FREMONT
MUTUAL
FUNDS, INC.
o Real Estate Securities Fund
March 1, 1998
Fremont
Funds [LOGO]
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TABLE OF CONTENTS
Item Page
Summary of Fees and Expenses..............................2
The Advisor, the Sub-Advisor and the Fund.................3
Investment Objective, Policies,
and Risk Considerations..................................6
General Investment Policies...............................8
Investment Results.......................................12
How to Invest............................................13
Shareholder Account Services and Privileges..............14
How to Redeem Shares.....................................16
Retirement Plans.........................................19
Dividends, Distributions, and Federal Income Taxation....20
Plan of Distribution.....................................22
Calculation of Net Asset Value
and Public Offering Price...............................23
Execution of Portfolio Transactions......................23
General Information......................................24
Telephone Numbers and Addresses..........................26
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PROSPECTUS
FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the FREMONT REAL ESTATE SECURITIES FUND (the
"Fund").
FREMONT REAL ESTATE SECURITIES FUND seeks to provide total return through a
combination of income and long-term capital appreciation by investing primarily
in equity securities of companies in the real estate industry.
There can be no assurance that the Fund will achieve its investment objective.
The Fund is a non- diversified fund as defined by the Investment Company Act of
1940, as amended (the "1940 Act").
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.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE 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, 1998.
FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
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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 1 None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets) 2
Management Fee 3 None
12b-1 Expenses 4 .25%
Other Expenses after Reimbursement .25%
Total Fund Operating Expenses .50%
Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
1 Year 3 Years
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$5 $16
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 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,
transfer agent fees paid to Fremont Investment Advisors, Inc.; custody, legal
and audit fees; 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 Fund are based on estimated
expenses for the current fiscal year.
See "The Advisor, the Sub-Advisor and the Fund."
1 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 $10.
See "How to Redeem Shares."
2 The Advisor has agreed to limit the Fund's total operating expenses to 1.50%
of average daily net assets. The Fund may reimburse the Advisor for any
reductions in the Advisor's fees during the three years following that
reduction if such reimbursement is requested by the Advisor, if such
reimbursement can be achieved within the foregoing expense limit, and if the
Board of Directors approves the reimbursement at the time of the request as
not inconsistent with the best interests of the Fund. The Advisor generally
seeks to reimburse the oldest reductions and waivers before payment of fees
and expenses for the current year. Absent reimbursements of expenses by the
Advisor, management fee, 12b-1 fee, other expenses and total operating
expenses are estimated to be 1.00%, .25%, .55% and 1.80%, respectively.
3 The Advisor has voluntarily waived the management fee for the first six
months, until June 30, 1998, and will continue to waive fees until December
31, 1998, or until the assets in the Fund reach $25 million.
4 12b-1 fees may be paid to financial intermediaries for services provided
through sales program(s). Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
rules of the National Association of Securities Dealers. For more information
on 12b-1 fees, see "Plan of Distribution."
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FREMONT MUTUAL FUNDS
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 Real
Estate Securities Fund. The Investment Company has other series offered under a
different prospectus, and the Board of Directors of the Investment Company is
permitted to create additional series 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 services under an
Investment Advisory 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 Kensington
Investment Group (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 Trust and Thrift Plan and the Bechtel Foundation since
1978 and to Fremont Investors, Inc. (formerly Fremont Group, Inc.) since 1987.
The Advisor also provides investment advisory services regarding asset
allocation, investment manager selection and portfolio diversification to a
number of large Bechtel-related investors. The Investment Company is one of its
clients.
As compensation for its services to the Fund, the Advisor receives from the Fund
an advisory fee, computed daily and paid monthly, of 1.00% per annum of the
Fund's average net assets. This advisory fee is higher than for most mutual
funds. The Fund also pays the Advisor a 12b-1 fee of 0.25% per annum, subject to
the terms of a plan of distribution more fully described under "Plan of
Distribution." In addition to the fees described above, the Fund pays its own
operating expenses including, but not limited to: taxes, if any; brokerage and
commission expenses, if any; interest charges on any borrowings; transfer agent,
administrator, custodian, legal and auditing fees; shareholder servicing fees
including fees to third-party servicing agents; fees and expenses of Directors
who are not interested persons of the Advisor or the Sub-Advisor; costs and
expenses of calculating daily net asset value; costs and expenses of accounting,
bookkeeping and recordkeeping required under the 1940 Act; insurance premiums;
trade association dues; fees and expenses of registering and maintaining
registration of shares under federal and applicable state securities laws; all
costs associated with shareholders' meetings and the preparation and
dissemination of proxy materials, except for meetings called solely for the
benefit of the Advisor of its affiliates; printing and mailing prospectuses,
statements of additional information and reports
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FREMONT MUTUAL FUNDS
to shareholders; and other expenses relating to the Fund's operations, plus any
extraordinary and non-recurring expenses that are not expressly assumed by the
Advisor.
The Advisor anticipates waiving fees and reimbursing the Fund for other
operating expenses in order to limit total operating expenses to 1.50% of
average daily net assets. To the extent management fees are waived and/or other
expenses are reimbursed by the Advisor, the Advisor may elect to recapture such
amounts if it requests reimbursement within three years of the year in which the
waiver and/or reimbursement is made, and the Board of Directors approves the
reimbursement, and the Fund is able to make reimbursement and still stay within
the then current operating expense limitation.
Kensington Investment Group is an SEC-registered investment advisor that
specializes in the management of both publicly traded and non-traded real estate
securities portfolios. Kensington was founded in 1993 by principals who have
been active in real estate securities research, trading and portfolio management
since 1985. Kensington currently manages over $70 million in private funds,
which have invested in traded real estate investment trusts, real estate related
operating companies and existing real estate limited partnerships. John P.
Kramer, President and founding partner of Kensington Investment Group, is
involved in all aspects of the organization and is primarily responsible for
directing the firm's investment policies. Paul Gray, Vice President and
Portfolio Manager is responsible for securities investment decisions on behalf
of Kensington's portfolios.
The Kensington Investment Group accounts were not registered under the
Investment Company Act of 1940 and therefore were not subject to certain
investment restrictions nor specific tax restrictions imposed by that Act or
Subchapter M of the Internal Revenue Code. If the accounts had been registered
under the 1940 Act, their performance may have been different. Total return for
the Kensington managed accounts in the following table was calculated using a
methodology that incorporates a time-weighted total rate of return concept and
is adjusted for cash flows. This methodology of calculating total return differs
from the methodology required to be employed by a mutual fund in calculating
total return, which is not time-weighted or dollar-weighted but simply measures
the total return of an investment in the Fund over a period of time. The Advisor
believes , however, that the performance would be substantially the same if it
was recalculated in accordance with mutual fund performance rules.
The following table depicts the Sub-Advisor's performance of all separately
managed accounts that contain publicly traded real estate securities and are
managed with an objective, policies, and strategy substantially similar to that
of the Fremont Real Estate Securities Fund. The performance information has been
adjusted to back-out the Sub-Advisor's performance fee and all expenses and has
been restated to reflect what the performance results would have been had the
Sub-Advisor charged a fee equal to the Fund's anticipated gross expense ratio.
This performance information is based on historical data and is not indicative
of the future performance of the Fund.
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FREMONT MUTUAL FUNDS
Average Annual Total Returns for Period
Ended December 31, 1997
Inception-
1 Year to-Date 1
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Kensington
Investment Group 29.14% 25.30%
NAREIT Total
Return Index 2 18.86% 19.48%
S&P 500 Index 3 33.36% 27.79%
1 Inception-to-Date returns incorporate the period July 10, 1994 through
December 31, 1997.
2 The National Association of Real Estate Investment Trusts Composite Total
Return Index (NAREIT Index) is comprised of all publicly traded real estate
investment trusts, dividends are reinvested monthly. Unlike Kensington
Investment Group net returns, Index returns do not reflect any fees or
expenses.
3 The Standard & Poor's 500 Index is an unmanaged market value-weighted measure
of 500 widely-held common stocks listed on the New York Stock Exchange, the
American Stock Exchange, and the Over the Counter market. Index returns are
computed monthly and assume reinvestment of dividends.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Fund), the Advisor and the Sub-Advisor provides
that the Sub-Advisor will manage the investment and reinvestment of the assets
of the Fund and continually review and administer the Fund's investments. As
compensation for its services, the Advisor (not the Fund) pays the Sub-Advisor a
fee equal to .50% per annum of Fund assets managed by the Sub-Advisor. Both the
Advisor and the Sub-Advisor will waive their fees for the first six months, and
will then continue to waive fees until the earlier of December 31, 1998 or until
assets in the Fund reach $25 million. The Portfolio Management Agreement with
the Sub-Advisor may be terminated by the Advisor or the Investment Company upon
30 days' written notice. The Advisor has day-to-day authority to increase or
decrease the amount of the Fund's assets under management by the Sub-Advisor.
The Advisor will provide direct portfolio management services to the extent that
the Sub-Advisor does not provide these services. The Investment Company and the
Advisor have received from the Securities and Exchange Commission an order (the
"SEC Order") exempting the Fund from the provisions of the 1940 Act that require
the shareholders of the Fund to approve the Fund's sub-advisory agreement(s) and
any amendments thereto. The SEC Order permits the Advisor to hire new
sub-advisors, terminate sub-advisors, rehire existing sub-advisors whose
agreements have been re-assigned (and, thus, automatically terminated), and
modify sub-advisory agreements without the prior approval of shareholders. By
eliminating shareholder approval in these matters, the Advisor would have
greater flexibility in managing sub-advisors, and shareholders would save the
considerable expense involved in holding shareholder meetings and soliciting
proxies. 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.
Investment Company Administration Corporation (the "Administrator"), pursuant to
an administrative agreement with the Advisor, supervises the administration of
the Investment Company and the Fund including, among other responsibilities, the
preparation and filing of documents
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FREMONT MUTUAL FUNDS
required for compliance by the Fund with applicable laws and regulations.
Certain officers of the Investment Company may be provided by the Administrator.
For additional information, see "Investment Advisory and Other Services" in the
Statement of Additional Information.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The investment objective and policies of the Fund are 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. The Fremont Real Estate Securities Fund is not
intended to constitute a complete investment program. Investors should consult
with their financial and other advisors concerning the suitability of this
investment for their own particular circumstances. There is no assurance that
the Fund will achieve its investment objective.
The investment objective of the Real Estate Securities Fund is to seek to
provide total return through a combination of income and long-term capital
appreciation by investing primarily in equity securities of companies in the
real estate industry. Equity securities include common stocks (including shares
or units in real estate investment trusts), rights or warrants to purchase
common stocks, limited partnership interests in master limited partnerships,
securities convertible into common stocks, and preferred stocks.
Under normal market conditions, at least 65% of the Portfolio's total assets
will be invested in equity securities of companies principally engaged in the
real estate industry. For purposes of the Fund's investment policies, a company
is in the real estate industry if it derives at least 50% of its revenues from
the ownership, construction, financing, management or sale of commercial,
industrial, or residential real estate or if it has at least 50% of its assets
in such real estate. Companies in the real estate industry may include: Real
Estate Investment Trusts (REITs), real estate operating companies, companies
operating businesses which own a substantial amount of real estate such as
hotels and assisted living facilities and development companies.
A substantial portion of the Fund's assets will be invested in securities of
REITs. REITs pool investors' funds for investment primarily in income producing
real estate or real estate related loans or interests. A REIT is not taxed on
income distributed to shareholders if it complies with several requirements
relating to its organization, ownership, assets, and income and a requirement
that it distribute to its shareholders at least 95% of its taxable income (other
than net capital gains) for each taxable year. REITs can generally be classified
as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the
majority of their assets directly in real property, derive their income
primarily from rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their income primarily
from interest payments. Hybrid REITs combine the characteristics of both
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FREMONT MUTUAL FUNDS
Equity REITs and Mortgage REITs.
The Fund will not invest in real estate directly, but only in securities issued
by real estate companies. However, the Fund may be subject to risks similar to
those associated with the direct ownership of real estate (in addition to
securities markets risks) because of its policy of concentration in the
securities of companies in the real estate industry. These risks include
declines in the value of real estate, risks related to general and local
economic conditions, dependency on management skill, increase in interest rates,
possible lack of availability of mortgage funds, overbuilding, extended
vacancies of properties, increased competition, increases in property taxes and
operating expenses, changes in zoning laws, losses due to costs resulting from
the clean-up of environmental problems, casualty or condemnation losses,
limitations on rents, changes in neighborhood values and the appeal of
properties to tenants. Certain REITs have relatively small capitalization, which
may tend to increase the volatility of the market price of securities issued by
such REITs.
Rising interest rates may cause investors in REITs to demand a higher annual
yield from future distributions, which may in turn decrease market prices for
equity securities issued by REITs. Rising interest rates also generally increase
the costs of obtaining financing, which could cause the value of the Fund's
investments to decline. During periods of declining interest rates, certain
mortgage REITs may hold mortgages that the mortgagors elect to prepay; such
prepayment may diminish the yield on securities issued by such mortgage REITs.
In addition, mortgage REITs may be affected by the ability of borrowers to repay
when due the debt extended by the REIT and equity REITs may be affected by the
ability of tenants to pay rent.
In addition to these risks, Equity REITs may be affected by changes in the value
of the underlying property owned by the trusts, while Mortgage REITs may be
affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be diversified.
In addition, Equity and Mortgage REITs could possibly fail to qualify for tax
free pass-through of income under the Internal Revenue Code of 1986, as amended
(the "Code"), or to maintain their exemptions from registration under the 1940
Act. The above factors may also adversely affect a borrower's or a lessee's
ability to meet its obligations to the REIT. In the event of a default by a
borrower or lessee, the REIT may experience delays in enforcing its rights as a
mortgagee or lessor and may incur substantial costs associated with protecting
its investments.
The Fund is a non-diversified portfolio and is not limited by the 1940 Act in
the proportion of its assets that may be invested in the obligations of a single
issuer. The Fund, therefore, may invest a greater proportion of its assets in
the securities of a smaller number of issuers and will be subject to a greater
risk with respect to its portfolio securities. Any economic, regulatory, or
political developments affecting the value of the securities held in the Fund
could have a greater impact on the total value of the Fund's holdings than would
be the case if the Fund were classified as diversified under the 1940 Act.
Although the Fund invests primarily in common stocks, for liquidity purposes it
will
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FREMONT MUTUAL FUNDS
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
convertible and non-convertible bonds and preferred stocks, when the Advisor and
Sub-Advisor believe that these investments offer opportunities for capital
appreciation. Preferred stocks and bonds will be rated at the time of purchase
in the top four categories of Moody's Investors Service, Inc. (Baa or higher) or
Standard & Poor's Ratings Group (BBB or higher) or be of comparable quality as
determined by the Advisor or Sub-Advisor. Bonds and preferred stocks in the
lowest investment grade category (Baa or BBB) have speculative characteristics;
as a result, changes in the economy or other circumstances are more likely to
lead to a weakened capacity of such securities to make principal and interest
payments or to pay the preferred stock obligations than would occur with bonds
and preferred stocks in higher categories. See Appendix A to the Statement of
Additional Information for a description of rating categories.
GENERAL INVESTMENT POLICIES
Money Market Instruments. The Fund may invest in any of the following "money
market" instruments: certificates of deposit, time deposits, commercial paper,
bankers' acceptances, and Eurodollar certificates of deposit; U.S.
dollar-denominated money market instruments of foreign financial institutions,
corporations, and governments; U.S. Government and agency securities; money
market mutual funds; and other debt securities which are not specifically named
but which meet the Fund's quality guidelines. The Fund also may enter into
repurchase agreements as described below and may purchase variable and floating
rate debt securities.
At the time of purchase, short-term securities must be rated in the top rating
category by at least two nationally recognized statistical rating organizations
("NRSROs") or by a single NRSRO in the case of a security rated by only one
NRSRO, or, if not rated by an NRSRO, must be of comparable quality as determined
by the Advisor or the Sub-Advisor. Generally, high quality short-term securities
must be issued by an entity with an outstanding debt issue rated A or better by
an NRSRO, or an entity of comparable quality as determined by the Advisor or the
Sub-Advisor. Obligations of foreign banks, foreign corporations, and foreign
branches of domestic banks must be payable in U.S. dollars. See Appendix A to
the Statement of Additional Information for a description of rating categories.
U.S. Government Securities. The Fund may invest in U.S. Government securities,
which are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as Treasury bills,
notes, and bonds and Government National Mortgage Association certificates, are
supported by the full faith and credit of the
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FREMONT MUTUAL FUNDS
United States; others, such as those of the Federal Home Loan Mortgage
Association, are supported by the right of the issuer to borrow from the
Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government will provide financial
support to U.S. Government agencies or instrumentalities as described above in
the future, other than as set forth above, 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 when-issued securities the value of which is greater
than 5% of its net assets.
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 such may facilitate achieving the
objective of the Fund or to the extent that they afford the primary 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.
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 enter into repurchase agreements only where (1) the underlying securities
are
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FREMONT MUTUAL FUNDS
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 reduced 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 perceived anomalies occurring in general market, economic, or
political conditions. Therefore, the Fund may have a higher portfolio turnover
rate than that of some other investment companies, but it is anticipated that
the annual portfolio turnover rate of the Fund will not exceed 200%. The
portfolio turnover rate is calculated by dividing the lesser of sales or
purchases of long-term portfolio securities by the Fund's average month-end
long-term investments. High portfolio turnover involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions and
other costs that the Fund will bear directly, and may result in the realization
of net capital gains, which are generally taxable whether or not distributed to
shareholders.
Loans of Portfolio Securities. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in an
amount not exceeding 33 1/3% of its net assets. The borrower must maintain with
the Fund's custodian collateral consisting of cash, cash equivalents, or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of, among other things, 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 may 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
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FREMONT MUTUAL FUNDS
the case; conversely, if the income and gains fail to exceed the cost, earnings
or net assets 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 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 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 segregate 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.
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
premiums and 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, however, 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 segregate cash, cash equivalents, or liquid securities, or hold a
covered position against any potential delivery or payment obligations under any
outstand-
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FREMONT MUTUAL FUNDS
ing option or futures contacts.
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, possible reduction in value of both the securities
hedged and the hedging instrument, 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 -- inability to effect closing transactions at favorable
prices and 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 Addition Information.
Investment Restrictions. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." 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, however, 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 on 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.
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FREMONT MUTUAL FUNDS
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, including reinvested
income 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, among
other things, economic conditions, 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 will be included in its
annual report, which will be mailed to shareholders without charge upon request.
HOW TO INVEST
The shares of the Fund may be purchased through the Transfer Agent by submitting
payment by check, 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 Fund. Purchases of shares are made at the current
net asset value 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
$100 or more except in the case of retirement plans or Automatic Investment
Plans. There is a minimum
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FREMONT MUTUAL FUNDS
continuing balance of $1,500 required for non-retirement accounts (calculated on
the basis of original investment value). All investments not meeting the minimum
will be returned. In some cases, the minimum balance requirement may be waived
at the sole discretion of the Advisor. All purchases made by check should be in
U.S. dollars and be made payable to the appropriate Fremont Fund. Third party
checks, credit cards, and cash will not be accepted. All investment checks are
subject to a 10-day holding period.
The Fund will be closed to new shareholders whenever the Fund's market
capitalization exceeds 3/10 of 1% of the market capitalization of the REITs
which comprise the "ALL REITS Index" as published by NAREIT. As of January 31,
1998, the NAREIT Index showed a market capitalization of $146.734 billion for
all REITs.
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. All bank wire investments received before the close of trading on
the New York Stock Exchange (currently 4:00 p.m., Eastern time), will be
credited the same day. Otherwise, bank wire investments 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 or other selling charge 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 for such activities.
As a condition of this offering, if an order to purchase shares is canceled due
to nonpayment (for example, a check returned for "insufficient funds"), the
person who placed the order 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.
First Fund Distributors, Inc., 4455 Camelback Road, Suite 261E, Phoenix,
Arizona, 85018, is the principal underwriter for the Fund.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
Statements and Reports. When a shareholder makes an initial investment in the
Fund, a shareholder account is opened in accordance with registration
instructions. Each time there is a transaction, such as an additional
investment, a dividend or other distribution, or a redemption, the shareholder
will receive from the Transfer Agent a confirmation statement showing the
current transaction in the account and the
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FREMONT MUTUAL FUNDS
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. See "Dividends,
Distributions and Federal Income Taxation" for further information.
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 that are offered for sale in your state of residence at the time
of the exchange. 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 at the sole discretion of the Advisor. 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 of shares should be made for investment
purposes only. A pattern of frequent exchanges, purchases, and sales can be
limited, at the discretion of the Board of Directors, by the Investment
Company's refusal to accept further purchase and exchange orders from a
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 the close of trading on the New York
Stock Exchange (currently 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.
Autobuy Privilege. The autobuy privilege allows shareholders to purchase
subsequent shares by moving money directly from their checking account to a
Fremont
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FREMONT MUTUAL FUNDS
Fund. The Autobuy privilege is an ACH privilege. ACH privileges will not be
added to an account without written authorization from the shareholder. The
Autobuy privilege will be automatically added to an account when the shareholder
chooses any type of ACH privilege. A shareholder may then purchase additional
shares in an existing account by calling 800-548-4539 and instructing the
Transfer Agent as to the dollar amount wanting to be invested. The investment
will automatically be processed through the Automatic Clearing House (ACH)
system. There is no fee for this option. If the privilege was not established at
the time the account was opened, the shareholder must complete the appropriate
form. The form is available on request.
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 $100 minimum for subsequent investments. If the
purchase falls on a weekend or holiday, the purchase will be made on the
previous business day. Shareholders should note that if there is an Automatic
Investment Plan established for an account and the entire account is exchanged
into another Fund, the Automatic Investment Plan must be renewed by the
shareholder to the Transfer Agent. 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
canceled due to nonpayment (for example, "insufficient funds"), 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 $10
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."
Shares are redeemed 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 $10 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 or other Fund
agent
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FREMONT MUTUAL FUNDS
authorized to accept orders before the close of trading on the New York Stock
Exchange (currently 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). Otherwise, orders received by the Transfer
Agent 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 that the amount paid for them.
Redemption of shares by exchanges, transfers 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 the close of trading
on the New York Stock Exchange (currently 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
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FREMONT MUTUAL FUNDS
Investment Company, or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. 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 by check will be
made on the 15th and/or the last business day of the month. Redemptions made by
electronic transfer will be made on any date the shareholder chooses.
Shareholders may also request automatic exchanges and transfers of a specified
dollar amount. Exchanges and transfers will be made on any date the shareholder
chooses. 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). If the
redemption date falls on a weekend or holiday, the redemption will be made on
the previous business day. 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 the shareholder 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
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FREMONT MUTUAL FUNDS
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 10 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 $100 or more.) This minimum balance may be waived at the sole
discretion of the Advisor.
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. The Advisor is the transfer agent of the Fund an has engaged
State Street Bank and Trust Company, c/o NFDS, P.O. Box 419343, Kansas City,
Missouri 64141, to serve as Sub-Transfer and Dividend Disbursing Agent and
shareholder service agent. State Street Bank and Trust Company has contracted
with National Financial Data Services to serve as shareholder servicing agent. A
depository account has been established at United Missouri Bank of Kansas City
("United Missouri Bank") through which all payments for the funds will be
processed.
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; Roth IRAs; 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, Roth 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.
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FREMONT MUTUAL FUNDS
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 intends to qualify and elect, and to continue to qualify, to be treated
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). For any tax year in which the Fund so
qualifies and meets distribution requirements, it will not incur a federal tax
liability. Such qualification under the Code requires a Fund, among other
things, 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 all of its net investment income in October, and
December or January.
The Fund intends to distribute all of its net realized capital gains, if any, at
the end of the calendar year. Net investment income 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 or mid-term capital gains distributions are
taxable to shareholders as long-term or mid-term capital gains, respectively,
regardless of how long shareholders have held Fund shares. The maximum capital
gains rate for individuals is 28% with respect to assets held for more than 12
months, but not more than 18 months, and 20% with respect to assets held more
than 18 months. The maximum capital gains rate for corporate shareholders is the
same as the maximum tax rate for ordinary income. Distributions of short-term
capital gains will be subject to the tax as ordinary income.
Shareholders may elect:
o to have all dividends and capital gain distributions automatically reinvested
in additional shares;
o to receive the income dividends and short-term capital gains distributions in
cash and accept the long-term capital gains distributions in additional
shares;
o to receive all distributions of income dividends and capital gains in cash;
or
o to invest all dividend and capital gain distributions in another Fremont Fund
owned through an identically registered account.
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
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FREMONT MUTUAL FUNDS
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.) Because REITs invested in by the Fund do not provide
complete information about the taxability of their distributions until after the
calendar year end, Fremont Investment Advisors may not be able to determine how
much of the Fund's distribution is taxable to shareholders until after the
January 31 deadline for issuing Form 1099-DIV. As a result, the Fund may request
permission each year from the Internal Revenue Service for an extension of time
to issue Form 1099-DIV to February 28.
Distributions are taxable to you regardless of whether they are taken in cash or
reinvested, even if the value of your shares is below your cost. If you purchase
shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) remains the same. In addition, the share price at the time you purchase
shares may include unrealized gains in the securities held in the investment
portfolio of the Fund. If these portfolio securities are subsequently sold and
the gains are realized, they will, to the extent not offset by capital losses,
be paid to you as a distribution of capital gains and will be taxable to you as
short-term or long-term capital gains.
In the case of corporate shareholders, certain dividends may be eligible for the
dividends received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund. Dividends
received from REITs generally do not constitute qualifying dividends. A
corporation's dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of the Fund is financed with indebtedness.
Because of the nature of REIT investments, REITs may generate significant non
cash deductions (i.e. depreciation on real estate holdings) while having a
greater cash flow to distribute to its shareholders, If a REIT distributes more
cash than it has taxable income, a "return of capital" results. A "return of
capital" represents a portion of shareholder's original investment that is
generally non taxable when distributed (returned) to the investor. If you do not
reinvest distributions, the cost basis of your shares will be decreased by the
amount of return capital, which may result in a larger capital gain when you
sell your shares. Although a return of capital is generally non taxable to you
upon distribution,
21
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FREMONT MUTUAL FUNDS
it would be taxable to you as a capital gain if your cost basis in the shares is
reduced to zero. This could occur if you do not reinvest distributions and the
returns of capital are significant.
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 redemption proceeds 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 (which includes short-term
capital gains) paid to certain nonresident alien, non-U.S. partnership, and
non-U.S. corporation shareholder accounts. Although not expected, under certain
circumstances the Fund may be required to withhold additional amounts of federal
income tax on redemptions of shares by non-U.S. shareholders.
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.
PLAN OF DISTRIBUTION
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a plan of
distribution (the "Plan") under which the Fund may directly compensate the
Advisor, paying for certain distribution-related expenses, including payments to
securities dealers and others (including the Underwriter) who are engaged in
promoting the sale of shares of the Fund and who may be advising investors
regarding the purchase, sale, or retention of such 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,
prospectuses, 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
other expenses related to the distribution of the Fund's shares.
The annual limitation for compensation to the Advisor pursuant to the Plan is
.25% of the Fund's average daily net assets. All payments will be reviewed by
the Fund's Board of Directors. However, it is possible that in certain periods,
the amount of the Advisor's compensation could exceed the Advisor's distribution
expenses resulting in a profit to the Advisor. If the Plan is terminated by the
Fund in accordance with its terms, the Fund
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FREMONT MUTUAL FUNDS
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
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. 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. 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 ("NYSE"). 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 the close of trading on the New York Stock Exchange
(currently 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). Otherwise, orders received by the Transfer
Agent 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
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FREMONT MUTUAL FUNDS
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 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
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FREMONT MUTUAL FUNDS
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.
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FREMONT MUTUAL FUNDS
TELEPHONE NUMBERS AND ADDRESSES
To make an initial purchase:
1. By mail:
Fremont Mutual Funds, Inc.
c/o National Financial Data Services
P.O. Box 419343
Kansas City, MO 64141-6343
Street address:
1004 Baltimore Avenue
Kansas City, MO 64105
2. By wire:
Please call the Transfer Agent at 800-548-4539 (press 2) to obtain an account
number and detailed instructions.
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
Fremont Mutual Funds, Inc.
Fremont Money Market Fund
Fremont Bond Fund
Fremont California Intermediate
Tax-Free Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
Fremont U.S. Small Cap Fund
Fremont International Small Cap Fund
Fremont Emerging Markets Fund
Fremont U.S. Micro-Cap Fund
Fremont Real Estate Securities Fund
Fremont Select 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
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FREMONT MUTUAL FUNDS
Advisor/Transfer Agent
Fremont Investment Advisors, Inc.
333 Market Street, Suite 2600
San Francisco, CA 94105
Sub-Transfer Agent
Mailing Address:
National Financial Data Services
P.O. Box 419343
Kansas City, MO 64141-6343
800-548-4539 (press 2)
Street Address:
National Financial Data Services
1004 Baltimore Avenue
Kansas City, MO 64105
Custodian
The Northern Trust Company
50 South Lasalle Street
Chicago, IL 60675
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
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 secu rities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
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Fremont
Funds [LOGO]
For general information: 800-548-4539 (press 1), or 816-435-1777 (outside U.S.)
50 Beale Street, Suite 100, San Francisco, CA 94105 o 888-502-3253
3000 Post Oak Blvd., Suite 100, Houston, TX 77056 o 800-735-2705
9801 Washingtonian Blvd., Suite 105, Gaithersburg, MD 20878 o 888-373-6684
Distributed by First Fund Distributors, Inc., San Francisco, CA 94105
Copyright 1998 Fremont Mutual Funds, Inc. All rights reserved.
P035-9803
