favorable environment for international financial
assets, and continue to believe that the greatest potential will be
found in Southeast Asian stocks, as well as in some European markets.
While they have been slow to respond to declining U.S. interest rates
and rising international corporate earnings, the markets of Southeast
Asia should eventually react positively. In Europe, solid corporate
earnings and declining interest rates should continue. Finally, we plan
to invest in a number of well-priced stocks as many investors remain on
the sidelines waiting for the markets to rebound.
Sincerely,
Andrew L. Pang
Portfolio Manager
NOTE:
On September 1, 1995, Fremont Investment Advisors replaced Sit/Kim
International Investment Associates, Inc. as the advisor for the Fremont
International Growth Fund.
The Fremont International Growth Fund's
Geographic
Diversification as of October 31, 1995
MAP
United States 5.1% (cash)
Emerging Markets: Latin America 3.4%
United Kingdom 5.0%
Continental Europe 29.7%
Hong Kong/Singapore/Malaysia 14.2%
Australia/New Zealand 3.4%
Japan 21.4%
Other Emerging Markets: Including Thailand, The Philippines, Indonesia,
Taiwan and Others 17.8%
<PAGE>
Questions & ANSWERS
Dr. Gary L. Bergstrom, Portfolio Manager
Acadian Asset Management, Inc.
Fremont International Small Cap Fund
Q: How did the Fremont International Small Cap Fund perform for the fiscal year
ended October 31, 1995?
A: The Fremont International Small Cap Fund produced a total return of
- -7.96% for the fiscal year. During the same twelve months, the Salomon
Brothers Extended Market Index of the Europe and Pacific countries (EMI)
recorded a return of -4.70%. The average for funds comprising the Lipper
International Small Company category was -2.75%.
Q: What worked well for the Fund during this period?
A: The Fund's Japanese investments were limited during the entire period,
which protected investors from the effects of a volatile year. At the
same time, the vast depth and breadth of the Japanese market made it
possible to buy a number of stocks that performed extremely well. Stock
selection also contributed positively to portfolio performance in the
U.K., as this market reached all-time highs and smaller, value-oriented
stocks did well. A relatively strong presence in the Australia and New
Zealand markets, as well as the emerging markets of Turkey, Greece and
Thailand, also contributed to returns.
Q: What strategies were less successful?
A: The weak dollar and Mexican economic crisis shook investor confidence
and resulted in volatile international markets during the first half of
the fiscal year. This hurt the returns of smaller, value-oriented stocks
as investors moved towards larger, growth-oriented stocks. Extremely
small "micro-cap" foreign stocks, like many of those held by the Fund,
proved particularly vulnerable. While this trend reversed itself in the
third quarter, it nevertheless had a substantial negative impact on the
Fund's performance.
In terms of specific portfolio selections, the Fund's relatively strong
presence in France had a mixed effect, adding value in the first half
but detracting from returns later on. Our comparatively light
participation in the German market had a negative effect during the
first three quarters, but has recently begun to pay off. In addition,
some emerging markets investments dampened performance, particularly
during the first half of the year.
3. FREMONT INTERNATIONAL SMALL CAP FUND - Growth of $10,000* * Assumes initial
investment of $10,000 on inception date, June 30, 1994.
<TABLE>
<CAPTION>
Fremont International Salomon Brothers
Small Cap Fund EMI Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
30-Jun-94 $10,000 $10,000
31-Jul-94 1.30% $10,130 1.14% $10,114
31-Aug-94 2.37% $10,370 1.06% $10,221
30-Sep-94 -4.34% $9,920 -2.86% $9,929
31-Oct-94 -0.60% $9,860 1.81% $10,109
30-Nov-94 -5.58% $9,310 -6.24% $9,478
31-Dec-94 -3.11% $9,020 1.34% $9,605
31-Jan-95 -5.32% $8,540 -3.25% $9,293
28-Feb-95 -0.94% $8,460 -1.46% $9,157
31-Mar-95 2.25% $8,650 4.25% $9,546
30-Apr-95 3.47% $8,950 3.00% $9,833
31-May-95 2.57% $9,180 -1.75% $9,660
30-Jun-95 -0.98% $9,090 -1.23% $9,542
31-Jul-95 5.61% $9,600 5.83% $10,098
31-Aug-95 -2.19% $9,390 -2.53% $9,842
30-Sep-95 0.43% $9,430 0.78% $9,919
31-Oct-95 -3.76% $9,075 -2.88% $9,634
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year -7.96%
Since Inception (6/30/94) -7.01%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Salomon Brothers Extended Market Index.
<PAGE>
Questions & ANSWERS
Dr. Gary L. Bergstrom, Portfolio Manager
Acadian Asset Management, Inc.
Fremont International Small Cap Fund (cont'd.)
Q: What changes were made to the country allocations during the year?
A: During the first six months, the most significant changes to the
portfolio involved an increased allocation to emerging markets, which
started at roughly 7% of the portfolio and grew to 28%. In the developed
markets, we reduced our emphasis on Japan during the first half of the
year, but recently increased it again. Allocations in France and Germany
remained fairly steady throughout the year.
Q: What is the Fund's current strategy?
A: While small cap stocks have recently underperformed larger stocks, this
trend may be reversing. Over the long term, smaller cap stocks have
significantly outperformed other sectors, and we believe they will do so
in the future. Based on this belief, the portfolio continues to
emphasize smaller micro-cap stocks, and companies that tend to be either
cyclical or sensitive to economic changes.
The portfolio currently emphasizes a range of attractive developed
markets, such as France, Canada, Hong Kong, the Netherlands and Australia, as
well as relatively liquid markets in expanding economies, such as those of
Brazil, Thailand, and Greece.
Overall, it is our view that a value-oriented small cap approach will
prosper in the coming months. More importantly, we believe the Fund's
investment process, which combines a fundamental value approach with
earnings growth trends and other important data, will be successful in
identifying high-performance small cap companies for the Fund's
portfolio.
Sincerely,
Dr. Gary L. Bergstrom
Portfolio Manager
ABOUT THE SUB-ADVISOR:
Acadian Asset Management Inc. manages over $2 billion in international small
cap portfolios.
The Fremont International Small Cap Fund's
Geographic Diversification as of October 31, 1995
MAP
United States/Canada 3.6%
Emerging Markets: Latin America 11.0%
United Kingdom 5.7%
Continental Europe 28.2%
Hong Kong/Singapore/Malaysia 12.3%
Australia/New Zealand 7.9%
Japan 14.6%
Other Emerging Markets: Including Greece, Thailand, South Africa,
Czech Republic, Turkey and Others 16.7%
<PAGE>
Questions & ANSWERS
Robert E. Kern, Portfolio Manager
Morgan Grenfell Capital Management, Inc.
Fremont U.S. Micro-Cap Fund
Q: How did the Fremont U.S. Micro-Cap Fund perform for the fiscal year
ended October 31, 1995?
A: For the year, the U.S. Micro-Cap Fund posted an impressive return of
38.68%, outperforming the Russell 2000 Index by more than a two-to-one margin.
The Russell 2000 Index, a widely-used gauge of small company performance, rose
a much lower 18.32% over the same period.
Q: Why did the fund perform so well?
A: The overall investment environment for stocks was very favorable
throughout fiscal 1995. A combination of relatively low inflation,
declining interest rates and strong growth in corporate earnings
produced excellent stock market performance. In general, however, larger
company stocks tended to outperform smaller companies, as evidenced by
the 26.39% increase in the S&P 500 Index. The fact that the performance
of the U.S. Micro-Cap Fund outpaced even this figure indicates that
superior stock selection was at the heart of the Fund's success.
Q: How does the Fund's performance compare with that of other micro-cap funds?
A: The Fund's strategy of searching out successful micro-cap companies that
have the potential to develop into tomorrow's small cap, medium cap and,
in some cases, large cap companies proved extremely successful during
the fiscal year. Reliance on this strategy allowed the Fund to
outperform most other micro-cap funds.
Q: What strategies worked well for the Fund?
A: Investments in early-stage emerging growth companies had a dramatic
impact on the Fund's overall success. This was especially true of
technology stocks, which led the market throughout most of the year.
Verity Inc., Garden Ridge Corp., Veritas Software, Delta and Pine Land,
and PRI Automation provided the most substantial gains for the Fund.
Equally important to the Fund's overall success was our ability to
minimize losses. Over the course of the year, gains were roughly three times
greater than losses.
4. FREMONT U.S. MICRO-CAP FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, June 30, 1994.
<TABLE>
<CAPTION>
Fremont U.S.
Micro-Cap Fund Russell 2000 Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
30-Jun-94 $10,000 $10,000
31-Jul-94 2.20% $10,220 1.64% $10,164
31-Aug-94 0.98% $10,320 5.57% $10,730
30-Sep-94 1.45% $10,470 -0.34% $10,694
31-Oct-94 -1.05% $10,360 -0.40% $10,651
30-Nov-94 -3.48% $10,000 -4.04% $10,221
31-Dec-94 1.50% $10,150 2.68% $10,494
31-Jan-95 1.97% $10,350 -1.26% $10,362
28-Feb-95 3.10% $10,671 4.16% $10,793
31-Mar-95 4.23% $11,122 1.71% $10,978
30-Apr-95 2.43% $11,392 2.22% $11,222
31-May-95 4.57% $11,913 1.72% $11,415
30-Jun-95 4.88% $12,495 5.19% $12,007
31-Jul-95 6.82% $13,346 5.76% $12,699
31-Aug-95 6.31% $14,188 2.07% $12,961
30-Sep-95 2.54% $14,549 1.79% $13,193
31-Oct-95 -1.24% $14,368 -4.48% $12,602
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 38.68%
Since Inception (6/30/94) 31.16%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Russell 2000 Index.
<PAGE>
Questions & ANSWERS
Robert E. Kern, Portfolio Manager
Morgan Grenfell Capital Management, Inc.
Fremont U.S. Micro-Cap Fund (cont'd.)
Q: What aspects were less successful?
A: While successful stock selections far outweighed unsuccessful ones,
several disappointing investments prevented the Fund from reaching even
higher levels of performance. The largest loss resulted from an
investment in Vmark Software which experienced problems integrating an
acquisition.
Q: What is your current outlook for U.S. micro-cap stocks?
A: Micro-cap stocks are becoming more widely recognized as a separate asset
class. During the past year, more investment advisers and institutional
investors have recognized the benefits of micro-cap investing -- the
potential of higher long-term rates of return and better diversification
- -- as well as the importance of specialized micro-cap investment
management. The result has been an increase in cash flows into the
micro-cap sector of the market.
We expect the trend toward micro-cap investing to accelerate. With
roughly 4,000 publicly-traded companies having market capitalizations
between $10 million and $225 million, there is a huge opportunity to
find successful micro-cap companies before they become widely recognized
by other investors.
Stock selection is the "key to success" in micro-cap investing, and we
believe that our fundamental approach to investment research --
financial analysis combined with company visits and the discussion of
overall strategies with top management -- provides the Fund with the
opportunity for continued exceptional performance.
As we enter fiscal 1996, we are optimistic that well-selected micro-cap
companies will provide excellent returns to investors in the Fremont U.S.
Micro-Cap Fund.
Sincerely,
Robert E. Kern
Portfolio Manager
ABOUT THE SUB-ADVISOR:
Morgan Grenfell Capital Management, Inc. manages over $500 million in
small- and micro-cap stocks.
<PAGE>
Questions & ANSWERS
Andrew L. Pang, Fremont Investment Advisors, Inc.
Eugene C. Sit, Sit Investment Associates, Inc.
Fremont Growth Fund
Q: How did the Fremont Growth Fund perform for the fiscal year ended
October 31, 1995?
A: The Fremont Growth Fund produced a total return of 28.12% for the fiscal
year ended October 31, 1995. This compares favorably both with the 26.39%
return posted by the S&P 500 Index and the 18.32% return of the Russell 2000
Index.
The Fund also outpaced other growth funds. The average return for the
funds in the Lipper Growth category was 22.14% -- approximately 6% less than
that of the Fremont Growth Fund.
Q: What worked well during this period?
A: Larger companies significantly outperformed smaller companies for the
Fund, during the twelve-month period. Two of the Fund's most heavily
weighted industry groups, technology and health care, performed very
well. Among the top performers were Micron Technology (253%), Cisco
Systems (157%) and Xilinx (137%).
Q: What strategies were less successful?
A: The retail sector was weak throughout the year. Even with only 4% of the
Fund's assets invested in the retail sector, poor performance by such
well-known companies as Toys R Us, Home Depot and Wal-Mart had a negative
impact on overall performance.
Q: What is the Fund's current strategy?
A: Throughout the past year, we slowly moved the Fund toward a more
growth-oriented stance. The fund was fully invested with cash reserves
of only 4% on October 31, 1995. We continue to emphasize technology
stocks (23% of the Fund's portfolio) and health care stocks (16%) based
upon our projections of continued strong earnings growth in these
sectors.
Q: What is your current outlook for the Fund?
A: The Federal Reserve appears to have pulled off the "soft landing" it was
striving for, creating an outstanding environment for stock market
investing. As long as the economy continues to grow at a modest pace and
inflation remains under control, the Fremont Growth Fund should continue
to perform well.
Sincerely,
Andrew L. Pang
Eugene C. Sit
Portfolio Managers
5. FREMONT GROWTH FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, August 14, 1992.
<TABLE>
<CAPTION>
Fremont Growth Fund S&P 500 Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
14-Aug-92 $10,000 $10,000
31-Aug-92 -1.01% $9,899 -1.27% $9,873
30- Sep-92 1.93% $10,091 1.15% $9,987
31-Jan-00 1.08% $10,200 0.36% $10,023
01-Mar-00 4.46% $10,655 3.37% $10,361
01-Apr-00 1.57% $10,822 1.30% $10,495
02-May-00 1.22% $10,954 0.73% $10,572
30-May-00 -1.02% $10,843 1.36% $10,716
30-Jun-00 1.50% $11,005 2.15% $10,947
30-Apr-93 -3.60% $10,609 -2.45% $10,679
31-May-93 2.40% $10,863 2.67% $10,964
30-Jun-93 0.75% $10,945 0.33% $11,000
31-Jul-93 -0.09% $10,935 -0.49% $10,946
31-Aug-93 3.36% $11,302 3.78% $11,359
30-Sep-93 0.99% $11,414 -0.74% $11,276
31-Oct-93 0.80% $11,506 2.05% $11,507
30-Nov-93 -2.04% $11,270 -0.90% $11,404
31-Dec-93 2.18% $11,516 1.23% $11,544
31-Jan-94 3.40% $11,907 3.36% $11,932
28-Feb-94 -3.11% $11,536 -2.71% $11,608
31-Mar-94 -5.27% $10,929 -4.34% $11,104
30-Apr-94 1.13% $11,052 1.29% $11,248
31-May-94 0.37% $11,093 1.63% $11,432
30-Jun-94 -3.35% $10,722 -2.47% $11,149
31-Jul-94 4.04% $11,155 3.31% $11,518
31-Aug-94 5.10% $11,724 4.07% $11,986
30-Sep-94 -2.12% $11,476 -2.42% $11,696
31-Oct-94 1.98% $11,704 2.30% $11,965
30-Nov-94 -3.15% $11,335 -3.67% $11,526
31-Dec-94 2.02% $11,563 1.47% $11,695
31-Jan-95 0.40% $11,609 2.59% $11,998
28-Feb-95 3.25% $11,897 3.87% $12,463
31-Mar-95 2.67% $12,307 2.96% $12,832
30-Apr-95 2.14% $12,570 2.95% $13,210
31-May-95 3.28% $12,982 3.96% $13,733
30-Jun-95 4.93% $13,622 2.35% $14,056
31-Jul-95 4.45% $14,228 3.33% $14,524
31-Aug-95 1.37% $14,423 0.23% $14,557
30-Sep-95 3.89% $14,983 4.17% $15,164
31-Oct-95 0.08% $14,995 -0.28% $15,122
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 28.12%
2 Years 14.17%
3 Years 13.72%
Since Inception (08/14/92) 13.44%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
S&P 500 Index.
<PAGE>
Questions & ANSWERS
Bill Gross, Portfolio Manager
Pacific Investment Management Company
Fremont Bond Fund
Q: How did the Fremont Bond Fund perform for the fiscal year ended
October 31, 1995?
A: The Fremont Bond Fund returned 16.49% for the fiscal year, outpacing the
15.65% performance of the Lehman Brothers Aggregate Bond Index during the same
period.
Q: What strategies worked well for the Fund during this period?
A: Federal Reserve policy played a major role in the bond market and our
portfolio strategy. Early in the year, the Fed raised rates to slow the
rapid economic growth to a more modest pace. The Fed then cut rates in
July. While this environment created turbulence in bond prices, it also
presented opportunities that the Fund was able to capitalize upon.
For much of the year, we maintained relatively long average maturities
within the Fund's portfolio, allowing the Fund to capture more capital
appreciation, which in turn boosted returns. In addition, the Fund
benefitted as we adjusted exposures to emphasize the most attractive
portion of the yield curve. Our allocation to currency-hedged German
bonds was another plus, as these securities outperformed U.S. bonds.
Q: What strategies were less successful?
A: Over most of the year, we de-emphasized corporate bonds, feeling that
their added risk did not justify the additional yields they offered
relative to Treas-ury securities. As it turned out, corporate bonds were
the top performers in the U.S. market, with lower-quality issues posting
the strongest gains.
Q: What is your current strategy for the Fund?
A: We expect interest rates to continue downward over the next several
quarters and will maintain a higher average maturity to take advantage
of capital gains. We will also continue to limit emphasis on
intermediate and long corporate bonds. Within the mortgage sector, we
expect to selectively reduce prepayment exposure. Finally, we will
continue to invest in international bonds, focusing on the core European
markets.
Sincerely,
Bill Gross
Portfolio Manager
ABOUT THE SUB-ADVISOR:
Pacific Investment Management Co. (PIMCO) manages over $50 billion for
institutions and is the sub-advisor for the Bond Fund.
6. FREMONT BOND FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, April 30, 1993.
<TABLE>
<CAPTION>
Lehman Bros.
Fremont Bond Fund Aggregate Bond Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
30-Apr-93 $10,000 $10,000
31-May-93 -0.37% $9,963 0.13% $10,013
30-Jun-93 2.20% $10,182 1.81% $10,194
31-Jul-93 0.16% $10,198 0.57% $10,252
31-Aug-93 2.12% $10,415 1.75% $10,432
30-Sep-93 0.63% $10,481 0.27% $10,460
31-Oct-93 0.32% $10,515 0.37% $10,499
30-Nov-93 -1.41% $10,366 -0.85% $10,410
31-Dec-93 0.68% $10,437 0.54% $10,466
31-Jan-94 1.42% $10,585 1.35% $10,607
28-Feb-94 -1.86% $10,388 -1.74% $10,423
31-Mar-94 -2.32% $10,147 -2.47% $10,166
30-Apr-94 -0.97% $10,049 -0.80% $10,085
31-May-94 -0.89% $9,959 -0.01% $10,083
30-Jun-94 0.66% $10,025 -0.22% $10,061
31-Jul-94 1.79% $10,205 1.99% $10,261
31-Aug-94 0.25% $10,230 0.12% $10,274
30-Sep-94 -1.21% $10,106 -1.47% $10,123
31-Oct-94 -0.55% $10,050 -0.09% $10,114
30-Nov-94 -0.30% $10,020 -0.22% $10,091
31-Dec-94 -0.02% $10,018 0.69% $10,161
31-Jan-95 2.23% $10,242 1.98% $10,362
28-Feb-95 2.74% $10,522 2.38% $10,609
31-Mar-95 0.94% $10,621 0.61% $10,674
30-Apr-95! 1.90% $10,823 1.40% $10,823
31-May-95 3.74% $11,228 3.87% $11,242
30-Jun-95 0.63% $11,299 0.73% $11,324
31-Jul-95! -0.32% $11,263 -0.22% $11,299
31-Aug-95 1.19% $11,397 1.21% $11,436
30-Sep-95 1.16% $11,530 0.97% $11,547
31-Oct-95 1.54% $11,707 1.30% $11,697
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 16.49%
2 Years 5.52%
Since Inception (4/30/93) 6.50%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Lehman Bros. Aggregate Bond Index.
<PAGE>
Questions & ANSWERS
Norman Gee, Portfolio Manager
Fremont Investment Advisors, Inc.
Fremont Money Market Fund
Q: How did the Fremont Money Market Fund perform for the fiscal year ended
October 31, 1995?
A: The Money Market Fund produced a total return of 5.84% for the twelve
months ending October 31, 1995, ranking the Fund among the top 5% of taxable
money market funds for the entire year.
During the fiscal year, the Donoghue First Tier Taxable Average posted a
return of 5.24%.
Q: What worked well for the Fund during this period?
A: We maintained a conservative strategy over the first few months of the
fiscal year, waiting for a clearer picture of which direction the
Federal Reserve would take in adjusting interest rates. Throughout this
period, we kept the Fund's average maturity close to the average of the
money market funds tracked in the Donoghue First Tier Money Market Fund
universe. After rates were lowered in February, we lengthened the
average maturity.
Q: What strategies were less successful?
A: The strength of the U.S. economy was extremely difficult to predict
during fiscal 1995. In hindsight, the Fund would have done better if we had
begun lengthening the average maturity a few weeks earlier.
Q: What is your current strategy?
A: We believe the Federal Reserve has reached its goal of slowing economic
growth to a sustainable rate. As a result, we expect short-term interest
rates to continue downward.
Because the Fund invests in securities with maturities of one year or
less, our current strategy is to keep the Fund's average maturity considerably
longer than that of the Donoghue universe average. This will allow us to
maximize the yields of the Fund.
Sincerely,
Norman Gee
Portfolio Manager
7. FREMONT MONEY MARKET FUND - Growth of $10,000*
* Assumes initial investment of $10,000 on inception date, November 18, 1988.
<TABLE>
<CAPTION>
U.S. 91-Day Donoghue First Tier
Fremont Money Market Fund T-Bill Index Taxable Average
Qtrly Qtrly Qtrly
Return Balance Return Balance Return Balance
<S> <C> <C> <C> <C> <C> <C>
18-Nov-88 $10,000 $10,000 $10,000
30-Nov-88 0.27% $10,027 0.26% $10,026 0.25% $10,025
31-Dec-88 0.68% $10,096 0.67% $10,093 0.65% $10,090
31-Jan-89 0.74% $10,170 0.69% $10,163 0.68% $10,159
28-Feb-89 0.65% $10,237 0.72% $10,236 0.68% $10,228
31-Mar-89 0.77% $10,315 0.73% $10,311 0.71% $10,300
30-Apr-89 0.72% $10,389 0.70% $10,383 0.74% $10,377
31-May-89 0.83% $10,475 0.71% $10,457 0.73% $10,452
30-Jun-89 0.74% $10,552 0.66% $10,526 0.72% $10,528
31-Jul-89 0.73% $10,630 0.63% $10,592 0.69% $10,600
31-Aug-89 0.71% $10,705 0.65% $10,661 0.66% $10,670
30-Sep-89 0.65% $10,775 0.66% $10,731 0.66% $10,741
31-Oct-89 0.72% $10,852 0.76% $10,813 0.66% $10,812
30-Nov-89 0.66% $10,924 0.69% $10,887 0.64% $10,881
31-Dec-89 0.63% $10,993 0.62% $10,955 0.63% $10,949
31-Jan-90 0.67% $11,067 0.66% $11,027 0.62% $11,017
28-Feb-90 0.59% $11,132 0.60% $11,093 0.61% $11,084
31-Mar-90 0.63% $11,202 0.67% $11,168 0.61% $11,152
30-Apr-90 0.66% $11,276 0.65% $11,240 0.62% $11,221
31-May-90 0.66% $11,350 0.68% $11,317 0.62% $11,291
30-Jun-90 0.62% $11,420 0.65% $11,390 0.61% $11,360
31-Jul-90 0.68% $11,498 0.66% $11,465 0.61% $11,429
31-Aug-90 0.65% $11,573 0.65% $11,540 0.60% $11,498
30-Sep-90 0.58% $11,640 0.61% $11,610 0.60% $11,567
31-Oct-90 0.68% $11,719 0.62% $11,682 0.60% $11,636
30-Nov-90 0.62% $11,792 0.59% $11,751 0.59% $11,704
31-Dec-90 0.64% $11,867 0.59% $11,821 0.59% $11,773
31-Jan-91 0.62% $11,941 0.57% $11,888 0.56% $11,839
28-Feb-91 0.53% $12,005 0.49% $11,946 0.52% $11,901
31-Mar-91 0.50% $12,065 0.52% $12,008 0.49% $11,959
30-Apr-91 0.57% $12,134 0.48% $12,066 0.47% $12,015
31-May-91 0.50% $12,195 0.48% $12,124 0.44% $12,068
30-Jun-91 0.44% $12,249 0.46% $12,180 0.44% $12,121
31-Jul-91 0.52% $12,312 0.48% $12,238 0.44% $12,174
31-Aug-91 0.46% $12,369 0.47% $12,296 0.43% $12,227
30-Sep-91 0.47% $12,427 0.44% $12,350 0.42% $12,278
31-Oct-91 0.44% $12,482 0.44% $12,404 0.41% $12,328
30-Nov-91 0.39% $12,531 0.40% $12,454 0.39% $12,375
31-Dec-91 0.42% $12,584 0.37% $12,500 0.38% $12,422
31-Jan-92 0.37% $12,630 0.35% $12,543 0.34% $12,464
29-Feb-92 0.30% $12,668 0.31% $12,582 0.31% $12,502
31-Mar-92 0.31% $12,708 0.34% $12,625 0.30% $12,540
30-Apr-92 0.29% $12,744 0.32% $12,666 0.29% $12,576
31-May-92 0.27% $12,779 0.33% $12,707 0.28% $12,612
30-Jun-92 0.30% $12,817 0.30% $12,745 0.28% $12,647
31-Jul-92 0.27% $12,852 0.30% $12,784 0.26% $12,680
31-Aug-92 0.26% $12,885 0.28% $12,819 0.25% $12,711
30-Sep-92 0.24% $12,917 0.25% $12,852 0.24% $12,741
31-Oct-92 0.24% $12,947 0.25% $12,884 0.22% $12,769
30-Nov-92 0.24% $12,978 0.25% $12,916 0.22% $12,798
31-Dec-92 0.23% $13,008 0.27% $12,951 0.23% $12,828
31-Jan-93 0.21% $13,036 0.27% $12,986 0.23% $12,857
28-Feb-93 0.20% $13,062 0.23% $13,016 0.22% $12,885
31-Mar-93 0.24% $13,093 0.25% $13,048 0.21% $12,912
30-Apr-93 0.22% $13,122 0.24% $13,080 0.21% $12,939
31-May-93 0.20% $13,148 0.25% $13,113 0.21% $12,967
30-Jun-93 0.23% $13,178 0.25% $13,147 0.21% $12,994
31-Jul-93 0.22% $13,208 0.26% $13,181 0.21% $13,021
31-Aug-93 0.21% $13,235 0.26% $13,215 0.21% $13,049
30-Sep-93 0.21% $13,263 0.25% $13,248 0.21% $13,076
31-Oct-93 0.22% $13,291 0.26% $13,282 0.21% $13,104
30-Nov-93 0.21% $13,320 0.25% $13,315 0.21% $13,132
31-Dec-93 0.24% $13,351 0.26% $13,351 0.22% $13,161
31-Jan-94 0.21% $13,379 0.26% $13,385 0.22% $13,189
28-Feb-94 0.20% $13,406 0.24% $13,418 0.22% $13,218
31-Mar-94 0.23% $13,437 0.28% $13,455 0.23% $13,248
30-Apr-94 0.25% $13,470 0.30% $13,496 0.25% $13,281
31-May-94 0.31% $13,512 0.33% $13,540 0.27% $13,317
30-Jun-94 0.32% $13,555 0.34% $13,586 0.29% $13,356
31-Jul-94 0.35% $13,603 0.36% $13,636 0.31% $13,397
31-Aug-94 0.36% $13,651 0.37% $13,687 0.32% $13,439
30-Sep-94 0.36% $13,701 0.37% $13,737 0.34% $13,485
31-Oct-94 0.40% $13,755 0.41% $13,794 0.35% $13,532
30-Nov-94 0.41% $13,812 0.42% $13,852 0.37% $13,582
31-Dec-94 0.50% $13,880 0.46% $13,915 0.40% $13,636
31-Jan-95 0.45% $13,943 0.46% $13,979 0.42% $13,694
28-Feb-95 0.45% $14,006 0.44% $14,041 0.44% $13,754
31-Mar-95 0.54% $14,081 0.49% $14,110 0.45% $13,816
30-Apr-95 0.46% $14,145 0.48% $14,177 0.45% $13,877
31-May-95 0.50% $14,216 0.49% $14,247 0.44% $13,939
30-Jun-95 0.51% $14,289 0.47% $14,314 0.44% $14,000
31-Jul-95 0.46% $14,355 0.49% $14,384 0.43% $14,060
31-Aug-95 0.48% $14,423 0.47% $14,452 0.43% $14,120
30-Sep-95 0.47% $14,492 0.45% $14,517 0.42% $14,180
31-Oct-95 0.46% $14,558 0.46% $14,583 0.42% $14,239
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 5.84%
2 Years 4.66%
3 Years 3.99%
4 Years 3.92%
5 Years 4.43%
Since Inception (11/18/88) 5.55%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
U.S. 91-Day T-Bill Index. An investment in the Fund is neither insured nor
guaranteed by the U.S. Government. The Fund seeks to maintain a stable $1.00
share price although there is no assurance that it will be able to do so.
<PAGE>
Questions & ANSWERS
William M. Feeney, Portfolio Manager
Fremont Investment Advisors, Inc.
Q: How did the California Intermediate Tax-Free Fund perform for the fiscal
year ended October 31, 1995?
A: The Fremont California Intermediate Tax-Free Fund returned 12.77% for the
one-year period ended October 31, 1995, performing significantly better than
the Lehman Brothers 5-Year State Government Obligation (G.O.) Index, which
rose 10.37% during the fiscal year.
Q: Why did the fund perform so well?
A: The Fund maintained an average maturity in excess of eight years
throughout the 12-month period. This strategy was designed to take
advantage of two important market predictions. First, we forecasted that
a decrease in interest rates was likely to take place in 1995, which
typically boosts the performance of a portfolio with a longer average
maturity. Second, we anticipated that the California municipal bond
market would be under-supplied, keeping demand and prices at a high
level. In both cases, our predictions were correct.
Q: What impact did economic conditions have upon the Fund's performance?
A: The Fund benefited from the end of the California recession and the
compromise struck in the Orange County bankruptcy. As the state
recovered from the longest recession in its history, investors regained
confidence in California municipal bonds. While the Orange County
bankruptcy had no direct impact on the Fund, its ultimate outcome had a
settling effect on the California municipal bond market.
Q: What is your current strategy for the Fund?
A: Based on current projections, we will continue to maintain an average
maturity of eight years for the remainder of 1995. As the California
economy gains momentum, we expect to move into more general obligation
bonds, and perhaps to a limited number of lower-rated bonds. With a
continued scarcity of new bonds and a strong economy leading the way,
the outlook for the California municipal bond market is very good.
Sincerely,
William M. Feeney
Portfolio Manager
8. FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND - Growth of $10,000 * Assumes
initial investment of $10,000 on inception date, November 16, 1990.
<TABLE>
<CAPTION>
Fremont California Lehman Bros.
Intermediate Tax-Free Fund 5 -Year State G.O. Index
Qtrly Qtrly
Return Balance Return Balance
<S> <C> <C> <C> <C>
16-Nov-90 $10,000 $10,000
30-Nov-90 0.64% $10,064 0.67% $10,067
31-Dec-90 0.40% $10,105 0.35% $10,102
31-Jan-91 1.67% $10,273 1.46% $10,250
28-Feb-91 0.88% $10,364 0.88% $10,340
31-Mar-91 0.06% $10,370 -0.26% $10,313
30-Apr-91 0.93% $10,467 1.39% $10,456
31-May-91 0.60% $10,530 0.49% $10,508
30-Jun-91 -0.33% $10,496 -0.14% $10,493
31-Jul-91 1.02% $10,603 1.00% $10,598
31-Aug-91 1.26% $10,737 1.26% $10,731
30-Sep-91 1.34% $10,881 1.20% $10,860
31-Oct-91 0.50% $10,936 0.78% $10,945
30-Nov-91 0.16% $10,953 0.31% $10,979
31-Dec-91 2.14% $11,187 2.25% $11,226
31-Jan-92 0.27% $11,218 0.18% $11,246
29-Feb-92 0.04% $11,222 0.06% $11,253
31-Mar-92 -0.30% $11,188 -0.37% $11,211
30-Apr-92 0.73% $11,270 0.85% $11,306
31-May-92 0.91% $11,373 0.94% $11,413
30-Jun-92 1.43% $11,535 1.40% $11,572
31-Jul-92 2.91% $11,871 2.62% $11,876
31-Aug-92 -1.04% $11,747 -0.75% $11,787
30-Sep-92 0.71% $11,831 0.64% $11,862
31-Oct-92 -0.75% $11,741 -0.34% $11,821
30-Nov-92 1.40% $11,906 1.19% $11,962
31-Dec-92 0.82% $12,004 0.73% $12,049
31-Jan-93 1.26% $12,155 1.09% $12,180
28-Feb-93 2.99% $12,518 2.58% $12,495
31-Mar-93 -1.55% $12,325 -1.10% $12,357
30-Apr-93 0.89% $12,434 0.60% $12,432
31-May-93 0.21% $12,460 0.35% $12,475
30-Jun-93 1.66% $12,666 1.33% $12,641
31-Jul-93 -0.30% $12,629 0.01% $12,642
31-Aug-93 2.06% $12,889 1.38% $12,817
30-Sep-93 1.40% $13,069 0.76% $12,915
31-Oct-93 0.06% $13,076 0.12% $12,930
30-Nov-93 -0.86% $12,964 -0.24% $12,899
31-Dec-93 1.81% $13,198 1.39% $13,078
31-Jan-94 1.18% $13,354 0.95% $13,202
28-Feb-94 -2.60% $13,007 -1.97% $12,943
31-Mar-94 -2.63% $12,664 -2.24% $12,653
30-Apr-94 0.41% $12,717 1.00% $12,779
31-May-94 0.62% $12,795 0.58% $12,854
30-Jun-94 -0.63% $12,714 -0.26% $12,820
31-Jul-94 1.58% $12,915 1.04% $12,954
31-Aug-94 0.23% $12,945 0.48% $13,016
30-Sep-94 -1.39% $12,765 -0.74% $12,920
31-Oct-94 -1.60% $12,561 -0.56% $12,847
30-Nov-94 -1.65% $12,354 -0.76% $12,750
31-Dec-94 1.60% $12,552 0.91% $12,866
31-Jan-95 2.22% $12,830 1.05% $13,001
28-Feb-95 2.94% $13,208 1.49% $13,195
31-Mar-95 1.12% $13,356 0.97% $13,323
30-Apr-95! 0.20% $13,382 0.25% $13,356
31-May-95 2.71% $13,745 2.17% $13,646
30-Jun-95 -0.68% $13,652 0.14% $13,665
31-Jul-95 0.87% $13,771 1.40% $13,856
31-Aug-95 1.08% $13,920 0.88% $13,979
30-Sep-95 0.42% $13,978 0.32% $14,023
31-Odt-95 1.34% $14,165 0.41% $14,081
</TABLE>
Average Annual Returns for Periods Ended 10/31/95
1 Year 12.77%
2 Years 4.08%
3 Years 6.46%
4 Years 6.68%
Since Inception (11/16/90) 7.28%
Performance data illustrated is historical. Past performance is not predictive
of future performance. Share price and return will vary so that a gain or loss
may be realized when shares are sold. All performance figures assume
reinvestment of dividends. Management fees and other expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Lehman Bros. 5-Year State G.O. Index.
<PAGE>
To the Shareholders and Board of Directors of the Fremont Mutual Funds:
We have audited the accompanying statements of assets and liabilities of
the various funds comprising the Fremont Mutual Funds (the Funds) including
each Fund's statement of investments in securities and net assets as of
October 31, 1995, and the related statements of operations for the year then
ended and the statements of changes in net assets and the financial highlights
for each of the periods indicated thereon. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1995 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the various funds comprising the Fremont Mutual Funds as of
October 31, 1995, the results of their operations for the year then ended, and
the changes in their net assets and their financial highlights for each of the
periods indicated thereon in conformity with generally accepted accounting
principles.
/s/ Coopers Lybrand L.L.P.
San Francisco, California December 1, 1995
Global Fund
<TABLE>
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS - 70.0%
BUSINESS EQUIPMENT & SERVICES - 2.7%
6,000 Legrand FR $1,004,955
500,000 Wharf Holdings HK 1,687,944
143,400 Kyowa Exeo Corp. JP 1,249,581
10,000 Securitas AB "B" Free SW 387,486
20,000 Reuters Holdings PLC, ADR UK 1,110,000
13,100 Automatic Data Processing, Inc. US 936,650
20,300 Dun & Bradstreet Corp. US 1,212,925
* 12,900 Federal Express Corp. US 1,059,413
36,531 First Data Corp. US 2,415,658
* 19,200 Office Depot, Inc. US 549,600
52,200 WMX Technologies, Inc. US 1,468,125
-----------
13,082,337
-----------
CAPITAL GOODS - 4.1%
8,044 Lafarge Coppee FR 533,818
1,100 Heidelberger Zement AG GM 476,512
3,000 Mannesmann AG GM 984,270
2,000 Siemens AG GM 1,043,923
1,021,000 PT Dynaplast (Foreign Registered) ID 899,163
8,400 Kyocera Corp., ADR JP 1,390,200
206,000 Mitsubishi Heavy Industries JP 1,591,364
60,000 Cemex SA (Class B), ADR MX 385,710
954,000 IJM Corp. Berhad MY 1,569,969
160,000 Steel & Tube Holdings Ltd. NZ 760,262
30,000 Cementos Lima, ADR PE 417,120
19 Zardoya-Otis SP 1,856
40,000 Autoliv AB SW 2,297,776
14,400 Caterpillar, Inc. US 808,200
24,300 Emerson Electric Co. US 1,731,375
79,900 General Electric Co. US 5,053,675
-----------
19,945,193
-----------
CONSUMER DURABLES - 1.3%
3,160 Daimler-Benz AG GM 1,504,655
28,600 Ek Chor China Motorcycle Co. Ltd. HK 400,400
31,000 Fukoku Co. Ltd. JP 549,371
33,000 Murata Manufacturing Co. Ltd. JP 1,159,935
33,000 Sony Corp., ADR JP 1,509,750
112,000 Suzuki Motor Co. Ltd. JP 1,129,485
-----------
6,253,596
-----------
CONSUMER NON-DURABLES - 9.5%
12,000 BIC FR 1,140,096
6,000 Groupe Danone FR 959,499
10,760 LVMH FR 2,143,716
440 LVMH, ADR FR 17,545
2,880,000 Pacific Andes International
Holdings Ltd. HK 681,696
928,280 PT Mayora Indah (Foreign Registered)ID 664,225
20,000 Coca-Cola Femsa SA de CV ADR MX 360,000
35,000 PanAmerican Beverages, Inc.
(Class A) MX 958,125
10,600 Unilever NV (New York Shares) NL 1,388,600
250,000 Cervecer Backus & Johnston PE 453,944
268,450 San Miguel Corp. (Class B) PH 887,609
90,000 Fraser & Neave Ltd. SG 1,063,318
600 Nestle SA (Registered Shares) SZ 628,521
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER NON-DURABLES (CONTINUED)
100,000 Srithai Superware Co. Ltd.
(Foreign Registered) TH $675,541
*137,619 President Enterprises, GDR TW 1,513,812
23,700 Anheuser Busch Cos., Inc. US 1,564,200
51,238 Archer Daniels Midland Co. US 826,213
20,800 Campbell Soup Co. US 1,089,400
73,700 Coca-Cola Co. US 5,297,188
14,700 Colgate Palmolive Co. US 1,017,975
11,700 CPC International US 776,588
* 20,900 Crown Cork & Seal Co., Inc. US 728,888
28,700 Eastman Kodak Co. US 1,797,338
36,900 Gillette Co. US 1,785,037
21,200 Heinz (H.J.) & Co. US 985,800
18,700 Kellogg Co. US 1,351,075
70,600 Pepsico, Inc. US 3,724,150
63,100 Philip Morris Cos., Inc. US 5,331,950
51,800 Procter & Gamble Co. US 4,195,800
33,900 Sara Lee Corp. US 995,812
35,600 Tyson Foods, Inc. (Class A) US 849,950
-----------
45,853,611
-----------
CONSUMER SERVICES - 5.5%
22,000 News Corp. Ltd., ADR AU 437,250
185,400 Village Roadshow Ltd. (Preferred) AU 530,845
14,000 Societe Television Francaise 1 FR 1,447,643
220,000 PT Modern Photo Film Co.
(Foreign Registered) ID 1,336,856
3,300 H.I.S. Co. Ltd. JP 127,625
35,000 Secom Co. JP 2,282,273
20,000 Sega Enterprises Ltd. JP 1,061,340
10,000 Sega Enterprises Ltd., ADR JP 132,524
145,000 Genting Berhad MY 1,250,197
140,600 Elsevier NV NL 1,815,916
7,813 Wolters Kluwer NV NL 710,318
27,840 Wolters Kluwer NV, ADR NL 2,530,046
280,000 Helicopter Line Ltd. (The) NZ 813,058
110,000 Pearson PLC UK 1,095,278
20,400 Capital Cities/ABC, Inc. US 2,419,950
10,580 CBS, Inc. US 854,335
* 30,300 CUC International, Inc. US 1,049,138
40,700 Disney (Walt) Co. US 2,345,338
23,600 Mattel, Inc. US 678,500
9,500 Tribune Co. US 599,688
* 27,500 Viacom, Inc. (Class B) US 1,375,000
5,000 Washington Post Co. (Class B) US 1,450,000
-----------
26,343,118
-----------
ENERGY - 1.4%
50,000 YPF Sociedad, ADR AR 856,250
* 15 Petrofina SA (Warrants 06/03/97) BE 198
6,787 Societe Nationale Elf Aquintaine SA FR 462,769
17,300 Amoco Corp. US 1,105,037
12,100 Atlantic Richfield Co. US 1,291,675
16,100 Chevron Corp. US 752,675
15,600 Exxon Corp. US 1,191,450
11,400 Mobil Corp. US 1,148,550
-----------
6,808,604
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES - 8.2%
60,000 Lend Lease Corp. Ltd. AU $834,299
200,000 Westpac Banking Corp. Ltd. AU 820,897
7,566 Cetelem FR 1,208,379
8,000 Societe Generale Paris FR 917,318
23,472 Union des Assurances de Paris FR 610,374
4,000 Union des Assurances Federales FR 425,898
228 Allianz AG Holdings GM 419,035
2,200 Commerzbank AG GM 508,227
20,000 Deutsche Bank AG GM 901,893
760,000 Amoy Properties Ltd. HK 732,348
380,000 Cheung Kong (Holdings) Ltd. HK 2,142,977
1,398,000 JCG Holdings Ltd. HK 1,021,652
*495,000 Tian An China Investments Ltd.
(Warrants 01/25/96) HK 832
968,500 PT Lippo Bank (Foreign Registered) ID 1,961,735
150,000 Arab Malaysian Finance Berhad
(Foreign Registered) MY 525,591
200,000 Commerce Asset Holding Berhad MY 992,126
32,467 Aegon NV, ADR NL 1,237,804
289,000 City Developments SG 1,788,999
91,250 Development Bank of Singapore
(Foreign Registered) SG 1,045,808
95,833 Oversea-Chinese Banking Corp. Ltd.
(Foreign Registered) SG 1,125,453
129,899 United Overseas Bank Ltd.
(Foreign Registered) SG 1,139,547
808 Union Bank of Switzerland SZ 874,859
220,900 Bangkok Bank Ltd.
(Foreign Registered) TH 2,282,297
415,000 Bank of Ayudhya Ltd.
(Foreign Registered) TH 2,391,218
600,000 Krung Thai Bank Co. Ltd.
(Foreign Registered) TH 2,372,343
500,000 Siam City Bank Ltd.
(Foreign Registered) TH 531,492
160,000 Siam Commercial Bank
(Foreign Registered) TH 1,869,263
244,280 Thai Farmers Bank Co. Ltd.
(Foreign Registered) TH 2,019,084
155,801 HSBC Holdings PLC
(Hong Kong Shares) UK 2,267,098
44,850 American International Group, Inc. US 3,784,219
6,100 General Re Corp. US 883,737
-----------
39,636,802
-----------
HEALTH CARE - 8.0%
3,000 Gehe AG GM 1,472,144
* 749 Gehe AG, New GM 355,843
* 26,000 Merck KGaA GM 1,085,680
400,250 PT Dankos Laboratories
(Foreign Registered) ID 1,127,961
20,000 Towa Pharmaceutical Co. Ltd. JP 939,932
28,000 Kimberly-Clark de Mexico SA MX 368,181
8,000 Astra AB "A" Free SW 294,308
74,000 Astra AB "B" Free SW 2,677,723
360 Roche Holding AG SZ 2,614,437
61,000 Abbott Laboratories US 2,424,750
23,600 American Home Products Corp. US 2,091,550
38,400 Bristol-Myers Squibb Co. US 2,928,000
13,300 Cardinal Health, Inc. US 683,288
38,000 Columbia HCA Healthcare Corp. US 1,866,750
* 17,000 Forest Laboratories, Inc. (Class A) US 703,375
50,100 Johnson & Johnson US 4,083,150
22,100 Lilly (Eli) & Co. US 2,135,413
21,800 Medtronic, Inc. US 1,258,950
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE (CONTINUED)
89,800 Merck & Co. US $5,163,500
46,200 Pfizer, Inc. US 2,650,725
29,200 Schering Plough Corp. US 1,565,850
-----------
38,491,510
-----------
MISCELLANEOUS - 1.8%
*147,000 India Fund (Class A)
(United Kingdom Shares) IN 693,449
*100,900 BZW Taiwan Index Fund Ltd. TW 949,873
74,600 Inefficient Market Fund, Inc. US 783,300
299,528 Morgan Grenfell Small Cap Fund, Inc.US 3,482,013
122,000 Royce OTC Micro-Cap Trust, Inc. US 945,500
158,857 Royce Value Trust US 2,045,284
-----------
8,899,419
-----------
MULTI-INDUSTRY - 2.7%
35,000 Rhodia-Ster SA, GDR BR 458,500
24,000 Douglas Holding AG GM 864,112
4,800 Viag AG GM 1,942,975
410,000 Hutchison Whampoa HK 2,259,128
3,896,000 Yue Yuen Industrial Holdings HK 1,020,449
540,000 Renong Berhad MY 824,882
1,326,000 JG Summit Holdings - B PH 372,157
963,000 Comfort Group Ltd. SG 803,919
110,000 Cycle & Carriage Ltd. SG 980,545
10,900 ITT Corp. US 1,335,250
41,000 Minnesota Mining & ManufacturingCo. US 2,331,875
-----------
13,193,792
-----------
RAW MATERIALS - 2.3%
18,900 Broken Hill Proprietary Co.
Ltd., ADR AU 1,022,963
* 20,000 Companhia Siderurgica Tubarao, ADR BR 461,640
4,500 Compagnie de Saint-Gobain SA FR 537,184
2,000 Bayer AG GM 528,353
776,000 Asiatic Development Berhad MY 763,780
* 32,109 Hansol Paper Ltd., GDR SK 658,235
* 4,333 Hansol Paper Ltd., GDR SK 88,826
670 Sandoz AG (Registered Shares) SZ 552,632
14,200 Du Pont (E.I.) de Nemours & Co. US 885,725
61,500 Engelhard Corp. US 1,529,812
15,100 FMC Corp. US 1,081,537
11,800 Great Lakes Chemical Corp. US 792,075
7,100 Monsanto Co. US 743,725
18,900 Morton International, Inc. US 576,450
14,500 Nucor Corp. US 697,813
-----------
10,920,750
-----------
RETAIL - 4.5%
* 55,000 Makro Atacadista BR 508,915
2,100 Carrefour Supermarche FR 1,234,940
12,230 Castorama Dubois FR 1,985,829
1,500 AVA AG GM 562,440
300,000 PT Hero Supermarket
(Foreign Registered) ID 614,267
29,000 Ito-Yokado Co. Ltd. JP 1,587,213
41,000 Seven Eleven Japan JP 2,737,749
200,000 Cifra SA de CV MX 209,483
335,000 Cifra SA de CV, ADR MX 358,450
45,642 Ceteco Holdings NV NL 1,488,169
43,200 Home Depot, Inc. US 1,609,200
58,400 McDonalds Corp. US 2,394,400
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
RETAIL (CONTINUED)
* 23,300 Safeway, Inc. US $1,100,925
* 32,700 Stop & Shop Cos., Inc. US 678,525
* 23,400 Toys R Us, Inc. US 511,875
181,000 Wal Mart Stores, Inc. US 3,914,125
-----------
21,496,505
-----------
SHELTER - 2.1%
270,000 Sun Hung Kai Properties Ltd. HK 2,156,494
522,000 PT Jaya Real Property
(Foreign Registered) ID 1,488,309
45,000 Empresas ICA Sociedad Controladora
SA de CV, ADR MX 427,500
750,000 Ayala Land, Inc. PH 865,052
*3,200,000 C & P Homes, Inc. PH 2,060,746
*1,875,000 Filinvest Land, Inc. PH 504,614
17,600 International Paper Co. US 651,200
16,300 Kimberly-Clark Corp. US 1,183,787
14,200 Scott Paper Co. US 756,150
-----------
10,093,852
-----------
TECHNOLOGY - 9.2%
6,500 SAP AG (Preferred) GM 997,053
*1,020,000 Telecom Italia Mobile SPA IT 1,714,151
110,000 Canon, Inc. JP 1,884,760
18,900 Hirose Electronics JP 1,208,371
40,000 Hoya Corp. JP 1,174,916
255 Nippon Telegraph & Telephone JP 2,094,728
14,000 TDK Corp. JP 722,377
250,000 Fisher & Paykel Industries Ltd. NZ 816,688
250,000 CPT Telefonica del Peru SA PE 446,232
*545,486 Tele 2000 PE 536,110
26,000 Samsung Electronics Ltd.,
GDS (1/2 Non-Voting) SK 1,696,500
* 2,392 Samsung Electronics Ltd.,
GDS (1/2 Voting) SK 274,195
5,145 Samsung Electronics Ltd., New GDS
(1/2 Non-Voting) SK 268,569
* 821 Samsung Electronics Ltd., New
GDS (1/2 Voting) SK 94,111
47,250 Advanced Information Services
(Foreign Registered) TH 751,043
* 73,800 AirTouch Communications, Inc. US 2,103,300
23,400 Amp, Inc. US 918,450
* 15,800 Applied Materials, Inc. US 791,975
* 20,900 Cisco Systems, Inc. US 1,619,750
* 21,700 Compaq Computer Corp. US 1,209,775
18,500 Computer Associates
International, Inc. US 1,017,500
40,500 Hewlett-Packard Co. US 3,751,313
62,800 Intel Corp. US 4,388,150
11,500 International Business Machines US 1,118,375
* 25,400 Litton Industries, Inc. US 1,006,475
15,700 Micron Technology, Inc. US 1,108,812
* 44,100 Microsoft Corp. US 4,410,000
46,400 Motorola, Inc. US 3,045,000
* 34,200 Oracle Systems Corp. US 1,491,975
15,000 Texas Instruments, Inc. US 1,023,750
8,100 United Technologies Corp. US 718,875
-----------
44,403,279
-----------
TRANSPORTATION - 0.5%
32,000 Grupo Casa Autrey SP, ADR MX 408,000
125,000 Keppel Corp. SG 1,025,822
8,500 Keppel Corp.(Convertible Loan Stock)SG 13,109
* 8,500 Keppel Corp. (Warrants 06/30/97) SG 34,277
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION (CONTINUED)
11,200 CSX Corp. US $938,000
-----------
2,419,208
-----------
UTILITIES - 6.2%
10,000 Telecom de Argentina, ADR AR 383,750
8,900 Telefonica de Argentina SA, ADR AR 184,675
7,000 Compania Telecomunicacion
Chile, ADR CL 504,000
50,000 Enersis SA, ADR CL 1,256,250
4,000 RWE AG GM 1,428,825
420,480 Hong Kong & China Gas Co. HK 682,553
* 19,200 Hong Kong & China Gas Co.
(Warrants 12/31/95) HK 969
400,000 Hong Kong Telecommunications HK 698,460
37,500 Hong Kong Telecommunications , ADR HK 651,562
28,400 PT Indonesia Satellite, ADR ID 940,750
40,000 Telefonos de Mexico SA
(Class L), ADR MX 1,100,000
27,100 Telecom of New Zealand, ADR NZ 1,798,763
235,365 Manila Electric Co. (Class B) PH 1,755,510
14,900 Philippine Long Distance
Telephone Co. PH 830,642
70,000 Korea Electric Power Corp., ADR SK 1,732,500
30,300 Empresa Nacional de
Electricidad, ADR SP 1,522,575
15,457 British Telecommunications PLC, ADR UK 919,692
100,138 Northern Electric PLC UK 1,407,644
*113,200 Northern Electric PLC (Preferred) UK 177,404
91,807 Powergen PLC UK 825,477
34,000 Powergen PLC, ADR UK 1,262,250
26,000 Ameritech Corp. US 1,404,000
85,300 AT&T Corp. US 5,459,200
17,300 Bell Atlantic Corp. US 1,100,713
14,600 Bellsouth Corp. US 1,116,900
30,000 Frontier Corp. US 810,000
-----------
29,955,064
-----------
TOTAL STOCKS (Cost $297,936,613) 337,796,640
-----------
<CAPTION>
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
BONDS - 24.5%
CORPORATE BONDS - 5.5%
2,000,000 BankAmerica Corp., 8.125%, 08/15/04
(Callable 08/15/99 @ 100) 2,107,178
1,600,000 Chrysler Corp., 10.400%, 08/01/99
(Callable 08/01/97 @ 100) 1,706,784
2,000,000 Costco Wholesale, Inc., 5.750%, 05/15/02
(Convertible Bond) 1,870,000
2,500,000 General Electric Capital Corp., 8.850%, 03/01/07
(Puttable 03/01/97 @ 100) 2,963,400
3,000,000 General Motors Acceptance Corp.,
7.500%, 07/24/00 3,130,680
2,000,000 Great Western Bank, 9.875%, 06/15/01 2,288,300
2,000,000 Inter-American Development Bank,
7.000%, 06/15/25 2,022,060
2,000,000 Pohang Iron & Steel Co., Ltd., 7.375%,
05/15/05 2,070,680
2,000,000 Potomac Electric Power, 5.000%,
09/01/02 (Convertible Bond) 1,820,000
3,000,000 Societe Generale NY, 9.875%, 07/15/03 3,572,820
2,500,000 W.R. Grace, 7.400%, 02/01/00 2,563,975
249,883 Zions Auto Trust, 5.650%, 06/15/99 248,203
-----------
26,364,080
-----------
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
<CAPTION>
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE BACKED SECURITIES - 0.4%
2,020,139 FNMA CMO, 1992-137BA REMIC,
3.500%, 01/25/17 $1,906,506
-----------
1,906,506
-----------
U.S. GOVERNMENT & AGENCY BONDS - 4.0%
Federal Home Loan Mortgage Corp.
3,500,000 6.390%, 07/02/03 (Callable 07/02/96 @ 100) 3,438,190
3,000,000 8.375%, 03/15/10 (Callable 03/15/00 @ 100) 3,207,660
Federal National Mortgage Association
2,000,000 7.700%, 08/10/04 (Callable 08/10/99 @ 100) 2,090,320
3,000,000 8.400%, 10/25/04 (Callable 10/25/99 @ 100) 3,231,570
U.S. Treasury Notes
3,000,000 7.125%, 02/29/00 3,148,110
4,000,000 7.500%, 02/15/05 4,411,240
-----------
19,527,090
-----------
FOREIGN BONDS - 14.6%
European Investment Bank
CAN $2,000,000 6.625%, 09/15/00 1,436,824
4,000,000 7.750%, 04/22/03 2,937,011
Oesterreichische Kontrollbank
CAN $2,000,000 9.000%, 06/19/02 1,564,480
Japan Highway Public Corp.
CAN $2,000,000 7.875%, 09/27/02 1,482,482
Toyko Electric Power
CAN $2,000,000 10.500%, 06/14/01 1,651,137
Republic of Finland
CAN $2,000,000 9.500, 09/15/04 1,596,161
Kingdom of Denmark
DKK 13,000,000 9.000%, 11/15/00 2,578,579
20,000,000 8.000%, 11/15/01 3,797,144
20,000,000 7.000%, 12/15/04 3,476,382
20,000,000 8.000%, 03/15/06 3,683,632
Government of France
FF 10,000,000 8.500%, 11/25/02 2,216,512
15,000,000 8.500%, 04/25/03 3,318,011
10,500,000 6.750%, 10/25/03 2,102,451
10,000,000 7.750%, 10/25/05 2,112,085
Federal Republic of Germany
DM 3,000,000 8.500%, 08/21/00 2,387,388
3,000,000 8.250%, 09/20/01 2,373,966
3,000,000 7.250%, 10/21/02 2,263,182
3,000,000 6.750%, 04/22/03 2,189,042
4,500,000 6.875%, 05/12/05 3,281,327
Treuhandanstalt
DM 3,000,000 7.750%, 10/01/02 2,314,739
4,000,000 6.500%, 04/23/03 2,872,989
World Bank
DM 3,000,000 6.125%, 09/27/02 2,125,129
Government of Netherlands
NLG 6,000,000 6.500%, 04/15/03 3,867,047
5,000,000 6.750%, 11/15/05 3,216,208
European Investment Bank
(pound)2,000,000 8.000%, 06/10/03 3,132,361
<CAPTION>
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
<S> <C> <C>
FOREIGN BONDS (CONTINUED)
Republic of Argentina
US $4,000,000 5.000%, 03/31/23 (Callable Semiannually
in May or November @ 100) $1,892,500
Republic of South Africa
US $2,000,000 9.625%, 12/15/99 2,122,500
United Mexican States
US $4,000,000 6.250%, 12/31/19
(Callable at any time @ 100) 2,340,000
-----------
70,331,269
-----------
TOTAL BONDS (Cost $111,513,470) 118,128,945
-----------
<CAPTION>
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM SECURITIES - 5.5%
24,463,225 Bankers Trust Commingled Trust Fund 24,463,225
t 2,000,000 U.S. Treasury Bill, 5.270%, 12/14/95 1,987,411
-----------
TOTAL SHORT TERM SECURITIES (Cost $26,450,636) 26,450,636
-----------
TOTAL INVESTMENTS (Cost $435,900,719), 100.0% 482,376,221
OTHER ASSETS AND LIABILITIES, NET, (0.0)% (21,365)
-----------
NET ASSETS, 100.0% $482,354,856
============
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
CMO - Collateralized Mortgage Obligation
FNMA - Federal National Mortgage Association
GDR - Global Depository Receipt
GDS - Global Depository Share
REMIC - Real Estate Mortgage Investment Conduit
CURRENCY ABBREVIATIONS:
CAN $-Canadian Dollar
DKK - Danish Kroner
DM - German Deutschemark
FF - French Franc
NLG - Netherlands Guilder
(pound) - British Pound
US $- US Dollar
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION
Country % Of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AR Argentina 0.3%
AU Australia 0.8%
BE Belgium 0.0%
BR Brazil 0.3%
CL Chile 0.4%
CN Canada 2.2%
DK Denmark 2.8%
FR France 5.1%
GM Germany 7.2%
HK Hong Kong 2.9%
ID Indonesia 1.9%
IN India 0.1%
IT Italy 0.4%
JP Japan 5.1%
MX Mexico 0.9%
MY Malaysia 1.2%
NL Netherlands 3.4%
NZ New Zealand 0.9%
PE Peru 0.4%
PH Philippines 1.5%
SG Singapore 1.9%
SK South Korea 1.0%
SP Spain 0.3%
SW Sweden 1.2%
SZ Switzerland 1.0%
TH Thailand 2.7%
TW Taiwan 0.5%
UK United Kingdom 2.5%
US United States 51.1%
------
TOTAL 100.0%
======
<FN>
t On deposit with broker for initial margin on futures contract (Note 1). The
accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont International Growth Fund
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS - 93.8%
BUSINESS EQUIPMENT & SERVICES - 2.5%
41,000 Kyowa Exeo Corp. JP $ 357,272
8,000 Reuters Holdings PLC, ADR UK 444,000
-----------
801,272
-----------
CAPITAL GOODS - 10.8%
9,000 Kyocera Corp. JP 738,435
6,000 Mabuchi Motors Co. JP 363,636
16,000 Raito Kogyo Co. JP 328,976
148,000 IJM Corp. Berhad MY 243,559
158,333 Leader Universal Holdings Berhad MY 427,001
17,000 IHC Caland NL 483,254
15,300 Autoliv AB SW 878,899
-----------
3,463,760
-----------
CONSUMER DURABLES - 3.3%
15,000 Matsushita-Kotobuki Electronics JP 304,009
10,000 Murata Manufacturing Co. Ltd. JP 351,495
17,600 Rinnai Corp. JP 389,445
-----------
1,044,949
-----------
CONSUMER NON-DURABLES - 3.4%
83,550 PT Indofood Sukses Makmur
(Foreign Registered) ID 386,294
11,600 PanAmerican Beverages, Inc.
(Class A) MX 317,550
* 34,245 President Enterprises, GDR TW 376,691
-----------
1,080,535
-----------
CONSUMER SERVICES - 10.8%
50,226 News Corp. Ltd. AU 253,196
25,225 News Corp. Ltd. (Preferred) AU 115,253
41,800 Village Roadshow Ltd. (Preferred) AU 119,683
286,000 Shaw Brothers Ltd. HK 360,677
55,000 PT Modern Photo Film Co.
(Foreign Registered) ID 334,214
8,000 Secom Co. JP 521,663
66,000 Genting Berhad MY 569,055
7,574 Wolters Kluwer NV NL 688,589
105,000 Rentokil Group PLC UK 523,577
-----------
3,485,907
-----------
FINANCIAL SERVICES - 8.7%
90,000 Cheung Kong (Holdings) Ltd. HK 507,547
21,855 Aegon NV, ADR NL 833,222
46,000 Development Bank of Singapore
(Foreign Registered) SG 527,202
42,600 Bangkok Bank Ltd.
(Foreign Registered) TH 440,135
86,000 Bank of Ayudhya Ltd.
(Foreign Registered) TH 495,530
-----------
2,803,636
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE - 11.4%
1,050 Gehe AG GM $ 515,251
* 262 Gehe AG, New GM 124,474
200,000 PT Dankos Laboratories
(Foreign Registered) ID 563,628
40,000 Banyu Pharmaceutical Co. JP 422,970
32,000 Santen Pharmaceutical Co. JP 758,212
20,800 Astra AB "B" Free SW 752,657
73 Roche Holding AG SZ 530,150
-----------
3,667,342
-----------
MISCELLANEOUS - 0.4%
* 80,187 India Fund (Class B)
(United Kingdom Shares) IN 133,283
-----------
133,283
-----------
MULTI-INDUSTRY - 4.8%
98,000 Hutchison Whampoa HK 539,987
1,700,000 Yue Yuen Industrial Holdings HK 445,268
260,000 Renong Berhad MY 397,165
494,000 International UNP Holdings
(Canadian Shares) PO 176,757
-----------
1,559,177
-----------
RAW MATERIALS - 1.5%
* 20,400 Concordia Paper Holdings, Ltd.,ADR HK 183,600
* 15,355 Hansol Paper Ltd., GDR SK 314,778
-----------
498,378
-----------
RETAIL - 9.1%
* 7,600 Santa Isabel SA, ADR CL 171,950
880 Carrefour Supermarche FR 517,499
460 Hornbach Holding AG (Preferred) GM 462,238
3,600 Autobacs Seven JP 340,138
2,200 Ito Yokado Co. Ltd., ADR JP 475,475
6,000 Seven Eleven Japan JP 400,646
16,989 Ceteco Holdings, ADS NL 554,521
-----------
2,922,467
-----------
SHELTER - 1.4%
* 700,000 C & P Homes, Inc. PH 450,788
-----------
450,788
-----------
TECHNOLOGY - 14.1%
11,600 Nokia AB "A" Series FI 663,942
5,500 SAP AG (Preferred) GM 843,660
* 220,000 Telecom Italia Mobile SPA IT 244,636
8,100 Canon, Inc., ADR JP 690,525
51 Nippon Telegraph & Telephone JP 418,946
165,000 CPT Telefonica del Peru SA PE 294,513
* 140,303 Tele 2000 PE 137,892
* 4,348 Samsung Electronics Ltd., GDS
(1/2 Non-Voting) SK 283,707
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY (CONTINUED)
* 65 Samsung Electronics Ltd., New GDS
(1/2 Voting) SK $ 7,451
21,560 Ericsson (L.M.) Telephone Co., ADR SW 460,509
30,900 Advanced Information Services
(Foreign Registered) TH 491,158
-----------
4,536,939
-----------
UTILITIES - 11.6%
8,541 Companhia Energetica de
Minas Gerais, ADR BR 180,428
13,000 VEBA AG GM 533,516
22,000 Hong Kong Telecommunications , ADR HK 382,250
9,200 Telecom of New Zealand, ADR NZ 610,650
69,750 Manila Electric Co. (Class B) PH 520,242
7,100 Philippine Long Distance
Telephone Co. PH 395,809
9,000 Empresa Nacional de
Electricidad, ADR SP 452,250
71,405 Powergen PLC UK 642,034
-----------
3,717,179
-----------
TOTAL STOCKS (Cost $28,032,103) 30,165,612
-----------
<CAPTION>
Country Value
Face Amount/Issuer/Coupon Rate/Stated MaturityCode (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONVERTIBLE BONDS - 1.1%
250,000 United Micro Electronics,
1.250%, 06/08/04 TW 337,500
-----------
TOTAL CONVERTIBLE BONDS (Cost $411,473) 337,500
-----------
<PAGE>
<CAPTION>
Country Value
Face Amount/Issuer Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS - 5.1%
1,652,360 Bankers Trust Commingled Trust Fund US 1,652,360
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $1,652,360) 1,652,360
-----------
TOTAL INVESTMENTS (Cost $30,095,936), 100.0% 32,155,472
-----------
OTHER ASSETS AND LIABILITIES, NET, 0.0% 541
-----------
NET ASSETS, 100.0% $ 32,156,013
============
<FN>
PORTFOLIO ABBREVIATIONS:
ADR -American Depository Receipt
ADS -American Depository Shares
GDR -Global Depository Receipt
GDS -Global Depository Shares
</FN>
</TABLE>
<PAGE>
<TABLE>
COUNTRY DIVERSIFICATION
<CAPTION>
Country % Of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
AU Australia 1.5%
BR Brazil 0.6%
CL Chile 0.5%
FI Finland 2.1%
FR France 1.6%
GM Germany 7.7%
HK Hong Kong 7.5%
IN India 0.4%
ID Indonesia 4.0%
IT Italy 0.8%
JP Japan 21.4%
MY Malaysia 5.1%
MX Mexico 1.0%
NL Netherlands 8.0%
NZ New Zealand 1.9%
PE Peru 1.3%
PH Philippines 4.3%
PO Poland 0.5%
SG Singapore 1.6%
SK South Korea 1.9%
SP Spain 1.4%
SW Sweden 6.5%
SZ Switzerland 1.6%
TW Taiwan 2.3%
TH Thailand 4.4%
UK United Kingdom 5.0%
US United States 5.1%
------
TOTAL 100.0%
======
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont International Small Cap Fund
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS - 98.0%
BUSINESS EQUIPMENT & SERVICES - 1.6%
2,000 Aida Engineering JP $14,060
1,000 Dai-Dan Co. Ltd. JP 11,358
100 Polynorm NV NL 10,516
6,700 Cowie Group PLC UK 31,500
-----------
67,434
-----------
CAPITAL GOODS - 8.2%
7,600,000 CIA Acos Especiais Itabira BR 56,118
356 Skoda Koncern Plzen AS CZ 7,488
400 Labinal SA FR 43,655
* 1,800 Bremer Vulkan Verbund AG GM 55,221
10,000 Bunka Shutter Co. JP 70,299
3,000 Marufuji Sheet Piling JP 18,799
3,000 Seirei Industry JP 12,542
6,700 Steel & Tube Holdings Ltd. NZ 31,836
2,700 Celsius Industrier AB "B" SW 51,089
-----------
347,047
-----------
CONSUMER DURABLES - 1.9%
* 8,799 CIA Interamericana de Automotive AR 32,995
3,000 Tachi-S JP 22,617
58,658 Arcelik AS TU 9,714
6,100 Adwest Group UK 13,712
-----------
79,038
-----------
CONSUMER NON-DURABLES - 11.0%
21,400 Pacific Magazines & Printing Ltd. AU 45,955
*9,800,000 Perdigao SA BR 17,836
100,000 Sao Paulo Alpargatas SA BR 13,676
* 107 Cokoladovny AS CZ 9,452
100 Holsten-Brauerei AG GM 22,015
1,100 Hellenic Sugar Industry SA GR 13,845
7,000 Lai Sun Garment International Ltd. HK 7,379
8,000 PT Chareon Pokphand Indonesia
(Foreign Registered) ID 16,997
17,000 PT Japfa Comfeed Indonesia
(Foreign Registered) ID 8,421
4,000 Daito Gyorui JP 12,297
9,000 Kanematsu Corp. JP 30,753
11,000 Prima Meat Packers JP 37,695
15,000 Rhythm Watch Co. JP 48,465
53,000 Grupo Industrial Maseca SA de CV
Series B MX 34,958
2,000 Dutch Baby Milk Industries Berhad MY 11,024
8,000 Nanyang Press Berhad MY 16,378
14,000 Lion Nathan Ltd. NZ 31,783
11,000 GP Batteries International Ltd. SG 26,840
10,000 Times Publishing Ltd. SG 23,205
900 American Standard Sanitaryware Ltd.
(Foreign Registered) TH 15,379
2,600 Karat Sanitaryware Co. Ltd.
(Foreign Registered) TH 10,228
8,000 Tat Konserve Sanayii AS TU 5,378
3,600 Alexandra Workwear UK 9,517
-----------
469,476
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER SERVICES - 2.8%
450 Gaumont FR $27,182
1,100 Delta Dairy SA GR 20,127
* 8,600 Vard AS NO 11,323
400 Unicer-Uniao Cervejeira SA
(Registered Shares) PT 6,491
2,200 Sun International
Bophuthatswana Ltd. SA 14,175
6,000 Hotel Properties SG 9,084
6,200 Airtours PLC UK 32,290
-----------
120,672
-----------
ENERGY - 5.4%
4,700 CIA Naviera Perez Co. (Class B) AR 20,585
11,400 Caltex Australia Ltd. AU 36,808
30,000 Uniao de Industrias
Petroquimicas SA BR 33,384
1,400 TransCanada Pipelines Ltd. CN 18,654
100 Elf Gabon FR 14,743
2,000 Itochu Fuel Corp. JP 16,684
2,000 Kamei Corp. JP 22,323
* 5,300 Engen Ltd. SA 33,059
74,000 Petrol Ofisi AS TU 17,302
59,000 Turcas Petroculuk AS TU 15,231
-----------
228,773
-----------
FINANCIAL SERVICES (BANKS) - 12.3%
7,400 Advance Bank of Australia Ltd. AU 54,660
6,600 Bank of Melbourne Ltd. AU 33,472
900 Parisienne de Reescompt FR 69,290
1,100 Credit Bank of Athens
(Registered Shares) GR 66,142
1,300 National Bank of Greece
(Registered Shares) GR 64,888
2,000 Chuo Trust & Banking Co. Ltd. JP 17,526
21,000 Affin Holdings Berhad MY 39,685
12,000 MBF Capital Berhad MY 11,339
300 KAS Associatie NV NL 10,161
* 20,580 Union Bank of the Philippines PH 23,341
2,100 Banco Totta & Acores
(Registered Shares) PT 36,412
30 Verwalt & Privat-Bank AG SZ 42,254
27,600 First Bangkok City Bank Ltd.
(Foreign Registered) TH 24,129
418,000 Yapi Ve Kredi Bankasi SA TU 28,912
-----------
522,211
-----------
FINANCIAL SERVICES (OTHER) - 12.4%
* 600 Terca Brick Industries BE 29,002
350 Societe Financiere Interbail SA FR 22,288
500 Sovac FR 62,247
212,400 Century City International
Holdings Ltd. HK 46,154
42,000 Peregrine Investment Holdings Ltd. HK 53,510
27,500 Tai Cheung Holdings HK 23,120
1,600 La Previdente IT 11,027
3,000 Life Co. Ltd. JP 9,370
10,000 Nippon Shinpan Co. JP 62,564
19,000 Rashid Hussein Berhad MY 47,126
2,100 Assurantieconcern Stad Rotterdam NL 57,835
7,600 BNZ Finance Co. Ltd. NZ 8,426
110 Swiss Life Insurance & Pension SZ 42,315
2,800 Phatra Thanakit Co. Ltd.
(Foreign Registered) TH 20,250
8,400 Guardian Royal Exchange PLC UK 30,451
-----------
525,685
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE - 0.7%
90 Galenica Holdings AG
(Registered Shares) SZ $28,125
-----------
28,125
-----------
MULTI-INDUSTRY - 6.8%
* 1,700 Acklands Ltd. CN 15,524
300 Compagnie Generale d'Industrie FR 56,821
800 Marine-Wendel FR 64,704
2,500 Industrie Zignago S. MargheritaSPA IT 11,779
4,000 Yamato International, Inc. JP 15,470
19,000 Bandar Raya Developments Berhad MY 28,425
32,000 Berjaya Group Berhad MY 20,283
600 Internatio-Muller NV NL 42,925
8,900 Goode Durrant PLC UK 34,095
-----------
290,026
-----------
RAW MATERIALS - 15.8%
* 5,600 Aluar Aluminio Argentina SA
(Class B) AR 37,518
18,000 Alcan Australia Ltd. AU 41,121
100 Tessenderlo Chemie BE 34,492
1,400,000 CIA Petroquimica Sul-Copesul BR 59,113
9,300,000 Fertilizantes Fosfatdos
(Preferred) BR 28,048
2,400 Donohue, Inc. (Class A) CN 33,545
* 116 Sepap AS CZ 8,317
* 221 Synthesia AS CZ 6,592
400 Nord Est FR 9,050
150 Saint Louis FR 43,184
100 Sommer Allibert FR 26,475
400 Hellas Can SA GR 8,362
9,000 Chugoku Marine Paints JP 38,772
9,000 Nippon Metal Industry JP 33,133
9,000 Apasco SA de CV MX 33,631
* 6,000 Empaques Ponderosa SA Series B MX 12,739
400 DSM NV NL 29,934
1,800 European Vinyls Corp.
International NV NL 56,410
8,900 Hartebeesfontein Gold Mining
Co. Ltd. SA 22,328
3,000 Randfontein Estates Gold Mining Co.
Witwatersrand Ltd. SA 16,656
500 Western Deep Levels Ltd. SA 13,983
3,600 SSAB Svenskt Stal AB "B" SW 36,095
4,500 National Petrochemical Co. TH 10,640
15,000 Cimentas TU 9,060
2,300 Smith (David S.) Holdings PLC UK 21,044
-----------
670,242
-----------
RETAIL - 2.6%
2,000 Oak & Co. JP 11,534
20,400 Acma Ltd. SG 66,388
12,700 East Asiatic Co. Ltd. TH 16,654
9,100 Saha Pathana Inter-Holding Ltd.
(Foreign Registered) TH 16,815
-----------
111,391
-----------
SHELTER - 9.0%
700 Bau Holding AG AS 32,468
10,400 Leighton Holdings Ltd. AU 23,996
10,900 Pioneer International Ltd. AU 26,727
* 5,000 Brasilit SA BR 9,308
* 56 Inzenyrske a Prumslove Stavby AS CZ 4,711
325 GTM Entrepose SA FR 21,095
450 Societe Generale d'Enterprises SA FR 9,214
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHELTER (CONTINUED)
67,000 Kumagai Gumi HK $50,697
5,000 Daikyo, Inc. JP 33,436
5,000 Daito Trust Construction JP 44,059
9,000 Tokyu Construction Co. JP 40,094
4,800 Vitro SA MX 10,531
7,000 Land & General Berhad MY 16,260
4,400 Boskalis Westminster NL 52,928
12,200 Crest Nicholson PLC UK 8,884
-----------
384,408
-----------
TECHNOLOGY - 1.1%
* 322 SPT Telecom AS CZ 31,831
1,100 Alphatec Electronics Public
Co. Ltd. TH 13,900
45,731
TRANSPORTATION - 0.9%
1,500 Koninklijke Nedlloyd Groep NV NL 38,082
-----------
38,082
-----------
UTILITIES - 5.5%
3,100 Telecom Argentina SA (Class B) AR 11,903
2,500,000 Companhia Energetica de
Minas Gerais BR 54,079
* 741 Ceske Energeticke Zavody AS CZ 28,903
10,000 Boustead Holdings Berhad MY 20,079
1,200 Electra De Viesgo SA SP 23,849
50 Aare-Tessin AG
(Registered Shares) SZ 33,671
3,800 Northumbrian Water Group PLC UK 59,913
-----------
232,397
-----------
TOTAL STOCKS (Cost $4,377,310) 4,160,738
-----------
<PAGE>
<CAPTION>
Country Value
Face Amount/Issuer Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS - 0.2%
7,165 Bankers Trust Commingled Trust FundUS 7,165
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $7,165) 7,165
-----------
TOTAL INVESTMENTS (Cost $4,384,475), 98.2% 4,167,903
OTHER ASSETS AND LIABILITIES, NET, 1.8% 76,956
-----------
TOTAL NET ASSETS, 100.0% $ 4,244,859
===========
</TABLE>
<PAGE>
<TABLE>
COUNTRY DIVERSIFICATION
<CAPTION>
Country % Of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
AR Argentina 2.4%
AS Austria 0.8%
AU Australia 6.2%
BE Belgium 1.5%
BR Brazil 6.4%
CN Canada 1.6%
CZ Czech Republic 2.3%
FR France 11.0%
GM Germany 1.8%
GR Greece 4.1%
HK Hong Kong 4.3%
ID Indonesia 0.6%
IT Italy 0.5%
JP Japan 14.6%
MX Mexico 2.2%
MY Malaysia 5.0%
NL Netherlands 7.0%
NO Norway 0.3%
NZ New Zealand 1.7%
PH Philippines 0.5%
PT Portugal 1.0%
SG Singapore 3.0%
SA South Africa 2.4%
SP Spain 0.6%
SW Sweden 2.1%
SZ Switzerland 3.4%
TH Thailand 3.0%
TU Turkey 2.0%
UK United Kingdom 5.7%
US United States 2.0%
------
TOTAL 100.0%
======
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont U.S. Micro-Cap Fund
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
STOCKS - 88.2%
CONSUMER DURABLES - 5.1%
* 14,550 Leslie's Poolmart $210,975
* 3,000 SCP Pool Corp. 30,375
* 5,200 West Marine, Inc. 158,600
-----------
399,950
-----------
CONSUMER NON-DURABLES - 1.2%
* 2,400 Longhorn Steaks, Inc. 40,200
* 10,000 Mountasia Entertainment International, Inc.56,250
-----------
96,450
-----------
CONSUMER SERVICES - 12.9%
13,600 Barefoot, Inc. 164,900
* 5,600 Damark International, Inc. (Class A) 33,600
* 12,100 Garden Ridge Corp. 432,575
* 4,200 Logan's Roadhouse, Inc. 63,000
* 6,250 Saga Communications, Inc. (Class A) 98,438
* 21,600 Video Sentry Corp. 216,000
-----------
1,008,513
-----------
ENERGY - 7.9%
* 23,500 Core Laboratories NV 240,875
* 14,000 Cairn Energy USA, Inc. 168,000
* 11,000 Lomak Petroleum, Inc. 85,250
* 8,500 Numar Corp. 89,250
* 7,500 Tipperary Corp. 30,000
-----------
613,375
-----------
FINANCIAL SERVICES - 7.7%
* 4,200 Calumet Bancorp, Inc. 114,450
4,500 ISB Financial Corp. 75,375
* 4,500 Imperial Thrift & Loan Association 51,750
4,500 Life Bancorp, Inc. 69,750
* 10,000 PennFed Financial Services, Inc. 145,000
8,000 Sirrom Capital Corp. 141,000
-----------
597,325
-----------
HEALTH CARE - 12.7%
* 14,700 Cytel Corp. 75,338
* 4,500 Enterprise Systems, Inc. 105,187
* 39,000 Gensia, Inc. 165,750
* 9,900 Health Payment Review, Inc. 257,400
* 2,700 Liposome Co., Inc. 41,512
* 15,800 Penederm, Inc. 156,025
* 11,300 Summit Medical Systems, Inc. 186,450
-----------
987,662
-----------
<PAGE>
<CAPTION>
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS - 4.2%
8,500 Delta & Pine Land Co. $329,375
-----------
329,375
-----------
SHELTER - 3.5%
* 21,000 D.R. Horton, Inc. 233,625
4,000 Engle Homes, Inc. 35,000
-----------
268,625
-----------
TECHNOLOGY (EQUIPMENT) - 18.5%
* 12,000 Ade Corp. 180,000
* 24,000 Applied Signal Technology, Inc. 114,000
* 16,000 CEM Corp. 210,000
* 4,000 Computer Management Sciences, Inc. 82,000
* 9,000 Elantec Semiconductor, Inc. 65,250
* 10,300 Hologic, Inc. 267,800
* 10,000 Micrel, Inc. 227,500
* 8,000 PRI Automation, Inc. 296,000
-----------
1,442,550
-----------
TECHNOLOGY (SOFTWARE) - 13.2%
* 12,000 Speedfam International, Inc. 196,500
* 23,700 State of the Art, Inc. 254,775
* 12,700 Truevision 98,425
* 9,000 Verity, Inc. 330,750
* 4,500 Veritas Software Corp. 145,125
-----------
1,025,575
-----------
TRANSPORTATION - 1.3%
* 5,000 RailTex, Inc. 103,750
-----------
103,750
-----------
TOTAL STOCKS (Cost $5,925,270) 6,873,150
-----------
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS- 11.1%
365,479 Bankers Trust Commingled Trust Fund 365,479
500,000 Federal Home Loan Mortgage Corp.,
Discount Note, 5.600%, 11/01/95 500,000
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $865,479) 865,479
-----------
TOTAL INVESTMENTS (Cost $6,790,749), 99.3% 7,738,629
-----------
OTHER ASSETS AND LIABILITIES, NET, 0.7% 53,488
-----------
TOTAL NET ASSETS, 100.0% $ 7,792,117
===========
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Growth Fund
October 31, 1995
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS - 95.3%
BUSINESS EQUIPMENT & SERVICES - 6.3%
3,600 Automatic Data Processing, Inc. US $257,400
* 14,000 Ceridian Corp. US 609,000
2,600 Dun & Bradstreet Corp. US 155,350
23,301 First Data Corp. US 1,540,798
4,700 General Motors Corp. (Class E) US 221,488
* 14,300 Office Depot, Inc. US 409,338
8,250 Paychex, Inc. US 357,844
8,300 WMX Technologies, Inc. US 233,437
-----------
3,784,655
-----------
CAPITAL GOODS - 3.1%
3,300 Emerson Electric Co. US 235,125
12,900 General Electric Co. US 815,925
3,200 Illinois Tool Works, Inc. US 186,000
* 7,000 Owens-Corning Fiberglass Corp. US 296,625
3,400 PPG Industries, Inc. US 144,500
* 5,000 Varity Corp. US 181,250
-----------
1,859,425
-----------
CONSUMER DURABLES - 1.3%
4,000 Goodyear Tire & Rubber Co. US 152,000
23,000 Harley-Davidson, Inc. US 615,250
-----------
767,250
-----------
CONSUMER NON-DURABLES - 13.6%
3,500 Anheuser Busch Cos., Inc. US 231,000
8,300 Archer Daniels Midland Co. US 133,838
3,200 Campbell Soup Co. US 167,600
17,900 Coca-Cola Co. US 1,286,563
2,400 Colgate Palmolive Co. US 166,200
2,700 ConAgra, Inc. US 104,287
2,000 CPC International US 132,750
* 3,300 Crown Cork & Seal Co., Inc. US 115,087
4,700 Eastman Kodak Co. US 294,337
3,100 General Mills, Inc. US 177,862
18,400 Gillette Co. US 890,100
3,300 Heinz (H.J.) & Co. US 153,450
3,000 Kellogg Co. US 216,750
11,800 Pepsico, Inc. US 622,450
20,200 Philip Morris Cos., Inc. US 1,706,900
16,000 Procter & Gamble Co. US 1,296,000
2,100 Ralston Purina Group US 124,688
5,900 Sara Lee Corp. US 173,313
5,400 Tyson Foods, Inc. (Class A) US 128,925
-----------
8,122,100
-----------
CONSUMER SERVICES - 5.2%
9,000 Loewen Group, Inc. CN 360,422
2,200 Capital Cities/ABC, Inc. US 260,975
2,300 CBS, Inc. US 185,725
* 20,600 CUC International, Inc. US 713,275
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER SERVICES (CONTINUED)
6,900 Disney (Walt) Co. US $397,612
8,500 Marriott International, Inc. US 313,437
6,800 Mattel, Inc. US 195,500
* 10,300 Viacom, Inc. (Class B) US 515,000
600 Washington Post Co. (Class B) US 174,000
-----------
3,115,946
-----------
ENERGY - 2.8%
3,000 Amoco Corp. US 191,625
1,500 Atlantic Richfield Co. US 160,125
2,600 Exxon Corp. US 198,575
1,700 Mobil Corp. US 171,275
6,000 Schlumberger Ltd. US 373,500
11,000 Union Texas Petroleum
Holdings, Inc. US 198,000
13,500 Unocal Corp. US 354,375
-----------
1,647,475
-----------
FINANCIAL SERVICES - 8.6%
12,000 American Express Co. US 487,500
13,000 American International Group, Inc. US 1,096,875
13,500 Citicorp US 875,812
8,000 Exel Ltd. US 428,000
6,500 Federal Home Loan Mortgage Corp. US 450,125
900 General Re Corp. US 130,388
14,000 Mercury Finance Co. US 269,500
10,000 Mercury General Corp. US 420,000
10,000 MGIC Investment Corp. US 568,750
13,000 Norwest Corp. US 383,500
1,000 Progressive Corp. US 41,500
-----------
5,151,950
-----------
HEALTH CARE - 16.1%
10,700 Abbott Laboratories US 425,325
4,600 American Home Products Corp. US 407,675
* 14,000 Amgen, Inc. US 672,000
2,200 Becton Dickinson & Co. US 143,000
* 2,700 Boston Scientific Corp. US 113,737
7,000 Bristol-Myers Squibb Co. US 533,750
6,100 Columbia HCA Healthcare Corp. US 299,662
* 2,500 Forest Laboratories, Inc.
(Class A) US 103,437
7,000 HBO & Co. US 495,250
* 12,500 Healthsouth Rehabilitation Corp. US 326,562
16,800 Johnson & Johnson US 1,369,200
3,900 Lilly (Eli) & Co. US 376,838
13,000 Medtronic, Inc. US 750,750
14,600 Merck & Co. US 839,500
* 15,000 Mid Atlantic Medical Services,Inc. US 298,125
24,100 Pfizer, Inc. US 1,382,738
5,400 Schering Plough Corp. US 289,575
6,000 Stryker Corp. US 270,750
10,000 United Healthcare Corp. US 531,250
-----------
9,629,124
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
MISCELLANEOUS - 3.1%
29,100 Inefficient Market Fund, Inc. US $305,550
56,500 Morgan Grenfell Small Cap Fund,Inc.US 656,813
69,800 Royce Value Trust US 898,675
-----------
1,861,038
-----------
MULTI-INDUSTRY - 1.0%
1,700 ITT Corp. US 208,250
6,800 Minnesota Mining &
Manufacturing Co. US 386,750
-----------
595,000
-----------
RAW MATERIALS - 1.8%
* 4,300 Alumax, Inc. US 126,850
3,500 Du Pont (E.I.) de Nemours & Co. US 218,313
9,400 Engelhard Corp. US 233,825
5,000 Monsanto Co. US 523,750
-----------
1,102,738
-----------
RETAIL - 3.9%
* 4,300 Federated Department Stores, Inc. US 109,112
21,700 Home Depot, Inc. US 808,325
8,800 McDonalds Corp. US 360,800
* 3,700 Safeway, Inc. US 174,825
* 5,300 Stop & Shop Cos., Inc. US 109,975
* 6,300 Toys R Us, Inc. US 137,813
27,800 Wal Mart Stores, Inc. US 601,175
-----------
2,302,025
-----------
SHELTER - 1.1%
3,500 Georgia Pacific Corp. US 288,750
4,200 International Paper Co. US 155,400
2,900 Kimberly-Clark Corp. US 210,613
-----------
654,763
-----------
TECHNOLOGY (COMPONENTS) - 12.1%
* 8,000 3Com Corp. US 376,000
3,200 Amp, Inc. US 125,600
* 9,000 Applied Materials, Inc. US 451,125
* 19,200 Cisco Systems, Inc. US 1,488,000
23,500 Intel Corp. US 1,642,062
* 3,000 Litton Industries, Inc. US 118,875
* 14,000 LSI Logic Corp. US 659,750
2,800 Micron Technology, Inc. US 197,750
16,700 Motorola, Inc. US 1,095,937
* 14,000 Novadigm, Inc. US 287,000
3,800 Raytheon Co. US 165,775
2,700 Texas Instruments, Inc. US 184,275
* 9,000 Xilinx, Inc. US 414,000
----------
7,206,149
-----------
TECHNOLOGY (EQUIPMENT) - 5.4%
* 29,900 AirTouch Communications, Inc. US 852,150
8,700 Boeing Co. US 570,938
* 3,600 Compaq Computer Corp. US 200,700
* 13,500 DSC Communications Corp. US 499,500
6,900 Hewlett-Packard Co. US 639,113
1,800 International Business Machines US 175,050
* 8,000 Silicon Graphics, Inc. US 266,000
----------
3,203,451
-----------
<PAGE>
<CAPTION>
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY (SOFTWARE) - 5.6%
9,950 Computer Associates
International, Inc. US $547,250
* 13,500 Microsoft Corp. US 1,350,000
* 22,100 Oracle Systems Corp. US 964,113
* 7,000 Parametric Technology Corp. US 468,125
-----------
3,329,488
-----------
TRANSPORTATION - 0.3%
2,400 Union Pacific Corp. US 156,900
-----------
156,900
-----------
UTILITIES - 4.0%
5,000 Ameritech Corp. US 270,000
13,800 AT&T Corp. US 883,200
3,900 Bell Atlantic Corp. US 248,138
4,200 Century Telephone Enterprises US 121,800
15,100 Enron Corp. US 519,062
6,400 Illinova Corp. US 181,600
3,200 Telephone & Data Systems, Inc. US 128,000
-----------
2,351,800
-----------
TOTAL STOCKS (Cost $47,793,575) 56,841,277
<PAGE>
<CAPTION>
Country Value
Face Amount/Issuer Code (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS - 4.0%
2,353,577 Bankers Trust Commingled Trust Fund US 2,353,577
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $2,353,577) 2,353,577
-----------
TOTAL INVESTMENTS (Cost $50,147,152), 99.3% 59,194,854
-----------
OTHER ASSETS AND LIABILITIES, NET, 0.7% 437,565
-----------
NET ASSETS, 100.0% $59,632,419
-----------
</TABLE>
<PAGE>
<TABLE>
COUNTRY DIVERSIFICATION
<CAPTION>
Country % Of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
CN Canada 0.6%
US United States 99.4%
------
TOTAL 100.0%
======
<FN>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Bond Fund
October 31, 1995
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS - 76.1%
MORTGAGE BACKED SECURITIES - 42.3%
319,720 Collateralized Mortgage Obligation Trust CMO, 5-EZ .............. 9.400% 08/01/16 $ 337,405
488,483 Collateralized Mortgage Securities Corp. CMO, J-5Z, REMIC ....... 7.985% 05/01/17 501,001
793,364 FHLMC AO1007 .................................................... 8.250% 08/01/17 820,997
1,409,404 FHLMC CMO, 1018 0Z, PAC-1 (11) REMIC ............................ 7.000% 11/15/20 1,387,487
1,498,834 FNMA ARM ........................................................ 6.878% 11/01/23 1,535,135
596,490 FNMA CMO, 1990-142J, REMIC ...................................... 9.250% 12/25/03 600,403
1,034,420 FNMA CMO, 1990-53G, PAC REMIC ................................... 8.000% 12/25/18 1,046,378
200,000 FNMA CMO, 1993-11J, PAC REMIC ................................... 7.500% 02/25/08 203,031
6,682,646 GNMA II ARM ..................................................... 7.250% 09/20/24 6,749,472
4,802,570 GNMA II ARM ..................................................... 6.500% 10/20/24 4,850,596
126,980 GNMA II ARM ..................................................... 7.500% 02/20/25 129,889
1,687,127 GNMA II ARM ..................................................... 7.500% 03/20/25 1,725,779
1,613,946 MDC Mortgage Funding Corp. CMO, P-4Z ............................ 9.500% 11/20/17 1,704,408
1,000,000 Morgan Stanley Mortgage Trust CMO, 40-8, PAC (11) REMIC ......... 7.000% 07/20/21 999,150
7,338,223 Prudential Bache CMO Trust, 14-G, REMIC ......................... 8.400% 03/20/21 7,652,390
786,752 Resolution Trust Corp. CMO, 1992-M4 A1 REMIC .................... 8.000% 09/25/21 806,169
1,552,747 Ryland Mortgage Securities Corp. CMO, 1993-8-A, REMIC ........... 7.878% 09/25/23 1,576,039
967,849 Saxon Mortgage Securities Corp. CMO, 1992-1 A1, ARM REMIC ....... 8.169% 09/25/22 987,659
3,000,000 Securitized Asset Sales, lnc. CMO, 1993-2A9, PAC (11) REMIC ..... 6.200% 07/25/08 2,907,180
------------
TOTAL MORTGAGE BACKED SECURITIES 36,520,568
------------
CORPORATE BONDS - 18.2%
1,000,000 Arkla, lnc. ..................................................... 9.200% 12/18/97 1,044,150
500,000 Cleveland Electric Co. .......................................... 9.110% 07/22/96 505,590
260,000 CMS Energy Corp., Deferred Coupon (Callable 10/01/97 @ 101.65) .. 9.875% 10/01/99 274,300
907,000 Delta Air Lines, Inc. (Sinking Fund Bond) ....................... 9.450% 02/14/06 1,028,997
1,825,000 Delta Air Lines, Inc. (Sinking Fund Bond) ....................... 9.450% 02/26/06 2,048,002
3,000,000 General Motors Acceptance Corp. ................................. 6.700% 05/20/96 3,010,170
2,000,000 Long Island Lighting Co. ........................................ 8.750% 05/01/96 2,024,580
1,000,000 Ohio Edison ..................................................... 8.500% 05/01/96 1,009,880
2,000,000 Time Warner, Inc. ............................................... 7.450% 02/01/98 2,041,200
375,000 Time Warner, Inc., FRN (Callable 08/15/96 @ 101.5)............... 6.835% 08/15/00 375,900
225,000 Time Warner, Inc. ............................................... 7.975% 08/15/04 231,140
450,000 Time Warner, Inc. ............................................... 8.110% 08/15/06 462,884
450,000 Time Warner, Inc. ............................................... 8.180% 08/15/07 464,283
1,000,000 United Airlines ................................................. 10.670% 05/01/04 1,161,583
------------
TOTAL CORPORATE BONDS 15,682,659
------------
FOREIGN BONDS - 9.6%
DM 6,800,000 Federal Republic of Germany ..................................... 6.250% 01/04/24 4,259,205
CAN $2,500,000 Government of Canada ............................................ 8.750% 12/01/05 2,022,232
US $3,000,000 United Mexican States (Callable Semiannually in June or December @ 100) 6.875% 12/31/19 2,002,500
------------
TOTAL FOREIGN BONDS 8,283,937
------------
U.S. GOVERNMENT & AGENCY BONDS - 4.4%
290,000 Federal Home Loan Bank (Callable 04/29/96 @ 100)................. 6.380% 04/29/03 285,151
500,000 Federal Home Loan Mortgage Corp. (Callable 07/02/96 @ 100)....... 6.390% 07/02/03 491,170
3,000,000 U.S. Treasury Notes.............................................. 5.785% 07/31/97 3,011,730
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS 3,788,051
------------
<PAGE>
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STRIPPED MORTGAGE SECURITIES - 1.6%
3,596,654 FHLMC Interest Only, 1587HA, PAC-1 REMIC......................... 6.500% 10/15/08 $496,788
5,419,230 FNMA lnterest Only, 1994-27WB, PAC-1 REMIC....................... 6.500% 06/25/14 514,117
390,998 FNMA Principal Only, G93-12B, PAC (11) REMIC.............................. 02/25/23 367,902
------------
TOTAL STRIPPED MORTGAGE SECURITIES 1,378,807
------------
TOTAL BONDS (Cost $64,315,813) 65,654,022
------------
CONVERTIBLE PREFERRED STOCK - 0.5%
20,000 Long Island Lighting Co................................................................... 465,000
------------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost $486,000) 465,000
------------
SHORT TERM SECURITIES - 22.0%
1,700,000 Abbott Laboratories, CP ......................................... 5.710% 11/14/95 1,696,495
3,000,000 AT&T Corp., CP .................................................. 5.710% 11/29/95 2,986,677
717,851 Bankers Trust Commingled Trust Fund ...................................................... 717,851
100,000 Hewlett-Packard Co., CP ......................................... 5.630% 11/21/95 99,687
1,000,000 KFW International Finance, DN ................................... 5.700% 01/17/96 987,808
1,500,000 Kimberly-Clark Corp., CP ........................................ 5.730% 11/14/95 1,496,896
900,000 Mexico Government Bond, Tesobono ................................ 16.407% 01/18/96 884,250
2,000,000 Minnesota Mining & Manufacturing Co., CP ........................ 5.730% 11/01/95 2,000,000
1,000,000 New South Wales Treasury, DN .................................... 5.660% 11/10/95 998,585
3,000,000 Oesterreichische Kontrollbank, DN ............................... 5.700% 11/10/95 2,995,725
3,500,000 Procter & Gamble, CP ............................................ 5.630% 11/17/95 3,491,242
t 10,000 U.S. Treasury Bill .............................................. 5.450% 11/16/95 9,977
t 230,000 U.S. Treasury Bill .............................................. 5.880% 11/16/95 229,437
t 80,000 U.S. Treasury Bill .............................................. 5.280% 02/08/96 78,830
t 50,000 U.S. Treasury Bill .............................................. 5.300% 02/08/96 49,269
t 190,000 U.S. Treasury Bill .............................................. 5.250% 02/15/96 187,025
t 100,000 U.S. Treasury Bill .............................................. 5.290% 02/15/96 98,434
------------
TOTAL SHORT TERM SECURITIES (Cost $18,992,002) 19,008,188
------------
<PAGE>
<CAPTION>
Number of Value
Contracts Description (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PUT OPTIONS - 0.0%
35 CBOT 30 yr. U.S. Treasury Bond Futures, Strike @106, Exp. 11/17/95........................ 547
------------
TOTAL PUT OPTIONS (Cost $705) 547
------------
TOTAL INVESTMENTS (Cost $83,794,520), 98.6% 85,127,757
TOTAL OTHER ASSETS AND LIABILITIES, NET, 1.4% 1,214,914
------------
NET ASSETS, 100.0% $ 86,342,671
===========
<FN>
PORTFOLIO ABBREVIATIONS:
ARM -Adjustable Rate Mortgage
CBOT -Chicago Board of Trade
CMO -Collateralized Mortgage Obligation
CP -Commercial Paper
DN -Discount Note
FHLMC -Federal Home Loan Mortgage Corp.
FNMA -Federal National Mortgage Association
FRN -Floating Rate Note
GNMA -Government National Mortgage Association
REMIC -Real Estate Mortgage Investment Conduit
tOn deposit with broker for initial margin on futures contracts (Note 1). The
accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Money Market Fund
October 31, 1995
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<CAPTION>
Discount Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 82.5%
10,000,000 Abbey National North America Corp. ....................... 5.660% 12/07/95 $ 9,943,400
10,000,000 Alcatel Alsthom, Inc. .................................... 5.700% 01/17/96 9,878,083
10,000,000 American Express Credit Corp. ............................ 5.660% 12/18/95 9,926,106
10,000,000 Ameritech Capital Funding *............................... 5.540% 03/18/96 9,787,633
10,000,000 B.B.V. Finance (Delaware), Inc. .......................... 5.730% 11/03/95 9,996,817
10,000,000 Bausch & Lomb, Inc. ...................................... 5.670% 02/09/96 9,842,500
10,000,000 Boral Industries, Inc. ................................... 5.780% 11/27/95 9,958,256
5,000,000 Cadbury Schweppes Money Management PLC ................... 5.780% 11/15/95 4,988,761
10,000,000 Cargill Financial Services Corp.* ........................ 5.470% 01/12/96 9,890,600
10,000,000 CPC International* ....................................... 5.710% 01/10/96 9,888,972
5,000,000 Ford Motor Credit Corp. .................................. 5.730% 11/14/95 4,989,654
10,000,000 Goldman Sachs & Co. ...................................... 5.680% 01/26/96 9,864,311
10,000,000 Halifax Building Society ................................. 5.690% 01/08/96 9,892,522
10,000,000 Hanson Finance PLC (UK) .................................. 5.730% 11/13/95 9,980,900
10,000,000 Hitachi America Ltd. ..................................... 5.970% 11/03/95 9,996,683
10,000,000 Merrill Lynch & Co., Inc. ................................ 5.720% 11/08/95 9,988,878
10,000,000 Mitsui & Co. ............................................. 5.730% 12/05/95 9,945,883
10,000,000 Rabobank Nederland ....................................... 5.620% 12/06/95 9,945,361
10,000,000 Sandoz Corp. ............................................. 5.700% 01/29/96 9,859,083
10,000,000 Sonoco Products, Inc. .................................... 5.750% 11/07/95 9,990,417
10,000,000 Sony Capital Corp.* ...................................... 5.710% 12/11/95 9,936,556
10,000,000 Sumitomo Corp. of America ................................ 5.700% 12/22/95 9,919,250
10,000,000 Sweden, Kingdom of ....................................... 5.650% 11/27/95 9,959,195
10,000,000 Swedish Export Credit Corp. .............................. 5.670% 11/06/95 9,992,125
8,900,000 Toshiba International Finance PLC (UK) ................... 5.750% 01/03/96 8,810,444
10,000,000 Yale University .......................................... 5.720% 01/31/96 9,855,411
------------
TOTAL COMMERCIAL PAPER 247,027,801
------------
OTHER SHORT TERM SECURITIES - 19.0%
24,778,657 Bankers Trust Commingled Trust Fund .............................................. 24,778,657
10,000,000 Bayerische Vereinsbank AG, Yankee CD t ................. 5.900% 09/12/96 10,000,000
2,105,000 Federal Home Loan Bank, DN ............................. 5.520% 12/26/95 2,087,248
10,000,000 Federal National Mortgage Association, AN t............. 5.660% 03/15/96 10,000,000
10,000,000 Federal National Mortgage Association, MTN t............ 5.710% 06/10/96 9,994,672
------------
TOTAL OTHER SHORT TERM SECURITIES 56,860,577
------------
TOTAL INVESTMENTS (Cost $303,888,378), 101.5% 303,888,378
OTHER ASSETS AND LIABILITIES, NET (1.5)% (4,576,766)
------------
NET ASSETS, 100.0% $299,311,612
===========
<FN>
PORTFOLIO ABBREVIATIONS:
AN - Agency Note
CD - Certificate of Deposit
DN - Discount Note
MTN - Medium Term Note
*These securities are generally issued to institutional investors. Any resale
must be in an exempt transaction pursuant to Section 4(2) of the Securities
Act of 1933. t The rate indicated for these securities is the stated coupon
rate.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont California Intermediate Tax-Free Fund
October 31, 1995
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.1%
1,000,000 California State Dept. of Veterans Affairs, Home Purchase
Revenue 1991 Ser. A................................................. 6.450% 08/01/00 $1,047,250
1,000,000 California State Dept. of Water Resources, Central Valley Project
Revenue Ser. H...................................................... 6.400% 12/01/00 1,099,690
California State GO
1,000,000 Various Purpose .................................................... 6.400% 08/01/96 1,019,120
1,000,000 Various Purpose .................................................... 6.500% 08/01/97 1,042,630
1,000,000 California State Public Works Board, Lease Revenue Dept. of Corrections,
Madera County State Prison 1990 Ser. A .............................. 6.700% 09/01/97 1,046,660
1,000,000 California State Public Works Board, Lease Revenue Refunding, Trustees of
The California State University, 1995 Ser. B ........................ 5.600% 04/01/06 1,010,170
1,000,000 California State Public Works Board, Lease Revenue Dept. of Corrections,
Prison D ............................................................ 5.100% 06/01/06 980,740
1,000,000 Contra Costa Transportation Authority, Sales Tax Revenue 1991 Ser. A 6.400% 03/01/01 1,093,090
1,000,000 Contra Costa Water Authority, Revenue Refunding 1993 Ser. A
(FGIC Insured)...................................................... 5.300% 10/01/05 1,035,520
1,000,000 Contra Costa Water District, Water Revenue Ser. F (FGIC Insured) .... 5.250% 10/01/08 1,003,840
1,000,000 East Bay MUD, Water System Subordinated Revenue Ser. 1994 ........... 8.500% 06/01/98 1,106,370
1,000,000 City of Irvine, Assessment District No. 89-10, Limited Obligation
Refunding Improvement (MBIA Insured)................................. 4.200% 09/02/05 922,900
1,000,000 Los Angeles Dept. of Water & Power, Electric Plant Revenue Refunding 5.500% 09/01/07 1,025,890
1,000,000 Los Angeles Dept. of Water & Power, Electric Plant Revenue .......... 4.700% 10/15/06 962,170
1,000,000 Los Angeles Dept. of Water & Power, Waterworks Revenue Refunding .... 5.625% 04/15/08 1,025,390
1,000,000 City of Los Angeles, 1990 Solid Waste Collection Project, COP Revenue 6.400% 11/01/97 1,045,110
750,000 Los Angeles County Sanitation District Finance Authority, 1993 Ser. A 5.250% 10/01/06 768,315
1,000,000 Los Angeles County Transportation Authority, Sales Tax Revenue Ser. A 6.300% 07/01/01 1,086,480
1,000,000 Metropolitan Water District of Southern California, Waterworks GO Refunding
1993 Ser. A ......................................................... 5.250% 03/01/05 1,038,420
1,000,000 Modesto High School District, 1993 GO Refunding (FGIC Insured) ...... 5.300% 08/01/04 1,042,200
1,000,000 Modesto Irrigation District Finance Authority, Domestic Water Project Revenue
1992 Ser. A (AMBAC Insured) ......................................... 5.650% 09/01/03 1,068,000
500,000 M-S-R Public Power Agency, San Juan Project Revenue Ser. D
(AMBAC Insured)..................................................... 6.300% 07/01/98 521,615
1,000,000 M-S-R Public Power Agency, San Juan Project Revenue Ser. F .......... 5.650% 07/01/03 1,066,790
1,000,000 Northern California Power Agency, Geothermal Project #3 Revenue Ser. A 5.600% 07/01/06 1,024,940
1,000,000 Orange County Local Transportation Authority, Sales Tax Revenue
First Ser. M........................................................ 6.000% 02/15/06 1,036,400
1,000,000 Orange County Transportation Authority, Measure M Sales Tax Revenue Second
Senior Ser. 1994 (FGIC Insured) ..................................... 5.000% 02/15/08 974,840
500,000 Orange County Water District, COP 1990 Project A .................... 6.500% 08/15/98 532,095
500,000 City of Pasadena, Electric Works Revenue 1990 Series ................ 6.500% 08/01/99 540,285
1,500,000 City of Pasadena, GO Refunding Police and Jail Building 1993 ........ 5.000% 06/01/07 1,529,100
1,000,000 Rancho Cucamonga RDA, 1994 Tax Allocation Refunding (MBIA Insured) .. 5.000% 09/01/07 993,320
1,000,000 City of Riverside, Electric Revenue 1991 ............................ 6.100% 10/01/00 1,073,700
1,000,000 City of Riverside, Electric Revenue Refunding 1993 .................. 5.000% 10/01/06 996,210
1,000,000 Sacramento County Sanitation District Finance Authority, Revenue
(MBIA Insured) ...................................................... 5.000% 12/01/08 981,610
1,000,000 Sacramento MUD, Electric Revenue 1991 Ser. Y ........................ 6.250% 09/01/00 1,082,630
1,000,000 San Bernardino County Transportation Authority, Sales Tax Revenue 1992 Ser. A
(FGIC Insured) ...................................................... 6.000% 03/01/03 1,085,910
1,000,000 City and County of San Francisco International Airport Second Series Revenue
Issue 1 (AMBAC Insured) ............................................. 6.100% 05/01/03 1,093,910
1,000,000 City and County of San Francisco RDA, Lease Revenue Ser. 1991
(George R. Moscone Convention Center) (AMBAC Insured)................ 6.200% 10/01/00 1,084,280
1,000,000 City and County of San Francisco, Sewer Revenue Refunding Ser. 1992
(AMBAC Insured) ..................................................... 5.800% 10/01/05 1,071,430
1,000,000 San Francisco, CA Bay Area Rapid Transit, Sales Tax Revenue Refunding 6.400% 07/01/97 1,038,500
1,000,000 San Jose, CA Finance Authority Revenue, Convention Center Refunding
Project Ser. C (MBIA Insured) ....................................... 5.750% 09/01/03 1,060,680
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
1,000,000 Santa Margarita/Dana Point Authority Orange County, Revenue Bond Ser. A 5.375% 08/01/04 $1,041,700
Southern California Public Power Authority
1,000,000 Mead-Phoenix Project Revenue 1994 Ser. A (AMBAC Insured)............ 4.750% 07/01/09 923,090
1,000,000 Mead-Phoenix Project Revenue 1994 Ser. A (AMBAC Insured) ........... 4.750% 07/01/08 946,910
1,000,000 Palo Verde Power Projects Revenue, 1993 Ser. A ..................... 5.100% 07/01/06 1,004,100
500,000 City of Stockton, 1990 Wastewater System Project COP (AMBAC Insured). 6.700% 09/01/98 535,235
500,000 City of Stockton, 1990 Wastewater System Project COP (AMBAC Insured) 6.800% 09/01/99 541,025
1,000,000 University of California, Housing System Revenue Ser. A (MBIA Insured) 5.500% 11/01/08 1,023,560
1,000,000 West & Central Basin Financing Authority, Water Revenue West Basin
Refunding Project (AMBAC Insured) ................................... 5.125% 08/01/06 1,012,170
1,500,000 Yucaipa School Facilities Financing Authority, 1995 Sweetwater Refunding
(MBIA Insured) ...................................................... 6.000% 09/01/10 1,551,105
------------
TOTAL MUNICIPAL BONDS (Cost $46,944,424)......................................................... 48,837,095
------------
SHORT-TERM SECURITIES - 1.6%
816,260 Provident Institutional Fund .................................................................... 816,260
------------
TOTAL SHORT TERM SECURITIES (Cost $816,260)...................................................... 816,260
------------
TOTAL INVESTMENTS (Cost $47,760,684) 98.7%...................................................... 49,653,355
OTHER ASSETS AND LIABILITIES, NET 1.3%.......................................................... 659,846
------------
NET ASSETS, 100.0%.............................................................................. $50,313,201
============
<FN>
PORTFOLIO ABBREVIATIONS:
AMBAC -American Municipal Bond Assurance Corp.
COP -Certificates of Participation
FGIC -Financial Guaranty Insurance Corp.
GO -General Obligation
MBIA -Municipal Bond Investor Assurance Corp.
MUD -Municipal Utility District
RDA -Redevelopment Agency
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
October 31, 1995
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
International International
Global Growth Small Cap
Fund Fund Fund
<S> <C> <C> <C>
Assets:
Investments in securities at cost $435,900,719 $30,095,936 $4,384,475
=========== ========== ==========
Investments in securities at value (Note 1) 482,376,221 32,155,472 4,167,903
Cash -- -- 80,807
Dividends and interest receivable 3,479,812 57,128 15,046
Receivable for securities sold 1,109,860 -- --
Receivable from sale of fund shares 50,857 10,545 19,160
Receivable for variation margin -- -- --
Unrealized appreciation on foreign currency contracts 30,825 -- --
Prepaid expense 23,113 -- --
Unamortized organization costs (Note 3) -- -- --
----------- ---------- ----------
Total assets 487,070,688 32,223,145 4,282,916
----------- ---------- ----------
Liabilities:
Unrealized depreciation on foreign currency contracts -- -- --
Liability for options written -- -- --
Variation margin payable 53,025 -- --
Dividends payable to shareholders 125,057 383 15,458
Payable for securities purchased 3,182,827 26,401 15,640
Payable for fund shares redeemed 895,038 -- --
Accrued expenses:
Investment advisory and administrative fees 307,043 40,348 6,959
Shareholder servicing fees 6,500 -- --
Custody fees 76,603 -- --
Accounting fees 29,822 -- --
Audit and legal fees 31,617 -- --
Other payables 8,300 -- --
----------- ---------- ----------
Total liabilities 4,715,832 67,132 38,057
----------- ---------- ----------
Net assets $482,354,856 $32,156,013 $4,244,859
============ ========== ==========
Net assets consist of:
Paid in capital $416,233,588 $32,362,847 $4,496,814
Undistributed net investment income (loss) 2,004,174 170,045 9,448
Unrealized appreciation (depreciation) on investments 43,682,144 2,059,536 (216,572)
Unrealized appreciation (depreciation) on foreign currency
contracts and other assets and liabilities 38,458 661 (946)
Accumulated net realized gain (loss) 20,396,492 (2,437,076) (43,885)
----------- ---------- ----------
Net assets $482,354,856 $32,156,013 $4,244,859
=========== ========== ==========
Shares of capital stock outstanding 33,873,265 3,309,234 471,446
=========== ========== ==========
Net asset value per share $14.24 $9.72 $9.00
=========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
California
U.S. Money Intermediate
Micro-Cap Growth Bond Market Tax-Free
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities at cost $6,790,749 $50,147,152 $83,794,520 $303,888,378 $47,760,684
========== ========== ========== ========== ==========
Investments in securities at value (Note 1) 7,738,629 59,194,854 85,127,757 303,888,378 49,653,355
Cash -- 24,470 213,341 -- 76,349
Dividends and interest receivable 4,148 50,781 1,071,726 447,148 661,237
Receivable for securities sold -- 545,011 -- -- --
Receivable from sale of fund shares 61,518 21,900 1,946 1,380,490 1,650
Receivable for variation margin -- -- 59,813 -- --
Unrealized appreciation on foreign currency contracts -- -- -- -- --
Prepaid expense -- 429 -- 3,163 627
Unamortized organization costs (Note 3) -- 5,278 4,494 -- --
---------- ---------- ---------- ---------- ----------
Total assets 7,804,295 59,842,723 86,479,077 305,719,179 50,393,218
Liabilities:
Unrealized depreciation on foreign currency contracts -- 21,767 -- --
Liability for options written -- 2,188 -- --
Variation margin payable -- -- -- --
Dividends payable to shareholders -- 617 11,941 20,109 26,735
Payable for securities purchased -- 125,579 -- -- --
Payable for fund shares redeemed -- 14,265 38,295 6,283,032 --
Accrued expenses:
Investment advisory and administrative fees 12,178 32,559 28,859 54,800 13,016
Shareholder servicing fees -- 2,000 1,750 2,400 2,100
Custody fees 18,070 10,025 8,325 2,341
Accounting fees -- 4,264 6,231 15,019 5,670
Audit and legal fees -- 12,530 12,000 12,230 17,280
Other payables 420 3,350 11,652 12,875
---------- ---------- ---------- ---------- ----------
Total liabilities 12,178 210,304 136,406 6,407,567 80,017
---------- ---------- ---------- ---------- ----------
Net assets $7,792,117 $59,632,419 $86,342,671 $299,311,612 $50,313,201
========== ========== ========== ========== ==========
Net assets consist of:
Paid in capital $6,526,144 $47,012,251 $82,699,455 $299,311,612 $48,300,312
Undistributed net investment income (loss) -- 9,309 86,546 -- --
Unrealized appreciation (depreciation) on investments 947,880 9,047,702 2,078,249 -- 1,892,671
Unrealized appreciation (depreciation) on foreign currency
contracts and other assets and liabilities -- -- (23,464) -- --
Accumulated net realized gain (loss) 318,093 3,563,157 1,501,885 -- 120,218
========== ========== ========== ========== ==========
Net assets $7,792,117 $59,632,419 $86,342,671 $299,311,612 $50,313,201
---------- ---------- ---------- ---------- ----------
Shares of capital stock outstanding 543,454 4,564,901 8,521,976 299,311,612 4,633,776
========== ========== ========== ========= ==========
Net asset value per share $14.34 $13.06 $10.13 $1.00 $10.86
========== ========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
Year Ended October 31, 1995
STATEMENTS OF OPERATIONS
<CAPTION>
International International
Global Growth Small Cap
Fund Fund Fund
<S> <C> <C> <C>
Investment income:
Interest $12,543,616 $165,307 $16,001
Dividends 5,033,955 623,022 86,278
---------- ---------- ----------
Total income* 17,577,571 788,329 102,279
---------- ---------- ----------
Expenses:
Investment advisory and administrative fees (Note 2) 3,418,558 439,970 68,433
Shareholders servicing fees 66,012 -- --
Custody fees 227,315 -- --
Accounting fees 160,313 -- --
Audit and legal fees 39,967 -- --
Directors' fees (Note 2) 1,936 -- --
Registration fees 25,099 -- --
Other 75,790 -- --
---------- ---------- ----------
Total expenses before reductions 4,014,990 439,970 68,433
Expenses waived by Advisor -- -- (11,894)
---------- ---------- ----------
Total net expenses 4,014,990 439,970 56,539
---------- ---------- ----------
Net investment income (loss) 13,562,581 348,359 45,740
---------- ---------- ----------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) from:
Investments 23,444,879 (948,173) (21,568)
Transactions in written options -- -- --
Foreign currency transactions (435,755) (53,746) (14,440)
Net increase (decrease) in unrealized appreciation (depreciation) on:
Investments 18,907,997 601,879 (203,902)
Translation of assets and liabilities in foreign currencies (44,605) (47) 10,337
---------- ---------- ----------
Net realized and unrealized gain (loss) from investments
and foreign currency 41,872,516 (400,087) (229,573)
---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations $55,435,097 $(51,728) $(183,833)
========== ========== ==========
<FN>
* Net of foreign taxes withheld of $332,410 for the Global Fund, $56,603 for
the International Growth Fund, $9,851 for the International Small Cap Fund,
and $6,417 for the Growth Fund.
</FN>
<PAGE>
<CAPTION>
California
U.S. Money Intermediate
Micro-Cap Growth Bond Market Tax-Free
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Investment income:
Interest $46,139 $146,366 $4,960,774 $17,148,782 $3,057,222
Dividends 5,964 631,693 35,250 -- --
---------- ---------- ---------- ---------- ----------
Total income* 52,103 778,059 4,996,024 17,148,782 3,057,222
Expenses:
Investment advisory and administrative fees (Note 2) 94,198 254,882 377,026 1,049,432 284,195
Shareholders servicing fees -- 21,248 19,824 27,468 22,228
Custody fees -- 44,248 19,251 31,251 9,761
Accounting fees -- 20,169 31,453 86,187 31,515
Audit and legal fees -- 14,841 14,978 17,912 23,437
Directors' fees (Note 2) -- 1,936 1,936 1,936 1,936
Registration fees -- 17,115 19,596 51,707 3,309
Other -- 21,380 28,830 22,361 15,514
---------- ---------- ---------- ---------- ----------
Total expenses before reductions 94,198 395,819 512,894 1,288,254 391,895
Expenses waived by Advisor (16,899) (16,411) (102,754) (428,369) (117,038)
---------- ---------- ---------- ---------- ----------
Total net expenses 77,299 379,408 410,140 859,885 274,857
---------- ---------- ---------- ---------- ----------
Net investment income (loss) (25,196) 398,651 4,585,884 16,288,897 2,782,365
R ---------- ---------- ---------- ---------- ----------
ealized and unrealized gain (loss) from investments
and foreign currency:
Net realized gain (loss) from:
Investments 347,186 3,482,283 1,890,998 -- 119,954
Transactions in written options -- -- 339,267 -- --
Foreign currency transactions -- -- 82,647 -- --
Net increase (decrease) in unrealized appreciation (depreciation) on:
Investments 888,690 6,445,736 3,540,395 -- 3,671,361
Translation of assets and liabilities in foreign currencies -- -- (23,464) -- --
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss) from investments
and foreign currency 1,235,876 9,928,019 5,829,843 -- 3,791,315
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations $1,210,680 $10,326,670 $10,415,727 $16,288,897 $6,573,680
========== ========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
October 31, 1995
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
International
Global Growth
Fund Fund
Year Year Year Period
Ended Ended Ended Ended
10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Net investment income (loss) $13,562,581 $7,743,896 $348,359 $91,239
Net realized gain (loss) from investments and transactions
in written options 23,444,879 6,718,710 (948,173) (1,334,365)
Net realized gain (loss) from foreign currency transactions (435,755) (4,600,634) (53,746) (100,792)
Net unrealized appreciation (depreciation) on investments 18,907,997 (813,173) 601,879 1,457,657
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies (44,605) 83,063 (47) 708
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations 55,435,097 9,131,862 (51,728) 114,447
---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income (16,914,918) (2,968,563) (269,553) --
From net realized gains (1,140,840) (3,909,900) -- --
---------- ---------- ---------- ----------
Total distributions (18,055,758) (6,878,463) (269,553) --
---------- ---------- ---------- ----------
Capital share transactions:
Proceeds from shares sold 110,900,850 309,350,014 4,286,553 32,167,188
Payments for shares redeemed (136,942,988) (51,004,535) (1,803,707) (2,556,349)
Reinvested dividends 17,395,011 6,698,270 269,162 --
---------- ---------- ---------- ----------
Total capital share transactions (8,647,127) 265,043,749 2,752,008 29,610,839
---------- ---------- ---------- ----------
Net increase (decrease) in net assets 28,732,212 267,297,148 2,430,727 29,725,286
Net assets at beginning of period 453,622,644 186,325,496 29,725,286 --
---------- ---------- ---------- ----------
Net assets at end of period** $482,354,856 $453,622,644 $32,156,013 $29,725,286
---------- ---------- ---------- ----------
Capital transactions in shares:
Sold 8,368,781 23,760,853 433,837 3,298,539
Redeemed (10,326,949) (3,868,898) (188,969) (261,900)
Reinvested dividends 1,282,980 505,604 27,727 --
---------- ---------- ---------- ----------
Net increase (decrease) in capital share transactions (675,188) 20,397,559 272,595 3,036,639
========== ========== ========== ==========
<FN>
#Period from February 1, 1994 (commencement of operations) to October 31,
1994. tPeriod from June 30, 1994 (commencement of operations) to October 31,
1994. **Net assets at end of October 31, 1995 and October 31, 1994,
respectively, include undistributed net investment income (loss) of $2,004,174
and $5,356,511 for the Global Fund, $170,045 and $91,239 for the International
Growth Fund, $9,448 and $(1,256) for the International Small Cap Fund,
$(25,253) and $(57) for the U.S. Micro-Cap Fund, $9,309 and $115,797 for the
Growth Fund, and $86,546 and $31,900 for the Bond Fund.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
International U.S.
Small Cap Micro-Cap
Fund Fund
Year Period Year Period
Ended Ended Ended Ended
10/31/95 10/31/94t 10/31/95 10/31/94t
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Net investment income (loss) $45,740 $(1,256) $(25,196) $3,969
Net realized gain (loss) from investments and
transactions in written options (21,568) (3) 347,186 (3,840)
Net realized gain (loss) from foreign currency transactions (14,440) (7,874) -- --
Net unrealized appreciation (depreciation) on investments (203,902) (12,670) 888,690 59,190
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies 10,337 (11,283) -- --
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations (183,833) (33,086) 1,210,680 59,319
---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income (35,036) -- -- (4,026)
From net realized gains -- -- -- --
---------- ---------- ---------- ----------
Total distributions (35,036) -- -- (4,026)
---------- ---------- ---------- ----------
Capital share transactions:
Proceeds from shares sold 2,849,192 2,379,855 6,143,180 2,580,755
Payments for shares redeemed (172,610) (579,201) (1,614,127) (587,625)
Reinvested dividends 19,578 -- -- 3,961
---------- ---------- ---------- ----------
Total capital share transactions 2,696,160 1,800,654 4,529,053 1,997,091
---------- ---------- ---------- ----------
Net increase (decrease) in net assets 2,477,291 1,767,568 5,739,733 2,052,384
Net assets at beginning of period 1,767,568 -- 2,052,384 --
---------- ---------- ---------- ----------
Net assets at end of period** $4,244,859 $1,767,568 $7,792,117 $2,052,38
========== ========== ========== ==========
Capital transactions in shares:
Sold 308,867 237,224 462,168 254,056
Redeemed (18,867) (57,953) (117,136) (56,017)
---------- ---------- ---------- ----------
Reinvested dividends 2,175 -- -- 383
Net increase (decrease) in capital share transactions 292,175 179,271 345,032 198,422
========== ========== ========== ==========
<CAPTION>
Growth Bond
Fund Fund
Year Year Year Year
Ended Ended Ended Ended
10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Net investment income (loss) $398,651 $466,106 $4,585,884 $1,724,273
Net realized gain (loss) from investments and transactions
in written options 3,482,283 2,473,244 2,230,265 (791,756)
Net realized gain (loss) from foreign currency transactions -- -- 82,647 (19,271)
Net unrealized appreciation (depreciation) on investments 6,445,736 (2,336,664) 3,540,395 (1,714,573)
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies -- -- (23,464) --
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations 10,326,670 602,686 10,415,727 (801,327)
---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income (505,139) (392,103) (4,531,238) (1,692,373)
From net realized gains (241,849) (2,111,288) -- --
---------- ---------- ---------- ----------
Total distributions (746,988) (2,503,391) (4,531,238) (1,692,373)
---------- ---------- ---------- ----------
Capital share transactions:
Proceeds from shares sold 32,879,457 6,851,457 25,537,155 66,602,800
Payments for shares redeemed (10,815,329) (22,505,837) (13,731,939) (13,183,239)
Reinvested dividends 744,451 2,493,398 4,408,916 1,579,670
Total capital share transactions 22,808,579 (13,160,982) 16,214,132 54,999,231
---------- ---------- ---------- ----------
Net increase (decrease) in net assets 32,388,261 (15,061,687) 22,098,621 52,505,531
Net assets at beginning of period 27,244,158 42,305,845 64,244,050 11,738,519
---------- ---------- ---------- ----------
Net assets at end of period** $59,632,419 $27,244,158 $86,342,671 $64,244,050
========== ========== ========== ==========
Capital transactions in shares:
Sold 2,872,926 618,873 2,579,889 6,969,743
Redeemed (981,267) (2,009,215) (1,429,749) (1,361,785)
---------- ---------- ---------- ----------
Reinvested dividends 68,568 236,032 454,805 166,041
Net increase (decrease) in capital share transactions 1,960,227 (1,154,310) 1,604,945 5,773,999
========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
October 31, 1995
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
California
Intermediate
Money Tax-Free
Market Fund
Year Year Year Year
Ended Ended Ended Ended
10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Net investment income $16,288,897 $3,377,829 $2,782,365 $3,147,340
Net realized gain from investments -- -- 119,954 38,458
Net unrealized appreciation (depreciation) on investments -- -- 3,671,361 (5,886,267)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations 16,288,897 3,377,829 6,573,680 (2,700,469)
---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income (16,288,897) (3,377,829) (2,782,365) (3,147,340)
From net realized gains -- -- (4,639) (108,666)
---------- ---------- ---------- ----------
Total distributions (16,288,897) (3,377,829) (2,787,004) (3,256,006)
---------- ---------- ---------- ----------
Capital share transactions:
Proceeds from shares sold 297,387,013 260,385,003 2,822,896 15,326,306
Payments for shares redeemed (238,529,846) (63,534,667) (17,111,368) (13,768,196)
Reinvested dividends 16,015,143 3,382,435 2,510,108 2,987,160
---------- ---------- ---------- ----------
Total capital share transactions 74,872,310 200,232,771 (11,778,364) 4,545,270
---------- ---------- ---------- ----------
Net increase (decrease) in net assets 74,872,310 200,232,771 (7,991,688) (1,411,205)
Net assets at beginning of period 224,439,302 24,206,531 58,304,889 59,716,094
Net assets at end of period** $299,311,612 $224,439,302 $50,313,201 $58,304,889
========== ========== ========== ==========
Capital transactions in shares:
Sold 297,387,013 260,385,003 270,058 1,392,273
Redeemed (238,529,846) (63,534,667) (1,629,211) (1,297,341)
Reinvested dividends 16,015,143 3,382,435 239,479 280,888
---------- ---------- ---------- ----------
Net increase (decrease) in capital share transactions 74,872,310 200,232,771 (1,119,674) 375,820
========== ========== ========== ==========
<FN>
**There was no undistributed net investment income for the Money Market Fund
or the California Intermediate Tax-Free Fund at October 31, 1995 nor at
October 31, 1994. The accompanying notes are an integral part of these
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
Financial Highlights - October 31, 1995
GLOBAL FUND
<CAPTION>
Years ended October 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $13.13 $13.17 $11.52 $11.25 $9.93
------ ------ ------ ------ ------
Income from Investment Operations
Net investment income .40 .26 .32 .39 .47
Net realized and unrealized gain (loss) 1.24 (.03) 1.67 .40 1.34
------ ------ ------ ------ ------
Total investment operations 1.64 .23 1.99 0.79 1.81
------ ------ ------ ------ ------
Less Distributions
From net investment income (.50) (.14) (.26) (.40) (.45)
From net realized gains (.03) (.13) (.08) (.11) (.04)
Return of capital -- -- -- (.01) --
------ ------ ------ ------ ------
Total distributions (.53) (.27) (.34) (.52) (.49)
------ ------ ------ ------ ------
Net asset value, end of period $14.24 $13.13 $13.17 $11.52 $11.25
====== ====== ====== ====== ======
Total Return 12.78% 1.74% 17.51% 7.10% 18.38%
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $482,355 $453,623 $186,325 $101,839 $74,502
Ratio of expenses to average net assets .88% .95% .99% 1.09% 1.12%
Ratio of net investment income to average net assets 2.98% 2.47% 2.89% 3.41% 4.34%
Portfolio Turnover Rate 83% 52% 40% 50% 81%
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL GROWTH FUND
<CAPTION>
Year Period from
Ended March 1, 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 $9.79 $9.57
------ ------
Income from Investment Operations
Net investment income .10 .02
Net realized and unrealized gain (loss) (.09) .20
------ ------
Total investment operations .01 .22
------ ------
Less Distributions
From net investment income (.08) --
From net realized gains -- --
------ ------
Total distributions (.08) --
------ ------
Net asset value, end of period $9.72 $9.79
====== ======
Total Return 0.13% 3.44%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $32,156 $29,725
Ratio of expenses to average net assets 1.50% 1.50%*
Ratio of net investment income to average net assets 1.19% .35%*
Portfolio Turnover Rate 32% 44%*
<FN>
*Annualized
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
Financial Highlights - October 31, 1995
INTERNATIONAL SMALL CAPFUND
<CAPTION>
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 $9.86 $10.00
------ ------
Income from Investment Operations
Net investment income (loss)(a) .10 (.01)
Net realized and unrealized loss (.88) (.13)
------ ------
Total investment operations (.78) (.14)
------ ------
Less Distributions
From net investment income (.08) --
From net realized gains -- --
------ ------
Total distributions (.08) --
------ ------
Net asset value, end of period $9.00 $9.86
====== ======
Total Return # -7.96% -4.15%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $4,245 $1,768
Ratio of expenses to average net assets (a) 2.06% 2.50%*
Ratio of net investment income (loss) to average
net assets (a) 1.67% -.28%*
Portfolio Turnover Rate 96% --
<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 $.07, 2.50% and 1.23%,
respectively, for the year ended October 31, 1995.
# Total return would have been lower had the advisor not waived expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
U.S. MICRO-CAP FUND
<CAPTION>
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)
From net realized gains -- --
------ ------
Total distributions -- (.02)
------ ------
Net asset value, end of period $14.34 $10.34
====== ======
Total Return # 38.68% 10.69%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $7,792 $2,052
Ratio of expenses to average net assets (a) 2.04% 2.50%*
Ratio of net investment income (loss) to average
net assets (a) -.67% .68%*
Portfolio Turnover Rate 144% 129%*
<FN>
*Annualized
(a) Management fees have been voluntarily waived for the period February 1,
1995 to October 31, 1995. If fees had been charged fully, net investment
income per share, ratio of expenses to average net assets and ratio of net
investment income to average net assets would have been -$.08, 2.50% and
- -1.13%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the advisor not waived expenses. The
accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc.
Financial Highlights - October 31, 1995
GROWTH FUND
<CAPTION>
Period from
Years ended October 31 August 14, 1992
1995 1994 1993 to October 31, 1992
<S> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $10.46 $11.25 $10.08 $ 9.92
------ ------ ------ ------
Income from Investment Operations
Net investment income(a) .13 .21 .13 .02
Net realized and unrealized gain (loss) 2.74 (.02) 1.16 .18
------ ------ ------ ------
Total investment operations 2.87 .19 1.29 .20
------ ------ ------ ------
Less Distributions
From net investment income (.17) (.18) (.12) (.04)
From net realized gains (.10) (.80) -- --
------ ------ ------ ------
Total distributions (.27) (.98) (.12) (.04)
------ ------ ------ ------
Net asset value, end of period $13.06 $10.46 $11.25 $10.08
====== ====== ====== ======
Total Return # 28.12% 1.72% 12.80% 9.35%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $59,632 $27,244 $42,306 $32,388
Ratio of expenses to average net assets(a) .97% .94% .87% .94%*
Ratio of net investment income to average net assets(a) 1.02% 1.31% 1.19% 1.08%*
Portfolio Turnover Rate 108% 55% 44% 49%*
<FN>
*Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. 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 $.12, 1.01% and .98%,
respectively, for the year ended October 31, 1995; $.19, 1.08% and 1.17%,
respectively, for the year ended October 31, 1994; $.11, 1.02% and 1.04%,
respectively, for the year ended October 31, 1993; and $.02, 1.18% and 0.84%,
respectively, for the period from August 14, 1992 to October 31, 1992. # Total
return would have been lower had the advisor not waived expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
BOND FUND
Period from
Years ended October 31 April 30, 1993
1995 1994 to October 31, 1993
<S> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $9.29 $10.27 $10.04
------ ------ ------
Income from Investment Operations
Net investment income(a) .65 .53 .27
Net realized and unrealized gain (loss) .83 (.98) .24
------ ------ ------
Total investment operations 1.48 (.45) .51
------ ------ ------
Less Distributions
From net investment income (.64) (.53) (.27)
From net realized gains -- -- (.01)
------ ------ ------
Total distributions (.64) (.53) (0.28)
------ ------ ------
Net asset value, end of period $10.13 $9.29 $10.27
====== ====== ======
Total Return # 16.49% -4.42% 10.21%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $86,343 $64,244 $11,738
Ratio of expenses to average net assets(a) .60% .66% .50%*
Ratio of net investment income to average
net assets(a) 6.69% 5.76% 5.35%*
Portfolio Turnover Rate 21% 205% 13%*
<FN>
*Annualized (a) Management and other expenses charged since the Fund's
inception have been phased in over time. 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 $.64, .75% and
6.54%, respectively, for the year ended October 31, 1995; $.50, 1.04%, and
5.38%, respectively, for the year ended October 30, 1994; and $.23, 1.23% and
4.62%, respectively, for the period ended October 31, 1993. # Total return
would have been lower had the advisor not waived expenses. The accompanying
notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Fremont Mutual Funds, Inc. Financial Highlights - October 31, 1995
MONEY MARKET FUND
<CAPTION>
Years ended October 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Income from Investment Operations
Net investment income(a) .06 .03 .03 .04 .06
----- ----- ----- ----- -----
Total investment operations .06 .03 .03 .04 .06
----- ----- ----- ----- -----
Less Distributions
From net investment income (.06) (.03) (.03) (.04) (.06)
----- ----- ----- ----- -----
Total distributions (.06) (.03) (.03) (.04) (.06)
----- ----- ----- ----- -----
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return # 5.84% 3.49% 2.66% 3.73% 6.51%
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $299,312 $224,439 $24,207 $31,832 $33,814
Ratio of expenses to average net assets(a) .30% .46% .67% .70% .51%
Ratio of net investment income to average net
assets(a) 5.70% 4.02% 2.62% 3.70% 6.44%
<FN>
(a) Administrative fees have been voluntarily waived for the period from April
1, 1990 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 $.06, .45% and 5.55%,
respectively, for the year ended October 31, 1995; $.03, .61% and 3.87%,
respectively, for the year ended October 31, 1994; $.03, .82% and 2.47%,
respectively, for the year ended October 31, 1993; $.04, .85% and 3.55%,
respectively, for the year ended October 31, 1992; and $.06, .66% and 6.29%,
respectively, for the year ended October 31, 1991. # Total return would have
been lower had the advisor not waived expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
CALIFORNIA INTERMEDIATE TAX-FREE FUND <CAPTION>
Period from
Years ended October 31 November 16, 1990
1995 1994 1993 1992 to October 31, 1991
<S> <C> <C> <C> <C> <C>
Selected Per Share Data
for one share outstanding during the period
Net asset value, beginning of period $10.13 $11.10 $10.55 $10.39 $10.11
------ ------ ------ ------ ------
Income from Investment Operations
Net investment income(a) .53 .53 .55 .57 .58
Net realized and unrealized gain (loss) .73 (.97) .62 .19 .34
------ ------ ------ ------ ------
Total investment operations 1.26 (.44) 1.17 .76 .92
------ ------ ------ ------ ------
Less Distributions
From net investment income (.53) (.53) (.55) (.57) (.58)
From net realized gains -- -- (.07) (.03) (.06)
------ ------ ------ ------ ------
Total distributions (.53) (.53) (.62) (.60) (.64)
------ ------ ------ ------ ------
Net asset value, end of period $10.86 $10.13 $11.10 $10.55 $10.39
====== ====== ====== ====== ======
Total Return # 12.77% -3.94% 11.37% 7.37% 9.78%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $50,313 $58,305 $59,716 $44,305 $33,572
Ratio of expenses to average net assets(a) .50% .51% .50% .54% .36%*
Ratio of net investment income to average net assets(a) 5.08% 4.94% 5.05% 5.38% 5.88%*
Portfolio Turnover Rate 18% 21% 26% 18% 41%*
<FN>
*Annualized (a) Management and other expenses charged since the Fund's
inception have been phased-in over time. 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 $.51,
.72% and 4.86%, respectively, for the year ended October 31, 1995; $.51, .71%
and 4.74%, respectively, for the year ended October 31, 1994; $.53, .71% and
4.84%, respectively, for the year ended October 31, 1993; and $.54, .83% and
5.09%, respectively, for the year ended October 31, 1992; and $.53, .88% and
5.36%, respectively, for the period November 16, 1990 to October 31, 1991. #
Total return would have been lower had the advisor not waived expenses. The
accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Fremont Mutual Funds, Inc. (the Corporation) is an open-end, diversified
investment company authorized to issue ten billion shares of $.0001 par
value capital stock. These shares are currently offered in eight series:
n the FREMONTGLOBALFUND
n the FREMONTINTERNATIONAL GROWTHFUND
n the FREMONTINTERNATIONAL SMALL CAP FUND
n the FREMONT U.S. MICRO-CAP FUND
n the FREMONTGROWTHFUND
n the FREMONTBONDFUND
n the FREMONTMONEYMARKETFUND
n the FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
(the California Intermediate Tax-Free Fund is available only to
residents of Arizona, California, Colorado, Nevada, New Mexico, Oregon,
Texas, Utah and Washington)
Each of the Funds maintains a totally separate investment portfolio.
Significant accounting policies followed by the Funds are summarized below.
The policies are in conformity with generally accepted accounting principles
for investment companies.
Several funds were offered on a private placement basis to qualified
investors prior to their registration for sale under the Securities Act of
1933 and subsequent offering to the general public. The funds and their
respective registration dates are as follows :
Registration Date Under
Investment Company Securities Act
Act of 1940 of 1933
Fund
International Growth February 1, 1994 March 1, 1994
Growth May 11, 1992 August 14, 1992
Bond March 1, 1993 April 30, 1993
California Tax-Free July 2, 1990 November 16, 1990
Because the dates on which the shares were offered for public sale do not
coincide with the dates these funds began operations, the Financial
Highlights contained in this report for these funds reflect information
only from public offer date as required by the Securities and Exchange
Commission.
A. Security Valuations
Investments, including options, are stated at value based on recorded
closing sales on a national securities exchange or, in the absence of
a recorded sale, at the mean between the last reported bid and asked
prices or at fair value as determined by the Board of Directors.
Short-term notes and similar securities are included in investments
at amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective
exchanges or the most recent price available where no closing value
is available.
Securities in the Money Market Fund have a remaining maturity of not
more than 397 days and its entire portfolio has a weighted average
maturity of not more than 90 days. As such, all of the Fund's
securities are valued at amortized cost, which approximates value. If
the Fund's portfolio had a remaining weighted average maturity of
greater than 90 days the portfolio would be stated at value based on
recorded closing sales on a national securities exchange or, in the
absence of a recorded sale, at the mean between the bid and asked
prices.
B. Security Transactions
Security transactions are accounted for as of trade date. Realized
gains and losses on security transactions are determined on the basis
of specific identification for both financial statement and federal
income tax purposes.
C. Investment Income, Expenses and Distributions
Dividends are recorded on the ex-dividend date, except that certain
dividends from foreign securities in the Global Fund, the
International Growth Fund and the International Small Cap Fund are
recorded when the Fund is informed of the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount and
premium are amortized as required by the Internal Revenue Code.
Distributions to shareholders are recorded on the ex-dividend date.
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
D. Expense Allocation
The Corporation accounts for the assets of each Fund separately and
allocates general expenses of the Corporation to each Fund based upon
the relative net assets of each Fund or the nature of the services
performed and their applicability to each Fund.
E. Income Taxes
The Funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all taxable income and net capital gains, if any, to
shareholders. Therefore, no income tax provision is required. Each
Fund is treated as a separate entity in the determination of
compliance with the Internal Revenue Code and distributes taxable
income and net realized gains, if any, in accordance with schedules
described in their respective Prospectuses. The portfolio of the
California Intermediate Tax-Free Fund is composed solely of issues
that qualify for tax-exempt status for both Federal and State of
California income tax purposes.
Income dividends and capital gain distributions paid to shareholders
are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles and, therefore,
may differ from the information presented in the financial
statements. These differences are generally referred to as "book/tax"
differences and are primarily due to differing treatments for foreign
currency transactions, losses deferred due to wash sale rules,
classification of gains/losses related to paydowns and certain
futures and options transactions.
Permanent book/tax differences causing payments to shareholders of
income dividends which are in excess of the net investment income
reported in the financial statements will result in reclassification
of such excess to paid in capital from undistributed net investment
income. Temporary book/tax differences, which will reverse in
subsequent periods, will not be reclassified and will remain in
undistributed net investment income. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
For Federal income tax purposes, certain funds have capital loss
carryovers at October 31, 1995. Capital loss carryovers result when a
fund has net capital losses during a tax year. These are carried over
to subsequent years and may reduce distributions of realized gains in
those years. Unused capital loss carryovers expire in eight years.
The following funds have capital loss carryovers at October 31, 1995
which expire in the years indicated.
Fund Amount Expires in
International Growth $ 1,334,365 2002
948,173 2003
International Small Cap 21,571 2003
Until such capital loss carryovers are offset or expire, it is
unlikely that the Board of Directors will authorize a distribution of any net
realized gains.
F. Foreign Currency Translation
The market values of foreign securities, currency holdings, and other
assets and liabilities of the Global Fund, the International Growth
Fund, the International Small Cap Fund and the Bond Fund are
translated to U.S. dollars based on the daily exchange rates.
Purchases and sales of securities, income and expenses are translated
at the exchange rate on the transaction date. Income and withholding
taxes are translated at prevailing exchange rates when accrued or
incurred.
For those Funds which are allowed by the terms of their respective
prospectuses to invest in securities and other transactions
denominated in foreign currencies, currency gain(loss) will occur
when such securities and transactions are translated into U.S.
dollars. Such Funds have adopted Statement of Position (SOP) 93-4:
Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies effective November 1, 1993. The key provisions
of the SOP and its impact on the financial statements are summarized
below.
Certain transactions which result in realized currency gain(loss) are
reported on the Statements of Operations as Realized Gain(Loss) from
Foreign Currency Transactions. These are: currency gain(loss) from
the sale or maturity of forward currency contracts and from the
disposition of foreign currency; and the realization of currency
fluctuations between trade and settlement dates on security
transactions and between accrual and receipt dates on net investment
income.
Realized currency gain(loss) from the sale, maturity or disposition
of foreign securities is not separately reported from the economic or
market component of the gain(loss) and is included under the caption
Realized Gain(Loss) from Investments. Activity related to foreign
currency futures and options on foreign currency is, likewise,
reported under this heading, as these instruments are used to hedge
the foreign currency risks associated with investing in foreign
securities. Consistent with the method of reporting realized currency
gain(loss), unrealized currency gain(loss) on investments is not
separately reported from the underlying economic or market component,
but included under the caption Net Unrealized Appreciation
(Depreciation) on Investments. Unrealized currency gain(loss) on
other net assets is reported under Net Unrealized Appreciation
(Depreciation) on Translation of Assets and Liabilities in Foreign
Currencies.
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
G. Forward Foreign Currency Contracts
A forward foreign currency contract is an obligation to purchase or
sell a currency against another currency at a future date and price
as agreed upon by the parties. These contracts are traded
over-the-counter and not on organized commodities or securities
exchanges. Losses may arise due to changes in the value of the
foreign currencies or if the counterparty does not perform under
the contract.
The Funds may and do use forward foreign currency contracts to
facilitate the settlement of foreign securities. A commitment by a
Fund to purchase a currency forward allows the Fund to have the local
currency on hand to settle foreign security purchases on the payment
date. Likewise, a commitment to sell a currency forward allows the
Fund to take the foreign currency proceeds from the sale of foreign
securities and exchange it for U.S. dollars at a predetermined price.
In addition, the Global Fund and the Bond Fund use such contracts
to manage their respective currency exposure. Contracts to receive
generally are used to acquire exposure to foreign currencies,
while contracts to deliver are used to hedge a fund's investments
against currency fluctuations. A contract to receive or deliver
can also be used to offset a previous contract.
The market risk involved in these contracts is in excess of the
amounts reflected in the Funds' Statements of Assets and Liabilities
since only the change in the underlying values is reflected (as an
asset where there is appreciation or as a liability if depreciated)
and not the actual underlying values. At October 31, 1995 the
underlying values for open foreign currency contracts were as
follows:
<TABLE>
<CAPTION>
Net Unrealized
Settlement To Receive Initial Current Appreciation
Date (To Deliver) Value Value (Depreciation)
<S> <C> <C> <C> <C> <C>
Global Fund 11/16/95 NLG5,036,938 $3,164,899 $3,188,944 $ 24,045
11/01/95 DM(1,562,850) (1,116,640) (1,109,860) 6,780
----------
30,825
==========
Bond Fund 11/30/95 DM(6,116,000) $(4,331,123) $(4,348,692) $ (17,569)
12/08/95 DM (591,840) (416,789) (420,987) (4,198)
----------
$ (21,767)
==========
</TABLE>
DM - Deutschemark, NLG - Netherlands Gilder
H. Futures
A futures contract is an agreement between two parties to buy or sell
a security or financial interest at a set price on a future date and
is standardized and exchange-traded. Upon entering into such a
contract, the purchaser is required to pledge to the broker an amount
of cash or securities equal to the minimum "initial margin"
requirements of the exchange on which the contract is traded.
Pursuant to the contract, the purchaser agrees to receive from or pay
to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the purchaser as unrealized
gains or losses. When the contract is closed, the purchaser records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed. The Funds use futures contracts to hedge foreign currency
and interest rate risks.
At October 31, 1995, the following Funds had futures contracts
outstanding:
<TABLE>
<CAPTION>
Net
Contracts Unrealized
To Buy Expiration Initial Current Appreciation
(To Sell) Date Value Value (Depreciation)
<S> <C> <C> <C> <C> <C>
Global Fund
Deutschemark (707) Dec 95 $ (60,111,967) $ (62,905,325) $ (2,793,358)
=========
Bond Fund
5 yr. U.S. Treasury Note 100 Dec 95 $ 10,720,156 $ 10,832,812 $ 112,656
10 yr. U.S. Treasury Note 175 Dec 95 19,288,906 19,517,969 229,063
30 yr. U.S. Treasury Bond 70 Dec 95 7,940,625 8,194,375 253,750
10 yr. Federal Republic of Germany Bond 40 Dec 95 DM 9,474,000 DM 9,663,000* 127,983
----------
$ 723,452
==========
<FN>
DM - Deutschemark
*The current value of these contracts in U.S. dollars is $6,862,195.
</FN>
</TABLE>
At October 31, 1995, $2,000,000 and $660,000 par value of U.S.
Treasury Bills were held by brokers to satisfy the initial margin requirements
related to these contracts for the Global Fund and the Bond Fund,
respectively.
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
I. Securities Lending
All the Funds are authorized to make loans of their portfolio
securities to broker-dealers or to other institutional investors up to
33-1/3% of their respective net assets. The borrower must maintain
with the Funds' 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 but unpaid
distributions. The collateral is invested in a money market fund that
meets the criteria of Section 2(a)-7 of the 1940 Act.
The Funds receive a portion of the income earned on the collateral.
For the year ended October 31, 1995, transactions in securities
lending resulted in fee income to the Global, International Growth,
International Small Cap and Growth Funds of $82,438, $9,361, $244 and
$1,816, respectively.
At October 31, 1995, no Fund had securities out on loan.
2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Investment Advisor
The Funds each have entered into an investment management agreement with
Fremont Investment Advisors, Inc. (the Advisor), a wholly owned
subsidiary of The Fremont Group, Inc. Under these agreements, the Advisor
supervises and implements each Fund's investment activities and provides
administrative services as necessary to conduct Fund business. For its
advisory and administrative services, the Advisor receives a fee based on
the average daily net assets of the Funds as described below.
<TABLE>
<CAPTION>
Advisory Fee Administrative Fee
<S> <C> <C>
Global Fund .60% on all net assets .15% on all net assets
International Growth Fund 1.50% on all net assets --
International Small Cap Fund (*) 2.50% on first $30 million --
2.00% on next $70 million --
1.50% on balance over $100 million --
U.S. Micro-Cap Fund (*) 2.50% on first $30 million --
2.00% on next $70 million --
1.50% on balance over $100 million --
Growth Fund(*) .50% on all net assets .15% on all net assets
Bond Fund(*) .40% on all net assets .15% on all net assets
Money Market Fund(*) .30% on first $50 million .15% on all net assets
.20% on balance over $50 million
California Intermediate Tax-Free Fund(*) .40% on first $25 million .15% on all net assets
.35% on next $25 million
.30% on next $50 million
.25% on next $50 million
.20% on balance over $150 million
<FN>
(*)The Advisor has voluntarily waived some of its fees for these Funds.
All fees waived in the past will not be recouped in the future and,
as these waivers are voluntary, they may be changed in the future.
For the International Small Cap Fund and the U.S. Micro-Cap Fund,
effective February 1, 1995, the Advisor is voluntarily limiting the
advisory fee to a reduced rate of 1.98% of net assets. For the Growth
Fund, the Advisor waived the entire administrative fee until June 26,
1992 when it began charging a voluntarily reduced rate of 0.01% of
net assets. This waiver was eliminated on April 1, 1995. For the
California Intermediate Tax-Free Fund, the Advisor has waived part or
all of the advisory and administrative fees at various times.
Currently, the advisory and administrative fees are charged at
voluntarily reduced rates of .30% and .005% of net assets,
respectively. For the Bond Fund, the Advisor waived its investment
advisory fee until March 1, 1994 when it began charging .25% of net
assets. The advisory fee remained at .25% until June 15, 1994 when it
was charged at the full rate of .40% of net assets. The
administrative fee has been waived in its entirety until further
notice. In addition, the Advisor had limited the other operating
expenses of the Fund to 0.50% of net assets until July 14, 1994 when
the Fund began bearing all of its own expenses.
For the Money Market Fund, the Advisor has waived the administrative
fee in its entirety since April 1, 1990.
</FN>
</TABLE>
Selected per share data and operating ratios have been disclosed both
before and after the impact of these various waivers and expense limitations
under each Fund's Financial Highlights table.
Under the terms of the Advisory agreements, the Advisor receives a single
management fee from the International Growth Fund, the International
Small Cap Fund, and the U.S. Micro-Cap Fund, and is obligated to pay all
expenses of these Funds except extraordinary expenses (as determined by a
majority of the disinterested directors) and interest, brokerage
commissions, and other transaction charges relating to the investing
activities of those Funds.
Each Fund is also required to comply with the limitations set forth in the
laws, regulations, and administrative interpretations of the states in
which it is registered. For the year ended October 31, 1995, no
reimbursements were required or made to any Fund by the Advisor to comply
with these limitations.
Other Related Parties
At October 31, 1995 The Fremont Group, Inc. and its affiliated companies
including their employee retirement plans, its principal shareholder,
Stephen D. Bechtel, Jr., and members of his family, including trusts,
owned directly or indirectly the following approximate percentages of
the various Funds:
% of Shares
Outstanding
Global Fund 65%
International Growth Fund 91%
International Small Cap Fund 21%
U.S. Micro-Cap Fund 31%
Growth Fund 71%
Bond Fund 92%
Money Market Fund 83%
California Intermediate Tax-Free Fund 63%
Additionally, Morgan Grenfell Capital Management, Inc., subadvisor of the
U.S. Micro-Cap Fund, owned approximately 9% of the Fund. Certain officers
and/or directors of the Funds are also officers and/or directors of the
Advisor and/or The Fremont Group, Inc.
3. ORGANIZATION COSTS
Costs incurred by each Fund, if any, in connection with its organization
have been deferred and are amortized on a straight-line basis over a
period of five years (60 months).
4. PURCHASES AND SALES/MATURITIES OF INVESTMENT SECURITIES
Aggregate purchases and aggregate proceeds from sales and maturities of
securities for the year ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
Purchases Proceeds
<S> <C> <C>
Long term securities excluding US Government securities:
Global Fund $ 375,014,303 $ 327,950,059
International Growth Fund 12,325,575 8,485,050
International Small Cap Fund 5,242,125 2,353,699
U.S. Micro-Cap Fund 8,565,687 4,411,818
Growth Fund 60,533,280 40,259,370
Bond Fund 16,907,058 9,337,949
California Intermediate Tax-Free Fund 9,455,820 19,021,435
Long term US Government securities:
Global Fund $ 20,988,232 $ 25,498,348
Bond Fund 10,112,310 2,121,850
</TABLE>
<PAGE>
Fremont Mutual Funds, Inc.
Notes to Financial Statements - October 31, 1995
Transactions in written put and call options for the year ended
October 31, 1995 for the Bond Fund were as follows:
<TABLE>
<CAPTION>
Amount of Number of
Premiums Contracts
<S> <C> <C>
Options outstanding at October 31, 1994 $20,013 50
Options sold 396,877 710
Options cancelled in closing purchase transactions -- --
Options expired prior to exercise (345,437) (620)
Options exercised (47,705) (70)
------- -------
Options outstanding at October 31, 1995 $23,748 70
======= =======
The following written options were outstanding at October 31, 1995:
<CAPTION>
Number of Exercise Expiration
Name of Issuer Contracts Price Date Value
<S> <C> <C> <C> <C> <C>
Put Options: CBOT 30 yr. U.S. Treasury Bond Futures 70 112 11/17/95 $ 2,188
CBOT - Chicago Board of Trade
</TABLE>
The Bond Fund received premiums of $23,748 on these contracts and has an
unrealized gain of $21,560. The total notional value underlying these
contracts is $7,000,000.
5. PORTFOLIO CONCENTRATIONS
Although each Fund has a diversified investment portfolio, there are
certain investment concentrations of risk which may subject each Fund more
significantly to economic changes occurring in certain segments or industries.
6. UNREALIZED APPRECIATION (DEPRECIATION) - TAXBASIS
At October 31, 1995, the cost of securities for Federal income tax
purposes and the gross aggregate unrealized appreciation and/or depreciation
based on that cost were as follows: <TABLE>
<CAPTION>
Gross Aggregate Unrealized
Cost Appreciation Depreciation Net
<S> <C> <C> <C> <C>
Global Fund $ 436,028,883 $ 56,758,719 $ (10,411,381) $ 46,347,338
International Growth Fund 30,095,936 4,381,143 (2,321,607) 2,059,536
International Small Cap Fund 4,384,475 252,366 (468,938) (216,572)
U.S. Micro-Cap Fund 6,795,869 1,232,783 (290,023) 942,760
Growth Fund 50,189,029 9,921,703 (915,878) 9,005,825
Bond Fund 83,794,520 2,026,421 (693,184) 1,333,237
Money Market Fund 303,888,378 -- -- --
California Intermediate Tax-Free Fund 47,760,684 2,092,397 (199,726) 1,892,671
</TABLE>
<PAGE>
FREMONT MUTUAL FUNDS, INC.
PART C; OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS
(a) Financial Statements: Audited Financial Statements of the
Registrant for the fiscal year ended October 31,
1995 are incorporated by reference from the
Statement of Additional Information included herein
(b) Exhibits -- Exhibits required by Part C, Item 24 of Form N-
1A
(1) (a) Articles of Incorporation -- on file
(File No. 811-5632)
(b) Articles of Amendment -- on file
(File No. 811-5632)
(c) Articles of Amendment changing name -- on file (File
No. 811-5632)
(d) Articles Supplementary relating to shares of
International Growth Fund -- on file (File No. 811-
5632 under Post-Effective Amendment No. 16 filed
December 29, 1993)
(e) Articles Supplementary for Income Fund, changing name
to Bond Fund -- on file (File No. 811-5632 under Post-
Effective Amendment No. 17 filed March 1, 1994)
(f) Articles Supplementary relating to shares of the
International Small-Cap Fund -- on file (File No. 811-
5632 under Post-Effective Amendment No. 18 filed April
22, 1994)
(g) Articles Supplementary relating to shares of the U.S.
Micro-Cap Fund -- on file (File No. 811-5632 under
Post-Effective Amendment No. 18 filed April 22, 1994)
(2) Bylaws -- filed herewith
(3) None
(4) Forms of specimen stock certificate -- shares are issued in
uncertificated form only
<PAGE>
(5) (a) Amended and Restated Investment Advisory and
Administrative Services Agreement -- on file (File No.
811-5632 under Post-Effective Amendment filed May 11,
1992)
(b) Investment Advisory and Administrative Services
Agreement relating to International Growth Fund -- on
file (File No. 811-5632 under Post-Effective Amendment
No. 17 filed March 1, 1994)
(c) Investment Advisory and Administrative Services
Agreement relating to International Small-Cap Fund and
U.S. Micro-Cap Fund -- on file (File No. 811-5632
under Post-Effective Amendment No. 19 filed August 1,
1994)
(d) Portfolio Management Agreement with Pacific Investment
Management Co. and Fremont Investment Advisors, Inc.
for Bond (formerly Income) Fund -- on file (File No.
811-5632 under Post-Effective Amendment No. 17 filed
March 1, 1994)
(e) Portfolio Management Agreement with Acadian Asset
Management, Inc. and Fremont Investment Advisors, Inc.
for International Small-Cap Fund -- on file (File No.
811-5632 under Post-Effective Amendment No. 18 filed
April 22, 1994)
(f) Portfolio Management Agreement with Morgan Grenfell
Capital Management and Fremont Investment Advisors,
Inc. for U.S. Micro-Cap Fund -- on file (File No. 811-
5632 under Post-Effective Amendment No. 18 filed April
22, 1994)
(6) Distribution Agreement with Funds Distributor, Inc. --
filed herewith
(7) None
(8) Custodian Agreement with The Northern Trust Company --
filed herewith
(9) (a) Transfer Agency Agreement with MGF Service Corp. -- on
file (File No. 811-5632 under Post-Effective Amendment
No. 20 filed February 23, 1995)
<PAGE>
(b) Administrative Services Agreement with MGF Service
Corp. -- on file (File No. 811-5632 under Post-
Effective Amendment No. 18 filed April 22, 1994)
(c) License Agreement relating to the Mark "Fremont" with
Fremont Investment Advisors, Inc. -- on file (File No.
811-5632)
(d) Investment Accounting Agreement between Investors
Fiduciary Trust Company and Fremont Mutual Funds, Inc.
-- on file (File No. 811-5632 under Post-Effective
Amendment No. 17 filed March 1, 1994)
(10) Opinion and Consent of Counsel -- on file (File No. 811-
5632)
(11) Consent of Independent Accountants -- filed herewith
(12) Inapplicable
(13) (a) Subscription Agreement with initial shareholders --
on file (File No. 811-5632 under Post-Effective
Amendment filed May 11, 1992)
(b) Subscription Agreement with initial shareholders of
International Growth Fund -- on file (File No. 811-
5632 under Post-Effective Amendment No. 16 filed
December 29, 1993)
(c) Subscription Agreement with initial shareholders of
International Small-Cap Fund -- on file (File No.
811-5632 under Post-Effective Amendment No. 18 filed
April 22, 1994)
(d) Subscription Agreement with initial shareholders of
U.S. Micro-Cap Fund -- on file (File No. 811-5632
under Post-Effective Amendment No. 18 filed April
22, 1994)
(14) Retirement Plans -- on file (File No. 811-5632)
(15) None
(16) Inapplicable
(17) Financial Data Schedules -- filed herewith
(18) Inapplicable
<PAGE>
(19) Powers of Attorney -- on file (File No. 811-5632 under
Post Effective Amendment No. 19 filed August 1, 1994)
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
REGISTRANT
Stephen D. Bechtel, Jr. and members of his family, including
trusts for family members, would be considered controlling
persons under applicable Securities and Exchange Commission
regulations, on account of their shareholdings in the Funds.
Item 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record
Holders as of
TITLE OF CLASS DECEMBER 31, 1995
Capital Stock -- Money Market Fund 1,032
Capital Stock -- Global Fund 3,600
Capital Stock -- California Intermediate
Tax-Free Fund 377
Capital Stock -- Bond Fund 237
Capital Stock -- Growth Fund 753
Capital Stock -- International Growth Fund 272
Capital Stock -- International Small Cap Fund 173
Capital Stock -- U.S. Micro-Cap Fund 1,159
Item 27. INDEMNIFICATION
Article VII(g) of the Articles of Incorporation, filed as
Exhibit (1), Item 24(b), provides for indemnification of certain persons
acting on behalf of the Funds.
The Funds and the Advisor are jointly insured under an
errors and omissions policy issued by Gulf Insurance Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons by the Registrant's charter and bylaws, 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 said Act, and is, therefore, unenforceable. In particular,
<PAGE>
the Articles of the Company provide certain limitations on liability of
officers and directors. In the event that a claim for indemnification
against such liabilities (other than the payment by the Series of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, 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 Act and
will be governed by the final adjudication of such issues.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
See the material following the captions "Advisory Agreement"
and "Advisory and Sub-Advisory Agreements" appearing as a portion of Parts
A hereof and "Investment Advisory and Other Services" appearing as a
portion of Part B hereof.
Item 29. PRINCIPAL UNDERWRITERS
(a) Funds Distributor, Inc. is a leading provider of
distribution and sales services for mutual funds. Its
current clients represent over 225 investment portfolios
with assets of approximately $85 billion. Funds
Distributor, Inc. also offers a range of specialized
investment company consulting services.
(b) None of the officers of Funds Distributor, Inc. hold
positions or offices with the Registrant.
(c) Inapplicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other records required by Rules 31a-1
and 31a-2 under the Investment Company Act of 1940, as amended, are
maintained and held in the offices of the Registrant and its investment
manager, Fremont Investment Advisors, Inc., 50 Fremont Street, 36th Floor,
San Francisco, California 94105. Other books and records will be maintained
by the sub-advisers to the Funds.
Records covering stockholder accounts and portfolio
transactions are also maintained and kept by the Funds' Transfer Agent, MGF
Service Corp., and by the Custodian, The Northern Trust Company.
Item 31. MANAGEMENT SERVICES
None
<PAGE>
Item 32. UNDERTAKINGS
a) Inapplicable
b) Inapplicable
c) The information required by part 5A of the Form
N-1A is or will be contained in the latest annual
report to shareholders, and Registrant undertakes
to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and
without charge.
d) The Registrant undertakes that within five business days
after receipt of a written application by shareholders
holding in the aggregate at least 1% of the shares then
outstanding or shares then having a net asset value of
$25,000, which is less, each of whom shall have been a
shareholder for at least six months prior to the date of
application (hereinafter the "Petitioning Shareholders"),
requesting to communicate with other shareholders with a
view to obtaining signatures to a request for a meeting for
the purpose of voting upon removal of any Trustee of the
Registrant, which application shall be accompanied by a
form of communication and request which such Petitioning
Shareholders wish to transmit, Registrant will: (i) provide
such Petitioning Shareholders with access to a list of the
names and addresses of all shareholders of the Registrant;
or (ii) inform such Petitioning Shareholders of the
approximate number of shareholders and the estimated costs
of mailing such communication, and to undertake such
mailing promptly after tender by such Petitioning
Shareholders to the Registrant of the material to be mailed
and the reasonable expenses of such mailing.
<PAGE>
SIGNATURE OF THE REGISTRANT
Pursuant to the requirements of the Securities Act of 1933,
and the Investment Company Act of 1940, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment No. 24 (1940 Act) and Post-Effective Amendment
No. 21 (1933 Act) to the Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of San Francisco,
and the State of California, on the 16th day of February, 1996.
FREMONT MUTUAL FUNDS, INC.
By: /S/ DAVID L. REDO
President
Pursuant to the requirements of the Securities Act of 1933
this Post-Effective Amendment No. 21 to the Registration Statement has been
signed below by the following persons in the capacities listed, and each on
February 16, 1996.
PRINCIPAL EXECUTIVE OFFICER:
/S/ DAVID L. REDO President and Chief
David L. Redo Executive Officer
PRINCIPAL ACCOUNTING OFFICER:
/S/ CHANTAL GAIDDON Principal Accounting
Chantal Gaiddon Officer
PRINCIPAL FINANCIAL OFFICER:
/S/ PETER F. LANDINI Vice President, Treasurer
Peter F. Landini and Principal Financial
Officer
<PAGE>
DIRECTORS:
Director
Richard E. Holmes*
Director
William W. Jahnke*
Director
Donald C. Luchessa*
Director
David L. Egan*
/S/ VINCENT P. KUHN, JR. Director
Vincent P. Kuhn, Jr.
/S/ DAVID L. REDO Director
David L. Redo
/S/ ALBERT W. KIRSCHBAUM Director
Albert W. Kirschbaum
*By:/S/ VINCENT P. KUHN, JR.
(Attorney-in-Fact pursuant
to limited powers of attorney
filed with Post-Effective
Amendment No. 19 filed on
August 1, 1994.)
<PAGE>
FREMONT MUTUAL FUNDS, INC.
EXHIBIT INDEX
1. Bylaws
2. Distribution Agreement with Funds Distributor, Inc
3. Custodian Agreement with The Northern Trust
Company
4. Consent of Independent Accountants
5. Financial Data Schedule - Fremont Global Fund
6. Financial Data Schedule - Fremont Money Market Fund
7. Financial Data Schedule - Fremont California Intermediate
Tax-Free Fund
8. Financial Data Schedule - Fremont Growth Fund
9. Financial Data Schedule - Fremont Bond Fund
10. Financial Data Schedule - Fremont International Growth Fund
11. Financial Data Schedule - Fremont U.S. Micro-Cap Fund
12. Financial Data Schedule - Fremont International Small Cap
Fund
BYLAWS OF
FREMONT MUTUAL FUNDS, INC.
1
<PAGE>
FREMONT MUTUAL FUNDS, INC.
BYLAWS
INDEX
SECTION AND TITLE PAGE
ARTICLE I SHAREHOLDERS ..........................................1
1.1 Annual Meetings .......................................1
1.2 Special Meetings ......................................1
1.3 Place of Meetings .....................................1
1.4 Notice of Meetings ....................................1
1.5 Quorum ................................................2
1.6 Votes Required ........................................2
1.7 Proxies ...............................................2
1.8 List of Shareholders ..................................2
1.9 Voting ................................................3
1.10 Action by Shareholders Other than at a Meeting ........3
ARTICLE II BOARD OF DIRECTORS ....................................3
2.1 Powers ................................................3
2.2 Number of Directors ...................................3
2.3 Election of Directors .................................4
2.4 Regular Meetings ......................................4
2.5 Special Meetings ......................................4
2.6 Notice of Meetings ....................................4
2.7 Quorum ................................................5
2.8 Vacancies..............................................5
2.9 Compensation and Expenses .............................5
2.10 Action by Directors Other than at a Meeting ...........5
2.11 Committees ............................................5
i
<PAGE>
2.12 Committee Procedure ...................................6
2.13 Emergency .............................................6
2.14 Holding of Meetings by Conference Telephone Call.......6
ARTICLE III OFFICERS .....................................................7
3.1 Executive Officers ....................................7
3.2 Chairman and Vice Chairman of the Board ...............7
3.3 President .............................................7
3.4 Vice Presidents .......................................7
3.5 Secretary and Assistant Secretaries ...................8
3.6 Treasurer and Assistant Treasurers ....................8
3.7 Subordinate Officers ..................................8
3.8 Removal ...............................................8
3.9 Compensation ..........................................8
3.10 Annual Statement of Affairs ...........................9
ARTICLE IV STOCK .................................................9
4.1 Certificates ..........................................9
4.2 Transfers .............................................9
4.3 Stock Ledgers .........................................9
4.4 Record Dates ..........................................9
4.5 Replacement Certificates .............................10
4.6 Certification of Beneficial Owners....................10
ARTICLE V GENERAL PROVISIONS ...................................10
5.1 Dividends ............................................10
5.2 Checks ...............................................11
5.3 Fiscal Year...........................................11
5.4 Custodian ............................................11
5.5 Seal .................................................11
5.6 Representation of Shares .............................11
ii
<PAGE>
5.7 Bonds ................................................11
ARTICLE VI AMENDMENT OF BYLAWS ..................................12
iii
<PAGE>
BYLAWS
OF
FREMONT MUTUAL FUNDS, INC.
ARTICLE I.
SHAREHOLDERS
1.1 ANNUAL MEETINGS. The annual meeting of shareholders shall be
held during the month of January, at such date and time as may be designated
from time to time by the Board of Directors for the election of Directors and
the transaction of any business within the powers of the Corporation, except
that the Corporation shall not be required to hold an annual meeting in any
year in which the election of directors is not required to be acted upon under
the Investment Company Act of 1940. Any business of the Corporation may be
transacted at an annual meeting without being specifically designated in the
notice, except such business as is specifically required by statute or by the
Articles of Incorporation to be stated in the notice. Failure to hold an
annual meeting at the designated time shall not, however, invalidate the
corporate existence or affect otherwise valid corporate acts.
1.2 SPECIAL MEETINGS. At any time in the interval between annual
meetings, special meetings of the shareholders may be called by the Chairman
of the Board or the President or by a majority of the Board by vote at a
meeting or in writing (addressed to the Secretary of the Corporation) with or
without a meeting or by 10% of the shareholders by written consent.
1.3 PLACE OF MEETINGS. Meetings of the shareholders for the
election of Directors shall be held at such place either within or without the
State of Maryland or elsewhere in the United States as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting. Meetings of shareholders for any other purpose may be held at such
time and place, within the State of Maryland or elsewhere in the United
States, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
1.4 NOTICE OF MEETINGS. Not less than ten days nor more than
ninety days before the date of every shareholders' meeting, the Secretary
shall give to each shareholder entitled to vote at such meeting, written or
printed notice stating the time and place of the meeting and, if the meeting
is a special meeting or notice of the purpose is required by statute, the
purpose or purposes for which the meeting is called, either by mail or by
presenting it to the shareholder personally or by leaving it at the
shareholder's residence or usual place of business. If mailed, such notice
shall be deemed to be given when deposited in the United States mail addressed
to the shareholder at his post office address as it appears on the records of
the Corporation, with postage thereon prepaid. Notwithstanding the foregoing
provision, a waiver of notice in writing, signed by the person or
iv
<PAGE>
persons entitled to such notice and filed with the records of the meeting,
whether before or after the holding thereof, or actual attendance at the
meeting in person or by proxy, shall be deemed equivalent to the giving of
such notice to such persons. Any meeting of shareholders, annual or special,
may adjourn from time to time to reconvene at the same or some other place,
and no notice need be given of any such adjourned meeting other than by
announcement at the meeting.
1.5 QUORUM. At any meeting of shareholders the presence in person
or by proxy of a majority of all the votes entitled to be cast at the meeting
shall constitute a quorum; but this Section shall not affect any requirement
under statute or under the Articles for the vote necessary for the adoption of
any measure. In the absence of a quorum no business may be transacted;
provided, however, that at any meeting of shareholders whether or not a quorum
is present, the holders of a majority of the shares of capital stock present
in person or by proxy and entitled to vote may adjourn the meeting from time
to time, without notice other than announcement at the meeting except as
otherwise required by the Articles and these Bylaws, until the holders of the
requisite amount of shares of capital stock shall be present to constitute a
quorum or to transact the business to be transacted, or for any other lawful
purpose, provided that no such adjournment without notice shall continue for
more than 120 days after the original record date. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted
which might have been transacted at the meeting as originally called. The
absence from any meeting, in person or by proxy, of holders of the number of
shares of capital stock of the Corporation in excess of a majority thereof
which may be required by the General Laws of the State of Maryland, the
Investment Company Act of 1940, these Bylaws, or the Articles of
Incorporation, for action upon any given matter shall not prevent action at
such meeting upon any other matter or matters which may properly come before
the meeting, if there shall be present at the meeting, in person or by proxy,
holders of the number of shares of capital stock of the Corporation required
for action in respect of such other matter or matters.
1.6 VOTES REQUIRED. A majority of the votes cast at a meeting of
shareholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly come
before the meeting. Each outstanding share of stock shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders and
fractional shares shall be entitled to corresponding fractions of one vote on
such matters, except that a plurality of all the votes cast at a meeting at
which a quorum is present is sufficient to elect a director.
1.7 PROXIES. A shareholder may vote the shares owned of record by
him either in person or by proxy executed in writing by the shareholder or by
the shareholder's duly authorized attorney-in-fact. No proxy shall be valid
after eleven months from its
v
<PAGE>
date, unless otherwise provided in the proxy. Every proxy shall be in writing,
subscribed by the shareholder or the shareholder's duly authorized attorney,
and dated, but need not be sealed, witnessed or acknowledged.
1.8 LIST OF SHAREHOLDERS. At each meeting of shareholders, a
full, true and complete list in alphabetical order of all shareholders
entitled to vote at such meeting, certifying the number and class or series of
shares held by each, shall be made available by the Secretary.
1.9 VOTING. In all elections for Directors every shareholder
shall have the right to vote, in person or by proxy, the shares owned of
record by the shareholder for as many persons as there are Directors to be
elected and for whose election the shareholder has a right to vote. At all
meetings of shareholders, unless the voting is conducted by inspectors, the
proxies and ballots shall be received, and all questions regarding the
qualification of voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by, the chairman of the meeting. If
demanded by shareholders, present in person or by proxy, entitled to cast 10%
in number of votes, or if ordered by the chairman, the vote upon any election
or question shall be taken by ballot. Upon like demand or order, the voting
shall be conducted by two inspectors in which event the proxies and ballots
shall be received, and all questions regarding the qualification of voters and
the validity of proxies and the acceptance or rejection of votes shall be
decided, by such inspectors. Unless so demanded or ordered, no vote need be by
ballot, and voting need not be conducted by inspectors. Inspectors may be
elected by the shareholders at their annual meeting, to serve until the close
of the next annual meeting and their election may be held at the same time as
the election of Directors. In case of a failure to elect inspectors, or in
case an inspector shall fail to attend, or refuse or be unable to serve, the
shareholders at any meeting may choose an inspector or inspectors to act at
such meeting, and in default of such election the chairman of the meeting may
appoint an inspector or inspectors.
1.10 ACTION BY SHAREHOLDERS OTHER THAN AT A MEETING. Any
action required or permitted to be taken at any meeting of
shareholders may be taken without a meeting, if a consent in
writing, setting forth such action, is signed by all the
shareholders entitled to vote on the subject matter thereof and
any other shareholders entitled to notice of a meeting of
shareholders (but not to vote thereat) have waived in writing any
rights which they may have to dissent from such action, and such
consent and waiver are filed with the records of the Corporation.
vi
<PAGE>
ARTICLE II.
BOARD OF DIRECTORS
2.1 POWERS. The Board may exercise all the powers of the
Corporation, except such as are conferred upon or reserved to the shareholders
by the Articles of Incorporation, these Bylaws, the Investment Company Act of
1940 or the Maryland General Corporation Law. The Board shall keep full and
fair accounts of
its transactions.
2.2 NUMBER OF DIRECTORS. The number of directors which shall
constitute the whole of the Board of Directors shall be as provided in the
Articles of Incorporation unless otherwise established by resolution adopted
by an affirmative vote of a majority of the Board of Directors from time to
time. In accord with such resolution, the number of directors is now
established as seven (7). Directors need not be stockholders.
In the event of any change in the authorized number of
directors, each director then continuing to serve as such shall nevertheless
continue as a director until the expiration of his current term, or his prior
resignation, disqualification, disability or removal. If, for any reason, the
Board of Directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
2.3 ELECTION OF DIRECTORS. Until the first annual meeting of
shareholders and until successors or additional Directors are duly elected and
qualify, the Board shall consist of the persons named as such in the Articles
of Incorporation. When and as required at each annual meeting that may be held
by the Corporation beginning with the first annual meeting, the shareholders
shall elect Directors to hold office until the next annual meeting and until
their successors are elected and qualify. At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any Director or Directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed Directors.
2.4 REGULAR MEETINGS. After each meeting of shareholders at which
a Board of Directors shall have been elected, the Board so elected shall meet
for the purpose of organization and the transaction of other business. No
notice of such first meeting shall be necessary if held immediately after the
adjournment, and at the site, of such meeting of shareholders. Other regular
meetings of the Board shall be held without notice on such dates and at such
places within or without the State of Maryland as may be designated from time
to time by the Board.
2.5 SPECIAL MEETINGS. Special meetings of the Board may be
called at any time by the Chairman of the Board, the President or
vii
<PAGE>
the Secretary of the Corporation, or by a majority of the Board by vote at a
meeting, or in writing with or without a meeting. Such special meetings shall
be held at such place or places within or without the State of Maryland as may
be designated from time to time by the Board. In the absence of such
designation such meetings shall be held at such places as may be designated in
the calls.
2.6 NOTICE OF MEETINGS. Except as provided in Section 2.4, notice
of the place, day and hour of all meetings shall be given to each Director two
days (or more) before the meeting, by delivering the same personally, or by
sending the same by telegraph, or by leaving the same at the Director's
residence or usual place of business, or, in the alternative, by mailing such
notice three days (or more) before the meeting, postage prepaid, and addressed
to the Director at the Director's last known business or residence post office
address, according to the records of the Corporation. Unless required by these
Bylaws or by resolution of the Board, no notice of any meeting of the Board
need state the business to be transacted thereat. No notice of any meeting of
the Board need be given to any Director who attends, or to any Director who in
writing executed and filed with the records of the meeting either before or
after the holding thereof, waives such notice. Any meeting of the Board,
regular or special, may adjourn from time to time to reconvene at the same or
some other place, and no notice need be given of any such adjourned meeting
other than by announcement at the adjourned meeting.
2.7 QUORUM. At all meetings of the Board, a majority of the
entire Board (but in no event fewer than two Directors) shall constitute a
quorum for the transaction of business. Except in cases in which it is by
statute, by the Articles of Incorporation or by these Bylaws otherwise
provided, the act of a majority of such quorum at a duly constituted meeting
shall be sufficient to elect and pass any measure. In the absence of a quorum,
the Directors present by majority vote and without notice other than by
announcement at the meeting may adjourn the meeting from time to time until a
quorum shall attend. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at
the meeting as originally noticed.
2.8 VACANCIES. Any vacancy occurring in the Board of Directors
for any cause other than by reason of an increase in the number of Directors
may be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum. Any vacancy occurring
by reason of an increase in the number of Directors may be filled by action of
a majority of the entire Board of Directors. If at any time after the first
annual meeting of shareholders of the Corporation a majority of the Directors
in office shall consist of Directors elected by the Board of Directors, a
meeting of the shareholders shall be called forthwith for the purpose of
electing the entire Board of Directors, and the terms of office of the
Directors then
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in office shall terminate upon the election and qualification of such Board of
Directors. A Director elected by the Board of Directors or the shareholders to
fill a vacancy shall be elected to hold office until the next annual meeting
of shareholders and until his successor is elected and qualifies.
2.9 COMPENSATION AND EXPENSES. Directors may, pursuant to
resolution of the Board, be paid fees for their services, which fees may
consist of an annual fee or retainer and/or a fixed fee for attendance at
meetings. In addition, Directors may in the same manner be reimbursed for
expenses incurred in connection with their attendance at meetings or otherwise
in performing their duties as Directors. Members of committees may be allowed
like compensation and reimbursement. Nothing herein contained shall preclude
any Director from serving the Corporation in any other capacity and receiving
compensation therefor.
2.10 ACTION BY DIRECTORS OTHER THAN AT A MEETING. Any action
required or permitted to be taken at any meeting of the Board, or of any
committee thereof, may be taken without a meeting, if a written consent to
such action is signed by all members of the Board or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board or committee.
2.11 COMMITTEES. The Board of Directors may appoint from among
its members an Executive Committee, Audit Committee or other committees
composed of two or more directors and delegate to these committees any of the
powers of the Board of Directors to the extent permitted by the General Laws
of the State of Maryland. If the Board of Directors has given general
authorization for the issuance of stock, a committee of the Board, in
accordance with a general formula or method specified by the Board by
resolution, may fix the terms of stock subject to classification or
reclassification and the terms on which any stock may be issued, including all
terms and conditions required or permitted to be established or authorized by
the Board of Directors.
2.12 COMMITTEE PROCEDURE. Each committee may fix rules of
procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of a majority
of those present at a meeting at which a quorum is present shall be the act of
the committee. The members of a committee present at any meeting, whether or
not they constitute a quorum, may appoint a director to act in the place of an
absent member. Any action required or permitted to be taken at a meeting of a
committee may be taken without a meeting, if an unanimous written consent
which sets forth the action is signed by each member of the committee and
filed with the minutes of the committee. The members of a committee may
conduct any meeting thereof by conference telephone in accordance with the
provisions of Section 2.14.
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2.13 EMERGENCY. In the event of a state of disaster of sufficient
severity to prevent the conduct and management of these affairs and business
of the Corporation by its directors and officers as contemplated by the
Articles of Incorporation and these Bylaws, any two or more available members
of the then incumbent Executive Committee shall constitute a quorum of that
Committee for the full conduct and management of the affairs and business of
the Corporation. In the event of the unavailability, at such time, of a
minimum of two members of the then incumbent Executive Committee, the
available directors shall elect an Executive Committee consisting of any two
members of the Board of Directors, whether or not they be officers of the
Corporation, which two members shall constitute the Executive Committee for
the full conduct and management of the affairs of the Corporation in
accordance with the foregoing provisions of this Section. This Section shall
be subject to implementation by resolution of the Board of Directors passed
from time to time for that purpose, and any provisions of the Bylaws (other
than this Section) and any resolutions which are contrary to the provisions of
this Section or to the provisions of any such implementary resolutions shall
be suspended until it shall be determined by any interim Executive Committee
acting under this Section that it shall be to the advantage of the Corporation
to resume the conduct and management of its affairs and business under all the
other provisions of the Bylaws.
2.14 HOLDING OF MEETINGS BY CONFERENCE TELEPHONE CALL. At any
regular or special meeting of the Board or any committee thereof, members
thereof may participate in such meeting by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other. Participation in a meeting pursuant to
this section shall constitute presence in person at such meeting.
ARTICLE III.
OFFICERS
3.1 EXECUTIVE OFFICERS. The Board of Directors may choose a
Chairman of the Board and a Vice Chairman of the Board from among the
Directors, and shall choose a President, a Secretary and a Treasurer who need
not be Directors. The Board of Directors shall designate as principal
executive officer of the Corporation either the Chairman of the Board, or the
Vice Chairman of the Board. The Board of Directors may choose an Executive
Vice President, one or more Senior Vice Presidents, one or more Vice
Presidents, one or more Assistant Secretaries and one or more Assistant
Treasurers, none of whom need be a Director. Any two or more of the
above-mentioned offices, except those of President and a Vice President, may
be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity if such instrument be required
by law, by the Articles of Incorporation, by these Bylaws or by resolution of
the Board of Directors to be executed by any two or more officers. Each such
officer shall hold office
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until his successor shall have been duly chosen and qualified, or until he
shall have resigned or shall have been removed. Any vacancy in any of the
above offices may be filled for the unexpired portion of the term of the Board
of Directors at any regular or special meeting.
3.2 CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Chairman of the
Board, if one be elected, shall preside at all meetings of the Board of
Directors and of the shareholders at which he is present. He shall have and
may exercise such powers as are, from time to time, assigned to him by the
Board of Directors. The Vice Chairman of the Board, if one be elected, shall,
when present and in the absence of the Chairman of the Board, preside at all
meetings of the shareholders and Directors, and he shall perform such other
duties as may from time to time be assigned to him by the Board of Directors
or as may be required by law.
3.3 PRESIDENT. In the absence of the Chairman or Vice Chairman of
the Board, the President shall preside at all meetings of the shareholders and
of the Board at which the President is present; and in general, shall perform
all duties incident to the office of a president of a Maryland Corporation,
and such other duties, as from time to time, may be assigned to him by the
Board.
3.4 VICE PRESIDENTS. The Vice President or Vice Presidents,
including any Executive or Senior Vice President(s), at the request of the
President or in the President's absence or during the President's inability or
refusal to act, shall perform the duties and exercise the functions of the
President, and when so acting shall have the powers of the President. If there
be more than one Vice President, the Board may determine which one or more of
the Vice Presidents shall perform any of such duties or exercise any of such
functions, or if such determination is not made by the Board, the President
may make such determination. The Vice President or Vice Presidents shall have
such other powers and perform such other duties as may be assigned by the
Board, the Chairman of the Board, or the President.
3.5 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall keep
the minutes of the meetings of the shareholders, of the Board and of any
committees, in books provided for the purpose; shall see that all notices are
fully given in accordance with the provisions of these Bylaws or as required
by law; be custodian of the records of the Corporation; see that the corporate
seal is affixed to all documents the execution of which, on behalf of the
Corporation, under its seal, is duly authorized, and when so affixed may
attest the same; and in general perform all duties incident to the office of a
secretary of a Maryland Corporation, and such other duties as, from time to
time, may be assigned to him by the Board, the Chairman of the Board, or the
President.
The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board,
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the President or the Chairman of the Board, shall, in the absence of the
Secretary or in the event of the Secretary's inability or refusal to act,
perform the duties and exercise the power of the Secretary and shall perform
such other duties and have such other powers as the Board may from time to
time prescribe.
3.6 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall have
charge of and be responsible for all funds, securities, receipts and
disbursements of the Corporation, and shall deposit, or cause to be deposited
in the name of the Corporation, all moneys or other valuable effects in such
banks, trust companies or other depositories as shall, from time to time, be
selected by the Board in accordance with Section 5.4 of these Bylaws; render
to the President, the Chairman of the Board and to the Board, whenever
requested, an account of the financial condition of the Corporation; and in
general, perform all the duties incident to the office of a treasurer of a
corporation, such other duties as may be assigned to him by the Board, the
President or the Chairman of the Board.
The Assistant Treasurer, or if there shall be more than one,
the Assistant Treasurers in the order determined by the Board, the President
or the Chairman of the Board shall, in the absence of the Treasurer or in the
event of the Treasurer's inability or refusal to act, perform the duties and
exercise the powers of the Treasurer and shall perform other duties and have
such other powers as the Board may from time to time prescribe.
3.7 SUBORDINATE OFFICERS. The Board may from time to time appoint
such subordinate officers as it may deem desirable. Each such officer shall
hold office for such period and perform such duties as the Board, the
President or the Chairman of the Board may prescribe. The Board may, from time
to time, authorize any committee or officer to appoint and remove subordinate
officers and prescribe the duties thereof.
3.8 REMOVAL. Any officer or agent of the Corporation may be
removed by the Board whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed.
3.9 COMPENSATION. The Board of Directors shall have power to fix
the salaries and other compensation and remuneration, of whatever kind, of all
officers of the Corporation. It may authorize any committee or officer, upon
whom the power of appointing assistant and subordinate officers may have been
conferred, to fix the salaries, compensation and remuneration of such
assistant and subordinate officers.
3.10 ANNUAL STATEMENT OF AFFAIRS. The President shall
prepare annually a full and correct statement of the affairs of
the Corporation, to include a balance sheet and a financial
statement of the operations for the preceding fiscal year. The
statement of affairs shall be submitted at the annual meeting of
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stockholders, if any, within twenty days after the meeting (or, in the absence
of an annual meeting within twenty days after the end of the second month
following the close of the fiscal year), placed on file at the Corporation's
principal office.
ARTICLE IV.
STOCK
4.1 CERTIFICATES. Each shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of stock owned by him in the Corporation. Such certificate shall be
signed by the President, the Chairman of the Board or a Vice President and
countersigned by the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer, and sealed with the seal of the Corporation. The
signatures may be either manual or facsimile signatures and the seal may be
either facsimile or any other form of seal. No certificates shall be issued
for fractional shares. Such certificates shall be in such form, not
inconsistent with law or with the Articles of Incorporation, as shall be
approved by the Board. In case any officer of the Corporation who has signed
any certificate ceases to be an officer of the Corporation, whether because of
death, resignation or otherwise, before such certificate is issued, the
certificate may nevertheless be issued and delivered by the Corporation as if
the officer had not ceased to be such officer as of the date of its issue.
Certificates need not be issued except to shareholders who request such
issuance in writing. A certificate is valid and may be issued whether or not
an officer who signed it is still an officer when it is issued.
4.2 TRANSFERS. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem necessary or
expedient concerning the issue, transfer and registration of certificates of
stock; and may appoint transfer agents and registrars thereof. The duties of
transfer agent and registrar, if any, may be combined.
4.3 STOCK LEDGERS. A stock ledger, containing the names and
addresses of the shareholders of the Corporation and the number of shares of
each class or series held by them, respectively, shall be kept by the Transfer
Agent of the Corporation. The stock ledger may be in written form or in any
other form which can be converted within a reasonable time into written form
for visual inspection.
4.4 RECORD DATES. The Board is hereby empowered to fix, in
advance, a date as the record date for the purpose of determining shareholders
entitled to notice of, or to vote at, any meeting of shareholders, or
shareholders entitled to receive payment of any dividend, capital gains
distribution or the allotment of any rights, or in order to make a
determination of shareholders for any other proper purpose. Such date in any
case shall be not more than ninety (90) days, and in case of a meeting of
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shareholders, not less than ten (10) days, prior to the date on which the
particular action, requiring such determining of shareholders, is to be taken;
the transfer books may not be closed for a period longer than twenty (20)
days.
4.5 REPLACEMENT CERTIFICATES. The Board of Directors may direct a
new stock certificate or certificates to be issued in place of any certificate
or certificates theretofore issued by the Corporation alleged to have been
lost, stolen or destroyed, upon such conditions as the Board shall determine.
When authorizing such issue of a new certificate or certificates, the Board of
Directors may in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it
may direct as indemnity against any claim that may be made against the
Corporation with respect to the Certificate alleged to have been lost, stolen
or destroyed.
4.6 CERTIFICATION OF BENEFICIAL OWNERS. The Board of Directors
may adopt by resolution a procedure by which a shareholder of the Corporation
may certify in writing to the Corporation that any shares of stock registered
in the name of the shareholder are held for the account of a specified person
other than the shareholder. The resolution shall set forth the class of
shareholders who may certify; the purpose for which the certification may be
made; the form of certification and the information to be contained in it; if
the certification is with respect to a record date or a closing of the stock
transfer books, the time after the record date or closing of the stock
transfer books within which the certification must be received by the
Corporation; and any other provisions with respect to the procedure which the
Board considers necessary or desirable. On receipt of a certification which
complies with the procedure adopted by the Board in accordance with this
Section, the person specified in the certification is, for the purpose set
forth in the certification, the holder of record of the specified stock in
place of the shareholder who makes the certification.
ARTICLE V.
GENERAL PROVISIONS
5.1 DIVIDENDS. Dividends or distributions upon the capital stock
of the Corporation, subject to provisions of the Articles of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends or distributions may be paid only in cash
or in shares of the capital stock, subject to the provisions of the Articles
of Incorporation.
Before payment of any dividend or distribution there
may be set aside out of any funds of the Corporation available for dividends
or distributions such sum or
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sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends or distributions or for maintaining any property of the Corporation,
or for such other purpose as the Directors shall think conducive to the
interest of the Corporation, and the Directors may modify or abolish any such
reserve in the manner in which it was created.
5.2 CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person
or persons as the Board may from time to time designate.
5.3 FISCAL YEAR. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors.
5.4 CUSTODIAN. All securities and cash of the Corporation shall
be placed in the custody of a bank or trust company ("Custodian") having
(according to its last published report) not less than $2,000,000 aggregate
capital, surplus and undivided profits, provided such a Custodian can be found
ready and willing to act (or maintained in such other manner as is consistent
with Section 17(f) of the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder). The Corporation shall enter into a
written contract with the Custodian regarding the powers, duties and
compensation of the Custodian with respect to the cash and securities of the
Corporation held by the Board of Directors of the Corporation. The Corporation
shall upon the resignation or inability to serve of the Custodian use its best
efforts to obtain a successor custodian; require that the cash and securities
owned by the Corporation be delivered directly to the successor custodian; and
in the event that no successor custodian can be found, submit to the
shareholders, before permitting delivery of the cash and securities owned by
the Corporation to other than a successor custodian, the question whether or
not the Corporation shall be liquidated or shall function without a custodian.
5.5 SEAL. The Board of Directors shall provide a suitable seal,
bearing the name of the Corporation, which shall be in the custody of the
Secretary. The Board of Directors may authorize one or more duplicate seals
and provide for the custody thereof. If the Corporation is required to place
its corporate seal to a document, it is sufficient to meet the requirements of
any law, rule, or regulation relating to a corporate seal to place the word
"Seal" adjacent to the signature of the person authorized to sign the document
on behalf of the Corporation.
5.6 REPRESENTATION OF SHARES. Any officer of the Corporation is
authorized to vote, represent and exercise for the Corporation any and all
rights incident to any shares of any corporation or other business enterprise
owned by the Corporation.
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5.7 BONDS. The Board of Directors may require any officer, agent
or employee of the Corporation to give a bond to the Corporation, conditioned
upon the faithful discharge of his duties, with one or more sureties and in
such amount as may be satisfactory to the Board of Directors. The Board of
Directors shall, in any event, require the Corporation to provide and maintain
a bond issued by a reputable fidelity insurance company, against larceny and
embezzlement, covering each officer and employee of the Corporation who may
singly, or jointly with others, have access to securities or funds of the
Corporation, either directly or through authority to draw upon such funds, or
to direct generally the disposition of such securities, such bond or bonds to
be in such reasonable amount as a majority of the Board of Directors who are
not such officers or employees of the Corporation shall determine with due
consideration to the value of the aggregate assets of the Corporation to which
any such officer or employee may have access, or in any amount or upon such
terms as the Securities and Exchange Commission may prescribe by order, rule
or regulations.
ARTICLE VI.
AMENDMENT OF BYLAWS
These Bylaws of the Corporation may be altered, amended,
added to or repealed by majority vote of the shareholders or by majority vote
of the entire Board.
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CERTIFICATE OF SECRETARY
The undersigned, Secretary of Fremont Mutual Funds, a
Maryland corporation, hereby certifies that the foregoing is a full, true and
correct copy of the Bylaws of said Corporation, with all amendments to date of
this Certificate.
WITNESS the signature of the undersigned this _____ day of
_____________, 1995.
/S/ Albert W. Kirschbaum
Secretary
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DISTRIBUTION AGREEMENT
FREMONT MUTUAL FUNDS, INC.
50 BEALE STREET
SUITE 100
SAN FRANCISCO, CA 94105
May 5, 1995
Funds Distributor, Inc.
One Exchange Place
Tenth Floor
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the
"Fund") has agreed that you shall be, for the period of this
agreement, the distributor of (a) shares of each Series of the
Fund set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, a "Series") or (b) if no Series
are set forth on such Exhibit, shares of the Fund. For purposes
of this agreement the term "Shares" shall mean the authorized
shares of the relevant Series, if any, and otherwise shall mean
the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares
covered by, and in accordance with, the registration statement
and prospectus then in effect under the Securities Act of 1933,
as amended, and will transmit promptly any orders received by you
for purchase or redemption of Shares to the Transfer and Dividend
Disbursing Agent for the Fund of which the Fund has notified you
in writing.
1.2 You agree to use your best efforts to solicit orders
for the sale of Shares. It is contemplated that you may enter
into sales or servicing agreements with securities dealers,
financial institutions and other industry professionals, such as
investment advisers, accountants and estate planning firms, and
in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance
with all applicable laws, rules and regulations, including,
without limitations, all rules and regulations made or adopted
pursuant to the Investment Company Act of 1940, as amended, by
the Securities and Exchange Commission or any securities
association registered under the Securities Exchange Act of 1934,
as amended.
fremont\distribu.agr
1.4 Whenever in their judgment such action is warranted by
unusual market, economic or political conditions, or by abnormal
circumstances of any kind deemed by the parties hereto to render
sales of a Fund's Shares not in the best interest of the Fund,
the parties hereto may decline to accept any orders for, or make
any sales of, any Shares until such time as those parties deem it
advisable to accept such orders and to make such sales and each
party shall advise promptly the other party of any such
determination.
1.5 The Fund agrees to pay all costs and expenses in
connection with the registration of Shares under the Securities
Act of 1933, as amended, and all expenses in connection with
maintaining facilities for the issue and transfer of Shares and
for supplying information, prices and other data to be furnished
by the Fund hereunder, and all expenses in connection with the
preparation and printing of the Fund's prospectuses and
statements of additional information for regulatory purposes and
for distribution to shareholders; provided however, that the Fund
shall not pay any of the costs of advertising or promotion for
the sale of Shares.
1.6 The Fund agrees to execute any and all documents and to
furnish any and all information and otherwise to take all actions
which may be reasonably necessary in the discretion of the Fund's
officers in connection with the qualification of Shares for sale
in such states as you may designate to the Fund and the Fund may
approve, and the Fund agrees to pay all expenses which may be
incurred in connection with such qualification. You shall pay
all expenses connected with your own qualification as a dealer
under state or Federal laws and, except as otherwise specifically
provided in this agreement, all other expenses incurred by you in
connection with the sale of Shares as contemplated in this
agreement.
1.7 The Fund shall furnish you from time to time, for use
in connection with the sale of Shares, such information with
respect to the Fund or any relevant Series and the Shares as you
may reasonably request, all of which shall be signed by one or
more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information,
when so signed by the Fund's officers, shall be true and correct.
The Fund also shall furnish you upon request with: (a) semi-
annual reports and annual audited reports of the Fund's books and
accounts made by independent public accountants regularly
retained by the Fund, (b) quarterly earnings statements prepared
by the Fund, (c) a monthly itemized list of the securities in the
Fund's or, if applicable, each Series' portfolio, (d) monthly
balance sheets as soon as practicable after the end of each
month, and (e) from time to time such additional information
regarding the Fund's financial condition as you may reasonably
request.
1.8 The Fund represents to you that all registration
statements and prospectuses filed by the Fund with the Securities
and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as
amended, with respect to the Shares have been carefully prepared
in conformity with the requirements of said Acts and rules and
regulations of the Securities and Exchange Commission thereunder.
As used in this agreement the terms "registration statement" and
"prospectus" shall mean any registration statement and
prospectus, including the statement of additional information
incorporated by reference therein, filed with the Securities and
Exchange Commission and any amendments and supplements thereto
which at any time shall have been filed with said Commission.
The Fund represents and warrants to you that any registration
statement and prospectus, when such registration statement
becomes effective, will contain all statements required to be
stated therein in conformity with said Acts and the rules and
regulations of said Commission; that all statements of fact
contained in any such registration statement and prospectus will
be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any
prospectus when such registration statement becomes effective
will include an 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 not misleading. The Fund may, but
shall not be obligated to, propose from time to time such
amendment or amendments to any registration statement and such
supplement or supplements to any prospectus as, in the light of
future developments may, in the opinion of the Fund's counsel, be
necessary or advisable. If the Fund shall not propose such
amendment or amendments and/or supplement or supplements within
fifteen days after receipt by the Fund of a written request from
you to do so, you may, at your option, terminate this agreement
or decline to make offers of the Fund's securities until such
amendments are made. The Fund shall not file any amendment to
any registration statement or supplement to any prospectus
without giving you reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement shall
in any way limit the Fund's right to file at any time such
amendments to any registration statement and/or supplements to
any prospectus, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and
unconditional.
1.9 The Fund authorizes you and any dealers with whom you
have entered into dealer agreements to use any prospectus in the
form furnished by the Fund in connection with the sale of Shares.
The Fund agrees to indemnify, defend and hold you, your several
officers and directors, and any person who controls you within
the meaning of Section 15 of the Securities Act of 1933, as
amended, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which you,
your officers and directors, or any such controlling persons, may
incur under the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, or common law or
otherwise, arising out of or on the basis of any untrue
statement, or alleged untrue statement, of a material fact
required to be stated in either any registration statement or any
prospectus or any statement of additional information, or arising
out of or based upon any omission, or alleged omission, to state
a material fact required to be stated in any registration
statement, any prospectus or any statement of additional
information or necessary to make the statements in any of them
not misleading, except that the Fund's agreement to indemnify
you, your officers or directors, and any such controlling person
will not be deemed to cover any such claim, demand, liability or
expense to the extent that it arises out of or is based upon any
such untrue statement, alleged untrue statement, omission or
alleged omission made in any registration statement, any
prospectus or any statement of additional information in reliance
upon information furnished by you, your officers, directors or
any such controlling person to the Fund or its representatives
for use in the preparation thereof, and except that the Fund's
agreement to indemnify you and the Fund's representations and
warranties set out in paragraph 1.8 of this Agreement will not be
deemed to cover any liability to the Funds or their shareholders
to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
your duties, or by reason of your reckless disregard of your
obligations and duties under this Agreement ("Disqualifying
Conduct"). The Fund's agreement to indemnify you, your officers
and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any
action brought against you, your officers or directors, or any
such controlling person, such notification to be given by letter,
by facsimile or by telegram addressed to the Fund at its address
set forth above within a reasonable period of time after the
summons or other first legal process shall have been served. The
failure so to notify the Fund of any such action shall not
relieve the Fund from any liability which the Fund may have to
the person against whom such action is brought by reason of any
such untrue, or alleged untrue, statement or omission, otherwise
than on account of the Fund's indemnity agreement contained in
this paragraph 1.9. The Fund will be entitled to assume the
defense of any suit brought to enforce any such claim, demand or
liability, but in such case, such defense shall be conducted by
counsel of good standing chosen by the Fund and approved by you.
In the event the Fund elects to assume the defense of any such
suit and retain counsel of good standing approved by you, the
defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but
in case the Fund does not elect to assume the defense of any such
suit, the Fund will reimburse you, your officers and directors,
or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expense of any counsel
retained by you or them. The Fund's indemnification agreement
contained in this paragraph 1.9 and the Fund's representations
and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or
on behalf of you, your officers and directors, or any controlling
person, and shall survive the delivery of any Shares. This
agreement of indemnity will inure exclusively to your benefit, to
the benefit of your several officers and directors, and their
respective estates, and to the benefit of any controlling persons
and their successors. The Fund agrees promptly to notify you of
the commencement of any litigation or proceedings against the
Fund or any of its officers or Board members in connection with
the issue and sale of Shares.
1.10 You agree to indemnify, defend and hold the Fund, its
several officers and Board members, and any person who controls
the Fund within the meaning of Section 15 of the Securities Act
of 1933, as amended, free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost
of investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the
Fund, its officers or Board members, or any such controlling
person, may incur under the Securities Act of 1933, as amended,
the Investment Company Act of 1940, as amended, or under common
law or otherwise, but only to the extent that such liability or
expense incurred by the Fund, its officers or Board members, or
such controlling person resulting from such claims or demands,
(a) shall arise out of or be based upon any unauthorized sales
literature, advertisements, information, statements or
representations or any Disqualifying Conduct in connection with
the offering and sale of any Shares, or (b) shall arise out of or
be based upon any untrue, or alleged untrue, statement of a
material fact contained in information furnished in writing by
you to the Fund specifically for use in the Fund's registration
statement and used in the answers to any of the items of the
registration statement or in the corresponding statements made in
the prospectus or statement of additional information, or shall
arise out of or be based upon any omission, or alleged omission,
to state a material fact in connection with such information
furnished in writing by you to the Fund and required to be stated
in such answers or necessary to make such information not
misleading. Your agreement to indemnify the Fund, its officers
and Board members, and any such controlling person, as aforesaid,
is expressly conditioned upon your being notified of any action
brought against the Fund, its officers or Board members, or any
such controlling person, such notification to be given by letter,
by facsimile or by telegram addressed to you at your address set
forth above within a reasonable period of time after the summons
or other first legal process shall have been served. You shall
have the right to control the defense of such action, with
counsel of your own choosing, satisfactory to the Fund, if such
action is based solely upon such alleged misstatement or omission
on your part, and in any other event the Fund, its officers or
Board members, or such controlling person shall each have the
right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such
action shall not relieve you from any liability which you may
have to the Fund, its officers or Board members, or to such
controlling person by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission, otherwise
than on account of your indemnity agreement contained in this
paragraph 1.10. This agreement of indemnity will inure
exclusively to the Fund's benefit, to the benefit of the Fund's
officers and Board members, and their respective estates, and to
the benefit of any controlling persons and their successors. You
agree promptly to notify the Fund of the commencement of any
litigation or proceedings against you or any of your officers or
directors in connection with the issue and sale of Shares.
1.11 No Shares shall be offered by either you or the Fund
under any of the provisions of this agreement and no orders for
the purchase or sale of such Shares hereunder shall be accepted
by the Fund if and so long as the effectiveness of the
registration statement then in effect or any necessary amendments
thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a
current prospectus as required by Section 10 of said Act, as
amended, is not on file with the Securities and Exchange
Commission; provide, however, that nothing contained in this
paragraph 1.11 shall in any way restrict or have an application
to or bearing upon the Fund's obligation to repurchase any Shares
from any shareholder in accordance with the provisions of the
Fund's prospectus or charter documents.
1.12 The Fund agrees to advise you immediately in writing:
(a) of any request by the Securities and Exchange
Commission for amendments to the registration statement or
prospectus then in effect or for additional information;
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of the registration statement or prospectus
then in effect or the initiation of any proceeding for that
purpose;
(c) of the happening of any event which makes untrue
any statement of a material fact made in the registration
statement or prospectus then in effect or which requires the
making of a change in such registration statement or
prospectus in order to make the statements therein not
misleading; and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to any
registration statement or prospectus which may from time to
time be filed with the Securities and Exchange Commission.
2. Offering Price
Shares of any class of the Fund offered for sale by you at a
price per share (the "offering price") approximately equal to (a)
the net asset value (determined in the manner set forth in the
Fund's charter documents) plus (b) a sales charge, if any and
except to those persons set forth in the then-current prospectus,
which shall be the percentage of the offering price of such
Shares as set forth in the Fund's then-current prospectus. The
offering price, if not an exact multiple of one cent, shall be
adjusted to the nearest cent. In addition, Shares of any class
of the Fund offered for sale by you may be subject to a
contingent deferred sales charge as set forth in the Fund's then-
current prospectus. You shall be entitled to receive any sales
charge or contingent deferred sale charge in respect of the
Shares. Any payments to dealers shall be governed by a separate
agreement between you and such dealer and the Fund's then-current
prospectus.
3. Term
This Agreement shall become effective with respect to the
Fund as of the date hereof and will continue for an initial one-
year term and will continue thereafter so long as such
continuance is specifically approved at least annually (i) by the
Fund's Board or (ii) by a vote of a majority (as defined in the
Investment Company Act of 1940) of the Shares of the Fund or the
relevant Series, as the case may be, provided that in either
event its continuance also is approved by a majority of the Board
members who are not "interested persons" (as defined in said Act)
of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This
agreement is terminable with respect to a Fund, without penalty,
on not less than sixty days' notice, by the Fund's Board of
Directors, by vote of a majority (as defined in the Investment
Company Act of 1940) of the outstanding voting securities of such
Fund, or by you.
4. Miscellaneous
4.1 The Fund recognizes that your directors, officers and
employees may from time to time serve as directors, trustees,
officers and employees of corporations and business trusts
(including other investment companies), and that you or your
affiliates may enter into distribution or other agreements with
such other corporations and trusts.
4.2 No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which an enforcement of the
change, waiver, discharge or termination is sought.
4.3 This Agreement shall be governed by the internal laws
of the Commonwealth of Massachusetts without giving effect to
principles of conflicts of laws.
4.4 If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule, or otherwise,
the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing
below, whereupon it shall become a binding agreement between us.
Very truly yours,
FREMONT MUTUAL FUNDS, INC.
By: /s/ V.P. Kuhn, Jr.
V.P. Kuhn, Jr.
Executive Vice President
& Director
Accepted:
FUNDS DISTRIBUTOR, INC.
By: /s/ Joseph F. Tower
EXHIBIT A
Series of Funds
FREMONT MUTUAL FUNDS, INC.
Fremont Money Market Fund
Fremont Bond Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
Fremont International Small Cap Fund
Fremont U.S. Micro-Cap Fund
Fremont California Intermediate Tax-Free Fund
FREMONT MUTUAL FUNDS, INC.
CUSTODY AGREEMENT
AGREEMENT dated as of November 1, 1995, between Fremont
Mutual Funds, Inc., a corporation organized under the laws of the
State of Maryland, having its principal office and place of
business at 50 Beale Street, Suite 100, San Francisco, California
94105 (the "Company"), and THE NORTHERN TRUST COMPANY (the
"Custodian"), an Illinois Company with its principal place of
business at 50 South LaSalle Street, Chicago, Illinois 60675.
W I T N E S S E T H:
That for and in consideration of the mutual promises
hereinafter set forth, the Company and the Custodian agree as
follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this
Agreement, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
(a) The "1940 Act" shall mean the Investment Company Act of
1940, and the Rules and Regulations thereunder, all as
amended from time to time.
(b) "Administrator" shall mean the person at the Company
which performs the administration functions for the Company.
(c) "Articles of Incorporation" shall mean the Articles of
Incorporation of the Company dated October 4, 1988, as
amended.
(d) "Authorized Person" shall be deemed to include the
Chairman of the Board of Directors, the President, and any
Vice President, the Secretary, the Treasurer or any other
person, whether or not any such person is an officer or
employee of the Company, duly authorized by the Board of
Directors to give Oral Instructions and Written Instructions
on behalf of the Company and listed in the certification
annexed hereto as Schedule A or such other certification as
may be received by the Custodian from time to time.
(e) "Board of Directors" shall mean the Board of Directors
of the Company.
fremont\custody.agr
(f) "Book-Entry System" shall mean the Federal Reserve/
Treasury book-entry system for United States and federal
agency Securities, its successor or successors and its
nominee or nominees.
(g) "Certificate" shall mean any notice, instruction or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, which is actually
received by the Custodian and signed on behalf of the
Company by any two Authorized Persons or any two officers
thereof.
(h) "Depository" shall mean The Depository Trust Company, a
clearing agency registered with the Securities and Exchange
Commission under Section 17(a) of the Securities Exchange
Act of 1934, as amended, its successor or successors and its
nominee or nominees, in which the Custodian is hereby
specifically authorized to make deposits. The term
"Depository" shall further mean and include any other person
to be named in a Certificate authorized to act as a
depository under the 1940 Act, its successor or successors
and its nominee or nominees.
(i) "Fund Accountant" shall mean the person appointed by
the Company who performs the daily calculations of the net
asset values of each of the Portfolios and determines the
amount of cash available in each portfolio on a daily basis
for investment. The Fund Accountant shall be identified to
the Custodian in writing.
(j) "Money Market Security" shall be deemed to include,
without limitation, debt obligations issued or guaranteed as
to interest and principal by the Government of the United
States or agencies or instrumentalities thereof, commercial
paper, bank certificates of deposit, bankers' acceptances
and short-term corporate obligations, where the purchase or
sale of such securities normally requires settlement in
federal funds on the same day as such purchase or sale, and
repurchase agreements with respect to any of the foregoing
types of securities.
(k) "Oral Instructions" shall mean an oral communication
actually received by the Custodian from a person reasonably
believed by the Custodian to be an Authorized Person.
(l) "Portfolio" refers to the Bond Fund, the California
Intermediate Tax-Free Fund, the Global Fund, the Growth
Fund, the International Growth Fund, the International Small
Cap Fund, the Money Market Fund, the U.S. Micro-Cap Fund,
or any such other separate and distinct investment portfolio
as may from time to time be created and designated by the
Company in accordance with the provisions of the Articles of
Incorporation and which the Company and the Custodian shall
have agreed in writing shall be subject to this Agreement
pursuant to the provisions of Section 5(b).
(m) "Prospectus" shall mean the Company's current
prospectus and statement of additional information relating
to the registration of the Portfolio's Shares under the
Securities Act of 1933, as amended.
(n) "Shares" refers to the shares of beneficial interest of
the Company.
(o) "Security" or "Securities" shall be deemed to include
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities, commodity interests and
investments from time to time owned by the Company.
(p) "Sub-Custodian" shall mean and include (i) any branch
of the Custodian, (ii) any branch of a "qualified U.S.
bank," as that term is defined in Rule 17f-5 under the 1940
Act, (iii) any "eligible foreign custodian," as that term is
defined in Rule 17f-5 under the 1940 Act, approved by the
Board of Directors and having a contract with the Custodian
which contract has been approved by the Board of Directors,
and (iv) any securities depository or clearing agency,
incorporated or organized under the laws of a country other
than the United States, which operates the central system
for handling of securities or equivalent book-entries in
that country or a transnational system for the central
handling of securities or equivalent book-entries, which
securities depository or clearing agency has been approved
by the Board of Directors; provided, that the Custodian or a
Sub-Custodian has entered into an agreement with such
securities depository or clearing agency.
(q) "Transfer Agent" shall mean the person which performs
as the transfer agent, dividend disbursing agent and
shareholder servicing agent for the Company.
(r) "Written Instructions" shall mean a written
communication actually received by the Custodian from a
person reasonably believed by the Custodian to be an
Authorized Person by any system whereby the receiver of such
communication is able to verify through codes or otherwise
with a reasonable degree of certainty the authenticity of
the sender of such communication; however, "Written
Instructions" from the Administrator to the Custodian shall
mean an electronic communication transmitted by fund
accountants and their managers (who have been provided an
access code by the Administrator) and actually received by
the Custodian. Except as otherwise provided in this
Agreement, "Written Instructions" may include instructions
given on a standing basis.
2. Appointment of Custodian.
(a) The Company hereby constitutes and appoints the
Custodian as custodian of all the Securities and monies
owned by or in the possession of the Portfolio during the
period of this Agreement.
(b) The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as
hereinafter set forth.
3. Appointment and Removal of Sub-Custodians.
(a) The Custodian may appoint one or more Sub-Custodians to
act as Depository or Depositories or as sub-custodian or
sub-custodians of Securities and moneys at any time owned by
any Portfolio, upon terms and conditions as are specified in
this Agreement. The Custodian shall oversee the maintenance
of any Securities or moneys of any Portfolio by any Sub-
Custodian.
(b) If, after the initial approval of Sub-Custodians by the
Board of Directors in connection with this Agreement, the
Custodian wishes to appoint other Sub-Custodians to hold
property of the Portfolios, it will so notify the Company
and provide it with information reasonably necessary to
determine any such new Sub-Custodian's eligibility under
Rule 17f-5 under the 1940 Act, including a copy of the
proposed agreement with such Sub-Custodian. The Company
shall within 30 days after receipt of such notice and
information give a written approval or disapproval of the
proposed action.
(c) The Agreement between the Custodian and each Sub-
Custodian acting hereunder shall contain the required
provisions set forth in Rule 17f-5(a)(1)(iii).
(d) If the Custodian intends to remove any Sub-Custodian
previously approved by the Board of Directors, it shall so
notify the Company and move the property of the Portfolio(s)
deposited with such Sub-Custodian to another Sub-Custodian
previously approved by the Board of Directors. The
Custodian shall promptly take such steps as may be required
to remove any Sub-Custodian that has ceased to meet the
requirements of Rule 17f-5 under the 1940 Act.
(e) The Custodian hereby warrants to the Company that in
its opinion, after due inquiry, the established procedures
to be followed by each Sub-Custodian (that is not being used
as a foreign securities depository or clearing agency) in
connection with the safekeeping of property of a Portfolio
pursuant to this Agreement afford protection for such
property not materially different from that afforded by the
Custodian's established safekeeping procedures with respect
to similar property held by it (and its securities
depositories) in Chicago, Illinois.
4. Use of Sub-Custodians.
With respect to property of a Portfolio which is maintained by
the Custodian in the custody of a Sub-Custodian pursuant to
Section 3:
(a) The Custodian will identify on its books as belonging
to the particular Portfolio any property held by such Sub-
Custodian.
(b) In the event that a Sub-Custodian permits any of the
Securities placed in its care to be held in an eligible
foreign securities depository, such Sub-Custodian will be
required by its agreement with the Custodian to identify on
its books such Securities as being held for the account of
the Custodian as a custodian for its customers.
(c) Any Securities held by a Sub-Custodian will be subject
only to the instructions of the Custodian or its agents; and
any Securities held in an eligible foreign securities
depository for the account of a Sub-Custodian will be
subject only to the instructions of such Sub-Custodian.
(d) The Custodian will only deposit property of a Portfolio
in an account with a Sub-Custodian which includes
exclusively the assets held by the Custodian for its
customers, and will cause such account to be designated by
such Sub-Custodian as a special custody account for the
exclusive benefit of customers of the Custodian.
5. Compensation.
(a) The Company will compensate the Custodian for its
services rendered under this Agreement in accordance with
the fees set forth in the Fee Schedule annexed hereto as
Schedule B and incorporated herein for the existing
Portfolios. Such Fee Schedule does not include out-of-
pocket disbursements of the Custodian for which the
Custodian shall be entitled to bill separately. Out-of-
pocket disbursements may include only the items specified in
Schedule B and which may be modified by the Custodian if the
Company consents in writing to the modification.
(b) The parties hereto will agree upon the compensation for
acting as Custodian for any Portfolio hereafter established
and designated, and at the time that the Custodian commences
serving as such for said Portfolio, such agreement shall be
reflected in a Fee Schedule for that Portfolio, dated and
signed by an officer of each party hereto, which shall be
attached to Schedule B of this Agreement.
(c) Any compensation agreed to hereunder may be adjusted
from time to time by attaching to Schedule B of this
Agreement a revised Fee Schedule, dated and signed by an
officer of each party hereto.
(d) The Custodian will bill the Company for its services to
each Portfolio hereunder as soon as practicable after the
end of each calendar quarter, and said billings will be
detailed in accordance with the Fee Schedule for the
Company. The Company will promptly pay to the Custodian the
amount of such billing. The Custodian shall have a claim of
payment against the property in each Portfolio for any
compensation or expense amount owing to the Custodian in
connection with such Portfolio from time to time under this
Agreement.
(e) The Custodian (not the Company) will be responsible for
the payment of the compensation of each Sub-Custodian.
6. Custody of Cash and Securities
(a) Receipt and Holding of Assets. The Company will
deliver or cause to be delivered to the Custodian and the
Sub-Custodians all Securities and monies owned by the
Company at any time during the period of this Agreement and
shall specify the Portfolio to which the Securities and
monies are to be specifically allocated. The Custodian will
not be responsible for such Securities and monies until
actually received by it or by a Sub-Custodian. The Company
shall instruct the Custodian from time to time in its sole
discretion, by means of Written Instructions, as to the
manner in which and in what amounts Securities, and monies
of a Portfolio are to be deposited on behalf of such
Portfolio in the Book-Entry System or a Depository;
provided, however, that prior to the deposit of Securities
of a Portfolio in the Book-Entry System or a Depository,
including a deposit in connection with the settlement of a
purchase or sale, the Custodian shall have received a
Certificate specifically approving such deposits by the
Custodian or a Sub-Custodian in the Book-Entry System or a
Depository. Securities and monies of a Portfolio deposited
in the Book-Entry System or a Depository will be deposited
in accounts which include only assets held by the Custodian
for its customers.
(b) Accounts and Disbursements. The Custodian shall
establish and maintain a separate account for each Portfolio
and shall credit to the separate account all monies received
by it or a Sub-Custodian for the account of such Portfolio
and shall disburse, or cause a Sub-Custodian to disburse,
the same only:
1. In payment for Securities purchased for the
Portfolio, as provided in Section 7 hereof;
2. In payment of dividends or distributions with
respect to the Shares of such Portfolio, as provided in
Section 9 hereof;
3. In payment of original issue or other taxes with
respect to the Shares of such Portfolio, as provided in
Section 10(c) hereof;
4. In payment for Shares which have been redeemed by
such Portfolio, as provided in Section 10 hereof;
5. In payment of fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to
the Company, as provided in Sections 5 and 14(h) hereof;
6. Pursuant to Written Instructions setting forth the
name of the Portfolio and the name and address of the person
to whom the payment is to be made, the amount to be paid
and the purpose for which payment is to be made.
(c) Fail Float. In the event that any payment made for a
Portfolio under this Section 6 exceeds the funds available
in that Portfolio's account, the Custodian or relevant Sub-
Custodian, as the case may be, may, in its discretion,
advance the Company on behalf of that Portfolio an amount
equal to such excess and such advance shall be deemed an
overdraft from the Custodian or such Sub-Custodian to that
Portfolio payable on demand, bearing interest at the rate of
interest customarily charged by the Custodian or such Sub-
Custodian on similar overdrafts.
(d) Confirmation and Statements. Promptly after the close
of business on each business day, the Custodian shall
furnish the Company with confirmations and a summary of all
transfers to or from the account of each Portfolio during
said day. Such summary shall include without limitation, as
to property acquired for a Portfolio, the identity of the
entity having physical possession of such property. Where
securities purchased by a Portfolio are in a fungible bulk
of securities registered in the name of the Custodian (or
its nominee) or shown on the Custodian's account on the
books of a Depository, the Book-Entry System or a Sub-
Custodian, the Custodian shall by book entry or otherwise
identify the quantity of those securities belonging to such
Portfolio. At least monthly, the Custodian shall furnish
the Company with a detailed statement of the Securities and
monies held by it and all Sub-Custodians for each Portfolio.
In the absence of the filing in writing with the Custodian
by the Company of exceptions or objections to any such
statement within 120 days after the date that a material
defect is reasonably discoverable, the Company shall be
deemed to have approved such statement; and in such case or
upon written approval of the Company of any such statement
the Custodian shall, to the extent permitted by law and
provided the Custodian has met the standard of care in
Section 14 hereof, be released, relieved and discharged with
respect to all matters and things set forth in such
statement as though such statement had been settled by the
decree of a court of competent jurisdiction in an action in
which the Company and all persons having any equity interest
in the Company were parties.
(e) Registration of Securities and Physical Separation.
All Securities held for a Portfolio which are issued or
issuable only in bearer form, except such Securities as are
held in the Book-Entry System, shall be held by the
Custodian or a Sub-Custodian in that form; all other
Securities held for a Portfolio may be registered in the
name of that Portfolio, in the name of any duly appointed
registered nominee of the Custodian or a Sub-Custodian as
the Custodian or such Sub-Custodian may from time to time
determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their
nominee or nominees. The Company reserves the right to
instruct the Custodian as to the method of registration and
safekeeping of the Securities. The Company agrees to
furnish to the Custodian appropriate instruments to enable
the Custodian or any Sub-Custodian to hold or deliver in
proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System
or a Depository, any Securities which the Custodian of a
Sub-Custodian may hold for the account of a Portfolio and
which may from time to time be registered in the name of a
Portfolio. The Custodian shall hold all such Securities
specifically allocated to a Portfolio which are not held in
the Book-Entry System or a Depository in a separate account
for such Portfolio in the name of such Portfolio physically
segregated at all times from those of any other person or
persons.
(f) Segregated Accounts. Upon receipt of a Written
Instruction, the Custodian will establish segregated
accounts on behalf of a Portfolio to hold liquid or other
assets as it shall be directed by a Written Instruction and
shall increase or decrease the assets in such Segregated
Accounts only as it shall be directed by subsequent Written
Instruction.
(g) Collection of Income and Other Matters Affecting
Securities. Unless otherwise instructed to the contrary by
a Written Instruction, the Custodian, by itself or through
the use of the Book-Entry System or a Depository with
respect to Securities therein deposited, shall, or shall
instruct the relevant Sub-Custodian to:
1. Collect all income due or payable with respect to
Securities held for a Portfolio in accordance with this
Agreement;
2. Present for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed
or retired, or otherwise become payable;
3. Surrender Securities in temporary form for
derivative Securities;
4. Execute any necessary declarations or certificates
of ownership under the federal income tax laws or the laws
or regulations of any other taxing authority now or
hereafter in effect; and
5. Hold directly, or through the Book-Entry System or
a Depository with respect to Securities therein deposited,
for the account of each Portfolio all rights and similar
Securities issued with respect to any Securities held by the
Custodian or relevant Sub-Custodian for each Portfolio.
If the Custodian or any Sub-Custodian causes the
account of a Portfolio to be credited on the payable date
for interest, dividends or redemptions, the particular
Portfolio involved will promptly return to the Custodian any
such amount or property so credited upon oral or written
notification that neither the custodian nor the relevant
Sub-Custodian can collect such amount or property in the
ordinary course of business. The Custodian or such Sub-
Custodian, as the case may be, shall have no duty or
obligation to institute legal proceedings, file a claim or
proof of claim in any insolvency proceeding or take any
other action with respect to the collection of such amount
or property beyond its ordinary collection procedures unless
it is specifically requested to do so by the Company and
indemnified to its satisfaction for any liability, cost or
expense arising therefrom.
(h) Delivery of Securities and Evidence of Authority. Upon
receipt of a Written Instruction and not otherwise, except
for subparagraphs 5, 6, 7, and 8 of this section 6(h) which
may be effected by Oral or Written Instructions, the
Custodian, directly or through the use of the Book-Entry
System or a Depository, shall, or shall instruct the
relevant Sub-Custodian to:
1. Execute and deliver or cause to be executed and
delivered to such persons as may be designated in such
Written Instructions, proxies, consents, authorizations, and
any other instruments whereby the authority of the Company
as owner of any Securities may be exercised;
2. Deliver or cause to be delivered any Securities held
for a Portfolio in exchange for other Securities or cash
issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any
conversion privilege;
3. Deliver or cause to be delivered any Securities held
for a Portfolio to any protective committee, reorganization
committee or other person in connection with the
reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and
receive and hold under the terms of this Agreement in the
separate account for each such Portfolio certificates of
deposit, interim receipts or other instruments or documents
as may be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of
the assets specifically allocated to the separate account of
a Portfolio and take such other steps as shall be stated in
Written Instructions to be for the purpose of effectuating
any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Company;
5. Deliver Securities upon sale of such Securities
for the account of a Portfolio pursuant to Section 7;
6. Deliver Securities upon the receipt of payment in
connection with any repurchase agreement related to such
Securities entered into by a Portfolio;
7. Deliver Securities owned by a Portfolio to the issuer
thereof or its agent when such Securities are called,
redeemed, retired or otherwise become payable; provided,
however, that in any such case the cash or other
consideration is to be delivered to the Custodian or Sub-
Custodian, as the case may be;
8. Deliver Securities for delivery in connection with any
loans of securities made by a Portfolio but only against
receipt of adequate collateral as agreed upon from time to
time by the Custodian and the Company which may be in the
form of cash or obligations issued by the United States
Government, its agencies or instrumentalities;
9. Deliver Securities for delivery as security in
connection with any borrowings by a Portfolio requiring a
pledge of Portfolio assets, but only against receipt of the
amounts borrowed;
10. Deliver Securities to the Transfer Agent or to the
holders of Shares in connection with distributions in kind,
as may be described from time to time in the Prospectus, in
satisfaction of requests by holders of Shares for repurchase
or redemption;
11. Deliver Securities owned by any Portfolio as collateral
in connection with short sales by such Portfolio of common
stock for which such Portfolio owns the stock or owns
preferred stocks of debt securities convertible or
exchangeable, without payment of further consideration, into
shares of the common stock sold short;
12. Deliver Securities owned by any Portfolio for any
purpose expressly permitted by and in accordance with
procedures described in the Prospectus; and
13. Deliver Securities owned by any Portfolio for any other
proper business purpose, but only upon receipt of, in
addition to Written Instructions, a certified copy of a
resolution of the Board of Directors signed by an Authorized
Person and certified by the Secretary of the Company,
specifying the Securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring
such purpose to be a proper business purpose, and naming the
person or persons to whom delivery of such Securities shall
be made.
(i) Endorsement and Collection of Checks, Etc. The
Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money
received by the Custodian for the account of a Portfolio.
7. Purchase and Sale of Investments of a Portfolio.
(a) Promptly after each purchase of Securities for a
Portfolio, the Company shall deliver to the Custodian (i)
with respect to each purchase of Securities which are not
Money Market Securities, a Written Instruction and (ii) with
respect to each purchase of Money Market Securities, either
a Written Instruction or Oral Instruction, in either case
specifying with respect to each purchase: (1) the name of
the Portfolio to which such Securities are to be
specifically allocated; (2) the name of the issuer and the
title of the Securities; (3) the number of shares or the
principal amount purchased and accrued interest, if any; (4)
the date of purchase and settlement; (5) the purchase price
per unit; (6) the total amount payable upon such purchase;
and 7) the name of the person from whom or the broker
through whom the purchase was made, if any. The Custodian
or specified Sub-Custodian shall receive the Securities
purchased by or for a Portfolio and upon receipt thereof
shall pay to the broker or other person designated by the
Company out of the monies held for the account of such
Portfolio the total amount payable upon such purchase,
provided that the same conforms to the total amount payable
as set forth in such Written or Oral Instruction.
(b) Promptly after each sale of Securities of a Portfolio,
the Company shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market
Securities, a Written Instruction, and (ii) with respect to
each sale of Money Market Securities, either Written
Instructions or Oral Instructions, in either case specifying
with respect to such sale: (1) the name of the Portfolio to
which the Securities sold were specifically allocated; (2)
the name of the issuer and the title of the Securities; (3)
the number of shares or principal amount sold, and accrued
interest, if any; (4) the date of sale; (5) the sale price
per unit; (6) the total amount payable to the Portfolio upon
such sale; and (7) the name of the broker through whom or
the person to whom the sale was made. The Custodian or
relevant Sub-Custodian shall deliver or cause to be
delivered the Securities to the broker or other person
designated by the Company upon receipt of the total amount
payable to such Portfolio upon such sale, provided that the
same conforms to the total amount payable to such Portfolio
as set forth in such Written or Oral Instruction. Subject
to the foregoing, the Custodian or relevant Sub-Custodian
may accept payment in such form as shall be satisfactory to
it, and may deliver Securities and arrange for payment in
accordance with the customs prevailing among dealers in
Securities.
(c) Notwithstanding (a) and (b) above, cash in any of the
Portfolios may be invested by the Custodian for short term
purposes pursuant to standing Written Instructions from the
Company.
8. Lending of Securities.
If any Portfolio is permitted by the terms of the Articles
of Incorporation and the Prospectus to lend Securities, then
the Board of Directors may approve a separate written
agreement between the Company and the Custodian authorizing
the Custodian to lend such Securities. Such agreement may
provide for the payment of additional reasonable
compensation to the Custodian.
8a. Investment in Futures
The Custodian shall pursuant to Written Instructions from an
Authorized Person (i) transfer initial margin to a
safekeeping bank; (ii) pay on demand variation margin to or
from a designated futures commission merchant based on daily
marking to market calculation and in accordance with
accepted industry practices and (iii) subject to consent of
the Custodian, enter into separate procedural, safekeeping
or other agreements with futures commission merchants and
safekeeping banks pursuant to which such banks will act as
custodian for initial margin deposits in transactions
involving futures contracts and options on futures
contracts. The Custodian shall have no custodial or
investment responsibility for any assets transferred to a
safekeeping bank or futures commission merchant pursuant to
this paragraph.
9. Payment of Dividends or Distributions.
(a) The Company shall furnish to the Custodian the vote of
the Board of Directors or the Dividend Committee thereof, as
the case may be, certified by the Secretary of the Company
(i) authorizing the declaration of distributions with
respect to a Portfolio on a specified periodic basis and
authorizing the Custodian to rely on Oral or Written
Instructions specifying the date of the declaration of such
distribution, the date of payment thereof, the record date
as of which shareholders entitled to payment shall be
determined, the amount payable per Share to the shareholders
of record as of the record date and the total amount payable
to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any distribution by a
Portfolio, the date of payment thereof, the record date as
of which shareholders entitled to payment shall be
determined, the amount payable per share to the shareholders
of record as of the record date and the total amount payable
to the Transfer Agent on the payment date.
(b) Upon the payment date specified in such vote, Oral
Instructions, or Written Instructions, as the case may be,
the Custodian shall pay the total amount payable to the
Transfer Agent out of the monies specifically allocated to
and held for the account of the appropriate Portfolio.
10. Sale and Redemption of Shares of the Company.
(a) Whenever the Company shall sell any Shares of a
Portfolio, the Company shall deliver or cause to be
delivered to the Custodian a Written Instruction duly
specifying:
1. The name of the Portfolio whose Shares were
sold;
2. The number of Shares sold, trade date, and
price; and
3. The amount of money to be received by the
Custodian
for the sale of such Shares.
The Custodian understands and agrees that Written
Instructions may be furnished subsequent to the purchase of
Shares of a Portfolio and that the information contained
therein will be derived from the sales of Shares as reported
to the Company by the Transfer Agent.
(b) Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account of
the Portfolio specified in (a)(1) above.
(c) Upon issuance of any Shares of a Portfolio in
accordance with the foregoing provisions of this Section 10,
the Custodian shall pay all original issue or other taxes
required to be paid in connection with such issuance upon
the receipt of a Written Instruction specifying the amount
to be paid.
(d) Except as provided hereafter, whenever any Shares of a
Portfolio are redeemed, the Company shall cause the Transfer
Agent to promptly furnish to the Custodian Written
Instructions specifying:
1. The name of the Portfolio whose Shares were
redeemed;
2. The number of Shares redeemed; and
3. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information
contained in such Written Instructions will be derived from
the redemption of Shares as reported to the Company by the
Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting
forth the number of Shares of a Portfolio being redeemed
pursuant to valid instructions as described in the
Prospectus, the Custodian shall make payment to the Transfer
Agent out of the monies specifically allocated to and held
for the account of the Portfolio specified in (d)(1) above
of the total amount specified in a Written Instruction
issued pursuant to paragraph (d) of this Section 10.
11. Indebtedness.
(a) The Company will cause to be delivered to the Custodian
by any bank (excluding the Custodian) from which the Company
borrows money, using Securities as collateral, a notice or
undertaking in the form currently employed by any such bank
setting forth the amount which such bank will loan to the
Company against delivery of a stated amount of collateral.
The Company shall promptly deliver to the Custodian Written
Instructions stating with respect to each such borrowing:
(1) the name of the Portfolio for which the borrowing is to
be made; (2) the name of the bank; (3) the amount and terms
of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the
Company, or other loan agreement; (4) the time and date, if
known, on which the loan is to be entered into (the
"borrowing date"); (5) the date on which the loan becomes
due and payable; (6) the total amount payable to the Company
for the separate account of the Portfolio on the borrowing
date; (7) the market value of Securities to be delivered as
collateral for such loan, including the name of the issuer,
the title and the number of shares or the principal amount
of any particular Securities; (8) whether the Custodian is
to deliver such collateral through the Book-Entry System or
a Depository; and (9) a statement that such loan is in
conformance with the 1940 Act and the Prospectus.
(b) Upon receipt of the Written Instruction referred to in
paragraph (a) above, the Custodian shall deliver on the
borrowing date the specified collateral and the executed
promissory note, if any, against delivery by the lending
bank of the total amount of the loan payable, provided that
the same conforms to the total amount payable as set forth
in the Written Instruction. The Custodian may, at the
option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all
rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall
deliver as additional collateral in the manner directed by
the Company from time to time such Securities specifically
allocated to such Portfolio as may be specified in Written
Instruction to collateralize further any transaction
described in this Section 11. The Company shall cause all
Securities released from collateral status to be returned
directly to the Custodian, and the Custodian shall receive
from time to time such return of collateral as may be
tendered to it. In the event that the Company fails to
specify in Written Instruction all of the information
required by this Section 11, the Custodian shall not be
under any obligation to deliver any Securities. Collateral
returned to the Custodian shall be held hereunder as it was
prior to being used as collateral.
12. Corporate Action
Whenever the Custodian or any Sub-Custodian (other than a
foreign securities depository or clearing agency) receives
information concerning Securities held for a Portfolio which
requires discretionary action by the beneficial owner of the
Securities (other than a proxy), such as subscription
rights, bond issues, stock repurchase plans and rights
offerings, or legal notices or other material intended to be
transmitted to Securities holders ("Corporate Actions"), the
Custodian will give the Company notice of such Corporate
Actions to the extent that the Custodian's central corporate
actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting
from a rights issue, stock dividend, stock split or similar
Corporate Action is received which bears an expiration date,
the Custodian will endeavor to obtain Written or Oral
Instructions from the Company, but if such Instructions are
not received in time for the Custodian to take timely
action, or actual notice of such Corporate Action was
received too late to seek such Instructions, the Custodian
is authorized to sell, or cause a Sub-Custodian to sell,
such rights entitlement or fractional interest and to credit
the applicable account with the proceeds and to take any
other action it deems, in good faith, to be appropriate, in
which case, provided it has met the standard of care in
Section 14 hereof, it shall be held harmless by the
particular Portfolio involved for any such action.
The Custodian will deliver proxies to the Company or its
designated agent pursuant to special arrangements which may
have been agreed to in writing between the parties hereto.
Such proxies shall be executed in the appropriate nominee
name relating to Securities registered in the name of such
nominee but without indicating the manner in which such
proxies are to be voted; and where bearer Securities are
involved, proxies will be delivered in accordance with
Written or Oral Instructions from Authorized Persons.
13. Persons Having Access of the Portfolios.
(a) No officer, director, employee or agent of the Company,
or of the Company's investment advisor or, of any sub-
investment adviser of the Company, or of the Administrator,
shall have physical access to the assets of any Portfolio
held by the Custodian or any Sub-Custodian or be authorized
or permitted to withdraw any investments of a Portfolio, nor
shall the Custodian or any Sub-Custodian deliver any assets
of a Portfolio to any such person. No officer, director,
employee or agent of the Custodian who holds any similar
position with the Company's investment adviser, with any
sub-investment adviser of the Company or with the
Administrator shall have access to the assets of any
Portfolio.
(b) Nothing in this Section 13 shall prohibit any officer,
employee or agent of the Company, or any officer, director,
employee or agent of the investment adviser, of any sub
investment adviser of the Company or of the Administrator,
from giving Oral Instructions or Written Instructions to the
Custodian or executing a Certificate so long as it does not
result in delivery of or access to assets of a Portfolio
prohibited by paragraph (a) of this Section 13.
(c) The Custodian represents that it maintains a system
that is reasonably designed to prevent unauthorized persons
from having access to the assets that it holds (by any
means) for its customers.
14. Concerning the Custodian.
(a) Scope of Services. The Custodian shall be obligated to
perform only such services as are set forth in this
Agreement or expressly contained in a Certificate, Written
Instructions or Oral Instructions given to the Custodian
which are not contrary to the provisions of this Agreement.
(b) Standard of Care.
1. The Custodian will use reasonable care with
respect to its obligations under this Agreement and the
safekeeping of property of the Portfolios. The
Custodian shall be liable to, and shall indemnify and
hold harmless the Company from and against any loss
which shall occur as the result of the failure of the Custodian
or a Sub-Custodian (other than a foreign securities depository or
clearing agency) to exercise reasonable care with respect to
their respective obligations under this Agreement and the
safekeeping of such property. The determination of whether the
Custodian or Sub-Custodian has exercised reasonable care in
connection with the safekeeping of Portfolio property shall be
made in light of the standards applicable to a professional asset
custodian acting without negligence. The determination of
whether the Custodian or Sub-Custodian has exercised reasonable
care in connection with their other obligations under this
Agreement shall be made in light of prevailing standards
applicable to professional custodians in the jurisdiction in
which such custodial Services are performed. In the event of any
loss to the Company by reason of the failure of the Custodian or
a Sub-Custodian (other than a foreign securities depository or
clearing agency) to exercise reasonable care, the Custodian shall
be liable to the Company to the extent of all of the Company's
direct damages and expenses, incurred or borne on account of such
loss which damages, for purposes of property only, shall be
determined based on the market value of the property which is the
subject of the loss.
2. Subject to the provisions of subparagraph (b)1.
above the Custodian will not be responsible for any
act, omission, default or for the solvency of any
foreign securities depository or clearing agency
utilized in connection with the provision of services
under this agreement.
3. The Custodian will not be responsible for any act,
omission, default or for the solvency of any broker or
agent (not referred to in paragraph (b)(2) above) which
it or a Sub-Custodian appoints and uses unless such
appointment and use is made or done negligently or in
bad faith. In the event such an appointment and use is
made or done negligently or in bad faith, the Custodian
shall be liable to the Company only for direct damages
and expenses (determined in the manner described in
paragraph (b)(1) above) resulting from such appointment
and use and, in the case of any loss due to an act,
omission or default of such agent or broker, only to
the extent that such loss occurs as a result of the
failure of the agent or broker to exercise reasonable
care ("reasonable care" for this purpose to be
determined in light of the prevailing standards
applicable to agents or brokers, as appropriate, in the
jurisdiction where services are performed).
4. The Custodian shall be entitled to rely, and may
act upon the advice of counsel (who may be counsel for
the Company) on all matters and shall be without
liability for any action reasonably taken or omitted in
good faith and without negligence pursuant to such
advice.
5. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing
received by the Custodian and reasonably believed by
the Custodian to be genuine and to be signed by two
officers of the Company. The Custodian shall be
entitled to rely upon any Written Instructions or Oral
Instructions actually received by the Custodian
pursuant to the applicable Sections of this Agreement
and reasonably believed by the Custodian to be genuine
and to be given by an Authorized Person. The Company
agrees to forward to the Custodian Written Instructions
from an Authorized Person confirming such Oral
Instructions in such manner so that such Written
Instructions are received by the Custodian, whether by
hand delivery, telex or otherwise, by the close of
business on the same day that such Oral Instructions
are given to the Custodian. The Company agrees that
the fact that such confirming instructions are not
received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the
transactions hereby authorized by the Company. The
Company agrees that the Custodian shall incur no
liability to the Company in (i) acting upon Oral
Instructions given to the Custodian hereunder
concerning such transactions provided such instructions
reasonably appear to have been received from a duly
Authorized Person or (ii) deciding not to act solely
upon Oral Instructions, provided that the Custodian
shall be required to contact the giver of such Oral
Instructions and request written confirmation
immediately following any such decision not to act.
6. The Custodian shall supply the Administrator
and/or Fund Accountant with such daily information
regarding the cash and securities positions and
activity of each Portfolio as the Custodian and the
Administrator and/or Fund Accountant shall from time to
time agree. It is understood that such information
will not be audited by Custodian and Custodian
represents that such information will be the best
information then available to the Custodian. The
Custodian shall have no responsibility whatsoever for
the pricing of Portfolio Securities or for the failure
of the Administrator and/or Fund Accountant to
reconcile differences between the information supplied
by the Custodian and information obtained by the
Administrator and/or Fund Accountant from other
sources, including but not limited to pricing vendors
and the Company's investment adviser. Subject to the
foregoing, to the extent that any miscalculation by the
Administrator and/or Fund Accountant of a Portfolio's
net asset value is attributable to the willful
misfeasance, bad faith or negligence of the Custodian
(including any Sub-Custodian other than a foreign
securities depository or clearing agency) in supplying
or omitting to supply the Administrator and/or Fund
Accountant with information as aforesaid, the Custodian
shall be liable to the Company for any resulting loss
(subject to such de minims rule of change in value as
the Board of Directors may from time to time adopt).
(c) Limit of Duties. Without limiting the generality of
the foregoing, the Custodian shall be under no duty or
obligation to inquire into, and shall not be liable for:
1. The validity of the issue of any Securities
purchased by any Portfolio, the legality of the
purchase thereof, or the propriety of the amount
specified by the Company for payment therefor;
2. The legality of the sale of any Securities by any
Portfolio or the propriety of the amount of
consideration for which the same are sold;
3. The legality of the issue or sale of any Shares,
or the sufficiency of the amount to be received
therefor;
4. The legality of the redemption of any Shares, or
the propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any
distribution of any Portfolio;
6. The legality of any borrowing.
(d) The Custodian need not maintain any insurance for the
exclusive benefit of the Company, but hereby warrants that
as of the date of this Agreement it is maintaining a bankers
Blanket Bond and hereby agrees to notify the Company in the
event that such bond is canceled or otherwise lapses.
(e) Consistent with and without limiting the language
contained in Section 14(b), it is specifically acknowledged
that the Custodian shall have no duty or responsibility to:
1. Question Written Instructions or Oral Instructions
or make any suggestions to the Company or an
Authorized Person regarding such Instructions;
2. Supervise or make recommendations with respect to
investments or the retention of Securities;
3. Subject to Section 14(b)(3) hereof, evaluate or
report to the Company or an Authorized Person
regarding the financial condition of any broker,
agent or other party to which Securities are
delivered or payments are made pursuant to this
Agreement.
4. Review or reconcile trade confirmations received
from brokers.
(f) Amounts Due for Transfer Agent. The Custodian shall
not be under any duty or obligation to take action to effect
collection of any amount due to any Portfolio from the
Transfer Agent nor to take any action to effect payment or
distribution by the Transfer Agent of any amount paid by the
Custodian to the Transfer Agent in accordance with this
Agreement.
(g) No Duty to Ascertain Authority. The Custodian shall
not be under any duty or obligation to ascertain whether any
Securities at any time delivered to or held by it for the
Company and specifically allocated to a Portfolio are such
as may properly be held by the Company under the provisions
of the Articles of Incorporation and the Prospectus.
(h) Indemnification. The Company agrees to indemnify and
hold the Custodian harmless from all loss, cost, taxes,
charges, assessments, claims, and liabilities (including,
without limitation, liabilities arising under the Securities
Act of 1933, the Securities Exchange Act of 1934 and the
1940 Act and state or foreign securities laws) and expenses
(including reasonable attorneys fees and disbursements)
arising directly or indirectly from any action taken or
omitted by the Custodian (i) at the request or on the
direction of or in reliance on the advice of the Company or
in reasonable reliance upon the Prospectus or (ii) upon a
Certificate or Oral or Written Instructions; provided, that
the foregoing indemnity shall not apply to any loss, cost,
tax, charge, assessment, claim, liability or expense to the
extent the same is attributable to the Custodian's or any
Sub-Custodian's (other than a foreign securities depository
or clearing agency) negligence, willful misconduct, bad
faith or reckless disregard of duties and obligations under
this Agreement or any other agreement relating to the
custody of Company property.
(i) The Company on behalf of the particular Portfolio
involved agrees to hold the Custodian harmless from any
liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges on a
Portfolio.
(j) Without limiting the foregoing, the Custodian shall not
be liable for any loss which results from:
1. the general risk of investing, or
2. subject to Section 14(b) hereof, investing or
holding property in a particular country
including, but not limited to, losses resulting
from nationalization, expropriation or other
governmental actions; regulation of the banking or
securities industry; currency restrictions,
devaluations or fluctuations; and market
conditions which prevent the orderly execution of
securities transactions or affect the value of
property held pursuant to this Agreement.
(k) No party shall be liable to the other for any loss due
to forces beyond their control including but not limited to
strikes or work stoppages (other than strikes or work
stoppages of the Custodian), acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(1) Inspection of Books and Records. The books and records
of the Custodian shall be open to inspection and audit at
reasonable times by officers and auditors employed by the
Company and by the appropriate employees of the Securities
and Exchange Commission.
(m) Accounting Control Reports. The Custodian shall
provide the Company with any report obtained by the
Custodian on the system of internal accounting control of
the Book-Entry System, each Depository, and each Sub-
Custodian and with an annual report on its own systems of
internal accounting control.
15. Term and Termination.
(a) This Agreement shall become effective on the date first
set forth above (the "Effective Date") and shall continue in
effect thereafter as the parties may, mutually agree.
(b) Either of the parties hereto may terminate this
Agreement with respect to any Portfolio by giving to the
other party a notice in writing specifying the date of such
termination, which, in case the Company is the terminating
party, shall be not less than 60 days after the date of
receipt of such notice or, in case the Custodian is the
terminating party, shall be not less than 90 days after the
date of receipt of such notice. In the event such notice is
given by the Company, it shall be accompanied by a certified
vote of the Board of Directors, electing to terminate this
Agreement with respect to any Portfolio and designating a
successor custodian or custodians, which shall be a person
qualified to so act under the 1940 Act.
In the event such notice is given by the Custodian, the
Company shall, on or before the termination date, deliver to
the Custodian a certified vote of the Board of Directors,
designating a successor custodian or custodians. In the
absence of such designation by the Company, the Custodian
may designate a successor custodian, which shall be a person
qualified to so act under the 1940 Act. If the Company
fails to designate a successor custodian with respect to any
Portfolio, the Company shall upon the date specified in the
notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than
Securities held in the Book-Entry System which cannot be
delivered to the Company) and monies then owned by such
Portfolio, be deemed to be its own custodian and the
Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the
duty with respect to Securities held in the Book-Entry
System which cannot be delivered to the Company.
(c) Upon the date set forth in such notice under paragraph
(b) of this Section 15, this Agreement shall terminate to
the extent specified in such notice, and the Custodian shall
upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor
custodian all Securities and monies then held by the
Custodian and specifically allocated to the Portfolio or
Portfolios specified, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it
shall then be entitled with respect to such Portfolio or
Portfolios.
16. Limitation of Liability.
The Company and the Custodian agree that the obligations of
the Company under this Agreement shall not be binding upon
any of the Directors, shareholders, nominees, officers,
employees or agents, whether past, present or future, of the
Company individually, but are binding only upon the assets
and property of the Company or of the appropriate
Portfolio(s) thereof, as provided in the Articles of
Incorporation. The execution and delivery of this Agreement have
been authorized by the Board of Directors of the Company, and
signed by an authorized officer of the Company, acting as such,
and neither such authorization by such the Board of Directors nor
such execution and delivery by such officer shall be deemed to
have been made by any of them or any shareholder of the Company
individually or to impose any liability on any of them or any
shareholder of the Company personally, but shall bind only the
assets and property of the Company or of the appropriate
Portfolio(s) thereof as provided in the Articles of
Incorporation.
17. Miscellaneous.
(a) Annexed hereto as Schedule A is a certification signed
by two of the present officers of the Company setting forth
the names and the signatures of the present Authorized
Persons. The Company agrees to furnish to the Custodian a
new certification in similar form in the event that any such
present Authorized Person ceases to be such an Authorized
Person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new
certification shall be received, the Custodian shall be
fully protected in acting under the provisions of this
Agreement upon Oral Instructions or signatures of the
present Authorized Persons as set forth in the last
delivered certification.
(b) Any notice or other instrument in writing, authorized
or required by this Agreement to be given to the Custodian,
shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at its address
stated on the first page hereof or at such other place as
the Custodian may from time to time designate in writing.
(c) Any notice or other instrument in writing, authorized
or required by this Agreement to be given to the Company,
shall be sufficiently given if addressed to the Company and
mailed or delivered to it at its offices at its address
shown on the first page hereof or at such other place as the
Company may from time to time designate in writing, with a
copy to:
(d) This Agreement may not be amended or modified in any
manner except by a written agreement executed by both
parties with the same formality as this Agreement, (i)
authorized and approved by a vote of the Board of Directors,
including a majority of the members of the Board of
Directors who are not "interested persons" of the Company
(as defined in the 1940 Act), or (ii) authorized and
approved by such other procedures as may be permitted or
required by the 1940 Act.
(e) This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Company without the written consent of the
Custodian, or by the Custodian without the written consent
of the Company authorized or approved by a vote of the Board
of Directors, and any attempted assignment without such
written consent shall be null and void.
(f) This Agreement shall be construed in accordance with
the laws of the State of Illinois.
(g) The captions of the Agreement are included for
convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect
their construction or effect.
(h) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original, but such counterparts shall, together, constitute
only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective representatives duly
authorized as of the day and year first above written.
FREMONT MUTUAL FUNDS, INC.
By: /s/ David S. Redo
Name: David L. Redo
Title: President
THE NORTHERN TRUST COMPANY
By: /s/ Ronald G. Szafranski
Name: Ronald G. Szafranski
Title: Vice President
EXHIBIT A
EXHIBIT A
Page 1 of 3
FREMONT INVESTMENT ADVISORS
AUTHORIZED SIGNATURES MATRIX: BY ACCOUNT
OFFICIAL REFERENCE for BANK, CUSTODIAN, TRUSTEE, TRANSFER AGENT, FUND ACCOUNTANT
August 28, 1995
<TABLE>
<CAPTION>
(l)
OPEN/
(a) (b) (c) (d) CLOSE
NAME TITLE AUTHORIZED SIGNATURE INITIALS CONTRACTS TRADE FEES CHECKS ACCT AUTHORIZED ACCOUNTS: SEE KEY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aronson, David FGI Treasurer X X X 21-24, 51, 55, 69
Bond, Helen FGI Ass't Controller X 0, 21, 22, 24, 26, 50 (N)
Copa, Kent FIA Vice President X X 2, 5, 11, 14, 51, 57
Cunningham, James FGI Mgr Fin'l Analysis X 21-24
Dachs, Alan FGI President X 1
Doty, Kent FGI Controller Spl Svc. X 51, 55
Dwyer, Marycatherine FIA Vice President X X 1, 11, 12, 14, 16-18, 20-24
Feeney, William FIA Vice President X 2, 3, 11, 13, 50, 52,
57, 58, 59, 60
Fenner, James FMF Salesman X 0, 1, 50
Gaiddon, Chantal FIA, FMF Controller X X 0, 10-18, 26, 50
Gee, Norman FIA Vice President X 1, 11, 12, 14, 16-18, 20-24
Haddick, Robert FIA Vice President X 2, 11, 16, 26, 55
Hand, Gregory Accounting Manager X 10-18
Higgins, Jon FGI CFO X X X 21-24, 26, 55
Hollstein, Gretchen FMF Asst Vice Pres X:O 10 (k)
Huang, Shu C FGI Tax Manager X 51, 55
Irion, Philip FGI Mgr Fin'l Plan & Treas X X 20-25
Kinchen, Alexandria FIA Vice President X X(i) 2, 3, 11, 50, 51, 52,
57-59, 64-76
Kirschbaum, Albert FIA Sr Vice President X X X:O 0, 1-4, 10(k), 11-18, 21, 23,
24, 26, 50-52, 55, 58
Kuhn, Vincent FIA Exec Vice President X X X X X 0-73 (k) (n)
Page 2 of 3
FREMONT INVESTMENT ADVISORS
AUTHORIZED SIGNATURES MATRIX: BY ACCOUNT
OFFICIAL REFERENCE for BANK, CUSTODIAN, TRUSTEE, TRANSFER AGENT, FUND ACCOUNTANT
August 28, 1995
<CAPTION>
(l)
OPEN/
(a) (b) (c) (d) CLOSE
NAME TITLE AUTHORIZED SIGNATURE INITIALS CONTRACTS TRADE FEES CHECKS ACCT AUTHORIZED ACCOUNTS: SEE KEY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kurtz, Richard FGI Controller X 0, 21, 24, 26, 50 (n)
Landini, Peter FIA Sr Vice Pres X X X:O 0, 1, 2, 5, 10, 11, 14,
16-18, 26, 51, 55, 57, (n)
Pang, Andrew FIA Vice President X 2, 5, 11, 14, 16, 26, 51,
57, 64-66, 72-76
Redo, David FIA President X X X X ALL (k) (n)
Stone, Ian FMF Vice Pres X X:O 0, 10(k)
Walker, Avard FIA Acc'tg Supvsr X X 0, 1, 26, 50, (n)
Weiser, John BTTF Chrmn/Ttee X X 1, 50, 60(h)
<FN>
NOTES:
(a) Authorized to enter into contracts on behalf of client.
(b) Authorized to execute purchase/sale transactions for client.
(c) Authorized to approve of fees, expenses, and other accounting or billing matters re: advisor/custodial/trustee
(d) Authorized to transfer funds to/from client's account(s), via wire or check
(e) Req. 2 signatures on all transactions. All trans. over $50k must have original sig's (not facsimile-Kurtz, Bond)
(f) Requires 2 signatures (min. of 1 from Group 1): Group 1:JSH, VPK, DLR; Group 2: SWK, AWK, ALP
(g) Requires 2 signatures for fees and expenses: DLR, VPK, IRS, PFL, JWF
(h) Weiser is trustee for all "S" Trusts except '89 Family Trust, (G Argyris, Trustee).
(i) Authorized to approve fees for account 50, 51 & 57
(j) Consulting Contract; managers are B Haddick, V Kuhn, P Landini, D Redo
(k) Authorized to act on behalf of FMF shareholders - administration & processing
(l) Authorized to open or close any account with Custodians
(m) Transmittals to IFTC for expense payments only
(n) Authorized to execute instructions & direct Fremont Group Retirement Plan
(o) Over $250 req. 2 signatures (min. of 1 from Group 1): Group 1: VPK, DLR, PFL, AWK; Group 2: IRS, GCH, CG, GJH --
FIA acct for FMF shareholders
(p) Requires 2 signatures (JSH, SCH, KDD); funds transfered only to related Wells account
(q) Requires 2 signatures (min. of 1 from Group 1): Group 1: PFL, AWK, VPK, DLR; Group 2: HB, CG, RK, AW
</FN>
</TABLE>
Page 3 of 3
FREMONT INVESTMENT ADVISORS
AUTHORIZED SIGNATURES MATRIX: BY ACCOUNT
OFFICIAL REFERENCE for BANK, CUSTODIAN, TRUSTEE, TRANSFER AGENT,FUND ACCOUNTANT
August 28, 1995
KEY: (Corresponds with FIA Sub-File Codes)
0 Fremont Investment Advisors (o) 50 Bechtel Foundation (e)
1 Bechtel Trust & Thrift Plan (BTTF) 51 SDB Jr Foundation (p)
2 Fund A 52 SDB Jr Ch Unitrusts
3 Fund B 55 BF LP I & II (f)(p)
4 Fund C 57 LPB 89 Fam Trust
5 Fund D 58 ABE Trust
6 Fund E 59 GAW Trusts
7 Fund F 60 S Trusts (ALL)
10 Fremont Mutual Funds (FMF) (g) 64 KSJ
11 F Global 65 P&M S
12 F Money Market 66 MST
13 F Ca Int Tax Free 68 LPB Ch Unitrusts
14 F Growth 69 Laural Foundation
15 F Bond 70 AGS
16 F International Growth 71 PMS
17 F U.S. Micro-Cap 72 BSW
18 F International Small Cap 73 R&SB
20 Bechtel Power Corp 74 Foothill
21 Fremont Group Inc (formerly BII) 75 Shenandoah
22 Bechtel Investment Realty 76 Ramsay Foundation
23 Bechtel Int'l Constructors 77 M. Ramsay
24 Sequoia Ventures 78 O. Ramsay
25 Bechtel Enterprises (j) 79 SST '95 Trust
26 Fremont Summit Partners (q) 80 S. Family Farm Trust
81 CHFT Pending
SCHEDULE B
A GLOBAL CUSTODY FEE SCHEDULE FOR
FREMONT MUTUAL FUNDS
DOMESTIC FUNDS:
U.S. Micro-Cap Fund
Growth Fund ( SIT Investments )
Growth Fund ( Fremont Investment Advisors )
Money Market Fund
California Intermediate Tax-Free Fund
INTERNATIONAL FUNDS:
Global Fund
International Growth Fund
International Small Cap Fund
Bond Fund
ASSUMPTIONS USED: (derived from the Annual Report dated October 31, 1994
for the Fremont Mutual Funds and a facsimile
dated June 8, 1995 provided by Mr. Norman Gee).
Total market value = $ 857,585,327
Tier I * = $ 656,842,994
Tier II = $ 190,779,056
Tier III = $ 13,778,231
8 mutual funds
5 domestically invested funds
3 globally invested funds
<PAGE>
Annualized purchase/sale activity was not provided by Fremont.
Northern Trust has assumed the following activity based upon
current average client transaction activity.
U.S. Equities = 1,754
U.S. Fixed Income = 515
U.S. Mortgage Back Securities = 16
Short Settlements = 380
Non-U.S. = 1,592
Security holdings
Total U.S. = 683
Equities = 480
Fixed Income = 140
Mortgage Back Securities = 16
Short Settlements = 47
Total Non-U.S. = 350
Utilization of Securities Lending
Daily on-line interface with Fund Accountant and Transfer Agent
Approximately 5% excess cash invested with Northern Utilization of
our on-line inquiry system for all parties involved At least 20%
of total foreign exchange volume transacted through Northern
SERVICES PROVIDED:
Safekeeping of securities
Settlement of trades
Foreign exchange services
Investment and management of excess cash balances Interest and
dividend collection and payable date crediting Tax withholding and
reclamation Corporate action and proxy handling
Relationship servicing to Fremont Mutual Funds, the Fund
Administrator/Accountant and Transfer Agent Daily on-line
reporting to all parties Monthly fund level reporting
CUSTODY FEE PROPOSAL:
ACCOUNT-BASED CHARGES:
$5,000 per portfolio/account per annum (9 x $5,000 = $45,000)
ASSET-BASED CHARGES:
Tier I * 0.5 Basis points on the market value
($656,842,994 x .00005 = $32,842)
Tier II 3.0 Basis points on the market value
($180,885,358 x .0003 = $54,266)
Tier III 20.0 Basis points on the market value
($19,856,975 x .0020 = $39,714)
TRANSACTION-BASED CHARGES (PER PURCHASE/SALE):
Tier I * Equities & Fixed Income $ 7
(2,269 x $7 = $15,883)
Mortgage Backed Securities $15
(16 x $15 = $240)
Short Settlements $15
(Comm. Paper, T-Bills, Repos)
(380 x $15 = $5,700)
Wire Transfers $ 7
Tiers II & III Equities & Fixed Income $15
(1,592 x $15 = $23,880)
Non-Northern Trust foreign $30
exchange contract
We do NOT impose additional charges for facsimile, telex, income
collection, tax reclamation, administration, or other "miscellaneous"
activities. Execution costs attributable, but not limited , to
settlement in specific markets, such as stamp duty and security
re-registration charges and subcustodian delivery/receipt charges
would be passed through at cost as and where applicable.
TOTAL ESTIMATED ANNUAL FEE = $217,525 OR 2.48 BASIS POINTS EQUIVALENT
TOTAL ESTIMATED ANNUAL BASIS POINT EQUIVALENT ON GLOBAL FUNDS = 3.26 BPTS.
TOTAL ESTIMATED ANNUAL BASIS POINT EQUIVALENT ON DOMESTIC FUNDS = 1.47 BPTS.
<PAGE>
DESKTOP SERVICES:
Full access to Northern Trust's on-line customized reporting system,
Passport, will be made available free of charge. A one-time charge of
$5,000 applies for the licensing and installation of the Passport
software. Training on the software is included in the above charge
assuming that training is done in one location. Any telecommunication
charges incurred by Northern in supporting Passport would be passed
through at cost where applicable.
PERFORMANCE ANALYSIS SERVICES (PAS) AND FEE SCHEDULE:
Northern Trust is the largest bank provider of comprehensive
performance measurement. By providing accurate, timely and incisive
data our performance analytics service can help optimize your funds'
returns.
1. QUARTERLY PERFORMANCE FEES
PAS General Review $4,000 per account* per annum for the first six
Overview of Manager Mix managers, and $2,000 per account per annum
Intense Review thereafter Composite Information Package Workstation
Availability $4,000 X 2 ACCOUNTS = $8,000
Special projects are billed at $100 per hour plus expenses.
* Individually managed account, excluding cash, GIC, and single
asset accounts. Returns for these accounts are reported free of
charge when combined with an individually managed account.
SECURITIES LENDING:
Northern Trust has an extensive securities lending program.
Historically we have been very successful in offsetting significant
portions of client custody fees through lending activity.
Below are our evaluations of the October 31, 1994 Fremont Mutual Fund
portfolios detailing the currently loanable and non-loanable
components. Based upon those components, we estimated gross annual
Securities Lending earnings of $320,000- $425,000 of which
$210,000-$280,000 would be for Fremont Mutual Funds.
The portfolio also holds other non-U.S. securities which may be
loanable in the future and as Northern's lending program continues to
expand, these securities could generate additional income for the
client.
MATERIAL CHANGES:
The fees quoted above are offered contingent upon the information
provided and assume that actual experience will not be materially
different from projected activity. "Material" changes, for the
purposes of this provision, will be changes in excess of 10% from the
assumptions used.
REFERENCE:
Tier I * United States
Tier II Africa, Argentina, Australia, Austria,
Belgium, Canada, China Denmark, Euroclear,
Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, Luxembourg,
Malaysia, Mexico, Netherlands, New
Zealand, Norway, Portugal Singapore, South
Korea, Spain, Sri Lanka, Sweden,
Switzerland, Taiwan, Thailand, Turkey, and
the United Kingdom
Tier III Bangladesh, Botswana, Brazil, Czech
Republic, Chile, Columbia, Cyprus, Ghana,
Greece, Hungary, India, Indonesia, Israel,
Jordan, Morocco, Namibia, Nigeria,
Pakistan, Peru, Philippines, Poland,
Uruguay, Venezuela, and Zimbabwe
Coopers Coopers & Lybrand L.L.P.
& Lybrand
a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 21 to
the Registration Satement on Form N-1A (File No. 33-23453) of
Fremont Mutual Funds, Inc. of our report dated December 1, 1995
on our audit of the financial statements and financial highlights
for the periods indicated thereon. We also consent to the
reference to our Firm under the caption "Independent Auditors;
Financial Statements."
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
February 5, 1996
Coopers & Lybrand L.L.P., a registered limited liability partnership,
is a member firm of Coopers & Lybrand (International).
<TABLE> <S> <C>
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<NAME> FREMONT MUTUAL FUNDS, INC.
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<ASSETS-OTHER> 53,938
<OTHER-ITEMS-ASSETS> 0
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<TABLE> <S> <C>
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<PERIOD-TYPE> 12-MOS
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<PERIOD-START> NOV-1-1994
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<DISTRIBUTIONS-OF-GAINS> 4,639
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<PERIOD-START> NOV-1-1994
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