FREMONT MUTUAL FUNDS INC, PRE 14A, 1997-06-23

FREMONT MUTUAL FUNDS INC
PRE 14A, 1997-06-23

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FREMONT MUTUAL FUNDS, INC.
FREMONT U.S. MICRO-CAP FUND

333 MARKET STREET
26TH FLOOR
SAN FRANCISCO, CA 94105

July 15, 1997

Dear Shareholder:

Currently, the portfolio management of the Fremont U.S. Micro-Cap Fund (the
"Fund") is handled directly and completely by Fremont Investment Advisors, Inc.
(the "Investment Manager"). Mr. Robert E. Kern is responsible for the day-to-day
portfolio management of the Fund. Mr. Kern, who currently performs this role as
an employee of the Investment Manager, has organized, and is in the process of
registering with the Securities and Exchange Commission, a new investment
advisory organization called Kern Capital Management L.L.C. ("Kern Capital"). It
is Mr. Kern's intention to resign his position with the Investment Manager on or
about September 1, 1997 in order to manage the business of Kern Capital on a
full-time basis. The Investment Manager has proposed, therefore, that Kern
Capital be retained on behalf of the Fund to provide investment subadvisory
services to the Fund following Kern Capital's registration as an investment
adviser. The Board of Directors of Fremont Mutual Funds, Inc. has preliminarily
approved a new Portfolio Management Agreement with Kern Capital. Implementa-
tion of the New Portfolio Management Agreement is subject to final approval by
the Board of Directors and the Fund's shareholders.

The following important facts about the new Portfolio Management Agreement
are outlined below:

o The advisory fees charged to the Fund will not change.
o The investment objectives of the Fund will remain the same
and the Fund's portfolio manager, who will become an
employee of Kern Capital, will continue to manage your Fund
as he has in the past.
o You will continue to receive the high quality investment
management and shareholder services that you have come to
expect since the Fund's inception.

Shareholders of the Fund are also being asked to approve a proposal to
permit the Investment Manager to enter into, terminate or modify subadvisory
agreements on behalf of the Fund with subadvisors without obtaining the approval
of a majority of the outstanding voting securities of the Fund, as is otherwise
required by the Investment Company Act of 1940. By eliminating shareholder
approval in these matters, the Investment Manager would have greater flexibility
in managing subadvisors, and shareholders would save the considerable expenses
involved in holding shareholder meetings and soliciting proxies.

After careful consideration, the Board of Directors of Fremont Mutual
Funds, Inc. unanimously recommends that you read the enclosed materials
carefully and then vote FOR the proposals.

Your vote is important. Please take a moment now to sign and return your
proxy cards in the enclosed postage paid return envelope.

Thank you for your cooperation and continued support.

Sincerely,

Michael H. Kosich
President

Q&A on reverse side

<PAGE>

Q. WHAT IS HAPPENING?

A. The portfolio manager of your Fund is in the process of organizing a
new investment advisory organization. The Board is recommending that
you approve a Portfolio Management Agreement with this new organization
to ensure that the Fund's current portfolio manager will continue to be
responsible for managing the Fund. Consequently, approval of this new
Portfolio Management Agreement will not result in any material changes
in the portfolio management of the Fund.

Q. WHY AM I BEING ASKED TO VOTE ON THIS PROPOSAL?

A. The Investment Company Act of 1940 requires the approval of a new
investment subadvisory agreement by the shareholders of the Fund.

Q. HOW WILL THIS AFFECT ME AS A FUND SHAREHOLDER?

A. Any expenses you are currently charged will not be increased. The Board
expects no change in services provided to you since the Fund's
inception. The Fund's portfolio manager, who will become an employee of
Kern Capital, will continue to act in the same capacity as before.

Q. WILL THE INVESTMENT ADVISORY FEES CHARGED TO THE FUND BE THE SAME?

A. Yes, the FEES FOR INVESTMENT ADVICE CHARGED TO YOUR FUND REMAIN
UNCHANGED AS A RESULT OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT.

Q. ARE THERE ANY OTHER PROPOSALS TO BE VOTED ON?

A. Shareholders are being asked to vote on one additional proposal which,
if approved, would generally permit Fremont Investment Advisors, Inc.
to enter into, terminate or modify subadvisory agreements on behalf of
the Fund with subadvisors without obtaining the approval of a majority
of the outstanding voting securities of the Fund, as is otherwise
required by the Investment Company Act of 1940. By eliminating
shareholder approval in these matters, the Investment Manager would
have greater flexibility in managing subadvisors, and shareholders
would save the considerable expenses involved in holding shareholder
meetings and soliciting proxies.

Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?

A. After careful consideration, the Board of Directors unanimously
recommends that you vote "FOR" the proposals on the enclosed proxy card.

Q. HOW DO I CONTACT YOU?

A. If you have any questions, please call 800-548-4539.

Q. WHO IS MANAGEMENT INFORMATION SERVICES, INC.?

A. Management Information Services, Inc. is a professional proxy
solicitation firm retained by the Investment Manager to
assist it in coordinating shareholder questions and soliciting
shareholder votes.

PLEASE VOTE
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES OF THE FUND YOU OWN

<PAGE>

FREMONT U.S. MICRO-CAP FUND
SPECIAL MEETING OF SHAREHOLDERS

August 29, 1997

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FREMONT MUTUAL
FUNDS, INC.

The undersigned hereby appoints Michael H. Kosich and Tina Thomas, and each of
them, as Proxies with power of substitution and hereby authorizes each of them
to represent and to vote as provided on the reverse side, all shares of the
Fremont U.S. Micro-Cap Fund (the "Fund") which the undersigned is entitled to
vote at the special meeting of shareholders to be held on August 29, 1997 or at
any adjournment thereof.

The undersigned acknowledges receipt of the Notice of Special Meeting and Proxy
Statement dated July 3, 1997.

Date: ________________________

NOTE: Please sign exactly as your
name appears on this proxy. If
signing for an estate, trust or
corporation, title or capacity should
be stated. If the shares are held
jointly, both signers should
sign, although the signature of one
will bind the other.

__________________

__________________
Signature(s) PLEASE SIGN IN THE BOX ABOVE

<PAGE>

PLEASE INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOX BELOW, AS SHOWN,
USING BLUE OR BLACK INK OR DARK PENCIL. DO NOT USE RED INK.

IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSALS DESCRIBED
HEREIN.

1. With respect to the approval or disapproval of a new Portfolio
Management Agreement for the Fund with Kern Capital Management L.L.C.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

2. With respect to the approval of a proposal to permit Fremont
Investment Advisors, Inc. to hire and terminate subadvisors or modify
subadvisory agreements without shareholder approval.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

3. In their discretion, the Proxies are authorized to vote upon such
other matters as may properly come before the meeting.

PLEASE MARK YOUR PROXY, DATE AND SIGN IT ON THE REVERSE SIDE, AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.

<PAGE>

FREMONT MUTUAL FUNDS, INC.
FREMONT U.S. MICRO-CAP FUND

333 MARKET STREET
26TH FLOOR
SAN FRANCISCO, CALIFORNIA 94105

SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON AUGUST 29, 1997

A Special Meeting of Shareholders (the "Meeting") of the FREMONT U.S.
MICRO-CAP FUND (the "Fund") will be held at the Fund's offices at 333 Market
Street, 26th Floor, San Francisco, California 94105, on Friday, August 29, 1997
at 10:00 a.m. for the following purposes:

1. To consider and act upon the approval of a new Portfolio
Management Agreement between (i) Fremont Mutual Funds, Inc.,
(ii) Fremont Investment Advisors, Inc., the investment
manager of the Fund, and (iii) Kern Capital Management L.L.C.

2. To consider and act upon the approval of a proposal to permit
Fremont Investment Advisors, Inc. to hire and terminate
subadvisors or modify subadvisory agreements without
shareholder approval.

3. To transact such other business as may properly come before
the Meeting or any adjournments thereof.

The stock transfer books will not be closed but, in lieu thereof, the
Board of Directors has fixed the close of business on June 30, 1997 as the
record date for the determination of shareholders of the Fund entitled to notice
of, and to vote at, the Meeting.

By order of the Board of Directors

Tina Thomas, Secretary
San Francisco, California
July 3, 1997

- ------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN PERSON OR
BY PROXY; IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE APPROPRIATE ENCLOSED PROXY OR PROXIES IN THE ACCOMPANYING
ENVELOPE PROVIDED FOR YOUR CONVENIENCE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
- ------------------------------------------------------------------------------

<PAGE>

FREMONT MUTUAL FUNDS, INC.
FREMONT U.S. MICRO-CAP FUND

333 MARKET STREET
26TH FLOOR
SAN FRANCISCO, CALIFORNIA 94105
(800) 548-4539

FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 29, 1997

INTRODUCTION

This Proxy Statement (the "Proxy") is furnished in connection with the
solicitation by the Board of Directors (the "Board") of Fremont Mutual Funds,
Inc. (the "Company") on behalf of the Fremont U.S. Micro-Cap Fund (the "Fund")
of proxies to be voted at a Special Meeting of Shareholders of the Fund to be
held at the Fund's offices at 333 Market Street, 26th Floor, San Francisco,
California 94105, on August 29, 1997 at 10:00 a.m. (the "Meeting") and at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders.

The costs of preparing, printing, mailing and soliciting the proxies will
be borne by Fremont Investment Advisors, Inc. (the "Investment Manager"). In
addition, certain officers, directors and employees of the Investment Manager
and officers and directors of the Fund (none of whom will receive additional
compensation therefor) may solicit proxies in person or by telephone, telegraph
or mail. Management Information Systems, Inc. has been retained at its customary
rates to solicit proxies.

All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, shares
represented by the proxies will be voted "FOR" all the proposals. All shares in
Fund-sponsored IRA accounts not voted by the account owner will be voted by the
IRA trustee in the same proportion (for, against and abstain) as all other votes
cast whether in person or by proxy. For purposes of determining the presence of
a quorum for transacting business at the Meeting, abstentions and broker
"non-votes" (that is, proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be treated as shares
that are present. However, broker non-votes are disregarded in determining
"votes cast" when the voting requirement is based on achieving a percentage of
the voting securities entitled to vote present in person or by proxy at the
Meeting. Any proxy may be revoked at any time prior to the exercise thereof by
submitting another proxy bearing a later date or by giving written notice to the
Secretary of the Company at the address indicated above or by voting in person
at the Meeting. The affirmative vote of a majority of the shares as defined
under the Investment Company Act of 1940 (a "Majority Vote") (either 67% of the
shares present at the Meeting, if holders of more than 50% of the outstanding
shares are present in person or by proxy, or more than 50% of the outstanding
shares, whichever is less) of the Fund is necessary to approve the Fund's new
Portfolio Management Agreement (Proposal I) and to approve an arrangement to
permit the Investment Manager to hire and terminate subadvisors or modify
subadvisory agreements without shareholder approval (Proposal II).

In the event that insufficient votes in favor of any of the items to be
considered at the Meeting are received by the time scheduled for the Meeting,
the Meeting may be held for the purpose of voting on those proposals for which
sufficient votes have been received, and the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of the proxies with respect to any proposals for which sufficient votes had not
been received. Any such adjournment will require the affirmative vote of a
majority of votes cast on the question in person or by proxy at the

<PAGE>

Meeting. The persons named as proxies will vote against such adjournment only
with respect to those proxies that they are required to vote against such
proposal.

The Board of Directors of the Company knows of no business other than that
specifically mentioned in the Notice of Meeting which will be presented for
consideration at the Meeting. If any other matters are properly presented, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment.

The Board of Directors of the Company has fixed the close of business on
June 30, 1997 as the record date (the "Record Date") for the determination of
shareholders of the Fund entitled to notice of and to vote at the Meeting or any
adjournment thereof. Shareholders of the Fund on that date will be entitled to
one vote on each matter on which they are entitled to vote for each share held
and a fractional vote with respect to fractional shares, and shareholders will
not have cumulative voting rights. At the close of business on the Record Date,
the Fund had [ ] outstanding shares, each with a par value of $0.0001 per share.

The principal executive offices of the Company are located at 333 Market
Street, 26th Floor, San Francisco, California 94105. The enclosed proxy and this
proxy statement are first being sent to the Fund's shareholders on or about July
15, 1997.

As of the Record Date, to the best knowledge of the Fund, no person
beneficially owned more than 5% of the outstanding shares of the Fund.

PROPOSAL I

TO CONSIDER A NEW SUBADVISORY AGREEMENT FOR THE FUND

Currently, the portfolio management of the Fremont U.S. Micro-Cap Fund (the
"Fund") is handled directly and completely by Fremont Investment Advisors, Inc.
(the "Investment Manager"). Mr. Robert G. Kern is responsible for the day-to-day
portfolio management of the Fund. Mr. Kern, who currently performs this role as
an employee of the Investment Manager, has organized, and is in the process of
registering with the Securities and Exchange Commission, a new investment
advisory organization called Kern Capital Management L.L.C. ("Kern Capital"). It
is Mr. Kern's intention to resign his position with the Investment Manager on or
about September 1, 1997 in order to manage the business of Kern Capital on a
full-time basis. The Investment Manager has proposed, therefore, that Kern
Capital be retained on behalf of the Fund to provide investment subadvisory
services to the Fund. After careful consideration, the Board of Directors of
Fremont Mutual Funds, Inc. has approved a new Portfolio Management Agreement
with Kern Capital, subject to approval of the Fund's shareholders. If the new
Portfolio Management Agreement is approved by shareholders, Mr. Kern will
continue to be responsible for managing the day-to-day portfolio management
affairs of the Fund. Thus, in the view of the Board, the new Portfolio
Management Agreement will not result in any material changes in the portfolio
management and investment operations of the Fund.

Section 15 of the Investment Company Act of 1940, as amended (the "1940
Act"), prohibits any person from serving as an investment advisor to a
registered investment company except pursuant to a written contract that has
been approved by the shareholders. Therefore, in order for Kern Capital to
provide investment subadvisory services to the Fund, the shareholders of the
Fund must approve the new Portfolio Management Agreement.

The new Portfolio Management Agreement, if approved by the Fund's
shareholders, will commence on or about September 1, 1997, but not before Kern
Capital's effective registration as an investment adviser with the Securities
and Exchange Commission. The new Portfolio Management Agreement will remain in
effect for two years and will continue in effect thereafter for successive
annual periods if and so long as such continuance is specifically approved by
(a) the Board of Directors or (b) a

<PAGE>

Majority Vote of a the Fund's shareholders, provided that in either event, the
continuance also is approved by a majority of the directors who are not
"interested persons" by vote cast in person at a meeting called for the purpose
of voting on such approval. If the Portfolio Management Agreement is not
approved by shareholders, the Investment Manager will continue to manage the
Fund's assets directly until alternative arrangements can be made.

After careful consideration, the Board of Directors of the Company
unanimously recommends that shareholders vote "FOR" the new Portfolio Management
Agreement between the Company, the Investment Manager and Kern Capital. See
"Evaluation by the Board" below.

BENEFITS TO SHAREHOLDERS

The Board has identified the following benefits which the shareholders are
anticipated to realize as a result of the new Portfolio Management Agreement.

1. The advisory fees charged to the Fund will not increase as a result
of approving the New Subadvisory Agreement;

2. The investment objective of the Fund will remain the same and the
Fund's portfolio manager will not change; and

3. The quality of the investment management and shareholder services to
the Fund will not diminish as a result of approving the New
Subadvisory Agreement.

THE INVESTMENT SUBADVISOR

Kern Capital, located at 114 West 47th Street, Suite 1926, New York, New
York 10036, will serve as the Fund's investment subadvisor upon approval by the
Fund's shareholders. Kern Capital will manage the Fund's investments, subject to
supervision by the Investment Manager. Portfolio Manager Robert E. Kern will
continue to be responsible for the day to day management of the Fund.

The controlling members of Kern Capital include: Robert E. Kern and his
son, David G. Kern, and the Investment Manager.

THE PORTFOLIO MANAGEMENT AGREEMENT

Pursuant to the new Portfolio Management Agreement between Kern Capital,
the Investment Manager and the Fund, Kern Capital will be retained to manage the
investments of the Fund and to provide such investment research, advice and
supervision, in conformity with the Fund's investment objectives and policies,
as may be necessary for the operations of the Fund. The new portfolio management
arrangements for the Fund were discussed and preliminarily approved by the
Company's Board of Directors on May 2, 1997. Final approval of the Board of
Directors is expected to be given at the next meeting of the Board of Directors
on August 1, 1997. The new Portfolio Management Agreement provides that the
Investment Manager (not the Fund) shall pay to Kern Capital a fee for its
services which is equal to .75% of the Fund's average daily net asset value.

The Portfolio Management Agreement requires that brokerage orders for the
Fund's portfolio securities transactions will be placed by Kern Capital. Kern
Capital will seek to obtain the best available prices in the Fund's portfolio
transactions, taking into account the costs and promptness of executions.
Subject to this policy, transactions may be directed to those broker-dealers who
provide research, statistical and other information to the Fund or the
subadvisor or who provide assistance with respect to the distribution of Fund
shares. Subject to the requirements of the 1940 Act 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 Company, the Investment Manager or Kern Capital.

<PAGE>

The Portfolio Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, Kern Capital is not liable to the Fund or any of the
Fund's shareholders for any act or omission by Kern Capital in the supervision
or management of its respective investment activities or for any loss sustained
by the Fund or the Fund's shareholders, and that the Fund will indemnify Kern
Capital subject to the requirements of the 1940 Act.

The Portfolio Management Agreement may be terminated at any time by the
Fund, without the payment of any penalty, upon the vote of a majority of the
Company's Board of Directors or a majority of the outstanding voting securities
of the Fund or by Kern Capital, on 30 days' written notice.

EVALUATION BY THE BOARD OF DIRECTORS

On May 2, 1997, the independent Directors of the Company's Board met and
discussed the new portfolio management arrangements and their possible effects
on the Fund. Management of the Investment Manager outlined for the Board of
Directors the plan to employ Mr. Kern as a portfolio adviser of the Investment
Manager in order to retain continuity in portfolio management for the Fund. The
Investment Manager indicated that it was aware of a plan by Mr. Kern to form his
own investment advisory company, Kern Capital Management L.L.C., and that if Mr.
Kern went forward with this plan (and the new investment advisory operation was
satisfactory to the Investment Manager), the Investment Manager would recommend
to the Board that a new sub-advisory contract be awarded to Kern Capital at the
appropriate time in the future. The Board considered these matters and in
particular noted that Mr. Kern, the current portfolio manager, would be
available to provide continuous services to the Fund. The Board was advised that
any arrangements with Mr. Kern and his new company (if and when formed) would be
on the same basic terms as the current arrangements.

The Board was advised by its own counsel and considered all information
that it determined was relevant to its deliberations. In determining to
recommend that shareholders of the Fund vote to approve the new Portfolio
Management Agreement as being in the best interest of the Fund's
shareholders,
the Board gave substantial weight to management's representations that the
Fund's portfolio manager will not change and that expenses to be incurred by the
Fund after the execution of the Portfolio Management Agreement will not be
greater than those that would otherwise be incurred by the Fund.

ACCORDINGLY, AFTER CONSIDERATION OF THE ABOVE, AND SUCH OTHER FACTORS AND
INFORMATION AS IT DEEMED RELEVANT, THE BOARD OF DIRECTORS, INCLUDING ALL OF THE
DIRECTORS WHO ARE NOT INTERESTED PERSONS (AS SUCH TERM IS DEFINED BY THE 1940
ACT), UNANIMOUSLY GAVE PRELIMINARY APPROVAL TO THE PORTFOLIO MANAGEMENT
AGREEMENT WITH KERN CAPITAL AND VOTED TO RECOMMEND ITS APPROVAL TO THE FUND'S
SHAREHOLDERS.

PROPOSAL II

APPROVAL OR DISAPPROVAL OF A PROPOSAL TO PERMIT THE INVESTMENT MANAGER TO
HIRE AND TERMINATE SUBADVISORS OR MODIFY SUBADVISORY AGREEMENTS WITHOUT
SHAREHOLDER APPROVAL

The Investment Manager currently serves as investment advisor to the Fund
pursuant to an Investment Advisory and Administrative Services Agreement (the
"Advisory Agreement") with the Company. The Investment Manager proposes to
employ a subadvisor with respect to the Fund and may engage additional
subadvisors in the future. The Company is proposing to permit the Investment
Manager to enter into, terminate, or modify subadvisory agreements on behalf of
the Fund with subadvisors without obtaining the prior approval of a majority of
the outstanding voting securities of the Fund, as is otherwise required by
Section 15(a) of the 1940 Act.

<PAGE>

Section 15(a) of the 1940 Act and Rule 18f-2 thereunder require that the
shareholders of the Fund approve the Fund's subadvisory agreement(s) and any
amendments thereto. On December 16, 1996, the Company and the Investment Manager
received from the Securities and Exchange Commission an order (the "SEC Order")
exempting the Fund from these provisions. The SEC Order permits the Investment
Manager to hire new subadvisors, terminate subadvisors, rehire existing
subadvisors whose agreements have been assigned (and, thus, automatically
terminated), and modify subadvisory agreements without the prior approval of
shareholders. By eliminating shareholder approval in these matters, the
Investment Manager would have greater flexibility in managing subadvisors, and
shareholders would save the considerable expenses involved in holding
shareholder meetings and soliciting proxies. Pursuant to the SEC Order, the
Company and the Investment Manager have agreed to the imposition of the
following conditions:

(1) The Investment Manager will not enter into a subadvisory
agreement with a subadvisor that is an "affiliated person,"
as defined in the 1940 Act, of the Company or the Investment
Manager (an "Affiliated Manager"), other than by reason of
serving as a subadvisor to the Fund, without such agreement,
including the compensation to be paid thereunder, being
approved by the shareholders of the Fund.

(2) At all times, a majority of the Company's directors will be
persons each of whom is not an "interested person" of the
Company as defined in the 1940 Act ("Independent Directors"),
and the nomination of new or additional Independent Directors
will be placed with the discretion of the then existing
Independent Directors.

(3) When a subadvisor change is proposed for the Fund with an
Affiliated Manager, the Company's directors, including a
majority of the Independent Directors, will make a separate
finding, reflected in the Company's board minutes, that such
change is in the best interests of the Fund and its
shareholders and does not involve a conflict of interest from
which the Investment Manager or the Affiliated Manager derives
an inappropriate advantage.

(4) The Investment Manager will provide general management
services to the Company and the Fund and, subject to review
and approval by the Company's Board of Directors,
will (i) set the Fund's overall investment strategies;
(ii) select subadvisor(s); (iii) allocate and, when
appropriate, reallocate the Fund's assets among the
Investment Manager and one or more subadvisors; (iv) monitor
and evaluate the performance of subadvisors; and (v) seek
to ensure that the subadvisors comply with the Fund's
investment objectives, policies and restrictions.

(5) Within 60 days of the hiring of any new subadvisor or the
implementation of any proposed material change in a
subadvisory agreement, the Investment Manager will furnish
shareholders all information about the new subadvisor or
subadvisory agreement that would be included in a proxy
statement. Such information will include the fees paid by the
Investment Manager to the subadvisor and any change in such
disclosure caused by the addition of a new subadvisor or any
proposed material change in a subadvisory agreement. The
Investment Manager will meet this condition by providing
shareholders with an information statement which meets the
requirements of the proxy rules under applicable federal
securities laws.

(6) The Fund will disclose in its Prospectus the existence,
substance and effect of the SEC Order.

(7) Before the Fund may rely on the SEC Order, the operations of
the Fund in the manner described therein will be approved by a
majority of the Fund's outstanding voting securities, as
defined in the 1940 Act.

<PAGE>

(8) No director or officer of the Company or the Investment
Manager will own directly or indirectly (other than through a
pooled investment vehicle that is not controlled by any such
director or officer) any interest in a subadvisor except for
(i) ownership of interests in the Investment Manager or any
entity that controls, is controlled by or is under common
control with the Investment Manager; (ii) ownership of less
than 1% of the outstanding securities of any class of equity
or debt of a publicly-traded company that is either a
subadvisor or an entity that controls, is controlled by or is
under common control with a subadvisor.

In accordance with condition (7), shareholder approval of this proposed
new arrangement is being sought. Even if the Fund's shareholders approve this
arrangement, any new subadvisors engaged or any change in a subadvisory
agreement in the future will still require shareholder approval if the
subadvisor is affiliated with the Investment Manager (as is the case with Kern
Capital) and will also still require approval of the Board of Directors. In
order to approve new subadvisors, the Board will analyze the factors they deem
relevant, including the nature, quality and scope of services provided by
subadvisors to investment companies comparable to the Fund. The Board will
review the ability of the subadvisor to provide its services to the Fund, as
well as its personnel, operation, financial condition or any other factor which
would affect the provision of these services. The Board will examine the
performance of the subadvisor with respect to compliance and regulatory matters
over the past fiscal year. The Board will review the subadvisor's investment
performance with respect to accounts deemed comparable. Finally, the Board will
consider other factors deemed relevant to the subadvisor's performance as an
investment advisor. The Board believes that this review provides adequate
shareholder protection in the selection of subadvisors.

On October 30, 1996, the Board of Directors of the Company, including a
majority of the Independent Directors, unanimously approved, subject to the
required shareholder approval described herein, the proposal to permit the
Investment Manager to hire and terminate subadvisors or modify subadvisory
agreements without shareholder approval.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO PERMIT THE INVESTMENT MANAGER TO HIRE AND TERMINATE SUBADVISORS OR MODIFY
SUBADVISORY AGREEMENTS WITHOUT SHAREHOLDER APPROVAL. If the shareholders of the
Fund do not approve this Proposal, the Advisory Agreement will continue and the
terms and conditions of the SEC Order will not be applicable to the Fund.

OTHER MATTERS

The management knows of no other matters which are to be brought before the
Meeting. However, if any other matters not now known or determined properly come
before the Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote such Proxy in accordance with their best judgment on such
matters.

All Proxies received will be voted in favor of all the proposals, unless
otherwise directed therein.

Very truly yours,

Tina Thomas
Secretary
July 3, 1997

<PAGE>

EXHIBIT A
PORTFOLIO MANAGEMENT AGREEMENT

THIS AGREEMENT dated and effective as of [ ] 1997, among Kern Capital
Management L.L.C. (the "Subadvisor"); Fremont Investment Advisors, Inc., a
Delaware corporation (the "Advisor"); and Fremont Mutual Funds, Inc., a Maryland
corporation (the "Fund").

WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company and is authorized to issue separate series (the "Series"),
each of which may offer a separate class of shares of beneficial interest, each
series having its own investment objective, policies and limitations;

WHEREAS, the Fund presently offers shares of a particular series named
the Fremont U.S. Micro-Cap Fund (the "U.S. Micro-Cap Series"),

WHEREAS, the Fund has retained the Advisor to render investment
management and administrative services to the Series;

WHEREAS, the Advisor and the Fund desire to retain the Subadvisor to
furnish portfolio management services to the U.S. Micro-Cap Series in connection
with Advisor's investment management activities on behalf of the Series, and the
Subadvisor is willing to furnish such services to the Advisor and the U.S.
Micro-Cap Series.

NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Subadvisor, the Advisor and the Fund
as follows:

1. APPOINTMENT. The Advisor and the Fund hereby appoint Subadvisor to
act as Subadvisor with respect to certain assets of the U.S. Micro-Cap Series
for the periods and on the terms set forth in this Agreement. The Subadvisor
accepts such appointment and agrees to furnish the services herein set forth,
for the compensation herein provided.

2. SUBADVISOR DUTIES. Subject to the supervision of the Advisor and
the Fund's Board of Directors, the Subadvisor shall have full discretionary
authority as agent and attorney-in-fact with respect to the portion of assets of
the U.S. Micro-Cap Series' portfolio assigned to the Subadvisor, from time to
time by the Advisor or the Board of Directors, including authority to: (a) buy,
sell, exchange, convert or otherwise trade in any stocks without limitation and
(b) place orders for the execution of such securities transactions with or
through such brokers, dealers, or issuers as Subadvisor may select. The
Subadvisor will provide the services under this Agreement in accordance with the
U.S. Micro-Cap Series' registration statement filed with the Securities and
Exchange Commission ("SEC"), as amended. Investments by the Subadvisor shall
conform with the provisions of Appendix B attached hereto, as such may be
revised from time to time at the discretion of the Advisor and the Fund. Subject
to the foregoing, the Subadvisor will vote proxies with respect to the
securities and investments purchased with the assets of the U.S. Micro-Cap
Series' portfolio managed by the Subadvisor and will provide regular reports of
proxy voting. The Subadvisor further agrees that it will:

(a) conform with all applicable rules and regulations of the
Securities and Exchange Commission;

(b) place orders pursuant to its investment determinations for
the U.S. Micro- Cap Series either directly with the issuer or with any broker or
dealer. In placing orders with brokers and dealers, the Subadvisor will attempt
to obtain the best net price and the most favorable execution of its orders.
Consistent with this obligation, when the execution and price offered by two or
more brokers or dealers are comparable, the Subadvisor may, in its discretion,
purchase and sell portfolio securities to and from brokers and dealers who
provide it with research advice and other services of lawful

<PAGE>

assistance to the Subadvisor in serving the U.S. Micro-Cap Series as the
Subadvisor or who sell the U.S. Micro-Cap Series' shares; and

(c) make available to the Advisor and the Fund promptly upon
their request all its investment records and ledgers to assist the Advisor and
the Fund in their compliance with respect to the U.S. Micro-Cap Series'
securities transactions as required by the 1940 Act and the Investment Advisers
Act of 1940 ("Advisers Act"), as well as other applicable laws. The Subadvisor
will furnish the Fund's Board of Directors with respect to the U.S. Micro-Cap
Series such periodic and special reports as the Advisor and the Directors may
reasonably request.

(d) maintain detailed records of the assets managed by the
Subadvisor as well as all investments, receipts, disbursements and other
transactions made with such assets. Such records shall be open to inspection and
audit at reasonable times by any person designated by the Advisor or the Fund.
The Subadvisor shall provide to the Advisor or the Fund and any other party
either the Advisor or the Fund designates: (i) monthly statements of the
activities with regard to the assets for the month and of the assets showing
each asset at its cost and, for each security listed on any national securities
exchange, its value at the last quoted sale price reported on the composite tape
on the valuation date or, in the cases of securities not so reported, by the
principal exchange on which the security is traded, or, if no trade was made on
the valuation date or if such security is not listed on any exchange, its value
as determined by a nationally recognized pricing service used by the Subadvisor
to value securities in their client accounts, at the value specified by such
pricing service on the valuation date, and for any other security or asset in a
manner determined in good faith by the Subadvisor to reflect its then fair
market value; (ii) statements evidencing any purchases and sales as soon as
practicable after such transaction has taken place; (iii) a quarterly review of
the assets under management; and (iv) tax information as requested, on a monthly
basis, to the Fund's custodian bank.

3. EXPENSES. During the term of this Agreement, the Subadvisor will
pay all expenses incurred by it, its staff and their activities, in connection
with its portfolio management activities under this Agreement.

4. COMPENSATION. For the services provided to the Initial Series, the
Advisor of the Fund will pay the Subadvisor a monthly fee at the annual rate of
.75% of the Fund's average daily net assets. The fee will be prorated for any
period of less than one month.

5. BOOKS AND RECORDS; CUSTODY. (a) In compliance with the requirements
of Rule 31a-3 under the 1940 Act, the Subadvisor hereby agrees that all records
which it maintains for the U.S. Micro-Cap Series are the property of the Fund
and further agrees to surrender promptly to the Fund any of such records upon
the Fund's request. The Subadvisor further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to preserve the records required
by Rule 204-2 under the Advisers Act for the period specified in the Rule.

(b) Title to all investments shall be made in the name of the
Fund, provided that for convenience in buying, selling, and exchanging
securities (stocks, bonds, commercial paper, etc.), title to such securities may
be held in the name of the Fund's custodian bank, or its nominee. The Fund shall
advise the Subadvisor of the identity of its custodian bank and shall give the
Subadvisor 15 days' written notice of any changes in such custody arrangements.

Neither the Subadvisor, nor any parent, subsidiary or related
firm, shall take possession of or handle any cash, securities, mortgages or
deeds of trust, or other indicia of ownership of the Fund's investments, or
otherwise act as custodian of such investments. All cash and the indicia of
ownership of all other investments shall be held by the Fund's custodian bank.

<PAGE>

The Fund shall instruct its custodian bank to (a) carry out all
investment instructions as may be directed by the Subadvisor with respect
thereto (which may be orally given if confirmed in writing); and (b) provide the
Subadvisor with all operational information necessary for the Subadvisor to
trade on behalf of the Fund.

6. INDEMNIFICATION. The Subadvisor agrees to indemnify and hold
harmless, the Advisor, the Fund, any affiliated person within the meaning of
Section 2(a)(3) of the 1940 Act ("affiliated person") of the Advisor or the Fund
(other than the Subadvisor) and each person, if any, who, within the meaning of
Section 15 of the Securities Act of 1933 (the "1933 Act"), controls
("controlling person") the Advisor or the Fund against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses),
to which the Advisor, the Fund or such affiliated person or controlling person
may become subject under the 1933 Act, 1940 Act, the Advisers Act, or under any
other statute, at common law or otherwise, which (1) may be based upon any
wrongful act or omission by the Subadvisor, any of its employees or
representatives or any affiliate of or any person acting on behalf of the
Subadvisor or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering the shares of the Fund or any Series or any amendment thereof or any
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if such a statement or omission was made in reliance
upon information furnished to the Fund or any affiliated person of the Fund by
the Subadvisor or any affiliated person of the Subadvisor; provided, however,
that in no case is the Subadvisor's indemnity in favor of the Advisor or the
Fund or any affiliated person or controlling person of the Advisor or the Fund
deemed to protect such person against any liability to which any such person
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of his duties or by reason of his reckless
disregard of obligations and duties under this Agreement.

The Fund agrees not to hold the Subadvisor or any of its officers or
employees liable for, and to indemnify or insure the Subadvisor and its officers
and employees ("Indemnified Parties") against any act or omission of any other
subadvisor providing investment management services to the Fund, and against any
costs and liabilities the Indemnified Parties may incur as a result of a claim
against the Indemnified Parties regarding actions taken in good faith exercise
of their powers hereunder excepting matters as to which the Indemnified Parties
have been negligent, engaged in willful misfeasance, bad faith, reckless
disregard of the obligations and duties under this Agreement or have been in
violation of applicable law or regulations.

7. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Subadvisor are not exclusive, and nothing in this Agreement shall prevent the
Subadvisor from providing similar services to other investment companies
(subject to such restrictions as Subadvisor may agree to separately) or from
engaging in other activities. When the Subadvisor recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Subadvisor recommends the purchase or sale of the same security
for the U.S. Micro-Cap Series, it is understood that such transactions will be
executed on a basis that is fair and equitable to the Series.

8. (a) DURATION. This Agreement shall become effective on the date
first written above. Unless terminated as herein provided, this Agreement shall
remain in full force and effective for no more than two (2) years and shall
continue in full force and effect for periods of one year thereafter so long as
such continuance is approved at least annually (i) by either the Directors of
the Fund or by a vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the U.S. Micro-Cap Series, and (ii) by the
Advisor, and (iii) in either event by the vote of a majority of the Directors of
the Fund who are not parties of this 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.

<PAGE>

(b) TERMINATION. This Agreement may be terminated at any time,
without payment of any penalty, by the Board of Trustees of the Fund or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the U.S. Micro-Cap Series, or by the Advisor, on thirty (30) days
written notice to the Subadvisor, or by the Subadvisor on like notice to the
Fund and to the Advisor.

9. AMENDMENTS. No provision of this agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought and no amendment of this Agreement shall be effective
until approved by a vote of a majority of the outstanding voting securities of
the U.S. Micro- Cap Series, if such approval is required by applicable law.

10. MISCELLANEOUS.

(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder.

(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.

(c) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.

(d) Nothing herein shall be construed as constituting the
Subadvisor as an agent of the Fund or the Advisor.

(e) This Agreement supersedes any prior agreement relating to the
subject matter hereof between the parties.

KERN CAPITAL MANAGEMENT L.L.C.

By:____________________________

_________________________________
(Title)

FREMONT INVESTMENT ADVISORS, INC.

By:____________________________

_________________________________
(Title)

FREMONT MUTUAL FUNDS, INC.

By:____________________________

_________________________________
(Title)

<PAGE>

FREMONT MUTUAL FUNDS, INC.
FREMONT EMERGING MARKETS FUND

333 MARKET STREET
26TH FLOOR
SAN FRANCISCO, CA 94105

July 15, 1997

Dear Shareholder:

As you may know, Credit Lyonnais International Asset Management (HK) Ltd.
("Credit Lyonnais HK"), the investment subadvisor to the Fremont Emerging
Markets Fund (the "Fund") has entered into an agreement under which its shares
and assets will be acquired by Nicholas-Applegate Capital Management (Hong Kong)
LLC ("Nicholas-Applegate"). Because of the acquisition, it is necessary for the
shareholders of the Fund to approve a new investment subadvisory agreement
between Nicholas-Applegate, the Fund and Fremont Investment Advisors, Inc., the
Fund's investment manager (the "Investment Manager").

The following important facts about the transaction are outlined below:

o The amount of shares you own and the advisory fees charged to the
Fund will not change.
o The investment objectives of the Fund will remain the same and
key employees of Credit Lyonnais HK, who will become employees
of Nicholas-Applegate, will continue to manage your Fund as
they have in the past.
o You will continue to receive the high quality investment
management and shareholder services that you have come to
expect since the Fund's inception.

After careful consideration, the Board of Directors of Fremont Mutual
Funds, Inc. has unanimously approved each of the foregoing proposals and
recommends that you read the enclosed materials carefully and then vote FOR the
proposals.

Your vote is important. Please take a moment now to sign and return your
proxy cards in the enclosed postage paid return envelope.

Thank you for your cooperation and continued support.

Sincerely,

Michael H. Kosich
President

Q&A on reverse side

<PAGE>

Q. WHAT IS HAPPENING?

A. Credit Lyonnais HK, NOT YOUR FUND, has entered into an agreement for
its business to be acquired by Nicholas-Applegate. Importantly, key
members of Credit Lyonnais HK's management team will join
Nicholas-Applegate and continue to be responsible for managing the
Fund. Consequently, this transaction will not result in any material
changes in the portfolio management of the Fund.

Q. WHY AM I BEING ASKED TO VOTE ON THIS PROPOSAL?

A. The Investment Company Act of 1940 requires a vote due to the change
of ownership of the Fund's investment subadvisor. As a result, the
Act requires the approval of a new investment subadvisory agreement
by the shareholders of the Fund.

Q. HOW WILL THIS AFFECT ME AS A FUND SHAREHOLDER?

A. Your Fund shares WILL NOT CHANGE. You will still own the same shares
in the same Fund. Any expenses you are currently charged will not be
increased. The Board expects no change in services provided to you
since the Fund's inception. Key employees of Credit Lyonnais HK who
have been responsible for the management of your Fund, and who will
become employees of Nicholas-Applegate, will continue to act in the
same capacities as before.

Q. WILL THE INVESTMENT ADVISORY FEES BE THE SAME?

A. Yes, the FEES FOR INVESTMENT ADVICE CHARGED TO YOUR FUND AS A RESULT
OF THE NEW SUBADVISORY AGREEMENT WILL STAY THE SAME.

Q. ARE THERE ANY OTHER PROPOSALS TO BE VOTED ON?

Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?

A. After careful consideration, the Board of Directors unanimously
recommends that you vote "FOR" the proposals on the enclosed proxy
card.

Q. HOW DO I CONTACT YOU?

A. If you have any questions, please call 800-548-4539.

Q. WHO IS MANAGEMENT INFORMATION SERVICES, INC.?

A. Management Information Services, Inc. is a professional proxy
solicitation firm retained by Credit Lyonnais HK to assist
them in coordinating shareholder questions and soliciting shareholder
votes.

PLEASE VOTE
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES OF THE FUND YOU OWN

<PAGE>

FREMONT EMERGING MARKETS FUND
SPECIAL MEETING OF SHAREHOLDERS

August 29, 1997

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FREMONT MUTUAL
FUNDS, INC.

The undersigned hereby appoints Michael H. Kosich and Tina Thomas, and each of
them, as Proxies with power of substitution and hereby authorizes each of them
to represent and to vote as provided on the reverse side, all shares of the
Fremont Emerging Markets Fund (the "Fund") which the undersigned is entitled to
vote at the special meeting of shareholders to be held on August 29, 1997 or at
any adjournment thereof.

The undersigned acknowledges receipt of the Notice of Special Meeting and Proxy
Statement dated July 3, 1997.

Date: ________________________

NOTE: Please sign exactly as your
name appears on this proxy. If
signing for an estate, trust or
corporation, title or capacity
should be stated. If the shares
are held jointly, both signers
should sign, although the
signature of one will bind the
other.
_____________________
_____________________
Signature(s) PLEASE SIGN IN THE BOX ABOVE

<PAGE>

PLEASE INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOX BELOW, AS SHOWN,
USING BLUE OR BLACK INK OR DARK PENCIL. DO NOT USE RED INK.

IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSALS DESCRIBED
HEREIN.

1. With respect to the approval or disapproval of a new subadvisory
agreement for the Fund with Nicholas-Applegate Capital Management (Hong Kong)
LLC ("Nicholas Applegate"), effective upon the closing of the acquisition of
Credit Lyonnais International Asset Management (HK) Ltd. by Nicholas Applegate.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

2. With respect to the approval of a proposal to permit Fremont
Investment Advisors, Inc. to hire and terminate subadvisors or modify
subadvisory agreements without shareholder approval.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

3. In their discretion, the Proxies are authorized to vote upon such
other matters as may properly come before the meeting.

PLEASE MARK YOUR PROXY, DATE AND SIGN IT ON THE REVERSE SIDE, AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.

<PAGE>

FREMONT MUTUAL FUNDS, INC.
FREMONT EMERGING MARKETS FUND

333 MARKET STREET
26TH FLOOR
SAN FRANCISCO, CALIFORNIA 94105

SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON AUGUST 29, 1997

A Special Meeting of Shareholders (the "Meeting") of the FREMONT EMERGING
MARKETS FUND (the "Fund") will be held at the Fund's offices at 333 Market
Street, 26th Floor, San Francisco, California 94105, on Friday, August 29, 1997
at 10:00 a.m. for the following purposes:

1. To consider and act upon the approval of a new investment
subadvisory agreement between (i) Fremont Mutual Funds, Inc.,
(ii) Fremont Investment Advisors, Inc., the investment manager
of the Fund, and (iii) Nicholas-Applegate Capital Management
(Hong Kong) LLC ("Nicholas Applegate") which will take effect
upon the closing of the acquisition of the stock and assets of
Credit Lyonnais HK by Nicholas-Applegate.

2. To consider and act upon the approval of a proposal to permit
Fremont Investment Advisors, Inc. to hire and terminate
subadvisors or modify subadvisory agreements without
shareholder approval.

3. To transact such other business as may properly come before
the Meeting or any adjournments thereof.

The stock transfer books will not be closed but, in lieu thereof, the Board
of Directors has fixed the close of business on June 30, 1997 as the record date
for the determination of shareholders of the Fund entitled to notice of, and to
vote at, the Meeting.

By order of the Board of Directors

Tina Thomas, Secretary
San Francisco, California
July 3, 1997

<PAGE>

FREMONT MUTUAL FUNDS, INC.
FREMONT EMERGING MARKETS FUND

333 MARKET STREET
26TH FLOOR
SAN FRANCISCO, CALIFORNIA 94105
(800) 548-4539

FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 29, 1997

INTRODUCTION

This Proxy Statement (the "Proxy") is furnished in connection with the
solicitation by the Board of Directors (the "Board") of Fremont Mutual Funds,
Inc. (the "Company") on behalf of the Fremont Emerging Markets Fund (the "Fund")
of proxies to be voted at a Special Meeting of Shareholders of the Fund to be
held at the Fund's offices at 333 Market Street, 26th Floor, San Francisco,
California 94105, on August 29, 1997 at 10:00 a.m. (the "Meeting") and at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders.

The costs of preparing, printing, mailing and soliciting the proxies will
be borne by Credit Lyonnais International Asset Management South East Asia B.V.
(the "Parent"). In addition, certain officers, directors and employees of the
Parent and officers and directors of the Fund (none of whom will receive
additional compensation therefor) may solicit proxies in person or by telephone,
telegraph or mail. Management Information Systems, Inc. has been retained at its
customary rates to solicit proxies.

All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, shares
represented by the proxies will be voted "FOR" all the proposals. All shares in
Fund-sponsored IRA accounts not voted by the account owner will be voted by the
IRA trustee in the same proportion (for, against and abstain) as all other votes
cast whether in person or by proxy. For purposes of determining the presence of
a quorum for transacting business at the Meeting, abstentions and broker
"non-votes" (that is, proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be treated as shares
that are present. However, broker non-votes are disregarded in determining
"votes cast" when the voting requirement is based on achieving a percentage of
the voting securities entitled to vote present in person or by proxy at the
Meeting. Any proxy may be revoked at any time prior to the exercise thereof by
submitting another proxy bearing a later date or by giving written notice to the
Secretary of the Company at the address indicated above or by voting in person
at the Meeting. Any proxy may be revoked at any time prior to the exercise
thereof by submitting another proxy bearing a later date or by giving written
notice to the Secretary of the Company at the address indicated above or by
voting in person at the Meeting. The affirmative vote of a majority of the
shares as defined under the Investment Company Act of 1940 (a "Majority Vote")
(either 67% of the shares present at the Meeting, if holders of more than 50% of
the outstanding shares are present in person or by proxy, or more than 50% of
the outstanding shares, whichever is less) of the Fund is necessary to approve
the Fund's new investment subadvisory agreement (Proposal I) and to approve an
arrangement to permit Fremont Investment Advisors, Inc. (the "Investment
Manager") to hire and terminate subadvisors or modify subadvisory agreements
without shareholder approval (Proposal II).

<PAGE>

may propose one or more adjournments of the Meeting to permit further
solicitation of the proxies with respect to any proposals for which sufficient
votes had not been received. Any such adjournment will require the affirmative
vote of a majority of votes cast on the question in person or by proxy at the
Meeting. The persons named as proxies will vote against such adjournment only
with respect to those proxies that they are required to vote against such
proposal.

As of the Record Date, to the best knowledge of the Fund, no person
beneficially owned more than 5% of the outstanding shares of the Fund.

PROPOSAL I

TO CONSIDER A NEW SUBADVISORY AGREEMENT FOR THE FUND WHICH TOOK
EFFECT UPON THE CLOSING OF THE ACQUISITION OF
THE SUBADVISOR

SUMMARY OF THE TRANSACTION

On February 17, 1997, Credit Lyonnais International Asset Management (HK)
Ltd. ("Credit Lyonnais HK") and its parent Credit Lyonnais International Asset
Management South East Asia B.V. (the "Parent"), entered into a definitive
agreement (the "Agreement") to sell the shares of Credit Lyonnais HK to
Nicholas-Applegate Capital Management (Hong Kong) LLC ("Nicholas Applegate") for
$7.4 million in cash and Credit Lyonnais HK will promptly thereafter transfer
all of its assets to its new parent company, Nicholas-Applegate (the
"Transaction"). The Transaction is expected to close in mid-July, 1997 and is
subject to various conditions, including approval by the shareholders of the
Fund of new investment subadvisory agreement between (i) the Company, (ii) the
Investment Manager, and (iii) Nicholas-Applegate (the "New Subadvisory
Agreement"). While shareholder approval is required for Nicholas-Applegate to
become the subadvisor, Nicholas-Applegate may waive approval as a condition of
closing the Transaction. After the Closing, Nicholas-Applegate, as successor,
will continue to operate out of Credit Lyonnais HK's Hong Kong office. Key
members of Credit Lyonnais HK's management team will join Nicholas-Applegate and
continue to be responsible for managing the day-to-day affairs of the Fund. Thus
in the view of the Board and Credit Lyonnais HK, the Transaction will not result
in any material changes in the portfolio management and investment operations of
the Fund.

Nicholas-Applegate is part of an experienced investment management
organization which together manage in excess of U.S. $30 billion through a
variety of investment products and services. The Nicholas-Applegate group of
companies is headquartered in San Diego, California.

<PAGE>

Pursuant to Section 15 of the Investment Company Act of 1940, as amended
(the "1940 Act"), the Fund's existing investment subadvisory agreement
terminates automatically upon its assignment, which is deemed to include any
change of control of the investment subadvisor. Section 15(a) of the 1940 Act
prohibits any person from serving as an investment advisor to a registered
investment company except pursuant to a written contract that has been approved
by the shareholders. Therefore, in order for Nicholas-Applegate to provide
investment subadvisory services to the Fund as of the closing of the
Transaction, the shareholders of the Fund must approve the New Subadvisory
Agreement.

The Transaction also contemplates that Credit Lyonnais HK and
Nicholas-Applegate and other persons will comply with the requirements of
Section 15(f) of the 1940 Act after the Closing. Section 15(f) provides, in
pertinent part, that Credit Lyonnais HK and its affiliates may receive any
amount or benefit in connection with a sale of securities of, or a sale of any
other interest in, Credit Lyonnais HK which results in an assignment of an
investment subadvisory contract if (1) for a period of three years after such
event, at least 75% of the members of the board of directors of the investment
company which it advises are not "interested persons" (as defined in the 1940
Act) of the new or old investment subadvisor; and (2) for a two-year period
there is no "unfair burden" imposed on the investment company as a result of the
Transaction. In the Agreement with Credit Lyonnais HK, Nicholas-Applegate and
its affiliates have represented and warranted to Credit Lyonnais HK that they
have no express or implied understanding or arrangement that would impose an
unfair burden on the Fund as a result of the Transaction. Nicholas-Applegate and
its affiliates have agreed to indemnify and hold Credit Lyonnais HK harmless
from and against and in respect of any and all losses arising in connection with
the imposition of any unfair burden on the Fund constituting a breach or
violation of, or non-compliance with, Section 15(f) of the 1940 Act which is
caused by acts or conduct within the control of NicholasApplegate and its
affiliates.

The New Subadvisory Agreement, if approved by the Fund's shareholders, will
commence as of the Closing. Thereafter, the New Subadvisory Agreement will
remain in effect for an annual period and will continue in effect thereafter for
successive annual periods if and so long as such continuance is specifically
approved by (a) the Board of Directors or (b) a Majority Vote of a the Fund's
shareholders, provided that in either event, the continuance also is approved by
a majority of the directors who are not "interested persons" by vote cast in
person at a meeting called for the purpose of voting on such approval. If the
Closing occurs before the approval by shareholders, Nicholas-Applegate, as
successor entity to Credit Lyonnais HK, will manage the assets of the Fund
according to the current sub-advisory agreement. However, any fees earned by
Nicholas-Applegate, if any, will be placed into an escrow account and not paid
to Nicholas-Applegate until the approval occurs.

After careful consideration, the Board of Directors of the Company
unanimously recommends that shareholders vote "FOR" the New Subadvisory
Agreement between the Company, the Investment Manager and Nicholas-Applegate to
replace the current subadvisory agreement with Credit Lyonnais HK upon
consummation of the Transaction. See "Evaluation by the Boards" below.

BENEFITS TO SHAREHOLDERS

The Board has identified the following benefits which the shareholders are
anticipated to realize as a result of the Transaction:

1. Senior members of the Fund's investment management team have agreed
to remain employed with Nicholas-Applegate;

2. The advisory fees charged to the Fund will not increase as a result
of the Transaction; and

3. Nicholas-Applegate and its affiliates are an experienced mutual fund
management organization whose operation is more stable than that of
Credit Lyonnais HK and its affiliates, which are undergoing a
reorganization by the French government.

<PAGE>

THE INVESTMENT SUBADVISOR

Nicholas-Applegate, located (upon the closing of the Transaction) at Room
604-6, Three Exchange Square, Connaught Place, Central, Hong Kong, will serve as
the Fund's investment subadvisor upon approval by the Board and the
shareholders. Nicholas-Applegate will manage the Fund's investments, subject to
supervision by the Investment Manager. Portfolio Manager Henry L. Thornton will
continue to be responsible for the day to day management of the Fund.

Nicholas-Applegate Capital Management Holdings L.P., a California limited
partnership, will act as managing member of the investment subadvisor (the
"Managing Member"). The Managing Member will act through one or more of its
executive officers: Arthur E. Nicholas, Chairman of the Board; Tom Waring,
President; and Paul Mack, Vice President.

THE EMPLOYMENT AGREEMENTS

Upon the Closing, Henry L. Thornton will enter into an employment agreement
with Nicholas Applegate or one of its affiliates that provides for his continued
service; it also provides that he cannot be terminated except for cause or
disability and contains non-competition provisions. Mr. Thornton's agreement has
a term of 2 years. Other key members of the Credit Lyonnais HK's investment
management team will also enter into minimum 1 year employment and non-compete
contracts with NicholasApplegate which provide long-term compensation
incentives. They will continue to have senior management roles.

THE NEW SUBADVISORY AGREEMENT

Pursuant to the current subadvisory agreement between Credit Lyonnais HK,
the Investment Manager and the Fund, Credit Lyonnais HK has been retained to
manage the investments of the Fund and to provide such investment research,
advice and supervision, in conformity with the Fund's investment objectives and
policies, as may be necessary for the operations of the Fund. The New
Subadvisory Agreement provides the same authority. The current subadvisory
agreement for the Fund is dated June 24, 1996 and was approved by the Company's
Board of Directors on June 18, 1996. The current subadvisory agreement and the
New Subadvisory Agreement each provides that the Advisor shall pay to Credit
Lyonnais HK a fee for its services which is equal to .50% of the Fund's average
daily net asset value, such fee to be waived until the date the Investment
Manager reaches "break-even" with respect to the Fund.

The New Subadvisory Agreement provides for the furnishing of the same
subadvisory services for the same subadvisory fees as the current subadvisory
agreement with the Fund. The current subadvisory agreement provides, among other
things, that Credit Lyonnais HK will bear all expenses of its employees and
overhead incurred in connection with its duties. A form of the New Subadvisory
Agreement is attached as Exhibit A.

The New Subadvisory Agreement allows the subadvisor to provide investment
advisory services for other individuals and entities in addition to the Fund.
This clause is less restrictive than the language in the current subadvisory
agreement.

Both the current and New Subadvisory Agreements require that brokerage
orders for the Fund's portfolio securities transactions are placed by the
subadvisor. The subadvisor seeks to obtain the best available prices in the
Fund's portfolio transactions, taking into account the costs and promptness of
executions. Subject to this policy, transactions may be directed to those
broker-dealers who provide research, statistical and other information to the
Fund or the subadvisor or who provide assistance with respect to the
distribution of Fund shares. Subject to the requirements of the 1940 Act 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 Company,

<PAGE>

Fremont Investment Advisors, Inc. or the subadvisor. During the fiscal year
ended October 31, 1996, the Fund paid brokerage commissions of $2,352 to Credit
Lyonnais Securities (USA), Inc. (which was 11.7% of the aggregate brokerage
commissions paid by the Fund during such period). Credit Lyonnais Securities
(USA), Inc. is an affiliated company of Credit Lyonnais HK.

The current and New Subadvisory Agreements both provide that in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the subadvisor is not liable to the Fund or any of the
Fund's shareholders for any act or omission by the subadvisor in the supervision
or management of its respective investment activities or for any loss sustained
by the Fund or the Fund's shareholders, and that the Fund will indemnify the
subadvisor subject to the requirements of the 1940 Act.

Both the current and New Subadvisory Agreements may be terminated at any
time by the Fund, without the payment of any penalty, upon the vote of a
majority of the Company's Board of Directors or a majority of the outstanding
voting securities of the Fund or by Credit Lyonnais HK, on 30 days' written
notice by either party to the other.

NICHOLAS-APPLEGATE SUBADVISORY COMMITMENTS

Upon the closing of the Transaction, Nicholas-Applegate will act as a
subadvisor to the following fund, assuming approval by the shareholders of such
fund:
<TABLE>
<CAPTION>

NAME OF FUND SIZE OF FUND (AS OF 3/31/97) COMPENSATION RATE
<S> <C> <C>
Pacific Capital-New Asia Growth Fund $18.0 million .50% of average
daily net assets
</TABLE>
EVALUATION BY THE BOARD OF DIRECTORS

On May 2, 1997, the independent directors of the Company's Board met and
discussed the Transaction and its possible effect on the Fund and evaluated the
New Subadvisory Agreement. In evaluating the New Subadvisory Agreement, the
Board reviewed materials furnished by Credit Lyonnais HK and Nicholas-Applegate
relevant to its decision. Those materials included information regarding Credit
Lyonnais HK and Nicholas-Applegate and their affiliates and their personnel,
operations and financial condition. Management of the Company indicated its
belief that, as a consequence of the Transaction, the operations of Credit
Lyonnais under its new ownership and name, and its ability to provide services
to the Fund, would not be adversely affected and would likely be enhanced. The
Board considered the potential benefits to shareholders. In its deliberations,
the Board considered the terms of the Transaction, including, among other
things, the continued employment of the senior members of the management team by
Nicholas-Applegate, which the Board believed to be important to assure
continuity of the subadvisory services provided to the Fund. In addition, the
Board reviewed and discussed the terms and provisions of the New Subadvisory
Agreement and compared fees and expenses under the New Subadvisory Agreement
with those paid by other investment companies.

The Board was advised by its own counsel and considered all information
that it determined was relevant to its deliberations. In determining to
recommend that shareholders of the Fund vote to approve the New Subadvisory
Agreement as being in the best interest of the Fund's shareholders, the Board
gave substantial weight to management's representations that the advisory
services to be provided by Nicholas-Applegate would be performed by the same
people and that there were certain assurances that expenses to be incurred under
the New Subadvisory Agreement will not be greater than those that would be
incurred under the current subadvisory agreement.

ACCORDINGLY, AFTER CONSIDERATION OF THE ABOVE, AND SUCH OTHER FACTORS AND
INFORMATION AS IT DEEMED RELEVANT, THE BOARD OF DIRECTORS, INCLUDING ALL OF THE
DIRECTORS WHO ARE NOT INTERESTED PERSONS (AS SUCH TERM IS DEFINED BY THE 1940
ACT), UNANIMOUSLY APPROVED THE NEW SUBADVISORY AGREEMENT AND VOTED TO RECOMMEND
ITS APPROVAL TO THE FUND'S SHAREHOLDERS.

<PAGE>

PROPOSAL II

APPROVAL OR DISAPPROVAL OF A PROPOSAL TO PERMIT THE INVESTMENT MANAGER TO
HIRE AND TERMINATE SUBADVISORS OR MODIFY SUBADVISORY AGREEMENTS WITHOUT
SHAREHOLDER APPROVAL

The Investment Manager currently serves as investment advisor to the Fund
pursuant to an Investment Advisory and Administrative Services Agreement (the
"Advisory Agreement") with the Company. The Investment Manager currently employs
a subadvisor with respect to the Fund and may engage additional subadvisors in
the future. The Company is proposing to permit the Investment Manager to enter
into, terminate, or modify subadvisory agreements on behalf of the Fund with
subadvisors without obtaining the prior approval of a majority of the
outstanding voting securities of the Fund, as is otherwise required by Section
15(a) of the 1940 Act.

(1) The Investment Manager will not enter into a subadvisory
agreement with a subadvisor that is an "affiliated person," as
defined in the 1940 Act, of the Company or the Investment
Manager (an "Affiliated Manager"), other than by reason of
serving as a subadvisor to the Fund, without such agreement,
including the compensation to be paid thereunder, being
approved by the shareholders of the Fund.

(4) The Investment Manager will provide general management services
to the Company and the Fund and, subject to review and
approval by the Company's Board of Directors, will (i) set
the Fund's overall investment strategies; (ii) select
subadvisor(s); (iii) allocate and, when appropriate,
reallocate the Fund's assets among the Investment Manager
and one or more subadvisors; (iv) monitor and evaluate the
performance of subadvisors; and (v) seek to ensure that the
subadvisors comply with the Fund's investment objectives,
policies and restrictions.

<PAGE>

(6) The Fund will disclose in its Prospectus the existence, s
ubstance and effect of the SEC Order.

In accordance with condition (7), shareholder approval of this proposed new
arrangement is being sought. Even if the Fund's shareholders approve this
arrangement, any new subadvisors engaged or terminated or any change in a
subadvisory agreement will still require approval of the Board of Directors. In
order to approve new subadvisors, the Board will analyze the factors they deem
relevant, including the nature, quality and scope of services provided by
subadvisors to investment companies comparable to the Fund. The Board will
review the ability of the subadvisor to provide its services to the Fund, as
well as its personnel, operation, financial condition or any other factor which
would affect the provision of these services. The Board will examine the
performance of the subadvisor with respect to compliance and regulatory matters
over the past fiscal year. The Board will review the subadvisor's investment
performance with respect to accounts deemed comparable. Finally, the Board will
consider other factors deemed relevant to the subadvisor's performance as an
investment advisor. The Board believes that this review provides adequate
shareholder protection in the selection of subadvisors.

<PAGE>

OTHER MATTERS

All Proxies received will be voted in favor of all the proposals, unless
otherwise directed therein.

Very truly yours,

Tina Thomas
Secretary
July 3, 1997

<PAGE>

EXHIBIT A

PORTFOLIO MANAGEMENT AGREEMENT

THIS AGREEMENT dated and effective as of [ ] 1997, among Nicholas-Applegate
Capital Management (Hong Kong) LLC, a Hong Kong company (the "Subadvisor");
Fremont Investment Advisors, Inc., a Delaware corporation (the "Advisor"); and
Fremont Mutual Funds, Inc., a Maryland corporation (the "Fund").

WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, diversified management investment
company and is authorized to issue separate series (the "Series"), each of which
may offer a separate class of shares of beneficial interest, each Series having
its own investment objective, policies and limitations; and

WHEREAS, the Fund presently offers shares of a particular series named the
Fremont Emerging Markets Fund (the "Emerging Markets Series"); and

WHEREAS, the Fund has retained the Advisor to render investment management
and administrative services to the Series; and

WHEREAS, the Advisor and the Fund desire to retain the Subadvisor to
furnish portfolio management services to the Emerging Markets Series in
connection with Advisor's investment management activities on behalf of the
Series, and the Subadvisor is willing to furnish such services to the Advisor
and the Emerging Markets Series;

NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Subadvisor, the Advisor and the Fund as
follows:

1. APPOINTMENT. The Advisor and the Fund hereby appoint Subadvisor to
provide subinvestment advisory services to the Advisor and the Fund with respect
to certain assets of the Emerging Markets Series for the periods and on the
terms set forth in this Agreement. The Subadvisor accepts such appointment and
agrees to furnish the services herein set forth, for the compensation herein
provided.

2. SUBADVISOR DUTIES. Subject to the supervision of the Advisor, the
Subadvisor shall have full discretionary authority as agent and attorney-in-fact
with respect to the portion of assets of the Emerging Markets Series' portfolio
assigned to the Subadvisor, from time to time by the Advisor or the Board of
Directors, including authority to: (a) buy, sell, exchange, convert or otherwise
trade in any stocks without limitation and (b) place orders for the execution of
such securities transactions with or through such brokers, dealers, or issuers
as Subadvisor may select. The Subadvisor will provide the services under this
Agreement in accordance with the Emerging Markets Series' registration statement
filed with the Securities and Exchange Commission ("SEC"), as amended. The
Advisor will provide the Subadvisor with a copy of each registration statement
promptly after it has been filed with the SEC. Investments by the Subadvisor
shall conform with the provisions of Appendix B attached hereto, as such may be
revised from time to time at the discretion of the Advisor and the Fund. Subject
to the foregoing, the Subadvisor will vote proxies with respect to the
securities and investments purchased with the assets of the Emerging Markets
Series' portfolio managed by the Subadvisor. The Subadvisor further agrees that
it will:

(a) conform with all applicable rules and regulations of the
Securities and Exchange Commission.

(b) select brokers and dealers to execute portfolio transactions for
the Emerging Markets Series and select the markets on or in which the
transaction will be executed. In providing the Emerging Markets Series with
investment management, it is recognized that the Subadvisor will give

<PAGE>

primary consideration to securing the most favorable price and efficient
execution considering all circumstances. Within the framework of this policy,
the Subadvisor may consider the financial responsibility, research and
investment information and other research services and products provided by
brokers or dealers who may effect or be a party to any such transaction or other
transactions to which the Subadvisor's other clients may be a party. It is
understood that it is desirable for the Fund that the Subadvisor have access to
brokerage and research services and products and security and economic analysis
provided by brokers who may execute brokerage transactions at a higher cost to
the Emerging Markets Series than broker-dealers that do not provide such
brokerage and research services. Therefore, in compliance with Section 28(e) of
the Securities Exchange Act of 1934 (the "1934 Act"), the Subadvisor is
authorized to place orders for the purchase and sale of securities for the
Emerging Markets Series with such brokers, that provide brokerage and research
products and/or services that charge an amount of commission for effecting
securities transactions in excess of the amount of commission another broker
would have charged for effecting that transaction, provided the Subadvisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research products and/or services
provided by such broker viewed in terms of either that particular transaction or
the overall responsibilities of the Subadvisor for this or other advisory
accounts, subject to review by the Fund from time to time with respect to the
extent and continuation of this practice. It is understood that the information,
services and products provided by such brokers may be useful to the Subadvisor
in connection with the Subadvisor's services to other clients. On occasions when
the Subadvisor deems the purchase or sale of a security to be in the best
interest of the Emerging Markets Series as well as other clients of the
Subadvisor, the Subadvisor, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be sold or purchased in order to obtain the most favorable price of lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, shall be made by the Subadvisor in the manner the Subadvisor
considers to be the most equitable and consistent with its fiduciary obligations
to the Emerging Markets Series and to such other clients.

(c) make available to the Advisor and the Fund's Board of Directors
promptly upon their request all its investment records and ledgers relating to
the Emerging Markets Series to assist the Advisor and the Fund in their
compliance with respect to the Emerging Markets Series' securities transactions
as required by the 1940 Act and the Investment Advisers Act of 1940 ("Advisers
Act"), as well as other applicable laws. The Subadvisor will furnish the Fund's
Board of Directors with respect to the Emerging Markets Series such periodic and
special reports as the Advisor and the Directors may reasonably request in
writing.

(d) maintain detailed records of the assets managed by the Subadvisor
as well as all investments, receipts, disbursements and other transactions made
with such assets. Such records shall be open to inspection and audit during
Subadvisor's normal business hours upon reasonable notice by any person
designated by the Advisor or the Fund. The Subadvisor shall provide to the
Advisor or the Fund and any other party designated by either the Advisor or the
Fund: (i) monthly statements of the activities with regard to the assets for the
month and of the assets showing each asset at its cost and, for each security
listed on any national securities exchange, its value at the last quoted sale
price reported on the composite tape on the valuation date or, in the cases of
securities not so reported, by the principal exchange on which the security
traded or, if no trade was made on the valuation date or if such security is not
listed on any exchange, its value as determined by a nationally recognized
pricing service used by the Subadvisor specified by such pricing service on the
valuation date, and for any other security or asset in a manner determined in
good faith by the Subadvisor to reflect its then fair market value; (ii)
statements evidencing any purchases and sales as soon as practicable after such
transaction has taken place, and (iii) a quarterly review of the assets under
management.

3. EXPENSES. During the term of this Agreement, the Subadvisor will pay all
expenses incurred by it, its staff and their activities, in connection with its
portfolio management activities under this

<PAGE>

Agreement. The Subadvisor shall not be responsible for any expense incurred
by the Advisor or the Fund, except as provided in Section 6 below.

4. COMPENSATION. For the services provided to the Emerging Markets Series,
the Advisor will pay the Subadvisor the fees as set forth in Appendix A hereto
at the times set forth in Appendix A hereto.

5. BOOKS AND RECORDS; CUSTODY. (a) In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Subadvisor hereby agrees that all records
which it maintains for the Emerging Markets Series are the property of the Fund
and further agrees to surrender promptly to the Fund any of such records upon
the Fund's request. The Subadvisor further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to preserve the records required
by Rule 204-2 under the Advisers Act for the period specified in the Rule.

(b) Title to all investments shall be made in the name of the Fund,
provided that for convenience in buying, selling, and exchanging securities
(stocks, bonds, commercial paper, etc.), title to such securities may be held in
the name of the Fund's custodian bank, or its nominee. The Fund shall advise the
Subadvisor of the identity of its custodian bank and shall give the Subadvisor
15 days' written notice of any changes in such custody arrangements.

Neither the Subadvisor, nor any parent, subsidiary or related firm,
shall take possession of or handle any cash, securities, mortgages or deeds of
trust, or other indicia of ownership of the Fund's investments, or otherwise act
as custodian of such investments. All cash and the indicia of ownership of all
other investments shall be held by the Fund's custodian bank.

6. INDEMNIFICATION. The Subadvisor agrees to indemnify and hold harmless
the Advisor, the Fund, any affiliated person within the meaning of Section
2(a)(3) of the 1940 Act ("affiliated person") of the Advisor or the Fund (other
than the Subadvisor) and each person, if any, who, within the meaning of Section
15 of the Securities Act of 1933 (the "1933 Act"), controls ("controlling
person") the Advisor or the Fund against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Advisor, the Fund or such affiliated person or controlling person may
become subject under the 1933 Act, 1940 Act, the Advisers Act, or under any
other statute, at common law or otherwise, which (1) may be based upon any
wrongful act or omission by the Subadvisor, any of its employees or
representatives or any affiliate of or any person acting on behalf of the
Subadvisor or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering the shares of the Fund or any amendment thereof or any supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished to the Fund or any affiliated person of the Fund by the
Subadvisor or any affiliated person of the Subadvisor; provided, however, that
in no case is the Subadvisor's indemnity in favor of the Advisor or the Fund or
any affiliated person or controlling person of the Advisor or the Fund deemed to
protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of his or its duties or by reason of his or its
reckless disregard of obligations and duties under this Agreement or under any
law.

The Fund agrees not to hold the Subadvisor or any of its officers or
employees liable for, and to indemnify and hold harmless, the Subadvisor and its
directors, officers, employees, affiliated persons and controlling persons
("Indemnified Parties") against, any act or omission of any other

<PAGE>

subadvisor providing investment management services to the Fund, and against any
costs and liabilities the Indemnified Parties may incur as a result of a claim
against the Indemnified Parties regarding actions taken in good faith exercise
of their powers hereunder excepting matters as to which the Indemnified Parties
have been grossly negligent, engaged in willful misfeasance, bad faith, reckless
disregard of the obligations and duties under this Agreement or have been in
violation of applicable law or regulations.

7. OTHER INVESTMENT ACTIVITIES OF SUBADVISOR. The Fund and Advisor
acknowledge that Subadvisor, or one or more of its affiliates, may have
investment responsibilities or render investment advice to, or perform other
investment advisory services for, other individuals or entities ("Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, the Fund agrees
that the Subadvisor or its affiliates may give advice or exercise investment
responsibility and take other action with respect to other Affiliated Accounts
which may differ from advice given or the timing or nature of action taken with
respect to the Emerging Markets Series; provided that the Subadvisor acts in
good faith, and provided further that it is the Subadvisor's policy to allocate,
within its reasonable discretion, investment opportunities to the Emerging
Markets Series over a period of time on a fair and equitable basis relative to
the Affiliated Accounts, taking into account the investment objectives and
policies of the Emerging Markets Series and any specific investment restrictions
applicable thereto. The Fund acknowledges that one or more of the Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Emerging Markets
Series may have an interest from time to time, whether in transactions which may
involve the Emerging Markets Series or otherwise. Subadvisor shall have no
obligation to acquire for the Emerging Markets Series a position in any
investment which any Affiliated Account may acquire, and the Fund shall have no
first refusal, co-investment or other rights in respect of any such investment
either for the Emerging Markets Series or otherwise.

8. (a) DURATION. This Agreement shall become effective on the date hereof.
Unless terminated as herein provided, this Agreement shall remain in full force
and effective for a period of two years from the date of this Agreement, and
shall continue in full force and effect for periods of one year thereafter so
long as such continuance is approved at least annually (i) by either the Board
of Directors of the Fund or by a vote of a majority (as defined in the 1940 Act)
of the outstanding voting securities of the Emerging Markets Series, and (ii) by
the Advisor, and (iii) by the vote of a majority of the Board of Directors of
the Fund who are not parties to this 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.

(b) TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Directors of the Fund or by the vote of
a majority (as defined in the 1940 Act) of the outstanding voting securities of
the Emerging Markets Series, or by the Advisor, on thirty (30) days' written
notice to the Subadvisor, or by the Subadvisor on like notice to the Board of
Directors of the Fund and to the Advisor. Payment of fees earned through the
date of termination shall not be construed as a penalty.

9. AMENDMENTS. No provision of this agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought and no amendment of this Agreement shall be effective
until approved by a vote of a majority of the outstanding voting securities of
the Emerging Markets Series, if such approval is required by applicable law.

10. MISCELLANEOUS.

<PAGE>

(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.

(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.

(d) Nothing herein shall be construed as constituting the Subadvisor
as an agent of the Fund or the Advisor.

(e) This Agreement supersedes any prior agreement relating to the
subject matter hereof between the parties.

(f) This Agreement may be executed in counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered, shall be deemed an original and all of which
counterparts shall constitute but one and the same agreement.

11. USE OF NAME. It is understood that the name "Nicholas-Applegate"
or the name of any of its affiliates, or any derivative associated with those
names, are the valuable property of the Subadvisor and its affiliates and that
the Fund and/or the Fund's distributor have the right to use such name(s) or
derivative(s) in offering materials and sales literature of the Fund so long as
this Agreement is in effect. Upon termination of the Agreement the Fund shall
forthwith cease to use such name(s) or derivative(s).

12. RECEIPT OF BROCHURE. The Advisor and the Fund have received from
Nicholas-Applegate the disclosure statement or "brochure" required to be
delivered pursuant to Rule 204-3 of the Advisers Act, which disclosure statement
or brochure was received by the Advisor and the Fund more than 48 hours prior to
entering into this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.

NICHOLAS-APPLEGATE CAPITAL
MANAGEMENT (Hong Kong) LLC

By:____________________________

_________________________________
(Title)

FREMONT INVESTMENT ADVISORS, INC.

By:____________________________

_________________________________
(Title)

FREMONT MUTUAL FUNDS, INC.

By:____________________________

_________________________________
(Title)

<PAGE>

APPENDIX A

TO PORTFOLIO MANAGEMENT AGREEMENT

Nicholas-Applegate Capital Management (Hong Kong ) LLC
Subadvisor to the Fremont Emerging Markets Fund

SCHEDULE OF FEES

Fremont Investment Advisors, Inc. will pay to Nicholas Applegate a fee
computed at the annual rate of 0.50% (50 basis points) of the average value of
the daily assets of the Emerging Markets Fund under management by Nicholas
Applegate.*

Fee will be billed after the end of each calendar month. Fees will be prorated
for any period less than one month. Fees shall be due and payable within thirty
(30) days after an invoice has been delivered to Fremont Investment Advisors,
Inc.

*NOTE: Nicholas Applegate will waive this fee until the date Fremont
Investment Advisors, Inc. reaches "breakeven" with respect to the Fund.

<PAGE>

APPENDIX B

TO PORTFOLIO MANAGEMENT AGREEMENT

Nicholas-Applegate Capital Management (Hong Kong) LLC
Subadvisor to the Fremont Emerging Markets Fund

INVESTMENT OBJECTIVES AND GUIDELINES

OVERALL INVESTMENT OBJECTIVE:

The objective of the Fremont Emerging Markets Fund is to achieve long-term
capital appreciation by investing, in normal market conditions, at least 65% of
its total assets in equity securities of issuers domiciled in emerging market
countries. In normal market conditions, at least three different emerging market
countries will be represented in the Fund's portfolio.

POLICY AND GUIDELINES FOR SUBADVISOR:

The Subadvisor will adhere to the Investment Objective and to policies in the
Fremont Emerging Markets Fund prospectus.

PERFORMANCE OBJECTIVE FOR SUBADVISOR:

The Subadvisor is expected to achieve a competitive rate of return over a 3 to 5
year time horizon and/or a complete market cycle, relative to other emerging
market funds as compiled by Lipper Analytical Services and/or Morningstar. A
competitive rate of return is defined as Fund performance in the top one-third
of such funds. Performance will also be compared to the Morgan Stanley Capital
International Emerging Markets Free Index.

<PAGE>