<PAGE>
FREMONT
MUTUAL
FUNDS, INC.
- MONEY MARKET FUND
- BOND FUND
- REAL ESTATE SECURITIES FUND
- GLOBAL FUND
- GROWTH FUND
- SELECT FUND
- U.S. SMALL CAP FUND
- EMERGING MARKETS FUND
- U.S. MICRO-CAP FUND
March 1, 1998
[LOGO]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
Summary of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Advisor, The Sub-Advisors and the Funds. . . . . . . . . . . . . . . . 9
Investment Objectives, Policies and Risk Considerations. . . . . . . . . .13
General Investment Policies. . . . . . . . . . . . . . . . . . . . . . . .23
Investment Results . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
How to Invest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Shareholder Account Services and Privileges. . . . . . . . . . . . . . . .31
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Dividends, Distributions and Federal Income Taxation . . . . . . . . . . .34
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Calculation of Net Asset Value and Public Offering Price . . . . . . . . .35
Execution of Portfolio Transactions. . . . . . . . . . . . . . . . . . . .36
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Telephone Numbers and Addresses. . . . . . . . . . . . . . . . . . . . . .38
</TABLE>
<PAGE>
PROSPECTUS
FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in nine 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 provide 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 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.
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 SELECT FUND seeks to achieve long-term capital appreciation by investing
primarily in equity securities of medium capitalized U.S. companies.
FREMONT U.S. SMALL CAP FUND seeks to achieve long-term capital appreciation by
investing primarily in common stocks of small, rapidly growing U.S. companies.
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.
There can be no assurance that any Fund will achieve its investment objective.
Each of the Funds, except for the Fremont Real Estate Securities Fund, Fremont
Select Fund, and Fremont Emerging Markets Fund, is a diversified fund as defined
by the Investment Company Act of 1940, as amended (the "1940 Act").
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.
This Prospectus is dated March 1, 1998.
FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
1
<PAGE>
SUMMARY OF FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases. . . . . . . . None Redemption Fees(1) . . .None
Maximum Sales Load Imposed on Reinvested Dividends . . None Exchange Fee . . . . . .None
Deferred Sales Load. . . . . . . . . . . . . . . . . . None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEE 12b-1 FEES(9) OTHER EXPENSES OPERATING EXPENSES
-------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
Money Market Fund(2) .21% None .09% .30%
Bond Fund(3) .40% None .21% .61%
Real Estate Securities Fund(4) None .25% .25% .50%
Global Fund .60% None .25% .85%
Growth Fund .50% None .35% .85%
Select Fund(5) 1.00% .25% .15% 1.40%
U.S. Small Cap Fund(6) 1.00% .25% .25% 1.50%
Emerging Markets Fund(7) 1.00% .25% .25% 1.50%
U.S. Micro-Cap Fund(8) 1.88% None None 1.88%
</TABLE>
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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund(2) $3 $10 $17 $38
Bond Fund(3) 6 20 34 77
Real Estate Securities Fund(4) 5 16 -- --
Global Fund 9 27 47 105
Growth Fund 9 27 47 105
Select Fund(5) 15 44 -- --
U.S. Small Cap Fund(6) 15 47 -- --
Emerging Markets Fund(7) 15 47 82 179
U.S. Micro-Cap Fund(8) 19 59 102 221
</TABLE>
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 tables above are intended 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 services, 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
Real Estate Securities Fund, the Select Fund, and the U.S. Small Cap 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.
See "The Advisor, the Sub-Advisor and the Funds" section of this prospectus.
(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) 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 .45%, respectively, for the fiscal
year ended October 31, 1997.
(3) Administrative fees of .15% had been waived by the Advisor. Absent such
waiver, other expenses and total operating expenses of the Bond Fund would
have been .36% and .76%, respectively, for the fiscal year ended October
31, 1997. Effective 3/1/98, the Advisor will waive .10% out of the .15%
administrative fee with respect to the Fund.
(4) The Advisor has voluntarily agreed to waive 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.
Absent this limitation, the management fee, 12b-1 fee, other expenses and
total operating expenses are estimated to be 1.00%, .25%, .55% and 1.80%,
respectively.
(5) The Advisor has voluntarily agreed to currently limit the total operating
expenses to 1.40% of average net assets. Absent this limitation, the
management fee, 12b-1 fee, other expenses and total operating expenses are
estimated to be 1.00%, .25%, .63% and 1.88%, respectively.
(6) The Advisor has voluntarily agreed to currently limit the total operating
expenses to 1.50% of average net assets. Absent this limitation, the
management fee, 12b-1 fee, other expenses and total operating expenses are
estimated to be 1.00%, .25%, .55% and 1.80%, respectively.
(7) The Advisor has voluntarily agreed to currently limit the total operating
expenses to 1.50% of average net assets. Absent this limitation, the
management fee, 12b-1 fee, other expenses and total operating expenses
would have been 1.00%, .25%, 1.38% and 2.63%, respectively, for the fiscal
year ended October 31, 1997.
(8) 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 1.90% for the fiscal year ended October 31, 1997.
(9) 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."
2
<PAGE>
FREMONT MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
The financial highlights of the Funds presented here and the pages following
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, 1997, is included in the Funds' Annual Report. Further
information about the Funds' performance is contained in the Annual Report,
which is included in the Funds' Statement of Additional Information and which
may be obtained without charge.
MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
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 .05 .05 .06 .03 .03
-------- -------- -------- -------- -------
Total investment operations .05 .05 .06 .03 .03
-------- -------- -------- -------- -------
LESS DISTRIBUTIONS
From net investment income (.05) (.05) (.06) (.03) (.03)
-------- -------- -------- -------- -------
Total distributions (.05) (.05) (.06) (.03) (.03)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
TOTAL RETURN(1) 5.39% 5.34% 5.84% 3.49% 2.66%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $433,152 $329,652 $299,312 $224,439 $24,207
Ratio of net expenses to average net assets(2) .30% .31% .30% .46% .67%
Ratio of gross expenses to average net assets(2) .45% .46% .45% .61% .82%
Ratio of net investment income to average net assets 5.26 5.22% 5.70% 4.02% 2.62%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
--------------------------------------- 11/18/88 TO
SELECTED PER SHARE DATA 1992 1991 1990 10/31/89
---- ---- ---- --------
<S> <C> <C> <C> <C>
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .04 .06 .08 .08
-------- -------- -------- --------
Total investment operations .04 .06 .08 .08
-------- -------- -------- --------
LESS DISTRIBUTIONS
From net investment income (.04) (.06) (.08) (.08)
-------- -------- -------- --------
Total distributions (.04) (.06) (.08) (.08)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
-------- -------- -------- --------
TOTAL RETURN(1) 3.73% 6.51% 7.99% 8.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $31,832 $33,814 $62,599 $56,477
Ratio of net expenses to average net assets(2) .70% .51% .60% .65%*
Ratio of gross expenses to average net assets(2) .85% .66% .69% .65%*
Ratio of net investment income to average net assets 3.70% 6.44% 7.66% 8.04%*
3
</TABLE>
For footnote references, see "Notes to Financial Highlights" on page 8.
<PAGE>
FREMONT MUTUAL FUNDS
BOND FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
----------------------------------------------------- 4/30/93 TO
SELECTED PER SHARE DATA 1997 1996 1995 1994 10/31/93
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 10.13 $ 9.29 $ 10.27 $ 10.04
------- -------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .67 .67 .65 .53 .27
Net realized and unrealized gain (loss) .25 .11 .83 (.98) .24
------- -------- ------- -------- --------
Total investment operations .92 .78 1.48 (.45) .51
------- -------- ------- -------- --------
LESS DISTRIBUTIONS
From net investment income (.66) (.7) (.64) (.53) (.27)
From net realized gains (.02) (.22) -- -- .01
------- -------- ------- -------- --------
Total distributions (.68) (.92) (.64) (.53) (.28%)
------- -------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.23 $ 9.99 $ 10.13 $ 9.29 $ 10.27
------- -------- ------- -------- --------
------- -------- ------- -------- --------
TOTAL RETURN(1) 9.54% 8.18% 16.49% (4.42%) 5.15%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $90,302 $70,577 $86,343 $64,244 $11,738
Ratio of net expenses to average net assets(2) .61% .68% .60% .66% .50%*
Ratio of gross expenses to average net assets(2) .76% .83% .75% 1.04% 1.23%*
Ratio of net investment income to average net
assets 6.40% 6.82% 6.69% 5.76% 5.35%*
Portfolio turnover rate 191% 154% 21% 205% 7%
</TABLE>
For footnote references, see "Notes to Financial Highlights" on page 8.
4
<PAGE>
FREMONT MUTUAL FUNDS
GLOBAL FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
--------------------------------------
SELECTED PER SHARE DATA 1997 1996 1995
FOR ONE SHARE OUTSTANDING DURING THE PERIOD ---- ---- ----
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.11 $14.24 $13.13
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .45 .39 .40
Net realized and unrealized gain (loss) 1.31 1.49 1.24
------ ------ ------
Total investment operations 1.76 1.88 1.64
------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.52) (.44) (.50)
From net realized gains (2.19) (.57) (.03)
Return of capital -- -- --
------ ------ ------
Total distributions (2.71) (1.01) (.53)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.16 $15.11 $14.24
------ ------ ------
------ ------ ------
TOTAL RETURN 13.01% 13.72% 12.78%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $665,747 $572,150 $482,355
Ratio of expenses to average net assets .85% .87% .88%
Ratio of net investment income to average net assets 2.66% 2.66% 2.98%
Portfolio turnover rate 48% 71% 83%
Average commission rate paid(3) $.0149 $.0238 --
</TABLE>
GLOBAL FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
--------------------------------------
SELECTED PER SHARE DATA 1994 1993 1992
FOR ONE SHARE OUTSTANDING DURING THE PERIOD ---- ---- ----
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.17 $11.52 $11.25
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .26 .32 .39
Net realized and unrealized gain (loss) (.03) 1.67 .40
------ ------ ------
Total investment operations .23 1.99 .79
------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.14) (.26) (.4)
From net realized gains (.13) (.08) (.11)
Return of capital -- -- (.01)
------ ------ ------
Total distributions (.27) (.34) (.52)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.13 $13.17 $11.52
------ ------ ------
------ ------ ------
TOTAL RETURN 1.74% 17.51% 7.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $453,623 $186,325 $101,839
Ratio of expenses to average net assets .95% .99% 1.09%
Ratio of net investment income to average net assets 2.47% 2.89% 3.41%
Portfolio turnover rate 52% 40% 50%
Average commission rate paid(3) -- -- --
</TABLE>
GLOBAL FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
----------------------- 11/10/93 TO
SELECTED PER SHARE DATA 1991 1990 10/31/93
FOR ONE SHARE OUTSTANDING DURING THE PERIOD ---- ---- --------
<S> <C> <C> <C>
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 net assets 4.34% 5.01% 5.30%*
Portfolio turnover rate 81% 36% 49%
Average commission rate paid(3) -- -- --
</TABLE>
For footnote references, see "Notes to Financial Highlights" on page 8.
5
<PAGE>
FREMONT MUTUAL FUNDS
GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
--------------------------------------
SELECTED PER SHARE DATA 1997 1996 1995
FOR ONE SHARE OUTSTANDING DURING THE PERIOD ---- ---- ----
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.02 $13.06 $10.46
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .20 .10 .13
Net realized and unrealized gain (loss) 3.43 2.65 2.74
------ ------ ------
Total investment operations 3.63 2.75 2.87
------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.22) (.08) (.17)
From net realized gains (3.47) (.71) (.10)
------ ------ ------
Total distributions (3.69) (.79) (.27)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.96 $15.02 $13.06
------ ------ ------
------ ------ ------
TOTAL RETURN 29.26% 22.06% 28.12%(1)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $147,641 $78,624 $59,632
Ratio of net expenses to average net assets(2) .85% .92% .97%
Ratio of gross expenses to average net assets(2) .85% .92% 1.01%
Ratio of net investment income to average net assets 1.44% .75% 1.02%
Portfolio turnover rate 48% 129% 108%
Average commission rate paid(3) $.0467 $.0429 --
</TABLE>
For footnote references, see Notes to Financial Highlights on page 8.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
----------------------- 5/14/92 TO
SELECTED PER SHARE DATA 1994 1993 10/31/92
FOR ONE SHARE OUTSTANDING DURING THE PERIOD ---- ---- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.25 $10.08 $9.92
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .21 .13 .02
Net realized and unrealized gain (loss) (.02) 1.16 .18
------ ------ ------
Total investment operations .19 1.29 .20
------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.18) (.12) (.04)
From net realized gains (.80) -- --
------ ------ ------
Total distributions (.98) (.12) (.04)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.46 $11.25 $10.08
------ ------ ------
------ ------ ------
TOTAL RETURN 1.72%(1) 12.80%(1) 2.00%(1)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $27,244 $42,306 $32,388
Ratio of net expenses to average net assets(2) .94% .87% .94%*
Ratio of gross expenses to average net assets(2) 1.08% 1.02% 1.18%*
Ratio of net investment income to average net assets 1.31% 1.19% 1.08%*
Portfolio turnover rate 55% 44% 11%
Average commission rate paid(3) -- -- --
</TABLE>
For footnote references, see Notes to Financial Highlights on page 8.
6
<PAGE>
FREMONT MUTUAL FUNDS
U.S. SMALL CAP FUND
<TABLE>
<CAPTION>
PERIOD FROM
9/24/97 TO
10/31/97
--------
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .02
Net realized and unrealized loss (.42)
------
Total investment operations (.40)
------
LESS DISTRIBUTIONS
From net investment income (.02)
From net realized gains (.01)
------
Total distributions (.03)
------
NET ASSET VALUE, END OF PERIOD $9.57
------
------
TOTAL RETURN(1) (4.06%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $5,350
Ratio of net expenses to average net assets(2) 1.50%*
Ratio of gross expenses to average net assets(2) 3.32%*
Ratio of net investment income to average net assets 1.81%*
Portfolio turnover rate 8%
Average commission rate paid $.0543
</TABLE>
For footnote references, see "Notes to Financial Highlights" on page 8.
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
YEAR PERIOD FROM
ENDED 6/24/96 TO
10/31/97 10/31/96
-------- --------
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.62 $10.00
------ ------
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .17 .10
Net realized and unrealized gain (loss) 1.03 (.41)
------ ------
Total investment operations 1.20 (.31)
------ ------
LESS DISTRIBUTIONS
From net investment income (.06) (.07)
From net realized gains (1.18) --
------ ------
Total distributions (1.24) (.07)
------ ------
NET ASSET VALUE, END OF PERIOD $9.58 $9.62
------ ------
------ ------
TOTAL RETURN(1) 12.55% (3.12%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $12,175 $3,772
Ratio of net expenses to average net assets(2) .26% --
Ratio of gross expenses to average net assets(2) 2.63% 4.95%*
Ratio of net investment income to average net assets 2.04% 3.32%*
Portfolio turnover rate 208% 7%
Average commission rate paid $.0038 $.0063
</TABLE>
For footnote references, see "Notes to Financial Highlights" on page 8.
7
<PAGE>
FREMONT MUTUAL FUNDS
U.S. MICRO-CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
-------------------------------------- 6/30/94 TO
SELECTED PER SHARE DATA 1997 1996 1995 10/31/94
FOR ONE SHARE OUTSTANDING DURING THE PERIOD ---- ---- ---- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.63 $14.34 $10.34 $10.00
------ ------ ------ ------
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.10) (.04) (.05) .02
Net realized and unrealized gain 5.60 5.83 4.05 .34
------ ------ ------ ------
Total investment operations 5.50 5.79 4.00 .36
------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income -- -- -- (.02)
From net realized gains (2.44) (.50) -- --
------ ------ ------ ------
Total distributions (2.44) (.50) -- (.02)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $22.69 $19.63 $14.34 $10.34
------ ------ ------ ------
------ ------ ------ ------
TOTAL RETURN 28.80%(1) 41.46%(1) 38.68%(1) 3.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $171,507 $102,481 $7,792 $2,052
Ratio of net expenses to average net assets(2) 1.88% 1.96% 2.04% 2.50%*
Ratio of gross expenses to average net assets(2) 1.90% 2.22% 2.50% 2.50%*
Ratio of net investment income (loss) to average net assets (.67%) (.51%) (.67%) .68%*
Portfolio turnover rate 125% 81% 144% 44%
Average commission rate paid(3) $.0505 $.0541 -- --
</TABLE>
For footnote references, see "Notes to Financial Highlights" on page 8.
NOTES TO FINANCIAL HIGHLIGHTS
The following notes are being used as reference items in the Financial
Highlights of the Funds presented on pages 3 through 8.
(1) Total returns would have been lower had the Advisor not waived and/or
reimbursed expenses.
(2) For the most recent period ended 10/31/97, the Advisor has voluntarily
waived and/or reimbursed some of its fees for the following Funds: Money
Markets Fund, Bond Fund, U.S. Small Cap Fund, Emerging Markets Fund and the
U.S. Micro-Cap Fund. Except for the U.S. Small Cap Fund, all fees waived
in the past will not be recouped in the future. The waivers are voluntary
and may be changed in the future.
Ratios of expenses have been disclosed both before and after the impact of
these various waivers and/or reimbursements under each Fund's Financial
Highlights table.
For the Money Market Fund, the Advisor is voluntarily waiving the
administrative fee in its entirety.
For the Bond Fund, the Advisor is voluntarily waiving the administrative
fee in its entirety.
For the U.S. Small Cap Fund, the Advisor is voluntarily limiting the Fund's
total operating expenses to 1.50% of average 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. Because
of these substantial contingencies, the potential reimbursements will be
accounted for as contingent liabilities that are not recordable on the
balance sheet of the Fund until payment is probable.
For the Emerging Markets Fund, the Advisor voluntarily waived advisory,
12b-1 and administrative fees and reimbursed all other operating expenses
from June 24, 1996 to September 18, 1997, after which the Advisor limited
the total operating expenses to 1.50% of average net assets.
For the U.S. Micro-Cap Fund, the Advisor is voluntarily limiting the
advisory fee to a reduced rate of no greater than 1.98% of average net
assets.
(3) Disclosure not required for years prior to 1996.
(*) Annualized
8
<PAGE>
FREMONT MUTUAL FUNDS
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 nine
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.
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.
Investment Company Administration Corporation (the "Sub-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 required for
compliance by the Fund with applicable laws and regulations. Certain
officers of the Investment Company may be provided by the Sub-Administrator.
For additional information, 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. Currently, the Advisor is waiving the
entire administrative fee with respect to the Fund. See "Other Expenses of
the Funds" below.
- - Norman Gee is the Senior Portfolio Manager for the Money Market Fund, Vice
President of the Advisor and a member of the Advisor's Fixed Income
Committee. Norman has 19 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 currently waiving .10% out of the .15%
administrative fee with respect to the Fund. See "Other Expenses of the Funds"
below.
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 $115 billion of
assets under management. The controlling partner of PIMCO is PIMCO Advisors
Holdings L.P. PIMCO is one of seven investment management subsidiaries of
PIMCO Advisors Holding L.P. The ownership of PIMCO Advisors Holdings L.P. is
represented by the following, approximate positions; 30% Pacific Life, 30%
management, 40% public. 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 27 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 con-
9
<PAGE>
FREMONT MUTUAL FUNDS
nection with its portfolio management activities. As compensation for its
services, the Advisor (not the Bond 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.
REAL ESTATE SECURITIES FUND
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." See "Other Expenses of the Funds" below.
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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR
PERIOD ENDED DECEMBER 31, 1997
1 YEAR INCEPTION-TO-DATE(1)
------ --------------------
<S> <C> <C>
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%
</TABLE>
(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.
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
10
<PAGE>
FREMONT MUTUAL FUNDS
Advisor an administrative fee of .15% per annum of average net assets. See
"Other Expenses of the Funds" below.
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. Based on the Advisor's evaluation, an
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, Albert W. Kirschbaum, Peter
F. Landini, and David L. Redo.
- - Robert J. Haddick, CFA, is Vice President of the Advisor and a member of
its Investment and U.S. 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.
- - Albert W. Kirschbaum is Senior Vice President and Director of Fremont
Investment Advisors. He is Chairman of the Advisor's Fixed Income
Committee and is also a member of the Fremont Investment Committee. Al
received an undergraduate degree from Washington University and has done
course work at Princeton and Wharton.
- - Peter F. Landini is Executive Vice President, Chief Operating Officer, 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 U.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 $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 U.S. Equity Committee 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. Kosecoff
and Peter F. Landini. Ken, John and Pete have managed the Fund since January
1995, November 1996, and since inception, respectively.
- - W. Kent Copa, CFA, is Vice President of the Advisor and a member of its
U.S. Equity Committee. Ken earned his B.A. and M.B.A. from Brigham Young
University.
- - John B. Kosecoff is Vice President of the Advisor and a member of its U.S.
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 from December 1993 to December 1996, as a hedge fund analyst and
portfolio manager at Omega Advisors from November 1992 to November 1993.
For a biography on Peter F. Landini, chairman of the Advisor's U.S. Equity
Committee, please refer to the Global Fund section.
SELECT FUND
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 in "Plan of
Distribution." See "Other Expenses of the Funds" below.
The Advisor anticipates waiving fees and reimbursing the Fund for other
operating expenses in order to limit total operating expenses to 1.40% 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.
The portfolio managers for the Fund, since inception, are John B. Kosecoff,
Debra L. McNeill and Peter F. Landini.
- - Debra F. McNeill received her B.S. from the University of California at
Berkeley. She was previously employed as a portfolio manager with C.M.
Bidwell & Associates from July 1990 to January 1996, and as a quantitative
analyst with RCM Capital Management from November 1986 to July 1990.
For a biography on John B. Kosecoff, please refer to the Growth Fund section.
11
<PAGE>
FREMONT MUTUAL FUNDS
For a biography on Peter F. Landini, please refer to the Global Fund section.
U.S. SMALL CAP FUND
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. The Advisory Agreement also provides that the Fund
will pay to the Advisor an administrative fee of .15% per annum of average net
assets. In addition to the fees described above, the Fund pays its own operating
expenses including shareholder servicing fees to third party servicing agents.
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.
Kern Capital Management LLC, ("KCM"), 114 West 47th Street, Suite 1926, New
York, New York 10036, serves as Sub-Advisor for the Fund pursuant to a Portfolio
Management Agreement. The controlling economic and voting members of the
Sub-Advisor are Robert E. Kern, and the Advisor; consequently, the Advisor is an
affiliate of the Sub-Advisor. The portfolio management team for the Fund is
headed by portfolio manager David G. Kern. The senior investment managers are
Robert E. Kern Jr., Judy R. Finger and David G. Kern.
- - David Kern, Managing Member and Executive Vice President of KCM, was Vice
President of the Advisor from May 1997 until September 1997. From January
1995 until April 1997 he was employed as portfolio manager, and from
February 1997 until April 1997, was also employed as Vice President of
Founders Assets Management, Inc., a registered investment advisor located
in Denver, Colorado. David also served as Vice President and Assistant
Portfolio Manager for the Delaware Management Company of Philadelphia,
Pennsylvania from February 1990 until December 1994.
- - Bob Kern, Managing Member, President and Chief Executive Officer of KCM,
has over 30 years of investment management experience and was a Senior Vice
President of the Advisor from April 1997 to August 1997. He also was
employed by Morgan Grenfell Assets Management, Inc. from 1986 through April
1997, where he headed Morgan Grenfell's Smaller Capitalization Equities
Team.
- - Judy Finger, Member and Senior Vice President of KCM, was employed from
June 1995 to August 1997 as Vice President and Assistant Portfolio Manager
for the Delaware Management Company of Philadelphia, Pennsylvania, and from
June 1992 to June 1995 as a Senior Analyst at Fred Alger Management located
in New York.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the U.S. Small-Cap Fund), the Advisor and KCM provides
that KCM will manage the investment and reinvestment of the assets of the Fund
and continually review, supervise, and administer the Fund's investments. KCM
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 KCM a fee equal to .65% per annum of the Fund's assets
managed by KCM. KCM has agreed to waive its fee until January 1, 1999, or until
the Fund reaches $25 million in assets, whichever occurs first. The Portfolio
Management Agreement with KCM 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 KCM.
The Advisor will provide direct portfolio management services to the extent that
the Sub-Advisor does not provide these services.
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 currently capping fees at
1.50%. See "Other Expenses of the Fund" below.
Nicholas-Applegate Capital Management (Hong Kong) LLC ("Nicholas-Applegate HK"),
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. Nicholas-Applegate HK is a limited liability company which is an
affiliate of Nicholas-Applegate Capital Management, a California limited
partnership. Its managing member is Nicholas-Applegate Capital Management
Holdings, L.P., a California limited partnership, the general partner of which
is Nicholas-Applegate Capital Management Holdings, Inc., a California
corporation owned by Arthur E. Nicholas. The Nicholas-Applegate group of
companies currently manages approximately $30 billion of discretionary assets
for numerous types of clients, including employee benefit plans of corporations,
public retirement systems and unions, university endowments, foundations, and
other institutional investors and individuals.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Emerging Markets Fund), the Advisor and
Nicholas-Applegate HK provides that Nicholas-Applegate HK will manage the
investment and reinvestment of the assets of the Fund and continually review,
supervise and administer the Fund's investments. Nicholas-Applegate HK 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 Nicholas-Applegate HK a fee equal to .50% per annum of the Fund's
average daily net assets. The Portfolio Management Agreement with
Nicholas-Applegate HK
12
<PAGE>
FREMONT MUTUAL FUNDS
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 Nicholas-Applegate HK.
U.S. MICRO-CAP FUND
Under the terms of the Advisory Agreement, the U.S. Micro-Cap Fund pays the
Advisor a fee, computed daily and paid monthly, of 2.50% per annum of the Fund's
average net assets with respect to the first $30 million, 2.00% with respect to
the next $70 million of such assets, and 1.50% of such assets in excess of $100
million. Under this agreement, the Advisor has agreed to bear all of the Fund's
expenses, except extraordinary expenses (as designated by a majority of the
Investment Company's disinterested directors) and interest, brokerage
commissions and other transaction charges relating to the investing activities
of the Fund.
Kern Capital Management LLC, ("KCM"), 114 West 47th Street, Suite 1926, New
York, New York 10036, serves as Sub-Advisor for the Fund pursuant to a Portfolio
Management Agreement. The controlling economic and voting members of the
Sub-Advisor are Robert E. Kern, and the Advisor; consequently, the Advisor is an
affiliate of the Sub-Advisor. The portfolio management team for the Fund is
headed by portfolio manager Robert E. Kern. The senior investment managers are
Robert E. Kern, Judy R. Finger and David G. Kern. For a biography on Bob Kern,
David Kern and Judy R. Finger, please refer to the U.S. Small Cap Fund section.
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the U.S. Micro-Cap Fund), the Advisor and KCM provides
that KCM will manage the investment and reinvestment of the assets of the Fund
and continually review, supervise, and administer the Fund's investments. KCM
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 KCM 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 KCM 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 KCM. For
further information, see "Other Expenses of the Funds" below.
OTHER EXPENSES OF THE FUNDS. In addition to the fees described above, the Money
Market Fund, the Bond Fund, the Real Estate Securities Fund, the Global Fund,
the Growth Fund, the Select Fund, the U.S. Small Cap Fund and the Emerging
Markets Fund each pay their 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;
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 or its affiliates; printing and mailing prospectuses,
statements of additional information and reports 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.
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 shares a short period of time after the purchase.
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. There is no assurance that any Fund will achieve its
investment objective.
MONEY MARKET FUND
The investment objective of the Money Market Fund is to seek 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 to do so, the Fund may in the future enter into reverse
repurchase agreements.
The Fund seeks to maintain a constant net asset value of $1.00 per share by
valuing its securities using the amortized cost method. To do so, it must
invest only in readily marketable short-term securities with remaining
maturities of not more than 397 days (as allowed by regulations under the 1940
Act) which are of high quality and present minimal credit risks as determined by
the Advisor, under the direction of the Board of Directors. The portfolio must
have a dollar-weighted average maturity of not more than 90 days. At least 25%
of the Fund's assets will have a maturity of 90 days or less. All portfolio
securities will be denominated in U.S. dollars.
At the time of purchase, short-term securities must be considered "First Tier"
quality: rated in the top rating category by at least two
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<PAGE>
FREMONT MUTUAL FUNDS
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 five NRSROs: Standard
& Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
Fitch, Duff & Phelps Credit Rating Co. ("D&P"), IBCA, Inc. ("IBCA"), and Thomson
Bankwatch, Inc. ("TBW"). Generally, high quality short-term securities must be
issued by an entity with an outstanding debt issue rated single "A" or better by
an NRSRO, or if unrated, by an entity of comparable quality as determined
specifically by the Advisor, under the direction of the Board of Directors.
Obligations of foreign banks, foreign corporations and foreign branches of
domestic banks must be payable in U.S. dollars. See Appendix A of the Statement
of Additional Information for a description of rating categories.
The Fund may invest no more than 5% of its total assets in the securities of any
one issuer, other than U.S. Government securities, except in times of unexpected
shareholder redemptions or purchases. In such circumstances, the Fund may
invest temporarily in the securities of any one issuer in excess of 5% (but not
more than 25%) of the Fund's total assets for up to three business days after
the purchase to allow the Fund to manage its portfolio liquidity. the Fund will
not invest more than 10% of its assets in time deposits with a maturity of
greater than seven days. The Fund may make loans of its portfolio securities
and enter into repurchase agreements as described in the Statement of Additional
Information, except that such repurchase agreements with a maturity of greater
than seven days and other securities and assets that are not readily marketable
shall not exceed 10% of the value of the Fund's net assets. For a description
of these investments, see "General Investment Policies."
BOND FUND
The investment objective of the Bond Fund is to seek to provide 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 typically vary from five to 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.
Generally, when interest rates decline, the value of a portfolio invested at
higher yields can be expected to rise. Conversely, when interest rates rise,
the value of a portfolio invested at lower yields can be expected to decline.
See "Corporate Debt Securities" below for more information on quality ratings
and risks involved with lower rated securities.
The Fund may invest directly in foreign currency-denominated debt securities
which meet the credit quality guidelines set forth for U.S. holdings. Under
normal market conditions, at least 60% of the Fund's total assets will be
invested in securities of U.S. issuers and at least 80% of the Fund's total
assets, adjusted to reflect the Fund's net exposure after giving effect to
currency transactions and positions, will be denominated in U.S. dollars. The
Fund may not invest more than 25% of its total assets in the securities of
issuers domiciled in a single country other than the United States.
In selecting securities and currencies for the Fund's portfolio, the Sub-Advisor
utilizes economic forecasting, interest rate expectations, credit and call risk
analysis and other security and currency selection techniques. The proportion
of the Fund's assets invested in securities with particular characteristics
(such as maturity, type, and coupon rate) may vary based on the Sub-Advisor's
outlook for the economy, the financial markets, and other factors. The Fund's
investments will be concentrated in certain 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. These techniques may be used both to hedge the foreign currency and
interest rate risks associated with the Fund's portfolio securities, and, in the
case of certain techniques, to seek to increase the total return of the Fund.
Such active management techniques include foreign currencies, options on
securities, futures contracts, options on futures contracts and currency, and
swap agreements. See "General Investment Policies" and the Statement of
Additional Information for further information regarding these securities and
other instruments. When the Sub-Advisor deems it advisable because of unusual
economic or market conditions, the Fund may invest all or a portion of its
assets in cash or cash equivalents, such as obligations of banks, commercial
paper and short-term obligations of U.S. or foreign issuers.
In addition, the Fund may purchase securities on a when-issued or forward
commitment basis, engage in portfolio securities lending, 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
14
<PAGE>
FREMONT MUTUAL FUNDS
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 stocks 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 50% 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
generally 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.
REAL ESTATE SECURITIES FUND
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 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
15
<PAGE>
FREMONT MUTUAL FUNDS
estate mortgages, derive their income primarily from interest payments. Hybrid
REITs combine the characteristics of both 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, increases 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 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.
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 that the Advisor believes have 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 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 differ-
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<PAGE>
FREMONT MUTUAL FUNDS
ent 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 Advisor's outlook for the
currencies being considered. 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
that the Advisor believes are 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 Advisor's 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 Advisor's
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 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.
17
<PAGE>
FREMONT MUTUAL FUNDS
OTHER CONSIDERATIONS WITH RESPECT TO THE FUND. The Advisor will allocate
investments among securities of particular issuers on the basis of its views as
to the best values then currently available in the marketplace. Such values of
the fixed income portion of the Fund's portfolio are a function of yield,
maturity, issue classification and quality characteristics, coupled with
expectations regarding the economy, movements in the general level and term of
interest rates, currency values, political developments, and variations of the
supply of funds available for investment. Under normal economic and market
conditions, the fixed-income portion of the Fund's portfolio will be invested
primarily in debt instruments with short to intermediate maturities (1 to 10
years to maturity). However, there are no restrictions on the maturity
composition of the Fund's portfolio. If market interest rates decline,
fixed-income securities generally appreciate in value. If the currency in which
a security is denominated appreciates against the U.S. dollar, the dollar value
of the security will increase. Conversely, a rise in interest rates or a
decline in the exchange rate of the currency would adversely affect the value of
the security expressed in dollars. In seeking to achieve the Fund's objective
of total return, the Advisor may increase the average maturity of the fixed
income portion of the Fund's portfolio in times of declining interest rates and
decrease such average maturity in times of rising interest rates. The Advisor
generally evaluates currencies on the basis of fundamental economic criteria
(e.g., relative inflation and interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies), as well as
technical and political data.
In seeking current income or to reduce principal volatility, the Fund may also
(1) enter into futures contracts, including contracts for the future delivery of
debt securities of the types described above, stock index futures contracts with
respect to the S&P 500 Index or other similar broad-based stock market indices
and commodities futures, the initial margins of which are limited to 5% of the
Fund's assets; and (2) purchase put and call options on portfolio securities,
indexes, commodities or futures contracts, the premiums of which are limited to
5% of the Fund's assets.
Further information concerning options and futures and their associated risks is
contained in "General Investment Policies--Options and Futures Contracts" and in
the Statement of Additional Information.
The Fund may enter into forward currency contracts and currency futures
contracts, and may purchase put and call options on currencies. See "General
Investment Policies--Forward Currency, Futures and Options Transactions." The
Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Advisor to be fully exchangeable into U.S. dollars without legal
restriction. The Fund may purchase securities that are issued by the government
or a corporation or financial institution of one nation but denominated in the
currency of another country.
A portion of the Fund's assets may be invested in mortgage-related and other
asset-backed securities. See "General Investment Policies" for a discussion of
these securities.
The Fund may invest in convertible debentures (convertible to equity securities)
and preferred stocks (which may or may not have a dividend yield) using the same
quality and rating criteria noted above.
GROWTH FUND
The investment objective of the Growth Fund is to seek to provide growth of
capital over the long term. Although not an objective of the Fund, the Fund may
also provide income. 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 that the Advisor believes
will eventually become well-recognized as well as in the equity securities of
larger companies which the Advisor believes 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 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 ADRs and EDRs
representing shares of foreign compa-
18
<PAGE>
FREMONT MUTUAL FUNDS
nies. 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.
SELECT FUND
The Fund seeks to achieve long-term capital appreciation by investing primarily
in equity securities of established medium-capitalization U.S.-based companies.
Under normal market conditions, the Fund expects to hold not more than 30 common
stocks representing at least 80% of its total assets.
While limiting the number of securities in the portfolio, the Fund will not
purchase a security if, as a result, more than 15% of the assets of the Fund
would be invested in the voting securities of a single issuer. Additionally,
the Fund may not invest more than 25% of its total assets in any one industry
and, although the Fund will normally invest in common stocks of U.S. companies,
up to 10% of the Fund's assets, at the time of purchase, may be invested in
securities of companies domiciled outside the United States. The Fund may also
invest in stock index futures contracts, options on index futures and options on
portfolio securities and stock indices.
The Advisor defines medium market capitalization companies as those companies
whose market capitalization falls within the capitalization range of the Russell
MidCap Index. This index measures the performance of the 800 smallest
securities in the Russell 1000 Index. The Russell 1000 Index is composed of the
1000 largest U.S. securities as determined by total market capitalization. As
of October 31, 1997, 94% of the companies in the Russell MidCap Index had market
capitalizations of between $1 billion and $9 billion. These companies represent
approximately 35% of the capitalization of the total market.
Investing in medium capitalization stocks may involve greater risk than
investing in large capitalization stocks, because among other things, they can
be subject to more abrupt or erratic price movements. Current income, which may
be characteristic of large stocks, will be considered only as part of total
return and will not be emphasized.
Medium capitalization companies tend to involve less risk than stocks of small
capitalization companies. Smaller companies, which often have limited product
lines, markets, and/or financial resources and may be dependent on one-person
management, may have limited marketability and may be subject to more abrupt or
erratic market movements than securities of medium and large cap companies or
the market averages in general. Conversely, medium capitalization companies may
have less rapid growth potential than smaller companies and may be able to react
less quickly to changes in the market place.
The Fund, while focusing on securities of mid-cap companies, may also purchase
securities of companies with higher or lower capitalizations. Stock selection
is based, first, on "bottom up" fundamental research that focuses on what the
Advisor believes are superior business growth prospects and, secondly, on
statistical valuation which, at the time of purchase, is measurably below the
historic relative worth of such securities.
The Fund may invest in several types of equity securities, including common and
preferred stocks, convertible securities and warrants. Although equity
securities have a history of long-term growth in value, their prices fluctuate
based on, among other things, changes in a company's financial condition and on
overall
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FREMONT MUTUAL FUNDS
market and economic conditions.
Over the long term, owning equity interests in well-run, quality businesses
should ease the effect of market volatility in the Fund. The Advisor expects
that through the exercise of disciplined valuation, the Fund's portfolio
typically should encompass less market risk than other medium capitalization
growth funds as measured by the Fund's price-to-normal-earnings,
price-to-book-value, and enterprise-value-to-internal-cash-flow ratios.
The Advisor believes 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.
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 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 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
believes 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.
U.S. SMALL CAP FUND
The Fund seeks to achieve long-term capital appreciation by investing primarily
in a diversified portfolio of common stocks. Under normal market conditions, at
least 65% of the total assets of the Fund will be invested in common stocks of
small, rapidly growing U.S. companies. Typically, these companies are not listed
on a national securities exchange but trade on the over-the-counter (OTC)
market. Although the Fund will normally invest in common stocks of U.S.
companies, up to 25% of the Fund's total assets, at the time of purchase, may be
invested in securities of 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 Advisor generally selects the Fund's portfolio securities among small-cap
companies, which the Fund defines as companies whose individual market
capitalizations would place them in the smallest 20% 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 $1.8 billion or
less. Many small-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 small-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 small-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, an investment in the
Fund may involve considerably more risk than an investment in an investment
company that invests in the more liquid equity securities of companies traded on
the New York or American Stock Exchanges.
The Advisor believes 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.
The Fund generally selects its portfolio securities among small-cap companies
which are, the Advisor believes, still in the developing stages of their life
cycles and may be able to achieve rapid growth in both sales and earnings.
Capable management and fertile operating areas are two of the most important
characteristics of such companies. In addition, the Advisor believes these
companies should employ sound financial and accounting policies; demonstrate
effective research and successful product development and marketing; provide
efficient service; and possess pricing flexibility. The Advisor will seek to
avoid investing in companies where oper-
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FREMONT MUTUAL FUNDS
ating results may be adversely affected by excessive competition, severe
governmental regulation, or unsatisfactory productivity. The investable universe
provides what the Advisor believes is a broad range of stock selection
opportunities.
Although the Fund invests primarily in common stocks, 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 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
believes 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. 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.
EMERGING MARKETS FUND
The Fund is a non-diversified mutual fund which seeks to provide 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 typically 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 ADRs and 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 international 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 typically 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 certain
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 and market
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
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FREMONT MUTUAL FUNDS
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. Terms on which the Fund may be permitted to participate may be less
advantageous than those afforded local investors. There can be no assurance
that governments in Emerging Markets will continue to sell companies currently
owned or controlled by them or that privatization programs will be successful.
Because the Fund is non-diversified, it may invest a larger percentage of its
assets in individual issuers than a diversified fund. In this regard, the Fund
is not subject to the general limitation that it not invest more than 5% of its
total assets in the securities of any one issuer. To the extent the Fund makes
investments in excess of 5% of its assets in a particular issuer, its exposure
to credit and market risks associated with that issuer is increased.
The Fund may invest in debt securities of both governmental and corporate
issuers in Emerging Markets which are rated 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, among
other things, changes in interest rates. Typically, 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.
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 typically 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 ADRs and 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 $870 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 $400 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.
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FREMONT MUTUAL FUNDS
Thus, an investment in the Fund may involve considerably more risk than an
investment in 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 may 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, among other things,
the likelihood of 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 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 typically 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.
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, if applicable). 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 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
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FREMONT MUTUAL FUNDS
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 typically 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, as noted above, are not
backed by the full faith and credit of the U.S. Government. As is the case with
GNMA securities, 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 also invest 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 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
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FREMONT MUTUAL FUNDS
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, if
applicable)may, consistent with a Fund's investment objective, policies and
quality-of-investment 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, if applicable), will
monitor 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 such investment 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 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 (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 reduced levels
of income and lack of access to income during this period; and (3) expenses of
enforcing the Fund's rights.
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FREMONT MUTUAL FUNDS
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 each 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 Funds 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. Each Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in an
amount not exceeding 33 1/3% of its net assets. The borrower must maintain with
the Funds' custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. 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, 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. 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 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, 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 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
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FREMONT MUTUAL FUNDS
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 when
an 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 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 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
seeking 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
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FREMONT MUTUAL FUNDS
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 purchases a cap and sells a
floor 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, among other
things, fluctuations in currency exchange rates, which are affected by
international balances of payments and other economic and financial conditions;
government intervention; and speculation. 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. Certain foreign 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, 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 and market conditions in the countries with which they trade.
The value of a Fund's portfolio securities computed in U.S. dollars will vary
with increases and decreases in the exchange rate between the currencies in
which the Fund has invested and the U.S. dollar. A decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of a Fund's holdings of securities denominated in such currency
and, therefore, will cause an overall decline in the Fund's net asset value and
net investment income and capital gains, if any, to be distributed in U.S.
dollars to shareholders by the Fund.
The rate of exchange between the U.S. dollar and other currencies is influenced
by many factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the price of oil, the pace of activity in the industrial countries,
including the United States, and other economic and financial conditions
affecting the world economy.
The Funds will not invest in a foreign currency or in securities denominated in
a foreign currency if such currency is not at the time of investment considered
by the Advisor (or Sub-Advisor, if applicable), to be fully exchangeable into
U.S. dollars without legal
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FREMONT MUTUAL FUNDS
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 may 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.) 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, among other things, fluctuations in
currency exchange rates, which are affected by international balances of
payments and other economic and financial conditions; government intervention;
and speculation. 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.
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. 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, however, 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 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 seeks to maintain a stable net asset value of $1.00 per share.
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, including 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.
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FREMONT MUTUAL FUNDS
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 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, 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 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 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. The Funds may
also be mentioned in newspapers, magazines, or other media from time to time.
Additional performance information regarding the Funds will be included in the
Funds' annual report, which will be mailed to shareholders without charge upon
request.
HOW TO INVEST
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 net asset value 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). Retirement plans are subject to a $1,000 minimum initial
investment. The minimum initial investment is waived for accounts opened with
the Automatic Investment Plan and may be waived in other instances at the sole
discretion of the Advisor. (See "Automatic Investment Plan.")
Each subsequent investment in the Funds must be $100 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). 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 Fremont Mutual Funds. Third party checks, credit
cards, and cash will not be accepted. All investment checks are subject to a
10-day holding period.
The Real Estate Securities Fund will be closed to new shareholders whenever the
Fund's market capitalization exceeds 3/10 of 1% of the market capitalization,
recalculated quarterly, of the REITs which comprise the "ALL REITs Index" as
published by the National Association of Real Estate Investment Trusts
("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 received 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 or other selling charge 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 for such activities.
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FREMONT MUTUAL FUNDS
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 placed the order 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.
First Fund Distributors, Inc., 4455 E. Camelback Road, Suite 261E, Phoenix,
Arizona 85018, is the principal underwriter for the Funds.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
STATEMENTS AND REPORTS
When a shareholder makes an initial investment in the Funds, a shareholder
account is opened in accordance with registration instructions. Each time there
is a transaction, such as an additional investment, a dividend or other
distribution, or a redemption, the shareholder will receive from the Transfer
Agent a confirmation statement showing the current transaction in the account
and the transaction date. Shareholders of the Money Market Fund and the Bond
Fund will receive monthly statements. Shareholders of the other Funds will
receive statements as of the end of 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.
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 that are
offered for sale in your state of residence at the time of 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 and, at the discretion of the Board of Directors, 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 Funds. 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 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 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 $100
minimum for subsequent investments. If the purchase date 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
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FREMONT MUTUAL FUNDS
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 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 $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 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, Fund shares will be
redeemed at the price determined as of the close of trading on the New York
Stock Exchange on the next business day.
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 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 of the New York
Stock Exchanged (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 Investment Company, or the Transfer Agent, or
both, will employ reasonable procedures to determine that telephone instructions
are genuine. If the Investment Company and/or the Transfer Agent do not employ
such procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of the transactions, and/or tape recording telephone
instructions.
CHECK REDEMPTION PRIVILEGE (MONEY MARKET FUND AND BOND FUND ONLY)
The 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 State
Street Bank and Trust Company, Kansas City, Missouri (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. 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
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FREMONT MUTUAL FUNDS
be modified or terminated by the Investment Company or the Transfer Agent upon
three days' notice to shareholders.
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. Systematic 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 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 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 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 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 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 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
The Advisor is transfer agent to the Funds and 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 Funds 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
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FREMONT MUTUAL FUNDS
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 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 on or about December 15. The
Fund will also distribute short-term capital gains, if any, in October.
Each of the Growth Fund, the Select Fund, the U.S. Small Cap Fund, the Emerging
Markets Fund and the U.S. Micro-Cap Fund intends to distribute substantially all
of its net investment income once each year in October. The Real Estate
Securities Fund intends to distribute all of its net investment income in
October and December or January.
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 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. 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 distributions in additional
shares; or
- - to receive all distributions of income dividends and capital gains in cash.
- - 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 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. 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.
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
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FREMONT MUTUAL FUNDS
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.
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 may elect to
"pass through" to its shareholders the amount of foreign taxes paid. If this
election is made, the 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.
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 a 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, 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.
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
(REAL ESTATE SECURITIES FUND, SELECT FUND, U.S. SMALL CAP FUND AND EMERGING
MARKETS FUND ONLY) Pursuant to Rule 12b-1 under the 1940 Act, the Real Estate
Securities Fund, Select Fund, U.S. Small Cap Fund and the Emerging Markets Fund
have adopted a plan of distribution (the "Plan") under which the Funds 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 Funds 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 Funds; 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
Funds in accordance with its terms, the 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
Each Fund's net asset value per share is computed by dividing the value of the
securities held by the Fund, plus any cash or other assets (including interest
accrued and dividends declared but not yet received) minus all liabilities
(including accrued expenses), by the total number of shares outstanding at such
time. There is no sales charge in connection with purchases or redemptions of
Fund shares.
Each Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open (excluding banking
holidays, in the case of the Money Market Fund). 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
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FREMONT MUTUAL FUNDS
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
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 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.
AMORTIZED COST METHOD OF VALUATION--MONEY MARKET FUND ONLY
The Money Market Fund seeks 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.
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
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FREMONT MUTUAL FUNDS
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.
37
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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
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 SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER IN SUCH JURISDICTION.
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<PAGE>
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 - 888-502-3253
3000 POST OAK BLVD., SUITE 100, HOUSTON, TX 77056 - 800-735-2705
9801 WASHINGTONIAN BLVD., SUITE 105, GAITHERSBURG, MD 20878 - 888-373-6684
Distributed by First Fund Distributors, Inc., San Francisco, CA 94105
Copyright 1998 Fremont Mutual Funds, Inc. All rights reserved.
P013-9803
