FREMONT MUTUAL FUNDS INC, 497, 1996-06-28

FREMONT MUTUAL FUNDS INC
497, 1996-06-28

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Prospectus

FREMONT EMERGING MARKETS FUND

FREMONT MUTUAL FUNDS, INC.

FREMONT MUTUAL FUNDS, INC. is an open-end investment company
which under this Prospectus is offering shares in the FREMONT EMERGING MARKETS
FUND, primarily investing in equity securities of issuers domiciled in countries
with emerging or developing capital markets.

FREMONT EMERGING MARKETS FUND seeks to achieve long-term
capital appreciation.

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 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, CA 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.

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 June 24, 1996.

FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 1-800-548-4539.

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PLEASE READ THIS PROSPECTUS CAREFULLY. IT IS
DESIGNED TO PROVIDE YOU WITH INFORMATION AND TO HELP YOU DECIDE IF THE FREMONT
EMERGING MARKETS FUND'S OBJECTIVE MEETS YOUR OWN GOALS.

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<PAGE>

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 None
12b-1 Fees None
Other Expenses None
Total Fund Operating Expenses None

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 $ 0
3 years $43

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 estimated amounts for the current 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 anticipates waiving management, 12b-1 and administrative fees
and reimbursing the Fund for all of its other operating expenses until further
notice. Absent fee waivers and reimbursement of expenses by the Advisor, the
management fee, 12b-1 fees, other expenses and total fund operating expenses
would be 1.00%, .25%, .70% and 1.95%, respectively.

<PAGE>

THE ADVISOR, THE SUB-ADVISOR AND THE FUND

Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end,
diversified investment company which under this Prospectus is offering shares in
the Fremont Emerging Markets Fund (the "Fund"). The Investment Company has other
series offered with different prospectuses, 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 like a separate
mutual fund.

The management of the business and affairs of the Fund 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. As described more fully below, the Advisor has
retained Credit Lyonnais International Asset Management (HK) Limited (the
"Sub-Advisor") to provide the Fund with portfolio management services. The
Advisor's Investment Committee oversees the portfolio management of the Fund,
including the services provided by the Sub-Advisor.

The professional staff of the Advisor has offered professional investment
management services regarding asset allocation and in connection with securities
portfolios to the Bechtel Group, Inc. Retirement Plan and the Bechtel Foundation
since 1978 and to Fremont Investors, Inc. (formerly Fremont Group, Inc.) since
1987. The Advisor also provides investment advisory services regarding asset
allocation, investment manager selection and portfolio diversification to a
number of large Bechtel-related investors. The Investment Company is one of its
clients.

As compensation for its services to the Fund, the Advisor receives from the Fund
an advisory fee, computed daily and paid monthly, of 1.00% per annum of the
Fund's average daily net assets. The Advisory Agreement also provides that the
Fund will pay to the Advisor an administrative fee of .15% per annum of average
daily net assets. The Advisor is waiving both fees and reimbursing the Fund for
all of its other operating expenses until further notice. See "Other Expenses of
the Fund" below.

Credit Lyonnais International Asset Management (HK) Limited, Three Exchange
Square, 38 Connaught Place, 6th floor, Hong

<PAGE>

Kong, serves as Sub-Advisor to the Fund pursuant to a Portfolio Management
Agreement. The Sub-Advisor is a Hong Kong company which is a wholly-owned
indirect subsidiary of Credit Lyonnais S.A., the world's sixteenth largest
banking group in terms of assets, which exceeded $320 billion as of December 31,
1994. Credit Lyonnais manages or advises in excess of $1.9 billion world-wide as
of December 31, 1995. The Sub-Advisor is registered as an investment advisor
with the Securities and Exchange Commission under the Investment Advisers Act of
1940. All investment decisions of the Sub- Advisor with respect to the Fund are
made by a committee, and no one person is primarily responsible for making
recommendations to the committee.

Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Fund), the Advisor and the Sub-Advisor provides
that the Sub-Advisor will manage the investment and reinvestment of the assets
of the Fund and continually review, supervise and administer the Fund's
investments. The Sub-Advisor 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 the Sub-Advisor a fee equal to .50%
per annum of the Fund's average daily net assets. The Sub-Advisor has agreed,
however, to waive its entire fee until further notice. The Portfolio Management
Agreement with the Sub-Advisor 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 the Sub-Advisor.

The Advisor will provide direct portfolio management services to the extent that
a sub-advisor does not provide those services. In the future, the Advisor may
propose to the Investment Company that different or additional sub- advisor(s)
be engaged to provide investment advisory or portfolio management services to
the Fund. Prior to such engagement, any agreement with a sub-advisor would be
submitted to a vote of the Board of Directors and if required by law, by the
shareholders of the Fund. The Advisor may in its discretion manage all or a
portion of the Fund's portfolio directly, with or without the use of a sub-
advisor.

For additional information about the Advisor and the Sub- Advisor, see
"Investment Advisory and Other Services" in the Statement of Additional
Information.

<PAGE>

OTHER EXPENSES OF THE FUND. 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); promotional expenses in connection with the distribution of
the Fund's shares (see "Plan of Distribution"); 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.

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INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The Fund is a non-diversified mutual fund which seeks to achieve long-term
capital appreciation by investing primarily in equity securities of issuers
domiciled in countries with emerging or developing capital markets. Investments
in emerging or developing capital markets may exhibit substantially greater
price volatility than investments in developed markets, and therefore the Fund
is intended for long-term investors, not for those who may wish to redeem their
shares after a short period of time. All investments, including mutual funds,
have risks, and no investment is suitable for all investors. Investors should
consult with their financial and other advisors concerning the suitability of
this investment for their own particular circumstances. Accordingly, there is no
assurance that the Fund will achieve its investment objective.

Under normal market conditions, at least 65% of the total assets of the Fund
will be invested in equity securities of issuers in Emerging Markets (as defined
below). The Fund will not necessarily seek to diversify investments on a
geographical basis or on the basis of the level of economic development of any
particular country. However, the Fund will be invested in a minimum of three
countries defined as Emerging Markets. The Fund's portfolio of equity securities

<PAGE>

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 equity securities of issuers in Emerging
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.

An issuer will be deemed to be in an Emerging Market if: (1) the principal
securities trading market for such issuer is in an Emerging Market; (2) such
issuer derives at least 50% of its revenues or earnings, either alone or on a
consolidated basis, from goods produced or sold, investments made or services
performed in an Emerging Market, or has at least 50% of its total assets
situated in one or more Emerging Markets; or (3) such issuer is organized under
the laws of, and with a principal office in, an Emerging Market. Determinations
as to whether an issuer is an Emerging Markets issuer will be made by the
Sub-Advisor based on publicly available information and inquires made to the
issuers.

As used in this Prospectus, an Emerging Market is any country except: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Luxembourg, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland,
United Kingdom and the United States.

Emerging 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 and Sub-Advisor
believe that investments in equity securities of issuers in Emerging Markets
offer the opportunity for significant long-term investment returns. However,
these investments involve not only the risks discussed below with respect to
foreign securities (see "General Investment Policies - Risk Factors and Special
Considerations for International Investing"), but also other risks. Investments
in Emerging Markets may

<PAGE>

exhibit greater price volatility, have less liquidity and have settlement
arrangements which are less efficient than in developed markets. Furthermore,
the economies of countries with Emerging Markets generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by adjustments in currency values and 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 Fund may invest a portion of its assets in equity securities of smaller to
medium sized growth 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.

The governments in some Emerging Markets have been engaged in programs of
selling part or all of their stakes in government owned or controlled
enterprises ("privatizations"). The Advisor and Sub-Advisor believe that
privatizations may offer opportunities for significant capital appreciation, and
intend to invest assets of the Fund in privatizations in appropriate
circumstances. In certain Emerging Markets, the ability of foreign entities such
as the Fund to participate in privatizations may be limited by local law and/or
the terms on which the Fund may be permitted to participate may be less
advantageous than those afforded local investors. There can be no assurance that
governments in Emerging Markets will continue to sell companies currently owned
or controlled by them or that privatization programs will be successful.

Because the Fund is non-diversified, it may invest a larger percentage of its
assets in individual issuers than a diversified fund. In this regard, the Fund
is not subject to the general limitation that it not invest more than 5% of its
total assets in the securities of any one issuer. To the extent the Fund makes
investments in excess of 5% of its assets in a particular issuer, its exposure
to credit and market risks associated with that issuer is increased.

The Fund may invest in debt securities of both governmental and corporate
issuers in Emerging Markets which are rated

<PAGE>

Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB or higher by
S&P Ratings Group ("S&P") or, if unrated, determined by the Sub-Advisor to be of
comparable quality. 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. For further
information, see the Statement of Additional Information.

Debt securities are 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.
Capital appreciation in debt securities in which the Fund invests may arise as a
result of favorable changes in relative foreign exchange rates, in relative
interest rate levels and/or in the creditworthiness of issuers. The receipt of
income from debt securities owned by the Fund is incidental to the Fund's
objective of long-term capital appreciation.

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-equivalent investments or in high quality debt securities with 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-equivalent investments
or in high quality debt securities with maturities of one year or less.

In seeking to protect against the effect of adverse changes in the financial
markets in which the Fund invests, or against currency exchange rate changes
that are adverse to the present or prospective positions of the Fund, the Fund
may use forward currency contracts, options on securities, options on indices,
options on currencies, and futures contracts and options on futures contracts on
securities and currencies. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose performance
is derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). There can be no assurance that
the Fund's risk management policies will succeed. These

<PAGE>

techniques are described below and are further detailed in
the Statement of Additional Information.

GENERAL INVESTMENT POLICIES

MONEY MARKET INSTRUMENTS. The Fund may invest in any of the following "money
market" instruments: certificates of deposit, time deposits, commercial paper,
bankers' acceptances and Eurodollar certificates of deposit; U.S.
dollar-denominated money market instruments of foreign financial institutions,
corporations and governments; U.S. Government and agency securities; money
market mutual funds; and other debt securities which are not specifically named
but which meet the Fund's quality guidelines. The Fund also may enter into
repurchase agreements as described below and may purchase variable and floating
rate debt securities.

At the time of purchase, short-term securities must be rated in the top rating
category by at least two nationally recognized statistical rating organizations
("NRSROs") or by a single NRSRO in the case of a security rated by only one
NRSRO, or, if not rated by an NRSRO, must be of comparable quality as determined
by the Advisor or the Sub-Advisor. Generally, high quality short-term securities
must be issued by an entity with an outstanding debt issue rated A or better by
an NRSRO, or an entity of comparable quality as determined by the Advisor or the
Sub-Advisor. Obligations of foreign banks, foreign corporations and foreign
branches of domestic banks must be payable in U.S. dollars. See Appendix A to
the Statement of Additional Information for a description of rating categories.

U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. Government securities,
which are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as Treasury bills,
notes and bonds and Government National Mortgage Association certificates, are
supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Mortgage Corporation, are supported by the right
of the issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities as described above

<PAGE>

in the future, other than as set forth above, since it is not obligated to do
so by law.

There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business, which may take substantially more than three
business days for non-U.S. securities, are not treated by the Fund as
when-issued or forward commitment transactions and, accordingly, are not subject
to the foregoing limitations, even though some of the risks described above may
be present in such transactions.

SHARES OF INVESTMENT COMPANIES. The Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
investment companies to the extent that they may facilitate achieving the
objective of the Fund or to the extent that they afford the principal or most
practical means of access to a particular market or markets or they represent
attractive investments in their own right. Pursuant to the 1940 Act, the
percentage of Fund assets which may be so invested is not limited, provided that
the Fund and its affiliates do not acquire more than 3% of the shares of any
such investment company. The provisions of the 1940 Act may also impose certain
restrictions on redemption of the Fund's shares in other investment companies.
The Fund's purchase of shares of investment companies may result in the payment
by a shareholder of duplicative management fees. The Advisor and/or Sub-Advisor
will consider such fees in determining whether to invest in other mutual funds.
The Fund will invest only in investment companies which do not charge a

<PAGE>

sales load; however, the Fund may invest in such companies with distribution
plans and fees under Rule 12b-1 of the 1940 Act, and may pay customary brokerage
commissions to buy and sell shares of closed-end investment companies.

The return on the Fund's investments in investment companies will be reduced by
the operating expenses, including investment advisory and administrative fees,
of such companies. The Fund's investment in a closed-end investment company may
require the payment of a premium above the net asset value of the investment
company's shares, and the market price of the investment company thereafter may
decline without any change in the value of the investment company's assets. The
Fund, however, will not invest in any investment company or trust unless it is
believed that the potential benefits of such investment are sufficient to
warrant the payment of any such premium.

As an exception to the above 1940 Act restrictions, the Fund does have the
authority to invest all of its assets in the securities of a single open-end
investment company with substantially the same fundamental investment
objectives, restrictions and policies as that of the Fund. The Fund will notify
its shareholders prior to initiating such an arrangement.

REPURCHASE AGREEMENTS. As part of its cash reserve position, the Fund may enter
into repurchase agreements through which the Fund acquires a security (the
"underlying security") from the seller, a well-established securities dealer or
a bank that is a member of the Federal Reserve System. At that time, the bank or
securities dealer agrees to repurchase the underlying security at the same
price, plus a specified amount of interest. Repurchase agreements are generally
for a short period of time, often less than a week. The seller must maintain
with the Fund's custodian collateral equal to at least 100% of the repurchase
price, including accrued interest, as monitored daily by the Advisor and/or
Sub-Advisor. The Fund will not enter into a repurchase agreement with a maturity
of more than seven business days if, as a result, more than 15% of the value of
its net assets, together with other illiquid assets, would then be invested in
such repurchase agreements. The Fund will only enter into repurchase agreements
where (1) the underlying securities are issued or guaranteed by the U.S.
Government, (2) the market value of the underlying security, including interest
accrued, 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

<PAGE>

account of the custodian or a bank acting as agent. In the event of a bankruptcy
or other default of a seller of a repurchase agreement, the Fund could
experience both delays in liquidating the underlying securities and losses,
including: (1) a possible decline in the value of the underlying security during
the period in which the Fund seeks to enforce its rights thereto; (2) possible
subnormal levels of income and lack of access to income during this period; and
(3) expenses of enforcing the Fund's rights.

PORTFOLIO TURNOVER. The Fund expects to trade in securities for short-term gain
whenever deemed advisable by the Advisor and/or Sub-Advisor in order to take
advantage of anomalies occurring in general market, economic or political
conditions. Therefore, the Fund may have a higher portfolio turnover rate than
that of some other investment companies, but it is anticipated that the annual
portfolio turnover rate of the Fund will not exceed 200%. The portfolio turnover
rate is calculated by dividing the lesser of sales or purchases of long-term
portfolio securities by the Fund's average month-end long-term investments. High
portfolio turnover involves correspondingly greater transaction costs in the
form of dealer spreads or brokerage commissions and other costs that the Fund
will bear directly, and may result in the realization of net capital gains,
which are generally taxable when distributed to shareholders.

LOANS OF PORTFOLIO SECURITIES. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in an
amount not exceeding 33 1/3% of its net assets. The borrower must maintain with
the Fund's custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities, or possible loss of
rights in the collateral should the borrower fail financially. The lender also
may bear the risk of capital loss on investment of the cash collateral, which
must be returned in full to the borrower when the loan is terminated. Loans will
be made only to firms deemed by the Advisor to be of good standing and will not
be made unless, in the judgment of the Advisor, the consideration to be earned
from such loans would justify the associated risk.

<PAGE>

BORROWING. The Fund may borrow from banks in an amount not exceeding 30% of the
value of its total assets for temporary or emergency purposes and enter into
reverse repurchase agreements. If the income and gains on securities purchased
with the proceeds of borrowings or reverse repurchase agreements exceed the cost
of such borrowings or agreements, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the cost, earnings or net asset value would decline faster
than otherwise would be the case. If the 300% asset coverage required by the
1940 Act should decline as a result of market fluctuation or other reasons, the
Fund may be required to sell some of its portfolio securities within three days
to reduce the borrowings and restore the 300% asset coverage, even though it may
be disadvantageous from an investment standpoint to sell securities at that
time.

WARRANTS OR RIGHTS. Warrants or rights may be acquired by the Fund in connection
with other securities or separately and provide the Fund with the right to
purchase other securities of the issuer at a later date. As a condition of its
continuing registration in certain states, the Fund's investments in warrants or
rights, valued at the lower of cost or market, will not exceed 5% of the value
of its net assets, and not more than 2% of such assets will be invested in
warrants and rights which are not listed on the American or New York Stock
Exchanges. Warrants or rights acquired by the Fund in units or attached to
securities will be deemed to be without value for purposes of this restriction.
These limits are not fundamental policies of the Fund and may be changed by the
Board of Directors without shareholder approval.

OPTIONS AND FUTURES CONTRACTS. When the Fund is not fully invested, strategies
such as buying calls, writing puts, and buying futures may be used to increase
its exposure to price changes in stocks or debt securities. When the Advisor
and/or Sub-Advisor wishes to hedge against market fluctuations, strategies such
as buying puts, writing calls, and selling futures may be used to reduce market
exposure. Since most stock index futures and options are based on broad stock
market 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 Fund invests. The Fund will maintain segregated accounts consisting of
liquid assets, such as cash, U.S. Government securities or other high quality
debt securities (or, as permitted by applicable regulations, enter into certain

<PAGE>

offsetting positions) to cover its obligations under options and futures
contacts to avoid leveraging.

In seeking appreciation or to reduce principal volatility, the Fund may also (1)
enter into futures contracts contracts for the future delivery of debt
securities, stock, stock index futures contracts with respect to the S&P 500
Index, small capitalization stock market indices or other similar broad-based
stock market indices, the initial margins of which are limited to 5% of the
Fund's assets; and (2) purchase put and call options on portfolio securities,
stock indices or stock index futures contracts - the premiums of which are
limited to 5% of the Fund's assets.

The Fund may write put and call options. It will only do so by writing covered
put or call options, and the aggregate value of the securities underlying put
options, as of the date of sale of the options, will not exceed 50% of the net
assets of the Fund.

The Fund will set aside cash, cash equivalents, or high quality debt securities,
or hold a covered position against any potential delivery or payment obligations
under any outstanding option or futures contracts.

Options and futures can be volatile investments. If the Advisor and/or
Sub-Advisor applies a hedge at an inappropriate time or evaluates market
conditions incorrectly, options and futures strategies may lower the Fund's
return. The Fund could also experience a loss if the prices of its options or
futures positions were poorly correlated with its other investments, or if it
could not close out its positions because of an illiquid secondary market.

Although these investment practices will be used primarily to minimize the
fluctuation of principal, they do involve risks which are different in some
respects from the investment risks associated with similar funds which do not
engage in such activities. These risks may include the following: futures
contracts - no assurance that closing purchase transactions will be available at
favorable prices, possible reduction of the Fund's income due to the use of
hedging, the possible reduction in value of both the securities hedged and the
hedging instrument, and possible loss in excess of the initial margin payment;
options and futures contracts - imperfect correlation between the contract and
the underlying security, commodity or index and unsuccessful hedging
transactions due to incorrect forecasts of market trends; writing covered call
options - the

<PAGE>

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. The Fund 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 the Fund's portfolio securities. The 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.

The 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, the Fund may enter into a currency contract to sell
the currency the Advisor and/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, the 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

<PAGE>

instruments, and their use involves certain risks beyond those associated with
transactions in other futures contracts.

While the 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, the 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, the Fund
will set aside with its Custodian cash, cash equivalents or high quality debt
securities, or hold a coverage position against any potential delivery or
payment obligations under any outstanding contracts. To the extent the Fund
enters into over-the-counter options, the options and the assets so segregated
or 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 the Fund
may not exceed 5% of the Fund's net assets.

Although the 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.

<PAGE>

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 vice
versa in an attempt to protect itself against interest rate movements exceeding
minimum or maximum levels. Whether the 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.

The 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 the 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. Investment
in securities of foreign entities and securities denominated in foreign
currencies involves risks typically not present to the same degree in domestic
investments. Likewise, investment in ADRs and EDRs presents similar risks, even
though the Fund will purchase, sell and be paid dividends on ADRs in U.S.
dollars. These risks include fluctuations in currency exchange rates, which are
affected by international balances of payments and other economic and financial
conditions; government intervention; speculation; and other factors. With
respect to certain

<PAGE>

foreign countries, there is the possibility of expropriation or nationalization
of assets, confiscatory taxation and political, social or economic instability.
The Fund may be required to pay foreign withholding or other taxes on
certain of its 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 some 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, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States, particularly with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Fund to make intended securities purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Settlement
procedures in certain emerging markets also carry with them a heightened risk of
loss due to the failure of the broker or other service provider to deliver cash
or securities.

The value of the Fund's portfolio securities computed in U.S. dollars will vary
with increases and decreases in the exchange rate between the currencies in
which the Fund has

<PAGE>

invested and the U.S. dollar. A decline in the value of any particular
currency against the U.S. dollar will cause a decline in the U.S. dollar value
of the Fund's holdings of securities denominated in such currency and,
therefore, will cause an overall decline in the Fund's net asset value and net
investment income and capital gains, if any, to be distributed in U.S. dollars
to shareholders by the Fund.

The rate of exchange between the U.S. dollar and other currencies is influenced
by many factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the price of oil, the pace of activity in the industrial countries,
including the United States, and other economic and financial conditions
affecting the world economy.

The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Advisor or Sub-Advisor to be fully exchangeable into U.S. dollars without
legal restriction. The Fund may purchase securities that are issued by the
government or a corporation or financial institution of one nation but
denominated in the currency of another nation. To the extent that the Fund
invests in ADRs, the depository bank generally pays cash dividends in U.S.
dollars regardless of the currency in which such dividends originally are paid
by the issuer of the underlying security.

The operating expense ratio of the Fund may be higher than that of an investment
company investing exclusively in U.S. securities because certain expenses, such
as custodial, transfer and brokerage costs, may be higher.

Several of the countries in which the Fund may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital gains),
(ii) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation, (iii)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor, (iv) limitations on the types of
securities which a foreign investor may purchase and (v) restrictions on a
foreign

<PAGE>

investor's right to invest in companies whose securities are not publicly
traded. In some circumstances, these restrictions may limit or preclude
investment in certain countries. Therefore, the Fund intends to invest in such
countries through the purchase of shares of investment companies organized under
the laws of such countries.

The Fund's interest and dividend income from foreign issuers may be subject to
non-U.S. withholding taxes. The Fund also may be subject to taxes on trading
profits in some countries. In addition, many of the countries in the Pacific
Basin have a transfer or stamp duties tax on certain securities transactions.
The imposition of these taxes will increase the cost to the Fund of investing in
any country imposing such taxes. For United States tax purposes, United States
shareholders may be entitled to a credit or deduction to the extent of any
foreign income taxes paid by the Fund. See "Dividends, Distributions and Federal
Income Taxation."

AMERICAN DEPOSITORY RECEIPTS. American Depository Receipts ("ADRs") are
negotiable receipts issued by a United States bank or trust to evidence
ownership of securities in a foreign company which have been deposited with such
bank or trust's office or agent in a foreign country. Investing in ADRs presents
risks not present to the same degree as investing in domestic securities even
though the Fund will purchase, sell and be paid dividends on ADRs in U.S.
dollars. These risks include fluctuations in currency exchange rates, which are
affected by international balances of payments and other economic and financial
conditions; government intervention; speculation; and other factors. With
respect to certain foreign countries, there is the possibility of expropriation
or nationalization of assets, confiscatory taxation and political, social and
economic instability. The Fund may be required to pay foreign withholding or
other taxes on certain of its ADRs, but investors may or may not be able to
deduct their pro rata shares of such taxes in computing their taxable income, or
take such shares as a credit against their U.S. income taxes. See "Dividends,
Distributions and Federal Income Taxation." Unsponsored ADRs are offered by
companies which are not prepared to meet either the reporting or accounting
standards of the United States. While readily exchangeable with stock in local
markets, unsponsored ADRs may be less liquid than sponsored ADRs. Additionally,
there generally is less publicly available information with respect to
unsponsored ADRs.

INVESTMENT RESTRICTIONS. The Fund has certain fundamental policies that
are described in the Statement of Additional

<PAGE>

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). These investment
restrictions and the Fund's investment objective cannot be changed without the
approval of shareholders of the Fund; all other investment practices described
in this Prospectus and in the Statement of Additional Information can be changed
by the Board of Directors without shareholder approval.

- -------------------------------------------------------------------------------

INVESTMENT RESULTS

The Fund may from time to time include information on its investment results
and/or comparisons of its investment results to various unmanaged indices or
results of other mutual funds or groups of mutual funds in advertisements, sales
literature or reports furnished to present or prospective shareholders. All such
figures are based on historical performance data and are not intended to be
indicative of future performance. The investment return and principal value of
an investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.

The Fund may calculate performance on an average annual total return basis for
l-, 5- and 10-year periods and over the life of the Fund, after such periods
have elapsed. Average annual total return will be computed by determining the
average annual compounded rate of return over the applicable period that would
equate the initial amount invested to the ending redeemable value of the
investment. Ending redeemable value includes dividends and capital gain
distributions, reinvested at net asset value at the reinvestment date determined
by the Board of Directors. The resulting percentages indicate the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the period. The average annual compounded rate of return over various
periods may also be computed by utilizing ending redeemable values as determined
above.

The Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses of
the Fund, so that any investment results reported by the Fund should not

<PAGE>

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 will be included in the
Fund's annual and semi-annual reports, which will be mailed to shareholders
without charge upon request.

- -------------------------------------------------------------------------------

HOW TO INVEST

The shares of the Fund may be purchased through the Transfer Agent by submitting
payment by check, wire transfer 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, except for retirement plans
such as Individual Retirement Accounts (IRAs) and Keogh Plans. Retirement plans
are subject to a $1,000 minimum initial investment. The minimum initial
investment is waived for accounts opened with the Automatic Investment Plan and
may be waived in other instances at the sole discretion of the Advisor. (See
"Automatic Investment Plan.") Each subsequent investment in the Fund must be
$200 or more except in the case of retirement plans or Automatic Investment
Plans. There is a minimum continuing balance of

<PAGE>

$1,500 required for non-retirement accounts (calculated on the basis of original
investment value). In some cases, the minimum balance requirement may be waived.

Investors wishing to open a new account by bank wire must call the Transfer
Agent at 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. 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 and the Advisor may seek reimbursement of such
payments pursuant to the Fund's Plan of Distribution (see "Plan of
Distribution").

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, Boston, MA 02109, is the principal
underwriter for the Fund.

<PAGE>

- ------------------------------------------------------------------------------

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

STATEMENTS AND REPORTS

When a shareholder makes an initial investment in the Fund, a shareholder
account is opened in accordance with registration instructions. Each time there
is a transaction, such as an additional investment, a dividend or other
distribution, or a redemption, the shareholder will receive from the Transfer
Agent a confirmation statement showing the current transaction in the account
and the transaction date. Shareholders of the Fund will receive statements as of
the end of March, June, September and December.

Shares are issued only in book-entry form (without certificates).

The fiscal year of the Fund ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which contain
a schedule of the Fund's portfolio securities and financial statements. Annual
reports will include audited financial statements. The federal income tax status
of shareholder distributions also will be reported to the Fund's shareholders
after the end of the calendar year on Form 1099-DIV.

EXCHANGES BETWEEN FUNDS

Shares of one Fremont Fund may be exchanged for shares of another Fremont Fund
at their respective net asset values, provided that the account registration
remains identical. Exchanges may only be made for shares of a Fremont Fund then
offered for sale in your state of residence. It is required that (1) all shares
in one Fund must be exchanged or (2) the remaining balance must be at least
$1,500. This minimum balance requirement may be waived. These exchanges are not
tax-free and will result in a shareholder realizing a gain or loss for tax
purposes, except in the case of tax-deferred retirement accounts or other
tax-exempt shareholders. A shareholder interested in making an exchange should
contact the Investment Company to request a current prospectus.

<PAGE>

The following are the Fremont Mutual Funds currently offered to the public:

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
Fremont Emerging Markets Fund

Exchanges by mail should be sent to the Transfer Agent at the address set forth
in the last section of this Prospectus.

Purchases, redemptions and exchanges should be made for investment purposes
only. A pattern of frequent exchanges, purchases and sales is not acceptable
and, at the discretion of the Board of Directors, can be limited by the
Investment Company's refusal to accept further purchase and exchange orders from
the shareholder.

The Investment Company reserves the right to modify or eliminate the exchange
privilege upon 60 days' written notice to shareholders.

TELEPHONE EXCHANGE PRIVILEGE

An investor may elect on the account application to authorize exchanges by
telephone. A shareholder may give instructions regarding exchanges by calling
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.

<PAGE>

AUTOMATIC INVESTMENT PLAN

A shareholder may authorize a withdrawal to be made automatically once or twice
each month from a credit balance in the shareholder's bank checking, savings,
negotiable on withdrawal ("NOW") or similar account, with the proceeds to be
used to purchase shares of the Fund. The minimum initial investment is waived
for accounts opened with the Automatic Investment Plan. The amount of the
monthly investment must be at least $50, and is not otherwise subject to the
$200 minimum for subsequent investments. There is no obligation to make
additional payments, and the plan may be terminated by the shareholder at any
time. Termination requests must be received in writing at least 5 days prior to
the regular draft date, or the drafts will not cease until the next cycle. The
Transfer Agent may impose a charge for this service, although no such charge
currently is contemplated. If a shareholder's order to purchase shares is
cancelled due to nonpayment (for example, "insufficient funds"), the
shareholder's account will be subject to a $20 charge and the shareholder will
be responsible for reimbursing the 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

<PAGE>

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

<PAGE>

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 Fund
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions, and/or tape recording telephone instructions.

SYSTEMATIC WITHDRAWAL PLAN

A shareholder may request redemptions of a specified dollar amount (minimum of
$100) on either a monthly, quarterly, or yearly basis. Currently, there is no
charge for this service. Redemptions will be made on the last business day of
the month. Because a redemption constitutes a liquidation of shares, the number
of shares owned in the account will be reduced. Systematic redemptions should
not reduce the account below the minimum balance required (currently $1,500).
Shareholders may terminate the Systematic Withdrawal Plan at any time, but not
less than five days before a scheduled payment date. When an exchange is made
between 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 shareholders 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 redemption
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

<PAGE>

associations. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program. A notary public
is not an acceptable guarantor.

OTHER IMPORTANT REDEMPTION INFORMATION

A request for redemption will not be processed until all of the documentation
described above has been received by the Transfer Agent in proper form. A
shareholder in doubt about what documents are required should contact the
Transfer Agent.

Payment in redemption of shares is normally made within three business days
after receipt by the Transfer Agent of a request in proper form, provided that
payment in redemption of shares purchased by check or draft will be effected
only after such check or draft has been collected. Although it is anticipated
that this process will be completed in less time, this may take up to 15 days.
Redemption proceeds will not be delayed when shares have been paid for by wire
transfer, 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

<PAGE>

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 and dividend paying agent. In addition, MGF Service Corp.
has been retained by the Advisor to assist the Advisor 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.

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RETIREMENT PLANS

Shares of the Fund may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs); Qualified
Retirement Plans for self-employed persons and their employees; corporate
pension and profit-sharing plans; Simplified Employee Pension (SEP) IRAs; 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 pays any compensation due
to organizations hired for sub-transfer agency services where such services are
specific to retirement plans using the Fund as an investment option.

- ------------------------------------------------------------------------------

DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION

The Fund intends 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,

<PAGE>

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, with 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.

The Fund intends to distribute substantially all of its net investment income
once each year, and 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 Fund.

Shareholders may elect:

o to have all dividends and capital gain distribu-
tions automatically reinvested in additional
shares; or

o 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

o to receive all distributions of income dividends
and capital gains in cash.

Automatic reinvestments will be at net asset value on the day of reinvestment.
If no election is made by a shareholder, all dividends and capital gain
distributions will be automatically reinvested. These elections may be changed
by the shareholder at any time, but to be effective for a particular dividend or
capital gain distribution, the election

<PAGE>

must be received by the Transfer Agent approximately 5 business days prior
to the payment date to permit the change to be entered into the shareholder
account. The federal income tax status of dividends and capital gains
distributions is the same whether taken in cash or reinvested in shares.

Dividends and capital gains generally are taxable to shareholders at the time
they are paid. However, dividends or capital gains declared in December by the
Fund and paid in January are taxable as if paid in December. The Fund will
provide to its shareholders federal tax information annually by January 31,
including information about dividends and distributions paid during the year.

If a shareholder has not furnished a certified correct taxpayer identification
number (generally a Social Security number) and has not certified that
withholding does not apply, or if the Internal Revenue Service has notified the
Fund that the taxpayer identification number listed on the account is incorrect
according to their records or that the shareholder is subject to backup
withholding, federal law generally requires the Fund to withhold 31% from any
dividends and/or redemptions (including exchange redemptions). Amounts withheld
are applied to the shareholder's tax liability; a refund may be obtained from
the Internal Revenue Service if withholding results in overpayment of taxes. A
shareholder should contact the Transfer Agent if the shareholder is uncertain
whether a proper taxpayer identification number is on file with the Transfer
Agent. Federal law also requires the Fund to withhold 30%, or the applicable tax
treaty rate, from dividends paid to certain nonresident alien, non-U.S.
partnership and non-U.S. corporation shareholder accounts.

Dividends and interest from foreign issuers earned by the Fund may give rise to
withholding and other taxes imposed by foreign countries, generally at rates
from 10% to 40%. Tax conventions between certain countries and the United States
may reduce or eliminate these taxes. Foreign countries generally do not impose
taxes on capital gains with respect to investments by non-resident investors.
Except as indicated below, to the extent that the Fund does pay foreign
withholding or other foreign taxes on certain of its investments, investors will
not be able to deduct their pro rata shares of such taxes in computing their
taxable income and will not be able to take their shares of such taxes as a
credit against U.S. income taxes.

If more than 50% of the Fund's total assets at the close of its fiscal year
consist of securities of foreign corporations, the Fund will be eligible to
file, and will

<PAGE>

file, elections with the Internal Revenue Service pursuant to which shareholders
of the Fund will be required to include in their federal income tax returns as
gross income their respective pro rata portions of foreign taxes paid by the
Fund, to treat such amounts as foreign taxes paid by them, and to deduct such
respective pro rata portions in computing their taxable incomes or,
alternatively, to use them as foreign tax credits against their U.S. income
taxes. The Fund will report annually to its shareholders the amount per share of
such withholding.

The foregoing is a brief discussion of certain federal income tax
considerations. Please see "Taxes-Mutual Funds" in the Statement of Additional
Information for further information regarding the tax implications of investment
in the Fund.

- ------------------------------------------------------------------------------

PLAN OF DISTRIBUTION

Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund has
adopted a plan of distribution (the "Plan") under which the Fund may directly
incur or reimburse the Advisor for certain distribution-related expenses,
including payments to securities dealers and others, including the Underwriter,
who are engaged in the sale of shares of the Fund and who may be advising
investors regarding the purchase, sale or retention of Fund shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Advisor or MGF
Service Corp.; expenses of formulating and implementing marketing and
promotional activities, including direct mail promotions and mass media
advertising; expenses of preparing, printing and distributing sales literature
and prospectuses and statements of additional information and reports for
recipients other than existing shareholders of the Fund; expenses of obtaining
such information, analyses and reports with respect to marketing and promotional
activities as the Investment Company may, from time to time, deem advisable; and
any other expenses related to the distribution of the Fund's shares.

The annual limitation for payment of expenses pursuant to the Plan is .25% of
the Fund's average daily net assets. Unreimbursed expenditures will not be
carried over from year to year. In the event the Plan is terminated by the Fund
in accordance with its terms, the Fund will not be required to make any payments
for expenses incurred by the Advisor after the date the Plan terminates.

<PAGE>

- -------------------------------------------------------------------------------

CALCULATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE

The Fund's net asset value per share is computed by dividing the value of the
securities held by the Fund, plus any cash or other assets (including interest
accrued and dividends declared but not yet received) minus all liabilities
(including accrued expenses), by the total number of shares outstanding at such
time. There is no sales charge in connection with purchases or redemptions of
Fund shares.

The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. The Fund's portfolio
typically will include securities which trade primarily on non-U.S. exchanges or
otherwise in non-U.S. markets. Because of time zone differences, the prices of
these securities, as used for net asset value calculations, may be established
substantially in advance of the close of the New York Stock Exchange. Foreign
securities may also trade on days when the New York Stock Exchange is closed
(such as a Saturday). The net asset value and public offering price of the Fund,
to the extent that it holds securities valued on foreign markets, may vary
during periods when the New York Stock Exchange is closed. As a result, the
value of the Fund's portfolio may be affected significantly by such trading on
days when a shareholder has no access to the Fund. For further information, see
"How to Invest," "How to Redeem Shares" and "Exchanges Between Funds" in this
Prospectus, and "How to Invest" and "Other Investment and Redemption Services"
in the Statement of Additional Information.

The net asset value and public offering price of the Fund will be determined as
of the close of the regular session of the New York Stock Exchange. The shares
of the Fund are offered at net asset value without a sales charge. Purchase,
redemption and exchange orders received in proper form by the Transfer Agent
before 4:00 p.m. Eastern time, will be priced at the net asset value next
determined on that day (with certain limited exceptions discussed in the
Statement of Additional Information). Orders received by the Transfer Agent
after 4:00 p.m. Eastern time, will be entered at the next calculated net asset
value.

- -------------------------------------------------------------------------------

EXECUTION OF PORTFOLIO TRANSACTIONS

Orders for the Fund's portfolio securities transactions are placed by the
Advisor or Sub-Advisor. The Advisor and Sub- Advisor strive to obtain the best
available prices in the

<PAGE>

Fund's portfolio transactions, taking into account the costs and promptness of
executions. Subject to this policy, transactions may be directed to those
broker-dealers who provide research, statistical and other information to the
Fund, the Advisor or the Sub-Advisor or who provide assistance with respect to
the distribution of Fund shares. There is no agreement or commitment to place
orders with any broker-dealer.

Debt securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. Government securities
issued by the United States and other countries, and money market securities in
which the Fund may invest, are generally traded in the over-the-counter ("OTC")
markets. In underwritten offerings, securities usually are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, securities
may be purchased directly from an issuer, in which case no commissions or
discounts are paid. Dealers may receive commissions on futures, currency and
options transactions. Commissions or discounts in foreign securities exchanges
or OTC markets typically are fixed and generally are higher than those in U.S.
securities exchanges or OTC markets. There is generally less government
supervision and regulation of foreign exchanges and brokers than in the United
States. Foreign security settlements may, in some instances, be subject to
delays and related administrative uncertainties.

Subject to the requirements of the Investment Company Act of 1940 and procedures
adopted by the Board of Directors, the Fund may execute portfolio transactions
through any broker or dealer and pay brokerage commissions to a broker which is
an affiliated person of the Investment Company, the Advisor or the Sub-Advisor,
or an affiliated person of such person. It is presently anticipated that certain
affiliates of the Sub-Advisor will effect brokerage transactions of the Fund in
certain markets and receive compensation for such services.

- -------------------------------------------------------------------------------

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

<PAGE>

(with proportional voting for fractional shares) and are freely transferable.
Shareholders have no preemptive or conversion rights. Shares may be voted in the
election of directors and on other matters submitted to the vote of
shareholders. As permitted by Maryland law, there normally will be no annual
meeting of shareholders in any year, except as required under the 1940 Act. The
1940 Act requires that a meeting be held within 60 days in the event that less
than a majority of the directors holding office has been elected by
shareholders. Directors shall continue to hold office until their successors are
elected and have qualified. Investment Company shares do not have cumulative
voting rights, which means that the holders of a majority of the shares voting
for the election of directors can elect all of the directors. Shareholders
holding 10% of the outstanding shares may call a meeting of shareholders for any
purpose, including that of removing any director. A director may be removed upon
a majority vote of the shareholders qualified to vote in the election. The 1940
Act requires the Investment Company to assist shareholders in calling such a
meeting.

On any matter submitted to a vote of shareholders, such matter shall be voted by
the Fund's shareholders separately when the matter affects the specific interest
of the Fund (such as approval of the Advisory Agreement with the Advisor and the
Portfolio Management Agreement with the Sub-Advisor) except in matters where a
vote of all 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 nonas-
sessable. The Board of Directors may, at its discretion, establish and issue
shares of additional series of the Investment Company.

<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 Guaran-
tees."

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:

<PAGE>

Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
800-548-4539 or 415-284-8900

FREMONT MUTUAL FUNDS, INC.

For more information on the Fremont Family of Mutual Funds
please call 1-800-548-4539 (press 1) 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

<PAGE>

LEGAL COUNSEL

Morrison & Foerster, LLP
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.

<PAGE>

TABLE OF CONTENTS

ITEM PAGE NO.

Summary of Fees and Expenses................ 2

The Advisor, the Sub-Advisor and The Fund... 3

Investment Objective, Policies
and Risk Considerations................... 5

General Investment Policies................. 9

Investment Results.......................... 21

How to Invest............................... 22

Shareholder Account Services and
Privileges................................ 24

How to Redeem Shares........................ 26

Retirement Plans............................ 30

Dividends, Distributions and Federal
Income Taxation........................... 30

Plan of Distribution........................ 33

Calculation of Net Asset Value and
Public Offering Price..................... 34

Execution of Portfolio Transactions......... 34

General Information......................... 35

Telephone Numbers and Addresses............. 37

FREMONT FUNDS

50 BEALE STREET, SUITE 100
SAN FRANCISCO, CA 94105
P.O. BOX 193663
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

<PAGE>

FREMONT MUTUAL FUNDS, INC.

FREMONT EMERGING MARKETS FUND

1-800-548-4539

Part B

Statement of Additional Information

This Statement of Additional Information concerning the Fremont Emerging Markets
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 June 24, 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 June 24, 1996.

<PAGE>

TABLE OF CONTENTS

Investment Objective, Policies and Risk
Considerations............................................................ 3
Investment Restrictions.....................................................21
Investment Company Directors and Officers...................................24
Investment Advisory and Other Services......................................27
Plan of Distribution........................................................30
Execution of Portfolio Transactions.........................................32
How to Invest...............................................................33
Other Investment and Redemption Services....................................35
Taxes--Mutual Funds.........................................................36
Additional Information......................................................40
Investment Results......................................................... 41
Information About Fremont Investment Advisors...............................51
Appendix A: Description of Ratings.........................................A-1

<PAGE>

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The descriptions below are intended to supplement the material in the Prospectus
under "Investment Objective, Policies and Risk Considerations" and "General
Investment Policies."

WRITING COVERED CALL OPTIONS. The Emerging Markets Fund (the "Fund") may write
(sell) "covered" call options and purchase options to close out options
previously written by the Fund. The purpose of writing covered call options is
to generate additional premium income for the Fund. This premium income will
serve to enhance the Fund's total return 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 Fund.

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
Fund will write only covered call options. This means that the Fund will only
write a call option on a security, index or currency which the 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 the
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 the Fund will not
do), but capable of enhancing the Fund's total return. When writing a covered
call option, the Fund, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security or currency above the
exercise

<PAGE>

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, the 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, the 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 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 the Fund's
custodian. The Fund will not 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 the 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 the Fund for writing covered call options will
be recorded as a liability in the 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 the 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 the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to sell
a particular security or currency from its portfolio on which

<PAGE>

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 the 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 will pay transaction costs in
connection 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 Fund 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, the 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.

The 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.

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, the 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.

<PAGE>

If the 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 loss. The Fund will attempt to monitor Section 988 transactions
to avoid an adverse tax impact.

WRITING COVERED PUT OPTIONS. The Fund 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 Fund would write put options only on a covered basis, which means that the
Fund would maintain in a segregated account, or set aside, 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.) The Fund would generally write covered put options in
circumstances where the Advisor or Sub-Advisor wishes to purchase the underlying
security or currency for the 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 the 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

<PAGE>

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 Fund may purchase put options. As the holder of a
put option, the Fund has the right to sell the underlying security or currency
at the exercise price at any time during the option period. The Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire. The 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 Fund 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 the 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 transaction costs would reduce any capital gain otherwise
available for distribution when the security or currency is eventually sold.

The Fund may also purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the 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 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.

The Fund will commit no more than 5% of its assets to premiums when purchasing
put options. The premium paid by the Fund when purchasing a put option will be
recorded as an asset in the Fund's statement of assets and liabilities.

<PAGE>

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 the 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 Fund may purchase call options. As the holder of a
call option, the Fund has the right to purchase the underlying security or
currency at the exercise price at any time during the option period. The Fund
may enter into closing sale transactions with respect to such options, exercise
them or permit them to expire. The Fund may purchase call options for the
purpose of increasing its current return or avoiding tax consequences which
could reduce its current return. The 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 the 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 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 the 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 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.

The Fund will commit no more than 5% of its assets to premiums when purchasing
call options. The 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 the Fund's current
return. For example, where the Fund has written a call option on an underlying
security or currency having a current market value below the price at which such

<PAGE>

security or currency was purchased by the Fund, an increase in the market price
could result in the exercise of the call option written by the 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 realizes a gain;
if it is more, the Fund realizes a loss. Conversely, if the offsetting sale
price is more than the original purchase price, the Fund realizes a gain; if it
is less, the Fund realizes a loss. The transaction costs must also be included
in these calculations. There can be no assurance, however, that the 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 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.

The Fund may enter into interest rate, S&P Index (or other stock market indexes)
or currency Futures Contracts as a hedge against changes in prevailing levels of
stock values, interest rates, or currency exchange rates in order to establish
more definitely the effective return on securities

<PAGE>

or currencies 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 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, the Fund
will segregate, or set aside, cash and high-grade debt obligations to cover any
related liability.

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 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 the Fund's exposure to currency exchange rate fluctuations, the
Fund may be able to hedge its exposure more effectively and perhaps at a lower
cost through using Futures Contracts.

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 Stock Index contract 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 the 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

<PAGE>

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.

FUTURES CONTRACTS GENERALLY. Persons who trade in Futures Contracts may be
broadly classified as "hedgers" and "speculators." Hedgers, such as the Fund,
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 Fund's 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 the Fund owns, or Futures
Contracts will be purchased to protect the 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 the Fund's open positions in Futures Contracts. A margin
deposit ("initial margin") is intended to assure the 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.

<PAGE>

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 the Fund. In computing daily
net asset values, the 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, 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 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, the Fund would presumably have
sustained comparable losses

<PAGE>

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 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 Fund
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 or currencies held by the 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 the Fund to continue to qualify for federal

<PAGE>

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 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 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, 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 or currencies 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.

OPTIONS ON INTEREST RATE AND/OR CURRENCY 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 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

<PAGE>

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 Fund may
purchase call and put options on the underlying securities or currencies. 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 the Fund or to
reduce or eliminate the hedge position then currently held by the Fund, the Fund
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 Fund 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. The 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 value against the dollar of a

<PAGE>

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 Fund will not purchase an OTC option unless it believes that daily
valuation for such option is readily obtainable.

REVERSE REPURCHASE AGREEMENTS AND LEVERAGE. The Fund may enter into reverse
repurchase agreements which involve the sale of a security by the Fund and its
agreement to repurchase the security at a specified time and price. The Fund
will maintain in a segregated account, or set aside, 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 the Fund; accordingly, the 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 the Fund creates leverage which increases the Fund's investment
risk. If the income and gains on securities purchased with the proceeds of these
transactions exceed the cost, 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 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, the
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. The 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.

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

<PAGE>

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 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.

SWAP AGREEMENTS. The Fund 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.

<PAGE>

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.

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 Fund would calculate the
obligations of the parties to the agreement on a "net basis." Consequently the
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"). The 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 maintaining in a segregated
account, or setting aside, cash, U.S. Government securities, or high grade debt
obligations, to avoid any potential leveraging of the Fund's portfolio. The 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 the 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, the 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 the Fund to enter into swap agreements only with
counterparties that would be eligible for consideration as repurchase agreement
counterparties under the Fund's repurchase agreement guidelines. Certain
restrictions imposed on the Fund by the Internal Revenue Code may limit the
Fund's ability to use swap agreements. The swaps

<PAGE>

market is largely unregulated. It is possible that developments in the swaps
market, including potential government regulation, could adversely affect the
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. 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 or firm commitment basis. The Fund, as
purchaser, assumes the risk of any decline in value of the security beginning on
the date of the agreement or purchase and no interest accrues to the Fund until
it accepts delivery of the security. The Fund will not use such transactions for
leveraging purposes, and accordingly will segregate, or set aside, 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 the 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 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 the
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. The 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 the 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 Fund to investment risks that
are different in some respects from

<PAGE>

those of investments in obligations of domestic issuers. Although the 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 the 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. The Fund may invest up to 15% of its net assets in all
forms of "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 Fund 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 Fund 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 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 the Fund's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.

LENDING OF PORTFOLIO SECURITIES. For the purpose of realizing additional
income, the Fund may make secured loans

<PAGE>

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. The Fund 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. The Fund may invest in debt securities rated not lower
than Baa or BBB. In the event that the rating for any security held by the Fund
drops below the minimum acceptable rating applicable to the 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 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

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 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:

<PAGE>

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.

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.

6. Change its status as a non-diversified investment
company.

<PAGE>

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 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.

<PAGE>

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 the Fund's net assets.

17. Make short sales of securities or maintain a short
position, except that the 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.

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

The By-laws of Fremont Mutual Fund, 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 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.
<TABLE>
<C> <C> <C> <C>
PRINCIPAL OCCUPATIONS
AND BUSINESS EXPERIENCE
NAME AND ADDRESS AGE POSITIONS HELD FOR PAST FIVE YEARS

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, L.L.C. and Fremont
San Francisco, CA 94105 Investors, Inc.; Director, Sequoia
Ventures, Inc., Sit/Kim
International Investment
Associates and J.P. Morgan
Securities Asia.

<PAGE>

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 1/96 - Present
Jahnke & Associates Chairman, Financial Design
58 Camino del Diablo Education Corp.
Orinda, CA 94563
3/93 - Present
Principal, Jahnke & Associates
(Consultants)

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
1640 Sylvaner advisor) and Fairfield Capital
St. Helena, CA 94574 Funding, Inc. (a broker-dealer)

Peter F. Landini(4) 45 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 40 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,

<PAGE>

Liberty Securities

Norman Gee 46 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 32 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 Vice President and Controller,
Fremont Investment and Controller Fremont Investment Advisors,
Advisors, Inc. Inc.
50 Beale St., Suite 100
San Francisco, CA 94105

<PAGE>

Gretchen Hollstein 29 Vice President 8/92-Present
Fremont Investment Regional Sales Manager,
Advisors, Inc. Fremont Investment Advisors,
50 Beale St., Suite 100 Inc.
San Francisco, CA 94105
8/90 -7/92
Assistant Vice President,
Bank of California

Dean Boebinger 40 Vice President 8/94-Present
Fremont Investment Regional Sales Manager,
Advisors, Inc. Fremont Investment Advisors,
3000 Post Oak Blvd, Suite 100 Inc.
Houston, TX 77056
3/92-7/94
Certified Financial Planner and
Account Executive, GNA Inc.
</TABLE>
- ----------------------------
(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.

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 April 1, 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 Fund acquired by certain
retirement plans.

The Fund will pay all of its own expenses not assumed by the
Advisor, including, but not limited to, the following: custodian,

<PAGE>

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); promotional
expenses in connection with the distribution of the Fund's shares (see "Plan of
Distribution"); 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. Once waived, fees will not be recognized 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).

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
currently waiving the entire administrative fee until further notice.

<PAGE>

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 Fund 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-ADVISOR. The Advisory Agreement authorizes 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 Fund. Pursuant to this authority,
Credit Lyonnais International Asset Management (HK) Limited serves as the Fund's
Sub-Advisor. The Sub-Advisor is overseen by the members of the Fremont
Investment Committee. See "Investment Company Directors and Officers."

The Portfolio Management Agreement provides that the Sub-Advisor agrees 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 Fund's current Prospectus and
Statement of Additional Information), as interpreted from time to time by the
Board of Directors.

For its services under the Portfolio Management Agreement, the Advisor has
agreed to pay the Sub-Advisor an annual fee equal to .50% of the value of the
Fund's average net assets, payable monthly. The Sub-Advisor has agreed to waive
its fees until further notice.

The Portfolio Management Agreement continues 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

<PAGE>

shares of the Fund, and (ii) by the vote of a majority of the directors of the
Investment Company who are not parties to the Agreement or interested persons of
the Advisor or the Sub-Advisor or the Investment Company. The 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, the Agreement
automatically terminates in the event of its assignment.

PRINCIPAL UNDERWRITER. 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 (not the Fund); however, the Advisor may seek
reimbursement of payments made to the Distributor pursuant to the Fund's Plan of
Distribution (see "Plan of Distribution").

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 concerning their
accounts, 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 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.

PLAN OF DISTRIBUTION

As stated in the Prospectus, the Fund has adopted a plan of distribution
(the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940
which permits the Fund to pay for expenses incurred in the distribution and
promotion of the Fund's shares, including but not limited to, the printing of
prospectuses, statements of additional information and reports used for sales
purposes, advertisements, expenses of preparation and printing of sales
literature, promotion, marketing and sales

<PAGE>

expenses and other distribution-related expenses, including any distribution
fees paid to securities dealers or other firms who have executed a distribution
or service agreement with the Underwriter. The Plan expressly limits payment of
the distribution expenses listed above in any fiscal year to a maximum of .25%
of the average daily net assets of the Fund. Unreimbursed expenses will not be
carried over from year to year.

Agreements implementing the Plan (the "Implementation Agreements") are in
writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plan are made in accordance with written agreements.

The continuance of the Plan and the Implementation Agreements must be
specifically approved at least annually by a vote of the Investment Company's
Board of Directors and by a vote of the Directors who are not interested persons
of the Investment Company and have no direct or indirect financial interest in
the Plan or any Implementation Agreement (the "Independent Directors") at a
meeting called for the purpose of voting on such continuance. The Plan may be
terminated at any time by a vote of a majority of the Independent Directors or
by a vote of the holders of a majority of the outstanding shares of the Fund. In
the event the Plan is terminated in accordance with its terms, the Fund will not
be required to make any payments for expenses incurred by the Adviser after the
termination date. Each Implementation Agreement terminates automatically in the
event of its assignment and may be terminated at any time by a vote of a
majority of the Independent Directors or by a vote of the holders of a majority
of the outstanding shares of the Fund on not more than 60 days' written notice
to any other party to the Implementation Agreement. The Plan may not be amended
to increase materially the amount to be spent for distribution without
shareholder approval. All material amendments to the Plan must be approved by a
vote of the Investment Company's Board of Directors and by a vote of the
Independent Directors.

In approving the Plan, the Directors determined, in the exercise of their
business judgment and in light of their fiduciary duties as Directors, that
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Board of Directors believes that expenditure of the Fund's
assets for distribution expenses under the Plan should assist in the growth of
the Fund which will benefit the Fund and its shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Directors make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Fund's assets for distribution will be
realized. While

<PAGE>

the Plan is in effect, all amounts spent by the Fund pursuant to the Plan and
the purposes for which such expenditures were made must be reported quarterly to
the Board of Directors for its review. In addition, the selection and nomination
of those Directors who are not interested persons of the Investment Company are
committed to the discretion of the Independent Directors during such period.

Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Investment Company believes that the Glass- Steagall Act should not preclude a
bank from providing such services. However, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law. If a bank were prohibited from continuing to perform all or a part of
such services, management of the Investment Company believes that there would be
no material impact on the Fund or its shareholders. Banks may charge their
customers fees for offering these services to the extent permitted by regulatory
authorities, and the overall return to those shareholders availing themselves of
the bank services will be lower than to those shareholders who do not. The Fund
may from time to time purchase securities issued by banks which provide such
services; however, in selecting investments for the Fund, no preference will be
shown for such securities.

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 or Sub-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 or Sub-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.

The Fund contemplates purchasing foreign equity and/or fixed-income securities
in over-the-counter markets or stock exchanges located in the countries in which
the respective

<PAGE>

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 the Fund 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 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 the Fund may invest are
generally traded in the over-the-counter markets.

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 the
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
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 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.

<PAGE>

The 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 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 the Fund may be significantly affected by such
trading on days when a shareholder has no access to the Fund. 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 Privileges - Exchanges Between 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
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. Options on currencies
purchased by the Fund 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;

<PAGE>

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 Fund's 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 the Fund used in such
calculation. Events affecting the values of 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 the Fund's 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. 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;

5. The Fund's liabilities, including proper accruals of
taxes and other expense items, are deducted from total
assets; and

6. 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.

<PAGE>

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. 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 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." The Fund will be treated under the
Internal Revenue Code (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

<PAGE>

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 (if any)
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 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 the 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 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.

<PAGE>

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.

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 the
Fund in the same manner whether such dividends are received as shares or in
cash. If the Fund does not receive any dividend income from U.S. corporations,
dividends from the Fund will not be eligible for the dividends received
deduction allowed to corporations. To the extent that dividends received by the
Fund 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. 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 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
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 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 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
38

<PAGE>

a realized capital gain or loss for tax purposes. Under Code Section 1256,
futures contracts held by the 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 Fund 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 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.

Under the Code, the 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. The Fund may be required to pay
withholding and other taxes imposed by foreign countries generally at rates from
10% to 40% which would reduce the Fund's investment income. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.

So long as the Fund (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
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 Fund may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment

<PAGE>

companies ("PFICs"). Currently, PFICs are the only or primary means by which the
Fund may invest in some countries. If the 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 the 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 the 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.

The foregoing is a general abbreviated summary of present United States federal
income taxes on dividends and distributions 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 will be issued 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 will be
passed upon by Morrison & Foerster LLP, 345 California Street, San Francisco,
California 94104. In addition to acting as counsel to the Investment Company,

<PAGE>

Morrison & Foerster LLP 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
nine 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.

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 Fund is best suited as a long-term investment. While the Fund offers higher
potential total returns than certificates of deposit or money market funds, it
involves added return volatility or risk. The prospective investor must weigh
this potential for higher return against the associated higher risk.

INVESTMENT RESULTS

The Investment Company may from time to time include information on the
investment results of the Fund in advertisements or in reports furnished to
current or prospective shareholders.

<PAGE>

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 average annual total return
figures.

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 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.

The Investment Company may from time to time compare the investment results of
the Fund with, or refer to, 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.

<PAGE>

(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) Dow Jones Industrial Average.

(6) CNBC/Financial News Composite Index.

(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) Wilshire Associates, an on-line database for international
financial and economic data including performance measures for a
wide variety of securities.

(10) Morgan Stanley Europe, Australia and Far East (EAFE) Index which
is composed of foreign stocks.

(11) Morgan Stanley Capital International Emerging Markets Index which
measures stock market performance in various developing countries
around the world.

(12) IFC Emerging Markets Investables Indices which measure stock
market performance in various developing countries around the
world.

(13) Salomon Brothers World Bond Index which is composed of domestic
and foreign corporate and government fixed income securities.

(14) Lehman Brothers Government/Corporate Bond Index which is
a widely used index composed of investment quality U.S.
government and corporate fixed income securities.

(15) 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.

(16) 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.

<PAGE>

(17) 90-day U.S. Treasury Bills Index which is a measure of
the performance of constant maturity 90-day U.S. Treasury
Bills.

(18) Donoghue First Tier Money Fund Average which is an average of the
30-day yield of approximately 250 major domestic money market
funds.

(19) Salomon Brothers Non-U.S. World Government Bond Index
which is the World Government Bond index excluding its
U.S. market component.

(20) Salomon Brothers Non-Dollar Bond Index which is composed of
foreign corporate and government fixed income securities.

(21) Bear Stearns Foreign Bond Index which provides simple average
returns for individual countries and GNP-weighted index, beginning
in 1975. The returns are broken down by local market and currency.

(22) Ibbottson Associates International Bond Index which provides a
detailed breakdown of local market and currency returns since
1960.

(23) The World Bank Publication of Trends in Developing Countries
("TIDE") which provides brief reports on most of the World Bank's
borrowing members. The World Development Report is published
annually and looks at global and regional economic trends and
their implications for the developing economies.

(24) Datastream and Worldscope which is an on-line database retrieval
service for information including but not limited to international
financial and economic data.

(25) International Financial Statistics which is produced by
the International Monetary Fund.

(26) Various publications and annual reports such as the World
Development Report, produced by the World Bank and its affiliates.

(27) Various publications from the International Bank for
Reconstruction and Development/The World Bank.

(28) Various publications including but not limited to ratings agencies
such as Moody's Investors Service, Fitch Investors Service and
Standard Poor's Ratings Group.

<PAGE>

(29) Various publications from the Organization for Economic
Cooperation and Development.

Indices prepared by the research departments of such financial organizations as
the Sub-Advisor of the Fund; J.P. Morgan; Lehman Brothers; S.G. Warburg; Jardine
Fleming; the Asian Development Bank; Bloomberg, L.P.; Morningstar, Inc; 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 and the respective central banks of
various countries.

The Investment Company may use performance rankings and ratings reported
periodically in national financial publications such as, but not limited to,
Money Magazine, Forbes, The Wall Street Journal, Investor's Business Daily,
Fortune, Smart Money, Business Week, and Barron's.

The Advisor believes the Fund is an appropriate investment for long-term
investment goals including but not limited to funding retirement, paying for
education or purchasing a house. The Fund does not represent a complete
investment program and investors should consider the Fund as appropriate for a
portion of their overall investment portfolio with regard to their long-term
investment goals.

The Advisor believes that a growing number of consumer products, including but
not limited to home appliances, automobiles and clothing, purchased by Americans
are manufactured abroad. The Advisor believes that investing globally in the
companies that produce products for U.S. consumers can help U.S. investors seek
protection of the value of their assets against the potentially increasing costs
of foreign manufactured goods. Of course, there can be no assurance that there
will be any correlation between global investing and the costs of such foreign
goods unless there is a corresponding change in value of the U.S. dollar to
foreign currencies. From time to time, the Investment Company may refer to or
advertise the names of such companies although there can be no assurance that
the Fund may own the securities of these companies.

From time to time, the Investment Company may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all Fremont
Mutual Funds or the dollar amount of Fund assets under management or rankings by
DALBAR Savings, Inc. in advertising materials.

The Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future.

<PAGE>

The Fund may be compared in advertising to Certificates of Deposit (CDs), the
Bank Rate Monitor National Index, an average of the quoted rates for 100 leading
banks and thrifts in ten U.S. cities chosen to represent the ten largest
Consumer Metropolitan statistical areas, or other investments issued by banks.
The Fund differs from bank investments in several respects. The Fund may offer
greater liquidity or higher potential returns than CDs; but unlike CDs, the Fund
will have a fluctuating share price and return and is not FDIC insured.

The Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of total
return, assuming reinvestment of distributions, but does not take sales charges
or redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings, the Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.

The Investment Company may provide information designed to help individuals
understand their investment goals and explore various financial strategies. For
example, the Investment Company may describe general principles of investing,
such as asset allocation, diversification and risk tolerance.

Ibbottson Associates of Chicago, Illinois (Ibbottson) provides historical
returns of capital markets in the United States, including common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.

The Investment Company may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the Fund. The Fund
may also compare performance to that of other compilations or indices that may
be developed and made available in the future.

In advertising materials, the Advisor may reference or discuss its products and
services, which may include: retirement

<PAGE>

investing; the effects of dollar-cost averaging and saving for college or a
home. In addition, the Advisor may quote financial or business publications and
periodicals, including model portfolios or allocations, as they relate to fund
management, investment philosophy, and investment techniques.

The Fund may discuss its Quotron number, CUSIP number, and its current portfolio
management team.

From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the Fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk- adjusted performance. In addition, the Fund may quote financial
or business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques. Rankings that compare the
performance of Fremont Mutual Funds to one another in appropriate categories
over specific periods of time may also be quoted in advertising.

The Fund may quote various measures of volatility and benchmark correlation such
as beta, standard deviation and R2 in advertising. In addition, the Fund may
compare these measures to those of other funds. Measures of volatility seek to
compare the Fund's historical share price fluctuations or total returns compared
to those of a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation are
calculated using averages of historical data.

The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if a
fixed number of shares are purchased at the same intervals. In evaluating such a
plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.

The Fund may be available for purchase through retirement plans of other
programs offering deferral of or exemption from income taxes, which may produce
superior after tax returns over time. For example, a $10,000 investment earning
a taxable return of 10% annually would have an after-tax value of $17,976 after
ten years, assuming tax was deducted from the return each year at a 39.6% rate.
An equivalent tax-deferred investment would have an

<PAGE>

after-tax value of $19,626 after ten years, assuming tax was deducted at a 39.6%
rate from the deferred earnings at the end of the ten-year period.

The Fund may describe in its sales material and advertisements how an investor
may invest in the Fund through various retirement accounts and plans that offer
deferral of income taxes on investment earnings and may also enable you to make
pre-tax contributions. Because of their advantages, these retirement accounts
and plans may produce returns superior to comparable non-retirement investments.
The Fund may also discuss these accounts and plans which include:

INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self- employment) can contribute up to $2,000 each
year to an IRA (or 100% of compensation, whichever is less). If your spouse is
not employed, a total of $2,250 may be contributed each year to IRAs set up for
each individual (subject to the maximum of $2,000 per IRA). Some individuals may
be able to take an income tax deduction for the contribution. Regular
contributions may not be made for the year after you become 70 1/2, or
thereafter.

ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can rollover (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA.

SEP-IRAS AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore lower annual administration
expenses.

PROFIT SHARING (INCLUDING 401(K) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees. A
401(k) plan, a type of profit sharing plan, additionally permits the eligible,
participating employees to make pre-tax salary reduction contributions to the
plan (up to certain limitations).

The Advisor may from time to time in its sales methods and advertising discuss
the risks inherent in investing. The major types of investment risk are market
risk, industry risk, credit risk, interest rate risk and inflation risk. Risk
represents the possibility that you may lose some or all of your investment over
a period of time. A basic tenet of investing is the greater the

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potential reward, the greater the risk.

From time to time, the Fund and the Advisor will quote certain information
including but not limited to data regarding: individual countries, regions,
world stock exchanges, and economic and demographic statistics from sources the
Advisor deems reliable, including but not limited to, the economic and financial
data of such financial organizations as:

1) Stock market capitalization: Morgan Stanley Capital
International World Indices, International Finance
Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital
International World Indices, International Finance
Corporation.
3) The number of listed companies: International Finance
Corporation, Salomon Brothers, Inc., and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan
Stanley Capital International World Indices.
5) International industry performance: Morgan Stanley Capital
International World Indices, Wilshire Associates and Salomon
Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital
International World Indices, International Finance
Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank,
Datastream and International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, The
World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World
Bank, Datastream and United Nations.
12) Age distribution within populations: Organization for
Economic Cooperation and Development and United Nations.
13) Total exports and imports by year: International Finance
Corporation, The World Bank and Datastream.
14) Top three companies by country, industry or market:
International Finance Corporation, Salomon Brothers, Inc.,
and S.G. Warburg.
15) Foreign direct investments to developing countries: The
World Bank and Datastream.
16) Supply, consumption, demand and growth in demand of certain
products, services and industries, including, but not
limited to electricity, water, transportation, construction
materials, natural resources, technology, other basic
infrastructure, financial services, health care services and
supplies, consumer products and services and
telecommunications equipment and services (sources of such
information may include, but would not be limited to, The

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World Bank, OECD, IMF, Bloomberg and Datastream).
17) Standard deviation and performance returns for U.S. and non-
U.S. equity and bond markets: Morgan Stanley Capital
International.
18) Political and economic structure of countries: Economist
Intelligence Unit.
19) Government and corporate bonds - credit ratings, yield to
maturity and performance returns: Salomon Brothers, Inc.
20) Dividend for U.S. and non-U.S. companies: Bloomberg.

In advertising and sales materials, the Advisor or the Sub- Advisor may make
reference to or discuss its products, services and accomplishments. Such
accomplishments do not provide any assurance that the Fremont Mutual Funds'
investment objectives will be achieved.

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FREMONT INVESTMENT ADVISORS

INNOVATIVE INVESTMENT
MANAGEMENT AND
ADVISORY SERVICES

A subsidiary of The Fremont Group

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THE FREMONT GROUP

THE FREMONT GROUP MANAGES OVER $5 BILLION IN FOUR KEY BUSINESS AREAS.

Fremont Investment Advisors, Inc., (FIA) is a wholly-owned subsidiary
of The Fremont Group, formerly Bechtel Investments, Inc. The Fremont Group
employs over 200 professionals in offices throughout the United States and
manages over $5 billion in four key business areas:

-- Direct Investments - The Fremont Group holds significant equity
positions in companies from a broad range of industries including:

- Coldwell Banker - residential real estate

- Crown Pacific - timber/lumber

- Petro Stopping Centers - full-service truck stops

- Trinity Ventures - venture capital

-- Real Estate - Fremont Properties, Inc., a wholly-owned subsidiary
of The Fremont Group, acquires and develops commerical, retail and
industrial real estate. Fremont Properties also manages over 6
million square feet of real estate in 23 properties across the
U.S.

-- Energy - Activities of The Fremont Group's energy division include
oil and natural gas exploration, developmment and refining, and
directional drilling.

-- Securities Management - Through its subsidiary, Fremont Investment
Advisors, The Fremont Group manages over $3.5 billion in global
investment portfolios.

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FREMONT INVESTMENT ADVISORS

FREMONT INVESTMENT ADVISORS PROVIDES INVESTMENT MANAGEMENT
SERVICES TO BOTH INSTITUTIONAL AND INDIVIDUAL CLIENTS.

Originally organized to manage the marketable securities of Bechtel,
Fremont Investment Advisor's professional staff operated for many years within
Bechtel's treasury area. In 1986, FIA
became a separate organization.

FIA is a registered investment advisor which provides investment
management and advisory services to a variety of clients including:

-- defined benefit plans

-- defined contribution plans

-- foundations and trusts

-- high net worth individuals

Major clients include the Bechtel Retirement Plan which has
over 15,000 participants and was recently rated as one of the ten
best corporate retirement plans in the U.S. by Worth Magazine.

FREMONT MUTUAL FUNDS

THE FREMONT FUNDS OFFER INVESTORS EIGHT NO-LOAD MUTUAL FUNDS IN A
WIDE VARIETY OF INVESTMENT AREAS.

Fremont Investment Advisors formed the Fremont Mutual Funds in 1988 at the
request of retiring Bechtel employees who were taking their retirement savings
out of the Bechtel Retirement Plan. These employees were looking for a low-cost
way to invest their retirement savings in mutual funds with investment
objectives similar to those offered in the Bechtel Plan.

The Fremont Family of Funds includes eight 100% no-load mutual funds in
a variety of investment disciplines. From conservative bond and money market
funds to aggressive U.S. micro-cap and international small cap stock funds,
Fremont Mutual Funds offer investors a full range of investment options.

<PAGE>

INNOVATIVE INVESTMENT MANAGEMENT

FREMONT INVESTMENT ADVISORS UTILIZES BOTH INTERNAL AND EXTERNAL
INVESTMENT MANAGEMENT EXPERTISE.

FOR MORE INFORMATION ABOUT FREMONT OR THE FREMONT FUNDS, PLEASE
CALL 1-800-548-4539 (PRESS 1).

Fremont Investment Advisors is innovative in its approach to investment
management. By combining the talents of both internal and external investment
managers, FIA offers the highest quality management in each investment
discipline.

This "hybrid" approach allows FIA to concentrate resources in
investment areas where its investment professionals excel. These areas include
global asset allocation, economic analysis and the municipal bond market.

For other specialty investment disciplines, FIA selects external or
"outside" managers with excellent long-term performance track records within the
institutional marketplace. This close partnership provides smaller institutional
and individual investors with access to the investment management expertise
usually reserved only for the largest institutional investors.

FIA's current team of external managers includes:

U.S. Stock Investments
-- Morgan Grenfell Capital Management
-- Sit Investment Associates

International Stock Investments
-- Acadian Asset Management

Bond Investments
-- Pacific Investment Management Company
(PIMCO)

FOR MORE INFORMATION ON FREMONT INVESTMENT
ADVISORS OR THE FREMONT FUNDS, PLEASE CALL
1-800-548-4539 (PRESS 1) OR (415) 284-8900.

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<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.

A-1

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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."

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-2

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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."

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."

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."

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 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."

A-3

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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."

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."

AA - "High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions."

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."

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:

A-4

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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."

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."

A-5

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