File Nos. 33-23453
811-5632
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / X/
Post-Effective Amendment No. 23
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / X/
Amendment No. 26
FREMONT MUTUAL FUNDS, INC.
----------------------------------------------------
(Exact Name of Registration as Specified in Charter)
333 Market Street, Suite 2600
SAN FRANCISCO, CALIFORNIA 94105
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(415) 284-8733
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Tina Thomas, Secretary
Fremont Mutual Funds, Inc.
333 Market Street, Suite 2600
San Francisco, California 94105
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(Name and Address of Agent for Service)
copy to:
Julie Allecta
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104-2878
---------------------------------------------------
The Registrant has filed a declaration pursuant
to Rule 24f-2. On December 30, 1996, it
filed its Rule 24f-2 Notice for the fiscal year ended
October 31, 1996.
----------------------------------------------------
It is proposed that this filing will become effective (check
appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on March 1, 1997 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485
<PAGE>
<TABLE>
<CAPTION>
FREMONT MUTUAL FUNDS, INC.
CROSS-REFERENCE SHEET
Between Items Enumerated in Form N-1A and
this Registration Statement
Item No. of
PART A OF FORM N-1A CAPTIONS IN PROSPECTUS
- -------------------- ----------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Fees and Expenses;
Investment Results
3. Financial Highlights Financial Highlights
4. General Description of The Advisor, the Sub-Advisor
Registrant and the Fund; Investment
Objective, Policies and Risk
Considerations; General
Investment Policies
5. Management of the Fund The Advisor, the Sub-Advisor
and the Fund; Execution of
Portfolio Transactions;
General Information
6. Capital Stock and Other Shareholder Account Services
Securities and Privileges; Dividends,
Distributions and Federal
Income Taxation; General
Information
7. Purchase of Securities How to Invest; Calculation of
Being Offered Net Asset Value and
Public Offering Price; Plan of
Distribution
8. Redemption or Repurchase How to Redeem Shares;
Calculation of Net Asset Value
and Public Offering Price;
Retirement Plans
9. Pending Legal Proceedings Inapplicable
- 2 -
<PAGE>
<CAPTION>
Item No. of Captions in Statement of
PART B OF FORM N-1A ADDITIONAL INFORMATION
- ------------------- ------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Inapplicable
History
13. Investment Objectives and Investment Objective,
Policies Policies and Risk
Considerations; Investment
Restrictions; Appendix A:
Description of Securities
Ratings
14. Management of the Funds Investment Company Directors
and Officers; Investment
Advisory and Other Services
15. Control Persons and Investment Company Directors
Principal Holders of and Officers; Investment
Securities Advisory and Other Services;
Additional Information
16. Investment Advisory and Investment Advisory and Other
Other Services Services; Plan of
Distribution; Additional
Information
17. Brokerage Allocation and Execution of Portfolio
Other Practices Transactions
18. Capital Stock and Other Additional Information
Securities
19. Purchase, Redemption and How to Invest; Other
Pricing of Securities Investment and Redemption
Being Offered Services
20. Tax Status Taxes -- Mutual Funds
21. Underwriters Investment Advisory and Other
Services
22. Calculation of Performance Investment Results
Data
23. Financial Statements Appendix B: Audited Financial
Statements as of October 31,
1996
- 3 -
</TABLE>
<PAGE>
ITEMS IN PART C
24. Financial Statements and Exhibits
25. Persons Controlled by or Under
Common Control
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections
of Investment Advisors
29. Principal Underwriter
30. Location of Accounts and Records
31. Management Services
32. Undertakings
- 4 -
<PAGE>
FREMONT
MUTUAL
FUNDS, INC.
- Money Market Fund
- Bond Fund
- Global Fund
- Growth Fund
- International Growth Fund
- International Small Cap Fund
- Emerging Markets Fund
- U. S. Micro-Cap Fund
March 1, 1997
<PAGE>
TABLE OF CONTENTS
ITEM PAGE NO.
Summary of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . .2
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . .3
The Advisor, The Sub-Advisors and the Funds. . . . . . . . . . . . . . .9
Investment Objectives, Policies and Risk Considerations. . . . . . . . 12
General Investment Policies. . . . . . . . . . . . . . . . . . . . . . 22
Investment Results . . . . . . . . . . . . . . . . . . . . . . . . . . 28
How to Invest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Shareholder Account Services and Privileges. . . . . . . . . . . . . . 30
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . . . . . 31
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Dividends, Distributions and Federal Income Taxation . . . . . . . . . 33
Plan of Distribution (Emerging Markets Fund only) . . . . . . . . . . 34
Calculation of Net Asset Value and Public Offering Price . . . . . . . 34
Execution of Portfolio Transactions. . . . . . . . . . . . . . . . . . 35
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . 36
Telephone Numbers and Addresses. . . . . . . . . . . . . . . . . . . . 37
<PAGE>
PROSPECTUS
FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under
this Prospectus is offering shares in eight series, or Funds:
FREMONT MONEY MARKET FUND seeks to maximize current income to the extent
consistent with preservation of capital and liquidity by investing in short-term
money market instruments. AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT OR ANY OTHER ENTITY. THE FUND
WILL ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, BUT THERE
CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
FREMONT BOND FUND seeks to realize maximum total return consistent with the
preservation of capital and prudent investment management by investing primarily
in bonds, notes, bills and money market instruments of U.S. and foreign issuers.
FREMONT GLOBAL FUND seeks to maximize total return (including income and
capital gains) while reducing risk by investing in multiple categories of U.S.
and foreign securities.
FREMONT GROWTH FUND seeks to provide growth of capital over the long term
by investing primarily in common stocks of companies domiciled within the United
States.
FREMONT INTERNATIONAL GROWTH FUND seeks to achieve long-term growth of
capital by investing primarily in equity securities of issuers domiciled outside
the United States.
FREMONT INTERNATIONAL SMALL CAP FUND seeks to achieve long-
term capital appreciation by investing primarily in equity securities of small
cap companies domiciled outside the United States.
FREMONT EMERGING MARKETS FUND seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers domiciled in
countries with emerging or developing capital markets.
FREMONT U.S. MICRO-CAP FUND seeks to achieve long-term capital appreciation
by investing primarily in equity securities of micro-cap companies domiciled
within the United States.
<PAGE>
There can be no assurance that any Fund will achieve its investment
objective. Each of the Funds, except for the Fremont Emerging Markets Fund, is
a diversified fund as defined by the Investment Company Act of 1940.
Shares of each Fund are offered without a sales charge.
This Prospectus, which should be retained for future reference, sets forth
concisely the information an investor should know before investing. Should more
detailed information be desired, a Statement of Additional Information, which is
incorporated by reference into this Prospectus, is available without charge by
calling toll-free 800-548-4539 (press 1) or by writing to Fremont Mutual Funds,
Inc., 50 Beale Street, Suite 100, San Francisco, California 94105.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR ARE SHARES INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March 1, 1997.
FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
PLEASE READ THIS PROSPECTUS CAREFULLY. IT IS DESIGNED TO PROVIDE YOU WITH
INFORMATION AND TO HELP YOU DECIDE WHICH OF THE FUNDS' OBJECTIVES MEETS YOUR OWN
GOALS.
FREMONT MUTUAL FUNDS 1
<PAGE>
SUMMARY OF FEES AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(a) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
TOTAL FUND
MANAGEMENT 12B- OTHER OPERATING
FEE FEES EXPENSES EXPENSES
--- ---- -------- --------
Money Market Fund(b) .22% None .09% .31%
Bond Fund(c) .40% None .28% .68%
Global Fund .60% None .27% .87%
Growth Fund .50% None .42% .92%
International Growth Fund(d) 1.50% None None 1.50%
International Small Cap Fund(e) (d) 1.50% None None 1.50%
Emerging Markets Fund(f) (e) None None None None
U.S. Micro-Cap Fund(g) (f) 1.96% None None 1.96%
- --------------------------------------------------------------------------------
Example: You would pay the following total expenses on a $1,000 investment in
each Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Money Market Fund $ 3 $10 $17 $39
Bond Fund 7 22 38 85
Global Fund 9 28 48 107
Growth Fund 9 29 51 113
International Growth Fund 15 47 82 179
International Small Cap Fund 15 47 82 179
Emerging Markets Fund 0 43
U.S. Micro-Cap Fund 20 62 106 229
<PAGE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE
EXPENSES OR ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR
LESS THAN THOSE SHOWN ABOVE.
The purpose of the above tables is to give you information and assistance
in understanding the various costs and expenses of the Funds that an investor
may bear directly or indirectly. Other expenses include, but are not limited
to, administrative and transfer agent fees paid to Fremont Investment Advisors,
Inc., custody, legal and audit, costs of registration of fund shares under
applicable laws, and costs of printing and distributing reports to shareholders.
The percentages expressing annual fund operating expenses of the Emerging
Markets Fund are based on estimated amounts for the current fiscal year. The
percentages expressing annual fund operating expenses of the remaining Funds are
based on actual expenses incurred during the most recent fiscal year, except
that the management fee of the International Small Cap Fund has been restated to
reflect the management fee currently being charged to the Fund.
See "The Advisor, the Sub-Advisor and the Funds."
(a) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
(b) Administrative fees of .15% have been waived by the Advisor. Absent such
waiver, other expenses and total fund operating expenses of the Money
Market Fund would have been .24% and .46%, respectively, for the fiscal
year ended October 31, 1996.
(c) Administrative fees of .15% have been waived by the Advisor. Absent such
waiver, other expenses and total operating expenses of the Bond Fund would
have been .43% and .83%, respectively, for the fiscal year ended October
31, 1996.
(d) Each of the International Growth Fund and the International Small Cap Fund
is obligated, under the terms of the management agreement, to pay the
Advisor an annual management fee of 1.5% of average net assets. However,
the Advisor is obligated to pay all of the Funds' other ordinary operating
expenses.
(e) The Advisor anticipates waiving management, 12b-1 and administrative fees
and reimbursing the Emerging Markets Fund for all of its other operating
expenses until further notice. Absent fee waivers and reimbursements of
expenses by the Advisor, the management fee, 12b-1 fee, other expenses and
total operating expenses would be 1.00%, .25%, .70% and 1.95%,
respectively.
(f) The U.S. Micro-Cap Fund is obligated, under the terms of the management
agreement, to pay the Advisor an annual management fee of 2.5% of average
net assets with respect to the first $30 million, 2.0% with respect to the
next $70 million and 1.5% thereafter. However, the Advisor is obligated to
pay all of the Fund's other ordinary operating expenses. Absent waivers of
management fees, the management fee and total operating expenses would have
been 2.22% for the fiscal year ended October 31, 1996.
2 FREMONT MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights of the Funds presented below have been audited by
Coopers & Lybrand, L.L.P., independent accountants. Their report covering each
of the five fiscal years in the period ended October 31, 1996, is included in
the Funds' Annual Report. Further information about the Funds' performance is
also contained in the Annual Report, which is included in the Funds' Statement
of Additional Information and which may be obtained without charge.
<TABLE>
<CAPTION>
Year Ended October 31
MONEY MARKET FUND ------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .05 .06 .03 .03 .04
------ ------ ------ ------ ------
Total investment operations .05 .06 .03 .03 .04
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.05) (.06) (.03) (.03) (.04)
------ ------ ------ ------ ------
Total distributions (.05) (.06) (.03) (.03) (.04)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN # 5.34% 5.84% 3.49% 2.66% 3.73%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $329,652 $299,312 $224,439 $24,207 $31,832
Ratio of expenses to average net assets(a) .31% .30% .46% .67% .70%
Ratio of net investment income to average
net assets(a) 5.22% 5.70% 4.02% 2.62% 3.70%
* Annualized
<PAGE>
<CAPTION>
Year Ended October 31 PERIOD
MONEY MARKET FUND ------------------------ NOVEMBER 18, 1988
1991 1990 TO OCTOBER 31, 1989
<S> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .06 .08 .08
------ ------ ------
Total investment operations .06 .08 .08
------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.06) (.08) (.08)
------ ------ ------
Total distributions (.06) (.08) (.08)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
------ ------ ------
TOTAL RETURN# 6.51% 7.99% 8.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $33,814 $62,599 $56,477
Ratio of expenses to average net assets(a) .51% .60% .65%*
Ratio of net investment income to average
net assets(a) 6.44% 7.66% 8.04%*
</TABLE>
*Annualized
(a) Administrative fees have been voluntarily waived from April 1, 1990
onwards. If fees had been charged fully, net investment income per share,
ratio of expenses to average net assets and ratio of net investment income
to average net assets would have been $.05, .46% and 5.07%, respectively,
for the year ended October 31, 1996; $.06, .45% and 5.55%, respectively,
for the year ended October 31, 1995; $.03, .61% and 3.87%, respectively,
for the year ended October 31, 1994; $.03, .82% and 2.47%, respectively,
for the year ended October 31, 1993; $.04, .85% and 3.55%, respectively,
for the year ended October 31, 1992; $.06, .66% and 6.29%, respectively,
for the year ended October 31, 1991; and $.08, .69% and 7.57%,
respectively, for the year ended October 31, 1990.
# Total return would have been lower had the Advisor not waived expenses.
FREMONT MUTUAL FUNDS 3
<PAGE>
<TABLE>
<CAPTION>
Year Ended October 31 PERIOD FROM
BOND FUND ------------------------------ APRIL 30, 1993 TO
1996 1995 1994 OCTOBER 31, 1993
----------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $10.13 $9.29 $10.27 $10.04
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .67 .65 .53 .27
Net realized and unrealized gain (loss) .11 .83 (.98) .24
------ ------ ------ ------
Total investment operations .78 1.48 (.45) .51
------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.70) (.64) (.53) (.27)
From net realized gains (.22) -- -- (.01)
------ ------ ------ ------
Total distributions (.92) (.64) (.53) (.28)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.99 $10.13 $9.29 $10.27
------ ------ ------ ------
------ ------ ------ ------
TOTAL RETURN # 8.18% 16.49% -4.42% 5.15%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $70,577 $86,343 $64,244 $11,738
Ratio of expenses to average net assets(a) .68% .60% .66% .50%*
Ratio of net investment income to average
net assets(a) 6.82% 6.69% 5.76% 5.35%*
Portfolio turnover rate 154% 21% 205% 13%*
</TABLE>
* Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased in over time. If fees had been charged fully, net investment income
per share, ratio of expenses to average net assets and ratio of net
investment income to average net assets would have been $.66, .83% and
6.67%, respectively, for the year ended October 31, 1996; $.64, .75% and
6.54%, respectively, for the year ended October 31, 1995; $.50, 1.04% and
5.38%, respectively, for the year ended October 31, 1994; and $.23, 1.23%
and 4.62%, respectively, for the period from April 30, 1993 to October 31,
1993.
# Total return would have been lower had the Advisor not waived expenses.
4 FREMONT MUTUAL FUNDS
<PAGE>
<TABLE>
<CAPTION>
Year Ended October 31
GLOBAL FUND --------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $14.24 $13.13 $13.17 $11.52 $11.25
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .39 .40 .26 .32 .39
Net realized and unrealized gain (loss) 1.49 1.24 (.03) 1.67 .40
------ ------ ------ ------ ------
Total investment operations 1.88 1.64 .23 1.99 .79
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.44) (.50) (.14) (.26) (.40)
From net realized gains (.57) (.03) (.13) (.08) (.11)
Return of Capital -- -- -- -- (.01)
------ ------ ------ ------ ------
Total distributions (1.01) (.53) (.27) (.34) (.52)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.11 $14.24 $13.13 $13.17 $11.52
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN 13.72% 12.78% 1.74% 17.51% 7.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $572,150 $482,355 $453,623 $186,325 $101,839
Ratio of expenses to average net assets .87% .88% .95% .99% 1.09%
Ratio of net investment income to average 2.66% 2.98% 2.47% 2.89% 3.41%
net assets
Portfolio turnover rate 71% 83% 52% 40% 50%
Average commission rate paid $.0238 -- -- -- --
<PAGE>
<CAPTION>
Year Ended October 31 PERIOD
GLOBAL FUND ------------------------ NOVEMBER 18, 1988
1991 1990 TO OCTOBER 31, 1989
<S> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $9.93 $10.77 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .47 .54 .57
Net realized and unrealized gain (loss) 1.34 (.82) (.79)
------ ------ ------
Total investment operations 1.81 (.28) 1.36
------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.45) (.54) (.45)
From net realized gains (.04) (.02) (.14)
Return of capital -- -- --
------ ------ ------
Total distributions (.49) (.56) (.59)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.25 $9.93 $10.77
------ ------ ------
------ ------ ------
TOTAL RETURN 18.38% -2.64% 13.71%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $74,502 $55,028 $43,918
Ratio of expenses to average net assets 1.12% 1.10% 1.02%*
Ratio of net investment income to average 4.34% 5.01% 5.30%*
net assets
Portfolio turnover rate 81% 36% 51%*
Average commission paid -- -- --
* Annualized
</TABLE>
FREMONT MUTUAL FUNDS 5
<PAGE>
<TABLE>
<CAPTION>
Year Ended October 31 PERIOD FROM
GROWTH FUND --------------------------------------- AUGUST 14, 1992 TO
1996 1995 1994 1993 OCTOBER 31, 1992
----------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $13.06 $10.46 $11.25 $10.08 $9.92
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .10 .13 .21 .13 .02
Net realized and unrealized gain (loss) 2.65 2.74 (.02) 1.16 .18
------ ------ ------ ------ ------
Total investment operations 2.75 2.87 .19 1.29 .20
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.08) (.17) (.18) (.12) (.04)
From net realized gains (.71) (.10) (.80) -- --
------ ------ ------ ------ ------
Total distributions (.79) (.27) (.98) (.12) (.04)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.02 $13.06 $10.46 $11.25 $10.08
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN # 22.06% 28.12% 1.72% 12.80% 2.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $78,624 $59,632 $27,244 $42,306 $32,388
Ratio of expenses to average net assets(a) .92% .97% .94% .87% .94%*
Ratio of net investment income to average
net assets(a) .75% 1.02% 1.31% 1.19% 1.08%
Portfolio turnover rate 129% 108% 55% 44% 49%
Average commission rate paid $.0429 -- -- -- --
</TABLE>
* Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. If fees had been charged fully, net investment income
per share, ratio of expenses to average net assets, and ratio of net
investment income to average net assets would have been $.12, 1.01% and
.98%, respectively, for the year ended October 31, 1995; $.19, 1.08% and
1.17%, respectively, for the year ended October 31, 1994; $.11, 1.02% and
1.04%, respectively, for the year ended October 31, 1993; and $.02, 1.18%
and 0.84%, respectively, for the period from August 14, 1992 to October 31,
1992.
# Total return would have been lower had the Advisor not waived expenses.
6 FREMONT MUTUAL FUNDS
<PAGE>
INTERNATIONAL GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
------------------------- MARCH 31 1994 TO
1996 1995 OCTOBER 31, 1994
---- ---- -----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $9.72 $9.79 $9.57
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.02) .10 .02
Net realized and unrealized gain (loss) .71 (.09) .20
------ ------ ------
Total investment operations .69 .01 .22
------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.01) (.08) --
From net realized gains -- -- --
------ ------ ------
Total distributions (.01) (.08) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.40 $9.72 $9.79
------ ------ ------
------ ------ ------
TOTAL RETURN 7.07% 0.13% 2.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $35,273 $32,156 $29,725
Ratio of expenses to average net assets 1.50% 1.50% 1.50%*
Ratio of net investment income (loss) to
average net assets -.20% 1.19% .35%*
Portfolio turnover rate 74% 32% 44%
Average commission rate paid $.0150 -- --
</TABLE>
*Annualized
<PAGE>
INTERNATIONAL SMALL CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
------------------------- JUNE 30 1994 TO
1996 1995 OCTOBER 31, 1994
---- ---- -----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $9.00 $9.86 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) .14 .10 (.01)
Net realized and unrealized gain (loss) 1.08 (.88) (.13)
------ ------ ------
Total investment operations 1.22 (.78) (.14)
------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.07) (.08) --
From net realized gains -- -- --
------ ------ ------
Total distributions (.07) (.08) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.15 $9.00 $9.86
------ ------ ------
------ ------ ------
TOTAL RETURN # 13.69% -7.96% -1.40%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $9,214 $4,245 $1,768
Ratio of expenses to average net assets(a) 1.81% 2.06% 2.50%*
Ratio of net investment income (loss) to
average net assets(a) 1.61% 1.67% -.28%*
Portfolio turnover rate 74% 96% --
Average commission rate paid $.0003 -- --
</TABLE>
*Annualized
(a) Management fees have been voluntarily waived from February 1, 1995 onwards.
If fees had been charged fully, net investment income (loss) per share,
ratio of expenses to average net assets and ratio of net investment income
(loss) to average net assets would have been $.08, 2.50% and 0.92%,
respectively, for the year ended October 31, 1996, and $.07, 2.50% and
1.23%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the Advisor not waived expenses.
FREMONT MUTUAL FUNDS 7
<PAGE>
EMERGING MARKETS FUND
PERIOD FROM
JUNE 24, 1996 TO
OCTOBER 31, 1996
----------------
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .10
Net realized and unrealized loss (.41)
------
Total investment operations (.31)
------
LESS DISTRIBUTIONS
From net investment income (.07)
From net realized gains --
------
Total distributions (.07)
------
NET ASSET VALUE, END OF PERIOD $9.62
------
------
TOTAL RETURN # -3.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $3,772
Ratio of expenses to average net assets(a) 0.00%*
Ratio of net investment income to
average net assets(a) 3.32%*
Portfolio turnover rate 20%*
Average commission rate paid $.0063
*Annualized
(a) Management fees and all other expenses have been voluntarily waived or
reimbursed from June 24, 1996 onwards. If fees had been charged fully, net
investment income (loss) per share, ratio of expenses to average net assets
and ratio of net investment income (loss) to average net assets would have
been -$.05, 4.95% and -1.63%, respectively, for the period ended October 31,
1996.
# Total return would have been lower had the Advisor not waived or reimbursed
expenses.
U.S. MICRO-CAP FUND
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
------------------------- JUNE 30 1994 TO
1996 1995 OCTOBER 31, 1994
---- ---- -----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $14.34 $10.34 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) (.04) (.05) .02
Net realized and unrealized gain 5.83 4.05 .34
------ ------ ------
Total investment operations 5.79 4.00 .36
------ ------ ------
LESS DISTRIBUTIONS
From net investment income -- -- (.02)
From net realized gains (.50) -- --
------ ------ ------
Total distributions (.50) -- (.02)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $19.63 $14.34 $10.34
------ ------ ------
------ ------ ------
TOTAL RETURN # 41.46% 38.68% 3.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $102,481 $7,792 $2,052
Ratio of expenses to average net assets(a) 1.96% 2.04% 2.50%*
Ratio of net investment income (loss) to
average net assets(a) -.51% -.67% .68%*
Portfolio turnover rate 81% 144% 129%
Average commission rate paid $.0541 -- --
</TABLE>
* Annualized
(a) Management fees have been voluntarily waived from February 1, 1995 onwards.
If fees had been charged fully, net investment income (loss) per share,
ratio of expenses to average net assets and ratio of net investment income
(loss) to average net assets would have been -$.06, 2.22% and -.77%,
respectively, for the year ended October 31, 1996, and -$.08, 2.50% and -
1.13%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the Advisor not waived expenses.
8 FREMONT MUTUAL FUNDS
<PAGE>
THE ADVISOR, THE SUB-ADVISORS
AND THE FUNDS
Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in eight series, or
Funds. The Board of Directors of the Investment Company is permitted to create
additional Funds at any time. Each Fund has its own investment objective and
policies and operates as a separate mutual fund.
FREMONT INVESTMENT ADVISORS, INC. PROVIDES INVESTMENT ADVISORY SERVICES TO THE
FREMONT FUNDS.
The management of the business and affairs of the Investment Company is the
responsibility of the Board of Directors. Fremont Investment Advisors, Inc.
(the "Advisor") provides each Fund with investment management and administrative
services under an Investment Advisory and Administrative Agreement (the
"Advisory Agreement") with the Investment Company. The Advisory Agreement
provides that the Advisor shall furnish advice to each Fund with respect to its
investments and shall, to the extent authorized by the Board of Directors,
determine what securities shall be purchased or sold by the Fund. As described
more fully below, the Advisor has retained investment management firms (the
"Sub-Advisors") to provide certain of the Funds with portfolio management
services. The Advisor's Investment Committee oversees the portfolio management
of the Funds, including the services provided by the Sub-Advisors.
The professional staff of the Advisor has offered professional investment
management services regarding asset allocation in connection with securities
portfolios to the Bechtel Group, Inc. Retirement Plan and the Bechtel
Foundation since 1978 and to Fremont Investors, Inc. (formerly Fremont Group,
Inc.) since 1987. The Advisor also provides investment advisory services
regarding asset allocation, investment manager selection and portfolio
diversification to a number of large Bechtel-related investors. The Investment
Company is one of its clients.
The Advisor will provide direct portfolio management services to the extent that
a sub-advisor does not provide those services. In the future, the Advisor may
propose to the Investment Company that different or additional sub-advisor(s) be
engaged to provide investment advisory or portfolio management services to the
Funds. Prior to such engagement, any agreement with a sub-advisor must be
approved by the Board of Directors and, if required by law, by the shareholders
of the applicable Fund. The Advisor may in its discretion manage all or a
portion of a Fund's portfolio directly with or without the use of a sub-advisor.
For additional information about the Advisor and the Sub-Advisors, see
"Investment Advisory and Other Services" in the Statement of Additional
Information.
MONEY MARKET FUND
As compensation for its services to the Money Market Fund, the Advisor receives
from the Fund an advisory fee, computed daily and paid monthly, of .30% per
annum of the first $50 million of the Fund's average net assets and .20% of such
assets in excess of $50 million. The Advisory Agreement also provides that the
Fund will pay to the Advisor an administrative fee of .15% per annum of average
net assets. The Advisor is waiving the entire administrative fee with respect
to the Fund until further notice. See "Other Expenses of the Funds" below.
- - Norman Gee is the Portfolio Manager for the Money Market Fund and Vice
President of the Advisor. Norman has 18 years' experience in portfolio
management and analysis. He is a graduate of San Francisco State
University.
BOND FUND
As compensation for its services to the Bond Fund, the Advisor receives from the
Fund an advisory fee of .40% per annum of the Fund's average net assets,
computed daily and paid monthly. The Advisory Agreement also provides that the
Fund will pay to the Advisor an administrative fee of .15% per annum of average
net assets. The Advisor is waiving the entire administrative fee with respect
to the Fund until further notice. See "Other Expenses of the Funds" below.
PIMCO SERVES AS SUB-ADVISOR FOR THE BOND FUND. PIMCO CURRENTLY MANAGES $83
BILLION AND IS ONE OF THE MOST RECOGNIZED BOND FUND MANAGERS IN THE WORLD.
Pacific Investment Management Company ("PIMCO"), 840 Newport Center Drive, Suite
360, Newport Beach, California 92660, serves as Sub-Advisor for the Bond Fund
pursuant to a Portfolio Management Agreement. PIMCO is an investment counseling
firm founded in 1971, and currently has $83 billion of assets under management.
The controlling partner of PIMCO is PIMCO Advisors L.P., in which Pacific Mutual
Life Insurance Company indirectly holds an approximate 62.7% interest; the
remaining interest is held indirectly by a group comprised of the managing
directors of PIMCO. PIMCO is registered as an investment advisor with the
Securities and Exchange Commission and as a commodity trading advisor with the
Commodity Futures Trading Commission. William H. Gross, CFA, Chairman and Chief
Investment Officer of PIMCO, is the portfolio manager of the Fund and has served
in that capacity since March 1, 1994. A founder of the firm, Bill has been
associated with PIMCO for 23 years. He received his bachelor's degree from Duke
University and his MBA from the UCLA Graduate School of Business.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Bond Fund), the Advisor and PIMCO provides that
PIMCO will manage the investment and reinvestment of the assets of the Fund and
continually review, supervise, and administer the Fund's investments. PIMCO
pays all expenses of its staff and their activities in connection with its
portfolio management activities. As compensation for its services, the Advisor
(not the Bond
FREMONT MUTUAL FUNDS 9
<PAGE>
Fund) pays PIMCO a fee equal to .25% per annum of Fund assets managed by PIMCO.
The Portfolio Management Agreement with PIMCO may be terminated by the Advisor
or the Investment Company upon 30 days' written notice. The Advisor has day-to-
day authority to increase or decrease the amount of the Fund's assets under
management by PIMCO.
GLOBAL FUND
As compensation for its services to the Global Fund, the Advisor receives from
the Fund an advisory fee of .60% per annum of the Fund's average net assets,
computed daily and paid monthly. The Advisory Agreement also provides that the
Fund will pay to the Advisor an administrative fee of .15% per annum of average
net assets. See "Other Expenses of the Funds" below.
THE ADVISOR'S ASSET ALLOCATION REVIEW IS BASED ON FORECASTS OF RETURNS FOR EACH
ASSET CLASS.
The Advisor will allocate and reallocate the assets of the Global Fund to seek
to achieve the Fund's investment objective. This will involve a periodic review
of the outlook for various securities which may result in reallocation of assets
among the categories. The Advisor's asset allocation review process is based on
forecasts of returns for each asset class. The investment environment is also
analyzed since capital markets often anticipate economic developments. Given
the Advisor's evaluation, an appropriate asset mix is determined for the Fund.
The Global Fund is managed by the Advisor's Asset Allocation Committee, whose
members are Robert J. Haddick, Alexandra Kinchen, Vincent P. Kuhn, Jr., Peter F.
Landini, and David L. Redo.
- - Robert J. Haddick, CFA, is Vice President of the Advisor and a member of
its Investment and Equity Committees. His primary responsibilities include
developing global asset allocation and investment management strategies.
Bob earned his B.A. and M.B.A. from the University of Illinois.
- - Alexandra Kinchen is Vice President of the Advisor and a member of its
Investment and Fixed Income Committees. Sandie earned her B.A. and M.B.A.
from Golden Gate University, San Francisco, California.
- - Vincent P. Kuhn is Executive Vice President and Director of Fremont Mutual
Funds and the Advisor. He is Chairman of the Advisor's Fixed Income
Committee and is also a member of the Fremont Investment Committee. Vince
received an undergraduate degree in Finance from Iona College, and an
M.B.A. from New York University.
- - Peter F. Landini is Senior Vice President and Director of the Advisor and a
member of its Investment Committee. Pete graduated from the University of
Santa Clara with a degree in Accounting and received an M.B.A. from Golden
Gate University, San Francisco, California. He is Chairman of the
Advisor's Equity and Asset Allocation Committees.
- - David L. Redo is a Director of Fremont Mutual Funds and President, CEO and
Chief Investment Officer for the Advisor. He has overall responsibility
for the management of approximately $4.5 billion of marketable securities
portfolios including the Fremont Mutual Funds. Prior to joining the
Advisor's predecessor organization in 1977, Dave was responsible for
Pacific Telesis' Pension Fund Investments. He received a B.S. in
Electrical Engineering from the University of California, Berkeley and an
M.B.A. from the University of Santa Clara.
GROWTH FUND
As compensation for its services to the Growth Fund, the Advisor receives from
the Fund an advisory fee of .50% per annum of the Fund's average net assets,
computed daily and paid monthly. The Advisory Agreement also provides that the
Fund will pay to the Advisor an administrative fee of .15% per annum of average
net assets. See "Other Expenses of the Funds" below.
The Equity Committee is responsible for managing the mix between the portion of
the Growth Fund's portfolio which is managed directly by the Advisor and the
portion of the Fund's portfolio which is managed by the Fund's Sub-Advisor, and
is responsible for reviewing the securities and overall characteristics of the
Fund's portfolio.
The portfolio managers for the Growth Fund are W. Kent Copa, John B. Kosekoff
and Peter F. Landini. Ken has co-managed the Fund since January 1995. John has
co-managed the Fund since November 1996. Pete has co-managed the Fund since its
inception.
- - W. Kent Copa, CFA, is Vice President of the Advisor and a member of its
Equity Committee. Ken earned his B.A. and M.B.A. from Brigham Young
University.
- - John B. Kosekoff is Vice President of the Advisor and a member of its
Equity Committee. John earned his B.A. from the University of California
at Berkeley and his M.B.A. from Cornell University. He was previously
employed as a senior analyst and portfolio manager at RCM Capital
Management, as a hedge fund analyst and portfolio manager at Omega
Advisors, and as a senior consumer sector analyst at Lord, Abbett & Co.
For a biography on Peter F. Landini, chairman of the Advisor's Equity Committee,
please refer to the Global Fund section.
INTERNATIONAL GROWTH FUND
Under the terms of the Advisory Agreement, the International Growth Fund pays
the Advisor a fee of 1.50% per annum of the Fund's average net assets, computed
daily and paid monthly. Under this Agreement the Advisor has agreed to bear all
of the Fund's expenses, except extraordinary expenses (as designated by a
majority of the Investment Company's disinterested directors) and interest,
brokerage commissions and other transaction charges relating to the investing
activities of the Fund.
The portfolio managers for the International Growth Fund since
10 FREMONT MUTUAL FUNDS
<PAGE>
September 1995 are Andrew L. Pang, Peter F. Landini and Robert J. Haddick.
- - Andrew L. Pang is Vice President of the Advisor and a member of its
Investment Committee and Equity Committee. Andrew received his degree in
Finance from San Francisco State University and received an M.B.A. from
Golden Gate University, San Francisco, California.
For biographies of Peter F. Landini and Robert J. Haddick, please refer to the
Global Fund section.
INTERNATIONAL SMALL CAP FUND
Under the terms of the Advisory Agreement, the International Small Cap Fund pays
the Advisor a fee, computed daily and paid monthly, of 1.50% per annum of the
Fund's average net assets. Under this Agreement the Advisor has agreed to bear
all of the Fund's expenses, except extraordinary expenses (as designated by a
majority of the Investment Company's disinterested directors) and interest,
brokerage commissions and other transaction charges relating to the investing
activities of the Fund.
ACADIAN ASSET MANAGEMENT SERVES AS THE SUB-ADVISOR FOR THE INTERNATIONAL
SMALL CAP FUND. ACADIAN MANAGES $3.9 BILLION IN INTERNATIONAL PORTFOLIOS.
Acadian Asset Management, Inc. ("Acadian"), Two International Place, Boston,
Massachusetts 02110, serves as Sub-Advisor to the International Small Cap Fund
pursuant to a Portfolio Management Agreement. Acadian is an international
investment management firm and currently manages approximately $3.9 billion in
assets. Acadian is a wholly-owned subsidiary of United Asset Management
Corporation and provides investment management services to corporations, pension
and profit-sharing plans, 401(k) and thrift plans, endowments, foundations and
other institutions and individuals. Dr. Gary L. Bergstrom, President of
Acadian, oversees the day-to-day investment decisions for the Fund and has done
so since the Fund's inception. Dr. Bergstrom founded Acadian's predecessor,
Acadian Financial Research, Inc., in 1977.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the International Small Cap Fund), the Advisor and
Acadian provides that Acadian will manage the investment and reinvestment of the
assets of the Fund and continually review, supervise and administer the Fund's
investments. Acadian pays all expenses of its staff and their activities in
connection with its portfolio management activities. As compensation for its
services, the Advisor (not the Fund) pays Acadian a fee equal to .75% per annum
of the first $50 million of the Fund's average net assets, .65% of the next $50
million of such assets, .50% of the next $100 million of such assets and .40% of
such assets in excess of $200 million. The Portfolio Management Agreement with
Acadian may be terminated by the Advisor or the Investment Company upon 30 days'
written notice. The Advisor has day-to-day authority to increase or decrease
the amount of the Fund's assets under management by Acadian Asset Management.
EMERGING MARKETS FUND
As compensation for its services to the Emerging Markets Fund, the Advisor
receives from the Fund an advisory fee, computed daily and paid monthly, of
1.00% per annum of the Fund's average net assets. The Advisory Agreement also
provides that the Fund will pay to the Advisor an administrative fee of .15% per
annum of average daily net assets. The Advisor is waiving both fees and
reimbursing the Fund for all of its other operating expenses until further
notice. See "Other Expenses of the Fund" below.
CREDIT LYONNAIS INTERNATIONAL ASSET MANAGEMENT, AN INDIRECT SUBSIDIARY OF CREDIT
LYONNAIS S.A., SERVES AS THE SUB-ADVISOR FOR THE EMERGING MARKETS FUND.
Credit Lyonnais International Management (HK) Limited ("Credit Lyonnais
Management"), Three Exchange Square, 38 Connaught Place, 6th floor, Hong Kong,
serves as Sub-Advisor to the Emerging Markets Fund pursuant to a Portfolio
Management Agreement. Credit Lyonnais Management is a Hong Kong company which
is a wholly-owned indirect subsidiary of Credit Lyonnais S.A., whose assets
exceeded $339 billion as of December 31, 1995. Credit Lyonnais S.A. manages or
advises in excess of $86.2 billion world-wide as of December 31, 1996. All
investment decisions of Credit Lyonnais Management with respect to the Fund are
made by committee, and no one person is primarily responsible for making
recommendations to the committee.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Emerging Markets Fund), the Advisor and Credit
Lyonnais Management provides that Credit Lyonnais Management will manage the
investment and reinvestment of the assets of the Fund and continually review,
supervise and administer the Fund's investments. Credit Lyonnais Management
<PAGE>
pays all expenses of its staff and their activities in connection with its
portfolio management activities. As compensation for its services, the Advisor
(not the Fund) pays Credit Lyonnais Management a fee equal to .50% per annum of
the Fund's average daily net assets. Credit Lyonnais Management has agreed,
however, to waive its entire fee until further notice. The Portfolio Management
Agreement with Credit Lyonnais Management may be terminated by the Advisor or
the Investment Company upon 30 days' written notice. The Advisor has day-to-day
authority to increase or decrease the amount of the Fund's assets under
management by Credit Lyonnais Management.
U.S. MICRO-CAP FUND
Under the terms of the Advisory Agreement, the U.S. Micro-Cap Fund pays the
Advisor a fee, computed daily and paid monthly, of 2.50% per annum of the Fund's
average net assets
FREMONT MUTUAL FUNDS 11
<PAGE>
with respect to the first $30 million, 2.00% with respect to the next $70
million of such assets, and 1.50% of such assets in excess of $100 million.
Under this Agreement, the Advisor has agreed to bear all of the Fund's expenses,
except extraordinary expenses (as designated by a majority of the Investment
Company's disinterested directors) and interest, brokerage commissions and other
transaction charges relating to the investing activities of the Fund.
MORGAN GRENFELL CAPITAL MANAGEMENT, INC. SERVES AS THE SUB-ADVISOR FOR THE U.S.
MICRO-CAP FUND. MORGAN MANAGES OVER $500 MILLION IN SMALL- AND MICRO-CAP
STOCKS.
Morgan Grenfell Capital Management, Inc. ("Morgan Grenfell"), 885 Third Avenue,
New York, New York 10022, currently serves as Sub-Advisor to the U.S. Micro-Cap
Fund pursuant to a Portfolio Management Agreement. Morgan Grenfell is a U.S.
investment advisory subsidiary of London-based Morgan Grenfell Group PLC.
Morgan Grenfell Group PLC is owned by Deutsche Bank AG. Within Morgan Grenfell,
the Smaller Capitalization Equities team, headed by Mr. Robert E. Kern, has
managed the Fund since inception. Bob has over 30 years of investment
management experience and has been employed by Morgan Grenfell since 1986. The
Smaller Capitalization Equities team is comprised of experienced professionals
each having investment research/portfolio management responsibility within a
specialized economic sector. Investment research specialization by economic
sectors is designed to create an advantage by providing an in-depth
understanding of each economic sector and of the industries within these
sectors. This knowledge provides the team with the ability to make individual
company investment decisions. Each team member works with the team's specialist
small cap trader to determine execution strategy. This approach, designed
specifically for smaller company investing, provides each member of the team
with beginning-to-end involvement in the investment process.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the U.S. Micro-Cap Fund), the Advisor and Morgan
Grenfell provides that Morgan Grenfell will manage the investment and
reinvestment of the assets of the Fund and continually review, supervise, and
administer the Fund's investments. Morgan Grenfell pays all expenses of its
staff and their activities in connection with its portfolio management
activities. As compensation for its services, the Advisor (not the Fund) pays
Morgan Grenfell a fee equal to 1.50% per annum of the first $30 million of the
Fund's average net assets, 1.00% of the next $70 million of such assets and .75%
of such assets in excess of $100 million. The Portfolio Management Agreement
with Morgan Grenfell may be terminated by the Advisor or the Investment Company
upon 30 days' written notice. The Advisor has day-to-day authority to increase
or decrease the amount of the Fund's assets under management by Morgan Grenfell.
OTHER EXPENSES OF THE FUNDS. In addition to the fees described above, each of
the Money Market Fund, the Bond Fund, the Global Fund, the Growth Fund and the
Emerging Markets Fund each pay their own operating expenses including;
shareholder servicing fees to third party servicing agents.
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The investment objective and policies of each Fund are stated below. A broad
range of objectives and policies is offered because the Funds are intended to
offer investment alternatives for a broad range of investors, who are expected
to have a wide and varying range of investment objectives. All of the Funds
(except for the Money Market Fund) are intended for long-term investors, not for
those who may wish to redeem their shares after a short period of time.
All investments, including mutual funds, have risks, and no investment is
suitable for all investors. Investors should consult with their financial and
other advisors concerning the suitability of this investment for their own
particular circumstances. Accordingly, there is no assurance that any Fund will
achieve its investment objective.
THE FREMONT MONEY MARKET FUND SEEKS TO MAXIMIZE CURRENT INCOME TO THE EXTENT
CONSISTENT WITH PRESERVATION OF CAPITAL AND LIQUIDITY.
MONEY MARKET FUND
The investment objective of the Money Market Fund is to maximize current income
to the extent consistent with preservation of capital and liquidity. The Fund
seeks to achieve its objective by investing primarily in any of the following
"money market" instruments: certificates of deposit, time deposits, commercial
paper, bankers' acceptances and Eurodollar certificates of deposit; U.S. dollar-
denominated money market instruments of foreign financial institutions,
corporations and governments; U.S. Government and agency securities; and other
debt securities having no more than 397 days to maturity. The Money Market Fund
also may enter into repurchase agreements. Though it has no current intention
<PAGE>
to do so, the Fund may in the future enter into reverse repurchase agreements.
THE FUND ATTEMPTS TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE.
The Fund attempts to maintain a constant net asset value of $1.00 per share by
valuing its securities using the amortized cost method. To do so, it must
invest only in readily marketable short-term securities with remaining
maturities of not more than 397 days (as allowed by regulations under the 1940
Act) which are of high quality and present minimal credit risks as determined by
the Advisor, under the direction of the Board of Directors. The portfolio must
have a dollar-weighted average maturity of not more than 90 days. At least 25%
of the Fund's assets will have a maturity of 90 days or less. All portfolio
securities will be denominated in U.S. dollars.
12 FREMONT MUTUAL FUNDS
<PAGE>
At the time of purchase, short-term securities must be considered "First Tier"
quality: rated in the top rating category by at least two nationally recognized
statistical rating organizations ("NRSROs"), or by a single NRSRO in the case of
a security rated by only one NRSRO, or if unrated, of comparable quality as
determined specifically by the Advisor, under the direction of the Board of
Directors. There are currently six NRSROs: Standard & Poor's Ratings Group
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Services,
Inc. ("Fitch"), Duff & Phelps Credit Rating Co. ("D&P"), IBCA Limited and its
affiliate IBCA, Inc. ("IBCA"), and Thomson Bankwatch, Inc. ("TBW"). Generally,
high quality short-term securities must be issued by an entity with an
outstanding debt issue rated single "A" or better by an NRSRO, or if unrated, by
an entity of comparable quality as determined specifically by the Advisor, under
the direction of the Board of Directors. Obligations of foreign banks, foreign
corporations and foreign branches of domestic banks must be payable in U.S.
dollars. See Appendix A of the Statement of Additional Information for a
description of rating categories.
The Fund may invest no more than 5% of its total assets in the securities of any
one issuer, other than U.S. Government securities, except in times of unexpected
shareholder redemptions or purchases. In such circumstances, the Fund may
invest temporarily in the securities of any one issuer in excess of 5% (but not
more than 25%) of the Fund's total assets for up to three business days after
the purchase to allow the Fund to manage its portfolio liquidity. The Fund will
not invest more than 10% of its assets in time deposits with a maturity of
greater than seven days. The Fund may make loans of its portfolio securities
and enter into repurchase agreements as described in the Statement of Additional
Information, except that such repurchase agreements with a maturity of greater
than seven days and other securities and assets that are not readily marketable
shall not exceed 10% of the value of the Fund's net assets. For a description
of these investments, see "General Investment Policies."
THE FREMONT BOND FUND SEEKS TO REALIZE MAXIMUM TOTAL RETURN CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND PRUDENT INVESTMENT MANAGEMENT.
BOND FUND
The investment objective of the Bond Fund is to seek to realize maximum total
return consistent with the preservation of capital and prudent investment
management.
Under normal market conditions, the Fund will invest at least 65% of the value
of its total assets in debt securities, such as obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities; obligations issued or
guaranteed by a foreign government, or any of its political subdivisions,
authorities, agencies or instrumentalities or by supranational organizations
(such as the World Bank); obligations of domestic or foreign corporations and
other entities; and mortgage-related and other asset-backed securities. The
obligations in which the Fund may invest may have fixed, variable or floating
interest rates. Depending upon the level of interest rates, the average maturity
of these securities will vary between 5 and 15 years. In addition, the Fund may
invest in obligations of domestic and foreign commercial banks and bank holding
companies (such as commercial paper, bankers' acceptances, certificates of
deposit and time deposits).
The Fund will invest primarily in securities rated Baa or better by Moody's, or
BBB or better by S&P or, if unrated, determined by the Fund's Sub-Advisor,
PIMCO, to be of comparable quality. The Fund also may invest up to 10% of its
assets in corporate debt securities that are not investment grade but are rated
B or higher by Moody's or S&P. Although long-term securities generally produce
higher income than short-term securities, long-term securities are more
susceptible to market fluctuations resulting from changes in interest rates.
When interest rates decline, the value of a portfolio invested at higher yields
can be expected to rise. Conversely, when interest rates rise, the value of a
portfolio invested at lower yields can be expected to decline. See "Corporate
Debt Securities" below for more information on quality ratings and risks
involved with lower rated securities.
THE FUND'S INVESTMENTS WILL BE CONCENTRATED IN AREAS OF THE BOND MARKET THAT THE
SUB-ADVISOR BELIEVES ARE RELATIVELY UNDERVALUED.
The Fund may invest directly in foreign currency-denominated debt securities
which meet the credit quality guidelines set forth for U.S. holdings. Under
normal market conditions, at least 60% of the Fund's total assets will be
invested in securities of U.S. issuers and at least 80% of the Fund's total
assets, adjusted to reflect the Fund's net exposure after giving effect to
currency transactions and positions, will be denominated in U.S. dollars. The
Fund may not invest more than 25% of its total assets in the securities of
issuers domiciled in a single country other than the United States.
In selecting securities and currencies for the Fund's portfolio, the Sub-Advisor
utilizes economic forecasting, interest rate expectations, credit and call risk
analysis and other security and currency selection techniques. The proportion
of the Fund's assets invested in securities with particular characteristics
(such as maturity, type, and coupon rate) may vary based on the Sub-Advisor's
outlook for the economy, the financial markets, and other factors. The Fund's
investments will be concentrated in areas of the bond market (based on quality,
sector, coupon or maturity) that the Sub-Advisor believes are relatively
undervalued.
The Fund may also employ certain active currency and interest rate management
techniques. The techniques may be used both to hedge the foreign currency and
interest rate risks associated with the Fund's portfolio securities, and, in the
case of certain techniques, to seek to increase the total return of the Fund.
Such active management techniques include foreign currencies, options on
securities, futures contracts, options on
FREMONT MUTUAL FUNDS 13
<PAGE>
futures contracts and currency, and swap agreements. See "General Investment
Policies" and the Statement of Additional Information for further information
regarding these securities and other instruments. When the Sub-Advisor deems it
advisable because of unusual economic or market conditions, the Fund may invest
all or a portion of its assets in cash or cash equivalents, such as obligations
of banks, commercial paper and short-term obligations of U.S. or foreign
issuers.
In addition, the Fund may purchase securities on a when-issued or forward
commitment basis, engage in portfolio securities lending, invest in reverse
repurchase agreements and borrow money for temporary administrative or emergency
purposes. See "General Investment Policies" and the Statement of Additional
Information for more information.
A portion of the Fund's assets may be invested in mortgage-related and other
asset-backed securities. See "General Investment Policies" for a discussion of
these securities.
The Fund may invest in convertible debentures (convertible to equity securities)
and preferred stocks (which may or may not have a dividend yield) using the same
quality and rating criteria noted above. The Fund may also invest in a small
percentage of assets in common stock consistent with its investment objectives.
Fixed-income securities of the type held by the Fund generally appreciate in
value when market interest rates decline. If the currency in which a security is
denominated appreciates against the U.S. dollar, the dollar value of the
security will increase. Conversely, a rise in interest rates or a decline in
the exchange rate of the currency would result in a depreciation in value or
adversely affect the value of the security expressed in dollars.
The Fund may participate in the options market, and may enter into futures
contracts and purchase and sell options on such contracts on a non-leveraged
basis. The Fund will set aside cash, cash equivalents or high quality debt
securities or hold a covered position against any potential delivery or payment
obligations under any outstanding option or futures contracts. Although these
investment practices will be used primarily to enhance total return or to
minimize the fluctuation of principal, they do involve risks which are different
in some respects from the investment risks associated with similar funds which
do not engage in such activities. These risks may include the following: the
imperfect correlation between the prices of options and futures contracts and
movement in the price of securities being hedged; the possible absence of a
liquid secondary market; in the case of over-the-counter options, the risk of
default by the counterparty; and the dependence upon the Sub-Advisor's ability
to correctly predict movements in the direction of interest rates and securities
prices. The Fund currently intends to commit no more than 5% of its net assets
to premiums when purchasing options. The Fund currently intends to limit its
writing of options so that the aggregate value of the securities underlying such
options, as of the date of sale of the options, will not exceed 5% of the Fund's
net assets. A more thorough description of these investment practices and their
associated risks is contained in "General Investment Policies" and the Statement
of Additional Information.
CORPORATE DEBT SECURITIES. The Fund's investments in dollar-denominated and
non-dollar-denominated corporate debt securities of domestic or foreign issuers
are limited to corporate debt securities (corporate bonds, debentures, notes and
other similar corporate debt instruments) which meet the minimum ratings
criteria set forth for the Fund, or, if unrated, are in the Sub-Advisor's
opinion comparable in quality to corporate debt securities in which the Fund may
invest.
Securities which are rated BBB by S&P or Baa by Moody's are considered
investment grade, but may have speculative characteristics, and changes in
economic conditions may lead to a weakened capacity to make principal and
interest payments than is the case with higher-rated securities. The securities
rated below Baa by Moody's or BBB by S&P (sometimes referred to as "junk bonds")
in which the Fund may invest (to a limited extent) will have speculative
characteristics (including the possibility of default or bankruptcy of the
issuers of such securities, market price volatility based upon interest rate
sensitivity, questionable creditworthiness and relative liquidity of the
secondary trading market). Because such lower-rated bonds have been found to be
more sensitive to adverse economic changes or individual corporate developments
and less sensitive to interest rate changes than higher-rated investments, an
economic downturn could disrupt the market for such bonds and adversely affect
the value of outstanding bonds and the ability of issuers to repay principal and
interest. In addition, in a declining interest rate market, issuers of lower-
rated bonds may exercise redemption or call provisions, which may force the
Fund, to the extent it owns such securities, to replace those securities with
lower yielding securities. This could result in a decreased return for
investors. For further information, see the Statement of Additional
Information.
THE FREMONT GLOBAL FUND SEEKS TO MAXIMIZE TOTAL RETURN (INCLUDING INCOME AND
CAPITAL GAINS) WHILE REDUCING RISK. THE FUND ALLOCATES ASSETS SO AS TO
EMPHASIZE ASSETS WITH THE MOST FAVORABLE RETURN OUTLOOK.
GLOBAL FUND
The investment objective of the Fund is to seek to maximize total return
(including income and capital gains) while reducing risk. In seeking to achieve
this objective, the Fund intends to allocate assets and periodically review the
asset allocation to emphasize assets with the most favorable return outlook,
consistent with the Fund's objective of minimizing price volatility. The Fund
may invest in U.S. stocks, U.S. bonds, foreign stocks, foreign bonds, real
estate securities, precious metals and cash equivalents, and adjust the level of
investment maintained in each asset category in response to changing market
conditions. The allocation of assets will be determined by the Advisor based on
its evaluation of projections of risk, market conditions, asset value and
expected return. This evaluation process is described in more detail below.
The Fund seeks to provide a systematic, disciplined approach to reduce overall
portfolio risk through asset diversification and to weight the portfolio toward
asset categories which, at the time of
14 FREMONT MUTUAL FUNDS
<PAGE>
evaluation, appear to have the best expected return potential. The Fund is
designed for investors who wish to accept the risks entailed in investments in
foreign securities and securities denominated in various currencies. See
"General Investment Policies - Special Considerations for International
Investing."
DESCRIPTION OF CLASSES OF ASSETS. Under normal circumstances, the Fund will
invest in securities of issuers located in at least three different countries,
including the United States. The Advisor will allocate the assets of the Fund
among the following categories of assets:
- - U.S. STOCKS - The Fund may invest in common and preferred stocks of
U.S.-based companies which are traded on a U.S. exchange or in the
Over-the-Counter (OTC) market. The Fund may also invest in stock index
futures contracts, options on index futures and options on stock indexes.
- - U.S. DOLLAR-DENOMINATED DEBT SECURITIES - The Fund may invest in the
following: obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; U.S. dollar-denominated corporate debt
securities of domestic or foreign issuers; mortgage and other asset-backed
securities; variable and floating rate debt securities; convertible bonds;
U.S. dollar-denominated obligations of a foreign government, or any of its
political subdivisions, authorities, agencies or instrumentalities or by
supranational organizations (such as the World Bank); and securities that
are eligible as short-term cash equivalents. The Fund will not invest more
than 5% of its net assets in variable and floating rate debt securities,
nor will the Fund invest more than 5% of its net assets in guaranteed
investment contracts. The Fund may invest in interest rate futures and
options on such futures. See "General Investment Policies" and the
Statement of Additional Information for further information regarding these
securities.
Most of the debt securities in which the Fund will invest are rated
Baa or better by Moody's, BBB or better by S&P, or, if unrated,
determined to be of comparable quality by the Advisor. Securities rated
BBB or Baa are considered investment grade, but may have speculative
characteristics, and changes in economic conditions may lead to a weakened
capacity to make principal and interest payments than is the case with
higher-rated securities. The Fund also may invest up to 10% of its assets
in corporate debt securities that are not investment grade but are rated Ba
by Moody's or BB by S&P. Securities rated below Baa by Moody's or BBB by
S&P (sometimes referred to as "junk bonds") will have speculative
characteristics (including the possibility of default or bankruptcy of the
issuers of such securities, market price volatility based upon interest
rate sensitivity, questionable creditworthiness and relative liquidity of
the secondary trading market). Because such lower-rated bonds have been
found to be more sensitive to adverse economic changes or individual
corporate developments and less sensitive to interest rate changes than
higher-rated investments, an economic downturn could disrupt the market for
such bonds and adversely affect the value of outstanding bonds and the
ability of issuers to repay principal and interest. In addition, in a
declining interest rate market, issuers of lower-rated bonds may exercise
redemption or call provisions, which may force the Fund, to the extent it
owns such securities, to replace those securities with lower yielding
securities. This could result in a decreased return for investors. For
further information, see the Statement of Additional Information.
- - FOREIGN STOCKS - The Fund may purchase stock of foreign-based companies,
including securities denominated in foreign currencies and issues of
American Depository Receipts ("ADRs") and European Depository Receipts
("EDRs") representing shares of foreign companies. See "General Investment
Policies" for a discussion of ADRs. EDRs are similar to ADRs but are
designed for use in the European securities markets. The Fund may invest in
foreign stock index futures, options on index futures and options on
foreign stock indexes. The Advisor may engage in foreign currency hedging
for assets in specific countries based on the outlook for the currencies
involved. Hedging may be undertaken through the purchase of currency
futures or otherwise. For a discussion of these transactions, see "Options
and Futures" and "Forward Currency, Futures and Options Transactions" in
the "General Investment Policies" section of this Prospectus.
- - FOREIGN BONDS - The Fund may invest in non-U.S. dollar denominated bonds,
notes and bills of foreign governments, their agencies and corporations of
a quality comparable to the U.S. dollar-denominated debt securities
described above. The Advisor will invest the assets in this class based on
the outlook for interest rates and currency trends in a particular country.
The Advisor may engage in foreign currency hedging from time to time based
on the outlook for currency values.
For a discussion of the risk factors associated with foreign investing, see
"General Investment Policies -- Special Considerations for International
Investing."
- - REAL ESTATE SECURITIES - The Fund may invest in the equity securities of
publicly traded and private real estate investment trusts ("REITs") which
invest in real estate. A REIT is an entity which concentrates its assets
in investments related to equity real estate and/or interests in mortgages
on real estate. The shares of publicly traded REITs are traded on a
national securities exchange or in the OTC market. Shares of private REITs
are not publicly traded, and will be treated as illiquid securities. The
Fund will limit its investments in illiquid securities, including private
REITs, to 15% of its net assets.
- - PRECIOUS METALS AND COMMODITIES FUTURES - The Fund may hold gold, other
precious metals, or commodity futures positions and/or securities of
companies principally engaged in producing or distributing gold, precious
metals or commodities in the United States and/or in foreign countries.
Such companies are defined as those which generate a substantial portion of
their gross income or net
FREMONT MUTUAL FUNDS 15
<PAGE>
profits from gold, precious metals, or commodities activities and/or have a
substantial portion of their assets productively engaged in these
activities. The Fund may purchase and sell futures and options contracts
on commodities.
The Fund will maintain the remainder of its assets in cash or cash equivalents.
The objective of the cash equivalent portfolio is to maximize current income to
the extent consistent with preservation of capital and liquidity.
OTHER CONSIDERATIONS WITH RESPECT TO THE FUND. The Advisor will allocate
investments among securities of particular issuers on the basis of its views as
to the best values then currently available in the marketplace. Such values of
the fixed income portion of the Fund's portfolio are a function of yield,
maturity, issue classification and quality characteristics, coupled with
expectations regarding the economy, movements in the general level and term of
interest rates, currency values, political developments, and variations of the
supply of funds available for investment. Under normal economic and market
conditions, the fixed-income portion of the Fund's portfolio will be invested
primarily in debt instruments with short to intermediate maturities (1 to 10
years to maturity). However, there are no restrictions on the maturity
composition of the Fund's portfolio. If market interest rates decline,
fixed-income securities generally appreciate in value. If the currency in which
a security is denominated appreciates against the U.S. dollar, the dollar value
of the security will increase. Conversely, a rise in interest rates or a
decline in the exchange rate of the currency would adversely affect the value of
the security expressed in dollars. In seeking to achieve the Fund's objective
of total return, the Advisor may increase the average maturity of the fixed
income portion of the Fund's portfolio in times of declining interest rates and
decrease such average maturity in times of rising interest rates. The Advisor
generally evaluates currencies on the basis of fundamental economic criteria
(e.g., relative inflation and interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies), as well as
technical and political data.
In seeking current income or to reduce principal volatility, the Fund may also
(1) enter into futures contracts, including contracts for the future delivery of
debt securities of the types described above, stock index futures contracts with
respect to the S&P 500 Index or other similar broad-based stock market indices
and commodities futures, the initial margins of which are limited to 5% of the
Fund's assets; and (2) purchase put and call options on portfolio securities,
indexes, commodities or futures contracts, the premiums of which are limited to
5% of the Fund's assets.
Further information concerning options and futures and their associated risks is
contained in "General Investment Policies -- Options and Futures Contracts" and
in the Statement of Additional Information.
The Fund may enter into forward currency contracts and currency futures
contracts, and may purchase put and call options on currencies. See "General
Investment Policies -- Forward Currency, Futures and Options Transactions." The
Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Advisor to be fully exchangeable into U.S. dollars without legal
restriction. The Fund may purchase securities that are issued by the government
or a corporation or financial institution of one nation but denominated in the
currency of another country.
A portion of the Fund's assets may be invested in mortgage-related and other
asset-backed securities. See "General Investment Policies" for a discussion of
these securities.
The Fund may invest in convertible debentures (convertible to equity securities)
and preferred stocks (which may or may not have a dividend yield) using the same
quality and rating criteria noted above.
THE FREMONT GROWTH FUND SEEKS TO PROVIDE GROWTH OF CAPITAL OVER THE LONG TERM
INVESTING PRIMARILY IN U.S. COMMON STOCKS.
GROWTH FUND
The investment objective of the Growth Fund is to provide growth of capital over
the long term. Although not an objective of the Fund, income may accompany
growth of capital. The Fund invests primarily in a diversified portfolio of
common stocks.
Under normal conditions, at least 65% of the total assets of the Fund will be
invested in U.S. common stocks. In addition, the Fund may purchase securities
convertible into common and preferred stocks, and restricted securities.
Preferred stocks held by the Fund will have a rating of B or better.
The Fund may invest in common and preferred stocks of U.S. based companies which
are traded on a U.S. exchange or in the over-the-counter (OTC) market and may
invest in stock index futures contracts, options on index futures and options on
stock indexes.
The Fund may invest a portion of its assets in the equity securities of a
diversified group of small, emerging growth companies before they become
well-recognized as well as in the equity securities of larger companies which
offer improved growth possibilities because of rejuvenated management, changes
in product or some other development that might stimulate earnings growth. No
assurance can be given that any of these expectations will be met.
Because the Fund may invest in small, emerging growth companies before they
become well-recognized, investors should realize that the very nature of
investing in smaller companies involves greater risk than is customarily
associated with more established companies. Smaller companies often have
limited product lines, markets or financial resources, and may be dependent upon
one-person management. The securities of smaller companies may have limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger companies or the market averages in general. Because the
Fund invests in companies based on their intrinsic value, and because intrinsic
value may
16 FREMONT MUTUAL FUNDS
<PAGE>
not be immediately recognized in the market, investors should consider this Fund
a long-term or value-oriented growth fund.
Although the Fund invests primarily in common stocks, for liquidity purposes it
will normally invest a portion of its assets in high quality, short-term debt
securities and money market instruments, including repurchase agreements. When
a temporary defensive posture in the market is appropriate in the Advisor's
opinion, the Fund may temporarily invest up to 100% of its assets in these
instruments. The Fund may also hold other types of securities from time to
time, including bonds.
The Fund may invest up to 35% of its total assets in stocks of foreign-based
companies denominated in foreign currencies and issues of American Depository
Receipts ("ADRs") and European Depository Receipts ("EDRs") representing shares
of foreign companies. See "General Investment Policies" for a discussion of
ADRs. EDRs are similar to ADRs but are designed for use in the European
securities markets. The Fund may invest in foreign stock index futures, options
on index futures and options on foreign stock indexes. The Advisor or the Sub-
Advisor may engage in foreign currency hedging for assets in specific countries
based on the outlook for the currencies involved. Hedging may be undertaken
through the use of currency futures or otherwise. For a discussion of the risk
factors associated with forward currency, futures and options transactions, see
"General Investment Policies -- Forward Currency, Futures and Options
Transactions" and the Statement of Additional Information.
When the Fund holds bonds, the Fund will be invested primarily in debt
instruments with short to intermediate maturities (1 to 10 years to maturity).
These bonds, including convertibles, will have a S&P or Moody's rating of A or
better. However, there are no restrictions on the maturity composition of the
Fund's portfolio. If market interest rates decline, fixed-income securities
generally appreciate in value. In seeking to achieve the Fund's objective of
growth of capital, the Advisor may increase the average maturity of the fixed
income portion of the Fund's portfolio in times of declining interest rates and
decrease such average maturity in times of rising interest rates.
The Fund may invest in non-U.S. dollar denominated bonds, notes and bills of
foreign governments, their agencies and corporations of a quality comparable to
the U.S. dollar-denominated debt securities described above. The dollar-
weighted average maturity of the Fund's foreign bonds may range from 2 to 8
years. The Advisor will invest the assets in this class based on the outlook
for interest rates and currency trends in a particular country. The Advisor may
engage in foreign currency hedging from time to time based on the outlook for
currency values.
For a discussion of the risk factors associated with foreign investing, see
"General Investment Policies -- Risk Factors and Special Considerations for
International Investing."
The Fund will maintain the remainder of its assets in cash or cash equivalents
and other fixed income securities. Cash and cash equivalents will be
denominated in U.S. dollars. The objective of the cash equivalent portfolio is
to maximize current income to the extent consistent with preservation of capital
and liquidity.
The Advisor will allocate investments among the securities of particular issuers
on the basis of its views as to the best values then currently available in the
marketplace. Such values are a function of growth potential, relative valuation
yield, maturity, issue classification and quality characteristics, coupled with
expectations regarding the economy, movements in the general level of interest
rates, political developments, and variations of the supply of funds available
for investment.
THE FREMONT INTERNATIONAL GROWTH FUND SEEKS TO ACHIEVE LONG-TERM GROWTH OF
CAPITAL BY PRIMARILY INVESTING IN EQUITY SECURITIES OF ISSUERS DOMICILED OUTSIDE
THE UNITED STATES.
INTERNATIONAL GROWTH FUND
The Fund seeks to achieve long-term growth of capital by investing primarily in
equity securities of issuers domiciled outside the United States. The Fund is
designed for investors who wish to accept the risks entailed in investments in
foreign securities and securities denominated in various currencies. See
"General Investment Policies -- Risk Factors and Special Considerations for
International Investing."
Under normal market conditions, at least 90% of the Fund's assets will be
invested in equity securities of issuers domiciled outside the United States.
The Fund will be invested in a minimum of three countries excluding the United
States. The Fund's portfolio of equity securities consists of common and
preferred stock, warrants and debt securities convertible into common stock.
Included in this 90% total, up to 5% of the Fund's assets may be invested in
rights or warrants to purchase equity securities. For defensive purposes, the
Fund may temporarily have less than 90% of its assets invested in equity
securities domiciled outside the United States.
The Fund's management anticipates that, from time to time, the Fund may have
more than 25% of its assets invested in securities of companies domiciled in
the countries of Japan, the United Kingdom and/or Germany. These are among the
leading industrial economies outside the United States and the values of their
stock markets account for a significant portion of the value of international
markets.
In addition to investing directly in equity securities, the Fund may invest in
instruments such as sponsored and unsponsored American Depository Receipts
("ADRs") and European Depository Receipts ("EDRs"). See "General Investment
Policies" for a discussion of ADRs. EDRs are similar to ADRs but are designed
for use in the European securities markets.
FREMONT MUTUAL FUNDS 17
<PAGE>
THE FUND MAY INVEST UP TO 50% OF ITS TOTAL ASSETS IN EQUITY SECURITIES OF
SMALLER TO MEDIUM SIZED GROWTH COMPANIES IN BOTH DEVELOPED AND EMERGING MARKET
The Fund may invest up to 50% of its total assets in equity securities of
smaller to medium sized growth companies in both developed and emerging world
markets. For the developed markets, such investments include equity securities
of companies with market capitalizations of over $200 million but less than $2
billion. However, market capitalizations of smaller to medium sized company
equity securities in emerging markets are significantly smaller and currently
range between $25 million and $200 million. Emerging growth companies are
small- and medium-sized companies that the Advisor believes often have a
potential for earnings growth over time that is above the growth rate of more
established companies or are early in their life cycles and have the potential
to become major enterprises.
As used in this Prospectus, international emerging markets are countries
categorized as emerging markets by the International Finance Corporation, the
World Bank's private sector division. Such countries currently include but are
not limited to Thailand, Indonesia, the Philippines, South Korea, Taiwan and
certain Latin American countries. Such markets tend to be in the less
economically developed regions of the world. General characteristics of
emerging market countries also include lower degrees of political stability, a
high demand for capital investment, a high dependence on export markets for
their major industries, a need to develop basic economic infrastructures and
rapid economic growth. The Advisor believes that investments in equity
securities of companies in international emerging markets offer the opportunity
for significant long-term investment returns. However, these investments
involve certain risks, as discussed below and in "General Investment Policies -
Risk Factors and Special Considerations for International Investing."
Investing in emerging growth companies involves certain special risks. Emerging
growth companies may have limited product lines, markets, or financial
resources, and their managements may be dependent on a limited number of key
individuals. The securities of emerging growth companies may have limited
market liquidity and may be subject to more abrupt or erratic market movements
than securities of larger, more established companies or the market averages in
general.
Whenever in the judgment of the Advisor market or economic conditions warrant,
the Fund may, for temporary defensive purposes, invest without limitation in
U.S. dollar-denominated or foreign currency denominated cash or in high-quality
debt securities with remaining maturities of one year or less. During times
that the Fund is investing defensively, the Fund will not be pursuing its stated
investment objective. For liquidity purposes, the Fund may normally also invest
up to 10% of its assets in U.S. dollar-denominated or foreign currency-
denominated cash or in high quality debt securities with remaining maturities of
one year or less.
Emphasis is placed on identifying securities of companies believed to be
undervalued in the marketplace in relation to factors such as the company's
revenues, earnings, assets and long-term competitive positions which over time
will enhance the equity value of the company. The Fund will not concentrate its
investments in companies of a particular asset size, although, from time to
time, it may emphasize investments in companies within particular industries,
and will select its investments based on the characteristics of the particular
markets and economies of the countries in which it invests.
In selecting portfolio investments, a company's growth prospects will be
considered, including the potential for superior appreciation due to growth in
earnings, relative valuation of its securities, and any risks associated with
such investment; the industry in which the company operates, with a view to
identification of international developments within industries, international
investment trends, and social, economic or political factors affecting a
particular industry; the country in which the company is based, as well as
historical and anticipated foreign currency exchange rate fluctuations; and the
feasibility of gaining access to the securities market in a country and of
implementing the necessary custodial arrangements. The investment program of
the Fund has been developed in the belief that research-based investment in a
portfolio of equity securities of companies in a number of foreign countries
will give shareholders a chance to participate on an international basis in the
opportunities available in the growing foreign securities markets.
Investment will be made in those countries where the Advisor believes that
economic and political factors, including currency movements, are likely to
produce above average long-term investment returns. There is no limitation on
the percentage of the Fund's assets that may be invested at any one time in one
or more countries except that the Fund will normally be invested in at least
three countries outside the United States.
The Fund may enter into forward currency contracts and currency futures
contracts, and may purchase put and call options on currencies. See "General
Investment Policies -- Forward Currency, Futures and Options Transactions."
THE FREMONT INTERNATIONAL SMALL CAP FUND SEEKS TO ACHIEVE LONG-TERM CAPITAL
APPRECIATION BY PRIMARILY INVESTING IN SMALL CAP EQUITY SECURITIES OF ISSUERS
DOMICILED OUTSIDE THE UNITED STATES.
INTERNATIONAL SMALL CAP FUND
The Fund seeks to achieve long-term capital appreciation by investing primarily
in small capitalization ("small cap") equity securities of issuers domiciled
outside the United States. The Fund selects its portfolio securities primarily
from among small cap companies in developed markets whose individual market
capitalizations would place them among the smallest 20% of market capitalization
in their
18 FREMONT MUTUAL FUNDS
<PAGE>
respective markets. Developed markets will generally be defined as those
included in the Morgan Stanley Capital International Europe, Asia and Far East
(EAFE) Index. It is expected that the majority of the companies in which the
Fund invests will have a market capitalization of under $1 billion; however, the
Fund is likely to hold some companies with a market capitalization greater than
$1 billion. The Fund is designed for investors willing to accept the risks
entailed in investments in foreign securities of small companies and securities
denominated in various currencies. See "General Investment Policies - Special
Considerations for International Investing."
Under normal market conditions, at least 65% of the total assets of the Fund
will be invested in small cap equity securities of issuers domiciled outside the
United States with a market capitalization of under $1 billion. The Fund will
be invested in a minimum of three countries excluding the United States. The
Fund's portfolio of equity securities will consist of common and preferred
stock, warrants and debt securities convertible into common stock. Included in
this 65% total, up to 5% of the Fund's assets may be invested in rights or
warrants to purchase equity securities. For defensive purposes, the Fund may
temporarily have less than 65% of its total assets invested in small cap equity
issuers domiciled outside the United States.
In addition to investing directly in equity securities, the Fund may invest in
instruments such as sponsored and unsponsored American Depository Receipts
("ADRs") and European Depository Receipts ("EDRs"). See "General Investment
Policies" for a discussion of ADRs. EDRs are similar to ADRs but are designed
for use in the European securities markets.
International small cap companies are smaller sized companies that the Advisor
and Sub-Advisor believe often have a potential for earnings growth over time
that is above the growth rate of more established companies or are early in
their life cycles and have the potential to become major enterprises. In
addition, some smaller companies may be undervalued because they are not as
closely followed by security analysts or institutional investors. The Advisor
and Sub-Advisor believe that an investment in shares of the Fund provides an
opportunity for greater rewards but will involve more risk than an investment in
a fund which seeks capital appreciation from investment in common stocks of
larger, better-known companies.
Investing in small companies involves certain special risks. Small companies
may have limited product lines, markets, or financial resources, and their
managements may be dependent on a limited number of key individuals. The
securities of small companies may have limited market liquidity and may be
subject to more abrupt or erratic market movements than securities of larger,
more established companies or the market averages in general.
EMPHASIS IS PLACED ON IDENTIFYING SECURITIES OF COMPANIES BELIEVED TO BE
UNDERVALUED IN THE MARKETPLACE.
Emphasis is placed on identifying securities of companies believed to be
undervalued in the marketplace in relation to factors such as the company's
revenues, earnings, assets and long-term competitive positions which over time
will enhance the equity value of the company. In selecting portfolio
investments, a company's growth prospects will be considered, including the
potential for superior appreciation due to growth in earnings, relative
valuation of its securities, and any risks associated with such investment; the
industry in which the company operates, with a view to identification of
international developments within industries, international investment trends,
and social, economic or political factors affecting a particular industry; the
country in which the company is based, as well as historical and anticipated
foreign currency exchange rate fluctuations; and the feasibility of gaining
access to the securities market in a country and of implementing the necessary
custodial arrangements.
INVESTMENTS WILL BE MADE IN COUNTRIES THAT ARE BELIEVED LIKELY TO PRODUCE ABOVE
AVERAGE INVESTMENT RETURNS.
Investments will be made in those countries where the Advisor and Sub-Advisor
believe that economic and political factors, including currency movements, are
likely to produce above average long-term investment returns. There is no
limitation on the percentage of the Fund's assets that may be invested at any
one time in one or more countries. However, except during times that the Fund
is in a temporary defensive posture, the Fund will invest at least 65% of its
total assets in the securities of issuers domiciled in at least three different
non-U.S. countries.
The Fund may invest in equity securities of companies domiciled in emerging
markets. See the Emerging Markets Fund section of this prospectus for more
detailed information on emerging markets.
The Fund's management anticipates that, from time to time, the Fund may have
more than 25% of its assets invested in securities of companies domiciled in the
countries of Japan, the United Kingdom and/or Germany. These are among the
leading industrial economies outside the United States and the values of their
stock markets account for a significant portion of the value of international
markets.
Whenever in the judgment of the Advisor or Sub-Advisor market or economic
conditions warrant, the Fund may, for temporary defensive purposes, invest
without limitation in U.S. dollar-denominated or foreign currency-denominated
cash or in high quality debt securities with remaining maturities of one year or
less. During times that the Fund is investing defensively, the Fund will not be
pursuing its stated investment objective. For liquidity purposes, the Fund may
normally also
FREMONT MUTUAL FUNDS 19
<PAGE>
invest up to 10% of its assets in U.S. dollar-denominated or foreign currency-
denominated cash or in high quality debt securities with remaining maturities of
one year or less. The Fund may also invest in convertible debentures
(convertible to equity securities) and preferred stocks (which may or may not
have a dividend yield). All preferred stocks and debt securities, both foreign
and domestic, in which the Fund invests must, at the time of acquisition, be
rated Aa or better by Moody's or AA or better by S&P, or be of comparable
quality as determined by the Advisor or Sub-Advisor.
The Fund may enter into forward currency contracts and currency futures
contracts, and may purchase put and call options on currencies. See "General
Investment Policies -- Forward Currency, Futures and Options Transactions."
THE FREMONT EMERGING MARKETS FUND SEEKS TO ACHIEVE LONG-TERM CAPITAL
APPRECIATION. THE FUND INVESTS IN EQUITY SECURITIES OF ISSUERS LOCATED IN
DEVELOPING COUNTRIES.
EMERGING MARKETS FUND
The Fund is a non-diversified mutual fund which seeks to achieve long-term
capital appreciation by investing primarily in equity securities of issuers
domiciled in countries with emerging or developing capital markets. Investments
in emerging or developing capital markets may exhibit substantially greater
price volatility than investments in developed markets.
Under normal market conditions, at least 65% of the total assets of the Fund
will be invested in equity securities of issuers in Emerging Markets (as defined
below). The Fund will not necessarily seek to diversify investments on a
geographical basis or on the basis of the level of economic development of any
particular country. However, the Fund will be invested in a minimum of three
countries defined as Emerging Markets. The Fund's portfolio of equity
securities will consist of common and preferred stock, warrants and debt
securities convertible into common stock. Included in this 65% total, up to 5%
of the Fund's assets may be invested in rights or warrants to purchase equity
securities. For defensive purposes, the Fund may temporarily have less than 65%
of its total assets invested in equity securities of issuers in Emerging
Markets.
In addition to investing directly in equity securities, the Fund may invest in
instruments such as sponsored and unsponsored American Depository Receipts
("ADRs") and European Depository Receipts ("EDRs"). See "General Investment
Policies" for a discussion of ADRs. EDRs are similar to ADRs but are designed
for use in the European securities markets.
An issuer will be deemed to be in an Emerging Market if: (1) the principal
securities trading market for such issuer is in an Emerging Market; (2) such
issuer derives at least 50% of its revenues or earnings, either alone or on a
consolidated basis, from goods produced or sold, investments made or services
performed in an Emerging Market, or has at least 50% of its total assets
situated in one or more Emerging Markets: or (3) such issuer is organized under
the laws of, and with a principal office in, an Emerging Market. Determinations
as to whether an issuer is an Emerging Markets issuer will be made by the Sub-
Advisor based on publicly available information and inquiries made to the
issuers.
As used in this Prospectus, an Emerging Market is any country except: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Luxembourg, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland,
United Kingdom and the United States.
Emerging Markets tend to be in the less economically developed regions of the
world. General characteristics of emerging market countries also include lower
degrees of political stability, a high demand for capital investment, a high
dependence on export markets for their major industries, a need to develop basic
economic infrastructures and rapid economic growth. The Advisor and Sub-Advisor
believe that investments in equity securities of issuers in Emerging Markets
offer the opportunity for significant long-term investment returns. However,
these investments involve not only the risks discussed below with respect to
foreign securities (see "General Investment Policies -- Risk Factors and Special
Considerations for International Investing"), but also other risks. Investments
in Emerging Markets may exhibit greater price volatility, have less liquidity
and have settlement arrangements which are less efficient than in developed
markets. Furthermore, the economies of countries with Emerging Markets generally
are heavily dependent upon international trade and, accordingly, have been and
may continue to be adversely affected by adjustments in currency values and
protectionist measures imposed or negotiated by the countries with which they
trade. These Emerging Market economies also have been and may continue to be
adversely affected by economic conditions in the countries with which they
trade.
The Fund may invest a portion of its assets in equity securities of smaller- to
medium-sized growth companies. Investing in small companies involves certain
special risks. Small companies may have limited product lines, markets, or
financial resources, and their managements may be dependent on a limited number
of key individuals. The securities of small companies may have limited market
liquidity and may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general.
The governments in some Emerging Markets have been engaged in programs of
selling part or all of their stakes in government owned or controlled
enterprises ("privatizations"). The Advisor and Sub-Advisor believe that
privatizations may offer opportunities for significant capital appreciation, and
intend to invest assets of the Fund in privatizations in appropriate
circumstances. In certain Emerging Markets, the ability of foreign entities
such as the Fund to participate in privatizations may be limited by local law
and/or the terms on which the Fund may be permitted to participate may be less
advantageous than those afforded local investors. There can be no assurance
that governments in Emerging Markets will
20 FREMONT MUTUAL FUNDS
<PAGE>
continue to sell companies currently owned or controlled by them or that
privatization programs will be successful.
Because the Fund is non-diversified, it may invest a larger percentage of its
assets in individual issuers than a diversified fund. In this regard, the Fund
is not subject to the general limitation that it not invest more than 5% of its
total assets in the securities of any one issuer. To the extent the Fund makes
investments in excess of 5% of its assets in a particular issuer, its exposure
to credit and market risks associated with that issuer is increased.
The Fund may invest in debt securities of both governmental and corporate
issuers in Emerging Markets which are rated Baa or higher by Moody's or BBB or
higher by S&P or, if unrated, determined by the Sub-Advisor to be of comparable
quality. Securities which are rated BBB by S&P or Baa by Moody's are considered
investment grade, but may have speculative characteristics, and changes in
economic conditions may lead to a weakened capacity to make principal and
interest payments than is the case with higher rated securities. For further
information, see the Statement of Additional Information.
Debt securities are susceptible to market fluctuations resulting from changes in
interest rates. When interest rates decline, the value of a portfolio invested
at higher yields can be expected to rise. Conversely, when interest rates rise,
the value of a portfolio invested at lower yields can be expected to decline.
Capital appreciation in debt securities in which the Fund invests may arise as a
result of favorable changes in relative foreign exchange rates, in relative
interest rate levels and/or in the creditworthiness of issuers. The receipt of
income from debt securities owned by the Fund is incidental to the Fund's
objective of long-term capital appreciation.
Whenever in the judgment of the Advisor or Sub-Advisor market or economic
conditions warrant, the Fund may, for temporary defensive purposes, invest
without limitation in U.S. dollar denominated or foreign currency-denominated
cash-equivalent investments or in high quality debt securities with maturities
of one year or less. During times that the Fund is investing defensively, the
Fund will not be pursuing its stated investment objective. For liquidity
purposes, the Fund may normally also invest up to 10% of its assets in U.S.
dollar-denominated or foreign currency-denominated cash-equivalent investments
or in high quality debt securities with maturities of one year or less.
In seeking to protect against the effect of adverse changes in the financial
markets in which the Fund invests, or against currency exchange rate changes
that are adverse to the present or prospective positions of the Fund, the Fund
may use forward currency contracts, options on securities, options on indices,
options on currencies, and futures contracts and options on futures contracts on
securities and currencies. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose performance
is derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). There can be no assurance that
the Fund's risk management policies will succeed. These techniques are described
below and are further detailed in the Statement of Additional Information.
THE FREMONT U.S. MICRO-CAP FUND SEEKS TO ACHIEVE LONG-TERM CAPITAL APPRECIATION
BY PRIMARILY INVESTING IN A DIVERSIFIED PORTFOLIO OF COMMON U.S. STOCKS.
U.S. MICRO-CAP FUND
The Fund seeks to achieve long-term capital appreciation by investing primarily
in a diversified portfolio of common stocks and securities convertible into
common stock. Under normal market conditions, at least 65% of the total assets
of the Fund will be invested in equity securities of U.S. micro-cap companies
(described below). These securities will trade on a U.S. exchange or in the OTC
market. However, up to 25% of the Fund's total assets, at the time of purchase,
may be invested in securities of micro-cap companies domiciled outside the
United States, including sponsored and unsponsored American Depository Receipts
("ADRs") and European Depository Receipts ("EDRs"). See "General Investment
Policies" for a discussion of ADRs. EDRs are similar to ADRs but are designed
for use in the European securities market. The Fund may also invest in stock
index futures contracts, options on index futures and options on portfolio
securities and stock indices.
UP TO 25% OF THE FUND'S TOTAL ASSETS MAY BE INVESTED IN SECURITIES OF SMALL
COMPANIES DOMICILED OUTSIDE THE UNITED STATES.
The Fund generally selects its portfolio securities among micro-cap companies,
which the Fund defines as companies whose individual market capitalizations
would place them in the smallest 10% of market capitalization of companies in
the United States as measured by the Wilshire 5000 Index. Currently, these
companies have a market capitalization of about $425 million or less. Under
normal market conditions, the weighted average capitalization of the portfolio
will be less than the market capitalization of the largest company in the bottom
5% of the market value of all U.S. equities as measured by the Wilshire 5000
Index (currently about $200 million).
Many micro-cap companies in which the Fund is likely to invest may be more
vulnerable than larger companies to adverse business or market developments, may
have limited product lines, markets or financial resources and may lack
management depth. In addition, many micro-cap companies are not well-known to
the investing public, do not have significant institutional ownership and are
followed by relatively few securities analysts, with the result that there may
tend to be less publicly available information concerning such companies
compared to what is available for larger capitalization securities. Finally,
the securities of micro-cap companies traded in the OTC market may have fewer
market makers, wider spreads between their quoted bid and asked prices and lower
trading volumes, resulting in comparatively greater price volatility and less
liquidity than the securities of companies that have larger market
capitalizations and/or that are traded on the New York or
FREMONT MUTUAL FUNDS 21
<PAGE>
American Stock Exchanges or the market averages in general. Thus, the Fund may
involve considerably more risk than an investment company investing in the more
liquid equity securities of companies traded on the New York or American Stock
Exchanges.
The Advisor and Sub-Advisor believe that an investment in shares of the Fund
provides an opportunity for greater rewards but will involve more risk than an
investment in a fund which seeks capital appreciation from investment in common
stocks of larger, better-known companies. This is due to greater opportunities
for superior returns from companies with small stock market capitalizations
which are not as well-known to the general public. These shares may have less
investor following, and, therefore, may provide opportunities for investment
gains due to the inefficiencies in this sector of the marketplace.
THE FUND SEEKS TO INVEST IN THOSE COMPANIES WHICH ARE IN THE EARLY STAGES OF AN
EMERGING GROWTH CYCLE.
The Fund seeks to invest in those companies which are in the early stages of an
emerging growth cycle, where the Advisor and Sub-Advisor believe earnings will
grow faster than both inflation and the economy in general and where it believes
such growth has not yet been fully reflected in the market price of these
stocks. In seeking investments, the Advisor and Sub-Advisor will give weight to
companies possessing a variety of characteristics including quality of
management, companies which have gone public in recent years, an entrepreneurial
management team, a narrow product line focus, or established companies where the
growth potential has been significantly enhanced by new product developments,
new market opportunities, mergers or divestitures, or new management. The
investable universe provides what the Advisor and Sub-Advisor believe is a broad
range of stock selection opportunities.
Although the Fund invests primarily in common stocks and securities convertible
into common stock, for liquidity purposes it will normally invest a portion of
its assets in high quality debt securities and money market instruments with
remaining maturities of one year or less, including repurchase agreements.
Whenever in the judgment of the Advisor or Sub-Advisor market or economic
conditions warrant, the Fund may, for temporary defensive purposes, invest
without limitation in these instruments. During times that the Fund is
investing defensively, the Fund will not be pursuing its stated investment
objective. The Fund may also hold other types of securities from time to time,
including non-convertible bonds and preferred stocks, in an amount not exceeding
5% of its net assets. Preferred stocks and bonds will be rated at the time of
purchase in the top two categories of Moody's (Aaa or Aa) or S&P (AAA or AA) or
be of comparable quality as determined by the Advisor or Sub-Advisor.
GENERAL INVESTMENT POLICIES
MONEY MARKET INSTRUMENTS. The Funds may invest in any of the following "money
market" instruments: certificates of deposit, time deposits, commercial paper,
bankers' acceptances and Eurodollar certificates of deposit; U.S.
dollar-denominated money market instruments of foreign financial institutions,
corporations and governments; U.S. Government and agency securities; money
market mutual funds; and other debt securities which are not specifically named
but which meet a Fund's quality guidelines. The Funds also may enter into
repurchase agreements as described below and may purchase variable and floating
rate debt securities.
SHORT-TERM SECURITIES MUST BE RATED "TIER 1" QUALITY.
At the time of purchase, short-term securities must be rated in the top rating
category by at least two nationally recognized statistical rating organizations
("NRSROs") or by a single NRSRO in the case of a security rated by only one
NRSRO, or, if not rated by an NRSRO, must be of comparable quality as determined
by the Advisor or the Sub-Advisor. Generally, high quality short-term
securities must be issued by an entity with an outstanding debt issue rated A or
better by a NRSRO, or an entity of comparable quality as determined by the
Advisor or the Sub-Advisor. Obligations of foreign banks, foreign corporations
and foreign branches of domestic banks must be payable in U.S. dollars. See
Appendix A to the Statement of Additional information for a description of
rating categories.
U.S. GOVERNMENT SECURITIES. Each of the Funds may invest in U.S. Government
securities, which are obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. Some U.S. Government securities, such as
Treasury bills, notes and bonds and Government National Mortgage Association
("GNMA") certificates, are supported by the full faith and credit of the United
States; others, such as those of the Federal Home Loan Mortgage Corporation
("FHLMC"), are supported by the right of the issuer to borrow from the Treasury;
others, such as those of the Federal National Mortgage Association ("FNMA"), are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government will provide financial
support to U.S. Government agencies or instrumentalities as described above in
the future, other than as set forth above, because it is not obligated to do so
by law.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. Each Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction, but the settlement is delayed).
Each Fund (except for the Bond Fund) will not purchase securities the value of
which is greater than 5% of its net assets on a when-issued basis. A Fund, as
purchaser, assumes the risk of any decline in value of the security beginning on
the date of the agreement or purchase, and no interest accrues to the Fund until
it accepts delivery of the security. The Funds will not use such transactions
for leveraging purposes, and accordingly will segregate cash, cash
22 FREMONT MUTUAL FUNDS
<PAGE>
equivalents or liquid securities or hold a covered position in an amount
sufficient to meet its payment obligations thereunder.
There is always a risk that the securities may not be delivered and that a Fund
may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business, which may take substantially more than three
business days for non-U.S. securities, are not treated by the Funds as when-
issued or forward commitment transactions and, accordingly, are not subject to
the foregoing limitations, even though some of the risks described above may be
present in such transactions.
MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES. Mortgage pass-through
securities are securities representing interests in "pools" of mortgages in
which payments of both interest and principal on the securities are made
monthly, in effect, "passing through" monthly payments made by the individual
borrowers on the residential mortgage loans which underlie the securities (net
of fees paid to the issuer or guarantor of the securities). The total return on
mortgage-related securities varies with changes in the general level of interest
rates. The maturities of mortgage-related securities are variable and unknown
when issued because their maturities depend on pre-payment rates. Early
repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose a Fund to a
lower rate of return upon reinvestment of principal. Also, if a security
subject to prepayment has been purchased at a premium, in the event of
prepayment the value of the premium would be lost. Mortgage prepayments
generally increase with falling interest rates and decrease with rising interest
rates. Like other fixed-income securities, when interest rates rise, the value
of a mortgage-related security generally will decline; however, when interest
rates are declining, the value of mortgage-related securities with prepayment
features may not increase as much as that of other fixed income securities.
A Fund may invest in GNMA certificates, which are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Because both interest and principal payments (including prepayments)
on the underlying mortgage loans are passed through to the holder of the
certificate, GNMA certificates are called "pass-through" securities.
Although most mortgage loans in the pool will have stated maturities of up to 30
years, the actual average life or effective maturity of the GNMA certificates
will be substantially less because the mortgages are subject to normal
amortization of principal and may be repaid prior to maturity. Prepayment rates
may vary widely over time among pools and typically are affected by the
relationship between the interest rates on the underlying loans and the current
rates on new home loans. In periods of falling interest rates, the rate of
prepayment tends to increase, thereby shortening the actual average life of the
GNMA certificates. Conversely, when interest rates are rising, the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
GNMA certificates. Accordingly, it is not possible to predict accurately the
average life of a particular pool. Reinvestment of prepayments may occur at
higher or lower rates than the original yield on the certificates. Due to the
prepayment feature and the need to reinvest prepayments of principal at current
market rates, GNMA certificates can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of declining interest
rates. GNMA certificates may appreciate or decline in market value during
periods of declining or rising interest
rates, respectively.
A Fund may invest also in mortgage-related securities issued by the FNMA or by
the FHLMC. FNMA, a federally chartered and privately owned corporation, issues
pass-through securities representing interests in a pool of conventional
mortgage loans. FNMA guarantees the timely payment of principal and interest
but this guarantee is not backed by the full faith and credit of the U.S.
Government. FHLMC, a corporate instrumentality of the U.S. Government, issues
participation certificates which represent an interest in a pool of conventional
mortgage loans. FHLMC guarantees the timely payment of interest and the
ultimate collection of principal, and maintains reserves to protect holders
against losses due to default, but the certificates are not backed by the full
faith and credit of the U.S. Government. As is the case with GNMA certificates,
the actual maturity of and realized yield on particular FNMA and FHLMC pass-
through securities will vary based on the prepayment experience of the
underlying pool of mortgages.
A Fund may invest also in mortgage-related securities issued by financial
institutions, such as commercial banks, savings and loan associations, mortgage
bankers and securities broker-dealers (or separate trusts or affiliates of such
institutions established to issue these securities).
Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities.
Real Estate Mortgage Investment Conduits are CMO vehicles that qualify for
special tax treatment under the Internal Revenue Code and invest in mortgages
principally secured by interests in real property and other investments
permitted by the Internal Revenue Code.
Stripped Mortgage Securities are derivative multiclass mortgage securities
issued by agencies or instrumentalities of the United States Government, or by
private originators of, or investors in, mortgage loans, including savings and
loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. Stripped Mortgage Securities are
usually structured with two classes that receive different proportions of the
interest and principal distributions on a pool of mortgage assets. A
FREMONT MUTUAL FUNDS 23
<PAGE>
common type of Stripped Mortgage Security will have one class receiving all of
the interest from the mortgage assets (the interest-only or "IO" class), while
the other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on the securities' yield to maturity. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, a Fund may fail to
recoup fully its initial investment in these securities even if the security is
rated AAA or Aaa, and could even lose its entire investment. Although Stripped
Mortgage Securities are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed for certain Stripped Mortgage Securities. Investments in Stripped
Mortgage Securities for which there is no established market are considered
illiquid and together with other illiquid securities will not exceed 15% of a
Fund's net assets.
Other asset-backed securities (unrelated to mortgage loans) have been offered to
investors, such as Certificates for Automobile Receivables-SM- ("CARS-SM-") and
interests in pools of credit card receivables. CARS-SM- represent undivided
fractional interests in a trust whose assets consist of a pool of motor vehicle
retail installment sales contracts and security interests in the vehicles
securing the contracts. CARS-SM- will be deemed to be illiquid securities and
subject to the limitation on investments in illiquid securities. Certificates
representing pools of credit card receivables have similar characteristics to
CARS-SM- although the underlying loans are unsecured.
As new types of mortgage-related securities and other asset-backed securities
are developed and offered to investors, the Advisor or Sub-Advisor will,
consistent with a Fund's investment objective, policies and quality standards,
and subject to the review and approval of the Investment Company's Board of
Directors, consider making investments in such new types of securities.
The Funds may invest only in high quality mortgage-related (or other
asset-backed) securities either (i) issued by U.S. Government sponsored
corporations or (ii) rated in one of the three highest categories by Moody's or
S&P, or, if not rated, of equivalent investment quality as determined by the
Advisor or Sub-Advisor. The Advisor or Sub-Advisor will monitor continuously
the ratings of securities held by a Fund and the creditworthiness of their
issuers. An investment-grade rating will not protect a Fund from loss due to
factors such as a change in market interest rate levels or other particular
financial market change that affects the value of or return due on an
instrument.
SHARES OF INVESTMENT COMPANIES. Each Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
investment companies to the extent that they may facilitate achieving the
objective of the Fund or to the extent that they afford the principal or most
practical means of access to a particular market or markets or they represent
attractive investments in their own right. The percentage of Fund assets which
may be so invested is not limited, provided that a Fund and its affiliates do
not acquire more than 3% of the shares of any such investment company. The
provisions of the 1940 Act may also impose certain restrictions on redemption of
a Fund's shares in other investment companies. A Fund's purchase of shares of
investment companies may result in the payment by a shareholder of duplicative
management fees. The Advisor and/or Sub-Advisor will consider such fees in
determining whether to invest in other mutual funds. The Funds will invest only
in investment companies which do not charge a sales load; however, the Funds may
invest in such companies with distribution plans and fees, and may pay customary
brokerage commissions to buy and sell shares of closed-end investment companies.
The return on a Fund's investments in investment companies will be reduced by
the operating expenses, including investment advisory and administrative fees,
of such companies. A Fund's investment in a closed-end investment company may
require the payment of a premium above the net asset value of the investment
company's shares, and the market price of the investment company thereafter may
decline without any change in the value of the investment company's assets. The
Funds, however, will not invest in any investment company or trust unless it is
believed that the potential benefits of such investment are sufficient to
warrant the payment of any such premium.
As an exception to the above, each Fund has the authority to invest all of its
assets in the securities of a single open-end investment company with
substantially the same fundamental investment objectives, restrictions and
policies as that of the Fund. A Fund will notify its shareholders prior to
initiating such an arrangement.
REPURCHASE AGREEMENTS. As part of its cash reserve position, each Fund may
enter into repurchase agreements through which the Fund acquires a security (the
"underlying security") from the seller, a well-established securities dealer or
a bank that is a member of the Federal Reserve System. At that time, the bank
or securities dealer agrees to repurchase the underlying security at the same
price, plus a specified amount of interest. Repurchase agreements are generally
for a short period of time, often less than a week. The seller must maintain
with the Fund's custodian collateral equal to at least 100% of the repurchase
price, including accrued interest, as monitored daily by the Advisor and/or Sub-
Advisor. A Fund will not enter into a repurchase agreement with a maturity of
more than seven business days if, as a result, more than 15% (or 10% in the case
of the Money Market Fund) of the value of its net assets, would then be invested
in such repurchase agreements. A Fund will only enter into repurchase
agreements where (1) the underlying securities are issued or guaranteed by the
U.S. Government, (2) the market value of the underlying security, including
accrued interest, will be at all times equal to or in excess of the value of the
repurchase agreement, and
24 FREMONT MUTUAL FUNDS
<PAGE>
(3) payment for the underlying securities is made only upon physical delivery or
evidence of book-entry transfer to the account of the custodian or a bank acting
as agent. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, a Fund could experience both delays in liquidating the
underlying securities and losses, including:
(1) a possible decline in the value of the underlying security during the period
in which the Fund seeks to enforce its rights thereto; (2) possible subnormal
levels of income and lack of access to income during this period; and (3)
expenses of enforcing the Fund's rights.
PORTFOLIO TURNOVER. Each Fund (except for the Money Market Fund) expects to
trade in securities for short-term gain whenever deemed advisable by the Advisor
and/or Sub-Advisor in order to take advantage of anomalies occurring in general
market, economic or political conditions. Therefore, each Fund may have a
higher portfolio turnover rate than that of some other investment companies, but
it is anticipated that the annual portfolio turnover rate of each Fund will not
exceed 200%. The portfolio turnover rate is calculated by dividing the lesser
of sales or purchases of long-term portfolio securities by the Funds' average
month-end long-term investments. High portfolio turnover involves
correspondingly greater transaction costs in the form of dealer spreads or
brokerage commissions and other costs that the Funds will bear directly, and may
result in the realization of net capital gains, which are generally taxable
whether or not distributed to shareholders.
EACH FUND MAY LEND UP TO ONE-THIRD OF ITS SECURITIES ONLY IF COVERED BY
COLLATERAL EQUAL TO 100% OF THE VALUE OF SECURITIES BORROWED.
LOANS OF PORTFOLIO SECURITIES. Each Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in an
amount not exceeding 331/3% of its net assets. The borrower must maintain with
the Funds' custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. A Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities, or possible loss of
rights in the collateral should the borrower fail financially. The lender also
may bear the risk of capital loss on investment of the cash collateral, which
must be returned in full to the borrower when the loan is terminated. Loans will
be made only to firms deemed by the Advisor to be of good standing and will not
be made unless, in the judgment of the Advisor, the consideration to be earned
from such loans would justify the associated risk.
BORROWING. Each Fund may borrow from banks an amount not exceeding 30% of the
value of its total assets for temporary or emergency purposes and enter into
reverse repurchase agreements. If the income and gains on securities purchased
with the proceeds of borrowings or reverse repurchase agreements exceed the cost
of such borrowings or agreements, a Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the cost, earnings or net asset value would decline faster
than otherwise would be the case.
RESTRICTED SECURITIES. Each Fund may purchase securities that are not
registered ("restricted securities") under federal securities laws, but can be
offered and sold to "qualified institutional buyers." However, a Fund will not
invest more than 15% of its assets (or 10% with respect to the Money Market
Fund) in illiquid investments, which includes repurchase agreements and fixed
time deposits maturing in more than seven days, and securities that are not
readily marketable and restricted securities, unless the Board of Directors
determines, based upon a continuing review of the trading markets for the
specific restricted security, that such restricted securities are liquid. The
Board of Directors may adopt guidelines and delegate to the Advisor or Sub-
Advisor the daily function of determining and monitoring liquidity of restricted
securities. The Board, however, will retain sufficient oversight and be
ultimately responsible for the determinations.
WARRANTS OR RIGHTS. Warrants or rights may be acquired by a Fund in connection
with other securities or separately and provide the Fund with the right to
purchase other securities of the issuer at a later date. It is the present
intention of each Fund to limit its investments in warrants or rights, valued at
the lower of cost or market, to no more than 5% of the value of its net assets.
Warrants or rights acquired by the Funds in units or attached to securities will
be deemed to be without value for purposes of this restriction.
OPTIONS AND FUTURES CONTRACTS. (Except for the Money Market Fund.) When a Fund
is not fully invested, strategies such as buying calls, writing puts, and buying
futures may be used to increase its exposure to price changes in stocks or debt
securities. When the Advisor and/or Sub-Advisor wishes to hedge against market
fluctuations, strategies such as buying puts, writing calls, and selling futures
may be used to reduce market exposure. Because most stock index futures and
options are based on broad stock market indexes, their performance tends to
track the performance of common stocks generally - which may or may not
correspond to the types of securities in which the Funds invest. Each Fund will
maintain segregated accounts consisting of cash, U.S. Government securities or
other liquid securities (or, as permitted by applicable regulations, enter into
certain offsetting positions) to cover its obligations under options and futures
contracts to avoid leveraging.
In seeking appreciation or to reduce principal volatility, a Fund may also (1)
enter into futures contracts -- contracts for the future delivery of debt
securities, stock, stock index futures contracts with respect to the S&P 500
Index, small capitalization stock market indices or other similar broad-based
stock market indices, the initial margins of which are limited to 5% of the
Fund's assets; and (2) purchase put and call options on portfolio securities,
stock indices or stock index futures
FREMONT MUTUAL FUNDS 25
<PAGE>
contracts -- the premiums of which are limited to 5% of the Fund's assets.
A Fund may write put and call options. It will only do so by writing covered
put or call options, and the aggregate value of the securities underlying put
options, as of the date of sale of the options, will not exceed 50% of the net
assets of the Fund.
The Funds will set aside cash, cash equivalents, or liquid securities, or hold a
covered position against any potential delivery or payment obligations under any
outstanding option or futures contracts.
Options and futures can be volatile investments. If the Advisor and/or Sub-
Advisor applies a hedge at an inappropriate time or evaluates market conditions
incorrectly, options and futures strategies may lower a Fund's return. A Fund
could also experience a loss if the prices of its options or futures positions
were poorly correlated with its other investments, or if it could not close out
its positions because of an illiquid secondary market.
Although these investment practices will be used primarily to generate income or
to minimize the fluctuation of principal, they do involve risks which are
different in some respects from the investment risks associated with similar
funds which do not engage in such activities. These risks may include the
following: futures contracts -- no assurance that closing purchase transactions
will be available at favorable prices, possible reduction of a Fund's income due
to the use of hedging, the possible reduction in value of both the securities
hedged and the hedging instrument, and possible loss in excess of the initial
margin payment; options and futures contracts -- imperfect correlation between
the contract and the underlying security, commodity or index and unsuccessful
hedging transactions due to incorrect forecasts of market trends; writing
covered call options -- the inability to effect closing transactions at
favorable prices and the inability to participate in the appreciation of the
underlying securities above the exercise price and premium received; and
purchasing or selling put and call options -- possible loss of the entire
premium. A more thorough description of these investment practices and their
associated risks is contained in the Statement of Additional Information.
FORWARD CURRENCY, FUTURES AND OPTIONS TRANSACTIONS. Except for the Money Market
Fund, the Funds may enter into forward currency contracts and currency futures
contracts and may purchase put or call options on currencies (each such
arrangement sometimes referred to as a "currency contract"). Forward contracts
typically will involve the purchase or sale of a foreign currency against the
dollar. These techniques are designed primarily to hedge against future changes
in currency prices which might adversely affect the value of a Fund's portfolio
securities. A Fund may attempt to accomplish objectives similar to those
involved in its use of forward currency contracts by purchasing put or call
options on currencies or currency futures. For a more detailed description of
such arrangements, see the Statement of Additional Information.
A Fund may enter into currency contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. For example,
when the Advisor and/or Sub-Advisor anticipates making a purchase or sale of a
security, the Fund may enter into a currency contract in order to set the rate
(either relative to the U.S. dollar or another currency) at which a currency
exchange transaction related to the purchase or sale will be made. Further,
when it is believed that a particular currency may decline compared to the U.S.
dollar or another currency, a Fund may enter into a currency contract to sell
the currency the Advisor or Sub-Advisor expects to decline in the amount
approximating the value of some or all of the Fund's portfolio securities
denominated in that currency or related currencies that the Advisor and/or Sub-
Advisor feels demonstrate a correlation in exchange rate movements. The
practice of using correlated currencies is known as "cross-hedging." When the
Advisor and/or Sub-Advisor believes that the U.S. dollar may suffer a
substantial decline against a foreign currency or currencies, a Fund may enter
into a currency contract to buy a foreign currency for a fixed dollar amount.
By entering into such transactions, however, the Fund may be required to forego
the benefits of advantageous changes in exchange rates. Currency contracts
generally are traded over-the-counter, and not on organized commodities or
securities exchanges. As a result, such contracts operate in a manner distinct
from exchange-traded instruments, and their use involves certain risks beyond
those associated with transactions in other futures contracts.
While a Fund enters into forward currency contracts and purchases currency
options or currency futures to reduce the risks of fluctuations in exchange
rates, these contracts cannot eliminate all such risks and do not eliminate
fluctuations in the prices of the Fund's portfolio securities. Purchasing
(selling) a currency forward limits the Fund's exposure to risk of loss from a
rise (decline) in the dollar value of the currency, but also limits its
potential for gain from a decline (rise) in the currency's dollar value. While
purchasing options can protect the Fund against certain exchange rate
fluctuations, a Fund is subject to the loss of its entire premium payment where
the option is allowed to expire without exercise.
To avoid leverage in connection with forward currency transactions, a Fund will
set aside with its Custodian cash, cash equivalents or liquid securities, or
hold a covered position against any potential delivery or payment obligations
under any outstanding contracts. To the extent a Fund enters into over-the-
counter options, the options and the assets so set aside to cover such options
are considered illiquid assets and, together with other illiquid assets and
securities, will not exceed 15% of the net assets of the Fund. In addition,
premiums paid for currency options held by a Fund may not exceed 5% of the
Fund's net assets.
Although a Fund will enter into currency contracts solely for hedging purposes,
their use does involve certain risks. For example, there can be no assurance
that a liquid secondary market will exist for any currency contract purchased or
sold, and a Fund may be required to maintain a position until
26 FREMONT MUTUAL FUNDS
<PAGE>
exercise or expiration, which could result in losses.
Currency contracts may be entered into on United States exchanges regulated by
the Securities and Exchange Commission or the Commodity Futures Trading
Commission as well as in the over-the-counter market and on foreign exchanges.
SWAP AGREEMENTS. (Except for the Money Market Fund.) The Funds may enter into
interest rate, index and currency exchange rate swap agreements for purposes of
attempting to obtain a particular desired return at a lower cost to the Fund
than if the Fund had invested directly in an instrument that yielded that
desired return. Swap agreements are two-party contracts entered into primarily
by institutional investors for periods ranging from a few weeks to more than one
year. In a standard "swap" transaction, two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on
predetermined investments or instruments. The gross returns to be exchanged or
"swapped" between the parties are calculated with respect to a "notional
amount," i.e., the return on or increase in value of a particular dollar amount
invested at a particular interest rate, in a particular foreign currency, or in
a "basket" of securities representing a particular index. Commonly used swap
agreements include interest rate caps, under which, in return for a premium, one
party agrees to make payments to the other to the extent that interest rates
exceed a specified rate; interest rate floors, under which, in return for a
premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level; and interest rate collars, under
which a party sells a cap and purchases a floor or vice versa in an attempt to
protect itself against interest rate movements exceeding minimum or maximum
levels. Whether a Fund's use of swap agreements will be successful in furthering
its investment objective will depend on the Advisor's or Sub-Advisor's ability
to predict correctly whether certain types of investments are likely to produce
greater returns than other investments.
A Fund's obligations under a swap agreement will be accrued daily (offset
against amounts owed to the Fund) and any accrued but unpaid net amounts owed to
a swap counterparty will be covered by the maintenance of a segregated account
consisting of cash, U.S. Government securities or other liquid securities to
avoid any potential leveraging of the Fund's portfolio. Swap agreements having
a term of greater than seven days are considered illiquid assets and a Fund's
obligations under such agreements, together with other illiquid assets and
securities, will not exceed 15% of the net assets of the Fund.
RISK FACTORS AND SPECIAL CONSIDERATIONS FOR INTERNATIONAL INVESTING. (Except
for the Money Market Fund.) Investment in securities of foreign entities and
securities denominated in foreign currencies involves risks typically not
present to the same degree in domestic investments. Likewise, investment in
ADRs and EDRs presents similar risks, even though the Funds will purchase, sell
and be paid dividends on ADRs in U.S. dollars. These risks include fluctuations
in currency exchange rates, which are affected by international balances of
payments and other economic and financial conditions; government intervention;
speculation; and other factors. With respect to certain foreign countries,
there is the possibility of expropriation or nationalization of assets,
confiscatory taxation and political, social or economic instability. A Fund may
be required to pay foreign withholding or other taxes on certain of its foreign
investments, but investors may or may not be able to deduct their pro rata
shares of such taxes in computing their taxable income, or take such shares as a
credit against their U.S. income taxes. See "Dividends, Distributions and
Federal Income Taxation."
There may be less publicly available information about foreign issuers or
securities than about U.S. issuers or securities, and foreign issuers may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those of U.S. entities. With respect to unsponsored
ADRs, these programs cover securities of companies which are not required to
meet either the reporting or accounting standards of the United States. Many
foreign financial markets, while generally growing in volume, continue to have
substantially less volume than domestic markets, and securities of many foreign
companies are less liquid and their prices are more volatile than are securities
of comparable U.S. companies. Such markets may have longer settlement periods
than markets in the United States. In addition, brokerage commissions,
custodial services and other costs related to investment in foreign markets
generally are more expensive than in the United States, particularly with
respect to emerging markets. Such markets have different settlement and
clearance procedures. In certain markets, there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. The inability
of a Fund to make intended securities purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to
dispose of a portfolio security caused by settlement problems could result
either in losses to a Fund due to subsequent declines in value of a portfolio
security or, if a Fund had entered into a contract to sell the security, could
result in possible liability to the purchaser. Settlement procedures in certain
emerging markets also carry with them a heightened risk of loss due to the
failure of the broker or other service provider to deliver cash or securities.
The risks of foreign investing are of greater concern in the case of investments
in emerging markets which may exhibit greater price volatility, have less
liquidity and have settlement arrangements which are less efficient than in
developed markets. Furthermore, the economies of emerging market countries
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade barriers, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. These emerging
market economies also have been and may continue to be adversely affected by
economic conditions in the countries with which they trade.
The value of a Fund's portfolio securities computed in U.S. dollars will vary
with increases and decreases in the exchange
FREMONT MUTUAL FUNDS 27
<PAGE>
rate between the currencies in which the Fund has invested and the U.S. dollar.
A decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of a Fund's holdings of securities
denominated in such currency and, therefore, will cause an overall decline in
the Fund's net asset value and net investment income and capital gains, if any,
to be distributed in U.S. dollars to shareholders by the Fund.
The rate of exchange between the U.S. dollar and other currencies is influenced
by many factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the price of oil, the pace of activity in the industrial countries,
including the United States, and other economic and financial conditions
affecting the world economy.
The Funds will not invest in a foreign currency or in securities denominated in
a foreign currency if such currency is not at the time of investment considered
by the Advisor or Sub-Advisor to be fully exchangeable into U.S. dollars without
legal restriction. The Funds may purchase securities that are issued by the
government or a corporation or financial institution of one nation but
denominated in the currency of another nation. To the extent that a Fund
invests in ADRs, the depository bank generally pays cash dividends in U.S.
dollars regardless of the currency in which such dividends originally are paid
by the issuer of the underlying security.
The operating expense ratio of a Fund investing in foreign securities may be
higher than that of an investment company investing exclusively in U.S.
securities because certain expenses, such as custodial costs, may be higher.
Several of the countries in which the Funds may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital gains),
(ii) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation, (iii)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor, (iv) limitations on the types of
securities which a foreign investor may purchase and (v) restrictions on a
foreign investor's right to invest in companies whose securities are not
publicly traded. In some circumstances, these restrictions may limit or
preclude investment in certain countries. Therefore, the Funds intend to invest
in such countries through the purchase of shares of investment companies
organized under the laws of such
countries.
A Fund's interest and dividend income from foreign issuers may be subject to
non-U.S. withholding taxes. A Fund also may be subject to taxes on trading
profits in some countries. In addition, many of the countries in the Pacific
Basin have a transfer or stamp duties tax on certain securities transactions.
The imposition of these taxes will increase the cost to the Funds of investing
in any country imposing such taxes. For United States federal income tax
purposes, United States shareholders may be entitled to a credit or deduction to
the extent of any foreign income taxes paid by the Funds. See "Dividends,
Distributions and Federal Income Taxation."
AMERICAN DEPOSITORY RECEIPTS. (Except for the Money Market Fund.) American
Depository Receipts ("ADRs") are negotiable receipts issued by a United States
bank or trust to evidence ownership of securities in a foreign company which
have been deposited with such bank or trust's office or agent in a foreign
country. Investing in ADRs presents risks not present to the same degree as
investing in domestic securities even though the Funds will purchase, sell and
be paid dividends on ADRs in U.S. dollars. These risks include fluctuations in
currency exchange rates, which are affected by international balances of
payments and other economic and financial conditions; government intervention;
speculation; and other factors. With respect to certain foreign countries,
there is the possibility of expropriation or nationalization of assets,
confiscatory taxation and political, social and economic instability. The Funds
may be required to pay foreign withholding or other taxes on certain of its
ADRs, but investors may or may not be able to deduct their pro rata shares of
such taxes in computing their taxable income, or take such shares as a credit
against their U.S. federal income tax. See "Dividends, Distributions and
Federal Income Taxation." Unsponsored ADRs are offered by companies which are
not prepared to meet either the reporting or accounting standards of the United
States. While readily exchangeable with stock in local markets, unsponsored
ADRs may be less liquid than sponsored ADRs. Additionally, there generally is
less publicly available information with respect to unsponsored ADRs.
EACH FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS CANNOT BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
INVESTMENT RESTRICTIONS. Each Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating a Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). These investment restrictions and each Fund's
investment objective cannot be changed without the approval of shareholders of
that Fund; all other investment practices described in this Prospectus and in
the Statement of Additional Information can be changed by the Board of Directors
without shareholder approval.
INVESTMENT RESULTS
Each Fund may from time to time include information on its investment results
and/or comparisons of its investment results to various unmanaged indices or
results of other mutual funds
28 FREMONT MUTUAL FUNDS
<PAGE>
or groups of mutual funds in advertisements, sales literature or reports
furnished to present or prospective shareholders. All such figures are based on
historical performance data and are not intended to be indicative of future
performance. The investment return on an investment in a Fund will fluctuate.
With respect to each Fund, except the Money Market Fund, the principal value of
an investment will also fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The Money Market Fund
attempts to maintain a stable net asset value of $1.00 per share.
EACH FUND'S "TOTAL RETURN" WILL BE EX-PRESSED IN PERIODS OF 1, 5 AND 10 YEARS,
AND FOR THE LIFE OF EACH FUND.
Each Fund except for the Money Market Fund may calculate performance on an
average annual total return basis for 1-, 5- and 10-year periods and over the
life of the Fund, after such periods have elapsed. Average annual total return
will be computed by determining the average annual compounded rate of return
over the applicable period that would equate the initial amount invested to the
ending redeemable value of the investment. Ending redeemable value includes
dividends and capital gain distributions, reinvested at net asset value at the
reinvestment date determined by the Board of Directors. The resulting
percentages indicate the positive or negative investment results that an
investor would have experienced from reinvested dividends and capital gain
distributions and changes in share price during the period. The average annual
compounded rate of return over various periods may also be computed by utilizing
ending redeemable values as determined above.
From time to time, each Fund may advertise its yield. The Funds' yields are
calculated according to methods that are standardized for all mutual funds.
Because yield calculation methods differ from the methods used for other
purposes, a Fund's yield may not equal its distribution rate, the income paid to
a shareholder's account, or the income reported in the Fund's financial
statements. With respect to the Money Market Fund, the yield refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). The Money Market Fund's net income
per share for such period (excluding realized gains and losses, if any) will be
divided by the Fund's constant net asset value of $1.00 and annualized on a 365-
day basis. An effective yield quotation, taking into account the effects of a
shareholder's assumed reinvestment of income (compounding), may also be used.
With respect to the Funds other than the Money Market Fund, yield refers to the
income generated by an investment in a Fund over a 30-day period (which period
will be stated in the advertisement). This income is then "annualized." That
is, the amount of income generated by the investment during that period is
assumed to be generated each 30 days over a 365-day period and is shown as a
percentage of the investment.
A Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses of
the Fund, so that any investment results reported by the Fund should not be
considered representative of what an investment in the Fund may earn in any
future period. When utilized, total return for the unmanaged indices described
in the Statement of Additional Information will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
recurring expenses such as advisory fees, brokerage costs or administrative
expenses. These factors and possible differences in calculation methods should
be considered when comparing a Fund's investment results with those published
for other investment companies, other investment vehicles and unmanaged indices.
The comparison of a Fund to an alternative investment should be made with
consideration of differences in features and expected performance. The Funds
may also be mentioned in newspapers, magazines, or other media from time to
time. The Funds assume no responsibility for the accuracy of such data. A
Fund's results also should be considered relative to the risks associated with
the Fund's investment objective and policies. See "Investment Results" in the
Statement of Additional Information.
Additional performance information regarding the Funds will be included in the
Funds' annual report, which will be mailed to shareholders without charge upon
request.
THERE ARE NO SALES CHARGES ON INVESTMENTS OR REINVESTMENTS,
AND THERE ARE NO REDEMPTION FEES.
HOW TO INVEST
The shares of each Fund may be purchased through the Transfer Agent by
submitting payment by check, bank wire or electronic (Automated Clearing House
or "ACH") transfer and, in the case of new accounts, a completed account
application form. There is no sales load or contingent deferred sales load
charged to purchase shares of the Funds. All orders for the purchase of shares
are subject to acceptance or rejection by the Board of Directors or the Advisor.
Purchases of shares are made at the current public offering price next
determined after the purchase order is received by the Transfer Agent or by a
selling agent of the Funds. A minimum initial investment of $2,000 is required
to open a shareholder account, except for retirement plans such as Individual
Retirement Accounts (IRAs) and Keogh Plans. Retirement plans are subject to a
$1,000 minimum initial investment. The minimum initial investment is waived for
accounts opened with the Automatic Investment Plan and may be waived in other
instances at the sole discretion of the Advisor. (See "Automatic Investment
Plan.")
FREMONT MUTUAL FUNDS 29
<PAGE>
THERE IS AN INITIAL INVESTMENT MINIMUM OF $2,000 PER ACCOUNT OR $1,000 FOR
RETIREMENT ACCOUNTS (IRAS, ETC.). THE INITIAL MINIMUM IS WAIVED FOR ACCOUNTS
OPENED WITH THE AUTOMATIC INVESTMENT PLAN.
Each subsequent investment in the Funds must be $200 or more except in the case
of retirement plans or Automatic Investment Plans. There is a minimum continuing
balance of $1,500 required for non-retirement accounts (calculated on the basis
of original investment value). In some cases, the minimum balance requirement
may be waived.
Investors wishing to open a new account by bank wire must call the Transfer
Agent at 800-548-4539 to obtain an account number and detailed wire
instructions. Bank wire instructions are also provided in the last section of
this Prospectus. All bank wire investments received before 4:00 p.m., Eastern
time, will be credited the same day. Bank wire investments received after 4:00
p.m., Eastern time, will be credited the next business day. A bank wire
investment is considered received when the Transfer Agent is notified that the
bank wire has been credited to its account.
Shares of a Fund may also be purchased through broker-dealers or other financial
intermediaries who have made appropriate arrangements with the Funds. Such
agents are responsible for ensuring that the account documentation is complete
and that timely payment is made for the Fund shares purchased for their
customers pursuant to such orders. These agents may charge a reasonable
transaction fee to their customers. In some instances, all or a portion of the
transaction fee may be paid by the Advisor. To the extent these agents perform
shareholder servicing activities for a Fund, they may receive fees from the Fund
or the Advisor for such services.
From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor to do so.
As a condition of this offering, if an order to purchase shares is cancelled due
to nonpayment (for example, a check returned for "insufficient funds"), the
person who made the order will be subject to a $20 charge and must reimburse the
Funds for any loss incurred by reason of such cancellation. For more
information, see "Other Investment and Redemption Services" in the Statement of
Additional Information.
Funds Distributor, Inc., Sixty State Street, Boston, Massachusetts, 02109, is
the principal underwriter for the Funds. The compensation of Funds Distributor,
Inc. is paid by the Advisor (not the Funds).
SHAREHOLDER ACCOUNT SERVICES
AND PRIVILEGES
STATEMENTS AND REPORTS
When a shareholder makes an initial investment in the Funds, a shareholder
account is opened in accordance with registration instructions. Each time there
is a transaction, such as an additional investment, a dividend or other
distribution, or a redemption, the shareholder will receive from the Transfer
Agent a confirmation statement showing the current transaction in the account
and the transaction date. Shareholders of the Money Market Fund and the Bond
Fund will receive monthly statements. Shareholders of the other Funds will
receive statements as of the end of March, June, September and December.
Shares are issued only in book-entry form (without certificates).
The fiscal year of the Funds ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which contain
a schedule of each Fund's portfolio securities and financial statements. Annual
reports will include audited financial statements. The federal income tax
status of shareholder distributions also will be reported to each Fund's
shareholders after the end of the calendar year on Form 1099-DIV.
SHAREHOLDERS RECEIVE AN ACCOUNT STATEMENT FOR EACH TRANSACTION IN THEIR ACCOUNT.
SHAREHOLDERS OF THE MONEY MARKET FUND AND THE BOND FUND RECEIVE MONTHLY
STATEMENTS. SHAREHOLDERS OF THE OTHER FUNDS RECEIVE STATEMENTS AS OF THE END OF
MARCH, JUNE, SEPTEMBER AND DECEMBER.
EXCHANGES BETWEEN FUNDS
Shares of one Fund may be exchanged for shares of another Fund at their
respective net asset values, provided that the account registration remains
identical. Exchanges may only be made for shares of a Fremont Fund then offered
for sale in your state of residence. It is required that (1) all shares in one
Fund must be exchanged or (2) the remaining balance must be at least $1,500.
This minimum balance requirement may be waived. These exchanges are not tax-
free and will result in a shareholder realizing a gain or loss for tax purposes,
except in the case of tax-deferred retirement accounts or other tax-exempt
shareholders that have not borrowed to acquire the shares exchanged.
Exchanges by mail should be sent to the Transfer Agent at the address set forth
in the last section of this Prospectus.
Purchases, redemptions and exchanges should be made for investment purposes
only. A pattern of frequent exchanges, purchases and sales is not acceptable
and, at the discretion of the Board of Directors, can be limited by the
Investment Company's refusal to accept further purchase and exchange orders from
the shareholder.
The Investment Company reserves the right to modify or eliminate the exchange
privilege upon 60 days' written notice to shareholders.
30 FREMONT MUTUAL FUNDS
<PAGE>
SHAREHOLDERS MAY EXCHANGE SHARES AMONG THE FREMONT FUNDS VIA TELEPHONE.
TELEPHONE EXCHANGE PRIVILEGE
An investor may elect on the account application to authorize exchanges by
telephone. A shareholder may give instructions regarding exchanges by calling
800-548-4539. A shareholder wishing to initiate the telephone exchange
privilege should contact the Funds. This privilege will not be added to an
account without written instruction to do so from the shareholder. Telephone
requests received by 4:00 p.m., Eastern time, will be processed the same day.
During times of drastic economic or market conditions, the telephone exchange
privilege may be difficult to implement. The Transfer Agent will make its best
effort to accommodate shareholders when its telephone lines are used to
capacity. Under these circumstances, a shareholder should consider using
overnight mail to send a written exchange request.
See "Telephone Redemption Privilege" in the next section of this Prospectus.
THE AUTOMATIC INVESTMENT PLAN PERMITS PURCHASES TO BE MADE ONCE OR TWICE EACH
MONTH, DEBITING THE SHAREHOLDER'S BANK ACCOUNT.
AUTOMATIC INVESTMENT PLAN
A shareholder may authorize a withdrawal to be made automatically once or twice
each month from a credit balance in the shareholder's bank checking, savings,
negotiable on withdrawal (NOW) or similar account, with the proceeds to be used
to purchase shares of the Funds. The minimum initial investment is waived for
accounts opened with the Automatic Investment Plan. The amount of the monthly
investment must be at least $50, and is not otherwise subject to the $200
minimum for subsequent investments. There is no obligation to make additional
payments, and the plan may be terminated by the shareholder at any time.
Termination requests must be received in writing at least 5 days prior to the
regular draft date, or the drafts will not cease until the next cycle. The
Transfer Agent may impose a charge for this service, although no such charge
currently is contemplated. If a shareholder's order to purchase shares is
cancelled due to nonpayment (for example, "insufficient funds"), the
shareholder's account will be subject to a $20 charge and the shareholder will
be responsible for reimbursing the Funds for any loss incurred by reason of such
cancellation. A shareholder wishing to initiate the plan on a new or existing
account must fill out an Automatic Investment Plan form. The form is available
on request.
HOW TO REDEEM SHARES
Shares are redeemed at no charge (other than wire transfer fees, if any) at the
net asset value next determined after receipt by the Transfer Agent of proper
written redemption instructions. The current charge for a wire transfer is $8
per wire. This is subject to change by the Transfer Agent at any time, without
prior notification. See "Calculation of Net Asset Value and Public Offering
Price."
Redemption orders received in proper form by the Transfer Agent before 4:00
p.m., Eastern time, will be priced at the net asset value determined on that day
(with certain limited exceptions discussed in the Statement of Additional
Information). Orders received by the Transfer Agent after 4:00 p.m., Eastern
time, will be entered at the next calculated net asset value.
Redemption proceeds can be sent by check, electronic transfer, or bank wire. An
electronic transfer can be processed only to bank checking and savings accounts.
Before requesting an electronic transfer, shareholders should confirm that their
financial institution can receive an electronic transfer. Currently, there is
no charge to shareholders for processing an electronic transfer.
Shareholders may have redemption proceeds sent by bank wire, electronic
transfer, or check to a designated bank account by providing in writing the
appropriate bank information to the Transfer Agent at the time of original
application. If the investor wishes to change the predesignated account, this
must be requested in writing with a signature guarantee (see "Signature
Guarantee" below).
Redemptions from retirement accounts require a written request, with a signature
guarantee, unless authorized under the Automatic Withdrawal Plan. Call the
Transfer Agent for specific instructions on redemptions.
For written redemption requests for an amount greater than $25,000, or a
redemption request that directs proceeds to a party other than the registered
account owner(s), all signatures must be guaranteed (see "Signature Guarantee"
below).
Because of market fluctuations, the amount a shareholder receives for shares
redeemed may be more or less than the amount paid for them.
Redemption of shares, exchanges and redemptions under an Automatic Withdrawal
Plan may result in taxable capital gains or losses.
TELEPHONE REDEMPTION PRIVILEGE
An investor may elect on the regular account application to authorize
redemptions by telephone. This privilege will not be added to an account
without written authorization to do so from the shareholder. A shareholder may
then give instructions regarding redemptions by calling 800-548-4539. (The
Telephone Redemption Privilege is not available for IRA or other retirement
accounts.) Telephone requests received by 4:00 p.m., Eastern time, will be
processed at the net asset value calculated that same day. During times of
drastic economic or market conditions, the telephone redemption privilege may be
difficult to implement. The Transfer Agent will make its best effort to
accommodate shareholders when its telephone lines are used to capacity. Under
these circumstances, a shareholder should consider using overnight mail to send
a written redemption request.
FREMONT MUTUAL FUNDS 31
<PAGE>
Neither the Investment Company, the Transfer Agent, nor their respective
affiliates, will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost or expense in
acting on such telephone instructions. The affected shareholder(s) will bear
the risk of any such loss. The Investment Company, or the Transfer Agent, or
both, will employ reasonable procedures to determine that telephone instructions
are genuine. If the Investment Company and/or the Transfer Agent do not employ
such procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of the transactions, and/or tape recording telephone
instructions.
THE MONEY MARKET FUND AND THE BOND FUND OFFER FREE CHECKWRITING.
CHECK REDEMPTION PRIVILEGE (Money Market Fund and Bond Fund only)
The Transfer Agent will, upon request, provide each shareholder of the Money
Market Fund and the Bond Fund (except for retirement accounts) with free checks
which may be made payable by shareholders to the order of anyone in any amount
of at least $250. The Funds will arrange for checks to be honored by The Fifth
Third Bank, Cincinnati, Ohio (the "Bank") for this purpose. The Bank has the
right to refuse any check which does not conform with its requirements. The
shareholder will be subject to the Bank's rules and regulations governing
checking accounts, including a $20 charge for refused checks. This charge may
change without notice. When such a check is presented to the Transfer Agent for
payment, the Transfer Agent, as the shareholder's agent, will cause the
Investment Company to redeem a sufficient number of full and fractional shares
in the shareholder's account to cover the amount of the check. Since it is not
possible to predict the exact value of a shareholder's account when a redemption
check is cleared, shareholders may not close an account with a check.
The Check Redemption Privilege enables the shareholder to continue receiving
dividends on those shares equaling the amount being redeemed by check until such
time as the check is presented to the Transfer Agent for payment. The Check
Redemption Privilege may be modified or terminated by the Investment Company or
the Transfer Agent upon three days' notice to shareholders.
THE AUTOMATIC WITHDRAWAL PLAN ALLOWS SHAREHOLDERS TO RECEIVE REGULAR MONTHLY,
QUARTERLY, OR YEARLY PAYMENTS.
AUTOMATIC WITHDRAWAL PLAN
A shareholder may request redemptions of a specified dollar amount (minimum of
$100) on either a monthly, quarterly, or yearly basis. Currently, there is no
charge for this service. Redemptions will be made on the last business day of
the month. Because a redemption constitutes a liquidation of shares, the number
of shares owned in the account will be reduced. Systematic redemptions should
not reduce the account below the minimum balance required (currently $1,500).
Shareholders may terminate the Automatic Withdrawal Plan at any time, but not
less than five days before a scheduled payment date. When an exchange is made
between Fremont Funds, shareholders must specify if they desire the automatic
withdrawal option to be transferred to a new account opened by the exchange. As
an account balance declines to the minimum permitted, the shareholder must
advise the Transfer Agent if the automatic withdrawal feature is to be
transferred to another account of the shareholder. Shareholders should note
that if there is an Automatic Withdrawal Plan established for an account and the
entire account is exchanged into another Fund, the automatic withdrawal option
must be renewed by written request to the Transfer Agent. A shareholder wishing
to initiate automatic redemptions must complete an Automatic Withdrawal Plan
form available from the Transfer Agent.
SIGNATURE GUARANTEE
To better protect the Funds and shareholders' accounts, a signature guarantee is
required for certain transactions. Signatures must be guaranteed by an
"eligible guarantor institution" as defined in applicable regulations. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. A
notary public is not an acceptable guarantor.
OTHER IMPORTANT REDEMPTION INFORMATION
A request for redemption will not be processed until all of the documentation
described above has been received by the Transfer Agent in proper form. A
shareholder in doubt about what documents are required should contact the
Transfer Agent.
Payment in redemption of shares is normally made within three business days
after receipt by the Transfer Agent of a request in proper form, provided that
payment in redemption of shares purchased by check or draft will be effected
only after such check or draft has been collected. Although it is anticipated
that this process will be completed in less time, it may take up to 15 days.
Redemption proceeds will not be delayed when shares have been paid for by bank
wire or where the account holds a sufficient number of shares already paid for
with collected funds.
Except in extraordinary circumstances, payment for shares redeemed will be made
promptly after receipt of a redemption request, if in good order, but not later
than seven calendar days after the redemption request is received in proper
form. Requests for redemption which are subject to any special conditions or
which specify an effective date other than as provided herein cannot be
accepted.
32 FREMONT MUTUAL FUNDS
<PAGE>
The Fund reserves the right to redeem mandatorily the shares in a shareholder's
account (other than a retirement plan account) if the balance is reduced to less
than $1,500 in net asset value through redemptions or other action by the
shareholder. Notice will be given to the shareholder at least 30 days prior to
the date fixed for such redemption, during which time the shareholder may
increase its holdings to an aggregate amount of $1,500 or more (with a minimum
purchase of $200 or more.) This minimum balance may be waived.
REDEMPTION IN KIND
The Investment Company reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
the applicable Fund and valued as they are for purposes of computing the Fund's
net asset value (a redemption in kind). If payment is made in securities, a
shareholder may incur transaction expenses in converting these securities into
cash.
TRANSFER AGENT
Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354, has
been retained by the Advisor to serve as each Fund's transfer agent, dividend
paying and shareholder service agent. In addition, Countrywide Fund Services,
Inc. has been retained by the Advisor to assist in providing certain
administrative services to the Funds. Countrywide Fund Services, Inc. is an
indirect wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New
York Stock Exchange listed company principally engaged in residential mortgage
lending.
RETIREMENT PLANS
Shares of the Funds may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs); SEP-
IRAs; SIMPLE IRAs; Qualified Retirement Plans for self-employed persons and
their employees; corporate pension and profit-sharing plans and Section 403(b)
Plans, which are deferred compensation arrangements for employees of public
schools and certain charitable organizations. Forms for establishing IRAs, SEP-
IRAs, SIMPLE IRAs, and Qualified Retirement Plans are available through the
Investment Company, as are forms for corporate Pension and Profit-Sharing plans.
Please contact the Investment Company for more information about establishing
these accounts. In accordance with industry practice, there may be an annual
account charge for participation in these plans. Information regarding these
charges is available from the Investment Company.
Retirement plan participants may receive additional services related to their
plan at no extra cost to any shareholder.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION
Each Fund has qualified, and intends to continue to qualify to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
(the "Code"). For any tax year in which a Fund so qualifies and meets certain
other distribution requirements, it will not incur a federal tax liability.
Such qualification under the Code requires a Fund to, among other things,
diversify its investments so that, at the end of each fiscal quarter, (1) at
least 50 % of the market value of the Fund's assets is represented by cash, U.S.
government securities, securities of other regulated investment companies, and
other securities, limited, in respect to any one issuer, to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (2) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. government
securities or the securities of other regulated investment companies), or in two
or more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses.
Each Fund intends to distribute substantially all of its net investment income
according to the following schedule:
The Money Market Fund and the Bond Fund declare dividends daily and will
distribute net investment income monthly.
The Global Fund intends to distribute its net investment
income four times a year, at the end of March, June, September
and December.
Each of the Growth Fund, the International GrowthFund, the International Small
Cap Fund, the Emerging Markets Fund and the U.S. Micro-Cap Fund intend to
distribute substantially all of its net investment income once each year in
September.
EACH FUND INTENDS TO DISTRIBUTE SUBSTANTIALLY ALL NET INVESTMENT INCOME AND NET
REALIZED CAPITAL GAINS.
Each Fund intends to distribute substantially all of its net realized capital
gains, if any, at the end of the calendar year (on or about December 15).
Dividend and capital gains distributions, if any, may be reinvested in
additional shares at net asset value on the day of reinvestment, or may be
received in cash. All dividends and distributions are taxable to a shareholder
(except tax-exempt shareholders who have not borrowed to acquire their shares)
whether or not they are reinvested in shares of the Fund. Any long-term capital
gains distributions are taxable to shareholders as long-term capital gains,
regardless of how long shareholders have held Fund shares. Distributions of
short-term capital gains will be subject to the tax as ordinary income.
Corporate investors may be entitled to the dividends received deduction on all
or a portion of the dividends paid by the Global Fund, the Growth Fund and the
U.S. Micro-Cap Fund. Availability of the "dividends received" deduction is
subject to certain holding period and debt-financing limitations.
Shareholders may elect:
- - to have all dividends and capital gain distributions automatically
reinvested in additional shares; or
- - to receive the income dividends and short-term capital gains distributions
in cash and accept the long-term capital gains
FREMONT MUTUAL FUNDS 33
<PAGE>
distributions in additional shares; or
- - to receive all distributions of income dividends and capital gains in cash.
SHAREHOLDERS MAY RECEIVE DIVIDENDS AND DISTRIBUTIONS IN CASH OR MAY HAVE THEM
AUTOMATICALLY REINVESTED AT NO CHARGE.
Automatic reinvestments will be at net asset value on the day of reinvestment.
If no election is made by a shareholder, all dividends and capital gain
distributions will be automatically reinvested. These elections may be changed
by the shareholder at any time, but to be effective for a particular dividend or
capital gain distribution, the election must be received by the Transfer Agent
approximately 5 business days prior to the payment date to permit the change to
be entered into the shareholder account. The federal income tax status of
dividends and capital gains distributions is the same whether taken in cash or
reinvested in shares.
Dividends and capital gains generally are taxable to shareholders at the time
they are paid. However, dividends or capital gains declared in October,
November or December by the Funds and paid in January are taxable as if paid in
December. Each Fund will provide to its shareholders federal tax information
annually by January 31, including information about dividends and distributions
paid during the year.
If a shareholder has not furnished a certified correct taxpayer identification
number (generally a Social Security number) and has not certified that
withholding does not apply, or if the Internal Revenue Service has notified the
Funds that the taxpayer identification number listed on the account is incorrect
according to their records or that the shareholder is subject to backup
withholding, federal law generally requires the Funds to withhold 31% from any
dividends and/or redemptions (including exchange redemptions to the
shareholder). Amounts withheld are applied to the shareholder's federal tax
liability; a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. A shareholder should contact the
Transfer Agent if the shareholder is uncertain whether a proper taxpayer
identification number is on file with the Transfer Agent. Federal law also
requires the Funds to withhold 30%, or the applicable tax treaty rate, from
ordinary dividends paid to certain nonresident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts. Long-term capital gains
distributions may be subject to this withholding.
Dividends and interest from foreign issuers earned by a Fund may give rise to
withholding and other taxes imposed by foreign countries, generally at rates
from 10% to 40%. Tax conventions between certain countries and the United
States may reduce or eliminate these taxes. Foreign countries generally do not
impose taxes on capital gains with respect to investments by non-resident
investors. Except as indicated below, to the extent that a Fund does pay
foreign withholding or other foreign taxes on certain of its investments,
investors will not be able to deduct their pro rata shares of such taxes in
computing their taxable income nor be able to take their shares of such taxes as
a credit against U.S. income taxes.
If more than 50% of the value of a Fund's total assets at the close of its
fiscal year consist of securities of foreign corporations, the Fund will be
eligible to file, and will file, elections with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to include in their
federal income tax returns as gross income their respective pro rata portions of
foreign taxes paid by the Fund, to treat such amounts as foreign taxes paid by
them, and to deduct such respective pro rata portions in computing their taxable
incomes, or, alternatively, to use them as foreign tax credits (subject to
certain limitations) against their U.S. income taxes. The Funds will report
annually to their shareholders the amount per share of such withholding, if any.
The foregoing is a brief discussion of certain federal income
tax considerations. Please see "Taxes - Mutual Funds" in the Statement of
Additional Information for further information regarding the tax implications of
an investment in the Funds.
PLAN OF DISTRIBUTION
(EMERGING MARKETS FUND ONLY)
The Emerging Markets Fund has adopted a plan of distribution (the "Plan") under
which the Fund may directly incur or reimburse the Advisor for certain
distribution-related expenses, including payments to securities dealers and
others, including the Underwriter, who are engaged in the sale of shares of the
Fund and who may be advising investors regarding the purchase, sale or retention
of Fund shares: expenses of maintaining personnel who engage in or support
distribution of shares or who render shareholder support services not otherwise
provided by the Advisor or the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of the
Fund; expenses of obtaining such information, analyses and reports with respect
to marketing and promotional activities as the Investment Company may, from time
to time, deem advisable; and any other expenses related to the distribution of
the Fund's shares.
The annual limitation for payment of expenses pursuant to the Plan is .25% of
the Emerging Markets Fund's average daily net assets. Unreimbursed expenditures
will not be carried over from year to year. In the event the Plan is terminated
by the Emerging Markets Fund in accordance with its terms, the Fund will not be
required to make any payments for expenses incurred by the Advisor after the
date the Plan terminates.
CALCULATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE
Each Fund's net asset value per share is computed by dividing the value of the
securities held by the Fund, plus any cash or other assets (including interest
accrued and dividends declared
34 FREMONT MUTUAL FUNDS
<PAGE>
but not yet received) minus all liabilities (including accrued expenses), by the
total number of shares outstanding at such time. There is no sales charge in
connection with purchases or redemptions of Fund shares.
SOME OF THE FUNDS' NET ASSET VALUES WILL BE PUBLISHED DAILY IN THE PRESS UNDER
MUTUAL FUND QUOTATIONS.
Each Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open (excluding banking
holidays, in the case of the Money Market Fund). The Funds' portfolios may
include securities which trade primarily on non-U.S. exchanges or otherwise in
non-U.S. markets. Because of time zone differences, the prices of these
securities, as used for net asset value calculations, may be established
substantially in advance of the close of the New York Stock Exchange. Foreign
securities may also trade on days when the New York Stock Exchange is closed
(such as a Saturday). The net asset value and public offering price of a Fund,
to the extent that it holds securities valued on foreign markets, may vary
during periods when the New York Stock Exchange is closed. As a result, the
value of a Fund's portfolio may be affected significantly by such trading on
days when a shareholder has no access to the Fund. For further information, see
"How to Invest," "How to Redeem Shares" and "Exchanges Between Funds" in this
Prospectus, and "How to Invest" and "Other Investment and Redemption Services"
in the Statement of Additional Information.
The net asset value and public offering price of each Fund will be determined as
of the close of the regular session of the New York Stock Exchange. The shares
of each Fund are offered at net asset value without a sales charge. Purchase,
redemption and exchange orders received in proper form by the Transfer Agent
before 4:00 p.m., Eastern time, will be priced at the net asset value next
determined on that day (with certain limited exceptions discussed in the
Statement of Additional Information). Orders received by the Transfer Agent
after 4:00 p.m., Eastern time, will be entered at the next calculated net asset
value.
AMORTIZED COST METHOD OF VALUATION -- MONEY MARKET
FUND ONLY
The Money Market Fund attempts to maintain a stable net asset value of $1.00 per
share by valuing its assets on the basis of amortized cost. This involves
initially valuing a portfolio instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
Although the Money Market Fund attempts to maintain a stable net asset value of
$1.00 per share, there can be no assurance that a stable net asset value will be
maintained.
As is generally the case with other money market funds, on any day that the
Money Market Fund experiences a decline in net asset value below $1.00 per
share, the Fund may offset any such amount against the shareholder dividends
accrued during the month. Alternatively, to maintain the net asset value of its
shares at $1.00, the Money Market Fund may redeem or declare a dividend of
shares. Any such action would not change a shareholder's pro rata share of net
assets, but would reflect the increase or decrease in the value of the
shareholder's holdings which resulted from the change in net asset value.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for each Fund's portfolio securities transactions are placed by the
Advisor or Sub-Advisor, as applicable. The Advisor and Sub-Advisors strive to
obtain the best available prices in the Funds' portfolio transactions, taking
into account the costs and promptness of executions. Subject to this policy,
transactions may be directed to those broker-dealers who provide research,
statistical and other information to the Funds, the Advisor or the Sub-Advisors
or who provide assistance with respect to the distribution of Fund shares.
There is no agreement or commitment to place orders with any
broker-dealer.
Debt securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. Government securities
issued by the United States and other countries and money market securities in
which the Funds may invest are generally traded in the OTC markets. In
underwritten offerings, securities usually are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid. Dealers may receive commissions on futures, currency and options
transactions. Commissions or discounts in foreign securities exchanges or OTC
markets typically are fixed and generally are higher than those in U.S.
securities exchanges or OTC markets. There is generally less government
supervision and regulation of foreign exchanges and brokers than in the United
States. Foreign security settlements may, in some instances, be subject to
delays and related administrative uncertainties.
Subject to the requirements of the 1940 Act and procedures adopted by the Board
of Directors, the Funds may execute portfolio transactions through any broker or
dealer and pay brokerage commissions to a broker which is an affiliated person
of the Investment Company, the Advisor, or a Sub-Advisor, or an affiliated
person of such person. It is presently anticipated that certain affiliates of
the Sub-Advisor(s) will effect brokerage transactions of the Funds in certain
markets and receive compensation for such services.
FREMONT MUTUAL FUNDS 35
<PAGE>
GENERAL INFORMATION
The Investment Company, organized as a Maryland corporation on July 13, 1988, is
a fully managed open-end investment company. Currently, the Investment Company
has authorized several series of capital stock with equal dividend and
liquidation rights within each series. Investment Company shares are entitled
to one vote per share (with proportional voting for fractional shares) and are
freely transferable. Shareholders have no preemptive or conversion rights.
Shares may be voted in the election of directors and on other matters submitted
to the vote of shareholders. As permitted by Maryland law, there normally will
be no annual meeting of shareholders in any year, except as required under the
1940 Act. The 1940 Act requires that a meeting be held within 60 days in the
event that less than a majority of the directors holding office has been elected
by shareholders. Directors shall continue to hold office until their successors
are elected and have qualified. Investment Company shares do not have
cumulative voting rights, which means that the holders of a majority of the
shares voting for the election of directors can elect all of the directors.
Shareholders holding 10% of the outstanding shares may call a meeting of
shareholders for any purpose, including that of removing any director. A
director may be removed upon a majority vote of the shareholders qualified to
vote in the election. The 1940 Act requires the Investment Company to assist
shareholders in calling such a meeting.
On any matter submitted to a vote of shareholders, such matter shall be voted by
a Fund's shareholders separately when the matter affects the specific interest
of the Fund (such as approval of the Advisory Agreement with the Advisor and the
Portfolio Management Agreement with a Sub-Advisor) except in matters where a
vote of all series in the aggregate is required by the 1940 Act or otherwise.
Pursuant to the Articles of Incorporation, the Investment Company may issue ten
billion shares. This amount may be increased or decreased from time to time in
the discretion of the Board of Directors. Each share of a series represents an
interest in that series only, has a par value of $0.0001 per share, represents
an equal proportionate interest in that series with other shares of that series
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to that series as may be declared at the discretion of the
Board of Directors. Shares of a series when issued are fully paid and are non-
assessable. The Board of Directors may, at its discretion, establish and issue
shares of additional series of the Investment Company.
Stephen D. Bechtel, Jr., and members of his family, including trusts for family
members, due to their shareholdings, may be considered controlling persons of
the Funds under applicable Securities and Exchange Commission regulations.
36 FREMONT MUTUAL FUNDS
<PAGE>
TELEPHONE NUMBERS AND ADDRESSES
To make an initial purchase:
1. By mail:
Fremont Mutual Funds, Inc.
c/o Countrywide Fund Services, Inc.
P.O. Box 5354 Cincinnati, OH 45201-5354
Street address:
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
2. By wire:
Via the Federal Reserve Bank Wire System to:
FIFTH CIN
(Fifth Third Bank)
ABA No. 042000314
Credit to: Fremont Mutual Funds
Account No. 999-36844
Further Credit to: Fremont Fund name, shareholder name, and account number
TO MAKE A SUBSEQUENT PURCHASE:
Include shareholder name and account number. Use the same instructions for
initial purchase.
To redeem shares:
1. By mail: same instructions as above for purchase by mail. Redemptions
greater than $25,000 or payments to a party or address other than
registered on the account require a signature guarantee. See "Signature
Guarantees."
2. By telephone: 800-548-4539
Requires prior selection of telephone redemption option.
For further copies of this Prospectus, the Statement of Additional Information,
and details of automatic investment, retirement and automatic withdrawal plans,
please contact:
Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
800-548-4539 or 415-284-8900
FREMONT MUTUAL FUNDS, INC.
Fremont Money Market Fund
Fremont California Intermediate Tax-Free Fund
Fremont Bond Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
Fremont International Small Cap Fund
Fremont Emerging Markets Fund
Fremont U.S. Micro-Cap Fund
For more information on the Fremont Mutual Funds please call 800-548-4539 or
write to:
Fremont Mutual Funds
50 Beale Street, Suite 100
San Francisco, CA 94105
ADVISOR/TRANSFER AGENT
Fremont Investment Advisors, Inc.
333 Market Street, Suite 2600
San Francisco, CA 94105
SUB-TRANSFER AGENT
Mailing Address:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201-5354
800-548-4539
Street Address:
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
CUSTODIAN
The Northern Trust Company
50 South Lasalle Street
Chicago, IL 60675
LEGAL COUNSEL
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104
AUDITORS
Coopers & Lybrand, L.L.P.
333 Market Street
San Francisco, CA 94105
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Funds or the Advisor. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
FREMONT MUTUAL FUNDS 37
<PAGE>
[LOGO]
50 BEALE STREET, SUITE 100, SAN FRANCISCO, CA 94105 - 800-548-4539 (PRESS 1)
9801 WASHINGTONIAN BLVD., SUITE 105, GAITHERSBURG, MD 20878 - 888-373-6684
3000 POST OAK BLVD., SUITE 100, HOUSTON, TX 77056 - 800-735-2705
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC., 50 BEALE STREET, SUITE 100,
SAN FRANCISCO, CA 94105
<PAGE>
FREMONT
MUTUAL
FUNDS, INC.
TABLE OF CONTENTS
ITEM PAGE NO.
Summary of Fees and Expenses ....................................2
Financial Highlights ............................................3
The Advisor and the Fund ........................................4
Investment Objective, Policies
and Risk Considerations .....................................4
Investment Results .............................................10
How to Invest ..................................................11
Shareholder Account Services and Privileges ....................12
How to Redeem Shares ...........................................13
Dividends, Distributions and
Income Taxation ............................................16
Calculation of Net Asset Value and
Public Offering Price ......................................18
Execution of Portfolio Transactions ............................18
General Information ............................................19
Telephone Numbers and Addresses ................................20
- - Fremont
California
Intermediate
Tax-Free Fund
FREMONT FUNDS [LOGO]
50 BEALE STREET, SUITE 100,
SAN FRANCISCO, CA 94105
800-548-4539 (PRESS 1)
9801 WASHINGTONIAN BLVD., SUITE 105,
GAITHERSBURG, MD 20878
888-373-6684
3000 POST OAK BLVD., SUITE 100,
HOUSTON, TX 77056
800-735-2705
Distributed by Funds Distributor, Inc.,
50 Beale Street, Suite 100, San Francisco, CA 94105 P013-9703
---------------
March 1, 1997
---------------
<PAGE>
PROSPECTUS
FREMONT CALIFORNIA INTERMEDIATE
TAX-FREE FUND
FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the Fremont California Intermediate Tax-Free
Fund, investing in tax-exempt securities of the State of California and its
political subdivisions.
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND seeks to obtain as high a level of
interest income exempt from federal income tax and California personal income
tax as is consistent with prudent investment management.
There can be no assurance that the Fund will achieve its investment objective.
Shares of the Fund are offered without a sales charge.
This Prospectus, which should be retained for future reference, sets forth
concisely the information an investor should know before investing. Should more
detailed information be desired, a Statement of Additional Information, which is
incorporated by reference into this Prospectus, is available without charge by
calling toll-free 800-548-4539 (press 1) or by writing to Fremont Mutual Funds,
Inc., 50 Beale Street, Suite 100, San Francisco, California 94105.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE SHARES INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS
PROSPECTUS CAREFULLY.
IT IS DESIGNED TO PROVIDE
YOU WITH INFORMATION
AND TO HELP YOU DECIDE
IF THE CALIFORNIA
INTERMEDIATE TAX-FREE
FUND'S OBJECTIVE MEETS
YOUR OWN GOALS.
The date of this Prospectus is March 1, 1997.
FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
FREMONT MUTUAL FUNDS 1
<PAGE>
SUMMARY OF FEES AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(a) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(b)
Management Fee .30%
12b-1 Fees None
Other Expenses .21%
Total Fund Operating Expenses .51%
Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
1 Year $ 5
3 Years 16
5 Years 29
10 Years 64
The purpose of the above table is to give you information and assistance in
understanding the various costs and expenses of the Fund that an investor may
bear directly or indirectly. Other expenses include, but are not limited to,
administrative and transfer agent fees paid to Fremont Investment Advisors,
Inc., custody, legal and audit, costs of registration of Fund shares under
applicable laws, and costs of printing and distributing reports to
shareholders. The percentages expressing annual fund operating expenses are
based on actual expenses incurred during the most recent fiscal year.
THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE EXPENSES OR
ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR LESS THAN
THOSE SHOWN ABOVE.
(a) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
(b) The Advisor has voluntarily waived management and administrative fees.
Absent such waivers, the management fee, other expenses and total operating
expenses of the Fund would have been .37%, .36% and .73%, respectively, for
the fiscal year ended October 31, 1996.
2 FREMONT MUTUAL FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights of the Fund presented below have been audited by
Coopers & Lybrand, L.L.P., independent accountants. Their report covering each
of the five fiscal years in the period ended October 31, 1996, is included in
the Fund's Annual Report. Further information about the Fund's performance is
contained in the Annual Report, which is included in the Fund's Statement of
Additional Information and which may be obtained without charge.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
--------------------------------------------- NOVEMBER 16, 1990
1996 1995 1994 1993 1992 TO OCTOBER 31, 1991
---- ---- ---- ---- ---- -------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $10.86 $10.13 $11.10 $10.55 $10.39 $10.11
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .52 .53 .53 .55 .57 .58
Net realized and unrealized gain (loss) (.03) .73 (.97) .62 .19 .34
------- ------- ------- ------- ------- -------
Total investment operations .49 1.26 (.44) 1.17 .76 .92
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
From net investment income (.52) (.53) (.53) (.55) (.57) (.58)
From net realized gains (.03) -- -- (.07) (.03) (.06)
------- ------- ------- ------- ------- -------
Total distributions (.55) (.53) (.53) (.62) (.60) (.64)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.80 $10.86 $10.13 $11.10 $10.55 $10.39
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
TOTAL RETURN # 4.63% 12.77% -3.94% 11.37% 7.37% 9.78%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $51,156 $50,313 $58,305 $59,716 $44,305 $33,572
Ratio of expenses to average net assets(a) .51% .50%* .51% .50% .54% .36%*
Ratio of net investment income to
average net assets(a) 4.86%* 5.08% 4.94% 5.05% 5.38% 5.88%*
Portfolio turnover rate 6%* 18% 21% 26% 18% 41%*
</TABLE>
*Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. If fees had been charged fully, net investment income
per share, ratio of expenses to average net assets, and ratio of net
investment income to average net assets would have been $.50, .73% and
4.64%, respectively, for the year ended October 31, 1996; $.51, .72% and
4.86%, respectively, for the year ended October 31, 1995; $.51, .71% and
4.74%, respectively, for the year ended October 31, 1994; $.53, .71% and
4.84%, respectively, for the year ended October 31, 1993; and $.54, .83%
and 5.09%, respectively, for the year ended October 31, 1992.
# Total return would have been lower had the Advisor not waived expenses.
FREMONT MUTUAL FUNDS 3
<PAGE>
THE ADVISOR AND THE FUND
Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in the Fremont California
Intermediate Tax-Free Fund (the "Fund"). The Investment Company has other
series offered with a different prospectus, and the Board of Directors of the
Investment Company is permitted to create additional funds at any time. The
Fund has its own investment objective and policies and operates as a separate
mutual fund.
FREMONT INVESTMENT
ADVISORS, INC. PROVIDES
INVESTMENT ADVISORY
SERVICES TO THE FUND.
The management of the business and affairs of the Investment Company is the
responsibility of the Board of Directors. Fremont Investment Advisors, Inc.
(the "Advisor") provides the Fund with investment management and administrative
services under an Investment Advisory and Administrative Agreement (the
"Advisory Agreement") with the Investment Company. The Advisory Agreement
provides that the Advisor shall furnish advice to the Fund with respect to its
investments and shall, to the extent authorized by the Board of Directors,
determine what securities shall be purchased or sold by the Fund.
The professional staff of the Advisor has offered professional investment
management services regarding asset allocation in connection with securities
portfolios to the Bechtel Group, Inc. Retirement Plan and the Bechtel Foundation
since 1978 and to Fremont Investors, Inc. (formerly Fremont Group, Inc.) since
1987. The Advisor also provides investment advisory services regarding asset
allocation, investment manager selection and portfolio diversification to a
number of large Bechtel-related investors. The Investment Company is one of its
clients.
As compensation for its services to the Fund, the Advisor receives from the Fund
an advisory fee, computed daily and paid monthly, of .40% per annum of the first
$25 million of the Fund's average net assets, .35% of the next $25 million of
such assets, .30% of the next $50 million of such assets, .25% of the next $50
million of such assets and .20% of such assets in excess of $150 million. The
Advisory Agreement also provides that the Fund will pay to the Advisor an
administrative fee of .15% per annum of average net assets. The advisory and
administrative fees are currently being charged at voluntarily reduced rates of
.30% and .005%, respectively, of the Fund's average net assets.
The portfolio manager for the Fund since the Fund's inception is William M.
Feeney, Vice President of the Advisor. Will received his B.A. from the
University of Colorado and his M.B.A. from the University of San Francisco.
For additional information about the Advisor, see "Investment Advisory and Other
Services" in the Statement of Additional Information.
OTHER EXPENSES OF THE FUNDS. In addition to the fees described above, the Fund
pays all expenses not assumed by the Advisor. These expenses include, but are
not limited to, the following: custodian, stock transfer and dividend disbursing
fees and expenses; and shareholder servicing fees including fees to third party
servicing agents.
INVESTMENT OBJECTIVE, POLICIES
AND RISK CONSIDERATIONS
The investment objective of the Fund is to obtain as high a level of interest
income exempt from federal income tax and California personal income tax as is
consistent with prudent investment management. The Fund seeks to achieve its
objective by investing in debt securities, the interest income from which is not
includable in gross income for federal income tax purposes ("exempt from federal
income tax") and is exempt from California personal income taxes. There is no
assurance that the Fund will achieve its investment objective. A portion of the
income received from the Fund may be included in the calculation of the federal
alternative minimum tax. The Fund may also invest in open-end and closed-end
investment companies which invest in securities whose
4 FREMONT MUTUAL FUNDS
<PAGE>
THE FUND SEEKS AS
HIGH A LEVEL OF INTEREST
INCOME EXEMPT FROM
FEDERAL INCOME TAX AND
CALIFORNIA PERSONAL
INCOME TAX AS IS
CONSISTENT WITH
PRUDENT INVESTMENT
MANAGEMENT.
income is exempt from federal income tax and California personal income tax. It
is the current intention of the Fund to limit its investments in such investment
companies to not more than 5% of its net assets. Income received from these
investments is exempt from federal, but not California tax.
THE FUND INVESTS
PRIMARILY IN HIGH QUALITY
INTERMEDIATE-TERM
CALIFORNIA MUNICIPAL
SECURITIES. THE DOLLAR-
WEIGHTED AVERAGE
PORTFOLIO MATURITY IS
EXPECTED TO RANGE FROM
3 TO 10 YEARS.
The term "municipal securities" as used in this Prospectus means obligations
issued by or on behalf of states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities. The term "California municipal securities" as used
herein refers to obligations that are issued by or on behalf of the State of
California and its political subdivisions. An opinion as to the tax-exempt
status of the interest paid on a municipal security is rendered to the issuer by
the issuer's bond counsel at the time of the issuance of the security.
The Fund invests primarily in California municipal securities which generally
have 3 to 20 years remaining to maturity at the time of acquisition. The
dollar-weighted average portfolio maturity is expected to range from 3 to 10
years. The Fund restricts its municipal securities investments to those
within or of a quality comparable to the four highest rating classifications
of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings
Group ("S&P"). Municipal bonds and notes and tax-exempt commercial paper
would have, at the date of purchase by the Fund, Moody's ratings of Aaa, Aa,
A or Baa; MIG 1/VMIG1 or MIG2/VMIG2; P-1; or S&P's ratings of AAA, AA, A, or
BBB; SP-1+, SP-1 or SP-2; A-1+ or A-1, respectively. (See Appendix A in the
Statement of Additional Information for a description of these ratings.) The
Fund's net asset value per share will fluctuate as market conditions change.
Securities ratings are the opinions of the rating agencies issuing them and are
not absolute standards of quality. Because of the cost of ratings, certain
issuers do not obtain a rating for each issue. The Fund may purchase unrated
municipal securities which the Advisor determines to have a credit quality
comparable to that required for investment by the Fund (see the discussion of
securities ratings above).
Securities which are rated BBB by S&P or Baa by Moody's are considered
investment grade, but are more likely to have speculative characteristics, and
changes in economic conditions may lead to a weakened capacity to make principal
and interest payments than is the case with higher rated securities.
As a matter of operating policy, not more than 25% of the Fund's investments
(other than those guaranteed by the U.S. Government or any of its agencies or
instrumentalities) may be unrated securities. Such percentage shall apply only
at the time of acquisition of a security. To the extent that unrated municipal
securities may be less liquid, there may be somewhat greater market risk
incurred in purchasing them than in purchasing comparable rated securities. Any
unrated securities deemed to be not readily marketable by the Board of Directors
will be included in the calculation of the limitation of 15% of net assets which
may be invested in illiquid securities and other assets.
The Fund is considered "non-diversified" because the Fund may invest more than
5% of its assets in the securities of a single California issuer, such as the
State of California. Since the Fund invests primarily in California municipal
securities, it may be advantageous to be able to invest more than 5% of such
assets in the securities of a particular issuer. This may result in additional
risk since changes in the value of the securities
FREMONT MUTUAL FUNDS 5
<PAGE>
of one issuer may affect the value of the Fund to a greater extent than would be
the case with a diversified fund. See "Special Risk Considerations In
California." The Fund has qualified and intends to continue to qualify to be
treated as a "regulated investment company" for purposes of the Internal Revenue
Code ("the Code") and meet the Code's separate requirements for portfolio
diversification. See discussion of taxes in "Dividends, Distributions and
Income Taxation."
As a fundamental policy (i.e., the policy will not be changed without a majority
vote of its shareholders) the Fund will, under normal circumstances, invest up
to 100%, and not less than 80%, of its net assets in California municipal
securities, the interest on which is exempt from federal income tax and
California personal income tax and are not subject to the alternative minimum
tax. The Fund reserves the right to invest up to 20% of its net assets in
taxable U.S. Treasury securities which are secured by the "full faith and
credit" pledge of the U.S. Government, and in municipal securities of other
states which, although exempt from federal income taxes, are not exempt from
California income taxes. For temporary defensive purposes the Fund may invest
in excess of 20% of its net assets in these securities.
DESCRIPTION OF MUNICIPAL SECURITIES. Municipal securities may have fixed,
variable or floating rates of interest. Any variable or floating rate municipal
security not payable on demand within seven days will be deemed illiquid unless
the Advisor determines, according to procedures established by the Board of
Directors, that such securities are liquid. If held by the Fund, such
securities will be included in the calculation of the limitation of 15% of net
assets which may be invested in illiquid securities. Municipal bonds, which
finance long-term capital needs and generally have maturities of more than one
year when issued, are generally classified as either general obligation bonds or
revenue bonds. General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, the proceeds of a
special excise tax or other specific revenue source. The Fund may also invest
in certificates of participation in general fund obligation leases of the State
of California and its political subdivisions. The staff of the Securities and
Exchange Commission may view such a security as illiquid. Unless the Board of
Directors determines that such a security is not illiquid, the Advisor will
limit its investment in such securities, together with all other illiquid
securities and assets, to 15% of the Fund's net assets.
MUNICIPAL SECURITIES
WITH SHORTER MATURITIES
GENERALLY HAVE GREATER
PRICE STABILITY AS
INTEREST RATES CHANGE.
The securities in which the Fund invests are subject to market and credit risk.
Market risk relates to the changes in market value that occur as a result of
variation in the level of prevailing interest rates and yield relationships in
the municipal securities market. In general, the longer the maturity of a
municipal security, the higher the yield and the greater the potential for
taxable capital appreciation or depreciation. Conversely, shorter maturities
tend to provide lower yields, but greater stability of principal. An increase
in interest rates will normally decrease the value of these longer-term
investments, while a decline in interest rates will normally increase the value
of these investments. Generally, the shorter the average maturity of the Fund's
portfolio, the less its price will be affected by interest rate fluctuations.
In addition to the market risk of changing interest rates, municipal securities
are subject to credit risk relating to the operations of individual issuers.
The ability of the Fund to achieve its investment objective is dependent upon
the continuing ability of the issuers of municipal securities in which the Fund
invests to meet their obligations for the payment of principal and interest when
due.
SPECIAL RISK CONSIDERATIONS IN CALIFORNIA. The Fund's performance may be
especially affected by factors pertaining to the California economy, as well as
other
6 FREMONT MUTUAL FUNDS
<PAGE>
factors affecting the ability of issuers of California municipal securities to
meet their obligations. As a result, the value of the Fund's shares may
fluctuate more widely than the value of shares of a portfolio investing in
securities relating to a number of different states. The amounts of tax and
other revenues available to issuers of California municipal securities may be
affected from time to time by economic, political, geographic and demographic
conditions.
There are additional risks associated with the Fund's investment in California
municipal obligations. These risks result from certain amendments to the
California Constitution and other statues that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial conditions of the State of California. These may impair the ability
of issuers of California municipal obligations to pay interest and principal on
their obligations.
California constitutional and statutory amendments and initiatives have imposed
certain limitations on taxes that may be levied against real property, as well
as place limits on the annual appropriations of the state and its political
subdivisions. These initiative measures approved by California voters have
resulted in a reduction in state and local government revenues and in spending
limits.
The payment of California municipal securities may be dependent on the ability
and willingness of the California Legislature to assist local governments in
paying bond obligations, and on the collection of ad valorem or special taxes by
local governments within the state. The continuing ability of the California
Legislature to increase the revenue of local governments, as well as to make
timely payments in connection with its own obligations, and the continuing
ability of local governments to raise revenue through taxation will affect the
ability of the state and local governments to pay debt service on these
obligations.
The payment of California municipal securities secured by general fund leases of
the state and local governments may depend on continued lease payments by the
lessor and continued use and occupancy of the leased property.
California municipal securities secured by payments from health care
institutions are subject to declining revenues of such institutions resulting
from more stringent cost controls by health insurers and by the federal, state
and local governments which reimburse such health institutions for indigent and
Medicare patients, which may adversely affect payment on those debt obligations.
California municipal securities that are secured by mortgages or deeds of trust
on real property are subject to certain provisions of California law which limit
the remedies available to creditors in the case of a default and subsequent
foreclosure.
The California economy and general financial condition affect the ability of the
State and local governments to raise and redistribute revenues to assist issuers
of municipal securities to make timely payments on their obligations.
California has a diverse economy, with major employment in the agriculture,
manufacturing, high technology, services, trade, entertainment, and construction
sectors. Starting in mid-1990, the State entered a sustained economic
recession, somewhat later than the rest of the nation. It was the most severe
recession in the State since the 1930's, with job losses estimated at over
800,000, particularly in the manufacturing (predominantly aerospace), services,
and construction sectors. The greatest effects were felt in Southern
California. A significant portion of these losses were linked to post-Cold War
cuts in the federal defense budget and military base closures. The trough of
the recession is estimated to have occurred in late 1993, again later than for
the nation as a whole. Although a steady recovery has been underway since 1994,
pre-recession employment levels are not expected to be reached until later in
the decade.
On December 6, 1994, Orange County, California, together with its pooled
investment funds (the "Pools"), filed for protection under Chapter 9 of the
federal Bankruptcy Code, after reports that the Pools had suffered significant
market losses in their investments, causing a liquidity crisis for the Pools and
Orange County. More than 180 other public entities, including municipal
issuers, most of which were located in Orange County, were also depositors in
the Pools. The County
FREMONT MUTUAL FUNDS 7
<PAGE>
has reported the Pools' losses at about $1.69 billion, or about 23% of their
initial deposits of approximately $7.5 billion. Many of the entities which
deposited moneys in the Pools, including Orange County, faced interim and/or
extended cash flow difficulties because of the bankruptcy filing and may be
required to reduce programs or capital projects. The California legislature has
enacted legislation designed to assist Orange County in the resolution of the
bankruptcy proceedings. The bankruptcy of Orange County and the losses suffered
in the Pools by municipal issuers have resulted in increased costs of financing
for certain California municipal issuers. However, the California municipal
market in general has continued to function with adequate liquidity.
An expanded discussion of investment considerations regarding investment in
California municipal obligations is contained in the Statement of Additional
Information.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction, but the settlement is delayed).
The Fund will not purchase securities the value of which is greater than 5% of
its net assets on a when-issued basis. The Fund, as purchaser, assumes the risk
of any decline in value of the security beginning on the date of the agreement
or purchase, and no interest accrues to the Fund until its accepts delivery of
the security. The Fund will not use such transactions for leveraging purposes,
and accordingly will segregate cash, cash equivalents or liquid securities or
hold a covered position in an amount sufficient to meet its payment obligations
thereunder.
There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account.
FINANCIAL FUTURES CONTRACTS. The Fund may purchase and sell financial futures
contracts listed on a commodities board of trade to hedge its portfolio
investments against changes in value or as a temporary substitute for purchases
or sales of actual securities. The Fund is not a commodity pool and will engage
in futures transactions only for bona fide hedging purposes. Futures contracts
are agreements to buy or sell underlying securities at a specific future date
and price. The underlying instrument may be a security or an index of
securities. By buying or selling a futures contract, the Fund agrees to buy or
sell the underlying instrument or to deliver or receive cash settlement. Income
from financial futures trading is not exempt from federal or state income taxes.
Because fixed-income securities fluctuate in value inversely with the movement
of interest rates, a decline in value of a security can be hedged, or offset, by
an increase in value of an interest rate futures contract. Also, if the Advisor
anticipates that the value of a security will decline, it may purchase a futures
contract instead of the security to gain the benefit of the expected lower
price. Different trading strategies for futures have different risk and return
characteristics. The Advisor will choose among futures strategies based on its
judgment of how best to meet the Fund's goals. The judgment will be based on
factors such as current and anticipated interest rates, relative market
liquidity, and price levels in the futures markets compared to the underlying
securities markets. If the Advisor judges these factors incorrectly, or if
price changes in the futures positions are not well correlated with other
investments, the strategies may lower the Fund's return. These strategies
involve certain risks. There is no assurance that closing purchase transactions
will be available at favorable prices, resulting in possible reduction of the
Fund's income due to the use of hedging instruments, and possible loss in excess
of the initial margin. There may be imperfect correlation between the contract
and the underlying security and unsuccessful hedging transactions due to
incorrect market trend forecasts. A more thorough description of these
investment practices and their associated risks is contained in the Statement of
Additional Information.
When required by Securities and Exchange Commission guidelines, the Fund will
maintain a segregated account
8 FREMONT MUTUAL FUNDS
<PAGE>
with the custodian with sufficient cash, U.S. Government securities or other
liquid securities to cover the potential obligations created by futures. The
Fund may invest up to 5% of its assets in futures transactions represented by
the aggregate "initial margin" (down payment). The aggregate market value of
securities underlying futures contracts will not exceed 25% of the net assets of
the Fund.
SHARES OF INVESTMENT COMPANIES. The Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
investment companies which invest in securities whose income is exempt from
Federal and California state income taxes. Pursuant to the 1940 Act, the
percentage of Fund assets which may be so invested is not limited, provided that
the Fund and its affiliates do not acquire more than 3% of the shares of any
such investment company. The provisions of the 1940 Act may also impose certain
restrictions on redemption of the Fund's shares in other investment companies.
The Fund's purchase of shares of investment companies may result in the payment
by a shareholder of duplicative management fees. The Advisor will consider such
fees in determining whether to invest in other mutual funds. The Fund will
invest only in investment companies which do not charge a sales load; however,
the Fund may invest in such companies with distribution plans and fees under
Rule 12b-1 of the 1940 Act, and may pay customary brokerage commissions to buy
and sell shares of closed-end investment companies.
The return on the Fund s investments in investment companies will be reduced by
the operating expenses, including investment advisory and administrative fees,
of such companies. The Fund's investment in a closed-end investment company may
require the payment of a premium above the net asset value of the investment
company's shares, and the market price of the investment company thereafter may
decline without any change in the value of the investment company's assets. The
Fund, however, will not invest in any investment company or trust unless it is
believed that the potential benefits of such investment are sufficient to
warrant the payment of any such premium.
As an exception to the above 1940 Act restrictions, the Fund does have the
authority to invest all of its assets in the securities of a single open-end
investment company with substantially the same fundamental investment objective,
restrictions and policies as that of the Fund. The Fund will notify its
shareholders prior to initiating such an arrangement.
PORTFOLIO TURNOVER. The Fund expects to trade in securities for short-term gain
whenever deemed advisable by the Advisor in order to take advantage of anomalies
occurring in general market, economic or political conditions. Therefore, the
Fund may have a higher portfolio turnover rate than that of some other
investment companies, but it is anticipated that the annual portfolio turnover
rate of the Fund will not exceed 100%. The portfolio turnover rate is
calculated by dividing the lesser of sales or purchases of long-term portfolio
securities by the Fund's average month-end long-term investments. High
portfolio turnover involves correspondingly greater transaction costs in the
form of dealer spreads or brokerage commissions and other costs that the Fund
will bear directly, and may result in the realization of net capital gains,
which are generally taxable whether or not distributed to shareholders.
THE FUND MAY LEND UP TO ONE-THIRD OF ITS SECURITIES ONLY IF COVERED BY
COLLATERAL EQUAL TO 100% OF THE VALUE OF THE SECURITIES BORROWED.
LOANS OF PORTFOLIO SECURITIES. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors up to
331/3% of its net assets. The borrower must maintain with the Fund's custodian
collateral consisting of cash, cash equivalents or U.S. Government securities
equal to at least 100% of the value of the borrowed securities, plus any accrued
interest. The Fund will receive any interest paid on the loaned securities and
a fee or a portion of the interest earned on the collateral. The risks in
lending portfolio securities, as with other extensions of secured
FREMONT MUTUAL FUNDS 9
<PAGE>
FREMONT MUTUAL FUNDS
credit, consist of possible delay in receiving additional collateral or in
the recovery of the securities, or possible loss of rights in the collateral
should the borrower fail financially. The lender also may bear the risk of
capital loss on investment of the cash collateral, which must be returned in
full to the borrower when the loan is terminated. Loans will be made only to
firms deemed by the Advisor to be of good standing and will not be made
unless, in the judgment of the Advisor, the consideration to be earned from
such loans would justify the associated risk.
BORROWING. The Fund may borrow from banks up to 30% of the value of its
total assets for temporary or emergency purposes and enter into reverse
repurchase agreements. If the income and gains on securities purchased with
the proceeds of borrowings or reverse repurchase agreements exceed the cost
of such borrowings or agreements, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income
and gains fail to exceed the cost, earnings or net asset value would decline
faster than otherwise would be the case. If the 300% asset coverage required
by the 1940 Act should decline as a result of market fluctuation or other
reasons, the Fund may be required to sell some of its portfolio securities
within three days to reduce the borrowings and restore the 300% asset
coverage, even though it may be disadvantageous from an investment standpoint
to sell securities at that time.
THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS CANNOT BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
INVESTMENT RESTRICTIONS. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating the
Fund's investments in issuers conducting their principal business activities
in a single industry (except that this limitation does not apply with respect
to U.S. Government securities). In addition, a minimum of 80% of assets must
be invested in California municipal securities exempt from federal and
California income taxes and not subject to the alternative minimum tax on
individuals. These investment restrictions and the Fund's investment
objective cannot be changed without the approval of shareholders of the Fund;
all other investment practices described in this Prospectus and in the
Statement of Additional Information can be changed by the Board of Directors
without shareholder approval.
INVESTMENT RESULTS
THE FUND'S "TOTAL RETURN" WILL BE EXPRESSED IN PERIODS OF 1, 5 AND 10 YEARS,
AND FOR THE LIFE OF THE FUND.
The Fund may from time to time include information on its investment results
and/or comparisons of its investment results to various unmanaged indices or
results of other mutual funds or groups of mutual funds in advertisements,
sales literature or reports furnished to present or prospective shareholders.
All such figures are based on historical performance data and are not
intended to be indicative of future performance. The investment return on
and the principal value of an investment in the Fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
The Fund may calculate performance on an average annual total return basis
for 1-, 5- and 10-year periods and over the life of the Fund, after such
periods have elapsed. Average annual total return will be computed by
determining the average annual compounded rate of return over the applicable
period that would equate the initial amount invested to the ending redeemable
value of the investment. Ending redeemable value includes dividends and
capital gain distributions, reinvested at net asset value at the reinvestment
date determined by the Board of Directors. The resulting percentages
indicate the positive or negative investment results that an
10 FREMONT MUTUAL FUNDS
<PAGE>
investor would have experienced from reinvested dividends and capital gain
distributions and changes in share price during the period. The average
annual compounded rate of return over various periods may also be computed by
utilizing ending values as determined above.
THE FUND'S QUOTED "YIELD" WILL REFLECT THE INCOME GENERATED BY ITS PORTFOLIO
OF SECURITIES OVER A 30-DAY PERIOD.
From time to time, the Fund may advertise its yield and "tax-equivalent"
yield. The Fund's yields are calculated according to methods that are
standardized for all mutual funds. Because yield calculation methods differ
from the methods used for other purposes, the Fund's yield may not equal its
distribution rate, the income paid to a shareholder s account, or the income
reported in the Fund's financial statements. The yield of the Fund refers to
the income generated by an investment in the Fund over a 30-day period (which
period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment
during that period is assumed to be generated each 30 days over a 365-day
period and is shown as a percentage of the investment. The Fund may also
advertise together with its yield a tax-equivalent yield which reflects the
yield which would be required of a taxable investment at a stated income tax
rate in order to equal the Fund's yield.
The Fund's investment results will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio, and operating
expenses of the Fund, so that any investment results reported by the Fund
should not be considered representative of what an investment in the Fund may
earn in any future period. When utilized, total return for the unmanaged
indices described in the Statement of Additional Information will be
calculated assuming reinvestment of dividends and interest, but will not
reflect any deductions for recurring expenses such as advisory fees,
brokerage costs or administrative expenses. These factors and possible
differences in calculation methods should be considered when comparing the
Fund's investment results with those published for other investment
companies, other investment vehicles and unmanaged indices. The comparison of
the Fund to an alternative investment should be made with consideration of
differences in features and expected performance. The Fund may also be
mentioned in newspapers, magazines, or other media from time to time. The
Fund assumes no responsibility for the accuracy of such data. The Fund's
results also should be considered relative to the risks associated with the
Fund's investment objective and policies. See "Investment Results" in the
Statement of Additional Information.
Additional performance information regarding the Fund is included in the Fund
s annual report, which will be mailed to shareholders without charge upon
request.
HOW TO INVEST
THERE ARE NO SALES CHARGES ON INVESTMENTS OR REINVESTMENTS, AND THERE ARE NO
REDEMPTION FEES.
THERE IS AN INITIAL INVESTMENT MINIMUM OF $2,000 PER ACCOUNT.
The shares of the Fund may be purchased through the Transfer Agent by
submitting payment by check, bank wire or electronic (Automated Clearing
House or "ACH") transfer and, in the case of new accounts, a completed
account application form. There is no sales load or contingent deferred sales
load charged to purchase shares of the Fund. All orders for the purchase of
shares are subject to acceptance or rejection by the Board of Directors or
the Advisor. Purchases of shares are made at the current public offering
price next determined after the purchase order is received by the Transfer
Agent or by a selling agent of the Fund. A minimum initial investment of
$2,000 is required to open a shareholder account. The minimum initial
investment is waived for accounts opened with the Automatic Investment Plan
and may be waived in other instances at the sole discretion of the Advisor.
(See "Automatic Investment Plan.") Each subsequent investment must be $200
or more. There is a minimum
FREMONT MUTUAL FUNDS 11
<PAGE>
continuing balance of $1,500 required (calculated on the basis of original
investment value). In some cases, the initial investment minimum balance
requirement may be waived.
Investors wishing to open a new account by bank wire must call the Transfer
Agent at 800-548-4539 to obtain an account number and detailed wire
instructions. Bank wire instructions are also provided in the last section
of this Prospectus. All bank wire investments received before 4:00 p.m.,
Eastern time, will be credited the same day. Bank wire investments received
after 4:00 p.m., Eastern time, will be credited the next business day. A
bank wire investment is considered received when the Transfer Agent is
notified that the bank wire has been credited to its account.
Shares of the Fund may also be purchased through broker-dealers or other
financial intermediaries who have made appropriate arrangements with the
Fund. Such agents are responsible for ensuring that the account documentation
is complete and that timely payment is made for the Fund shares purchased for
their customers pursuant to such orders. These agents may charge a
reasonable transaction fee to their customers. In some instances, all or a
portion of the transaction fee may be paid by the Advisor. To the extent
these agents perform shareholder servicing activities for the Fund, they may
receive fees from the Fund or the Advisor for such services.
From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated
by the Advisor to do so.
As a condition of this offering, if an order to purchase shares is cancelled
due to nonpayment (for example, a check returned for "insufficient funds"),
the person who made the order will be subject to a $20 charge and must
reimburse the Fund for any loss incurred by reason of such cancellation. For
more information, see Other Investment and Redemption Services in the
Statement of Additional Information.
Funds Distributor, Inc., Sixty State Street, Boston, Massachusetts, 02109, is
the principal underwriter for the Fund. The compensation of Funds
Distributor, Inc. is paid by the Advisor (not the Fund).
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
STATEMENTS AND REPORTS
SHAREHOLDERS RECEIVE AN ACCOUNT STATEMENT FOR EACH TRANSACTION IN THEIR
ACCOUNT AS WELL AS A MONTHLY ACCOUNT STATEMENT.
When a shareholder makes an initial investment in the Fund, a shareholder
account is opened in accordance with registration instructions. Each time
there is a transaction, such as an additional investment, a dividend or other
distribution, or a redemption, the shareholder will receive from the Transfer
Agent a confirmation statement showing the current transaction in the account
and the transaction date. Shareholders of the Fund will receive monthly
statements.
Shares are issued only in book-entry form (without certificates).
The fiscal year of the Fund ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which
contain a schedule of the Fund's portfolio securities and financial
statements. Annual reports will include audited financial statements. The
federal income tax status of shareholder distributions also will be reported
to the Fund's shareholders after the end of the calendar year on Form
1099-DIV.
EXCHANGES BETWEEN FUNDS
Shares of the Fund and of any other Fremont Fund may be exchanged for each
other at their respective net asset values, provided that the account
registration remains identical. Exchanges may only be made for shares of a
12 FREMONT MUTUAL FUNDS
<PAGE>
Fremont Fund then offered for sale in your state of residence. It is required
that (1) all shares in one Fund must be exchanged or (2) the remaining balance
must be at least $1,500. The minimum balance requirement may be waived. These
exchanges are not tax-free and will result in a shareholder realizing a gain or
loss for tax purposes.
Exchanges by mail should be sent to the Transfer Agent at the address set forth
in the last section of this Prospectus.
Purchases, redemptions and exchanges should be made for investment purposes
only. A pattern of frequent exchanges, purchases and sales is not acceptable
and, at the discretion of the Board of Directors, can be limited by the
Investment Company's refusal to accept further purchase and exchange orders from
the shareholder.
The Investment Company reserves the right to modify or eliminate the exchange
privilege upon 60 days' written notice to shareholders.
TELEPHONE EXCHANGE PRIVILEGE
SHAREHOLDERS MAY EXCHANGE FUND SHARES WITH THOSE OF OTHER FREMONT FUNDS VIA
TELEPHONE.
An investor may elect on the account application to authorize exchanges by
telephone. A shareholder may give instructions regarding exchanges by calling
800-548-4539. A shareholder wishing to initiate the telephone exchange
privilege should contact the Fund. This privilege will not be added to an
account without written instruction to do so from the shareholder. Telephone
requests received by 4:00 p.m., Eastern time, will be processed the same day.
During times of drastic economic or market conditions, the telephone exchange
privilege may be difficult to implement. The Transfer Agent will make its best
effort to accommodate shareholders when its telephone lines are used to
capacity. Under these circumstances, a shareholder should consider using
overnight mail to send a written exchange request.
See "Telephone Redemption Privilege" in the next section of this Prospectus.
AUTOMATIC INVESTMENT PLAN
THE AUTOMATIC INVESTMENT PLAN PERMITS PURCHASES TO BE MADE ONCE OR TWICE A
MONTH, DEBITING THE SHAREHOLDER'S BANK ACCOUNT.
A shareholder may authorize a withdrawal to be made automatically once or twice
each month from a credit balance in the shareholder's bank checking, savings,
negotiable on withdrawal (NOW) or similar account, with the proceeds to be used
to purchase shares of the Fund. The minimum initial investment is waived for
accounts opened with the Automatic Investment Plan. The amount of the monthly
investment must be at least $50, and is not otherwise subject to the $200
minimum for subsequent investments. There is no obligation to make additional
payments, and the plan may be terminated by the shareholder at any time.
Termination requests must be received in writing at least 5 days prior to the
regular draft date, or the drafts will not cease until the next cycle. The
Transfer Agent may impose a charge for this service, although no such charge
currently is contemplated. If a shareholder's order to purchase shares is
cancelled due to nonpayment (for example, "insufficient funds"), the
shareholder's account will be subject to a $20 charge and the shareholder will
be responsible for reimbursing the Fund for any loss incurred by reason of such
cancellation. A shareholder wishing to initiate the plan on a new or existing
account must fill out an Automatic Investment Plan form. The form is available
upon request.
HOW TO REDEEM SHARES
Shares are redeemed at no charge (other than wire transfer fees, if any) at the
net asset value next determined after receipt by the Transfer Agent of proper
written redemption instructions. The current charge for a wire transfer is $8
per wire. This is subject to change by the Transfer Agent at any time, without
prior notification.
FREMONT MUTUAL FUNDS 13
<PAGE>
See "Calculation of Net Asset Value and Public Offering Price."
Redemption orders received in proper form by the Transfer Agent before
4:00 p.m., Eastern time, will be priced at the net asset value next determined
on that day (with certain limited exceptions discussed in the Statement of
Additional Information). Orders received by the Transfer Agent after 4:00 p.m.,
Eastern time, will be entered at the next calculated net asset value.
Redemption proceeds can be sent by check, electronic transfer, or bank wire.
An electronic transfer can be processed only to bank checking and savings
accounts. Before requesting an electronic transfer, shareholders should
confirm that their financial institution can receive an electronic transfer.
Currently, there is no charge to shareholders for processing an electronic
transfer.
Shareholders may have redemption proceeds sent by bank wire, electronic
transfer, or check to a designated bank account by providing in writing the
appropriate bank information to the Transfer Agent at the time of original
application. If the investor wishes to change the predesignated account, this
must be requested in writing with a signature guarantee (see Signature
Guarantee" below).
For written redemption requests for an amount greater than $25,000, or a
redemption request that directs proceeds to a party other than the registered
account owner(s), all signatures must be guaranteed (see "Signature Guarantee"
below).
Because of market fluctuations, the amount a shareholder receives for shares
redeemed may be more or less than the amount paid for them.
Redemption of shares, exchanges and redemptions under an Automatic Withdrawal
Plan may result in taxable capital gains or losses.
TELEPHONE REDEMPTION PRIVILEGE
An investor may elect on the regular account application to authorize
redemptions by telephone. This privilege will not be added to an account
without written authorization to do so from the shareholder. A shareholder may
then give instructions regarding redemptions by calling 800-548-4539. Telephone
requests received by 4:00 p.m., Eastern time, will be processed at the net asset
value calculated that same day. During times of drastic economic or market
conditions, the telephone redemption privilege may be difficult to implement.
The Transfer Agent will make its best effort to accommodate shareholders when
its telephone lines are used to capacity. Under these circumstances, a
shareholder should consider using overnight mail to send a written redemption
request.
Neither the Investment Company, nor the Transfer Agent, nor their respective
affiliates, will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost or expense in
acting on such telephone instructions. The affected shareholder(s) will bear
the risk of any such loss. The Investment Company, or the Transfer Agent, or
both, will employ reasonable procedures to determine that telephone instructions
are genuine. If the Investment Company and/or the Transfer Agent do not employ
such procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of the transactions, and/or tape recording telephone
instructions.
CHECK REDEMPTION PRIVILEGE
THE FUND OFFERS FREE CHECKWRITING.
The Transfer Agent will, upon request, provide each shareholder with free checks
which may be made payable by shareholders to the order of anyone in any amount
of at least $250. The Fund will arrange for checks to be honored by The Fifth
Third Bank, Cincinnati, Ohio (the "Bank") for this purpose. The Bank has the
right to refuse any check which does not conform with its requirements. The
shareholder will be
14 FREMONT MUTUAL FUNDS
<PAGE>
subject to the Bank's rules and regulations governing checking accounts,
including a $20 charge for refused checks. This charge may change without
notice. When such a check is presented to the Transfer Agent for payment, the
Transfer Agent, as the shareholder's agent, will cause the Investment Company to
redeem a sufficient number of full and fractional shares in the shareholder's
account to cover the amount of the check. Since it is not possible to predict
the exact value of a shareholder's account when a redemption check is cleared,
shareholders may not close an account with a check.
The Check Redemption Privilege enables the shareholder to continue receiving
dividends on those shares equaling the amount being redeemed by check until such
time as the check is presented to the Transfer Agent for payment. The Check
Redemption Privilege may be modified or terminated by the Investment Company or
the Transfer Agent upon three days' notice to shareholders.
AUTOMATIC WITHDRAWAL PLAN
THE AUTOMATIC WITHDRAWAL PLAN ALLOWS SHAREHOLDERS TO RECEIVE REGULAR MONTHLY,
QUARTERLY, OR YEARLY PAYMENTS.
A shareholder may request redemptions of a specified dollar amount (minimum of
$100) on either a monthly, quarterly, or yearly basis. Currently, there is no
charge for this service. Redemptions will be made on the last business day of
the month. Because a redemption constitutes a liquidation of shares, the number
of shares owned in the account will be reduced. Automatic redemptions should
not reduce the account below the minimum balance required (currently $1,500).
Shareholders may terminate the Automatic Withdrawal Plan at any time, but not
less than five days before a scheduled payment date. When an exchange is made
between Fremont Funds, shareholders must specify if they desire the automatic
withdrawal option to be transferred to a new account opened by the exchange. As
an account balance declines to the minimum permitted, the shareholder must
advise the Transfer Agent if the automatic withdrawal feature is to be
transferred to another account of the shareholder. Shareholders should note
that if there is an Automatic Withdrawal Plan established for an account and the
entire account is exchanged into another fund, the automatic withdrawal option
must be renewed by written request to the Transfer Agent. A shareholder wishing
to initiate automatic redemptions must complete an Automatic Withdrawal Plan
form available from the Transfer Agent.
SIGNATURE GUARANTEE
To better protect the Fund and shareholders' accounts, a signature guarantee is
required for certain transactions. Signatures must be guaranteed by an
"eligible guarantor institution" as defined in applicable regulations. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. A
notary public is not an acceptable guarantor.
OTHER IMPORTANT REDEMPTION INFORMATION
A request for redemption will not be processed until all of the documentation
described above has been received by the Transfer Agent in proper form. A
shareholder in doubt about what documents are required should contact the
Transfer Agent.
Payment in redemption of shares is normally made within three business days
after receipt by the Transfer Agent of a request in proper form, provided that
payment in redemption of shares purchased by check or draft will be effected
only after such check or draft has been collected.
Although it is anticipated that this process will be completed in less time, it
may take up to 15 days. Redemption proceeds will not be delayed when shares have
been paid for by bank wire or where the account holds a sufficient number of
shares already paid for with collected funds.
FREMONT MUTUAL FUNDS 15
<PAGE>
Except in extraordinary circumstances and as permissible under the 1940 Act,
payment for shares redeemed will be made promptly after receipt of a
redemption request, if in good order, but not later than seven calendar days
after the redemption request is received in proper form. Requests for
redemption which are subject to any special conditions or which specify an
effective date other than as provided herein cannot be accepted.
The Investment Company reserves the right to redeem mandatorily the shares in a
shareholder's account if the balance is reduced to less than $1,500 in net asset
value through redemptions or other action by the shareholder. Notice will be
given to the shareholder at least 30 days prior to the date fixed for such
redemption, during which time the shareholder may increase its holdings to an
aggregate amount of $1,500 or more (with a minimum purchase of $200 or more).
This minimum balance may be waived.
REDEMPTION IN KIND
The Investment Company reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
the Fund and valued as they are for purposes of computing the Fund's net asset
value (a redemption in kind). If payment is made in securities, a shareholder
may incur transaction expenses in converting these securities into cash.
TRANSFER AGENT
Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354, has
been retained by the Advisor to serve as the Fund's transfer agent, dividend
paying and shareholder service agent. In addition, Countrywide Fund Services,
Inc. has been retained by the Advisor to assist in providing certain
administrative services to the Fund. Countrywide Fund Services, Inc. is an
indirect wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New
York Stock Exchange listed company principally engaged in residential mortgage
lending.
DIVIDENDS, DISTRIBUTIONS AND INCOME TAXATION
The Fund has elected, and intends to continue to qualify to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
(the "Code"). For any tax year in which the Fund so qualifies and meets certain
other distribution requirements, it will not incur a federal tax liability.
Such qualification under the Code requires the Fund to diversify its investments
so that, at the end of each fiscal quarter, (1) at least 50% of the market value
of the Fund s assets is represented by cash, U.S. Government securities,
securities of other regulated investment companies and other securities,
limited, in respect to any one issuer, to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(2) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
INCOME DIVIDENDS ACCRUE DAILY AND ARE PAID MONTHLY. CAPITAL GAIN
DISTRIBUTIONS WILL BE MADE ANNUALLY.
The Fund declares dividends daily and will distribute its net investment income
monthly. The Fund intends to distribute substantially all of its net realized
capital gains, if any, at the end of the calendar year (on or about December
15). Dividend and capital gains distributions, if any, may be reinvested in
additional shares at net asset value on the day of reinvestment, or may be
received in cash. All taxable dividends and distributions are taxable to a
shareholder whether or not they are reinvested in shares of the Fund. Any
long-term capital gains distributions are taxable to shareholders as long-term
capital gains, regardless of how long shareholders have held Fund shares.
16 FREMONT MUTUAL FUNDS
<PAGE>
Shareholders may elect:
- - to have all dividends and capital gain distributions automatically
reinvested in additional shares; or
- - to receive the income dividends and short-term capital gains distributions
in cash and accept the long-term capital gains distributions in additional
shares; or
- - to receive all distributions of income dividends and capital gains in cash.
SHAREHOLDERS MAY RECEIVE DIVIDENDS AND DISTRIBUTIONS IN CASH OR MAY HAVE THEM
AUTOMATICALLY REINVESTED AT NO CHARGE.
Automatic reinvestments will be made at net asset value on the day of
reinvestment. If no election is made by a shareholder, all dividends and
capital gain distributions will be automatically reinvested. These elections
may be changed by the shareholder at any time, but to be effective for a
particular dividend or capital gain distribution, the election must be received
by the Transfer Agent approximately 5 business days prior to the payment date to
permit the change to be entered into the shareholder account. The federal
income tax status of dividends and capital gains distributions is the same
whether taken in cash or reinvested in shares.
Dividends and capital gains generally are taxable to shareholders at the time
they are paid. However, dividends or capital gains declared in December by the
Fund and paid in January are taxable as if paid in December. The Fund will
provide to its shareholders federal tax information annually by January 31,
including information about dividends and distributions paid during the year.
The Fund intends to invest in sufficient municipal securities so that it will
qualify to pay "exempt-income dividends" (as defined in the Code) to
shareholders. Exempt-interest dividends distributed to shareholders are not
includable in the shareholder's gross income for federal income tax purposes.
However, this favorable tax treatment may not apply to shareholders who are
"substantial users" (or "related persons" thereto) with respect to facilities
financed by securities held by the Fund.
To the extent that dividends are derived from interest on California municipal
securities, or from interest earnings on certain U.S. Government obligations,
and as long as at least 50% of the value of the total assets of the Fund
consists of bonds on which the interest is exempt from taxation under the laws
of California or the laws of the United States, such dividends will also be
exempt from California personal income taxes. For California income tax
purposes, capital gain distributions and any income from investment in taxable
securities (other than California municipal obligations and direct U.S.
Government obligations) are taxable as ordinary income. The Fund will inform
shareholders annually as to the portion of the distributions which constitutes
dividends exempt from California personal income tax. All distributions
received by a corporation doing business in California may be subject to
California franchise taxes.
Interest income (in the form of dividends) exempt from federal income tax is not
necessarily exempt under the income or other tax laws of state and local taxing
authorities. Shareholders should consult their tax advisors about the status of
distributions from the Fund in this regard.
The Tax Reform Act of 1986 restricts the federal tax exemption for interest
earned on certain municipal obligations. Under that law, interest on "private
activity" municipal bonds (for example, those issued to finance housing
projects) issued after the effective date is an item of "tax preference" subject
to the individual Alternative Minimum Tax. It is the current intention of the
Fund not to purchase bonds that are subject to the individual Alternative
Minimum Tax. Shareholders will be given prior notification if the Fund intends
to change this policy. Corporate shareholders may wish to consult their tax
advisors before investing in the Fund, since some of the interest on municipal
bonds held in the Fund's portfolio may be included in income subject to the
corporate Alternative Minimum Tax.
FREMONT MUTUAL FUNDS 17
<PAGE>
If a shareholder has not furnished a certified correct taxpayer
identification number (generally a Social Security number) and has not
certified that withholding does not apply, or if the Internal Revenue Service
has notified the Fund that the taxpayer identification number listed on the
account is incorrect according to their records or that the shareholder is
subject to backup withholding, federal law generally requires the Funds to
withhold 31% from any dividends and/or redemptions (including exchange
redemptions). Amounts withheld are applied to the shareholder s federal tax
liability; a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. A shareholder should contact
the Transfer Agent if the shareholder is uncertain whether a proper taxpayer
identification number is on file with the Transfer Agent. Federal law also
requires the Fund to withhold 30%, or the applicable tax treaty rate, from
dividends paid to certain nonresident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts.
The foregoing is a brief discussion of certain income tax considerations.
Please see "Special Tax Considerations" and "Taxes - Mutual Funds" in the
Statement of Additional Information for further information regarding the tax
implications of an investment in the Fund.
CALCULATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE
The Fund's net asset value per share is computed by dividing the value of the
securities held by the Fund, plus any cash or other assets (including interest
accrued and dividends declared but not yet received) minus all liabilities
(including accrued expenses), by the total number of shares outstanding at such
time. There is no sales charge in connection with purchases or redemptions of
Fund shares.
The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. For further information,
see "How to Invest," "How to Redeem Shares" and "Exchanges Between Funds" in
this Prospectus, and "How to Invest" and "Other Investment and Redemption
Services" in the Statement of Additional Information.
THE FUND'S NET ASSET VALUE WILL BE PUBLISHED DAILY IN THE PRESS UNDER MUTUAL
FUND QUOTATIONS.
The net asset value and public offering price of the Fund will be determined as
of the close of the regular session of the New York Stock Exchange. The shares
of the Fund are offered at net asset value without a sales charge. Purchase,
redemption and exchange orders received in proper form by the Transfer Agent
before 4:00 p.m., Eastern time, will be priced at the net asset value next
determined on that day (with certain limited exceptions discussed in the
Statement of Additional Information). Orders received by the Transfer Agent
after 4:00 p.m., Eastern time, will be entered at the next calculated net asset
value.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the Fund's portfolio securities transactions are placed by the
Advisor. The Advisor strives to obtain the best available prices in the Fund's
portfolio transactions, taking into account the costs and promptness of
executions. Subject to this policy, transactions may be directed to those
broker-dealers who provide research, statistical and other information to the
Fund or the Advisor or who provide assistance with respect to the distribution
of Fund shares. There is no agreement or commitment to place orders with any
broker-dealer.
Debt securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. Government securities
issued by the United States, municipal securities and money market securities in
which the Fund may invest are generally traded in the over-the-counter markets.
In underwritten offerings, securities usually are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as
18 FREMONT MUTUAL FUNDS
<PAGE>
the underwriter's concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or discounts
are paid. Dealers may receive commissions on futures and options transactions.
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 Investment Company, the Advisor, or an affiliated person of such person.
GENERAL INFORMATION
The Investment Company, organized as a Maryland corporation on July_13, 1988, is
a fully managed open-end investment company. Currently, the Investment Company
has authorized several series of capital stock with equal dividend and
liquidation rights within each series. Investment Company shares are entitled
to one vote per share (with proportional voting for fractional shares) and are
freely transferable. Shareholders have no preemptive or conversion rights.
Shares may be voted in the election of directors and on other matters submitted
to the vote of shareholders. As permitted by Maryland law, there normally will
be no annual meeting of shareholders in any year, except as required under the
1940 Act. The 1940 Act requires that a meeting be held within 60 days in the
event that less than a majority of the directors holding office has been elected
by shareholders. Directors shall continue to hold office until their successors
are elected and have qualified. Investment Company shares do not have
cumulative voting rights, which means that the holders of a majority of the
shares voting for the election of directors can elect all of the directors.
Shareholders holding 10% of the outstanding shares may call a meeting of
shareholders for any purpose, including that of removing any director. A
director may be removed upon a majority vote of the shareholders qualified to
vote in the election. The 1940 Act requires the Investment Company to assist
shareholders in calling such a meeting.
On any matter submitted to a vote of shareholders, such matter shall be voted by
the Fund's shareholders separately when the matter affects the specific interest
of the Fund (such as approval of the Advisory Agreement with the Advisor) except
in matters where a vote of all series in the aggregate is required by the 1940
Act or otherwise.
Pursuant to the Articles of Incorporation, the Investment Company may issue ten
billion shares. This amount may be increased or decreased from time to time in
the discretion of the Board of Directors. Each share of a series represents an
interest in that series only, has a par value of $0.0001 per share, represents
an equal proportionate interest in that series with other shares of that series
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to that series as may be declared at the discretion of the
Board of Directors. Shares of a series when issued are fully paid and are
non-assessable. The Board of Directors may, at its discretion, establish and
issue shares of additional series of the Investment Company.
Stephen D. Bechtel, Jr., and members of his family, including trusts for family
members, due to their shareholdings, may be considered controlling persons of
the Fund under applicable Securities and Exchange Commission regulations.
FREMONT MUTUAL FUNDS 19
<PAGE>
TELEPHONE NUMBERS AND ADDRESSES
TO MAKE AN INITIAL PURCHASE:
1. By mail:
Fremont Mutual Funds
c/o Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201-5354
Street address:
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
2. By wire:
Via the Federal Reserve Bank Wire System to:
FIFTH CIN
(Fifth Third Bank)
ABA No. 042000314
Credit to: Fremont Mutual Funds
Account No. 999-36844
Further Credit to: Fremont Fund name, shareholder name, and account number
TO MAKE A SUBSEQUENT PURCHASE:
Include shareholder name and account number. Use the same instructions for
initial purchase.
To redeem shares:
1. By mail: same instructions as above for purchase by mail. Redemptions
greater than $25,000 or payments to a party or address other than registered
on the account require a signature guarantee. See "Signature Guarantees."
2. By telephone: 800-548-4539
Requires prior selection of telephone redemption option.
For further copies of this Prospectus, the Statement of Additional Information,
and details of automatic investment, retirement and automatic withdrawal plans,
please contact:
Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
800-548-4539 or 415-284-8900
FREMONT MUTUAL FUNDS, INC.
Fremont Money Market Fund
Fremont California Intermediate Tax-Free Fund
Fremont Bond Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
Fremont International Small Cap Fund
Fremont Emerging Markets Fund
Fremont U.S. Micro-Cap Fund
For more information on the Fremont Mutual Funds please call 800-548-4539 or
write to:
Fremont Mutual Funds,Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
ADVISOR/TRANSFER AGENT
Fremont Investment Advisors, Inc.
333 Market Street, Suite 2600
San Francisco, CA 94105
SUB-TRANSFER AGENT
Mailing Address:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201-5354
800-548-4539
Street Address:
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
CUSTODIAN
The Northern Trust Company
50 South Lasalle Street
Chicago, IL 60675
LEGAL COUNSEL
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104
20 FREMONT MUTUAL FUNDS
<PAGE>
AUDITORS
Coopers & Lybrand, L.L.P
333 Market Street
San Francisco, CA 94105
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Fund or the Advisor. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
FREMONT MUTUAL FUNDS 21
<PAGE>
FREMONT
MUTUAL
FUNDS, INC.
U.S. Micro-Cap Fund
March 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE NO.
<S> <C>
Summary of Fees and Expenses ......................................... 3
Financial Highlights ................................................. 4
The Advisor, The Sub-Advisor and the Fund ............................ 5
Investment Objective, Policies and Risk Considerations ............... 6
General Investment Policies .......................................... 8
Investment Results ................................................... 16
How to Invest ........................................................ 16
Shareholder Account Services and Privileges .......................... 17
How to Redeem Shares ................................................. 19
Retirement Plans ..................................................... 22
Dividends, Distributions and Federal Income Taxation ................. 22
Calculation of Net Asset Value and Public Offering Price ............. 24
Execution of Portfolio Transactions .................................. 25
General Information .................................................. 25
Telephone Numbers and Addresses ...................................... 27
</TABLE>
<PAGE>
PROSPECTUS
FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the Fremont U.S. Micro-Cap Fund (the "Fund").
FREMONT U.S. MICRO-CAP FUND seeks to achieve long-term capital appreciation
by investing primarily in equity securities of micro-cap companies domiciled
within the United States.
There can be no assurance that the Fund will achieve its investment
objective. The Fund is a diversified fund as defined by the Investment Company
Act of 1940.
Shares of the Fund are offered without a sales charge.
This Prospectus, which should be retained for future reference, sets forth
concisely the information an investor should know before investing. Should more
detailed information be desired, a Statement of Additional Information, which is
incorporated by reference into this Prospectus, is available without charge by
calling toll-free 800-548-4539 (press 1) or by writing to Fremont Mutual Funds,
Inc., 50 Beale Street, Suite 100, San Francisco, California 94105.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE SHARES INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March 1, 1997.
FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
2 FREMONT MUTUAL FUNDS
<PAGE>
SUMMARY OF FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(a) None
Exchange Fee None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee(b) 1.96%
12b-1 Expenses None
Other Expenses None
----
Total Fund Operating Expenses 1.96%
</TABLE>
Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
U.S. Micro-Cap Fund $20 $62 $106 $229
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE EXPENSES OR
ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR LESS THAN
THOSE SHOWN ABOVE.
The purpose of the above tables is to give you information and assistance in
understanding the various costs and expenses of the Fund that an investor may
bear directly or indirectly. The percentages expressing annual fund operating
expenses of the Fund are based on actual expenses incurred during the most
recent fiscal year.
See "The Advisor, the Sub-Advisor and the Fund."
(a) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is currently $8.
See "How to Redeem Shares."
(b) The Fund is obligated, under the terms of the management agreement, to pay
the Advisor an annual management fee of 2.5% of average net assets with
respect to the first $30 million, 2.0% with respect to the next $70 million
and 1.5% thereafter. However, the Advisor is obligated to pay all of the
Fund's other ordinary operating expenses. Absent waivers of management fees,
the management fee and total operating expenses would have been 2.22% for
the fiscal year ended October 31, 1996.
FREMONT MUTUAL FUNDS 3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand, L.L.P.,
independent accountants, whose unqualified opinion is included in the Fund's
Annual Report. Further information about the Fund's performance is contained in
the Annual Report, which is included in the Fund's Statement of Additional
Information and which may be obtained without charge.
U.S. MICRO-CAP FUND
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED OCTOBER 31 JUNE 30, 1994 TO
1996 1995 OCTOBER 31, 1994
---- ---- ----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $14.34 $10.34 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) (.04) (.05) .02
Net realized and unrealized gain 5.83 4.05 .34
------ ------ ------
Total investment operations 5.79 4.00 .36
------ ------ ------
LESS DISTRIBUTIONS
From net investment income -- -- (.02)
From net realized gains (.50) -- --
------ ------ ------
Total distributions (.50) -- (.02)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $19.63 $14.34 $10.34
====== ====== ======
TOTAL RETURN # 41.46% 38.68% 3.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $102,481 $7,792 $2,052
Ratio of expenses to average net assets(a) 1.96% 2.04% 2.50%*
Ratio of net investment income (loss) to average net assets(a) -.51% -.67% .68%*
Portfolio turnover rate 81% 144% 129%*
Average commission rate paid $.0541 -- --
</TABLE>
*Annualized
(a) Management fees have been voluntarily waived from February 1, 1995 onwards.
If fees had been charged fully, net investment income (loss) per share,
ratio of expenses to average net assets and ratio of net investment income
(loss) to average net assets would have been -$.06, 2.22% and -.77%,
respectively, for the year ended October 31, 1996, and -$.08, 2.50% and
-1.13%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the Advisor not waived expenses.
<PAGE>
THE ADVISOR, THE SUB-ADVISOR AND THE FUND
Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in the Fremont U.S.
Micro-Cap Fund. The Investment Company has other series offered with a different
prospectus, and the Board of Directors of the Investment Company is permitted to
create additional funds at any time. The Fund has its own investment objective
and policies and operates as a separate mutual fund.
The management of the business and affairs of the Investment Company is the
responsibility of the Board of Directors. Fremont Investment Advisors, Inc. (the
"Advisor") provides the Fund with investment management and administrative
services under an Investment Advisory and Administrative Agreement (the
"Advisory Agreement") with the Investment Company. The Advisory Agreement
provides that the Advisor shall furnish advice to the Fund with respect to its
investments and shall, to the extent authorized by the Board of Directors,
determine what securities shall be purchased or sold by the Fund. As described
more fully below, the Advisor has retained an investment management firm (the
"Sub-Advisor") to provide the Fund with portfolio management services. The
Advisor's Investment Committee oversees the portfolio management of the Fund,
including the services provided by the Sub-Advisor.
The professional staff of the Advisor has offered professional investment
management services regarding asset allocation in connection with securities
portfolios to the Bechtel Group, Inc. Retirement Plan and the Bechtel Foundation
since 1978 and to Fremont Investors, Inc. (formerly Fremont Group, Inc.) since
1987. The Advisor also provides investment advisory services regarding asset
allocation, investment manager selection and portfolio diversification to a
number of large Bechtel-related investors. The Investment Company is one of its
clients.
The Advisor will provide direct portfolio management services to the extent that
a sub-advisor does not provide those services. In the future, the Advisor may
propose to the Investment Company that different or additional sub-advisor(s) be
engaged to provide investment advisory or portfolio management services to the
Fund. Prior to such engagement, any agreement with a sub-advisor must be
approved by the Board of Directors and, if required by law, by the shareholders
of the Fund. The Advisor may in its discretion manage all or a portion of the
Fund's portfolio directly with or without the use of a sub-advisor.
For additional information about the Advisor and the Sub-Advisor, see
"Investment Advisory and Other Services" in the Statement of Additional
Information.
Under the terms of the Advisory Agreement, the Fund pays the Advisor a fee,
computed daily and paid monthly, of 2.50% per annum of the Fund's average net
assets with respect to the first $30 million, 2.00% with respect to the next $70
million of such assets, and 1.50% of such assets in excess of $100 million.
Under this Agreement the Advisor has agreed to bear all of the Fund's expenses,
except extraordinary expenses (as designated by a majority of the Investment
Company's disinterested directors) and interest, brokerage commissions and other
transaction charges relating to the
FREMONT MUTUAL FUNDS 5
<PAGE>
investing activities of the Fund. Morgan Grenfell Capital Management, Inc.
("Morgan Grenfell"), 885 Third Avenue, New York, New York 10022, currently
serves as Sub-Advisor to the Fund pursuant to a Portfolio Management Agreement.
Morgan Grenfell manages over $500 million in small and micro-cap stocks. Morgan
Grenfell is a U.S. investment advisory subsidiary of London-based Morgan
Grenfell Group PLC. Morgan Grenfell Group PLC is owned by Deutsche Bank AG.
Within Morgan Grenfell, the Smaller Capitalization Equities team, headed by Mr.
Robert E. Kern, has managed the Fund since inception. Bob has over 30 years of
investment management experience and has been employed by Morgan Grenfell since
1986. The Smaller Capitalization Equities team is comprised of experienced
professionals each having investment research/portfolio management
responsibility within a specialized economic sector. Investment research
specialization by economic sectors is designed to create an advantage by
providing an in-depth understanding of each economic sector and of the
industries within these sectors. This knowledge provides the team with the
ability to make individual company investment decisions. Each team member works
with the team's specialist small cap trader to determine execution strategy.
This approach, designed specifically for smaller company investing, provides
each member of the team with beginning-to-end involvement in the investment
process.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Fund), the Advisor and Morgan Grenfell provides
that Morgan Grenfell will manage the investment and reinvestment of the assets
of the Fund and continually review, supervise, and administer the Fund's
investments. Morgan Grenfell pays all expenses of its staff and their activities
in connection with its portfolio management activities. As compensation for its
services, the Advisor (not the Fund) pays Morgan Grenfell a fee equal to 1.50%
per annum of the first $30 million of the Fund's average net assets, 1.00% of
the next $70 million of such assets and .75% of such assets in excess of $100
million. The Portfolio Management Agreement with Morgan Grenfell may be
terminated by the Advisor or the Investment Company upon 30-days' written
notice. The Advisor has day-to-day authority to increase or decrease the amount
of the Fund's assets under management by Morgan Grenfell.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The investment objective and policies of the Fund is stated below. The Fund is
intended for long-term investors, not for those who may wish to redeem their
shares after a short period of time.
All investments, including mutual funds, have risks, and no investment is
suitable for all investors. Investors should consult with their financial and
other advisors concerning the suitability of this investment for their own
particular circumstances. Accordingly, there is no assurance that the Fund will
achieve its investment objective.
The Fund seeks to achieve long-term capital appreciation by investing primarily
in a diversified portfolio of common stocks and securities convertible into
common stock. Under normal market
6 FREMONT MUTUAL FUNDS
<PAGE>
conditions, at least 65% of the total assets of the Fund will be invested in
equity securities of U.S. micro-cap companies (described below). These
securities will trade on a U.S. exchange or in the over-the-counter (OTC)
market. However, up to 25% of the Fund's total assets, at the time of purchase,
may be invested in securities of micro-cap companies domiciled outside the
United States, including sponsored and unsponsored American Depository Receipts
("ADRs") and European Depository Receipts ("EDRs"). See "General Investment
Policies" for a discussion of ADRs. EDRs are similar to ADRs but are designed
for use in the European securities market. The Fund may also invest in stock
index futures contracts, options on index futures and options on portfolio
securities and stock indices.
The Fund generally selects its portfolio securities among micro-cap companies,
which the Fund defines as companies whose individual market capitalizations
would place them in the smallest 10% of market capitalization of companies in
the United States as measured by the Wilshire 5000 Index. Currently, these
companies have a market capitalization of about $425 million or less. Under
normal market conditions, the weighted average capitalization of the portfolio
will be less than the market capitalization of the largest company in the bottom
5% of the market value of all U.S. equities as measured by the Wilshire 5000
Index (currently about $200 million).
Many micro-cap companies in which the Fund is likely to invest may be more
vulnerable than larger companies to adverse business or market developments, may
have limited product lines, markets or financial resources and may lack
management depth. In addition, many micro-cap companies are not well-known to
the investing public, do not have significant institutional ownership and are
followed by relatively few securities analysts, with the result that there may
tend to be less publicly available information concerning such companies
compared to what is available for larger capitalization securities. Finally, the
securities of micro-cap companies traded in the OTC market may have fewer market
makers, wider spreads between their quoted bid and asked prices and lower
trading volumes, resulting in comparatively greater price volatility and less
liquidity than the securities of companies that have larger market
capitalizations and/or that are traded on the New York or American Stock
Exchanges or the market averages in general. Thus, the Fund may involve
considerably more risk than an investment company investing in the more liquid
equity securities of companies traded on the New York or American Stock
Exchanges.
The Advisor and Sub-Advisor believe that an investment in shares of the Fund
provides an opportunity for greater rewards but will involve more risk than an
investment in a fund which seeks capital appreciation from investment in common
stocks of larger, better- known companies. This is due to greater opportunities
for superior returns from companies with small stock market capitalizations
which are not as well-known to the general public. These shares may have less
investor following, and, therefore, may provide opportunities for investment
gains due to the inefficiencies in this sector of the marketplace.
The Fund seeks to invest in those companies which are in the early stages of an
emerging growth cycle, where the Advisor
FREMONT MUTUAL FUNDS 7
<PAGE>
and Sub-Advisor believe earnings will grow faster than both inflation and the
economy in general and where it believes such growth has not yet been fully
reflected in the market price of these stocks. In seeking investments, the
Advisor and Sub-Advisor will give weight to companies possessing a variety of
characteristics including quality of management, companies which have gone
public in recent years, an entrepreneurial management team, a narrow product
line focus, or established companies where the growth potential has been
significantly enhanced by new product developments, new market opportunities,
mergers or divestitures, or new management. The investable universe provides
what the Advisor and Sub-Advisor believe is a broad range of stock selection
opportunities.
Although the Fund invests primarily in common stocks and securities convertible
into common stock, for liquidity purposes it will normally invest a portion of
its assets in high quality debt securities and money market instruments with
remaining maturities of one year or less, including repurchase agreements.
Whenever in the judgment of the Advisor or Sub-Advisor market or economic
conditions warrant, the Fund may, for temporary defensive purposes, invest
without limitation in these instruments. During times that the Fund is investing
defensively, the Fund will not be pursuing its stated investment objective. The
Fund may also hold other types of securities from time to time, including
non-convertible bonds and preferred stocks, in an amount not exceeding 5% of its
net assets. Preferred stocks and bonds will be rated at the time of purchase in
the top two categories of Moody's Investor Service, Inc. (Aaa or Aa) or Standard
& Poor's Ratings Group, (AAA or AA) or be of comparable quality as determined by
the Advisor or Sub-Advisor.
GENERAL INVESTMENT POLICIES
MONEY MARKET INSTRUMENTS. The Fund may invest in any of the following "money
market" instruments: certificates of deposit, time deposits, commercial paper,
bankers' acceptances and Eurodollar certificates of deposit; U.S.
dollar-denominated money market instruments of foreign financial institutions,
corporations and governments; U.S. Government and agency securities; money
market mutual funds; and other debt securities which are not specifically named
but which meet the Fund's quality guidelines. The Fund also may enter into
repurchase agreements as described below and may purchase variable and floating
rate debt securities.
At the time of purchase, short-term securities must be
rated in the top rating category by at least two nationally recognized
statistical rating organizations ("NRSROs") or by a single NRSRO in the case of
a security rated by only one NRSRO, or, if not rated by an NRSRO, must be of
comparable quality as determined by the Advisor or the Sub-Advisor. Generally,
high quality short-term securities must be issued by an entity with an
outstanding debt issue rated A or better by an NRSRO, or an entity of comparable
quality as determined by the Advisor or the Sub-Advisor. Obligations of foreign
banks, foreign corporations and foreign branches of domestic banks must be
payable in U.S. dollars. See Appendix A to the Statement of Additional
information for a description of rating categories.
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. Government securities,
8 FREMONT MUTUAL FUNDS
<PAGE>
which are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as Treasury bills,
notes and bonds and Government National Mortgage Association ("GNMA")
certificates, are supported by the full faith and credit of the United States;
others, such as those of the Federal Home Loan Mortgage Corporation ("FHLMC"),
are supported by the right of the issuer to borrow from the Treasury; others,
such as those of the Federal National Mortgage Association ("FNMA"), are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government will provide financial
support to U.S. Government agencies or instrumentalities as described above in
the future, other than as set forth above, because it is not obligated to do so
by law.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction, but the settlement is delayed).
The Fund will not purchase securities the value of which is greater than 5% of
its net assets on a when-issued basis. The Fund, as purchaser, assumes the risk
of any decline in value of the security beginning on the date of the agreement
or purchase, and no interest accrues to the Fund until it accepts delivery of
the security. The Fund will not use such transactions for leveraging purposes,
and accordingly will segregate cash, cash equivalents or liquid securities or
hold a covered position in an amount sufficient to meet its payment obligations
thereunder.
There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business, which may take substantially more than three
business days for non-U.S. securities, are not treated by the Fund as
when-issued or forward commitment transactions and, accordingly, are not subject
to the foregoing limitations, even though some of the risks described above may
be present in such transactions.
SHARES OF INVESTMENT COMPANIES. The Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
investment companies to the extent that they may facilitate achieving the
objective of the Fund or to the extent that they afford the principal or most
practical means of access to a particular market or markets or they represent
attractive investments in their own right. The percentage of Fund assets which
may be so invested is not limited, provided that the Fund and its affiliates do
not acquire more than 3% of the shares of any such investment company. The
provisions of the 1940 Act may also impose certain restrictions on redemption of
the Fund's shares in other investment companies. The Fund's purchase of shares
of investment companies may result in the payment by a shareholder of
duplicative management fees. The Advisor and/or
FREMONT MUTUAL FUNDS 9
<PAGE>
Sub-Advisor will consider such fees in determining whether to invest in other
mutual funds. The Fund will invest only in investment companies which do not
charge a sales load; however, the Fund may invest in such companies with
distribution plans and fees, and may pay customary brokerage commissions to buy
and sell shares of closed-end investment companies.
The return on the Fund's investments in investment companies will be reduced by
the operating expenses, including investment advisory and administrative fees,
of such companies. The Fund's investment in a closed-end investment company may
require the payment of a premium above the net asset value of the investment
company's shares, and the market price of the investment company thereafter may
decline without any change in the value of the investment company's assets. The
Fund, however, will not invest in any investment company or trust unless it is
believed that the potential benefits of such investment are sufficient to
warrant the payment of any such premium.
As an exception to the above, the Fund has the authority to invest all of its
assets in the securities of a single open-end investment company with
substantially the same fundamental investment objectives, restrictions and
policies as that of the Fund. The Fund will notify its shareholders prior to
initiating such an arrangement.
REPURCHASE AGREEMENTS. As part of its cash reserve position, the Fund may enter
into repurchase agreements through which the Fund acquires a security (the
"underlying security") from the seller, a well-established securities dealer or
a bank that is a member of the Federal Reserve System. At that time, the bank or
securities dealer agrees to repurchase the underlying security at the same
price, plus a specified amount of interest. Repurchase agreements are generally
for a short period of time, often less than a week. The seller must maintain
with the Fund's custodian collateral equal to at least 100% of the repurchase
price, including accrued interest, as monitored daily by the Advisor and/or
Sub-Advisor. The Fund will not enter into a repurchase agreement with a maturity
of more than seven business days if, as a result, more than 15% of the value of
its net assets, would then be invested in such repurchase agreements. The Fund
will only enter into repurchase agreements where (1) the underlying securities
are issued or guaranteed by the U.S. Government, (2) the market value of the
underlying security, including accrued interest, will be at all times equal to
or in excess of the value of the repurchase agreement, and (3) payment for the
underlying securities is made only upon physical delivery or evidence of
book-entry transfer to the account of the custodian or a bank acting as agent.
In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses, including: (1) a possible decline in the value of the
underlying security during the period in which the Fund seeks to enforce its
rights thereto; (2) possible subnormal levels of income and lack of access to
income during this period; and (3) expenses of enforcing the Fund's rights.
PORTFOLIO TURNOVER. The Fund expects to trade in securities for short-term gain
whenever deemed advisable by the Advisor and/or Sub-Advisor in order to take
advantage of anomalies occurring in general market, economic or political
conditions.
10 FREMONT MUTUAL FUNDS
<PAGE>
Therefore, the Fund may have a higher portfolio turnover rate than that of some
other investment companies, but it is anticipated that the annual portfolio
turnover rate of the Fund will not exceed 200%. The portfolio turnover rate is
calculated by dividing the lesser of sales or purchases of long-term portfolio
securities by the Fund's average month-end long-term investments. High portfolio
turnover involves correspondingly greater transaction costs in the form of
dealer spreads or brokerage commissions and other costs that the Fund will bear
directly, and may result in the realization of net capital gains, which are
generally taxable whether or not distributed to shareholders.
LOANS OF PORTFOLIO SECURITIES. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in an
amount not exceeding 331/3% of its net assets. The borrower must maintain with
the Fund's custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities, or possible loss of
rights in the collateral should the borrower fail financially. The lender also
may bear the risk of capital loss on investment of the cash collateral, which
must be returned in full to the borrower when the loan is terminated. Loans will
be made only to firms deemed by the Advisor to be of good standing and will not
be made unless, in the judgment of the Advisor, the consideration to be earned
from such loans would justify the associated risk.
BORROWING. The Fund may borrow from banks an amount not exceeding 30% of the
value of its total assets for temporary or emergency purposes and enter into
reverse repurchase agreements. If the income and gains on securities purchased
with the proceeds of borrowings or reverse repurchase agreements exceed the cost
of such borrowings or agreements, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the cost, earnings or net asset value would decline faster
than otherwise would be the case.
RESTRICTED SECURITIES. The Fund may purchase securities that are not registered
("restricted securities") under federal securities laws, but can be offered and
sold to "qualified institutional buyers." However, the Fund will not invest more
than 15% of its assets in illiquid investments, which includes repurchase
agreements and fixed time deposits maturing in more than seven days, and
securities that are not readily marketable and restricted securities, unless the
Board of Directors determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are liquid. The Board of Directors may adopt guidelines and delegate to the
Advisor or Sub-Advisor the daily function of determining and monitoring
liquidity of restricted securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations.
WARRANTS OR RIGHTS. Warrants or rights may be acquired by the Fund in connection
with other securities or separately
FREMONT MUTUAL FUNDS 11
<PAGE>
and provide the Fund with the right to purchase other securities of the issuer
at a later date. It is the present intention of the Fund to limit its
investments in warrants or rights, valued at the lower of cost or market, to no
more than 5% of the value of its net assets. Warrants or rights acquired by the
Fund in units or attached to securities will be deemed to be without value for
purposes of this restriction.
OPTIONS AND FUTURES CONTRACTS. When the Fund is not fully invested, strategies
such as buying calls, writing puts, and buying futures may be used to increase
its exposure to price changes in stocks or debt securities. When the Advisor
and/or Sub-Advisor wishes to hedge against market fluctuations, strategies such
as buying puts, writing calls, and selling futures may be used to reduce market
exposure. Because most stock index futures and options are based on broad stock
market indices, their performance tends to track the performance of common
stocks generally -- which may or may not correspond to the types of securities
in which the Fund invests. The Fund will maintain segregated accounts consisting
of cash, U.S. Government securities or other liquid securities (or, as permitted
by applicable regulations, enter into certain offsetting positions) to cover its
obligations under options and futures contracts to avoid leveraging.
In seeking appreciation or to reduce principal volatility, the Fund may also (1)
enter into futures contracts -- contracts for the future delivery of debt
securities, stock, stock index futures contracts with respect to the S&P 500
Index, small capitalization stock market indices or other similar broad-based
stock market indices, the initial margins of which are limited to 5% of the
Fund's assets; and (2) purchase put and call options on portfolio securities,
stock indices or stock index futures contracts -- the premiums of which are
limited to 5% of the Fund's assets.
The Fund may write put and call options. It will only do so by writing covered
put or call options, and the aggregate value of the securities underlying put
options, as of the date of sale of the options, will not exceed 50% of the net
assets of the Fund.
The Fund will set aside cash, cash equivalents, or liquid securities, or hold a
covered position against any potential delivery or payment obligations under any
outstanding option or futures contracts.
Options and futures can be volatile investments. If the Advisor and/or
Sub-Advisor applies a hedge at an inappropriate time or evaluates market
conditions incorrectly, options and futures strategies may lower the Fund's
return. The Fund could also experience a loss if the prices of its options or
futures positions were poorly correlated with its other investments, or if it
could not close out its positions because of an illiquid secondary market.
Although these investment practices will be used primarily to generate
income or to minimize the fluctuation of principal, they do involve risks which
are different in some respects from the investment risks associated with similar
funds which do not engage in such activities. These risks may include the
following: futures contracts -- no assurance that closing purchase transactions
will be available at favorable prices, possible reduction of the Fund's income
due to the use of hedging, the possible reduction in value of both the
securities hedged and the hedging instrument, and possible loss in excess of the
initial margin payment; options and futures contracts -- imperfect correlation
12 FREMONT MUTUAL FUNDS
<PAGE>
between the contract and the underlying security, commodity or index and
unsuccessful hedging transactions due to incorrect forecasts of market trends;
writing covered call options -- the inability to effect closing transactions at
favorable prices and the inability to participate in the appreciation of the
underlying securities above the exercise price and premium received; and
purchasing or selling put and call options -- possible loss of the entire
premium. A more thorough description of these investment practices and their
associated risks is contained in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS FOR INTERNATIONAL INVESTING. Investment
in securities of foreign entities and securities denominated in foreign
currencies involves risks typically not present to the same degree in domestic
investments. Likewise, investment in ADRs and EDRs presents similar risks, even
though the Fund will purchase, sell and be paid dividends on ADRs in U.S.
dollars. These risks include fluctuations in currency exchange rates, which are
affected by international balances of payments and other economic and financial
conditions; government intervention; speculation; and other factors. With
respect to certain foreign countries, there is the possibility of expropriation
or nationalization of assets, confiscatory taxation and political, social or
economic instability. The Fund may be required to pay foreign withholding or
other taxes on certain of its foreign investments, but investors may or may not
be able to deduct their pro rata shares of such taxes in computing their taxable
income, or take such shares as a credit against their U.S. income taxes. See
"Dividends, Distributions and Federal Income Taxation."
There may be less publicly available information about foreign issuers or
securities than about U.S. issuers or securities, and foreign issuers may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those of U.S. entities. With respect to unsponsored
ADRs, these programs cover securities of companies which are not required to
meet either the reporting or accounting standards of the United States. Many
foreign financial markets, while generally growing in volume, continue to have
substantially less volume than domestic markets, and securities of many foreign
companies are less liquid and their prices are more volatile than are securities
of comparable U.S. companies. Such markets may have longer settlement periods
than markets in the United States. In addition, brokerage commissions, custodial
services and other costs related to investment in foreign markets generally are
more expensive than in the United States, particularly with respect to emerging
markets. Such markets have different settlement and clearance procedures. In
certain markets, there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. The inability of the Fund to make intended securities
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Fund due to subsequent
declines in value of a portfolio security or, if the Fund had entered into a
contract to sell the security, could result in possible liability to the
purchaser. Settlement procedures in certain emerging markets also carry with
them a heightened risk of loss due to the
FREMONT MUTUAL FUNDS 13
<PAGE>
failure of the broker or other service provider to deliver cash or securities.
The risks of foreign investing are of greater concern in the case of investments
in emerging markets which may exhibit greater price volatility, have less
liquidity and have settlement arrangements which are less efficient than in
developed markets. Furthermore, the economies of emerging market countries
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade barriers, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. These emerging
market economies also have been and may continue to be adversely affected by
economic conditions in the countries with which they trade.
The value of the Fund's portfolio securities computed in U.S. dollars will vary
with increases and decreases in the exchange rate between the currencies in
which the Fund has invested and the U.S. dollar. A decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of the Fund's holdings of securities denominated in such currency
and, therefore, will cause an overall decline in the Fund's net asset value and
net investment income and capital gains, if any, to be distributed in U.S.
dollars to shareholders by the Fund.
The rate of exchange between the U.S. dollar and other currencies is influenced
by many factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the price of oil, the pace of activity in the industrial countries,
including the United States, and other economic and financial conditions
affecting the world economy.
The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Advisor or Sub-Advisor to be fully exchangeable into U.S. dollars without
legal restriction. The Fund may purchase securities that are issued by the
government or a corporation or financial institution of one nation but
denominated in the currency of another nation. To the extent that the Fund
invests in ADRs, the depository bank generally pays cash dividends in U.S.
dollars regardless of the currency in which such dividends originally are paid
by the issuer of the underlying security.
The operating expense ratio of the Fund when investing in foreign securities may
be higher than that of an investment company investing exclusively in U.S.
securities because certain expenses, such as custodial costs, may be higher.
Several of the countries in which the Fund may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital gains),
(ii) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation, (iii)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor, (iv) limitations on the types of
securities which a foreign
14 FREMONT MUTUAL FUNDS
<PAGE>
investor may purchase and (v) restrictions on a foreign investor's right to
invest in companies whose securities are not publicly traded. In some
circumstances, these restrictions may limit or preclude investment in certain
countries. Therefore, the Fund intends to invest in such countries through the
purchase of shares of investment companies organized under the laws of such
countries.
The Fund's interest and dividend income from foreign issuers may be subject to
non-U.S. withholding taxes. The Fund also may be subject to taxes on trading
profits in some countries. In addition, many of the countries in the Pacific
Basin have a transfer or stamp duties tax on certain securities transactions.
The imposition of these taxes will increase the cost to the Fund of investing in
any country imposing such taxes. For United States federal income tax purposes,
United States shareholders may be entitled to a credit or deduction to the
extent of any foreign income taxes paid by the Fund. See "Dividends,
Distributions and Federal Income Taxation."
AMERICAN DEPOSITORY RECEIPTS. American Depository Receipts ("ADRs") are
negotiable receipts issued by a United States bank or trust to evidence
ownership of securities in a foreign company which have been deposited with such
bank or trust's office or agent in a foreign country. Investing in ADRs presents
risks not present to the same degree as investing in domestic securities even
though the Fund will purchase, sell and be paid dividends on ADRs in U.S.
dollars. These risks include fluctuations in currency exchange rates, which are
affected by international balances of payments and other economic and financial
conditions; government intervention; speculation; and other factors. With
respect to certain foreign countries, there is the possibility of expropriation
or nationalization of assets, confiscatory taxation and political, social and
economic instability. The Fund may be required to pay foreign withholding or
other taxes on certain of its ADRs, but investors may or may not be able to
deduct their pro rata shares of such taxes in computing their taxable income, or
take such shares as a credit against their U.S. federal income tax. See
"Dividends, Distributions and Federal Income Taxation." Unsponsored ADRs are
offered by companies which are not prepared to meet either the reporting or
accounting standards of the United States. While readily exchangeable with stock
in local markets, unsponsored ADRs may be less liquid than sponsored ADRs.
Additionally, there generally is less publicly available information with
respect to unsponsored ADRs.
INVESTMENT RESTRICTIONS. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating the Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). These investment restrictions and the Fund's investment
objective cannot be changed without the approval of shareholders of the Fund;
all other investment practices described in this Prospectus and in the Statement
of Additional Information can be changed by the Board of Directors without
shareholder approval.
FREMONT MUTUAL FUNDS 15
<PAGE>
INVESTMENT RESULTS
The Fund may from time to time include information on its investment results
and/or comparisons of its investment results to various unmanaged indices or
results of other mutual funds or groups of mutual funds in advertisements, sales
literature or reports furnished to present or prospective shareholders. All such
figures are based on historical performance data and are not intended to be
indicative of future performance. The investment return and principal value of
an investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
The Fund may calculate performance on an average annual total return basis for
1-, 5- and 10-year periods and over the life of the Fund, after such periods
have elapsed. Average annual total return will be computed by determining the
average annual compounded rate of return over the applicable period that would
equate the initial amount invested to the ending redeemable value of the
investment. Ending redeemable value includes dividends and capital gain
distributions, reinvested at net asset value at the reinvestment date determined
by the Board of Directors. The resulting percentages indicate the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the period. The average annual compounded rate of return over various
periods may also be computed by utilizing ending redeemable values as determined
above.
The Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses of
the Fund, so that any investment results reported by the Fund should not be
considered representative of what an investment in the Fund may earn in any
future period. When utilized, total return for the unmanaged indices described
in the Statement of Additional Information will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
recurring expenses such as advisory fees, brokerage costs or administrative
expenses. These factors and possible differences in calculation methods should
be considered when comparing the Fund's investment results with those published
for other investment companies, other investment vehicles and unmanaged indices.
The comparison of the Fund to an alternative investment should be made with
consideration of differences in features and expected performance. The Fund may
also be mentioned in newspapers, magazines, or other media from time to time.
The Fund assumes no responsibility for the accuracy of such data. The Fund's
results also should be considered relative to the risks associated with its
investment objective and policies. See "Investment Results" in the Statement of
Additional Information.
Additional performance information regarding the Fund will be included in its
annual report, which will be mailed to shareholders without charge upon request.
HOW TO INVEST
Shares of the Fund may be purchased through the Transfer Agent by submitting
payment by check, bank wire or electronic (Automated Clearing House or "ACH")
transfer and, in the case of new accounts, a completed account application form.
There is no sales load or contingent deferred sales load charged to purchase
16 FREMONT MUTUAL FUNDS
<PAGE>
shares of the Fund. All orders for the purchase of shares are subject to
acceptance or rejection by the Board of Directors or the Advisor. Purchases of
shares are made at the current public offering price next determined after the
purchase order is received by the Transfer Agent or by a selling agent of the
Fund. A minimum initial investment of $2,000 is required to open a shareholder
account, except for retirement plans such as Individual Retirement Accounts
(IRAs) and Keogh Plans. Retirement plans are subject to a $1,000 minimum initial
investment. The minimum initial investment is waived for accounts opened with
the Automatic Investment Plan and may be waived in other instances at the sole
discretion of the Advisor. (See "Automatic Investment Plan.") Each subsequent
investment in the Fund must be $200 or more except in the case of retirement
plans or Automatic Investment Plans. There is a minimum continuing balance of
$1,500 required for non-retirement accounts (calculated on the basis of original
investment value). In some cases, the minimum balance requirement may be waived.
Investors wishing to open a new account by bank wire must call the Transfer
Agent at 800-548-4539 to obtain an account number and detailed wire
instructions. Bank wire instructions are also provided in the last section of
this Prospectus. All bank wire investments received before 4:00 p.m., Eastern
time, will be credited the same day. Bank wire investments received after 4:00
p.m., Eastern time, will be credited the next business day. A bank wire
investment is considered received when the Transfer Agent is notified that the
bank wire has been credited to its account.
Shares of the Fund may also be purchased through broker-dealers or other
financial intermediaries who have made appropriate arrangements with the Fund.
Such agents are responsible for ensuring that the account documentation is
complete and that timely payment is made for the Fund shares purchased for their
customers pursuant to such orders. These agents may charge a reasonable
transaction fee to their customers. In some instances, all or a portion of the
transaction fee may be paid by the Advisor. To the extent these agents perform
shareholder servicing activities for the Fund, they may receive fees from the
Fund or the Advisor for such services.
From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor to do so.
As a condition of this offering, if an order to purchase shares is cancelled due
to nonpayment (for example, a check returned for "insufficient funds"), the
person who made the order will be subject to a $20 charge and must reimburse the
Fund for any loss incurred by reason of such cancellation. For more information,
see "Other Investment and Redemption Services" in the Statement of Additional
Information.
Funds Distributor, Inc., Sixty State Street, Boston, MA 02109, is the principal
underwriter for the Fund.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
STATEMENTS AND REPORTS. When a shareholder makes an initial investment in the
Fund, a shareholder account is opened in accordance with registration
instructions. Each time there is a transaction, such as
FREMONT MUTUAL FUNDS 17
<PAGE>
an additional investment, a dividend or other distribution, or a redemption, the
shareholder will receive from the Transfer Agent a confirmation statement
showing the current transaction in the account and the transaction date.
Shareholders of the Fund will receive statements as of the end of March, June,
September and December.
Shares are issued only in book-entry form (without certificates).
The fiscal year of the Fund ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which contain
a schedule of the Fund's portfolio securities and financial statements. Annual
reports will include audited financial statements. The federal income tax status
of shareholder distributions also will be reported to the Fund's shareholders
after the end of the calendar year on Form 1099-DIV.
EXCHANGES BETWEEN FUNDS. Shares of one Fremont Fund may be exchanged for shares
of another Fremont Fund at their respective net asset values, provided that the
account registration remains identical. Exchanges may only be made for shares of
a Fremont Fund then offered for sale in your state of residence. It is required
that (1) all shares in one Fund must be exchanged or (2) the remaining balance
must be at least $1,500. This minimum balance requirement may be waived. These
exchanges are not tax-free and will result in a shareholder realizing a gain or
loss for tax purposes, except in the case of tax-deferred retirement accounts or
other tax-exempt shareholders that have not borrowed to acquire the shares
exchanged.
Exchanges by mail should be sent to the Transfer Agent at the address set forth
in the last section of this Prospectus.
Purchases, redemptions and exchanges should be made for investment purposes
only. A pattern of frequent exchanges, purchases and sales is not acceptable
and, at the discretion of the Board of Directors, can be limited by the
Investment Company's refusal to accept further purchase and exchange orders from
the shareholder.
The Investment Company reserves the right to modify or eliminate the exchange
privilege upon 60 days' written notice to shareholders.
TELEPHONE EXCHANGE PRIVILEGE. An investor may elect on the account application
to authorize exchanges by telephone. A shareholder may give instructions
regarding exchanges by calling 800-548-4539. A shareholder wishing to initiate
the telephone exchange privilege should contact the Fund. This privilege will
not be added to an account without written instruction to do so from the
shareholder. Telephone requests received by 4:00 p.m., Eastern time, will be
processed the same day. During times of drastic economic or market conditions,
the telephone exchange privilege may be difficult to implement. The Transfer
Agent will make its best effort to accommodate shareholders when its telephone
lines are used to capacity. Under these circumstances, a shareholder should
consider using overnight mail to send a written exchange request.
See "Telephone Redemption Privilege" in the next section of this Prospectus.
AUTOMATIC INVESTMENT PLAN. A shareholder may authorize a withdrawal to be made
automatically once or twice each month from a credit balance in the
share-
18 FREMONT MUTUAL FUNDS
<PAGE>
holder's bank checking, savings, negotiable on withdrawal (NOW) or similar
account, with the proceeds to be used to purchase shares of the Fund. The
minimum initial investment is waived for accounts opened with the Automatic
Investment Plan. The amount of the monthly investment must be at least $50, and
is not otherwise subject to the $200 minimum for subsequent investments. There
is no obligation to make additional payments, and the plan may be terminated by
the shareholder at any time. Termination requests must be received in writing at
least 5 days prior to the regular draft date, or the drafts will not cease until
the next cycle. The Transfer Agent may impose a charge for this service,
although no such charge currently is contemplated. If a shareholder's order to
purchase shares is cancelled due to nonpayment (for example, "insufficient
funds"), the shareholder's account will be subject to a $20 charge and the
shareholder will be responsible for reimbursing the Fund for any loss incurred
by reason of such cancellation. A shareholder wishing to initiate the plan on a
new or existing account must fill out an Automatic Investment Plan form. The
form is available on request.
HOW TO REDEEM SHARES
Shares are redeemed at no charge (other than wire transfer fees, if any) at the
net asset value next determined after receipt by the Transfer Agent of proper
written redemption instructions. The current charge for a wire transfer is $8
per wire. This is subject to change by the Transfer Agent at any time, without
prior notification. See "Calculation of Net Asset Value and Public Offering
Price."
Redemption orders received in proper form by the Transfer Agent before 4:00
p.m., Eastern time, will be priced at the net asset value determined on that day
(with certain limited exceptions discussed in the Statement of Additional
Information). Orders received by the Transfer Agent after 4:00 p.m., Eastern
time, will be entered at the next calculated net asset value.
Redemption proceeds can be sent by check, electronic transfer, or bank wire. An
electronic transfer can be processed only to bank checking and savings accounts.
Before requesting an electronic transfer, shareholders should confirm that their
financial institution can receive an electronic transfer. Currently, there is no
charge to shareholders for processing an electronic transfer.
Shareholders may have redemption proceeds sent by bank wire, electronic
transfer, or check to a designated bank account by providing in writing the
appropriate bank information to the Transfer Agent at the time of original
application. If the investor wishes to change the predesignated account, this
must be requested in writing with a signature guarantee (see "Signature
Guarantee" below).
Redemptions from retirement accounts require a written request, with a signature
guarantee, unless authorized under the Automatic Withdrawal Plan. Call the
Transfer Agent for specific instructions on redemptions.
For written redemption requests for an amount greater than $25,000, or a
redemption request that directs proceeds to a party other than the registered
account owner(s), all signatures must be guaranteed (see "Signature Guarantee"
below.)
Because of market fluctuations, the amount a shareholder receives for shares
FREMONT MUTUAL FUNDS 19
<PAGE>
redeemed may be more or less than the amount paid for them.
Redemption of shares, exchanges and redemptions under an Automatic Withdrawal
Plan may result in taxable capital gains or losses.
TELEPHONE REDEMPTION PRIVILEGE. An investor may elect on the regular account
application to authorize redemptions by telephone. This privilege will not be
added to an account without written authorization to do so from the shareholder.
A shareholder may then give instructions regarding redemptions by calling
800-548-4539. (The Telephone Redemption Privilege is not available for IRA or
other retirement accounts.) Telephone requests received by 4:00 p.m., Eastern
time, will be processed at the net asset value calculated that same day. During
times of drastic economic or market conditions, the telephone redemption
privilege may be difficult to implement. The Transfer Agent will make its best
effort to accommodate shareholders when its telephone lines are used to
capacity. Under these circumstances, a shareholder should consider using
overnight mail to send a written redemption request.
Neither the Investment Company, the Transfer Agent, nor their respective
affiliates, will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost or expense in
acting on such telephone instructions. The affected shareholder(s) will bear the
risk of any such loss. The Investment Company, or the Transfer Agent, or both,
will employ reasonable procedures to determine that telephone instructions are
genuine. If the Investment Company and/or the Transfer Agent do not employ such
procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of the transactions, and/or tape recording telephone
instructions.
AUTOMATIC WITHDRAWAL PLAN. A shareholder may request redemptions of a specified
dollar amount (minimum of $100) on either a monthly, quarterly, or yearly basis.
Currently, there is no charge for this service. Redemptions will be made on the
last business day of the month. Because a redemption constitutes a liquidation
of shares, the number of shares owned in the account will be reduced. Automatic
redemptions should not reduce the account below the minimum balance required
(currently $1,500). Shareholders may terminate the Automatic Withdrawal Plan at
any time, but not less than five days before a scheduled payment date. When an
exchange is made between Funds, shareholders must specify if they desire the
automatic withdrawal option to be transferred to a new account opened by the
exchange. As an account balance declines to the minimum permitted, the
shareholder must advise the Transfer Agent if the automatic withdrawal feature
is to be transferred to another account of the shareholder. Shareholders should
note that if there is an Automatic Withdrawal Plan established for an account
and the entire account is exchanged into another Fremont Fund, the automatic
withdrawal option must be renewed by written request to the Transfer Agent. A
shareholder wishing to initiate automatic redemptions must complete an Automatic
Withdrawal Plan form
20 FREMONT MUTUAL FUNDS
<PAGE>
available from the Transfer Agent.
SIGNATURE GUARANTEE. To better protect the Fund and shareholders' accounts, a
signature guarantee is required for certain transactions. Signatures must be
guaranteed by an "eligible guarantor institution" as defined in applicable
regulations. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Signature guarantees
will be accepted from any eligible guarantor institution which participates in a
signature guarantee program. A notary public is not an acceptable guarantor.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the documentation described above has been received by
the Transfer Agent in proper form. A shareholder in doubt about what documents
are required should contact the Transfer Agent.
Payment in redemption of shares is normally made within three business days
after receipt by the Transfer Agent of a request in proper form, provided that
payment in redemption of shares purchased by check or draft will be effected
only after such check or draft has been collected. Although it is anticipated
that this process will be completed in less time, it may take up to 15 days.
Redemption proceeds will not be delayed when shares have been paid for by bank
wire or where the account holds a sufficient number of shares already paid for
with collected funds.
Except in extraordinary circumstances, payment for shares redeemed will be made
promptly after receipt of a redemption request, if in good order, but not later
than seven calendar days after the redemption request is received in proper
form. Requests for redemption which are subject to any special conditions or
which specify an effective date other than as provided herein cannot be
accepted.
The Fund reserves the right to redeem mandatorily the shares in a shareholder's
account (other than a retirement plan account) if the balance is reduced to less
than $1,500 in net asset value through redemptions or other action by the
shareholder. Notice will be given to the shareholder at least 30 days prior to
the date fixed for such redemption, during which time the shareholder may
increase its holdings to an aggregate amount of $1,500 or more (with a minimum
purchase of $200 or more.) This minimum balance may be waived.
REDEMPTION IN KIND. The Investment Company reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for redemption
or repurchase order by making payment in whole or in part in readily marketable
securities chosen by the Fund and valued as they are for purposes of computing
the Fund's net asset value (a redemption in kind). If payment is made in
securities, a shareholder may incur transaction expenses in converting these
securities into cash.
TRANSFER AGENT. Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio
45201-5354, has been retained by the Advisor to serve as the Fund's transfer
agent, dividend paying and shareholder service agent. In addition, Countrywide
Fund Services, Inc. has been retained by the Advisor to assist in providing
certain administrative services to the Fund. Countrywide Fund Services, Inc. is
an indirect wholly-owned subsidiary of Countrywide Credit Industries, Inc., a
New York Stock Exchange
FREMONT MUTUAL FUNDS 21
<PAGE>
listed company principally engaged in residential mortgage lending.
RETIREMENT PLANS
Shares of the Fund may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs); SEP-IRAs;
SIMPLE IRAs; Qualified Retirement Plans for self-employed persons and their
employees; corporate pension and profit-sharing plans; and Section 403(b) Plans,
which are deferred compensation arrangements for employees of public schools and
certain charitable organizations. Forms for establishing IRAs, SEP-IRAs, SIMPLE
IRAs, and Qualified Retirement Plans are available through the Investment
Company, as are forms for corporate Pension and Profit-Sharing plans. Please
contact the Investment Company for more information about establishing these
accounts. In accordance with industry practice, there may be an annual account
charge for participation in these plans. Information regarding these charges is
available from the Investment Company.
Retirement plan participants may receive additional services related to their
plan at no extra cost to any shareholder.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION
The Fund has qualified, and intends to continue to qualify to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
(the "Code"). For any tax year in which the Fund so qualifies and meets certain
other distribution requirements, it will not incur a federal tax liability. Such
qualification under the Code requires a Fund to diversify its investments so
that, at the end of each fiscal quarter, (1) at least 50% of the market value
of the Fund's assets is represented by cash, U.S. government securities,
securities of other regulated investment companies, and other securities,
limited, in respect to any one issuer, to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(2) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. government securities or the securities of
other regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
The Fund intends to distribute substantially all of its net investment income
once each year in September.
The Fund intends to distribute substantially all of its net realized capital
gains, if any, at the end of the calendar year (on or about December 15).
Dividend and capital gains distributions, if any, may be reinvested in
additional shares at net asset value on the day of reinvestment, or may be
received in cash. All dividends and distributions are taxable to a shareholder
(except tax-exempt shareholders who have not borrowed to acquire their shares)
whether or not they are reinvested in shares of the Fund. Any long-term capital
gains distributions are taxable to shareholders as long-term capital gains,
regardless of how long shareholders have held Fund shares. Distributions of
short-term capital gains will be subject to the
22 FREMONT MUTUAL FUNDS
<PAGE>
tax as ordinary income. Corporate investors may be entitled to the "dividends
received" deduction on all or a portion of the dividends paid by the Fund.
Availability of the "dividends received" deduction is subject to certain holding
period and debt-financing limitations.
Shareholders may elect:
- - to have all dividends and capital gain distributions automatically
reinvested in additional shares; or
- - to receive the income dividends and short-term capital gains distributions
in cash and accept the long-term capital gains distributions in additional
shares; or
- - to receive all distributions of income dividends and capital gains in cash.
Automatic reinvestments will be at net asset value on the day of reinvestment.
If no election is made by a shareholder, all dividends and capital gain
distributions will be automatically reinvested. These elections may be changed
by the shareholder at any time, but to be effective for a particular dividend or
capital gain distribution, the election must be received by the Transfer Agent
approximately 5 business days prior to the payment date to permit the change to
be entered into the shareholder account. The federal income tax status of
dividends and capital gains distributions is the same whether taken in cash or
reinvested in shares.
Dividends and capital gains generally are taxable to shareholders at the time
they are paid. However, dividends or capital gains declared in October, November
or December by the Fund and paid in January are taxable as if paid in December.
The Fund will provide to its shareholders federal tax information annually by
January 31, including information about dividends and distributions paid during
the year.
If a shareholder has not furnished a certified correct taxpayer identification
number (generally a Social Security number) and has not certified that
withholding does not apply, or if the Internal Revenue Service has notified the
Fund that the taxpayer identification number listed on the account is incorrect
according to their records or that the shareholder is subject to backup
withholding, federal law generally requires the Fund to withhold 31% from any
dividends and/or redemptions (including exchange redemptions to the
shareholder). Amounts withheld are applied to the shareholder's federal tax
liability; a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. A shareholder should contact the
Transfer Agent if the shareholder is uncertain whether a proper taxpayer
identification number is on file with the Transfer Agent. Federal law also
requires the Fund to withhold 30%, or the applicable tax treaty rate, from
ordinary dividends paid to certain nonresident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts. Long-term capital gains distributions
may be subject to this withholding.
Dividends and interest from foreign issuers earned by the Fund may give rise to
withholding and other taxes imposed by foreign countries, generally at rates
from 10% to 40%. Tax conventions between certain countries and the United States
may reduce or eliminate these taxes. Foreign countries generally do not impose
taxes on capital gains with respect to investments by non-resident investors.
Except as indicated below, to the extent that the Fund does pay foreign
withholding or other foreign taxes on cer-
FREMONT MUTUAL FUNDS 23
<PAGE>
tain of its investments, investors will not be able to deduct their pro rata
shares of such taxes in computing their taxable income nor be able to take their
shares of such taxes as a credit against U.S. income taxes.
If more than 50% of the value of the Fund's total assets at the close of its
fiscal year consist of securities of foreign corporations, the Fund will be
eligible to file, and will file, elections with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to include in their
federal income tax returns as gross income their respective pro rata portions of
foreign taxes paid by the Fund, to treat such amounts as foreign taxes paid by
them, and to deduct such respective pro rata portions in computing their taxable
incomes, or, alternatively, to use them as foreign tax credits, (subject to
certain limitations) against their U.S. income taxes. The Fund will report
annually to its shareholders the amount per share of such withholding, if any.
The foregoing is a brief discussion of certain federal income tax
considerations. Please see "Taxes -- Mutual Funds" in the Statement of
Additional Information for further information regarding the tax implications of
an investment in the Fund.
CALCULATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE
The Fund's net asset value per share is computed by dividing the value of the
securities held by the Fund, plus any cash or other assets (including interest
accrued and dividends declared but not yet received) minus all liabilities
(including accrued expenses), by the total number of shares outstanding at such
time. There is no sales charge in connection with purchases or redemptions of
Fund shares.
The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. The Fund's portfolio may
include securities which trade primarily on non-U.S. exchanges or otherwise in
non-U.S. markets. Because of time zone differences, the prices of these
securities, as used for net asset value calculations, may be established
substantially in advance of the close of the New York Stock Exchange. Foreign
securities may also trade on days when the New York Stock Exchange is closed
(such as a Saturday). The net asset value and public offering price of the Fund,
to the extent that it holds securities valued on foreign markets, may vary
during periods when the New York Stock Exchange is closed. As a result, the
value of the Fund's portfolio may be affected significantly by such trading on
days when a shareholder has no access to the Fund. For further information, see
"How to Invest," "How to Redeem Shares" and "Exchanges Between Funds" in this
Prospectus, and "How to Invest" and "Other Investment and Redemption Services"
in the Statement of Additional Information.
The net asset value and public offering price of the Fund will be determined as
of the close of the regular session of the New York Stock Exchange. The shares
of the Fund are offered at net asset value without a sales charge. Purchase,
redemption and exchange orders received in proper form by the Transfer Agent
before 4:00 p.m., Eastern time, will be priced at the net asset value next
determined on that day (with certain limited
24 FREMONT MUTUAL FUNDS
<PAGE>
exceptions discussed in the Statement of Additional Information). Orders
received by the Transfer Agent after 4:00 p.m., Eastern time, will be entered at
the next calculated net asset value.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the Fund's portfolio securities transactions are placed by the
Advisor or Sub-Advisor, as applicable. The Advisor and Sub-Advisor strive to
obtain the best available prices in the Fund's portfolio transactions, taking
into account the costs and promptness of executions. Subject to this policy,
transactions may be directed to those broker-dealers who provide research,
statistical and other information to the Fund, the Advisor or the Sub-Advisor or
who provide assistance with respect to the distribution of Fund shares. There is
no agreement or commitment to place orders with any broker-dealer.
Debt securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. Government securities
issued by the United States and other countries and money market securities in
which the Fund may invest are generally traded in the OTC markets. In
underwritten offerings, securities usually are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid. Dealers may receive commissions on futures, currency and options
transactions. Commissions or discounts in foreign securities exchanges or OTC
markets typically are fixed and generally are higher than those in U.S.
securities exchanges or OTC markets. There is generally less government
supervision and regulation of foreign exchanges and brokers than in the United
States. Foreign security settlements may, in some instances, be subject to
delays and related administrative uncertainties.
Subject to the requirements of the 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 Investment Company, the Advisor or the Sub-Advisor, or an affiliated
person of such person.
GENERAL INFORMATION
The Investment Company, organized as a Maryland corporation on July 13, 1988, is
a fully managed open-end investment company. Currently, the Investment Company
has authorized several series of capital stock with equal dividend and
liquidation rights within each series. Investment Company
shares are entitled to one vote
per share (with proportional voting for fractional shares) and are freely
transferable. Shareholders have no preemptive or conversion rights. Shares may
be voted in the election of directors and on other matters submitted to the vote
of shareholders. As permitted by Maryland law, there normally will be no annual
meeting of shareholders in any year, except as required under the 1940 Act. The
1940 Act requires that a meeting be held within 60 days in the event that less
than a majority of the directors holding office has been elected by
shareholders. Directors shall continue to hold office until their successors are
elected and have qualified. Investment Company
FREMONT MUTUAL FUNDS 25
<PAGE>
shares do not have cumulative voting rights, which means that the holders of a
majority of the shares voting for the election of directors can elect all of the
directors. Shareholders holding 10% of the outstanding shares may call a meeting
of shareholders for any purpose, including that of removing any director. A
director may be removed upon a majority vote of the shareholders qualified to
vote in the election. The 1940 Act requires the Investment Company to assist
shareholders in calling such a meeting.
On any matter submitted to a vote of shareholders, such matter shall be voted by
the Fund's shareholders separately when the matter affects the specific interest
of the Fund (such as approval of the Advisory Agreement with the Advisor and the
Portfolio Management Agreement with the Sub-Advisor) except in matters where a
vote of all series in the aggregate is required by the 1940 Act or otherwise.
Pursuant to the Articles of Incorporation, the Investment Company may issue ten
billion shares. This amount may be increased or decreased from time to time in
the discretion of the Board of Directors. Each share of a series represents an
interest in that series only, has a par value of $0.0001 per share, represents
an equal proportionate interest in that series with other shares of that series
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to that series as may be declared at the discretion of the
Board of Directors. Shares of a series when issued are fully paid and are
non-assessable. The Board of Directors may, at its discretion, establish and
issue shares of additional series of the Investment Company.
Stephen D. Bechtel, Jr., and members of his family, including trusts for family
members, due to their shareholdings, may be considered controlling persons of
the Fund under applicable Securities and Exchange Commission regulations.
26 FREMONT MUTUAL FUNDS
<PAGE>
TELEPHONE NUMBERS AND ADDRESSES
To make an initial purchase:
1. By mail:
Fremont Mutual Funds, Inc.
c/o Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201-5354
Street address:
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
2. By wire: Via the Federal Reserve
Bank Wire System to:
FIFTH CIN
(Fifth Third Bank)
ABA No. 042000314
Credit to: Fremont Mutual Funds, Inc.
Account No. 999-36844
Further Credit to: Fremont Fund name,
shareholder name, and account number
TO MAKE A SUBSEQUENT PURCHASE:
Include shareholder name and account number. Use the same instructions for
initial purchase.
To redeem shares:
1. By mail: same instructions as above for purchase by mail. Redemptions
greater than $25,000 or payments to a party or address other than
registered on the account require a signature guarantee. See "Signature
Guarantees."
2. By telephone: 800-548-4539 Requires prior selection of telephone
redemption option.
For further copies of this Prospectus, the Statement of Additional Information,
and details of automatic investment, retirement and automatic withdrawal plans,
please contact:
Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
800-548-4539 or 415-284-8900
FREMONT MUTUAL FUNDS, INC.
Fremont Money Market Fund
Fremont California Intermediate
Tax-Free Fund
Fremont Bond Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
Fremont International Small Cap Fund
Fremont Emerging Markets Fund
Fremont U.S. Micro-Cap Fund
For more information on the Fremont Mutual Funds please call 800-548-4539 or
write to:
Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
ADVISOR/TRANSFER AGENT
Fremont Investment Advisors, Inc.
333 Market Street, Suite 2600
San Francisco, CA 94105
SUB-TRANSFER AGENT
Mailing Address:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201-5354
800-548-4539
Street Address:
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
CUSTODIAN
The Northern Trust Company
50 South Lasalle Street
Chicago, IL 60675
FREMONT MUTUAL FUNDS 27
<PAGE>
LEGAL COUNSEL
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104
AUDITORS
Coopers & Lybrand, L.L.P.
333 Market Street
San Francisco, CA 94105
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Fund or the Advisor. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
28 FREMONT MUTUAL FUNDS
<PAGE>
[FREMONT FUNDS LOGO]
50 Beale Street, Suite 100, San Francisco, CA 94105 - 800-548-4539 (press 1)
9801 Washingtonian Blvd., Suite 105, Gaithersburg, MD 20878 - 888-373-6684
3000 Post Oak Blvd., Suite 100, Houston, TX 77056 - 800-735-2705
Distributed by Funds Distributor, Inc.,
50 Beale Street, Suite 100, San Francisco, CA 94105
<PAGE>
FREMONT
MUTUAL
FUNDS, INC.
- INTERNATIONAL SMALL CAP FUND
March 1, 1997
<PAGE>
TABLE OF CONTENTS
ITEM PAGE NO.
Summary of Fees and Expenses ....................................... 3
Financial Highlights ............................................... 4
The Advisor, The Sub-Advisor and the Fund .......................... 5
Investment Objective, Policies and Risk Considerations ............. 6
General Investment Policies ........................................ 10
Investment Results ................................................. 17
How to Invest ...................................................... 18
Shareholder Account Services and Privileges ........................ 19
How to Redeem Shares ............................................... 20
Retirement Plans ................................................... 22
Dividends, Distributions and Federal Income Taxation ............... 23
Calculation of Net Asset Value and Public Offering Price ........... 24
Execution of Portfolio Transactions ................................ 25
General Information ................................................ 26
Telephone Numbers and Addresses .................................... 27
<PAGE>
PROSPECTUS
FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the Fremont International Small Cap Fund (the
"Fund").
FREMONT INTERNATIONAL SMALL CAP FUND seeks to achieve long-term capital
appreciation by investing primarily in equity securities of small cap companies
domiciled outside the United States.
There can be no assurance that the Fund will achieve its investment
objective. The Fund is a diversified fund as defined by the Investment Company
Act of 1940.
Shares of the Fund are offered without a sales charge.
This Prospectus, which should be retained for future reference, sets forth
concisely the information an investor should know before investing. Should more
detailed information be desired, a Statement of Additional Information, which is
incorporated by reference into this Prospectus, is available without charge by
calling toll-free 800-548-4539 (press 1) or by writing to Fremont Mutual Funds,
Inc., 50 Beale Street, Suite 100, San Francisco, California 94105.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE SHARES INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March 1, 1997.
FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
2 FREMONT MUTUAL FUNDS
<PAGE>
SUMMARY OF FEES AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(a) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fee(b) 1.50%
12b-1 Expenses None
Other Expenses None
----
Total Fund Operating Expenses 1.50%
Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
International Small Cap Fund $15 $47 $82 $179
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE EXPENSES OR
ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR LESS THAN
THOSE SHOWN ABOVE.
The purpose of the above tables is to give you information and assistance in
understanding the various costs and expenses of the Fund that an investor may
bear directly or indirectly. The percentages expressing annual fund operating
expenses of the Fund are based on actual expenses incurred during the most
recent fiscal year, except that the management fee of the Fund has been restated
to reflect the management fee currently being charged to the Fund.
See "The Advisor, the Sub-Advisor and the Fund."
(a) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
(b) The Fund is obligated, under the terms of the management agreement, to pay
the Advisor an annual management fee of 1.5% of average net assets.
However, the Advisor is obligated to pay all of the Fund's other ordinary
operating expenses.
FREMONT MUTUAL FUNDS 3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand, L.L.P.,
independent accountants, whose unqualified opinion is included in the Fund's
Annual Report. Further information about the Fund's performance is contained in
the Annual Report, which is included in the Fund's Statement of Additional
Information and which may be obtained without charge.
INTERNATIONAL SMALL CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
--------------------- JUNE 30, 1994 TO
1996 1995 OCTOBER 31, 1994
---- ---- ----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, beginning of period $9.00 $9.86 $10.00
INCOME FROM INVESTMENT OPERATIONS ----- ----- ------
Net investment income (loss)(a) .14 .10 (.01)
Net realized and unrealized gain (loss) 1.08 (.88) (.13)
----- ----- ------
Total investment operations 1.22 (.78) (.14)
----- ----- ------
LESS DISTRIBUTIONS
From net investment income (.07) (.08) --
From net realized gains -- -- --
----- ----- ------
Total distributions (.07) (.08) --
----- ----- -------
NET ASSET VALUE, END OF PERIOD $10.15 $9.00 $9.86
====== ====== =======
TOTAL RETURN # 13.69% -7.96% -1.40%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $9,214 $4,245 $1,768
Ratio of expenses to average net assets(a) 1.81% 2.06% 2.50%*
Ratio of net investment income (loss) to average net assets(a) 1.61% 1.67% -.28%*
Portfolio turnover rate 74% 96% --
Average commission rate paid $.0003 -- --
</TABLE>
*Annualized
(a) Management fees have been voluntarily waived from February 1, 1995 onwards.
If fees had been charged fully, net investment income (loss) per share,
ratio of expenses to average net assets and ratio of net investment income
(loss) to average net assets would have been $.08, 2.50% and 0.92%,
respectively, for the year ended October 31, 1996, and $.07, 2.50% and
1.23%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the Advisor not waived expenses.
4 FREMONT MUTUAL FUNDS
<PAGE>
THE ADVISOR, THE SUB-ADVISOR AND THE FUND
Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in the Fremont
International Small Cap Fund. The Investment Company has other series offered
with a different prospectus, and the Board of Directors of the Investment
Company is permitted to create additional funds at any time. The Fund has its
own investment objective and policies and operates as a separate mutual fund.
The management of the business and affairs of the Investment Company is the
responsibility of the Board of Directors. Fremont Investment Advisors, Inc. (the
"Advisor") provides the Fund with investment management and administrative
services under an Investment Advisory and Administrative Agreement (the
"Advisory Agreement") with the Investment Company. The Advisory Agreement
provides that the Advisor shall furnish advice to the Fund with respect to its
investments and shall, to the extent authorized by the Board of Directors,
determine what securities shall be purchased or sold by the Fund. As described
more fully below, the Advisor has retained an investment management firm (the
"Sub-Advisor") to provide the Fund with portfolio management services. The
Advisor's Investment Committee oversees the portfolio management of the Fund,
including the services provided by the Sub-Advisor.
The professional staff of the Advisor has offered professional investment
management services regarding asset allocation in connection with securities
portfolios to the Bechtel Group, Inc. Retirement Plan and the Bechtel Foundation
since 1978 and to Fremont Investors, Inc. (formerly Fremont Group, Inc.) since
1987. The Advisor also provides investment advisory services regarding asset
allocation, investment manager selection and portfolio diversification to a
number of large Bechtel-related investors. The Investment Company is one of its
clients.
The Advisor will provide direct portfolio management services to the extent that
a sub-advisor does not provide those services. In the future, the Advisor may
propose to the Investment Company that different or additional sub-advisor(s) be
engaged to provide investment advisory or portfolio management services to the
Fund. Prior to such engagement, any agreement with a sub-advisor must be
approved by the Board of Directors and, if required by law, by the shareholders
of the Fund. The Advisor may in its discretion manage all or a portion of the
Fund's portfolio directly with or without the use of a sub-advisor.
For additional information about the Advisor and the Sub-Advisor, see
"Investment Advisory and Other Services" in the Statement of Additional
Information.
Under the terms of the Advisory Agreement, the Fund pays the Advisor a fee,
computed daily and paid monthly, of 1.50% per annum of the Fund's average net
assets. Under this Agreement the Advisor has agreed to bear all of the Fund's
expenses, except extraordinary expenses (as designated by a majority of the
Investment Company's disinterested directors) and interest, brokerage
commissions and other transaction charges relating to the investing activities
of the Fund.
Acadian Asset Management, Inc. ("Acadian"), Two International Place, Boston,
Massachusetts, 02110, serves as Sub-Advisor to the Fund pursuant to a Portfolio
Management Agreement. Acadian is an international investment management firm and
currently manages approximately $3.9 billion in assets. Acadian is a
wholly-owned subsidiary of United Asset Management Corporation and provides
investment management services to
FREMONT MUTUAL FUNDS 5
<PAGE>
corporations, pension and profit-sharing plans, 401(k) and thrift plans,
endowments, foundations and other institutions and individuals. Dr. Gary L.
Bergstrom, President of Acadian, oversees the day-to-day investment decisions
for the Fund and has done so since the Fund's inception. Dr. Bergstrom founded
Acadian's predecessor, Acadian Financial Research, Inc., in 1977.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Fund), the Advisor and Acadian provides that
Acadian will manage the investment and reinvestment of the assets of the Fund
and continually review, supervise and administer the Fund's investments. Acadian
pays all expenses of its staff and their activities in connection with its
portfolio management activities. As compensation for its services, the Advisor
(not the Fund) pays Acadian a fee equal to .75% per annum of the first $50
million of the Fund's average net assets, .65% of the next $50 million of such
assets, .50% of the next $100 million of such assets and .40% of such assets in
excess of $200 million. The Portfolio Management Agreement with Acadian may be
terminated by the Advisor or the Investment Company upon 30 days' written
notice. The Advisor has day-to-day authority to increase or decrease the amount
of the Fund's assets under management by Acadian Asset Management.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The investment objective and policies of the Fund is stated below. The Fund is
intended for long-term investors, not for those who may wish to redeem their
shares after a short period of time.
All investments, including mutual funds, have risks, and no investment is
suitable for all investors. Investors should consult with their financial and
other advisors concerning the suitability of this investment for their own
particular circumstances. Accordingly, there is no assurance that the Fund will
achieve its investment objective.
The Fund seeks to achieve long-term capital appreciation by investing primarily
in small capitalization ("small cap") equity securities of issuers domiciled
outside the United States. The Fund selects its portfolio securities primarily
from among small cap companies in developed markets whose individual market
capitalizations would place them among the smallest 20% of market capitalization
in their respective markets. Developed markets will generally be defined as
those included in the Morgan Stanley Capital International Europe, Asia and Far
East (EAFE) Index. It is expected that the majority of the companies in which
the Fund invests will have a market capitalization of under $1 billion; however,
the Fund is likely to hold some companies with a market capitalization greater
than $1 billion. The Fund is designed for investors willing to accept the risks
entailed in investments in foreign securities of small companies and securities
denominated in various currencies. See "General Investment Policies - Special
Considerations for International Investing."
Under normal market conditions, at least 65% of the total assets of the Fund
will be invested in small cap equity securities of issuers domiciled outside the
United States with a market capitalization of under $1 billion. The Fund will be
invested in a minimum of three countries excluding the United States. The Fund's
portfolio of equity securities will consist of common and preferred stock,
warrants and debt securities convertible into common stock. Included in this 65%
total, up to 5% of the Fund's assets may be invested in rights or warrants to
purchase equity securities. For
6 FREMONT MUTUAL FUNDS
<PAGE>
defensive purposes, the Fund may temporarily have less than 65% of its total
assets invested in small cap equity issuers domiciled outside the United States.
In addition to investing directly in equity securities, the Fund may invest in
instruments such as sponsored and unsponsored American Depository Receipts
("ADRs") and European Depository Receipts ("EDRs"). See "General Investment
Policies" for a discussion of ADRs. EDRs are similar to ADRs but are designed
for use in the European securities markets.
International small cap companies are smaller sized companies that the Advisor
and Sub-Advisor believe often have a potential for earnings growth over time
that is above the growth rate of more established companies or are early in
their life cycles and have the potential to become major enterprises. In
addition, some smaller companies may be undervalued because they are not as
closely followed by security analysts or institutional investors. The Advisor
and Sub-Advisor believe that an investment in shares of the Fund provides an
opportunity for greater rewards but will involve more risk than an investment in
a fund which seeks capital appreciation from investment in common stocks of
larger, better-known companies.
Investing in small companies involves certain special risks. Small companies may
have limited product lines, markets, or financial resources, and their
managements may be dependent on a limited number of key individuals. The
securities of small companies may have limited market liquidity and may be
subject to more abrupt or erratic market movements than securities of larger,
more established companies or the market averages in general.
Emphasis is placed on identifying securities of companies believed to be
undervalued in the marketplace in relation to factors such as the company's
revenues, earnings, assets and long-term competitive positions which over time
will enhance the equity value of the company. In selecting portfolio
investments, a company's growth prospects will be considered, including the
potential for superior appreciation due to growth in earnings, relative
valuation of its securities, and any risks associated with such investment; the
industry in which the company operates, with a view to identification of
international developments within industries, international investment trends,
and social, economic or political factors affecting a particular industry; the
country in which the company is based, as well as historical and anticipated
foreign currency exchange rate fluctuations; and the feasibility of gaining
access to the securities market in a country and of implementing the necessary
custodial arrangements.
Investments will be made in those countries where the Advisor and Sub-Advisor
believe that economic and political factors, including currency movements, are
likely to produce above average long-term investment returns. There is no
limitation on the percentage of the Fund's assets that may be invested at any
one time in one or more countries. However, except during times that the Fund is
in a temporary defensive posture, the Fund will invest at least 65% of its total
assets in the securities of issuers domiciled in at least three different
non-U.S. countries.
The Fund may invest in equity securities of companies domiciled in emerging
markets. As used in this prospectus, international emerging markets are
countries categorized as emerging markets by the International Finance
Corporation, the World Bank's private sector division. Such countries currently
include but are not limited to Thailand, Indonesia, the Philippines, South
Korea, Taiwan and certain Latin American countries.
FREMONT MUTUAL FUNDS 7
<PAGE>
Such markets tend to be in less economically developed regions of the world.
General characteristics of emerging market countries also include lower degrees
of political stability, a high demand for capital investment, a high dependence
on export markets for their major industries, a need to develop basic economic
infrastructures and rapid economic growth. The Advisor believes that investments
in equity securities of companies in international emerging markets offer the
opportunity for significant long-term investment returns. However, these
investments involve certain risks, as discussed below in "Risk Factors and
Special Considerations for International Investing."
The Fund's management anticipates that, from time to time, the Fund may have
more than 25% of its assets invested in securities of companies domiciled in the
countries of Japan, the United Kingdom and/or Germany. These are among the
leading industrial economies outside the United States and the values of their
stock markets account for a significant portion of the value of international
markets.
Whenever in the judgment of the Advisor or Sub-Advisor market or economic
conditions warrant, the Fund may, for temporary defensive purposes, invest
without limitation in U.S. dollar-denominated or foreign currency-denominated
cash or in high quality debt securities with remaining maturities of one year or
less. During times that the Fund is investing defensively, the Fund will not be
pursuing its stated investment objective. For liquidity purposes, the Fund may
normally also invest up to 10% of its assets in U.S. dollar-denominated or
foreign currency-denominated cash or in high quality debt securities with
remaining maturities of one year or less. The Fund may also invest in
convertible debentures (convertible to equity securities) and preferred stocks
(which may or may not have a dividend yield). All preferred stocks and debt
securities, both foreign and domestic, in which the Fund invests must, at the
time of acquisition, be rated Aa or better by Moody's Investors Service, Inc.,
or AA or better by Standard & Poor's Ratings Group, or be of comparable quality
as determined by the Advisor or Sub-Advisor.
The Fund may enter into forward currency contracts and currency futures
contracts, and may purchase put and call options on currencies. See "General
Investment Policies -- Forward Currency, Futures and Options Transactions.
RISK FACTORS AND SPECIAL CONSIDERATIONS FOR INTERNATIONAL INVESTING. Investment
in securities of foreign entities and securities denominated in foreign
currencies involves risks typically not present to the same degree in domestic
investments. Likewise, investment in ADRs and EDRs presents similar risks, even
though the Fund will purchase, sell and be paid dividends on ADRs in U.S.
dollars. These risks include fluctuations in currency exchange rates, which are
affected by international balances of payments and other economic and financial
conditions; government intervention; speculation; and other factors. With
respect to certain foreign countries, there is the possibility of expropriation
or nationalization of assets, confiscatory taxation and political, social or
economic instability. The Fund may be required to pay foreign withholding or
other taxes on certain of its foreign investments, but investors may or may not
be able to deduct their pro rata shares of such taxes in computing their taxable
income, or take such shares as a credit against their U.S. income taxes. See
"Dividends, Distributions and Federal Income Taxation."
There may be less publicly available information about foreign issuers or
securities than about U.S. issuers or securities, and foreign issuers may not be
subject to accounting,
8 FREMONT MUTUAL FUNDS
<PAGE>
auditing and financial reporting standards and requirements comparable to those
of U.S. entities. With respect to unsponsored ADRs, these programs cover
securities of companies which are not required to meet either the reporting or
accounting standards of the United States. Many foreign financial markets, while
generally growing in volume, continue to have substantially less volume than
domestic markets, and securities of many foreign companies are less liquid and
their prices are more volatile than are securities of comparable U.S. companies.
Such markets may have longer settlement periods than markets in the United
States. In addition, brokerage commissions, custodial services and other costs
related to investment in foreign markets generally are more expensive than in
the United States, particularly with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets, there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
The inability of the Fund to make intended securities purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Fund due to subsequent declines in
value of a portfolio security or, if the Fund had entered into a contract to
sell the security, could result in possible liability to the purchaser.
Settlement procedures in certain emerging markets also carry with them a
heightened risk of loss due to the failure of the broker or other service
provider to deliver cash or securities.
The risks of foreign investing are of greater concern in the case of investments
in emerging markets which may exhibit greater price volatility, have less
liquidity and have settlement arrangements which are less efficient than in
developed markets. Furthermore, the economies of emerging market countries
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade barriers, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. These emerging
market economies also have been and may continue to be adversely affected by
economic conditions in the countries with which they trade.
The value of the Fund's portfolio securities computed in U.S. dollars will vary
with increases and decreases in the exchange rate between the currencies in
which the Fund has invested and the U.S. dollar. A decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of the Fund's holdings of securities denominated in such currency
and, therefore, will cause an overall decline in the Fund's net asset value and
net investment income and capital gains, if any, to be distributed in U.S.
dollars to shareholders by the Fund.
The rate of exchange between the U.S. dollar and other currencies is influenced
by many factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the price of oil, the pace of activity in the industrial countries,
including the United States, and other economic and financial conditions
affecting the world economy.
The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Advisor or Sub-Advisor to be fully exchangeable into U.S. dollars without
legal restriction. The Fund may purchase securities that are issued
FREMONT MUTUAL FUNDS 9
<PAGE>
by the government or a corporation or financial institution of one nation but
denominated in the currency of another nation. To the extent that the Fund
invests in ADRs, the depository bank generally pays cash dividends in U.S.
dollars regardless of the currency in which such dividends originally are paid
by the issuer of the underlying security.
Several of the countries in which the Fund may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital gains),
(ii) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation, (iii)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor, (iv) limitations on the types of
securities which a foreign investor may purchase and (v) restrictions on a
foreign investor's right to invest in companies whose securities are not
publicly traded. In some circumstances, these restrictions may limit or preclude
investment in certain countries. Therefore, the Fund intends to invest in such
countries through the purchase of shares of investment companies organized under
the laws of such countries.
The Fund's interest and dividend income from foreign issuers may be subject to
non-U.S. withholding taxes. The Fund also may be subject to taxes on trading
profits in some countries. In addition, many of the countries in the Pacific
Basin have a transfer or stamp duties tax on certain securities transactions.
The imposition of these taxes will increase the cost to the Fund of investing in
any country imposing such taxes. For United States federal income tax purposes,
United States shareholders may be entitled to a credit or deduction to the
extent of any foreign income taxes paid by the Fund. See "Dividends,
Distributions and Federal Income Taxation."
GENERAL INVESTMENT POLICIES
MONEY MARKET INSTRUMENTS. The Fund may invest in any of the following "money
market" instruments: certificates of deposit, time deposits, commercial paper,
bankers' acceptances and Eurodollar certificates of deposit; U.S.
dollar-denominated money market instruments of foreign financial institutions,
corporations and governments; U.S. Government and agency securities; money
market mutual funds; and other debt securities which are not specifically named
but which meet the Fund's quality guidelines. The Fund also may enter into
repurchase agreements as described below and may purchase variable and floating
rate debt securities.
At the time of purchase, short-term securities must be rated in the top rating
category by at least two nationally recognized statistical rating organizations
("NRSROs") or by a single NRSRO in the case of a security rated by only one
NRSRO, or, if not rated by an NRSRO, must be of comparable quality as determined
by the Advisor or the Sub-Advisor. Generally, high quality short-term securities
must be issued by an entity with an outstanding debt issue rated A or better by
an NRSRO, or an entity of comparable quality as determined by the Advisor or the
Sub-Advisor. Obligations of foreign banks, foreign corporations and foreign
branches of domestic banks must be payable in U.S. dollars. See Appendix A to
the Statement of Additional information for a description of rating categories.
U.S. GOVERNMENT SECURITIES. The Fund may
10 FREMONT MUTUAL FUNDS
<PAGE>
invest in U.S. Government securities, which are obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities. Some U.S. Government
securities, such as Treasury bills, notes and bonds and Government National
Mortgage Association ("GNMA") certificates, are supported by the full faith and
credit of the United States; others, such as those of the Federal Home Loan
Mortgage Corporation ("FHLMC"), are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the Federal National Mortgage
Association ("FNMA"), are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others, such as those
of the Student Loan Marketing Association, are supported only by the credit of
the instrumentality. No assurance can be given that the U.S. Government will
provide financial support to U.S. Government agencies or instrumentalities as
described above in the future, other than as set forth above, because it is not
obligated to do so by law.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction, but the settlement is delayed).
The Fund will not purchase securities the value of which is greater than 5% of
its net assets on a when-issued basis. The Fund, as purchaser, assumes the risk
of any decline in value of the security beginning on the date of the agreement
or purchase, and no interest accrues to the Fund until it accepts delivery of
the security. The Fund will not use such transactions for leveraging purposes,
and accordingly will segregate cash, cash equivalents or liquid securities or
hold a covered position in an amount sufficient to meet its payment obligations
thereunder.
There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business, which may take substantially more than three
business days for non-U.S. securities, are not treated by the Fund as
when-issued or forward commitment transactions and, accordingly, are not subject
to the foregoing limitations, even though some of the risks described above may
be present in such transactions.
SHARES OF INVESTMENT COMPANIES. The Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
investment companies to the extent that they may facilitate achieving the
objective of the Fund or to the extent that they afford the principal or most
practical means of access to a particular market or markets or they represent
attractive investments in their own right. The percentage of Fund assets which
may be so invested is not limited, provided that the Fund and its affiliates do
not acquire more than 3% of the shares of any such investment company. The
provisions of the 1940 Act may also impose certain restrictions on redemption of
the Fund's shares in other investment companies. The Fund's purchase of shares
of investment companies may result in the payment by a shareholder of
duplicative management fees. The Advisor and/or Sub-Advisor will consider such
fees in determining whether to invest in other mutual funds. The Fund will
invest only in investment companies which do not charge a sales load; however,
the Fund may invest in such companies with distribution plans and fees, and may
pay customary brokerage commissions to buy and sell shares of closed-end
investment companies.
FREMONT MUTUAL FUNDS 11
<PAGE>
The return on the Fund's investments in investment companies will be reduced by
the operating expenses, including investment advisory and administrative fees,
of such companies. The Fund's investment in a closed-end investment company may
require the payment of a premium above the net asset value of the investment
company's shares, and the market price of the investment company thereafter may
decline without any change in the value of the investment company's assets. The
Fund, however, will not invest in any investment company or trust unless it is
believed that the potential benefits of such investment are sufficient to
warrant the payment of any such premium.
As an exception to the above, the Fund does have the authority to invest all of
its assets in the securities of a single open-end investment company with
substantially the same fundamental investment objectives, restrictions and
policies as that of the Fund. The Fund will notify its shareholders prior to
initiating such an arrangement.
REPURCHASE AGREEMENTS. As part of its cash reserve position, the Fund may enter
into repurchase agreements through which the Fund acquires a security (the
"underlying security") from the seller, a well-established securities dealer or
a bank that is a member of the Federal Reserve System. At that time, the bank or
securities dealer agrees to repurchase the underlying security at the same
price, plus a specified amount of interest. Repurchase agreements are generally
for a short period of time, often less than a week. The seller must maintain
with the Fund's custodian collateral equal to at least 100% of the repurchase
price, including accrued interest, as monitored daily by the Advisor and/or
Sub-Advisor. The Fund will not enter into a repurchase agreement with a maturity
of more than seven business days if, as a result, more than 15% of the value of
its net assets, would then be invested in such repurchase agreements. The Fund
will only enter into repurchase agreements where (1) the underlying securities
are issued or guaranteed by the U.S. Government, (2) the market value of the
underlying security, including accrued interest, will be at all times equal to
or in excess of the value of the repurchase agreement, and (3) payment for the
underlying securities is made only upon physical delivery or evidence of
book-entry transfer to the account of the custodian or a bank acting as agent.
In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses, including: (1) a possible decline in the value of the
underlying security during the period in which the Fund seeks to enforce its
rights thereto; (2) possible subnormal levels of income and lack of access to
income during this period; and (3) expenses of enforcing the Fund's rights.
PORTFOLIO TURNOVER. The Fund expects to trade in securities for short-term gain
whenever deemed advisable by the Advisor and/or Sub-Advisor in order to take
advantage of anomalies occurring in general market, economic or political
conditions. Therefore, the Fund may have a higher portfolio turnover rate than
that of some other investment companies, but it is anticipated that the annual
portfolio turnover rate of the Fund will not exceed 200%. The portfolio turnover
rate is calculated by dividing the lesser of sales or purchases of long-term
portfolio securities by the Fund's average month-end long-term investments. High
portfolio turnover involves correspondingly greater transaction costs in the
form of dealer spreads or brokerage commissions and other costs that the Fund
will bear directly, and may result in the realization of net capital gains,
which are generally taxable whether or not distributed to shareholders.
12 FREMONT MUTUAL FUNDS
<PAGE>
LOANS OF PORTFOLIO SECURITIES. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in an
amount not exceeding 33 1/3% of its net assets. The borrower must maintain with
the Fund's custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities, or possible loss of
rights in the collateral should the borrower fail financially. The lender also
may bear the risk of capital loss on investment of the cash collateral, which
must be returned in full to the borrower when the loan is terminated. Loans will
be made only to firms deemed by the Advisor to be of good standing and will not
be made unless, in the judgment of the Advisor, the consideration to be earned
from such loans would justify the associated risk.
BORROWING. The Fund may borrow from banks an amount not exceeding 30% of the
value of its total assets for temporary or emergency purposes and enter into
reverse repurchase agreements. If the income and gains on securities purchased
with the proceeds of borrowings or reverse repurchase agreements exceed the cost
of such borrowings or agreements, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the cost, earnings or net asset value would decline faster
than otherwise would be the case.
RESTRICTED SECURITIES. The Fund may purchase securities that are not registered
("restricted securities") under federal securities law, but can be offered and
sold to "qualified institutional buyers." However, the Fund will not invest more
than 15% of its assets in illiquid investments, which includes repurchase
agreements and fixed time deposits maturing in more than seven days, and
securities that are not readily marketable and restricted securities, unless the
Board of Directors determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are liquid. The Board of Directors may adopt guidelines and delegate to the
Advisor or Sub-Advisor the daily function of determining and monitoring
liquidity of restricted securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations.
WARRANTS OR RIGHTS. Warrants or rights may be acquired by the Fund in connection
with other securities or separately and provide the Fund with the right to
purchase other securities of the issuer at a later date. It is the present
intention of the Fund to limit its investments in warrants or rights, valued at
the lower of cost or market, to no more than 5% of the value of its net assets.
Warrants or rights acquired by the Fund in units or attached to securities will
be deemed to be without value for purposes of this restriction.
OPTIONS AND FUTURES CONTRACTS. When the Fund is not fully invested, strategies
such as buying calls, writing puts, and buying futures may be used to increase
its exposure to price changes in stocks or debt securities. When the Advisor
and/or Sub-Advisor wishes to hedge against market fluctuations, strategies such
as buying puts, writing calls, and selling futures may be used to reduce market
exposure. Because most stock index futures and options are based on broad stock
market indices, their performance tends to track the performance of common
stocks generally -
FREMONT MUTUAL FUNDS 13
<PAGE>
which may or may not correspond to the types of securities in which the Fund
invests. The Fund will maintain segregated accounts consisting of cash, U.S.
Government securities or other liquid securities (or, as permitted by applicable
regulations, enter into certain offsetting positions) to cover its obligations
under options and futures contracts to avoid leveraging.
In seeking appreciation or to reduce principal volatility, the Fund may also (1)
enter into futures contracts -- contracts for the future delivery of debt
securities, stock, stock index futures contracts with respect to the S&P 500
Index, small capitalization stock market indices or other similar broad-based
stock market indices, the initial margins of which are limited to 5% of the
Fund's assets; and (2) purchase put and call options on portfolio securities,
stock indices or stock index futures contracts -- the premiums of which are
limited to 5% of the Fund's assets.
The Fund may write put and call options. It will only do so by writing covered
put or call options, and the aggregate value of the securities underlying put
options, as of the date of sale of the options, will not exceed 50% of the net
assets of the Fund.
The Fund will set aside cash, cash equivalents, or liquid securities, or hold a
covered position against any potential delivery or payment obligations under any
outstanding option or futures contracts.
Options and futures can be volatile investments. If the Advisor and/or
Sub-Advisor applies a hedge at an inappropriate time or evaluates market
conditions incorrectly, options and futures strategies may lower the Fund's
return. The Fund could also experience a loss if the prices of its options or
futures positions were poorly correlated with its other investments, or if it
could not close out its positions because of an illiquid secondary market.
Although these investment practices will be used primarily to generate income or
to minimize the fluctuation of principal, they do involve risks which are
different in some respects from the investment risks associated with similar
funds which do not engage in such activities. These risks may include the
following: futures contracts -- no assurance that closing purchase transactions
will be available at favorable prices, possible reduction of the Fund's income
due to the use of hedging, the possible reduction in value of both the
securities hedged and the hedging instrument, and possible loss in excess of the
initial margin payment; options and futures contracts -- imperfect correlation
between the contract and the underlying security, commodity or index and
unsuccessful hedging transactions due to incorrect forecasts of market trends;
writing covered call options -- the inability to effect closing transactions at
favorable prices and the inability to participate in the appreciation of the
underlying securities above the exercise price and premium received; and
purchasing or selling put and call options -- possible loss of the entire
premium. A more thorough description of these investment practices and their
associated risks is contained in the Statement of Additional Information.
FORWARD CURRENCY, FUTURES AND OPTIONS TRANSACTIONS. The Fund may enter into
forward currency contracts and currency futures contracts and may purchase put
or call options on currencies (each such arrangement sometimes referred to as a
"currency contract"). Forward contracts typically will involve the purchase or
sale of a foreign currency against the dollar. These techniques are designed
primarily to hedge against future changes in currency prices which might
adversely affect the value of the Fund's portfolio securities. The Fund may
attempt to accomplish objectives similar to those
14 FREMONT MUTUAL FUNDS
<PAGE>
involved in its use of forward currency contracts by purchasing put or call
options on currencies or currency futures. For a more detailed description of
such arrangements, see the Statement of Additional Information.
The Fund may enter into currency contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. For example,
when the Advisor and/or Sub-Advisor anticipates making a purchase or sale of a
security, the Fund may enter into a currency contract in order to set the rate
(either relative to the U.S. dollar or another currency) at which a currency
exchange transaction related to the purchase or sale will be made. Further, when
it is believed that a particular currency may decline compared to the U.S.
dollar or another currency, the Fund may enter into a currency contract to sell
the currency the Advisor or Sub-Advisor expects to decline in the amount
approximating the value of some or all of the Fund's portfolio securities
denominated in that currency or related currencies that the Advisor and/or
Sub-Advisor feels demonstrate a correlation in exchange rate movements. The
practice of using correlated currencies is known as "cross-hedging." When the
Advisor and/or Sub-Advisor believes that the U.S. dollar may suffer a
substantial decline against a foreign currency or currencies, the Fund may enter
into a currency contract to buy a foreign currency for a fixed dollar amount. By
entering into such transactions, however, the Fund may be required to forego the
benefits of advantageous changes in exchange rates. Currency contracts generally
are traded over-the-counter, and not on organized commodities or securities
exchanges. As a result, such contracts operate in a manner distinct from
exchange-traded instruments, and their use involves certain risks beyond those
associated with transactions in other futures contracts.
While the Fund enters into forward currency contracts and purchases currency
options or currency futures to reduce the risks of fluctuations in exchange
rates, these contracts cannot eliminate all such risks and do not eliminate
fluctuations in the prices of the Fund's portfolio securities. Purchasing
(selling) a currency forward limits the Fund's exposure to risk of loss from a
rise (decline) in the dollar value of the currency, but also limits its
potential for gain from a decline (rise) in the currency's dollar value. While
purchasing options can protect the Fund against certain exchange rate
fluctuations, the Fund is subject to the loss of its entire premium payment
where the option is allowed to expire without exercise.
To avoid leverage in connection with forward currency transactions, the Fund
will set aside with its Custodian cash, cash equivalents or liquid securities,
or hold a covered position against any potential delivery or payment obligations
under any outstanding contracts. To the extent the Fund enters into
over-the-counter options, the options and the assets so set aside to cover such
options are considered illiquid assets and, together with other illiquid assets
and securities, will not exceed 15% of the net assets of the Fund. In addition,
premiums paid for currency options held by the Fund may not exceed 5% of the
Fund's net assets.
Although the Fund will enter into currency contracts solely for hedging
purposes, their use does involve certain risks. For example, there can be no
assurance that a liquid secondary market will exist for any currency contract
purchased or sold, and the Fund may be required to maintain a position until
exercise or expiration, which could result in losses.
Currency contracts may be entered into on United States exchanges regulated by
the Securities and Exchange Commission or the Commodity Futures Trading
Commission as
FREMONT MUTUAL FUNDS 15
<PAGE>
well as in the over-the-counter market and on foreign exchanges.
SWAP AGREEMENTS. The Fund may enter into interest rate, index and currency
exchange rate swap agreements for purposes of attempting to obtain a particular
desired return at a lower cost to the Fund than if the Fund had invested
directly in an instrument that yielded that desired return. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on predetermined investments or instruments.
The gross returns to be exchanged or "swapped" between the parties are
calculated with respect to a "notional amount," i.e., the return on or increase
in value of a particular dollar amount invested at a particular interest rate,
in a particular foreign currency, or in a "basket" of securities representing a
particular index. Commonly used swap agreements include interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates exceed a specified rate; interest rate
floors, under which, in return for a premium, one party agrees to make payments
to the other to the extent that interest rates fall below a specified level; and
interest rate collars, under which a party sells a cap and purchases a floor or
vice versa in an attempt to protect itself against interest rate movements
exceeding minimum or maximum levels. Whether the Fund's use of swap agreements
will be successful in furthering its investment objective will depend on the
Advisor's or Sub-Advisor's ability to predict correctly whether certain types of
investments are likely to produce greater returns than other investments.
The Fund's obligations under a swap agreement will be accrued daily (offset
against amounts owed to the Fund) and any accrued but unpaid net amounts owed to
a swap counterparty will be covered by the maintenance of a segregated account
consisting of cash, U.S. Government securities or other liquid securities to
avoid any potential leveraging of the Fund's portfolio. Swap agreements having a
term of greater than seven days are considered illiquid assets and the Fund's
obligations under such agreements, together with other illiquid assets and
securities, will not exceed 15% of the net assets of the Fund.
AMERICAN DEPOSITORY RECEIPTS. American Depository Receipts ("ADRs") are
negotiable receipts issued by a United States bank or trust to evidence
ownership of securities in a foreign company which have been deposited with such
bank or trust's office or agent in a foreign country. Investing in ADRs presents
risks not present to the same degree as investing in domestic securities even
though the Fund will purchase, sell and be paid dividends on ADRs in U.S.
dollars. These risks include fluctuations in currency exchange rates, which are
affected by international balances of payments and other economic and financial
conditions; government intervention; speculation; and other factors. With
respect to certain foreign countries, there is the possibility of expropriation
or nationalization of assets, confiscatory taxation and political, social and
economic instability. The Fund may be required to pay foreign withholding or
other taxes on certain of its ADRs, but investors may or may not be able to
deduct their pro rata shares of such taxes in computing their taxable income, or
take such shares as a credit against their U.S. federal income tax. See
"Dividends, Distributions and Federal Income Taxation." Unsponsored ADRs are
offered by companies which are not prepared to meet either the reporting or
16 FREMONT MUTUAL FUNDS
<PAGE>
accounting standards of the United States. While readily exchangeable with stock
in local markets, unsponsored ADRs may be less liquid than sponsored ADRs.
Additionally, there generally is less publicly available information with
respect to unsponsored ADRs.
INVESTMENT RESTRICTIONS. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating the Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). These investment restrictions and the Fund's investment
objective cannot be changed without the approval of shareholders of the Fund;
all other investment practices described in this Prospectus and in the Statement
of Additional Information can be changed by the Board of Directors without
shareholder approval.
INVESTMENT RESULTS
The Fund may from time to time include information on its investment results
and/or comparisons of its investment results to various unmanaged indices or
results of other mutual funds or groups of mutual funds in advertisements, sales
literature or reports furnished to present or prospective shareholders. All such
figures are based on historical performance data and are not intended to be
indicative of future performance. The investment return and principal value of
an investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
The Fund may calculate performance on an average annual total return basis for
1-, 5- and 10-year periods and over the life of the Fund, after such periods
have elapsed. Average annual total return will be computed by determining the
average annual compounded rate of return over the applicable period that would
equate the initial amount invested to the ending redeemable value of the
investment. Ending redeemable value includes dividends and capital gain
distributions, reinvested at net asset value at the reinvestment date determined
by the Board of Directors. The resulting percentages indicate the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the period. The average annual compounded rate of return over various
periods may also be computed by utilizing ending redeemable values as determined
above.
The Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses of
the Fund, so that any investment results reported by the Fund should not be
considered representative of what an investment in the Fund may earn in any
future period. When utilized, total return for the unmanaged indices described
in the Statement of Additional Information will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
recurring expenses such as advisory fees, brokerage costs or administrative
expenses. These factors and possible differences in calculation methods should
be considered when comparing the Fund's investment results with those published
for other investment companies, other investment vehicles and unmanaged indices.
The comparison of the Fund to an alternative investment should be made with
consideration of differences in features and expected performance. The Fund may
also be mentioned in newspapers, magazines, or other
FREMONT MUTUAL FUNDS 17
<PAGE>
media from time to time. The Fund assumes no responsibility for the accuracy of
such data. The Fund's results also should be considered relative to the risks
associated with its investment objective and policies. See "Investment Results"
in the Statement of Additional Information.
Additional performance information regarding the Fund will be included in its
annual report, which will be mailed to shareholders without charge upon request.
HOW TO INVEST
Shares of the Fund may be purchased through the Transfer Agent by submitting
payment by check, bank wire or electronic (Automated Clearing House or "ACH")
transfer and, in the case of new accounts, a completed account application form.
There is no sales load or contingent deferred sales load charged to purchase
shares of the Fund. All orders for the purchase of shares are subject to
acceptance or rejection by the Board of Directors or the Advisor. Purchases of
shares are made at the current public offering price next determined after the
purchase order is received by the Transfer Agent or by a selling agent of the
Fund. A minimum initial investment of $2,000 is required to open a shareholder
account, except for retirement plans such as Individual Retirement Accounts
(IRAs) and Keogh Plans. Retirement plans are subject to a $1,000 minimum initial
investment. The minimum initial investment is waived for accounts opened with
the Automatic Investment Plan and may be waived in other instances at the sole
discretion of the Advisor. (See "Automatic Investment Plan.") Each subsequent
investment in the Fund must be $200 or more except in the case of retirement
plans or Automatic Investment Plans. There is a minimum continuing balance of
$1,500 required for non-retirement accounts (calculated on the basis of original
investment value). In some cases, the minimum balance requirement may be waived.
Investors wishing to open a new account by bank wire must call the Transfer
Agent at 800-548-4539 to obtain an account number and detailed wire
instructions. Bank wire instructions are also provided in the last section of
this Prospectus. All bank wire investments received before 4:00 p.m., Eastern
time, will be credited the same day. Bank wire investments received after 4:00
p.m., Eastern time, will be credited the next business day. A bank wire
investment is considered received when the Transfer Agent is notified that the
bank wire has been credited to its account.
Shares of the Fund may also be purchased through broker-dealers or other
financial intermediaries who have made appropriate arrangements with the Fund.
Such agents are responsible for ensuring that the account documentation is
complete and that timely payment is made for the Fund shares purchased for their
customers pursuant to such orders. These agents may charge a reasonable
transaction fee to their customers. In some instances, all or a portion of the
transaction fee may be paid by the Advisor. To the extent these agents perform
shareholder servicing activities for the Fund, they may receive fees from the
Fund or the Advisor for such services.
From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor to do so.
As a condition of this offering, if an order to purchase shares is cancelled due
to nonpayment (for example, a check returned for "insufficient funds"), the
person who made the order will be subject to a $20 charge and must reimburse the
Fund for any loss incurred by reason of such cancellation. For more information,
see "Other Investment and
18 FREMONT MUTUAL FUNDS
<PAGE>
Redemption Services" in the Statement of Additional Information.
Funds Distributor, Inc., Sixty State Street, Boston, Massachusetts, 02109, is
the principal underwriter for the Fund. The compensation of Funds Distributor,
Inc. is paid by the Advisor (not the Fund).
SHAREHOLDER ACCOUNT
SERVICES AND PRIVILEGES
STATEMENTS AND REPORTS. When a shareholder makes an initial investment in the
Fund, a shareholder account is opened in accordance with registration
instructions. Each time there is a transaction, such as an additional
investment, a dividend or other distribution, or a redemption, the shareholder
will receive from the Transfer Agent a confirmation statement showing the
current transaction in the account and the transaction date. Shareholders of the
Fund will receive statements as of the end of March, June, September and
December.
Shares are issued only in book-entry form (without certificates).
The fiscal year of the Fund ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which contain
a schedule of the Fund's portfolio securities and financial statements. Annual
reports will include audited financial statements. The federal income tax status
of shareholder distributions also will be reported to the Fund's shareholders
after the end of the calendar year on Form 1099-DIV.
EXCHANGES BETWEEN FUNDS. Shares of one Fremont Fund may be exchanged for shares
of another Fremont Fund at their respective net asset values, provided that the
account registration remains identical. Exchanges may only be made for shares of
a Fremont Fund then offered for sale in your state of residence. It is required
that (1) all shares in one Fund must be exchanged or (2) the remaining balance
must be at least $1,500. This minimum balance requirement may be waived. These
exchanges are not tax-free and will result in a shareholder realizing a gain or
loss for tax purposes, except in the case of tax-deferred retirement accounts or
other tax-exempt shareholders that have not borrowed to acquire shares
exchanged.
Exchanges by mail should be sent to the Transfer Agent at the address set forth
in the last section of this Prospectus.
Purchases, redemptions and exchanges should be made for investment purposes
only. A pattern of frequent exchanges, purchases and sales is not acceptable
and, at the discretion of the Board of Directors, can be limited by the
Investment Company's refusal to accept further purchase and exchange orders from
the shareholder.
The Investment Company reserves the right to modify or eliminate the exchange
privilege upon 60 days' written notice to shareholders.
TELEPHONE EXCHANGE PRIVILEGE. An investor may elect on the account application
to authorize exchanges by telephone. A shareholder may give instructions
regarding exchanges by calling 800-548-4539. A shareholder wishing to initiate
the telephone exchange privilege should contact the Fund. This privilege will
not be added to an account without written instruction to do so from the
shareholder. Telephone requests received by 4:00 p.m., Eastern time, will be
processed the same day. During times of drastic economic or market conditions,
the telephone exchange privilege may be difficult to implement. The Transfer
Agent will make its best effort to accommodate shareholders when its telephone
lines are used to capacity. Under these circumstances, a shareholder should
consider using overnight mail to send a written exchange request.
FREMONT MUTUAL FUNDS 19
<PAGE>
See "Telephone Redemption Privilege" in the next section of this Prospectus.
AUTOMATIC INVESTMENT PLAN. A shareholder may authorize a withdrawal to be made
automatically once or twice each month from a credit balance in the
shareholder's bank checking, savings, negotiable on withdrawal (NOW) or similar
account, with the proceeds to be used to purchase shares of the Fund. The
minimum initial investment is waived for accounts opened with the Automatic
Investment Plan. The amount of the monthly investment must be at least $50, and
is not otherwise subject to the $200 minimum for subsequent investments. There
is no obligation to make additional payments, and the plan may be terminated by
the shareholder at any time. Termination requests must be received in writing at
least 5 days prior to the regular draft date, or the drafts will not cease until
the next cycle. The Transfer Agent may impose a charge for this service,
although no such charge currently is contemplated. If a shareholder's order to
purchase shares is cancelled due to nonpayment (for example, "insufficient
funds"), the shareholder's account will be subject to a $20 charge and the
shareholder will be responsible for reimbursing the Fund for any loss incurred
by reason of such cancellation. A shareholder wishing to initiate the plan on a
new or existing account must fill out an Automatic Investment Plan form. The
form is available on request.
HOW TO REDEEM SHARES
Shares are redeemed at no charge (other than wire transfer fees, if any) at the
net asset value next determined after receipt by the Transfer Agent of proper
written redemption instructions. The current charge for a wire transfer is $8
per wire. This is subject to change by the Transfer Agent at any time, without
prior notification. See "Calculation of Net Asset Value and Public Offering
Price."
Redemption orders received in proper form by the Transfer Agent before 4:00
p.m., Eastern time, will be priced at the net asset value determined on that day
(with certain limited exceptions discussed in the Statement of Additional
Information). Orders received by the Transfer Agent after 4:00 p.m., Eastern
time, will be entered at the next calculated net asset value.
Redemption proceeds can be sent by check, electronic transfer, or bank wire. An
electronic transfer can be processed only to bank checking and savings accounts.
Before requesting an electronic transfer, shareholders should confirm that their
financial institution can receive an electronic transfer. Currently, there is no
charge to shareholders for processing an electronic transfer.
Shareholders may have redemption proceeds sent by bank wire, electronic
transfer, or check to a designated bank account by providing in writing the
appropriate bank information to the Transfer Agent at the time of original
application. If the investor wishes to change the predesignated account, this
must be requested in writing with a signature guarantee (see "Signature
Guarantee" below).
Redemptions from retirement accounts require a written request, with a signature
guarantee, unless authorized under the Automatic Withdrawal Plan. Call the
Transfer Agent for specific instructions on redemptions.
For written redemption requests for an amount greater than $25,000, or a
redemption request that directs proceeds to a party other than the registered
account owner(s), all signatures must be guaranteed (see "Signature Guarantee.")
Because of market fluctuations, the amount a shareholder receives for shares
redeemed may be more or less than the amount paid for them.
Redemption of shares, exchanges and
20 FREMONT MUTUAL FUNDS
<PAGE>
redemptions under an Automatic Withdrawal Plan may result in taxable capital
gains or losses.
TELEPHONE REDEMPTION PRIVILEGE. An investor may elect on the regular account
application to authorize redemptions by telephone. This privilege will not be
added to an account without written authorization to do so from the shareholder.
A shareholder may then give instructions regarding redemptions by calling
800-548-4539. (The Telephone Redemption Privilege is not available for IRA or
other retirement accounts.) Telephone requests received by 4:00 p.m., Eastern
time, will be processed at the net asset value calculated that same day. During
times of drastic economic or market conditions, the telephone redemption
privilege may be difficult to implement. The Transfer Agent will make its best
effort to accommodate shareholders when its telephone lines are used to
capacity. Under these circumstances, a shareholder should consider using
overnight mail to send a written redemption request.
Neither the Investment Company, the Transfer Agent, nor their respective
affiliates, will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost or expense in
acting on such telephone instructions. The affected shareholder(s) will bear the
risk of any such loss. The Investment Company, or the Transfer Agent, or both,
will employ reasonable procedures to determine that telephone instructions are
genuine. If the Investment Company and/or the Transfer Agent do not employ such
procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of the transactions, and/or tape recording telephone
instructions.
AUTOMATIC WITHDRAWAL PLAN. A shareholder may request redemptions of a specified
dollar amount (minimum of $100) on either a monthly, quarterly, or yearly basis.
Currently, there is no charge for this service. Redemptions will be made on the
last business day of the month. Because a redemption constitutes a liquidation
of shares, the number of shares owned in the account will be reduced. Automatic
redemptions should not reduce the account below the minimum balance required
(currently $1,500). Shareholders may terminate the Automatic Withdrawal Plan at
any time, but not less than five days before a scheduled payment date. When an
exchange is made between Fremont Funds, shareholders must specify if they desire
the automatic withdrawal option to be transferred to a new account opened by the
exchange. As an account balance declines to the minimum permitted, the
shareholder must advise the Transfer Agent if the automatic withdrawal feature
is to be transferred to another account of the shareholder. Shareholders should
note that if there is an Automatic Withdrawal Plan established for an account
and the entire account is exchanged into another Fremont Fund, the automatic
withdrawal option must be renewed by written request to the Transfer Agent. A
shareholder wishing to initiate automatic redemptions must complete an Automatic
Withdrawal Plan form available from the Transfer Agent.
SIGNATURE GUARANTEE. To better protect the Fund and shareholders' accounts, a
signature guarantee is required for certain transactions. Signatures must be
guaranteed by an "eligible guarantor institution" as defined in applicable
regulations. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations.
FREMONT MUTUAL FUNDS 21
<PAGE>
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program. A notary public is not an
acceptable guarantor.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the documentation described above has been received by
the Transfer Agent in proper form. A shareholder in doubt about what documents
are required should contact the Transfer Agent.
Payment in redemption of shares is normally made within three business days
after receipt by the Transfer Agent of a request in proper form, provided that
payment in redemption of shares purchased by check or draft will be effected
only after such check or draft has been collected. Although it is anticipated
that this process will be completed in less time, it may take up to 15 days.
Redemption proceeds will not be delayed when shares have been paid for by bank
wire or where the account holds a sufficient number of shares already paid for
with collected funds.
Except in extraordinary circumstances, payment for shares redeemed will be made
promptly after receipt of a redemption request, if in good order, but not later
than seven calendar days after the redemption request is received in proper
form. Requests for redemption which are subject to any special conditions or
which specify an effective date other than as provided herein cannot be
accepted.
The Fund reserves the right to redeem mandatorily the shares in a shareholder's
account (other than a retirement plan account) if the balance is reduced to less
than $1,500 in net asset value through redemptions or other action by the
shareholder. Notice will be given to the shareholder at least 30 days prior to
the date fixed for such redemption, during which time the shareholder may
increase its holdings to an aggregate amount of $1,500 or more (with a minimum
purchase of $200 or more). This minimum balance may be waived.
REDEMPTION IN KIND. The Investment Company reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for redemption
or repurchase order by making payment in whole or in part in readily marketable
securities chosen by the Fund and valued as they are for purposes of computing
the Fund's net asset value (a redemption in kind). If payment is made in
securities, a shareholder may incur transaction expenses in converting these
securities into cash.
TRANSFER AGENT. Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati,
Ohio, 45201-5354, has been retained by the Advisor to serve as the Fund's
transfer agent, dividend paying and shareholder service agent. In addition,
Countrywide Fund Services, Inc. has been retained by the Advisor to assist in
providing certain administrative services to the Fund. Countrywide Fund
Services, Inc. is an indirect wholly-owned subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in residential mortgage lending.
RETIREMENT PLANS
Shares of the Fund may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs); SEP-IRAs;
SIMPLE IRAs; Qualified Retirement Plans for self-employed persons and their
employees; corporate pension and profit-sharing plans; and Section 403(b) Plans,
which are deferred compensation arrangements for employees of public schools and
certain charitable organizations. Forms for establishing IRAs, SEP-IRAs, SIMPLE
IRAs, and Qualified Retirement Plans
22 FREMONT MUTUAL FUNDS
<PAGE>
are available through the Investment Company, as are forms for corporate Pension
and Profit-Sharing plans. Please contact the Investment Company for more
information about establishing these accounts. In accordance with industry
practice, there may be an annual account charge for participation in these
plans. Information regarding these charges is available from the Investment
Company.
Retirement plan participants may receive additional services related to their
plan at no extra cost to any shareholder.
DIVIDENDS, DISTRIBUTIONS
AND FEDERAL INCOME
TAXATION
The Fund has qualified, and intends to continue to qualify to be treated as a
"regulated investment company" under Sub-chapter M of the Internal Revenue Code
(the "Code"). For any tax year in which the Fund so qualifies and meets certain
other distribution requirements, it will not incur a federal tax liability. Such
qualification under the Code requires a Fund to diversify its investments so
that, at the end of each fiscal quarter, (1) at least 50 % of the market value
of the Fund's assets is represented by cash, U.S. government securities,
securities of other regulated investment companies, and other securities,
limited, in respect to any one issuer, to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(2) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. government securities or the securities of
other regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
The Fund intends to distribute substantially all of its net investment income
once each year in September.
The Fund intends to distribute substantially all of its net realized capital
gains, if any, at the end of the calendar year (on or about December 15).
Dividend and capital gains distributions, if any, may be reinvested in
additional shares at net asset value on the day of reinvestment, or may be
received in cash. All dividends and distributions are taxable to a shareholder
(except tax-exempt shareholders who have not borrowed to acquire their shares)
whether or not they are reinvested in shares of the Fund. Any long-term capital
gains distributions are taxable to shareholders as long-term capital gains,
regardless of how long shareholders have held Fund shares. Distribution of
short-term capital gains will be subject to the tax as ordinary income.
Shareholders may elect:
- - to have all dividends and capital gain distributions automatically
reinvested in additional shares; or
- - to receive the income dividends and short-term capital gains distributions
in cash and accept the long-term capital gains distributions in additional
shares; or
- - to receive all distributions of income dividends and capital gains in
cash.
Automatic reinvestments will be at net asset value on the day of reinvestment.
If no election is made by a shareholder, all dividends and capital gain
distributions will be automatically reinvested. These elections may be changed
by the shareholder at any time, but to be effective for a particular dividend or
capital gain distribution, the election must be received by the Transfer Agent
approximately 5 business days prior to the payment date to permit the change to
be entered into the shareholder account. The federal income tax
FREMONT MUTUAL FUNDS 23
<PAGE>
status of dividends and capital gains distributions is the same whether taken in
cash or reinvested in shares.
Dividends and capital gains generally are taxable to shareholders at the time
they are paid. However, dividends or capital gains declared in October, November
or December by the Fund and paid in January are taxable as if paid in December.
The Fund will provide to its shareholders federal tax information annually by
January 31, including information about dividends and distributions paid during
the year.
If a shareholder has not furnished a certified correct taxpayer identification
number (generally a Social Security number) and has not certified that
withholding does not apply, or if the Internal Revenue Service has notified the
Fund that the taxpayer identification number listed on the account is incorrect
according to their records or that the shareholder is subject to backup
withholding, federal law generally requires the Fund to withhold 31% from any
dividends and/or redemptions (including exchange redemptions to the
shareholder). Amounts withheld are applied to the shareholder's federal tax
liability; a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. A shareholder should contact the
Transfer Agent if the shareholder is uncertain whether a proper taxpayer
identification number is on file with the Transfer Agent. Federal law also
requires the Fund to withhold 30%, or the applicable tax treaty rate, from
ordinary dividends paid to certain nonresident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts. Long-term capital gains distributions
may be subject to this withholding.
Dividends and interest from foreign issuers earned by the Fund may give rise to
withholding and other taxes imposed by foreign countries, generally at rates
from 10% to 40%. Tax conventions between certain countries and the United States
may reduce or eliminate these taxes. Foreign countries generally do not impose
taxes on capital gains with respect to investments by non-resident investors.
Except as indicated below, to the extent that the Fund does pay foreign
withholding or other foreign taxes on certain of its investments, investors will
not be able to deduct their pro rata shares of such taxes in computing their
taxable income nor be able to take their shares of such taxes as a credit
against U.S. income taxes.
If more than 50% of the value of the Fund's total assets at the close of its
fiscal year consist of securities of foreign corporations, the Fund will be
eligible to file, and will file, elections with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to include in their
federal income tax returns as gross income their respective pro rata portions of
foreign taxes paid by the Fund, to treat such amounts as foreign taxes paid by
them, and to deduct such respective pro rata portions in computing their taxable
incomes, or, alternatively, to use them as foreign tax credits (subject to
certain limitations) against their U.S. income taxes. The Fund will report
annually to its shareholders the amount per share of such withholding, if any.
The foregoing is a brief discussion of certain federal income tax
considerations. Please see "Taxes - Mutual Funds" in the Statement of Additional
Information for further information regarding the tax implications of an
investment in the Fund.
CALCULATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE
The Fund's net asset value per share is computed by dividing the value of the
securities held by the Fund, plus any cash or other assets (including interest
accrued and divi-
24 FREMONT MUTUAL FUNDS
<PAGE>
dends declared but not yet received) minus all liabilities (including accrued
expenses), by the total number of shares outstanding at such time. There is no
sales charge in connection with purchases or redemptions of Fund shares.
The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. The Fund's portfolio may
include securities which trade primarily on non-U.S. exchanges or otherwise in
non-U.S. markets. Because of time zone differences, the prices of these
securities, as used for net asset value calculations, may be established
substantially in advance of the close of the New York Stock Exchange. Foreign
securities may also trade on days when the New York Stock Exchange is closed
(such as a Saturday). The net asset value and public offering price of the Fund,
to the extent that it holds securities valued on foreign markets, may vary
during periods when the New York Stock Exchange is closed. As a result, the
value of the Fund's portfolio may be affected significantly by such trading on
days when a shareholder has no access to the Fund. For further information, see
"How to Invest," "How to Redeem Shares" and "Exchanges Between Funds" in this
Prospectus, and "How to Invest" and "Other Investment and Redemption Services"
in the "Statement of Additional Information."
The net asset value and public offering price of the Fund will be determined as
of the close of the regular session of the New York Stock Exchange. The shares
of the Fund are offered at net asset value without a sales charge. Purchase,
redemption and exchange orders received in proper form by the Transfer Agent
before 4:00 p.m., Eastern time, will be priced at the net asset value next
determined on that day (with certain limited exceptions discussed in the
Statement of Additional Information). Orders received by the Transfer Agent
after 4:00 p.m., Eastern time, will be entered at the next calculated net asset
value.
EXECUTION OF PORTFOLIO
TRANSACTIONS
Orders for the Fund's portfolio securities transactions are placed by the
Advisor or Sub-Advisor, as applicable. The Advisor and Sub- Advisor strive to
obtain the best available prices in the Fund's portfolio transactions, taking
into account the costs and promptness of executions. Subject to this policy,
transactions may be directed to those broker-dealers who provide research,
statistical and other information to the Fund, the Advisor or the Sub-Advisor or
who provide assistance with respect to the distribution of Fund shares.
There is no agreement or commitment to place orders with any broker-dealer.
Debt securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. Government securities
issued by the United States and other countries and money market securities in
which the Fund may invest are generally traded in the OTC markets. In
underwritten offerings, securities usually are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid. Dealers may receive commissions on futures, currency and options
transactions.
Commissions or discounts in foreign securities exchanges or OTC markets
typically are fixed and generally are higher than those in U.S. securities
exchanges or OTC markets. There is generally less government supervi-
FREMONT MUTUAL FUNDS 25
<PAGE>
sion and regulation of foreign exchanges and brokers than in the United States.
Foreign security settlements may, in some instances, be subject to delays and
related administrative uncertainties.
Subject to the requirements of the 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 Investment Company, the Advisor or the Sub-Advisor, or an affiliated
person of such person.
GENERAL INFORMATION
The Investment Company, organized as a Maryland corporation on July 13, 1988, is
a fully managed, open-end investment company. Currently, the Investment Company
has authorized several series of capital stock with equal dividend and
liquidation rights within each series. Investment Company shares are entitled to
one vote per share (with proportional voting for fractional shares) and are
freely transferable. Shareholders have no preemptive or conversion rights.
Shares may be voted in the election of directors and on other matters submitted
to the vote of shareholders. As permitted by Maryland law, there normally will
be no annual meeting of shareholders in any year, except as required under the
1940 Act. The 1940 Act requires that a meeting be held within 60 days in the
event that less than a majority of the directors holding office has been elected
by shareholders. Directors shall continue to hold office until their successors
are elected and have qualified. Investment Company shares do not have cumulative
voting rights, which means that the holders of a majority of the shares voting
for the election of directors can elect all of the directors. Shareholders
holding 10% of the outstanding shares may call a meeting of shareholders for any
purpose, including that of removing any director. A director may be removed upon
a majority vote of the shareholders qualified to vote in the election. The 1940
Act requires the Investment Company to assist shareholders in calling such a
meeting.
On any matter submitted to a vote of shareholders, such matter shall be voted by
the Fund's shareholders separately when the matter affects the specific interest
of the Fund (such as approval of the Advisory Agreement with the Advisor and the
Portfolio Management Agreement with the Sub-Advisor) except in matters where a
vote of all series in the aggregate is required by the 1940 Act or otherwise.
Pursuant to the Articles of Incorporation, the Investment Company may issue ten
billion shares. This amount may be increased or decreased from time to time in
the discretion of the Board of Directors. Each share of a series represents an
interest in that series only, has a par value of $0.0001 per share, represents
an equal proportionate interest in that series with other shares of that series
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to that series as may be declared at the discretion of the
Board of Directors. Shares of a series when issued are fully paid and are
non-assessable. The Board of Directors may, at its discretion, establish and
issue shares of additional series of the Investment Company.
Stephen D. Bechtel, Jr., and members of his family, including trusts for family
members, due to their shareholdings, may be considered controlling persons of
the Fund under applicable Securities and Exchange Commission regulations.
26 FREMONT MUTUAL FUNDS
<PAGE>
TELEPHONE NUMBERS AND ADDRESSES
To make an initial purchase:
1. By mail:
Fremont Mutual Funds, Inc.
c/o Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201-5354
Street address:
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
2. By wire: Via the Federal Reserve
Bank Wire System to:
FIFTH CIN
(Fifth Third Bank)
ABA No. 042000314
Credit to: Fremont Mutual Funds, Inc.
Account No. 999-36844
Further Credit to: Fremont Fund name, shareholder name, and account number
TO MAKE A SUBSEQUENT PURCHASE:
Include shareholder name and account number. Use the same instructions for
initial purchase.
To redeem shares:
1. By mail: same instructions as above for purchase by mail. Redemptions
greater than $25,000 or payments to a party or address other than
registered on the account require a signature guarantee. See "Signature
Guarantees."
2. By telephone: 800-548-4539
Requires prior selection of telephone redemption option.
For further copies of this Prospectus, the Statement of Additional Information,
and details of automatic investment, retirement and automatic withdrawal plans,
please contact:
Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
800-548-4539 or 415-284-8900
FREMONT MUTUAL FUNDS, INC.
Fremont Money Market Fund
Fremont California Intermediate
Tax-Free Fund
Fremont Bond Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
Fremont International Small Cap Fund
Fremont Emerging Markets Fund
Fremont U.S. Micro-Cap Fund
For more information on the Fremont Mutual Funds please call 800-548-4539 or
write to:
Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105
ADVISOR/TRANSFER AGENT
Fremont Investment Advisors, Inc.
333 Market Street, Suite 2600
San Francisco, CA 94105
SUB-TRANSFER AGENT
Mailing Address:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201-5354
800-548-4539
Street Address:
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
CUSTODIAN
The Northern Trust Company
50 South Lasalle Street
Chicago, IL 60675
FREMONT MUTUAL FUNDS 27
<PAGE>
LEGAL COUNSEL
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104
AUDITORS
Coopers & Lybrand, L.L.P.
333 Market Street
San Francisco, CA 94105
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Fund or the Advisor. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
28 FREMONT MUTUAL FUNDS
<PAGE>
NOTES:
<PAGE>
[FREMONT FUNDS LOGO]
50 Beale Street, Suite 100, San Francisco, CA 94105 - 800-548-4539 (press 1)
9801 Washingtonian Blvd., Suite 105, Gaithersburg, MD 20878 - 888-373-6684
3000 Post Oak Blvd., Suite 100, Houston, TX 77056 - 800-735-2705
Distributed by Funds Distributor, Inc., 50 Beale Street, Suite 100,
San Francisco, CA 94105
<PAGE>
<PAGE>
FREMONT MUTUAL FUNDS, INC.
FREMONT MONEY MARKET FUND
FREMONT BOND FUND
FREMONT GLOBAL FUND
FREMONT GROWTH FUND
FREMONT INTERNATIONAL GROWTH FUND
FREMONT INTERNATIONAL SMALL CAP FUND
FREMONT EMERGING MARKETS FUND
FREMONT U.S. MICRO-CAP FUND
TOLL-FREE: 1-800-548-4539
PART B
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information concerning Fremont Mutual Funds, Inc.
(the "Investment Company") is not a prospectus for the Investment Company.
This Statement supplements the Prospectus for the Investment Company dated
March 1, 1997 and should be read in conjunction with the Prospectus. Copies of
the Prospectus are available without charge by calling the Investment Company
at the phone number printed above.
The date of this Statement of Additional Information is March 1, 1997.
8funds.sai
February 27, 1997
- 5 -
<PAGE>
LETTER FROM THE CHAIRMAN
DEAR INVESTOR:
The history of the Fremont Funds is a story of development driven by
customer needs.
In 1978, members of Fremont Investment Advisors took over the asset
allocation services for the retirement plan assets of the Bechtel Group.
Bechtel is a San Francisco-based international construction and engineering
company with more than 18,000 employees throughout the world.
In the years that followed, the participants in the Bechtel Retirement Plan
became accustomed to the performance of their retirement plan investment
options. These investment options featured diversified portfolios, and a
global investment orientation.
As they retired or left the retirement plan, some participants asked if they
could move their plan assets into Individual Retirement Accounts (IRAs) with
similar investment styles -- and the same investment manager -- as the Bechtel
Retirement Plan. To meet this demand, Fremont Investment Advisors (FIA)
introduced the Fremont Mutual Funds at the end of 1988.
Our customers subsequently asked us to introduce more mutual funds and
continue our focus on worldwide investing. Today, the Fremont Family of Funds
has grown to nine no-load funds, which are designed to meet the needs of
virtually every investor.
SPECIALIZED INVESTMENT EXPERTISE
The investment managers at FIA are seasoned professionals who focus their
efforts in areas where they have excelled for many years. To enhance our pool
of internal investment talent, Fremont Funds has formed alliances with an
impressive list of globally-prominent investment management professionals,
providing our investors with access to a level of investment talent usually
reserved for the nation's largest institutional investors.
FOCUS ON CUSTOMER SERVICE
A final element of Fremont Funds' commitment to its investors is our goal of
providing the highest quality service in the industry. We are proud of the
superior level of service we provide. Our Investor Relations Group understands
mutual funds and the investment process, ensuring that you receive quick and
expert access to the information that you need.
This brochure is designed to provide you with an overview of the funds which
today make up the Fremont Family. I encourage you to read it and to learn for
yourself what thousands of investors already know -- that the Fremont Funds
deliver a level of service, selection, and investment expertise that other
mutual fund companies simply do not.
Sincerely,
/s/ Michael H. Kosich
Michael H. Kosich
President
- 1 -
<PAGE>
INTRODUCTION TO THE FUNDS
CHOOSING YOUR INVESTMENTS
MUTUAL FUNDS GEARED TOWARD A VARIETY OF INVESTMENT NEEDS
Choosing the investments that are "right" for you is no easy task. When
making your choices, you must weigh a number of factors:
o YOUR PERSONAL INVESTMENT OBJECTIVES -- Are you seeking capital growth,
income, total return, safety or liquidity?
o YOUR TOLERANCE FOR RISK -- Are you an aggressive or conservative
investor?
o YOUR TIME HORIZON -- Are you investing for the short term or many years
from now?
At Fremont Funds, we recognize that every investor has investment needs and
attitudes that are uniquely his or hers. By developing a family of funds that
covers a broad spectrum of investment objectives, Fremont Funds give you the
flexibility to choose the combination of funds that is appropriate
for you. The chart below compares the potential return and relative price
volatility of six categories of mutual funds, and shows the Fremont Funds
that fall into each category.
CLASS: MONEY MARKET
VOLATILITY PROFILE: VOLATILITY: LOW
INVESTMENT HORIZON: 0-2 YEARS
RETURN PROFILE: LOW
DESCRIPTION: Money Market Funds provide
liquidity and price stability by
investing in short-term
investments.
FREMONT FUND: FREMONT MONEY MARKET FUND
CLASS: BONDS
VOLATILITY PROFILE: VOLATILITY: MODERATELY LOW
INVESTMENT HORIZON: 2+ YEARS
RETURN PROFILE: MODERATELY LOW
DESCRIPTION: Bond Funds typically have less
price fluctuation than stock funds, with
historically lower total returns.
FREMONT FUND: FREMONT BOND FUND
CLASS: ASSET ALLOCATION
VOLATILITY PROFILE: VOLATILITY: MODERATE
INVESTMENT HORIZON: 3+ YEARS
RETURN PROFILE: MODERATELY HIGH
DESCRIPTION: Asset Allocation Funds invest in more than one
asset class -- stocks, bonds and money market
securities -- and sometimes in more than one
country, which helps lower the overall
volatility of the fund.
FREMONT FUND: FREMONT GLOBAL FUND
CLASS: LARGE COMPANY STOCKS
VOLATILITY PROFILE: VOLATILITY: HIGH
INVESTMENT HORIZON: 4+ YEARS
RETURN PROFILE: HIGH
DESCRIPTION: Domestic and International Large
Company Stock Mutual Funds
provide potentially high long-term returns
with a high level of price volatility.
FREMONT FUND: FREMONT GROWTH FUND
FREMONT INTERNATIONAL GROWTH FUND
CLASS: SMALL COMPANY STOCKS
VOLATILITY PROFILE: VOLATILITY: VERY HIGH INVESTMENT
HORIZON: 5+ YEARS
RETURN PROFILE: VERY HIGH
DESCRIPTION: Domestic and International Small
Company Stock Mutual Funds
provide potentially higher long-term
returns with a high level of price volatility.
FREMONT FUND: FREMONT INTERNATIONAL SMALL CAP FUND
FREMONT U.S. MICRO-CAP FUND
CLASS: EMERGING MARKET STOCKS
VOLATILITY PROFILE: VOLATILITY: VERY HIGH INVESTMENT
HORIZON: 5+ YEARS
RETURN PROFILE: VERY HIGH
DESCRIPTION: Emerging Market Stock Funds provide potentially
higher long-term returns with a high level of
price volatiltiy.
- 2 -
<PAGE>
BUILDING A DIVERSIFIED PORTFOLIO
Pie Charts:
INCOME:
100% Money Market 50% Money Market
50% Bond
INCOME WITH GROWTH: GROWTH WITH INCOME:
25% Money Market 25% Bond
25% Bond 50% Global Stock & Bonds
50% Global Stock & Bonds 25% Large Company Stock
GROWTH: AGGRESSIVE GROWTH:
50% Global Stock & Bonds 25% Global Stock & Bonds
25% Large Company Stock 25% Large Company Stock
25% Small Company Stock 25% Emerging Markets Stock
25% Small Company Stock
Professional money managers agree that diversification -- spreading
investments among several different asset classes, countries or individual
securities -- is one of the surest ways to reduce risk in an investment
portfolio.
Because all mutual funds contain a number of different securities, they
provide a level of diversification. Globally diversified funds which invest in
both stocks and bonds, such as the Fremont Global Fund, allow you to further
diversify across a number of asset categories within a single investment.
Many investors use another powerful method of adding diversification to
their port-folio. By investing in several different funds, they create a mix
of investments uniquely suited to their particular investment goals and risk
tolerance. For example, investors whose primary goal is income might invest
50% of their assets in a bond fund and 50% in a money market fund. At the
other end of the spectrum, aggressive investors seeking maximum growth
potential might choose a portfolio comprised of 25% global stocks and bonds,
25% large company stocks, 25% emerging markets stock and 25% small company
stock funds. These and other examples are illustrated above. They are included
for illustration purposes only, and do not represent a recommended allocation
for any particular investor.
BEFORE MAKING YOUR INVESTMENT DECISIONS
This brochure contains a brief overview of the investment objectives and
strategies for eight of the Fremont Funds. Information about our ninth fund,
the Fremont California Intermediate Tax-Free Fund, is available in a separate
prospectus and brochure. Before deciding which fund or combination of funds is
right for you, be sure to obtain a prospectus by calling 800-548-4539 (press
1). The prospectus contains more detailed information about the funds,
including charges and expenses. Please read it carefully before investing or
sending money.
- 3 -
<PAGE>
GLOBAL AND INTERNATIONAL INVESTMENTS
THE FREMONT GLOBAL FUND (SIMILAR ASSET ALLOCATION STRATEGY AS FUND A IN THE
BECHTEL RETIREMENT PLAN)
GLOBAL FUND AT A GLANCE:
Inception Date: November 18, 1988
Investment Manager: Fremont Investment Advisors
Objective: Seeks to maximize total return while reducing risk
Invests in: U.S. and foreign stocks, bonds and money market securities
POTENTIAL
RETURN:MODERATELY HIGH
VOLATILITY:MODERATE
INVESTMENT
HORIZON:3+ YEARS
INVESTMENT OBJECTIVE
If a single asset class -- like stocks, bonds or money market investments --
in a single country consistently outperformed all other asset classes
worldwide, your investment decisions would be easy. Unfortunately, no single
asset class or country investment can offer consistently attractive
performance year after year. Investing in international markets also involves
added risk due to political uncertainty and exchange rate fluctuations.
Recognizing these facts, the Fremont Global Fund seeks to maximize total
return while reducing some of these risks by allocating and reallocating its
assets among a range of different asset classes in countries throughout the
world. These asset classes include U.S. stocks and bonds, foreign stocks and
bonds and money market securities.
INVESTMENT STRATEGY
The Fremont Global Fund simplifies your life by putting complex asset
allocation decisions in the hands of professional money managers.
The fund managers review the allocations to each asset class on an ongoing
basis and then determine the investment outlook for each class in each
country. The managers then adjust the Fund's asset mix so it will best fit the
Global Fund's objective.
INVESTMENT MANAGEMENT
The Fremont Global Fund is managed by Fremont Investment Advisors, a team of
seasoned professionals who have successfully employed the strategy of global
asset allocation for nearly two decades.
- 4 -
<PAGE>
THE FREMONT INTERNATIONAL GROWTH FUND
INTERNATIONAL GROWTH FUND AT A GLANCE:
Inception Date: March 1, 1994
Investment Manager: Fremont Investment Advisors, Inc.
Objective: Long-term capital appreciation
Invests in: The stock of companies outside the U.S.
POTENTIAL
RETURN:HIGH
VOLATILITY:HIGH
INVESTMENT
HORIZON:4+ YEARS
INVESTMENT OBJECTIVE
Today, nearly 65% of the world's stock market opportunities lie outside the
borders of the U.S. The Fremont International Growth Fund pursues long-term
growth of capital by selectively investing in foreign stocks.
INVESTMENT STRATEGY
The International Growth Fund allows U.S. investors to invest in a
diversified pool of stocks issued by companies located in some of the world's
fastest growing regions. At least 90% of the Fund's assets will usually be
invested in the stocks of companies located outside the United States. The
Fund may invest up to 50% of its total assets in small to medium-sized
companies in both developed and emerging international markets.1
INVESTMENT MANAGEMENT
The Fremont International Growth Fund is managed by Fremont Investment
Advisors. Fremont Investment Advisors has used a team approach to manage
international stock portfolios since 1988. This team currently manages over
$200 million in international stock investments.
1 Investing in small companies throughout the world involves additional risk
because of high trading costs, currency exchange rate risks and possible
difficulties with the liquidity of smaller, thinly-traded stocks.
THE FREMONT INTERNATIONAL SMALL CAP FUND
INTERNATIONAL SMALL CAP FUND AT A GLANCE:
Inception Date: June 30, 1994
Investment Manager: Acadian Asset Management, Inc.
Objective: Long-term capital appreciation
Invests in: The stock of small companies outside the U.S.
POTENTIAL
RETURN:VERY HIGH
VOLATILITY:VERY HIGH
INVESTMENT
HORIZON:5+ YEARS
INVESTMENT OBJECTIVE
The Fremont International Small Cap Fund seeks to provide investors with
long-term capital appreciation by primarily investing in the stocks of small
capitalization ("small cap") companies located outside the United States.
International small cap firms are defined as the smallest 20% of firms in both
developed and emerging markets worldwide, based on market capitalization.1
INVESTMENT STRATEGY
The subadvisor for the Fremont International Small Cap Fund has compiled a
proprietary database which is used to analyze more than 20,000 small companies
outside the United States. This database is used to help identify individual
stocks which the fund managers believe may help enhance the Fund's return.
INVESTMENT MANAGEMENT
Acadian Asset Management, Inc., is a Boston-based global investment firm
with over $3.9 billion in assets under management. Acadian has built an
impressive track record managing the assets of some of the largest pension
funds in America.
1 Investing in small companies throughout the world involves additional risk
because of high trading costs, currency exchange rate risks and possible
difficulties with the liquidity of smaller, thinly-traded stocks.
THE FREMONT EMERGING MARKETS FUND
EMERGING MARKETS FUND AT A GLANCE:
Inception Date: June 24, 1996
Investment Manager: Credit Lyonnais International Asset
Management (HK) Ltd.
Objective: Long-term capital appreciation
Invests in: Stocks of companies in developing markets
POTENTIAL RETURN: VERY HIGH
VOLATILITY: VERY HIGH
INVESTMENT HORIZON: 5+ YEARS
INVESTMENT OBJECTIVE
The Fremont Emerging Markets Fund seeks long-term capital appreciation by
primarily investing in the stocks of companies in emerging or developing
countries. The Fund is intended for long-term investors, since investments in
emerging markets may exhibit greater price volatility than investments in
developed markets.
INVESTMENT PROCESS
The managers of the Fund create stock portfolios in the emerging markets using
an active "bottom-up" stock picking approach. The managers begin with a
database of over 2,500 companies. Rigorous research, including company visits,
is then conducted on the most promising companies. Finally, the top 10
companies per emerging market are identified and individual stocks are
selected within each market.
INVESTMENT MANAGEMENT
The Fund is sub-advised by Credit Lyonnais International Asset Management (HK)
Ltd. (CLIAM). Based in Hong Kong, and with offices in Singapore, London and
San Francisco, CLIAM has gained world renown as investors in developing
markets. CLIAM concentrates investments in the emerging markets of Asia,
including South Korea, Singapore, Malaysia, Thailand, Taiwan and the
Philippines.
- 5 -
<PAGE>
U.S. STOCK MUTUAL FUNDS
For decades, growth-oriented investors have turned repeatedly to the U.S.
stock market in pursuit of long-term capital appreciation. Fremont offers a
choice of two professionally-managed U.S. equity funds, one that invests
primarily in larger companies and one that invests primarily in the nation's
smallest firms.
THE FREMONT GROWTH FUND
GROWTH FUND AT A GLANCE:
Inception Date: August 14, 1992
Investment Manager:Fremont Investment Advisors, Inc.
Objective: Long-term capital appreciation
Invests in: U.S. stocks
POTENTIAL
RETURN:HIGH
VOLATILITY:HIGH
INVESTMENT
HORIZON:4+ YEARS
INVESTMENT OBJECTIVE
Historically, stocks have produced the best long-term growth for investors.
This time-honored strategy is the oundation for the Fremont Growth Fund --
which pursues long-term growth of capital by investing in a diversified
portfolio of common stocks.
INVESTMENT STRATEGY
Most stock funds follow either a "growth" or "value" management
style."Growth" funds purchase the stocks of companies that are expected to
produce high earnings grwth. "Value" funds concentate on stocks with prices
that appear to be low relative to earnings, book value and dividends.
Depending on current economic conditions, the managers of the Fund
allocate its investment between the growth and the value styles to try to
achieve exceptional performance. At any one time one style typically dominates
the portfolio.
INVESTMENT MANAGEMENT
The Fremont Growth Fund is managed by a team from Fremont Investment
Advisors, Inc. This team has been managing U.S. stock investment portfolios
for nearly 20 years, and currently manages over $400 million.
THE FREMONT U.S. MICRO-CAP FUND
U.S. MICRO-CAP FUND AT A GLANCE:
Inception Date: June 30, 1994
Investment Manager: Morgan Grenfell Capital Management, Inc.
Objective: Long-term capital appreciation
Invests in: The stock of the smallest companies in the U.S.
POTENTIAL
RETURN:VERY HIGH
VOLATILITY:VERY HIGH
INVESTMENT
HORIZON:5+ YEARS
INVESTMENT OBJECTIVE
The history of the U.S. stock market reveals that, while the nation's
smallest companies are more volatile than their larger counterparts, as a
group they have also grown more rapidly. The Fremont U.S. Micro-Cap Fund seeks
to capitalize on the potential of very small growth companies, and deliver
long-term capital appreciation, by investing in common stocks and convertible
securities.
INVESTMENT STRATEGY
The U.S. Micro-Cap Fund invests in the nation's smallest publicly traded
firms -- primarily companies with market capitalization levels ranging from
$10 million to $425 million. Although there may be liquidity and business
risks associated with investments in these companies, many times they also
have very high revenue and profit growth.
The Fund's sub-advisor uses a "bottom-up" strategy to target companies it
believes will grow more rapidly than the U.S. economy as a whole. To diversify
the portfolio, stocks from a variety of business sectors are purchased.
INVESTMENT MANAGEMENT
Morgan Grenfell Capital Management manages over $500 million in small cap
and micro-cap stocks, primarily for large pension funds.
- 6 -
<PAGE>
BOND AND MONEY MARKET FUNDS
Investors seeking income, preservation of capital, or a way to diversify a
portfolio frequently invest in bonds or money market securities. The Fremont
Funds make both of these asset classes readily accessible through two
professionally-managed funds.
THE FREMONT BOND FUND (FUND B IN THE BECHTEL RETIREMENT PLAN) BOND FUND AT A
GLANCE:
Inception Date: March 30, 1993
Investment Manager: Pacific Investment Management Co.
Objective: Total return and preservation of capital
Invests in: Primarily investment-grade, intermediate-term bonds
POTENTIAL
RETURN: MODERATELY LOW
VOLATILITY:MODERATELY LOW
INVESTMENT
HORIZON:2+ YEARS
INVESTMENT OBJECTIVE
Experienced investors know that there are at least two potential ways to
profit from bond investments: the income that bonds generate, and the net
capital gains that may occur if bonds rise in value. The Fremont Bond Fund
seeks to provide investors with high total returns -- income plus capital
gains -- consistent with preservation of capital and prudent investment
management.
INVESTMENT STRATEGY
The Fremont Bond Fund invests primarily in investment-grade bonds issued by
the U.S. government and domestic corporations, as well as international
governments and corporations. Depending upon market conditions, the average
maturity of these securities will range from 5 to 15 years. Historically,
intermediate-term bonds have produced higher yields than less volatile money
market instruments, without the higher levels of volatility associated with
higher-yielding long-term bonds.
INVESTMENT MANAGEMENT
Investment decisions for the Fremont Bond Fund are made by The Pacific
Investment Management Company (PIMCO), a nationally recognized fixed-income
specialist with more than two decades of experience. PIMCO currently manages
more than $83 billion for large institutional clients.
THE FREMONT MONEY MARKET FUND
(FUND C IN THE BECHTEL RETIREMENT PLAN)
MONEY MARKET FUND
AT A GLANCE:
Inception Date: November 18, 1988
Investment Manager: Fremont Investment Advisors, Inc.
Objective: Current income, capital preservation and liquidity
Invests in: High-quality money market securities
POTENTIAL
RETURN:LOW
VOLATILITY:LOW
INVESTMENT
HORIZON:0-2 YEARS
INVESTMENT OBJECTIVE
If you're like most investors, you want to keep a certain portion of your
assets liquid by investing them in low-risk accounts. The Fremont Money Market
Fund's objective is to maximize current income consistent with preservation of
capital and liquidity.
INVESTMENT STRATEGY
The Fremont Money Market Fund places its emphasis on price stability,
pursuing a stable share price of $1.00.1 To qualify for the Fund's portfolio,
a security must have a maturity of thirteen months or less and be of high
quality -- within Standard & Poor's or Moody's top rating categories (A-1,
P-1, respectively).
INVESTMENT MANAGEMENT
Fremont Investment Advisors, with nearly two decades of professional money
management experience, directs the investments of the Fremont Money Market
Fund.
1The Fund is neither insured nor guaranteed by the U.S. Government or any
other entity and there is no assurance that the stable $1.00 net asset value
objective will be met.
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FEATURES & BENEFITS
INVESTING IN THE FREMONT FUNDS PROVIDES ALL OF THESE BENEFITS:
100% NO-LOAD
Every dollar you invest works to help you achieve your investment goals.
The Fremont Funds have:
o No sales charges on purchases ("front-end" loads)
o No redemption charges ("back-end" loads)
o No fees to exchange shares of one Fremont Fund for shares of another.
NO IRA MAINTENANCE FEES
With a Fremont Funds IRA, there are no annual IRA maintenance fees to reduce
your account balance.
AFFORDABLE INVESTMENT MINIMUMS
The minimum initial investment in any Fremont Fund is just $2,000 (only
$1,000 for an IRA). This minimum investment is waived for investors using the
Automatic Investment Plan.
AUTOMATIC INVESTMENT PLAN
If you wish, you can automatically add to your mutual fund balance. Simply
decide how much you'd like to invest (minimum of $50/month per fund) and that
amount will be automatically transferred from the checking or savings account
you specify.
GIFTS TO MINORS
Investors can give shares of a Fremont Fund to a child and enjoy valuable
tax benefits under the Uniform Gift to Minors Act.
TAX-DEFERRED RETIREMENT PLANS
Shares of Fremont Funds may be purchased for a variety of tax-deferred
retirement plans, including Individual Retirement Accounts (IRAs), Qualified
Retirement Plans (Keoghs), SIMPLEs and Simplified Employee Pension Plans
(SEPs) for small business owners and employees.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Regular dividends and capital gains distributions may be automatically
reinvested to purchase additional shares of a fund or, if you prefer, may be
paid directly to you in cash.
REDEMPTIONS AND EXCHANGES BY TELEPHONE1
As an added convenience, you can elect to redeem shares by telephone. All
redemptions are at current net asset value (NAV) which may be more or less
than the original cost of the shares.
AUTOMATIC WITHDRAWALS
Investors seeking a regular source of income may request withdrawals of $100
or more from the Fremont Funds on a monthly, quarterly or yearly basis.2
Withdrawals can be sent directly to a bank account if you choose. There is no
charge for this convenient service.
CHECKWRITING
Shareholders in the Fremont Money Market, Bond and California Intermediate
Tax-Free Funds may write checks for $250 or more from their accounts. IRA
customers who are over 59-1/2 may also write checks for $250 or more from
their Fremont Money Market or Bond Fund accounts.
FOR MORE INFORMATION
For more complete information about the Fremont Funds, including charges and
expenses, call 800-548-4539 (press 1) for a free prospectus. Read the
prospectus carefully before investing or sending money.
1Telephone redemption is not available for IRA or other retirement accounts.
2Because systematic withdrawals require a liquidation of shares, the number of
shares owned in the account will be reduced.
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INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The descriptions below are intended to supplement the material in the
Prospectus under "Investment Objectives, Policies and Risk Considerations" and
"General Investment Policies."
FREMONT BOND FUND, FREMONT GLOBAL FUND, FREMONT GROWTH FUND, FREMONT
INTERNATIONAL GROWTH FUND, FREMONT INTERNATIONAL SMALL CAP FUND,
FREMONT EMERGING MARKETS FUND AND FREMONT U.S. MICRO-CAP FUND:
WRITING COVERED CALL OPTIONS. The Fremont Bond Fund (formerly the Fremont
Income Fund), the Fremont Global Fund (formerly the Fremont Multi-Asset Fund),
the Fremont Growth Fund (formerly the Fremont Equity Fund), the Fremont
International Growth Fund, the Fremont International Small Cap Fund, the
Fremont Emerging Markets Fund and the Fremont U.S. Micro-Cap Fund
(collectively, the "Funds") may write (sell) "covered" call options and
purchase options to close out options previously written by the Funds. The
purpose of writing covered call options is to generate additional premium
income for the Funds. This premium income will serve to enhance the Funds'
total returns and will reduce the effect of any price decline of the security
or currency involved in the option. Covered call options will generally be
written on securities and currencies which, in the opinion of Fremont
Investment Advisors, Inc. (the "Advisor") or a Fund's sub-advisor
("Sub-Advisor"), are not expected to make any major price moves in the near
future but which, over the long term, are deemed to be attractive investments
for the Funds.
A call option gives the holder (buyer) the "right to purchase" a security or
currency at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at
which the writer effects a closing purchase transaction by purchasing an
option identical to that previously sold. To secure his obligation to deliver
the underlying security or currency in the case of a call option, a writer is
required to deposit in escrow the underlying security or currency or other
assets in accordance with the rules of the Options Clearing Corporation. The
Funds will write only covered call options. This means that each Fund will
only write a call option on a security, index, or currency which that Fund
already owns or has the right to acquire without additional cost.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
each Fund's investment objectives. The writing of covered call options is a
conservative investment technique
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believed to involve relatively little risk (in contrast to the writing of
naked or uncovered options, which no Fund will do), but capable of enhancing a
Fund's total return. When writing a covered call option, a Fund, in return for
the premium, gives up the opportunity for profit from a price increase in the
underlying security or currency above the exercise price, but conversely
retains the risk of loss should the price of the security or currency decline.
Unlike one who owns securities or currencies not subject to an option, a Fund
has no control over when it may be required to sell the underlying securities
or currencies, since it may be assigned an exercise notice at any time prior
to the expiration of its obligation as a writer. If a call option which the
Fund involved has written expires, that Fund will realize a gain in the amount
of the premium; however, such gain may be offset by a decline in the market
value of the underlying security or currency during the option period. If the
call option is exercised, the Fund involved will realize a gain or loss from
the sale of the underlying security or currency. The security or currency
covering the call will be maintained in a separate account by that Fund's
custodian. No Fund will consider a security or currency covered by a call to
be "pledged" as that term is used in its policy which limits the pledging or
mortgaging of its assets.
The premium received is the market value of an option. The premium a Fund will
receive from writing a call option will reflect, among other things, the
current market price of the underlying security or currency, the relationship
of the exercise price to such market price, the historical price volatility of
the underlying security or currency, and the length of the option period. Once
the decision to write a call option has been made, the Advisor or Sub-Advisor,
in determining whether a particular call option should be written on a
particular security or currency, will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will
exist for those options. The premium received by a Fund for writing covered
call options will be recorded as a liability in that Fund's statement of
assets and liabilities. This liability will be adjusted daily to the option's
current market value, which will be the latest sales price at the time at
which the net asset value per share of that Fund is computed (close of the
regular trading session of the New York Stock Exchange), or, in the absence of
such sale, the latest asked price. The liability will be extinguished upon
expiration of the option, the purchase of an identical option in a closing
transaction, or delivery of the underlying security or currency upon the
exercise of the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Fund to write
another call option on the underlying security or currency with either a
different exercise price or
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expiration date or both. If a Fund desires to sell a particular security or
currency from its portfolio on which it has written a call option, it will
seek to effect a closing transaction prior to, or concurrently with, the sale
of the security or currency. There is, of course, no assurance that the Fund
involved will be able to effect such closing transactions at a favorable
price. If a Fund cannot enter into such a transaction, it may be required to
hold a security or currency that it might otherwise have sold, in which case
it would continue to be at market risk with respect to the security or currency.
The Fund involved will pay transaction costs in connection with the writing of
options to close out previously written options. Such transaction costs are
normally higher than those applicable to purchases and sales of portfolio
securities.
Call options written by the Funds will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may
be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to
time, a Fund may purchase an underlying security or currency for delivery in
accordance with an exercise notice of a call option assigned to it, rather
than delivering such security or currency from its portfolio. In such cases,
additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from the
writing of the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying
security or currency, any loss resulting from the repurchase of a call option
is likely to be offset in whole or in part by appreciation of the underlying
security or currency owned by the Fund involved.
FEDERAL INCOME TAX TREATMENT OF COVERED CALL OPTIONS. Expiration of an option
or entry into a closing purchase transaction will result in capital gain or
loss. If the option was "in-the-money" (i.e., the option strike price was less
than the market value of the security or currency covering the option) at the
time it was written, any gain or loss realized as a result of the closing
purchase transaction will be long-term capital gain or loss if the security or
currency covering the option was held for more than one year prior to the
writing of the option. The holding period of the securities or currencies
covering an "in-the-money" option will not include the period of time the
option is outstanding. If the option is exercised, a Fund will realize a gain
or loss from the sale of the security or currency covering the call option,
and in determining such gain or loss the premium will be included in the
proceeds of the sale.
If a Fund writes options other than "qualified covered call options," as
defined in the Internal Revenue Code of 1986, as amended (the "Code"), any
losses on such options transactions, to the extent they
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do not exceed the unrealized gains on the securities or currencies covering
the options, may be subject to deferral until the securities or currencies
covering the options have been sold. In addition, any options written against
securities other than bonds or currencies will be considered to have been
closed out at the end of the Fund's fiscal year and any gains or losses will
be recognized for tax purposes at that time. Under Code Section 1256, such
gains or losses would be characterized as 60% long-term capital gain or loss
and 40% short-term capital gain or loss. Code Section 988 may also apply to
currency transactions. Under Section 988, each foreign currency gain or loss
is generally computed separately and treated as ordinary income or loss. In
the case of overlap between Sections 1256 and 988, special provisions
determine the character and timing of any income, gain, or loss. Each Fund
will attempt to monitor Section 988 transactions to avoid an adverse tax
impact.
WRITING COVERED PUT OPTIONS. The Funds may write covered put options. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) has the obligation to buy, the underlying security or currency at the
exercise price during the option period. So long as the obligation of the
writer continues, the writer may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring the writer to make
payment of the exercise price against delivery of the underlying security or
currency. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
The Funds may write put options only on a covered basis, which means that a
Fund would maintain in a segregated account cash and liquid securities in an
amount not less than the exercise price at all times while the put option is
outstanding. (The rules of the Clearing Corporation currently require that
such assets be deposited in escrow to secure payment of the exercise price.) A
Fund would generally write covered put options in circumstances where the
Advisor or Sub- Advisor wishes to purchase the underlying security or currency
for that Fund's portfolio at a price lower than the current market price of
the security or currency. In such event the Fund would write a put option at
an exercise price which, reduced by the premium received on the option,
reflects the lower price it is willing to pay. Since a Fund would also receive
interest on debt securities or currencies maintained to cover the exercise
price of the option, this technique could be used to enhance current return
during periods of market uncertainty. The risk in such a transaction would be
that the market price of the underlying security or currency would decline
below the exercise price less the premiums received.
PURCHASING PUT OPTIONS. The Funds may purchase put options. As the holder of a
put option, a Fund has the right to sell the underlying security or currency
at the exercise price at any time during the option period. Such Fund may
enter into closing sale transactions with respect to such options, exercise
them, or permit them to expire. A Fund may purchase put options for defensive
purposes in order to
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protect against an anticipated decline in the value of its securities
or currencies. An example of such use of put options is provided
below.
The Funds may purchase a put option on an underlying security or currency (a
"protective put") owned as a defensive technique in order to protect against
an anticipated decline in the value of the security or currency. Such hedge
protection is provided only during the life of the put option when a Fund, as
the holder of the put option, is able to sell the underlying security or
currency at the put exercise price regardless of any decline in the underlying
security's market price or currency's exchange value. For example, a put
option may be purchased in order to protect unrealized appreciation of a
security or currency where the Advisor or Sub-Advisor deems it desirable to
continue to hold the security or currency because of tax considerations. The
premium paid for the put option and any transaction costs would reduce any
capital gain otherwise available for distribution when the security or
currency is eventually sold.
The Funds may also purchase put options at a time when a Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold
when it has remaining value, and if the market price of the underlying
security or currency remains equal to or greater than the exercise price
during the life of the put option, the Fund involved will lose its entire
investment in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale
transaction.
A Fund will commit no more than 5% of its assets to premiums when purchasing
put options. The premium paid by such Fund when purchasing a put option will
be recorded as an asset in that Fund's statement of assets and liabilities.
This asset will be adjusted daily to the option's current market value, which
will be the latest sale price at the time at which that Fund's net asset value
per share is computed (close of trading on the New York Stock Exchange), or,
in the absence of such sale, the latest bid price. The asset will be
extinguished upon expiration of the option, the selling (writing) of an
identical option in a closing transaction, or the delivery of the underlying
security or currency upon the exercise of the option.
PURCHASING CALL OPTIONS. The Funds may purchase call options. As the holder of
a call option, a Fund has the right to purchase the underlying security or
currency at the exercise price at any time during the option period. Each Fund
may enter into closing sale transactions with respect to such options,
exercise them, or permit them to expire. A Fund may purchase call options for
the purpose of increasing its current return or avoiding tax consequences
which could reduce its current return. A Fund may also purchase call options in
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order to acquire the underlying securities or currencies. Examples of
such uses of call options are provided below.
Call options may be purchased by a Fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund involved to acquire the
securities or currencies at the exercise price of the call option plus the
premium paid. At times the net cost of acquiring securities or currencies in
this manner may be less than the cost of acquiring the securities or
currencies directly. This technique may also be useful to such Fund in
purchasing a large block of securities that would be more difficult to acquire
by direct market purchases. So long as it holds such a call option rather than
the underlying security or currency itself, the Fund involved is partially
protected from any unexpected decline in the market price of the underlying
security or currency and in such event could allow the call option to expire,
incurring a loss only to the extent of the premium paid for the option.
Each Fund will commit no more than 5% of its assets to premiums when
purchasing call options. A Fund may also purchase call options on underlying
securities or currencies it owns in order to protect unrealized gains on call
options previously written by it. A call option would be purchased for this
purpose where tax considerations make it inadvisable to realize such gains
through a closing purchase transaction. Call options may also be purchased at
times to avoid realizing losses that would result in a reduction of such
Fund's current return. For example, where a Fund has written a call option on
an underlying security or currency having a current market value below the
price at which such security or currency was purchased by that Fund, an
increase in the market price could result in the exercise of the call option
written by that Fund and the realization of a loss on the underlying security
or currency with the same exercise price and expiration date as the option
previously written.
DESCRIPTION OF FUTURES CONTRACTS. A Futures Contract provides for the future
sale by one party and purchase by another party of a specified amount of a
specific financial instrument (security or currency) for a specified price at
a designated date, time and place. Brokerage fees are incurred when a Futures
Contract is bought or sold and margin deposits must be maintained.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, the Futures Contracts are usually
closed out before the delivery date. Closing out an open Futures Contract sale
or purchase is effected by entering into an offsetting Futures Contract
purchase or sale, respectively, for the same aggregate amount of the identical
type of financial instrument or currency and the same delivery date. If the
offsetting purchase price is less than the original sale price, the Fund
involved realizes a gain; if it is more, that Fund realizes a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, the
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Fund involved realizes a gain; if it is less, that Fund realizes a loss. The
transaction costs must also be included in these calculations. There can be no
assurance, however, that a Fund will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular
time. If a Fund is not able to enter into an offsetting transaction, that Fund
will continue to be required to maintain the margin deposits on the Contract.
As an example of an offsetting transaction in which the financial instrument
or currency is not delivered, the contractual obligations arising from the
sale of one Contract of September Treasury Bills on an exchange may be
fulfilled at any time before delivery of the Contract is required (e.g., on a
specified date in September, the "delivery month") by the purchase of one
Contract of September Treasury Bills on the same exchange. In such instance
the difference between the price at which the Futures Contract was sold and
the price paid for the offsetting purchase, after allowance for transaction
costs, represents the profit or loss to the Fund involved.
The Funds may enter into interest rate, S&P Index (or other major market
index), or currency Futures Contracts as a hedge against changes in prevailing
levels of stock values, interest rates, or currency exchange rates in order to
establish more definitely the effective return on securities or currencies
held or intended to be acquired by such Fund. A Fund's hedging may include
sales of Futures as an offset against the effect of expected increases in
currency exchange rates, purchases of such Futures as an offset against the
effect of expected declines in currency exchange rates, and purchases of
Futures in anticipation of purchasing underlying index stocks prior to the
availability of sufficient assets to purchase such stocks or to offset
potential increase in stocks prices. When selling options or Futures
Contracts, a Fund will segregate cash and liquid securities to cover any
related liability.
The Funds will not enter into Futures Contracts for speculation and will only
enter into Futures Contracts which are traded on national futures exchanges
and are standardized as to maturity date and underlying financial instrument.
The principal Futures exchanges in the United States are the Board of Trade of
the City of Chicago and the Chicago Mercantile Exchange. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission. Futures are also traded in various overseas
markets.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce a Fund's exposure to currency exchange rate fluctuations, a
Fund may be able to hedge its exposure more effectively and perhaps at a lower
cost through using Futures Contracts.
A Fund will not enter into a Futures Contract if, as a result thereof, more
than 5% of the Fund's total assets (taken at market value at the
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time of entering into the contract) would be committed to "margin" (down
payment) deposits on such Futures Contracts.
A Stock Index contract such as the S&P 500 Stock Index Contract, for example,
is an agreement to take or make delivery at a specified future date of an
amount of cash equal to $500 multiplied by the difference between the value of
the Stock Index at purchase and at the close of the last trading day of the
contract. In order to close long positions in the Stock Index contracts prior
to their settlement date, the Fund will enter into offsetting sales of Stock
Index contracts.
Using Stock Index contracts in anticipation of market transactions involves
certain risks. Although a Fund may intend to purchase or sell Stock Index
contracts only if there is an active market for such contracts, no assurance
can be given that a liquid market will exist for the contracts at any
particular time. In addition, the price of Stock Index contracts may not
correlate perfectly with the movement in the Stock Index due to certain market
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the Stock Index
and movements in the price of Stock Index contracts, a correct forecast of
general market trends may not result in a successful anticipatory hedging
transaction.
FUTURES CONTRACTS GENERALLY. Persons who trade in Futures Contracts may be
broadly classified as "hedgers" and "speculators." Hedgers, such as the Funds,
whose business activity involves investment or other commitments in debt
securities, equity securities, or other obligations, use the Futures markets
primarily to offset unfavorable changes in value that may occur because of
fluctuations in the value of the securities and obligations held or expected
to be acquired by them or fluctuations in the value of the currency in which
the securities or obligations are denominated. Debtors and other obligers may
also hedge the interest cost of their obligations. The speculator, like the
hedger, generally expects neither to deliver nor to receive the financial
instrument underlying the Futures Contract, but, unlike the hedger, hopes to
profit from fluctuations in prevailing interest rates, securities prices, or
currency exchange rates.
A public market exists in Futures Contracts covering foreign financial
instruments such as U.K. Pound, Japanese Yen, and German Mark, among others.
Additional Futures Contracts may be established from time to time as various
exchanges and existing Futures Contract markets may be terminated or altered
as to their terms or methods of operation.
The Funds' Futures transactions will be entered into for traditional hedging
purposes; that is, Futures Contracts will be sold to protect against a decline
in the price of securities or currencies that such Fund owns, or Futures
Contracts will be purchased to protect that
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Fund against an increase in the price of securities or currencies it has a
fixed commitment to purchase.
"Margin" with respect to Futures and Futures Contracts is the amount of funds
that must be deposited by the Fund with a broker in order to initiate Futures
trading and to maintain a Fund's open positions in Futures Contracts. A margin
deposit ("initial margin") is intended to assure such Fund's performance of
the Futures Contract. The margin required for a particular Futures Contract is
set by the exchange on which the Contract is traded, and may be significantly
modified from time to time by the exchange during the term of the Contract.
Futures Contracts are customarily purchased and sold on margins that may range
upward from less than 5% of the value of the Contract being traded.
If the price of an open Futures Contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy
margin requirements, the broker will require an increase in the margin deposit
("margin variation"). However, if the value of a position increases because of
favorable price changes in the Futures Contract so that the margin deposit
exceeds the required margin, the broker will pay the excess to that Fund. In
computing daily net asset values, that Fund will mark to market the current
value of its open Futures Contracts. The Fund expects to earn interest income
on its margin deposits.
The prices of Futures Contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates, which in turn are
affected by fiscal and monetary policies and national and international
political and economic events.
At best, the correlation between changes in prices of Futures Contracts and of
the securities or currencies being hedged can be only approximate. The degree
of imperfection of correlation depends upon circumstances such as: variations
in speculative market demand for Futures and for securities or currencies,
including technical influences in Futures trading; and differences between the
financial instruments being hedged and the instruments underlying the standard
Futures Contracts available for trading, with respect to interest rate levels,
maturities, and creditworthiness of issuers. A decision of whether, when, and
how to hedge involves skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of unexpected market behavior or
interest rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss or
gain to the investor. For example, if at the time of purchase, 10% of the
value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract
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would result in a total loss of the margin deposit, before any deduction for
the transaction costs, if the account were then closed out. A 15% decrease
would result in a loss equal to 150% of the original margin deposit, if the
Contract were closed out. Thus, a purchase or sale of a Futures Contract may
result in losses in excess of the amount invested in the Futures Contract.
However, a Fund would presumably have sustained comparable losses if, instead
of the Futures Contract, it had invested in the underlying financial
instrument and sold it after the decline. Furthermore, in the case of a
Futures Contract purchase, in order to be certain that such Fund has
sufficient assets to satisfy its obligations under a Futures Contract, the
Fund involved segregates and commits to back the Futures Contract with money
market instruments equal in value to the current value of the underlying
instrument less the margin deposit.
Most United States Futures exchanges limit the amount of fluctuation permitted
in Futures Contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a Futures Contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
Contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of Futures
positions and subjecting some Futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS. Except for transactions the Funds
identified as hedging transactions, each Fund is required for federal income
tax purposes to recognize as income for each taxable year its net unrealized
gains and losses on Futures Contracts as of the end of the year as well as
those actually realized during the year. Identified hedging transactions would
not be subject to the mark to market rules and would result in the recognition
of ordinary gain or loss. Otherwise, unless transactions in Futures Contracts
are classified as part of a "mixed straddle," any gain or loss recognized with
respect to a Futures Contract is considered to be 60% long-term capital gain
or loss and 40% short-term capital gain or loss, without regard to the holding
period of the Contract. In the case of a Futures transaction classified as a
"mixed straddle," the recognition of losses may be deferred to a later taxable
year.
Sales of Futures Contracts which are intended to hedge against a change in the
value of securities or currencies held by a Fund may affect the holding period
of such securities or currencies and, consequently, the nature of the gain or
loss on such securities or currencies upon disposition.
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In order for a Fund to continue to qualify for federal income tax treatment as
a regulated investment company, at least 90% of its gross income for a taxable
year must be derived from qualifying income, i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
currencies. In addition, gains realized on the sale or other disposition of
securities or currencies held for less than three months must be limited to
less than 30% of that Fund's annual gross income. It is anticipated that any
net gain realized from the closing out of Futures Contracts will be considered
gain from the sale of securities or currencies and therefore be qualifying
income for purposes of the 90% requirement. In order to avoid realizing
excessive gains on securities or currencies held less than three months, such
Fund may be required to defer the closing out of Futures Contracts beyond the
time when it would otherwise be advantageous to do so. It is anticipated that
unrealized gains on Futures Contracts, which have been open for less than
three months as of the end of the Investment Company's fiscal year and which
are recognized for tax purposes, will not be considered gains on securities or
currencies held less than three months for purposes of the 30% test.
The Funds will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Investment Company's fiscal year) on
Futures transactions. Such distributions will be combined with distributions
of capital gains realized on each Fund's other investments and shareholders
will be advised of the nature of the payments.
OPTIONS ON INTEREST RATE AND/OR CURRENCY FUTURES CONTRACTS, AND WITH RESPECT
TO THE FREMONT GLOBAL FUND, GOLD FUTURES CONTRACTS. Options on Futures
Contracts are similar to options on fixed income or equity securities or
options on currencies except that options on Futures Contracts give the
purchaser the right, in return for the premium paid, to assume a position in a
Futures Contract (a long position if the option is a call and a short position
if the option is a put), rather than to purchase or sell the Futures Contract,
at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the delivery of the Futures position by the
writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between
the exercise price of the option and the closing level of the securities or
currencies upon which the Futures Contracts are based on the
- 19 -
<PAGE>
expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
As an alternative to purchasing call and put options on Futures, the Funds may
purchase call and put options on the underlying securities or currencies, or
with respect to the Global Fund, on gold or other commodities. Such options
would be used in a manner identical to the use of options on Futures
Contracts. To reduce or eliminate the leverage then employed by a Fund or to
reduce or eliminate the hedge position then currently held by that Fund, the
Fund involved may seek to close out an option position by selling an option
covering the same securities or contract and having the same exercise price
and expiration date.
FORWARD CURRENCY AND OPTIONS TRANSACTIONS. A forward currency contract is an
obligation to purchase or sell a currency against another currency at a future
date and price as agreed upon by the parties. The Funds may either accept or
make delivery of the currency at the maturity of the forward contract or,
prior to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract. A Fund typically engages in forward currency
transactions in anticipation of, or to protect itself against, fluctuations in
exchange rates. The Fund might sell a particular currency forward, for
example, when it wanted to hold bonds denominated in that currency but
anticipated, and sought to be protected against, a decline in the currency
against the U.S. dollar. Similarly, the Fund might purchase a currency forward
to "lock in" the dollar price of securities denominated in that currency which
it anticipated purchasing.
A put option gives the Fund, as purchaser, the right (but not the obligation)
to sell a specified amount of currency at the exercise price until the
expiration of the option. A call option gives the Fund, as purchaser, the
right (but not the obligation) to purchase a specified amount of currency at
the exercise price until its expiration. The Fund might purchase a currency
put option, for example, to protect itself during the contract period against
a decline in the dollar value of a currency in which it holds or anticipates
holding securities. If the currency's value should decline against the dollar,
the loss in currency value should be offset, in whole or in part, by an
increase in the value of the put.
If the value of the currency instead should rise against the dollar, any gain
to the Fund would be reduced by the premium it had paid for the put option. A
currency call option might be purchased, for example, in anticipation of, or
to protect against, a rise in the value against the dollar of a currency in
which the Fund anticipates purchasing securities.
- 20 -
<PAGE>
Currency options may be either listed on an exchange or traded
over-the-counter (OTC). Listed options are third-party contracts (i.e.,
performance of the obligations of the purchaser and seller is guaranteed by
the exchange or clearing corporation), and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. The Funds will not purchase an OTC option unless
they believe that daily valuation for such option is readily obtainable.
THE FUNDS (INCLUDING THE FREMONT MONEY MARKET FUND) GENERALLY
DIVERSIFICATION. Each Fund, except for the Fremont Emerging Markets Fund,
intends to operate as a "diversified" management investment company, as
defined in the Investment Company Act of 1940 (the "1940 Act"). A
"diversified" investment company means a company which meets the following
requirements: At least 75% of the value of the company's total assets is
represented by cash and cash items (including receivables), "Government
Securities," securities of other investment companies, and other securities
for the purposes of this calculation limited in respect of any one issuer to
an amount not greater in value than 5% of the value of the total assets of
such management company and to not more than 10% of the outstanding voting
securities of such issuer. "Government Securities" means securities issued or
guaranteed as to principal or interest by the United States, or by a person
controlled or supervised by and acting as an instrumentality of the Government
of the United States pursuant to authority granted by the Congress of the
United States.
As a non-diversified fund, the Fremont Emerging Markets Fund is not subject to
the foregoing requirements.
REVERSE REPURCHASE AGREEMENTS AND LEVERAGE. The Funds may enter into reverse
repurchase agreements which involve the sale of a security by a Fund and its
agreement to repurchase the security at a specified time and price. The Fund
involved will maintain in a segregated account with its custodian cash, cash
equivalents, or liquid securities in an amount sufficient to cover its
obligations under reverse repurchase agreements with broker-dealers (but not
with banks). Under the 1940 Act, reverse repurchase agreements are considered
borrowings by a Fund; accordingly, each Fund will limit its investments in
these transactions, together with any other borrowings, to no more than
one-third of its total assets. The use of reverse repurchase agreements by a
Fund creates leverage which increases the Fund's investment risk. If the
income and gains on securities purchased with the proceeds of these
transactions exceed the cost, a Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income
and gains fail to exceed the costs, earnings or net asset value would decline
faster than otherwise would be the case. If the 300% asset coverage required
by the 1940 Act should decline as a result of market fluctuation or other
- 21 -
<PAGE>
reasons, a Fund may be required to sell some of its portfolio securities
within three days to reduce the borrowings (including reverse repurchase
agreements) and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
The Funds intend to enter into reverse repurchase agreements only if the
income from the investment of the proceeds is greater than the expense of the
transaction, as the proceeds are invested for a period no longer than the term
of the reverse repurchase agreement.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS AND PARTICIPATION INTERESTS. The
Funds may purchase floating rate and variable rate obligations, including
participation interests therein. Floating rate or variable rate obligations
provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate at a major commercial bank) or is
reset on a regular basis by a bank or investment banking firm to a market
rate. At specified times, the owner can demand payment of the obligation at
par plus accrued interest. Variable rate obligations provide for a specified
periodic adjustment in the interest rate, while floating rate obligations have
an interest rate which changes whenever there is a change in the external
interest rate. Frequently banks provide letters of credit or other credit
support or liquidity arrangements to secure these obligations. The quality of
the underlying creditor or of the bank, as the case may be, must, as
determined by the Advisor or Sub-Advisor, be equivalent to the quality
standards prescribed for the Funds.
The Funds may invest in participation interests purchased from banks in
floating rate or variable rate obligations owned by banks. A participation
interest gives a Fund an undivided interest in the obligation in the
proportion that the Fund's participation interest bears to the total principal
amount of the obligation, and provides a demand repayment feature. Each
participation is backed by an irrevocable letter of credit or guarantee of a
bank (which may be the bank issuing the participation interest or another
bank). The bank letter of credit or guarantee must meet the prescribed
investment quality standards for the Funds. A Fund has the right to sell the
participation instrument back to the issuing bank or draw on the letter of
credit on demand for all or any part of the Fund's participation interest in
the underlying obligation, plus accrued interest.
SWAP AGREEMENTS. The Funds may enter into interest rate, index, and currency
exchange rate swap agreements for purposes of attempting to obtain a
particular desired return at a lower cost to the Fund than if the Fund had
invested directly in an instrument that yielded that desired return. Swap
agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard "swap" transaction, two parties agree to exchange the returns (or
differentials in rates of
- 22 -
<PAGE>
return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the
parties are calculated with respect to a "notional amount," i.e., the return
on or increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of
securities representing a particular index. Commonly used swap agreements
include interest rate caps, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates exceed
a specified rate, or "cap"; interest rate floors, under which, in return for a
premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor"; and interest rate
collars, under which a party sells a cap and purchases a floor or vice versa
in an attempt to protect itself against interest rate movements exceeding
minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictive basis on which
to calculate the obligations which the parties to a swap agreement have agreed
to exchange. Most swap agreements entered into by the Funds would calculate
the obligations of the parties to the agreement on a "net basis." Consequently
a Fund's obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based
on the relative values of the positions held by each party to the agreement
(the "net amount"). A Fund's obligations under a swap agreement will be
accrued daily (offset against amounts owed to the Fund) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
securities, or high grade debt obligations, to avoid any potential leveraging
of the Fund's portfolio. A Fund will not enter into a swap agreement with any
single party if the net amount owed or to be received under existing contracts
with that party would exceed 5% of the Fund's net assets.
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the Advisor's or the Sub-Advisor's ability
to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Because they are two-party
contracts and because they may have terms of greater than seven days, swap
agreements will be considered to be illiquid. Moreover, a Fund bears the risk
of loss of the amount expected to be received under a swap agreement in the
event of the default or bankruptcy of a swap agreement counterparty. The
Advisor or Sub-Advisor will cause a Fund to enter into swap agreements only
with counterparties that would be eligible for consideration as repurchase
agreement counterparties under a Fund's repurchase agreement guidelines.
Certain restrictions imposed on the Funds by the Internal Revenue Code may
limit the Funds' ability to use swap agreements. The swaps market is largely
unregulated. It is possible that developments in the swaps market, including
potential government
- 23 -
<PAGE>
regulation, could adversely affect a Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. A Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and
interest rate are fixed at the time of the transaction but the settlement is
delayed). A Fund will not purchase securities the value of which is greater
than 5% of its net assets on a when-issued or firm commitment basis, except
that this limitation does not apply to the Fremont Bond Fund. A Fund, as
purchaser, assumes the risk of any decline in value of the security beginning
on the date of the agreement or purchase and no interest accrues to the Fund
until it accepts delivery of the security. A Fund will not use such
transactions for leveraging purposes, and accordingly will segregate cash,
cash equivalents, or liquid securities in an amount sufficient to meet its
payment obligations thereunder. Although these transactions will not be
entered into for leveraging purposes, to the extent a Fund's aggregate
commitments under these transactions exceed its holdings of cash and
securities that do not fluctuate in value (such as short-term money market
instruments), the Fund temporarily will be in a leveraged position (i.e., it
will have an amount greater than its net assets subject to market risk).
Should market values of a Fund's portfolio securities decline while the Fund
is in a leveraged position, greater depreciation of its net assets would
likely occur than were it not in such a position. As the Fund's aggregate
commitments under these transactions increase, the opportunity for leverage
similarly increases. A Fund will not borrow money to settle these transactions
and, therefore, will liquidate other portfolio securities in advance of
settlement if necessary to generate additional cash to meet its obligations
thereunder.
COMMERCIAL BANK OBLIGATIONS. For the purposes of each Fund's investment
policies with respect to bank obligations, obligations of foreign branches of
U.S. banks and of foreign banks may be general obligations of the parent bank
in addition to the issuing bank, or may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks, and of foreign banks may subject the Funds to investment risks
that are different in some respects from those of investments in obligations
of domestic issuers. Although a Fund will typically acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at
the time of purchase in excess of $1 billion, this $1 billion figure is not a
fundamental investment policy or restriction of any Fund. For the purposes of
calculation with respect to the $1 billion figure, the assets of a bank will
be deemed to include the assets of its U.S. and non-U.S. branches.
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<PAGE>
ILLIQUID SECURITIES. Each Fund (other than the Money Market Fund) may
invest up to 15% of its net assets in all forms of "illiquid
securities." The Money Market Fund may invest up to 10% of its net
assets in "illiquid securities."
An investment is generally deemed to be "illiquid" if it cannot be disposed of
within seven days in the ordinary course of business at approximately the
amount at which such securities are valued by the Fund. "Restricted"
securities are securities which were originally sold in private placements and
which have not been registered under the Securities Act of 1933 (the "1933
Act"). However, a market exists for certain restricted securities (for
example, securities qualifying for resale to certain "qualified institutional
buyers" pursuant to Rule 144A under the 1933 Act). Additionally, the Advisor
and the Funds believe that a similar market exists for commercial paper issued
pursuant to the private placement exemption of Section 4(2) of the 1933 Act.
The Funds may invest without limitation in these forms of restricted
securities if such securities are determined by the Advisor or Sub-Advisor to
be liquid in accordance with standards established by the Investment Company's
Board of Directors. Under these standards, the Advisor or Sub-Advisor must
consider (a) the frequency of trades and quotes for the security, (b) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers, (c) any dealer undertaking to make a market in the
security, and (d) the nature of the security and the nature of the marketplace
trades (for example, the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer).
It is not possible to predict with accuracy how the markets for certain
restricted securities will develop. Investing in restricted securities could
have the effect of increasing the level of a Fund's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.
GUARANTEED INVESTMENT CONTRACTS (FREMONT GLOBAL FUND). The Global Fund may
enter into agreements known as guaranteed investment contracts ("GICs") with
banks and insurance companies. GICs provide to the Fund a fixed rate of return
for a fixed period of time, similar to any fixed income security. While there
is no ready market for selling GICs and they typically are not assignable, the
Fund will only invest in GICs if the financial institution permits a
withdrawal of the principal (together with accrued interest) after the Fund
gives seven days' notice. Like any fixed income security, if market interest
rates at the time of such withdrawal have increased from the guaranteed rate,
the Fund would be required to pay a premium or penalty upon such withdrawal.
If market rates declined, the Fund would receive a premium on withdrawal.
Since GICs are considered illiquid, the Fund will not invest more than 15% of
its net assets in GICs and other illiquid assets.
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<PAGE>
LENDING OF PORTFOLIO SECURITIES. For the purpose of realizing additional
income, a Fund may make secured loans of portfolio securities amounting to not
more than 33-1/3% of its net assets. Securities loans are made to
broker-dealers or institutional investors pursuant to agreements requiring
that the loans be continuously secured by collateral at least equal at all
times to the value of the securities lent marked to market on a daily basis.
The collateral received will consist of cash, short-term U.S. Government
securities, bank letters of credit, or such other collateral as may be
permitted under a Fund's investment program and by regulatory agencies and
approved by the Board of Directors. While the securities are being lent, a
Fund will continue to receive the equivalent of the interest or dividends paid
by the issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower. The Funds have a right to call each
loan and obtain the securities on five business days' notice. The Funds will
not have the right to vote equity securities while they are being lent, but it
will call a loan in anticipation of any vote in which it seeks to participate.
REDUCTION IN BOND RATING (FREMONT GLOBAL FUND AND FREMONT BOND FUND). The
Global Fund and the Bond Fund may each invest up to 10% of its net assets in
debt securities rated below BBB or Baa, but not lower than B. In the event
that the rating for any security held by the Funds drops below the minimum
acceptable rating applicable to that Fund, the Fund's Advisor or Sub-Advisor
will determine whether the Fund should continue to hold such an obligation in
its portfolio. Bonds rated below BBB or Baa are commonly known as "junk
bonds." These bonds are subject to greater fluctuations in value and risk of
loss of income and principal due to default by the issuer than are higher
rated bonds. The market values of junk bonds tend to reflect short-term
corporate, economic, and market developments and investor perceptions of the
issuer's credit quality to a greater extent than higher rated bonds. In
addition, it may be more difficult to dispose of, or to determine the value
of, junk bonds. See Appendix A for a complete description of the bond ratings.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following fundamental investment policies and
restrictions in addition to the policies and restrictions discussed in its
prospectus. With respect to each Fund, the policies and restrictions listed
below cannot be changed without approval by the holders of a "majority of the
outstanding voting securities" of that Fund (which is defined in the 1940 Act
to mean the lesser of (i) 67% of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented or (ii) more than 50%
of the outstanding shares). These restrictions provide that no Fund may:
1. Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business
- 26 -
<PAGE>
activities in the same industry, except that this limitation
shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its
agencies or instrumentalities, to tax exempt securities
issued by state governments or political subdivisions
thereof, or to investments by the Money Market Fund in
securities of domestic banks, of foreign branches of
domestic banks where the domestic bank is unconditionally
liable for the security, and domestic branches of foreign
banks subject to the same regulation of domestic banks.
2. Buy or sell real estate (including real estate limited
partnerships) or commodities or commodity contracts;
however, the Funds may invest in securities secured by real
estate, or issued by companies which invest in real estate
or interests therein, including real estate investment
trusts, and may purchase and sell currencies (including
forward currency exchange contracts), gold, bullion, futures
contracts, and related options generally as described in the
Prospectus and Statement of Additional Information.
3. Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an
investment position may technically cause it to be
considered an underwriter as that term is defined under the
Securities Act of 1933.
4. Make loans, except that a Fund may purchase debt securities,
enter into repurchase agreements, and make loans of
portfolio securities amounting to not more than 33 1/3% of
its net assets calculated at the time of the securities
lending.
5. Borrow money, except from banks for temporary or emergency
purposes not in excess of 30% of the value of the Fund's
total assets. A Fund will not purchase securities while such
borrowings are outstanding.
6. Change its status as either a diversified or a non-
diversified investment company.
7. Issue senior securities, except as permitted under the 1940
Act, and except that the Investment Company and the Funds
may issue shares of common stock in multiple series or
classes.
8. Notwithstanding any other fundamental investment restriction
or policy, each Fund may invest all of its assets in the
securities of a single open-end investment company with
substantially the same fundamental investment objectives,
restrictions, and policies as that Fund.
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<PAGE>
Other current investment policies of the Funds, which are not fundamental and
which may be changed by action of the Board of Directors without shareholder
approval, are as follows. A Fund may not:
9. Invest in companies for the purpose of exercising control or
management.
10. Mortgage, pledge or hypothecate any of its assets, provided
that this restriction shall not apply to the transfer of
securities in connection with any permissible borrowing.
11. Invest in interests in oil, gas or other mineral exploration
or development programs or leases.
12. Invest more than 5% of its total assets in securities of
companies having, together with their predecessors, a record
of less than three years continuous operation.
13. Purchase securities on margin, provided that the Fund may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities, except that
the Fund may make margin deposits in connection with futures
contracts.
14. Enter into a futures contract if, as a result thereof, more
than 5% of the Fund's total assets (taken at market value at
the time of entering into the contract) would be committed
to margin on such futures contract.
15. Acquire securities or assets for which there is no readily
available market or which are illiquid, if, immediately
after and as a result of the acquisition, the value of such
securities would exceed, in the aggregate, 15% of that
Fund's net assets, except that the value of such securities
may not exceed 10% of the Money Market Fund's net assets.
16. Make short sales of securities or maintain a short position,
except that a Fund may sell short "against the box."
17. Invest in securities of an issuer if the investment would
cause a Fund to own more than 10% of any class of securities
of any one issuer.
18. Acquire more than 3% of the outstanding voting securities of
any one investment company.
INVESTMENT COMPANY DIRECTORS AND OFFICERS
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<PAGE>
The Bylaws of Fremont Mutual Funds, Inc. (the "Investment Company"), the
Maryland investment company which established the Funds, authorize a Board of
Directors of between three and 15 persons, as fixed by the Board of Directors.
A majority of directors may fill director vacancies caused by resignation,
death, or expansion of the Board of Directors. Any director may be removed by
vote of holders of a majority of all outstanding shares of the Investment
Company qualified to vote at the meeting.
- 29 -
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
DATE OF AND BUSINESS EXPERIENCE
NAME AND ADDRESS BIRTH POSITIONS HELD FOR PAST FIVE YEARS
<S> <C> <C> <C>
David L. Redo (1)(2)(4) 9-1-37 Chairman, Chief Executive President and Director, Fremont
Fremont Investment, Advisors, Inc. Officer and Director Investment Advisors, Inc.;
333 Market Street, 26th Floor Managing Director, Fremont
San Francisco, CA 94105 Group, L.L.C. and Fremont
Investors, Inc.; Director, Sequoia
Ventures, Sit/Kim International
Investment Associates, and J.P.
Morgan Securities Asia.
Michael H. Kosich(1)(2) 3-30-40 President and Director 10/77 - 7/96
Fremont Investment Advisors, Inc. Senior Vice President Business
333 Market Street, 26th Floor Development, Benham
San Francisco, CA 94105 Management
Vincent P. Kuhn, Jr.(1)(2)(4) 4-22-32 Executive Vice President Executive Vice President and
Fremont Investment Advisors, Inc. and Director Director, Fremont Investment
333 Market Street, 26th Floor. Advisors, Inc.
San Francisco, CA 94105
Richard E. Holmes(3) 5-14-43 Director Vice President and Director,
P.O. Box 479 BelMar Advisors, Inc.
Sanibel, FL 33957 (marketing firm)
William W. Jahnke(3) 2-6-44 Director 1/96 - Present
Jahnke & Associates Chairman, Financial Design
58 Camino del Diablo Education Corp.
Orinda, CA 94563 3/93 - Present
Principal, Jahnke & Associates
(Consultants) 6/83 - 3/93
Chairman, Board of Directors,
Vestek Systems, Inc.
Donald C. Luchessa(3) 2-18-30 Director Principal, DCL Advisory
DCL Advisory (marketer for investment
345 California Street, 10th Fl advisors)
San Francisco, CA 94104
David L. Egan(3) 5-1-34 Director President, Fairfield Capital
Fairfield Capital Associates, Inc. Associates, Inc. (an investment
1640 Sylvaner advisor) and Fairfield Capital
St. Helena, CA 94574 Funding, Inc. (a broker-dealer)
- 30 -
<PAGE>
<CAPTION>
<S> <C> <C> <C>
Albert W. Kirschbaum(4) 8-17-38 Senior Vice President Senior Vice President and
Fremont Investment Advisors, Inc. Director, Fremont Investment
333 Market Street, 26th Floor Advisors, Inc.
San Francisco, CA 94105
Peter F. Landini(4) 5-10-51 Senior Vice President Senior Vice President and
Fremont Investment Advisors, Inc. Director, Fremont Investment
333 Market Street, 26th Floor Advisors, Inc.
San Francisco, CA 94105
John Kosecoff 10-29-51 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor 12/93 - 9/96
San Francisco, CA 94105 Senior Analyst and Portfolio
Manager, RCM Capital Management
11/92 - 12/93 Hedge Fund Analyst
and Portfolio Manager, Omega
Advisors 10/90 - 11/92 Senior
Consumer Sector Analyst, Lord
Abbett & Co.
William M. Feeney 3-27-56 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Marycatherine Dwyer 1-29-63 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Norman Gee 3-29-50 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Alexandra W. Kinchen(4) 4-25-45 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Andrew L. Pang(4) 4-15-49 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
- 31 -
<PAGE>
<CAPTION>
<S> <C> <C> <C>
Robert J. Haddick(4) 2-26-60 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor Fund Group, Inc.
San Francisco, CA 94105
Tina Thomas 8-7-49 Vice President, Secretary, and Vice President and Chief
Fremont Investment Advisors, Inc. Chief Compliance Officer Compliance Officer, Fremont
333 Market Street, 26th Floor Investment Advisors, Inc.
San Francisco, CA 94105 9/88 - 5/96
Chief Compliance Officer and
Vice President, Bailard, Biehl
& Kaiser, Inc.; Treasurer,
Bailard, Biehl & Kaiser
International Fund Group, Inc.
and Bailard, Biehl & Kaiser Fund
Group; Principal, BB&K Fund
Services, Inc.
Ian R. Stone 12-16-63 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Richard G. Thomas 1-7-57 Senior Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Chantal Gaiddon 5-13-56 Vice President, Controller Vice President and Controller,
Fremont Investment Advisors, Inc. and Treasurer Fremont Investment Advisors,
333 Market Street, 26th Floor Inc.
San Francisco, CA 94105
Gretchen Hollstein 3-23-67 Vice President Regional Sales Manager,
Fremont Investment Advisors, Inc. Fremont Investment Advisors,
333 Market Street, 26h Floor Inc.
San Francisco, CA 94105 8/90 - 7/92
Asst. Vice President
Bank of California
Allyn Hughes 6-12-60 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
- 32 -
<PAGE>
<CAPTION>
<S> <C> <C> <C>
Jill Paiz 8-13-66 Vice President 10/95 - Present
Fremont Investment Advisors, Inc. Vice President and Director
333 Market Street, 26th Floor of Communications, Fremont
San Francisco, CA 94105 Investment Advisors, Inc.
9/94 - 10/95
Marketing Consultant
1/94 - 9/94
Manager of Marketing
Consultants, Montgomery
Asset Management
11/91 - 1/94
Marketing Manager, Govett
Financial Services
Dean Boebinger 11-21-55 Vice President 8/92 - Present
Fremont Investment Advisors, Inc. Regional Sales Manager,
3000 Post Oak Blvd., Suite 100 Fremont Investment
Houston, TX 77056 Advisors, Inc.
3/92 - 7/94
Certified Financial Planner and
Account Executive, GNA, Inc.
</TABLE>
(1) Director who is an "interested person" of the Company due to his
affiliation with the Company's investment manager.
(2) Member of the Executive Committee.
(3) Member of the Audit Committee and the Contracts Committee.
(4) Member of the Fremont Investment Committee.
During the fiscal year ended October 31, 1996, Richard E. Holmes, William W.
Jahnke, and David L. Egan each received $4,500 and Donald C. Luchessa received
$3,000 for serving as directors of the Investment Company.
As of December 31, 1996, the officers and directors as a group owned in the
aggregate beneficially or of record less than 1% of the outstanding shares of
the Investment Company.
INVESTMENT ADVISORY AND OTHER SERVICES
MANAGEMENT AGREEMENT. The Advisor, in addition to providing investment
management services, furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative,
clerical, and bookkeeping functions of the Investment Company, provides
suitable office space, necessary small office equipment and utilities, and
general purpose accounting forms, supplies, and postage used at the offices of
the Investment Company.
The Advisor is responsible to pay sub-transfer agency fees when such entities
are engaged in connection with share holdings in the Funds acquired by certain
retirement plans.
- 33 -
<PAGE>
Each Fund (other than the International Growth Fund, the International Small
Cap Fund, and the U.S. Micro-Cap Fund) will pay all of its own expenses not
assumed by the Advisor, including, but not limited to, the following:
custodian, stock transfer, and dividend disbursing fees and expenses; taxes
and insurance; expenses of the issuance and redemption of shares of the Fund
(including stock certificates, registration or qualification fees and
expenses); legal and auditing expenses; and the costs of stationery and forms
prepared exclusively for the Fund.
With respect to the U.S. Micro-Cap Fund, the Advisor has agreed to bear all of
the Fund's ordinary operating expenses in return for receiving a monthly fee
of 2.5% per annum of the Fund's average daily net assets with respect to the
first $30 million, 2.0% with respect to the next $70 million, and 1.5%
thereafter. The U.S. Micro Cap Fund will bear all expenses relating to
interest, brokerage commissions, other transaction charges relative to
investing activities of the Fund, and extraordinary expenses (including for
example, litigation expenses, if any).
The allocation of general Investment Company expenses among the Funds is made
on a basis that the directors deem fair and equitable, which may be based on
the relative net assets of each Fund or the nature of the services performed
and relative applicability to each Fund.
The directors of the Advisor are David L. Redo, Vincent P. Kuhn, Jr.,
Jon S. Higgins, Peter F. Landini, and Albert W. Kirschbaum.
The Investment Advisory and Administration Agreement (the "Advisory
Agreement") with respect to each Fund may be renewed annually, provided that
any such renewal has been specifically approved by (i) the Board of Directors,
or by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of a Fund, and (ii) the vote of a majority of directors who
are not parties to the Advisory Agreement or "interested persons" (as defined
in the 1940 Act) of any such party, cast in person, at a meeting called for
the purpose of voting on such approval. The Advisory Agreement also provides
that either party thereto has the right with respect to any Fund to terminate
it without penalty upon sixty (60) days' written notice to the other party,
and that the Advisory Agreement terminates automatically in the event of its
assignment (as defined in the 1940 Act).
The following table depicts the advisory fees (net of voluntary waivers) paid
by the Funds to the Advisor for the fiscal years ended October 31, 1996, 1995,
and 1994:
- 34 -
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
10/31/96 10/31/95 10/31/94
<S> <C> <C> <C>
Money Market Fund $ 650,049 $ 621,063 $ 332,393
Bond Fund 316,693 274,272 98,252
Global Fund 3,198,046 2,734,846 1,881,639
Growth Fund 341,238 195,838 176,971
Internat'l Growth Fund 548,887 439,970 286,003
Internat'l Small Cap Fund 158,372 56,539 11,108
Emerging Markets Fund 0 -- --
U.S. Micro-Cap Fund 889,829 77,299 14,668
</TABLE>
The Advisory Agreements with respect to the Money Market Fund, the Bond Fund,
the Global Fund, the Growth Fund, and the Emerging Markets Fund also provide
for the payment of an administrative fee to the Advisor at the annual rate of
.15% of average net assets. With respect to the Money Market Fund, the Bond
Fund, and the Emerging Markets Fund, the Advisor has waived and is currently
waiving the entire administrative fee until further notice. For the fiscal
years ended October 31, 1996, 1995, and 1994, the Growth Fund paid to the
Advisor administrative fees (net of voluntary waivers) of $102,371, $42,633,
and $3,536, respectively. For the fiscal years ended October 31, 1996, 1995,
and 1994, the Global Fund paid to the Advisor administrative fees of $799,511,
$683,712, and $469,838, respectively.
The Advisor's employees may engage in personal securities transactions.
However, the Investment Company and the Advisor have adopted a Code of Ethics
for the purpose of establishing standards of conduct for the Advisor's
employees with respect to such transactions. The Code of Ethics includes some
broad prohibitions against fraudulent conduct, and also includes specific
rules, restrictions, and reporting obligations with respect to personal
securities transactions of the Advisor's employees. Generally, each employee
is required to obtain prior approval of the Advisor's compliance officer in
order personally to purchase or sell a security. Purchases or sales of
securities which are not eligible for purchase or sale by the Funds or any
other client of the Advisor are exempted from the prior approval requirement,
as are certain other transactions which the Advisor believes present no
potential conflict of interest. The Advisor's employees are also required to
file with the Advisor quarterly reports of their securities transactions.
THE SUB-ADVISORS - FREMONT BOND FUND, FREMONT INTERNATIONAL GROWTH
FUND, FREMONT INTERNATIONAL SMALL CAP FUND, FREMONT EMERGING MARKETS
FUND, AND FREMONT U.S. MICRO-CAP FUND.
The Advisory Agreements authorize the Advisor, at its option and at its sole
expense, to appoint a Sub-Advisor, which may assume all or a portion of the
responsibilities and obligations of the Advisor
- 35 -
<PAGE>
pursuant to the Advisory Agreement as shall be delegated to the Sub-Advisor.
Any appointment of a Sub-Advisor and assumption of responsibilities and
obligations of the Advisor by such Sub-Advisor is subject to approval by the
Board of Directors and, as required by law, the shareholders of the affected
Fund. Pursuant to this authority, Pacific Investment Management Company serves
as the Bond Fund's Sub-Advisor, Acadian Asset Management, Inc. serves as the
International Small Cap Fund's Sub-Advisor, Credit Lyonnais International
Asset Management (HK) Limited serves as the Emerging Markets Fund's
Sub-Advisor, and Morgan Grenfell Capital Management, Inc. serves as the U.S.
Micro-Cap Fund's Sub-Advisor (collectively referred to as "the Sub-Advisors").
The Sub-Advisors are overseen by the members of the Fremont Investment
Committee. See "Investment Company Directors and Officers." Prior to September
1, 1995, Sit/Kim International Investment Associates, Inc. served as the
International Growth Fund's Sub-Advisor.
The current Portfolio Management Agreements provide that the Sub-Advisors
agree to manage the investment of the Fund's assets, subject to the applicable
provisions of the Investment Company's Articles of Incorporation, Bylaws and
current registration statement (including, but not limited to, the investment
objective, policies, and restrictions delineated in the Funds' current
Prospectus and Statement of Additional Information), as interpreted from time
to time by the Board of Directors.
For their services under the Portfolio Management Agreements, the Advisor has
agreed to pay the Sub-Advisors an annual fee equal to the percentages set
forth below of the value of the applicable Fund's average net assets, payable
monthly:
Bond Fund: .25% to Pacific Investment Management
Company
Internat'l Small Cap Fund: to Acadian Asset Management, Inc.:
.75% on the first $50
million .65% on the next
$50 million .50% on the
next $100 million .40% on
assets in excess of $200
million
Emerging Markets Fund: .50% to Credit Lyonnais International
Asset Management (HK) Limited
U.S. Micro-Cap Fund: to Morgan Grenfell Capital Management,
Inc.:
1.50% on the first $30 million
1.00% on the next $70 million
.75% on assets in excess of $100 million
For the fiscal year ended October 31, 1996, Pacific Investment
Management Company, Sit Investment Associates, Inc., and Morgan
Grenfell Capital Management, Inc. received from the Advisor (not the
- 36 -
<PAGE>
Funds) subadvisory fees (net of voluntary fee waivers) of $198,574, $81,991,
and $364,583, respectively. Acadian Asset Management, Inc. waived its
subadvisory fees for the fiscal year ended October 31, 1996. For the fiscal
year ended October 31, 1995, Pacific Investment Management Company, Sit
Investment Associates, Inc., and Sit/Kim International Investment Associates,
Inc. received from the Advisor subadvisory fees (net of voluntary waivers) of
$181,386, $57,522 and $165,172, respectively. Acadian Asset Management, Inc.
and Morgan Grenfell Capital Management, Inc. each waived its subadvisory fees
for the fiscal year ended October 31, 1995. For the fiscal year ended October
31, 1994, Pacific Investment Management Company, Sit Investment Associates,
Inc., and Sit/Kim International Investment Associates, Inc. received from the
Advisor net subadvisory fees of $64,792, $73,951, and $9,614, respectively.
Credit Lyonnais International Asset Management (HK) Limited has agreed to
waive its subadvisory fees until further notice.
The Portfolio Management Agreements for each Fund continue in effect from year
to year only as long as such continuance is specifically approved at least
annually by (i) the Board of Directors of the Investment Company or by the
vote of a majority of the outstanding voting shares of the Fund, and (ii) by
the vote of a majority of the directors of the Investment Company who are not
parties to the Agreement or interested persons of the Advisor or the
Sub-Advisor or the Investment Company. Each Agreement may be terminated at any
time, without the payment of any penalty, by the Board of Directors of the
Investment Company or by the vote of a majority of the outstanding voting
shares of the Fund, or by the Sub-Advisor or the Advisor, upon 30 days'
written notice to the other party. Additionally, each Agreement automatically
terminates in the event of its assignment.
PRINCIPAL UNDERWRITER. The Funds' principal underwriter is Funds Distributor,
Inc., Sixty State Street, Boston, Massachusetts (the "Distributor"). The
Distributor is engaged on a non-exclusive basis to assist in the distribution
of shares in various jurisdictions. The Distributor receives compensation from
the Advisor and is not paid either directly or indirectly by the Investment
Company. The Distributor received compensation of $75,000 from the Advisor
with respect to the fiscal year ended October 31, 1996 for services as
Distributor. Additionally, the Distributor received $24,000 in compensation
for separate services related to telephone call coverage during the fiscal
year ended October 31, 1996.
TRANSFER AGENT. The Advisor is also the Funds' transfer agent and is
responsible for maintaining the records of each shareholder's account,
answering shareholders' inquiries concerning their accounts, processing
purchases and redemptions of the Funds' shares, acting as dividend and
distribution disbursing agent, and performing other shareholder service
functions. The Advisor retains Countrywide Fund Services, Inc. (the
"Sub-Transfer Agent") to perform many of these services. The Sub-Transfer
Agent is an indirect wholly-owned subsidiary of Countrywide Credit Industries,
Inc., a New York Stock Exchange listed company principally engaged in the
business of residential mortgage lending.
- 37 -
<PAGE>
For its services as transfer agent, the Advisor receives a monthly fee at the
annual rate of $27 per shareholder account from the Money Market Fund and the
Bond Fund and $24 per shareholder account from the Global Fund, the Growth
Fund, the International Growth Fund, the International Small Cap Fund, and the
Emerging Markets Fund; provided, however, that the minimum monthly fee paid to
the Advisor is $2,000 with respect to each Fund.
In addition, the Sub-Transfer Agent has been retained by the Advisor to assist
the Advisor in providing administrative services to the Investment Company. In
this capacity, the Sub-Transfer Agent supplies non-investment related
regulatory compliance services and executive and administrative services. The
Sub-Transfer Agent supervises the preparation of reports to and filings with
the Securities and Exchange Commission and materials for meetings of the Board
of Directors. The Advisor (not the Investment Company) pays the Sub-Transfer
Agent a monthly fee of $6,500 for these administrative services. For the
fiscal year ended October 31, 1996, the Advisor paid the Sub-Transfer Agent
$74,000 for administrative services on behalf of all series of the Investment
Company.
PLAN OF DISTRIBUTION (EMERGING MARKETS FUND ONLY)
As stated in the Prospectus, the Emerging Markets Fund has adopted a plan
of distribution (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 which permits the Fund to pay for expenses incurred in the
distribution and promotion of the Fund's shares, including, but not limited
to, the printing of prospectuses, statements of additional information, and
reports used for sales purposes, advertisements, expenses of preparation and
printing of sales literature, promotion, marketing, and sales expenses, and
other distribution-related expenses, including any distribution fees paid to
securities dealers or other firms who have executed a distribution or service
agreement with the Underwriter. The Plan expressly limits payment of the
distribution expenses listed above in any fiscal year to a maximum of .25% of
the average daily net assets of the Emerging Markets Fund. Unreimbursed
expenses will not be carried over from year to year.
Agreements implementing the Plan (the "Implementation Agreements") are in
writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plan are made in accordance with written agreements.
The continuance of the Plan and the Implementation Agreements must be
specifically approved at least annually by a vote of the Investment Company's
Board of Directors and by a vote of the Directors who are not interested
persons of the Investment Company and have no direct or indirect financial
interest in the Plan or any Implementation Agreement (the "Independent
Directors") at a meeting called for the purpose of voting on such continuance.
The Plan may be terminated at any time by a vote of a majority of the
Independent Directors or by a vote of the holders of a majority of the
outstanding shares of the Emerging Markets Fund. In the event the Plan is
terminated in
- 38 -
<PAGE>
accordance with its terms, the Fund will not be required to make any payments
for expenses incurred by the Adviser after the termination date. Each
Implementation Agreement terminates automatically in the event of its
assignment and may be terminated at any time by a vote of a majority of the
Independent Directors or by a vote of the holders of a majority of the
outstanding shares of the Fund on not more than 60 days' written notice to any
other party to the Implementation Agreement. The Plan may not be amended to
increase materially the amount to be spent for distribution without
shareholder approval. All material amendments to the Plan must be approved by
a vote of the Investment Company's Board of Directors and by a vote of the
Independent Directors.
In approving the Plan, the Directors determined, in the exercise of their
business judgment and in light of their fiduciary duties as Directors, that
there is a reasonable likelihood that the Plan will benefit the Emerging
Markets Fund and its shareholders. The Board of Directors believes that
expenditure of the Fund's assets for distribution expenses under the Plan
should assist in the growth of the Fund which will benefit the Fund and its
shareholders through increased economies of scale, greater investment
flexibility, greater portfolio diversification, and less chance of disruption
of planned investment strategies. The Plan will be renewed only if the
Directors make a similar determination for each subsequent year of the Plan.
There can be no assurance that the benefits anticipated from the expenditure
of the Fund's assets for distribution will be realized. While the Plan is in
effect, all amounts spent by the Fund pursuant to the Plan and the purposes
for which such expenditures were made must be reported quarterly to the Board
of Directors for its review. In addition, the selection and nomination of
those Directors who are not interested persons of the Investment Company are
committed to the discretion of the Independent Directors during such period.
Pursuant to the Plan, the Emerging Markets Fund may also make payments to
banks or other financial institutions that provide shareholder services and
administer shareholder accounts. The Glass- Steagall Act prohibits banks from
engaging in the business of underwriting, selling, or distributing securities.
Although the scope of this prohibition under the Glass-Steagall Act has not
been clearly defined by the courts or appropriate regulatory agencies,
management of the Investment Company believes that the Glass-Steagall Act
should not preclude a bank from providing such services. However, state
securities laws on this issue may differ from the interpretations of federal
law expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law. If a bank were prohibited from
continuing to perform all or a part of such services, management of the
Investment Company believes that there would be no material impact on the Fund
or its shareholders. Banks may charge their customers fees for offering these
services to the extent permitted by regulatory authorities, and the overall
return to
- 39 -
<PAGE>
those shareholders availing themselves of the bank services will be lower than
to those shareholders who do not. The Fund may from time to time purchase
securities issued by banks which provide such services; however, in selecting
investments for the Fund, no preference will be shown for such securities.
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for a Fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other accounts served by the Advisor or Sub-Advisor, including other series of
the Investment Company. Although such concurrent authorizations potentially
could be either advantageous or disadvantageous to a Fund, they will be
effected only when the Advisor or Sub-Advisor believes that to do so will be
in the best interest of such Fund. When such concurrent authorizations occur,
the objective will be to allocate the executions in a manner which is deemed
equitable to the accounts involved, including each of the Funds.
The Bond Fund, the Global Fund, the Growth Fund, the International Growth
Fund, the International Small Cap Fund, the Emerging Markets Fund, and the
U.S. Micro-Cap Fund contemplate purchasing foreign equity and/or fixed-income
securities in over-the-counter markets or stock exchanges located in the
countries in which the respective principal offices of the issuers of the
various securities are located, if that is the best available market. Fixed
commissions on foreign stock transactions and transaction costs with respect
to foreign fixed-income securities are generally higher than negotiated
commissions on United States transactions, although these Funds will endeavor
to achieve the best net results on their portfolio transactions. There is
generally less government supervision and regulation of foreign stock
exchanges and brokers than in the United States. Foreign security settlements
may in some instances be subject to delays and related administrative
uncertainties.
Foreign equity securities may be held by the Global Fund, the Growth Fund, the
International Growth Fund, the International Small Cap Fund, the Emerging
Markets Fund, and the U.S. Micro-Cap Fund in the form of American Depository
Receipts ("ADRs") or similar instruments. ADRs may be listed on stock
exchanges or traded in the over-the-counter markets in the United States.
ADRs, like other securities traded in the United States, will be subject to
negotiated commission rates. The government securities issued by the United
States and other countries and money market securities in which a Fund may
invest are generally traded in the over-the-counter markets.
No brokerage commissions have been paid by the Money Market Fund during the
last three fiscal years. The aggregate dollar amount of brokerage commissions
paid by the other Funds during the last three years are as follows:
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<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
10/31/96 10/31/95 10/31/94
<S> <C> <C> <C>
Bond Fund $ 11,855 $ 17,243 $ 4,000
Global Fund 1,069,049 1,545,310 1,357,600
Growth Fund 141,414 102,857 53,700
Internat'l Growth Fund 344,243 99,089 138,200
Internat'l Small Cap Fund 8,854 11,850 3,200
Emerging Markets Fund 20,196 --- ---
U.S. Micro-Cap Fund 68,850 4,326 500
</TABLE>
Subject to the requirement of seeking the best available prices and
executions, the Advisor or Sub-Advisor may, in circumstances in which two or
more broker-dealers are in a position to offer comparable prices and
executions, give preference to broker-dealers who have provided investment
research, statistical, and other related services to the Advisor or
Sub-Advisor for the benefit of a Fund and/or of other accounts served by the
Advisor or Sub-Advisor. Such preferences would only be afforded to a
broker-dealer if the Advisor determines that the amount of the commission is
reasonable in relation to the value of the brokerage and research services
provided by that broker-dealer and only to a broker-dealer acting as agent and
not as principal. The Advisor is of the opinion that, while such information
is useful in varying degrees, it is of indeterminable value and does not
reduce the expenses of the Advisor in managing each Fund's portfolio.
Subject to the requirements of the Investment Company Act of 1940 and
procedures adopted by the Board of Directors, the Funds may execute portfolio
transactions through any broker or dealer and pay brokerage commissions to a
broker which is an affiliated person of the Investment Company, the Advisor,
or a Sub-Advisor, or an affiliated person of such person. It is presently
anticipated that certain affiliates of the Sub-Advisor(s) will effect
brokerage transactions of the Funds in certain markets and receive
compensation for such services.
As of October 31, 1996, the Money Market Fund owned securities of the
Investment Company's regular brokers or dealers or their parents (as
defined in Rule 10b-1 promulgated under the 1940 Act) as follows:
Goldman, Sachs & Co. - $4,981,042; and Merrill Lynch & Co., Inc. -
$4,950,500. As of October 31, 1996, the Global Fund owned securities
of the Investment Company's regular brokers or dealers or their
parents (as defined in Rule 10b-1 promulgated under the 1940 Act) as
follows: HSBC Holdings PLC - $1,503,016; Citicorp. -$3,108,600;
Goldman Sachs & Co. - $4,981,806; Merrill Lynch & Co., Inc. -
$4,991,964; and American Express Co. - $1,551,000. As of October 31,
1996, the Growth Fund owned securities of the Investment Company's
regular brokers or dealers or their parents (as defined in Rule 10b-1
- 41 -
<PAGE>
promulgated under the 1940 Act) as follows: Citicorp - $1,455,300;
and American Express Co. - $564,000. As of October 31, 1996, the U.S.
Micro Cap Fund owned securities of the Investment Company's regular
brokers or dealers or their parents (as defined in Rule 10b-1
promulgated under the 1940 Act) as follows: Merrill Lynch & Co., Inc.
- - $5,000,000.
HOW TO INVEST
PRICE OF SHARES. The price to be paid by an investor for shares of a Fund, the
public offering price, is based on the net asset value per share which is
calculated once daily as of the close of trading (currently 4:00 p.m., Eastern
time) each day the New York Stock Exchange is open as set forth below. The New
York Stock Exchange is currently closed on weekends and on the following
holidays: (i) New Year's Day, Presidents' Day, Good Friday, Memorial Day, July
4th, Labor Day, Thanksgiving, and Christmas Day; and (ii) the preceding Friday
when any one of those holidays falls on a Saturday or the subsequent Monday
when any one of those holidays falls on a Sunday. The Money Market Fund will
also observe additional federal holidays that are not observed by the New York
Stock Exchange: Martin Luther King Day, Columbus Day, and Veterans Day.
Each Fund will calculate its net asset value and complete orders to purchase,
exchange, or redeem shares only on a Monday-Friday basis (excluding holidays
on which the New York Stock Exchange is closed). The Bond Fund's, the Global
Fund's, the Growth Fund's, the International Growth Fund's, the International
Small Cap Fund's, the Emerging Market Fund's, and the U.S. Micro-Cap Fund's
portfolio securities may from time to time be listed on foreign stock
exchanges or otherwise traded on foreign markets which may trade on other days
(such as Saturday). As a result, the net asset value of these Funds may be
significantly affected by such trading on days when a shareholder has no
access to the Funds. See also in the Prospectus at "General Investment
Policies - Special Considerations in International Investing," "Calculation of
Net Asset Value and Public Offering Price," "How to Invest," "How to Redeem
Shares," and "Shareholder Account Services and Privileges - Exchanges Between
Funds."
FREMONT BOND FUND, FREMONT GLOBAL FUND, FREMONT GROWTH FUND, FREMONT
INTERNATIONAL GROWTH FUND, FREMONT INTERNATIONAL SMALL CAP FUND,
FREMONT EMERGING MARKETS FUND, AND FREMONT U.S. MICRO-CAP FUND:
1. Fixed-income obligations with original or remaining maturities
in excess of 60 days are valued at the mean of representative
quoted bid and asked prices for such securities or, if such
prices are not available, at prices for securities of
comparable maturity, quality, and type. However, in
circumstances where the Advisor deems it appropriate to do so,
prices obtained for the day of valuation from a bond pricing
service will be used. The Funds amortize to maturity all
securities with 60 days or less remaining to maturity based on
their cost to the Funds if acquired within 60 days of maturity
- 42 -
<PAGE>
or, if already held by a Fund on the 60th day, based on the
value determined on the 61st day. Options on currencies
purchased by the Funds are valued at their last bid price in the
case of listed options or at the average of the last bid prices
obtained from dealers in the case of OTC options. Where market
quotations are not readily available, securities are valued at
fair value pursuant to methods approved by the Board of
Directors;
2. Equity securities, including ADRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange
on which such securities are traded, as of the close of
business on the day the securities are being valued or,
lacking any sales, at the last available mean price. In cases
where securities are traded on more than one exchange, the
securities are valued on the exchange designated by or under
the authority of the Board of Directors as the primary market.
Securities traded in the over-the-counter market are valued at
the last available bid price in the over-the-counter market
prior to the time of valuation. Securities and assets for
which market quotations are not readily available (including
restricted securities which are subject to limitations as to
their sale) are valued at fair value as determined in good
faith by or under the direction of the Board of Directors;
3. Trading in securities on European and Far Eastern securities
exchanges and over-the-counter markets is normally completed
well before the close of the business day in New York. In
addition, European or Far Eastern securities trading may not
take place on all business days in New York. Furthermore,
trading takes place in Japanese markets on certain Saturdays
and in various foreign markets on days which are not business
days in New York and on which the Funds' net asset value is
not calculated. The calculation of net asset value may not
take place contemporaneously with the determination of the
prices of securities held by these Funds used in such
calculation. Events affecting the values of portfolio
securities that occur between the time their prices are
determined and the close of the New York Stock Exchange will
not be reflected in these Funds' calculation of net asset
value unless the Board of Directors deems that the particular
event would materially affect net asset value, in which case
an adjustment will be made;
4. With respect to the Global Fund, gold bullion and bullion-type
coins are valued at the closing price of gold on the New York
Commodity Exchange;
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<PAGE>
5. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the
prevailing market rate as determined by the Advisor;
6. Each Fund's liabilities, including proper accruals of taxes
and other expense items, are deducted from total assets and a
net asset figure is obtained; and
7. The net assets so obtained are then divided by the total number
of shares outstanding (excluding treasury shares), and the
result, rounded to the nearest cent, is the net asset value per
share.
FREMONT MONEY MARKET FUND:
It is the Money Market Fund's policy to use its best efforts to maintain a
constant per share price for the Money Market Fund equal to $1.00.
The portfolio instruments of the Money Market Fund are valued on the basis of
amortized cost. This involves valuing an instrument at its cost initially and,
thereafter, assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which the value, as determined by amortized cost,
is higher or lower than the price the Money Market Fund would receive if it
sold the instrument.
The valuation of the Money Market Fund's portfolio instruments based upon
their amortized cost and simultaneous maintenance of a per share net asset
value at $1.00 are permitted by Rule 2a-7 adopted by the Securities and
Exchange Commission ("SEC"). Under this rule, the Money Market Fund must
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of 397 days or less as
allowed by regulations under the 1940 Act, and invest only in securities
determined by the Board of Directors to be of high quality with minimal credit
risks. In accordance with this rule the Board of Directors has established
procedures designed to stabilize, to the extent reasonably practicable, the
Money Market Fund's price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the portfolio holdings
by the Board of Directors at such intervals as it may deem appropriate, to
determine whether the net asset value of the Money Market Fund calculated by
using available market quotations or market equivalents deviates from $1.00
per share based on amortized cost. The rule also provides that a deviation
between the Money Market Fund's net asset value based upon available market
quotations or market equivalents and $1.00 per share net asset value based on
amortized cost exceeding $0.005 per share must be
- 44 -
<PAGE>
examined by the Board of Directors. In the event the Board of Directors
determines that the deviation may result in material dilution or is otherwise
unfair to investors or existing shareholders, the Board of Directors must
cause the Money Market Fund to take such corrective action as it regards as
necessary and appropriate, including: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or
capital gains; redeeming shares in kind; or establishing a net asset value per
share by using available market quotations.
In the event that a security meeting the Money Market Fund's quality
requirements is acquired and subsequently is assigned a rating below "First
Tier" by one or more of the rating organizations, the Board of Directors must
assess promptly whether the security presents minimal credit risks and direct
the Money Market Fund to take such action as the Board of Directors determines
is in the best interest of the Money Market Fund and its shareholders. This
responsibility cannot be delegated to the Advisor. However, this assessment by
the Board of Directors is not required if the security is disposed of (by sale
or otherwise) or matures within five Business Days of the time the Advisor
learns of the lower rating. However, in such a case the Board of Directors
must be notified thereafter.
In the event that a security acquired by the Money Market Fund either defaults
(other than an immaterial default unrelated to the issuer's financial
condition), or is determined no longer to present minimal credit risks, the
Money Market Fund must dispose of the security (by sale or otherwise) as soon
as practicable unless the Board of Directors finds that this would not be in
the Money Market Fund's best interest.
OTHER INVESTMENT AND REDEMPTION SERVICES
THE OPEN ACCOUNT. When an investor makes an initial investment in a Fund, a
shareholder account is opened in accordance with the investor's registration
instructions. Each time there is a transaction in a shareholder account, such
as an additional investment, redemption, or distribution (dividend or capital
gain), the shareholder will receive from the Sub-Transfer Agent a confirmation
statement showing the current transaction in the shareholder account, along
with a summary of the status of the account as of the transaction date.
PAYMENT AND TERMS OF OFFERING. Payment of shares purchased should
accompany the purchase order, or funds should be wired to the Sub-
Transfer Agent as described in the Prospectus. Payment, other than by
wire transfer, must be made by check or money order drawn on a U.S.
bank. Checks or money orders must be payable in U.S. dollars.
As a condition of this offering, if an order to purchase shares is cancelled
due to nonpayment (for example, on account of a check
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<PAGE>
returned for "not sufficient funds"), the person who made the order will be
subject to a $20 charge and will be responsible for reimbursing the Advisor
for any loss incurred by reason of such cancellation. If such purchaser is a
shareholder, that Fund shall have the authority as agent of the shareholder to
redeem shares in his account for their then-current net asset value per share
to reimburse that Fund for the loss incurred. Such loss shall be the
difference between the net asset value of that Fund on the date of purchase
and the net asset value on the date of cancellation of the purchase. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.
The Investment Company reserves the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent investments with
respect to any person or class of persons. An order to purchase shares is not
binding on the Investment Company until it has been confirmed in writing by
the Sub-Transfer Agent (or other arrangements made with the Investment
Company, in the case of orders utilizing wire transfer of funds) and payment
has been received. To protect existing shareholders, the Investment Company
reserves the right to reject any offer for a purchase of shares by any
individual.
REDEMPTION IN KIND. The Investment Company may elect to redeem shares in
assets other than cash but must pay in cash all redemptions with respect to
any shareholder during any 90-day period in an amount equal to the lesser of
(i) $250,000 or (ii) 1% of the net asset value of a Fund at the beginning of
such period.
SUSPENSION OF REDEMPTION PRIVILEGES. The Investment Company may suspend
redemption privileges with respect to any Fund or postpone the date of payment
for more than seven calendar days after the redemption order is received
during any period (1) when the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the Exchange is
restricted as determined by the SEC, (2) when an emergency exists, as defined
by the SEC, which makes it not reasonably practicable for the Investment
Company to dispose of securities owned by it or to fairly determine the value
of its assets, or (3) as the SEC may otherwise permit.
TAXES - MUTUAL FUNDS
STATUS AS A "REGULATED INVESTMENT COMPANY." Each Fund will be treated under
the Internal Revenue Code (the "Code") as a separate entity, and each Fund has
elected and intends to continue to qualify to be treated as a separate
"regulated investment company" under Subchapter M of the Code. To qualify for
the tax treatment afforded a regulated investment company under the Code, a
Fund must annually distribute at least 90% of the sum of its investment
company taxable income (generally net investment income and certain short-term
capital gains), its tax-exempt interest income (if any) and net capital gains,
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<PAGE>
and meet certain diversification of assets and other requirements of the Code.
If a Fund qualifies for such tax treatment, it will not be subject to federal
income tax on the part of its investment company taxable income and its net
capital gain which it distributes to shareholders. To meet the requirements of
the Code, a Fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of securities or currencies; (b) derive less
than 30% of its gross income from the sale or other disposition of securities
held less than three months; and (c) diversify its holdings so that, at the
end of each fiscal quarter, (i) at least 50% of the market value of the Fund's
total assets is represented by cash, U.S. Government securities, securities of
other regulated investment companies, and other securities, limited, in
respect of any one issuer, to an amount not greater than 5% of the Fund's
total assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies), or in two or more issuers
which a Fund controls and which are engaged in the same or similar trades or
businesses. Income and gain from investing in gold or other commodities will
not qualify in meeting the 90% gross income test.
Even though a Fund qualifies as a "regulated investment company," it may be
subject to certain federal excise taxes unless that Fund meets certain
additional distribution requirements. Under the Code, a nondeductible excise
tax of 4% is imposed on the excess of a regulated investment company's
"required distribution" for the calendar year over the "distributed amount"
for such calendar year. The term "required distribution" means the sum of (i)
98% of ordinary income (generally net investment income) for the calendar
year, (ii) 98% of capital gain net income (both long-term and short-term) for
the one-year period ending on October 31 of such year, and (iii) the sum of
any untaxed, undistributed net investment income and net capital gains of the
regulated investment company for prior periods. The term "distributed amount"
generally means the sum of (i) amounts actually distributed by a Fund from its
current year's ordinary income and capital gain net income and (ii) any amount
on which a Fund pays income tax for the year. Each Fund intends to meet these
distribution requirements to avoid the excise tax liability.
If for any taxable year a Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits.
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<PAGE>
DISTRIBUTIONS OF NET INVESTMENT INCOME. Dividends from net investment income
(including net short-term capital gains) are taxable as ordinary income.
Shareholders will be taxed for federal income tax purposes on dividends from a
Fund in the same manner whether such dividends are received as shares or in
cash. If a Fund does not receive any dividend income from U.S. corporations,
dividends from that Fund will not be eligible for the dividends received
deduction allowed to corporations. To the extent that dividends received by a
Fund would qualify for the dividends received deduction available to
corporations, the Fund must designate in a written notice to shareholders the
amount of the Fund's dividends that would be eligible for this treatment. In
order to qualify for the dividends received deduction, a corporate shareholder
must hold the Fund's shares paying the dividends, upon which a dividend
received deduction would be based, for at least 46 days.
NET CAPITAL GAINS. Any distributions designated as being made from a Fund's
net capital gains will be taxable as long-term capital gains, regardless of
the holding period of the shareholders of that Fund's shares. Shareholders are
advised to consult their tax advisor regarding application of these rules to
their particular circumstances.
For federal income tax purposes, the Bond Fund and the Emerging Markets Fund
have capital loss carryforwards at October 31, 1996 of $242,923 and $84,620,
respectively, which expire on October 31, 2004. Capital loss carryforwards
result when a Fund has net capital losses during a tax year. These are carried
over to subsequent years and may reduce distributions of realized gains in
those years. Unused capital loss carryforwards expire in eight years. Until
such capital loss carryforwards are offset or expire, it is unlikely that the
Board of Directors will authorize a distribution of any net realized gains.
NON-U.S. SHAREHOLDERS. Under the Code, distributions of net
investment income by a Fund to a shareholder who, as to the U.S., is a
nonresident alien individual, nonresident alien fiduciary of a trust
or estate, foreign corporation, or foreign partnership (a "foreign
shareholder") will be subject to U.S. tax withholding (at a 30% or
lower treaty rate). Withholding will not apply if a dividend paid by
a Fund to a foreign shareholder is "effectively connected" with a U.S.
trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents, or domestic
corporations will apply. Distributions of net long-term capital gains
are not subject to tax withholding, but in the case of a foreign
shareholder who is a nonresident alien individual, such distributions
ordinarily will be subject to U.S. income tax withholding at a rate of
30% if the individual is physically present in the U.S. for more than
182 days during the taxable year.
OTHER INFORMATION. The amount of any realized gain or loss on closing
out a futures contract such as a forward commitment for the purchase
or sale of foreign currency will generally result in a realized
capital gain or loss for tax purposes. Under Code Section 1256,
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<PAGE>
futures contracts held by a Fund at the end of each fiscal year will be
required to be "marked to market" for federal income tax purposes, that is,
deemed to have been sold at market value. Sixty percent (60%) of any net gain
or loss recognized on these deemed sales and sixty percent (60%) of any net
realized gain, or loss from any actual sales will be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss. Code Section 988 may also apply to currency transactions. Under
Section 988, each foreign currency gain or loss is generally computed
separately and treated as ordinary income or loss. In the case of overlap
between Sections 1256 and 988, special provisions determine the character and
timing of any income, gain, or loss. The Funds will attempt to monitor Section
988 transactions to avoid an adverse tax impact. See also "Investment
Objectives, Policies and Risk Considerations" in this Statement of Additional
Information.
Any loss realized on redemption or exchange of a Fund's shares will be
disallowed to the extent shares are reacquired within the 61 day period
beginning 30 days before and ending 30 days after the shares are disposed of.
Under the Code, a Fund's taxable income for each year will be computed without
regard to any net foreign currency loss attributable to transactions after
October 31, and any such net foreign currency loss will be treated as arising
on the first day of the following taxable year. A Fund may be required to pay
withholding and other taxes imposed by foreign countries generally at rates
from 10% to 40% which would reduce such Fund's investment income. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is not anticipated that shareholders (except with
respect to the Global Fund, the International Growth Fund, the International
Small Cap Fund, and the Emerging Markets Fund) will be entitled to a foreign
tax credit or deduction for such foreign taxes.
With respect to the Global Fund, the International Growth Fund, the
International Small Cap Fund, or the Emerging Markets Fund, so long as it (i)
qualifies for treatment as a regulated investment company, (ii) is liable for
foreign income taxes, and (iii) more than 50% of its total assets at the close
of its taxable year consist of stock or securities of foreign corporations, it
may elect to "pass through" to its shareholders the amount of such foreign
taxes paid. If this election is made, information with respect to the amount
of the foreign income taxes that are allocated to the applicable Fund's
shareholders will be provided to them and any shareholder subject to tax on
dividends will be required (i) to include in ordinary gross income (in
addition to the amount of the taxable dividends actually received) its
proportionate share of the foreign taxes paid that are attributable to such
dividends, and (ii) either deduct its proportionate share of foreign taxes in
computing its taxable income
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<PAGE>
or to claim that amount as a foreign tax credit (subject to applicable
limitations) against U.S. income taxes.
The Funds may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies ("PFICs"). Currently, PFICs
are the only or primary means by which these Funds may invest in some
countries. If a Fund invests in PFICs, it may be subject to U.S. federal
income tax on a portion of any "excess distribution" or gain from the
disposition of such shares even if such income is distributed as a taxable
dividend to shareholders. In addition to bearing their proportionate share of
a Fund's expenses, shareholders will also bear indirectly similar expenses of
PFICs in which the Fund has invested. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains. Capital gains on the
sale of such holdings will be deemed to be ordinary income regardless of how
long such PFICs are held. If a Fund were to invest in a PFIC and elect to
treat the PFIC as a "qualified electing fund" under the Code, in lieu of the
foregoing requirements, the Fund might be required to include in income each
year a portion of the ordinary earnings and net capital gains of the qualified
electing fund, even if not distributed to the Fund, and such amounts would be
subject to the 90% and calendar year distribution requirements described
above.
The foregoing is a general abbreviated summary of present United States
federal income taxes on dividends and distributions by each Fund. Investors
are urged to consult their own tax advisors for more detailed information and
for information regarding any foreign, state, and local taxes applicable to
dividends and distributions received.
ADDITIONAL INFORMATION
CUSTODIAN. The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675, acts as Custodian for the Investment Company's assets, and as
such safekeeps the Funds' portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Investment Company's
request, and maintains records in connection with its duties.
INDEPENDENT AUDITORS; FINANCIAL STATEMENTS. The Investment Company's
independent auditors are Coopers & Lybrand L.L.P., 333 Market Street, San
Francisco, California 94105. Coopers & Lybrand L.L.P. will conduct an annual
audit of each Fund, assist in the preparation of each Fund's federal and state
income tax returns, and consult with the Investment Company as to matters of
accounting, regulatory filings, and federal and state income taxation. The
financial statements of the Funds as of October 31, 1996 included herein are
audited. Such financial statements are included herein in reliance on the
opinion of Coopers & Lybrand L.L.P. given on the authority of said firm as
experts in auditing and accounting.
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<PAGE>
LEGAL OPINIONS. The validity of the shares of common stock offered hereby will
be passed upon by Heller Ehrman White & McAuliffe, 333 Bush Street, San
Francisco, California 94104. In addition to acting as counsel to the
Investment Company, Heller Ehrman White & McAuliffe has acted and may continue
to act as counsel to the Advisor and its affiliates in various matters.
USE OF NAME. The Advisor has granted the Investment Company the right to use
the "Fremont" name and has reserved the rights to withdraw its consent to the
use of such name by the Investment Company at any time, or to grant the use of
such name to any other company, and the Investment Company has granted the
Advisor, under certain conditions, the use of any other name it might assume
in the future, with respect to any other investment company sponsored by the
Advisor.
SHAREHOLDER VOTING RIGHTS. The Investment Company currently issues shares in
nine series and may establish additional classes or series of shares in the
future. When more than one class or series of shares is outstanding, shares of
all classes and series will vote together for a single set of directors, and
on other matters affecting the entire Investment Company, with each share
entitled to a single vote. On matters affecting only one class or series, only
the shareholders of that class or series shall be entitled to vote. On matters
relating to more than one class or series but affecting the classes and series
differently, separate votes by class and series are required. Shareholders
holding 10% of the shares of the Investment Company may call a special meeting
of shareholders.
LIABILITY OF DIRECTORS AND OFFICERS. The Articles of Incorporation of the
Investment Company provide that, subject to the provisions of the 1940 Act, to
the fullest extent permitted under Maryland law, no officer or director of the
Investment Company may be held personally liable to the Investment Company or
its shareholders.
CERTAIN SHAREHOLDERS. As of February 7, 1997, the Advisor owned of record
10.6% of the outstanding shares of the International Small Cap Fund and 35.7%
of the outstanding shares of the Emerging Markets Fund; BF Fund Limited, 50
Fremont Street, San Francisco, California 94105, owned of record 6.2% of the
outstanding shares of the Global Fund, 65.9% of the outstanding shares of the
Growth Fund, and 71.7% of the outstanding shares of the International Growth
Fund; Bankers Trust Company as Trustee for the Bechtel Master Trust for
Qualified Employees, P.O. Box 1742 Church Street Station, New York, New York
10008, owned of record 44.3% of the outstanding shares of the Global Fund,
76.5% of the outstanding shares of the Bond Fund, and 49.0% of the outstanding
shares of the Money Market Fund; Fremont Investors, Inc., 50 Fremont Street,
San Francisco, California 94105, owned of record 8.4% of the outstanding
shares of the Money Market Fund; The Northern Trust Company as Trustee for The
Fremont Group Retirement Plan, P.O. Box 92956, Chicago, Illinois 60675, owned
of record 6.7% of
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<PAGE>
the outstanding shares of the International Growth Fund and 6.9% of the
outstanding shares of the Emerging Markets Fund; Sequoia Ventures, Inc., 50
Fremont Street, San Francisco, California 94105, owned of record 6.5% of the
outstanding shares of the Money Market Fund and 8.7% of the outstanding shares
of the Bond Fund; Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, California 94104, owned of record 42.7% of the outstanding shares
of the U.S. Micro-Cap Fund and 37.0% of the outstanding shares of the
International Small Cap Fund; National Financial Services, for the benefit of
its customers, Church Street Station, P.O. Box NY, New York, New York 10008,
owned of record 9.6% of the outstanding shares of the U.S. Micro-Cap Fund;
Donaldson, Lufkin & Jenrette Securities Corporation, 1 Pershing Plaza, Jersey
City, New Jersey 07399, owned of record 8.1% of the outstanding shares of the
U.S. Micro-Cap Fund; Fremont Group L.L.C. Pension Plan, 50 Fremont Street, San
Francisco, California 94105, owned of record 8.4% of the outstanding shares of
the International Small Cap Fund and 6.4% of the outstanding shares of the
Emerging Markets Fund; Edward F. McCormick IRA Rollover Account, 4263
Knollview Drive, Danville, California 94506, owned of record 7.4% of the
outstanding shares of the Emerging Markets Fund; and Fremont Investors, Inc.
Pension Plan, 50 Fremont Street, San Francisco, California 94105, owned of
record 11.8% of the outstanding shares of the International Small Cap Fund and
14.8% of the outstanding shares of the Emerging Markets Fund.
OTHER INVESTMENT INFORMATION. The Advisor directs the management of over $4.7
billion of assets and internally manages over $1.9 billion of assets for
retirement plans, foundations, private portfolios, and mutual funds. The
Advisor's philosophy is to apply a long-term approach to investing that
balances risk and return potential.
The Global Fund's investment objectives are similar to the objectives of
Bechtel Trust & Thrift Plan, Fund A. The Bond Fund's investment objectives are
the same as the objectives of Bechtel Trust & Thrift Plan, Fund B. The Money
Market Fund's investment objectives are the same as the objectives of Bechtel
Trust & Thrift Plan, Fund C.
Historical annual returns of various market indices may be used to represent
the returns of various asset classes as follows:
(1) U.S. Stocks: Standard & Poor's 500 Index;
(2) Foreign Stocks: Morgan Stanley Europe, Australia and Far East
(EAFE) Index;
(3) Intermediate U.S. Bonds: Lehman Brothers Intermediate
Government/Corporate Bond Index;
(4) Foreign Bonds: Salomon Brothers Non-U.S. Dollar Bond Index;
and
(5) Money Market Securities: 1980-1986, 90 day U.S. Treasury Bill
rate: 1987-1992 Donoghue First Tier Money Market Fund Average.
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<PAGE>
<TABLE>
<CAPTION>
The total returns for the above indices for the years 1980 through
1996 are as follows (source: Fremont Investment Advisors, Inc.):
U.S. Foreign Intmdte Foreign Money Market
Stocks Stocks U.S.Bonds Bonds Securities
<S> <C> <C> <C> <C> <C>
1980 32.4% 24.4% 6.4% 14.2% 11.8%
1981 -5.0% -1.0% 10.5% -4.6% 16.1%
1982 21.3% -0.9% 26.1% 11.9% 10.7%
1983 22.3% 24.6% 8.6% 4.4% 8.6%
1984 6.3% 7.9% 14.4% -1.9% 10.0%
1985 31.8% 56.7% 18.1% 35.0% 7.5%
1986 18.7% 70.0% 13.1% 31.4% 5.9%
1987 5.1% 24.9% 3.7% 35.2% 6.0%
1988 16.8% 28.8% 6.7% 2.4% 6.9%
1989 31.4% 11.1% 12.8% -3.4% 8.5%
1990 -3.2% -23.0% 9.2% 15.3% 7.5%
1991 30.6% 12.9% 14.6% 16.2% 5.5%
1992 7.7% -11.5% 7.2% 4.8% 3.3%
1993 10.0% 33.3% 8.8% 15.1% 2.6%
1994 1.3% 8.1% -1.9% 6.0% 3.6%
1995 37.5% 11.2% 15.3% 19.6% 5.3%
1996 23.0% 6.1% 4.1% 4.5% 4.8%
</TABLE>
The Bond Fund, the Global Fund, the Growth Fund, the International Growth
Fund, the International Small Cap Fund, the Emerging Markets Fund, and the
U.S. Micro-Cap Fund are best suited as long-term investments. While they offer
higher potential total returns than certificates of deposit or money market
funds (including the Money Market Fund), they involve added return volatility
or risk. The prospective investor must weigh this potential for higher return
against the associated higher risk.
The Investment Company offers shares in an additional series under a separate
Prospectus and Statement of Additional Information. This series, the
California Intermediate Tax-Free Fund, offers California residents monthly
income free from federal and state income taxes ("double tax-free income") by
investing primarily in intermediate-term California municipal bonds, as well
as greater price stability relative to mutual funds which invest in
longer-term California municipal bonds.
INVESTMENT RESULTS
The Investment Company may from time to time include information on the
investment results (yield or total return) of a Fund in advertisements or in
reports furnished to current or prospective shareholders.
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<PAGE>
Current yield for the Money Market Fund will be calculated based on the net
change, exclusive of capital changes, over a seven-day period, in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7) with the
resulting yield figure carried to at least the nearest hundredth of one
percent. As of October 31, 1996, the seven-day current yield for the Money
Market Fund was 5.15%.
Effective Yield (or 7-day compound yield) for the Money Market Fund will be
calculated based on the net change, exclusive of capital changes, over a
seven-day period, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts, and then
dividing the difference by the value of the account, at the beginning of the
base period to obtain this base period return, and then compounding the base
period return by adding 1, raising the sum to a power equal to (365/7), and
subtracting 1 from the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7 -1].
The resulting yield figure is carried to at least the nearest hundredth of one
percent. As of October 31, 1996, the effective yield for the Money Market Fund
was 5.28%.
With respect to the Bond Fund, the Global Fund, the Growth Fund, the
International Growth Fund, the International Small Cap Fund, the Emerging
Markets Fund, and the U.S. Micro-Cap Fund, the average annual rate of return
("T") for a given period is computed by using the redeemable value at the end
of the period ("ERV") of a hypothetical initial investment of $1,000 ("P")
over the period in years ("n") according to the following formula as required
by the SEC:
P(1+T)n = ERV
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) reinvestment of dividends and distributions
at net asset value on the reinvestment date determined by the Board of
Directors; and (2) a complete redemption at the end of any period illustrated.
Each Fund will calculate total return for one, five, and ten-year periods
after such a period has elapsed, and may calculate total returns for other
periods as well. In addition, each Fund will provide lifetime average annual
total return figures.
The average annual total returns of the Funds for the periods ended October
31, 1996 are as follows:
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<PAGE>
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS INCEPTION
<S> <C> <C> <C>
Bond Fund 8.18% --- 6.97%
Global Fund 13.72% 10.42% 10.12%
Growth Fund 22.06% --- 15.43%
International Growth Fund 7.07% --- 3.52%
International Small Cap Fund 13.69% --- 1.35%
Emerging Markets Fund --- --- -3.12%*
U.S. Micro-Cap Fund 41.46% --- 35.44%
<FN>
*Unannualized
</FN>
</TABLE>
The Bond Fund may quote its yield, which is computed by dividing the net
investment income per share earned during a 30-day period by the maximum
offering price per share on the last day of the period, according to the
following formula:
YIELD = 2[((a - b)/cd + 1)6 - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
The Bond Fund's 30-day yield as of October 31, 1996 was 6.70%.
Each Fund's investment results will vary from time to time depending upon
market conditions, the composition of a Fund's portfolio and operating
expenses of a Fund, so that current or past yield or total return should not
be considered representations of what an investment in a Fund may earn in any
future period. These factors and possible differences in the methods used in
calculating investment results should be considered when comparing a Fund's
investment results with those published for other investment companies and
other investment vehicles. A Fund's results also should be considered relative
to the risks associated with such Fund's investment objective and policies.
The Investment Company may from time to time compare the investment results of
a Fund with, or refer to, the following:
(1) Average of Savings Accounts, which is a measure of all kinds
of savings deposits, including longer-term certificates (based
on figures supplied by the U.S. League of Savings
Institutions). Savings accounts offer a guaranteed rate of
return on principal, but no opportunity for capital growth.
During certain periods, the maximum rates paid on some savings
deposits were fixed by law.
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<PAGE>
(2) The Consumer Price Index, which is a measure of the average
change in prices over time in a fixed market basket of goods and
services (e.g., food, clothing, shelter, and fuels,
transportation fares, charges for doctors' and dentists'
services, prescription medicines, and other goods and services
that people buy for day-to-day living).
(3) Statistics reported by Lipper Analytical Services, Inc., which
ranks mutual funds by overall performance, investment
objectives, and assets.
(4) Standard & Poor's "500" Index, which is a widely recognized
index composed of the capitalization-weighted average of the
price of 500 large publicly traded U.S. common stocks.
(5) Dow Jones Industrial Average.
(6) CNBC/Financial News Composite Index.
(7) Russell 1000 Index, which reflects the common stock price
changes of the 1,000 largest publicly traded U.S. companies by
market capitalization.
(8) Russell 3000 Index, which reflects the common stock price
changes of the 3,000 largest publicly traded U.S. companies by
market capitalization.
(9) Wilshire 5000 Index, which reflects the investment return of the
approximately 5,000 publicly traded securities for which daily
pricing is available, weighted by market capitalization,
excluding income.
(10) Salomon Brothers Broad Investment Grade Index, which is a widely
used index composed of U.S. domestic government, corporate, and
mortgage-backed fixed income securities.
(11) Wilshire Associates, an on-line database for international
financial and economic data including performance measures for a
wide variety of securities.
(12) Morgan Stanley Europe, Australia and Far East (EAFE) Index,
which is composed of foreign stocks.
(13) IFC Emerging Markets Investables Indices, which measure stock
market performance in various developing countries around the
world.
(14) Salomon Brothers World Bond Index, which is composed of domestic
and foreign corporate and government fixed income securities.
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<PAGE>
(15) Lehman Brothers Government/Corporate Bond Index, which is a
widely used index composed of investment quality U.S.
government and corporate fixed income securities.
(16) Lehman Brothers Government/Corporate Intermediate Bond Index,
which is a widely used index composed of investment quality U.S.
government and corporate fixed income securities with maturities
between one and ten years.
(17) Salomon Brothers World Government Bond Index, which is a
widely used index composed of U.S. and non-U.S. government
fixed income securities of the major countries of the World.
(18) 90-day U.S. Treasury Bills Index, which is a measure of the
performance of constant maturity 90-day U.S. Treasury Bills.
(19) Donoghue First Tier Money Fund Average, which is an average of
the 30-day yield of approximately 250 major domestic money
market funds.
(20) Salomon Brothers Non-U.S. World Government Bond Index, which
is the World Government Bond index excluding its U.S. market
component.
(21) Salomon Brothers Non-Dollar Bond Index, which is composed of
foreign corporate and government fixed income securities.
(22) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index,
beginning in 1975. The returns are broken down by local market
and currency.
(23) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since
1960.
(24) The World Bank Publication of Trends in Developing Countries
("TIDE"), which provides brief reports on most of the World
Bank's borrowing members. The World Development Report is
published annually and looks at global and regional economic
trends and their implications for the developing economies.
(25) Datastream and Worldscope, which is an on-line database
retrieval service for information including but not limited to
international financial and economic data.
(26) International Financial Statistics, which is produced by the
International Monetary Fund.
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<PAGE>
(27) Various publications and annual reports such as the World
Development Report, produced by the World Bank and its
affiliates.
(28) Various publications from the International Bank for
Reconstruction and Development/The World Bank.
(29) Various publications including but not limited to ratings
agencies such as Moody's Investors Service, Fitch Investors
Service, and Standard Poor's Ratings Group.
(30) Various publications from the Organization for Economic
Cooperation and Development.
(31) Bechtel Trust & Thrift Plan, Fund A (Global Multi-Asset Fund),
Fund B (Bond Fund), Fund C (Money Market Fund), and Fund D
(U.S. Stock Fund).*
* Bechtel Trust & Thrift Plan performance results include reinvestment
of dividends, interest, and other income, and are net of investment
management fees. Results for Fund A, Fund B, and Fund D were in part
achieved through the efforts of investment managers selected by
Fremont Investment Advisors or its predecessor organizations.
Indices prepared by the research departments of such financial organizations
as the Sub-Advisor of the Funds; J.P. Morgan; Lehman Brothers; S.G. Warburg;
Jardine Fleming; the Asian Development Bank; Bloomberg, L.P.; Morningstar,
Inc; Salomon Brothers, Inc.; Merrill Lynch, Pierce, Fenner & Smith, Inc.;
Morgan Stanley; Bear Stearns & Co., Inc.; and Ibbottson Associates may be
used, as well as information provided by the Federal Reserve and the
respective central banks of various countries.
The Investment Company may use performance rankings and ratings reported
periodically in national financial publications such as, but not limited to,
MONEY MAGAZINE, FORBES, THE WALL STREET JOURNAL, INVESTOR'S BUSINESS DAILY,
FORTUNE, SMART MONEY, BUSINESS WEEK, and BARRON'S.
The Advisor believes the Funds are an appropriate investment for long-term
investment goals including, but not limited to, funding retirement, paying for
education, or purchasing a house. The Funds do not represent a complete
investment program, and investors should consider the Funds as appropriate for
a portion of their overall investment portfolio with regard to their long-term
investment goals.
The Advisor believes that a growing number of consumer products, including,
but not limited to, home appliances, automobiles, and clothing, purchased by
Americans are manufactured abroad. The Advisor believes that investing
globally in the companies that produce products for U.S. consumers can help
U.S. investors seek protection of the value of their assets against the
potentially increasing costs of
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<PAGE>
foreign manufactured goods. Of course, there can be no assurance that there
will be any correlation between global investing and the costs of such foreign
goods unless there is a corresponding change in value of the U.S. dollar to
foreign currencies. From time to time, the Investment Company may refer to or
advertise the names of such companies although there can be no assurance that
the Funds may own the securities of these companies.
From time to time, the Investment Company may refer to the number of
shareholders in a Fund or the aggregate number of shareholders in all Fremont
Mutual Funds or the dollar amount of Fund assets under management or rankings
by DALBAR Savings, Inc. in advertising materials.
A Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future. The Funds may be compared in advertising to
Certificates of Deposit (CDs), the Bank Rate Monitor National Index, an
average of the quoted rates for 100 leading banks and thrifts in ten U.S.
cities chosen to represent the ten largest Consumer Metropolitan statistical
areas, or other investments issued by banks. The Funds differ from bank
investments in several respects. The Funds may offer greater liquidity or
higher potential returns than CDs; but unlike CDs, the Funds will have a
fluctuating share price and return and are not FDIC insured.
A Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take sales
charges or redemption fees into consideration, and is prepared without regard
to tax consequences. In addition to the mutual fund rankings, a Fund's
performance may be compared to mutual fund performance indices prepared by
Lipper.
The Investment Company may provide information designed to help individuals
understand their investment goals and explore various financial strategies.
For example, the Investment Company may describe general principles of
investing, such as asset allocation, diversification, and risk tolerance.
Ibbottson Associates of Chicago, Illinois (Ibbottson) provides historical
returns of capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and
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<PAGE>
combinations of various capital markets. The performance of these
capital markets is based on the returns of different indices.
The Investment Company may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to
those of the Funds. The Funds may also compare performance to that of other
compilations or indices that may be developed and made available in the
future.
In advertising materials, the Advisor may reference or discuss its products
and services, which may include retirement investing, the effects of
dollar-cost averaging, and saving for college or a home. In addition, the
Advisor may quote financial or business publications and periodicals,
including model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques.
A Fund may discuss its NASDAQ symbol, CUSIP number, and its current portfolio
management team.
From time to time, a Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the Funds may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on
the basis of risk-adjusted performance. In addition, the Funds may quote
financial or business publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques. Rankings that
compare the performance of Fremont Mutual Funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
The Funds may quote various measures of volatility and benchmark correlation
such as beta, standard deviation, and R2 in advertising. In addition, the
Funds may compare these measures to those of other funds. Measures of
volatility seek to compare a Fund's historical share price fluctuations or
total returns compared to those of a benchmark. Measures of benchmark
correlation indicate how valid a comparative benchmark may be. All measures of
volatility and correlation are calculated using averages of historical data.
The Funds may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the
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<PAGE>
investor's average cost per share can be lower than if a fixed number of
shares are purchased at the same intervals. In evaluating such a plan,
investors should consider their ability to continue purchasing shares through
periods of low price levels.
The Funds may be available for purchase through retirement plans of other
programs offering deferral of or exemption from income taxes, which may
produce superior after-tax returns over time. For example, a $10,000
investment earning a taxable return of 10% annually would have an after-tax
value of $17,976 after ten years, assuming tax was deducted from the return
each year at a 39.6% rate. An equivalent tax-deferred investment would have an
after-tax value of $19,626 after ten years, assuming tax was deducted at a
39.6% rate from the deferred earnings at the end of the ten-year period.
A Fund may describe in its sales material and advertisements how an investor
may invest in the Fund through various retirement accounts and plans that
offer deferral of income taxes on investment earnings and may also enable you
to make pre-tax contributions. Because of their advantages, these retirement
accounts and plans may produce returns superior to comparable non-retirement
investments. The Funds may also discuss these accounts and plans which
include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned
income from employment (including self-employment) can contribute up to $2,000
each year to an IRA (or 100% of compensation, whichever is less). If your
spouse is not employed, a total of $2,250 may be contributed each year to IRAs
set up for each individual (subject to the maximum of $2,000 per IRA). Some
individuals may be able to take an income tax deduction for the contribution.
Regular contributions may not be made for the year after you become 70 1/2, or
thereafter.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can rollover (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA.
SEP-IRAS AND SIMPLE IRAS: Simplified employee pension (SEP) plans and SIMPLE
plans provide employers and self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore lower annual administration
expenses.
PROFIT SHARING (INCLUDING 401(K) AND MONEY PURCHASE PENSION PLANS):
Corporations can sponsor these qualified defined contribution plans for their
employees. A 401(k) plan, a type of profit sharing plan, additionally permits
the eligible, participating employees to make
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<PAGE>
pre-tax salary reduction contributions to the plan (up to certain
limitations).
The Advisor may from time to time in its sales methods and advertising discuss
the risks inherent in investing. The major types of investment risk are market
risk, industry risk, credit risk, interest rate risk, and inflation risk. Risk
represents the possibility that you may lose some or all of your investment
over a period of time. A basic tenet of investing is the greater the potential
reward, the greater the risk.
From time to time, the Funds and the Advisor will quote certain information
including, but not limited to, data regarding: individual countries, regions,
world stock exchanges, and economic and demographic statistics from sources
the Advisor deems reliable, including, but not limited to, the economic and
financial data of such financial organizations as:
1) Stock market capitalization: Morgan Stanley Capital International
World Indices, International Finance Corporation, and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International
World Indices, and International Finance Corporation.
3) The number of listed companies: International Finance
Corporation, Salomon Brothers, Inc., and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan
Stanley Capital International World Indices.
5) International industry performance: Morgan Stanley Capital
International World Indices, Wilshire Associates, and Salomon
Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International
World Indices, International Finance Corporation, and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank,
Datastream, and International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, The World
Bank, and Datastream.
10) Population: The World Bank, Datastream, and United Nations.
11) Average annual growth rate (%) of population: The World Bank,
Datastream, and United Nations.
12) Age distribution within populations: Organization for Economic
Cooperation and Development and United Nations.
13) Total exports and imports by year: International Finance
Corporation, The World Bank, and Datastream.
14) Top three companies by country, industry, or market:
International Finance Corporation, Salomon Brothers, Inc., and
S.G. Warburg.
15) Foreign direct investments to developing countries: The World
Bank and Datastream.
16) Supply, consumption, demand, and growth in demand of certain
products, services, and industries, including, but not limited
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<PAGE>
to, electricity, water, transportation, construction materials,
natural resources, technology, other basic infrastructure, financial
services, health care services and supplies, consumer products and
services, and telecommunications equipment and services (sources of
such information may include, but would not be limited to, The World
Bank, OECD, IMF, Bloomberg, and Datastream).
17) Standard deviation and performance returns for U.S. and non-U.S.
equity and bond markets: Morgan Stanley Capital International.
18) Political and economic structure of countries: Economist
Intelligence Unit.
19) Government and corporate bonds - credit ratings, yield to
maturity and performance returns: Salomon Brothers, Inc.
20) Dividend for U.S. and non-U.S. companies: Bloomberg.
In advertising and sales materials, the Advisor or a Sub-Advisor may make
reference to or discuss its products, services, and accomplishments. Such
accomplishments do not provide any assurance that the Fremont Mutual Funds'
investment objectives will be achieved.
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<PAGE>
FREMONT INVESTMENT ADVISORS
INNOVATIVE INVESTMENT
MANAGEMENT AND
ADVISORY SERVICES
A subsidiary of Fremont Investors, Inc.
<PAGE>
THE FREMONT GROUP
THE FREMONT GROUP MANAGES OVER $6 BILLION IN FOUR KEY BUSINESS AREAS.
Fremont Investment Advisors, Inc., (FIA) is a subsidiary of Fremont
Investments, Inc., which is affiliated with The Fremont Group. Fremont
Investors, Inc. employs over 200 professionals in offices throughout the
United States and manages over $6 billion in four key business areas:
Direct Investments - Fremont holds significant equity positions
in companies from a broad range of industries including:
- Crown Pacific - timber/lumber
- Petro Stopping Centers - full-service truck stops
- Trinity Ventures - venture capital
Real Estate - Fremont Properties, Inc., a subsidiary of Fremont
Investors, Inc., acquires and develops commerical, retail and
industrial real estate. Fremont Properties also manages over 6 million
square feet of real estate in 23 properties across the U.S.
Energy - Activities of The Fremont Group's energy affiliate,
Fremont Energy L.P., include oil and natural gas exploration, and
developmment.
Securities Management - Through its affiliated company, Fremont
Investment Advisors, The Fremont Group manages over $4.7 billion in
global investment portfolios.
<PAGE>
FREMONT INVESTMENT ADVISORS
FREMONT INVESTMENT ADVISORS PROVIDES INVESTMENT MANAGEMENT
SERVICES TO BOTH INSTITUTIONAL AND INDIVIDUAL CLIENTS.
Originally organized to manage the marketable securities of Bechtel,
Fremont Investment Advisors' professional staff operated for many years within
Bechtel's treasury area. In 1986, FIA became a separate organization.
FIA is a registered investment advisor which provides investment
management and advisory services to a variety of clients including:
-- defined benefit plans
-- defined contribution plans
-- foundations and trusts
-- high net worth individuals
Major clients include the Bechtel Retirement Plan which has
over 15,000 participants and was recently rated as one of the ten
best corporate retirement plans in the U.S. by Worth Magazine.
FREMONT MUTUAL FUNDS
THE FREMONT FUNDS OFFER INVESTORS NINE NO-LOAD MUTUAL FUNDS IN A WIDE VARIETY
OF INVESTMENT AREAS.
Fremont Investment Advisors formed the Fremont Mutual Funds in 1988 at the
request of retiring Bechtel employees who were taking their retirement savings
out of the Bechtel Retirement Plan. These employees were looking for low cost
mutual fund options for their personal investments and retirement plan
distributions.
The Fremont Family of Funds includes nine no-load mutual funds
in a variety of investment disciplines. From conservative bond and money
market funds to aggressive U.S. micro-cap and international small cap stock
funds, Fremont Mutual Funds offer investors a full range of investment
options.
<PAGE>
INNOVATIVE INVESTMENT MANAGEMENT
FREMONT INVESTMENT ADVISORS UTILIZES BOTH INTERNAL AND EXTERNAL
INVESTMENT MANAGEMENT EXPERTISE.
Fremont Investment Advisors is innovative in its approach to
investment management. By combining the talents of both internal and external
investment managers, FIA offers the highest quality management in each
investment discipline.
This "hybrid" approach allows FIA to concentrate resources in
investment areas where its investment professionals excel. These areas include
global asset allocation, economic analysis and the municipal bond market.
For other specialty investment disciplines, FIA selects external or
"outside" managers with excellent long-term performance track records within
the institutional marketplace. This close partnership provides smaller
institutional and individual investors with access to the investment
management expertise usually reserved only for the largest institutional
investors.
FIA's current team of external managers includes:
U.S. Stock Investments
-- Morgan Grenfell Capital Management
International Stock Investments
-- Acadian Asset Management
-- Credit Lyonnais International Asset Management
Bond Investments
-- Pacific Investment Management Company
(PIMCO)
FOR MORE INFORMATION ABOUT FREMONT OR THE FREMONT FUNDS, PLEASE CALL
800-548-4539 (PRESS 1)
FOR A PROSPECTUS WHICH CONTAINS MORE INFORMATION ABOUT THE FREMONT FUNDS,
INCLUDING MANAGEMENT FEES AND EXPENSES, PLEASE CALL 800-548-4539 (PRESS 1).
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
THE FREMONT GROUP
ORGANIZATION
| | | |
| | | |
| | | |
Direct Investments | | |
| | |
Real Estate | |
| |
Energy |
|
Securities Management
|
|
Fremont Fremont
Investment -- Mutual
Advisors Funds
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<PAGE>
APPENDIX A: DESCRIPTION OF RATINGS
DESCRIPTION OF COMMERCIAL PAPER RATINGS:
MOODY'S INVESTORS SERVICE, INC. employs the designation "Prime-1" to
indicate commercial paper having the highest capacity for timely
repayment.
Issuers rated Prime-1 "have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced
by the following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative
capitalization structures with moderate reliance on debt and ample asset
protections; broad margins in earnings coverage of fixed financial charges and
high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity."
STANDARD & POOR'S RATINGS GROUP'S ratings of commercial paper are graded into
four categories ranging from "A" for the highest quality obligations to "D"
for the lowest. Issues assigned the highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety.
A-1 - "This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation."
FITCH INVESTORS SERVICES, INC.'s short-term ratings apply to debt obligations
that are payable on demand or have original maturities of generally up to
three years, including commercial paper, certificates of deposit, medium-term
notes, and municipal and investment notes. The short-term rating places
greater emphasis than a long-term rating on the existence of liquidity
necessary to meet the issuer's obligations in a timely manner.
F-1+ - "Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for
timely payment."
F-1 - "Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+."
DUFF & PHELPS CREDIT RATING CO. employs the designation "D-1" to
indicate high-grade short-term debt.
D-1+ - "Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources or funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations."
A-1
<PAGE>
D-1 - "Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor."
D-1- - "High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small."
IBCA LIMITED's short-term ratings range from "A1" for the highest quality
obligation to "C" for the lowest.
A1 - "Obligations supported by the highest capacity for timely repayment.
Where issues possess a particularly strong credit feature, a rating of 'A1+'
is assigned."
THOMSON BANKWATCH assigns short-term debt ratings ranging from "TBW-1" to
"TBW-4." Important factors that may influence its assessment are the overall
financial health of the particular company, and the probability that the
government will come to the aid of a troubled institution in order to avoid a
default or failure.
TBW-1 - "The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis."
DESCRIPTION OF BOND RATINGS:
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities
issued by various entities from "Aaa" to "C." The ratings from "Aa"
through "B" may be modified by the addition of 1, 2 or 3 to show
relative standing within the major rating categories. Investment
ratings are as follows:
Aaa - Best quality. These securities "carry the smallest degree of investment
risk and are generally referred to as `gilt edge.' Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues."
Aa - High quality by all standards. "They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risks appear somewhat
greater."
A - Upper medium grade obligations. These bonds possess many favorable
investment attributes. "Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future."
A-2
<PAGE>
Baa - Medium grade obligations. "Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well."
Ba - "Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class."
B - "Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
STANDARD & POOR'S RATINGS GROUP rates the long-term debt securities of various
entities in categories ranging from "AAA" to "D" according to quality. The
ratings from "AA" to "CCC" may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories. Investment
ratings are as follows:
AAA - Highest rating. "Capacity to pay interest and repay principal
is extremely strong."
AA - High grade. "Very strong capacity to pay interest and repay
principal."
A - "Strong capacity to pay interest and repay principal," although "somewhat
more susceptible to the adverse effects of change in circumstances and
economic conditions than debt in higher rated categories."
BBB - "Adequate capacity to pay interest and repay principal." These bonds
normally exhibit adequate protection parameters, but "adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal than for debt in higher rated
categories."
BB, B, CCC, CC - "Debt rated BB, B, CCC, or CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions."
A-3
<PAGE>
FITCH INVESTORS SERVICES, INC. rates the long-term debt securities of various
entities in categories ranging from "AAA" to "D." The ratings from "AA"
through "C" may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories. Investment ratings are
as follows:
AAA - "Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events."
AA - "Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated `AAA.' Because bonds are rated
`AAA' and `AA' categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
`F-1+'."
A - "Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings."
BBB - "Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings."
BB - "Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified, which could
assist the obligor in satisfying its debt service requirements."
B - "Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue."
DUFF & PHELPS CREDIT RATING CO. rates the long-term debt securities of various
entities in categories ranging from "AAA" to "DD." The ratings from "AA"
through "B" may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories. Investment ratings are
as follows:
AAA - "Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt."
A-4
<PAGE>
AA - "High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic
conditions."
A - "Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress."
BBB - "Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles."
BB - "Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category."
B - "Below investment grade and possessing risk that obligations will not be
met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade."
IBCA LIMITED rates the long-term debt securities of various entities in
categories ranging from "AAA" to "C." The ratings below "AAA" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories. Investment ratings are as follows:
AAA - "Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk substantially."
AA - "Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk, albeit not very significantly."
A - "Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk."
BBB - "Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in other categories."
A-5
<PAGE>
BB - "Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest exists,
but is susceptible over time to adverse changes in business, economic or
financial conditions."
B - "Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse changes
in business, economic or financial conditions."
THOMSON BANKWATCH rates the long-term debt securities of various entities in
categories ranging from "AAA" to "D." The ratings may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories. Investment ratings are as follows:
AAA - "Indicates that the ability to repay principal and interest on a timely
basis is extremely high."
AA - "Indicates a very strong ability to repay principal and interest on a
timely basis, with limited incremental risk compared to issues rated in the
highest category."
A - " Indicates the ability to repay principal and interest is strong. Issues
rated A could be more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings."
BBB - "The lowest investment-grade category; indicates an acceptable capacity
to repay principal and interest. BBB issues are more vulnerable to adverse
developments (both internal and external) than obligations with higher
ratings."
BB - "While not investment grade, the BB rating suggests that the likelihood
of default is considerably less than for lower-rated issues. However, there
are significant uncertainties that could affect the ability to adequately
service debt obligations."
B - "Issues rated B show a higher degree of uncertainty and therefore greater
likelihood of default than higher-rated issues. Adverse developments could
negatively affect the payment of interest and principal on a timely basis."
A-6
<PAGE>
FREMONT MUTUAL FUNDS, INC.(R)
ANNUAL REPORT
[GRAPHIC]
October 31, 1996
[FREMONT FUNDS LOGO]
<PAGE>
FREMONT FUNDS
A MESSAGE FROM DAVID L. REDO, CHAIRMAN AND CEO OF FREMONT MUTUAL FUNDS
[PICTURE OF DAVE REDO]
Dear Fellow Shareholder:
We are pleased to report on the progress of our nine mutual funds and some
of the exciting recent developments at our firm.
First, we would like to formally introduce Fremont Mutual Funds' new
President, Michael Kosich. Mike joins us from the Benham Group, where as
Senior Vice President and Director of Business Development, he was
instrumental in Benham's dramatic growth in the 1980's and 1990's. Mike brings
extensive investment experience, industry expertise and, most importantly,
commitment to the interests of shareholders of the Fremont Funds to this new
position.
On the performance front, six of the eight Fremont Funds reporting for the
full fiscal year exceeded their designated benchmark returns. That is a
batting average any mutual fund family would be proud of. Portfolio Managers
Bob Kern of Fremont U.S. Micro-Cap Fund and Bill Gross of Fremont Bond Fund
deserve special mention. Fremont U.S. Micro-Cap Fund returned 41.46% compared
to the Russell 2000's 16.61% gain. We just recently learned that for the
two-year period ended November 26, 1996, Fremont U.S. Micro-Cap Fund finished
first in Investor Business Daily's growth fund category with a 114% total
return. Fremont Bond Fund returned 8.18% versus the Lehman Brothers Aggregate
Index's 5.83% gain for fiscal 1996 -- a 40% higher return than this widely
followed bond market index.
As you read through this annual report, you will notice a number of changes
in its format. These changes reflect your responses to the questionnaire we
sent in our last semi-annual report. We have added a Fund Profile which
explains each fund's investment philosophy and methodology in simple
straightforward language. This feature will continue in all subsequent
reports. We have also asked each of our portfolio managers to discuss one or
more current holdings to demonstrate how investment theory is put into
practice. Finally, we have put faces to portfolio management names so that you
can get to know us better.
We are pleased with our funds' success in fiscal 1996, but are reminded of
the many challenges that face us in the year ahead. We are ever mindful of our
mandate -- to preserve and enhance the assets you have entrusted to us. We
pledge our very best efforts on your behalf.
Sincerely,
/s/ David L. Redo
David L. Redo
Chairman & CEO
<PAGE>
FREMONT FUNDS
TABLE OF CONTENTS
FUND PROFILES AND LETTERS TO SHAREHOLDERS
Fremont Global Fund..................................... 2
Fremont International Growth Fund....................... 5
Fremont International Small Cap Fund.................... 8
Fremont Emerging Markets Fund.......................... 11
Fremont U.S. Micro-Cap Fund............................ 14
Fremont Growth Fund.................................... 16
Fremont Bond Fund...................................... 18
Fremont Money Market Fund.............................. 20
Fremont California Intermediate Tax-Free Fund.......... 22
Auditor's Opinion...................................... 24
STATEMENTS OF INVESTMENTS
Fremont Global Fund.................................... 25
Fremont International Growth Fund...................... 30
Fremont International Small Cap Fund................... 32
Fremont Emerging Markets Fund.......................... 35
Fremont U.S. Micro-Cap Fund............................ 36
Fremont Growth Fund.................................... 38
Fremont Bond Fund...................................... 40
Fremont Money Market Fund.............................. 42
Fremont California Intermediate Tax-Free Fund.......... 44
COMBINED FINANCIAL STATEMENTS
Statements of Assets and Liabilities................... 46
Statements of Operations............................... 48
Statements of Changes in Net Assets.................... 50
FINANCIAL HIGHLIGHTS................................... 54
NOTES TO FINANCIAL STATEMENTS.......................... 59
1
<PAGE>
FREMONT FUNDS
FREMONT GLOBAL FUND
The Fremont Asset Allocation Committee, Portfolio Managers for Fremont Global
Fund Dave Redo, Pete Landini, Bob Haddick, Sandie Kinchen, Vince Kuhn
[FUND PROFILE]
Fremont Global Fund offers conservative investors a truly balanced approach to
global investing. The Fund management team understands and appreciates both
the reward potential and perhaps more importantly, the risks of global
investing. Through country diversification, prudent allocation between stocks,
bonds and cash, and disciplined securities selection, the Fund seeks total
returns equaling at least 80% of the global equities markets with only half of
the downside risk as measured by portfolio beta.
The Fund's five-member portfolio management team employs a three-step
investment process. First, economic growth, inflation, and interest rate
forecasts are developed to identify those regions and individual countries
offering the best investment opportunities. Second, financial market data are
examined to determine the most advantageous mix of stocks and bonds. Finally,
individual stocks are selected from those industry groups with the best
earnings growth potential. Fund management favors large, financially healthy
companies with consistent earnings records. Individual bonds are chosen based
on credit quality and opportunistic pricing.
[PHOTO OF A MEETING]
The Fremont Asset Allocation Committee Vince Kuhn, Sandie Kinchen, Dave Redo,
Bob Haddick, Pete Landini
Global investing demands truly professional management. The Fund's portfolio
management team collectively has over 100 years of global investing
experience.
FREMONT GLOBAL FUND INVESTMENT RETURNS
FREMONT MUTUAL FUNDS
GROWTH OF $10,000 CHART
<TABLE>
<CAPTION>
LEHMAN BROS SAL NON-US BOND
FREMONT GLOBAL FUND S&P500 COPR/GOVT INTER EAFE INDEX 100% HEDGED
--------------------- ----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18-NOV-88 $10,000 $10,000 $10,000 $10,000 $10,000
30-NOV-88 0.40% $10,040 2.81% $10,281 -0.34% $9,966 1.61% $10,161 0.04% $10,004
31-DEC-88 0.83% $10,123 1.81% $10,467 0.09% $9,975 0.56% $10,218 0.80% $10,084
31-JAN-89 2.88% $10,415 7.22% $11,223 1.05% $10,080 1.76% $10,398 0.56% $10,141
28-FEB-89 -0.87% $10,325 -2.48% $10,944 -0.42% $10,037 0.51% $10,451 -0.84% $10,055
31-MAR-89 1.75% $10,506 2.34% $11,201 0.43% $10,081 -1.96% $10,246 0.69% $10,125
30-APR-89 1.63% $10,677 5.15% $11,777 2.00% $10,282 0.93% $10,341 0.97% $10,223
31-MAY-89 1.41% $10,828 4.05% $12,254 1.98% $10,486 -5.44% $9,779 0.05% $10,228
30-JUN-89 0.46% $10,878 -0.55% $12,187 2.52% $10,750 -1.68% $9,614 0.87% $10,317
31-JUL-89 4.72% $11,391 8.98% $13,281 2.05% $10,970 12.56% $10,822 2.18% $10,542
31-AUG-89 1.06% $11,512 1.93% $13,538 -1.29% $10,829 -4.50% $10,335 0.09% $10,551
30-SEP-89 -0.44% $11,462 -0.39% $13,485 0.47% $10,880 4.56% $10,806 -0.53% $10,495
31-OCT-89 -0.79% $11,371 -2.36% $13,167 2.12% $11,110 -4.02% $10,371 -0.06% $10,489
30-NOV-89 1.30% $11,519 2.07% $13,439 0.95% $11,216 5.03% $10,893 -0.23% $10,465
31-DEC-89 1.88% $11,735 2.37% $13,758 0.28% $11,247 3.69% $11,295 0.33% $10,500
31-JAN-90 -3.09% $11,373 -6.71% $12,835 -0.64% $11,175 -3.73% $10,874 -1.98% $10,292
28-FEB-90 -0.37% $11,331 1.29% $13,000 0.37% $11,217 -6.97% $10,116 -1.49% $10,138
31-MAR-90 0.38% $11,373 2.62% $13,341 0.13% $11,231 -10.42% $9,062 -0.05% $10,133
30-APR-90 -1.50% $11,203 -2.48% $13,010 -0.35% $11,192 -0.79% $8,990 -0.08% $10,125
31-MAY-90 5.42% $11,810 9.75% $14,278 2.20% $11,438 11.41% $10,016 2.48% $10,376
30-JUN-90 0.27% $11,842 -0.69% $14,180 1.34% $11,591 -0.88% $9,928 0.52% $10,430
31-JUL-90 0.72% $11,927 -0.32% $14,134 1.39% $11,753 1.41% $10,068 0.39% $10,471
31-AUG-90 -4.91% $11,341 -9.04% $12,857 -0.41% $11,704 -9.71% $9,090 -1.35% $10,330
30-SEP-90 -4.13% $10,873 -4.92% $12,224 0.77% $11,795 -13.94% $7,823 -0.56% $10,272
31-OCT-90 1.82% $11,070 -0.37% $12,179 1.16% $11,931 15.59% $9,042 2.87% $10,567
30-NOV-90 2.52% $11,349 6.43% $12,961 1.52% $12,112 -5.90% $8,509 1.64% $10,740
31-DEC-90 1.57% $11,527 2.75% $13,318 1.37% $12,278 1.62% $8,647 1.00% $10,847
31-JAN-91 2.34% $11,797 4.42% $13,907 1.02% $12,403 3.23% $8,926 1.90% $11,053
28-FEB-91 4.00% $12,270 7.16% $14,902 0.80% $12,501 10.72% $9,883 1.47% $11,216
31-MAR-91 0.37% $12,315 2.37% $15,255 0.68% $12,586 -6.00% $9,290 0.05% $11,221
30-APR-91 0.46% $12,371 0.28% $15,297 1.09% $12,724 0.98% $9,381 0.49% $11,276
31-MAY-91 1.91% $12,607 4.30% $15,955 0.61% $12,802 1.04% $9,479 0.59% $11,343
30-JUN-91 -2.77% $12,258 -4.56% $15,228 0.07% $12,811 -7.35% $8,782 -0.54% $11,282
31-JUL-91 2.75% $12,596 4.68% $15,940 1.12% $12,954 4.91% $9,213 0.91% $11,384
31-AUG-91 1.70% $12,810 2.35% $16,315 1.91% $13,202 -2.03% $9,026 1.29% $11,531
30-SEP-91 0.79% $12,911 -1.65% $16,046 1.72% $13,429 5.64% $9,535 1.63% $11,719
31-OCT-91 1.50% $13,105 1.33% $16,259 1.14% $13,582 1.42% $9,671 0.71% $11,802
30-NOV-91 -1.78% $12,872 -4.03% $15,604 1.15% $13,738 -4.67% $9,219 0.32% $11,840
31-DEC-91 6.24% $13,676 11.42% $17,386 2.44% $14,073 5.16% $9,695 1.78% $12,051
31-JAN-92 -0.59% $13,595 -1.85% $17,064 -0.91% $13,946 -2.14% $9,488 0.84% $12,152
29-FEB-92 1.12% $13,747 1.28% $17,282 0.39% $14,001 -3.58% $9,148 0.33% $12,192
31-MAR-92 -2.04% $13,466 -1.95% $16,945 -0.39% $13,946 -6.60% $8,544 -0.57% $12,123
30-APR-92 0.26% $13,501 2.92% $17,440 0.88% $14,068 0.48% $8,585 0.31% $12,160
31-MAY-92 2.01% $13,773 0.53% $17,533 1.55% $14,286 6.69% $9,160 1.08% $12,292
30-JUN-92 -0.86% $13,655 -1.46% $17,277 1.48% $14,498 -4.74% $8,726 0.41% $12,342
31-JUL-92 1.13% $13,808 4.04% $17,975 1.99% $14,786 -2.56% $8,502 0.70% $12,428
31-AUG-92 0.26% $13,844 -2.02% $17,612 1.00% $14,934 6.27% $9,035 0.32% $12,468
30-SEP-92 0.86% $13,964 1.15% $17,815 1.36% $15,138 -1.98% $8,856 1.64% $12,673
31-OCT-92 0.51% $14,035 0.36% $17,879 -1.30% $14,941 -5.25% $8,392 1.71% $12,889
30-NOV-92 1.30% $14,218 3.37% $18,482 -0.38% $14,884 0.94% $8,471 0.04% $12,895
31-DEC-92 1.20% $14,389 1.30% $18,722 1.34% $15,083 0.52% $8,515 0.95% $13,017
31-JAN-93 0.43% $14,450 0.73% $18,858 1.94% $15,375 -0.01% $8,514 1.05% $13,154
28-FEB-93 1.10% $14,609 1.36% $19,115 1.58% $15,618 3.02% $8,771 1.83% $13,395
31-MAR-93 2.10% $14,916 2.15% $19,527 0.40% $15,681 8.72% $9,536 -0.28% $13,358
30-APR-93 0.16% $14,940 -2.45% $19,049 0.80% $15,806 9.49% $10,441 -0.05% $13,351
31-MAY-93 0.99% $15,089 2.67% $19,558 -0.22% $15,771 2.11% $10,662 0.48% $13,416
30-JUN-93 0.82% $15,212 0.33% $19,623 1.57% $16,019 -1.56% $10,495 1.86% $13,666
31-JUL-93 1.38% $15,423 -0.49% $19,526 0.24% $16,058 3.50% $10,863 1.12% $13,819
31-AUG-93 3.07% $15,896 3.78% $20,263 1.59% $16,313 5.40% $11,449 1.97% $14,091
30-SEP-93 1.25% $16,095 -0.74% $20,114 0.41% $16,381 -2.25% $11,192 0.67% $14,185
31-OCT-93 2.47% $16,493 2.05% $20,527 0.27% $16,425 3.08% $11,536 1.30% $14,369
30-NOV-93 -0.99% $16,330 -0.90% $20,342 -0.56% $16,333 -8.74% $10,528 0.84% $14,490
31-DEC-93 5.38% $17,209 1.23% $20,592 0.46% $16,408 7.22% $11,288 1.88% $14,763
31-JAN-94 1.32% $17,436 3.36% $21,284 1.11% $16,590 8.45% $12,242 -0.77% $14,650
28-FEB-94 -2.83% $16,944 -2.71% $20,707 -1.48% $16,344 -0.28% $12,208 -1.96% $14,362
31-MAR-94 -4.10% $16,249 -4.34% $19,808 -1.65% $16,075 -4.31% $11,683 -0.62% $14,273
30-APR-94 0.39% $16,312 1.29% $20,064 -0.68% $15,965 4.24% $12,178 -0.55% $14,194
31-MAY-94 0.39% $16,375 1.63% $20,392 0.07% $15,976 -0.57% $12,108 -0.77% $14,084
30-JUN-94 -1.08% $16,198 -2.47% $19,887 0.01% $15,978 1.41% $12,279 -1.09% $13,930
31-JUL-94 1.95% $16,514 3.31% $20,545 1.44% $16,208 0.96% $12,397 0.69% $14,026
31-AUG-94 2.83% $16,982 4.07% $21,381 0.31% $16,259 2.37% $12,691 -0.95% $13,893
30-SEP-94 -2.16% $16,615 -2.42% $20,864 -0.92% $16,109 -3.15% $12,291 0.30% $13,934
31-OCT-94 0.99% $16,780 2.30% $21,344 -0.01% $16,108 3.33% $12,700 0.34% $13,982
30-NOV-94 -1.98% $16,447 -3.67% $20,560 -0.45% $16,035 -4.81% $12,089 1.30% $14,163
31-DEC-94 0.26% $16,491 1.47% $20,862 0.35% $16,091 0.63% $12,166 0.04% $14,169
31-JAN-95 -1.09% $16,310 2.59% $21,403 1.68% $16,362 -3.84% $11,699 1.06% $14,319
28-FEB-95 1.26% $16,516 3.87% $22,231 2.07% $16,700 -0.29% $11,665 1.27% $14,501
31-MAR-95 2.19% $16,877 2.96% $22,889 0.57% $16,795 6.24% $12,392 2.21% $14,821
30-APR-95 2.14% $17,238 2.95% $23,564 1.24% $17,004 3.76% $12,858 1.60% $15,059
31-MAY-95 3.56% $17,851 3.96% $24,498 3.02% $17,517 -1.19% $12,705 3.20% $15,540
30-JUN-95 1.17% $18,060 2.35% $25,073 0.67% $17,635 -1.75% $12,483 -0.15% $15,517
31-JUL-95 3.03% $18,608 3.33% $25,908 0.01% $17,636 6.23% $13,261 1.19% $15,702
31-AUG-95 -0.21% $18,568 0.23% $25,968 0.91% $17,797 -3.81% $12,756 0.71% $15,813
30-SEP-95 1.56% $18,858 4.17% $27,051 0.72% $17,925 1.95% $13,004 1.64% $16,073
31-OCT-95 0.35% $18,924 -0.28% $26,975 1.11% $18,124 -2.69% $12,654 1.04% $16,240
30-NOV-95 1.47% $19,204 4.40% $28,161 1.31% $18,361 2.78% $13,006 2.04% $16,571
31-DEC-95 2.42% $19,669 1.85% $28,683 1.05% $18,554 4.03% $13,530 0.84% $16,710
31-JAN-96 3.18% $20,294 3.44% $29,669 0.86% $18,714 0.41% $13,586 1.11% $16,896
29-FEB-96 -0.34% $20,225 0.96% $29,955 -1.17% $18,495 0.34% $13,632 -1.12% $16,707
31-MAR-96 0.34% $20,294 0.96% $30,244 -0.51% $18,401 2.12% $13,921 0.97% $16,869
30-APR-96 2.12% $20,725 1.47% $30,688 -0.35% $18,336 2.91% $14,326 0.98% $17,034
31-MAY-96 0.68% $20,865 2.58% $31,480 -0.08% $18,321 -1.84% $14,063 0.05% $17,042
30-JUN-96 0.67% $21,006 0.38% $31,599 1.06% $18,516 0.56% $14,141 0.83% $17,184
31-JUL-96 -2.61% $20,458 -4.42% $30,203 0.30% $18,571 -2.92% $13,728 0.67% $17,299
31-AUG-96 1.31% $20,727 2.11% $30,840 0.08% $18,586 0.22% $13,759 0.76% $17,430
30-SEP-96 3.21% $21,392 5.63% $32,576 1.39% $18,844 2.66% $14,125 2.02% $17,783
31-OCT-96 0.60% $21,520 2.76% $33,475 1.77% $19,178 -1.00% $13,983 1.64% $18,074
110.06% 10.24% $2.16 16.31% $0.85 8.43% $0.41 4.66% $0.72
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, November 18, 1988.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that a
gain or loss may be realized when shares are sold. All performance figures
assume reinvestment of dividends. Management fees and other expenses are
included in the Fund's performance; however, fees and expenses are not
incorporated in the S&P 500 Index, the Morgan Stanley Capital International
EAFE Index, the Salomon Non-U.S. Government Bond Index (currency hedged), or
the Lehman Bros. Intermediate Government/Corporate Bond Index.
2
<PAGE>
FREMONT FUNDS
FREMONT GLOBAL FUND
GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1996
[MAP]
<TABLE>
<S> <C>
CANADA............................. 2.9%
EUROPE............................. 17.6%
UNITED STATES...................... 62.4%
JAPAN.............................. 4.1%
EMERGING MARKETS--LATIN AMERICA.... 0.3%
PACIFIC RIM........................ 8.3%
EMERGING MARKETS--OTHER............ 4.3%
</TABLE>
TO OUR SHAREHOLDERS
In second half fiscal 1996, ended October 31, 1996, Fremont Global Fund
returned 3.84% compared to the Lipper Global Flexible Fund Average's 5.48%.
For full fiscal year 1996, the Fund returned 13.7% versus the Average's 13.6%.
The Fund's overweighting in European, Canadian and Australian bonds and our
9.8% portfolio position in Asian (except Japan) stocks aided performance. The
Fund's relatively high (on average 20-25%) cash position restrained returns.
The Fund's larger than normal cash holdings reflected our concern that
strong global economic growth would lead to higher inflation and interest
rates, thereby increasing financial market risk. Based on economic data
released in early November which indicate more moderate global economic
expansion, low inflation and stable-to-declining interest rates, we are now
comfortable putting more money to work in global stock and bond markets.
In the U.S. stock market, we see attractive, albeit less robust, return
potential. We are forecasting corporate earnings to be up 5% to 10% in the
coming year. We doubt stocks will experience the price/earnings multiple
expansion witnessed in 1996. But, stock market gains in the high single digits
are achievable. With inflationary fear subsiding, U.S. bonds should have a
yield-like return with little net price movement in the coming 12 months.
In Europe, central banks should continue to keep interest rates low. We
believe these low rates will finally induce some broad-based economic momentum
(2 - 2.5% GDP growth). With high unemployment and low industrial capacity
utilization rates, European economies have a lot of room to grow before
rekindling any inflationary pressure. The European monetary union should be
particularly beneficial to countries like Spain, Portugal and Italy, whose
volatile currencies have restrained economic growth and foreign investment. We
will continue to focus our attention on these markets.
The Japanese economy should continue its modest expansion. But, an increase
in the consumption tax scheduled for April 1997 and long-term structural
problems in the banking sector make us neutral on the Japanese stock market.
Extremely low yields on Japanese bonds eliminate them from serious
consideration.
The robust long-term economic growth prospects for Southeast Asian countries
makes this region an attractive investment arena. Substantial declines in
Thailand, Singapore, and Korea have wrung the speculative excess out of these
stock markets, and created some very appealing funda-
(continued on page 4)
3
<PAGE>
FREMONT FUNDS
THE CHANGING FREMONT GLOBAL FUND ASSET MIX
ASSET MIX ASSET MIX ASSET MIX
ASSET CLASS 11/30/96 10/31/96 10/31/95
STOCKS
U.S 38% 30% 35%
FOREIGN 25% 22% 35%
--- --- ---
TOTAL STOCKS 63% 52% 70%
BONDS
U.S 7% 6% 10%
FOREIGN 17% 16% 15%
--- --- ---
TOTAL BONDS 24% 22% 25%
CASH RESERVES 13% 26% 5%
-------------------------------------------------------------
TOTAL 100% 100% 100%
mental values. The decent returns of emerging market indices, up around 10% in
1996, have restored international investor confidence, and with the U.S. and
many European stock markets at record levels, we could see a very favorable
flow of funds into Pacific Rim equities markets in the year ahead. Over the
next several months, we plan to invest some of the Fund's cash reserves into
carefully selected Southeast Asian stocks.
Next we would like to briefly discuss some of the global equities that
appear particularly compelling today. Since things can change rapidly in the
financial markets, it should be noted that the following stocks may or may not
be portfolio holdings at the time you read this report.
When Hong Kong is officially handed over to China on June 30, 1997, the
great uncertainty that has restrained the market in recent years will finally
subside. Citic Pacific will be the most direct beneficiary of the changing of
the guard. A publicly-held company, Citic Pacific is essentially the
investment arm of the Chinese central government. It is aggressively investing
in Hong Kong commercial real estate, transportation systems and finance
companies. Citic is going to replace the British trading companies that have
dominated the Hong Kong economy for a century. The company will make money in
Hong Kong and be one of the biggest commercial conduits to mainland China.
Citic is not a monopoly, but it is going to be one of the biggest and most
influential players in the region.
With its recent acquisition of Morton Thiokol's auto airbag business,
Sweden's Autoliv is now the world's largest player in what will continue to be
a great growth industry. Over the next several years, global auto
manufacturers will be adding front passenger side airbags in their mid-price
lines. Many will follow Volvo and Mercedes' lead by adding side impact airbags
to their luxury lines. This translates into incremental revenues and earnings
for dominant market share companies like Autoliv.
We are pleased to have modestly exceeded our performance benchmark in fiscal
1996 despite the portfolio's relatively large cash holdings. Based on
better-than-expected news on the global inflation and interest rate fronts, we
will be more fully invested in the year ahead. We expect decent absolute
returns from global stock and bond markets in general and particularly good
relative returns from our investments in Southeast Asia. We remain confident
the Fund will continue to produce attractive risk-adjusted returns in global
financial markets.
Sincerely,
/s/Dave Redo /s/Pete Landini
/s/Robert L. Haddick /s/Sandie Kinchen
/s/Vince Kuhn
The Fremont Asset Allocation Committee
Portfolio Managers
Fremont Global Fund
4
<PAGE>
FREMONT FUNDS
FREMONT INTERNATIONAL GROWTH FUND
Andrew L. Pang, Portfolio Manager
Fremont Investment Advisors, Inc.
[PHOTO OF ANDREW PANG]
[FUND PROFILE]
Fremont International Growth Fund invests in international stocks with
superior earnings growth potential. Approximately 40 percent of the portfolio
is generally invested in European stock markets, with the balance devoted to
Asian markets including Japan.
First, fund management employs a top-down approach -- factoring in
economic growth potential, corporate earnings outlook, market valuations,
political and currency stability, and inflation and interest rate trends -- in
making country asset allocation decisions. Then, within each country, the Fund
focuses on those industry groups providing essential products and services --
consumer basics, banking, telecommunications, information technology, power
generation, health care and infrastructure. The Fund favors dominant market
share companies (in some cases monopolies) most likely to produce consistent
earnings growth.
Portfolio Manager Andrew L. Pang is a Chinese American with strong cultural
ties and investment research contacts in Asia. He travels globally on a
regular basis meeting with research analysts and directly with corporate
management to identify investment opportunities.
TO OUR SHAREHOLDERS
For the six months ended October 31, 1996, Fremont International Growth Fund
returned -4.06% compared to -2.39% for the Europe, Australia, and Far East
(EAFE) Index. For full fiscal year 1996, the Fund gained 7.07% versus EAFE's
10.51%.
Feathers in our cap for the second fiscal half include our overweighting in
Hong Kong (7.5% compared to EAFE's 3.5%), and our underweighting in Japan
(23.5% versus EAFE's 40%). The Hong Kong stock market rose to record highs
recently, and over the last six months the Japanese stock market as measured
by the MSCI was off 16.02% including yen-to-dollar currency translation. Black
eyes for the portfolio included an overweighting in other Southeast Asian
markets, which performed poorly
(continued on page 6)
FREMONT INTERNATIONAL GROWTH FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT INT'L GROWTH FUND EAFE
----------------- --------------
<S> <C> <C> <C> <C> <C>
01-MAR-94 $10,000 $10,000
31-MAR-94 -3.66% $9,634 -4.31% $9,569
30-APR-94 0.33% $9,666 4.24% $9,975
31-MAY-94 0.11% $9,676 -0.57% $9,918
30-JUN-94 -1.94% $9,488 1.41% $10,058
31-JUL-94 2.42% $9,718 0.96% $10,155
31-AUG-94 4.73% $10,178 2.37% $10,395
30-SEP-94 -1.44% $10,031 -3.15% $10,068
31-OCT-94 1.98% $10,230 3.33% $10,403
30-NOV-94 -4.80% $9,739 -4.81% $9,903
31-DEC-94 -0.51% $9,689 0.63% $9,965
31-JAN-95 -6.90% $9,020 -3.84% $9,582
28-FEB-95 1.97% $9,198 -0.29% $9,555
31-MAR-95 2.05% $9,386 6.24% $10,151
30-APR-95 3.34% $9,699 3.76% $10,533
31-MAY-95 2.59% $9,950 -1.19% $10,407
30-JUN-95 2.10% $10,159 -1.75% $10,225
31-JUL-95 5.66% $10,734 6.23% $10,862
31-AUG-95 -2.43% $10,473 -3.81% $10,448
30-SEP-95 0.70% $10,546 1.95% $10,652
31-OCT-95 -2.87% $10,243 -2.69% $10,366
30-NOV-95 -0.93% $10,148 2.78% $10,654
31-DEC-95 2.36% $10,387 4.03% $11,083
31-JAN-96 3.45% $10,746 0.41% $11,129
29-FEB-96 1.57% $10,915 0.34% $11,166
31-MAR-96 0.77% $10,999 2.12% $11,403
30-APR-96 3.93% $11,431 2.91% $11,735
31-MAY-96 -0.92% $11,326 -1.84% $11,519
30-JUN-96 1.68% $11,516 0.56% $11,584
31-JUL-96 -5.22% $10,915 -2.92% $11,245
30-AUG-96 1.74% $11,104 0.22% $11,270
30-SEP-96 2.37% $11,368 2.66% $11,570
31-OCT-96 -3.53% $10,967 -1.00% $11,454
15.16% 6.24% 15.84% 6.50%
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, March 1, 1994.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the Morgan Stanley Capital International EAFE
Index.
5
<PAGE>
FREMONT FUNDS
FREMONT INTERNATIONAL GROWTH FUND
GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1996
[MAP]
<TABLE>
<CAPTION>
<S> <C>
CANADA........................... 0.3%
UNITED KINGDOM................... 8.4%
CONTINENTAL EUROPE............... 31.0%
UNITED STATES.................... 3.5%
JAPAN............................ 23.5%
HONG KONG/SINGAPORE/MALAYSIA..... 11.2%
OTHER EMERGING MARKETS:
INCLUDING THAILAND, INDONESIA,
THE PHILIPPINES, TAIWAN AND
SOUTH KOREA.................... 18.9%
AUSTRALIA/NEW ZEALAND............ 3.2%
</TABLE>
relative to European markets. We are currently seeing a rebound in some of
these markets. Portfolio performance was also restrained by our underweighting
in the United Kingdom (8.4% versus EAFE's 16%), even though our UK stocks
outperformed the UK index 16% to 14%.
Looking ahead, we believe our overweighting in Hong Kong in particular and
Southeast Asia in general will serve us well. We are forecasting 6 - 8% real
GDP growth in Southeast Asia compared to 2 - 2.5% growth in Europe. In
addition, after three years of lackluster performance relative to European
stock markets, Southeast Asian stock market valuations are more than
reasonable. Our current asset allocation of approximately 54% in Asia (23.5%
in Japan and 30% spread out among eight other Southeast Asian markets), and
about 40% in Europe, reflects our expectations for much better relative
returns for Southeast Asian stocks.
Bearing in mind we are committed to no stock forever, let's talk about a few
of our current favorites. Datacraft Asia (Singapore) is in the information
technology upgrade business serving companies throughout Southeast Asia. They
have developed a particularly promising niche in China, where they recently
received six contracts to upgrade telecommunications systems in corporate
regional offices. We are looking for 30 - 35% earnings growth in the next two
years. This rapid earnings growth could be extended well into the future if
Datacraft can further expand its presence in China.
In the United Kingdom, we have found an intriguing monopolistic company.
Railtrack, created via an initial public offering in May 1996, is part of the
privatization of the United Kingdom's transportation system. Railtrack owns
all the railroad infrastructure and is paid by railroad companies to maintain
and improve railway tracks and station
6
<PAGE>
FREMONT FUNDS
houses throughout the country. Because of long-term contracts with the
railroad companies, Railtrack's revenues are very predictable. The company is
now in the process of aggressively cutting costs, which will improve margins
and earnings. Railtrack stock has performed well and we believe it will
continue to rise on accelerating earnings.
Going forward, we believe our commitment to Southeast Asian markets will be
more adequately rewarded. Our focus on dominant market share essential service
companies should continue to contribute to our stock-picking success. We thank
you for your appreciation of our investment discipline and look forward to a
financially rewarding year ahead.
Sincerely,
/s/Andrew L. Pang
Andrew L. Pang
Portfolio Manager
Fremont International Growth Fund
<TABLE>
<CAPTION>
FREMONT INTERNATIONAL GROWTH FUND
SECTOR ALLOCATION AS OF OCTOBER 31, 1996
<S> <C>
SHORT TERM SECURITIES (3.6%)
TECHNOLOGY (14.1%)
FINANCIAL SERVICES (11.4%)
HEALTH CARE (10.6%)
UTILITIES (8.0%)
CONSUMER NON-DURABLES (7.0%)
CONSUMER SERVICES (6.7%)
CAPITAL GOODS (6.6%)
CONSUMER DURABLES (6.6%)
OTHER (25.4%)
</TABLE>
7
<PAGE>
FREMONT FUNDS
FREMONT INTERNATIONAL SMALL CAP FUND
Dr. Gary L. Bergstrom, Portfolio Manager
Acadian Asset Management, Inc.
[PHOTO OF GARY BERGSTROM]
[FUND PROFILE]
Fremont International Small Cap Fund's investment thesis is simple:
extensive statistical evidence shows that superior long-term returns are
achieved by investing in fundamentally undervalued small company stocks. The
Fund's Sub-Advisor, Acadian Asset Management, Inc., has a unique financial
database of approximately 20,000 companies in over 50 countries. This database
includes up to 25 years of historical earnings, dividends, book values, stock
prices, country indices, and inflation and interest rate statistics for
individual countries.
After screening stocks through numerous fundamental value models, country
and currency valuation is factored in, producing a relative attractiveness
ranking ("alpha ranking") for all the stocks in this extensive global
universe. The Fund invests in those highly ranked stocks judged to have above
average performance potential. Country diversification is maintained to reduce
portfolio risk.
Portfolio Manager Dr. Gary L. Bergstrom, (President and Chief Investment
Officer of the Fund's Sub-Advisor, Acadian Asset Management, Inc.) has more than
25 years of professional investment experience in global markets. He has
personally developed many of the quantitative techniques employed in Acadian's
valuation models.
TO OUR SHAREHOLDERS
For the six months ended October 31, 1996, Fremont International Small Cap
Fund was down 1.3% compared to the Salomon Brothers Extended Market Index of
Europe and Pacific Countries' (EMI EPAC) loss of 3.4%. For the full fiscal
year, the Fund gained 13.7% versus EMI EPAC's 12.8%. The Fund outperformed the
Lipper International Small Company Average by 0.6% for the year.
In the second half of fiscal 1996, the Fund achieved superior relative
returns from Japanese stocks, as signs of economic recovery boosted the
smaller, economically-sensitive companies in the
FREMONT INTERNATIONAL SMALL CAP FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT INTERNATIONAL SMALL CAP FUND SOLOMON EMI INDEX
------------------------------------ -----------------
<S> <C> <C> <C> <C>
30-JUN-94 $10,000 $10,000
31-JUL-94 1.30% $10,130 1.14% $10,114
31-AUG-94 2.37% $10,370 1.06% $10,221
30-SEP-94 -4.34% $9,920 -2.86% $9,929
31-OCT-94 -0.60% $9,860 1.81% $10,109
30-NOV-94 -5.58% $9,310 -6.24% $9,478
31-DEC-94 -3.11% $9,020 1.34% $9,605
31-JAN-95 -5.32% $8,540 -3.25% $9,293
28-FEB-95 -0.94% $8,460 -1.46% $9,157
31-MAR-95 2.25% $8,650 4.25% $9,546
30-APR-95 3.47% $8,950 3.00% $9,833
31-MAY-95 2.57% $9,180 -1.75% $9,660
30-JUN-95 -0.98% $9,090 -1.23% $9,542
31-JUL-95 5.61% $9,600 5.83% $10,098
31-AUG-95 -2.19% $9,390 -2.53% $9,842
30-SEP-95 0.43% $9,430 0.78% $9,919
31-OCT-95 -3.76% $9,075 -2.88% $9,634
30-NOV-95 -0.78% $9,004 1.06% $9,736
31-DEC-95 2.95% $9,270 3.83% $10,109
31-JAN-96 6.47% $9,870 1.78% $10,288
29-FEB-96 1.75% $10,043 1.56% $10,449
31-MAR-96 1.92% $10,236 2.30% $10,689
30-APR-96 2.09% $10,450 5.26% $11,252
31-MAY-96 0.10% $10,460 -0.81% $11,160
30-JUN-96 -1.17% $10,338 0.01% $11,162
31-JUL-96 -2.85% $10,043 -3.78% $10,740
30-AUG-96 1.21% $10,165 1.01% $10,848
30-SEP-96 0.50% $10,216 0.56% $10,909
31-OCT-96 1.00% $10,318 0.00% $10,909
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, June 30, 1994.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that a
gain or loss may be realized when shares are sold. All performance figures
assume reinvestment of dividends. Management fees and other expenses are
included in the Fund's performance; however, fees and expenses are not
incorporated in the Salomon Brothers Extended Market Index.
8
<PAGE>
FREMONT FUNDS
FREMONT INTERNATIONAL SMALL CAP FUND
GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1996
[MAP]
<TABLE>
<S> <C>
CANADA........................................ 3.3%
IRELAND....................................... 0.9%
CONTINENTAL EUROPE............................ 19.5%
UNITED STATES................................. 1.1%
UNITED KINGDOM................................ 12.7%
JAPAN......................................... 17.1%
HONG KONG/SINGAPORE/MALAYSIA.................. 10.5%
EMERGING MARKETS: LATIN AMERICA............... 10.0%
OTHER EMERGING MARKETS:
INCLUDING SOUTH KOREA, TURKEY,
CZECH REPUBLIC, PORTUGAL, GREECE,
CHINA AND OTHERS............................ 23.5%
AUSTRALIA/NEW ZEALAND ........................ 1.4%
</TABLE>
portfolio. Investments in smaller markets like Italy, Spain, New Zealand and
Malaysia were rewarding, as was successful stock selection in emerging markets
including Greece, China, Mexico and Turkey. The Fund's overweighting in the
strong Brazilian stock market was also a performance positive. The portfolio's
underweighting in the United Kingdom and the relative underperformance of
portfolio holdings in France restrained Fund returns.
The Fund's portfolio characteristics remain consistent with our investment
thesis that over the longer term, superior returns are generated through
investing in fundamentally undervalued small cap stocks.
As the following chart indicates, our bottom-up stock selection discipline
has resulted in attractive portfolio valuations and higher yield relative to
three international benchmarks -- EAFE, for large cap developed nations;
EMI-EPAC, for small cap developed nations; and IFC Investable, for emerging
countries.
(continued on page 10)
PORTFOLIO VALUATIONS AND YIELDS
<TABLE>
<CAPTION>
PRICE/ PRICE/ CURRENT NEXT YEAR PRICE/CASH
BOOK SALES P/E P/E EARNINGS YIELD
---- ----- ---- ---- -------- -----
<S> <C> <C> <C> <C> <C> <C>
EAFE 2.2 0.8 20.8 18.6 9.0 2.1%
EMI-EPAC 1.8 0.6 21.0 17.5 7.9 2.0%
IFC INVESTABLE 1.7 1.4 15.0 12.4 9.1 2.0%
FREMONT 1.0 0.3 10.7 9.0 4.3 4.2%
</TABLE>
9
<PAGE>
FREMONT FUNDS
Based on our value-oriented stock selection criteria and the expected return
forecasts of our country and currency models, the United Kingdom and Canadian
markets are among those with superior relative investment potential. The
United Kingdom market should continue to benefit from steady economic growth,
low inflation, and strong corporate earnings, all boons to smaller
value-oriented companies. We believe the recent uptick in UK interest rates
represents a modest adjustment rather than a change of trend in relatively
relaxed monetary policy.
We find the U.S. market relatively overvalued at present, with Canada
appearing more attractive in aggregate. Even though the Canadian market is up
30% compared to the U.S. market's 23.8% gain over the last year, it remains
fundamentally cheaper. The Canadian macro-economic outlook is positive, with
controlled inflation, strong foreign capital in-flows, and a government
committed to deficit reduction.
With the IFC Investable Index, a widely-used benchmark for emerging market
performance, up 10.4% year-to-date through October 1996, the Fund's 33%
commitment to emerging market stocks has been productive while providing
diversification benefits that make this asset class a valuable component of
any broad international equities strategy. The emerging markets in aggregate
are quite cheap relative to the U.S. and other developed country equities
markets. With good year-to-date 1996 performance renewing investor confidence
in the emerging markets and the U.S. market being perceived as increasingly
risky at its current lofty levels, we anticipate a strong international flow
of funds into the emerging markets in the year ahead.
In the Pacific Rim, the Hong Kong market is fundamentally attractive, as is
the Thailand market, which is down 30% over the last year. Among emerging
markets in Latin America, Brazil remains our favorite, with an aggregate
price/book value ratio among the lowest in the world. Earnings, particularly
for the utilities sector, which has received a government-approved rate
increase, look good. The government's privatization program is attracting
additional foreign capital and providing more opportunities in the market.
Mexico has delivered strong returns year-to-date, making it somewhat less
attractive on a relative valuation basis despite a still favorable political
and economic outlook.
In our semi-annual report to you, we covered a lot of ground on developed
and emerging market valuations and prospects. This is relevant to our
investment outlook, but it is driven by our individual stock selection
process. To give you a feel for our stock picking discipline, we will also
briefly discuss an individual stock in the portfolio. Bearing in mind that
things can change in a hurry, we add the caveat that the company we are
writing about today may or may not be a timely investment by the time you read
this.
Hollandsche Beton (HBG) is a Dutch construction company involved in
industrial, commercial and public works from housing and civil development
projects to road and infrastructure building. The stock's price has fallen to
attractive levels as some analysts are predicting that slower government
spending in the United Kingdom and Germany might limit HBG's prospects. Based
on its currently low price/earnings ratio and other fundamental value
criteria, and in view of its strong cash position being used for a
well-planned expansion into new markets, Hollandsche Beton is our brand of
attractive investment opportunity.
In closing, the short-to-intermediate performance of Fremont International
Small Cap Fund will always be determined by a number of variables --
macro-economic and market trends within the countries in which we invest, the
performance of small cap stocks relative to bigger cap stocks within each
market, and most importantly, the effectiveness of our stock-picking
discipline. Longer term, we believe international small cap value investing
will produce attractive absolute and relative rates of return for equities
investors. We thank you for your appreciation of our investment philosophy and
our investment talents. Be assured, we continue to work diligently on your
behalf.
Sincerely,
/S/Gary L. Bergstrom
Dr. Gary L. Bergstrom
Portfolio Manager
Fremont International Small Cap Fund
10
<PAGE>
FREMONT FUNDS
FREMONT EMERGING MARKETS FUND
Henry L. Thornton, Portfolio Manager
Credit Lyonnais International Asset Management (HK) Limited
[PHOTO OF HENRY THORNTON]
[FUND PROFILE]
Around the globe, countries that once relied on agriculture, natural
resources or low-level manufacturing are developing sophisticated,
high-growth, export-driven industrial economies. These emerging market
countries offer a wealth of opportunity for experienced professional
investors.
Fremont Emerging Markets Fund employs a bottom-up stock picking approach in
building a diversified portfolio of emerging market companies. The Fund
focuses on the stocks of companies with rapid, sustainable earnings growth
trading at reasonable market valuations. Portfolio risk is further reduced by
country diversification. Fund management establishes a country allocation
policy and each regional investment team conducts rigorous fundamental
research, including company visits, to select individual stocks within each
market. Liquidity is also carefully monitored.
Portfolio Manager Henry Thornton (Investment Director of Sub-Advisor Credit
Lyonnais International Asset Management, CLIAM) is widely recognized as an
expert in emerging market investing. Headquartered in London, with offices in
Hong Kong and Singapore, CLIAM's experienced team of analysts is
geographically well positioned for "hands-on" emerging market research.
TO OUR SHAREHOLDERS
From its June 24, 1996 inception, the Fremont Emerging Markets Fund declined
3.12% compared to a 6.19% loss for the Morgan Stanley Capital International
Emerging Markets Free (MSCI-EMF) Index and a 4.45% loss for the IFC Investable
Index over the June 30 - October 31, 1996 time period.
At this early juncture, performance comparisons between our four-month-old
mutual fund and appropriate indices are premature and largely immaterial. We
have just begun planting the seeds we hope to harvest in the years ahead. We
are progressing slowly, partially due to short-term caution regarding the
emerging markets, (certainly justified by poor performance of emerging market
(continued on page 12)
FREMONT EMERGING MARKETS FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT Emerging Markets Fund MSCI Emerging Markets Free Index
<S> <C> <C> <C> <C>
----------------------------- ---------------------------------------
24-JUN-96 $10,000 $10,000
31-JUL-96 -4.40% $9,560 -4.44% $9,556
30-AUG-96 2.09% $9,760 -6.83% $8,903
30-SEP-96 1.64% $9,920 2.56% $9,131
31-OCT-96 -2.34% $9,688 -2.67% $8,887
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, June 24, 1996.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that a
gain or loss may be realized when shares are sold. All performance figures
assume reinvestment of dividends. Management fees and other expenses are
included in the Fund's performance; however, fees and expenses are not
incorporated in the MSCI Emerging Markets Free Index.
11
<PAGE>
FREMONT FUNDS
FREMONT EMERGING MARKETS FUND
GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1996
[MAP]
<TABLE>
<S> <C>
UNITED STATES............................ 29.4%
PACIFIC RIM: INCLUDING
HONG KONG, MALAYSIA,
AND TAIWAN............................. 37.1%
EMERGING MARKETS: INCLUDING
INDONESIA, THAILAND, THE PHILIPPINES
TURKEY, SOUTH AFRICA, INDIA,
RUSSIA AND CHINA....................... 33.5%
</TABLE>
indices over the last four months), but more particularly, consistent with our
risk-averse stock picking discipline.
Before we address investment issues specific to the Fund, let's step back
and review the still embryonic history of emerging market investing. In the
early 1990's, the global investment community "discovered" the emerging
markets. Buoyed by strong cash in-flows, the emerging markets took off,
creating the speculative excess that culminated in a major peak in Asia in
first quarter 1994 and in Latin America in third quarter 1994. Since then,
emerging markets in aggregate have performed quite poorly relative to the
robust returns from the U.S. and major European stock markets. From 1994
through third quarter 1996, the IFC Investable Index declined 18% and the
MSCI-EMFI lost 12%.
Now, back to the future. The basic investment thesis that first attracted
investors to the emerging markets -- rapidly expanding economies producing
superior corporate earnings growth and appealing long term investment returns
- -- remains quite valid. Today, you can buy this growth at very reasonable
prices. At year end 1993, emerging markets price/earnings ratios approximated
30. Today, aggregate emerging market P/E's are around 20. In short, you no
longer have to pay a large premium for growth. We suggest this spells
opportunity and foreshadows significantly better returns for emerging market
investors over the next several years.
As you know, due to our extensive investment experience in Southeast Asia
(we had our research teams in place in the mid 1980's, long before most of our
competitors), the Fund is structurally biased to these emerging markets. We
are building research capacity in Eastern Europe and Latin America and
recently made our first investment in Russia -- Mosenergo, the electric
utility in Moscow. Going forward, we expect to have the Fund portfolio 70 -
75% invested in Southeast Asia with 10 - 15% of assets in each of Eastern
Europe and Latin America.
Rather than commenting on the short-term prospects for individual emerging
markets or briefly reviewing portfolio holdings, we thought it would be more
constructive to discuss an individual stock that demonstrates our
"growth-at-a-price" investment discipline. We want to buy well-managed
companies with superior earnings potential. We do not want to
12
<PAGE>
FREMONT FUNDS
make the classic mistake of overpaying for them.
Yageo, a Taiwanese manufacturer of the resistors used in cellular
telephones, is our kind of investment opportunity. Yageo is one of a handful
of companies in the world that makes these resistors (there are approximately
130 of these tiny items in one wireless telephone), and the only non-Japanese
company in the business. The stock had been under some pressure as the Yen's
decline has made their Japanese counterparts more price competitive. However,
with Japanese monetary authorities signaling that the Yen has fallen far
enough, Yageo should be able to once again increase its market share in this
fast-growing business. Currently priced around 16 times earnings, which we
believe will grow 20 - 30% annually, Yageo stock offers superior growth at a
discount price.
In this, our first letter to shareholders, we've provided a brief history of
emerging market investing, discussed current emerging market valuations, and
profiled a portfolio holding that demonstrates our stock picking discipline.
In future letters to you, we will focus on the prospects for individual
emerging markets and detail more of our portfolio holdings. In closing, we
reaffirm our conviction that disciplined emerging market investing will
produce attractive long-term returns for growth-oriented investors.
Sincerely,
/s/Henry Thornton
Henry Thornton
Portfolio Manager
Fremont Emerging Markets Fund
13
<PAGE>
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FREMONT MUTUAL FUNDS INC
PO BOX 193663
SAN FRANCISCO CA 94119-9747
<PAGE>
ATTENTION!
FREMONT U.S. MICRO-CAP SHAREHOLDERS
INVEST IN THE SMALLEST COMPANIES THROUGHOUT THE WORLD
WITH THE FREMONT INTERNATIONAL SMALL CAP FUND.*
[ ] YES! I'd like to find out how investing in international small cap stocks
can help me take advantage of the higher-than-average growth potential of
small companies around the world, while diversifying my investment portfolio.
Please send me more information on the Fremont International Small Cap Fund,
including a prospectus which contains more information about the fees and
expenses of the Fund. I will read the prospectus carefully before I invest.
Name (first, middle initial, last):____________________________________________
Address:_______________________________________________________________________
Apt. # or P.O. Box:____________________________________________________________
City:______________________________ State:_____ Zip:___________________________
Daytime Phone:_________________________________________________________________
*There are risks of investing in a fund of this type which invests in newly
emerging foreign companies which may be subject to competitive conditions in
the industry, limited earnings history, reliance on one or a limited number of
products, erratic market conditions, economic and political instability, and
fluctuations in currency exchange rates.
Distributed by Funds Distributor, Inc., 50 Beale Street, Suite 100, San
Francisco, CA 94105
<PAGE>
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ON OUR FUNDS TO ANYONE ELSE?
We often get requests from shareholders to send information to other people
they know who are looking for no-load investments from top managers. If you
would like us to send a Fremont Funds brochure and prospectus to someone that
you know, just complete this postage-paid card and drop it in the mail.
[ ] PLEASE SEND A FREMONT FUNDS BROCHURE AND PROSPECTUS TO:
Name (first, middle initial, last):____________________________________________
Address:_______________________________________________________________________
Apt. # or P.O. Box:____________________________________________________________
City:______________________________ State:_____ Zip:___________________________
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Distributed by Funds Distributor, Inc., 50 Beale Street, Suite 100, San
Francisco, CA 94105
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[FREMONT FUNDS LOGO]
FREMONT MUTUAL FUNDS INC
PO BOX 193663
SAN FRANCISCO CA 94119-9747
<PAGE>
FREMONT FUNDS
FREMONT U.S. MICRO-CAP FUND
Robert E. Kern, Portfolio Manager
Morgan Grenfell Capital Management, Inc.
[PHOTO OF ROBERT E. KERN]
[FUND PROFILE]
The U.S. micro-cap stock market (stocks with market capitalizations in the
bottom 5% of the equities market) is a breeding ground for
entrepreneurially-managed companies with exceptional growth prospects. With
minimal Wall Street research coverage and low institutional ownership,
micro-cap stocks represent the least efficient sector of the domestic equities
market. This inefficiency creates attractive investment opportunities for the
research-driven stock pickers managing Fremont U.S. Micro-Cap Fund.
Since the investment potential of micro-cap stocks is largely determined by
the business prospects for individual companies rather than macro-economic
trends, the Fund's focus is on bottom-up stock selection. Fund management
analyzes financial statements, the company's competitive position, and meets
with key corporate decision makers to discuss strategies for future growth.
The Fund's goal is to find "winners" early in their growth cycle and,
importantly, to minimize fundamental investment mistakes.
Successful micro-cap investing also involves minimizing transaction costs.
The Fund's dedicated traders work hand-in-hand with the portfolio management
team on execution strategies to enhance the Fund's performance.
Robert E. Kern (Executive Vice President of the Fund's Sub-Advisor, Morgan
Grenfell Capital Management) is nationally recognized as a pioneer and leading
practitioner of micro-cap research and portfolio management.
TO OUR SHAREHOLDERS
For the six months ended October 31, 1996, Fremont U.S. Micro-Cap Fund
returned 2.45% compared to the Russell 2000's -1.53%. For full fiscal year
1996, the Fund gained 41.46% versus the Index's 16.61%. Over the 24 months
ending November 26, 1996, the Fund's performance ranked first in Investor's
Business Daily's Growth
FREMONT U.S. MICRO-CAP FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT U.S. MICRO-CAP FUND RUSSELL 2000 INDEX
---------------------------
<S> <C> <C> <C> <C>
30-JUN-94 $10,000 $10,000
31-JUL-94 2.20% $10,220 1.64% $10,164
31-AUG-94 0.98% $10,320 5.57% $10,730
30-SEP-94 1.45% $10,470 -0.34% $10,694
31-OCT-94 -1.05% $10,360 -0.40% $10,651
30-NOV-94 -3.48% $10,000 -4.04% $10,221
31-DEC-94 1.50% $10,150 2.68% $10,494
31-JAN-95 1.97% $10,350 -1.26% $10,362
28-FEB-95 3.10% $10,671 4.16% $10,793
31-MAR-95 4.23% $11,122 1.71% $10,978
30-APR-95 2.43% $11,392 2.22% $11,222
31-MAY-95 4.57% $11,913 1.72% $11,415
30-JUN-95 4.88% $12,495 5.19% $12,007
31-JUL-95 6.82% $13,346 5.76% $12,699
31-AUG-95 6.31% $14,188 2.07% $12,961
30-SEP-95 2.54% $14,549 1.79% $13,193
31-OCT-95 -1.24% $14,368 -4.48% $12,602
30-NOV-95 4.53% $15,020 4.21% $13,132
31-DEC-95 4.10% $15,635 2.64% $13,479
31-JAN-96 3.44% $16,174 -0.11% $13,465
29-FEB-96 6.66% $17,250 3.12% $13,884
31-MAR-96 3.24% $17,810 2.04% $14,167
30-APR-96 11.40% $19,839 5.35% $14,924
31-MAY-96 8.40% $21,506 3.94% $15,512
30-JUN-96 -3.76% $20,699 -4.11% $14,875
31-JUL-96 -8.70% $18,897 -8.73% $13,576
30-AUG-96 6.14% $20,057 5.81% $14,364
30-SEP-96 4.75% $21,009 3.91% $14,925
31-OCT-96 -3.25% $20,326 -1.54% $14,695
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, June 30, 1994.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the Russell 2000 Index.
14
<PAGE>
FREMONT FUNDS
Fund category with a 114% total return.
If I may borrow from Charles Dickens, fiscal 1996 was "A Tale of Two
Halves." In the first half, smaller company stocks as a group performed well
and our micro-cap portfolio did even better as evidenced by the Fund's strong
returns relative to the benchmark index. Smaller company stocks got slammed in
June - July, and rebounded, but did not keep pace with bigger cap stocks from
August through October. Peak to trough, the Fund was down 15.7% during the
summer correction, but we managed a relatively impressive comeback to finish
the second half of 1996 in the black. We are as proud of this performance in a
challenging market environment as we were of our superior results in the first
half's more favorable investment climate.
After market shocks such as we experienced this summer, investor confidence
generally returns to the big cap sector first. This is reflected in the strong
performance of the S&P 500 relative to the Russell 2000 in recent months.
Today, the dust has cleared and we expect investors to once again gravitate to
smaller company stocks. With the caution that rising stock prices or
unexpected fundamental deterioration can rather quickly change our opinion on
any given portfolio holding, we will briefly review some of our current
favorites.
Micrel has carved a niche for itself as a leading supplier of high
performance analog semiconductors. Micrel's products find application in
laptop computers, cellular phones and PC memory card (PCMCIA) sockets. These
fast-growing markets and a focused product strategy have driven revenues from
less than $20 million in 1993 to a current annualized rate of over $70
million. We are forecasting a continuation of strong growth for Micrel and
revenues could accelerate as the new digital Personal Communications Services
(PCS) systems are built over the next few years. Micrel's growth potential,
focused business strategies, financial strength and attractive valuation
support its #1 ranking among the Fund's technology holdings.
LodgeNet is the fastest growing company in hotel room interactive media
business. In hotels with LodgeNet systems, you can order movies whenever you
want to watch them rather than at scheduled intervals. Your kids can also play
Nintendo games. LodgeNet systems generate approximately $23 in revenues per
room per month, which translates into a short two-year payback period for
hotel operators. The company's modular technology also makes its systems more
cost-efficient for smaller hotels, which have generally not offered
interactive media services. As existing hotel contracts come up for re-bid,
LodgeNet should continue to gain market share from its primary competitor, On
Command (the reincarnation of Spectravision, which recently emerged from
bankruptcy). With its current rapid expansion, LodgeNet is a cash flow, rather
than an earnings story. We expect cash flow to grow 20 - 25% annually for the
foreseeable future. Bottom-line oriented management (they don't overbid for
contracts) is doing a terrific job building value that will ultimately
translate into strong earnings growth.
Daisytek is the leading U.S. wholesale distributor of computer office
supplies and accessories. This is a "razorblade" company that wholesales all
the consumable products that have to be replaced on a fairly regular basis. We
believe that Daisytek will grow earnings at around 20% annually, with the
possibility of accelerating earnings as the company expands globally (they
recently opened offices in Latin America and made an acquisition in Australia
to serve the Pacific Rim markets). Currently trading at 14 times our 1997
earnings estimates, Daisytek remains fundamentally appealing.
In closing, we are very pleased with the Fund's fiscal 1996 performance. We
can't promise we'll deliver 40% plus returns every year. However, we are
confident that our intensive research efforts in selecting successful
micro-cap companies will generate superior long-term investment returns.
Sincerely,
/s/Robert E. Kern
Robert E. Kern
Portfolio Manager
Fremont U.S. Micro-Cap Fund
15
<PAGE>
FREMONT FUNDS
FREMONT GROWTH FUND
W. Kent Copa, CFA, Portfolio Manager
Fremont Investment Advisors, Inc.
[PHOTO OF W. KENT COPA]
[FUND PROFILE]
Fremont Growth Fund invests principally in large capitalization U.S. stocks
with superior earnings growth prospects. The Fund also invests selectively in
mid-cap companies with favorable earnings dynamics. The goal is to
consistently outperform the Standard & Poor's 500 Index (S&P 500). Extensive
statistical evidence reveals a direct relationship between the performance of
stocks in selected industry groups during the varying stages of the economic
cycle. For example, food and drug stocks, which generally produce consistent
earnings growth throughout the business cycle, tend to perform well in a
sluggish economy. Auto, energy, and banking company earnings and stock prices
tend to grow faster when the economy gains momentum.
Fremont Growth Fund utilizes sophisticated quantitative models to forecast
macro-economic trends and to identify those industry groups providing the best
relative investment potential. The stock selection process involves
identifying leading companies in each industry group with consistent earnings
growth records and reasonable valuations.
This "sector rotation" style is widely utilized by large institutional
investors. Fremont Growth Fund offers this sophisticated investment discipline
to mutual fund shareholders.
TO OUR SHAREHOLDERS
For the second half of the fiscal year ended October 31, 1996, Fremont
Growth Fund returned 10.81% compared to the S&P 500's 9.08%. For full fiscal
year 1996, the Fund gained 22.1% versus the S&P 500's 24.1%. Despite modestly
underperforming the S&P 500, our results compare quite favorably to the 18.5%
average return for the Lipper Growth Fund Average.
Fund performance benefitted from our overweighting in the technology,
consumer goods, and healthcare sectors for much of second fiscal half 1996.
Performance was restrained by underweighting in the financial service and
energy sectors.
At the end of September, we overweighted
FREMONT GROWTH FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT GROWTH FUND S&P 500
------------------- ---------------------
<S> <C> <C> <C> <C> <C>
14-AUG-92 $10,000 $10,000
31-AUG-92 -1.01% $9,899 -1.27% $9,873
30-SEP-92 1.93% $10,091 1.15% $9,987
31-OCT-92 1.08% $10,200 0.36% $10,023
30-NOV-92 4.46% $10,655 3.37% $10,361
31-DEC-92 1.57% $10,822 1.30% $10,495
31-JAN-93 1.22% $10,954 0.73% $10,572
28-FEB-93 -1.02% $10,843 1.36% $10,716
31-MAR-93 1.50% $11,005 2.15% $10,947
30-APR-93 -3.60% $10,609 -2.45% $10,679
31-MAY-93 2.40% $10,863 2.67% $10,964
30-JUN-93 0.75% $10,945 0.33% $11,000
31-JUL-93 -0.09% $10,935 -0.49% $10,946
31-AUG-93 3.36% $11,302 3.78% $11,359
30-SEP-93 0.99% $11,414 -0.74% $11,276
31-OCT-93 0.80% $11,506 2.05% $11,507
30-NOV-93 -2.04% $11,270 -0.90% $11,404
31-DEC-93 2.18% $11,516 1.23% $11,544
31-JAN-94 3.40% $11,907 3.36% $11,932
28-FEB-94 -3.11% $11,536 -2.71% $11,608
31-MAR-94 -5.27% $10,929 -4.34% $11,104
30-APR-94 1.13% $11,052 1.29% $11,248
31-MAY-94 0.37% $11,093 1.63% $11,432
30-JUN-94 -3.35% $10,722 -2.47% $11,149
31-JUL-94 4.04% $11,155 3.31% $11,518
31-AUG-94 5.10% $11,724 4.07% $11,986
30-SEP-94 -2.12% $11,476 -2.42% $11,696
31-OCT-94 1.98% $11,704 2.30% $11,965
30-NOV-94 -3.15% $11,335 -3.67% $11,526
31-DEC-94 2.02% $11,563 1.47% $11,695
31-JAN-95 0.40% $11,609 2.59% $11,998
28-FEB-95 3.25% $11,987 3.87% $12,463
31-MAR-95 2.67% $12,307 2.96% $12,832
30-APR-95 2.14% $12,570 2.95% $13,210
31-MAY-95 3.28% $12,982 3.96% $13,733
30-JUN-95 4.93% $13,622 2.35% $14,056
31-JUL-95 4.45% $14,228 3.33% $14,524
31-AUG-95 1.37% $14,423 0.23% $14,558
30-SEP-95 3.89% $14,983 4.17% $15,164
31-OCT-95 0.08% $14,995 -0.28% $15,122
30-NOV-95 3.22% $15,477 4.40% $15,787
31-DEC-95 -0.18% $15,449 1.85% $16,079
31-JAN-96 2.91% $15,898 3.44% $16,633
29-FEB-96 1.22% $16,092 0.96% $16,793
31-MAR-96 -0.38% $16,032 0.96% $16,954
30-APR-96 3.03% $16,517 1.47% $17,204
31-MAY-96 3.45% $17,087 2.58% $17,647
30-JUN-96 0.57% $17,184 0.38% $17,714
31-JUL-96 -4.87% $16,347 -4.42% $16,932
30-AUG-96 1.78% $16,638 2.11% $17,289
30-SEP-96 7.29% $17,852 5.63% $18,262
31-OCT-96 2.53% $18,304 2.76% $18,766
71.84% 14.99% 77.14% 15.89%
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, August 14, 1992.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the S&P 500 Index.
16
<PAGE>
FREMONT FUNDS
FREMONT GROWTH FUND
SECTOR DIVERSIFICATION AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL SERVICES (23.0%)
ENERGY (15.0%)
TECHNOLOGY (13.7%)
UTILITIES (10.5%)
HEALTH CARE (5.7%)
RETAIL (4.3%)
CAPITAL GOODS (3.2)
SHORT TERM SECURITIES (2.3%)
OTHER (22.3%)
</TABLE>
industrial cyclicals, financial service companies, and energy stocks in
anticipation of accelerating earnings for the balance of 1996 through first
quarter 1997. Concurrently, we reduced our commitments to technology and
healthcare stocks, and eliminated our positions in consumer non-durables
stocks -- all sectors in which we expect good but less inspiring earnings
relative to the more economically sensitive groups we currently favor. This
may seem contrary in view of an economy that is slowing after the rapid growth
posted in first half 1996. However, corporate earnings generally lag GDP
growth and we are looking for strong earnings comparisons for the auto,
insurance, and oil companies, as well as banks over the next two quarters. We
continuously re-examine those economic forces most directly influencing
corporate earnings momentum and may well reverse course as this slowing
economy begins to restrain cyclical earnings.
Within the Fund's overweighted sectors, current stock selection favorites
include Chrysler, Mobil, Bank of America, Allstate Insurance and MGIC
Investors.
Chrysler enjoys a clear production cost advantage over General Motors. It
has already made peace with the United Auto Workers in a contract that holds
wage increases to 3% per year. Most importantly, its light truck division,
which includes the Dodge Ram pickups and mini-van market leaders Dodge Caravan
and Plymouth Voyager, represents 70% of sales. This is the fastest growing and
highest margin segment of the auto industry. The popularity of its mini-vans
in particular should spare Chrysler the need to match the buyer incentives
currently being offered by Ford and GM. That means better margins and
earnings.
In the energy sector, we favor Mobil, primarily because it has been the most
aggressive cost-cutter in the industry and is "leaner and meaner" than the
other major domestic oil companies. In the financial services sector, which we
divide between banking and non-banking companies, we would highlight Bank of
America, which is the most direct beneficiary of the strong recovery of the
California economy; Allstate Insurance, the "good hands" people have a nice
string of strong earnings comparisons and a very good risk management record;
and MGIC Investors (Mortgage Guarantee Insurance Company), which underwrote
$110 billion in new policies in 1995, and should continued to thrive as
existing home sales and new housing starts remain strong.
In conclusion, September's substantial shift in sector weighting has already
paid off in October. We believe it will continue to reward our shareholders
for the next several quarters. As always, we will be monitoring economic
trends and the ever-changing business cycle to identify those sectors and
individual companies with the best relative investment potential. We are
pleased with our fiscal 1996 returns relative to our peers in the large cap
growth stock category and will be working hard to duplicate this success in
fiscal 1997.
Sincerely,
/s/Kent Copa
W. Kent Copa
Portfolio Manager
Fremont Growth Fund
17
<PAGE>
FREMONT FUNDS
FREMONT BOND FUND
Bill Gross, Founder and Managing Director
Pacific Investment Management Company (PIMCO)
[PHOTO OF BILL GROSS]
[FUND PROFILE]
Fremont Bond Fund invests in high quality corporate, mortgage backed, hedged
international, and government bonds. The Fund's goal is to consistently
provide attractive risk-adjusted returns relative to the broad fixed income
market.
The Fund's investment philosophy embodies three key principles. First,
portfolio strategy is driven by longer term trends in interest rates. Three-
to five-year economic, demographic, and political forecasts are updated
annually to identify the long term interest rate trend, which determines the
most appropriate maturity/duration (interest rate sensitivity) range for the
portfolio. Second, consistent performance is achieved by avoiding extreme
swings in portfolio maturity/duration. By operating within a moderate duration
range relative to the broad fixed income market, the Fund limits downside risk
during short-lived, but periodically violent interest rate fluctuations.
Finally, emphasis is placed on adding value through the analysis of
traditional variables such as sector, coupon, and quality.
Portfolio Manager Bill Gross (Founder and Managing Director of PIMCO,
Pacific Investment Management Company) has 25 years of professional
fixed-income investment experience. In addition to serving as the sub-advisor
to the Fremont Bond Fund, PIMCO manages $83 billion in fixed income
investments for institutional clients.
TO OUR SHAREHOLDERS
For the six months ended October 31, 1996, Fremont Bond Fund returned 6.96%
compared to 5.29% for the Lehman Brothers Aggregate Index. For full fiscal
year, the Fund returned 8.18% versus 5.83% for the Index. We are pleased to
have exceeded our benchmark by 2.35% this year.
Focusing on the second half of the fiscal year, we were fortunate to have
each major portfolio strategy work in our favor. We maintained the portfolio's
average duration (a measure of interest rate sensitiv-
FREMONT BOND FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
LEHMAN BROS GOV/CORP LEHMAN BROS GOV/CORP LEHMAN BROS AGGREGATE
FREMONT BOND FUND INTER. BOND BOND INDEX BOND INDEX
----------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30-APR-93 $10,000 $10,000 $10,000 $10,000
31-MAY-93 -0.37% $9,963 -0.22% $9,978 -0.05% $9,995 0.13% $10,013
30-JUN-93 2.20% $10,182 1.57% $10,135 2.27% $10,222 1.81% $10,194
31-JUL-93 0.16% $10,198 0.24% $10,159 0.64% $10,287 0.57% $10,252
31-AUG-93 2.12% $10,415 1.59% $10,321 2.30% $10,524 1.75% $10,432
30-SEP-93 0.63% $10,481 0.41% $10,364 0.35% $10,560 0.27% $10,460
31-OCT-93 0.32% $10,515 0.27% $10,392 0.41% $10,603 0.37% $10,499
30-NOV-93 -1.41% $10,366 -0.56% $10,333 -1.13% $10,483 -0.85% $10,410
31-DEC-93 0.68% $10,437 0.46% $10,381 0.44% $10,529 0.54% $10,466
31-JAN-94 1.42% $10,585 1.11% $10,496 1.50% $10,688 1.35% $10,607
28-FEB-94 -1.86% $10,388 -1.48% $10,340 -2.18% $10,455 -1.74% $10,423
31-MAR-94 -2.32% $10,147 -1.65% $10,170 -2.45% $10,199 -2.47% $10,166
30-APR-94 -0.97% $10,049 -0.68% $10,101 -0.83% $10,115 -0.80% $10,085
31-MAY-94 -0.89% $9,959 0.07% $10,108 -0.18% $10,097 -0.01% $10,083
30-JUN-94 0.66% $10,025 0.01% $10,109 -0.23% $10,073 -0.22% $10,061
31-JUL-94 1.79% $10,205 1.44% $10,254 2.00% $10,274 1.99% $10,261
31-AUG-94 0.25% $10,230 0.31% $10,286 0.04% $10,278 0.12% $10,274
30-SEP-94 -1.21% $10,106 -0.92% $10,192 -1.51% $10,123 -1.47% $10,123
31-OCT-94 -0.55% $10,050 -0.01% $10,191 -0.11% $10,111 -0.09% $10,114
30-NOV-94 -0.30% $10,020 -0.45% $10,145 -0.18% $10,093 -0.22% $10,091
31-DEC-94 -0.02% $10,018 0.35% $10,180 0.66% $10,160 0.69% $10,161
31-JAN-95 2.23% $10,242 1.68% $10,351 1.92% $10,355 1.98% $10,362
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
28-FEB-95 2.74% $10,522 2.07% $10,566 2.32% $10,595 2.38% $10,609
31-MAR-95 0.94% $10,621 0.57% $10,626 0.67% $10,666 0.61% $10,674
30-APR-95 1.90% $10,823 1.24% $10,758 1.39% $10,814 1.40% $10,823
31-MAY-95 3.74% $11,228 3.02% $11,082 4.19% $11,268 3.87% $11,242
30-JUN-95 0.63% $11,299 0.67% $11,157 0.80% $11,358 0.73% $11,324
31-JUL-95 -0.32% $11,263 0.01% $11,158 -0.39% $11,313 -0.22% $11,299
31-AUG-95 1.19% $11,397 0.91% $11,259 1.28% $11,458 1.21% $11,436
30-SEP-95 1.16% $11,530 0.72% $11,340 1.02% $11,575 0.97% $11,547
31-OCT-95 1.54% $11,707 1.11% $11,466 1.47% $11,745 1.30% $11,697
30-NOV-95 2.11% $11,954 1.31% $11,617 1.65% $11,939 1.50% $11,872
31-DEC-95 1.61% $12,146 1.05% $11,738 1.47% $12,114 1.40% $12,038
31-JAN-96 1.01% $12,269 0.86% $11,839 0.62% $12,190 0.66% $12,118
29-FEB-96 -2.73% $11,935 -1.17% $11,701 -2.12% $11,931 -1.74% $11,907
31-MAR-96 -0.35% $11,893 -0.51% $11,641 -0.84% $11,831 -0.70% $11,824
30-APR-96 -0.45% $11,840 -0.35% $11,601 -0.69% $11,749 -0.56% $11,758
31-MAY-96 -0.63% $11,765 -0.08% $11,591 -0.17% $11,729 -0.08% $11,748
30-JUN-96 1.69% $11,964 1.06% $11,714 1.34% $11,887 1.06% $11,873
31-JUL-96 0.08% $11,973 0.30% $11,749 0.23% $11,914 0.27% $11,905
30-AUG-96 0.20% $11,997 0.08% $11,759 -0.24% $11,885 -0.17% $11,885
30-SEP-96 2.64% $12,313 1.39% $11,922 1.78% $12,097 1.74% $12,091
31-OCT-96 2.85% $12,664 1.77% $12,133 2.33% $12,379 2.22% $12,360
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, April 30, 1993.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the Lehman Bros. Aggregate Bond Index.
18
<PAGE>
FREMONT FUNDS
ity) above that of the index, accentuating the price gains that occurred in
the market as interest rates declined across the curve by approximately 30
basis points (0.3%). With respect to sector, our overweighting in
mortgage-backed securities helped to boost relative performance as we captured
the higher yields associated with this group. In addition, by focusing our
corporate exposure in lower rated (BBB and BB) issues, we captured the
continued strong performance of this portion of the corporate market. Finally,
our modest allocation to foreign bonds (both hedged foreign and dollar
denominated Latin American issues) was a strong positive as the non-U.S.
markets significantly outperformed all domestic market sectors.
Looking ahead, our long-term view on interest rates remains bullish for
bonds. There are a handful of prominent economic themes that serve as the
basis for this market outlook. First, the competitive forces unleashed by the
globalization of trade and production lead the way to lower-cost goods and
limit pricing power. Next, the integration of world capital markets empowers
investors to demand from governments sound, market-friendly fiscal and
monetary policies. And finally, we expect the aging populations across the
developing world to shift into a savings-oriented phase of their life as
retirement approaches. We expect these long-term, disinflationary forces to
broadly pull interest rates lower and anticipate a 5 - 7% range for the yield
on the 30-year Treasury bond over the next 3 - 5 years. As a result of our
favorable outlook for interest rates, we will continue to target the Fund's
average duration moderately higher than that of the broad market.
With respect to sector, we continue to like mortgage-backed securities,
particularly lower coupon fixed rate issues and adjustable rate mortgages. In
the corporate sector, lower rated issues (BBB and BB) are still attractive
because their higher yields offer downside protection in the event that
corporate bonds weaken relative to other U.S. market sectors. Finally, some
opportunities remain in the foreign sector, particularly in dollar bloc
countries (Canada, Australia, New Zealand) and Latin America.
In closing, we thank you for your ongoing investment in Fremont Bond Fund
and we will continue to work diligently to grow the assets you have entrusted
with us.
Sincerely,
/s/William H. Gross
Bill Gross
Portfolio Manager
Fremont Bond Fund
PORTFOLIO CREDIT QUALITY OF FREMONT BOND FUND
AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
AAA (80%)
AA (3%)
BBB (10%)
BB (7%)
</TABLE>
19
<PAGE>
FREMONT FUNDS
FREMONT MONEY MARKET FUND
Norman Gee, Portfolio Manager
Fremont Investment Advisors, Inc.
[PHOTO OF NORMAN GEE]
[FUND PROFILE]
Fremont Money Market Fund invests primarily in high-quality short-term debt
securities (commercial paper) issued by U.S. corporations and U.S.
subsidiaries of foreign corporations. The Fund will also take small positions
in other investment-grade short-term debt instruments such as Yankee CDs
(dollar denominated certificates of deposit in foreign banks).
Portfolio Manager Norman Gee strives to add value through price-sensitive
trading and by identifying undervalued high quality money market securities.
He will also make conservative adjustments to the portfolio's average maturity
relative to the market in attempting to enhance total portfolio yield.
TO OUR SHAREHOLDERS
For the six-month period ended October 31, 1996, Fremont Money Market Fund
returned 2.6% compared to the IBC Money Market First Tier Taxable Average's
2.0%. For the full fiscal year, the Fund returned 5.34% versus the Index's
4.86%. We are pleased to have once again finished in the top ten percent of
comparable money market funds in the IBC money market universe.
The Fund's slightly longer average maturity (65 days compared to 52 days for
the index of top-tier taxable money market funds) provided a total return
advantage in what has been a flat short-term interest rate environment over
the last two quarters. Our price-sensitive trading practice of tirelessly
pursuing the highest yields and our opportunistic securities selection also
contributed to superior returns. Looking ahead over the next several quarters,
we expect short-term interest rates to remain relatively stable. Consequently,
we will continue to maintain a slightly longer-than-average maturity. This may
well change, however, in second half 1997. Currently, Wall Street is focusing
on the benign "core" inflation rate (inflation excluding food and energy
prices). But, commodity pricing and wage pressure is build-
FREMONT MONEY MARKET FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT MONEY MARKET FUND 90 DAY US T-BILLS DONOGHUE FIRST TIER TAXABLE PRIME AVG.
------------------------- ----------------- --------------------------------------
<C> <C> <C> <C> <C> <C> <C>
18-NOV-88 $10,000 $10,000 $10,000
30-NOV-88 0.27% $10,027 0.26% $10,026 0.25% $10,025
31-DEC-88 0.68% $10,096 0.67% $10,093 0.65% $10,090
31-JAN-89 0.74% $10,170 0.69% $10,163 0.68% $10,159
28-FEB-89 0.65% $10,237 0.72% $10,236 0.68% $10,228
31-MAR-89 0.77% $10,315 0.73% $10,311 0.71% $10,300
30-APR-89 0.72% $10,389 0.70% $10,383 0.74% $10,377
31-MAY-89 0.83% $10,475 0.71% $10,457 0.73% $10,452
30-JUN-89 0.74% $10,552 0.66% $10,526 0.72% $10,528
31-JUL-89 0.73% $10,630 0.63% $10,592 0.69% $10,600
31-AUG-89 0.71% $10,705 0.65% $10,661 0.66% $10,670
30-SEP-89 0.65% $10,775 0.66% $10,731 0.66% $10,741
31-OCT-89 0.72% $10,852 0.76% $10,813 0.66% $10,812
30-NOV-89 0.66% $10,924 0.69% $10,887 0.64% $10,881
31-DEC-89 0.63% $10,993 0.62% $10,955 0.63% $10,949
31-JAN-90 0.67% $11,067 0.66% $11,027 0.62% $11,017
28-FEB-90 0.59% $11,132 0.60% $11,093 0.61% $11,084
31-MAR-90 0.63% $11,202 0.67% $11,168 0.61% $11,152
30-APR-90 0.66% $11,276 0.65% $11,240 0.62% $11,221
31-MAY-90 0.66% $11,350 0.68% $11,317 0.62% $11,291
30-JUN-90 0.62% $11,420 0.65% $11,390 0.61% $11,360
31-JUL-90 0.68% $11,498 0.66% $11,465 0.61% $11,429
31-AUG-90 0.65% $11,573 0.65% $11,540 0.60% $11,498
30-SEP-90 0.58% $11,640 0.61% $11,610 0.60% $11,567
31-OCT-90 0.68% $11,719 0.62% $11,682 0.60% $11,636
30-NOV-90 0.62% $11,792 0.59% $11,751 0.59% $11,704
31-DEC-90 0.64% $11,867 0.59% $11,821 0.59% $11,773
31-JAN-91 0.62% $11,941 0.57% $11,888 0.56% $11,839
28-FEB-91 0.53% $12,005 0.49% $11,946 0.52% $11,901
31-MAR-91 0.50% $12,065 0.52% $12,008 0.49% $11,959
30-APR-91 0.57% $12,134 0.48% $12,066 0.47% $12,015
31-MAY-91 0.50% $12,195 0.48% $12,124 0.44% $12,068
30-JUN-91 0.44% $12,249 0.46% $12,180 0.44% $12,121
31-JUL-91 0.52% $12,312 0.48% $12,238 0.44% $12,174
31-AUG-91 0.46% $12,369 0.47% $12,296 0.43% $12,227
30-SEP-91 0.47% $12,427 0.44% $12,350 0.42% $12,278
31-OCT-91 0.44% $12,482 0.44% $12,404 0.41% $12,328
30-NOV-91 0.39% $12,531 0.40% $12,454 0.39% $12,375
31-DEC-91 0.42% $12,584 0.37% $12,500 0.38% $12,422
31-JAN-92 0.37% $12,630 0.35% $12,543 0.34% $12,464
29-FEB-92 0.30% $12,668 0.31% $12,582 0.31% $12,502
31-MAR-92 0.31% $12,708 0.34% $12,625 0.30% $12,540
30-APR-92 0.29% $12,744 0.32% $12,666 0.29% $12,576
31-MAY-92 0.27% $12,779 0.33% $12,707 0.28% $12,612
30-JUN-92 0.30% $12,817 0.30% $12,745 0.28% $12,647
31-JUL-92 0.27% $12,852 0.30% $12,784 0.26% $12,680
31-AUG-92 0.26% $12,885 0.28% $12,819 0.25% $12,711
30-SEP-92 0.24% $12,917 0.25% $12,852 0.24% $12,741
31-OCT-92 0.24% $12,947 0.25% $12,884 0.22% $12,769
30-NOV-92 0.24% $12,978 0.25% $12,916 0.22% $12,798
31-DEC-92 0.23% $13,008 0.27% $12,951 0.23% $12,828
31-JAN-93 0.21% $13,036 0.27% $12,986 0.23% $12,857
28-FEB-93 0.20% $13,062 0.23% $13,016 0.22% $12,885
31-MAR-93 0.24% $13,093 0.25% $13,048 0.21% $12,912
30-APR-93 0.22% $13,122 0.24% $13,080 0.21% $12,939
31-MAY-93 0.20% $13,148 0.25% $13,113 0.21% $12,967
30-JUN-93 0.23% $13,178 0.25% $13,147 0.21% $12,994
31-JUL-93 0.22% $13,208 0.26% $13,181 0.21% $13,021
31-AUG-93 0.21% $13,235 0.26% $13,215 0.21% $13,049
30-SEP-93 0.21% $13,263 0.25% $13,248 0.21% $13,076
31-OCT-93 0.22% $13,291 0.26% $13,282 0.21% $13,104
30-NOV-93 0.21% $13,320 0.25% $13,315 0.21% $13,132
31-DEC-93 0.24% $13,351 0.26% $13,351 0.22% $13,161
31-JAN-94 0.21% $13,379 0.26% $13,385 0.22% $13,189
28-FEB-94 0.20% $13,406 0.24% $13,418 0.22% $13,218
31-MAR-94 0.23% $13,437 0.28% $13,455 0.23% $13,248
30-APR-94 0.25% $13,470 0.30% $13,496 0.25% $13,281
31-MAY-94 0.31% $13,512 0.33% $13,540 0.27% $13,317
30-JUN-94 0.32% $13,556 0.34% $13,586 0.29% $13,356
31-JUL-94 0.35% $13,603 0.36% $13,636 0.31% $13,397
31-AUG-94 0.36% $13,651 0.37% $13,687 0.32% $13,439
30-SEP-94 0.36% $13,701 0.37% $13,737 0.34% $13,485
31-OCT-94 0.40% $13,755 0.41% $13,794 0.35% $13,532
30-NOV-94 0.41% $13,812 0.42% $13,852 0.37% $13,582
31-DEC-94 0.50% $13,880 0.46% $13,915 0.40% $13,636
31-JAN-95 0.45% $13,943 0.46% $13,979 0.42% $13,694
28-FEB-95 0.45% $14,006 0.44% $14,041 0.44% $13,754
31-MAR-95 0.54% $14,081 0.49% $14,110 0.45% $13,816
30-APR-95 0.46% $14,145 0.48% $14,177 0.45% $13,877
31-MAY-95 0.50% $14,216 0.49% $14,247 0.44% $13,939
30-JUN-95 0.51% $14,289 0.47% $14,314 0.44% $14,000
31-JUL-95 0.46% $14,355 0.49% $14,384 0.43% $14,060
31-AUG-95 0.48% $14,423 0.47% $14,452 0.43% $14,120
30-SEP-95 0.47% $14,492 0.45% $14,517 0.42% $14,180
31-OCT-95 0.46% $14,558 0.46% $14,583 0.42% $14,239
30-NOV-95 0.45% $14,624 0.47% $14,652 0.42% $14,299
31-DEC-95 0.48% $14,695 0.55% $14,732 0.42% $14,359
31-JAN-96 0.45% $14,760 0.46% $14,800 0.41% $14,418
29-FEB-96 0.41% $14,821 0.40% $14,859 0.39% $14,474
31-MAR-96 0.43% $14,885 0.37% $14,913 0.38% $14,529
30-APR-96 0.42% $14,947 0.43% $14,977 0.38% $14,584
31-MAY-96 0.46% $15,015 0.44% $15,043 0.38% $14,640
30-JUN-96 0.39% $15,073 0.41% $15,105 0.38% $14,695
31-JUL-96 0.43% $15,139 0.45% $15,173 0.39% $14,752
30-AUG-96 0.46% $15,209 0.45% $15,242 0.39% $14,809
30-SEP-96 0.40% $15,269 0.47% $15,313 0.39% $14,867
31-OCT-96 0.44% $15,336 0.42% $15,378 0.39% $14,925
Tbills 51.05% # donoghue 46.95% 5.19%
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, November 18, 1988.
Performance data illustrated is historical. Past performance is not
predictive of future performance. All performance figures assume reinvestment
of dividends. Management fees and other expenses are included in the Fund's
performance; however, fees and expenses are not incorporated in the U.S.
91-Day T-Bill Index. An investment in the Fund is neither insured nor
guaranteed by the U.S. Government. The Fund seeks to maintain a stable $1.00
share price although there is no assurance that it will be able to do so.
20
<PAGE>
FREMONT FUNDS
ing. We all have to put gas in the car, buy groceries and pay the heating
bill. We know it's getting more expensive. We all deserve a little bit of a
pay raise in the midst of this vibrant economy. With unemployment at
historically low levels, some of us will get one. Of course, our employers
will do their best to pass higher wage costs along to consumers. The bottom
line is that at some point in 1997, the Federal Reserve is likely to respond
to an increase in the Consumer Price Index by raising short-term rates by 25 -
50 basis points from today's 5.25%. Anticipating this modest uptick in short
term rates, we will very probably be shortening the portfolio's average
maturity so that we can more quickly average into higher yielding securities.
We will also continue to seek out undervalued securities. For example, every
Monday, Jostens Corporation (a dominant market share company in the school
ring and yearbook businesses) issues seven-day investment grade commercial
paper. Because the company wants to sell its paper within a short four-hour
window at the beginning of each week, it is generally priced to yield 3 - 5
basis points above most other comparable maturity and credit quality issues.
As long as Jostens remains financially healthy and we can earn an extra 3 - 5
basis points weekly, we will continue to be one of their best customers.
In closing, we thank you for your ongoing support. We remain dedicated to
delivering superior money market returns.
Sincerely,
/s/Norman Gee
Norman Gee
Portfolio Manager
Fremont Money Market Fund
21
<PAGE>
FREMONT FUNDS
FREMONT CALIFORNIA INTERMEDIATE
TAX-FREE FUND
William M. Feeney, Portfolio Manager
Fremont Investment Advisors, Inc.
[PHOTO OF WILLIAM M. FEENEY]
[FUND PROFILE]
Fremont California Intermediate Tax-Free Fund invests in California
municipal bonds. Essential service bonds (water, sewer, electric, gas, etc.)
and general obligation bonds (secured by the full faith and credit of the
government issuer) are emphasized in this conservatively managed portfolio.
Income from the Fund is free from both federal and state taxes for California
residents.
The direction of interest rates impacts the total return potential of bonds.
When interest rates decline, longer maturities and higher durations (a measure
of interest rate sensitivity) are advantageous. When interest rates rise, the
reverse is true. Through the analysis of macro-economic, political, and market
factors, Fund management strives to identify the dominant interest rate trend.
The Fund's strategy is simply to position the portfolio's maturity/duration to
take advantage of the dominant interest rate trend rather than trading on
largely unpredictable temporary interest rate fluctuations.
The Fund invests almost exclusively in the highest investment grade credits
and will not invest in any bond below a BBB rating. Fund management also
strives to identify "special situation" opportunities created by incomplete
credit analysis, investor misperception, and market conditions.
TO OUR SHAREHOLDERS
For the six-month period ended October 31, 1996, Fremont California
Intermediate Tax-Free Fund returned 3.42% compared to the Lehman Brothers
Municipal 5-Year State General Obligation (GO) Index's 3.03%. For the full
fiscal year, the Fund returned 4.63% versus the Index's 4.63%. We are pleased
to report the Fund has maintained its Morningstar five year 5-star ranking.
In the first fiscal half, the Fund portfolio's longer than average maturity
(around 7 years) worked against us as stronger-than-expected economic growth
reawakened long dormant inflationary fears and drove interest rates higher. In
the second half,
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT CA INTER TAX-FREE FUND LEHMAN MUNI 5 YR STATE G.O. INDEX
------------------------------ ---------------------------------
<C> <C> <C> <C> <C> <C> <C>
16-NOV-90 $10,000 $10,000
30-NOV-90 0.64% $10,064 0.67% $10,067 0.95%
31-DEC-90 0.40% $10,105 0.35% $10,102
31-JAN-91 1.67% $10,273 1.46% $10,250
28-FEB-91 0.88% $10,364 0.88% $10,340
31-MAR-91 0.06% $10,370 -0.26% $10,313
30-APR-91 0.93% $10,467 1.39% $10,456
31-MAY-91 0.60% $10,530 0.49% $10,508
30-JUN-91 -0.33% $10,496 -0.14% $10,493
31-JUL-91 1.02% $10,603 1.00% $10,598
31-AUG-91 1.26% $10,737 1.26% $10,731
30-SEP-91 1.34% $10,881 1.20% $10,860
31-OCT-91 0.50% $10,936 0.78% $10,945
30-NOV-91 0.16% $10,953 0.31% $10,979
31-DEC-91 2.14% $11,187 2.25% $11,226
31-JAN-92 0.27% $11,218 0.18% $11,246
29-FEB-92 0.04% $11,222 0.06% $11,253
31-MAR-92 -0.30% $11,188 -0.37% $11,211
30-APR-92 0.73% $11,270 0.85% $11,306
31-MAY-92 0.91% $11,373 0.94% $11,413
30-JUN-92 1.43% $11,535 1.40% $11,572
31-JUL-92 2.91% $11,871 2.62% $11,876
31-AUG-92 -1.04% $11,747 -0.75% $11,787
30-SEP-92 0.71% $11,831 0.64% $11,862
31-OCT-92 -0.75% $11,741 -0.34% $11,821
30-NOV-92 1.40% $11,906 1.19% $11,962
31-DEC-92 0.82% $12,004 0.73% $12,049
31-JAN-93 1.26% $12,155 1.09% $12,180
28-FEB-93 2.99% $12,518 2.58% $12,495
31-MAR-93 -1.55% $12,325 -1.10% $12,357
30-APR-93 0.89% $12,434 0.60% $12,432
31-MAY-93 0.21% $12,460 0.35% $12,475
30-JUN-93 1.66% $12,666 1.33% $12,641
31-JUL-93 -0.30% $12,629 0.01% $12,642
31-AUG-93 2.06% $12,889 1.38% $12,817
30-SEP-93 1.40% $13,069 0.76% $12,915
31-OCT-93 0.06% $13,076 0.12% $12,930
30-NOV-93 -0.86% $12,964 -0.24% $12,899
31-DEC-93 1.81% $13,198 1.39% $13,078
31-JAN-94 1.18% $13,354 0.95% $13,202
28-FEB-94 -2.60% $13,007 -1.97% $12,943
31-MAR-94 -2.63% $12,664 -2.24% $12,653
30-APR-94 0.41% $12,717 1.00% $12,779
31-MAY-94 0.62% $12,795 0.58% $12,854
30-JUN-94 -0.63% $12,714 -0.26% $12,820
31-JUL-94 1.58% $12,915 1.04% $12,954
31-AUG-94 0.23% $12,945 0.48% $13,016
30-SEP-94 -1.39% $12,765 -0.74% $12,920
31-OCT-94 -1.60% $12,561 -0.56% $12,847
30-NOV-94 -1.65% $12,354 -0.76% $12,750
31-DEC-94 1.60% $12,552 0.91% $12,866
31-JAN-95 2.22% $12,830 1.05% $13,001
28-FEB-95 2.94% $13,208 1.49% $13,195
31-MAR-95 1.12% $13,356 0.97% $13,323
30-APR-95 0.20% $13,382 0.25% $13,356
31-MAY-95 2.71% $13,745 2.17% $13,646
30-JUN-95 -0.68% $13,652 0.14% $13,665
31-JUL-95 0.87% $13,771 1.40% $13,856
31-AUG-95 1.08% $13,920 0.88% $13,979
30-SEP-95 0.42% $13,978 0.32% $14,023
31-OCT-95 1.34% $14,165 0.41% $14,081
30-NOV-95 1.05% $14,313 0.88% $14,204
31-DEC-95 0.75% $14,421 0.57% $14,285
31-JAN-96 1.13% $14,583 1.25% $14,464
29-FEB-96 -0.44% $14,519 -0.36% $14,412
31-MAR-96 -1.33% $14,326 -0.60% $14,326
30-APR-96 0.03% $14,330 -0.19% $14,299
31-MAY-96 -0.12% $14,313 -0.13% $14,280
30-JUN-96 0.57% $14,394 0.60% $14,366
31-JUL-96 1.26% $14,575 0.73% $14,470
30-AUG-96 -0.13% $14,557 0.13% $14,489
30-SEP-96 0.74% $14,665 0.69% $14,589
31-OCT-96 1.06% $14,820 0.98% $14,732
43.66% 6.66%
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, November 16, 1990.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the Lehman Bros. 5-Year State G.O. Index.
22
<PAGE>
FREMONT FUNDS
PORTFOLIO CREDIT QUALITY OF FREMONT CALIFORNIA
INTERMEDIATE TAX-FREE FUND AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
A (21.5%)
AA (26.9%)
AAA (51.6%)
</TABLE>
when no evidence of inflation materialized, interest rates came back down,
making our longer maturity posture a blessing as is demonstrated in second
half results. Going forward, with economic growth and inflation expectations
moderating, we see intermediate-term interest rates continuing to trend lower,
and consequently, have extended the portfolio's average maturity to 8 years.
If our interest rate forecast proves accurate, this longer maturity will
enhance the Fund's returns.
Looking ahead, there is some good news and potentially bad news in the
California municipal bond market. The California economy is gaining momentum.
Unemployment is down from a peak of around 11% to 7.4%. Existing home sales
are up 24% and housing starts are up 23.5% from year-ago levels. We have gone
from years of big state government budget deficits to a comfortable surplus.
California State general obligation bonds were recently upgraded from A to A+.
There may be further upgrades on the horizon.
The potentially bad news is that Medicare and welfare reform will increase
the financial burden on county and local governments. In addition, the recent
passage of Proposition 218 subjects certain revenue raising issues to public
referendum. This may restrict the ability of county and local governments to
raise additional funds. We are taking a hard look at the impact this may have
on county and municipal general obligation bonds. We anticipate reducing the
Fund portfolio's position in these issues until the dust clears, at which
point some attractive value-oriented opportunities may be available.
Currently some appetizing values are evolving in the utility bond sector. We
believe the rating agencies are over-reacting to the recent deregulation of
the water and electric utilities industries. Under new regulation, privately
held utilities will be allowed to compete for public utilities customers. But,
being allowed to compete and doing so effectively are horses of two very
different colors. For example, private electric utilities are to be given
access to their public counterparts' grids (electric delivery systems). But,
they are going to have to pay for it and in the end, may have little or no
pricing advantage. We doubt anyone is likely to move a major power plant from
one locale to another for modestly lower electric or water costs. Yet Los
Angeles Department of Water and Power Bonds and Pasadena Electric Bonds were
recently downgraded from AA to A+, creating higher yields we can take
advantage of.
In conclusion, we strive to add value both by adjusting the Fund's average
maturity/duration to take advantage of dominant interest rate trends and by
searching for opportunistically-priced securities in the California municipal
bond universe. We are confident of continued success on both fronts and remain
committed to providing you with superior risk-adjusted returns.
Sincerely,
/s/William M. Feeney
William M. Feeney
Portfolio Manager
Fremont California Intermediate Tax-Free Fund
23
<PAGE>
FREMONT FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF FREMONT MUTUAL FUNDS, INC.:
We have audited the accompanying statements of assets and liabilities of
each of the nine funds comprising Fremont Mutual Funds, Inc. (the Funds),
including each Fund's statement of investments in securities and net assets as
of October 31, 1996, and the related statements of operations, the statements
of changes in net assets, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1996 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principals used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the nine funds comprising Fremont Mutual Funds, Inc. as of October 31,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for each of the periods presented in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
San Francisco, California
December 6, 1996
24
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
- -------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
Country Value
Shares Security Description Code (Note 1)
- -------------------------------------------------------------------------
STOCKS - 51.6%
BUSINESS EQUIPMENT & SERVICES - 1.3%
2,800 Sodexho SA FR $ 1,350,945
143,000 Kyowa Exeo Corp. JP 1,367,881
100,000 Compass Group PLC UK 992,744
24,500 First Data Corp. US 1,953,875
59,300 WMX Technologies, Inc. US 2,038,437
-----------
7,703,882
-----------
CAPITAL GOODS - 2.4%
1,521,000 PT Dynaplast (Foreign Registered) ID 1,616,140
8,400 Kyocera Corp., ADR JP 1,103,550
206,000 Mitsubishi Heavy Industries JP 1,581,834
60,000 Cemex SA (Class B), ADR MX 433,248
20 Zardoya-Otis SP 2,037
80,000 Autoliv AB SW 3,391,556
20,300 Caterpillar, Inc. US 1,393,088
23,700 Emerson Electric Co. US 2,109,300
34,500 PACCAR, Inc. US 1,923,375
-----------
13,554,128
-----------
CONSUMER DURABLES - 2.6%
* 33,600 Daimler-Benz AG GM 1,973,149
31,000 Fukoku Co. Ltd. JP 372,707
33,000 Murata Manufacturing Co. Ltd. JP 1,059,939
33,000 Sony Corp., ADR JP 1,992,375
112,000 Suzuki Motor Co. Ltd. JP 1,140,149
53,500 Chrysler Corp. US 1,798,937
25,100 Eaton Corp. US 1,499,725
70,800 Ford Motor Co. US 2,212,500
48,400 General Motors Corp. US 2,607,550
-----------
14,657,031
-----------
CONSUMER NON-DURABLES - 2.3%
15,760 LVMH FR 3,603,464
440 LVMH, ADR FR 20,185
3,456,000 Pacific Andes International Holdings Ltd. HK 545,287
* 288,000 Pacific Andes International Holdings Ltd.
(Warrants 08/31/98) HK 16,202
1,000,000 PT Mayora Indah ID 407,848
460,295 San Miguel Corp. (Class B) PH 1,663,928
2,000,000 Universal Robina Corp. PH 913,242
76,000 Cerebos Pacific Ltd. SG 588,143
108,000 Fraser & Neave Ltd. SG 1,073,482
* 180,000 Pacific Andes Holdings Ltd. SG 90,000
100,000 Srithai Superware Co. Ltd.
(Foreign Registered) TH 497,785
* 162,955 President Enterprises, GDR TW 2,525,806
170,000 Associated British Foods PLC UK 1,167,533
-----------
13,112,905
-----------
CONSUMER SERVICES - 2.3%
22,000 News Corp. Ltd., ADR AU 497,750
190,820 Village Roadshow Ltd. (Preferred) AU 551,379
3,300 H.I.S. Co. Ltd. JP 174,919
35,000 Secom Co. JP 2,082,492
20,000 Sega Enterprises Ltd. JP 807,372
10,000 Sega Enterprises Ltd., ADR JP 101,107
265,000 Genting Berhad MY 1,981,994
CONSUMER SERVICES (CONTINUED)
70,600 Elsevier NV NL $ 1,171,164
7,902 Wolters Kluwer NV NL 1,013,810
9,953 Wolters Kluwer NV, ADR NL 1,280,001
280,000 Helicopter Line Ltd. (The) NZ 593,670
180,000 Rentokil Group PLC UK 1,208,382
28,000 Disney (Walt) Co. US 1,844,500
-----------
13,308,540
-----------
ENERGY - 5.0%
* 15 Petrofina SA (Warrants 06/03/97) BE 71
33,800 Amoco Corp. US 2,560,350
14,900 Atlantic Richfield Co. US 1,974,250
48,900 Chevron Corp. US 3,215,175
61,500 Dresser Industries, Inc. US 2,021,812
58,200 Exxon Corp. US 5,157,975
31,400 Kerr-McGee Corp. US 1,970,350
30,300 Mobil Corp. US 3,537,525
66,100 Occidental Petroleum Corp. US 1,619,450
37,700 Phillips Petroleum Co. US 1,545,700
33,200 Texaco, Inc. US 3,373,950
68,200 USX-Marathon Group US 1,491,875
-----------
28,468,483
-----------
FINANCIAL SERVICES - 11.8%
62,859 Lend Lease Corp. Ltd. AU 1,064,416
200,000 Westpac Banking Corp. Ltd. AU 1,139,976
5,000 Union Financiere de France Banque SA FR 615,060
770,000 Citic Pacific Ltd. HK 3,744,293
1,398,000 JCG Holdings Ltd. HK 1,301,760
1,452,750 PT Lippo Bank (Foreign Registered) ID 2,104,938
150,000 Instituto Mobiliare Italiano SPA IT 1,186,515
150,000 Arab Malaysian Finance Berhad
(Foreign Registered) MY 807,281
200,000 Commerce Asset Holding Berhad MY 1,305,896
33,912 Aegon NV, ADR NL 1,746,482
105,416 Oversea-Chinese Banking Corp. Ltd.
(Foreign Registered) SG 1,204,968
129,899 United Overseas Bank Ltd.
(Foreign Registered) SG 1,263,485
* 6,300 Housing & Commercial Bank, Korea SK 121,234
130 Samsung Fire & Marine Insurance SK 60,575
170,900 Bangkok Bank Ltd. (Foreign Registered) TH 1,822,004
600,000 Krung Thai Bank Public Co. Ltd.
(Foreign Registered) TH 1,622,702
120,000 Siam Commercial Bank
(Foreign Registered) TH 1,091,208
294,280 Thai Farmers Bank Co. Ltd.
(Foreign Registered) TH 2,249,230
* 24,285 Thai Farmers Bank Public Co. Ltd.
(Warrants 09/30/99) TH 23,797
73,789 HSBC Holdings PLC (Hong Kong Shares) UK 1,503,016
55,600 Ahmanson (H.F.) & Co. US 1,744,450
42,800 Allstate Corp. US 2,402,150
33,000 American Express Co. US 1,551,000
41,000 Banc One Corp. US 1,737,375
26,200 BankAmerica Corp. US 2,397,300
18,800 Bankers Trust New York Corp. US 1,588,600
27,500 Chase Manhattan Corp. US 2,358,125
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
Country Value
Shares Security Description Code (Note 1)
- -------------------------------------------------------------------------
FINANCIAL SERVICES (CONTINUED)
11,900 Cigna Corp. US $ 1,552,950
31,400 Citicorp US 3,108,600
33,700 Dean Witter, Discover & Co. US 1,984,088
18,200 Federal Home Loan Mortgage Corp. US 1,838,200
59,900 Federal National Mortgage Association US 2,343,588
40,700 First Chicago NBD Corp. US 2,075,700
40,000 First Hawaiian, Inc. US 1,240,000
21,200 First Union Corp. US 1,542,300
29,200 Fleet Financial Group, Inc. US 1,456,350
20,700 Nationsbank Corp. US 1,950,975
37,800 Norwest Corp. US 1,658,475
31,200 Republic New York Corp. US 2,379,000
39,300 Travelers, Inc. US 2,132,025
72,500 USLIFE Corp. US 2,265,625
-----------
67,285,712
-----------
HEALTH CARE - 2.2%
37,490 Gehe AG GM 2,520,336
800,500 PT Dankos Laboratories
(Foreign Registered) ID 670,148
22,000 Towa Pharmaceutical Co. Ltd. JP 361,036
8,000 Astra AB "A" Free SW 367,115
29,600 Aetna, Inc. US 1,979,500
44,900 Baxter International, Inc. US 1,868,963
51,900 Columbia HCA Healthcare Corp. US 1,855,425
21,600 Medtronic, Inc. US 1,390,500
27,000 Warner-Lambert Co. US 1,717,875
-----------
12,730,898
-----------
MISCELLANEOUS - 0.2%
100,900 Taiwan Index Fund Ltd. TW 1,198,692
-----------
1,198,692
-----------
MULTI-INDUSTRY - 2.6%
2,400 Viag AG GM 885,813
* 685 Viag AG (New) GM 248,988
560,000 Hutchison Whampoa HK 3,910,867
1,240,000 Renong Berhad MY 1,952,988
* 248,000 Renong Berhad
(Convertible Loan Stock 05/21/01) MY 90,780
* 155,000 Renong Berhad (Warrants Exp. 11/21/00) MY 63,178
963,000 Comfort Group Ltd. SG 854,633
110,000 Cycle & Carriage Ltd. SG 1,155,840
29,800 Allied-Signal, Inc. US 1,951,900
29,600 Minnesota Mining & Manufacturing Co. US 2,268,100
19,500 TRW, Inc. US 1,764,750
-----------
15,147,837
-----------
RAW MATERIALS - 1.6%
37,800 Broken Hill Proprietary Co. Ltd., ADR AU 1,015,875
776,000 Asiatic Development Berhad MY 694,009
24,567 Hansol Paper Ltd., GDR SK 362,363
11,875 Hansol Paper Ltd., GDR SK 175,156
27,200 Dow Chemical Co. US 2,114,800
19,000 Du Pont (E.I.) de Nemours & Co. US 1,762,250
80,900 Engelhard Corp. US 1,476,425
40,400 Goodrich (B.F.) Co. US 1,711,950
-----------
9,312,828
-----------
RETAIL - 2.5%
9,350 Hermes International FR $ 2,369,700
600,000 PT Hero Supermarket (Foreign Registered) ID 373,503
29,000 Ito-Yokado Co. Ltd. JP 1,445,546
45,000 Seven Eleven Japan JP 2,614,305
* 200,000 Cifra SA de CV MX 258,469
* 58,500 Federated Department Stores, Inc. US 1,930,500
36,100 Home Depot, Inc. US 1,976,475
38,600 McDonalds Corp. US 1,712,875
36,900 Sears Roebuck & Co. US 1,785,037
-----------
14,466,410
-----------
SHELTER - 2.4%
1,044,000 PT Jaya Real Property ID 1,154,124
28,000 Kimberly-Clark de Mexico SA MX 538,218
1,125,000 Ayala Land, Inc. PH 1,198,630
4,800,000 C & P Homes, Inc. PH 2,191,781
*3,562,500 Filinvest Land, Inc. PH 1,206,478
200,000 Nawarat Patanakarn Public Co. Ltd.
(Foreign Registered) TH 266,531
25,300 Armstrong World Industries, Inc. US 1,688,775
35,400 International Paper Co. US 1,513,350
21,500 Kimberly-Clark Corp. US 2,004,875
29,800 Mead Corp. US 1,691,150
-----------
13,453,912
-----------
TECHNOLOGY - 4.8%
6,000 SAP AG, ADR GM 276,000
110,000 Canon, Inc. JP 2,104,432
18,900 Hirose Electronics JP 1,121,229
40,000 Hoya Corp. JP 1,312,857
14,000 TDK Corp. JP 820,711
600,000 Informatics Holdings Ltd. SG 234,292
* 31,145 Samsung Electronics Ltd., GDS
(1/2 Non-Voting) SK 657,938
4,241 Samsung Electronics Ltd., GDS
(1/2 Voting) SK 192,966
* 9,386 Samsung Electronics Ltd., New GDS
(1/2 Non-Voting) SK 150,176
* 1,278 Samsung Electronics Ltd., New GDS
(1/2 Voting) SK 43,292
220 Sungmi Telecom Electronics SK 44,732
47,250 Advanced Information Services
(Foreign Registered) TH 640,791
39,300 Amp, Inc. US 1,331,287
33,000 Avnet, Inc. US 1,662,375
26,700 Boeing Co. US 2,546,512
* 29,700 Compaq Computer Corp. US 2,067,862
35,500 Hewlett-Packard Co. US 1,566,437
36,500 International Business Machines Corp. US 4,708,500
53,800 Motorola, Inc. US 2,474,800
30,000 Rockwell International Corp. US 1,650,000
15,500 United Technologies Corp. US 1,995,625
-----------
27,602,814
-----------
TRANSPORTATION - 1.4%
22,000 Grupo Casa Autrey SP, ADR MX 415,250
125,000 Keppel Corp. SG 931,842
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
Country Value
Shares Security Description Code (Note 1)
- -------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
8,500 Keppel Corp.
(Convertible Loan Stock 07/15/97) SG $ 10,018
* 8,500 Keppel Corp. (Warrants 06/30/97) SG 26,553
9,770 Korean Air SK 182,097
100,000 British Airways PLC UK 901,607
245,000 Railtrack Group PLC UK 1,104,469
24,900 Burlington Northern Santa Fe US 2,051,138
25,600 Conrail, Inc. US 2,435,200
------------
8,058,174
------------
UTILITIES - 6.2%
* 42,048 Hong Kong & China Gas Co.
(Warrants 09/30/97) HK 15,498
1,020,000 Telecom Italia Mobile SPA IT 2,106,966
255 Nippon Telegraph & Telephone JP 1,779,070
22,100 Telecom of New Zealand, ADR NZ 1,839,825
305,975 Manila Electric Co. (Class B) PH 2,247,073
14,900 Philippine Long Distance Telephone Co. PH 892,979
70,000 Korea Electric Power Corp., ADR SK 1,260,000
* 61,000 Korea Mobile Telecommunications, ADR SK 762,500
130,000 Cable & Wireless PLC UK 1,034,570
113,200 Northern Electric PLC (Preferred) UK 189,294
30,000 Vodafone Group PLC, ADR UK 1,158,750
* 64,400 AirTouch Communications, Inc. US 1,682,450
35,400 Ameritech Corp. US 1,938,150
29,600 Bell Atlantic Corp. US 1,783,400
62,800 Bellsouth Corp. US 2,559,100
30,000 Boston Edison Co. US 720,000
37,500 Coastal Corp. US 1,612,500
73,600 Entergy Corp. US 2,060,800
44,300 GTE Corp. US 1,866,138
111,900 Pacific Gas & Electric Co. US 2,629,650
38,600 Texas Utilities Co. US 1,563,300
73,200 Unicom Corp. US 1,903,200
38,400 Williams Cos., Inc. US 2,006,400
------------
35,611,613
------------
TOTAL STOCKS (Cost $274,384,412) $295,673,859
------------
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------
BONDS - 21.9%
CORPORATE BONDS - 4.0%
2,000,000 Asia Pulp & Paper International Finance
10.250%, 10/01/00 2,040,000
2,000,000 BankAmerica Corp., 8.125%, 08/15/04
(Callable 08/15/99) @ 100) 2,121,060
3,000,000 Cemex SA de CV, 10.750%, 07/15/00 3,060,000
1,600,000 Chrysler Corp., 10.400%
08/01/99 (Callable 08/01/97 @ 100) 1,651,536
3,000,000 Ford Motor Credit Corp.
6.800%, 04/23/01 3,026,460
2,500,000 General Electric Capital Corp.
8.850%, 03/01/07 (Puttable 03/01/97 @ 100) 2,862,425
3,000,000 General Motors Acceptance Corp.
7.500%, 07/24/00 3,100,140
CORPORATE BONDS (CONTINUED)
2,000,000 Pohang Iron & Steel Co. Ltd.
7.375%, 05/15/05 $ 2,040,500
3,000,000 Sears, Roebuck and Co., 6.240%, 08/03/99 2,998,920
83,037 Zions Auto Trust, 5.650%, 06/15/99 83,098
------------
22,984,139
------------
MORTGAGE BACKED SECURITIES - 0.3%
1,561,586 FNMA CMO, 1992-137BA REMIC,
3.500%, 01/25/17 1,477,651
------------
1,477,651
------------
U.S. GOVERNMENT BONDS - 1.3%
U.S. Treasury Notes
4,000,000 6.375%, 09/30/01 4,045,000
3,000,000 7.125%, 02/29/00 3,103,110
------------
7,148,110
------------
FOREIGN BONDS - 16.3%
AUS $ 4,000,000 European Bank for Reconstruction
and Development, 9.000%, 10/15/02 3,441,698
Government of Australia
AUS $ 4,000,000 7.500%, 07/15/05 3,203,333
AUS $ 4,000,000 8.750%, 01/15/01 3,376,197
European Investment Bank
CAN $ 4,000,000 7.750%, 04/22/03 3,227,312
CAN $ 4,000,000 8.500%, 08/30/05 3,348,639
Government of Canada
CAN $ 4,000,000 7.500%, 03/01/01 3,225,565
Japan Highway Public Corp.
CAN $ 2,000,000 7.875%, 09/27/02 1,622,989
Oesterreichische Kontrollbank
CAN $ 2,000,000 (Republic of Austria), 9.000%, 06/19/02 1,699,518
Republic of Finland
CAN $ 2,000,000 9.500%, 09/15/04 1,762,982
Toyko Electric Power
CAN $ 2,000,000 10.500%, 06/14/01 1,765,782
Kingdom of Denmark
DKK 20,000,000 7.000%, 12/15/04 3,522,155
Government of France
FF 20,000,000 8.500%, 11/25/02 4,554,179
FF 15,000,000 8.500%, 04/25/03 3,419,442
Federal Republic of Germany
DM 6,000,000 6.000%, 01/05/06 3,953,337
DM 3,000,000 6.750%, 04/22/03 2,105,783
DM 4,500,000 6.875%, 05/12/05 3,144,736
DM 4,000,000 8.375%, 05/21/01 3,003,856
Treuhandanstalt
DM 3,000,000 7.750%, 10/01/02 2,209,590
World Bank
DM 3,000,000 6.125%, 09/27/02 2,059,318
Government of Ireland
IEP 2,000,000 6.250%, 04/01/99 3,260,229
IEP 2,000,000 6.500%, 10/18/01 3,279,781
IEP 2,000,000 8.000%, 08/18/06 3,493,219
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------
FOREIGN BONDS (CONTINUED)
Government of Italy
ITL 4,500,000,000 8.500%, 01/01/04 $ 3,050,445
ITL 4,500,000,000 10.500%, 07/15/98 3,117,456
Government of Netherlands
NLG 6,000,000 6.500%, 04/15/03 3,734,227
Government of Sweden
SEK 20,000,000 6.000%, 02/09/05 2,800,708
SEK 25,000,000 10.250%, 05/05/03 4,446,707
UK Treasury
(pound) 2,500,000 7.500%, 12/07/06 4,033,024
(pound) 2,000,000 8.500%, 12/07/05 3,445,108
United Mexican States
US $ 6,000,000 6.250%, 12/31/19
(Callable at any time @ 100) 4,192,500
-------------
93,499,815
-------------
TOTAL BONDS (Cost $118,813,559) 125,109,715
-------------
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------
SHORT TERM SECURITIES - 26.1%
9,025,091 Benchmark Diversified Assets Fund 9,025,091
** 5,000,000 Allianz of America Finance Corp.
5.300%, 11/05/96 4,997,056
5,000,000 Associates Corp. of North America,
CP, 5.250%, 12/03/96 4,976,667
5,000,000 Berliner Handels-und Frankfurt Bank,
CP, 5.240%, 11/18/96 4,987,628
5,000,000 C.I.T. Group Holdings, Inc.,
CP, 5.240%, 11/21/96 4,985,444
** 5,000,000 Cargill Financial Services Corp.,
CP, 5.240%, 11/08/96 4,994,906
5,000,000 Clorox Co., CP, 5.230%, 11/19/96 4,986,925
5,000,000 Ford Motor Credit Corp., CP,
5.250%, 11/06/96 4,996,354
** 5,000,000 Gillette Co., CP, 5.230%, 11/07/96 4,995,642
5,000,000 Goldman Sachs & Co., CP,
5.240%, 11/26/96 4,981,806
** 5,000,000 Great Lakes Chemical Corp.,
CP, 5.240%, 11/14/96 4,990,539
5,000,000 Heinz (H.J.) & Co., CP, 5.350%, 11/05/96 4,997,028
5,000,000 Jostens, Inc., CP, 5.330%, 11/04/96 4,997,779
** 5,000,000 Koch Industries, Inc., CP,
5.230%, 12/09/96 4,972,397
5,000,000 Merrill Lynch & Co., Inc., CP,
5.260%, 11/12/96 4,991,964
5,000,000 MetLife Funding, Inc.,
CP, 5.230%, 11/13/96 4,991,283
5,000,000 Mitsubishi International Corp., CP,
5.250%, 11/15/96 4,989,792
5,000,000 Mitsui & Co. (U.S.A.), Inc., CP,
5.280%, 12/06/96 4,974,333
SHORT TERM SECURITIES (CONTINUED)
5,000,000 Penney (J.C.) Funding Corp., CP,
5.230%, 11/20/96 $ 4,986,199
** 5,000,000 Rexam PLC, CP, 5.250%, 12/04/96 4,975,938
5,000,000 Sandoz Corp., CP, 5.230%, 11/14/96 4,990,557
** 5,000,000 Sony Capital Corp., CP, 5.250%,
11/01/96 5,000,000
** 5,000,000 St. Paul Cos., Inc., CP, 5.240%,
12/02/96 4,977,439
5,200,000 Toshiba Capital (Asia) Ltd., CP
5.300%, 12/11/96 5,169,378
5,000,000 Toys "R" Us, Inc., CP, 5.220%,
11/25/96 4,982,600
5,000,000 Transamerica Finance Corp., CP,
5.240%, 11/22/96 4,984,716
5,000,000 Unilever Capital Corp., CP, 5.300%,
11/04/96 4,997,791
5,000,000 Union Bank of Switzerland Finance, Inc.,
CP, 5.625%, 11/01/96 5,000,000
5,000,000 USAA Capital Corp., CP, 5.250%,
11/27/96 4,981,113
------------
TOTAL SHORT TERM SECURITIES (Cost $148,878,365) 148,878,365
------------
TOTAL INVESTMENTS (Cost $542,076,336), 99.6% 569,661,939
OTHER ASSETS AND LIABILITIES, NET, 0.4% 2,488,297
------------
NET ASSETS, 100.0% $572,150,236
============
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
CP - Commercial Paper
CMO - Collateralized Mortgage Obligation
FNMA - Federal National Mortgage Association
GDR - Global Depository Receipt
GDS - Global Depository Share
REMIC - Real Estate Mortgage Investment Conduit
CURRENCY ABBREVIATIONS:
AUS$ - Australian Dollar
CAN$ - Canadian Dollar
DKK - Danish Kroner
FF - French Franc
DM - German Deutschemark
IEP - Irish Punt
ITL - Italian Lira
NLG - Netherlands Guilder
SEK - Swedish Krona
(pound) - British Pound
US$ - US Dollar
** These securities are generally issued to institutional investors. Any
resale must be in an exempt transaction pursuant to Section 4(2) of the
Securities Act of 1933.
The accompanying notes are an integral part of these financial
statements.
28
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
- -----------------------------------------------------------------------------
COUNTRY DIVERSIFICATION
Country % of
Code Country Name Net Assets
- -----------------------------------------
AU Australia 2.5%
CN Canada 2.9%
DK Denmark 0.7%
FR France 2.9%
GM Germany 4.0%
HK Hong Kong 1.7%
ID Indonesia 1.1%
IR Ireland 1.8%
IT Italy 1.7%
JP Japan 4.1%
MX Mexico 0.3%
MY Malaysia 1.2%
NL Netherlands 1.6%
NZ New Zealand 0.4%
PH Philippines 1.8%
SG Singapore 1.3%
SK South Korea 0.7%
SW Sweden 2.0%
TH Thailand 1.4%
TW Taiwan 0.6%
UK United Kingdom 2.9%
US United States 62.4%
-----
TOTAL 100.0%
-----
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
FREMONT INTERNATIONAL GROWTH FUND
October 31, 1996
- -----------------------------------------------------------------------
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
Country Value
Shares Security Description Code (Note 1)
- -----------------------------------------------------------------------
STOCKS - 95.5%
BUSINESS EQUIPMENT & SERVICES - 4.6%
825 Sodexho SA FR $ 398,046
81,000 Kyowa Exeo Corp. JP 774,814
45,000 Compass Group PLC UK 446,735
------------
1,619,595
------------
CAPITAL GOODS - 6.6%
7,000 Kyocera Corp. JP 461,343
6,000 Mabuchi Motors Co. JP 305,397
16,000 Raito Kogyo Co. JP 247,126
1,000 Shinkawa JP 17,990
30,600 Autoliv AB SW 1,297,270
------------
2,329,126
------------
CONSUMER DURABLES - 6.6%
1,200 Volkswagen AG GM 474,147
28,000 Alpine Electronics, Inc. JP 442,299
15,000 Matsushita-Kotobuki Electronics JP 346,204
10,000 Murata Manufacturing Co. Ltd. JP 321,194
17,600 Rinnai Corp. JP 375,323
6,000 Sony Corp. JP 359,631
------------
2,318,798
------------
CONSUMER NON-DURABLES - 7.0%
2,500 LVMH FR 571,615
240,000 PT Budi Acid Jaya (Foreign Registered) ID 309,106
40,000 PT Hanjaya Mandala Sampoerna
(Foreign Registered) ID 371,786
165,000 San Miguel Corp. (Class B) PH 596,461
*40,549 President Enterprises, GDR TW 628,513
------------
2,477,481
------------
CONSUMER SERVICES - 6.7%
200,000 PT Steady Safe (Foreign Registered) ID 193,191
8,000 Secom Co. JP 475,998
7,661 Wolters Kluwer NV NL 982,890
105,000 Rentokil Group PLC UK 704,889
------------
2,356,968
------------
FINANCIAL SERVICES - 11.4%
160,000 Reinsurance Australia Corp. Ltd. AU 478,790
375,000 PT Lippo Bank (Foreign Registered) ID 543,350
200,000 Public Bank Berhad (Foreign Registered) MY 375,148
14,558 Aegon NV, ADR NL 749,732
7,850 Kookmin Bank SK 125,410
67,600 Bangkok Bank Ltd.(Foreign Registered) TH 720,699
120,000 Finance One Public Co. Ltd.
(Foreign Registered) TH 338,651
25,000 Siam Commercial Bank
(Foreign Registered) TH 227,335
62,000 Thai Farmers Bank Public Co. Ltd.
(Foreign Registered) TH 473,876
* 3,750 Thai Farmers Bank Public Co. Ltd.
(Warrants 09/30/99) TH 3,675
------------
4,036,666
------------
HEALTH CARE - 10.6%
13,120 Gehe AG GM $ 882,017
600,000 PT Dankos Laboratories
(Foreign Registered) ID 502,297
40,000 Banyu Pharmaceutical Co. JP 508,995
35,000 Santen Pharmaceutical Co. JP 740,237
73 Roche Holding AG SZ 550,379
18,000 Glaxo Wellcome PLC, ADR UK 567,000
------------
3,750,925
------------
MULTI-INDUSTRY - 4.3%
98,000 Hutchison Whampoa HK 684,402
250,000 Renong Berhad MY 393,748
* 72,000 Renong Berhad
(Convertible Loan Stock 05/21/01) MY 26,355
* 45,000 Renong Berhad (Warrants 11/21/00) MY 18,342
*494,000 International UNP Holdings CN 114,339
300,000 Comfort Group Ltd. SG 266,241
------------
1,503,427
------------
RAW MATERIALS - 3.3%
250,000 M.I.M. Holdings Ltd. AU 324,577
160,000 QNI Ltd. AU 321,727
* 20,400 Concordia Paper Holdings Ltd., ADR HK 102,000
* 15,355 Hansol Paper Ltd., GDR SK 226,486
28,000 Siam City Cement Public Co. Ltd.
(Foreign Registered) TH 175,597
------------
1,150,387
------------
RETAIL - 6.0%
2,750 Hermes International FR 696,971
2,200 Ito Yokado Co. Ltd., ADR JP 440,000
17,164 Ceteco Holdings, ADS NL 970,796
------------
2,107,767
------------
SHELTER - 2.4%
160,000 Malaysian Resources Corp. Berhad MY 614,167
189,700 Nawarat Patanakarn Public Co. Ltd.
(Foreign Registered) TH 252,804
------------
866,971
------------
TECHNOLOGY - 13.2%
10,000 TT Tieto OY (Class B) FI 668,398
1,450 Rexel SA FR 428,931
5,500 SAP AG (Preferred) GM 738,771
1,000 Advantest Corp. JP 37,736
8,100 Canon, Inc., ADR JP 780,638
25,000 Hoya Corp. JP 820,535
16,000 NTT Data Communications Systems Co. JP 473,190
300,000 Datacraft Asia Ltd. SG 351,000
600,000 Informatics Holdings Ltd. SG 234,292
* 4,348 Samsung Electronics Ltd., GDS
(1/2 Non-Voting) SK 91,851
130 Samsung Electronics Ltd., GDS
(1/2 Voting) SK 5,915
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
October 31, 1996
- -----------------------------------------------------------------------
Country Value
Shares Security Description Code (Note 1)
- -----------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
* 1,310 Samsung Electronics Ltd., New GDS
(1/2 Non-Voting) SK $ 20,960
* 39 Samsung Electronics Ltd., New GDS
(1/2 Voting) SK 1,321
------------
4,653,538
------------
TRANSPORTATION - 4.8%
240,000 Cathay Pacific Airways HK 375,567
60,000 Singapore Airlines Ltd.
(Foreign Registered) SG 528,221
46,000 British Airways PLC UK 414,739
85,000 Railtrack Group PLC UK 383,183
------------
1,701,710
------------
UTILITIES - 8.0%
13,000 VEBA AG GM 692,048
260,000 Telecom Italia Mobile SPA IT 537,070
220,000 Telecom Italia SPA IT 250,777
51 Nippon Telegraph & Telephone JP 355,814
75,075 Manila Electric Co. (Class B) PH 551,350
55,000 Cable & Wireless PLC UK 437,703
------------
2,824,762
------------
TOTAL STOCKS (Cost $31,207,266) 33,698,121
------------
Country Value
Face Amount/Issuer/Coupon Rate/Stated Maturity Code (Note 1)
- -----------------------------------------------------------------------
CONVERTIBLE BONDS - 0.9%
250,000 United Micro Electronics,
1.250%, 06/08/04 TW 307,625
------------
TOTAL CONVERTIBLE BONDS (Cost $368,564) 307,625
------------
Country Value
Face Amount/Issuer Code (Note 1)
- -----------------------------------------------------------------------
SHORT TERM SECURITIES - 2.8%
991,842 Benchmark Diversified Assets Fund US 991,842
------------
TOTAL SHORT TERM SECURITIES (Cost $991,842) 991,842
------------
TOTAL INVESTMENTS (Cost $32,567,672), 99.2% 34,997,588
OTHER ASSETS AND LIABILITIES, NET, 0.8% 275,158
------------
NET ASSETS, 100.0% $ 35,272,746
============
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
ADS - American Depository Shares
GDR - Global Depository Receipt
GDS - Global Depository Shares
COUNTRY DIVERSIFICATION
Country % of
Code Country Name Net Assets
- -----------------------------------------
AU Australia 3.2%
CN Canada 0.3%
FI Finland 1.9%
FR France 6.0%
GM Germany 7.9%
HK Hong Kong 3.3%
ID Indonesia 5.5%
IT Italy 2.2%
JP Japan 23.5%
MY Malaysia 4.0%
NL Netherlands 7.7%
PH Philippines 3.2%
SG Singapore 3.9%
SK South Korea 1.3%
SW Sweden 3.7%
SZ Switzerland 1.6%
TH Thailand 6.2%
TW Taiwan 2.7%
UK United Kingdom 8.4%
US United States 3.5%
-----
TOTAL 100.0%
=====
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
October 31, 1996
- --------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------
STOCKS - 98.3%
BUSINESS EQUIPMENT & SERVICES - 2.1%
5,000 Aida Engineering JP $ 35,542
6,000 Kyudenko Co. Ltd. JP 68,978
5,000 Toenec Corp. JP 37,692
8,933 Cowie Group PLC UK 52,191
------------
194,403
------------
CAPITAL GOODS - 11.5%
7,980,000 Companhia de Acos Especiais
Itabira-Acesita BR 16,313
6,400,000 Companhia Siderurgica de Tubarao
(Preferred B) BR 95,006
* 356 Skoda Koncern Plzen AS CZ 11,311
5,300 Rautaruukki OY FI 46,425
1,450 Bertrand Faure FR 49,547
20 Campagnie Fives-Lille FR 1,808
600 Legris Industries FR 23,302
750 Vallourec SA FR 41,795
* 350 DLW AG GM 22,376
200 Felten & Guilleaume Energietechnik AG GM 22,409
7,000 Bunka Shutter Co. JP 48,776
22,000 Energy Support JP 140,939
1,000 Inaba Denkisangyo Co. JP 21,150
* 13,000 Mitsubishi Steel Manufacturing JP 66,283
3,000 Seirei Industry JP 13,111
2,000 Yokogawa Bridge Corp. JP 23,519
6,700 Steel & Tube Holdings Ltd. NZ 37,029
36,000 Van Der Horst Ltd. SG 132,907
8,000 Dongkuk Steel Mill Co. SK 159,758
7,000 Poongsan Corp. SK 85,567
------------
1,059,331
------------
CONSUMER DURABLES - 0.9%
* 9,679 CIA Interamericana de Automotive AR 43,078
4,100 Toyota South Africa Ltd. SA 27,499
87,987 Arcelik AS TU 8,674
------------
79,251
------------
CONSUMER NON-DURABLES - 9.3%
1,300,000 Bombril SA (Preferred) BR 25,309
8,700,000 Ceval Alimentos SA (Preferred) BR 83,841
9,800,000 Perdigao SA Comercio e Industria
(Preferred) BR 18,507
100,000 Sao Paulo Alpargatas SA (Preferred) BR 6,230
107 Cokoladovny AS CZ 13,290
1,100 Delta Dairy SA (Preferred) GR 9,186
1,100 Hellenic Sugar Industry SA GR 10,756
7,000 Lai Sun Garment International Ltd. HK 10,501
* 8,000 PT Chareon Pokphand Indonesia
(Foreign Registered) ID 8,930
17,000 PT Japfa Comfeed Indonesia
(Foreign Registered) ID 11,312
4,000 Daito Gyorui Co. JP 14,041
6,000 Kirin Beverage Corp. JP 80,035
6,000 Marudai Food Co. Ltd. JP 36,911
CONSUMER NON-DURABLES (CONTINUED)
11,000 Prima Meat Packers JP $ 36,200
1,000 Sanyo Coca-Cola Bottling JP 13,690
53,000 Grupo Industrial Maseca SA de CV
(Series B) MX 65,036
17,000 Guinness Anchor Berhad MY 43,728
8,000 Nanyang Press Berhad MY 31,342
35,000 Yeo Hiap Seng Berhad MY 94,183
3,400 Lion Nathan Ltd. NZ 8,771
400 Unicer-Uniao Cervejeira SA
(Registered Shares) PT 7,192
11,000 GP Batteries International Ltd.
(U.S. Dollar Shares) SG 31,900
2,000 Dongwon Industries Co. SK 41,876
* 3,100 LG International Corp. SK 30,991
3,000 Sam Yang Co. Ltd. SK 103,843
900 American Standard Sanitaryware Ltd.
(Foreign Registered) TH 14,463
2,600 Karat Sanitaryware Co. Ltd.
(Foreign Registered) TH 5,554
15,999 Tat Konserve Sanayii AS TU 2,241
------------
859,859
------------
CONSUMER SERVICES - 0.7%
850 Gaumont FR 67,732
------------
67,732
------------
ENERGY - 4.2%
5,311 CIA Naviera Perez Co. (Class B) AR 33,465
3,600,000 Distribuidora de Produtos de Petroleo
Ipiranga SA (Preferred) BR 42,052
5,300,000 Petrobras Distribuidora SA (Preferred) BR 89,769
37,500 Uniao de Industrias Petroquimicas SA
(Preferred B) BR 15,331
100 Elf Gabon FR 23,821
2,000 Itochu Fuel Corp. JP 15,270
2,000 Kamei Corp. JP 22,115
* 1,325 Energy Africa Ltd. SA 3,978
46,300 Bangchak Petroleum Public Co. Ltd.
(Foreign Registered) TH 48,091
56,000 Petrol Ofisi AS TU 16,271
230,100 Turcas Petroculuk AS TU 16,475
112,200 Premier Oil PLC UK 60,258
------------
386,896
------------
FINANCIAL SERVICES (BANKS) - 13.0%
7,400 Advance Bank of Australia Ltd. AU 39,719
5,600 Bank of Melbourne Ltd. AU 38,569
17,200 National Bank of Canada CN 166,947
14,600 Investicni A Postovni Banka CZ 162,932
* 550 Credit Lyonnais FR 15,024
2,400 Parisienne de Reescompt FR 190,259
1,466 Credit Bank of Athens
(Registered Shares) GR 93,513
1,700 National Bank of Greece
(Registered Shares) GR 107,726
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
October 31, 1996
- ---------------------------------------------------------------------------
Country Value
Shares Security Description Code (Note 1)
- ---------------------------------------------------------------------------
FINANCIAL SERVICES (BANKS) (CONTINUED)
12,000 MBF Capital Berhad MY $ 16,525
300 KAS Associatie NV NL 13,236
* 24,696 Union Bank of the Philippines PH 28,192
2,100 Banco Totta & Acores
(Registered Shares) PT 38,019
13,800 BPI-SGPS SA (Registered Shares) PT 163,802
* 45,000 Bangkok Bank of Commerce Public
Co. Ltd. (Foreign Registered) TH 28,221
13,800 First Bangkok City Bank Public
Co. Ltd. (Foreign Registered) TH 15,956
1,405,000 Demirbank TAS TU 48,111
1,295,800 Yapi Ve Kredi Bankasi SA TU 33,615
------------
1,200,366
------------
FINANCIAL SERVICES (OTHER) - 7.8%
1,200 London Insurance Group CN 30,373
2,150 Credit National FR 113,347
350 Societe Financiere Interbail SA FR 15,171
212,400 Century City International Holdings Ltd. HK 50,269
60,000 Liu Chong Hing Investment Ltd. HK 65,569
42,000 Peregrine Investment Holdings Ltd. HK 67,625
27,500 Tai Cheung Holdings HK 22,406
7,100 Irish Permanent PLC IR 54,023
15,000 Life Co. Ltd. JP 50,417
13,000 Nippon Shinpan Co. JP 78,605
14,000 Datuk Keramat Holdings Berhad MY 23,269
23 Assurantieconcern Stad Rotterdam NL 864
2,800 Phatra Thanakit Co. Ltd.
(Foreign Registered) TH 10,371
12,600 Union Asia Finance Co. Ltd.
(Foreign Registered) TH 27,409
31,700 E D & F Man Group PLC UK 88,735
9,100 Lloyd Thompson Group PLC UK 25,103
------------
723,556
------------
HEALTH CARE - 0.8%
100 Andreae-Noris Zahn AG GM 37,898
90 Galenica Holdings AG
(Registered Shares) SZ 34,424
------------
72,322
------------
MULTI-INDUSTRY - 8.9%
1,400 Marine-Wendel FR 126,074
9,700 Crean (James) PLC (Units) IR 31,608
2,000 Suntelephone Co. Ltd. JP 13,357
115,000 Berjaya Group Berhad MY 81,460
* 57,500 Berjaya Group Berhad (Rights) MY 796
21,000 Oriental Holdings Berhad MY 142,936
700 Hollandsche Beton Groep NV NL 129,669
1,600 Internatio-Muller NV NL 38,495
10,000 Daewoo Corp. SK 84,720
*6,157,200 Dogan Sirketler Grubu Holdings AS TU 116,602
8,900 Goode Durrant PLC UK 51,057
------------
816,774
------------
RAW MATERIALS - 13.1%
29,120 Aluar Aluminio Argentina SA (Class B) AR $ 68,443
1,400 Voest-Alpine Stahl AG AS 46,370
200 Tessenderlo Chemie BE 73,594
1,400,000 Companhia Petroquimica de Sul BR 74,272
9,300,000 Fertilizantes Fosfatdos SA (Preferred) BR 49,519
292,000 Shanghai Petrochemical Co. Ltd.
(Hong Kong Shares) CH 78,360
614,000 Yizheng Chemical Fibre Co. Ltd.
(Hong Kong Shares) CH 142,139
* 18,400 Stelco, Inc. CN 107,843
* 116 Sepap AS CZ 4,658
* 221 Synthesia AS CZ 3,114
400 Nord Est FR 10,060
2,500 Sommer-Allibert FR 69,316
400 Hellas Can Packaging SA GR 7,260
31,000 Chuetsu Pulp & Paper Co. Ltd. JP 145,818
13,000 Cydsa SA (Series A) MX 24,793
* 36,000 Empaques Ponderosa SA de CV
(Series B) MX 17,164
900 DSM NV NL 86,032
6,100 Portucel Industrial-Empresa Produtora
de Celulosa SA PT 37,474
8,900 Hartebeesfontein Gold Mining Co. Ltd. SA 22,740
2,000 Sunkyong Industries Ltd. SK 33,404
2,800 Empresa Nacional de Celulosas SA SP 35,945
* 15,800 Ercros SA SP 7,421
4,500 National Petrochemical Co.
(Foreign Registered) TH 4,674
43,209 Cimentas TU 4,932
134,000 Petkim Petrokimya Holdings AS TU 54,229
------------
1,209,574
------------
RETAIL - 7.8%
* 200 Kaufring AG GM 11,336
7,000 Chiyoda Co. JP 130,233
10,000 Kotobukiya Co. Ltd. JP 53,532
2,000 Oak & Co. JP 12,550
5,000 Parco JP 46,951
* 42,000 Controladora Comercial Mexicana
SA de CV (Units) MX 37,099
2,300 Macintosh NV NL 54,119
12,700 East Asiatic Public Co. Ltd.
(Local Shares) TH 12,818
9,100 Saha Pathana Inter-Holding Ltd.
(Foreign Registered) TH 21,579
42,100 Kwik Save Group PLC UK 218,222
19,700 Lex Service PLC UK 116,541
------------
714,980
------------
SHELTER - 8.0%
700 Bau Holdings AG AS 33,116
5,000 Brasilit SA BR 8,031
* 56 Inzenyrske a Prumslove Stavby AS CZ 6,424
* 1,200 Societe Generale d'Enterprises SA FR 23,899
* 4,250 AGIV AG GM 61,064
89,000 Kumagai Gumi HK 82,298
* 17,800 Kumagai Gumi (Warrants 06/30/98) HK 3,338
20,000 Daikyo, Inc. JP 124,265
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
October 31, 1996
- --------------------------------------------------------------------------------
Country Value
Shares Security Description Code (Note1)
- --------------------------------------------------------------------------------
SHELTER (CONTINUED)
100 Daito Trust Construction JP $ 1,264
4,000 Kawasho Gecoss Corp. JP 46,687
10,000 Nichiei Construction JP 85,652
8,000 SXL Corp. JP 69,644
4,800 Vitro SA MX 9,214
1,100 Koninklijke BAM Groep NV NL 64,061
880 Sungwon Construction Co. SK 13,420
29,900 Persimmon PLC UK 101,458
---------
733,835
---------
TECHNOLOGY - 0.5%
* 322 SPT Telecom AS CZ 34,371
1,100 Alphatec Electronics Public Co. Ltd.
(Foreign Registered) TH 8,709
---------
43,080
---------
TRANSPORTATION - 3.3%
1,000 Compagnie Maritime Belge SA BE 74,874
5,000 Nippon Konpo Unyu Soko JP 38,350
3,800 Koninklijke Nedlloyd Groep NV NL 95,226
25,000 Hai Sun Hup Group Ltd. SG 17,661
37,000 Neptune Orient Lines Ltd. SG 30,997
* 2,000 Hanjin Shipping Co. SK 45,265
---------
302,373
---------
UTILITIES - 6.4%
3,100 Telecom de Argentina SA (Class B) AR 11,472
2,500,000 Companhia Energetica de Minas Gerais
(Preferred) BR 79,310
* 741 Ceske Energeticke Zavody AS CZ 26,374
1,200 Electricas Reunidas de Zaragoza SA SP 34,755
6,700 Hyder PLC UK 77,200
20,300 Northern Ireland Electricity PLC UK 107,536
5,300 Scottish Hydro-Electric PLC UK 23,720
19,400 Southern Electric PLC UK 203,169
5,400 Wessex Water PLC UK 31,066
---------
594,602
---------
TOTAL STOCKS (Cost $8,946,630) 9,058,934
---------
<TABLE>
<CAPTION>
Country Value
Face Amount/Issuer Code (Note 1)
- ------------------ ------- --------
<S> <C> <C>
SHORT TERM SECURITIES - 1.2%
110,337 Benchmark Diversified Assets Fund US 110,337
-----------
TOTAL SHORT TERM SECURITIES (Cost $110,337) 110,337
-----------
TOTAL INVESTMENTS (Cost $9,056,967), 99.5% 9,169,271
OTHER ASSETS AND LIABILITIES, NET, 0.5% 44,904
-----------
NET ASSETS, 100.0% $ 9,214,175
===========
</TABLE>
COUNTRY DIVERSIFICATION
<TABLE>
<CAPTION>
Country % of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
AR Argentina 1.7%
AS Austria 0.9%
AU Australia 0.9%
BE Belgium 1.7%
BR Brazil 6.6%
CH China 2.4%
CN Canada 3.3%
CZ Czech Republic 2.8%
FI Finland 0.5%
FR France 8.4%
GM Germany 1.7%
GR Greece 2.5%
HK Hong Kong 3.4%
ID Indonesia 0.2%
IR Ireland 0.9%
JP Japan 17.1%
MX Mexico 1.7%
MY Malaysia 4.8%
NL Netherlands 5.2%
NO Norway 0.1%
NZ New Zealand 0.5%
PH Philippines 0.3%
PT Portugal 2.7%
SA South Africa 0.6%
SG Singapore 2.3%
SK South Korea 6.5%
SP Spain 0.8%
SZ Switzerland 0.2%
TH Thailand 2.2%
TU Turkey 3.3%
UK United Kingdom 12.7%
US United States 1.1%
-----
TOTAL 100.0%
=====
</TABLE>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
FREMONT EMERGING MARKETS FUND
October 31, 1996
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
- --------------------------------------------------------------------------------
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
STOCKS - 69.9%
CAPITAL GOODS - 2.3%
40,000 IJM Corp. Berhad MY $ 87,060
-----------
87,060
-----------
CONSUMER DURABLES - 4.7%
635,000 Arcelik AS TU 62,597
74,000 China Motor Co. Ltd. TW 114,197
-----------
176,794
-----------
CONSUMER NON-DURABLES - 14.8%
300,000 Chaifa Holdings Ltd. HK 90,206
* 292,000 Glorious Sun Enterprises HK 135,005
90,000 Goldlion Holdings Ltd. HK 73,329
150,000 PT Davomas Abadi
(Foreign Registered) ID 138,454
* 125,000 PT Daya Guna Samudera
(Foreign Registered) ID 122,086
-----------
559,080
-----------
CONSUMER SERVICES - 3.1%
30,000 Tanjong PLC MY 116,343
-----------
116,343
-----------
FINANCIAL SERVICES - 9.4%
80,000 PT Lippo Life Insurance
(Foreign Registered) ID 61,821
* 8,700 Industrial Credit & Investment
Corp. of India Ltd., GDR IN 71,775
50,000 Public Finance Berhad
(Foreign Registered) MY 77,167
45,000 Siam General Factoring Co. Ltd.
(Foreign Registered) TH 64,820
3,000,000 Yapi Ve Kredi Bankasi SA TU 77,825
-----------
353,408
-----------
MULTI-INDUSTRY - 4.5%
* 240,000 Fairyoung Holdings Ltd. HK 96,220
6,200 Sasol Ltd. SA 75,578
-----------
171,798
-----------
RAW MATERIALS - 2.4%
25,000 PT Semen Gresik
(Foreign Registered) ID 71,910
* 1,600 Aromatics (Thailand)
Public Co. Ltd.
(Local Shares) TH 1,442
* 17,800 Aromatics (Thailand)
Public Co. Ltd.
(Foreign Registered) TH 16,047
-----------
89,399
-----------
SHELTER - 15.7%
20,000 New World Development Co. Ltd. HK 116,395
130,000 DNP Holdings Berhad MY 102,889
20,000 Malaysian Resources Corp. Berhad MY 76,771
* 400,000 Primetown Property Group, Inc. PH 83,714
* 500,000 Robinson's Land Corp. (Series B) PH 91,324
30,000 Central Pattana Public Co. Ltd.
(Foreign Registered) TH 119,939
-----------
591,032
-----------
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
TECHNOLOGY - 7.1%
20,000 KCE Electronics Public Co. Ltd.
(Foreign Registered) TH $ 77,607
* 79,000 Macronix International Co. Ltd. TW 104,989
* 44,000 Yageo Corp. TW 87,073
-----------
269,669
-----------
TRANSPORTATION - 1.5%
* 150,000 Guangshen Railway Co. Ltd.
(Hong Kong Shares) CH 55,773
-----------
55,773
-----------
UTILITIES - 4.4%
29,000 Hong Kong Electric Holdings Ltd. HK 92,825
2,500 Mosenergo, ADR RU 71,346
-----------
164,171
-----------
TOTAL STOCKS (Cost $2,678,367) 2,634,527
-----------
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
SHORT TERM SECURITIES - 30.7%
255,525 Benchmark Diversified Assets Fund US 255,525
310,000 Federal Farm Credit Bank, DN, 5.200%,
11/05/96 US 309,821
595,000 Federal National Mortgage Association,
DN, 5.170%, 11/07/96 US 594,487
-----------
TOTAL SHORT TERM SECURITIES (Cost $1,159,833) 1,159,833
-----------
TOTAL INVESTMENTS (Cost $3,838,200), 100.6% 3,794,360
OTHER ASSETS AND LIABILITIES, NET, (0.6)% (22,611)
-----------
NET ASSETS, 100.0% $ 3,771,749
===========
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
DN - Discount Note
GDR - Global Depository Receipt
COUNTRY DIVERSIFICATION
<TABLE>
<CAPTION>
Country % of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
CH China 1.5%
HK Hong Kong 16.0%
ID Indonesia 10.5%
IN India 1.9%
MY Malaysia 12.2%
PH Philippines 4.6%
RU Russia 1.9%
SA South Africa 2.0%
TH Thailand 7.4%
TU Turkey 3.7%
TW Taiwan 8.9%
US United States 29.4%
-----
TOTAL 100.0%
=====
</TABLE>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
FREMONT U.S. MICRO-CAP FUND
October 31, 1996
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
- --------------------------------------------------------------------------------
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
STOCKS - 86.6%
BUSINESS EQUIPMENT & SERVICES - 13.2%
* 10,200 Daisytek International Corp. $ 390,150
* 117,800 IntelliQuest Information Group, Inc. 2,591,600
* 30,000 Mail Boxes Etc. 611,250
* 108,750 Metzler Group, Inc. 2,535,234
* 135,200 NuCO2, Inc. 1,791,400
* 33,000 Printrak International, Inc. 321,750
* 30,150 Rental Service Corp. 693,450
* 253,900 Richey Electronics, Inc. 2,221,625
* 88,850 Ultrak, Inc. 2,343,419
-----------
13,499,878
-----------
CAPITAL GOODS - 5.4%
* 84,600 Adept Technology, Inc. 549,900
* 88,000 AFC Cable Systems, Inc. 1,562,000
* 40,000 Channell Commercial Corp. 467,500
* 156,100 Gradall Industries, Inc. 1,697,588
* 18,000 Miller Industries, Inc. 420,750
100,000 PPT Vision, Inc. 837,500
-----------
5,535,238
-----------
CONSUMER DURABLES - 2.5%
* 111,300 Diamond Home Services, Inc. 2,559,900
-----------
2,559,900
-----------
CONSUMER NON-DURABLES - 6.5%
* 34,200 Boyds Wheels, Inc. 474,525
* 82,200 Conso Products Co. 1,171,350
* 206,100 Genesco, Inc. 1,854,900
* 61,850 Sonic Corp. 1,407,088
* 119,000 Sport-Haley, Inc. 1,710,625
-----------
6,618,488
-----------
CONSUMER SERVICES - 9.2%
* 144,000 Damark International, Inc. (Class A) 1,278,000
* 53,200 DM Management Co. 219,450
* 50,000 Gray Communications System, Inc.
(Class B) 1,006,250
* 17,000 Insight Enterprises, Inc. 578,000
* 137,300 LodgeNet Entertainment Corp. 2,162,475
* 86,150 Saga Communications, Inc. (Class A) 1,841,456
* 128,800 ShoLodge, Inc. 1,706,600
* 30,600 Suburban Lodges of America, Inc. 638,775
-----------
9,431,006
-----------
ENERGY - 7.5%
* 126,400 Basin Exploration, Inc. 853,200
* 73,000 Cairn Energy USA, Inc. 775,625
* 30,100 Core Laboratories NV 459,025
-----------
246,300 Lomak Petroleum, Inc. 4,033,163
-----------
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
ENERGY (CONTINUED)
* 83,900 Mallon Resources Corp. $ 671,200
* 12,100 Numar Corp. 193,600
* 20,500 Trico Marine Services, Inc. 722,625
-----------
7,708,438
-----------
FINANCIAL SERVICES - 7.5%
81,600 GA Financial, Inc. 1,111,800
6,500 ISB Financial Corp. 106,844
* 171,100 PennFed Financial Services, Inc. 3,336,450
40,000 Premier Financial Bancorp, Inc. 520,000
107,700 R&G Financial Corp. (Class B) 2,140,538
30,000 SierraWest Bancorp 431,250
-----------
7,646,882
-----------
HEALTH CARE - 5.8%
* 133,700 AccuMed International, Inc. 467,950
* 104,750 Advance Paradigm, Inc. 851,094
* 59,600 American Healthcorp, Inc. 528,950
* 66,050 Cytyc Corp. 850,394
* 113,700 FemRx, Inc. 568,500
111,100 Gensia, Inc. 555,500
* 90,500 MIME Corp. 497,750
* 103,200 Oasis Healthier Holdings Corp. 954,600
* 85,500 Unison Healthcare Corp. 705,375
-----------
5,980,113
-----------
RETAIL - 5.7%
* 119,350 Baby Superstore, Inc. 3,237,369
* 93,900 Chico's Fas, Inc. 586,875
* 208,100 Garden Ridge Corp. 2,002,963
-----------
5,827,207
-----------
SHELTER - 2.0%
* 199,916 D.R. Horton, Inc. 1,824,234
27,700 Engle Homes, Inc. 193,900
-----------
2,018,134
-----------
TECHNOLOGY (COMPONENTS) - 2.9%
* 130,600 Aware, Inc. 1,599,850
* 46,200 Elantec Semiconductor, Inc. 248,325
* 73,200 Speedfam International, Inc. 1,152,899
-----------
3,001,074
-----------
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
FREMONT U.S. MICRO-CAP FUND
October 31, 1996
- --------------------------------------------------------------------------------
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
TECHNOLOGY (EQUIPMENT) - 12.6%
* 55,000 Ade Corp. $ 488,125
* 20,900 Applied Signal Technology, Inc. 99,275
* 51,400 CEM Corp. 504,363
* 19,500 Cymer, Inc. 458,250
* 190,800 Micrel, Inc. 3,911,400
* 165,600 PCD, Inc. 1,821,600
* 78,000 PRI Automation, Inc. 2,769,000
* 47,000 Sawtek, Inc. 1,421,750
* 99,300 Specialty Teleconstructors, Inc. 732,338
99,000 World Access, Inc. 742,500
------------
12,948,601
------------
TECHNOLOGY (SOFTWARE) - 4.7%
* 9,005 Avant! Corp. 272,386
* 90,800 BTG, Inc. 1,566,300
* 93,900 ISG International Software Group Ltd. 1,525,875
* 42,300 OrCAD, Inc. 433,575
* 92,500 Timeline, Inc. 346,875
* 140,000 V-One Corp. 717,497
------------
4,862,508
------------
TRANSPORTATION - 1.1%
* 120,000 Smithway Motor Express Corp. (Class A) 1,080,000
------------
1,080,000
------------
TOTAL STOCKS (Cost $88,281,744) 88,717,467
------------
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
SHORT TERM SECURITIES - 12.6%
530,225 Benchmark Diversified Assets Fund 530,225
3,000,000 A.I. Credit Corp., CP, 5.230%,11/08/96 2,996,949
1,400,000 Heinz (H.J.) & Co., CP, 5.250%,11/20/96 1,396,121
3,000,000 Jostens, Inc., CP, 5.330%,11/04/96 2,998,668
5,000,000 Merrill Lynch & Co., CP, 5.630%,11/01/96 5,000,000
------------
TOTAL SHORT TERM SECURITIES (Cost $12,921,963) 12,921,963
------------
TOTAL INVESTMENTS (Cost $101,203,707), 99.2% 101,639,430
OTHER ASSETS AND LIABILITIES, NET, 0.8% 841,521
------------
NET ASSETS, 100.0% $102,480,951
============
PORTFOLIO ABBREVIATIONS:
CP - Commercial Paper
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
FREMONT GROWTH FUND
October 31, 1996
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
STOCKS - 97.7%
BUSINESS EQUIPMENT & SERVICES - 3.8%
2,500 Danka Business Systems PLC, ADR UK $ 99,063
* 1,500 Career Horizons, Inc. US 60,938
* 6,500 Ceridian Corp. US 322,563
* 2,500 Computer Sciences Corp. US 185,625
* 3,500 COREStaff, Inc. US 89,250
* 4,000 Dendrite International, Inc. US 106,500
8,600 First Data Corp. US 685,850
* 5,000 Fiserv, Inc. US 191,875
* 2,000 Interim Services, Inc. US 80,000
* 4,000 Medic Computer Systems, Inc. US 113,000
3,500 Paychex, Inc. US 199,500
3,500 Stewart Enterprises, Inc. (Class A) US 119,875
20,800 WMX Technologies, Inc. US 715,000
------------
2,969,039
------------
CAPITAL GOODS - 3.2%
10,900 Caterpillar, Inc. US 748,013
4,000 Crane Co. US 186,000
7,300 Emerson Electric Co. US 649,700
13,800 PACCAR, Inc. US 769,350
4,000 Sundstrand Corp. US 161,000
------------
2,514,063
------------
CONSUMER DURABLES - 4.5%
22,600 Chrysler Corp. US 759,925
25,700 Ford Motor Co. US 803,125
20,300 General Motors Corp. US 1,093,663
14,600 Goodyear Tire & Rubber Co. US 669,775
5,500 Harley-Davidson, Inc. US 248,188
------------
3,574,676
------------
CONSUMER SERVICES - 2.2%
* 9,000 CUC International, Inc. US 220,500
7,000 Gannett Co., Inc. US 531,125
5,000 Loewen Group, Inc. US 198,125
* 5,500 Promus Hotel Corp. US 174,625
7,300 Tribune Co. US 596,775
------------
1,721,150
------------
ENERGY - 15.0%
* 3,500 Petroleum Geo-Services AS, ADR NO 119,875
13,700 Amoco Corp. US 1,037,775
5,700 Atlantic Richfield Co. US 755,250
3,000 Camco International, Inc. US 116,250
19,100 Chevron Corp. US 1,255,825
22,500 Exxon Corp. US 1,994,063
12,700 Kerr-McGee Corp. US 796,925
11,700 Mobil Corp. US 1,365,975
1,000 Noble Affiliates, Inc. US 43,500
28,100 Occidental Petroleum Corp. US 688,450
15,400 Phillips Petroleum Co. US 631,400
7,200 Schlumberger Ltd. US 713,700
13,900 Texaco, Inc. US 1,412,588
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
ENERGY (CONTINUED)
3,500 Transocean Offshore, Inc. US $ 221,375
* 1,500 Triton Energy Ltd. US 66,938
27,900 USX-Marathon Group US 610,312
----------
11,830,201
----------
FINANCIAL SERVICES (BANKS) - 11.9%
13,400 Banc One Corp. US 567,825
9,000 BankAmerica Corp. US 823,500
6,600 Bankers Trust New York Corp. US 557,700
9,900 Chase Manhattan Corp. US 848,925
14,700 Citicorp US 1,455,300
14,300 First Chicago NBD Corp. US 729,300
25,500 First Hawaiian, Inc. US 790,500
6,800 First Union Corp. US 494,700
7,500 Mellon Bank Corp. US 488,437
7,000 Nationsbank Corp. US 659,750
12,500 Norwest Corp. US 548,437
10,300 Republic New York Corp. US 785,375
12,900 Suntrust Banks, Inc. US 601,462
----------
9,351,211
----------
FINANCIAL SERVICES (OTHER) - 11.1%
1,000 Ace Ltd. US 54,750
20,000 Ahmanson (H.F.) & Co. US 627,500
16,400 Allstate Corp. US 920,450
12,000 American Express Co. US 564,000
4,200 Cigna Corp. US 548,100
1,500 CMAC Investment Corp. US 103,687
12,400 Dean Witter, Discover & Co. US 730,050
7,100 Federal Home Loan Mortgage Corp. US 717,100
23,100 Federal National Mortgage
Association US 903,787
3,100 General Re Corp. US 456,475
3,000 Green Tree Financial Corp. US 118,875
7,000 Mercury General Corp. US 341,250
5,000 MGIC Investment Corp. US 343,125
1,500 NAC Re Corp. US 52,687
10,000 Price (T. Rowe) Associates US 341,250
6,000 TCF Financial Corp. US 232,500
15,200 Travelers, Inc. US 824,600
26,700 USLIFE Corp. US 834,375
----------
8,714,561
----------
HEALTH CARE - 5.7%
* 7,000 Elan Corp. PLC, ADR IR 194,250
13,700 Aetna, Inc. US 916,187
* 4,000 Amgen, Inc. US 245,250
* 5,500 Cephalon, Inc. US 123,062
* 4,000 Cerner Corp. US 48,500
21,900 Columbia HCA Healthcare Corp. US 782,925
5,000 HBO & Co. US 300,625
* 2,000 HCIA, Inc. US 55,500
* 8,500 Healthsouth Rehabilitation Corp. US 318,750
8,800 Medtronic, Inc. US 566,500
* 6,500 Oxford Health Plans, Inc. US 295,750
9,600 Warner-Lambert Co. US 610,800
----------
4,458,099
----------
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
FREMONT GROWTH FUND
October 31, 1996
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
MULTI-INDUSTRY - 2.1%
11,800 Allied-Signal, Inc. US $ 772,900
11,400 Minnesota Mining & Manufacturing Co. US 873,525
----------
1,646,425
----------
RAW MATERIALS - 3.9%
12,000 Dow Chemical Co. US 933,000
7,100 Du Pont (E.I.) de Nemours & Co. US 658,525
31,200 Engelhard Corp. US 569,400
19,200 Goodrich (B.F.) Co. US 813,600
2,500 IMC Global, Inc. US 93,750
----------
3,068,275
----------
RETAIL - 4.3%
* 26,000 Federated Department Stores, Inc. US 858,000
12,500 Home Depot, Inc. US 684,375
* 6,500 Kohls Corp. US 234,000
9,900 Penney (J.C.), Inc. US 519,750
* 4,000 PETsMART, Inc. US 108,000
10,900 Sears Roebuck & Co. US 527,287
18,200 Wal Mart Stores, Inc. US 484,575
----------
3,415,987
----------
SHELTER - 3.6%
11,600 Armstrong World Industries, Inc. US 774,300
14,500 International Paper Co. US 619,875
7,900 Kimberly-Clark Corp. US 736,675
12,600 Mead Corp. US 715,050
----------
2,845,900
----------
TECHNOLOGY - 13.7%
* 5,500 Business Objects SA, ADR FR 81,813
* 3,500 Baan Co. NV NL 129,500
* 3,500 ADC Telecommunications, Inc. US 239,312
18,100 Amp, Inc. US 613,137
* 8,000 Analog Devices, Inc. US 208,000
* 3,000 Aspen Technologies, Inc. US 201,750
10,900 Boeing Co. US 1,039,588
* 5,500 Cisco Systems, Inc. US 340,313
* 12,700 Compaq Computer Corp. US 884,238
* 2,500 Electronics for Imaging, Inc. US 180,000
15,800 Hewlett-Packard Co. US 697,175
14,900 International Business Machines Corp. US 1,922,100
* 1,500 Legato Systems, Inc. US 53,250
* 2,000 Microsoft Corp. US 274,500
22,400 Motorola, Inc. US 1,030,400
* 8,000 Parametric Technology Corp. US 391,000
* 3,500 Peoplesoft, Inc. US 314,125
* 4,000 PictureTel Corp. US 108,000
* 1,500 Premisys Communications, Inc. US 75,000
11,900 Rockwell International Corp. US 654,500
* 2,000 U.S. Robotics Corp. US 125,750
7,900 United Technologies Corp. US 1,017,125
* 5,500 Xilinx, Inc. US 180,125
----------
10,760,701
----------
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
TRANSPORTATION - 2.2%
8,800 Burlington Northern Santa Fe US $ 724,900
10,000 Conrail, Inc. US 951,250
----------
1,676,150
----------
UTILITIES - 10.5%
* 26,800 AirTouch Communications, Inc. US 700,150
12,100 Ameritech Corp. US 662,475
12,200 Bell Atlantic Corp. US 735,050
25,700 Bellsouth Corp. US 1,047,275
10,000 Boston Edison Co. US 240,000
15,500 Coastal Corp. US 666,500
27,500 Entergy Corp. US 770,000
26,200 GPU, Inc. US 861,325
* 3,000 LCI International, Inc. US 95,625
43,000 Pacific Gas & Electric Co. US 1,010,500
* 6,000 Paging Network, Inc. US 102,750
12,800 SBC Communications, Inc. US 622,400
28,700 Unicom Corp. US 746,200
----------
8,260,250
----------
TOTAL STOCKS (Cost $72,318,053) 76,806,688
----------
Country Value
Face Amount/Issuer Code (Note 1)
- --------------------------------------------------------------------------------
SHORT TERM SECURITIES - 1.9%
1,527,432 Benchmark Diversified Assets Fund US 1,527,432
------------
TOTAL SHORT TERM SECURITIES (Cost $1,527,432) 1,527,432
------------
TOTAL INVESTMENTS (Cost $73,845,485), 99.6% 78,334,120
OTHER ASSETS AND LIABILITIES, NET, 0.4% 289,992
------------
NET ASSETS, 100.0% $ 78,624,112
============
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
COUNTRY DIVERSIFICATION
Country % of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
FR France 0.1%
IR Ireland 0.2%
NL Netherlands 0.2%
NO Norway 0.2%
UK United Kingdom 0.1%
US United States 99.2%
-----
TOTAL 100.0%
=====
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
FREMONT BOND FUND
October 31, 1996
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<TABLE>
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS - 101.6%
COLLATERALIZED MORTGAGE OBLIGATIONS - 48.8%
528,948 Collateralized Mortgage Securities Corp. CMO, J-5Z, REMIC........ 7.985% 05/01/17 $ 543,817
1,511,289 FHLMC CMO, 1018 0Z, PAC-1 (11) REMIC............................. 7.000% 11/15/20 1,470,636
539,232 FNMA CMO, 1990-53G, PAC REMIC.................................... 8.000% 12/25/18 546,813
15,000,000 FNMA CMO, 1992-131KA, PAC(11) REMIC.............................. 8.000% 01/25/22 15,763,950
200,000 FNMA CMO, 1993-11J, PAC REMIC.................................... 7.500% 02/25/08 204,242
1,613,946 MDC Mortgage Funding Corp. CMO, P-4Z............................. 9.500% 11/20/17 1,607,894
1,000,000 Morgan Stanley Mortgage Trust CMO, 40-8, PAC (11) REMIC.......... 7.000% 07/20/21 985,890
7,978,928 Prudential Bache CMO Trust, 14-GZ, REMIC......................... 8.400% 03/20/21 8,279,384
536,814 Resolution Trust Corp. CMO, 1992-M4 A1 REMIC..................... 8.000% 09/25/21 541,511
980,959 Ryland Mortgage Securities Corp. CMO, 1993-8-A, REMIC............ 7.822% 09/25/23 996,286
567,574 Saxon Mortgage Securities Corp. CMO, 1992-1 A1, ARM REMIC........ 7.622% 09/25/22 574,846
3,000,000 Securitized Asset Sales, Inc. CMO, 1993-2A9, PAC (11) REMIC...... 6.200% 07/25/08 2,908,110
-----------
34,423,379
-----------
FIXED RATE AND ADJUSTABLE RATE MORTGAGE SECURITIES - 29.6%
639,668 FHLMC............................................................ 8.250% 08/01/17 662,453
430,439 FHLMC............................................................ 6.500% 01/01/26 412,817
218,479 FHLMC............................................................ 6.500% 03/01/26 209,329
1,131,996 FHLMC............................................................ 6.500% 04/01/26 1,084,588
223,377 FHLMC............................................................ 6.500% 05/01/26 214,231
774,553 FNMA ARM......................................................... 6.069% 12/01/27 771,409
1,018,559 FNMA ARM......................................................... 7.766% 11/01/23 1,055,798
3,630,444 GNMA II ARM...................................................... 7.125% 08/20/23 3,701,202
2,250,630 GNMA............................................................. 7.000% 01/15/26 2,206,322
7,767,157 GNMA............................................................. 7.000% 02/15/26 7,614,245
3,000,000 GNMA TBA......................................................... 6.000% 12/23/26 3,003,750
-----------
20,936,144
-----------
FOREIGN BONDS - 11.9%
CAN$ 2,500,000 Government of Canada............................................. 8.750% 12/01/05 2,173,255
NZ$ 1,500,000 Government of New Zealand........................................ 8.000% 04/15/04 1,102,318
NZ$ 1,300,000 Government of New Zealand........................................ 10.000% 03/15/02 1,027,650
US$ 1,960,000 Republic of Argentina, FRN
(Callable Semiannually in March or September @ 100)............. 6.625% 03/31/05 1,607,200
US$ 3,000,000 United Mexican States, FRN
(Callable Semiannually in June or December @ 100)............... 6.453% 12/31/19 2,463,750
-----------
8,374,173
-----------
CORPORATE BONDS - 10.7%
260,000 CMS Energy Corp. (Callable 10/01/97 @ 101.65).................... 9.875% 10/01/99 270,400
870,000 Delta Air Lines, Inc. (Sinking Fund Bond)........................ 9.450% 02/14/06 965,622
1,749,000 Delta Air Lines, Inc. (Sinking Fund Bond)........................ 9.450% 02/26/06 1,942,072
2,000,000 Time Warner, Inc................................................. 7.450% 02/01/98 2,029,560
225,000 Time Warner, Inc................................................. 7.975% 08/15/04 230,317
450,000 Time Warner, Inc................................................. 8.110% 08/15/06 457,969
450,000 Time Warner, Inc................................................. 8.180% 08/15/07 463,073
1,000,000 United Airlines.................................................. 10.670% 05/01/04 1,186,579
-----------
7,545,592
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
FREMONT BOND FUND
October 31, 1996
<TABLE>
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STRIPPED MORTGAGE SECURITIES - 0.6%
4,094,587 FNMA Interest Only, 1994-27WB, PAC-1 REMIC....................... 6.500% 06/25/14 $ 245,962
168,039 FNMA Principal Only, G93-12B, PAC (11) REMIC..................... 0.000% 02/25/23 160,949
------------
406,911
------------
TOTAL BONDS (Cost $69,821,209) 71,686,199
------------
OTHER SECURITIES - 6.7%
1,169,146 Benchmark Diversified Assets Fund......................................................... 1,169,146
20,000 Long Island Lighting Co. (Convertible Preferred Stock).................................... 472,500
7,000,000 Call Option on U.S. Treasury Note, 5.625%, 11/30/00,
Strike @ 91.875000, Exp. 01/06/97......................................................... 464,310
400,000 Abbott Laboratories, CP.......................................... 5.230% 11/21/96 398,838
300,000 Caisse d'Amortissement de la Dette Sociale, CP................... 5.260% 11/27/96 298,860
400,000 Caisse d'Amortissement de la Dette Sociale, CP................... 5.300% 12/04/96 398,057
1,200,000 General Electric Capital Corp., CP............................... 5.250% 12/12/96 1,192,825
+ 65,000 U.S. Treasury Bill............................................... 5.035% 11/21/96 64,818
+ 90,000 U.S. Treasury Bill............................................... 5.100% 11/14/96 89,834
+ 105,000 U.S. Treasury Bill............................................... 5.105% 11/14/96 104,807
+ 95,000 U.S. Treasury Bill............................................... 5.270% 11/14/96 94,819
------------
TOTAL OTHER SECURITIES (Cost $4,712,262) 4,748,814
------------
TOTAL INVESTMENTS (Cost $74,533,471), 108.3% 76,435,013
OTHER ASSETS AND LIABILITIES, NET, (8.3)% (5,857,950)
------------
NET ASSETS, 100.0% $ 70,577,063
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
ARM - Adjustable Rate Mortgage
CMO - Collateralized Mortgage Obligation
CP - Commercial Paper FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
FRN - Floating Rate Note
GNMA - Government National Mortgage Association
PAC - Planned Amortization Class
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced
CURRENCY ABBREVIATIONS:
CAN$ - Canadian Dollar
NZ$ - New Zealand Dollar
US$ - US Dollar
+On deposit with broker for initial margin on futures contracts (Note 1). The
accompanying notes are an integral part of these financial statements.
41
<PAGE>
FREMONT MONEY MARKET FUND
October 31, 1996
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<TABLE>
<CAPTION>
Discount Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 84.3%
10,000,000 Abbey National North America Corp. ....................... 5.320% 11/04/96 $ 9,995,567
5,000,000 Akzo Nobel, Inc. ......................................... 5.330% 01/29/97 4,934,115
5,000,000 Allianz of America Finance Corp. ......................... 5.340% 11/13/96 4,991,100
5,000,000 Associates Corp. of North America ........................ 5.390% 02/03/97 4,929,631
5,000,000 B.B.V. Finance (Delaware), Inc. .......................... 5.290% 11/13/96 4,991,183
5,000,000 Bank One Corp.*........................................... 5.300% 11/21/96 4,985,278
5,000,000 British Columbia, Province of ............................ 5.310% 12/19/96 4,964,600
5,000,000 BTR Dunlop Finance, Inc. ................................. 5.480% 11/21/96 4,984,778
5,000,000 C.I.T. Group Holdings, Inc. .............................. 5.380% 11/19/96 4,986,550
5,000,000 Cargill Financial Services Corp.*......................... 5.330% 04/23/97 4,871,932
5,000,000 Clorox Co. ............................................... 5.370% 11/04/96 4,997,763
5,000,000 CPC International, Inc.*.................................. 5.300% 11/08/96 4,994,847
5,000,000 Daimler-Benz North America Corp. ......................... 5.290% 11/27/96 4,980,897
5,000,000 Dairy Investments (Bermuda) Ltd.*......................... 5.320% 01/30/97 4,933,500
5,000,000 Deutsche Bank Financial, Inc.............................. 5.320% 01/21/97 4,940,150
5,000,000 Electricite de France .................................... 5.400% 02/03/97 4,929,500
5,000,000 Electricity Corp. of New Zealand Ltd. .................... 5.280% 11/08/96 4,994,867
5,000,000 Ford Motor Credit Corp. .................................. 5.350% 11/18/96 4,987,368
5,000,000 General Electric Capital Corp. ........................... 5.330% 04/21/97 4,873,413
5,000,000 Glaxo Wellcome PLC*....................................... 5.290% 11/12/96 4,991,918
5,000,000 Goldman Sachs & Co. ...................................... 5.250% 11/27/96 4,981,042
5,000,000 Hancock, John Capital Corp.*.............................. 5.350% 12/30/96 4,956,160
5,000,000 Hewlett-Packard Co. ...................................... 5.400% 12/03/96 4,976,000
5,000,000 Hitachi America Ltd. ..................................... 5.340% 03/25/97 4,893,200
5,000,000 International Business Machines Corp. .................... 5.320% 01/10/97 4,948,278
5,000,000 Jostens, Inc. ............................................ 5.330% 11/04/96 4,997,779
5,000,000 Marsh & McLennan Cos., Inc.*.............................. 5.350% 05/06/97 4,861,792
5,000,000 Merrill Lynch & Co., Inc. ................................ 5.400% 01/06/97 4,950,500
5,000,000 MetLife Funding, Inc. .................................... 5.300% 01/08/97 4,949,944
5,000,000 Mitsui & Co. (U.S.A.), Inc. .............................. 5.340% 12/26/96 4,959,208
10,000,000 Morgan (J.P.) & Co., Inc. ................................ 5.490% 12/09/96 9,942,050
5,000,000 National Rural Utilities Cooperative Finance Corp. ....... 5.300% 01/13/97 4,946,264
5,000,000 New Zealand, Her Majesty the Queen in right of............ 5.270% 01/21/97 4,940,713
5,000,000 Panasonic Finance, Inc.*.................................. 5.380% 11/08/96 4,994,769
5,000,000 Repsol International Finance BV........................... 5.330% 12/09/96 4,971,869
5,000,000 Rexam PLC*................................................ 5.370% 12/16/96 4,966,438
5,000,000 RTZ America, Inc.*........................................ 5.300% 01/24/97 4,938,167
5,000,000 Sandoz Corp. ............................................. 5.400% 11/07/96 4,995,500
5,000,000 Sherwin-Williams Co.*..................................... 5.270% 12/23/96 4,961,939
5,000,000 Siemens Capital Corp...................................... 5.290% 02/04/97 4,930,201
5,000,000 Sony Capital Corp.*....................................... 5.260% 12/20/96 4,964,203
5,000,000 Stanford, Leland Junior University........................ 5.500% 12/18/96 4,964,097
10,000,000 Sweden, Kingdom of ....................................... 5.250% 12/18/96 9,931,458
5,000,000 Swedish Export Credit Corp. .............................. 5.300% 01/14/97 4,945,528
5,000,000 Toronto Dominion Holdings USA, Inc. ...................... 5.270% 12/20/96 4,964,135
5,000,000 Toshiba International Finance PLC (UK) ................... 5.360% 12/11/96 4,970,222
5,000,000 Toyota Motor Credit Corp. ................................ 5.310% 02/03/97 4,930,675
5,000,000 Transamerica Finance Corp. ............................... 5.390% 11/20/96 4,985,776
5,000,000 Unilever Capital Corp.*................................... 5.210% 12/05/96 4,975,397
5,000,000 Union Bank of Switzerland Finance, Inc. .................. 5.625% 11/01/96 5,000,000
5,000,000 USAA Capital Corp. ....................................... 5.400% 01/07/97 4,949,750
5,000,000 Wool International ....................................... 5.270% 11/26/96 4,981,701
5,000,000 Yale University .......................................... 5.380% 11/22/96 4,984,308
-----------
TOTAL COMMERCIAL PAPER 277,868,020
-----------
</TABLE>
* These securities are generally issued to insitutional investors. Any resale
must be in an exempt transaction pursuant to Section 4(2) of the Securities
Act of 1933.
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
FREMONT MCNEY MARKET FUND
October 31, 1996
<TABLE>
<CAPTION>
Discount Maturity Value
Principal Issuer Rate Date (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
OTHER SHORT TERM SECURITIES - 15.4%
<S> <C> <C> <C> <C>
926,146 Benchmark Diversified Assets Fund ................................................ $ 926,146
10,000,000 Bayerische Verinsbank AG, Yankee CD+ ..................... 5.260% 03/06/97 10,000,000
10,000,000 Berliner Handels-und Frankfurt Bank, Eurodollar TD+ ...... 5.500% 11/04/96 10,000,000
10,000,000 Federal Home Loan Bank, AN+............................... 5.415% 01/17/97 10,000,000
10,000,000 Federal Home Loan Bank, AN+............................... 5.670% 06/27/97 10,012,168
5,000,000 Rabobank Nederland, Yankee CD+............................ 5.500% 04/18/97 5,001,079
5,000,000 U.S. Treasury Bill ....................................... 5.430% 09/18/97 4,757,912
------------
TOTAL OTHER SHORT TERM SECURITIES 50,697,305
------------
TOTAL INVESTMENTS (Cost $328,565,325), 99.7% 328,565,325
OTHER ASSETS AND LIABILITIES, NET, 0.3% 1,086,594
------------
NET ASSETS, 100.0% $ 329,651,919
=============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AN - Agency Note
CD - Certificate of Deposit
TD - Time Deposit
+The rate indicated for these securities is the stated coupon rate. The
accompanying notes are an integral part of these financial statements.
43
<PAGE>
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
October 31, 1996
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<TABLE>
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 94.9%
<S> <C> <C> <C> <C>
1,000,000 Anaheim, CA Public Finance Authority Revenue Bond, Anaheim Electric
Utility Projects ................................................... 5.600% 10/01/16 $ 977,080
1,000,000 California State Dept. of Veterans Affairs, Home Purchase Revenue 1991
Ser. A ............................................................. 6.450% 08/01/00 1,041,920
500,000 California State Dept. of Water Resources, Central Valley Project Revenue... 4.800% 12/01/07 487,770
1,000,000 California State Dept. of Water Resources, Central Valley Project Revenue
Ser. H.............................................................. 6.400% 12/01/00 1,085,190
1,000,000 California State GO, Various Purpose ................................ 6.500% 08/01/97 1,020,890
1,000,000 California State Public Works Board, Lease Revenue Dept. of Corrections,
Madera County State Prison 1990 Ser. A ............................. 6.700% 09/01/97 1,024,330
1,000,000 California State Public Works Board, Lease Revenue Dept. of Corrections,
Prison D ........................................................... 5.100% 06/01/06 999,200
1,000,000 California State Public Works Board, Lease Revenue Refunding, Trustees of
The California State University, 1995 Ser. B ....................... 5.600% 04/01/06 1,027,340
1,000,000 Contra Costa Transportation Authority, Sales Tax Revenue 1991 Ser. A... 6.400% 03/01/01 1,080,300
1,000,000 Contra Costa Water Authority, Water Treatment Revenue Refunding 1993
Ser. A (FGIC Insured) .............................................. 5.300% 10/01/05 1,032,230
1,000,000 Contra Costa Water District, Water Revenue Ser. F (FGIC Insured) .... 5.250% 10/01/08 1,009,300
1,000,000 East Bay CA MUD, Water System Subordinated Revenue Ser. 1994 ........ 8.500% 06/01/98 1,071,270
1,000,000 City of Irvine, Assessment District No. 89-10, Limited Obligation Refunding
Improvement (MBIA Insured) ......................................... 4.200% 09/02/05 927,130
750,000 Los Angeles County Sanitation District Finance Authority, 1993 Ser. A 5.250% 10/01/06 768,472
1,000,000 Los Angeles Dept. of Water & Power, Electric Plant Revenue .......... 4.700% 10/15/06 974,610
1,000,000 Los Angeles Dept. of Water & Power, Electric Plant Revenue Refunding... 5.500% 09/01/07 1,029,160
1,000,000 Los Angeles Dept. of Water & Power, Waterworks Revenue Refunding ...... 5.625% 04/15/08 1,029,790
1,000,000 Los Angeles, CA Convention & Exhibition Center Authority, Lease Revenue
Bonds Refunding Ser. A ............................................. 5.200% 08/15/09 997,610
1,000,000 City of Los Angeles, 1990 Solid Waste Collection Project COP Revenue... 6.400% 11/01/97 1,025,870
500,000 M-S-R Public Power Agency, San Juan Project Revenue Ser. D (AMBAC Insured)... 6.300% 07/01/98 511,750
1,000,000 M-S-R Public Power Agency, San Juan Project Revenue Ser. F .......... 5.650% 07/01/03 1,059,330
1,000,000 Metropolitan Water District of Southern California, Waterworks GO
Refunding 1993 Ser. A .............................................. 5.250% 03/01/05 1,032,270
1,000,000 Modesto High School District, 1993 GO Refunding (FGIC Insured) ...... 5.300% 08/01/04 1,038,190
1,000,000 Modesto Irrigation District Finance Authority, Domestic Water Project
Revenue 1992 Ser. A (AMBAC Insured) ................................ 5.650% 09/01/03 1,060,600
1,000,000 Northern California Power Agency, Geothermal Project #3 Revenue Ser. A... 5.600% 07/01/06 1,033,240
1,000,000 Orange County Transportation Authority, Measure M Sales Tax Revenue
First Ser. 1992 .................................................... 6.500% 02/15/06 1,070,420
1,000,000 Orange County Transportation Authority, Measure M Sales Tax Revenue
Second Senior Ser. 1994 (FGIC Insured) ............................. 5.000% 02/15/08 992,690
500,000 Orange County Water District, COP 1990 Project A .................... 6.500% 08/15/98 522,955
500,000 City of Pasadena, Electric Works Revenue Ser. 1990 .................. 6.500% 08/01/99 530,135
500,000 City of Pasadena, GO Refunding ...................................... 5.000% 06/01/07 495,725
1,000,000 Rancho Cucamonga RDA, 1994 Tax Allocation Refunding (MBIA Insured) .. 5.000% 09/01/07 999,520
1,000,000 City of Riverside, Electric Revenue 1991 ............................ 6.100% 10/01/00 1,061,800
1,000,000 City of Riverside, Electric Revenue Refunding 1993 .................. 5.000% 10/01/06 999,960
1,000,000 Sacramento County Sanitation District Finance Authority, Revenue Bond
(MBIA Insured) ..................................................... 5.000% 12/01/08 990,570
1,000,000 Sacramento MUD, Electric Revenue 1991 Ser. Y ........................ 6.250% 09/01/00 1,067,620
1,000,000 San Bernardino County Transportation Authority, Sales Tax Revenue 1992
Ser. A (FGIC Insured) .............................................. 6.000% 03/01/03 1,075,810
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
<TABLE>
<CAPTION>
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
October 31, 1996
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
<S> <C> <C> <C> <C>
1,000,000 San Francisco, CA Bay Area Rapid Transit, Sales Tax Revenue Refunding... 6.400% 07/01/97 $ 1,018,120
1,000,000 City and County of San Francisco International Airport, Revenue Second Ser.
Issue 1 (AMBAC Insured) ............................................ 6.100% 05/01/03 1,083,160
1,000,000 City and County of San Francisco RDA, Lease Revenue Ser. 1991
(George R. Moscone Convention Center) (AMBAC Insured) .............. 6.200% 10/01/00 1,071,240
1,000,000 City and County of San Francisco Sewer, Revenue Refunding Ser. 1992
(AMBAC Insured) .................................................... 5.800% 10/01/05 1,064,830
1,000,000 San Jose, CA Finance Authority, Convention Center Revenue Refunding
Project Ser. C (MBIA Insured) ...................................... 5.750% 09/01/03 1,055,310
1,000,000 Santa Margarita/Dana Point Authority Orange County, Revenue Bond Ser. A... 5.375% 08/01/04 1,039,720
Southern California Public Power Authority
1,000,000 Mead-Phoenix Project Revenue 1994 Ser. A (AMBAC Insured) ........... 4.750% 07/01/09 944,800
1,000,000 Mead-Phoenix Project Revenue 1994 Ser. A (AMBAC Insured) ........... 4.750% 07/01/08 957,980
1,000,000 Palo Verde Power Projects Revenue 1993 Ser. A ...................... 5.100% 07/01/06 1,010,050
500,000 City of Stockton, 1990 Wastewater System Project COP (AMBAC Insured) 6.700% 09/01/98 525,195
500,000 City of Stockton, 1990 Wastewater System Project COP (AMBAC Insured) 6.800% 09/01/99 530,735
1,000,000 University of California, Housing System Revenue 1993 Ser. A (MBIA Insured).. 5.500% 11/01/08 1,020,990
500,000 University of California, Research Facilities Revenue 1995 Ser. C
(AMBAC Insured) .................................................... 5.100% 09/01/07 501,550
1,000,000 West & Central Basin Finance Authority, West Basin Water Revenue
Refunding Project (AMBAC Insured) .................................. 5.125% 08/01/06 1,015,420
1,500,000 Yucaipa School Facilities Finance Authority, 1995 Sweetwater Refunding
(MBIA Insured) ..................................................... 6.000% 09/01/10 1,555,695
-----------
TOTAL MUNICIPAL BONDS (Cost $46,848,541) 48,546,842
-----------
SHORT TERM SECURITIES - 3.7%
1,000,000 California State Revenue Anticipation Notes Ser. A .................. 4.500% 06/30/97 1,005,880
900,064 Provident Institutional Fund: Municipal Fund for California Investors, Inc. ....................... 900,064
-----------
TOTAL SHORT TERM SECURITIES (Cost $1,904,017) 1,905,944
-----------
TOTAL INVESTMENTS (Cost $48,752,558), 98.6% 50,452,786
OTHER ASSETS AND LIABILITIES, NET, 1.4% 703,258
-----------
NET ASSETS, 100.0% $ 51,156,044
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificates of Participation
FGIC - Financial Guaranty Insurance Corp.
GO - General Obligation
MBIA - Municipal Bond Investor Assurance Corp.
MUD - Municipal Utility District
RDA - Redevelopment Agency
The accompanying notes are an integral part of these financial statements.
45
</TABLE>
<PAGE>
FREMONT MUTUAL FUNDS, INC.
October 31, 1996
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL EMERGING
GLOBAL GROWTH SMALL CAP MARKETS
FUND FUND FUND FUND
---- ---- ---- ----
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at cost $542,076,336 $ 32,567,672 $ 9,056,967 $ 3,838,200
============ ============ ============ ============
Investments in securities at value (Note 1) 569,661,939 34,997,588 9,169,271 3,794,360
Securities lending collateral (Note 1) 34,883,640 4,004,476 219,791 71,319
Cash -- -- 35,310 46,424
Dividends and interest receivable 4,115,885 35,584 20,090 1,167
Receivable for securities sold -- 275,447 -- 21,682
Receivable from sale of fund shares 309,335 8,064 3,091 457
Variation margin receivable -- -- -- --
Unrealized appreciation on foreign currency contracts 29,466 -- -- --
Prepaid expense 4,925 -- -- --
Unamortized organization costs (Note 3) -- -- -- 17,518
------------ ------------ ------------ ------------
TOTAL ASSETS 609,005,190 39,321,159 9,447,553 3,952,927
------------ ------------ ------------ ------------
LIABILITIES:
Liabilities for securities lending collateral 34,883,640 4,004,476 219,791 71,319
Liabilities for options written (Note 4) -- -- -- --
Dividends payable to shareholders -- -- -- --
Reverse repurchase agreement (Note 1) -- -- -- --
Payable for securities purchased -- -- -- 92,330
Payable to management company -- -- -- 17,518
Payable for fund shares redeemed 470,983 150 2,550 --
Unrealized depreciation on foreign currency contracts 979,032 -- -- 11
Accrued expenses:
Investment advisory and administrative fees 362,362 43,787 11,037 --
Shareholder servicing fees 10,500 -- -- --
Custody fees 58,362 -- -- --
Accounting fees 28,000 -- -- --
Audit and legal fees 31,515 -- -- --
Other payables 30,560 -- -- --
------------ ------------ ------------ ------------
TOTAL LIABILITIES 36,854,954 4,048,413 233,378 181,178
------------ ------------ ------------ ------------
NET ASSETS $572,150,236 $ 35,272,746 $ 9,214,175 $ 3,771,749
============ ============ ============ ============
Net assets consist of:
Paid in capital $474,152,043 $ 32,740,261 $ 8,869,021 $ 3,892,802
Undistributed net investment income (loss) 2,241,575 -- 27,143 7,385
Unrealized appreciation (depreciation) on investments 27,585,603 2,429,916 112,304 (43,840)
Unrealized appreciation (depreciation) on foreign currency
contracts and other assets and liabilities (928,008) (485 869 11
Accumulated net realized gain (loss) 69,099,023 103,054 204,838 (84,609)
------------ ------------ ------------ ------------
NET ASSETS $572,150,236 $ 35,272,746 $ 9,214,175 $ 3,771,749
============ ============ ============ ============
SHARES OF CAPITAL STOCK OUTSTANDING 37,869,936 3,392,090 907,834 391,921
============ ============ ============ ============
NET ASSET VALUE PER SHARE $ 15.11 $ 10.40 $ 10.15 $ 9.62
============ ============ ============ `============
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
U.S. INTERMEDIATE
MICRO-CAP GROWTH BOND MONEY MARKET TAX-FREE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities at cost $101,203,707 $ 73,845,485 $ 74,533,471 $328,565,325 $ 48,752,558
============ ============ ============ ============ ============
Investments in securities at value (Note 1) 101,639,430 78,334,120 76,435,013 328,565,325 50,452,786
Securities lending collateral (Note 1) 17,827,172 6,891,188 -- -- --
Cash -- -- -- -- 148,990
Dividends and interest receivable 26,104 129,790 714,366 1,143,370 640,350
Receivable for securities sold -- 82,317 -- 1,318,202 --
Receivable from sale of fund shares 1,467,142 257,302 356,968 -- 1,650
Variation margin receivable -- -- 28,594 --
Unrealized appreciation on foreign currency contracts -- -- 248,829 -- --
Prepaid expense -- 428 714 6,604 462
Unamortized organization costs (Note 3) -- 1,578 2,386 -- --
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 120,959,848 85,696,723 77,786,870 331,033,501 51,244,238
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Liabilities for securities lending collateral 17,827,172 6,891,188 -- -- --
Liabilities for options written (Note 4) -- -- 10,000 -- --
Dividends payable to shareholders -- -- 13,218 9,430 29,810
Reverse repurchase agreement (Note 1) -- -- 3,580,000 -- --
Payable for securities purchased 192,651 66,286 3,395,508 -- --
Payable to management company -- -- -- -- --
Payable for fund shares redeemed 295,019 21,995 10,988 1,257,181 5,174
Unrealized depreciation on foreign currency contracts -- -- 103,271 -- --
Accrued expenses:
Investment advisory and administrative fees 164,055 42,666 23,386 59,270 13,162
Shareholder servicing fees -- 3,500 2,900 6,500 2,700
Custody fees -- 9,183 4,909 8,718 2,683
Accounting fees -- 4,400 5,200 14,600 5,000
Audit and legal fees -- 14,515 14,515 14,515 14,515
Other payables -- 18,878 45,912 11,368 15,150
------------ ------------ ------------ ------------ ------------
Total liabilities 18,478,897 7,072,611 7,209,807 1,381,582 88,194
------------ ------------ ------------ ------------ ------------
NET ASSETS $102,480,951 $ 78,624,112 $ 70,577,063 $329,651,919 $ 51,156,044
============ ============ ============ ============ ============
Net assets consist of:
Paid in capital $ 96,935,718 $ 56,367,681 $ 68,832,392 $329,651,919 $ 49,410,725
Undistributed net investment income (loss) -- 110,727 2,647 -- --
Unrealized appreciation (depreciation) on
investments 435,723 4,488,635 2,355,038 -- 1,700,228
Unrealized appreciation (depreciation) on
foreign currency contracts and other assets
and liabilities -- -- 146,976 -- --
Accumulated net realized gain (loss) 5,109,510 17,657,069 (759,990) -- 45,091
------------ ------------ ------------ ------------ ------------
NET ASSETS $102,480,951 $ 78,624,112 $ 70,577,063 $329,651,919 $ 51,156,044
============ ============ ============ ============ ============
SHARES OF CAPITAL STOCK OUTSTANDING 5,221,792 5,234,734 7,063,078 329,651,919 4,734,699
============ ============ ============ ============ ============
NET ASSET VALUE PER SHARE $ 19.63 $ 15.02 $ 9.99 $ 1.00 $ 10.80
============ ============ ============ ============ ============
</TABLE>
47
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Year Ended October 31, 1996
STATEMENT OF OPERATIONS
<TABLE>
INTERNATIONAL INTERNATIONAL EMERGING
GLOBAL GROWTH SMALL CAP MARKETS
FUND FUND FUND FUND#
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 13,445,282 $ 47,149 $ 27,548 $ 33,460
Dividends 5,348,548 430,157 189,712 5,177
------------ ------------ ------------ ---------
TOTAL INCOME* 18,793,830 477,306 217,260 38,637
------------ ------------ ------------ ---------
EXPENSES:
Investment advisory and administrative fees (Note 2) 3,997,557 548,887 158,372 13,322
Shareholder servicing fees (Note 2) 98,552 -- -- 2,346
Custody fees 172,041 -- -- 4,800
Distribution fees (Note 2) -- -- -- 2,896
Accounting fees 164,882 -- -- 3,900
Audit and legal fees 40,962 -- -- 8,600
Directors' fees (Note 2) 2,564 -- -- 888
Registration fees 38,904 -- -- 16,453
Interest expense (Note 1) -- -- -- --
Other 99,659 -- -- 4,498
------------ ------------ ------------ ---------
TOTAL EXPENSES BEFORE REDUCTIONS 4,615,121 548,887 158,372 57,703
Expenses waived and/or reimbursed by Advisor -- -- (43,633) (57,703)
------------ ------------ ------------ ---------
TOTAL NET EXPENSES 4,615,121 548,887 114,739 --
------------ ------------ ------------ ---------
NET INVESTMENT INCOME (LOSS) 14,178,709 (71,581) 102,521 38,637
------------ ------------ ------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investments 66,430,845 2,385,592 272,776 (84,620)
Transactions in written options -- -- -- --
Foreign currency transactions 3,713,517 (123,314) (72,383) (5,125)
Net increase (decrease) in unrealized appreciation (depreciation) on:
Investments (16,096,541) 370,380 328,876 (43,840)
Translation of assets and liabilities in foreign currencies (966,466) (1,146) 1,815 11
------------ ------------ ------------ ---------
Net realized and unrealized gain (loss) from investments
and foreign currency 53,081,355 2,631,512 531,084 (133,574)
------------ ------------ ------------ ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 67,260,064 $ 2,559,931 $ 633,605 $ (94,937)
============ ============ ============ =========
</TABLE>
* Net of foreign taxes withheld of $337,033 for Fremont Global Fund, $46,245
for Fremont International Growth Fund, $16,217 for Fremont International
Small Cap Fund, $642 for Fremont Emerging Markets Fund and $1,088 for
Fremont Growth Fund.
# Period from June 24, 1996 (commencement of operations) to October 31, 1996.
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
U.S. INTERMEDIATE
MICRO-CAP GROWTH BOND MONEY MARKET TAX-FREE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 614,218 $ 163,469 $5,890,821 $16,549,182 $2,736,364
Dividends 42,612 971,413 35,250 -- --
------------ ------------ ---------- ----------- ----------
TOTAL INCOME* 656,830 1,134,882 5,926,071 16,549,182 2,736,364
------------ ------------ ---------- ----------- ----------
EXPENSES:
Investment advisory and administrative fees (Note 2) 1,008,115 443,609 435,345 1,099,021 267,175
Shareholder servicing fees (Note 2) -- 33,455 26,248 51,860 25,428
Custody fees -- 20,188 23,506 26,179 7,717
Distribution fees (Note 2) -- -- -- -- --
Accounting fees -- 26,561 33,958 84,164 29,134
Audit and legal fees -- 21,948 23,915 24,877 24,541
Directors' fees (Note 2) -- 2,564 2,564 2,564 2,564
Registration fees -- 21,573 12,290 36,857 2,809
Interest expense (Note 1) -- -- 53,283 -- --
Other -- 54,162 44,020 43,395 12,075
------------ ------------ ---------- ----------- ----------
TOTAL EXPENSES BEFORE REDUCTIONS 1,008,115 624,060 665,129 1,368,917 371,443
Expenses waived and/or reimbursed by Advisor (118,286) -- (118,652) (448,972) (111,434)
------------ ------------ ---------- ----------- ----------
TOTAL NET EXPENSES 889,829 624,060 536,477 919,945 260,009
------------ ------------ ---------- ----------- ----------
NET INVESTMENT INCOME (LOSS) (232,999) 510,822 5,389,594 15,629,237 2,476,355
------------ ------------ ---------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investments 5,347,629 17,602,434 (239,275) -- 44,827
Transactions in written options -- -- 23,043 -- --
Foreign currency transactions -- -- 96,978 -- --
Net increase (decrease) in unrealized appreciation
(depreciation) on:
Investments (512,157) (4,559,067) 276,789 -- (192,443)
Translation of assets and liabilities in foreign
currencies -- -- 170,440 -- --
------------ ------------ ---------- ----------- ----------
Net realized and unrealized gain (loss) from
investments and foreign currency 4,835,472 13,043,367 327,975 -- (147,616)
------------ ------------ ---------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 4,602,473 $ 13,554,189 $5,717,569 $15,629,237 $2,328,739
============ ============ ========== =========== ==========
</TABLE>
49
<PAGE>
FREMONT MUTUAL FUNDS, INC.
October 31, 1996
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL GROWTH
FUND FUND
----------------------- -------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96 10/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 14,178,709 $ 13,562,581 $ (71,581) $ 348,359
Net realized gain (loss) from investments and transactions in
written options 66,430,845 23,444,879 2,385,592 (948,173)
Net realized gain (loss) from foreign currency transactions 3,713,517 (435,755) (123,314) (53,746)
Net unrealized appreciation (depreciation) on investments (16,096,541) 18,907,997 370,380 601,879
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies (966,466) (44,605) (1,146) (47)
------------ ------------- ------------ ------------
Net increase (decrease) in net assets from operations 67,260,064 55,435,097 2,559,931 (51,728)
------------ ------------- ------------ ------------
Distributions to shareholders from:
Net investment income (15,978,412) (16,914,918) (25,060) (269,553)
Net realized gains (19,404,727) (1,140,840) -- --
------------ ------------- ------------ ------------
Total distributions to shareholders (35,383,139) (18,055,758) (25,060) (269,553)
------------ ------------- ------------ ------------
From capital share transactions:
Proceeds from shares sold 86,354,528 110,900,850 7,454,198 4,286,553
Payments for shares redeemed (62,546,779) (136,942,988) (6,897,361) (1,803,707)
Reinvested dividends 34,110,706 17,395,011 25,025 269,162
------------ ------------- ------------ ------------
Net increase (decrease) in net assets from capital share
transactions 57,918,455 (8,647,127) 581,862 2,752,008
------------ ------------- ------------ ------------
Net increase in net assets 89,795,380 28,732,212 3,116,733 2,430,727
Net assets at beginning of period 482,354,856 453,622,644 32,156,013 29,725,286
------------ ------------- ------------ ------------
NET ASSETS AT END OF PERIOD** 572,150,236 $ 482,354,856 $ 35,272,746 $ 32,156,013
=========== ============= ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 5,889,696 8,368,781 727,743 433,837
Redeemed (4,265,461) (10,326,949) (647,428) (188,969)
Reinvested dividends 2,372,436 1,282,980 2,541 27,727
------------ ------------- ------------ ------------
Net increase (decrease) in capital share transactions 3,996,671 (675,188) 82,856 272,595
=========== ============= ============ ============
</TABLE>
** Net assets at October 31, 1996 and October 31, 1995, respectively, include
undistributed net investment income (loss) of $204,471 and $2,004,174 for
Fremont Global Fund, $73,404 and $170,045 for Fremont International Growth
Fund, $75,473 and $9,448 for Fremont International Small Cap Fund, $12,521
and $ -- for Fremont Emerging Markets Fund, $(232,999) and $ -- for
Fremont U.S. Micro-Cap Fund, and $110,727 and $9,309 for Fremont Growth
Fund.
# Period from June 24, 1996 (commencement of operations) to October 31, 1996.
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP EMERGING MARKETS
FUND FUND
---------------------- ----------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96
-------- -------- --------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 102,521 $ 45,740 $ 38,637
Net realized gain (loss) from investments and transactions in written options 272,776 (21,568) (84,620)
Net realized gain (loss) from foreign currency transactions (72,383) (14,440) (5,125)
Net unrealized appreciation (depreciation) on investments 328,876 (203,902) (43,840)
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies 1,815 10,337 11
------------ ---------- ----------
Net increase (decrease) in net assets from operations 633,605 (183,833) (94,937)
------------ ---------- ----------
Distributions to shareholders from:
Net investment income (36,496) (35,036) (26,116)
Net realized gains -- -- --
------------ ---------- ----------
Total distributions to shareholders (36,496) (35,036) (26,116)
------------ ---------- ----------
From capital share transactions:
Proceeds from shares sold 5,840,661 2,849,192 3,982,064
Payments for shares redeemed (1,489,319) (172,610) (115,175)
Reinvested dividends 20,865 19,578 25,913
------------ ---------- ----------
Net increase (decrease) in net assets from capital share transactions 4,372,207 2,696,160 3,892,802
------------ ---------- ----------
Net increase in net assets 4,969,316 2,477,291 3,771,749
Net assets at beginning of period 4,244,859 1,767,568 --
------------ ---------- ----------
NET ASSETS AT END OF PERIOD** $ 9,214,175 $4,244,859 $3,771,749
============ ========== ==========
CAPITAL TRANSACTIONS IN SHARES:
Sold 583,448 308,867 401,191
Redeemed (149,348) (18,867) (11,901)
Reinvested dividends 2,288 2,175 2,631
------------ ---------- ----------
Net increase (decrease) in capital share transactions 436,388 292,175 391,921
============ ========== ==========
</TABLE>
<TABLE>
<CAPTION>
U.S. MICRO-CAP GROWTH
FUND FUND
----------------------- ------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96 10/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (232,999) $ (25,196) $ 510,822 $ 398,651
Net realized gain (loss) from investments and transactions in
written options 5,347,629 347,186 17,602,434 3,482,283
Net realized gain (loss) from foreign currency transactions -- -- -- --
Net unrealized appreciation (depreciation) on investments (512,157) 888,690 (4,559,067) 6,445,736
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies -- -- -- --
------------ ----------- ------------ ------------
Net increase (decrease) in net assets from operations 4,602,473 1,210,680 13,554,189 10,326,670
------------ ----------- ------------ ------------
Distributions to shareholders from:
Net investment income -- -- (409,404) (505,139)
Net realized gains (323,213) -- (3,508,522) (241,849)
------------ ----------- ------------ ------------
Total distributions to shareholders (323,213) -- (3,917,926) (746,988)
------------ ----------- ------------ ------------
From capital share transactions:
Proceeds from shares sold 162,319,610 6,143,180 31,461,523 32,879,457
Payments for shares redeemed (72,224,013) (1,614,127) (25,982,666) (10,815,329)
Reinvested dividends 313,977 -- 3,876,573 744,451
------------ ----------- ------------ ------------
Net increase (decrease) in net assets from capital share
transactions 90,409,574 4,529,053 9,355,430 22,808,579
------------ ----------- ------------ ------------
Net increase in net assets 94,688,834 5,739,733 18,991,693 32,388,261
Net assets at beginning of period 7,792,117 2,052,384 59,632,419 27,244,158
------------ ----------- ------------ ------------
NET ASSETS AT END OF PERIOD** $102,480,951 $ 7,792,117 $ 78,624,112 $ 59,632,419
============ =========== ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 8,424,985 462,168 2,313,441 2,872,926
Redeemed (3,767,440) (117,136) (1,944,975) (981,267)
Reinvested dividends 20,793 -- 301,367 68,568
------------ ----------- ------------ ------------
Net increase (decrease) in capital share transactions 4,678,338 345,032 669,833 1,960,227
============ =========== ============ ============
</TABLE>
51
<PAGE>
FREMONT MUTUAL FUNDS, INC.
October 31, 1996
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
BOND
FUND
----------------------
YEAR YEAR
ENDED ENDED
----- -----
10/31/96 10/31/95
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 5,389,594 $ 4,585,884
Net realized gain (loss) from investments and transactions in written options (216,232) 2,230,265
Net realized gain (loss) from foreign currency transactions 96,978 82,647
Net unrealized appreciation (depreciation) on investments 276,789 3,540,395
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies 170,440 (23,464)
------------ ------------
Net increase in net assets from operations 5,717,569 10,415,727
------------ ------------
Distributions to shareholders from:
Net investment income (5,647,913) (4,531,238)
Net realized gains (1,968,201) --
------------ ------------
Total distributions to shareholders (7,616,114) (4,531,238)
------------ ------------
From capital share transactions:
Proceeds from shares sold 17,733,366 25,537,155
Payments for shares redeemed (39,028,358) (13,731,939)
Reinvested dividends 7,427,929 4,408,916
------------ ------------
Net increase (decrease) in net assets from capital share transactions (13,867,063) 16,214,132
------------ ------------
Net increase (decrease) in net assets (15,765,608) 22,098,621
Net assets at beginning of period 86,342,671 64,244,050
------------ ------------
NET ASSETS AT END OF PERIOD** $ 70,577,063 $ 86,342,671
============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 1,778,229 2,579,889
Redeemed (3,985,015) (1,429,749)
Reinvested dividends 747,888 454,805
------------ ------------
Net increase (decrease) in capital share transactions (1,458,898) 1,604,945
============ ============
</TABLE>
** For Fremont Bond Fund, net assets at October 31, 1996 and October 31,
1995, include undistributed net investment income (loss) of $(171,773) and
$86,546, respectively. There was no undistributed net investment income
for Fremont Money Market Fund or Fremont California Intermediate Tax-Free
Fund at October 31, 1996 nor at October 31, 1995.
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
MONEY MARKET INTERMEDIATE TAX-FREE
FUND FUND
------------------------- -------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96 10/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 15,629,237 $ 16,288,897 $ 2,476,355 $ 2,782,365
Net realized gain (loss) from investments and transactions in
written options -- -- 44,827 119,954
Net realized gain (loss) from foreign currency transactions -- -- -- --
Net unrealized appreciation (depreciation) on investments -- -- (192,443) 3,671,361
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies -- -- -- --
------------ ------------ ------------ ------------
Net increase in net assets from operations 15,629,237 16,288,897 2,328,739 6,573,680
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (15,629,237) (16,288,897) (2,476,355) (2,782,365)
Net realized gains -- -- (119,954) (4,639)
------------ ------------ ------------ ------------
Total distributions to shareholders (15,629,237) (16,288,897) (2,596,309) (2,787,004)
------------ ------------ ------------ ------------
From capital share transactions:
Proceeds from shares sold 308,476,828 297,387,013 2,285,491 2,822,896
Payments for shares redeemed 293,545,954) (238,529,846) (3,402,568) (17,111,368)
Reinvested dividends 15,409,433 16,015,143 2,227,490 2,510,108
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from capital share
transactions 30,340,307 74,872,310 1,110,413 (11,778,364)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 30,340,307 74,872,310 842,843 (7,991,688)
Net assets at beginning of period 299,311,612 224,439,302 50,313,201 58,304,889
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD** $329,651,919 $ 299,311,612 $ 51,156,044 $ 50,313,201
============ ============= ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 308,476,828 297,387,013 210,037 270,058
Redeemed (293,545,954) (238,529,846) (315,379) (1,629,211)
Reinvested dividends 15,409,433 16,015,143 206,265 239,479
------------ ------------ ------------ ------------
Net increase (decrease) in capital share transactions 30,340,307 74,872,310 100,923 (1,119,674)
============ ============= ============ ============
</TABLE>
53
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Financial Highlights - October 31, 1996
GLOBAL FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31
----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $14.24 $13.13 $13.17 $11.52 $11.25
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .39 .40 .26 .32 .39
Net realized and unrealized gain (loss) 1.49 1.24 (.03) 1.67 .40
------ ------ ------ ------ ------
Total investment operations 1.88 1.64 .23 1.99 .79
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.44) (.50) (.14) (.26) (.40)
From net realized gains (.57) (.03) (.13) (.08) (.11)
Total distributions -- (.53) -- -- (.01)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD (1.01) $14.24 (.27) (.34) (.52)
$15.11 $13.13 $13.17 $11.52
====== ====== ====== ======
TOTAL RETURN 13.72% 12.78%
RATIOS AND SUPPLEMENTAL DATA 1.74% 17.51% 7.10%
Net assets, end of period (000s omitted) $572,150 $482,355 $453,623 $186,325 $101,839
Ratio of expenses to average net assets .87% .88% .95% .99% 1.09%
Ratio of net investment income (loss) to average net assets 2.66% 2.98% 2.47% 2.89% 3.41%
Portfolio turnover rate 71% 83% 52% 40% 50%
Average commission rate paid $.0238 -- -- -- --
</TABLE>
INTERNATIONAL GROWTH FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31 PERIOD FROM
---------------------- MARCH 1, 1994 TO
1996 1995 OCTOBER 31, 1994
---- ---- ----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $9.72 $9.79 $9.57
----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) (.02) .10 .02
Net realized and unrealized loss .71 (.09) .20
----- ----- -----
Total investment operations .69 .01 .22
----- ----- -----
LESS DISTRIBUTIONS
From net investment income (.01) (.08) --
From net realized gains -- -- --
----- ----- -----
Total distributions (.01) (.08) --
NET ASSET VALUE, END OF PERIOD $10.40 $9.72 $9.79
====== ===== =====
TOTAL RETURN 7.07% 0.13% 2.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $35,273 $32,156 $29,725
Ratio of expenses to average net assets(a) 1.50% 1.50% 1.50%*
Ratio of net investment income (loss) to average net assets(a) -.20% 1.19% .35%*
Portfolio turnover rate 74% 32% 44%*
Average commission rate paid $.0150 -- --
</TABLE>
* Annualized
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
INTERNATIONAL SMALL CAP FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31 PERIOD FROM
---------------------- JUNE 30, 1994 TO
1996 1995 OCTOBER 31, 1994
---- ---- ----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $9.00 $9.86 $10.00
----- ----- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) .14 .10 (.01)
Net realized and unrealized gain 1.08 (.88) (.13)
----- ----- ------
Total investment operations 1.22 (.78) (.14)
----- ----- ------
LESS DISTRIBUTIONS
From net investment income (.07) (.08) --
From net realized gains -- -- --
----- ----- ------
Total distributions (.07) (.08) --
----- ----- ------
NET ASSET VALUE, END OF PERIOD $10.15 $9.00 $9.86
====== ===== =====
TOTAL RETURN # 13.69% -7.96% -1.40%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $9,214 $4,245 $1,768
Ratio of expenses to average net assets(a) 1.81% 2.06% 2.50%*
Ratio of net investment income (loss) to average net assets(a) 1.61% 1.67% -.28%*
Portfolio turnover rate 74% 96% --
Average commission rate paid $.0003 -- --
</TABLE>
* Annualized
(a) Management fees have been voluntarily waived from February 1, 1995
onwards. If fees had been charged fully, net investment income (loss) per
share, ratio of expenses to average net assets and ratio of net investment
income (loss) to average net assets would have been $.08, 2.50% and 0.92%,
respectively, for the year ended October 31, 1996, and $.07, 2.50% and
1.23%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the advisor not waived expenses.
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
Period from
June 24, 1996 to
October 31, 1996
----------------
<S> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .10
Net realized and unrealized loss (.41)
Total investment operations (.31)
LESS DISTRIBUTIONS
From net investment income (.07)
From net realized gains --
Total distributions (.07)
NET ASSET VALUE, END OF PERIOD $9.62
TOTAL RETURN # -3.12%*
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $3,772
Ratio of expenses to average net assets(a) 0.00%*
Ratio of net investment income to average net assets(a) 3.32%*
Portfolio turnover rate 20%*
Average commission rate paid $.0063
</TABLE>
* Annualized
(a) Management fees and all other expenses have been voluntarily waived or
reimbursed from June 24, 1996 onwards. If fees had been charged fully, net
investment income (loss) per share, ratio of expenses to average net
assets and ratio of net investment income (loss) to average net assets
would have been -$.05, 4.95% and -1.63%, respectively, for the period
ended October 31, 1996.
# Total return would have been lower had the advisor not waived or
reimbursed expenses.
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
FREMONT MUTUAL FUNDS, INC.
FINANCIAL HIGHLIGHTS - OCTOBER 31, 1996
U.S. MICRO-CAP FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31 Period from
----------------------------------- June 30, 1994 to
1996 1995 October 31, 1994
------------- ------------- ----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.34 $ 10.34 $ 10.00
------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) (.04) (.05) .02
Net realized and unrealized gain 5.83 4.05 .34
------------- ------------- -------------
Total investment operations 5.79 4.00 .36
------------- ------------- -------------
LESS DISTRIBUTIONS
From net investment income -- -- (.02)
From net realized gains (.50) -- --
------------- ------------- -------------
Total distributions (.50) -- (.02)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 19.63 $ 14.34 $ 10.34
============= ============= =============
TOTAL RETURN # 41.46% 38.68% 3.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 102,481 $ 7,792 $ 2,052
Ratio of expenses to average net assets(a) 1.96% 2.04% 2.50%*
Ratio of net investment income (loss) to average net assets(a) -.51% -.67% .68%*
Portfolio turnover rate 81% 144% 129%*
Average commission rate paid $ .0541 -- --
</TABLE>
*Annualized
(a) Management fees have been voluntarily waived from February 1, 1995
onwards. If fees had been charged fully, net investment income (loss) per
share, ratio of expenses to average net assets and ratio of net investment
income (loss) to average net assets would have been -$.06, 2.22% and -.77%,
respectively, for the year ended October 31, 1996, and -$.08, 2.50% and
-1.13%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the advisor not waived expenses.
GROWTH FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31
-------------------------------------------------------------------
1996 1995 1994 1993
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.06 $ 10.46 $ 11.25 $ 10.08
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .10 .13 .21 .13
Net realized and unrealized gain (loss) 2.65 2.74 (.02) 1.16
Total investment operations 2.75 2.87 .19 1.29
LESS DISTRIBUTIONS
From net investment income (.08) (.17) (.18) (.12)
From net realized gains (.71) (.10) (.80) --
Total distributions (.79) (.27) (.98) (.12)
NET ASSET VALUE, END OF PERIOD $ 15.02 $ 13.06 $ 10.46 $ 11.25
TOTAL RETURN # 22.06% 28.12% 1.72% 12.80%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 78,624 $ 59,632 $ 27,244 $ 42,306
Ratio of expenses to average net assets(a) .92% .97% .94% .87%
Ratio of net investment income to average net assets(a) .75% 1.02% 1.31% 1.19%
Portfolio turnover rate 129% 108% 55% 44%
Average commission rate paid $ .0429 -- -- --
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1992 TO
OCTOBER 31, 1992
----------------
<S> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.92
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .02
Net realized and unrealized gain (loss) .18
----------
Total investment operations .20
----------
LESS DISTRIBUTIONS
From net investment income (.04)
From net realized gains --
----------
Total distributions (.04)
NET ASSET VALUE, END OF PERIOD $ 10.08
==========
Total Return # 2.00%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $ 32,388
Ratio of expenses to average net assets(a) .94%*
Ratio of net investment income to average net assets(a) 1.08%*
Portfolio turnover rate 49%*
Average commission rate paid --
</TABLE>
* Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. If fees had been charged fully, net investment income
per share, ratio of expenses to average net assets, and ratio of net
investment income to average net assets would have been $.12, 1.01% and
.98%, respectively, for the year ended October 31, 1995; $.19, 1.08% and
1.17%, respectively, for the year ended October 31, 1994; $.11, 1.02% and
1.04%, respectively, for the year ended October 31, 1993; and $.02, 1.18%
and 0.84%, respectively, for the period from August 14, 1992 to October
31, 1992.
# Total return would have been lower had the advisor not waived expenses.
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Financial Highlights - October 31, 1996
BOND FUND
<TABLE>
<CAPTION>
Years Ended October 31 Period from
----------------------------------- April 30, 1993 to
1996 1995 1994 October 31, 1993
---- ---- ---- ----------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.13 $ 9.29 $ 10.27 $ 10.04
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .67 .65 .53 .27
Net realized and unrealized gain (loss) .11 .83 (.98) .24
---------- ---------- ---------- ----------
Total investment operations .78 1.48 (.45) .51
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
From net investment income (.70) (.64) (.53) (.27)
From net realized gains (.22) -- -- (.01)
---------- ---------- ---------- ----------
Total distributions (.92) (.64) (.53) (.28)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.99 $ 10.13 $ 9.29 $ 10.27
========== ========== ========== ==========
TOTAL RETURN # 8.18% 16.49% -4.42% 5.15%*
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 70,577 $ 86,343 $ 64,244 $ 11,738
Ratio of expenses to average net assets(a) .68%* .60% .66% .50%*
Ratio of net investment income to average net assets(a) 6.82%* 6.69% 5.76% 5.35%*
Portfolio turnover rate 154%* 21% 205% 13%*
</TABLE>
*Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased in over time. If fees had been charged fully, net investment income
per share, ratio of expenses to average net assets and ratio of net
investment income to average net assets would have been $.66, .83% and
6.67%, respectively, for the year ended October 31, 1996; $.64, .75% and
6.54%, respectively, for the year ended October 31, 1995; $.50, 1.04% and
5.38%, respectively, for the year ended October 31, 1994; and $.23, 1.23%
and 4.62%, respectively, for the period from April 30, 1993 to October 31,
1993.
# Total return would have been lower had the advisor not waived expenses.
<PAGE>
MONEY MARKET FUND
57
<TABLE>
<CAPTION>
Years Ended October 31
---------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .05 .06 .03 .03 .04
--------- --------- --------- --------- ---------
Total investment operations .05 .06 .03 .03 .04
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
From net investment income (.05) (.06) (.03) (.03) (.04)
--------- --------- --------- --------- ---------
Total distributions (.05) (.06) (.03) (.03) (.04)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
TOTAL RETURN# 5.34% 5.84% 3.49% 2.66% 3.73%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 329,652 $ 299,312 $ 224,439 $ 24,207 $ 31,832
Ratio of expenses to average net assets(a) .31% .30% .46% .67% .70%
Ratio of net investment income to average net assets 5.22% 5.70% 4.02% 2.62% 3.70%
</TABLE>
*Annualized
(a) Administrative fees have been voluntarily waived from April 1, 1990
onwards. If fees had been charged fully, net investment income per share,
ratio of expenses to average net assets and ratio of net investment income
to average net assets would have been $.05, .46% and 5.07%, respectively,
for the year ended October 31, 1996; $.06, .45% and 5.55%, respectively,
for the year ended October 31, 1995; $.03, .61% and 3.87%, respectively,
for the year ended October 31, 1994; $.03, .82% and 2.47%, respectively,
for the year ended October 31, 1993; $.04, .85% and 3.55%, respectively,
for the year ended October 31, 1992.
# Total return would have been lower had the advisor not waived expenses.
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Financial Highlights - October 31, 1996
<TABLE>
<CAPTION>
CALIFORNIA INTERMEDIATE TAX-FREE FUND
Years Ended October 31
------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.86 $ 10.13 $ 11.10 $ 10.55 $ 10.39
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .52 .53 .53 .55 .57
Net realized and unrealized gain (loss) (.03) .73 (.97) .62 .19
---------- ---------- ---------- ---------- ----------
Total investment operations .49 1.26 (.44) 1.17 .76
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
From net investment income (.52) (.53) (.53) (.55) (.57)
From net realized gains (.03) -- -- (.07) (.03)
---------- ---------- ---------- ---------- ----------
Total distributions (.55) (.53) (.53) (.62) (.60)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.80 $ 10.86 $ 10.13 $ 11.10 $ 10.55
========== ========== ========== ========== ==========
TOTAL RETURN # 4.63% 12.77% -3.94% 11.37% 7.37%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 51,156 $ 50,313 $ 58,305 $ 59,716 $ 44,305
Ratio of expenses to average net assets(a) .51% .50% .51% .50% .54%
Ratio of net investment income to average net assets(a) 4.86% 5.08% 4.94% 5.05% 5.38%
Portfolio turnover rate 6% 18% 21% 26% 18%
</TABLE>
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. If fees had been charged fully, net investment income
per share, ratio of expenses to average net assets, and ratio of net
investment income to average net assets would have been $.50, .73% and
4.64%, respectively, for the year ended October 31, 1996; $.51, .72% and
4.86%, respectively, for the year ended October 31, 1995; $.51, .71% and
4.74%, respectively, for the year ended October 31, 1994; $.53, .71% and
4.84%, respectively, for the year ended October 31, 1993; and $.54, .83%
and 5.09%, respectively, for the year ended October 31, 1992.
# Total return would have been lower had the advisor not waived expenses. 58
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Fremont Mutual Funds, Inc. (the Corporation) is an open-end, diversified
investment company authorized to issue ten billion shares of $.0001 par
value capital stock. These shares are currently offered in nine series:
<TABLE>
<CAPTION>
<S> <C>
- the FREMONT GLOBAL FUND - the FREMONT GROWTH FUND
- the FREMONT INTERNATIONAL GROWTH FUND - the FREMONT BOND FUND
- the FREMONT INTERNATIONAL SMALL CAP FUND - the FREMONT MONEY MARKET FUND
- the FREMONT EMERGING MARKETS FUND - the FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
- the FREMONT U.S. MICRO-CAP FUND (the Fremont California Intermediate Tax-Free Fund is
available only to residents of Arizona, California, Colorado,
Nevada, New Mexico, Oregon, Texas, Utah and Washington)
</TABLE>
Each of the Funds maintains a totally separate investment portfolio.
Significant accounting policies followed by the Funds are summarized
below. The policies are in conformity with generally accepted accounting
principles for investment companies.
A. SECURITY VALUATION
Investments, including options, are stated at value based on recorded
closing sales on a national securities exchange or, in the absence of
a recorded sale, at the mean between the last reported bid and asked
prices or at fair value as determined by the Board of Directors.
Short-term notes and similar securities are included in investments
at amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective
exchanges or the most recent price available where no closing value
is available.
Securities in the Fremont Money Market Fund have a remaining maturity
of not more than 397 days and its entire portfolio has a weighted
average maturity of not more than 90 days. As such, all of the Fund's
securities are valued at amortized cost, which approximates value. If
the Fund's portfolio had a remaining weighted average maturity of
greater than 90 days the portfolio would be stated at value based on
recorded closing sales on a national securities exchange or, in the
absence of a recorded sale, at the mean between the bid and asked
prices.
B. SECURITY TRANSACTIONS
Security transactions are accounted for as of trade date. Realized
gains and losses on security transactions are determined on the basis
of specific identification for both financial statement and federal
income tax purposes.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Dividends are recorded on the ex-dividend date, except that certain
dividends from foreign securities in the Fremont Global Fund, the
Fremont International Growth Fund, the Fremont International Small
Cap Fund and the Fremont Emerging Markets Fund are recorded when the
Fund is informed of the ex-dividend date. Interest income and
estimated expenses are accrued daily. Bond discount and premium are
amortized as required by the Internal Revenue Code. Distributions to
shareholders are recorded on the ex-dividend date. The Corporation
accounts for the assets of each Fund separately and allocates general
expenses of the Corporation to each Fund based upon the relative net
assets of each Fund or the nature of the services performed and their
applicability to each Fund.
D. INCOME TAXES
The Funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all taxable income and net capital gains, if any, to
shareholders. Therefore, no income tax provision is required. Each
Fund is treated as a separate entity in the determination of
compliance with the Internal Revenue Code and distributes taxable
income and net realized gains, if any, in accordance with schedules
described in their respective Prospectuses. The portfolio of Fremont
California Intermediate Tax-Free Fund is composed solely of issues
that qualify for tax-exempt status for both Federal and State of
California income tax purposes.
Income dividends and capital gain distributions paid to shareholders
are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles and, therefore,
may differ from the information presented in the financial
statements. These differences are generally referred to as "book/tax"
differences and are primarily due to differing treatments for foreign
currency transactions, losses deferred due to wash sale rules,
classification of gains/losses related to paydowns and certain
futures and options transactions.
Permanent book/tax differences causing payments to shareholders of
income dividends which are in excess of the net investment income
reported in the financial statements will result in reclassification
of such excess to paid in capital from undistributed net investment
income. Temporary book/tax differences, which will reverse in
subsequent periods, will not be reclassified and will remain in
undistributed net investment income. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
59
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
For Federal income tax purposes, certain funds have capital loss
carryovers at October 31, 1996. Capital loss carryovers result when a
fund has net capital losses during a tax year. These are carried over
to subsequent years and may reduce distributions of realized gains in
those years. Unused capital loss carryovers expire in eight years.
The following funds have capital loss carryovers at October 31, 1996
which expire in the years indicated.
<TABLE>
<CAPTION>
FUND AMOUNT EXPIRES IN
---- ------ ----------
<S> <C> <C>
Emerging Markets $84,620 2004
Bond 242,923 2004
</TABLE>
Until such capital loss carryovers are offset or expire, it is
unlikely that the Board of Directors will authorize a distribution of
any net realized gains.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts
of income and expense during the reporting period. Actual results
could differ from those estimates.
F. FOREIGN CURRENCY TRANSLATION
The market values of foreign securities, currency holdings, and other
assets and liabilities of the Fremont Global Fund, the Fremont
International Growth Fund, the Fremont International Small Cap Fund,
the Fremont Emerging Markets Fund and the Fremont Bond Fund are
translated to U.S. dollars based on the daily exchange rates.
Purchases and sales of securities, income and expenses are translated
at the exchange rate on the transaction date. Income and withholding
taxes are translated at prevailing exchange rates when accrued or
incurred.
For those Funds which are allowed by the terms of their respective
prospectuses to invest in securities and other transactions
denominated in foreign currencies, currency gain (loss) will occur
when such securities and transactions are translated into U.S.
dollars.
Certain transactions which result in realized currency gain (loss)
are reported on the Statements of Operations as Net Realized Gain
(Loss) from Foreign Currency Transactions. These are: currency gain
(loss) from the sale or maturity of forward currency contracts and
from the disposition of foreign currency; and the realization of
currency fluctuations between trade and settlement dates on security
transactions and between accrual and receipt dates on net investment
income.
Realized currency gain (loss) from the sale, maturity or disposition
of foreign securities is not separately reported from the economic or
market component of the gain (loss) and is included under the caption
Net Realized Gain (Loss) from Investments. Activity related to
foreign currency futures and options on foreign currency is,
likewise, reported under this heading, as these instruments are used
to hedge the foreign currency risks associated with investing in
foreign securities. Consistent with the method of reporting realized
currency gain (loss), unrealized currency gain (loss) on investments
is not separately reported from the underlying economic or market
component, but included under the caption Net Unrealized Appreciation
(Depreciation) on Investments. Unrealized currency gain (loss) on
other net assets is reported under Net Unrealized Appreciation
(Depreciation) on Translation of Assets and Liabilities in Foreign
Currencies.
G. FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract is an obligation to purchase or
sell a currency against another currency at a future date and price
as agreed upon by the parties. These contracts are traded
over-the-counter and not on organized commodities or securities
exchanges. Losses may arise due to changes in the value of the
foreign currencies or if the counterparty does not perform under the
contract.
The Funds may and do use forward foreign currency contracts to
facilitate the settlement of foreign securities. A commitment by a
Fund to purchase a currency forward allows the Fund to have the local
currency on hand to settle foreign security purchases on the payment
date. Likewise, a commitment to sell a currency forward allows the
Fund to take the foreign currency proceeds from the sale of foreign
securities and exchange it for U.S. dollars at a predetermined price.
In addition, the Fremont Global Fund and the Fremont Bond Fund use
such contracts to manage their respective currency exposure.
Contracts to receive generally are used to acquire exposure to
foreign currencies, while contracts to deliver are used to hedge a
fund's investments against currency fluctuations. A contract to
receive or deliver can also be used to offset a previous contract.
The market risk involved in these contracts is in excess of the
amounts reflected in the Funds' Statements of Assets and Liabilities
since only the change in the underlying values is reflected (as an
asset if appreciated or as a liability if depreciated) and not the
actual underlying values.
60
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
At October 31, 1996 the underlying values for open foreign currency contracts
were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
SETTLEMENT TO RECEIVE INITIAL CURRENT APPRECIATION
DATE (TO DELIVER) VALUE VALUE (DEPRECIATION)
---- ------------ ----- ----- --------------
GLOBAL FUND
<S> <C> <C> <C> <C> <C> <C>
Danish Krone ........ 11/08/96 35,000,000 $ 5,979,840 $ 6,009,306 $ 29,466
British Pound ....... 11/08/96 (4,600,000) (7,186,580) (7,482,820) (296,240)
Canadian Dollar ..... 11/08/96 (22,000,000) (16,264,971) (16,442,451) (177,480)
Danish Krone ........ 11/08/96 (54,800,000) (9,380,349) (9,408,856) (28,507)
Dutch Guilder ....... 11/08/96 (6,500,000) (3,783,910) (3,819,934) (36,024)
French Franc ........ 11/08/96 (41,000,000) (7,930,367) (8,003,279) (72,912)
German Deutschemark . 11/08/96 (25,000,000) (16,329,197) (16,472,294) (143,097)
Irish Punt .......... 11/08/96 (6,000,000) (9,597,600) (9,762,600) (165,000)
Italian Lira ........ 11/08/96 (9,300,000,000) (6,109,377) (6,116,811) (7,434)
Swedish Krona ....... 11/08/96 (49,000,000) (,392,321) (7,444,659) (52,338)
---------
$(949,566)
=========
EMERGING MARKETS FUND
Thai Bhat ............ 11/01/96 (95,040) $ (3,726) $ (3,726) --
Thai Bhat ............ 11/04/96 (458,140) (17,945) (17,956) $ (11)
---------
$ (11)
=========
BOND FUND
German Deutschemark .. 01/16/97 3,600,000 $ 2,470,152 $ 2,390,279 $ (79,873)
German Deutschemark .. 01/16/97 2,516,000 1,663,691 1,670,540 6,849
Canadian Dollar ...... 01/21/97 (1,000,000) (744,574) (749,401) (4,827)
Canadian Dollar ...... 05/01/97 (1,000,000) (737,463) (753,636) (16,173)
German Deutschemark .. 12/09/96 (591,840) (420,565) (391,999) 28,566
German Deutschemark .. 01/16/97 (6,116,000) (4,274,233) (4,060,819) 213,414
New Zealand Dollar ... 11/15/96 (3,036,000) (2,138,255) (2,140,653) (2,398)
---------
$ 145,558
=========
</TABLE>
H. FUTURES
A futures contract is an agreement between two parties to buy or sell
a security or financial interest at a set price on a future date and
is standardized and exchange-traded. Upon entering into such a
contract, the purchaser is required to pledge to the broker an amount
of cash or securities equal to the minimum "initial margin"
requirements of the exchange on which the contract is traded.
Pursuant to the contract, the purchaser agrees to receive from or pay
to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the purchaser as unrealized
gains or losses. When the contract is closed, the purchaser records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed. The Funds use futures contracts to hedge foreign currency
and interest rate risks.
At October 31, 1996, the Fremont Bond Fund had the following futures
contracts outstanding:
<TABLE>
<CAPTION>
CONTRACTS EXPIRATION INITIAL CURRENT NET UNREALIZED
TO BUY DATE VALUE VALUE APPRECIATION
------ ---- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
5 yr. U.S. Treasury Note 70 Dec 96 $7,379,531 $7,506,406 $126,875
10 yr. U.S. Treasury Note 25 Dec 96 2,675,000 2,740,625 65,625
30 yr. U.S. Treasury Bond 40 Dec 96 4,320,000 4,520,000 200,000
--------
$392,500
========
</TABLE>
At October 31, 1996, $355,000 par value of U.S. Treasury Bills were
held by brokers to satisfy the initial margin requirements related to
these contracts.
61
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
I. SECURITIES LENDING
All the Funds are authorized to make loans of their portfolio
securities to broker-dealers or to other institutional investors up
to 33-1/3% of their respective net assets. The borrower must maintain
with the Funds' custodian collateral consisting of cash, cash
equivalents or U.S. Government securities equal to at least 100% of
the value of the borrowed securities, plus any accrued but unpaid
distributions. The collateral is invested in a money market fund that
meets the criteria of Section 2(a)-7 of the 1940 Act.
The Funds receive a portion of the income earned on the collateral.
For the year ended October 31, 1996, transactions in securities
lending resulted in fee income to the Fremont Global Fund, the
Fremont International Growth Fund, the Fremont International Small
Cap Fund, the Fremont Emerging Markets Fund, the Fremont U.S.
Micro-Cap Fund and the Fremont Growth Fund of $69,874, $13,799,
$1,549, $74, $18,035 and $5,372, respectively.
The market value of the securities on loan and the collateral balance
held by the Funds as of October 31, 1996 were as follows:
<TABLE>
<CAPTION>
MARKET VALUE COLLATERAL VALUE
------------ ----------------
<S> <C> <C>
Fremont Global Fund ................ $34,688,544 $34,883,640
Fremont International Growth Fund .. 3,982,079 4,004,476
Fremont International Small Cap Fund 218,562 219,791
Fremont Emerging Markets Fund ...... 70,920 71,319
Fremont U.S. Micro-Cap Fund ........ 17,727,466 17,827,172
Fremont Growth Fund ................ 6,852,646 6,891,188
</TABLE>
J. REVERSE REPURCHASE AGREEMENTS
During the year ended October 31, 1996, the Fremont Bond Fund entered
into reverse repurchase agreements with certain brokers. Reverse
repurchase agreements involve the sale of a portfolio-eligible
security by the Fund, coupled with an agreement to repurchase the
security at a specified date and price. Reverse repurchase agreements
involve the risk that the market value of securities pledged as
collateral may decline below the repurchase price of the securities
sold by the Fund which it is obligated to repurchase.
Such transactions are accounted for as a borrowing by the Fund and
are subject to the Fund's overall restriction on borrowing under
which it must maintain asset coverage of at least 300%.
The difference between the selling price and the repurchase price is
accounted for as interest expense. At October 31, 1996, outstanding
reverse repurchase agreements for the Fremont Bond Fund, which were
collateralized by mortgage-backed securities issued by the Government
National Mortgage Association, were as follows:
<TABLE>
<CAPTION>
AMOUNT OF REVERSE INTEREST MATURITY COST OF VALUE OF
COUNTERPARTY REPURCHASE AGREEMENTS RATE DATE COLLATERAL COLLATERAL
------------ --------------------- ---- ---- ---------- ----------
<S> <C> <C> <C> <C> <C>
Morgan Stanley $3,580,000 5.570% 11/21/96 $3,612,127 $3,722,757
</TABLE>
2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
INVESTMENT ADVISOR
The Funds each have entered into an investment management agreement with
Fremont Investment Advisors, Inc. (the Advisor), a wholly owned
subsidiary of Fremont Investors, Inc. (formerly The Fremont Group, Inc.).
Under these agreements, the Advisor supervises and implements each Fund's
investment activities and provides administrative services as necessary
to conduct Fund business. For its advisory and administrative services,
the Advisor receives a fee based on the average daily net assets of the
Funds as described below.
<TABLE>
<CAPTION>
ADVISORY FEE ADMINISTRATIVE FEE
<S> <C> <C>
Fremont Global Fund .60% on all net assets .15% on all net assets
Fremont International Growth Fund 1.50% on all net assets --
Fremont International Small Cap Fund (*) 2.50% on first $30 million --
2.00% on next $70 million --
1.50% on balance over $100 million --
Fremont Emerging Markets Fund (*) 1.00% on all net assets .15% on all net assets
Fremont U.S. Micro-Cap Fund (*) 2.50% on first $30 million --
2.00% on next $70 million --
1.50% on balance over $100 million --
Fremont Growth Fund .50% on all net assets .15% on all net assets
</TABLE>
62
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fremont Bond Fund (*) .40% on all net assets .15% on all net assets
Fremont Money Market Fund (*) .30% on first $50 million .15% on all net assets
.20% on balance over $50 million
Fremont California Intermediate .40% on first $25 million .15% on all net assets
Tax-Free Fund (*) .35% on next $25 million
.30% on next $50 million
.25% on next $50 million
.20% on balance over $150 million
</TABLE>
(*) The Advisor has voluntarily waived and/or reimbursed some of its fees
for these Funds. All fees waived in the past will not be recouped in
the future and, as these waivers are voluntary, they may be changed in
the future.
For the Fremont International Small Cap Fund and the Fremont U.S.
Micro-Cap Fund, the Advisor is voluntarily limiting the advisory fee
to a reduced rate of 1.50% and 1.98% of net assets, respectively.
For the Fremont Emerging Markets Fund, the Advisor is voluntarily
waiving advisory, 12b-1 and administrative fees and reimbursing all
other operating expenses until further notice.
For the Fremont Bond Fund and the Fremont Money Market Fund, the
Advisor is voluntarily waiving the administrative fee in its entirety.
For the Fremont California Intermediate Tax-Free Fund, the advisory
and administrative fees are charged at voluntarily reduced rates of
.30% and .005% of net assets, respectively.
Selected per share data and operating ratios have been disclosed both
before and after the impact of these various waivers under each Fund's
Financial Highlights table.
Under the terms of the Advisory agreements, the Advisor receives a single
management fee (i.e., a unitary fee) from the Fremont International
Growth Fund, the Fremont International Small Cap Fund and the Fremont
U.S. Micro-Cap Fund, and is obligated to pay all expenses of these Funds
except extraordinary expenses (as determined by a majority of the
disinterested directors) and interest, brokerage commissions, and other
transaction charges relating to the investing activities of those Funds.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Fremont Emerging Markets Fund has adopted a plan of distribution under
which the Fund may directly incur or reimburse the Advisor for certain
distribution-related expenses. The maximum amount the Fund is obligated
to pay the Advisor is 0.25% of net assets. Payments have been waived by
the Advisor in their entirety since the Fund began operations and it is
anticipated that the Advisor will continue voluntarily waiving such
payments until further notice.
Each Fund is also required to comply with the limitations set forth in
the laws, regulations, and administrative interpretations of the states
in which it is registered. For the year ended October 31, 1996, no
reimbursements were required or made to any Fund by the Advisor to comply
with these limitations.
Under the terms of a shareholder services agreement with the Advisor,
effective July 1, 1996, the Funds pay the Advisor for transfer agent
services on a per shareholder account basis, subject to a monthly minimum
per Fund as well as out-of-pocket expenses. Total costs incurred by the
Funds in aggregate for the period July 1, 1996 through October 31, 1996
were $97,341, excluding funds under a unitary fee arrangement.
OTHER RELATED PARTIES
At October 31, 1996, Fremont Investors, Inc. and its affiliated companies
including their employee retirement plans, its principal shareholder,
Stephen D. Bechtel, Jr., and members of his family, including trusts,
owned directly or indirectly the following approximate percentages of the
various Funds:
<TABLE>
<CAPTION>
% OF SHARES OUTSTANDING
-----------------------
<S> <C>
Fremont Global Fund 62%
Fremont International Growth Fund 84%
Fremont International Small Cap Fund 35%
Fremont Emerging Markets Fund 91%
Fremont U.S. Micro-Cap Fund 6%
Fremont Growth Fund 65%
Fremont Bond Fund 88%
Fremont Money Market Fund 82%
Fremont California Intermediate Tax-Free Fund 65%
</TABLE>
Certain officers and/or directors of the Funds are also officers and/or
directors of the Advisor and/or Fremont Investors, Inc.
3. ORGANIZATION COSTS
Costs incurred by each Fund, if any, in connection with its organization
have been deferred and are amortized on a straight-line basis over a
period of five years (60 months).
63
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
4. PURCHASES AND SALES/MATURITIES OF INVESTMENT SECURITIES Aggregate
purchases and aggregate proceeds from sales and maturities of securities
for the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
PURCHASES PROCEEDS
--------- --------
<S> <C> <C>
LONG TERM SECURITIES EXCLUDING U.S. GOVERNMENT SECURITIES:
Fremont Global Fund $310,032,957 $381,291,526
Fremont International Growth Fund 26,941,395 26,194,733
Fremont International Small Cap Fund 8,700,793 4,404,248
Fremont Emerging Markets Fund 2,882,203 119,220
Fremont U.S. Micro-Cap Fund 106,347,944 29,339,100
Fremont Growth Fund 90,939,257 84,017,213
Fremont Bond Fund 5,692,873 14,997,373
Fremont California Intermediate Tax-Free Fund 2,955,196 3,095,906
LONG TERM U.S. GOVERNMENT SECURITIES:
Fremont Global Fund $ 4,027,412 $ 16,093,607
Fremont Bond Fund 114,345,636 98,849,763
</TABLE>
Transactions in written put and call options for the year ended October
31, 1996 for the Fremont Bond Fund were as follows:
<TABLE>
<CAPTION>
AMOUNT OF PREMIUMS NUMBER OF CONTRACTS
------------------ -------------------
<S> <C> <C>
Options outstanding at October 31, 1995 $ 23,748 70
Options sold 70,996 50
Options cancelled in closing purchase transactions -- --
Options expired prior to exercise (23,748) (70)
Options exercised -- --
-------- ----
Options outstanding at October 31, 1996 $ 70,996 50
======== ====
</TABLE>
The following written options were outstanding at October 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION
NAME OF ISSUER CONTRACTS PRICE DATE VALUE
-------------- --------- ----- ---- -----
<S> <C> <C> <C> <C> <C>
PUT OPTIONS: CME June 97 Eurodollar Futures 50 93.5 06/16/97 $10,000
</TABLE>
CME - Chicago Mercantile Exchange
The Bond Fund received premiums of $70,996 on these contracts and has an
unrealized gain of $60,996. The total notional value underlying these
contracts is $50,000,000.
5. PORTFOLIO CONCENTRATIONS
Although each Fund has a diversified investment portfolio, there are
certain investment concentrations of risk which may subject each Fund
more significantly to economic changes occurring in certain segments or
industries.
6. UNREALIZED APPRECIATION (DEPRECIATION) - TAXBASIS
At October 31, 1996, the cost of securities for Federal income tax
purposes and the gross aggregate unrealized appreciation and/or
depreciation based on that cost were as follows:
<TABLE>
<CAPTION>
GROSS AGGREGATE UNREALIZED
--------------------------
COST APPRECIATION DEPRECIATION NET
---- ------------ ------------ ---
<S> <C> <C> <C> <C>
Fremont Global Fund $542,076,336 $39,491,784 $(11,906,181) $ 27,585,603
Fremont International Growth Fund 32,567,672 6,022,606 (3,592,690) 2,429,916
Fremont International Small Cap Fund 9,056,967 798,803 (686,499) 112,304
Fremont Emerging Markets Fund 3,838,200 188,480 (232,320) (43,840)
Fremont U.S. Micro-Cap Fund 101,238,120 10,665,019 (10,263,709) 401,310
Fremont Growth Fund 73,848,505 5,843,674 (1,358,059) 4,485,615
Fremont Bond Fund 74,533,471 2,446,860 (545,318) 1,901,542
Fremont Money Market Fund 328,565,325 -- -- --
Fremont California Intermediate Tax-Free Fund 48,752,558 1,807,498 (107,270) 1,700,228
</TABLE>
64
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<PAGE>
FREMONT FUNDS[LOGO]
50 Beale Street, Suite 100
San Francisco, CA 94105
<PAGE>
FREMONT MUTUAL FUNDS, INC.
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
1-800-548-4539
Part B
Statement of Additional Information
This Statement of Additional Information concerning the Fremont California
Intermediate Tax-Free Fund (the"Fund") of Fremont Mutual Funds, Inc. (the
"Investment Company") is not a prospectus for the Fund. This Statement
supplements the Prospectus for the Fund dated March 1, 1997 and should be read
in conjunction with that Prospectus. Copies of the Prospectus are available
without charge by calling the Investment Company at the phone number printed
above.
The date of this Statement of Additional Information is March 1, 1997.
caltfmf.sai
February 27, 1997
6
<PAGE>
TABLE OF CONTENTS
Page
Investment Objective, Policies and Risk
Considerations........................................................... 3
Investment Restrictions....................................................12
Investment Company Directors and Officers..................................14
Investment Advisory and Other Services.....................................18
Execution of Portfolio Transactions........................................21
How to Invest..............................................................21
Other Investment and Redemption Services...................................22
Special Tax Considerations.................................................24
Taxes - Mutual Funds.......................................................26
Additional Information.....................................................29
Investment Results........................................................ 31
Information About Fremont Investment Advisors..............................37
Appendix A: Description of Ratings........................................A-1
Appendix B: Annual Report
7
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The descriptions below are intended to supplement the material in the
Prospectus of the Fremont California Intermediate Tax-Free Fund (the "Fund")
under "Investment Objective, Policies and Risk Considerations."
MUNICIPAL SECURITIES
Municipal securities are issued by or on behalf of states, territories, and
possessions of the United States and the District of Columbia and by their
political subdivisions, agencies, and instrumentalities. The interest on these
obligations is generally not includable in gross income of most investors for
federal income tax purposes. Issuers of municipal obligations do not usually
seek assurances from governmental taxing authorities with respect to the
tax-free nature of the interest payable on such obligations. Rather, issuers
seek opinions of bond counsel as to such tax status. See "Special Tax
Considerations" below.
Municipal issuers of securities are not usually subject to the securities
registration and public reporting requirements of the Securities and Exchange
Commission and state securities regulators. As a result, the amount of
information available about the financial condition of an issuer of municipal
obligations may not be as extensive as that which is made available by
corporations whose securities are publicly traded. The two principal
classifications of municipal securities are general obligation securities and
limited obligation (or revenue) securities. There are, in addition, a variety
of hybrid and special types of municipal obligations as well as numerous
differences in the financial backing for the payment of municipal obligations
(including general fund obligation leases described below), both within and
between the two principal classifications. Long-term municipal securities are
typically referred to as "bonds" and short-term municipal securities are
typically called "notes."
Payments due on general obligation bonds are secured by the issuer's pledge of
its full faith and credit including, if available, its taxing power. Issuers
of general obligation bonds include states, counties, cities, towns and
various regional or special districts. The proceeds of these obligations are
used to fund a wide range of public facilities such as the construction or
improvement of schools, roads and sewer systems.
The principal source of payment for a limited obligation bond or revenue bond
is generally the net revenue derived from particular facilities financed with
such bonds. In some cases, the proceeds of a special tax or other revenue
source may be committed by law for use to repay particular revenue bonds. For
example, revenue
8
<PAGE>
bonds have been issued to lend the proceeds to a private entity for the
acquisition or construction of facilities with a public purpose such as
hospitals and housing. The loan payments by the private entity provide the
special revenue source from which the obligations are to be repaid.
MUNICIPAL NOTES. Municipal notes generally are used to provide short-term
capital funding for municipal issuers and generally have maturities of one
year or less. Municipal notes of municipal issuers include tax anticipation
notes, revenue anticipation notes and bond anticipation notes:
TAX ANTICIPATION NOTES are issued to raise working capital on a short-term
basis. Generally, these notes are issued in anticipation of various seasonal
tax revenues being paid to the issuer, such as property, income, sales, use
and business taxes, and are payable from these specific future taxes.
REVENUE ANTICIPATION NOTES are issued in anticipation of the receipt of
non-tax revenue, such as federal revenues or grants.
BOND ANTICIPATION NOTES are issued to provide interim financing until
long-term financing can be arranged. In most cases, long-term bonds are issued
to provide the money for the repayment of these notes.
COMMERCIAL PAPER. Issues of municipal commercial paper typically represent
short-term, unsecured, negotiable promissory notes. Agencies of state and
local governments issue these obligations in addition to or in lieu of notes
to finance seasonal working capital needs or to provide interim construction
financing and are paid from revenues of the issuer or are refinanced with
long-term debt. In most cases, municipal commercial paper is backed by letters
of credit, lending agreements, note repurchase agreements or other credit
facility agreements offered by banks or other institutions.
PARTICULAR RISK FACTORS RELATING TO CALIFORNIA MUNICIPAL
SECURITIES.
Certain risks are associated with California municipal securities in which the
Fund predominantly will invest. This summarized information is based on
information drawn from official statements and prospectuses relating to
securities offerings of the State of California and various local agencies in
California, available prior to the date of this Statement of Additional
Information. While the Advisor has not independently verified such
information, it has no reason to believe that such information is not correct
in all material respects. In addition to this current information, future
California constitutional amendments, legislative measures, executive orders,
administrative regulations, and voter initiatives could have an adverse effect
on the debt obligations of California issuers.
9
<PAGE>
Certain debt obligations held by the Fund may be obligations of issuers which
rely in whole or in substantial part on California state revenues for the
continuance of their operations and the payment of their obligations. In
recent efforts to assist California municipal issuers to raise revenues to pay
their bond obligations, the California legislature has passed measures which
have provided for the redistribution of California's General Fund surplus to
local agencies, the reallocation of revenues to local agencies, and the
assumption of certain local obligations by the State. It is not known whether
additional revenue redistribution legislation will be enacted in the future
or, if enacted, whether such legislation would provide sufficient revenue to
allow such issuers to pay their obligations. To the extent local entities do
not receive money from the state to pay for their operations and services,
their ability to pay debt service on obligations held by the Fund may be
impaired.
Certain of the debt obligations held by the Fund may be obligations of issuers
who rely in whole or in part on ad valorem real property taxes as a source of
revenue. The California Constitution limits the taxing and spending powers of
the State of California and its public agencies and, therefore, the ability of
California issuers to raise revenues through taxation, and to spend such
revenues over appropriations limits. Such limits may impair the ability of
such issuers to make timely payment on their obligations.
Certain debt obligations held by the Fund may be obligations payable solely
from lease payments on real property or personal property leased to the state,
cities, counties, or their various public entities. California law requires
that the lessee is not required to make lease payments during any period that
it is denied use and occupancy of the property leased in proportion to such
loss. Moreover, the lessee only agrees to include lease payments in its annual
budget for the current fiscal year. In case of a default under the lease, the
only remedy available against the lessee is that of reletting the property; no
acceleration of lease payments is permitted. Each of these factors presents a
risk that the lease financing obligations held by the Fund would not be paid
in a timely manner.
Certain debt obligations held by the Fund may be obligations which are payable
solely from the revenues of health care institutions. The method of
reimbursement for indigent care, California's selective contracting with
health care providers for such care, and selective contracting by health
insurers for care of their own beneficiaries now in effect under California
and federal law may adversely affect these revenues and, consequently, payment
on those debt obligations.
10
<PAGE>
Debt obligations payable solely from revenues of health care institutions may
also be insured by the State of California pursuant to a mortgage insurance
program operated by the Office of Statewide Health Planning and Development.
If a default occurs on such insured debt obligations, the Office may either
continue to make debt service payments on the obligations, or foreclose on the
mortgage and request the State Treasurer to issue debentures payable from a
reserve fund established under the insurance program or from unappropriated
state funds. Reports and studies prepared most recently a decade ago indicated
that the reserve fund was under-funded. Moreover, moneys in the reserve fund
may be and have been reappropriated by the California Legislature for other
purposes in the past, and the California legislature reserves the right to do
so in the future. The Investment Company cannot predict what, if any, impact
the underfunding of the reserve fund may have on such debt obligations.
Certain debt obligations held by the Fund may be obligations which are secured
in whole or in part by a mortgage or deed of trust on real property.
California has five principal statutory provisions which limit the remedies of
a creditor secured by a mortgage or deed of trust. To limit the creditor's
right to obtain a deficiency judgment, one limitation is based on the method
of foreclosure, and the second on the type of debt secured. Under the former,
a deficiency judgment is barred when the foreclosure is accomplished by means
of nonjudicial trustee's sale. Under the latter, a deficiency judgment is
barred when the foreclosed mortgage or deed of trust secures certain purchase
money obligations. A third statutory provision, commonly known as the "one
form of action" rule, requires creditors secured by real property to exhaust
their real property security by foreclosure before bringing a personal action
against the debtor. A fourth statutory provision limits any deficiency
judgment obtained by a creditor secured by real property following a judicial
sale of such property to the excess of the outstanding debt over the fair
value of the property at the time of the sale, thus preventing the creditor
from obtaining a large deficiency judgment against the debtor as a result of
low bids at a judicial sale. Finally, a fifth statutory provision gives the
debtor the right to redeem the real property from any judicial foreclosure
sale as to which a deficiency judgment may be ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to California
real property, the creditor's nonjudicial foreclosure rights under the power
of sale contained in the mortgage or deed of trust are subject to the
constraints imposed by California law upon transfers of title to real property
by private power of sale. During the three-month period beginning with the
filing of a formal notice of default, the debtor is entitled to reinstate the
mortgage by making any overdue payments. Under standard loan
11
<PAGE>
servicing procedures, the filing of the formal notice of default does not
occur unless at least three full monthly payments have become due and remain
unpaid. The power of sale is exercised by posting and publishing a notice of
sale for at least 20 days after expiration of the three-month reinstatement
period. Therefore, the effective minimum period of foreclosing on a mortgage
could be in excess of seven months after the initial default. Such time delays
in collections could disrupt the flow of revenues available to an issuer for
the payment of debt service on the outstanding obligations if such defaults
occur with respect to a substantial number of mortgages or deeds of trust
securing an issuer's obligations.
In addition, a court could find that there is sufficient involvement of the
issuer in the nonjudicial sale of property securing a mortgage for such
private sale to constitute "state action," and could hold that the private
right-of-sale proceedings violate the due process requirements of the federal
or state constitutions, consequently preventing an issuer from using the
nonjudicial foreclosure remedy described above.
Certain debt obligations held by the Fund may be obligations which finance the
acquisition of single-family home mortgages for low and moderate income
mortgagors. These obligations may be payable solely from revenues derived from
the home mortgages, and are subject to California's statutory limitations
described above applicable to obligations secured by real property. Under
California antideficiency legislation, there is no personal recourse against a
mortgagor of a single family residence purchased with the loan secured by the
mortgage, regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
Under California law, mortgage loans secured by single-family, owner-occupied
dwellings may be prepaid at any time. Prepayment charges on such mortgage
loans may be imposed only with respect to voluntary prepayments made during
the first five years during the term of the mortgage loan, and cannot in any
event exceed six months' advance interest on the amount prepaid in excess of
20% of the original principal amount of the mortgage loan. This limitation
could affect the flow of revenues available to an issuer for debt service on
the outstanding debt obligations which finance such home mortgages.
INTEREST RATE FUTURES CONTRACTS. The Fund may enter into interest rate
contracts ("Futures" or "Futures Contracts") as a hedge against changes in
prevailing levels of interest rates in order to establish more definitely the
effective return on securities held or intended to be acquired by the Fund.
The Fund's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates or purchases of Futures as an
offset against the effect of expected declines in interest
12
<PAGE>
rates. (See "Federal Tax Treatment of Interest Rate Futures
Contracts," below.)
The Fund will not enter into Futures Contracts for speculation and will only
enter into Futures Contracts which are traded on national futures exchanges
and are standardized as to maturity date and underlying financial instrument.
The principal interest rate Futures exchanges in the United States are the
Board of Trade of the City of Chicago and the Chicago Mercantile Exchange.
Futures exchanges and trading are regulated under the Commodity Exchange Act
by the Commodity Futures Trading Commission.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce a Fund's exposure to interest rate fluctuations, the Fund
may be able to hedge its exposure more effectively and perhaps at a lower cost
through using Futures Contracts.
The Fund will not enter into a Futures Contract if, as a result thereof, more
than 5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to "margin" (down payment)
deposits on such Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (debt
security or currency) for a specified price at a designated date, time and
place. Brokerage fees are incurred when a Futures Contract is bought or sold
and margin deposits must be maintained.
Although Futures Contracts typically require future delivery of and payment
for financial instruments, the Futures Contracts are usually closed out before
the delivery date. Closing out an open Futures Contract sale or purchase is
effected by entering into an offsetting Futures Contract purchase or sale,
respectively, for the same aggregate amount of the identical type of financial
instrument and the same delivery date. If the offsetting purchase price is
less than the original sale price, the Fund realizes a gain; if it is more,
the Fund realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that a Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to maintain the
margin deposits on the Contract.
As an example of an offsetting transaction in which the financial instrument
is not delivered, the contractual obligations arising from the sale of one
Contract of September Treasury Bills on an exchange may be fulfilled at any
time before delivery of the
13
<PAGE>
Contract is required (i.e., on a specified date in September, the "delivery
month") by the purchase of one Contract of September Treasury Bills on the
same exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase,
after allowance for transaction costs, represents the profit or loss to the
Fund.
RISKS IN INTEREST RATE FUTURES CONTRACTS. The prices of Futures Contracts are
volatile and are influenced, among other things, by actual and anticipated
changes in interest rates, which in turn are affected by fiscal and monetary
policies and national and international political and economic events.
At best, the correlation between changes in prices of Futures Contracts and of
the securities being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances such as: variations in
speculative market demand for futures and for debt securities or currencies,
including technical influences in Futures trading; and differences between the
financial instruments being hedged and the instruments underlying the standard
Futures Contracts available for trading, with respect to interest rate levels,
maturities, and creditworthiness of issuers. There are, for example, numerous
such differences between municipal securities and U.S. Treasury Bills. A
decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or interest rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss,
as well as gain, to the investor. For example, if at the time of purchase, 10%
of the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Contract were closed out. Thus, a
purchase or sale of a Futures Contract may result in losses in excess of the
amount invested in the Futures Contract. However, the Fund would presumably
have sustained comparable losses if, instead of the Futures Contract, it had
invested in the underlying financial instrument and sold it after the decline.
Furthermore, in the case of a Futures Contract purchase, in order to be
certain that the Fund has sufficient assets to satisfy its obligations under a
Futures Contract, the Fund segregates and commits to back the Futures Contract
money market instruments equal in value to the current value of the underlying
instrument less the margin deposit.
14
<PAGE>
Most United States Futures exchanges limit the amount of fluctuation permitted
in Futures Contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a Futures Contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
Contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of Futures
positions and subjecting some Futures traders to substantial losses.
FEDERAL TAX TREATMENT OF INTEREST RATE FUTURES CONTRACTS. Except for
transactions identified as hedging transactions, the Fund is required for
federal income tax purposes to recognize as income for each taxable year its
net unrealized gains and losses on Futures Contracts as of the end of the year
as well as those actually realized during the year. Identified hedging
transactions would not be subject to the mark to market rules and would result
in the recognition of ordinary gain or loss. Otherwise, unless transactions in
Futures Contracts are classified as part of a "mixed straddle," any gain or
loss recognized with respect to a Futures Contract is considered to be 60%
long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the Contract. In the case of a Futures
transaction classified as a "mixed straddle," the recognition of losses may be
deferred to a later taxable year.
Sales of Futures Contracts which are intended to hedge against a change in the
value of securities held by the Fund may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such
securities upon disposition.
In order for the Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities. In addition, gains realized on the sale or other disposition of
securities held for less than three months must be limited to less than 30% of
the Fund's annual gross income. It is anticipated that any net gain realized
from the closing out of Futures Contracts will be considered gain from the
sale of securities and therefore be qualifying income for purposes of the 90%
requirement. In order to avoid realizing excessive gains on securities held
less than three months, the Fund may be required
15
<PAGE>
to defer the closing out of Futures Contracts beyond the time when it would
otherwise be advantageous to do so. It is anticipated that unrealized gains on
Futures Contracts, which have been open for less than three months as of the
end of the Investment Company's fiscal year and which are recognized for tax
purposes, will not be considered gains on securities held less than three
months for purposes of the 30% test.
The Fund will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Investment Company's fiscal year) on
Futures transactions. Such distributions will be combined with distributions
of capital gains realized on the Fund's other investments and shareholders
will be advised of the nature of the payments.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS AND PARTICIPATION INTERESTS. The
Fund may purchase floating rate and variable rate obligations, including
participation interests therein. Floating rate or variable rate obligations
provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate at a major commercial bank) or is
reset on a regular basis by a bank or investment banking firm to a market
rate. At specified times, the owner can demand payment of the obligation at
par plus accrued interest. Variable rate obligations provide for a specified
periodic adjustment in the interest rate, while floating rate obligations have
an interest rate which changes whenever there is a change in the external
interest rate. Frequently, banks provide letters of credit or other credit
support or liquidity arrangements to secure these obligations. The quality of
the underlying creditor or of the bank, as the case may be, must, as
determined by the Advisor, be equivalent to the quality standards prescribed
for the Fund.
The Fund may invest in participation interests purchased from banks in
floating rate or variable rate obligations owned by banks. A participation
interest gives the Fund an undivided interest in the obligation in the
proportion that the Fund's participation interest bears to the total principal
amount of the obligation, and provides a demand repayment feature. Each
participation is backed by an irrevocable letter of credit or guarantee of a
bank (which may be the bank issuing the participation interest or another
bank). The bank letter of credit or guarantee must meet the prescribed
investment quality standards for the Fund. The Fund has the right to sell the
participation instrument back to the issuing bank or draw on the letter of
credit on demand for all or any part of the Fund's participation interest in
the underlying obligation, plus accrued interest.
LENDING OF PORTFOLIO SECURITIES. For the purpose of realizing
additional income, the Fund may make secured loans of portfolio
securities amounting to not more than 33-1/3% of its net assets.
Securities loans are made to broker-dealers or institutional
16
<PAGE>
investors pursuant to agreements requiring that the loans be continuously
secured by collateral at least equal at all times to the value of the
securities lent marked to market on a daily basis. The collateral received
will consist of cash, short-term U.S. Government securities, bank letters of
credit or such other collateral as may be permitted under the Fund's
investment program and by regulatory agencies and approved by the Board of
Directors. While the securities are being lent, the Fund will continue to
receive the equivalent of the interest or dividends paid by the issuer on the
securities, as well as interest on the investment of the collateral or a fee
from the borrower. The Fund has a right to call each loan and obtain the
securities on five business days' notice.
REDUCTION IN BOND RATING. The Fund may invest in debt securities rated at
least BBB or Baa. In the event that the rating for any security held by the
Fund drops below the minimum acceptable rating applicable to the Fund, the
Advisor will determine whether the Fund should continue to hold such an
obligation in its portfolio. Bonds rated below BBB or Baa are commonly known
as "junk bonds." These bonds are subject to greater fluctuations in value and
risk of loss of income and principal due to default by the issuer than are
higher rated bonds. The market value of junk bonds tends to reflect short-term
corporate, economic and market developments and investor perceptions of the
issuer's credit quality to a greater extent than higher rated bonds. In
addition, it may be more difficult to dispose of, or to determine the value
of, junk bonds. See Appendix A for a complete description of the bond ratings.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment policies and
restrictions in addition to the policies and restrictions discussed in its
prospectus. With respect to the Fund, the policies and restrictions listed
below cannot be changed without approval by the holders of a "majority of the
outstanding voting securities" of the Fund (which is defined in the Investment
Company Act of 1940 (the "1940 Act") to mean the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding
shares are represented or (ii) more than 50% of the outstanding shares). These
restrictions provide that the Fund may not:
1. Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business
activities in the same industry, except that this limitation
shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its
agencies or instrumentalities, or to tax exempt securities
issued by state governments or political subdivisions
thereof.
17
<PAGE>
2. Buy or sell real estate (including real estate limited
partnerships) or commodities or commodity contracts;
however, the Fund may invest in securities secured by real
estate, or issued by companies which invest in real estate
or interests therein, including real estate investment
trusts, and may purchase and sell currencies (including
forward currency exchange contracts), gold, bullion, futures
contracts and related options generally as described in the
Prospectus and Statement of Additional Information.
3. Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is
defined under the Securities Act of 1933.
4. Make loans, except that the Fund may purchase debt securities, enter
into repurchase agreements, and make loans of portfolio securities
amounting to not more than 33 1/3% of its net assets calculated at
the time of the securities lending.
5. Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The
Fund will not purchase securities while such borrowings are
outstanding.
6. Change its status as a non-diversified investment company.
7. Issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and except that the Investment
Company and the Fund may issue shares of common stock in multiple
series or classes.
8. Notwithstanding any other fundamental investment restriction or
policy, the Fund may invest all of its assets in the securities of a
single open-end investment company with substantially the same
fundamental investment objectives, restrictions and policies as the
Fund.
Other current investment policies of the Fund, which are not
fundamental and which may be changed by action of the Board of
Directors without shareholder approval, are as follows. The Fund
may not:
9. Invest in companies for the purpose of exercising control or
management.
10. Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in
connection with any permissible borrowing.
18
<PAGE>
11. Invest in interests in oil, gas, or other mineral
exploration or development programs or leases.
12. Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three
years of continuous operation.
13. Purchase securities on margin, provided that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities, except that the Fund may make margin
deposits in connection with futures contracts.
14. Enter into a futures contract if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to margin on such
futures contract.
15. Acquire securities or assets for which there is no readily available
market, or which are illiquid, if, immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of
that Fund's net assets.
16. Make short sales of securities or maintain a short position,
except that a Fund may sell short "against the box."
17. Invest in securities of an issuer if the investment would
cause the Fund to own more than 10% of any class of
securities of any one issuer.
18. Acquire more than 3% of the outstanding voting securities of
any one investment company.
INVESTMENT COMPANY DIRECTORS AND OFFICERS
The Bylaws of Fremont Mutual Funds, Inc. (the "Investment Company"), the
Maryland investment company which established the Fund, authorize a Board of
Directors of between three and 15 persons, as fixed by the Board of Directors.
A majority of directors may fill director vacancies caused by resignation,
death or expansion of the Board of Directors. Any director may be removed by
vote of holders of a majority of all outstanding shares of the Investment
Company qualified to vote at the meeting.
19
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
DATE OF AND BUSINESS EXPERIENCE
NAME AND ADDRESS BIRTH POSITIONS HELD FOR PAST FIVE YEARS
<S> <C> <C> <C>
David L. Redo (1)(2)(4) 9-1-37 Chairman, Chief Executive President and Director, Fremont
Fremont Investment, Advisors, Inc. Officer and Director Investment Advisors, Inc.;
333 Market Street, 26th Floor Managing Director, Fremont
San Francisco, CA 94105 Group, L.L.C. and Fremont
Investors, Inc.; Director, Sequoia
Ventures, Sit/Kim International
Investment Associates, and J.P.
Morgan Securities Asia.
Michael H. Kosich(1)(2) 3-30-40 President and Director 10/77 - 7/96
Fremont Investment Advisors, Inc. Senior Vice President Business
333 Market Street, 26th Floor Development, Benham
San Francisco, CA 94105 Management
Vincent P. Kuhn, Jr.(1)(2)(4) 4-22-32 Executive Vice President Executive Vice President and
Fremont Investment Advisors, Inc. and Director Director, Fremont Investment
333 Market Street, 26th Floor. Advisors, Inc.
San Francisco, CA 94105
Richard E. Holmes(3) 5-14-43 Director Vice President and Director,
P.O. Box 479 BelMar Advisors, Inc.
Sanibel, FL 33957 (marketing firm)
William W. Jahnke(3) 2-6-44 Director 1/96 - Present
Jahnke & Associates Chairman, Financial Design
58 Camino del Diablo Education Corp.
Orinda, CA 94563 3/93 - Present
Principal, Jahnke & Associates
(Consultants)
6/83 - 3/93
Chairman, Board of Directors,
Vestek Systems, Inc.
Donald C. Luchessa(3) 2-18-30 Director Principal, DCL Advisory
DCL Advisory (marketer for investment
345 California Street, 10th Fl advisors)
San Francisco, CA 94104
David L. Egan(3) 5-1-34 Director President, Fairfield Capital
Fairfield Capital Associates, Inc. Associates, Inc. (an investment
1640 Sylvaner advisor) and Fairfield Capital
St. Helena, CA 94574 Funding, Inc. (a broker-dealer)
20
<PAGE>
<CAPTION>
<S> <C> <C> <C>
Albert W. Kirschbaum(4) 8-17-38 Senior Vice President Senior Vice President and
Fremont Investment Advisors, Inc. Director, Fremont Investment
333 Market Street, 26th Floor Advisors, Inc.
San Francisco, CA 94105
Peter F. Landini(4) 5-10-51 Senior Vice President Senior Vice President and
Fremont Investment Advisors, Inc. Director, Fremont Investment
333 Market Street, 26th Floor Advisors, Inc.
San Francisco, CA 94105
John Kosecoff 10-29-51 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor 12/93 - 9/96
San Francisco, CA 94105 Senior Analyst and Portfolio
Manager, RCM Capital
Management
11/92 - 12/93
Hedge Fund Analyst and Portfolio
Manager, Omega Advisors
10/90 - 11/92
Senior Consumer Sector
Analyst, Lord Abbett & Co.
William M. Feeney 3-27-56 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Marycatherine Dwyer 1-29-63 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Norman Gee 3-29-50 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Alexandra W. Kinchen(4) 4-25-45 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Andrew L. Pang(4) 4-15-49 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
21
<PAGE>
<CAPTION>
<S> <C> <C> <C>
Robert J. Haddick(4) 2-26-60 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor Fund Group, Inc.
San Francisco, CA 94105
Tina Thomas 8-7-49 Vice President, Secretary, and Vice President and Chief
Fremont Investment Advisors, Inc. Chief Compliance Officer Compliance Officer, Fremont
333 Market Street, 26th Floor Investment Advisors, Inc.
San Francisco, CA 94105 9/88 - 5/96
Chief Compliance Officer and
Vice President, Bailard, Biehl &
Kaiser, Inc.; Treasurer, Bailard,
Biehl & Kaiser International
Fund Group, Inc. and Bailard,
Biehl & Kaiser Fund Group;
Principal, BB&K Fund Services,
Inc.
Ian R. Stone 12-16-63 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Richard G. Thomas 1-7-57 Senior Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
Chantal Gaiddon 5-13-56 Vice President, Controller Vice President and Controller,
Fremont Investment Advisors, Inc. and Treasurer Fremont Investment Advisors,
333 Market Street, 26th Floor Inc.
San Francisco, CA 94105
Gretchen Hollstein 3-23-67 Vice President 8/92 - Present
Fremont Investment Advisors, Inc. Regional Sales Manager,
333 Market Street, 26th Floor Fremont Investment Advisors,
San Francisco, CA 94105 Inc.
8/90 - 7/92
Asst. Vice President
Bank of California
Allyn Hughes 6-12-60 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105
22
<PAGE>
<CAPTION>
<S> <C> <C> <C>
Jill Paiz 8-13-66 Vice President 10/95 - Present
Fremont Investment Advisors, Inc. Vice President and Director
333 Market Street, 26th Floor of Communications, Fremont
San Francisco, CA 94105 Investment Advisors, Inc.
9/94 - 10/95
Marketing Consultant
1/94 - 9/94
Manager of Marketing
Consultants, Montgomery
Asset Management
11/91 - 1/94
Marketing Manager, Govett
Financial Services
Dean Boebinger 11-21-55 Vice President 8/92 - Present
Fremont Investment Advisors, Inc. Regional Sales Manager,
3000 Post Oak Blvd., Suite 100 Fremont Investment
Houston, TX 77056 Advisors, Inc.
3/92 - 7/94
Certified Financial Planner and
Account Executive, GNA, Inc.
</TABLE>
(1) Director who is an "interested person" of the Company due to
his affiliation with the Company's investment manager.
(2) Member of the Executive Committee.
(3) Member of the Audit Committee and the Contracts Committee.
(4) Member of the Fremont Investment Committee.
During the fiscal year ended October 31, 1996, Richard E. Holmes, William W.
Jahnke, and David L. Egan each received $4,500 and Donald C. Luchessa received
$3,000 for serving as directors of the Investment Company.
As of December 31, 1996, the officers and directors as a group owned in the
aggregate beneficially or of record less than 1% of the outstanding shares of
the Investment Company.
INVESTMENT ADVISORY AND OTHER SERVICES
MANAGEMENT AGREEMENT. The Advisor, in addition to providing investment
management services, furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Investment Company, provides suitable office
space, necessary small office equipment and utilities, and general purpose
accounting forms, supplies, and postage used at the offices of the Investment
Company.
The Fund will pay all of its own expenses not assumed by the
Advisor, including, but not limited to, the following: custodian,
23
<PAGE>
stock transfer and dividend disbursing fees and expenses; taxes and insurance;
expenses of the issuance and redemption of shares of the Fund (including stock
certificates, registration of qualification fees and expenses); legal and
auditing expenses; and the costs of stationery and forms prepared exclusively
for the Fund.
The allocation of general Investment Company expenses among the series of the
Investment Company, including the Fund, is made on a basis that the directors
deem fair and equitable, which may be based on the relative net assets of each
series or the nature of the services performed and relative applicability to
each series.
The directors of the Advisor are David L. Redo, Vincent P. Kuhn,
Jr., Jon S. Higgins, Peter F. Landini and Albert W. Kirschbaum.
As of March 1, 1992, the Advisor is limiting the management fee to 0.30% per
annum until further notice. Once waived, fees will not be recouped in the
future.
The Investment Advisory and Administration Agreement (the "Advisory
Agreement") may be renewed annually provided that any such renewal has been
specifically approved by (i) the Board of Directors, or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
the Fund, and (ii) the vote of a majority of directors who are not parties to
the Advisory Agreement or "interested persons" (as defined in the 1940 Act) of
any such party, cast in person, at a meeting called for the purpose of voting
on such approval. The Advisory Agreement also provides that either party
thereto has the right to terminate it without penalty upon sixty (60) days'
written notice to the other party, and that the Advisory Agreement terminates
automatically in the event of its assignment (as defined in the 1940 Act).
For the fiscal years ended October 31, 1996, 1995, and 1994, the advisory fees
(net of voluntary waivers) paid by the Fund to the Advisor were $153,187,
$164,416, and $190,766, respectively.
The Advisory Agreement also provides for the payment of an administrative fee
to the Advisor at the annual rate of .15% of average net assets. The Advisor
is limiting the administrative fee to .005% until further notice. For the
fiscal years ended October 31, 1996, 1995, and 1994, the Fund paid to the
Advisor administrative fees (net of voluntary waivers) of $2,553, $2,741, and
$3,173, respectively.
The Advisor's employees may engage in personal securities transactions.
However, the Investment Company and the Advisor have adopted a Code of Ethics
for the purpose of establishing standards of conduct for the Advisor's
employees with respect to
24
<PAGE>
such transactions. The Code of Ethics includes some broad prohibitions against
fraudulent conduct, and also includes specific rules, restrictions and
reporting obligations with respect to personal securities transactions of the
Advisor's employees. Generally, each employee is required to obtain prior
approval of the Advisor's compliance officer in order to personally purchase
or sell a security. Purchases or sales of securities which are not eligible
for purchase or sale by the Funds or any other client of the Advisor are
exempted from the prior approval requirement, as are certain other
transactions which the Advisor believes present no potential conflict of
interest. The Advisor's employees are also required to file with the Advisor
quarterly reports of their securities transactions.
PRINCIPAL UNDERWRITER. The Fund's principal underwriter is Funds Distributor,
Inc., Sixty State Street, Boston, Massachusetts 02109 (the "Distributor"). The
Distributor is engaged on a non-exclusive basis to assist in the distribution
of shares in various jurisdictions. The Distributor receives compensation from
the Advisor and is not paid either directly or indirectly by the Investment
Company. The Distributor received compensation of $75,000 with respect to the
fiscal year ended October 31, 1996 for services as Distributor. Additionally,
the Distributor received $24,000 in compensation for separate services related
to telephone call coverage during the fiscal year ended October 31, 1996.
TRANSFER AGENT. The Advisor is also the Fund's transfer agent and is
responsible for maintaining the records of each shareholder's account,
answering shareholders' inquiries concerning their accounts, processing
purchases and redemptions of the Fund's shares, acting as dividend and
distribution disbursing agent and performing other shareholder service
functions. The Advisor retains Countrywide Fund Services, Inc. (the
"Sub-Transfer Agent") to perform many of these services. The Sub-Transfer
Agent is an indirect wholly owned subsidiary of Countrywide Credit Industries,
Inc., a New York Stock Exchange listed company principally engaged in the
business of residential mortgage lending.
For its services as transfer agent, the Advisor receives a monthly fee at the
annual rate of $27 per shareholder account from the Fund; provided, however,
that the minimum monthly fee paid to the Advisor is $2,000.
In addition, the Sub-Transfer Agent has been retained by the Advisor to assist
the Advisor in providing administrative services to the Investment Company. In
this capacity, the Sub- Transfer Agent supplies non-investment related
regulatory compliance services and executive and administrative services. The
Sub-Transfer Agent supervises the preparation of reports to and filings with
the Securities and Exchange Commission and
25
<PAGE>
materials for meetings of the Board of Directors. The Advisor (not the
Investment Company) pays the Sub-Transfer Agent a monthly fee of $6,500 for
these administrative services. For the fiscal year ended October 31, 1996, the
Advisor paid the Sub- Transfer Agent $74,000 for administrative services on
behalf of all series of the Investment Company.
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the Fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other of the accounts served by the Advisor, including other
series of the Investment Company. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to the Fund, they
will be effected only when the Advisor believes that to do so will be in the
best interest of the Fund. When such concurrent authorizations occur, the
objective will be to allocate the executions in a manner which is deemed
equitable to the accounts involved, including the Fund.
No brokerage commissions have been paid by the Fund during the last three
fiscal years.
Subject to the requirement of seeking the best available prices and
executions, the Advisor may, in circumstances in which two or more
broker-dealers are in a position to offer comparable prices and executions,
give preference to broker-dealers who have provided investment research,
statistical, and other related services to the Advisor for the benefit of the
Fund and/or of other accounts served by the Advisor. Such preferences would
only be afforded to a broker-dealer if the Advisor determines that the amount
of the commission is reasonable in relation to the value of the brokerage and
research services provided by that broker-dealer and only to a broker-dealer
acting as agent and not as principal. The Advisor is of the opinion that,
while such information is useful in varying degrees, it is of indeterminable
value and does not reduce the expenses of the Advisor in managing the Fund's
portfolio.
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 Investment Company or the Advisor, or an affiliated
person of such person.
HOW TO INVEST
PRICE OF SHARES. The price to be paid by an investor for shares
of the Fund, the public offering price, is based on the net asset
value per share calculated once daily as of the close of trading
26
<PAGE>
(currently 4:00 p.m., Eastern time) each day the New York Stock Exchange is
open as set forth below. The New York Stock Exchange is currently closed on
weekends and on the following holidays: (i) New Year's Day, Presidents' Day,
Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas
Day; and (ii) the preceding Friday when any of those holidays falls on a
Saturday or the subsequent Monday when any one of those holidays falls on a
Sunday.
Portfolio securities with original or remaining maturities in excess of 60
days are valued at the mean of representative quoted bid and asked prices for
such securities or, if such prices are not available, at the equivalent value
of securities of comparable maturity, quality and type. However, in
circumstances where the Advisor deems it appropriate to do so, prices obtained
for the day of valuation from a bond pricing service will be used. The Fund
amortizes to maturity all securities with 60 days or less remaining to
maturity based on their cost to the Fund if acquired within 60 days of
maturity or, if already held by the Fund on the 60th day, based on the value
determined on the 61st day.
The Fund deems the maturities of variable or floating rate instruments, or
instruments which the Fund has the right to sell at par to the issuer or
dealer, to be the time remaining until the next interest rate adjustment date
or until they can be resold or redeemed ar par.
Where market quotations are not readily available, the Fund values securities
(including restricted securities which are subject to limitations as to their
sale) at fair value as determined in good faith by or under the direction of
the Board of Directors.
The fair value of any other assets is added to the value of securities, as
described above to arrive at total assets. The Fund's liabilities, including
proper accruals of taxes and other expense items, are deducted from total
assets and a net asset figure is obtained. The net assets so obtained are then
divided by the total number of shares outstanding (excluding treasury shares),
and the result, rounded to the nearest cent, is the net asset value per share.
OTHER INVESTMENT AND REDEMPTION SERVICES
THE OPEN ACCOUNT. When an investor makes an initial investment in the Fund, a
shareholder account is opened in accordance with the investor's registration
instructions. Each time there is a transaction in a shareholder account, such
as an additional investment, redemption or distribution (dividend or capital
gain), the shareholder will receive from the Sub-Transfer Agent a
27
<PAGE>
confirmation statement showing the current transaction in the shareholder
account, along with a summary of the status of the account as of the
transaction date.
PAYMENT AND TERMS OF OFFERING. Payment of shares purchased should accompany
the purchase order, or funds should be wired to the Sub-Transfer Agent as
described in the Prospectus. Payment, other than by wire transfer, must be
made by check or money order drawn on a U.S. bank. Checks or money orders must
be payable in U.S. dollars.
As a condition of this offering, if an order to purchase shares is cancelled
due to nonpayment (for example, on account of a check returned for "not
sufficient funds"), the person who made the order will be subject to a $20
charge and will be responsible for reimbursing the Advisor for any loss
incurred by reason of such cancellation. If such purchaser is a shareholder,
the Fund shall have the authority as agent of the shareholder to redeem shares
in his account for their then-current net asset value per share to reimburse
the Fund for the loss incurred. Such loss shall be the difference between the
net asset value of the Fund on the date of purchase and the net asset value on
the date of cancellation of the purchase. Investors whose purchase orders have
been cancelled due to nonpayment may be prohibited from placing future orders.
The Investment Company reserves the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent investments with
respect to any person or class of persons. An order to purchase shares is not
binding on the Investment Company until it has been confirmed in writing by
the Sub-Transfer Agent (or other arrangements made with the Investment
Company, in the case of orders utilizing wire transfer of funds) and payment
has been received. To protect existing shareholders, the Investment Company
reserves the right to reject any offer for a purchase of shares by any
individual.
REDEMPTION IN KIND. The Investment Company may elect to redeem shares in
assets other than cash but must pay in cash all redemptions with respect to
any shareholder during any 90-day period in an amount equal to the lesser of
(i) $250,000 or (ii) 1% of the net asset value of the Fund at the beginning of
such period.
SUSPENSION OF REDEMPTION PRIVILEGES. The Investment Company may suspend
redemption privileges with respect to the Fund or postpone the date of payment
for more than seven days after the redemption order is received during any
period (1) when the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the Exchange is restricted as
determined by the Securities and Exchange Commission (the "SEC"),
28
<PAGE>
(2) when an emergency exists, as defined by the SEC, which makes it not
reasonably practicable for the Investment Company to dispose of securities
owned by it or to fairly determine the value of its assets, or (3) as the SEC
may otherwise permit.
SPECIAL TAX CONSIDERATIONS
The percentage of total dividends paid by the Fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest
dividends") will be the same for all shareholders receiving dividends during
such year. In order for the Fund to pay exempt-interest dividends during any
taxable year, at the close of each fiscal quarter at least 50% of the
aggregate value of the Fund's assets must consist of tax-exempt securities. In
addition, the Fund must distribute 90% of the aggregate interest excludable
from gross income and 90% of the investment company taxable income earned by
the Fund during the taxable year. Not later than 60 days after the close of
its taxable year, the Fund will notify each shareholder of the portion of the
dividends paid by the Fund to the shareholder with respect to such taxable
year which constitutes exempt-interest dividends. The aggregate amount of
dividends so designated cannot, however, exceed the excess of the amount of
interest excludable from gross income from tax under Section 103 of the
Internal Revenue Code (the "Code") received by the Fund during the taxable
year over any amounts disallowed as deductions under Sections 265 and
171(a)(2) of the Code.
The Code treats interest on private activity bonds, as defined therein, as an
item of tax preference subject to an Alternative Minimum Tax on individuals at
a rate of 26% on AMT income up to $175,000 over the exemption amount, and 28%
thereafter, and on corporations at a rate of 20%. Further, under the Code
corporate shareholders must include all federal exempt-interest dividends in
their adjusted current earnings for calculation of corporate alternative
minimum taxable income.
Substantially all "investment company taxable income" earned by the Fund will
be distributed to shareholders. In general, the Fund's investment company
taxable income will be its taxable income (for example, its interest income on
taxable securities and any short-term capital gains) subject to certain
adjustments and excluding the excess of any net long-term capital gain for the
taxable year over the net short-term capital loss, if any, for such year. The
Fund would be taxed on any undistributed investment company taxable income.
Since it is intended that any such income will be distributed, it will be
taxable to shareholders as ordinary income. Market discount earned on
tax-exempt obligations will not qualify as tax-exempt income.
29
<PAGE>
Generally, taxable dividends are taxable to shareholders at the time they are
paid. However, such dividends declared in October, November, and December by a
Fund and made payable to shareholders of record in such a month are treated as
paid and are thereby taxable as of December 31, provided that the Fund pays
the dividend during January of the following year. Each January, stockholders
will receive full information, with respect to the previous year on dividends
and capital gain distributions for tax purposes, including information such as
the portion taxable as ordinary income, the portion taxable as capital gains,
and the amount of dividends eligible for the dividends-received deduction for
corporate taxpayers.
The Fund is subject to tax in California on the same basis as under Subchapter
M of the Code as described above. If, at the close of each quarter of its
taxable year, at least 50% of the value of the total assets of the Fund
consists of securities the interest on which is exempt from taxation under the
Constitution or statutes of California ("California Exempt Securities") or the
laws of the United States, the Fund will be qualified to pay dividends exempt
from California corporate or personal income tax to its shareholders
(hereinafter referred to as "California exempt-interest dividends"). The Fund
intends to qualify under the above requirement so that it can pay California
exempt-interest dividends. If the Fund fails to so qualify, no part of the
Fund's dividends will be exempt from California corporate or personal income
tax. Even if the Fund pays California exempt-interest dividends, those
dividends will nevertheless be subject to franchise taxes in California.
Not later than 60 days after the close of its taxable year, the Fund will
notify each of its shareholders of the portion of the dividends exempt from
California corporate or personal income tax paid by the Fund to the
shareholder with respect to such taxable year. The total amount of California
exempt-interest dividends paid by the Fund to all of its shareholders with
respect to any taxable year cannot exceed the amount of interest earned by the
Fund during such year on California Exempt Securities less any expenses or
expenditures (including any expenditures attributable to the acquisition of
securities of another California tax-exempt fund) that are deemed to have been
paid from such interest.
Dividends paid by the Fund in excess of this limitation will be treated as
ordinary dividends subject to California corporate or personal income tax at
ordinary rates. For purposes of the limitation, expenses paid during any year
generally will be deemed to have been paid with funds attributable to interest
received by the Fund from California municipal securities for such year in the
same ratio as such interest from California Exempt Securities bears to the
total gross income earned by the Fund for the year. The effect of this
accounting convention is
30
<PAGE>
that amounts of interest from California Exempt Securities received by the
Fund that would otherwise be available for distribution as California
exempt-interest dividends will be reduced by the expenses and expenditures
deemed to have been paid from such amounts.
In cases where shareholders are "substantial users" or "related persons" with
respect to California Exempt Securities held by the Fund, such shareholders
should consult their tax advisers to determine whether California
exempt-interest dividends paid by the Fund with respect to such obligations
retain their California corporate or personal income tax exclusion. In this
connection, rules similar to those regarding the possible unavailability of
federal exempt-interest dividend treatment to "substantial users" are
applicable for California state tax purposes.
Long-term and/or short-term capital gain distributions do not constitute
California exempt-interest dividends and will be taxable. Moreover, interest
on indebtedness incurred by a shareholder to purchase or carry the Fund's
shares is not deductible for California corporate or personal income tax
purposes if the Fund distributes California exempt-interest dividends during
the shareholder's taxable year.
TAXES - MUTUAL FUNDS
STATUS AS A "REGULATED INVESTMENT COMPANY." The Fund will be treated under the
Code as a separate entity, and the Fund intends to qualify as a separate
"regulated investment company" under Subchapter M of the Code. To qualify for
the tax treatment afforded a "regulated investment company" under the Code,
the Fund must annually distribute at least 90% of the sum of its investment
company taxable income (generally net investment income and certain short-term
capital gains), its tax-exempt interest income and net capital gains, and meet
certain diversification of assets and other requirements of the Code. If the
Fund qualifies for such tax treatment, it will not be subject to federal
income tax on the part of its investment company taxable income and its net
capital gain which it distributes to shareholders. To meet the requirements of
the Code, the Fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other dispositions of securities; (b) derive less than 30% of its
gross income from the sale or other disposition of securities held less than
three months; and (c) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value of the Fund's total
assets is represented by cash, U.S. Government securities, securities of other
regulated investment companies, and other securities, limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's total assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its total assets is invested in the securities of any
one issuer (other than U.S. Government
31
<PAGE>
securities or the securities of other regulated investment companies), or in
two or more issuers which the Fund controls and which are engaged in the same
or similar trades or businesses.
Even though the Fund qualifies as a "regulated investment company," it may be
subject to certain federal excise taxes unless the Fund meets certain
additional distribution requirements. Under the Code, a nondeductible excise
tax of 4% is imposed on the excess of a regulated investment company's
"required distribution" for the calendar year over the "distributed amount"
for such calendar year. The term "required distribution" means the sum of (i)
98% of ordinary income (generally net investment income) for the calendar
year, (ii) 98% of capital gain net income (both long-term and short-term) for
the one-year period ending on October 31 of such year and (iii) the sum of any
untaxed, undistributed net investment income and net capital gains of the
regulated investment company for prior periods. The term "distributed amount"
generally means the sum of (i) amounts actually distributed by the Fund from
its current year's ordinary income and capital gain net income and (ii) any
amount on which the Fund pays income tax for the year. The Fund intends to
meet these distribution requirements to avoid the excise tax liability.
If for any taxable year the Fund does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable income
will be subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits.
Fund shareholders are required by the Code to report to the Internal Revenue
Service all exempt-interest dividends, and all other tax-exempt interest
received during tax years beginning on or after January 1, 1987.
DISTRIBUTIONS OF NET INVESTMENT INCOME. Dividends from taxable net investment
income (including net short-term capital gains, if any) are taxable as
ordinary income. Shareholders will be taxed for federal income tax purposes on
dividends from the Fund in the same manner whether such dividends are received
as shares or in cash. While the Fund does not anticipate receiving any
dividend income from U.S. corporations, to the extent that it did receive
dividends that would qualify for the dividends-received deduction available to
corporations, the Fund must designate in a written notice to shareholders the
amount of the Fund's dividends that would be eligible for this treatment.
NET CAPITAL GAINS. Any distributions designated as being made
from the Fund's net capital gains will be taxable as long-term
capital gains, regardless of the holding period of the
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shareholders of the Fund's shares. Shareholders are advised to consult their
tax advisor regarding application of these rules to their particular
circumstances.
For federal income tax purposes, capital loss carryforwards result when the
Fund has net capital losses during a tax year. These are carried over to
subsequent years and may reduce distributions of realized gains in those
years. Unused capital loss carryforwards expire in eight years. Until such
capital loss carryforwards are offset or expire, it is unlikely that the Board
of Directors will authorize a distribution of any net realized gains.
NON-U.S. SHAREHOLDERS. Under the Code, distributions of net
investment income by the Fund to a shareholder who, as to the
U.S., is a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S.
withholding tax (at a 30% or lower treaty rate). Withholding will
not apply if a dividend paid by the Fund to a foreign shareholder
is "effectively connected" with a U.S. trade or business, in
which case the reporting and withholding requirements applicable
to U.S. citizens, U.S. residents or domestic corporations will
apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign
shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a
rate of 30% if the individual is physically present in the U.S.
for more than 182 days during the taxable year.
OTHER INFORMATION. Shares of the Fund would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans and individual retirement accounts.
Such plans and accounts are generally tax-exempt and, therefore, would not
gain any additional benefit from the tax-exempt nature of the Fund's
dividends, and such dividends would be ultimately taxable to the beneficiaries
when distributed to them. In addition, the Fund may not be an appropriate
investment for entities which are "substantial users" of facilities financed
by industrial development bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt
person who regularly uses a part of such facilities in his trade or business
and whose gross revenues derived with respect to the facilities financed by
the issuance of bonds are more than 5% of the total revenues derived by all
users of such facilities, or who occupies more than 5% of the usable area of
such facilities or for whom such facilities or a part thereof were
specifically constructed, reconstructed or acquired. "Related persons" include
certain related natural persons, affiliated corporations, a partnership and
its partners and an S Corporation and its shareholders.
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<PAGE>
Interest on indebtedness incurred by a shareholder to purchase or carry the
Fund's shares is not deductible for federal income tax purposes if the Fund
distributes exempt-interest dividends during the shareholder's taxable year.
If a shareholder receives an exempt-interest dividend with respect to shares
of the Fund and such shares are held for six months or less, any loss on the
sale or exchange of such shares will be disallowed to the extent of the amount
of such exempt-interest dividend.
Any loss realized on redemption or exchange of the Fund's shares will be
disallowed to the extent shares are reacquired within the 61 day period
beginning 30 days before and ending 30 days after the shares are disposed of.
The foregoing is a general abbreviated summary of present federal income taxes
and California franchise and income taxes on dividends and distribution by the
Fund. Investors are urged to consult their own tax advisors for more detailed
information and for information regarding any foreign, state and local taxes
applicable to dividends and distributions received.
ADDITIONAL INFORMATION
CUSTODIAN. The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675, acts as Custodian for the Investment Company's assets, and as
such safekeeps the Fund's portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Investment Company's
request and maintains records in connection with its duties.
INDEPENDENT AUDITORS; FINANCIAL STATEMENTS. The Investment Company's
independent auditors are Coopers & Lybrand L.L.P., 333 Market Street, San
Francisco, California 94105. Coopers & Lybrand L.L.P. will conduct an annual
audit of the Fund, assist in the preparation of the Fund's federal and state
income tax returns and consult with the Investment Company as to matters of
accounting, regulatory filings, and federal and state income taxation. The
financial statements of the Fund as of October 31, 1996 included herein are
audited. Such financial statements are included herein in reliance on the
opinion of Coopers & Lybrand L.L.P. given on the authority of said firm as
experts in auditing and accounting.
LEGAL COUNSEL. The validity of the shares of common stock offered hereby will
be passed upon by Heller Ehrman White & McAuliffe, 333 Bush Street, San
Francisco, California 94104. In addition to acting as counsel to the
Investment Company, Heller Ehrman White & McAuliffe have acted and may
continue to act as counsel to the Advisor and its affiliates in various
matters.
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USE OF NAME. The Advisor has granted the Investment Company the right to use
the "Fremont" name and has reserved the rights to withdraw its consent to the
use of such name by the Investment Company at any time, or to grant the use of
such name to any other company, and the Investment Company has granted the
Advisor, under certain conditions, the use of any other name it might assume
in the future, with respect to any other investment company sponsored by the
Advisor.
SHAREHOLDER VOTING RIGHTS. The Investment Company currently issues shares in
nine series and may establish additional classes or series of shares in the
future. When more than one class or series of shares is outstanding, shares of
all classes and series will vote together for a single set of directors, and
on other matters affecting the entire Investment Company, with each share
entitled to a single vote. On matters affecting only one class or series, only
the shareholders of that class or series shall be entitled to vote. On matters
relating to more than one class or series but affecting the classes and series
differently, separate votes by class and series are required. Shareholders
holding 10% of the shares of the Investment Company may call a special meeting
of shareholders.
LIABILITY OF DIRECTORS AND OFFICERS. The Articles of Incorporation of the
Investment Company provide that subject to the provisions of the 1940 Act, to
the fullest extent permitted under Maryland law, no officer or director of the
Investment Company may be held personally liable to the Investment Company or
its shareholders.
CERTAIN SHAREHOLDERS. As of February 7, 1997, the following shareholders are
the record owners of more than 5% of the outstanding shares of common stock of
the Fund:
BF Fund Limited 70.96%
50 Fremont Street, #3600
San Francisco, CA 94105
Willis S. & Marian B. Slusser 5.79%
200 Deer Valley Road
San Rafael, CA 94903
Charles Schwab & Co., Inc. 7.87%
101 Montgomery Street
San Francisco, CA 94104
OTHER INVESTMENT INFORMATION. The Advisor directs the management of over $4.7
billion of assets and internally manages over $1.9 billion of assets for
retirement plans, foundations, private portfolios, and mutual funds. The
Advisor's philosophy is to apply a long-term approach to investing that
balances risk and return potential.
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<PAGE>
The Fund will generally have lower price volatility than that of mutual funds
which invest in longer-term California municipal bonds, and it provides
immediate diversification and liquidity in thinly traded municipal bond
markets. Hypothetical current yields may be used to calculate hypothetical
tax-equivalent yields based on various combined marginal federal and state tax
rates for given tax brackets of single and joint filers. The formula used will
be as follows: tax equivalent yield = (current yield)/(1-tax rate). The State
of California has one of the highest personal income tax rates in the United
States.
INVESTMENT RESULTS
The Investment Company may from time to time include information on the
investment results (yield, tax-equivalent yield or total return) of the Fund
in advertisements or in reports furnished to current or prospective
shareholders.
The average annual rate of return ("T") for a given period is computed by
using the redeemable value at the end of the period ("ERV") of a hypothetical
initial investment of $1,000 ("P") over the period in years ("n") according to
the following formula as required by the SEC:
P(1+T)n = ERV
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) reinvestment of dividends and distributions
at net asset value on the reinvestment date determined by the Board of
Directors; and (2) a complete redemption at the end of any period illustrated.
The Fund will calculate total return for one, five and ten-year periods after
such a period has elapsed, and may calculate total returns for other periods
as well. In addition, the Fund will provide lifetime annual average annual
total return figures.
The average annual total return for the Fund for the one-year period ending
October 31, 1996 was 4.63%, and for the five year period ending October 31,
1996 was 6.27%. The lifetime average annual total return for the Fund as of
October 31, 1996 was 6.83%. The Fund will also calculate this return as of the
end of each calendar quarter.
The Fund may quote its yield, which is computed by dividing the net investment
income per share earned during a 30-day period by the maximum offering price
per share on the last day of the period, according to the following formula:
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<PAGE>
YIELD = 2[((a-b)/cd + 1)6 - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The Fund may also calculate a tax-equivalent yield based on a 30-day period,
computed by dividing that portion of the yield (as computed by the formula
stated above) which is tax-exempt by one minus a stated personal income tax
rate and adding the product to that portion, if any, of the yield that is not
tax-exempt.
The Fund's 30-day yield as of October 31, 1996 was 4.24%. The Fund's
tax-equivalent 30-day yield as of October 31, 1996, using a combined marginal
effective federal and state personal income tax rate of 46.24%, was 7.89%.
The Fund's investment results will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio and operating
expenses of the Fund, so that current or past yield or total return should not
be considered representations of what an investment in the Fund may earn in
any future period. These factors and possible differences in the methods used
in calculating investment results should be considered when comparing the
Fund's investment results with those published for other investment companies
and other investment vehicles. The Fund's results also should be considered
relative to the risks associated with the Fund's investment objective and
policies.
The Investment Company may from time to time compare the investment results of
the Fund with, or refer to, the following:
(1) Average of Savings Accounts, which is a measure of all
kinds of savings deposits, including longer-term
certificates (based on figures supplied by the U.S.
League of Savings Institutions). Savings accounts offer
a guaranteed rate of return on principal, but no
opportunity for capital growth. During certain periods,
the maximum rates paid on some savings deposits were
fixed by law.
(2) The Consumer Price Index, which is a measure of the average
change in prices over time in a fixed market basket of goods
and services (e.g., food, clothing, shelter, and fuels,
transportation fares, charges for
37
<PAGE>
doctors' and dentists' services, prescription medicines, and
other goods and services that people buy for day-to-day
living).
(3) Statistics reported by Lipper Analytical Services, Inc.,
which ranks mutual funds by overall performance, investment
objectives and assets.
(4) Lipper California Short-Term Municipal Funds Average,
which is an average of municipal mutual funds
concentrating their investments in securities which are
exempt from California state income taxes. This average
is compiled from the Lipper Short-Term Municipal Bond
Funds average which restricts inclusion to those funds
with an average weighted maturity of no more than 90
days. Most funds restrict their longest maturity to
thirteen months.
(5) Lipper Intermediate Municipal Average, which is an average
of municipal mutual funds which restricts their holdings to
bonds with maturities between 3 and 10 years.
(6) Lehman Brothers Municipal Bond Index, which is a widely used
index composed of investment quality state and municipal
fixed income securities.
(7) Lehman Brothers Five Year State General Obligation Index,
which is a composite measure of total return performance of
five year state general obligation bonds. It is a component
of the Lehman Brothers Municipal Bond Index.
(8) Lipper Municipal/California Intermediate Bond Index compiled
by Lipper Analytical Services, which is an average of bond
funds which are exempt from California state income taxes.
(9) Salomon Brothers Broad Investment Grade Index which is
a widely used index composed of U.S. domestic
government, corporate and mortgage-back fixed income
securities.
(10) 90-day U.S. Treasury Bills Index which is a measure of
the performance of constant maturity 90-day U.S.
Treasury Bills.
(11) Donoghue First Tier Money Fund Average which is an average
of the 30-day yield of approximately 250 major domestic
money market funds.
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<PAGE>
(12) Donoghue Tax-Exempt California Money Fund Average, which is
an average of municipal money market funds which concentrate
their investments in securities which are exempt from
California state income taxes.
Indices prepared by the research departments of such financial organizations
as J.P. Morgan; Lehman Brothers; Bloomberg, L.P.; Morningstar, Inc.; Salomon
Brothers, Inc.; Merrill Lynch, Pierce, Fenner & Smith, Inc.; Morgan, Stanley;
Bear Stearns & Co., Inc.; and Ibbottson Associates may be used, as well as
information provided by the Federal Reserve Board.
The Investment company may use performance rankings and ratings reported
periodically in national financial publications such as, but not limited to,
MONEY MAGAZINE, FORBES, THE WALL STREET JOURNAL, INVESTOR'S BUSINESS DAILY,
FORTUNE, SMART MONEY, BUSINESS WEEK, and BARRON'S.
From time to time, the Investment Company may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all
Fremont Mutual Funds or the dollar amount of Fund assets under management or
rankings by DALBAR Savings, Inc. in advertising materials.
The Fund may compare its performance to that of other compilations or indices
of comparable quality to those listed above which may be developed and made
available in the future. The Fund may be compared in advertising to
Certificates of Deposit (CDs), the Bank Rate Monitor National Index, an
average of the quoted rates for 100 leading banks and thrifts in ten U.S.
cities chosen to represent the ten largest Consumer Metropolitan statistical
areas, or other investments issued by banks. The Fund differs from bank
investments in several respects. The Fund may offer greater liquidity or
higher potential returns than CDs; but unlike CDs, the Fund will have a
fluctuating share price and return and is not FDIC insured.
The Fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual funds.
These comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take sales
charges or redemption fees into consideration, and is prepared without regard
to tax consequences. In addition to the mutual fund rankings, the Fund's
performance may be compared to mutual fund performance indices prepared by
Lipper.
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<PAGE>
The Investment Company may provide information designed to help individuals
understand their investment goals and explore various financial strategies.
For example, the Investment Company may describe general principles of
investing, such as asset allocation, diversification, and risk tolerance.
Ibbottson Associates of Chicago, Illinois (Ibbottson) provides historical
returns of capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets is based on the returns of different
indices.
The Investment Company may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to
those of the Fund. The Fund may also compare performance to that of other
compilations or indices that may be developed and made available in the
future.
In advertising materials, the Advisor may reference or discuss its products
and services, which may include retirement investing, the effects of
dollar-cost averaging, and saving for college or a home. In addition, the
Advisor may quote financial or business publications and periodicals,
including model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques.
The Fund may discuss its NASDAQ symbol, CUSIP number, and its current
portfolio management team.
From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the Fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on
the basis of risk- adjusted performance. In addition, the Fund may quote
financial or business publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques. Rankings that
compare the performance of Fremont Mutual Funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
The Fund may quote various measures of volatility and benchmark correlation
such as beta, standard deviation, and R2 in advertising. In addition, the Fund
may compare these measures to
40
<PAGE>
those of other funds. Measures of volatility seek to compare the Fund's
historical share price fluctuations or total returns compared to those of a
benchmark. Measures of benchmark correlation indicate how valid a comparative
benchmark may be. All measures of volatility and correlation are calculated
using averages of historical data.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share can
be lower than if a fixed number of shares are purchased at the same intervals.
In evaluating such a plan, investors should consider their ability to continue
purchasing shares through periods of low price levels.
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FREMONT INVESTMENT ADVISORS
INNOVATIVE INVESTMENT
MANAGEMENT AND
ADVISORY SERVICES
A subsidiary of Fremont Investors, Inc.
<PAGE>
THE FREMONT GROUP
THE FREMONT GROUP MANAGES OVER $6 BILLION IN FOUR KEY BUSINESS AREAS.
Fremont Investment Advisors, Inc., (FIA) is a subsidiary of Fremont
Investments, Inc., which is affiliated with The Fremont Group. Fremont
Investors, Inc. employs over 200 professionals in offices throughout the
United States and manages over $6 billion in four key business areas:
Direct Investments - Fremont holds significant equity positions
in companies from a broad range of industries including:
- Crown Pacific - timber/lumber
- Petro Stopping Centers - full-service truck stops
- Trinity Ventures - venture capital
Real Estate - Fremont Properties, Inc., a subsidiary of Fremont
Investors, Inc., acquires and develops commerical, retail and
industrial real estate. Fremont Properties also manages over 6 million
square feet of real estate in 23 properties across the U.S.
Energy - Activities of The Fremont Group's energy affiliate,
Fremont Energy L.P., include oil and natural gas exploration, and
developmment.
Securities Management - Through its affiliated company, Fremont
Investment Advisors, The Fremont Group manages over $4.7 billion in
global investment portfolios.
<PAGE>
FREMONT INVESTMENT ADVISORS
FREMONT INVESTMENT ADVISORS PROVIDES INVESTMENT MANAGEMENT
SERVICES TO BOTH INSTITUTIONAL AND INDIVIDUAL CLIENTS.
Originally organized to manage the marketable securities of Bechtel,
Fremont Investment Advisors' professional staff operated for many years within
Bechtel's treasury area. In 1986, FIA became a separate organization.
FIA is a registered investment advisor which provides investment
management and advisory services to a variety of clients including:
-- defined benefit plans
-- defined contribution plans
-- foundations and trusts
-- high net worth individuals
Major clients include the Bechtel Retirement Plan which has
over 15,000 participants and was recently rated as one of the ten
best corporate retirement plans in the U.S. by Worth Magazine.
FREMONT MUTUAL FUNDS
THE FREMONT FUNDS OFFER INVESTORS NINE NO-LOAD MUTUAL FUNDS IN A WIDE VARIETY
OF INVESTMENT AREAS.
Fremont Investment Advisors formed the Fremont Mutual Funds in 1988 at the
request of retiring Bechtel employees who were taking their retirement savings
out of the Bechtel Retirement Plan. These employees were looking for low cost
mutual fund options for their personal investments and retirement plan
distributions.
The Fremont Family of Funds includes nine no-load mutual funds
in a variety of investment disciplines. From conservative bond and money
market funds to aggressive U.S. micro-cap and international small cap stock
funds, Fremont Mutual Funds offer investors a full range of investment
options.
<PAGE>
INNOVATIVE INVESTMENT MANAGEMENT
FREMONT INVESTMENT ADVISORS UTILIZES BOTH INTERNAL AND EXTERNAL
INVESTMENT MANAGEMENT EXPERTISE.
Fremont Investment Advisors is innovative in its approach to
investment management. By combining the talents of both internal and external
investment managers, FIA offers the highest quality management in each
investment discipline.
This "hybrid" approach allows FIA to concentrate resources in
investment areas where its investment professionals excel. These areas include
global asset allocation, economic analysis and the municipal bond market.
For other specialty investment disciplines, FIA selects external or
"outside" managers with excellent long-term performance track records within
the institutional marketplace. This close partnership provides smaller
institutional and individual investors with access to the investment
management expertise usually reserved only for the largest institutional
investors.
FIA's current team of external managers includes:
U.S. Stock Investments
-- Morgan Grenfell Capital Management
International Stock Investments
-- Acadian Asset Management
-- Credit Lyonnais International Asset Management
Bond Investments
-- Pacific Investment Management Company
(PIMCO)
FOR MORE INFORMATION ABOUT FREMONT OR THE FREMONT FUNDS, PLEASE CALL
800-548-4539 (PRESS 1)
FOR A PROSPECTUS WHICH CONTAINS MORE INFORMATION ABOUT THE FREMONT FUNDS,
INCLUDING MANAGEMENT FEES AND EXPENSES, PLEASE CALL 800-548-4539 (PRESS 1).
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
THE FREMONT GROUP
ORGANIZATION
| | | |
| | | |
| | | |
Direct Investments | | |
| | |
Real Estate | |
| |
Energy |
|
Securities Management
|
|
Fremont Fremont
Investment -- Mutual
Advisors Funds
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APPENDIX A: DESCRIPTION OF RATINGS
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. employs the designations "Prime-1,"
"Prime-2" and "Prime-3" to indicate commercial paper having the
highest capacity for timely repayment.
Issuers rated Prime-1 "have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced
by the following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative
capitalization structures with moderate reliance on debt and ample asset
protections; broad margins in earnings coverage of fixed financial charges and
high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity."
Issues rated Prime-2 "have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained."
Issuers rated Prime-3 "have an acceptable capacity for repayment of short-term
promissory obligations. The effect of industry characteristics and market
composition may be more pronounced. Variability in earnings and profitability
may result in changes in the level of debt protection measurements and the
requirement for relatively high financial leverage. Adequate alternate
liquidity is maintained."
STANDARD & POOR'S RATINGS GROUP'S ratings of commercial paper are graded into
four categories ranging from "A" for the highest quality obligations to "D"
for the lowest. "A -- Issues assigned this highest rating are regarded as
having the greatest capacity for timely payment. Issues in this category are
delineated with numbers 1, 2, and 3 to indicate the relative degree of
safety."
A-1 -- "This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation."
A-1
<PAGE>
A-2 -- "Capacity for timely payments on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1."
A-3 -- "Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designation."
B -- "Issues rated B are regarded as having only an adequate capacity for
timely repayment. However, such capacity may be damaged by changing conditions
of short-term adversities."
C -- "This rating is assigned to short-term debt obligations with a doubtful
capacity for repayment."
D -- "This rating indicates that the issue is either in default or is expected
to be in default upon maturity."
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued by
various entities from "Aaa" to "C." The ratings may be modified by the
addition of 1, 2 or 3 to show relative standing within the major rating
categories. Investment ratings are as follows:
Aaa -- Best quality. These securities "carry the smallest degree of investment
risk and are generally referred to as 'gilt edge.' Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues."
Aa -- High quality by all standards. "They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risks appear somewhat
greater."
A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. "Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future."
A-2
<PAGE>
Baa -- Medium grade obligations. "Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well."
Ba -- "Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class."
B -- "Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
Caa -- "Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
and interest."
Ca -- "Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings."
C -- "Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing."
STANDARD & POOR'S RATINGS GROUP'S rates the long-term securities debt of
various entities in categories ranging from "AAA" to "D" according to quality.
The ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Investment ratings are as follows:
AAA -- Highest rating. "Capacity to pay interest and repay principal is
extremely strong."
AA -- High grade. "Very strong capacity to pay interest and repay
principal."
A-3
<PAGE>
A -- "Strong capacity to pay interest and repay principal," although "somewhat
more susceptible to the adverse effects of change in circumstances and
economic conditions than debt in higher rated categories."
BBB -- "Adequate capacity to pay interest and repay principal." These bonds
normally exhibit adequate protection parameters, but "adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal than for debt in higher rated
categories."
BB, B, CCC, CC -- "Debt rated BB, B, CCC, or CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions."
C -- "This rating is reserved for income bonds on which no interest is
being paid."
D -- "Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears."
A-4
<PAGE>
DESCRIPTION OF RATINGS OF NOTES
MOODY'S INVESTORS SERVICE, INC. ratings for state and municipal and other
short-term obligations will be designated Moody's Investment Grade ("MIG").
This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the
borrower are uppermost in importance in short-term borrowing, while various
factors of the first importance in long-term borrowing risk are of lesser
importance in the short run.
MIG1/VMIG1 -- Notes bearing this description are of the best quality enjoying
strong protection from established cash flow of funds for their servicing or
from established and broad-based access to the market for refinancing, or
both.
MIG2/VMIG2 -- Notes bearing this designation are of high quality, with margins
of protection ample although not so large as in the preceding group.
MIG3/VMIG3 -- Notes bearing this designation are of favorable quality, with
all security elements accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
STANDARD & POOR'S RATINGS GROUP'S ratings for state and municipal notes are
graded into three categories:
SP-1 -- Notes bearing this designation have a very strong or strong capacity
to pay principal and interest.
SP-2 -- Notes bearing this designation have a satisfactory capacity to pay
principal and interest.
SP-3 -- Notes bearing this designation have a speculative capacity to pay
principal and interest.
A-5
<PAGE>
FREMONT MUTUAL FUNDS, INC.(R)
ANNUAL REPORT
[GRAPHIC]
October 31, 1996
[FREMONT FUNDS LOGO]
<PAGE>
FREMONT FUNDS
A MESSAGE FROM DAVID L. REDO, CHAIRMAN AND CEO OF FREMONT MUTUAL FUNDS
[PICTURE OF DAVE REDO]
Dear Fellow Shareholder:
We are pleased to report on the progress of our nine mutual funds and some
of the exciting recent developments at our firm.
First, we would like to formally introduce Fremont Mutual Funds' new
President, Michael Kosich. Mike joins us from the Benham Group, where as
Senior Vice President and Director of Business Development, he was
instrumental in Benham's dramatic growth in the 1980's and 1990's. Mike brings
extensive investment experience, industry expertise and, most importantly,
commitment to the interests of shareholders of the Fremont Funds to this new
position.
On the performance front, six of the eight Fremont Funds reporting for the
full fiscal year exceeded their designated benchmark returns. That is a
batting average any mutual fund family would be proud of. Portfolio Managers
Bob Kern of Fremont U.S. Micro-Cap Fund and Bill Gross of Fremont Bond Fund
deserve special mention. Fremont U.S. Micro-Cap Fund returned 41.46% compared
to the Russell 2000's 16.61% gain. We just recently learned that for the
two-year period ended November 26, 1996, Fremont U.S. Micro-Cap Fund finished
first in Investor Business Daily's growth fund category with a 114% total
return. Fremont Bond Fund returned 8.18% versus the Lehman Brothers Aggregate
Index's 5.83% gain for fiscal 1996 -- a 40% higher return than this widely
followed bond market index.
As you read through this annual report, you will notice a number of changes
in its format. These changes reflect your responses to the questionnaire we
sent in our last semi-annual report. We have added a Fund Profile which
explains each fund's investment philosophy and methodology in simple
straightforward language. This feature will continue in all subsequent
reports. We have also asked each of our portfolio managers to discuss one or
more current holdings to demonstrate how investment theory is put into
practice. Finally, we have put faces to portfolio management names so that you
can get to know us better.
We are pleased with our funds' success in fiscal 1996, but are reminded of
the many challenges that face us in the year ahead. We are ever mindful of our
mandate -- to preserve and enhance the assets you have entrusted to us. We
pledge our very best efforts on your behalf.
Sincerely,
/s/ David L. Redo
David L. Redo
Chairman & CEO
<PAGE>
FREMONT FUNDS
TABLE OF CONTENTS
FUND PROFILES AND LETTERS TO SHAREHOLDERS
Fremont Global Fund..................................... 2
Fremont International Growth Fund....................... 5
Fremont International Small Cap Fund.................... 8
Fremont Emerging Markets Fund.......................... 11
Fremont U.S. Micro-Cap Fund............................ 14
Fremont Growth Fund.................................... 16
Fremont Bond Fund...................................... 18
Fremont Money Market Fund.............................. 20
Fremont California Intermediate Tax-Free Fund.......... 22
Auditor's Opinion...................................... 24
STATEMENTS OF INVESTMENTS
Fremont Global Fund.................................... 25
Fremont International Growth Fund...................... 30
Fremont International Small Cap Fund................... 32
Fremont Emerging Markets Fund.......................... 35
Fremont U.S. Micro-Cap Fund............................ 36
Fremont Growth Fund.................................... 38
Fremont Bond Fund...................................... 40
Fremont Money Market Fund.............................. 42
Fremont California Intermediate Tax-Free Fund.......... 44
COMBINED FINANCIAL STATEMENTS
Statements of Assets and Liabilities................... 46
Statements of Operations............................... 48
Statements of Changes in Net Assets.................... 50
FINANCIAL HIGHLIGHTS................................... 54
NOTES TO FINANCIAL STATEMENTS.......................... 59
1
<PAGE>
FREMONT FUNDS
FREMONT GLOBAL FUND
The Fremont Asset Allocation Committee, Portfolio Managers for Fremont Global
Fund Dave Redo, Pete Landini, Bob Haddick, Sandie Kinchen, Vince Kuhn
[FUND PROFILE]
Fremont Global Fund offers conservative investors a truly balanced approach to
global investing. The Fund management team understands and appreciates both
the reward potential and perhaps more importantly, the risks of global
investing. Through country diversification, prudent allocation between stocks,
bonds and cash, and disciplined securities selection, the Fund seeks total
returns equaling at least 80% of the global equities markets with only half of
the downside risk as measured by portfolio beta.
The Fund's five-member portfolio management team employs a three-step
investment process. First, economic growth, inflation, and interest rate
forecasts are developed to identify those regions and individual countries
offering the best investment opportunities. Second, financial market data are
examined to determine the most advantageous mix of stocks and bonds. Finally,
individual stocks are selected from those industry groups with the best
earnings growth potential. Fund management favors large, financially healthy
companies with consistent earnings records. Individual bonds are chosen based
on credit quality and opportunistic pricing.
[PHOTO OF A MEETING]
The Fremont Asset Allocation Committee Vince Kuhn, Sandie Kinchen, Dave Redo,
Bob Haddick, Pete Landini
Global investing demands truly professional management. The Fund's portfolio
management team collectively has over 100 years of global investing
experience.
FREMONT GLOBAL FUND INVESTMENT RETURNS
FREMONT MUTUAL FUNDS
GROWTH OF $10,000 CHART
<TABLE>
<CAPTION>
LEHMAN BROS SAL NON-US BOND
FREMONT GLOBAL FUND S&P500 COPR/GOVT INTER EAFE INDEX 100% HEDGED
--------------------- ----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18-NOV-88 $10,000 $10,000 $10,000 $10,000 $10,000
30-NOV-88 0.40% $10,040 2.81% $10,281 -0.34% $9,966 1.61% $10,161 0.04% $10,004
31-DEC-88 0.83% $10,123 1.81% $10,467 0.09% $9,975 0.56% $10,218 0.80% $10,084
31-JAN-89 2.88% $10,415 7.22% $11,223 1.05% $10,080 1.76% $10,398 0.56% $10,141
28-FEB-89 -0.87% $10,325 -2.48% $10,944 -0.42% $10,037 0.51% $10,451 -0.84% $10,055
31-MAR-89 1.75% $10,506 2.34% $11,201 0.43% $10,081 -1.96% $10,246 0.69% $10,125
30-APR-89 1.63% $10,677 5.15% $11,777 2.00% $10,282 0.93% $10,341 0.97% $10,223
31-MAY-89 1.41% $10,828 4.05% $12,254 1.98% $10,486 -5.44% $9,779 0.05% $10,228
30-JUN-89 0.46% $10,878 -0.55% $12,187 2.52% $10,750 -1.68% $9,614 0.87% $10,317
31-JUL-89 4.72% $11,391 8.98% $13,281 2.05% $10,970 12.56% $10,822 2.18% $10,542
31-AUG-89 1.06% $11,512 1.93% $13,538 -1.29% $10,829 -4.50% $10,335 0.09% $10,551
30-SEP-89 -0.44% $11,462 -0.39% $13,485 0.47% $10,880 4.56% $10,806 -0.53% $10,495
31-OCT-89 -0.79% $11,371 -2.36% $13,167 2.12% $11,110 -4.02% $10,371 -0.06% $10,489
30-NOV-89 1.30% $11,519 2.07% $13,439 0.95% $11,216 5.03% $10,893 -0.23% $10,465
31-DEC-89 1.88% $11,735 2.37% $13,758 0.28% $11,247 3.69% $11,295 0.33% $10,500
31-JAN-90 -3.09% $11,373 -6.71% $12,835 -0.64% $11,175 -3.73% $10,874 -1.98% $10,292
28-FEB-90 -0.37% $11,331 1.29% $13,000 0.37% $11,217 -6.97% $10,116 -1.49% $10,138
31-MAR-90 0.38% $11,373 2.62% $13,341 0.13% $11,231 -10.42% $9,062 -0.05% $10,133
30-APR-90 -1.50% $11,203 -2.48% $13,010 -0.35% $11,192 -0.79% $8,990 -0.08% $10,125
31-MAY-90 5.42% $11,810 9.75% $14,278 2.20% $11,438 11.41% $10,016 2.48% $10,376
30-JUN-90 0.27% $11,842 -0.69% $14,180 1.34% $11,591 -0.88% $9,928 0.52% $10,430
31-JUL-90 0.72% $11,927 -0.32% $14,134 1.39% $11,753 1.41% $10,068 0.39% $10,471
31-AUG-90 -4.91% $11,341 -9.04% $12,857 -0.41% $11,704 -9.71% $9,090 -1.35% $10,330
30-SEP-90 -4.13% $10,873 -4.92% $12,224 0.77% $11,795 -13.94% $7,823 -0.56% $10,272
31-OCT-90 1.82% $11,070 -0.37% $12,179 1.16% $11,931 15.59% $9,042 2.87% $10,567
30-NOV-90 2.52% $11,349 6.43% $12,961 1.52% $12,112 -5.90% $8,509 1.64% $10,740
31-DEC-90 1.57% $11,527 2.75% $13,318 1.37% $12,278 1.62% $8,647 1.00% $10,847
31-JAN-91 2.34% $11,797 4.42% $13,907 1.02% $12,403 3.23% $8,926 1.90% $11,053
28-FEB-91 4.00% $12,270 7.16% $14,902 0.80% $12,501 10.72% $9,883 1.47% $11,216
31-MAR-91 0.37% $12,315 2.37% $15,255 0.68% $12,586 -6.00% $9,290 0.05% $11,221
30-APR-91 0.46% $12,371 0.28% $15,297 1.09% $12,724 0.98% $9,381 0.49% $11,276
31-MAY-91 1.91% $12,607 4.30% $15,955 0.61% $12,802 1.04% $9,479 0.59% $11,343
30-JUN-91 -2.77% $12,258 -4.56% $15,228 0.07% $12,811 -7.35% $8,782 -0.54% $11,282
31-JUL-91 2.75% $12,596 4.68% $15,940 1.12% $12,954 4.91% $9,213 0.91% $11,384
31-AUG-91 1.70% $12,810 2.35% $16,315 1.91% $13,202 -2.03% $9,026 1.29% $11,531
30-SEP-91 0.79% $12,911 -1.65% $16,046 1.72% $13,429 5.64% $9,535 1.63% $11,719
31-OCT-91 1.50% $13,105 1.33% $16,259 1.14% $13,582 1.42% $9,671 0.71% $11,802
30-NOV-91 -1.78% $12,872 -4.03% $15,604 1.15% $13,738 -4.67% $9,219 0.32% $11,840
31-DEC-91 6.24% $13,676 11.42% $17,386 2.44% $14,073 5.16% $9,695 1.78% $12,051
31-JAN-92 -0.59% $13,595 -1.85% $17,064 -0.91% $13,946 -2.14% $9,488 0.84% $12,152
29-FEB-92 1.12% $13,747 1.28% $17,282 0.39% $14,001 -3.58% $9,148 0.33% $12,192
31-MAR-92 -2.04% $13,466 -1.95% $16,945 -0.39% $13,946 -6.60% $8,544 -0.57% $12,123
30-APR-92 0.26% $13,501 2.92% $17,440 0.88% $14,068 0.48% $8,585 0.31% $12,160
31-MAY-92 2.01% $13,773 0.53% $17,533 1.55% $14,286 6.69% $9,160 1.08% $12,292
30-JUN-92 -0.86% $13,655 -1.46% $17,277 1.48% $14,498 -4.74% $8,726 0.41% $12,342
31-JUL-92 1.13% $13,808 4.04% $17,975 1.99% $14,786 -2.56% $8,502 0.70% $12,428
31-AUG-92 0.26% $13,844 -2.02% $17,612 1.00% $14,934 6.27% $9,035 0.32% $12,468
30-SEP-92 0.86% $13,964 1.15% $17,815 1.36% $15,138 -1.98% $8,856 1.64% $12,673
31-OCT-92 0.51% $14,035 0.36% $17,879 -1.30% $14,941 -5.25% $8,392 1.71% $12,889
30-NOV-92 1.30% $14,218 3.37% $18,482 -0.38% $14,884 0.94% $8,471 0.04% $12,895
31-DEC-92 1.20% $14,389 1.30% $18,722 1.34% $15,083 0.52% $8,515 0.95% $13,017
31-JAN-93 0.43% $14,450 0.73% $18,858 1.94% $15,375 -0.01% $8,514 1.05% $13,154
28-FEB-93 1.10% $14,609 1.36% $19,115 1.58% $15,618 3.02% $8,771 1.83% $13,395
31-MAR-93 2.10% $14,916 2.15% $19,527 0.40% $15,681 8.72% $9,536 -0.28% $13,358
30-APR-93 0.16% $14,940 -2.45% $19,049 0.80% $15,806 9.49% $10,441 -0.05% $13,351
31-MAY-93 0.99% $15,089 2.67% $19,558 -0.22% $15,771 2.11% $10,662 0.48% $13,416
30-JUN-93 0.82% $15,212 0.33% $19,623 1.57% $16,019 -1.56% $10,495 1.86% $13,666
31-JUL-93 1.38% $15,423 -0.49% $19,526 0.24% $16,058 3.50% $10,863 1.12% $13,819
31-AUG-93 3.07% $15,896 3.78% $20,263 1.59% $16,313 5.40% $11,449 1.97% $14,091
30-SEP-93 1.25% $16,095 -0.74% $20,114 0.41% $16,381 -2.25% $11,192 0.67% $14,185
31-OCT-93 2.47% $16,493 2.05% $20,527 0.27% $16,425 3.08% $11,536 1.30% $14,369
30-NOV-93 -0.99% $16,330 -0.90% $20,342 -0.56% $16,333 -8.74% $10,528 0.84% $14,490
31-DEC-93 5.38% $17,209 1.23% $20,592 0.46% $16,408 7.22% $11,288 1.88% $14,763
31-JAN-94 1.32% $17,436 3.36% $21,284 1.11% $16,590 8.45% $12,242 -0.77% $14,650
28-FEB-94 -2.83% $16,944 -2.71% $20,707 -1.48% $16,344 -0.28% $12,208 -1.96% $14,362
31-MAR-94 -4.10% $16,249 -4.34% $19,808 -1.65% $16,075 -4.31% $11,683 -0.62% $14,273
30-APR-94 0.39% $16,312 1.29% $20,064 -0.68% $15,965 4.24% $12,178 -0.55% $14,194
31-MAY-94 0.39% $16,375 1.63% $20,392 0.07% $15,976 -0.57% $12,108 -0.77% $14,084
30-JUN-94 -1.08% $16,198 -2.47% $19,887 0.01% $15,978 1.41% $12,279 -1.09% $13,930
31-JUL-94 1.95% $16,514 3.31% $20,545 1.44% $16,208 0.96% $12,397 0.69% $14,026
31-AUG-94 2.83% $16,982 4.07% $21,381 0.31% $16,259 2.37% $12,691 -0.95% $13,893
30-SEP-94 -2.16% $16,615 -2.42% $20,864 -0.92% $16,109 -3.15% $12,291 0.30% $13,934
31-OCT-94 0.99% $16,780 2.30% $21,344 -0.01% $16,108 3.33% $12,700 0.34% $13,982
30-NOV-94 -1.98% $16,447 -3.67% $20,560 -0.45% $16,035 -4.81% $12,089 1.30% $14,163
31-DEC-94 0.26% $16,491 1.47% $20,862 0.35% $16,091 0.63% $12,166 0.04% $14,169
31-JAN-95 -1.09% $16,310 2.59% $21,403 1.68% $16,362 -3.84% $11,699 1.06% $14,319
28-FEB-95 1.26% $16,516 3.87% $22,231 2.07% $16,700 -0.29% $11,665 1.27% $14,501
31-MAR-95 2.19% $16,877 2.96% $22,889 0.57% $16,795 6.24% $12,392 2.21% $14,821
30-APR-95 2.14% $17,238 2.95% $23,564 1.24% $17,004 3.76% $12,858 1.60% $15,059
31-MAY-95 3.56% $17,851 3.96% $24,498 3.02% $17,517 -1.19% $12,705 3.20% $15,540
30-JUN-95 1.17% $18,060 2.35% $25,073 0.67% $17,635 -1.75% $12,483 -0.15% $15,517
31-JUL-95 3.03% $18,608 3.33% $25,908 0.01% $17,636 6.23% $13,261 1.19% $15,702
31-AUG-95 -0.21% $18,568 0.23% $25,968 0.91% $17,797 -3.81% $12,756 0.71% $15,813
30-SEP-95 1.56% $18,858 4.17% $27,051 0.72% $17,925 1.95% $13,004 1.64% $16,073
31-OCT-95 0.35% $18,924 -0.28% $26,975 1.11% $18,124 -2.69% $12,654 1.04% $16,240
30-NOV-95 1.47% $19,204 4.40% $28,161 1.31% $18,361 2.78% $13,006 2.04% $16,571
31-DEC-95 2.42% $19,669 1.85% $28,683 1.05% $18,554 4.03% $13,530 0.84% $16,710
31-JAN-96 3.18% $20,294 3.44% $29,669 0.86% $18,714 0.41% $13,586 1.11% $16,896
29-FEB-96 -0.34% $20,225 0.96% $29,955 -1.17% $18,495 0.34% $13,632 -1.12% $16,707
31-MAR-96 0.34% $20,294 0.96% $30,244 -0.51% $18,401 2.12% $13,921 0.97% $16,869
30-APR-96 2.12% $20,725 1.47% $30,688 -0.35% $18,336 2.91% $14,326 0.98% $17,034
31-MAY-96 0.68% $20,865 2.58% $31,480 -0.08% $18,321 -1.84% $14,063 0.05% $17,042
30-JUN-96 0.67% $21,006 0.38% $31,599 1.06% $18,516 0.56% $14,141 0.83% $17,184
31-JUL-96 -2.61% $20,458 -4.42% $30,203 0.30% $18,571 -2.92% $13,728 0.67% $17,299
31-AUG-96 1.31% $20,727 2.11% $30,840 0.08% $18,586 0.22% $13,759 0.76% $17,430
30-SEP-96 3.21% $21,392 5.63% $32,576 1.39% $18,844 2.66% $14,125 2.02% $17,783
31-OCT-96 0.60% $21,520 2.76% $33,475 1.77% $19,178 -1.00% $13,983 1.64% $18,074
110.06% 10.24% $2.16 16.31% $0.85 8.43% $0.41 4.66% $0.72
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, November 18, 1988.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that a
gain or loss may be realized when shares are sold. All performance figures
assume reinvestment of dividends. Management fees and other expenses are
included in the Fund's performance; however, fees and expenses are not
incorporated in the S&P 500 Index, the Morgan Stanley Capital International
EAFE Index, the Salomon Non-U.S. Government Bond Index (currency hedged), or
the Lehman Bros. Intermediate Government/Corporate Bond Index.
2
<PAGE>
FREMONT FUNDS
FREMONT GLOBAL FUND
GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1996
[MAP]
<TABLE>
<S> <C>
CANADA............................. 2.9%
EUROPE............................. 17.6%
UNITED STATES...................... 62.4%
JAPAN.............................. 4.1%
EMERGING MARKETS--LATIN AMERICA.... 0.3%
PACIFIC RIM........................ 8.3%
EMERGING MARKETS--OTHER............ 4.3%
</TABLE>
TO OUR SHAREHOLDERS
In second half fiscal 1996, ended October 31, 1996, Fremont Global Fund
returned 3.84% compared to the Lipper Global Flexible Fund Average's 5.48%.
For full fiscal year 1996, the Fund returned 13.7% versus the Average's 13.6%.
The Fund's overweighting in European, Canadian and Australian bonds and our
9.8% portfolio position in Asian (except Japan) stocks aided performance. The
Fund's relatively high (on average 20-25%) cash position restrained returns.
The Fund's larger than normal cash holdings reflected our concern that
strong global economic growth would lead to higher inflation and interest
rates, thereby increasing financial market risk. Based on economic data
released in early November which indicate more moderate global economic
expansion, low inflation and stable-to-declining interest rates, we are now
comfortable putting more money to work in global stock and bond markets.
In the U.S. stock market, we see attractive, albeit less robust, return
potential. We are forecasting corporate earnings to be up 5% to 10% in the
coming year. We doubt stocks will experience the price/earnings multiple
expansion witnessed in 1996. But, stock market gains in the high single digits
are achievable. With inflationary fear subsiding, U.S. bonds should have a
yield-like return with little net price movement in the coming 12 months.
In Europe, central banks should continue to keep interest rates low. We
believe these low rates will finally induce some broad-based economic momentum
(2 - 2.5% GDP growth). With high unemployment and low industrial capacity
utilization rates, European economies have a lot of room to grow before
rekindling any inflationary pressure. The European monetary union should be
particularly beneficial to countries like Spain, Portugal and Italy, whose
volatile currencies have restrained economic growth and foreign investment. We
will continue to focus our attention on these markets.
The Japanese economy should continue its modest expansion. But, an increase
in the consumption tax scheduled for April 1997 and long-term structural
problems in the banking sector make us neutral on the Japanese stock market.
Extremely low yields on Japanese bonds eliminate them from serious
consideration.
The robust long-term economic growth prospects for Southeast Asian countries
makes this region an attractive investment arena. Substantial declines in
Thailand, Singapore, and Korea have wrung the speculative excess out of these
stock markets, and created some very appealing funda-
(continued on page 4)
3
<PAGE>
FREMONT FUNDS
THE CHANGING FREMONT GLOBAL FUND ASSET MIX
ASSET MIX ASSET MIX ASSET MIX
ASSET CLASS 11/30/96 10/31/96 10/31/95
STOCKS
U.S 38% 30% 35%
FOREIGN 25% 22% 35%
--- --- ---
TOTAL STOCKS 63% 52% 70%
BONDS
U.S 7% 6% 10%
FOREIGN 17% 16% 15%
--- --- ---
TOTAL BONDS 24% 22% 25%
CASH RESERVES 13% 26% 5%
-------------------------------------------------------------
TOTAL 100% 100% 100%
mental values. The decent returns of emerging market indices, up around 10% in
1996, have restored international investor confidence, and with the U.S. and
many European stock markets at record levels, we could see a very favorable
flow of funds into Pacific Rim equities markets in the year ahead. Over the
next several months, we plan to invest some of the Fund's cash reserves into
carefully selected Southeast Asian stocks.
Next we would like to briefly discuss some of the global equities that
appear particularly compelling today. Since things can change rapidly in the
financial markets, it should be noted that the following stocks may or may not
be portfolio holdings at the time you read this report.
When Hong Kong is officially handed over to China on June 30, 1997, the
great uncertainty that has restrained the market in recent years will finally
subside. Citic Pacific will be the most direct beneficiary of the changing of
the guard. A publicly-held company, Citic Pacific is essentially the
investment arm of the Chinese central government. It is aggressively investing
in Hong Kong commercial real estate, transportation systems and finance
companies. Citic is going to replace the British trading companies that have
dominated the Hong Kong economy for a century. The company will make money in
Hong Kong and be one of the biggest commercial conduits to mainland China.
Citic is not a monopoly, but it is going to be one of the biggest and most
influential players in the region.
With its recent acquisition of Morton Thiokol's auto airbag business,
Sweden's Autoliv is now the world's largest player in what will continue to be
a great growth industry. Over the next several years, global auto
manufacturers will be adding front passenger side airbags in their mid-price
lines. Many will follow Volvo and Mercedes' lead by adding side impact airbags
to their luxury lines. This translates into incremental revenues and earnings
for dominant market share companies like Autoliv.
We are pleased to have modestly exceeded our performance benchmark in fiscal
1996 despite the portfolio's relatively large cash holdings. Based on
better-than-expected news on the global inflation and interest rate fronts, we
will be more fully invested in the year ahead. We expect decent absolute
returns from global stock and bond markets in general and particularly good
relative returns from our investments in Southeast Asia. We remain confident
the Fund will continue to produce attractive risk-adjusted returns in global
financial markets.
Sincerely,
/s/Dave Redo /s/Pete Landini
/s/Robert L. Haddick /s/Sandie Kinchen
/s/Vince Kuhn
The Fremont Asset Allocation Committee
Portfolio Managers
Fremont Global Fund
4
<PAGE>
FREMONT FUNDS
FREMONT INTERNATIONAL GROWTH FUND
Andrew L. Pang, Portfolio Manager
Fremont Investment Advisors, Inc.
[PHOTO OF ANDREW PANG]
[FUND PROFILE]
Fremont International Growth Fund invests in international stocks with
superior earnings growth potential. Approximately 40 percent of the portfolio
is generally invested in European stock markets, with the balance devoted to
Asian markets including Japan.
First, fund management employs a top-down approach -- factoring in
economic growth potential, corporate earnings outlook, market valuations,
political and currency stability, and inflation and interest rate trends -- in
making country asset allocation decisions. Then, within each country, the Fund
focuses on those industry groups providing essential products and services --
consumer basics, banking, telecommunications, information technology, power
generation, health care and infrastructure. The Fund favors dominant market
share companies (in some cases monopolies) most likely to produce consistent
earnings growth.
Portfolio Manager Andrew L. Pang is a Chinese American with strong cultural
ties and investment research contacts in Asia. He travels globally on a
regular basis meeting with research analysts and directly with corporate
management to identify investment opportunities.
TO OUR SHAREHOLDERS
For the six months ended October 31, 1996, Fremont International Growth Fund
returned -4.06% compared to -2.39% for the Europe, Australia, and Far East
(EAFE) Index. For full fiscal year 1996, the Fund gained 7.07% versus EAFE's
10.51%.
Feathers in our cap for the second fiscal half include our overweighting in
Hong Kong (7.5% compared to EAFE's 3.5%), and our underweighting in Japan
(23.5% versus EAFE's 40%). The Hong Kong stock market rose to record highs
recently, and over the last six months the Japanese stock market as measured
by the MSCI was off 16.02% including yen-to-dollar currency translation. Black
eyes for the portfolio included an overweighting in other Southeast Asian
markets, which performed poorly
(continued on page 6)
FREMONT INTERNATIONAL GROWTH FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT INT'L GROWTH FUND EAFE
----------------- --------------
<S> <C> <C> <C> <C> <C>
01-MAR-94 $10,000 $10,000
31-MAR-94 -3.66% $9,634 -4.31% $9,569
30-APR-94 0.33% $9,666 4.24% $9,975
31-MAY-94 0.11% $9,676 -0.57% $9,918
30-JUN-94 -1.94% $9,488 1.41% $10,058
31-JUL-94 2.42% $9,718 0.96% $10,155
31-AUG-94 4.73% $10,178 2.37% $10,395
30-SEP-94 -1.44% $10,031 -3.15% $10,068
31-OCT-94 1.98% $10,230 3.33% $10,403
30-NOV-94 -4.80% $9,739 -4.81% $9,903
31-DEC-94 -0.51% $9,689 0.63% $9,965
31-JAN-95 -6.90% $9,020 -3.84% $9,582
28-FEB-95 1.97% $9,198 -0.29% $9,555
31-MAR-95 2.05% $9,386 6.24% $10,151
30-APR-95 3.34% $9,699 3.76% $10,533
31-MAY-95 2.59% $9,950 -1.19% $10,407
30-JUN-95 2.10% $10,159 -1.75% $10,225
31-JUL-95 5.66% $10,734 6.23% $10,862
31-AUG-95 -2.43% $10,473 -3.81% $10,448
30-SEP-95 0.70% $10,546 1.95% $10,652
31-OCT-95 -2.87% $10,243 -2.69% $10,366
30-NOV-95 -0.93% $10,148 2.78% $10,654
31-DEC-95 2.36% $10,387 4.03% $11,083
31-JAN-96 3.45% $10,746 0.41% $11,129
29-FEB-96 1.57% $10,915 0.34% $11,166
31-MAR-96 0.77% $10,999 2.12% $11,403
30-APR-96 3.93% $11,431 2.91% $11,735
31-MAY-96 -0.92% $11,326 -1.84% $11,519
30-JUN-96 1.68% $11,516 0.56% $11,584
31-JUL-96 -5.22% $10,915 -2.92% $11,245
30-AUG-96 1.74% $11,104 0.22% $11,270
30-SEP-96 2.37% $11,368 2.66% $11,570
31-OCT-96 -3.53% $10,967 -1.00% $11,454
15.16% 6.24% 15.84% 6.50%
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, March 1, 1994.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the Morgan Stanley Capital International EAFE
Index.
5
<PAGE>
FREMONT FUNDS
FREMONT INTERNATIONAL GROWTH FUND
GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1996
[MAP]
<TABLE>
<CAPTION>
<S> <C>
CANADA........................... 0.3%
UNITED KINGDOM................... 8.4%
CONTINENTAL EUROPE............... 31.0%
UNITED STATES.................... 3.5%
JAPAN............................ 23.5%
HONG KONG/SINGAPORE/MALAYSIA..... 11.2%
OTHER EMERGING MARKETS:
INCLUDING THAILAND, INDONESIA,
THE PHILIPPINES, TAIWAN AND
SOUTH KOREA.................... 18.9%
AUSTRALIA/NEW ZEALAND............ 3.2%
</TABLE>
relative to European markets. We are currently seeing a rebound in some of
these markets. Portfolio performance was also restrained by our underweighting
in the United Kingdom (8.4% versus EAFE's 16%), even though our UK stocks
outperformed the UK index 16% to 14%.
Looking ahead, we believe our overweighting in Hong Kong in particular and
Southeast Asia in general will serve us well. We are forecasting 6 - 8% real
GDP growth in Southeast Asia compared to 2 - 2.5% growth in Europe. In
addition, after three years of lackluster performance relative to European
stock markets, Southeast Asian stock market valuations are more than
reasonable. Our current asset allocation of approximately 54% in Asia (23.5%
in Japan and 30% spread out among eight other Southeast Asian markets), and
about 40% in Europe, reflects our expectations for much better relative
returns for Southeast Asian stocks.
Bearing in mind we are committed to no stock forever, let's talk about a few
of our current favorites. Datacraft Asia (Singapore) is in the information
technology upgrade business serving companies throughout Southeast Asia. They
have developed a particularly promising niche in China, where they recently
received six contracts to upgrade telecommunications systems in corporate
regional offices. We are looking for 30 - 35% earnings growth in the next two
years. This rapid earnings growth could be extended well into the future if
Datacraft can further expand its presence in China.
In the United Kingdom, we have found an intriguing monopolistic company.
Railtrack, created via an initial public offering in May 1996, is part of the
privatization of the United Kingdom's transportation system. Railtrack owns
all the railroad infrastructure and is paid by railroad companies to maintain
and improve railway tracks and station
6
<PAGE>
FREMONT FUNDS
houses throughout the country. Because of long-term contracts with the
railroad companies, Railtrack's revenues are very predictable. The company is
now in the process of aggressively cutting costs, which will improve margins
and earnings. Railtrack stock has performed well and we believe it will
continue to rise on accelerating earnings.
Going forward, we believe our commitment to Southeast Asian markets will be
more adequately rewarded. Our focus on dominant market share essential service
companies should continue to contribute to our stock-picking success. We thank
you for your appreciation of our investment discipline and look forward to a
financially rewarding year ahead.
Sincerely,
/s/Andrew L. Pang
Andrew L. Pang
Portfolio Manager
Fremont International Growth Fund
<TABLE>
<CAPTION>
FREMONT INTERNATIONAL GROWTH FUND
SECTOR ALLOCATION AS OF OCTOBER 31, 1996
<S> <C>
SHORT TERM SECURITIES (3.6%)
TECHNOLOGY (14.1%)
FINANCIAL SERVICES (11.4%)
HEALTH CARE (10.6%)
UTILITIES (8.0%)
CONSUMER NON-DURABLES (7.0%)
CONSUMER SERVICES (6.7%)
CAPITAL GOODS (6.6%)
CONSUMER DURABLES (6.6%)
OTHER (25.4%)
</TABLE>
7
<PAGE>
FREMONT FUNDS
FREMONT INTERNATIONAL SMALL CAP FUND
Dr. Gary L. Bergstrom, Portfolio Manager
Acadian Asset Management, Inc.
[PHOTO OF GARY BERGSTROM]
[FUND PROFILE]
Fremont International Small Cap Fund's investment thesis is simple:
extensive statistical evidence shows that superior long-term returns are
achieved by investing in fundamentally undervalued small company stocks. The
Fund's Sub-Advisor, Acadian Asset Management, Inc., has a unique financial
database of approximately 20,000 companies in over 50 countries. This database
includes up to 25 years of historical earnings, dividends, book values, stock
prices, country indices, and inflation and interest rate statistics for
individual countries.
After screening stocks through numerous fundamental value models, country
and currency valuation is factored in, producing a relative attractiveness
ranking ("alpha ranking") for all the stocks in this extensive global
universe. The Fund invests in those highly ranked stocks judged to have above
average performance potential. Country diversification is maintained to reduce
portfolio risk.
Portfolio Manager Dr. Gary L. Bergstrom, (President and Chief Investment
Officer of the Fund's Sub-Advisor, Acadian Asset Management, Inc.) has more than
25 years of professional investment experience in global markets. He has
personally developed many of the quantitative techniques employed in Acadian's
valuation models.
TO OUR SHAREHOLDERS
For the six months ended October 31, 1996, Fremont International Small Cap
Fund was down 1.3% compared to the Salomon Brothers Extended Market Index of
Europe and Pacific Countries' (EMI EPAC) loss of 3.4%. For the full fiscal
year, the Fund gained 13.7% versus EMI EPAC's 12.8%. The Fund outperformed the
Lipper International Small Company Average by 0.6% for the year.
In the second half of fiscal 1996, the Fund achieved superior relative
returns from Japanese stocks, as signs of economic recovery boosted the
smaller, economically-sensitive companies in the
FREMONT INTERNATIONAL SMALL CAP FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT INTERNATIONAL SMALL CAP FUND SOLOMON EMI INDEX
------------------------------------ -----------------
<S> <C> <C> <C> <C>
30-JUN-94 $10,000 $10,000
31-JUL-94 1.30% $10,130 1.14% $10,114
31-AUG-94 2.37% $10,370 1.06% $10,221
30-SEP-94 -4.34% $9,920 -2.86% $9,929
31-OCT-94 -0.60% $9,860 1.81% $10,109
30-NOV-94 -5.58% $9,310 -6.24% $9,478
31-DEC-94 -3.11% $9,020 1.34% $9,605
31-JAN-95 -5.32% $8,540 -3.25% $9,293
28-FEB-95 -0.94% $8,460 -1.46% $9,157
31-MAR-95 2.25% $8,650 4.25% $9,546
30-APR-95 3.47% $8,950 3.00% $9,833
31-MAY-95 2.57% $9,180 -1.75% $9,660
30-JUN-95 -0.98% $9,090 -1.23% $9,542
31-JUL-95 5.61% $9,600 5.83% $10,098
31-AUG-95 -2.19% $9,390 -2.53% $9,842
30-SEP-95 0.43% $9,430 0.78% $9,919
31-OCT-95 -3.76% $9,075 -2.88% $9,634
30-NOV-95 -0.78% $9,004 1.06% $9,736
31-DEC-95 2.95% $9,270 3.83% $10,109
31-JAN-96 6.47% $9,870 1.78% $10,288
29-FEB-96 1.75% $10,043 1.56% $10,449
31-MAR-96 1.92% $10,236 2.30% $10,689
30-APR-96 2.09% $10,450 5.26% $11,252
31-MAY-96 0.10% $10,460 -0.81% $11,160
30-JUN-96 -1.17% $10,338 0.01% $11,162
31-JUL-96 -2.85% $10,043 -3.78% $10,740
30-AUG-96 1.21% $10,165 1.01% $10,848
30-SEP-96 0.50% $10,216 0.56% $10,909
31-OCT-96 1.00% $10,318 0.00% $10,909
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, June 30, 1994.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that a
gain or loss may be realized when shares are sold. All performance figures
assume reinvestment of dividends. Management fees and other expenses are
included in the Fund's performance; however, fees and expenses are not
incorporated in the Salomon Brothers Extended Market Index.
8
<PAGE>
FREMONT FUNDS
FREMONT INTERNATIONAL SMALL CAP FUND
GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1996
[MAP]
<TABLE>
<S> <C>
CANADA........................................ 3.3%
IRELAND....................................... 0.9%
CONTINENTAL EUROPE............................ 19.5%
UNITED STATES................................. 1.1%
UNITED KINGDOM................................ 12.7%
JAPAN......................................... 17.1%
HONG KONG/SINGAPORE/MALAYSIA.................. 10.5%
EMERGING MARKETS: LATIN AMERICA............... 10.0%
OTHER EMERGING MARKETS:
INCLUDING SOUTH KOREA, TURKEY,
CZECH REPUBLIC, PORTUGAL, GREECE,
CHINA AND OTHERS............................ 23.5%
AUSTRALIA/NEW ZEALAND ........................ 1.4%
</TABLE>
portfolio. Investments in smaller markets like Italy, Spain, New Zealand and
Malaysia were rewarding, as was successful stock selection in emerging markets
including Greece, China, Mexico and Turkey. The Fund's overweighting in the
strong Brazilian stock market was also a performance positive. The portfolio's
underweighting in the United Kingdom and the relative underperformance of
portfolio holdings in France restrained Fund returns.
The Fund's portfolio characteristics remain consistent with our investment
thesis that over the longer term, superior returns are generated through
investing in fundamentally undervalued small cap stocks.
As the following chart indicates, our bottom-up stock selection discipline
has resulted in attractive portfolio valuations and higher yield relative to
three international benchmarks -- EAFE, for large cap developed nations;
EMI-EPAC, for small cap developed nations; and IFC Investable, for emerging
countries.
(continued on page 10)
PORTFOLIO VALUATIONS AND YIELDS
<TABLE>
<CAPTION>
PRICE/ PRICE/ CURRENT NEXT YEAR PRICE/CASH
BOOK SALES P/E P/E EARNINGS YIELD
---- ----- ---- ---- -------- -----
<S> <C> <C> <C> <C> <C> <C>
EAFE 2.2 0.8 20.8 18.6 9.0 2.1%
EMI-EPAC 1.8 0.6 21.0 17.5 7.9 2.0%
IFC INVESTABLE 1.7 1.4 15.0 12.4 9.1 2.0%
FREMONT 1.0 0.3 10.7 9.0 4.3 4.2%
</TABLE>
9
<PAGE>
FREMONT FUNDS
Based on our value-oriented stock selection criteria and the expected return
forecasts of our country and currency models, the United Kingdom and Canadian
markets are among those with superior relative investment potential. The
United Kingdom market should continue to benefit from steady economic growth,
low inflation, and strong corporate earnings, all boons to smaller
value-oriented companies. We believe the recent uptick in UK interest rates
represents a modest adjustment rather than a change of trend in relatively
relaxed monetary policy.
We find the U.S. market relatively overvalued at present, with Canada
appearing more attractive in aggregate. Even though the Canadian market is up
30% compared to the U.S. market's 23.8% gain over the last year, it remains
fundamentally cheaper. The Canadian macro-economic outlook is positive, with
controlled inflation, strong foreign capital in-flows, and a government
committed to deficit reduction.
With the IFC Investable Index, a widely-used benchmark for emerging market
performance, up 10.4% year-to-date through October 1996, the Fund's 33%
commitment to emerging market stocks has been productive while providing
diversification benefits that make this asset class a valuable component of
any broad international equities strategy. The emerging markets in aggregate
are quite cheap relative to the U.S. and other developed country equities
markets. With good year-to-date 1996 performance renewing investor confidence
in the emerging markets and the U.S. market being perceived as increasingly
risky at its current lofty levels, we anticipate a strong international flow
of funds into the emerging markets in the year ahead.
In the Pacific Rim, the Hong Kong market is fundamentally attractive, as is
the Thailand market, which is down 30% over the last year. Among emerging
markets in Latin America, Brazil remains our favorite, with an aggregate
price/book value ratio among the lowest in the world. Earnings, particularly
for the utilities sector, which has received a government-approved rate
increase, look good. The government's privatization program is attracting
additional foreign capital and providing more opportunities in the market.
Mexico has delivered strong returns year-to-date, making it somewhat less
attractive on a relative valuation basis despite a still favorable political
and economic outlook.
In our semi-annual report to you, we covered a lot of ground on developed
and emerging market valuations and prospects. This is relevant to our
investment outlook, but it is driven by our individual stock selection
process. To give you a feel for our stock picking discipline, we will also
briefly discuss an individual stock in the portfolio. Bearing in mind that
things can change in a hurry, we add the caveat that the company we are
writing about today may or may not be a timely investment by the time you read
this.
Hollandsche Beton (HBG) is a Dutch construction company involved in
industrial, commercial and public works from housing and civil development
projects to road and infrastructure building. The stock's price has fallen to
attractive levels as some analysts are predicting that slower government
spending in the United Kingdom and Germany might limit HBG's prospects. Based
on its currently low price/earnings ratio and other fundamental value
criteria, and in view of its strong cash position being used for a
well-planned expansion into new markets, Hollandsche Beton is our brand of
attractive investment opportunity.
In closing, the short-to-intermediate performance of Fremont International
Small Cap Fund will always be determined by a number of variables --
macro-economic and market trends within the countries in which we invest, the
performance of small cap stocks relative to bigger cap stocks within each
market, and most importantly, the effectiveness of our stock-picking
discipline. Longer term, we believe international small cap value investing
will produce attractive absolute and relative rates of return for equities
investors. We thank you for your appreciation of our investment philosophy and
our investment talents. Be assured, we continue to work diligently on your
behalf.
Sincerely,
/S/Gary L. Bergstrom
Dr. Gary L. Bergstrom
Portfolio Manager
Fremont International Small Cap Fund
10
<PAGE>
FREMONT FUNDS
FREMONT EMERGING MARKETS FUND
Henry L. Thornton, Portfolio Manager
Credit Lyonnais International Asset Management (HK) Limited
[PHOTO OF HENRY THORNTON]
[FUND PROFILE]
Around the globe, countries that once relied on agriculture, natural
resources or low-level manufacturing are developing sophisticated,
high-growth, export-driven industrial economies. These emerging market
countries offer a wealth of opportunity for experienced professional
investors.
Fremont Emerging Markets Fund employs a bottom-up stock picking approach in
building a diversified portfolio of emerging market companies. The Fund
focuses on the stocks of companies with rapid, sustainable earnings growth
trading at reasonable market valuations. Portfolio risk is further reduced by
country diversification. Fund management establishes a country allocation
policy and each regional investment team conducts rigorous fundamental
research, including company visits, to select individual stocks within each
market. Liquidity is also carefully monitored.
Portfolio Manager Henry Thornton (Investment Director of Sub-Advisor Credit
Lyonnais International Asset Management, CLIAM) is widely recognized as an
expert in emerging market investing. Headquartered in London, with offices in
Hong Kong and Singapore, CLIAM's experienced team of analysts is
geographically well positioned for "hands-on" emerging market research.
TO OUR SHAREHOLDERS
From its June 24, 1996 inception, the Fremont Emerging Markets Fund declined
3.12% compared to a 6.19% loss for the Morgan Stanley Capital International
Emerging Markets Free (MSCI-EMF) Index and a 4.45% loss for the IFC Investable
Index over the June 30 - October 31, 1996 time period.
At this early juncture, performance comparisons between our four-month-old
mutual fund and appropriate indices are premature and largely immaterial. We
have just begun planting the seeds we hope to harvest in the years ahead. We
are progressing slowly, partially due to short-term caution regarding the
emerging markets, (certainly justified by poor performance of emerging market
(continued on page 12)
FREMONT EMERGING MARKETS FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT Emerging Markets Fund MSCI Emerging Markets Free Index
<S> <C> <C> <C> <C>
----------------------------- ---------------------------------------
24-JUN-96 $10,000 $10,000
31-JUL-96 -4.40% $9,560 -4.44% $9,556
30-AUG-96 2.09% $9,760 -6.83% $8,903
30-SEP-96 1.64% $9,920 2.56% $9,131
31-OCT-96 -2.34% $9,688 -2.67% $8,887
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, June 24, 1996.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that a
gain or loss may be realized when shares are sold. All performance figures
assume reinvestment of dividends. Management fees and other expenses are
included in the Fund's performance; however, fees and expenses are not
incorporated in the MSCI Emerging Markets Free Index.
11
<PAGE>
FREMONT FUNDS
FREMONT EMERGING MARKETS FUND
GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1996
[MAP]
<TABLE>
<S> <C>
UNITED STATES............................ 29.4%
PACIFIC RIM: INCLUDING
HONG KONG, MALAYSIA,
AND TAIWAN............................. 37.1%
EMERGING MARKETS: INCLUDING
INDONESIA, THAILAND, THE PHILIPPINES
TURKEY, SOUTH AFRICA, INDIA,
RUSSIA AND CHINA....................... 33.5%
</TABLE>
indices over the last four months), but more particularly, consistent with our
risk-averse stock picking discipline.
Before we address investment issues specific to the Fund, let's step back
and review the still embryonic history of emerging market investing. In the
early 1990's, the global investment community "discovered" the emerging
markets. Buoyed by strong cash in-flows, the emerging markets took off,
creating the speculative excess that culminated in a major peak in Asia in
first quarter 1994 and in Latin America in third quarter 1994. Since then,
emerging markets in aggregate have performed quite poorly relative to the
robust returns from the U.S. and major European stock markets. From 1994
through third quarter 1996, the IFC Investable Index declined 18% and the
MSCI-EMFI lost 12%.
Now, back to the future. The basic investment thesis that first attracted
investors to the emerging markets -- rapidly expanding economies producing
superior corporate earnings growth and appealing long term investment returns
- -- remains quite valid. Today, you can buy this growth at very reasonable
prices. At year end 1993, emerging markets price/earnings ratios approximated
30. Today, aggregate emerging market P/E's are around 20. In short, you no
longer have to pay a large premium for growth. We suggest this spells
opportunity and foreshadows significantly better returns for emerging market
investors over the next several years.
As you know, due to our extensive investment experience in Southeast Asia
(we had our research teams in place in the mid 1980's, long before most of our
competitors), the Fund is structurally biased to these emerging markets. We
are building research capacity in Eastern Europe and Latin America and
recently made our first investment in Russia -- Mosenergo, the electric
utility in Moscow. Going forward, we expect to have the Fund portfolio 70 -
75% invested in Southeast Asia with 10 - 15% of assets in each of Eastern
Europe and Latin America.
Rather than commenting on the short-term prospects for individual emerging
markets or briefly reviewing portfolio holdings, we thought it would be more
constructive to discuss an individual stock that demonstrates our
"growth-at-a-price" investment discipline. We want to buy well-managed
companies with superior earnings potential. We do not want to
12
<PAGE>
FREMONT FUNDS
make the classic mistake of overpaying for them.
Yageo, a Taiwanese manufacturer of the resistors used in cellular
telephones, is our kind of investment opportunity. Yageo is one of a handful
of companies in the world that makes these resistors (there are approximately
130 of these tiny items in one wireless telephone), and the only non-Japanese
company in the business. The stock had been under some pressure as the Yen's
decline has made their Japanese counterparts more price competitive. However,
with Japanese monetary authorities signaling that the Yen has fallen far
enough, Yageo should be able to once again increase its market share in this
fast-growing business. Currently priced around 16 times earnings, which we
believe will grow 20 - 30% annually, Yageo stock offers superior growth at a
discount price.
In this, our first letter to shareholders, we've provided a brief history of
emerging market investing, discussed current emerging market valuations, and
profiled a portfolio holding that demonstrates our stock picking discipline.
In future letters to you, we will focus on the prospects for individual
emerging markets and detail more of our portfolio holdings. In closing, we
reaffirm our conviction that disciplined emerging market investing will
produce attractive long-term returns for growth-oriented investors.
Sincerely,
/s/Henry Thornton
Henry Thornton
Portfolio Manager
Fremont Emerging Markets Fund
13
<PAGE>
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FREMONT MUTUAL FUNDS INC
PO BOX 193663
SAN FRANCISCO CA 94119-9747
<PAGE>
ATTENTION!
FREMONT U.S. MICRO-CAP SHAREHOLDERS
INVEST IN THE SMALLEST COMPANIES THROUGHOUT THE WORLD
WITH THE FREMONT INTERNATIONAL SMALL CAP FUND.*
[ ] YES! I'd like to find out how investing in international small cap stocks
can help me take advantage of the higher-than-average growth potential of
small companies around the world, while diversifying my investment portfolio.
Please send me more information on the Fremont International Small Cap Fund,
including a prospectus which contains more information about the fees and
expenses of the Fund. I will read the prospectus carefully before I invest.
Name (first, middle initial, last):____________________________________________
Address:_______________________________________________________________________
Apt. # or P.O. Box:____________________________________________________________
City:______________________________ State:_____ Zip:___________________________
Daytime Phone:_________________________________________________________________
*There are risks of investing in a fund of this type which invests in newly
emerging foreign companies which may be subject to competitive conditions in
the industry, limited earnings history, reliance on one or a limited number of
products, erratic market conditions, economic and political instability, and
fluctuations in currency exchange rates.
Distributed by Funds Distributor, Inc., 50 Beale Street, Suite 100, San
Francisco, CA 94105
<PAGE>
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ON OUR FUNDS TO ANYONE ELSE?
We often get requests from shareholders to send information to other people
they know who are looking for no-load investments from top managers. If you
would like us to send a Fremont Funds brochure and prospectus to someone that
you know, just complete this postage-paid card and drop it in the mail.
[ ] PLEASE SEND A FREMONT FUNDS BROCHURE AND PROSPECTUS TO:
Name (first, middle initial, last):____________________________________________
Address:_______________________________________________________________________
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Distributed by Funds Distributor, Inc., 50 Beale Street, Suite 100, San
Francisco, CA 94105
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[FREMONT FUNDS LOGO]
FREMONT MUTUAL FUNDS INC
PO BOX 193663
SAN FRANCISCO CA 94119-9747
<PAGE>
FREMONT FUNDS
FREMONT U.S. MICRO-CAP FUND
Robert E. Kern, Portfolio Manager
Morgan Grenfell Capital Management, Inc.
[PHOTO OF ROBERT E. KERN]
[FUND PROFILE]
The U.S. micro-cap stock market (stocks with market capitalizations in the
bottom 5% of the equities market) is a breeding ground for
entrepreneurially-managed companies with exceptional growth prospects. With
minimal Wall Street research coverage and low institutional ownership,
micro-cap stocks represent the least efficient sector of the domestic equities
market. This inefficiency creates attractive investment opportunities for the
research-driven stock pickers managing Fremont U.S. Micro-Cap Fund.
Since the investment potential of micro-cap stocks is largely determined by
the business prospects for individual companies rather than macro-economic
trends, the Fund's focus is on bottom-up stock selection. Fund management
analyzes financial statements, the company's competitive position, and meets
with key corporate decision makers to discuss strategies for future growth.
The Fund's goal is to find "winners" early in their growth cycle and,
importantly, to minimize fundamental investment mistakes.
Successful micro-cap investing also involves minimizing transaction costs.
The Fund's dedicated traders work hand-in-hand with the portfolio management
team on execution strategies to enhance the Fund's performance.
Robert E. Kern (Executive Vice President of the Fund's Sub-Advisor, Morgan
Grenfell Capital Management) is nationally recognized as a pioneer and leading
practitioner of micro-cap research and portfolio management.
TO OUR SHAREHOLDERS
For the six months ended October 31, 1996, Fremont U.S. Micro-Cap Fund
returned 2.45% compared to the Russell 2000's -1.53%. For full fiscal year
1996, the Fund gained 41.46% versus the Index's 16.61%. Over the 24 months
ending November 26, 1996, the Fund's performance ranked first in Investor's
Business Daily's Growth
FREMONT U.S. MICRO-CAP FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT U.S. MICRO-CAP FUND RUSSELL 2000 INDEX
---------------------------
<S> <C> <C> <C> <C>
30-JUN-94 $10,000 $10,000
31-JUL-94 2.20% $10,220 1.64% $10,164
31-AUG-94 0.98% $10,320 5.57% $10,730
30-SEP-94 1.45% $10,470 -0.34% $10,694
31-OCT-94 -1.05% $10,360 -0.40% $10,651
30-NOV-94 -3.48% $10,000 -4.04% $10,221
31-DEC-94 1.50% $10,150 2.68% $10,494
31-JAN-95 1.97% $10,350 -1.26% $10,362
28-FEB-95 3.10% $10,671 4.16% $10,793
31-MAR-95 4.23% $11,122 1.71% $10,978
30-APR-95 2.43% $11,392 2.22% $11,222
31-MAY-95 4.57% $11,913 1.72% $11,415
30-JUN-95 4.88% $12,495 5.19% $12,007
31-JUL-95 6.82% $13,346 5.76% $12,699
31-AUG-95 6.31% $14,188 2.07% $12,961
30-SEP-95 2.54% $14,549 1.79% $13,193
31-OCT-95 -1.24% $14,368 -4.48% $12,602
30-NOV-95 4.53% $15,020 4.21% $13,132
31-DEC-95 4.10% $15,635 2.64% $13,479
31-JAN-96 3.44% $16,174 -0.11% $13,465
29-FEB-96 6.66% $17,250 3.12% $13,884
31-MAR-96 3.24% $17,810 2.04% $14,167
30-APR-96 11.40% $19,839 5.35% $14,924
31-MAY-96 8.40% $21,506 3.94% $15,512
30-JUN-96 -3.76% $20,699 -4.11% $14,875
31-JUL-96 -8.70% $18,897 -8.73% $13,576
30-AUG-96 6.14% $20,057 5.81% $14,364
30-SEP-96 4.75% $21,009 3.91% $14,925
31-OCT-96 -3.25% $20,326 -1.54% $14,695
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, June 30, 1994.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the Russell 2000 Index.
14
<PAGE>
FREMONT FUNDS
Fund category with a 114% total return.
If I may borrow from Charles Dickens, fiscal 1996 was "A Tale of Two
Halves." In the first half, smaller company stocks as a group performed well
and our micro-cap portfolio did even better as evidenced by the Fund's strong
returns relative to the benchmark index. Smaller company stocks got slammed in
June - July, and rebounded, but did not keep pace with bigger cap stocks from
August through October. Peak to trough, the Fund was down 15.7% during the
summer correction, but we managed a relatively impressive comeback to finish
the second half of 1996 in the black. We are as proud of this performance in a
challenging market environment as we were of our superior results in the first
half's more favorable investment climate.
After market shocks such as we experienced this summer, investor confidence
generally returns to the big cap sector first. This is reflected in the strong
performance of the S&P 500 relative to the Russell 2000 in recent months.
Today, the dust has cleared and we expect investors to once again gravitate to
smaller company stocks. With the caution that rising stock prices or
unexpected fundamental deterioration can rather quickly change our opinion on
any given portfolio holding, we will briefly review some of our current
favorites.
Micrel has carved a niche for itself as a leading supplier of high
performance analog semiconductors. Micrel's products find application in
laptop computers, cellular phones and PC memory card (PCMCIA) sockets. These
fast-growing markets and a focused product strategy have driven revenues from
less than $20 million in 1993 to a current annualized rate of over $70
million. We are forecasting a continuation of strong growth for Micrel and
revenues could accelerate as the new digital Personal Communications Services
(PCS) systems are built over the next few years. Micrel's growth potential,
focused business strategies, financial strength and attractive valuation
support its #1 ranking among the Fund's technology holdings.
LodgeNet is the fastest growing company in hotel room interactive media
business. In hotels with LodgeNet systems, you can order movies whenever you
want to watch them rather than at scheduled intervals. Your kids can also play
Nintendo games. LodgeNet systems generate approximately $23 in revenues per
room per month, which translates into a short two-year payback period for
hotel operators. The company's modular technology also makes its systems more
cost-efficient for smaller hotels, which have generally not offered
interactive media services. As existing hotel contracts come up for re-bid,
LodgeNet should continue to gain market share from its primary competitor, On
Command (the reincarnation of Spectravision, which recently emerged from
bankruptcy). With its current rapid expansion, LodgeNet is a cash flow, rather
than an earnings story. We expect cash flow to grow 20 - 25% annually for the
foreseeable future. Bottom-line oriented management (they don't overbid for
contracts) is doing a terrific job building value that will ultimately
translate into strong earnings growth.
Daisytek is the leading U.S. wholesale distributor of computer office
supplies and accessories. This is a "razorblade" company that wholesales all
the consumable products that have to be replaced on a fairly regular basis. We
believe that Daisytek will grow earnings at around 20% annually, with the
possibility of accelerating earnings as the company expands globally (they
recently opened offices in Latin America and made an acquisition in Australia
to serve the Pacific Rim markets). Currently trading at 14 times our 1997
earnings estimates, Daisytek remains fundamentally appealing.
In closing, we are very pleased with the Fund's fiscal 1996 performance. We
can't promise we'll deliver 40% plus returns every year. However, we are
confident that our intensive research efforts in selecting successful
micro-cap companies will generate superior long-term investment returns.
Sincerely,
/s/Robert E. Kern
Robert E. Kern
Portfolio Manager
Fremont U.S. Micro-Cap Fund
15
<PAGE>
FREMONT FUNDS
FREMONT GROWTH FUND
W. Kent Copa, CFA, Portfolio Manager
Fremont Investment Advisors, Inc.
[PHOTO OF W. KENT COPA]
[FUND PROFILE]
Fremont Growth Fund invests principally in large capitalization U.S. stocks
with superior earnings growth prospects. The Fund also invests selectively in
mid-cap companies with favorable earnings dynamics. The goal is to
consistently outperform the Standard & Poor's 500 Index (S&P 500). Extensive
statistical evidence reveals a direct relationship between the performance of
stocks in selected industry groups during the varying stages of the economic
cycle. For example, food and drug stocks, which generally produce consistent
earnings growth throughout the business cycle, tend to perform well in a
sluggish economy. Auto, energy, and banking company earnings and stock prices
tend to grow faster when the economy gains momentum.
Fremont Growth Fund utilizes sophisticated quantitative models to forecast
macro-economic trends and to identify those industry groups providing the best
relative investment potential. The stock selection process involves
identifying leading companies in each industry group with consistent earnings
growth records and reasonable valuations.
This "sector rotation" style is widely utilized by large institutional
investors. Fremont Growth Fund offers this sophisticated investment discipline
to mutual fund shareholders.
TO OUR SHAREHOLDERS
For the second half of the fiscal year ended October 31, 1996, Fremont
Growth Fund returned 10.81% compared to the S&P 500's 9.08%. For full fiscal
year 1996, the Fund gained 22.1% versus the S&P 500's 24.1%. Despite modestly
underperforming the S&P 500, our results compare quite favorably to the 18.5%
average return for the Lipper Growth Fund Average.
Fund performance benefitted from our overweighting in the technology,
consumer goods, and healthcare sectors for much of second fiscal half 1996.
Performance was restrained by underweighting in the financial service and
energy sectors.
At the end of September, we overweighted
FREMONT GROWTH FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT GROWTH FUND S&P 500
------------------- ---------------------
<S> <C> <C> <C> <C> <C>
14-AUG-92 $10,000 $10,000
31-AUG-92 -1.01% $9,899 -1.27% $9,873
30-SEP-92 1.93% $10,091 1.15% $9,987
31-OCT-92 1.08% $10,200 0.36% $10,023
30-NOV-92 4.46% $10,655 3.37% $10,361
31-DEC-92 1.57% $10,822 1.30% $10,495
31-JAN-93 1.22% $10,954 0.73% $10,572
28-FEB-93 -1.02% $10,843 1.36% $10,716
31-MAR-93 1.50% $11,005 2.15% $10,947
30-APR-93 -3.60% $10,609 -2.45% $10,679
31-MAY-93 2.40% $10,863 2.67% $10,964
30-JUN-93 0.75% $10,945 0.33% $11,000
31-JUL-93 -0.09% $10,935 -0.49% $10,946
31-AUG-93 3.36% $11,302 3.78% $11,359
30-SEP-93 0.99% $11,414 -0.74% $11,276
31-OCT-93 0.80% $11,506 2.05% $11,507
30-NOV-93 -2.04% $11,270 -0.90% $11,404
31-DEC-93 2.18% $11,516 1.23% $11,544
31-JAN-94 3.40% $11,907 3.36% $11,932
28-FEB-94 -3.11% $11,536 -2.71% $11,608
31-MAR-94 -5.27% $10,929 -4.34% $11,104
30-APR-94 1.13% $11,052 1.29% $11,248
31-MAY-94 0.37% $11,093 1.63% $11,432
30-JUN-94 -3.35% $10,722 -2.47% $11,149
31-JUL-94 4.04% $11,155 3.31% $11,518
31-AUG-94 5.10% $11,724 4.07% $11,986
30-SEP-94 -2.12% $11,476 -2.42% $11,696
31-OCT-94 1.98% $11,704 2.30% $11,965
30-NOV-94 -3.15% $11,335 -3.67% $11,526
31-DEC-94 2.02% $11,563 1.47% $11,695
31-JAN-95 0.40% $11,609 2.59% $11,998
28-FEB-95 3.25% $11,987 3.87% $12,463
31-MAR-95 2.67% $12,307 2.96% $12,832
30-APR-95 2.14% $12,570 2.95% $13,210
31-MAY-95 3.28% $12,982 3.96% $13,733
30-JUN-95 4.93% $13,622 2.35% $14,056
31-JUL-95 4.45% $14,228 3.33% $14,524
31-AUG-95 1.37% $14,423 0.23% $14,558
30-SEP-95 3.89% $14,983 4.17% $15,164
31-OCT-95 0.08% $14,995 -0.28% $15,122
30-NOV-95 3.22% $15,477 4.40% $15,787
31-DEC-95 -0.18% $15,449 1.85% $16,079
31-JAN-96 2.91% $15,898 3.44% $16,633
29-FEB-96 1.22% $16,092 0.96% $16,793
31-MAR-96 -0.38% $16,032 0.96% $16,954
30-APR-96 3.03% $16,517 1.47% $17,204
31-MAY-96 3.45% $17,087 2.58% $17,647
30-JUN-96 0.57% $17,184 0.38% $17,714
31-JUL-96 -4.87% $16,347 -4.42% $16,932
30-AUG-96 1.78% $16,638 2.11% $17,289
30-SEP-96 7.29% $17,852 5.63% $18,262
31-OCT-96 2.53% $18,304 2.76% $18,766
71.84% 14.99% 77.14% 15.89%
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, August 14, 1992.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the S&P 500 Index.
16
<PAGE>
FREMONT FUNDS
FREMONT GROWTH FUND
SECTOR DIVERSIFICATION AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL SERVICES (23.0%)
ENERGY (15.0%)
TECHNOLOGY (13.7%)
UTILITIES (10.5%)
HEALTH CARE (5.7%)
RETAIL (4.3%)
CAPITAL GOODS (3.2)
SHORT TERM SECURITIES (2.3%)
OTHER (22.3%)
</TABLE>
industrial cyclicals, financial service companies, and energy stocks in
anticipation of accelerating earnings for the balance of 1996 through first
quarter 1997. Concurrently, we reduced our commitments to technology and
healthcare stocks, and eliminated our positions in consumer non-durables
stocks -- all sectors in which we expect good but less inspiring earnings
relative to the more economically sensitive groups we currently favor. This
may seem contrary in view of an economy that is slowing after the rapid growth
posted in first half 1996. However, corporate earnings generally lag GDP
growth and we are looking for strong earnings comparisons for the auto,
insurance, and oil companies, as well as banks over the next two quarters. We
continuously re-examine those economic forces most directly influencing
corporate earnings momentum and may well reverse course as this slowing
economy begins to restrain cyclical earnings.
Within the Fund's overweighted sectors, current stock selection favorites
include Chrysler, Mobil, Bank of America, Allstate Insurance and MGIC
Investors.
Chrysler enjoys a clear production cost advantage over General Motors. It
has already made peace with the United Auto Workers in a contract that holds
wage increases to 3% per year. Most importantly, its light truck division,
which includes the Dodge Ram pickups and mini-van market leaders Dodge Caravan
and Plymouth Voyager, represents 70% of sales. This is the fastest growing and
highest margin segment of the auto industry. The popularity of its mini-vans
in particular should spare Chrysler the need to match the buyer incentives
currently being offered by Ford and GM. That means better margins and
earnings.
In the energy sector, we favor Mobil, primarily because it has been the most
aggressive cost-cutter in the industry and is "leaner and meaner" than the
other major domestic oil companies. In the financial services sector, which we
divide between banking and non-banking companies, we would highlight Bank of
America, which is the most direct beneficiary of the strong recovery of the
California economy; Allstate Insurance, the "good hands" people have a nice
string of strong earnings comparisons and a very good risk management record;
and MGIC Investors (Mortgage Guarantee Insurance Company), which underwrote
$110 billion in new policies in 1995, and should continued to thrive as
existing home sales and new housing starts remain strong.
In conclusion, September's substantial shift in sector weighting has already
paid off in October. We believe it will continue to reward our shareholders
for the next several quarters. As always, we will be monitoring economic
trends and the ever-changing business cycle to identify those sectors and
individual companies with the best relative investment potential. We are
pleased with our fiscal 1996 returns relative to our peers in the large cap
growth stock category and will be working hard to duplicate this success in
fiscal 1997.
Sincerely,
/s/Kent Copa
W. Kent Copa
Portfolio Manager
Fremont Growth Fund
17
<PAGE>
FREMONT FUNDS
FREMONT BOND FUND
Bill Gross, Founder and Managing Director
Pacific Investment Management Company (PIMCO)
[PHOTO OF BILL GROSS]
[FUND PROFILE]
Fremont Bond Fund invests in high quality corporate, mortgage backed, hedged
international, and government bonds. The Fund's goal is to consistently
provide attractive risk-adjusted returns relative to the broad fixed income
market.
The Fund's investment philosophy embodies three key principles. First,
portfolio strategy is driven by longer term trends in interest rates. Three-
to five-year economic, demographic, and political forecasts are updated
annually to identify the long term interest rate trend, which determines the
most appropriate maturity/duration (interest rate sensitivity) range for the
portfolio. Second, consistent performance is achieved by avoiding extreme
swings in portfolio maturity/duration. By operating within a moderate duration
range relative to the broad fixed income market, the Fund limits downside risk
during short-lived, but periodically violent interest rate fluctuations.
Finally, emphasis is placed on adding value through the analysis of
traditional variables such as sector, coupon, and quality.
Portfolio Manager Bill Gross (Founder and Managing Director of PIMCO,
Pacific Investment Management Company) has 25 years of professional
fixed-income investment experience. In addition to serving as the sub-advisor
to the Fremont Bond Fund, PIMCO manages $83 billion in fixed income
investments for institutional clients.
TO OUR SHAREHOLDERS
For the six months ended October 31, 1996, Fremont Bond Fund returned 6.96%
compared to 5.29% for the Lehman Brothers Aggregate Index. For full fiscal
year, the Fund returned 8.18% versus 5.83% for the Index. We are pleased to
have exceeded our benchmark by 2.35% this year.
Focusing on the second half of the fiscal year, we were fortunate to have
each major portfolio strategy work in our favor. We maintained the portfolio's
average duration (a measure of interest rate sensitiv-
FREMONT BOND FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
LEHMAN BROS GOV/CORP LEHMAN BROS GOV/CORP LEHMAN BROS AGGREGATE
FREMONT BOND FUND INTER. BOND BOND INDEX BOND INDEX
----------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30-APR-93 $10,000 $10,000 $10,000 $10,000
31-MAY-93 -0.37% $9,963 -0.22% $9,978 -0.05% $9,995 0.13% $10,013
30-JUN-93 2.20% $10,182 1.57% $10,135 2.27% $10,222 1.81% $10,194
31-JUL-93 0.16% $10,198 0.24% $10,159 0.64% $10,287 0.57% $10,252
31-AUG-93 2.12% $10,415 1.59% $10,321 2.30% $10,524 1.75% $10,432
30-SEP-93 0.63% $10,481 0.41% $10,364 0.35% $10,560 0.27% $10,460
31-OCT-93 0.32% $10,515 0.27% $10,392 0.41% $10,603 0.37% $10,499
30-NOV-93 -1.41% $10,366 -0.56% $10,333 -1.13% $10,483 -0.85% $10,410
31-DEC-93 0.68% $10,437 0.46% $10,381 0.44% $10,529 0.54% $10,466
31-JAN-94 1.42% $10,585 1.11% $10,496 1.50% $10,688 1.35% $10,607
28-FEB-94 -1.86% $10,388 -1.48% $10,340 -2.18% $10,455 -1.74% $10,423
31-MAR-94 -2.32% $10,147 -1.65% $10,170 -2.45% $10,199 -2.47% $10,166
30-APR-94 -0.97% $10,049 -0.68% $10,101 -0.83% $10,115 -0.80% $10,085
31-MAY-94 -0.89% $9,959 0.07% $10,108 -0.18% $10,097 -0.01% $10,083
30-JUN-94 0.66% $10,025 0.01% $10,109 -0.23% $10,073 -0.22% $10,061
31-JUL-94 1.79% $10,205 1.44% $10,254 2.00% $10,274 1.99% $10,261
31-AUG-94 0.25% $10,230 0.31% $10,286 0.04% $10,278 0.12% $10,274
30-SEP-94 -1.21% $10,106 -0.92% $10,192 -1.51% $10,123 -1.47% $10,123
31-OCT-94 -0.55% $10,050 -0.01% $10,191 -0.11% $10,111 -0.09% $10,114
30-NOV-94 -0.30% $10,020 -0.45% $10,145 -0.18% $10,093 -0.22% $10,091
31-DEC-94 -0.02% $10,018 0.35% $10,180 0.66% $10,160 0.69% $10,161
31-JAN-95 2.23% $10,242 1.68% $10,351 1.92% $10,355 1.98% $10,362
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
28-FEB-95 2.74% $10,522 2.07% $10,566 2.32% $10,595 2.38% $10,609
31-MAR-95 0.94% $10,621 0.57% $10,626 0.67% $10,666 0.61% $10,674
30-APR-95 1.90% $10,823 1.24% $10,758 1.39% $10,814 1.40% $10,823
31-MAY-95 3.74% $11,228 3.02% $11,082 4.19% $11,268 3.87% $11,242
30-JUN-95 0.63% $11,299 0.67% $11,157 0.80% $11,358 0.73% $11,324
31-JUL-95 -0.32% $11,263 0.01% $11,158 -0.39% $11,313 -0.22% $11,299
31-AUG-95 1.19% $11,397 0.91% $11,259 1.28% $11,458 1.21% $11,436
30-SEP-95 1.16% $11,530 0.72% $11,340 1.02% $11,575 0.97% $11,547
31-OCT-95 1.54% $11,707 1.11% $11,466 1.47% $11,745 1.30% $11,697
30-NOV-95 2.11% $11,954 1.31% $11,617 1.65% $11,939 1.50% $11,872
31-DEC-95 1.61% $12,146 1.05% $11,738 1.47% $12,114 1.40% $12,038
31-JAN-96 1.01% $12,269 0.86% $11,839 0.62% $12,190 0.66% $12,118
29-FEB-96 -2.73% $11,935 -1.17% $11,701 -2.12% $11,931 -1.74% $11,907
31-MAR-96 -0.35% $11,893 -0.51% $11,641 -0.84% $11,831 -0.70% $11,824
30-APR-96 -0.45% $11,840 -0.35% $11,601 -0.69% $11,749 -0.56% $11,758
31-MAY-96 -0.63% $11,765 -0.08% $11,591 -0.17% $11,729 -0.08% $11,748
30-JUN-96 1.69% $11,964 1.06% $11,714 1.34% $11,887 1.06% $11,873
31-JUL-96 0.08% $11,973 0.30% $11,749 0.23% $11,914 0.27% $11,905
30-AUG-96 0.20% $11,997 0.08% $11,759 -0.24% $11,885 -0.17% $11,885
30-SEP-96 2.64% $12,313 1.39% $11,922 1.78% $12,097 1.74% $12,091
31-OCT-96 2.85% $12,664 1.77% $12,133 2.33% $12,379 2.22% $12,360
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, April 30, 1993.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the Lehman Bros. Aggregate Bond Index.
18
<PAGE>
FREMONT FUNDS
ity) above that of the index, accentuating the price gains that occurred in
the market as interest rates declined across the curve by approximately 30
basis points (0.3%). With respect to sector, our overweighting in
mortgage-backed securities helped to boost relative performance as we captured
the higher yields associated with this group. In addition, by focusing our
corporate exposure in lower rated (BBB and BB) issues, we captured the
continued strong performance of this portion of the corporate market. Finally,
our modest allocation to foreign bonds (both hedged foreign and dollar
denominated Latin American issues) was a strong positive as the non-U.S.
markets significantly outperformed all domestic market sectors.
Looking ahead, our long-term view on interest rates remains bullish for
bonds. There are a handful of prominent economic themes that serve as the
basis for this market outlook. First, the competitive forces unleashed by the
globalization of trade and production lead the way to lower-cost goods and
limit pricing power. Next, the integration of world capital markets empowers
investors to demand from governments sound, market-friendly fiscal and
monetary policies. And finally, we expect the aging populations across the
developing world to shift into a savings-oriented phase of their life as
retirement approaches. We expect these long-term, disinflationary forces to
broadly pull interest rates lower and anticipate a 5 - 7% range for the yield
on the 30-year Treasury bond over the next 3 - 5 years. As a result of our
favorable outlook for interest rates, we will continue to target the Fund's
average duration moderately higher than that of the broad market.
With respect to sector, we continue to like mortgage-backed securities,
particularly lower coupon fixed rate issues and adjustable rate mortgages. In
the corporate sector, lower rated issues (BBB and BB) are still attractive
because their higher yields offer downside protection in the event that
corporate bonds weaken relative to other U.S. market sectors. Finally, some
opportunities remain in the foreign sector, particularly in dollar bloc
countries (Canada, Australia, New Zealand) and Latin America.
In closing, we thank you for your ongoing investment in Fremont Bond Fund
and we will continue to work diligently to grow the assets you have entrusted
with us.
Sincerely,
/s/William H. Gross
Bill Gross
Portfolio Manager
Fremont Bond Fund
PORTFOLIO CREDIT QUALITY OF FREMONT BOND FUND
AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
AAA (80%)
AA (3%)
BBB (10%)
BB (7%)
</TABLE>
19
<PAGE>
FREMONT FUNDS
FREMONT MONEY MARKET FUND
Norman Gee, Portfolio Manager
Fremont Investment Advisors, Inc.
[PHOTO OF NORMAN GEE]
[FUND PROFILE]
Fremont Money Market Fund invests primarily in high-quality short-term debt
securities (commercial paper) issued by U.S. corporations and U.S.
subsidiaries of foreign corporations. The Fund will also take small positions
in other investment-grade short-term debt instruments such as Yankee CDs
(dollar denominated certificates of deposit in foreign banks).
Portfolio Manager Norman Gee strives to add value through price-sensitive
trading and by identifying undervalued high quality money market securities.
He will also make conservative adjustments to the portfolio's average maturity
relative to the market in attempting to enhance total portfolio yield.
TO OUR SHAREHOLDERS
For the six-month period ended October 31, 1996, Fremont Money Market Fund
returned 2.6% compared to the IBC Money Market First Tier Taxable Average's
2.0%. For the full fiscal year, the Fund returned 5.34% versus the Index's
4.86%. We are pleased to have once again finished in the top ten percent of
comparable money market funds in the IBC money market universe.
The Fund's slightly longer average maturity (65 days compared to 52 days for
the index of top-tier taxable money market funds) provided a total return
advantage in what has been a flat short-term interest rate environment over
the last two quarters. Our price-sensitive trading practice of tirelessly
pursuing the highest yields and our opportunistic securities selection also
contributed to superior returns. Looking ahead over the next several quarters,
we expect short-term interest rates to remain relatively stable. Consequently,
we will continue to maintain a slightly longer-than-average maturity. This may
well change, however, in second half 1997. Currently, Wall Street is focusing
on the benign "core" inflation rate (inflation excluding food and energy
prices). But, commodity pricing and wage pressure is build-
FREMONT MONEY MARKET FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT MONEY MARKET FUND 90 DAY US T-BILLS DONOGHUE FIRST TIER TAXABLE PRIME AVG.
------------------------- ----------------- --------------------------------------
<C> <C> <C> <C> <C> <C> <C>
18-NOV-88 $10,000 $10,000 $10,000
30-NOV-88 0.27% $10,027 0.26% $10,026 0.25% $10,025
31-DEC-88 0.68% $10,096 0.67% $10,093 0.65% $10,090
31-JAN-89 0.74% $10,170 0.69% $10,163 0.68% $10,159
28-FEB-89 0.65% $10,237 0.72% $10,236 0.68% $10,228
31-MAR-89 0.77% $10,315 0.73% $10,311 0.71% $10,300
30-APR-89 0.72% $10,389 0.70% $10,383 0.74% $10,377
31-MAY-89 0.83% $10,475 0.71% $10,457 0.73% $10,452
30-JUN-89 0.74% $10,552 0.66% $10,526 0.72% $10,528
31-JUL-89 0.73% $10,630 0.63% $10,592 0.69% $10,600
31-AUG-89 0.71% $10,705 0.65% $10,661 0.66% $10,670
30-SEP-89 0.65% $10,775 0.66% $10,731 0.66% $10,741
31-OCT-89 0.72% $10,852 0.76% $10,813 0.66% $10,812
30-NOV-89 0.66% $10,924 0.69% $10,887 0.64% $10,881
31-DEC-89 0.63% $10,993 0.62% $10,955 0.63% $10,949
31-JAN-90 0.67% $11,067 0.66% $11,027 0.62% $11,017
28-FEB-90 0.59% $11,132 0.60% $11,093 0.61% $11,084
31-MAR-90 0.63% $11,202 0.67% $11,168 0.61% $11,152
30-APR-90 0.66% $11,276 0.65% $11,240 0.62% $11,221
31-MAY-90 0.66% $11,350 0.68% $11,317 0.62% $11,291
30-JUN-90 0.62% $11,420 0.65% $11,390 0.61% $11,360
31-JUL-90 0.68% $11,498 0.66% $11,465 0.61% $11,429
31-AUG-90 0.65% $11,573 0.65% $11,540 0.60% $11,498
30-SEP-90 0.58% $11,640 0.61% $11,610 0.60% $11,567
31-OCT-90 0.68% $11,719 0.62% $11,682 0.60% $11,636
30-NOV-90 0.62% $11,792 0.59% $11,751 0.59% $11,704
31-DEC-90 0.64% $11,867 0.59% $11,821 0.59% $11,773
31-JAN-91 0.62% $11,941 0.57% $11,888 0.56% $11,839
28-FEB-91 0.53% $12,005 0.49% $11,946 0.52% $11,901
31-MAR-91 0.50% $12,065 0.52% $12,008 0.49% $11,959
30-APR-91 0.57% $12,134 0.48% $12,066 0.47% $12,015
31-MAY-91 0.50% $12,195 0.48% $12,124 0.44% $12,068
30-JUN-91 0.44% $12,249 0.46% $12,180 0.44% $12,121
31-JUL-91 0.52% $12,312 0.48% $12,238 0.44% $12,174
31-AUG-91 0.46% $12,369 0.47% $12,296 0.43% $12,227
30-SEP-91 0.47% $12,427 0.44% $12,350 0.42% $12,278
31-OCT-91 0.44% $12,482 0.44% $12,404 0.41% $12,328
30-NOV-91 0.39% $12,531 0.40% $12,454 0.39% $12,375
31-DEC-91 0.42% $12,584 0.37% $12,500 0.38% $12,422
31-JAN-92 0.37% $12,630 0.35% $12,543 0.34% $12,464
29-FEB-92 0.30% $12,668 0.31% $12,582 0.31% $12,502
31-MAR-92 0.31% $12,708 0.34% $12,625 0.30% $12,540
30-APR-92 0.29% $12,744 0.32% $12,666 0.29% $12,576
31-MAY-92 0.27% $12,779 0.33% $12,707 0.28% $12,612
30-JUN-92 0.30% $12,817 0.30% $12,745 0.28% $12,647
31-JUL-92 0.27% $12,852 0.30% $12,784 0.26% $12,680
31-AUG-92 0.26% $12,885 0.28% $12,819 0.25% $12,711
30-SEP-92 0.24% $12,917 0.25% $12,852 0.24% $12,741
31-OCT-92 0.24% $12,947 0.25% $12,884 0.22% $12,769
30-NOV-92 0.24% $12,978 0.25% $12,916 0.22% $12,798
31-DEC-92 0.23% $13,008 0.27% $12,951 0.23% $12,828
31-JAN-93 0.21% $13,036 0.27% $12,986 0.23% $12,857
28-FEB-93 0.20% $13,062 0.23% $13,016 0.22% $12,885
31-MAR-93 0.24% $13,093 0.25% $13,048 0.21% $12,912
30-APR-93 0.22% $13,122 0.24% $13,080 0.21% $12,939
31-MAY-93 0.20% $13,148 0.25% $13,113 0.21% $12,967
30-JUN-93 0.23% $13,178 0.25% $13,147 0.21% $12,994
31-JUL-93 0.22% $13,208 0.26% $13,181 0.21% $13,021
31-AUG-93 0.21% $13,235 0.26% $13,215 0.21% $13,049
30-SEP-93 0.21% $13,263 0.25% $13,248 0.21% $13,076
31-OCT-93 0.22% $13,291 0.26% $13,282 0.21% $13,104
30-NOV-93 0.21% $13,320 0.25% $13,315 0.21% $13,132
31-DEC-93 0.24% $13,351 0.26% $13,351 0.22% $13,161
31-JAN-94 0.21% $13,379 0.26% $13,385 0.22% $13,189
28-FEB-94 0.20% $13,406 0.24% $13,418 0.22% $13,218
31-MAR-94 0.23% $13,437 0.28% $13,455 0.23% $13,248
30-APR-94 0.25% $13,470 0.30% $13,496 0.25% $13,281
31-MAY-94 0.31% $13,512 0.33% $13,540 0.27% $13,317
30-JUN-94 0.32% $13,556 0.34% $13,586 0.29% $13,356
31-JUL-94 0.35% $13,603 0.36% $13,636 0.31% $13,397
31-AUG-94 0.36% $13,651 0.37% $13,687 0.32% $13,439
30-SEP-94 0.36% $13,701 0.37% $13,737 0.34% $13,485
31-OCT-94 0.40% $13,755 0.41% $13,794 0.35% $13,532
30-NOV-94 0.41% $13,812 0.42% $13,852 0.37% $13,582
31-DEC-94 0.50% $13,880 0.46% $13,915 0.40% $13,636
31-JAN-95 0.45% $13,943 0.46% $13,979 0.42% $13,694
28-FEB-95 0.45% $14,006 0.44% $14,041 0.44% $13,754
31-MAR-95 0.54% $14,081 0.49% $14,110 0.45% $13,816
30-APR-95 0.46% $14,145 0.48% $14,177 0.45% $13,877
31-MAY-95 0.50% $14,216 0.49% $14,247 0.44% $13,939
30-JUN-95 0.51% $14,289 0.47% $14,314 0.44% $14,000
31-JUL-95 0.46% $14,355 0.49% $14,384 0.43% $14,060
31-AUG-95 0.48% $14,423 0.47% $14,452 0.43% $14,120
30-SEP-95 0.47% $14,492 0.45% $14,517 0.42% $14,180
31-OCT-95 0.46% $14,558 0.46% $14,583 0.42% $14,239
30-NOV-95 0.45% $14,624 0.47% $14,652 0.42% $14,299
31-DEC-95 0.48% $14,695 0.55% $14,732 0.42% $14,359
31-JAN-96 0.45% $14,760 0.46% $14,800 0.41% $14,418
29-FEB-96 0.41% $14,821 0.40% $14,859 0.39% $14,474
31-MAR-96 0.43% $14,885 0.37% $14,913 0.38% $14,529
30-APR-96 0.42% $14,947 0.43% $14,977 0.38% $14,584
31-MAY-96 0.46% $15,015 0.44% $15,043 0.38% $14,640
30-JUN-96 0.39% $15,073 0.41% $15,105 0.38% $14,695
31-JUL-96 0.43% $15,139 0.45% $15,173 0.39% $14,752
30-AUG-96 0.46% $15,209 0.45% $15,242 0.39% $14,809
30-SEP-96 0.40% $15,269 0.47% $15,313 0.39% $14,867
31-OCT-96 0.44% $15,336 0.42% $15,378 0.39% $14,925
Tbills 51.05% # donoghue 46.95% 5.19%
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, November 18, 1988.
Performance data illustrated is historical. Past performance is not
predictive of future performance. All performance figures assume reinvestment
of dividends. Management fees and other expenses are included in the Fund's
performance; however, fees and expenses are not incorporated in the U.S.
91-Day T-Bill Index. An investment in the Fund is neither insured nor
guaranteed by the U.S. Government. The Fund seeks to maintain a stable $1.00
share price although there is no assurance that it will be able to do so.
20
<PAGE>
FREMONT FUNDS
ing. We all have to put gas in the car, buy groceries and pay the heating
bill. We know it's getting more expensive. We all deserve a little bit of a
pay raise in the midst of this vibrant economy. With unemployment at
historically low levels, some of us will get one. Of course, our employers
will do their best to pass higher wage costs along to consumers. The bottom
line is that at some point in 1997, the Federal Reserve is likely to respond
to an increase in the Consumer Price Index by raising short-term rates by 25 -
50 basis points from today's 5.25%. Anticipating this modest uptick in short
term rates, we will very probably be shortening the portfolio's average
maturity so that we can more quickly average into higher yielding securities.
We will also continue to seek out undervalued securities. For example, every
Monday, Jostens Corporation (a dominant market share company in the school
ring and yearbook businesses) issues seven-day investment grade commercial
paper. Because the company wants to sell its paper within a short four-hour
window at the beginning of each week, it is generally priced to yield 3 - 5
basis points above most other comparable maturity and credit quality issues.
As long as Jostens remains financially healthy and we can earn an extra 3 - 5
basis points weekly, we will continue to be one of their best customers.
In closing, we thank you for your ongoing support. We remain dedicated to
delivering superior money market returns.
Sincerely,
/s/Norman Gee
Norman Gee
Portfolio Manager
Fremont Money Market Fund
21
<PAGE>
FREMONT FUNDS
FREMONT CALIFORNIA INTERMEDIATE
TAX-FREE FUND
William M. Feeney, Portfolio Manager
Fremont Investment Advisors, Inc.
[PHOTO OF WILLIAM M. FEENEY]
[FUND PROFILE]
Fremont California Intermediate Tax-Free Fund invests in California
municipal bonds. Essential service bonds (water, sewer, electric, gas, etc.)
and general obligation bonds (secured by the full faith and credit of the
government issuer) are emphasized in this conservatively managed portfolio.
Income from the Fund is free from both federal and state taxes for California
residents.
The direction of interest rates impacts the total return potential of bonds.
When interest rates decline, longer maturities and higher durations (a measure
of interest rate sensitivity) are advantageous. When interest rates rise, the
reverse is true. Through the analysis of macro-economic, political, and market
factors, Fund management strives to identify the dominant interest rate trend.
The Fund's strategy is simply to position the portfolio's maturity/duration to
take advantage of the dominant interest rate trend rather than trading on
largely unpredictable temporary interest rate fluctuations.
The Fund invests almost exclusively in the highest investment grade credits
and will not invest in any bond below a BBB rating. Fund management also
strives to identify "special situation" opportunities created by incomplete
credit analysis, investor misperception, and market conditions.
TO OUR SHAREHOLDERS
For the six-month period ended October 31, 1996, Fremont California
Intermediate Tax-Free Fund returned 3.42% compared to the Lehman Brothers
Municipal 5-Year State General Obligation (GO) Index's 3.03%. For the full
fiscal year, the Fund returned 4.63% versus the Index's 4.63%. We are pleased
to report the Fund has maintained its Morningstar five year 5-star ranking.
In the first fiscal half, the Fund portfolio's longer than average maturity
(around 7 years) worked against us as stronger-than-expected economic growth
reawakened long dormant inflationary fears and drove interest rates higher. In
the second half,
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND INVESTMENT RETURNS
<TABLE>
<CAPTION>
FREMONT CA INTER TAX-FREE FUND LEHMAN MUNI 5 YR STATE G.O. INDEX
------------------------------ ---------------------------------
<C> <C> <C> <C> <C> <C> <C>
16-NOV-90 $10,000 $10,000
30-NOV-90 0.64% $10,064 0.67% $10,067 0.95%
31-DEC-90 0.40% $10,105 0.35% $10,102
31-JAN-91 1.67% $10,273 1.46% $10,250
28-FEB-91 0.88% $10,364 0.88% $10,340
31-MAR-91 0.06% $10,370 -0.26% $10,313
30-APR-91 0.93% $10,467 1.39% $10,456
31-MAY-91 0.60% $10,530 0.49% $10,508
30-JUN-91 -0.33% $10,496 -0.14% $10,493
31-JUL-91 1.02% $10,603 1.00% $10,598
31-AUG-91 1.26% $10,737 1.26% $10,731
30-SEP-91 1.34% $10,881 1.20% $10,860
31-OCT-91 0.50% $10,936 0.78% $10,945
30-NOV-91 0.16% $10,953 0.31% $10,979
31-DEC-91 2.14% $11,187 2.25% $11,226
31-JAN-92 0.27% $11,218 0.18% $11,246
29-FEB-92 0.04% $11,222 0.06% $11,253
31-MAR-92 -0.30% $11,188 -0.37% $11,211
30-APR-92 0.73% $11,270 0.85% $11,306
31-MAY-92 0.91% $11,373 0.94% $11,413
30-JUN-92 1.43% $11,535 1.40% $11,572
31-JUL-92 2.91% $11,871 2.62% $11,876
31-AUG-92 -1.04% $11,747 -0.75% $11,787
30-SEP-92 0.71% $11,831 0.64% $11,862
31-OCT-92 -0.75% $11,741 -0.34% $11,821
30-NOV-92 1.40% $11,906 1.19% $11,962
31-DEC-92 0.82% $12,004 0.73% $12,049
31-JAN-93 1.26% $12,155 1.09% $12,180
28-FEB-93 2.99% $12,518 2.58% $12,495
31-MAR-93 -1.55% $12,325 -1.10% $12,357
30-APR-93 0.89% $12,434 0.60% $12,432
31-MAY-93 0.21% $12,460 0.35% $12,475
30-JUN-93 1.66% $12,666 1.33% $12,641
31-JUL-93 -0.30% $12,629 0.01% $12,642
31-AUG-93 2.06% $12,889 1.38% $12,817
30-SEP-93 1.40% $13,069 0.76% $12,915
31-OCT-93 0.06% $13,076 0.12% $12,930
30-NOV-93 -0.86% $12,964 -0.24% $12,899
31-DEC-93 1.81% $13,198 1.39% $13,078
31-JAN-94 1.18% $13,354 0.95% $13,202
28-FEB-94 -2.60% $13,007 -1.97% $12,943
31-MAR-94 -2.63% $12,664 -2.24% $12,653
30-APR-94 0.41% $12,717 1.00% $12,779
31-MAY-94 0.62% $12,795 0.58% $12,854
30-JUN-94 -0.63% $12,714 -0.26% $12,820
31-JUL-94 1.58% $12,915 1.04% $12,954
31-AUG-94 0.23% $12,945 0.48% $13,016
30-SEP-94 -1.39% $12,765 -0.74% $12,920
31-OCT-94 -1.60% $12,561 -0.56% $12,847
30-NOV-94 -1.65% $12,354 -0.76% $12,750
31-DEC-94 1.60% $12,552 0.91% $12,866
31-JAN-95 2.22% $12,830 1.05% $13,001
28-FEB-95 2.94% $13,208 1.49% $13,195
31-MAR-95 1.12% $13,356 0.97% $13,323
30-APR-95 0.20% $13,382 0.25% $13,356
31-MAY-95 2.71% $13,745 2.17% $13,646
30-JUN-95 -0.68% $13,652 0.14% $13,665
31-JUL-95 0.87% $13,771 1.40% $13,856
31-AUG-95 1.08% $13,920 0.88% $13,979
30-SEP-95 0.42% $13,978 0.32% $14,023
31-OCT-95 1.34% $14,165 0.41% $14,081
30-NOV-95 1.05% $14,313 0.88% $14,204
31-DEC-95 0.75% $14,421 0.57% $14,285
31-JAN-96 1.13% $14,583 1.25% $14,464
29-FEB-96 -0.44% $14,519 -0.36% $14,412
31-MAR-96 -1.33% $14,326 -0.60% $14,326
30-APR-96 0.03% $14,330 -0.19% $14,299
31-MAY-96 -0.12% $14,313 -0.13% $14,280
30-JUN-96 0.57% $14,394 0.60% $14,366
31-JUL-96 1.26% $14,575 0.73% $14,470
30-AUG-96 -0.13% $14,557 0.13% $14,489
30-SEP-96 0.74% $14,665 0.69% $14,589
31-OCT-96 1.06% $14,820 0.98% $14,732
43.66% 6.66%
</TABLE>
* Unannualized
+ Assumes initial investment of $10,000 on inception date, November 16, 1990.
Performance data illustrated is historical. Past performance is not
predictive of future performance. Share price and return will vary so that
a gain or loss may be realized when shares are sold. All performance
figures assume reinvestment of dividends. Management fees and other
expenses are included in the Fund's performance; however, fees and expenses
are not incorporated in the Lehman Bros. 5-Year State G.O. Index.
22
<PAGE>
FREMONT FUNDS
PORTFOLIO CREDIT QUALITY OF FREMONT CALIFORNIA
INTERMEDIATE TAX-FREE FUND AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
A (21.5%)
AA (26.9%)
AAA (51.6%)
</TABLE>
when no evidence of inflation materialized, interest rates came back down,
making our longer maturity posture a blessing as is demonstrated in second
half results. Going forward, with economic growth and inflation expectations
moderating, we see intermediate-term interest rates continuing to trend lower,
and consequently, have extended the portfolio's average maturity to 8 years.
If our interest rate forecast proves accurate, this longer maturity will
enhance the Fund's returns.
Looking ahead, there is some good news and potentially bad news in the
California municipal bond market. The California economy is gaining momentum.
Unemployment is down from a peak of around 11% to 7.4%. Existing home sales
are up 24% and housing starts are up 23.5% from year-ago levels. We have gone
from years of big state government budget deficits to a comfortable surplus.
California State general obligation bonds were recently upgraded from A to A+.
There may be further upgrades on the horizon.
The potentially bad news is that Medicare and welfare reform will increase
the financial burden on county and local governments. In addition, the recent
passage of Proposition 218 subjects certain revenue raising issues to public
referendum. This may restrict the ability of county and local governments to
raise additional funds. We are taking a hard look at the impact this may have
on county and municipal general obligation bonds. We anticipate reducing the
Fund portfolio's position in these issues until the dust clears, at which
point some attractive value-oriented opportunities may be available.
Currently some appetizing values are evolving in the utility bond sector. We
believe the rating agencies are over-reacting to the recent deregulation of
the water and electric utilities industries. Under new regulation, privately
held utilities will be allowed to compete for public utilities customers. But,
being allowed to compete and doing so effectively are horses of two very
different colors. For example, private electric utilities are to be given
access to their public counterparts' grids (electric delivery systems). But,
they are going to have to pay for it and in the end, may have little or no
pricing advantage. We doubt anyone is likely to move a major power plant from
one locale to another for modestly lower electric or water costs. Yet Los
Angeles Department of Water and Power Bonds and Pasadena Electric Bonds were
recently downgraded from AA to A+, creating higher yields we can take
advantage of.
In conclusion, we strive to add value both by adjusting the Fund's average
maturity/duration to take advantage of dominant interest rate trends and by
searching for opportunistically-priced securities in the California municipal
bond universe. We are confident of continued success on both fronts and remain
committed to providing you with superior risk-adjusted returns.
Sincerely,
/s/William M. Feeney
William M. Feeney
Portfolio Manager
Fremont California Intermediate Tax-Free Fund
23
<PAGE>
FREMONT FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF FREMONT MUTUAL FUNDS, INC.:
We have audited the accompanying statements of assets and liabilities of
each of the nine funds comprising Fremont Mutual Funds, Inc. (the Funds),
including each Fund's statement of investments in securities and net assets as
of October 31, 1996, and the related statements of operations, the statements
of changes in net assets, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1996 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principals used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the nine funds comprising Fremont Mutual Funds, Inc. as of October 31,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for each of the periods presented in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
San Francisco, California
December 6, 1996
24
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
- -------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
Country Value
Shares Security Description Code (Note 1)
- -------------------------------------------------------------------------
STOCKS - 51.6%
BUSINESS EQUIPMENT & SERVICES - 1.3%
2,800 Sodexho SA FR $ 1,350,945
143,000 Kyowa Exeo Corp. JP 1,367,881
100,000 Compass Group PLC UK 992,744
24,500 First Data Corp. US 1,953,875
59,300 WMX Technologies, Inc. US 2,038,437
-----------
7,703,882
-----------
CAPITAL GOODS - 2.4%
1,521,000 PT Dynaplast (Foreign Registered) ID 1,616,140
8,400 Kyocera Corp., ADR JP 1,103,550
206,000 Mitsubishi Heavy Industries JP 1,581,834
60,000 Cemex SA (Class B), ADR MX 433,248
20 Zardoya-Otis SP 2,037
80,000 Autoliv AB SW 3,391,556
20,300 Caterpillar, Inc. US 1,393,088
23,700 Emerson Electric Co. US 2,109,300
34,500 PACCAR, Inc. US 1,923,375
-----------
13,554,128
-----------
CONSUMER DURABLES - 2.6%
* 33,600 Daimler-Benz AG GM 1,973,149
31,000 Fukoku Co. Ltd. JP 372,707
33,000 Murata Manufacturing Co. Ltd. JP 1,059,939
33,000 Sony Corp., ADR JP 1,992,375
112,000 Suzuki Motor Co. Ltd. JP 1,140,149
53,500 Chrysler Corp. US 1,798,937
25,100 Eaton Corp. US 1,499,725
70,800 Ford Motor Co. US 2,212,500
48,400 General Motors Corp. US 2,607,550
-----------
14,657,031
-----------
CONSUMER NON-DURABLES - 2.3%
15,760 LVMH FR 3,603,464
440 LVMH, ADR FR 20,185
3,456,000 Pacific Andes International Holdings Ltd. HK 545,287
* 288,000 Pacific Andes International Holdings Ltd.
(Warrants 08/31/98) HK 16,202
1,000,000 PT Mayora Indah ID 407,848
460,295 San Miguel Corp. (Class B) PH 1,663,928
2,000,000 Universal Robina Corp. PH 913,242
76,000 Cerebos Pacific Ltd. SG 588,143
108,000 Fraser & Neave Ltd. SG 1,073,482
* 180,000 Pacific Andes Holdings Ltd. SG 90,000
100,000 Srithai Superware Co. Ltd.
(Foreign Registered) TH 497,785
* 162,955 President Enterprises, GDR TW 2,525,806
170,000 Associated British Foods PLC UK 1,167,533
-----------
13,112,905
-----------
CONSUMER SERVICES - 2.3%
22,000 News Corp. Ltd., ADR AU 497,750
190,820 Village Roadshow Ltd. (Preferred) AU 551,379
3,300 H.I.S. Co. Ltd. JP 174,919
35,000 Secom Co. JP 2,082,492
20,000 Sega Enterprises Ltd. JP 807,372
10,000 Sega Enterprises Ltd., ADR JP 101,107
265,000 Genting Berhad MY 1,981,994
CONSUMER SERVICES (CONTINUED)
70,600 Elsevier NV NL $ 1,171,164
7,902 Wolters Kluwer NV NL 1,013,810
9,953 Wolters Kluwer NV, ADR NL 1,280,001
280,000 Helicopter Line Ltd. (The) NZ 593,670
180,000 Rentokil Group PLC UK 1,208,382
28,000 Disney (Walt) Co. US 1,844,500
-----------
13,308,540
-----------
ENERGY - 5.0%
* 15 Petrofina SA (Warrants 06/03/97) BE 71
33,800 Amoco Corp. US 2,560,350
14,900 Atlantic Richfield Co. US 1,974,250
48,900 Chevron Corp. US 3,215,175
61,500 Dresser Industries, Inc. US 2,021,812
58,200 Exxon Corp. US 5,157,975
31,400 Kerr-McGee Corp. US 1,970,350
30,300 Mobil Corp. US 3,537,525
66,100 Occidental Petroleum Corp. US 1,619,450
37,700 Phillips Petroleum Co. US 1,545,700
33,200 Texaco, Inc. US 3,373,950
68,200 USX-Marathon Group US 1,491,875
-----------
28,468,483
-----------
FINANCIAL SERVICES - 11.8%
62,859 Lend Lease Corp. Ltd. AU 1,064,416
200,000 Westpac Banking Corp. Ltd. AU 1,139,976
5,000 Union Financiere de France Banque SA FR 615,060
770,000 Citic Pacific Ltd. HK 3,744,293
1,398,000 JCG Holdings Ltd. HK 1,301,760
1,452,750 PT Lippo Bank (Foreign Registered) ID 2,104,938
150,000 Instituto Mobiliare Italiano SPA IT 1,186,515
150,000 Arab Malaysian Finance Berhad
(Foreign Registered) MY 807,281
200,000 Commerce Asset Holding Berhad MY 1,305,896
33,912 Aegon NV, ADR NL 1,746,482
105,416 Oversea-Chinese Banking Corp. Ltd.
(Foreign Registered) SG 1,204,968
129,899 United Overseas Bank Ltd.
(Foreign Registered) SG 1,263,485
* 6,300 Housing & Commercial Bank, Korea SK 121,234
130 Samsung Fire & Marine Insurance SK 60,575
170,900 Bangkok Bank Ltd. (Foreign Registered) TH 1,822,004
600,000 Krung Thai Bank Public Co. Ltd.
(Foreign Registered) TH 1,622,702
120,000 Siam Commercial Bank
(Foreign Registered) TH 1,091,208
294,280 Thai Farmers Bank Co. Ltd.
(Foreign Registered) TH 2,249,230
* 24,285 Thai Farmers Bank Public Co. Ltd.
(Warrants 09/30/99) TH 23,797
73,789 HSBC Holdings PLC (Hong Kong Shares) UK 1,503,016
55,600 Ahmanson (H.F.) & Co. US 1,744,450
42,800 Allstate Corp. US 2,402,150
33,000 American Express Co. US 1,551,000
41,000 Banc One Corp. US 1,737,375
26,200 BankAmerica Corp. US 2,397,300
18,800 Bankers Trust New York Corp. US 1,588,600
27,500 Chase Manhattan Corp. US 2,358,125
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
Country Value
Shares Security Description Code (Note 1)
- -------------------------------------------------------------------------
FINANCIAL SERVICES (CONTINUED)
11,900 Cigna Corp. US $ 1,552,950
31,400 Citicorp US 3,108,600
33,700 Dean Witter, Discover & Co. US 1,984,088
18,200 Federal Home Loan Mortgage Corp. US 1,838,200
59,900 Federal National Mortgage Association US 2,343,588
40,700 First Chicago NBD Corp. US 2,075,700
40,000 First Hawaiian, Inc. US 1,240,000
21,200 First Union Corp. US 1,542,300
29,200 Fleet Financial Group, Inc. US 1,456,350
20,700 Nationsbank Corp. US 1,950,975
37,800 Norwest Corp. US 1,658,475
31,200 Republic New York Corp. US 2,379,000
39,300 Travelers, Inc. US 2,132,025
72,500 USLIFE Corp. US 2,265,625
-----------
67,285,712
-----------
HEALTH CARE - 2.2%
37,490 Gehe AG GM 2,520,336
800,500 PT Dankos Laboratories
(Foreign Registered) ID 670,148
22,000 Towa Pharmaceutical Co. Ltd. JP 361,036
8,000 Astra AB "A" Free SW 367,115
29,600 Aetna, Inc. US 1,979,500
44,900 Baxter International, Inc. US 1,868,963
51,900 Columbia HCA Healthcare Corp. US 1,855,425
21,600 Medtronic, Inc. US 1,390,500
27,000 Warner-Lambert Co. US 1,717,875
-----------
12,730,898
-----------
MISCELLANEOUS - 0.2%
100,900 Taiwan Index Fund Ltd. TW 1,198,692
-----------
1,198,692
-----------
MULTI-INDUSTRY - 2.6%
2,400 Viag AG GM 885,813
* 685 Viag AG (New) GM 248,988
560,000 Hutchison Whampoa HK 3,910,867
1,240,000 Renong Berhad MY 1,952,988
* 248,000 Renong Berhad
(Convertible Loan Stock 05/21/01) MY 90,780
* 155,000 Renong Berhad (Warrants Exp. 11/21/00) MY 63,178
963,000 Comfort Group Ltd. SG 854,633
110,000 Cycle & Carriage Ltd. SG 1,155,840
29,800 Allied-Signal, Inc. US 1,951,900
29,600 Minnesota Mining & Manufacturing Co. US 2,268,100
19,500 TRW, Inc. US 1,764,750
-----------
15,147,837
-----------
RAW MATERIALS - 1.6%
37,800 Broken Hill Proprietary Co. Ltd., ADR AU 1,015,875
776,000 Asiatic Development Berhad MY 694,009
24,567 Hansol Paper Ltd., GDR SK 362,363
11,875 Hansol Paper Ltd., GDR SK 175,156
27,200 Dow Chemical Co. US 2,114,800
19,000 Du Pont (E.I.) de Nemours & Co. US 1,762,250
80,900 Engelhard Corp. US 1,476,425
40,400 Goodrich (B.F.) Co. US 1,711,950
-----------
9,312,828
-----------
RETAIL - 2.5%
9,350 Hermes International FR $ 2,369,700
600,000 PT Hero Supermarket (Foreign Registered) ID 373,503
29,000 Ito-Yokado Co. Ltd. JP 1,445,546
45,000 Seven Eleven Japan JP 2,614,305
* 200,000 Cifra SA de CV MX 258,469
* 58,500 Federated Department Stores, Inc. US 1,930,500
36,100 Home Depot, Inc. US 1,976,475
38,600 McDonalds Corp. US 1,712,875
36,900 Sears Roebuck & Co. US 1,785,037
-----------
14,466,410
-----------
SHELTER - 2.4%
1,044,000 PT Jaya Real Property ID 1,154,124
28,000 Kimberly-Clark de Mexico SA MX 538,218
1,125,000 Ayala Land, Inc. PH 1,198,630
4,800,000 C & P Homes, Inc. PH 2,191,781
*3,562,500 Filinvest Land, Inc. PH 1,206,478
200,000 Nawarat Patanakarn Public Co. Ltd.
(Foreign Registered) TH 266,531
25,300 Armstrong World Industries, Inc. US 1,688,775
35,400 International Paper Co. US 1,513,350
21,500 Kimberly-Clark Corp. US 2,004,875
29,800 Mead Corp. US 1,691,150
-----------
13,453,912
-----------
TECHNOLOGY - 4.8%
6,000 SAP AG, ADR GM 276,000
110,000 Canon, Inc. JP 2,104,432
18,900 Hirose Electronics JP 1,121,229
40,000 Hoya Corp. JP 1,312,857
14,000 TDK Corp. JP 820,711
600,000 Informatics Holdings Ltd. SG 234,292
* 31,145 Samsung Electronics Ltd., GDS
(1/2 Non-Voting) SK 657,938
4,241 Samsung Electronics Ltd., GDS
(1/2 Voting) SK 192,966
* 9,386 Samsung Electronics Ltd., New GDS
(1/2 Non-Voting) SK 150,176
* 1,278 Samsung Electronics Ltd., New GDS
(1/2 Voting) SK 43,292
220 Sungmi Telecom Electronics SK 44,732
47,250 Advanced Information Services
(Foreign Registered) TH 640,791
39,300 Amp, Inc. US 1,331,287
33,000 Avnet, Inc. US 1,662,375
26,700 Boeing Co. US 2,546,512
* 29,700 Compaq Computer Corp. US 2,067,862
35,500 Hewlett-Packard Co. US 1,566,437
36,500 International Business Machines Corp. US 4,708,500
53,800 Motorola, Inc. US 2,474,800
30,000 Rockwell International Corp. US 1,650,000
15,500 United Technologies Corp. US 1,995,625
-----------
27,602,814
-----------
TRANSPORTATION - 1.4%
22,000 Grupo Casa Autrey SP, ADR MX 415,250
125,000 Keppel Corp. SG 931,842
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
Country Value
Shares Security Description Code (Note 1)
- -------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
8,500 Keppel Corp.
(Convertible Loan Stock 07/15/97) SG $ 10,018
* 8,500 Keppel Corp. (Warrants 06/30/97) SG 26,553
9,770 Korean Air SK 182,097
100,000 British Airways PLC UK 901,607
245,000 Railtrack Group PLC UK 1,104,469
24,900 Burlington Northern Santa Fe US 2,051,138
25,600 Conrail, Inc. US 2,435,200
------------
8,058,174
------------
UTILITIES - 6.2%
* 42,048 Hong Kong & China Gas Co.
(Warrants 09/30/97) HK 15,498
1,020,000 Telecom Italia Mobile SPA IT 2,106,966
255 Nippon Telegraph & Telephone JP 1,779,070
22,100 Telecom of New Zealand, ADR NZ 1,839,825
305,975 Manila Electric Co. (Class B) PH 2,247,073
14,900 Philippine Long Distance Telephone Co. PH 892,979
70,000 Korea Electric Power Corp., ADR SK 1,260,000
* 61,000 Korea Mobile Telecommunications, ADR SK 762,500
130,000 Cable & Wireless PLC UK 1,034,570
113,200 Northern Electric PLC (Preferred) UK 189,294
30,000 Vodafone Group PLC, ADR UK 1,158,750
* 64,400 AirTouch Communications, Inc. US 1,682,450
35,400 Ameritech Corp. US 1,938,150
29,600 Bell Atlantic Corp. US 1,783,400
62,800 Bellsouth Corp. US 2,559,100
30,000 Boston Edison Co. US 720,000
37,500 Coastal Corp. US 1,612,500
73,600 Entergy Corp. US 2,060,800
44,300 GTE Corp. US 1,866,138
111,900 Pacific Gas & Electric Co. US 2,629,650
38,600 Texas Utilities Co. US 1,563,300
73,200 Unicom Corp. US 1,903,200
38,400 Williams Cos., Inc. US 2,006,400
------------
35,611,613
------------
TOTAL STOCKS (Cost $274,384,412) $295,673,859
------------
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------
BONDS - 21.9%
CORPORATE BONDS - 4.0%
2,000,000 Asia Pulp & Paper International Finance
10.250%, 10/01/00 2,040,000
2,000,000 BankAmerica Corp., 8.125%, 08/15/04
(Callable 08/15/99) @ 100) 2,121,060
3,000,000 Cemex SA de CV, 10.750%, 07/15/00 3,060,000
1,600,000 Chrysler Corp., 10.400%
08/01/99 (Callable 08/01/97 @ 100) 1,651,536
3,000,000 Ford Motor Credit Corp.
6.800%, 04/23/01 3,026,460
2,500,000 General Electric Capital Corp.
8.850%, 03/01/07 (Puttable 03/01/97 @ 100) 2,862,425
3,000,000 General Motors Acceptance Corp.
7.500%, 07/24/00 3,100,140
CORPORATE BONDS (CONTINUED)
2,000,000 Pohang Iron & Steel Co. Ltd.
7.375%, 05/15/05 $ 2,040,500
3,000,000 Sears, Roebuck and Co., 6.240%, 08/03/99 2,998,920
83,037 Zions Auto Trust, 5.650%, 06/15/99 83,098
------------
22,984,139
------------
MORTGAGE BACKED SECURITIES - 0.3%
1,561,586 FNMA CMO, 1992-137BA REMIC,
3.500%, 01/25/17 1,477,651
------------
1,477,651
------------
U.S. GOVERNMENT BONDS - 1.3%
U.S. Treasury Notes
4,000,000 6.375%, 09/30/01 4,045,000
3,000,000 7.125%, 02/29/00 3,103,110
------------
7,148,110
------------
FOREIGN BONDS - 16.3%
AUS $ 4,000,000 European Bank for Reconstruction
and Development, 9.000%, 10/15/02 3,441,698
Government of Australia
AUS $ 4,000,000 7.500%, 07/15/05 3,203,333
AUS $ 4,000,000 8.750%, 01/15/01 3,376,197
European Investment Bank
CAN $ 4,000,000 7.750%, 04/22/03 3,227,312
CAN $ 4,000,000 8.500%, 08/30/05 3,348,639
Government of Canada
CAN $ 4,000,000 7.500%, 03/01/01 3,225,565
Japan Highway Public Corp.
CAN $ 2,000,000 7.875%, 09/27/02 1,622,989
Oesterreichische Kontrollbank
CAN $ 2,000,000 (Republic of Austria), 9.000%, 06/19/02 1,699,518
Republic of Finland
CAN $ 2,000,000 9.500%, 09/15/04 1,762,982
Toyko Electric Power
CAN $ 2,000,000 10.500%, 06/14/01 1,765,782
Kingdom of Denmark
DKK 20,000,000 7.000%, 12/15/04 3,522,155
Government of France
FF 20,000,000 8.500%, 11/25/02 4,554,179
FF 15,000,000 8.500%, 04/25/03 3,419,442
Federal Republic of Germany
DM 6,000,000 6.000%, 01/05/06 3,953,337
DM 3,000,000 6.750%, 04/22/03 2,105,783
DM 4,500,000 6.875%, 05/12/05 3,144,736
DM 4,000,000 8.375%, 05/21/01 3,003,856
Treuhandanstalt
DM 3,000,000 7.750%, 10/01/02 2,209,590
World Bank
DM 3,000,000 6.125%, 09/27/02 2,059,318
Government of Ireland
IEP 2,000,000 6.250%, 04/01/99 3,260,229
IEP 2,000,000 6.500%, 10/18/01 3,279,781
IEP 2,000,000 8.000%, 08/18/06 3,493,219
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
Value
Face Amount/Issuer/Coupon Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------
FOREIGN BONDS (CONTINUED)
Government of Italy
ITL 4,500,000,000 8.500%, 01/01/04 $ 3,050,445
ITL 4,500,000,000 10.500%, 07/15/98 3,117,456
Government of Netherlands
NLG 6,000,000 6.500%, 04/15/03 3,734,227
Government of Sweden
SEK 20,000,000 6.000%, 02/09/05 2,800,708
SEK 25,000,000 10.250%, 05/05/03 4,446,707
UK Treasury
(pound) 2,500,000 7.500%, 12/07/06 4,033,024
(pound) 2,000,000 8.500%, 12/07/05 3,445,108
United Mexican States
US $ 6,000,000 6.250%, 12/31/19
(Callable at any time @ 100) 4,192,500
-------------
93,499,815
-------------
TOTAL BONDS (Cost $118,813,559) 125,109,715
-------------
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------
SHORT TERM SECURITIES - 26.1%
9,025,091 Benchmark Diversified Assets Fund 9,025,091
** 5,000,000 Allianz of America Finance Corp.
5.300%, 11/05/96 4,997,056
5,000,000 Associates Corp. of North America,
CP, 5.250%, 12/03/96 4,976,667
5,000,000 Berliner Handels-und Frankfurt Bank,
CP, 5.240%, 11/18/96 4,987,628
5,000,000 C.I.T. Group Holdings, Inc.,
CP, 5.240%, 11/21/96 4,985,444
** 5,000,000 Cargill Financial Services Corp.,
CP, 5.240%, 11/08/96 4,994,906
5,000,000 Clorox Co., CP, 5.230%, 11/19/96 4,986,925
5,000,000 Ford Motor Credit Corp., CP,
5.250%, 11/06/96 4,996,354
** 5,000,000 Gillette Co., CP, 5.230%, 11/07/96 4,995,642
5,000,000 Goldman Sachs & Co., CP,
5.240%, 11/26/96 4,981,806
** 5,000,000 Great Lakes Chemical Corp.,
CP, 5.240%, 11/14/96 4,990,539
5,000,000 Heinz (H.J.) & Co., CP, 5.350%, 11/05/96 4,997,028
5,000,000 Jostens, Inc., CP, 5.330%, 11/04/96 4,997,779
** 5,000,000 Koch Industries, Inc., CP,
5.230%, 12/09/96 4,972,397
5,000,000 Merrill Lynch & Co., Inc., CP,
5.260%, 11/12/96 4,991,964
5,000,000 MetLife Funding, Inc.,
CP, 5.230%, 11/13/96 4,991,283
5,000,000 Mitsubishi International Corp., CP,
5.250%, 11/15/96 4,989,792
5,000,000 Mitsui & Co. (U.S.A.), Inc., CP,
5.280%, 12/06/96 4,974,333
SHORT TERM SECURITIES (CONTINUED)
5,000,000 Penney (J.C.) Funding Corp., CP,
5.230%, 11/20/96 $ 4,986,199
** 5,000,000 Rexam PLC, CP, 5.250%, 12/04/96 4,975,938
5,000,000 Sandoz Corp., CP, 5.230%, 11/14/96 4,990,557
** 5,000,000 Sony Capital Corp., CP, 5.250%,
11/01/96 5,000,000
** 5,000,000 St. Paul Cos., Inc., CP, 5.240%,
12/02/96 4,977,439
5,200,000 Toshiba Capital (Asia) Ltd., CP
5.300%, 12/11/96 5,169,378
5,000,000 Toys "R" Us, Inc., CP, 5.220%,
11/25/96 4,982,600
5,000,000 Transamerica Finance Corp., CP,
5.240%, 11/22/96 4,984,716
5,000,000 Unilever Capital Corp., CP, 5.300%,
11/04/96 4,997,791
5,000,000 Union Bank of Switzerland Finance, Inc.,
CP, 5.625%, 11/01/96 5,000,000
5,000,000 USAA Capital Corp., CP, 5.250%,
11/27/96 4,981,113
------------
TOTAL SHORT TERM SECURITIES (Cost $148,878,365) 148,878,365
------------
TOTAL INVESTMENTS (Cost $542,076,336), 99.6% 569,661,939
OTHER ASSETS AND LIABILITIES, NET, 0.4% 2,488,297
------------
NET ASSETS, 100.0% $572,150,236
============
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
CP - Commercial Paper
CMO - Collateralized Mortgage Obligation
FNMA - Federal National Mortgage Association
GDR - Global Depository Receipt
GDS - Global Depository Share
REMIC - Real Estate Mortgage Investment Conduit
CURRENCY ABBREVIATIONS:
AUS$ - Australian Dollar
CAN$ - Canadian Dollar
DKK - Danish Kroner
FF - French Franc
DM - German Deutschemark
IEP - Irish Punt
ITL - Italian Lira
NLG - Netherlands Guilder
SEK - Swedish Krona
(pound) - British Pound
US$ - US Dollar
** These securities are generally issued to institutional investors. Any
resale must be in an exempt transaction pursuant to Section 4(2) of the
Securities Act of 1933.
The accompanying notes are an integral part of these financial
statements.
28
<PAGE>
FREMONT GLOBAL FUND
October 31, 1996
- -----------------------------------------------------------------------------
COUNTRY DIVERSIFICATION
Country % of
Code Country Name Net Assets
- -----------------------------------------
AU Australia 2.5%
CN Canada 2.9%
DK Denmark 0.7%
FR France 2.9%
GM Germany 4.0%
HK Hong Kong 1.7%
ID Indonesia 1.1%
IR Ireland 1.8%
IT Italy 1.7%
JP Japan 4.1%
MX Mexico 0.3%
MY Malaysia 1.2%
NL Netherlands 1.6%
NZ New Zealand 0.4%
PH Philippines 1.8%
SG Singapore 1.3%
SK South Korea 0.7%
SW Sweden 2.0%
TH Thailand 1.4%
TW Taiwan 0.6%
UK United Kingdom 2.9%
US United States 62.4%
-----
TOTAL 100.0%
-----
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
FREMONT INTERNATIONAL GROWTH FUND
October 31, 1996
- -----------------------------------------------------------------------
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
Country Value
Shares Security Description Code (Note 1)
- -----------------------------------------------------------------------
STOCKS - 95.5%
BUSINESS EQUIPMENT & SERVICES - 4.6%
825 Sodexho SA FR $ 398,046
81,000 Kyowa Exeo Corp. JP 774,814
45,000 Compass Group PLC UK 446,735
------------
1,619,595
------------
CAPITAL GOODS - 6.6%
7,000 Kyocera Corp. JP 461,343
6,000 Mabuchi Motors Co. JP 305,397
16,000 Raito Kogyo Co. JP 247,126
1,000 Shinkawa JP 17,990
30,600 Autoliv AB SW 1,297,270
------------
2,329,126
------------
CONSUMER DURABLES - 6.6%
1,200 Volkswagen AG GM 474,147
28,000 Alpine Electronics, Inc. JP 442,299
15,000 Matsushita-Kotobuki Electronics JP 346,204
10,000 Murata Manufacturing Co. Ltd. JP 321,194
17,600 Rinnai Corp. JP 375,323
6,000 Sony Corp. JP 359,631
------------
2,318,798
------------
CONSUMER NON-DURABLES - 7.0%
2,500 LVMH FR 571,615
240,000 PT Budi Acid Jaya (Foreign Registered) ID 309,106
40,000 PT Hanjaya Mandala Sampoerna
(Foreign Registered) ID 371,786
165,000 San Miguel Corp. (Class B) PH 596,461
*40,549 President Enterprises, GDR TW 628,513
------------
2,477,481
------------
CONSUMER SERVICES - 6.7%
200,000 PT Steady Safe (Foreign Registered) ID 193,191
8,000 Secom Co. JP 475,998
7,661 Wolters Kluwer NV NL 982,890
105,000 Rentokil Group PLC UK 704,889
------------
2,356,968
------------
FINANCIAL SERVICES - 11.4%
160,000 Reinsurance Australia Corp. Ltd. AU 478,790
375,000 PT Lippo Bank (Foreign Registered) ID 543,350
200,000 Public Bank Berhad (Foreign Registered) MY 375,148
14,558 Aegon NV, ADR NL 749,732
7,850 Kookmin Bank SK 125,410
67,600 Bangkok Bank Ltd.(Foreign Registered) TH 720,699
120,000 Finance One Public Co. Ltd.
(Foreign Registered) TH 338,651
25,000 Siam Commercial Bank
(Foreign Registered) TH 227,335
62,000 Thai Farmers Bank Public Co. Ltd.
(Foreign Registered) TH 473,876
* 3,750 Thai Farmers Bank Public Co. Ltd.
(Warrants 09/30/99) TH 3,675
------------
4,036,666
------------
HEALTH CARE - 10.6%
13,120 Gehe AG GM $ 882,017
600,000 PT Dankos Laboratories
(Foreign Registered) ID 502,297
40,000 Banyu Pharmaceutical Co. JP 508,995
35,000 Santen Pharmaceutical Co. JP 740,237
73 Roche Holding AG SZ 550,379
18,000 Glaxo Wellcome PLC, ADR UK 567,000
------------
3,750,925
------------
MULTI-INDUSTRY - 4.3%
98,000 Hutchison Whampoa HK 684,402
250,000 Renong Berhad MY 393,748
* 72,000 Renong Berhad
(Convertible Loan Stock 05/21/01) MY 26,355
* 45,000 Renong Berhad (Warrants 11/21/00) MY 18,342
*494,000 International UNP Holdings CN 114,339
300,000 Comfort Group Ltd. SG 266,241
------------
1,503,427
------------
RAW MATERIALS - 3.3%
250,000 M.I.M. Holdings Ltd. AU 324,577
160,000 QNI Ltd. AU 321,727
* 20,400 Concordia Paper Holdings Ltd., ADR HK 102,000
* 15,355 Hansol Paper Ltd., GDR SK 226,486
28,000 Siam City Cement Public Co. Ltd.
(Foreign Registered) TH 175,597
------------
1,150,387
------------
RETAIL - 6.0%
2,750 Hermes International FR 696,971
2,200 Ito Yokado Co. Ltd., ADR JP 440,000
17,164 Ceteco Holdings, ADS NL 970,796
------------
2,107,767
------------
SHELTER - 2.4%
160,000 Malaysian Resources Corp. Berhad MY 614,167
189,700 Nawarat Patanakarn Public Co. Ltd.
(Foreign Registered) TH 252,804
------------
866,971
------------
TECHNOLOGY - 13.2%
10,000 TT Tieto OY (Class B) FI 668,398
1,450 Rexel SA FR 428,931
5,500 SAP AG (Preferred) GM 738,771
1,000 Advantest Corp. JP 37,736
8,100 Canon, Inc., ADR JP 780,638
25,000 Hoya Corp. JP 820,535
16,000 NTT Data Communications Systems Co. JP 473,190
300,000 Datacraft Asia Ltd. SG 351,000
600,000 Informatics Holdings Ltd. SG 234,292
* 4,348 Samsung Electronics Ltd., GDS
(1/2 Non-Voting) SK 91,851
130 Samsung Electronics Ltd., GDS
(1/2 Voting) SK 5,915
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
October 31, 1996
- -----------------------------------------------------------------------
Country Value
Shares Security Description Code (Note 1)
- -----------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
* 1,310 Samsung Electronics Ltd., New GDS
(1/2 Non-Voting) SK $ 20,960
* 39 Samsung Electronics Ltd., New GDS
(1/2 Voting) SK 1,321
------------
4,653,538
------------
TRANSPORTATION - 4.8%
240,000 Cathay Pacific Airways HK 375,567
60,000 Singapore Airlines Ltd.
(Foreign Registered) SG 528,221
46,000 British Airways PLC UK 414,739
85,000 Railtrack Group PLC UK 383,183
------------
1,701,710
------------
UTILITIES - 8.0%
13,000 VEBA AG GM 692,048
260,000 Telecom Italia Mobile SPA IT 537,070
220,000 Telecom Italia SPA IT 250,777
51 Nippon Telegraph & Telephone JP 355,814
75,075 Manila Electric Co. (Class B) PH 551,350
55,000 Cable & Wireless PLC UK 437,703
------------
2,824,762
------------
TOTAL STOCKS (Cost $31,207,266) 33,698,121
------------
Country Value
Face Amount/Issuer/Coupon Rate/Stated Maturity Code (Note 1)
- -----------------------------------------------------------------------
CONVERTIBLE BONDS - 0.9%
250,000 United Micro Electronics,
1.250%, 06/08/04 TW 307,625
------------
TOTAL CONVERTIBLE BONDS (Cost $368,564) 307,625
------------
Country Value
Face Amount/Issuer Code (Note 1)
- -----------------------------------------------------------------------
SHORT TERM SECURITIES - 2.8%
991,842 Benchmark Diversified Assets Fund US 991,842
------------
TOTAL SHORT TERM SECURITIES (Cost $991,842) 991,842
------------
TOTAL INVESTMENTS (Cost $32,567,672), 99.2% 34,997,588
OTHER ASSETS AND LIABILITIES, NET, 0.8% 275,158
------------
NET ASSETS, 100.0% $ 35,272,746
============
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
ADS - American Depository Shares
GDR - Global Depository Receipt
GDS - Global Depository Shares
COUNTRY DIVERSIFICATION
Country % of
Code Country Name Net Assets
- -----------------------------------------
AU Australia 3.2%
CN Canada 0.3%
FI Finland 1.9%
FR France 6.0%
GM Germany 7.9%
HK Hong Kong 3.3%
ID Indonesia 5.5%
IT Italy 2.2%
JP Japan 23.5%
MY Malaysia 4.0%
NL Netherlands 7.7%
PH Philippines 3.2%
SG Singapore 3.9%
SK South Korea 1.3%
SW Sweden 3.7%
SZ Switzerland 1.6%
TH Thailand 6.2%
TW Taiwan 2.7%
UK United Kingdom 8.4%
US United States 3.5%
-----
TOTAL 100.0%
=====
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
October 31, 1996
- --------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------
STOCKS - 98.3%
BUSINESS EQUIPMENT & SERVICES - 2.1%
5,000 Aida Engineering JP $ 35,542
6,000 Kyudenko Co. Ltd. JP 68,978
5,000 Toenec Corp. JP 37,692
8,933 Cowie Group PLC UK 52,191
------------
194,403
------------
CAPITAL GOODS - 11.5%
7,980,000 Companhia de Acos Especiais
Itabira-Acesita BR 16,313
6,400,000 Companhia Siderurgica de Tubarao
(Preferred B) BR 95,006
* 356 Skoda Koncern Plzen AS CZ 11,311
5,300 Rautaruukki OY FI 46,425
1,450 Bertrand Faure FR 49,547
20 Campagnie Fives-Lille FR 1,808
600 Legris Industries FR 23,302
750 Vallourec SA FR 41,795
* 350 DLW AG GM 22,376
200 Felten & Guilleaume Energietechnik AG GM 22,409
7,000 Bunka Shutter Co. JP 48,776
22,000 Energy Support JP 140,939
1,000 Inaba Denkisangyo Co. JP 21,150
* 13,000 Mitsubishi Steel Manufacturing JP 66,283
3,000 Seirei Industry JP 13,111
2,000 Yokogawa Bridge Corp. JP 23,519
6,700 Steel & Tube Holdings Ltd. NZ 37,029
36,000 Van Der Horst Ltd. SG 132,907
8,000 Dongkuk Steel Mill Co. SK 159,758
7,000 Poongsan Corp. SK 85,567
------------
1,059,331
------------
CONSUMER DURABLES - 0.9%
* 9,679 CIA Interamericana de Automotive AR 43,078
4,100 Toyota South Africa Ltd. SA 27,499
87,987 Arcelik AS TU 8,674
------------
79,251
------------
CONSUMER NON-DURABLES - 9.3%
1,300,000 Bombril SA (Preferred) BR 25,309
8,700,000 Ceval Alimentos SA (Preferred) BR 83,841
9,800,000 Perdigao SA Comercio e Industria
(Preferred) BR 18,507
100,000 Sao Paulo Alpargatas SA (Preferred) BR 6,230
107 Cokoladovny AS CZ 13,290
1,100 Delta Dairy SA (Preferred) GR 9,186
1,100 Hellenic Sugar Industry SA GR 10,756
7,000 Lai Sun Garment International Ltd. HK 10,501
* 8,000 PT Chareon Pokphand Indonesia
(Foreign Registered) ID 8,930
17,000 PT Japfa Comfeed Indonesia
(Foreign Registered) ID 11,312
4,000 Daito Gyorui Co. JP 14,041
6,000 Kirin Beverage Corp. JP 80,035
6,000 Marudai Food Co. Ltd. JP 36,911
CONSUMER NON-DURABLES (CONTINUED)
11,000 Prima Meat Packers JP $ 36,200
1,000 Sanyo Coca-Cola Bottling JP 13,690
53,000 Grupo Industrial Maseca SA de CV
(Series B) MX 65,036
17,000 Guinness Anchor Berhad MY 43,728
8,000 Nanyang Press Berhad MY 31,342
35,000 Yeo Hiap Seng Berhad MY 94,183
3,400 Lion Nathan Ltd. NZ 8,771
400 Unicer-Uniao Cervejeira SA
(Registered Shares) PT 7,192
11,000 GP Batteries International Ltd.
(U.S. Dollar Shares) SG 31,900
2,000 Dongwon Industries Co. SK 41,876
* 3,100 LG International Corp. SK 30,991
3,000 Sam Yang Co. Ltd. SK 103,843
900 American Standard Sanitaryware Ltd.
(Foreign Registered) TH 14,463
2,600 Karat Sanitaryware Co. Ltd.
(Foreign Registered) TH 5,554
15,999 Tat Konserve Sanayii AS TU 2,241
------------
859,859
------------
CONSUMER SERVICES - 0.7%
850 Gaumont FR 67,732
------------
67,732
------------
ENERGY - 4.2%
5,311 CIA Naviera Perez Co. (Class B) AR 33,465
3,600,000 Distribuidora de Produtos de Petroleo
Ipiranga SA (Preferred) BR 42,052
5,300,000 Petrobras Distribuidora SA (Preferred) BR 89,769
37,500 Uniao de Industrias Petroquimicas SA
(Preferred B) BR 15,331
100 Elf Gabon FR 23,821
2,000 Itochu Fuel Corp. JP 15,270
2,000 Kamei Corp. JP 22,115
* 1,325 Energy Africa Ltd. SA 3,978
46,300 Bangchak Petroleum Public Co. Ltd.
(Foreign Registered) TH 48,091
56,000 Petrol Ofisi AS TU 16,271
230,100 Turcas Petroculuk AS TU 16,475
112,200 Premier Oil PLC UK 60,258
------------
386,896
------------
FINANCIAL SERVICES (BANKS) - 13.0%
7,400 Advance Bank of Australia Ltd. AU 39,719
5,600 Bank of Melbourne Ltd. AU 38,569
17,200 National Bank of Canada CN 166,947
14,600 Investicni A Postovni Banka CZ 162,932
* 550 Credit Lyonnais FR 15,024
2,400 Parisienne de Reescompt FR 190,259
1,466 Credit Bank of Athens
(Registered Shares) GR 93,513
1,700 National Bank of Greece
(Registered Shares) GR 107,726
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
October 31, 1996
- ---------------------------------------------------------------------------
Country Value
Shares Security Description Code (Note 1)
- ---------------------------------------------------------------------------
FINANCIAL SERVICES (BANKS) (CONTINUED)
12,000 MBF Capital Berhad MY $ 16,525
300 KAS Associatie NV NL 13,236
* 24,696 Union Bank of the Philippines PH 28,192
2,100 Banco Totta & Acores
(Registered Shares) PT 38,019
13,800 BPI-SGPS SA (Registered Shares) PT 163,802
* 45,000 Bangkok Bank of Commerce Public
Co. Ltd. (Foreign Registered) TH 28,221
13,800 First Bangkok City Bank Public
Co. Ltd. (Foreign Registered) TH 15,956
1,405,000 Demirbank TAS TU 48,111
1,295,800 Yapi Ve Kredi Bankasi SA TU 33,615
------------
1,200,366
------------
FINANCIAL SERVICES (OTHER) - 7.8%
1,200 London Insurance Group CN 30,373
2,150 Credit National FR 113,347
350 Societe Financiere Interbail SA FR 15,171
212,400 Century City International Holdings Ltd. HK 50,269
60,000 Liu Chong Hing Investment Ltd. HK 65,569
42,000 Peregrine Investment Holdings Ltd. HK 67,625
27,500 Tai Cheung Holdings HK 22,406
7,100 Irish Permanent PLC IR 54,023
15,000 Life Co. Ltd. JP 50,417
13,000 Nippon Shinpan Co. JP 78,605
14,000 Datuk Keramat Holdings Berhad MY 23,269
23 Assurantieconcern Stad Rotterdam NL 864
2,800 Phatra Thanakit Co. Ltd.
(Foreign Registered) TH 10,371
12,600 Union Asia Finance Co. Ltd.
(Foreign Registered) TH 27,409
31,700 E D & F Man Group PLC UK 88,735
9,100 Lloyd Thompson Group PLC UK 25,103
------------
723,556
------------
HEALTH CARE - 0.8%
100 Andreae-Noris Zahn AG GM 37,898
90 Galenica Holdings AG
(Registered Shares) SZ 34,424
------------
72,322
------------
MULTI-INDUSTRY - 8.9%
1,400 Marine-Wendel FR 126,074
9,700 Crean (James) PLC (Units) IR 31,608
2,000 Suntelephone Co. Ltd. JP 13,357
115,000 Berjaya Group Berhad MY 81,460
* 57,500 Berjaya Group Berhad (Rights) MY 796
21,000 Oriental Holdings Berhad MY 142,936
700 Hollandsche Beton Groep NV NL 129,669
1,600 Internatio-Muller NV NL 38,495
10,000 Daewoo Corp. SK 84,720
*6,157,200 Dogan Sirketler Grubu Holdings AS TU 116,602
8,900 Goode Durrant PLC UK 51,057
------------
816,774
------------
RAW MATERIALS - 13.1%
29,120 Aluar Aluminio Argentina SA (Class B) AR $ 68,443
1,400 Voest-Alpine Stahl AG AS 46,370
200 Tessenderlo Chemie BE 73,594
1,400,000 Companhia Petroquimica de Sul BR 74,272
9,300,000 Fertilizantes Fosfatdos SA (Preferred) BR 49,519
292,000 Shanghai Petrochemical Co. Ltd.
(Hong Kong Shares) CH 78,360
614,000 Yizheng Chemical Fibre Co. Ltd.
(Hong Kong Shares) CH 142,139
* 18,400 Stelco, Inc. CN 107,843
* 116 Sepap AS CZ 4,658
* 221 Synthesia AS CZ 3,114
400 Nord Est FR 10,060
2,500 Sommer-Allibert FR 69,316
400 Hellas Can Packaging SA GR 7,260
31,000 Chuetsu Pulp & Paper Co. Ltd. JP 145,818
13,000 Cydsa SA (Series A) MX 24,793
* 36,000 Empaques Ponderosa SA de CV
(Series B) MX 17,164
900 DSM NV NL 86,032
6,100 Portucel Industrial-Empresa Produtora
de Celulosa SA PT 37,474
8,900 Hartebeesfontein Gold Mining Co. Ltd. SA 22,740
2,000 Sunkyong Industries Ltd. SK 33,404
2,800 Empresa Nacional de Celulosas SA SP 35,945
* 15,800 Ercros SA SP 7,421
4,500 National Petrochemical Co.
(Foreign Registered) TH 4,674
43,209 Cimentas TU 4,932
134,000 Petkim Petrokimya Holdings AS TU 54,229
------------
1,209,574
------------
RETAIL - 7.8%
* 200 Kaufring AG GM 11,336
7,000 Chiyoda Co. JP 130,233
10,000 Kotobukiya Co. Ltd. JP 53,532
2,000 Oak & Co. JP 12,550
5,000 Parco JP 46,951
* 42,000 Controladora Comercial Mexicana
SA de CV (Units) MX 37,099
2,300 Macintosh NV NL 54,119
12,700 East Asiatic Public Co. Ltd.
(Local Shares) TH 12,818
9,100 Saha Pathana Inter-Holding Ltd.
(Foreign Registered) TH 21,579
42,100 Kwik Save Group PLC UK 218,222
19,700 Lex Service PLC UK 116,541
------------
714,980
------------
SHELTER - 8.0%
700 Bau Holdings AG AS 33,116
5,000 Brasilit SA BR 8,031
* 56 Inzenyrske a Prumslove Stavby AS CZ 6,424
* 1,200 Societe Generale d'Enterprises SA FR 23,899
* 4,250 AGIV AG GM 61,064
89,000 Kumagai Gumi HK 82,298
* 17,800 Kumagai Gumi (Warrants 06/30/98) HK 3,338
20,000 Daikyo, Inc. JP 124,265
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
October 31, 1996
- --------------------------------------------------------------------------------
Country Value
Shares Security Description Code (Note1)
- --------------------------------------------------------------------------------
SHELTER (CONTINUED)
100 Daito Trust Construction JP $ 1,264
4,000 Kawasho Gecoss Corp. JP 46,687
10,000 Nichiei Construction JP 85,652
8,000 SXL Corp. JP 69,644
4,800 Vitro SA MX 9,214
1,100 Koninklijke BAM Groep NV NL 64,061
880 Sungwon Construction Co. SK 13,420
29,900 Persimmon PLC UK 101,458
---------
733,835
---------
TECHNOLOGY - 0.5%
* 322 SPT Telecom AS CZ 34,371
1,100 Alphatec Electronics Public Co. Ltd.
(Foreign Registered) TH 8,709
---------
43,080
---------
TRANSPORTATION - 3.3%
1,000 Compagnie Maritime Belge SA BE 74,874
5,000 Nippon Konpo Unyu Soko JP 38,350
3,800 Koninklijke Nedlloyd Groep NV NL 95,226
25,000 Hai Sun Hup Group Ltd. SG 17,661
37,000 Neptune Orient Lines Ltd. SG 30,997
* 2,000 Hanjin Shipping Co. SK 45,265
---------
302,373
---------
UTILITIES - 6.4%
3,100 Telecom de Argentina SA (Class B) AR 11,472
2,500,000 Companhia Energetica de Minas Gerais
(Preferred) BR 79,310
* 741 Ceske Energeticke Zavody AS CZ 26,374
1,200 Electricas Reunidas de Zaragoza SA SP 34,755
6,700 Hyder PLC UK 77,200
20,300 Northern Ireland Electricity PLC UK 107,536
5,300 Scottish Hydro-Electric PLC UK 23,720
19,400 Southern Electric PLC UK 203,169
5,400 Wessex Water PLC UK 31,066
---------
594,602
---------
TOTAL STOCKS (Cost $8,946,630) 9,058,934
---------
<TABLE>
<CAPTION>
Country Value
Face Amount/Issuer Code (Note 1)
- ------------------ ------- --------
<S> <C> <C>
SHORT TERM SECURITIES - 1.2%
110,337 Benchmark Diversified Assets Fund US 110,337
-----------
TOTAL SHORT TERM SECURITIES (Cost $110,337) 110,337
-----------
TOTAL INVESTMENTS (Cost $9,056,967), 99.5% 9,169,271
OTHER ASSETS AND LIABILITIES, NET, 0.5% 44,904
-----------
NET ASSETS, 100.0% $ 9,214,175
===========
</TABLE>
COUNTRY DIVERSIFICATION
<TABLE>
<CAPTION>
Country % of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
AR Argentina 1.7%
AS Austria 0.9%
AU Australia 0.9%
BE Belgium 1.7%
BR Brazil 6.6%
CH China 2.4%
CN Canada 3.3%
CZ Czech Republic 2.8%
FI Finland 0.5%
FR France 8.4%
GM Germany 1.7%
GR Greece 2.5%
HK Hong Kong 3.4%
ID Indonesia 0.2%
IR Ireland 0.9%
JP Japan 17.1%
MX Mexico 1.7%
MY Malaysia 4.8%
NL Netherlands 5.2%
NO Norway 0.1%
NZ New Zealand 0.5%
PH Philippines 0.3%
PT Portugal 2.7%
SA South Africa 0.6%
SG Singapore 2.3%
SK South Korea 6.5%
SP Spain 0.8%
SZ Switzerland 0.2%
TH Thailand 2.2%
TU Turkey 3.3%
UK United Kingdom 12.7%
US United States 1.1%
-----
TOTAL 100.0%
=====
</TABLE>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
FREMONT EMERGING MARKETS FUND
October 31, 1996
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
- --------------------------------------------------------------------------------
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
STOCKS - 69.9%
CAPITAL GOODS - 2.3%
40,000 IJM Corp. Berhad MY $ 87,060
-----------
87,060
-----------
CONSUMER DURABLES - 4.7%
635,000 Arcelik AS TU 62,597
74,000 China Motor Co. Ltd. TW 114,197
-----------
176,794
-----------
CONSUMER NON-DURABLES - 14.8%
300,000 Chaifa Holdings Ltd. HK 90,206
* 292,000 Glorious Sun Enterprises HK 135,005
90,000 Goldlion Holdings Ltd. HK 73,329
150,000 PT Davomas Abadi
(Foreign Registered) ID 138,454
* 125,000 PT Daya Guna Samudera
(Foreign Registered) ID 122,086
-----------
559,080
-----------
CONSUMER SERVICES - 3.1%
30,000 Tanjong PLC MY 116,343
-----------
116,343
-----------
FINANCIAL SERVICES - 9.4%
80,000 PT Lippo Life Insurance
(Foreign Registered) ID 61,821
* 8,700 Industrial Credit & Investment
Corp. of India Ltd., GDR IN 71,775
50,000 Public Finance Berhad
(Foreign Registered) MY 77,167
45,000 Siam General Factoring Co. Ltd.
(Foreign Registered) TH 64,820
3,000,000 Yapi Ve Kredi Bankasi SA TU 77,825
-----------
353,408
-----------
MULTI-INDUSTRY - 4.5%
* 240,000 Fairyoung Holdings Ltd. HK 96,220
6,200 Sasol Ltd. SA 75,578
-----------
171,798
-----------
RAW MATERIALS - 2.4%
25,000 PT Semen Gresik
(Foreign Registered) ID 71,910
* 1,600 Aromatics (Thailand)
Public Co. Ltd.
(Local Shares) TH 1,442
* 17,800 Aromatics (Thailand)
Public Co. Ltd.
(Foreign Registered) TH 16,047
-----------
89,399
-----------
SHELTER - 15.7%
20,000 New World Development Co. Ltd. HK 116,395
130,000 DNP Holdings Berhad MY 102,889
20,000 Malaysian Resources Corp. Berhad MY 76,771
* 400,000 Primetown Property Group, Inc. PH 83,714
* 500,000 Robinson's Land Corp. (Series B) PH 91,324
30,000 Central Pattana Public Co. Ltd.
(Foreign Registered) TH 119,939
-----------
591,032
-----------
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
TECHNOLOGY - 7.1%
20,000 KCE Electronics Public Co. Ltd.
(Foreign Registered) TH $ 77,607
* 79,000 Macronix International Co. Ltd. TW 104,989
* 44,000 Yageo Corp. TW 87,073
-----------
269,669
-----------
TRANSPORTATION - 1.5%
* 150,000 Guangshen Railway Co. Ltd.
(Hong Kong Shares) CH 55,773
-----------
55,773
-----------
UTILITIES - 4.4%
29,000 Hong Kong Electric Holdings Ltd. HK 92,825
2,500 Mosenergo, ADR RU 71,346
-----------
164,171
-----------
TOTAL STOCKS (Cost $2,678,367) 2,634,527
-----------
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
SHORT TERM SECURITIES - 30.7%
255,525 Benchmark Diversified Assets Fund US 255,525
310,000 Federal Farm Credit Bank, DN, 5.200%,
11/05/96 US 309,821
595,000 Federal National Mortgage Association,
DN, 5.170%, 11/07/96 US 594,487
-----------
TOTAL SHORT TERM SECURITIES (Cost $1,159,833) 1,159,833
-----------
TOTAL INVESTMENTS (Cost $3,838,200), 100.6% 3,794,360
OTHER ASSETS AND LIABILITIES, NET, (0.6)% (22,611)
-----------
NET ASSETS, 100.0% $ 3,771,749
===========
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
DN - Discount Note
GDR - Global Depository Receipt
COUNTRY DIVERSIFICATION
<TABLE>
<CAPTION>
Country % of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
CH China 1.5%
HK Hong Kong 16.0%
ID Indonesia 10.5%
IN India 1.9%
MY Malaysia 12.2%
PH Philippines 4.6%
RU Russia 1.9%
SA South Africa 2.0%
TH Thailand 7.4%
TU Turkey 3.7%
TW Taiwan 8.9%
US United States 29.4%
-----
TOTAL 100.0%
=====
</TABLE>
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
FREMONT U.S. MICRO-CAP FUND
October 31, 1996
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
- --------------------------------------------------------------------------------
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
STOCKS - 86.6%
BUSINESS EQUIPMENT & SERVICES - 13.2%
* 10,200 Daisytek International Corp. $ 390,150
* 117,800 IntelliQuest Information Group, Inc. 2,591,600
* 30,000 Mail Boxes Etc. 611,250
* 108,750 Metzler Group, Inc. 2,535,234
* 135,200 NuCO2, Inc. 1,791,400
* 33,000 Printrak International, Inc. 321,750
* 30,150 Rental Service Corp. 693,450
* 253,900 Richey Electronics, Inc. 2,221,625
* 88,850 Ultrak, Inc. 2,343,419
-----------
13,499,878
-----------
CAPITAL GOODS - 5.4%
* 84,600 Adept Technology, Inc. 549,900
* 88,000 AFC Cable Systems, Inc. 1,562,000
* 40,000 Channell Commercial Corp. 467,500
* 156,100 Gradall Industries, Inc. 1,697,588
* 18,000 Miller Industries, Inc. 420,750
100,000 PPT Vision, Inc. 837,500
-----------
5,535,238
-----------
CONSUMER DURABLES - 2.5%
* 111,300 Diamond Home Services, Inc. 2,559,900
-----------
2,559,900
-----------
CONSUMER NON-DURABLES - 6.5%
* 34,200 Boyds Wheels, Inc. 474,525
* 82,200 Conso Products Co. 1,171,350
* 206,100 Genesco, Inc. 1,854,900
* 61,850 Sonic Corp. 1,407,088
* 119,000 Sport-Haley, Inc. 1,710,625
-----------
6,618,488
-----------
CONSUMER SERVICES - 9.2%
* 144,000 Damark International, Inc. (Class A) 1,278,000
* 53,200 DM Management Co. 219,450
* 50,000 Gray Communications System, Inc.
(Class B) 1,006,250
* 17,000 Insight Enterprises, Inc. 578,000
* 137,300 LodgeNet Entertainment Corp. 2,162,475
* 86,150 Saga Communications, Inc. (Class A) 1,841,456
* 128,800 ShoLodge, Inc. 1,706,600
* 30,600 Suburban Lodges of America, Inc. 638,775
-----------
9,431,006
-----------
ENERGY - 7.5%
* 126,400 Basin Exploration, Inc. 853,200
* 73,000 Cairn Energy USA, Inc. 775,625
* 30,100 Core Laboratories NV 459,025
-----------
246,300 Lomak Petroleum, Inc. 4,033,163
-----------
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
ENERGY (CONTINUED)
* 83,900 Mallon Resources Corp. $ 671,200
* 12,100 Numar Corp. 193,600
* 20,500 Trico Marine Services, Inc. 722,625
-----------
7,708,438
-----------
FINANCIAL SERVICES - 7.5%
81,600 GA Financial, Inc. 1,111,800
6,500 ISB Financial Corp. 106,844
* 171,100 PennFed Financial Services, Inc. 3,336,450
40,000 Premier Financial Bancorp, Inc. 520,000
107,700 R&G Financial Corp. (Class B) 2,140,538
30,000 SierraWest Bancorp 431,250
-----------
7,646,882
-----------
HEALTH CARE - 5.8%
* 133,700 AccuMed International, Inc. 467,950
* 104,750 Advance Paradigm, Inc. 851,094
* 59,600 American Healthcorp, Inc. 528,950
* 66,050 Cytyc Corp. 850,394
* 113,700 FemRx, Inc. 568,500
111,100 Gensia, Inc. 555,500
* 90,500 MIME Corp. 497,750
* 103,200 Oasis Healthier Holdings Corp. 954,600
* 85,500 Unison Healthcare Corp. 705,375
-----------
5,980,113
-----------
RETAIL - 5.7%
* 119,350 Baby Superstore, Inc. 3,237,369
* 93,900 Chico's Fas, Inc. 586,875
* 208,100 Garden Ridge Corp. 2,002,963
-----------
5,827,207
-----------
SHELTER - 2.0%
* 199,916 D.R. Horton, Inc. 1,824,234
27,700 Engle Homes, Inc. 193,900
-----------
2,018,134
-----------
TECHNOLOGY (COMPONENTS) - 2.9%
* 130,600 Aware, Inc. 1,599,850
* 46,200 Elantec Semiconductor, Inc. 248,325
* 73,200 Speedfam International, Inc. 1,152,899
-----------
3,001,074
-----------
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
FREMONT U.S. MICRO-CAP FUND
October 31, 1996
- --------------------------------------------------------------------------------
Value
Shares Security Description (Note 1)
- --------------------------------------------------------------------------------
TECHNOLOGY (EQUIPMENT) - 12.6%
* 55,000 Ade Corp. $ 488,125
* 20,900 Applied Signal Technology, Inc. 99,275
* 51,400 CEM Corp. 504,363
* 19,500 Cymer, Inc. 458,250
* 190,800 Micrel, Inc. 3,911,400
* 165,600 PCD, Inc. 1,821,600
* 78,000 PRI Automation, Inc. 2,769,000
* 47,000 Sawtek, Inc. 1,421,750
* 99,300 Specialty Teleconstructors, Inc. 732,338
99,000 World Access, Inc. 742,500
------------
12,948,601
------------
TECHNOLOGY (SOFTWARE) - 4.7%
* 9,005 Avant! Corp. 272,386
* 90,800 BTG, Inc. 1,566,300
* 93,900 ISG International Software Group Ltd. 1,525,875
* 42,300 OrCAD, Inc. 433,575
* 92,500 Timeline, Inc. 346,875
* 140,000 V-One Corp. 717,497
------------
4,862,508
------------
TRANSPORTATION - 1.1%
* 120,000 Smithway Motor Express Corp. (Class A) 1,080,000
------------
1,080,000
------------
TOTAL STOCKS (Cost $88,281,744) 88,717,467
------------
Value
Face Amount/Issuer/Discount Rate/Stated Maturity (Note 1)
- --------------------------------------------------------------------------------
SHORT TERM SECURITIES - 12.6%
530,225 Benchmark Diversified Assets Fund 530,225
3,000,000 A.I. Credit Corp., CP, 5.230%,11/08/96 2,996,949
1,400,000 Heinz (H.J.) & Co., CP, 5.250%,11/20/96 1,396,121
3,000,000 Jostens, Inc., CP, 5.330%,11/04/96 2,998,668
5,000,000 Merrill Lynch & Co., CP, 5.630%,11/01/96 5,000,000
------------
TOTAL SHORT TERM SECURITIES (Cost $12,921,963) 12,921,963
------------
TOTAL INVESTMENTS (Cost $101,203,707), 99.2% 101,639,430
OTHER ASSETS AND LIABILITIES, NET, 0.8% 841,521
------------
NET ASSETS, 100.0% $102,480,951
============
PORTFOLIO ABBREVIATIONS:
CP - Commercial Paper
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
FREMONT GROWTH FUND
October 31, 1996
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
IN SECURITIES AND NET ASSETS
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
STOCKS - 97.7%
BUSINESS EQUIPMENT & SERVICES - 3.8%
2,500 Danka Business Systems PLC, ADR UK $ 99,063
* 1,500 Career Horizons, Inc. US 60,938
* 6,500 Ceridian Corp. US 322,563
* 2,500 Computer Sciences Corp. US 185,625
* 3,500 COREStaff, Inc. US 89,250
* 4,000 Dendrite International, Inc. US 106,500
8,600 First Data Corp. US 685,850
* 5,000 Fiserv, Inc. US 191,875
* 2,000 Interim Services, Inc. US 80,000
* 4,000 Medic Computer Systems, Inc. US 113,000
3,500 Paychex, Inc. US 199,500
3,500 Stewart Enterprises, Inc. (Class A) US 119,875
20,800 WMX Technologies, Inc. US 715,000
------------
2,969,039
------------
CAPITAL GOODS - 3.2%
10,900 Caterpillar, Inc. US 748,013
4,000 Crane Co. US 186,000
7,300 Emerson Electric Co. US 649,700
13,800 PACCAR, Inc. US 769,350
4,000 Sundstrand Corp. US 161,000
------------
2,514,063
------------
CONSUMER DURABLES - 4.5%
22,600 Chrysler Corp. US 759,925
25,700 Ford Motor Co. US 803,125
20,300 General Motors Corp. US 1,093,663
14,600 Goodyear Tire & Rubber Co. US 669,775
5,500 Harley-Davidson, Inc. US 248,188
------------
3,574,676
------------
CONSUMER SERVICES - 2.2%
* 9,000 CUC International, Inc. US 220,500
7,000 Gannett Co., Inc. US 531,125
5,000 Loewen Group, Inc. US 198,125
* 5,500 Promus Hotel Corp. US 174,625
7,300 Tribune Co. US 596,775
------------
1,721,150
------------
ENERGY - 15.0%
* 3,500 Petroleum Geo-Services AS, ADR NO 119,875
13,700 Amoco Corp. US 1,037,775
5,700 Atlantic Richfield Co. US 755,250
3,000 Camco International, Inc. US 116,250
19,100 Chevron Corp. US 1,255,825
22,500 Exxon Corp. US 1,994,063
12,700 Kerr-McGee Corp. US 796,925
11,700 Mobil Corp. US 1,365,975
1,000 Noble Affiliates, Inc. US 43,500
28,100 Occidental Petroleum Corp. US 688,450
15,400 Phillips Petroleum Co. US 631,400
7,200 Schlumberger Ltd. US 713,700
13,900 Texaco, Inc. US 1,412,588
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
ENERGY (CONTINUED)
3,500 Transocean Offshore, Inc. US $ 221,375
* 1,500 Triton Energy Ltd. US 66,938
27,900 USX-Marathon Group US 610,312
----------
11,830,201
----------
FINANCIAL SERVICES (BANKS) - 11.9%
13,400 Banc One Corp. US 567,825
9,000 BankAmerica Corp. US 823,500
6,600 Bankers Trust New York Corp. US 557,700
9,900 Chase Manhattan Corp. US 848,925
14,700 Citicorp US 1,455,300
14,300 First Chicago NBD Corp. US 729,300
25,500 First Hawaiian, Inc. US 790,500
6,800 First Union Corp. US 494,700
7,500 Mellon Bank Corp. US 488,437
7,000 Nationsbank Corp. US 659,750
12,500 Norwest Corp. US 548,437
10,300 Republic New York Corp. US 785,375
12,900 Suntrust Banks, Inc. US 601,462
----------
9,351,211
----------
FINANCIAL SERVICES (OTHER) - 11.1%
1,000 Ace Ltd. US 54,750
20,000 Ahmanson (H.F.) & Co. US 627,500
16,400 Allstate Corp. US 920,450
12,000 American Express Co. US 564,000
4,200 Cigna Corp. US 548,100
1,500 CMAC Investment Corp. US 103,687
12,400 Dean Witter, Discover & Co. US 730,050
7,100 Federal Home Loan Mortgage Corp. US 717,100
23,100 Federal National Mortgage
Association US 903,787
3,100 General Re Corp. US 456,475
3,000 Green Tree Financial Corp. US 118,875
7,000 Mercury General Corp. US 341,250
5,000 MGIC Investment Corp. US 343,125
1,500 NAC Re Corp. US 52,687
10,000 Price (T. Rowe) Associates US 341,250
6,000 TCF Financial Corp. US 232,500
15,200 Travelers, Inc. US 824,600
26,700 USLIFE Corp. US 834,375
----------
8,714,561
----------
HEALTH CARE - 5.7%
* 7,000 Elan Corp. PLC, ADR IR 194,250
13,700 Aetna, Inc. US 916,187
* 4,000 Amgen, Inc. US 245,250
* 5,500 Cephalon, Inc. US 123,062
* 4,000 Cerner Corp. US 48,500
21,900 Columbia HCA Healthcare Corp. US 782,925
5,000 HBO & Co. US 300,625
* 2,000 HCIA, Inc. US 55,500
* 8,500 Healthsouth Rehabilitation Corp. US 318,750
8,800 Medtronic, Inc. US 566,500
* 6,500 Oxford Health Plans, Inc. US 295,750
9,600 Warner-Lambert Co. US 610,800
----------
4,458,099
----------
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
FREMONT GROWTH FUND
October 31, 1996
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
MULTI-INDUSTRY - 2.1%
11,800 Allied-Signal, Inc. US $ 772,900
11,400 Minnesota Mining & Manufacturing Co. US 873,525
----------
1,646,425
----------
RAW MATERIALS - 3.9%
12,000 Dow Chemical Co. US 933,000
7,100 Du Pont (E.I.) de Nemours & Co. US 658,525
31,200 Engelhard Corp. US 569,400
19,200 Goodrich (B.F.) Co. US 813,600
2,500 IMC Global, Inc. US 93,750
----------
3,068,275
----------
RETAIL - 4.3%
* 26,000 Federated Department Stores, Inc. US 858,000
12,500 Home Depot, Inc. US 684,375
* 6,500 Kohls Corp. US 234,000
9,900 Penney (J.C.), Inc. US 519,750
* 4,000 PETsMART, Inc. US 108,000
10,900 Sears Roebuck & Co. US 527,287
18,200 Wal Mart Stores, Inc. US 484,575
----------
3,415,987
----------
SHELTER - 3.6%
11,600 Armstrong World Industries, Inc. US 774,300
14,500 International Paper Co. US 619,875
7,900 Kimberly-Clark Corp. US 736,675
12,600 Mead Corp. US 715,050
----------
2,845,900
----------
TECHNOLOGY - 13.7%
* 5,500 Business Objects SA, ADR FR 81,813
* 3,500 Baan Co. NV NL 129,500
* 3,500 ADC Telecommunications, Inc. US 239,312
18,100 Amp, Inc. US 613,137
* 8,000 Analog Devices, Inc. US 208,000
* 3,000 Aspen Technologies, Inc. US 201,750
10,900 Boeing Co. US 1,039,588
* 5,500 Cisco Systems, Inc. US 340,313
* 12,700 Compaq Computer Corp. US 884,238
* 2,500 Electronics for Imaging, Inc. US 180,000
15,800 Hewlett-Packard Co. US 697,175
14,900 International Business Machines Corp. US 1,922,100
* 1,500 Legato Systems, Inc. US 53,250
* 2,000 Microsoft Corp. US 274,500
22,400 Motorola, Inc. US 1,030,400
* 8,000 Parametric Technology Corp. US 391,000
* 3,500 Peoplesoft, Inc. US 314,125
* 4,000 PictureTel Corp. US 108,000
* 1,500 Premisys Communications, Inc. US 75,000
11,900 Rockwell International Corp. US 654,500
* 2,000 U.S. Robotics Corp. US 125,750
7,900 United Technologies Corp. US 1,017,125
* 5,500 Xilinx, Inc. US 180,125
----------
10,760,701
----------
Country Value
Shares Security Description Code (Note 1)
- --------------------------------------------------------------------------------
TRANSPORTATION - 2.2%
8,800 Burlington Northern Santa Fe US $ 724,900
10,000 Conrail, Inc. US 951,250
----------
1,676,150
----------
UTILITIES - 10.5%
* 26,800 AirTouch Communications, Inc. US 700,150
12,100 Ameritech Corp. US 662,475
12,200 Bell Atlantic Corp. US 735,050
25,700 Bellsouth Corp. US 1,047,275
10,000 Boston Edison Co. US 240,000
15,500 Coastal Corp. US 666,500
27,500 Entergy Corp. US 770,000
26,200 GPU, Inc. US 861,325
* 3,000 LCI International, Inc. US 95,625
43,000 Pacific Gas & Electric Co. US 1,010,500
* 6,000 Paging Network, Inc. US 102,750
12,800 SBC Communications, Inc. US 622,400
28,700 Unicom Corp. US 746,200
----------
8,260,250
----------
TOTAL STOCKS (Cost $72,318,053) 76,806,688
----------
Country Value
Face Amount/Issuer Code (Note 1)
- --------------------------------------------------------------------------------
SHORT TERM SECURITIES - 1.9%
1,527,432 Benchmark Diversified Assets Fund US 1,527,432
------------
TOTAL SHORT TERM SECURITIES (Cost $1,527,432) 1,527,432
------------
TOTAL INVESTMENTS (Cost $73,845,485), 99.6% 78,334,120
OTHER ASSETS AND LIABILITIES, NET, 0.4% 289,992
------------
NET ASSETS, 100.0% $ 78,624,112
============
PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
COUNTRY DIVERSIFICATION
Country % of
Code Country Name Net Assets
- --------------------------------------------------------------------------------
FR France 0.1%
IR Ireland 0.2%
NL Netherlands 0.2%
NO Norway 0.2%
UK United Kingdom 0.1%
US United States 99.2%
-----
TOTAL 100.0%
=====
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
FREMONT BOND FUND
October 31, 1996
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<TABLE>
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS - 101.6%
COLLATERALIZED MORTGAGE OBLIGATIONS - 48.8%
528,948 Collateralized Mortgage Securities Corp. CMO, J-5Z, REMIC........ 7.985% 05/01/17 $ 543,817
1,511,289 FHLMC CMO, 1018 0Z, PAC-1 (11) REMIC............................. 7.000% 11/15/20 1,470,636
539,232 FNMA CMO, 1990-53G, PAC REMIC.................................... 8.000% 12/25/18 546,813
15,000,000 FNMA CMO, 1992-131KA, PAC(11) REMIC.............................. 8.000% 01/25/22 15,763,950
200,000 FNMA CMO, 1993-11J, PAC REMIC.................................... 7.500% 02/25/08 204,242
1,613,946 MDC Mortgage Funding Corp. CMO, P-4Z............................. 9.500% 11/20/17 1,607,894
1,000,000 Morgan Stanley Mortgage Trust CMO, 40-8, PAC (11) REMIC.......... 7.000% 07/20/21 985,890
7,978,928 Prudential Bache CMO Trust, 14-GZ, REMIC......................... 8.400% 03/20/21 8,279,384
536,814 Resolution Trust Corp. CMO, 1992-M4 A1 REMIC..................... 8.000% 09/25/21 541,511
980,959 Ryland Mortgage Securities Corp. CMO, 1993-8-A, REMIC............ 7.822% 09/25/23 996,286
567,574 Saxon Mortgage Securities Corp. CMO, 1992-1 A1, ARM REMIC........ 7.622% 09/25/22 574,846
3,000,000 Securitized Asset Sales, Inc. CMO, 1993-2A9, PAC (11) REMIC...... 6.200% 07/25/08 2,908,110
-----------
34,423,379
-----------
FIXED RATE AND ADJUSTABLE RATE MORTGAGE SECURITIES - 29.6%
639,668 FHLMC............................................................ 8.250% 08/01/17 662,453
430,439 FHLMC............................................................ 6.500% 01/01/26 412,817
218,479 FHLMC............................................................ 6.500% 03/01/26 209,329
1,131,996 FHLMC............................................................ 6.500% 04/01/26 1,084,588
223,377 FHLMC............................................................ 6.500% 05/01/26 214,231
774,553 FNMA ARM......................................................... 6.069% 12/01/27 771,409
1,018,559 FNMA ARM......................................................... 7.766% 11/01/23 1,055,798
3,630,444 GNMA II ARM...................................................... 7.125% 08/20/23 3,701,202
2,250,630 GNMA............................................................. 7.000% 01/15/26 2,206,322
7,767,157 GNMA............................................................. 7.000% 02/15/26 7,614,245
3,000,000 GNMA TBA......................................................... 6.000% 12/23/26 3,003,750
-----------
20,936,144
-----------
FOREIGN BONDS - 11.9%
CAN$ 2,500,000 Government of Canada............................................. 8.750% 12/01/05 2,173,255
NZ$ 1,500,000 Government of New Zealand........................................ 8.000% 04/15/04 1,102,318
NZ$ 1,300,000 Government of New Zealand........................................ 10.000% 03/15/02 1,027,650
US$ 1,960,000 Republic of Argentina, FRN
(Callable Semiannually in March or September @ 100)............. 6.625% 03/31/05 1,607,200
US$ 3,000,000 United Mexican States, FRN
(Callable Semiannually in June or December @ 100)............... 6.453% 12/31/19 2,463,750
-----------
8,374,173
-----------
CORPORATE BONDS - 10.7%
260,000 CMS Energy Corp. (Callable 10/01/97 @ 101.65).................... 9.875% 10/01/99 270,400
870,000 Delta Air Lines, Inc. (Sinking Fund Bond)........................ 9.450% 02/14/06 965,622
1,749,000 Delta Air Lines, Inc. (Sinking Fund Bond)........................ 9.450% 02/26/06 1,942,072
2,000,000 Time Warner, Inc................................................. 7.450% 02/01/98 2,029,560
225,000 Time Warner, Inc................................................. 7.975% 08/15/04 230,317
450,000 Time Warner, Inc................................................. 8.110% 08/15/06 457,969
450,000 Time Warner, Inc................................................. 8.180% 08/15/07 463,073
1,000,000 United Airlines.................................................. 10.670% 05/01/04 1,186,579
-----------
7,545,592
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
FREMONT BOND FUND
October 31, 1996
<TABLE>
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STRIPPED MORTGAGE SECURITIES - 0.6%
4,094,587 FNMA Interest Only, 1994-27WB, PAC-1 REMIC....................... 6.500% 06/25/14 $ 245,962
168,039 FNMA Principal Only, G93-12B, PAC (11) REMIC..................... 0.000% 02/25/23 160,949
------------
406,911
------------
TOTAL BONDS (Cost $69,821,209) 71,686,199
------------
OTHER SECURITIES - 6.7%
1,169,146 Benchmark Diversified Assets Fund......................................................... 1,169,146
20,000 Long Island Lighting Co. (Convertible Preferred Stock).................................... 472,500
7,000,000 Call Option on U.S. Treasury Note, 5.625%, 11/30/00,
Strike @ 91.875000, Exp. 01/06/97......................................................... 464,310
400,000 Abbott Laboratories, CP.......................................... 5.230% 11/21/96 398,838
300,000 Caisse d'Amortissement de la Dette Sociale, CP................... 5.260% 11/27/96 298,860
400,000 Caisse d'Amortissement de la Dette Sociale, CP................... 5.300% 12/04/96 398,057
1,200,000 General Electric Capital Corp., CP............................... 5.250% 12/12/96 1,192,825
+ 65,000 U.S. Treasury Bill............................................... 5.035% 11/21/96 64,818
+ 90,000 U.S. Treasury Bill............................................... 5.100% 11/14/96 89,834
+ 105,000 U.S. Treasury Bill............................................... 5.105% 11/14/96 104,807
+ 95,000 U.S. Treasury Bill............................................... 5.270% 11/14/96 94,819
------------
TOTAL OTHER SECURITIES (Cost $4,712,262) 4,748,814
------------
TOTAL INVESTMENTS (Cost $74,533,471), 108.3% 76,435,013
OTHER ASSETS AND LIABILITIES, NET, (8.3)% (5,857,950)
------------
NET ASSETS, 100.0% $ 70,577,063
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
ARM - Adjustable Rate Mortgage
CMO - Collateralized Mortgage Obligation
CP - Commercial Paper FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
FRN - Floating Rate Note
GNMA - Government National Mortgage Association
PAC - Planned Amortization Class
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced
CURRENCY ABBREVIATIONS:
CAN$ - Canadian Dollar
NZ$ - New Zealand Dollar
US$ - US Dollar
+On deposit with broker for initial margin on futures contracts (Note 1). The
accompanying notes are an integral part of these financial statements.
41
<PAGE>
FREMONT MONEY MARKET FUND
October 31, 1996
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<TABLE>
<CAPTION>
Discount Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 84.3%
10,000,000 Abbey National North America Corp. ....................... 5.320% 11/04/96 $ 9,995,567
5,000,000 Akzo Nobel, Inc. ......................................... 5.330% 01/29/97 4,934,115
5,000,000 Allianz of America Finance Corp. ......................... 5.340% 11/13/96 4,991,100
5,000,000 Associates Corp. of North America ........................ 5.390% 02/03/97 4,929,631
5,000,000 B.B.V. Finance (Delaware), Inc. .......................... 5.290% 11/13/96 4,991,183
5,000,000 Bank One Corp.*........................................... 5.300% 11/21/96 4,985,278
5,000,000 British Columbia, Province of ............................ 5.310% 12/19/96 4,964,600
5,000,000 BTR Dunlop Finance, Inc. ................................. 5.480% 11/21/96 4,984,778
5,000,000 C.I.T. Group Holdings, Inc. .............................. 5.380% 11/19/96 4,986,550
5,000,000 Cargill Financial Services Corp.*......................... 5.330% 04/23/97 4,871,932
5,000,000 Clorox Co. ............................................... 5.370% 11/04/96 4,997,763
5,000,000 CPC International, Inc.*.................................. 5.300% 11/08/96 4,994,847
5,000,000 Daimler-Benz North America Corp. ......................... 5.290% 11/27/96 4,980,897
5,000,000 Dairy Investments (Bermuda) Ltd.*......................... 5.320% 01/30/97 4,933,500
5,000,000 Deutsche Bank Financial, Inc.............................. 5.320% 01/21/97 4,940,150
5,000,000 Electricite de France .................................... 5.400% 02/03/97 4,929,500
5,000,000 Electricity Corp. of New Zealand Ltd. .................... 5.280% 11/08/96 4,994,867
5,000,000 Ford Motor Credit Corp. .................................. 5.350% 11/18/96 4,987,368
5,000,000 General Electric Capital Corp. ........................... 5.330% 04/21/97 4,873,413
5,000,000 Glaxo Wellcome PLC*....................................... 5.290% 11/12/96 4,991,918
5,000,000 Goldman Sachs & Co. ...................................... 5.250% 11/27/96 4,981,042
5,000,000 Hancock, John Capital Corp.*.............................. 5.350% 12/30/96 4,956,160
5,000,000 Hewlett-Packard Co. ...................................... 5.400% 12/03/96 4,976,000
5,000,000 Hitachi America Ltd. ..................................... 5.340% 03/25/97 4,893,200
5,000,000 International Business Machines Corp. .................... 5.320% 01/10/97 4,948,278
5,000,000 Jostens, Inc. ............................................ 5.330% 11/04/96 4,997,779
5,000,000 Marsh & McLennan Cos., Inc.*.............................. 5.350% 05/06/97 4,861,792
5,000,000 Merrill Lynch & Co., Inc. ................................ 5.400% 01/06/97 4,950,500
5,000,000 MetLife Funding, Inc. .................................... 5.300% 01/08/97 4,949,944
5,000,000 Mitsui & Co. (U.S.A.), Inc. .............................. 5.340% 12/26/96 4,959,208
10,000,000 Morgan (J.P.) & Co., Inc. ................................ 5.490% 12/09/96 9,942,050
5,000,000 National Rural Utilities Cooperative Finance Corp. ....... 5.300% 01/13/97 4,946,264
5,000,000 New Zealand, Her Majesty the Queen in right of............ 5.270% 01/21/97 4,940,713
5,000,000 Panasonic Finance, Inc.*.................................. 5.380% 11/08/96 4,994,769
5,000,000 Repsol International Finance BV........................... 5.330% 12/09/96 4,971,869
5,000,000 Rexam PLC*................................................ 5.370% 12/16/96 4,966,438
5,000,000 RTZ America, Inc.*........................................ 5.300% 01/24/97 4,938,167
5,000,000 Sandoz Corp. ............................................. 5.400% 11/07/96 4,995,500
5,000,000 Sherwin-Williams Co.*..................................... 5.270% 12/23/96 4,961,939
5,000,000 Siemens Capital Corp...................................... 5.290% 02/04/97 4,930,201
5,000,000 Sony Capital Corp.*....................................... 5.260% 12/20/96 4,964,203
5,000,000 Stanford, Leland Junior University........................ 5.500% 12/18/96 4,964,097
10,000,000 Sweden, Kingdom of ....................................... 5.250% 12/18/96 9,931,458
5,000,000 Swedish Export Credit Corp. .............................. 5.300% 01/14/97 4,945,528
5,000,000 Toronto Dominion Holdings USA, Inc. ...................... 5.270% 12/20/96 4,964,135
5,000,000 Toshiba International Finance PLC (UK) ................... 5.360% 12/11/96 4,970,222
5,000,000 Toyota Motor Credit Corp. ................................ 5.310% 02/03/97 4,930,675
5,000,000 Transamerica Finance Corp. ............................... 5.390% 11/20/96 4,985,776
5,000,000 Unilever Capital Corp.*................................... 5.210% 12/05/96 4,975,397
5,000,000 Union Bank of Switzerland Finance, Inc. .................. 5.625% 11/01/96 5,000,000
5,000,000 USAA Capital Corp. ....................................... 5.400% 01/07/97 4,949,750
5,000,000 Wool International ....................................... 5.270% 11/26/96 4,981,701
5,000,000 Yale University .......................................... 5.380% 11/22/96 4,984,308
-----------
TOTAL COMMERCIAL PAPER 277,868,020
-----------
</TABLE>
* These securities are generally issued to insitutional investors. Any resale
must be in an exempt transaction pursuant to Section 4(2) of the Securities
Act of 1933.
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
FREMONT MCNEY MARKET FUND
October 31, 1996
<TABLE>
<CAPTION>
Discount Maturity Value
Principal Issuer Rate Date (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
OTHER SHORT TERM SECURITIES - 15.4%
<S> <C> <C> <C> <C>
926,146 Benchmark Diversified Assets Fund ................................................ $ 926,146
10,000,000 Bayerische Verinsbank AG, Yankee CD+ ..................... 5.260% 03/06/97 10,000,000
10,000,000 Berliner Handels-und Frankfurt Bank, Eurodollar TD+ ...... 5.500% 11/04/96 10,000,000
10,000,000 Federal Home Loan Bank, AN+............................... 5.415% 01/17/97 10,000,000
10,000,000 Federal Home Loan Bank, AN+............................... 5.670% 06/27/97 10,012,168
5,000,000 Rabobank Nederland, Yankee CD+............................ 5.500% 04/18/97 5,001,079
5,000,000 U.S. Treasury Bill ....................................... 5.430% 09/18/97 4,757,912
------------
TOTAL OTHER SHORT TERM SECURITIES 50,697,305
------------
TOTAL INVESTMENTS (Cost $328,565,325), 99.7% 328,565,325
OTHER ASSETS AND LIABILITIES, NET, 0.3% 1,086,594
------------
NET ASSETS, 100.0% $ 329,651,919
=============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AN - Agency Note
CD - Certificate of Deposit
TD - Time Deposit
+The rate indicated for these securities is the stated coupon rate. The
accompanying notes are an integral part of these financial statements.
43
<PAGE>
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
October 31, 1996
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
<TABLE>
<CAPTION>
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 94.9%
<S> <C> <C> <C> <C>
1,000,000 Anaheim, CA Public Finance Authority Revenue Bond, Anaheim Electric
Utility Projects ................................................... 5.600% 10/01/16 $ 977,080
1,000,000 California State Dept. of Veterans Affairs, Home Purchase Revenue 1991
Ser. A ............................................................. 6.450% 08/01/00 1,041,920
500,000 California State Dept. of Water Resources, Central Valley Project Revenue... 4.800% 12/01/07 487,770
1,000,000 California State Dept. of Water Resources, Central Valley Project Revenue
Ser. H.............................................................. 6.400% 12/01/00 1,085,190
1,000,000 California State GO, Various Purpose ................................ 6.500% 08/01/97 1,020,890
1,000,000 California State Public Works Board, Lease Revenue Dept. of Corrections,
Madera County State Prison 1990 Ser. A ............................. 6.700% 09/01/97 1,024,330
1,000,000 California State Public Works Board, Lease Revenue Dept. of Corrections,
Prison D ........................................................... 5.100% 06/01/06 999,200
1,000,000 California State Public Works Board, Lease Revenue Refunding, Trustees of
The California State University, 1995 Ser. B ....................... 5.600% 04/01/06 1,027,340
1,000,000 Contra Costa Transportation Authority, Sales Tax Revenue 1991 Ser. A... 6.400% 03/01/01 1,080,300
1,000,000 Contra Costa Water Authority, Water Treatment Revenue Refunding 1993
Ser. A (FGIC Insured) .............................................. 5.300% 10/01/05 1,032,230
1,000,000 Contra Costa Water District, Water Revenue Ser. F (FGIC Insured) .... 5.250% 10/01/08 1,009,300
1,000,000 East Bay CA MUD, Water System Subordinated Revenue Ser. 1994 ........ 8.500% 06/01/98 1,071,270
1,000,000 City of Irvine, Assessment District No. 89-10, Limited Obligation Refunding
Improvement (MBIA Insured) ......................................... 4.200% 09/02/05 927,130
750,000 Los Angeles County Sanitation District Finance Authority, 1993 Ser. A 5.250% 10/01/06 768,472
1,000,000 Los Angeles Dept. of Water & Power, Electric Plant Revenue .......... 4.700% 10/15/06 974,610
1,000,000 Los Angeles Dept. of Water & Power, Electric Plant Revenue Refunding... 5.500% 09/01/07 1,029,160
1,000,000 Los Angeles Dept. of Water & Power, Waterworks Revenue Refunding ...... 5.625% 04/15/08 1,029,790
1,000,000 Los Angeles, CA Convention & Exhibition Center Authority, Lease Revenue
Bonds Refunding Ser. A ............................................. 5.200% 08/15/09 997,610
1,000,000 City of Los Angeles, 1990 Solid Waste Collection Project COP Revenue... 6.400% 11/01/97 1,025,870
500,000 M-S-R Public Power Agency, San Juan Project Revenue Ser. D (AMBAC Insured)... 6.300% 07/01/98 511,750
1,000,000 M-S-R Public Power Agency, San Juan Project Revenue Ser. F .......... 5.650% 07/01/03 1,059,330
1,000,000 Metropolitan Water District of Southern California, Waterworks GO
Refunding 1993 Ser. A .............................................. 5.250% 03/01/05 1,032,270
1,000,000 Modesto High School District, 1993 GO Refunding (FGIC Insured) ...... 5.300% 08/01/04 1,038,190
1,000,000 Modesto Irrigation District Finance Authority, Domestic Water Project
Revenue 1992 Ser. A (AMBAC Insured) ................................ 5.650% 09/01/03 1,060,600
1,000,000 Northern California Power Agency, Geothermal Project #3 Revenue Ser. A... 5.600% 07/01/06 1,033,240
1,000,000 Orange County Transportation Authority, Measure M Sales Tax Revenue
First Ser. 1992 .................................................... 6.500% 02/15/06 1,070,420
1,000,000 Orange County Transportation Authority, Measure M Sales Tax Revenue
Second Senior Ser. 1994 (FGIC Insured) ............................. 5.000% 02/15/08 992,690
500,000 Orange County Water District, COP 1990 Project A .................... 6.500% 08/15/98 522,955
500,000 City of Pasadena, Electric Works Revenue Ser. 1990 .................. 6.500% 08/01/99 530,135
500,000 City of Pasadena, GO Refunding ...................................... 5.000% 06/01/07 495,725
1,000,000 Rancho Cucamonga RDA, 1994 Tax Allocation Refunding (MBIA Insured) .. 5.000% 09/01/07 999,520
1,000,000 City of Riverside, Electric Revenue 1991 ............................ 6.100% 10/01/00 1,061,800
1,000,000 City of Riverside, Electric Revenue Refunding 1993 .................. 5.000% 10/01/06 999,960
1,000,000 Sacramento County Sanitation District Finance Authority, Revenue Bond
(MBIA Insured) ..................................................... 5.000% 12/01/08 990,570
1,000,000 Sacramento MUD, Electric Revenue 1991 Ser. Y ........................ 6.250% 09/01/00 1,067,620
1,000,000 San Bernardino County Transportation Authority, Sales Tax Revenue 1992
Ser. A (FGIC Insured) .............................................. 6.000% 03/01/03 1,075,810
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
<TABLE>
<CAPTION>
FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
October 31, 1996
Coupon Maturity Value
Principal Issuer Rate Date (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
<S> <C> <C> <C> <C>
1,000,000 San Francisco, CA Bay Area Rapid Transit, Sales Tax Revenue Refunding... 6.400% 07/01/97 $ 1,018,120
1,000,000 City and County of San Francisco International Airport, Revenue Second Ser.
Issue 1 (AMBAC Insured) ............................................ 6.100% 05/01/03 1,083,160
1,000,000 City and County of San Francisco RDA, Lease Revenue Ser. 1991
(George R. Moscone Convention Center) (AMBAC Insured) .............. 6.200% 10/01/00 1,071,240
1,000,000 City and County of San Francisco Sewer, Revenue Refunding Ser. 1992
(AMBAC Insured) .................................................... 5.800% 10/01/05 1,064,830
1,000,000 San Jose, CA Finance Authority, Convention Center Revenue Refunding
Project Ser. C (MBIA Insured) ...................................... 5.750% 09/01/03 1,055,310
1,000,000 Santa Margarita/Dana Point Authority Orange County, Revenue Bond Ser. A... 5.375% 08/01/04 1,039,720
Southern California Public Power Authority
1,000,000 Mead-Phoenix Project Revenue 1994 Ser. A (AMBAC Insured) ........... 4.750% 07/01/09 944,800
1,000,000 Mead-Phoenix Project Revenue 1994 Ser. A (AMBAC Insured) ........... 4.750% 07/01/08 957,980
1,000,000 Palo Verde Power Projects Revenue 1993 Ser. A ...................... 5.100% 07/01/06 1,010,050
500,000 City of Stockton, 1990 Wastewater System Project COP (AMBAC Insured) 6.700% 09/01/98 525,195
500,000 City of Stockton, 1990 Wastewater System Project COP (AMBAC Insured) 6.800% 09/01/99 530,735
1,000,000 University of California, Housing System Revenue 1993 Ser. A (MBIA Insured).. 5.500% 11/01/08 1,020,990
500,000 University of California, Research Facilities Revenue 1995 Ser. C
(AMBAC Insured) .................................................... 5.100% 09/01/07 501,550
1,000,000 West & Central Basin Finance Authority, West Basin Water Revenue
Refunding Project (AMBAC Insured) .................................. 5.125% 08/01/06 1,015,420
1,500,000 Yucaipa School Facilities Finance Authority, 1995 Sweetwater Refunding
(MBIA Insured) ..................................................... 6.000% 09/01/10 1,555,695
-----------
TOTAL MUNICIPAL BONDS (Cost $46,848,541) 48,546,842
-----------
SHORT TERM SECURITIES - 3.7%
1,000,000 California State Revenue Anticipation Notes Ser. A .................. 4.500% 06/30/97 1,005,880
900,064 Provident Institutional Fund: Municipal Fund for California Investors, Inc. ....................... 900,064
-----------
TOTAL SHORT TERM SECURITIES (Cost $1,904,017) 1,905,944
-----------
TOTAL INVESTMENTS (Cost $48,752,558), 98.6% 50,452,786
OTHER ASSETS AND LIABILITIES, NET, 1.4% 703,258
-----------
NET ASSETS, 100.0% $ 51,156,044
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificates of Participation
FGIC - Financial Guaranty Insurance Corp.
GO - General Obligation
MBIA - Municipal Bond Investor Assurance Corp.
MUD - Municipal Utility District
RDA - Redevelopment Agency
The accompanying notes are an integral part of these financial statements.
45
</TABLE>
<PAGE>
FREMONT MUTUAL FUNDS, INC.
October 31, 1996
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL EMERGING
GLOBAL GROWTH SMALL CAP MARKETS
FUND FUND FUND FUND
---- ---- ---- ----
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at cost $542,076,336 $ 32,567,672 $ 9,056,967 $ 3,838,200
============ ============ ============ ============
Investments in securities at value (Note 1) 569,661,939 34,997,588 9,169,271 3,794,360
Securities lending collateral (Note 1) 34,883,640 4,004,476 219,791 71,319
Cash -- -- 35,310 46,424
Dividends and interest receivable 4,115,885 35,584 20,090 1,167
Receivable for securities sold -- 275,447 -- 21,682
Receivable from sale of fund shares 309,335 8,064 3,091 457
Variation margin receivable -- -- -- --
Unrealized appreciation on foreign currency contracts 29,466 -- -- --
Prepaid expense 4,925 -- -- --
Unamortized organization costs (Note 3) -- -- -- 17,518
------------ ------------ ------------ ------------
TOTAL ASSETS 609,005,190 39,321,159 9,447,553 3,952,927
------------ ------------ ------------ ------------
LIABILITIES:
Liabilities for securities lending collateral 34,883,640 4,004,476 219,791 71,319
Liabilities for options written (Note 4) -- -- -- --
Dividends payable to shareholders -- -- -- --
Reverse repurchase agreement (Note 1) -- -- -- --
Payable for securities purchased -- -- -- 92,330
Payable to management company -- -- -- 17,518
Payable for fund shares redeemed 470,983 150 2,550 --
Unrealized depreciation on foreign currency contracts 979,032 -- -- 11
Accrued expenses:
Investment advisory and administrative fees 362,362 43,787 11,037 --
Shareholder servicing fees 10,500 -- -- --
Custody fees 58,362 -- -- --
Accounting fees 28,000 -- -- --
Audit and legal fees 31,515 -- -- --
Other payables 30,560 -- -- --
------------ ------------ ------------ ------------
TOTAL LIABILITIES 36,854,954 4,048,413 233,378 181,178
------------ ------------ ------------ ------------
NET ASSETS $572,150,236 $ 35,272,746 $ 9,214,175 $ 3,771,749
============ ============ ============ ============
Net assets consist of:
Paid in capital $474,152,043 $ 32,740,261 $ 8,869,021 $ 3,892,802
Undistributed net investment income (loss) 2,241,575 -- 27,143 7,385
Unrealized appreciation (depreciation) on investments 27,585,603 2,429,916 112,304 (43,840)
Unrealized appreciation (depreciation) on foreign currency
contracts and other assets and liabilities (928,008) (485 869 11
Accumulated net realized gain (loss) 69,099,023 103,054 204,838 (84,609)
------------ ------------ ------------ ------------
NET ASSETS $572,150,236 $ 35,272,746 $ 9,214,175 $ 3,771,749
============ ============ ============ ============
SHARES OF CAPITAL STOCK OUTSTANDING 37,869,936 3,392,090 907,834 391,921
============ ============ ============ ============
NET ASSET VALUE PER SHARE $ 15.11 $ 10.40 $ 10.15 $ 9.62
============ ============ ============ `============
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
U.S. INTERMEDIATE
MICRO-CAP GROWTH BOND MONEY MARKET TAX-FREE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities at cost $101,203,707 $ 73,845,485 $ 74,533,471 $328,565,325 $ 48,752,558
============ ============ ============ ============ ============
Investments in securities at value (Note 1) 101,639,430 78,334,120 76,435,013 328,565,325 50,452,786
Securities lending collateral (Note 1) 17,827,172 6,891,188 -- -- --
Cash -- -- -- -- 148,990
Dividends and interest receivable 26,104 129,790 714,366 1,143,370 640,350
Receivable for securities sold -- 82,317 -- 1,318,202 --
Receivable from sale of fund shares 1,467,142 257,302 356,968 -- 1,650
Variation margin receivable -- -- 28,594 --
Unrealized appreciation on foreign currency contracts -- -- 248,829 -- --
Prepaid expense -- 428 714 6,604 462
Unamortized organization costs (Note 3) -- 1,578 2,386 -- --
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 120,959,848 85,696,723 77,786,870 331,033,501 51,244,238
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Liabilities for securities lending collateral 17,827,172 6,891,188 -- -- --
Liabilities for options written (Note 4) -- -- 10,000 -- --
Dividends payable to shareholders -- -- 13,218 9,430 29,810
Reverse repurchase agreement (Note 1) -- -- 3,580,000 -- --
Payable for securities purchased 192,651 66,286 3,395,508 -- --
Payable to management company -- -- -- -- --
Payable for fund shares redeemed 295,019 21,995 10,988 1,257,181 5,174
Unrealized depreciation on foreign currency contracts -- -- 103,271 -- --
Accrued expenses:
Investment advisory and administrative fees 164,055 42,666 23,386 59,270 13,162
Shareholder servicing fees -- 3,500 2,900 6,500 2,700
Custody fees -- 9,183 4,909 8,718 2,683
Accounting fees -- 4,400 5,200 14,600 5,000
Audit and legal fees -- 14,515 14,515 14,515 14,515
Other payables -- 18,878 45,912 11,368 15,150
------------ ------------ ------------ ------------ ------------
Total liabilities 18,478,897 7,072,611 7,209,807 1,381,582 88,194
------------ ------------ ------------ ------------ ------------
NET ASSETS $102,480,951 $ 78,624,112 $ 70,577,063 $329,651,919 $ 51,156,044
============ ============ ============ ============ ============
Net assets consist of:
Paid in capital $ 96,935,718 $ 56,367,681 $ 68,832,392 $329,651,919 $ 49,410,725
Undistributed net investment income (loss) -- 110,727 2,647 -- --
Unrealized appreciation (depreciation) on
investments 435,723 4,488,635 2,355,038 -- 1,700,228
Unrealized appreciation (depreciation) on
foreign currency contracts and other assets
and liabilities -- -- 146,976 -- --
Accumulated net realized gain (loss) 5,109,510 17,657,069 (759,990) -- 45,091
------------ ------------ ------------ ------------ ------------
NET ASSETS $102,480,951 $ 78,624,112 $ 70,577,063 $329,651,919 $ 51,156,044
============ ============ ============ ============ ============
SHARES OF CAPITAL STOCK OUTSTANDING 5,221,792 5,234,734 7,063,078 329,651,919 4,734,699
============ ============ ============ ============ ============
NET ASSET VALUE PER SHARE $ 19.63 $ 15.02 $ 9.99 $ 1.00 $ 10.80
============ ============ ============ ============ ============
</TABLE>
47
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Year Ended October 31, 1996
STATEMENT OF OPERATIONS
<TABLE>
INTERNATIONAL INTERNATIONAL EMERGING
GLOBAL GROWTH SMALL CAP MARKETS
FUND FUND FUND FUND#
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 13,445,282 $ 47,149 $ 27,548 $ 33,460
Dividends 5,348,548 430,157 189,712 5,177
------------ ------------ ------------ ---------
TOTAL INCOME* 18,793,830 477,306 217,260 38,637
------------ ------------ ------------ ---------
EXPENSES:
Investment advisory and administrative fees (Note 2) 3,997,557 548,887 158,372 13,322
Shareholder servicing fees (Note 2) 98,552 -- -- 2,346
Custody fees 172,041 -- -- 4,800
Distribution fees (Note 2) -- -- -- 2,896
Accounting fees 164,882 -- -- 3,900
Audit and legal fees 40,962 -- -- 8,600
Directors' fees (Note 2) 2,564 -- -- 888
Registration fees 38,904 -- -- 16,453
Interest expense (Note 1) -- -- -- --
Other 99,659 -- -- 4,498
------------ ------------ ------------ ---------
TOTAL EXPENSES BEFORE REDUCTIONS 4,615,121 548,887 158,372 57,703
Expenses waived and/or reimbursed by Advisor -- -- (43,633) (57,703)
------------ ------------ ------------ ---------
TOTAL NET EXPENSES 4,615,121 548,887 114,739 --
------------ ------------ ------------ ---------
NET INVESTMENT INCOME (LOSS) 14,178,709 (71,581) 102,521 38,637
------------ ------------ ------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investments 66,430,845 2,385,592 272,776 (84,620)
Transactions in written options -- -- -- --
Foreign currency transactions 3,713,517 (123,314) (72,383) (5,125)
Net increase (decrease) in unrealized appreciation (depreciation) on:
Investments (16,096,541) 370,380 328,876 (43,840)
Translation of assets and liabilities in foreign currencies (966,466) (1,146) 1,815 11
------------ ------------ ------------ ---------
Net realized and unrealized gain (loss) from investments
and foreign currency 53,081,355 2,631,512 531,084 (133,574)
------------ ------------ ------------ ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 67,260,064 $ 2,559,931 $ 633,605 $ (94,937)
============ ============ ============ =========
</TABLE>
* Net of foreign taxes withheld of $337,033 for Fremont Global Fund, $46,245
for Fremont International Growth Fund, $16,217 for Fremont International
Small Cap Fund, $642 for Fremont Emerging Markets Fund and $1,088 for
Fremont Growth Fund.
# Period from June 24, 1996 (commencement of operations) to October 31, 1996.
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
U.S. INTERMEDIATE
MICRO-CAP GROWTH BOND MONEY MARKET TAX-FREE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 614,218 $ 163,469 $5,890,821 $16,549,182 $2,736,364
Dividends 42,612 971,413 35,250 -- --
------------ ------------ ---------- ----------- ----------
TOTAL INCOME* 656,830 1,134,882 5,926,071 16,549,182 2,736,364
------------ ------------ ---------- ----------- ----------
EXPENSES:
Investment advisory and administrative fees (Note 2) 1,008,115 443,609 435,345 1,099,021 267,175
Shareholder servicing fees (Note 2) -- 33,455 26,248 51,860 25,428
Custody fees -- 20,188 23,506 26,179 7,717
Distribution fees (Note 2) -- -- -- -- --
Accounting fees -- 26,561 33,958 84,164 29,134
Audit and legal fees -- 21,948 23,915 24,877 24,541
Directors' fees (Note 2) -- 2,564 2,564 2,564 2,564
Registration fees -- 21,573 12,290 36,857 2,809
Interest expense (Note 1) -- -- 53,283 -- --
Other -- 54,162 44,020 43,395 12,075
------------ ------------ ---------- ----------- ----------
TOTAL EXPENSES BEFORE REDUCTIONS 1,008,115 624,060 665,129 1,368,917 371,443
Expenses waived and/or reimbursed by Advisor (118,286) -- (118,652) (448,972) (111,434)
------------ ------------ ---------- ----------- ----------
TOTAL NET EXPENSES 889,829 624,060 536,477 919,945 260,009
------------ ------------ ---------- ----------- ----------
NET INVESTMENT INCOME (LOSS) (232,999) 510,822 5,389,594 15,629,237 2,476,355
------------ ------------ ---------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investments 5,347,629 17,602,434 (239,275) -- 44,827
Transactions in written options -- -- 23,043 -- --
Foreign currency transactions -- -- 96,978 -- --
Net increase (decrease) in unrealized appreciation
(depreciation) on:
Investments (512,157) (4,559,067) 276,789 -- (192,443)
Translation of assets and liabilities in foreign
currencies -- -- 170,440 -- --
------------ ------------ ---------- ----------- ----------
Net realized and unrealized gain (loss) from
investments and foreign currency 4,835,472 13,043,367 327,975 -- (147,616)
------------ ------------ ---------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 4,602,473 $ 13,554,189 $5,717,569 $15,629,237 $2,328,739
============ ============ ========== =========== ==========
</TABLE>
49
<PAGE>
FREMONT MUTUAL FUNDS, INC.
October 31, 1996
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL GROWTH
FUND FUND
----------------------- -------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96 10/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 14,178,709 $ 13,562,581 $ (71,581) $ 348,359
Net realized gain (loss) from investments and transactions in
written options 66,430,845 23,444,879 2,385,592 (948,173)
Net realized gain (loss) from foreign currency transactions 3,713,517 (435,755) (123,314) (53,746)
Net unrealized appreciation (depreciation) on investments (16,096,541) 18,907,997 370,380 601,879
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies (966,466) (44,605) (1,146) (47)
------------ ------------- ------------ ------------
Net increase (decrease) in net assets from operations 67,260,064 55,435,097 2,559,931 (51,728)
------------ ------------- ------------ ------------
Distributions to shareholders from:
Net investment income (15,978,412) (16,914,918) (25,060) (269,553)
Net realized gains (19,404,727) (1,140,840) -- --
------------ ------------- ------------ ------------
Total distributions to shareholders (35,383,139) (18,055,758) (25,060) (269,553)
------------ ------------- ------------ ------------
From capital share transactions:
Proceeds from shares sold 86,354,528 110,900,850 7,454,198 4,286,553
Payments for shares redeemed (62,546,779) (136,942,988) (6,897,361) (1,803,707)
Reinvested dividends 34,110,706 17,395,011 25,025 269,162
------------ ------------- ------------ ------------
Net increase (decrease) in net assets from capital share
transactions 57,918,455 (8,647,127) 581,862 2,752,008
------------ ------------- ------------ ------------
Net increase in net assets 89,795,380 28,732,212 3,116,733 2,430,727
Net assets at beginning of period 482,354,856 453,622,644 32,156,013 29,725,286
------------ ------------- ------------ ------------
NET ASSETS AT END OF PERIOD** 572,150,236 $ 482,354,856 $ 35,272,746 $ 32,156,013
=========== ============= ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 5,889,696 8,368,781 727,743 433,837
Redeemed (4,265,461) (10,326,949) (647,428) (188,969)
Reinvested dividends 2,372,436 1,282,980 2,541 27,727
------------ ------------- ------------ ------------
Net increase (decrease) in capital share transactions 3,996,671 (675,188) 82,856 272,595
=========== ============= ============ ============
</TABLE>
** Net assets at October 31, 1996 and October 31, 1995, respectively, include
undistributed net investment income (loss) of $204,471 and $2,004,174 for
Fremont Global Fund, $73,404 and $170,045 for Fremont International Growth
Fund, $75,473 and $9,448 for Fremont International Small Cap Fund, $12,521
and $ -- for Fremont Emerging Markets Fund, $(232,999) and $ -- for
Fremont U.S. Micro-Cap Fund, and $110,727 and $9,309 for Fremont Growth
Fund.
# Period from June 24, 1996 (commencement of operations) to October 31, 1996.
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP EMERGING MARKETS
FUND FUND
---------------------- ----------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96
-------- -------- --------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 102,521 $ 45,740 $ 38,637
Net realized gain (loss) from investments and transactions in written options 272,776 (21,568) (84,620)
Net realized gain (loss) from foreign currency transactions (72,383) (14,440) (5,125)
Net unrealized appreciation (depreciation) on investments 328,876 (203,902) (43,840)
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies 1,815 10,337 11
------------ ---------- ----------
Net increase (decrease) in net assets from operations 633,605 (183,833) (94,937)
------------ ---------- ----------
Distributions to shareholders from:
Net investment income (36,496) (35,036) (26,116)
Net realized gains -- -- --
------------ ---------- ----------
Total distributions to shareholders (36,496) (35,036) (26,116)
------------ ---------- ----------
From capital share transactions:
Proceeds from shares sold 5,840,661 2,849,192 3,982,064
Payments for shares redeemed (1,489,319) (172,610) (115,175)
Reinvested dividends 20,865 19,578 25,913
------------ ---------- ----------
Net increase (decrease) in net assets from capital share transactions 4,372,207 2,696,160 3,892,802
------------ ---------- ----------
Net increase in net assets 4,969,316 2,477,291 3,771,749
Net assets at beginning of period 4,244,859 1,767,568 --
------------ ---------- ----------
NET ASSETS AT END OF PERIOD** $ 9,214,175 $4,244,859 $3,771,749
============ ========== ==========
CAPITAL TRANSACTIONS IN SHARES:
Sold 583,448 308,867 401,191
Redeemed (149,348) (18,867) (11,901)
Reinvested dividends 2,288 2,175 2,631
------------ ---------- ----------
Net increase (decrease) in capital share transactions 436,388 292,175 391,921
============ ========== ==========
</TABLE>
<TABLE>
<CAPTION>
U.S. MICRO-CAP GROWTH
FUND FUND
----------------------- ------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96 10/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (232,999) $ (25,196) $ 510,822 $ 398,651
Net realized gain (loss) from investments and transactions in
written options 5,347,629 347,186 17,602,434 3,482,283
Net realized gain (loss) from foreign currency transactions -- -- -- --
Net unrealized appreciation (depreciation) on investments (512,157) 888,690 (4,559,067) 6,445,736
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies -- -- -- --
------------ ----------- ------------ ------------
Net increase (decrease) in net assets from operations 4,602,473 1,210,680 13,554,189 10,326,670
------------ ----------- ------------ ------------
Distributions to shareholders from:
Net investment income -- -- (409,404) (505,139)
Net realized gains (323,213) -- (3,508,522) (241,849)
------------ ----------- ------------ ------------
Total distributions to shareholders (323,213) -- (3,917,926) (746,988)
------------ ----------- ------------ ------------
From capital share transactions:
Proceeds from shares sold 162,319,610 6,143,180 31,461,523 32,879,457
Payments for shares redeemed (72,224,013) (1,614,127) (25,982,666) (10,815,329)
Reinvested dividends 313,977 -- 3,876,573 744,451
------------ ----------- ------------ ------------
Net increase (decrease) in net assets from capital share
transactions 90,409,574 4,529,053 9,355,430 22,808,579
------------ ----------- ------------ ------------
Net increase in net assets 94,688,834 5,739,733 18,991,693 32,388,261
Net assets at beginning of period 7,792,117 2,052,384 59,632,419 27,244,158
------------ ----------- ------------ ------------
NET ASSETS AT END OF PERIOD** $102,480,951 $ 7,792,117 $ 78,624,112 $ 59,632,419
============ =========== ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 8,424,985 462,168 2,313,441 2,872,926
Redeemed (3,767,440) (117,136) (1,944,975) (981,267)
Reinvested dividends 20,793 -- 301,367 68,568
------------ ----------- ------------ ------------
Net increase (decrease) in capital share transactions 4,678,338 345,032 669,833 1,960,227
============ =========== ============ ============
</TABLE>
51
<PAGE>
FREMONT MUTUAL FUNDS, INC.
October 31, 1996
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
BOND
FUND
----------------------
YEAR YEAR
ENDED ENDED
----- -----
10/31/96 10/31/95
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 5,389,594 $ 4,585,884
Net realized gain (loss) from investments and transactions in written options (216,232) 2,230,265
Net realized gain (loss) from foreign currency transactions 96,978 82,647
Net unrealized appreciation (depreciation) on investments 276,789 3,540,395
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies 170,440 (23,464)
------------ ------------
Net increase in net assets from operations 5,717,569 10,415,727
------------ ------------
Distributions to shareholders from:
Net investment income (5,647,913) (4,531,238)
Net realized gains (1,968,201) --
------------ ------------
Total distributions to shareholders (7,616,114) (4,531,238)
------------ ------------
From capital share transactions:
Proceeds from shares sold 17,733,366 25,537,155
Payments for shares redeemed (39,028,358) (13,731,939)
Reinvested dividends 7,427,929 4,408,916
------------ ------------
Net increase (decrease) in net assets from capital share transactions (13,867,063) 16,214,132
------------ ------------
Net increase (decrease) in net assets (15,765,608) 22,098,621
Net assets at beginning of period 86,342,671 64,244,050
------------ ------------
NET ASSETS AT END OF PERIOD** $ 70,577,063 $ 86,342,671
============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 1,778,229 2,579,889
Redeemed (3,985,015) (1,429,749)
Reinvested dividends 747,888 454,805
------------ ------------
Net increase (decrease) in capital share transactions (1,458,898) 1,604,945
============ ============
</TABLE>
** For Fremont Bond Fund, net assets at October 31, 1996 and October 31,
1995, include undistributed net investment income (loss) of $(171,773) and
$86,546, respectively. There was no undistributed net investment income
for Fremont Money Market Fund or Fremont California Intermediate Tax-Free
Fund at October 31, 1996 nor at October 31, 1995.
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
MONEY MARKET INTERMEDIATE TAX-FREE
FUND FUND
------------------------- -------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96 10/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 15,629,237 $ 16,288,897 $ 2,476,355 $ 2,782,365
Net realized gain (loss) from investments and transactions in
written options -- -- 44,827 119,954
Net realized gain (loss) from foreign currency transactions -- -- -- --
Net unrealized appreciation (depreciation) on investments -- -- (192,443) 3,671,361
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies -- -- -- --
------------ ------------ ------------ ------------
Net increase in net assets from operations 15,629,237 16,288,897 2,328,739 6,573,680
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (15,629,237) (16,288,897) (2,476,355) (2,782,365)
Net realized gains -- -- (119,954) (4,639)
------------ ------------ ------------ ------------
Total distributions to shareholders (15,629,237) (16,288,897) (2,596,309) (2,787,004)
------------ ------------ ------------ ------------
From capital share transactions:
Proceeds from shares sold 308,476,828 297,387,013 2,285,491 2,822,896
Payments for shares redeemed 293,545,954) (238,529,846) (3,402,568) (17,111,368)
Reinvested dividends 15,409,433 16,015,143 2,227,490 2,510,108
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from capital share
transactions 30,340,307 74,872,310 1,110,413 (11,778,364)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 30,340,307 74,872,310 842,843 (7,991,688)
Net assets at beginning of period 299,311,612 224,439,302 50,313,201 58,304,889
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD** $329,651,919 $ 299,311,612 $ 51,156,044 $ 50,313,201
============ ============= ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 308,476,828 297,387,013 210,037 270,058
Redeemed (293,545,954) (238,529,846) (315,379) (1,629,211)
Reinvested dividends 15,409,433 16,015,143 206,265 239,479
------------ ------------ ------------ ------------
Net increase (decrease) in capital share transactions 30,340,307 74,872,310 100,923 (1,119,674)
============ ============= ============ ============
</TABLE>
53
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Financial Highlights - October 31, 1996
GLOBAL FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31
----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $14.24 $13.13 $13.17 $11.52 $11.25
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .39 .40 .26 .32 .39
Net realized and unrealized gain (loss) 1.49 1.24 (.03) 1.67 .40
------ ------ ------ ------ ------
Total investment operations 1.88 1.64 .23 1.99 .79
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.44) (.50) (.14) (.26) (.40)
From net realized gains (.57) (.03) (.13) (.08) (.11)
Total distributions -- (.53) -- -- (.01)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD (1.01) $14.24 (.27) (.34) (.52)
$15.11 $13.13 $13.17 $11.52
====== ====== ====== ======
TOTAL RETURN 13.72% 12.78%
RATIOS AND SUPPLEMENTAL DATA 1.74% 17.51% 7.10%
Net assets, end of period (000s omitted) $572,150 $482,355 $453,623 $186,325 $101,839
Ratio of expenses to average net assets .87% .88% .95% .99% 1.09%
Ratio of net investment income (loss) to average net assets 2.66% 2.98% 2.47% 2.89% 3.41%
Portfolio turnover rate 71% 83% 52% 40% 50%
Average commission rate paid $.0238 -- -- -- --
</TABLE>
INTERNATIONAL GROWTH FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31 PERIOD FROM
---------------------- MARCH 1, 1994 TO
1996 1995 OCTOBER 31, 1994
---- ---- ----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $9.72 $9.79 $9.57
----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) (.02) .10 .02
Net realized and unrealized loss .71 (.09) .20
----- ----- -----
Total investment operations .69 .01 .22
----- ----- -----
LESS DISTRIBUTIONS
From net investment income (.01) (.08) --
From net realized gains -- -- --
----- ----- -----
Total distributions (.01) (.08) --
NET ASSET VALUE, END OF PERIOD $10.40 $9.72 $9.79
====== ===== =====
TOTAL RETURN 7.07% 0.13% 2.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $35,273 $32,156 $29,725
Ratio of expenses to average net assets(a) 1.50% 1.50% 1.50%*
Ratio of net investment income (loss) to average net assets(a) -.20% 1.19% .35%*
Portfolio turnover rate 74% 32% 44%*
Average commission rate paid $.0150 -- --
</TABLE>
* Annualized
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
INTERNATIONAL SMALL CAP FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31 PERIOD FROM
---------------------- JUNE 30, 1994 TO
1996 1995 OCTOBER 31, 1994
---- ---- ----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $9.00 $9.86 $10.00
----- ----- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) .14 .10 (.01)
Net realized and unrealized gain 1.08 (.88) (.13)
----- ----- ------
Total investment operations 1.22 (.78) (.14)
----- ----- ------
LESS DISTRIBUTIONS
From net investment income (.07) (.08) --
From net realized gains -- -- --
----- ----- ------
Total distributions (.07) (.08) --
----- ----- ------
NET ASSET VALUE, END OF PERIOD $10.15 $9.00 $9.86
====== ===== =====
TOTAL RETURN # 13.69% -7.96% -1.40%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $9,214 $4,245 $1,768
Ratio of expenses to average net assets(a) 1.81% 2.06% 2.50%*
Ratio of net investment income (loss) to average net assets(a) 1.61% 1.67% -.28%*
Portfolio turnover rate 74% 96% --
Average commission rate paid $.0003 -- --
</TABLE>
* Annualized
(a) Management fees have been voluntarily waived from February 1, 1995
onwards. If fees had been charged fully, net investment income (loss) per
share, ratio of expenses to average net assets and ratio of net investment
income (loss) to average net assets would have been $.08, 2.50% and 0.92%,
respectively, for the year ended October 31, 1996, and $.07, 2.50% and
1.23%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the advisor not waived expenses.
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
Period from
June 24, 1996 to
October 31, 1996
----------------
<S> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .10
Net realized and unrealized loss (.41)
Total investment operations (.31)
LESS DISTRIBUTIONS
From net investment income (.07)
From net realized gains --
Total distributions (.07)
NET ASSET VALUE, END OF PERIOD $9.62
TOTAL RETURN # -3.12%*
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $3,772
Ratio of expenses to average net assets(a) 0.00%*
Ratio of net investment income to average net assets(a) 3.32%*
Portfolio turnover rate 20%*
Average commission rate paid $.0063
</TABLE>
* Annualized
(a) Management fees and all other expenses have been voluntarily waived or
reimbursed from June 24, 1996 onwards. If fees had been charged fully, net
investment income (loss) per share, ratio of expenses to average net
assets and ratio of net investment income (loss) to average net assets
would have been -$.05, 4.95% and -1.63%, respectively, for the period
ended October 31, 1996.
# Total return would have been lower had the advisor not waived or
reimbursed expenses.
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
FREMONT MUTUAL FUNDS, INC.
FINANCIAL HIGHLIGHTS - OCTOBER 31, 1996
U.S. MICRO-CAP FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31 Period from
----------------------------------- June 30, 1994 to
1996 1995 October 31, 1994
------------- ------------- ----------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.34 $ 10.34 $ 10.00
------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) (.04) (.05) .02
Net realized and unrealized gain 5.83 4.05 .34
------------- ------------- -------------
Total investment operations 5.79 4.00 .36
------------- ------------- -------------
LESS DISTRIBUTIONS
From net investment income -- -- (.02)
From net realized gains (.50) -- --
------------- ------------- -------------
Total distributions (.50) -- (.02)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 19.63 $ 14.34 $ 10.34
============= ============= =============
TOTAL RETURN # 41.46% 38.68% 3.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 102,481 $ 7,792 $ 2,052
Ratio of expenses to average net assets(a) 1.96% 2.04% 2.50%*
Ratio of net investment income (loss) to average net assets(a) -.51% -.67% .68%*
Portfolio turnover rate 81% 144% 129%*
Average commission rate paid $ .0541 -- --
</TABLE>
*Annualized
(a) Management fees have been voluntarily waived from February 1, 1995
onwards. If fees had been charged fully, net investment income (loss) per
share, ratio of expenses to average net assets and ratio of net investment
income (loss) to average net assets would have been -$.06, 2.22% and -.77%,
respectively, for the year ended October 31, 1996, and -$.08, 2.50% and
-1.13%, respectively, for the year ended October 31, 1995.
# Total return would have been lower had the advisor not waived expenses.
GROWTH FUND
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31
-------------------------------------------------------------------
1996 1995 1994 1993
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.06 $ 10.46 $ 11.25 $ 10.08
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .10 .13 .21 .13
Net realized and unrealized gain (loss) 2.65 2.74 (.02) 1.16
Total investment operations 2.75 2.87 .19 1.29
LESS DISTRIBUTIONS
From net investment income (.08) (.17) (.18) (.12)
From net realized gains (.71) (.10) (.80) --
Total distributions (.79) (.27) (.98) (.12)
NET ASSET VALUE, END OF PERIOD $ 15.02 $ 13.06 $ 10.46 $ 11.25
TOTAL RETURN # 22.06% 28.12% 1.72% 12.80%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 78,624 $ 59,632 $ 27,244 $ 42,306
Ratio of expenses to average net assets(a) .92% .97% .94% .87%
Ratio of net investment income to average net assets(a) .75% 1.02% 1.31% 1.19%
Portfolio turnover rate 129% 108% 55% 44%
Average commission rate paid $ .0429 -- -- --
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1992 TO
OCTOBER 31, 1992
----------------
<S> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.92
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .02
Net realized and unrealized gain (loss) .18
----------
Total investment operations .20
----------
LESS DISTRIBUTIONS
From net investment income (.04)
From net realized gains --
----------
Total distributions (.04)
NET ASSET VALUE, END OF PERIOD $ 10.08
==========
Total Return # 2.00%*
Ratios and Supplemental Data
Net assets, end of period (000s omitted) $ 32,388
Ratio of expenses to average net assets(a) .94%*
Ratio of net investment income to average net assets(a) 1.08%*
Portfolio turnover rate 49%*
Average commission rate paid --
</TABLE>
* Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. If fees had been charged fully, net investment income
per share, ratio of expenses to average net assets, and ratio of net
investment income to average net assets would have been $.12, 1.01% and
.98%, respectively, for the year ended October 31, 1995; $.19, 1.08% and
1.17%, respectively, for the year ended October 31, 1994; $.11, 1.02% and
1.04%, respectively, for the year ended October 31, 1993; and $.02, 1.18%
and 0.84%, respectively, for the period from August 14, 1992 to October
31, 1992.
# Total return would have been lower had the advisor not waived expenses.
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Financial Highlights - October 31, 1996
BOND FUND
<TABLE>
<CAPTION>
Years Ended October 31 Period from
----------------------------------- April 30, 1993 to
1996 1995 1994 October 31, 1993
---- ---- ---- ----------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.13 $ 9.29 $ 10.27 $ 10.04
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .67 .65 .53 .27
Net realized and unrealized gain (loss) .11 .83 (.98) .24
---------- ---------- ---------- ----------
Total investment operations .78 1.48 (.45) .51
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
From net investment income (.70) (.64) (.53) (.27)
From net realized gains (.22) -- -- (.01)
---------- ---------- ---------- ----------
Total distributions (.92) (.64) (.53) (.28)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.99 $ 10.13 $ 9.29 $ 10.27
========== ========== ========== ==========
TOTAL RETURN # 8.18% 16.49% -4.42% 5.15%*
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 70,577 $ 86,343 $ 64,244 $ 11,738
Ratio of expenses to average net assets(a) .68%* .60% .66% .50%*
Ratio of net investment income to average net assets(a) 6.82%* 6.69% 5.76% 5.35%*
Portfolio turnover rate 154%* 21% 205% 13%*
</TABLE>
*Annualized
(a) Management and other expenses charged since the Fund's inception have been
phased in over time. If fees had been charged fully, net investment income
per share, ratio of expenses to average net assets and ratio of net
investment income to average net assets would have been $.66, .83% and
6.67%, respectively, for the year ended October 31, 1996; $.64, .75% and
6.54%, respectively, for the year ended October 31, 1995; $.50, 1.04% and
5.38%, respectively, for the year ended October 31, 1994; and $.23, 1.23%
and 4.62%, respectively, for the period from April 30, 1993 to October 31,
1993.
# Total return would have been lower had the advisor not waived expenses.
<PAGE>
MONEY MARKET FUND
57
<TABLE>
<CAPTION>
Years Ended October 31
---------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .05 .06 .03 .03 .04
--------- --------- --------- --------- ---------
Total investment operations .05 .06 .03 .03 .04
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
From net investment income (.05) (.06) (.03) (.03) (.04)
--------- --------- --------- --------- ---------
Total distributions (.05) (.06) (.03) (.03) (.04)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
TOTAL RETURN# 5.34% 5.84% 3.49% 2.66% 3.73%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 329,652 $ 299,312 $ 224,439 $ 24,207 $ 31,832
Ratio of expenses to average net assets(a) .31% .30% .46% .67% .70%
Ratio of net investment income to average net assets 5.22% 5.70% 4.02% 2.62% 3.70%
</TABLE>
*Annualized
(a) Administrative fees have been voluntarily waived from April 1, 1990
onwards. If fees had been charged fully, net investment income per share,
ratio of expenses to average net assets and ratio of net investment income
to average net assets would have been $.05, .46% and 5.07%, respectively,
for the year ended October 31, 1996; $.06, .45% and 5.55%, respectively,
for the year ended October 31, 1995; $.03, .61% and 3.87%, respectively,
for the year ended October 31, 1994; $.03, .82% and 2.47%, respectively,
for the year ended October 31, 1993; $.04, .85% and 3.55%, respectively,
for the year ended October 31, 1992.
# Total return would have been lower had the advisor not waived expenses.
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Financial Highlights - October 31, 1996
<TABLE>
<CAPTION>
CALIFORNIA INTERMEDIATE TAX-FREE FUND
Years Ended October 31
------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.86 $ 10.13 $ 11.10 $ 10.55 $ 10.39
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .52 .53 .53 .55 .57
Net realized and unrealized gain (loss) (.03) .73 (.97) .62 .19
---------- ---------- ---------- ---------- ----------
Total investment operations .49 1.26 (.44) 1.17 .76
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
From net investment income (.52) (.53) (.53) (.55) (.57)
From net realized gains (.03) -- -- (.07) (.03)
---------- ---------- ---------- ---------- ----------
Total distributions (.55) (.53) (.53) (.62) (.60)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.80 $ 10.86 $ 10.13 $ 11.10 $ 10.55
========== ========== ========== ========== ==========
TOTAL RETURN # 4.63% 12.77% -3.94% 11.37% 7.37%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 51,156 $ 50,313 $ 58,305 $ 59,716 $ 44,305
Ratio of expenses to average net assets(a) .51% .50% .51% .50% .54%
Ratio of net investment income to average net assets(a) 4.86% 5.08% 4.94% 5.05% 5.38%
Portfolio turnover rate 6% 18% 21% 26% 18%
</TABLE>
(a) Management and other expenses charged since the Fund's inception have been
phased-in over time. If fees had been charged fully, net investment income
per share, ratio of expenses to average net assets, and ratio of net
investment income to average net assets would have been $.50, .73% and
4.64%, respectively, for the year ended October 31, 1996; $.51, .72% and
4.86%, respectively, for the year ended October 31, 1995; $.51, .71% and
4.74%, respectively, for the year ended October 31, 1994; $.53, .71% and
4.84%, respectively, for the year ended October 31, 1993; and $.54, .83%
and 5.09%, respectively, for the year ended October 31, 1992.
# Total return would have been lower had the advisor not waived expenses. 58
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Fremont Mutual Funds, Inc. (the Corporation) is an open-end, diversified
investment company authorized to issue ten billion shares of $.0001 par
value capital stock. These shares are currently offered in nine series:
<TABLE>
<CAPTION>
<S> <C>
- the FREMONT GLOBAL FUND - the FREMONT GROWTH FUND
- the FREMONT INTERNATIONAL GROWTH FUND - the FREMONT BOND FUND
- the FREMONT INTERNATIONAL SMALL CAP FUND - the FREMONT MONEY MARKET FUND
- the FREMONT EMERGING MARKETS FUND - the FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
- the FREMONT U.S. MICRO-CAP FUND (the Fremont California Intermediate Tax-Free Fund is
available only to residents of Arizona, California, Colorado,
Nevada, New Mexico, Oregon, Texas, Utah and Washington)
</TABLE>
Each of the Funds maintains a totally separate investment portfolio.
Significant accounting policies followed by the Funds are summarized
below. The policies are in conformity with generally accepted accounting
principles for investment companies.
A. SECURITY VALUATION
Investments, including options, are stated at value based on recorded
closing sales on a national securities exchange or, in the absence of
a recorded sale, at the mean between the last reported bid and asked
prices or at fair value as determined by the Board of Directors.
Short-term notes and similar securities are included in investments
at amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective
exchanges or the most recent price available where no closing value
is available.
Securities in the Fremont Money Market Fund have a remaining maturity
of not more than 397 days and its entire portfolio has a weighted
average maturity of not more than 90 days. As such, all of the Fund's
securities are valued at amortized cost, which approximates value. If
the Fund's portfolio had a remaining weighted average maturity of
greater than 90 days the portfolio would be stated at value based on
recorded closing sales on a national securities exchange or, in the
absence of a recorded sale, at the mean between the bid and asked
prices.
B. SECURITY TRANSACTIONS
Security transactions are accounted for as of trade date. Realized
gains and losses on security transactions are determined on the basis
of specific identification for both financial statement and federal
income tax purposes.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Dividends are recorded on the ex-dividend date, except that certain
dividends from foreign securities in the Fremont Global Fund, the
Fremont International Growth Fund, the Fremont International Small
Cap Fund and the Fremont Emerging Markets Fund are recorded when the
Fund is informed of the ex-dividend date. Interest income and
estimated expenses are accrued daily. Bond discount and premium are
amortized as required by the Internal Revenue Code. Distributions to
shareholders are recorded on the ex-dividend date. The Corporation
accounts for the assets of each Fund separately and allocates general
expenses of the Corporation to each Fund based upon the relative net
assets of each Fund or the nature of the services performed and their
applicability to each Fund.
D. INCOME TAXES
The Funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all taxable income and net capital gains, if any, to
shareholders. Therefore, no income tax provision is required. Each
Fund is treated as a separate entity in the determination of
compliance with the Internal Revenue Code and distributes taxable
income and net realized gains, if any, in accordance with schedules
described in their respective Prospectuses. The portfolio of Fremont
California Intermediate Tax-Free Fund is composed solely of issues
that qualify for tax-exempt status for both Federal and State of
California income tax purposes.
Income dividends and capital gain distributions paid to shareholders
are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles and, therefore,
may differ from the information presented in the financial
statements. These differences are generally referred to as "book/tax"
differences and are primarily due to differing treatments for foreign
currency transactions, losses deferred due to wash sale rules,
classification of gains/losses related to paydowns and certain
futures and options transactions.
Permanent book/tax differences causing payments to shareholders of
income dividends which are in excess of the net investment income
reported in the financial statements will result in reclassification
of such excess to paid in capital from undistributed net investment
income. Temporary book/tax differences, which will reverse in
subsequent periods, will not be reclassified and will remain in
undistributed net investment income. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
59
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
For Federal income tax purposes, certain funds have capital loss
carryovers at October 31, 1996. Capital loss carryovers result when a
fund has net capital losses during a tax year. These are carried over
to subsequent years and may reduce distributions of realized gains in
those years. Unused capital loss carryovers expire in eight years.
The following funds have capital loss carryovers at October 31, 1996
which expire in the years indicated.
<TABLE>
<CAPTION>
FUND AMOUNT EXPIRES IN
---- ------ ----------
<S> <C> <C>
Emerging Markets $84,620 2004
Bond 242,923 2004
</TABLE>
Until such capital loss carryovers are offset or expire, it is
unlikely that the Board of Directors will authorize a distribution of
any net realized gains.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts
of income and expense during the reporting period. Actual results
could differ from those estimates.
F. FOREIGN CURRENCY TRANSLATION
The market values of foreign securities, currency holdings, and other
assets and liabilities of the Fremont Global Fund, the Fremont
International Growth Fund, the Fremont International Small Cap Fund,
the Fremont Emerging Markets Fund and the Fremont Bond Fund are
translated to U.S. dollars based on the daily exchange rates.
Purchases and sales of securities, income and expenses are translated
at the exchange rate on the transaction date. Income and withholding
taxes are translated at prevailing exchange rates when accrued or
incurred.
For those Funds which are allowed by the terms of their respective
prospectuses to invest in securities and other transactions
denominated in foreign currencies, currency gain (loss) will occur
when such securities and transactions are translated into U.S.
dollars.
Certain transactions which result in realized currency gain (loss)
are reported on the Statements of Operations as Net Realized Gain
(Loss) from Foreign Currency Transactions. These are: currency gain
(loss) from the sale or maturity of forward currency contracts and
from the disposition of foreign currency; and the realization of
currency fluctuations between trade and settlement dates on security
transactions and between accrual and receipt dates on net investment
income.
Realized currency gain (loss) from the sale, maturity or disposition
of foreign securities is not separately reported from the economic or
market component of the gain (loss) and is included under the caption
Net Realized Gain (Loss) from Investments. Activity related to
foreign currency futures and options on foreign currency is,
likewise, reported under this heading, as these instruments are used
to hedge the foreign currency risks associated with investing in
foreign securities. Consistent with the method of reporting realized
currency gain (loss), unrealized currency gain (loss) on investments
is not separately reported from the underlying economic or market
component, but included under the caption Net Unrealized Appreciation
(Depreciation) on Investments. Unrealized currency gain (loss) on
other net assets is reported under Net Unrealized Appreciation
(Depreciation) on Translation of Assets and Liabilities in Foreign
Currencies.
G. FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract is an obligation to purchase or
sell a currency against another currency at a future date and price
as agreed upon by the parties. These contracts are traded
over-the-counter and not on organized commodities or securities
exchanges. Losses may arise due to changes in the value of the
foreign currencies or if the counterparty does not perform under the
contract.
The Funds may and do use forward foreign currency contracts to
facilitate the settlement of foreign securities. A commitment by a
Fund to purchase a currency forward allows the Fund to have the local
currency on hand to settle foreign security purchases on the payment
date. Likewise, a commitment to sell a currency forward allows the
Fund to take the foreign currency proceeds from the sale of foreign
securities and exchange it for U.S. dollars at a predetermined price.
In addition, the Fremont Global Fund and the Fremont Bond Fund use
such contracts to manage their respective currency exposure.
Contracts to receive generally are used to acquire exposure to
foreign currencies, while contracts to deliver are used to hedge a
fund's investments against currency fluctuations. A contract to
receive or deliver can also be used to offset a previous contract.
The market risk involved in these contracts is in excess of the
amounts reflected in the Funds' Statements of Assets and Liabilities
since only the change in the underlying values is reflected (as an
asset if appreciated or as a liability if depreciated) and not the
actual underlying values.
60
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
At October 31, 1996 the underlying values for open foreign currency contracts
were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
SETTLEMENT TO RECEIVE INITIAL CURRENT APPRECIATION
DATE (TO DELIVER) VALUE VALUE (DEPRECIATION)
---- ------------ ----- ----- --------------
GLOBAL FUND
<S> <C> <C> <C> <C> <C> <C>
Danish Krone ........ 11/08/96 35,000,000 $ 5,979,840 $ 6,009,306 $ 29,466
British Pound ....... 11/08/96 (4,600,000) (7,186,580) (7,482,820) (296,240)
Canadian Dollar ..... 11/08/96 (22,000,000) (16,264,971) (16,442,451) (177,480)
Danish Krone ........ 11/08/96 (54,800,000) (9,380,349) (9,408,856) (28,507)
Dutch Guilder ....... 11/08/96 (6,500,000) (3,783,910) (3,819,934) (36,024)
French Franc ........ 11/08/96 (41,000,000) (7,930,367) (8,003,279) (72,912)
German Deutschemark . 11/08/96 (25,000,000) (16,329,197) (16,472,294) (143,097)
Irish Punt .......... 11/08/96 (6,000,000) (9,597,600) (9,762,600) (165,000)
Italian Lira ........ 11/08/96 (9,300,000,000) (6,109,377) (6,116,811) (7,434)
Swedish Krona ....... 11/08/96 (49,000,000) (,392,321) (7,444,659) (52,338)
---------
$(949,566)
=========
EMERGING MARKETS FUND
Thai Bhat ............ 11/01/96 (95,040) $ (3,726) $ (3,726) --
Thai Bhat ............ 11/04/96 (458,140) (17,945) (17,956) $ (11)
---------
$ (11)
=========
BOND FUND
German Deutschemark .. 01/16/97 3,600,000 $ 2,470,152 $ 2,390,279 $ (79,873)
German Deutschemark .. 01/16/97 2,516,000 1,663,691 1,670,540 6,849
Canadian Dollar ...... 01/21/97 (1,000,000) (744,574) (749,401) (4,827)
Canadian Dollar ...... 05/01/97 (1,000,000) (737,463) (753,636) (16,173)
German Deutschemark .. 12/09/96 (591,840) (420,565) (391,999) 28,566
German Deutschemark .. 01/16/97 (6,116,000) (4,274,233) (4,060,819) 213,414
New Zealand Dollar ... 11/15/96 (3,036,000) (2,138,255) (2,140,653) (2,398)
---------
$ 145,558
=========
</TABLE>
H. FUTURES
A futures contract is an agreement between two parties to buy or sell
a security or financial interest at a set price on a future date and
is standardized and exchange-traded. Upon entering into such a
contract, the purchaser is required to pledge to the broker an amount
of cash or securities equal to the minimum "initial margin"
requirements of the exchange on which the contract is traded.
Pursuant to the contract, the purchaser agrees to receive from or pay
to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the purchaser as unrealized
gains or losses. When the contract is closed, the purchaser records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed. The Funds use futures contracts to hedge foreign currency
and interest rate risks.
At October 31, 1996, the Fremont Bond Fund had the following futures
contracts outstanding:
<TABLE>
<CAPTION>
CONTRACTS EXPIRATION INITIAL CURRENT NET UNREALIZED
TO BUY DATE VALUE VALUE APPRECIATION
------ ---- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
5 yr. U.S. Treasury Note 70 Dec 96 $7,379,531 $7,506,406 $126,875
10 yr. U.S. Treasury Note 25 Dec 96 2,675,000 2,740,625 65,625
30 yr. U.S. Treasury Bond 40 Dec 96 4,320,000 4,520,000 200,000
--------
$392,500
========
</TABLE>
At October 31, 1996, $355,000 par value of U.S. Treasury Bills were
held by brokers to satisfy the initial margin requirements related to
these contracts.
61
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
I. SECURITIES LENDING
All the Funds are authorized to make loans of their portfolio
securities to broker-dealers or to other institutional investors up
to 33-1/3% of their respective net assets. The borrower must maintain
with the Funds' custodian collateral consisting of cash, cash
equivalents or U.S. Government securities equal to at least 100% of
the value of the borrowed securities, plus any accrued but unpaid
distributions. The collateral is invested in a money market fund that
meets the criteria of Section 2(a)-7 of the 1940 Act.
The Funds receive a portion of the income earned on the collateral.
For the year ended October 31, 1996, transactions in securities
lending resulted in fee income to the Fremont Global Fund, the
Fremont International Growth Fund, the Fremont International Small
Cap Fund, the Fremont Emerging Markets Fund, the Fremont U.S.
Micro-Cap Fund and the Fremont Growth Fund of $69,874, $13,799,
$1,549, $74, $18,035 and $5,372, respectively.
The market value of the securities on loan and the collateral balance
held by the Funds as of October 31, 1996 were as follows:
<TABLE>
<CAPTION>
MARKET VALUE COLLATERAL VALUE
------------ ----------------
<S> <C> <C>
Fremont Global Fund ................ $34,688,544 $34,883,640
Fremont International Growth Fund .. 3,982,079 4,004,476
Fremont International Small Cap Fund 218,562 219,791
Fremont Emerging Markets Fund ...... 70,920 71,319
Fremont U.S. Micro-Cap Fund ........ 17,727,466 17,827,172
Fremont Growth Fund ................ 6,852,646 6,891,188
</TABLE>
J. REVERSE REPURCHASE AGREEMENTS
During the year ended October 31, 1996, the Fremont Bond Fund entered
into reverse repurchase agreements with certain brokers. Reverse
repurchase agreements involve the sale of a portfolio-eligible
security by the Fund, coupled with an agreement to repurchase the
security at a specified date and price. Reverse repurchase agreements
involve the risk that the market value of securities pledged as
collateral may decline below the repurchase price of the securities
sold by the Fund which it is obligated to repurchase.
Such transactions are accounted for as a borrowing by the Fund and
are subject to the Fund's overall restriction on borrowing under
which it must maintain asset coverage of at least 300%.
The difference between the selling price and the repurchase price is
accounted for as interest expense. At October 31, 1996, outstanding
reverse repurchase agreements for the Fremont Bond Fund, which were
collateralized by mortgage-backed securities issued by the Government
National Mortgage Association, were as follows:
<TABLE>
<CAPTION>
AMOUNT OF REVERSE INTEREST MATURITY COST OF VALUE OF
COUNTERPARTY REPURCHASE AGREEMENTS RATE DATE COLLATERAL COLLATERAL
------------ --------------------- ---- ---- ---------- ----------
<S> <C> <C> <C> <C> <C>
Morgan Stanley $3,580,000 5.570% 11/21/96 $3,612,127 $3,722,757
</TABLE>
2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
INVESTMENT ADVISOR
The Funds each have entered into an investment management agreement with
Fremont Investment Advisors, Inc. (the Advisor), a wholly owned
subsidiary of Fremont Investors, Inc. (formerly The Fremont Group, Inc.).
Under these agreements, the Advisor supervises and implements each Fund's
investment activities and provides administrative services as necessary
to conduct Fund business. For its advisory and administrative services,
the Advisor receives a fee based on the average daily net assets of the
Funds as described below.
<TABLE>
<CAPTION>
ADVISORY FEE ADMINISTRATIVE FEE
<S> <C> <C>
Fremont Global Fund .60% on all net assets .15% on all net assets
Fremont International Growth Fund 1.50% on all net assets --
Fremont International Small Cap Fund (*) 2.50% on first $30 million --
2.00% on next $70 million --
1.50% on balance over $100 million --
Fremont Emerging Markets Fund (*) 1.00% on all net assets .15% on all net assets
Fremont U.S. Micro-Cap Fund (*) 2.50% on first $30 million --
2.00% on next $70 million --
1.50% on balance over $100 million --
Fremont Growth Fund .50% on all net assets .15% on all net assets
</TABLE>
62
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fremont Bond Fund (*) .40% on all net assets .15% on all net assets
Fremont Money Market Fund (*) .30% on first $50 million .15% on all net assets
.20% on balance over $50 million
Fremont California Intermediate .40% on first $25 million .15% on all net assets
Tax-Free Fund (*) .35% on next $25 million
.30% on next $50 million
.25% on next $50 million
.20% on balance over $150 million
</TABLE>
(*) The Advisor has voluntarily waived and/or reimbursed some of its fees
for these Funds. All fees waived in the past will not be recouped in
the future and, as these waivers are voluntary, they may be changed in
the future.
For the Fremont International Small Cap Fund and the Fremont U.S.
Micro-Cap Fund, the Advisor is voluntarily limiting the advisory fee
to a reduced rate of 1.50% and 1.98% of net assets, respectively.
For the Fremont Emerging Markets Fund, the Advisor is voluntarily
waiving advisory, 12b-1 and administrative fees and reimbursing all
other operating expenses until further notice.
For the Fremont Bond Fund and the Fremont Money Market Fund, the
Advisor is voluntarily waiving the administrative fee in its entirety.
For the Fremont California Intermediate Tax-Free Fund, the advisory
and administrative fees are charged at voluntarily reduced rates of
.30% and .005% of net assets, respectively.
Selected per share data and operating ratios have been disclosed both
before and after the impact of these various waivers under each Fund's
Financial Highlights table.
Under the terms of the Advisory agreements, the Advisor receives a single
management fee (i.e., a unitary fee) from the Fremont International
Growth Fund, the Fremont International Small Cap Fund and the Fremont
U.S. Micro-Cap Fund, and is obligated to pay all expenses of these Funds
except extraordinary expenses (as determined by a majority of the
disinterested directors) and interest, brokerage commissions, and other
transaction charges relating to the investing activities of those Funds.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Fremont Emerging Markets Fund has adopted a plan of distribution under
which the Fund may directly incur or reimburse the Advisor for certain
distribution-related expenses. The maximum amount the Fund is obligated
to pay the Advisor is 0.25% of net assets. Payments have been waived by
the Advisor in their entirety since the Fund began operations and it is
anticipated that the Advisor will continue voluntarily waiving such
payments until further notice.
Each Fund is also required to comply with the limitations set forth in
the laws, regulations, and administrative interpretations of the states
in which it is registered. For the year ended October 31, 1996, no
reimbursements were required or made to any Fund by the Advisor to comply
with these limitations.
Under the terms of a shareholder services agreement with the Advisor,
effective July 1, 1996, the Funds pay the Advisor for transfer agent
services on a per shareholder account basis, subject to a monthly minimum
per Fund as well as out-of-pocket expenses. Total costs incurred by the
Funds in aggregate for the period July 1, 1996 through October 31, 1996
were $97,341, excluding funds under a unitary fee arrangement.
OTHER RELATED PARTIES
At October 31, 1996, Fremont Investors, Inc. and its affiliated companies
including their employee retirement plans, its principal shareholder,
Stephen D. Bechtel, Jr., and members of his family, including trusts,
owned directly or indirectly the following approximate percentages of the
various Funds:
<TABLE>
<CAPTION>
% OF SHARES OUTSTANDING
-----------------------
<S> <C>
Fremont Global Fund 62%
Fremont International Growth Fund 84%
Fremont International Small Cap Fund 35%
Fremont Emerging Markets Fund 91%
Fremont U.S. Micro-Cap Fund 6%
Fremont Growth Fund 65%
Fremont Bond Fund 88%
Fremont Money Market Fund 82%
Fremont California Intermediate Tax-Free Fund 65%
</TABLE>
Certain officers and/or directors of the Funds are also officers and/or
directors of the Advisor and/or Fremont Investors, Inc.
3. ORGANIZATION COSTS
Costs incurred by each Fund, if any, in connection with its organization
have been deferred and are amortized on a straight-line basis over a
period of five years (60 months).
63
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Notes to Financial Statements - October 31, 1996
4. PURCHASES AND SALES/MATURITIES OF INVESTMENT SECURITIES Aggregate
purchases and aggregate proceeds from sales and maturities of securities
for the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
PURCHASES PROCEEDS
--------- --------
<S> <C> <C>
LONG TERM SECURITIES EXCLUDING U.S. GOVERNMENT SECURITIES:
Fremont Global Fund $310,032,957 $381,291,526
Fremont International Growth Fund 26,941,395 26,194,733
Fremont International Small Cap Fund 8,700,793 4,404,248
Fremont Emerging Markets Fund 2,882,203 119,220
Fremont U.S. Micro-Cap Fund 106,347,944 29,339,100
Fremont Growth Fund 90,939,257 84,017,213
Fremont Bond Fund 5,692,873 14,997,373
Fremont California Intermediate Tax-Free Fund 2,955,196 3,095,906
LONG TERM U.S. GOVERNMENT SECURITIES:
Fremont Global Fund $ 4,027,412 $ 16,093,607
Fremont Bond Fund 114,345,636 98,849,763
</TABLE>
Transactions in written put and call options for the year ended October
31, 1996 for the Fremont Bond Fund were as follows:
<TABLE>
<CAPTION>
AMOUNT OF PREMIUMS NUMBER OF CONTRACTS
------------------ -------------------
<S> <C> <C>
Options outstanding at October 31, 1995 $ 23,748 70
Options sold 70,996 50
Options cancelled in closing purchase transactions -- --
Options expired prior to exercise (23,748) (70)
Options exercised -- --
-------- ----
Options outstanding at October 31, 1996 $ 70,996 50
======== ====
</TABLE>
The following written options were outstanding at October 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION
NAME OF ISSUER CONTRACTS PRICE DATE VALUE
-------------- --------- ----- ---- -----
<S> <C> <C> <C> <C> <C>
PUT OPTIONS: CME June 97 Eurodollar Futures 50 93.5 06/16/97 $10,000
</TABLE>
CME - Chicago Mercantile Exchange
The Bond Fund received premiums of $70,996 on these contracts and has an
unrealized gain of $60,996. The total notional value underlying these
contracts is $50,000,000.
5. PORTFOLIO CONCENTRATIONS
Although each Fund has a diversified investment portfolio, there are
certain investment concentrations of risk which may subject each Fund
more significantly to economic changes occurring in certain segments or
industries.
6. UNREALIZED APPRECIATION (DEPRECIATION) - TAXBASIS
At October 31, 1996, the cost of securities for Federal income tax
purposes and the gross aggregate unrealized appreciation and/or
depreciation based on that cost were as follows:
<TABLE>
<CAPTION>
GROSS AGGREGATE UNREALIZED
--------------------------
COST APPRECIATION DEPRECIATION NET
---- ------------ ------------ ---
<S> <C> <C> <C> <C>
Fremont Global Fund $542,076,336 $39,491,784 $(11,906,181) $ 27,585,603
Fremont International Growth Fund 32,567,672 6,022,606 (3,592,690) 2,429,916
Fremont International Small Cap Fund 9,056,967 798,803 (686,499) 112,304
Fremont Emerging Markets Fund 3,838,200 188,480 (232,320) (43,840)
Fremont U.S. Micro-Cap Fund 101,238,120 10,665,019 (10,263,709) 401,310
Fremont Growth Fund 73,848,505 5,843,674 (1,358,059) 4,485,615
Fremont Bond Fund 74,533,471 2,446,860 (545,318) 1,901,542
Fremont Money Market Fund 328,565,325 -- -- --
Fremont California Intermediate Tax-Free Fund 48,752,558 1,807,498 (107,270) 1,700,228
</TABLE>
64
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
FREMONT FUNDS[LOGO]
50 Beale Street, Suite 100
San Francisco, CA 94105
<PAGE>
FREMONT MUTUAL FUNDS, INC.
PART C; OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS
(a) Financial Statements: Audited Financial Statements of the
Registrant for the fiscal year ended October 31,
1996 are incorporated by reference from the
Statement of Additional Information included herein
(b) Exhibits -- Exhibits required by Part C, Item 24 of Form N-
1A
(1) (a) Articles of Incorporation -- on file
(File No. 811-5632)
(b) Articles of Amendment -- on file
(File No. 811-5632)
(c) Articles of Amendment changing name -- on file (File
No. 811-5632)
(d) Articles Supplementary relating to shares of
International Growth Fund -- on file (File No. 811-
5632 under Post-Effective Amendment No. 16 filed
December 29, 1993)
(e) Articles Supplementary for Income Fund, changing
name to Bond Fund -- on file (File No. 811-5632
under Post-Effective Amendment No. 17 filed
March 1, 1994)
(f) Articles Supplementary relating to shares of the
International Small-Cap Fund -- on file (File No.
811-5632 under Post-Effective Amendment No. 18
filed April 22, 1994)
(g) Articles Supplementary relating to shares of the U.S.
Micro-Cap Fund -- on file (File No. 811-5632 under
Post-Effective Amendment No. 18 filed April 22, 1994)
(h) Articles Supplementary relating to shares of the
Emerging Markets Fund -- on file (File No. 811-5632
under Post-Effective Amendment No. 22 filed April 10,
1996)
(2) Bylaws -- on file (File No. 811-5632 under Post-Effective
Amendment No. 21 filed January 20, 1996)
(3) None
(4) Forms of specimen stock certificate -- shares are issued in
uncertificated form only
(5) (a) Amended and Restated Investment Advisory and
Administrative Services Agreement relating to Money
<PAGE>
Market Fund, Global Fund, California Intermediate Tax-
Free Fund, Bond Fund, Growth Fund and Emerging Markets
Fund -- on file (File No. 811-5632)
(b) Investment Advisory and Administrative Services
Agreement relating to International Growth Fund -- on
file (File No. 811-5632 under Post-Effective Amendment
No. 17 filed March 1, 1994)
(c) Investment Advisory and Administrative Services
Agreement relating to International Small-Cap Fund and
U.S. Micro-Cap Fund -- on file (File No. 811-5632
under Post-Effective Amendment No. 19 filed August 1,
1994)
(d) Portfolio Management Agreement with Pacific Investment
Management Co. and Fremont Investment Advisors, Inc.
for Bond (formerly Income) Fund -- on file (File No.
811-5632 under Post-Effective Amendment No. 17 filed
March 1, 1994)
(e) Portfolio Management Agreement with Acadian Asset
Management, Inc. and Fremont Investment Advisors, Inc.
for International Small-Cap Fund -- on file (File No.
811-5632 under Post-Effective Amendment No. 18 filed
April 22, 1994)
(f) Portfolio Management Agreement with Morgan Grenfell
Capital Management and Fremont Investment Advisors,
Inc. for U.S. Micro-Cap Fund -- on file (File No. 811-
5632 under Post-Effective Amendment No. 18 filed April
22, 1994)
(g) Form of Portfolio Management Agreement with Credit
Lyonnais International Asset Management (HK) Limited
for Emerging Markets Fund -- on file (File No. 811-
5632 under Post-Effective Amendment No. 22 filed April
10, 1996)
(6) Distribution Agreement with Funds Distributor, Inc. -- on
file (File No. 811-5632 under Post-Effective Amendment No.
21 filed January 20, 1996)
(7) None
(8) Custodian Agreement with The Northern Trust Company -- on
file (File No. 811-5632 under Post-Effective Amendment No.
21 filed January 20, 1996)
(9) (a) Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement with Fremont Investment
Advisors, Inc. -- filed herewith
(b) Form of Sub-Transfer Agency Agreement with Countrywide
Fund Services, Inc. -- filed herewith
<PAGE>
(c) Form of Administration Agreement with Countrywide Fund
Services, Inc. -- filed herewith
(d) License Agreement relating to the Mark "Fremont" with
Fremont Investment Advisors, Inc. -- on file (File No.
811-5632)
(e) Investment Accounting Agreement between Investors
Fiduciary Trust Company and Fremont Mutual Funds, Inc.
-- on file (File No. 811-5632 under Post-Effective
Amendment No. 17 filed March 1, 1994)
(10) Opinion and Consent of Counsel -- on file (File No. 811-
5632)
(11) Consent of Independent Accountants -- filed herewith
(12) Inapplicable
(13) (a) Subscription Agreement with initial shareholders
-- on file (File No. 811-5632 under Post-
Effective Amendment filed May 11, 1992)
(b) Subscription Agreement with initial shareholders
of International Growth Fund -- on file
(File No. 811- 5632 under Post-Effective
Amendment No. 16 filed December 29, 1993)
(c) Subscription Agreement with initial shareholders
of International Small-Cap Fund -- on file
(File No. 811-5632 under Post-Effective
Amendment No. 18 filed April 22, 1994)
(d) Subscription Agreement with initial shareholders
of U.S. Micro-Cap Fund -- on file (File No.
811-5632 under Post-Effective Amendment No. 18
filed April 22, 1994)
(14) Retirement Plans -- on file (File No. 811-5632)
(15) Form of Plan of Distribution Pursuant to Rule 12b-1 --
on file (File No. 811-5632 under Post-Effective
Amendment No. 22 filed April 10, 1996)
(16) Inapplicable
(17) Financial Data Schedules -- filed herewith
(18) Inapplicable
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
-----------------------------------------------------------------
Stephen D. Bechtel, Jr. and members of his family, including
trusts for family members, would be considered controlling
persons under applicable Securities and Exchange Commission
regulations, on account of their shareholdings in the Funds.
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record
Holders as of
TITLE OF CLASS JANUARY 31, 1997
Capital Stock -- Money Market Fund 1,203
Capital Stock -- Global Fund 3,280
Capital Stock -- California Intermediate
Tax-Free Fund 179
Capital Stock -- Bond Fund 210
Capital Stock -- Growth Fund 1,225
Capital Stock -- International Growth Fund 250
Capital Stock -- International Small Cap Fund 285
Capital Stock -- U.S. Micro-Cap Fund 4,988
Capital Stock -- Emerging Markets Fund 100
Item 27. INDEMNIFICATION
Article VII(g) of the Articles of Incorporation, filed as
Exhibit (1), Item 24(b), provides for indemnification of certain persons
acting on behalf of the Funds.
The Funds and the Advisor are jointly insured under an
errors and omissions policy issued by American International Specialty Lines
Insurance Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons by the Registrant's charter and bylaws, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in said Act, and
is, therefore, unenforceable. In particular, the Articles of the Company
provide certain limitations on liability of officers and directors. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Series of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issues.
<PAGE>
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
See the material following the captions "Advisory Agreement"
and "Advisory and Sub-Advisory Agreements" appearing as a portion of Parts A
hereof and "Investment Advisory and Other Services" appearing as a portion of
Part B hereof.
Item 29. PRINCIPAL UNDERWRITERS
(a) Funds Distributor, Inc. is a leading provider of
distribution and sales services for mutual funds. Funds
Distributor, Inc. also offers a range of specialized
investment company consulting services.
(b) None of the officers of Funds Distributor, Inc. hold
positions or offices with the Registrant.
(c) Inapplicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books, and other records required by Rules 31a-1
and 31a-2 under the Investment Company Act of 1940, as amended, are maintained
and held in the offices of the Registrant and its investment manager, Fremont
Investment Advisors, Inc., 333 Market Street, 26th Floor, San Francisco,
California 94105. Other books and records will be maintained
by the sub-advisers to the Funds.
Records covering stockholder accounts and portfolio
transactions are also maintained and kept by the Funds' Sub-Transfer Agent,
Countrywide Fund Services, Inc., and by the Custodian, The Northern Trust
Company.
Item 31. MANAGEMENT SERVICES
None
Item 32. UNDERTAKINGS
(a) Inapplicable
(b) Inapplicable
(c) The information required by part 5A of the Form
N-1A is or will be contained in the latest annual
report to shareholders, and Registrant undertakes
to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and
without charge.
(d) The Registrant undertakes that within five business
days after receipt of a written application by
shareholders holding in the aggregate at least 1%
of the shares then outstanding or shares then
having a net asset value of $25,000, which is less,
each of whom shall have been a shareholder for at
least six months prior to the date of
application (hereinafter the "Petitioning
Shareholders"), requesting to communicate with
other shareholders with a view to obtaining
signatures to a request for a meeting for the
purpose of voting upon removal of any Trustee of
the Registrant, which application shall be
accompanied by a form of communication and request
which such Petitioning Shareholders wish to
transmit, Registrant will: (i) provide such
Petitioning Shareholders with access to a list of
the names and addresses of all shareholders of the
Registrant; or (ii) inform such Petitioning
Shareholders of the approximate number of
shareholders and the estimated costs of mailing
such communication, and to undertake such mailing
promptly after tender by such Petitioning
Shareholders to the Registrant of the material to
be mailed and the reasonable expenses of such
mailing.
<PAGE>
SIGNATURE OF THE REGISTRANT
Pursuant to the requirements of the Securities Act of 1933,
and the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment No. 26 (1940 Act) and Post-Effective Amendment No. 23 (1933
Act) to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of San Francisco, and the
State of California, on the 28th day of February, 1997.
FREMONT MUTUAL FUNDS, INC.
By: /S/ DAVID L. REDO
Chairman
Pursuant to the requirements of the Securities Act of 1933
this Post-Effective Amendment No. 23 to the Registration Statement has been
signed below by the following persons in the capacities listed, and each on
February 28, 1997.
PRINCIPAL EXECUTIVE OFFICER:
/S/ David L. Redo Chairman and Chief
David L. Redo Executive Officer
PRINCIPAL ACCOUNTING OFFICER:
/S/ Chantal Gaiddon Treasurer
Chantal Gaiddon
<PAGE>
DIRECTORS:
Director
Richard E. Holmes*
Director
William W. Jahnke*
Director
Donald C. Luchessa*
Director
David L. Egan*
/S/ Vincent P. Kuhn, Jr. Director
Vincent P. Kuhn, Jr.
/S/ DavidL. Redo Director
David L. Redo
/S/ Michael H. Kosich Director
Michael H. Kosich
*By: /S/ Vincent P. Kuhn, Jr.
(Attorney-in-Fact pursuant
to limited powers of attorney
filed with Post-Effective
Amendment No. 19 filed on
August 1, 1994.)
FREMONT MUTUAL FUNDS, INC.
EXHIBIT INDEX
1. Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement with Fremont Investment Advisors, Inc.
2. Form of Sub-Transfer Agency Agreement with Countrywide Fund Services,
Inc.
3. Form of Administration Agreement with Countrywide Fund Services, Inc.
4. Consent of Independent Accountants
5. Financial Data Schedule -- Global Fund
6. Financial Data Schedule -- Money Market Fund
7. Financial Data Schedule -- California Intermediate Tax-Free Fund
8. Financial Data Schedule -- Growth Fund
9. Financial Data Schedule -- Bond Fund
10. Financial Data Schedule -- Interntional Growth Fund
11. Financial Data Schedule -- U.S. Micro-Cap Fund
12. Financial Data Schedule -- International Small Cap Fund
13. Financial Data Schedule -- Emerging Markets Fund
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
THIS AGREEMENT effective as of July 1, 1996 by and between FREMONT
MUTUAL FUNDS, INC., a Maryland corporation (the "Company"), and FREMONT
INVESTMENT ADVISORS, INC., a California corporation (the "T/A").
WITNESSETH THAT:
WHEREAS, the Company has been organized to operate as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Company desires to appoint the T/A as its transfer
agent, dividend disbursing agent, shareholder service agent, plan agent and
shareholder purchase and redemption agent, and the T/A is willing to act in
such capacities upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT OF TRANSFER AGENT.
The T/A is hereby appointed transfer agent for the shares of the
Company and dividend disbursing agent for the Company and shall also act as
plan agent, shareholder service agent and purchase and redemption agent for
shareholders of the Company, and the T/A accepts such appointment and agrees
to act in such capacities under the terms and conditions set forth herein.
2. DOCUMENTATION.
The Company will furnish from time to time the following
documents:
A. Each resolution of the Board of Directors of the Company
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities and
Exchange Commission and amendments thereof;
C. A certified copy of each amendment to the Articles of
Incorporation and the Bylaws of the Company;
freinvad.agr
February 27, 1997
<PAGE>
D. Certified copies of each resolution of the Board of Directors
authorizing officers to give instructions to the T/A;
E. Specimens of all new forms of share certificates accompanied
by Board of Directors' resolutions approving such forms;
F. Such other certificates, documents or opinions which the T/A
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or
withdrawal plans which are offered or may be offered in the
future by the Company and for which the T/A is to act as plan
agent.
3. T/A TO RECORD SHARES.
The T/A shall record the issuance of shares of the Company and
maintain pursuant to applicable rules of the Securities and Exchange
Commission a record of the total number of shares of the Company which are
authorized, issued and outstanding, based upon data provided to it by the
Company. The T/A shall also provide the Company on a regular basis or upon
reasonable request the total number of shares which are authorized, issued and
outstanding, based upon data provided to it by the Company. The T/A shall also
provide the Company on a regular basis or upon reasonable request the total
number of shares which are authorized, issued and outstanding, but shall have
no obligation when recording the issuance of the Company's shares, except as
otherwise set forth herein, to monitor the issuance of such shares or to take
cognizance of any laws relating to the issue or sale of such shares, which
functions shall be the sole responsibility of the Company.
4. T/A TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon surrender
to the T/A of certificates, if any, in proper form for transfer, the T/A shall
approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
the T/A shall notify the Company in writing or by computer report of each such
transaction and shall make appropriate entries on the shareholder records
maintained by the T/A.
5. SHARE CERTIFICATES.
If the Company authorizes the issuance of share certificates and
an investor requests a share certificate, the T/A will countersign and mail,
by first class mail, a share certificate to the investor at his address as set
forth on the transfer books of the Company, subject to any
- 62 -
<PAGE>
other instructions for delivery of certificates representing newly purchased
shares and subject to the limitation that no certificates representing newly
purchased shares shall be mailed to the investor until the cash purchase price
of such shares has been collected and credited to the account of the Company
maintained by the Custodian. The Company shall supply the T/A with a
sufficient supply of blank share certificates and from time to time shall
renew such supply upon request of the T/A. Such blank share certificates shall
be properly signed, manually or, if authorized by the Company, by facsimile;
and notwithstanding the death, resignation or removal of any officers of the
Company authorized to sign share certificates, the T/A may continue to
countersign certificates which bear the manual or facsimile signature of such
officer until otherwise directed by the Company. In case of the alleged loss
or destruction of any share certificate, no new certificate shall be issued in
lieu thereof, unless there shall first be furnished an appropriate bond
satisfactory to the T/A and the Company, and issued by a surety company
satisfactory to the T/A and the Company.
6. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or endorsed
to it as agent for, or identified as being for the account of, the Company or
the principal underwriter of the Company (the "Underwriter"), the T/A shall
stamp the check or instrument with the date of receipt, determine the amount
thereof due the Company and the Underwriter, respectively, and shall forthwith
process the same for collection. Upon receipt of notification of receipt of
funds eligible for share purchases, the T/A shall notify the Company, at the
close of each business day, in writing of the amount of said funds credited to
the Company and deposited in its account with the Custodian.
7. PURCHASE ORDERS.
Upon receipt of a check or other order for the purchase of
shares of the Company, accompanied by sufficient information to enable the T/A
to establish a shareholder account, the T/A shall, as of the next
determination of net asset value after receipt of such order in accordance
with the Company's then current prospectus and statement of additional
information, compute the number of shares due to the shareholder, credit the
share account of the shareholder, subject to collection of the funds, with the
number of shares so purchased, shall notify the Company in writing or by
computer report at the close of each business day of such transactions and
shall mail to the shareholder and/or dealer of record a notice of such credit.
8. RETURNED CHECKS.
In the event that the T/A is notified by the Company's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, the T/A will:
- 63 -
<PAGE>
A. Give prompt notification to the Company and the Underwriter
of the non-payment of said check;
B. In the absence of other instructions from the Company or the
Underwriter, take such steps as may be necessary to redeem
any shares purchased on the basis of such returned check and
cause the proceeds of such redemption plus any dividends
declared with respect to such shares to be credited to the
account of the Company and to request the Company's Custodian
to forward such returned check to the person who originally
submitted the check; and
C. Notify the Company of such actions and correct the Company's
records maintained by the T/A pursuant to this Agreement.
9. DIVIDENDS AND DISTRIBUTIONS.
The Company shall furnish the T/A with appropriate evidence of
director action authorizing the declaration of dividends and other
distributions. The T/A shall establish procedures in accordance with the
Company's then current prospectus and statement of additional information and
with other authorized actions of the Company's Board of Directors under which
it will have available from the Custodian of the Company or the Company any
required information for each dividend and other distribution. After deducting
any amount required to be withheld by any applicable laws, the T/A shall, as
agent for each shareholder who so requests, invest the dividends and other
distributions in full and fractional shares in accordance with the Company's
then current prospectus and statement of additional information. If a
shareholder has elected to receive dividends or other distributions in cash,
then the T/A shall disburse dividends to shareholders of record in accordance
with the Company's then current prospectus and statement of additional
information. The T/A shall notify the Company and the Custodian of the
estimated amount of cash required to pay such dividend or distribution, and
the Company shall instruct the Custodian to make available sufficient funds
therefor in the appropriate account of the Company. The T/A shall mail to the
shareholders periodic statements, as requested by the Company, showing the
number of full and fractional shares and the net asset value per share of
shares so credited. The T/A shall prepare and file with the Internal Revenue
Service, and when required, shall address and mail to shareholders, such
returns and information relating to dividends and distributions paid by the
Company as are required to be so prepared, filed and mailed by applicable
laws, rules and regulations.
10. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
The T/A shall, at least annually, furnish in writing to the
Company the names and addresses, as shown in the shareholder accounts
maintained by the T/A, of all shareholders for which there are, as of the end
of the calendar year, dividends, distributions or redemption proceeds
- 64 -
<PAGE>
for which checks or share certificates mailed in payment of distributions have
been returned. The T/A shall use its best efforts to contact the shareholders
affected and to follow any other written instructions received from the
Company concerning the disposition of any such unclaimed dividends,
distributions or redemption proceeds.
11. REDEMPTIONS AND EXCHANGES.
A. The T/A shall process, in accordance with the Company's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by the T/A. Upon its approval of such redemption
transactions, the T/A shall mail to the shareholder and/or dealer of record a
confirmation showing trade date, number of full and fractional shares
redeemed, the price per share and the total redemption proceeds. For such
redemption, the T/A shall either: (a) prepare checks in the appropriate
amounts for signature by an authorized officer of the T/A and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire system or by bank wire, cause such
proceeds to be wired in federal funds to the bank account designated by the
shareholder, or (c) effectuate such other redemption procedures which are
authorized by the Company's Board of Directors or its then current prospectus
and statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement
of additional information, subject to such supplemental instructions as may be
furnished by the Company and accepted by the T/A. If the T/A or the Company
determines that a request for redemption does not comply with the requirements
for redemptions, the T/A shall promptly notify the shareholder and/or dealer
of record indicating the reason therefor.
B. If shares of the Company are eligible for exchange with
shares of any other investment company, the T/A, in accordance with the then
current prospectus and statement of additional information and exchange rules
of the Company and such other investment company, or such other investment
company's transfer agent, shall review and approve all exchange requests and
shall, on behalf of the Company's shareholders, process such approved exchange
requests.
C. The T/A shall notify the Custodian on each business day of
the amount of cash required to meet payments made pursuant to the provisions
of this Paragraph 11, and, on the basis of such notice, the Company shall give
standing instructions to the Custodian to make available sufficient funds
therefor in the appropriate account of the Company. Procedures for effecting
redemption orders accepted from shareholders or dealers of record by telephone
or other methods shall be established by mutual agreement between the T/A and
the Company consistent with the then current prospectus and statement of
additional information.
- 65 -
<PAGE>
D. The authority of the T/A to perform its responsibilities
under Paragraph 7, Paragraph 9 and this Paragraph 11 shall be suspended upon
receipt of notification by it of the suspension of the determination of the
Company's net asset value.
12. AUTOMATIC WITHDRAWAL PLANS.
The T/A will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the
current prospectus and statement of additional information of the Company.
Payments upon such withdrawal order shall be made by the T/A from the
appropriate account maintained by the Company with the Custodian on
approximately the last business day of each month in which a payment has been
requested, and the T/A will withdraw from a shareholder's account and present
for repurchase or redemption as many shares as shall be sufficient to make
such withdrawal payment pursuant to the provisions of the shareholder's
withdrawal plan and the current prospectus and statement of additional
information of the Company. From time to time on new automatic withdrawal
plans a check for payment date already past may be issued upon request by the
shareholder.
13. WIRE-ORDER PURCHASES.
The T/A will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer
by the close of business on the business day following receipt of such orders
by the T/A or the Underwriter. Upon receipt of any check drawn or endorsed to
the Company (or the T/A, as agent) or otherwise identified as being payment of
an outstanding wire-order, the T/A will stamp said check with the date of its
receipt and deposit the amount represented by such check to the T/A's deposit
accounts maintained with the Custodian. The T/A will compute the respective
portions of such deposit which represent the sales charge, if any, and the net
asset value of the shares so purchased, will cause the Custodian to transfer
federal funds in an amount equal to the net asset value of the shares so
purchased to the Company's account with the Custodian, and will notify the
Company and the Underwriter before noon of each business day of the total
amount deposited in the Company's deposit accounts, and in the event that
payment for a purchase order is not received by the T/A or the Custodian on
the tenth business day following receipt of the order, prepare an NASD "notice
of failure of dealer to make payment" and forward such notification to the
Underwriter.
14. OTHER PLANS.
The T/A will process such accumulation plans, group programs and
other plans or programs for investing in shares of the Company as are now
provided for in the Company's current prospectus and statement of additional
information and will act as plan agent for shareholders
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pursuant to the terms of such plans and programs duly executed by such
shareholders.
15. BOOKS AND RECORDS.
The T/A shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in cash or
invested in shares;
E. Information with respect to the source of all dividends and
distributions allocated among income, realized short-term
gains and realized long-term gains;
F. Any instructions from a shareholder including all forms
furnished by the Company and executed by a shareholder with
respect to (i) dividend or distribution elections and (ii)
elections with respect to payment options in connection with
the redemption of shares;
G. Any correspondence relating to the current maintenance of a
shareholder's account;
H. Certificate numbers and denominations for any shareholder
holding certificates;
I. Any stop or restraining order placed against a shareholder's
account;
J. Information with respect to withholding in the case of a
foreign account or any other account for which withholding is
required by the Internal Revenue Code of 1986, as amended;
and
K. Any information required in order for the T/A to perform the
calculations contemplated under this Agreement.
All of the records prepared and maintained by the T/A pursuant
to this Agreement will be the property of the Company. In the event this
Agreement is terminated, all records shall promptly be delivered to the
Company or to any person designated by the Company at the Company's expense,
notwithstanding the resolution of fee matters under Sections 23
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and 24,and the T/A shall be relieved of responsibility for the preparation and
maintenance of any such records delivered to the Company or any such person.
16. TAX RETURNS AND REPORTS.
The T/A will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if required, mail
to shareholders of the Company such returns for reporting dividends and
distributions paid by the Company as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
17. OTHER INFORMATION TO THE COMPANY.
Subject to such instructions, verification and approval of the
Custodian and the Company as shall be required by any agreement or applicable
law, the T/A will also maintain such records as shall be necessary to furnish
to the Company the following: annual shareholder meeting lists, proxy lists
and mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
18. ACCESS TO SHAREHOLDER INFORMATION.
Upon request, the T/A shall arrange for the Company's investment
adviser to have direct access to shareholder information contained in the
T/A's computer system, including account balances, performance information and
such other information which is available to the T/A with respect to
shareholder accounts.
19. COOPERATION WITH ACCOUNTANTS.
The T/A shall cooperate with the Company's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Company.
20. SHAREHOLDER SERVICE AND CORRESPONDENCE.
The T/A, to the reasonable satisfaction of the Company, will
provide and maintain adequate personnel, records and equipment to receive and
answer all shareholder and dealer inquiries relating to account status, share
purchases, redemptions and exchanges and other investment plans available to
Company shareholders. The T/A will answer written correspondence from
shareholders relating to their share accounts and such other written or oral
inquiries as may from time to time be mutually agreed upon, and the T/A will
notify the Company of any correspondence or inquiries which may require an
answer from the Company.
21. PROXIES.
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The T/A shall assist the Company in the mailing of proxy cards
and other material in connection with shareholder meetings of the Company,
shall receive, examine and tabulate returned proxies and shall, if requested
by the Company, provide at least one inspector of election to attend and
participate as required by law in shareholder meetings of the Company.
22. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
23. FEES AND CHARGES.
For performing its services under this Agreement, each series of
the Company shall pay the T/A in accordance with the schedule attached hereto
as Schedule A. Fees shall be paid monthly in arrears. The Company shall
promptly reimburse the T/A for any out of pocket expenses which are to be paid
by the Company in accordance with Paragraph 24.
24. EXPENSES.
The T/A shall furnish, at its expense and without cost to the
Company (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of
data processing equipment. All costs and expenses not expressly assumed by the
T/A under this Paragraph 24 shall be paid by the Company, including, but not
limited to costs and expenses for postage, envelopes, checks, drafts,
continuous forms, reports, communications, statements and other materials,
telephone, telegraph and remote transmission lines, use of outside mailing
firms, necessary outside record storage, media for storage of records (e.g.,
microfilm, microfiche, computer tapes), printing, confirmations and any other
shareholder correspondence and any and all assessments, taxes or levies
assessed on the T/A for services provided under this Agreement.
25. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing contained
herein shall be construed to require the T/A to perform any services for the
Company which services could cause MGF to be deemed an "investment adviser" of
the Company within the meaning of Section 2(a)(20) of the 1940 Act or to
supersede or contravene the prospectus or statement of additional information
of the Company or any provisions of the 1940 Act and the rules thereunder.
Except as otherwise provided in this Agreement and except for the accuracy of
information furnished to it by the T/A, the Company assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction. The T/A agrees to
meet all standards of service and all
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other standards required of transfer agents under the Securities Exchange Act
of 1934, as amended.
26. REFERENCES TO THE T/A.
The Company shall not circulate any printed matter which
contains any reference to the T/A without the prior written approval of the
T/A, excepting solely such printed matter as merely identifies the T/A as
Transfer, Shareholder Servicing and Dividend Disbursing Agent. The Company
will submit printed matter requiring approval to the T/A in draft form,
allowing sufficient time for review by the T/A and its counsel prior to any
deadline for printing.
27. EQUIPMENT FAILURES.
In the event of equipment failures beyond the T/A's control, the
T/A shall take all steps necessary to minimize service interruptions but shall
have no liability except in the event of an equipment failure which occurs in
connection with the negligence of the T/A. The T/A shall endeavor to enter
into one or more agreements making provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
28. INDEMNIFICATION.
A. The T/A may rely on information reasonably believed by it to
be accurate and reliable. Except as may otherwise be required by the 1940 Act
and the rules thereunder, neither the T/A nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof
shall be subject to any liability for, or any damages, expenses or losses
incurred by the Company in connection with, any error of judgment, mistake of
law, any act or omission connected with or arising out of any services
rendered under or payments made pursuant to this Agreement or any other matter
to which this Agreement relates, except by reason of willful misfeasance, bad
faith or gross negligence on the part of any such persons in the performance
of the duties of the T/A under this Agreement or by reason of reckless
disregard by any of such persons of the obligations and duties of the T/A
under this Agreement.
B. Notwithstanding any other provision of this Agreement, the
Company shall indemnify and hold harmless the T/A, its directors, officers,
employees, shareholders and agents from and against any and all claims,
demands, expenses and liabilities (whether with or without basis in fact or
law) of any and every nature which the T/A may sustain or incur or which may
be asserted against the T/A by any person by reason of, or as a result of: (i)
any action taken or omitted to be taken by the T/A in good faith in reliance
upon any certificate, instrument, order or share certificate believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
person, upon the oral instructions or written instructions of an authorized
person of the Company or upon the opinion of legal counsel for the Company or
its own counsel; or (ii) any action taken or omitted to be taken by the T/A in
connection with its
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<PAGE>
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of the T/A or its
directors, officers, employees, shareholders or agents in cases of its or
their own gross negligence, willful misconduct, bad faith, or reckless
disregard of its or their own duties hereunder.
C. Notwithstanding any other provision of this Agreement, the T/A
shall indemnify and hold harmless the Company, its directors, officers,
employees, shareholders and agents from and against any and all claims,
demands, expenses and liabilities of any and every nature which the Company
may sustain or incur on which may be asserted against the Company by any
person by reason of, or as a result of, gross negligence, willful misconduct
or bad faith on the part of MGF or its directors, officers, employees, agents
or shareholders, or reckless disregard of its or their own duties hereunder.
29. TERMINATION.
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that
date and shall continue in force from year to year thereafter, but only so
long as such continuance is approved (1) by the T/A, (2) by vote, cast in
person at a meeting called for the purpose, of a majority of the Company's
directors who are not parties to this Agreement or interested persons (as
defined in the 1940 Act) of any such party, and (3) by vote of a majority of
the Company's Board of Directors or a majority of the Company's outstanding
voting securities.
B. Either party may terminate this Agreement after the initial
term by giving the other party at least sixty (60) days' prior written notice
of such termination specifying the date fixed therefor. Upon termination of
this Agreement, the Company shall pay to the T/A such compensation as may be
due as of the date of such termination, and shall likewise reimburse the T/A
for any out-of-pocket expenses and disbursements reasonably incurred by the
T/A to such date.
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<PAGE>
C. In the event that in connection with the termination of this
Agreement a successor to any of the T/A's duties or responsibilities under
this Agreement is designated by the Company by written notice to the T/A, the
T/A shall, promptly upon such termination and at the expense of the Company,
transfer all records maintained by the T/A under this Agreement and shall
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from the T/A's cognizant personnel in the
establishment of books, records and other data by such successor.
30. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent the T/A or any
affiliated person (as defined in the 1940 Act) of the T/A from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that the T/A expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Company under this Agreement.
31. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
32. SEVERABILITY.
In the event any provision of this Agreement is determined to be
void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
33. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
California. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said 1940 Act. In addition, where the effect of
a requirement of the 1940 Act, reflected in any provision of this Agreement,
is revised by rule, regulation or order of the Securities and Exchange
Commission, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
34. NOTICES.
Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as
such other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the Company for
this purpose shall be 50 Fremont Street, San Francisco,
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<PAGE>
California 94105 and that the address of the T/A for this purpose shall be 50
Beale Street, San Francisco, California 94105.
35. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party
indicated to the foregoing terms.
36. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
37. RESOLUTION OF DISPUTES.
It is the intention of the parties to the extent possible to
resolve disputes without recourse to the judicial system. The parties agree
that as a condition precedent to the filing of any claim the parties and their
attorneys must confer in person at least twice in San Francisco, California,
in an effort to resolve or narrow any dispute. Such conferences must be held
within one month of receipt of notice of a dispute. Should such efforts not be
successful, any dispute between the parties shall be heard by the American
Arbitration Association at its offices in San Francisco, California. The
parties consent to the jurisdiction over them of the American Arbitration
Association. The fees and expenses, including actual attorneys' fees, of the
prevailing party shall be paid by the non-prevailing party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
FREMONT MUTUAL FUNDS, INC.
By:___________________________
Its:
FREMONT INVESTMENT ADVISORS, INC.
By:___________________________
Its:
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<PAGE>
SCHEDULE A
COMPENSATION
As Transfer, Dividend Disbursing and
Shareholder Service Agent:
Fremont Global Fund: payable monthly at
rate of $24/account
per year; subject to
minimum of $2,000 per month
Fremont Growth Fund: payable monthly at
rate of $24/account
per year; subject to
minimum of $2,000 per month
Fremont California Intermediate payable monthly at
Tax-Free Fund: rate of $27/account
per year; subject to
minimum of $2,000 per month
Fremont Money Market Fund: payable monthly at
rate of $27/account
per year; subject to
minimum of $2,000 per month
Fremont Bond Fund: payable monthly at
rate of $27/account
per year; subject to
minimum of $2,000 per month
Fremont International Growth Fund: payable monthly at
rate of $24/account
per year; subject to
minimum of $2,000 per month
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<PAGE>
Fremont U.S. Micro-Cap Fund: payable monthly at
rate of $24/account
per year; subject to
minimum of $2,000 per month
Fremont International Small Cap Fund: payable monthly at
rate of $24/account
per year; subject to
minimum of $2,000 per month
Fremont Emerging Markets Fund: payable monthly at
rate of $24/account
per year; subject to
minimum of $2,000 per month
- 17 -
SUB-TRANSFER AGENCY AGREEMENT
THIS AGREEMENT, effective as of February 28, 1997 by and between
FREMONT INVESTMENT ADVISORS, INC. ("Fremont"), a California corporation, and
COUNTRYWIDE FUND SERVICES, INC. ("Countrywide"), an Ohio corporation and a
wholly-owned subsidiary of Countrywide Financial Services, Inc.
WITNESSETH THAT:
WHEREAS, Fremont Mutual Funds, Inc., a Maryland Corporation (the
"Company"), is an investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Company has appointed Fremont as the Company's transfer
agent, dividend disbursing agent, shareholder service and plan agent under an
agreement dated July 1, 1996 (the "Transfer Agent Agreement"); and
WHEREAS, Fremont desires to hire Countrywide to assist in its
capacities as the Company's transfer agent, dividend disbursing agent and
shareholder service and plan agent, and Countrywide is willing to perform such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. SERVICES. Fremont, being duly authorized, hereby hires Countrywide
as its agent to perform those services described in the Transfer Agent
Agreement, a copy of which is attached hereto and incorporated herein. Subject
to the direction and control of Fremont, Countrywide shall perform all the
obligations and duties thereof upon the terms and conditions hereinafter set
forth. Countrywide shall act as transfer agent and dividend disbursing agent
for the Company and agrees to be responsible and liable to the Company to the
same extent as Fremont under the Transfer Agent Agreement. Countrywide shall
perform all duties and obligations of Fremont under the Transfer Agent
Agreement which shall include but are not limited to those duties of Recording
Shares, Purchase Orders, Redemptions and Exchanges, Dividends and
Distributions, Books and Records, and other such items necessary to carry out
the Transfer Agent Agreement.
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<PAGE>
2. COMPENSATION. For the performance of its obligations under this
Agreement, Fremont shall pay Countrywide a fee with respect to each series of
the Company in accordance with the schedule attached hereto as Schedule A.
Fremont shall reimburse Countrywide for any out-of-pocket expenses and
advances including, but not limited to, costs and expenses for postage,
envelopes, checks, drafts, continuous forms, reports, communications,
statements and other materials, telephone, telegraph and remote transmission
lines, use of outside mailing firms, necessary outside record storage, media
for storage of records (e.g., microfilm, microfiche, computer tapes),
printing, confirmations and any other shareholder correspondence and any and
all assessments, taxes or levies assessed on Countrywide for services provided
under this Agreement. All fees and advances will be billed by Countrywide at
the end of each month. Payment by Fremont will be due within fifteen days of
receipt of the invoice.
3. LIMITATION OF LIABILITY. Countrywide shall not be liable for any
reasonable action taken, omitted or suffered to be taken by it in its
reasonable judgment, in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement,
or in accordance with instructions from Fremont, provided, however, that such
acts or omissions shall not have resulted from Countrywide's willful
misfeasance, bad faith or negligence.
4. INSURANCE COVERAGE. Countrywide is insured by a $1,000,000 Errors
& Omissions/Directors & Officers policy issued by Federal Insurance Company, a
copy of which has been provided to Fremont. Countrywide will maintain such
policy at all times during the term of this Agreement and will immediately
notify Fremont of any change in the scope or amount of coverage under such
policy.
5. CONFIDENTIALITY.
(a) All information furnished to Countrywide or its representatives
by the Company or by Fremont on behalf of the Company, including without
limitation all names, addresses, telephone numbers and other information of
customers and prospective customers, and whether furnished before or after the
date hereof (the "Information"), will be kept confidential by Countrywide
and/or its representatives, and will not, except to the extent necessary in
order to carry out Countrywide's responsibilities and obligations under this
Agreement, be disclosed by Countrywide or any of its representatives and will
not be used by Countrywide or any of its representatives for any purpose other
than fulfilling Countrywide's responsibilities and obligations under this
Agreement. The term "representatives" as used herein shall include
Countrywide's affiliates, and Countrywide and its affiliates' respective
officers, directors, employees, agents, and controlling persons. Countrywide
acknowledges and agrees that any
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<PAGE>
information supplied to Countrywide by a customer or potential customer of
Fremont as a result of discussions, solicitations, or communications between
Fremont and said customer or potential customer shall constitute "Information"
for the purposes hereof. Countrywide shall be permitted to transmit the
Information only to those of its representatives who need to know the
Information for the purpose of assisting Countrywide in fulfilling its
responsibilities and obligations under this Agreement, who are informed by
Countrywide of the confidential nature of the Information and who have agreed
in writing to keep the Information confidential on the same terms as if such
representatives were signatories hereto. Copies of all agreements by which
Countrywide's representatives have agreed to keep the Information confidential
shall be delivered by Countrywide to Fremont promptly after execution thereof.
In any event Countrywide shall be responsible for the breach of this Agreement
by its representatives.
(b) In the event that Countrywide or its representatives is requested or
becomes legally compelled to disclose any of the Information, said party
agrees to provide Fremont with prompt written notice so that Fremont may seek
(with Countrywide's and/or its representatives' cooperation, if so requested
by Fremont) a protective order or other appropriate remedy. In the event that
such protective order or other remedy is not obtained, or that Fremont waives
compliance with these confidentiality provisions, Countrywide and its
representatives agree to furnish only that portion of the Information which in
the reasonable opinion of its counsel is legally required and will use its
best efforts to obtain reliable assurance that confidential treatment will be
accorded the Information.
(c) The term "Information" as used herein shall not include matters which (i)
are or become generally available to the public other than as a result of a
disclosure by Countrywide or its representatives, or (ii) were known to
Countrywide on a non- confidential basis prior to its disclosure to
Countrywide by the Company or Fremont.
(d) Fremont shall be entitled to injunctive relief to prevent breaches of
Countrywide's confidentiality obligations hereunder and to specifically
enforce the terms hereof in addition to any other remedy to which Fremont or
the Company may be entitled at law or in equity.
(e) The confidentiality provisions of this Agreement shall survive
the termination of this Agreement.
6. TERMINATION. This Agreement may be terminated by either
party upon ninety (90) days' written notice to the other party.
Upon the termination of this Agreement, Fremont shall pay
Countrywide such compensation as may be payable for the period
prior to the effective date of such termination.
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<PAGE>
7. MISCELLANEOUS. Each party agrees to perform such further acts as
are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the
State of Ohio. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
FREMONT INVESTMENT ADVISORS, INC.
By: _______________________________
COUNTRYWIDE FUND SERVICES, INC.
By: _______________________________
Its: President
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<PAGE>
SCHEDULE A
COMPENSATION
As Sub-Transfer Agent:
Fremont Global Fund: payable monthly at
rate of $17/account
per year; subject to
minimum of $1,500 per month
Fremont Growth Fund: payable monthly at
rate of $17/account
per year; subject to
minimum of $1,500 per month
Fremont California Intermediate payable monthly at
Tax-Free Fund: rate of $20/account
per year; subject to
minimum of $1,500 per month
Fremont Money Market Fund: payable monthly at
rate of $20/account
per year; subject to
minimum of $1,500 per month
Fremont Bond Fund: payable monthly at
rate of $20/account
per year; subject to
minimum of $1,500 per month
Fremont International Growth Fund: payable monthly at
rate of $17/account
per year; subject to
minimum of $1,500 per month
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<PAGE>
Fremont U.S. Micro-Cap Fund: payable monthly at
rate of $17/account
per year; subject to
minimum of $1,500 per month
Fremont International Small Cap Fund: payable monthly at
rate of $17/account
per year; subject to
minimum of $1,500 per month
Fremont Emerging Markets Fund: payable monthly at
rate of $17/account
per year; subject to
minimum of $1,500 per month
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ADMINISTRATION AGREEMENT
AGREEMENT made as of February 28, 1997 between Fremont Investment
Advisors, Inc. ("Fremont"), a California corporation having its principal
place of business at 333 Market Street, San Francisco, California 94105 and
Countrywide Fund Services, Inc. ("Countrywide"), an Ohio corporation having
its principal place of business at 312 Walnut Street, Cincinnati, Ohio 45202.
WHEREAS, Fremont is registered as an investment adviser under the
Investment Advisers Act of 1940 and has entered into an investment advisory
agreement (the "Management Agreement") with Fremont Mutual Funds, Inc. (the
"Funds"); and
WHEREAS, the Funds have been organized as a Maryland corporation to
operate as an investment company registered under the Investment Company Act
of 1940; and
WHEREAS, Fremont provides investment management and
administrative services to the Funds pursuant to the Management
Agreement; and
WHEREAS, Fremont wishes to avail itself of the information, advice,
assistance and facilities of Countrywide to perform on behalf of the Funds the
administrative services as hereinafter described; and
WHEREAS, Countrywide wishes to provide such services to
Fremont under the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, Fremont and Countrywide agree as follows:
1. EMPLOYMENT. Fremont, being duly authorized, hereby
employs Countrywide to perform those services described in this
Agreement. Countrywide shall perform the obligations thereof
upon the terms and conditions hereinafter set forth.
2. FUND ADMINISTRATION. Subject to the direction and control of
Fremont, Countrywide shall assist Fremont in supervising the Funds' business
affairs not otherwise supervised by other agents of the Funds. The duties and
responsibilities to be performed by Countrywide shall include the following:
(1) preparation of all registration statements and prospectuses of the Funds,
semiannual reports on Form N-SAR and Rule 24f-2 Notices, and the filing
thereof with the appropriate federal regulatory authorities; (2) filing of all
public financial statements and financial reports with the appropriate federal
regulatory authorities, and the distribution to shareholders of the Funds; (3)
review of all marketing materials prepared on
newsvcag.mem
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<PAGE>
behalf of the Funds, and the filing thereof with the National Association of
Securities Dealers, Inc.; (4) coordination and liaison between the Funds and
their outside legal counsel; (5) management and scheduling of regular meetings
of the Funds' Board of Directors, and in connection therewith, providing all
necessary assistance in the conduct of such meetings, and the maintenance of
minutes of such meetings (provided, however, that Countrywide will be
reimbursed by Fremont for expenses incurred by its employees in attending any
such meetings); and (6) supplying or obtaining on behalf of the Funds such
other advice or assistance as may be necessary or desirable in the continuing
administration of the Funds' business affairs.
3. RECORDKEEPING AND OTHER INFORMATION. Countrywide shall create and
maintain all necessary records in accordance with all applicable laws, rules
and regulations, including but not limited to records required by Section
31(a) of the Investment Company Act of 1940 and the rules thereunder, as the
same may be amended from time to time, pertaining to the various functions
performed by it and not otherwise created and maintained by another party
pursuant to contract with the Funds. Where applicable, such records shall be
maintained by Countrywide for the periods and in the places required by Rule
31a-2 under the Investment Company Act of 1940.
4. AUDIT, INSPECTION AND VISITATION. Countrywide shall make available
to Fremont during regular business hours all records and other data created
and maintained pursuant to the foregoing provisions of this Agreement for
reasonable audit and inspection by the Funds or any regulatory agency having
authority over the Funds.
5. COMPENSATION. For the performance of its obligations under this
Agreement, Fremont shall pay to Countrywide, with respect to the nine (9)
existing series, a monthly fee of $6,500, to be paid in arrears. Such monthly
fee shall be increased by $500 for each new series of shares, or each new
class of any existing or future series, offered for sale by Fremont Mutual
Funds. Fremont is solely responsible for the payment of fees to Countrywide,
and Countrywide agrees to seek payment of its fees solely from Fremont.
Countrywide shall not reimburse Fremont for (or have deducted from its fees)
any expenses of the Funds in excess of expense limitations imposed by certain
state securities commissions having jurisdiction over the Funds.
6. LIMITATION OF LIABILITY. Countrywide shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with instructions from Fremont, provided, however, that such acts
or omissions shall not have resulted from Countrywide's willful misfeasance,
bad faith or negligence.
- 2 -
<PAGE>
7. COMPLIANCE WITH THE INVESTMENT COMPANY ACT OF 1940. The parties
hereto acknowledge and agree that nothing contained herein shall be construed
to require Countrywide to perform any services for Fremont which services
could cause Countrywide to be deemed an "investment adviser" of the Funds
within the meaning of Section 2(a)(20) of the Investment Company Act of 1940
or to supersede or contravene the Prospectus or Statement of Additional
Information of the Funds or any provisions of the Investment Company Act of
1940 and the rules thereunder.
8. TERMINATION. This Agreement may be terminated by either party upon
thirty (30) days' written notice to the other party. This Agreement shall
terminate automatically in the event of termination of the Management
Agreement. Upon the termination of this Agreement, Fremont shall pay
Countrywide such compensation as may be payable for the period prior to the
effective date of such termination.
9. ABSENCE OF LIABILITY. Countrywide is hereby expressly put on
notice that the Funds are not contracting parties to this Agreement and assume
no obligations pursuant to this Agreement. Countrywide shall seek satisfaction
of any obligations arising out of this Agreement only from Fremont, and not
from the Funds nor the Funds' directors, officers, employees or shareholders.
Countrywide shall not act as agent for or bind either Fremont or the Funds in
any matter.
10. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
FREMONT INVESTMENT ADVISORS, INC.
By:______________________________
COUNTRYWIDE FUND SERVICES, INC.
By:______________________________
Its: President
- 3 -
CONSENT OF INDEPENDENT ACCOUNTANTS
--------
We consent to the inclusion in Post-Effective Amendment No. 23 to
the Registration Statement of Fremont Mutual Funds, Inc. on Form
N-1A (File No. 33-23453) of our report dated December 6, 1996, on
our audit of the financial statements of Fremont Mutual Funds,
Inc. We also consent to the reference to our firm under the
caption "Additional Information."
s/s Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
San Francisco, California
February 25, 1997
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<SERIES>
<NUMBER> 3
<NAME> FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND
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<CIK> 0000837389
<NAME> FREMONT MUTUAL FUNDS, INC.
<SERIES>
<NUMBER> 8
<NAME> FREMONT INTERNATIONAL SMALL CAP FUND
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<CIK> 0000837389
<NAME> FREMONT MUTUAL FUNDS, INC.
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<NAME> FREMONT EMERGING MARKETS FUND
<S> <C>
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