FREMONT MUTUAL FUNDS INC, 485BPOS, 1998-03-02

FREMONT MUTUAL FUNDS INC
485BPOS, 1998-03-02

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File Nos. 33-23453
811-5632

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X/

Post-Effective Amendment No. 31

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X/

Amendment No. 34

FREMONT MUTUAL FUNDS, INC.
(Exact Name of Registration as Specified in Charter)

333 Market Street, Suite 2600
SAN FRANCISCO, CALIFORNIA 94105
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code:

(415) 284-8733

Tina Thomas, Secretary
Fremont Mutual Funds, Inc.
333 Market Street, Suite 2600
SAN FRANCISCO, CALIFORNIA 94105
(Name and Address of Agent for Service)

copy to:
Julie Allecta
Paul, Hastings, Janofsky & Walker, LLP
345 California Street, 29th floor
SAN FRANCISCO, CA 94104-2635

It is proposed that this filing will become effective (check
appropriate box)

/ / immediately upon filing pursuant to paragraph (b)
/X/ on March 2, 1998 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on _________ pursuant to paragraph (a) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(ii)
<PAGE>
FREMONT MUTUAL FUNDS, INC.

CROSS-REFERENCE SHEET
Between Items Enumerated in Form N-1A and this Registration Statement

References to items numbered 1 - 23 are for the Fremont Mutual Funds, Inc.

Item No. of
PART A OF FORM N-1A CAPTIONS IN PROSPECTUS

1. Cover Page Cover Page

2. Synopsis Summary of Fees and Expenses;
Investment Results

3. Financial Highlights Financial Highlights

4. General Description of The Advisor and the Fund;
Registrant Investment Objective,
Policies, and Risk
Considerations; General
Investment Policies

5. Management of the Fund The Advisor and the Fund;
Execution of Portfolio
Transactions; General
Information

6. Capital Stock and Other Shareholder Account Services
Securities and Privileges; Dividends,
Distributions, and Federal
Income Taxation; General
Information

7. Purchase of Securities How to Invest; Calculation of
Being Offered Net Asset Value and
Public Offering Price

8. Redemption or Repurchase How to Redeem Shares;
Calculation of Net Asset Value
and Public Offering Price

9. Pending Legal Proceedings Inapplicable
<PAGE>
Item No. of Captions in Statement of
PART B OF FORM N-1A ADDITIONAL INFORMATION

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information and Inapplicable
History

13. Investment Objectives and Investment Objective,
Policies Policies, and Risk
Considerations; Investment
Restrictions; Appendix A:
Description of Securities
Ratings

14. Management of the Funds Investment Company Directors
and Officers; Investment
Advisory and Other Services

15. Control Persons and Investment Company Directors
Principal Holders of and Officers; Investment
Securities Advisory and Other Services;
Additional Information

16. Investment Advisory and Investment Advisory and Other
Other Services Services; Additional
Information

17. Brokerage Allocation and Execution of Portfolio
Other Practices Transactions

18. Capital Stock and Other Additional Information
Securities

19. Purchase, Redemption and How to Invest; Other
Pricing of Securities Investment and Redemption
Being Offered Services

20. Tax Status Taxes -- Mutual Funds

21. Underwriters Investment Advisory and Other
Services

22. Calculation of Performance Investment Results
Data

23. Financial Statements Independent Audit; Financial Statements
<PAGE>
PART C OF FORM N-1A

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to the Registration Statement.
<PAGE>
FREMONT MUTUAL FUNDS, INC.

o Money Market Fund
o Bond Fund
o Real Estate Securities Fund
o Global Fund
o Growth Fund
o Select Fund
o U.S. Small Cap Fund
o Emerging Markets Fund
o U.S. Micro-Cap Fund

March 1, 1998
<PAGE>
Table of Contents

Item Page No.

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

Financial Highlights....................................................

The Advisor, The Sub-Advisors and the Funds.............................

Investment Objectives, Policies and Risk Considerations.................

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

Investment Results......................................................

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

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

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

Retirement Plans........................................................

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

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

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

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

General Information.....................................................

Telephone Numbers and Addresses.........................................
2
<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 realize maximum total return consistent with the
preservation of capital and prudent investment management by investing primarily
in bonds, notes, bills and money market instruments of U.S. and foreign issuers.

FREMONT REAL ESTATE SECURITIES FUND seeks to obtain 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. cap
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.
3
<PAGE>
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.
4
<PAGE>
SUMMARY OF FEES AND EXPENSES

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees1 None
Exchange Fee None

Annual Fund Operating Expenses (as a percentage of average net assets)

Total Fund
Management 12b-1(9) Other Operating
Fee Fees Expenses Expenses
--- ---- -------- --------
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%

Example: You would pay the following total expenses on a $1,000 investment in
each Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market Fund $ 3 $10 $17 $38
Bond Fund 6 20 34 77
Real Estate Securities Fund 5 16
Global Fund 9 27 47 105
Growth Fund 9 27 47 105
Select Fund 15 44
U.S. Small Cap Fund 15 47
5
<PAGE>
Emerging Markets Fund 15 47 82 179
U.S. Micro-Cap Fund 19 59 102 221

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, costs of registration of fund shares under
applicable laws, and costs of printing and distributing reports to shareholders.
The percentages expressing annual fund operating expenses of the Emerging
Markets Fund are based on estimated amounts for the current fiscal year. The
percentages expressing annual fund operating expenses of the remaining Funds are
based on actual expenses incurred during the most recent fiscal year, except
that the management fee of the International Small Cap Fund has been restated to
reflect the management fee currently being charged to the Fund.

See "The Advisor, the Sub-Advisor and the Funds."

(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% have 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 1.40% 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%, .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
6
<PAGE>
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-1fees 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."
7
<PAGE>
FINANCIAL HIGHLIGHTS

The financial highlights of the Funds presented below have been audited by
Coopers & Lybrand, L.L.P., independent accountants. Their report covering each
of the five fiscal years in the period ended October 31, 1997, is included in
the Funds' Annual Report. Further information about the Funds' performance is
also contained in the Annual Report, which is included in the Funds' Statement
of Additional Information and which may be obtained without charge.

<TABLE>
<CAPTION>
Year Ended October 31
---------------------
MONEY MARKET FUND
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD

NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .05 .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 # 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 expenses to average net assets(a) .30% .31% .30% .46% .67%
Ratio of net investment income to average
net assets(a) 5.26% 5.22% 5.70% 4.02% 2.62%

* Annualized

<CAPTION>
Year Ended October 31 PERIOD
MONEY MARKET FUND --------------------------------------- 11/18/88
1992 1991 1990 10/31/89
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD

NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .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# 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 expenses to average net assets(a) .70% .51% .60% .65%*
Ratio of net investment income to average
net assets(a) 3.70% 6.44% 7.66% 8.04%*

</TABLE>
8
<PAGE>
For footnote references, see "Notes to Financial Highlights" on page 8.

Year Ended October 31 PERIOD FROM
BOND FUND ----------------------------------------------- APRIL 30, 1993 TO
1997 1996 1995 1994 OCTOBER 31, 1993
---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
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(a) .67 .67 .65 .53 .27
---------- ---------- --------- --------- -----------
Net realized and unrealized gain (loss) .11 .11 .83 (.98) .24
---------- ---------- --------- --------- -----------
Total investment operations .92 .78 1.48 (.45) .51
---------- ---------- --------- --------- -----------

LESS DISTRIBUTIONS
From net investment income (.66) (.70) (.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 # 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 expenses to average net assets(a) .61% .68% .60% .66% .50%*
Ratio of net investment income to average
net assets(a) 6.40% 6.82% 6.69% 5.76% 5.35%*
Portfolio turnover rate 191% 154% 21% 205% 13%*

</TABLE>

Year Ended October 31
GLOBAL FUND ----------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD

NET ASSET VALUE, BEGINNING OF PERIOD $ 15.11 $ 14.24 $ 13.13 $ 13.17 $ 11.52 $ 11.25
---------- ---------- ---------- --------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .45 .39 .40 .26 .32 .39
---------- ---------- ---------- --------- ---------- ----------
Net realized and unrealized gain (loss) 1.31 1.49 1.24 (.03) 1.67 .40
---------- ---------- ---------- --------- ---------- ----------
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Total investment operations 1.76 1.88 1.64 .23 1.99 .79
---------- ---------- ---------- --------- ---------- ----------

LESS DISTRIBUTIONS
From net investment income (.52) (.44) (.50) (.14) (.26) (.40)
From net realized gains (2.19) (.57) (.03) (.13) (.08) (.11)
Return of Capital -- -- -- -- -- (.01)
---------- ---------- ---------- --------- ---------- ----------
Total distributions (2.71) (1.01) (.53) (.27) (.34) (.52)
NET ASSET VALUE, END OF PERIOD $ 14.16 $ 15.11 $ 14.24 $ 13.13 $ 13.17 $ 11.52
========== ========== ========== ========= ========== ==========

TOTAL RETURN 13.01% 13.72% 12.78% 1.74% 17.51% 7.10%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 665,747 $ 572,150 $ 482,355 $ 453,623 $ 186,325 $ 101,839
Ratio of expenses to average net assets .85% .87% .88% .95% .99% 1.09%
Ratio of net investment income to average 2.66% 2.66% 2.98% 2.47% 2.89% 3.41%
net assets
Portfolio turnover rate 48% 71% 83% 52% 40% 50%
Average commission rate paid $ .0149 $ .0238 -- -- -- --

<CAPTION>
Year Ended October 31 PERIOD
GLOBAL FUND ------------------------ NOVEMBER 18, 1988
1991 1990 TO OCTOBER 31, 1989
<S> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD

NET ASSET VALUE, BEGINNING OF PERIOD $9.93 $10.77 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .47 .54 .57
Net realized and unrealized gain (loss) 1.34 (.82) (.79)
------ ------ ------
Total investment operations 1.81 (.28) 1.36
------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.45) (.54) (.45)
From net realized gains (.04) (.02) (.14)
Return of capital -- -- --
------ ------ ------
Total distributions (.49) (.56) (.59)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.25 $9.93 $10.77
====== ===== ======

TOTAL RETURN 18.38% -2.64% 13.71%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $74,502 $55,028 $43,918
Ratio of expenses to average net assets 1.12% 1.10% 1.02%*
Ratio of net investment income to average 4.34% 5.01% 5.30%*
net assets
Portfolio turnover rate 81% 36% 51%*
Average commission paid -- -- --

<CAPTION>
Year Ended October 31 PERIOD FROM
GROWTH FUND --------------------------------------- AUGUST 14, 1992 TO
1997 1996 1995 1994 1993 OCTOBER 31, 1992
----------------
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD

NET ASSET VALUE, BEGINNING OF PERIOD $ 15.02 $ 13.06 $ 10.46 $ 11.25 $ 10.08 $ 9.92
---------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .20 .10 .13 .21 .13 .02
Net realized and unrealized gain (loss) 3.43 2.65 2.74 (.02) 1.16 .18
---------- --------- --------- --------- --------- ---------
Total investment operations 3.63 2.75 2.87 .19 1.29 .20
---------- --------- --------- --------- --------- ---------

LESS DISTRIBUTIONS
From net investment income (.22) (.08) (.17) (.18) (.12) (.04)
From net realized gains (3.47) (.71) (.10) (.80) -- --
---------- --------- --------- --------- --------- ---------
Total distributions (3.69) (.79) (.27) (.98) (.12) (.04)
---------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 14.96 $ 15.02 $ 13.06 $ 10.46 $ 11.25 $ 10.08
========== ========= ========= ========= ========= =========

TOTAL RETURN # 29.26% 22.06% 28.12% 1.72% 12.80% 2.00%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 147,641 $ 78,624 $ 59,632 $ 27,244 $ 42,306 $ 32,388
Ratio of expenses to average net assets(a) .85% .92% .97% .94% .87% .94%*
Ratio of net investment income to average
net assets(a) 1.44% .75% 1.02% 1.31% 1.19% 1.08%
Portfolio turnover rate 48% 129% 108% 55% 44% 49%
Average commission rate paid $ .0467 $ .0429 -- -- -- --

PERIOD FROM
U.S. Small Cap Fund 9/24/97 TO
10/31/97
---------
<S> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD

NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .02
Net realized and unrealized gain (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 # -4.06%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 5,350
Ratio of expenses to average net assets(a) 1.50%
Ratio of net investment income to average
net assets(a) 1.81%
Portfolio turnover rate 8%
Average commission rate paid $0.543
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Year PERIOD FROM
Ended 6/24/96 to
10/31/97 10/31/96
EMERGING MARKETS FUND -----------
<S> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD

NET ASSET VALUE, BEGINNING OF PERIOD $ 9.62 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .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 # 12.55% -3.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 12,175 $ 3,772
Ratio of expenses to average net assets(a) .26% --
Ratio of net investment income to average
net assets(a) 2.04% 3.32%
Portfolio turnover rate 208% 7%
Average commission rate paid $.0038 $.0063

</TABLE>
U.S. MICRO-CAP FUND
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED OCTOBER 31 JUNE 30, 1994 TO
1997 1996 1995 OCTOBER 31, 1994
---- ---- ---- ----------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.63 $ 14.34 $ 10.34 $ 10.00
----------- ----------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) (.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
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C>
Ratio of expenses to average net assets(2) 1.88% 1.96% 2.04% 2.50%*
Ratio of net investment income (loss) to average net assets(2) -.67% -.51% -.67% .68%*
Portfolio turnover rate 125% 81% 144% 129%*
Average commission rate paid $ .0505 $ .0541 -- --
</TABLE>

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 expeneses

(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 int eh future. The waivers are voluntary and may be changed
in the future.

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 n4et assets. The Fund may reimburse
the Advisor for any reduction in the Advisor's fees during the three years
following the reduction if such reimbursements is requested by the Advisor, if
such reimbursement can be achieved within the forgoing expense limit, and if the
Board of Directors approves the reimbursement at the time oaf the request as not
inconsistent with the best interest of the Fund. The Advisor generally seeks to
reimburse the oldest reductions and waiver before payment of fees and expenses
for the current year. Because of these substantial contingencies, the potential
reimbursement will be accounted for as contingent liabilities that are not
recordable on the balance sheet of the Fund until payment is probable.

For the U.S. Micro-Cap Fund, the Advisor is voluntarily limiting the advisory
fee t a reduced rate of no greater than 1.98% of average net assets.

(3) Disclosure not required for years prior to 1996.

*Annualized
13
<PAGE>
THE ADVISOR, THE SUB-ADVISORS
AND THE FUNDS

Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in 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.

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
14
<PAGE>
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.

o 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 connection 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

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-Advisors performance on 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.

Average Annual Total Returns for Period Ended December 31, 1997

1 Year Inception to
Date(1)

Kensington Investment Group 29.14% 25.30%
NAREIT Total Return Index(2) 18.86% 19.48%
S&P 500 Index(3) 33.36% 27.79%

(1) "Inception To Date" returns incorporates 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 & Poors 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 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. Given the
Advisor's evaluation, an appropriate asset mix is determined for the Fund.
16
<PAGE>
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.

o 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.

o 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.

o 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.

o 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.

o 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 has co-managed the Fund since January 1995. Ken, John
and Pete have managed the Fund since January 1995, November 1996, and since
inception, respectively.

o 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.

o 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.
17
<PAGE>
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

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.

o 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.

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.
18
<PAGE>
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 was employed as portfolio manager and
from February 1997 until April 1997 was 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 was a Senior
Vice President of the Advisor from April 1997 to August 1997 and 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, 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
19
<PAGE>
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 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. Nicholas-Applegate HK has agreed, however, to waive
its entire fee until further notice. The Portfolio Management Agreement with
Nicholas-Applegate HK 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
20
<PAGE>
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 of 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. Accordingly, there is no assurance that any Fund will
achieve its investment objective.
21
<PAGE>
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 attempts to maintain a constant net asset value of $1.00 per share by
valuing its securities using the amortized cost method. To do so, it must invest
only in readily marketable short-term securities with remaining maturities of
not more than 397 days (as allowed by regulations under the 1940 Act) which are
of high quality and present minimal credit risks as determined by the Advisor,
under the direction of the Board of Directors. The portfolio must have a
dollar-weighted average maturity of not more than 90 days. At least 25% of the
Fund's assets will have a maturity of 90 days or less. All portfolio securities
will be denominated in U.S. dollars.

At the time of purchase, short-term securities must be considered "First Tier"
quality: rated in the top rating category by at least two nationally recognized
statistical rating organizations ("NRSROs"), or by a single NRSRO in the case of
a security rated by only one NRSRO, or if unrated, of comparable quality as
determined specifically by the Advisor, under the direction of the Board of
Directors. There are currently 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
22
<PAGE>
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 between 5 and 15 years. In addition, the
Fund may invest in obligations of domestic and foreign commercial banks and bank
holding companies (such as commercial paper, bankers' acceptances, certificates
of deposit and time deposits).

The Fund will invest primarily in securities rated Baa or better by Moody's, or
BBB or better by S&P or, if unrated, determined by the Fund's Sub-Advisor,
PIMCO, to be of comparable quality. The Fund also may invest up to 10% of its
assets in corporate debt securities that are not investment grade but are rated
B or higher by Moody's or S&P. Although long-term securities generally produce
higher income than short-term securities, long-term securities are more
susceptible to market fluctuations resulting from changes in interest rates.
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
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futures contracts and currency, and swap agreements. See "General Investment
Policies" and the Statement of Additional Information for further information
regarding these securities and other instruments. When the Sub-Advisor deems it
advisable because of unusual economic or market conditions, the Fund may invest
all or a portion of its assets in cash or cash equivalents, such as obligations
of banks, commercial paper and short-term obligations of U.S. or foreign
issuers.

In addition, the Fund may purchase securities on a when-issued or forward
commitment basis, engage in portfolio securities lending, invest in reverse
repurchase agreements and borrow money for temporary administrative or emergency
purposes. See "General Investment Policies" and the Statement of Additional
Information for more information. A portion of the Fund's assets may be invested
in mortgage-related and other asset-backed securities. See "General Investment
Policies" for a discussion of these securities.

The Fund may invest in convertible debentures (convertible to equity securities)
and preferred stocks (which may or may not have a dividend yield) using the same
quality and rating criteria noted above. The Fund may also invest in a small
percentage of assets in common 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.
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<PAGE>
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 securities of
REITs. REITs pool investors' funds for investment primarily in income producing
real estate or real estate related loans or interests. A REIT is not taxed on
income distributed to shareholders if it complies with several requirements
relating to its organization, ownership, assets, and income and a requirement
that it distribute to its shareholders at least 95% of its taxable income (other
than net capital gains) for each taxable year. REITs can generally be classified
as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the
majority of their assets directly in real property, derive their income
primarily from rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their income primarily
from interest payments. Hybrid REITs combine the characteristics of both Equity
REITs and Mortgage REITs.
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<PAGE>
The Fund will not invest in real estate directly, but only in securities issued
by real estate companies. However, the Fund may be subject to risks similar to
those associated with the direct ownership of real estate (in addition to
securities markets risks) because of its policy of concentration in the
securities of companies in the real estate industry. These risks include
declines in the value of real estate, risks related to general and local
economic conditions, dependency on management skill, increase in interest rates,
possible lack of availability of mortgage funds, overbuilding, extended
vacancies of properties, increased competition, increases in property taxes and
operating expenses, changes in zoning laws, losses due to costs resulting from
the clean-up of environmental problems, casualty or condemnation losses,
limitations on rents, changes in neighborhood values and the appeal of
properties to tenants. Certain REITs have relatively small capitalization, which
may tend to increase the volatility of the market price of securities issued by
such REITs.

Rising interest rates may cause investors in REITs to demand a higher annual
yield from future distributions, which may in turn decrease market prices for
equity securities issued by REITs. Rising interest rates also generally increase
the costs of obtaining financing, which could cause the value of the Fund's
investments to decline. During periods of declining interest rates, certain
mortgage REITs may hold mortgages that the mortgagors elect to prepay, such
prepayment may diminish the yield on securities issued by such mortgage REITs.
In addition, mortgage REITs may be affected by the ability of borrowers to repay
when due the debt extended by the REIT and equity REITs may be affected by the
ability of tenants to pay rent.

In addition to these risks, Equity REITs may be affected by changes in the value
of the underlying property owned by the trusts, while Mortgage REITs may be
affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be diversified.
In addition, Equity and Mortgage REITs could possibly fail to qualify for tax
free pass-through of income under the Internal Revenue Code of 1986, as amended
(the "Code"), or to maintain their exemptions from registration under the 1940
Act. The above factors may also adversely affect a borrower's or a lessee's
ability to meet its obligations to the REIT. In the event of a default by a
borrower or lessee, the REIT may experience delays in enforcing its rights as a
mortgagee or lessor and may incur substantial costs associated with protecting
its investments.

The Fund is a non-diversified portfolio and is not limited by the 1940 Act in
the proportion of its assets that may be invested in the obligations of a single
issuer. The Fund, therefore, may invest a greater proportion of its assets in
the securities of a smaller number of issuers and will be subject to a greater
risk with respect to its portfolio securities. Any economic, regulatory, or
political developments affecting the value of the securities held in the Fund
could have a greater impact on the total value of the Fund's holdings than would
be the case if the Fund were classified as diversified under the 1940 Act.

Although the Fund invests primarily in common stocks, for liquidity purposes it
will 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.
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<PAGE>
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 different countries,
including the United States. The Advisor will allocate the assets of the Fund
among the following categories of assets:

o 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.

o 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
27
<PAGE>
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.

o 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.

o Foreign Bonds - The Fund may invest in non-U.S. dollar denominated bonds,
notes and bills of foreign governments, their agencies and corporations of a
quality comparable to the U.S. dollar-denominated debt securities described
above. The Advisor will invest the assets in this class based on the Advisor's
outlook for currencies being considered. The Advisor may engage in foreign
currency hedging from time to time based on the outlook for currency values.

For a discussion of the risk factors associated with foreign investing, see
"General Investment Policies -- Special Considerations for International
Investing."

o 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
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<PAGE>
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.

o 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.

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
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<PAGE>
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.
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<PAGE>
The Fund may invest up to 35% of its total assets in stocks of foreign-based
companies denominated in foreign currencies and issues of American Depository
Receipts ("ADRs") and European Depository Receipts ("EDRs") representing shares
of foreign companies. See "General Investment Policies" for a discussion of
ADRs. EDRs are similar to ADRs but are designed for use in the European
securities markets. The Fund may invest in foreign stock index futures, options
on index futures and options on foreign stock indexes. The Advisor or the
Sub-Advisor may engage in foreign currency hedging for assets in specific
countries based on the outlook for the currencies involved. Hedging may be
undertaken through the use of currency futures or otherwise. For a discussion of
the risk factors associated with forward currency, futures and options
transactions, see "General Investment Policies -- Forward Currency, Futures and
Options Transactions" and the Statement of Additional Information.

When the Fund holds bonds, the Fund will be invested primarily in debt
instruments with short to intermediate maturities (1 to 10 years to maturity).
These bonds, including convertibles, will have a S&P or Moody's rating of A or
better. However, there are no restrictions on the maturity composition of the
Fund's portfolio. If market interest rates decline, fixed-income securities
generally appreciate in value. In seeking to achieve the Fund's objective of
growth of capital, the Advisor may increase the average maturity of the fixed
income portion of the Fund's portfolio in times of declining interest rates and
decrease such average maturity in times of rising interest rates.

The Fund may invest in non-U.S. dollar denominated bonds, notes and bills of
foreign governments, their agencies and corporations of a quality comparable to
the U.S. dollar-denominated debt securities described above. The dollar-weighted
average maturity of the Fund's foreign bonds may range from 2 to 8 years. The
Advisor will invest the assets in this class based on the outlook for interest
rates and currency trends in a particular country. The Advisor may engage in
foreign currency hedging from time to time based on the outlook for currency
values.

For a discussion of the risk factors associated with foreign investing, see
"General Investment Policies -- Risk Factors and Special Considerations for
International Investing." The Fund will maintain the remainder of its assets in
cash or cash equivalents and other fixed income securities. Cash and cash
equivalents will be denominated in U.S. dollars. The objective of the cash
equivalent portfolio is to maximize current income to the extent consistent with
preservation of capital and liquidity.

The Advisor will allocate investments among the securities of particular issuers
on the basis of its views as to the best values then currently available in the
marketplace. Such values are a function of growth potential, relative valuation
yield, maturity, issue classification and quality characteristics, coupled with
expectations regarding the economy, movements in the general level of interest
rates, political developments, and variations of the supply of funds available
for investment.

Select Fund
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<PAGE>
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 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 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.
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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 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
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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 operating 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.

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
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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 American Depository
Receipts ("ADRs") and European Depository Receipts ("EDRs"). See "General
Investment Policies" for a discussion of ADRs. EDRs are similar to ADRs but are
designed for use in the European securities markets.

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

As used in this Prospectus, an 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
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securities (see "General Investment Policies -- Risk Factors and Special
Considerations for International Investing"), but also other risks. Investments
in Emerging Markets may exhibit greater price volatility, have less liquidity
and have settlement arrangements which are less efficient than in developed
markets. Furthermore, the economies of countries with Emerging Markets generally
are heavily dependent upon international trade and, accordingly, have been and
may continue to be adversely affected by adjustments in currency values and
protectionist measures imposed or negotiated by the countries with which they
trade. These Emerging Market economies also have been and may continue to be
adversely affected by economic conditions in the countries with which they
trade.

The Fund may invest a portion of its assets in equity securities of smaller- to
medium-sized growth companies. Investing in small companies involves certain
special risks. Small companies may have limited product lines, markets, or
financial resources, and their managements may be dependent on a limited number
of key individuals. The securities of small companies may have limited market
liquidity and may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general.

The governments in some Emerging Markets have been engaged in programs of
selling part or all of their stakes in government owned or controlled
enterprises ("privatizations"). The Advisor and Sub-Advisor believe that
privatizations may offer opportunities for significant capital appreciation, and
intend to invest assets of the Fund in privatizations in appropriate
circumstances. In certain Emerging Markets, the ability of foreign entities such
as the Fund to participate in privatizations may be limited by local laws. 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
36
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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 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).
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Many micro-cap companies in which the Fund is likely to invest may be more
vulnerable than larger companies to adverse business or market developments, may
have limited product lines, markets or financial resources and may lack
management depth. In addition, many micro-cap companies are not well-known to
the investing public, do not have significant institutional ownership and are
followed by relatively few securities analysts, with the result that there may
tend to be less publicly available information concerning such companies
compared to what is available for larger capitalization securities. Finally, the
securities of micro-cap companies traded in the OTC market may have fewer market
makers, wider spreads between their quoted bid and asked prices and lower
trading volumes, resulting in comparatively greater price volatility and less
liquidity than the securities of companies that have larger market
capitalizations and/or that are traded on the New York or American Stock
Exchanges or the market averages in general. Thus, 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, 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.
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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. 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, if applicable). 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
39
<PAGE>
lost the opportunity to invest the amount set aside for such transaction in the
segregated asset account. Settlements in the ordinary course of business, which
may take substantially more than three business days for non-U.S. securities,
are not treated by the Funds as when-issued or forward commitment transactions
and, accordingly, are not subject to the foregoing limitations, even though some
of the risks described above may be present in such transactions.

Mortgage-Related and Other Asset-Backed Securities. Mortgage pass-through
securities are securities representing interests in "pools" of mortgages in
which payments of both interest and principal on the securities are made
monthly, in effect, "passing through" monthly payments made by the individual
borrowers on the residential mortgage loans which underlie the securities (net
of fees paid to the issuer or guarantor of the securities). The total return on
mortgage-related securities varies with changes in the general level of interest
rates. The maturities of mortgage-related securities are variable and unknown
when issued because their maturities depend on pre-payment rates. Early
repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose a Fund to a
lower rate of return upon reinvestment of principal. Also, if a security subject
to prepayment has been purchased at a premium, in the event of prepayment the
value of the premium would be lost. Mortgage prepayments generally increase with
falling interest rates and decrease with rising interest rates. Like other
fixed-income securities, when interest rates rise, the value of a
mortgage-related security generally will decline; however, when interest rates
are declining, the value of mortgage-related securities with prepayment features
may not increase as much as that of other fixed income securities.

A Fund may invest in GNMA certificates, which are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Because both interest and principal payments (including prepayments)
on the underlying mortgage loans are passed through to the holder of the
certificate, GNMA certificates are called "pass-through" securities.

Although most mortgage loans in the pool will have stated maturities of up to 30
years, the actual average life or effective maturity of the GNMA certificates
will be substantially less because the mortgages are subject to normal
amortization of principal and may be repaid prior to maturity. Prepayment rates
may vary widely over time among pools and typically are affected by the
relationship between the interest rates on the underlying loans and the current
rates on new home loans. In periods of falling interest rates, the rate of
prepayment tends to increase, thereby shortening the actual average life of the
GNMA certificates. Conversely, when interest rates are rising, the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
GNMA certificates. Accordingly, it is not possible to predict accurately the
average life of a particular pool. Reinvestment of prepayments may occur at
higher or lower rates than the original yield on the certificates. Due to the
prepayment feature and the need to reinvest prepayments of principal at current
market rates, GNMA certificates can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of declining interest
rates. GNMA certificates may appreciate or decline in market value during
periods of declining or rising interest rates, respectively.
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A Fund may invest also in mortgage-related securities issued by the FNMA or by
the FHLMC. FNMA, a federally chartered and privately owned corporation, issues
pass-through securities representing interests in a pool of conventional
mortgage loans. FNMA guarantees the timely payment of principal and interest but
this guarantee is not backed by the full faith and credit of the U.S.
Government. FHLMC, a corporate instrumentality of the U.S. Government, issues
participation certificates which represent an interest in a pool of conventional
mortgage loans. FHLMC guarantees the timely payment of interest and the ultimate
collection of principal, and maintains reserves to protect holders against
losses due to default, but the certificates are not backed by the full faith and
credit of the U.S. Government. As is the case with GNMA certificates, the actual
maturity of and realized yield on particular FNMA and FHLMC pass-through
securities will vary based on the prepayment experience of the underlying pool
of mortgages. A Fund may invest also in mortgage-related securities issued by
financial institutions, such as commercial banks, savings and loan associations,
mortgage bankers and securities broker-dealers (or separate trusts or affiliates
of such institutions established to issue these securities).

Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities.

Real Estate Mortgage Investment Conduits are CMO vehicles that qualify for
special tax treatment under the Internal Revenue Code and invest in mortgages
principally secured by interests in real property and other investments
permitted by the Internal Revenue Code.

Stripped Mortgage Securities are derivative multiclass mortgage securities
issued by agencies or instrumentalities of the United States Government, or by
private originators of, or investors in, mortgage loans, including savings and
loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. Stripped Mortgage Securities are
usually structured with two classes that receive different proportions of the
interest and principal distributions on a pool of mortgage assets. A common type
of Stripped Mortgage Security will have one class receiving all of the interest
from the mortgage assets (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class). The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
a rapid rate of principal payments may have a material adverse effect on the
securities' yield to maturity. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, a Fund may fail to recoup
fully its initial investment in these securities even if the security is rated
AAA or Aaa, and could even lose its entire investment. Although Stripped
Mortgage Securities are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed for certain Stripped Mortgage Securities. Investments in Stripped
Mortgage Securities for which there is no established market are considered
illiquid and together with other illiquid securities will not exceed 15% of a
Fund's net assets. Other asset-backed securities (unrelated to mortgage loans)
have been offered to investors, such as Certificates for Automobile
ReceivablesSM ("CARSSM") and interests in pools of credit card receivables.
CARSSM represent undivided fractional interests in a trust whose assets consist
of a pool of motor vehicle retail
41
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installment sales contracts and security interests in the vehicles securing the
contracts. CARSSM 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 CARSSM 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 the Sub-Advisor, if
applicable) may, consistent with a Fund's investment objective, policies and
quality standards, and subject to the review and approval of the Investment
Company's Board of Directors, consider making investments in such new types of
securities.

The Funds may invest only in high quality mortgage-related (or other
asset-backed) securities either (i) issued by U.S. Government sponsored
corporations or (ii) rated in one of the three highest categories by Moody's or
S&P, or, if not rated, of equivalent investment quality as determined by the
Advisor (or the Sub-Advisor, if applicable). The Advisor or Sub-Advisor 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
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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.

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 331/3% of its net assets. The borrower must maintain with
the Funds' custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. A Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of, 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
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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.
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The Funds will set aside cash, cash equivalents, or liquid securities, or hold a
covered position against any potential delivery or payment obligations under any
outstanding option or futures contracts.

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

Although these investment practices will be used primarily to generate income or
to minimize the fluctuation of principal, they do involve risks which are
different in some respects from the investment risks associated with similar
funds which do not engage in such activities. These risks may include the
following: futures contracts -- no assurance that closing purchase transactions
will be available at favorable prices, possible reduction of a Fund's income due
to the use of hedging, the possible reduction in value of both the securities
hedged and the hedging instrument, and possible loss in excess of the initial
margin payment; options and futures contracts -- imperfect correlation between
the contract and the underlying security, commodity or index and unsuccessful
hedging transactions due to incorrect forecasts of market trends; writing
covered call options -- the inability to effect closing transactions at
favorable prices and the inability to participate in the appreciation of the
underlying securities above the exercise price and premium received; and
purchasing or selling put and call options -- possible loss of the entire
premium. A more thorough description of these investment practices and their
associated risks is contained in the Statement of Additional Information.
Forward Currency, Futures and Options Transactions. Except for the Money Market
Fund, the Funds may enter into forward currency contracts and currency futures
contracts and may purchase put or call options on currencies (each such
arrangement sometimes referred to as a "currency contract"). Forward contracts
typically will involve the purchase or sale of a foreign currency against the
dollar. These techniques are designed primarily to hedge against future changes
in currency prices which might adversely affect the value of a Fund's portfolio
securities. A Fund may attempt to accomplish objectives similar to those
involved in its use of forward currency contracts by purchasing put or call
options on currencies or currency futures. For a more detailed description of
such arrangements, see the Statement of Additional Information.

A Fund may enter into currency contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. For example,
when the Advisor and/or Sub-Advisor anticipates making a purchase or sale of a
security, the Fund may enter into a currency contract in order to set the rate
(either relative to the U.S. dollar or another currency) at which a currency
exchange transaction related to the purchase or sale will be made. Further, when
it is believed that a particular currency may decline compared to the U.S.
dollar or another currency, a Fund may enter into a currency contract to sell
the currency the Advisor or Sub-Advisor expects to decline in the amount
approximating the value of some or all of the Fund's portfolio securities
denominated in that currency or related currencies that the Advisor and/or
Sub-Advisor feels demonstrate a correlation in exchange rate movements. The
practice of using correlated currencies is known as "cross-hedging." When the
Advisor and/or Sub-Advisor believes that the U.S. dollar may suffer a
substantial decline against a foreign currency or currencies, a Fund may enter
into a currency contract to buy a
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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 so set aside to cover such
options are considered illiquid assets and, together with other illiquid assets
and securities, will not exceed 15% of the net assets of the Fund. In addition,
premiums paid for currency options held by a Fund may not exceed 5% of the
Fund's net assets. Although a Fund will enter into currency contracts solely for
hedging purposes, their use does involve certain risks. For example, there can
be no assurance that a liquid secondary market will exist for any currency
contract purchased or sold, and a Fund may be required to maintain a position
until 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 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,
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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; 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, could result in possible liability
to the purchaser. Settlement procedures in certain emerging markets also carry
with them a heightened risk of loss due to the
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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 the Sub-Advisor, if applicable) to be fully exchangeable into
U.S. dollars without legal restriction. The Funds may purchase securities that
are issued by the government or a corporation or financial institution of one
nation but denominated in the currency of another nation. To the extent that a
Fund invests in ADRs, the depository bank generally pays cash dividends in U.S.
dollars regardless of the currency in which such dividends originally are paid
by the issuer of the underlying security.

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

Several of the countries in which the Funds may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital gains),
(ii) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation, (iii)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor, (iv) limitations on the types of
securities which a foreign investor may purchase and (v) restrictions on a
foreign investor's right to invest in companies whose securities are not
publicly traded. In some circumstances, these restrictions may
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limit or preclude investment in certain countries. Therefore, the Funds may to
invest in such countries through the purchase of shares of investment companies
organized under the laws of such countries.

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

American Depository Receipts. (Except for the Money Market Fund.) 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; speculation;
and other factors. With respect to certain foreign countries, there is the
possibility of expropriation or nationalization of assets, confiscatory taxation
and political, social and economic instability. The Funds may be required to pay
foreign withholding or other taxes on certain of its ADRs, but investors may or
may not be able to deduct their pro rata shares of such taxes in computing their
taxable income, or take such shares as a credit against their U.S. federal
income tax. See "Dividends, Distributions and Federal Income Taxation."
Unsponsored ADRs are offered by companies which are not prepared to meet either
the reporting or accounting standards of the United States. While readily
exchangeable with stock in local markets, unsponsored ADRs may be less liquid
than sponsored ADRs. Additionally, there generally is less publicly available
information with respect to unsponsored ADRs.

Investment Restrictions. Each Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating a Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). These investment restrictions and each Fund's investment
objective cannot be changed without the approval of shareholders of that Fund;
all other investment practices described in this Prospectus and in the Statement
of Additional Information, 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
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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.

From time to time, each Fund may advertise its yield. The Funds' yields are
calculated according to methods that are standardized for all mutual funds.
Because yield calculation methods differ from the methods used for other
purposes, a Fund's yield may not equal its distribution rate, the income paid to
a shareholder's account, or the income reported in the Fund's financial
statements. With respect to the Money Market Fund, the yield refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). The Money Market Fund's net income
per share for such period (excluding realized gains and losses, if any) will be
divided by the Fund's constant net asset value of $1.00 and annualized on a
365-day basis. An effective yield quotation, taking into account the effects of
a shareholder's assumed reinvestment of income (compounding), may also be used.
With respect to the Funds other than the Money Market Fund, yield refers to the
income generated by an investment in a Fund over a 30-day period (which period
will be stated in the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during that period is assumed
to be generated each 30 days over a 365-day period and is shown as a percentage
of the investment.

A Fund's investment results will vary from time to time depending upon, among
other things, economic and market conditions, the composition of the Fund's
portfolio, and operating expenses of the Fund, so that any investment results
reported by the Fund should not be considered representative of what an
investment in the Fund may earn in any future period. When utilized, total
return for the unmanaged indices described in the Statement of Additional
Information will be calculated assuming reinvestment of dividends and interest,
but will not reflect any deductions for recurring expenses such as advisory
fees, brokerage costs or administrative expenses. These factors and possible
differences in calculation methods should be considered when comparing a Fund's
investment results with those published for other investment companies, other
investment vehicles and unmanaged indices. The comparison of a Fund to an
alternative investment should be made with consideration of differences in
features and expected performance. The Funds may also be mentioned in
newspapers, magazines, or other media from time to time. The Funds assume no
responsibility for the accuracy of such data. A Fund's results
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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 price next
determined after the purchase order is received by the Transfer Agent or by a
selling agent of the Funds. A minimum initial investment of $2,000 is required
to open a shareholder account, except for retirement plans such as Individual
Retirement Accounts (IRAs). 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.

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.
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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 charges 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.

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.
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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, can be limited by the
Investment Company's refusal to accept further purchase and exchange orders from
the shareholder.

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

Telephone Exchange Privilege

An investor may elect on the account application to authorize exchanges by
telephone. A shareholder may give instructions regarding exchanges by calling
800-548-4539. A shareholder wishing to initiate the telephone exchange privilege
should contact the 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
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time. Termination requests must be received in writing at least 5 days prior to
the regular draft date, or the drafts will not cease until the next cycle. The
Transfer Agent may impose a charge for this service, although no such charge
currently is contemplated. If a shareholder's order to purchase shares is
cancelled due to nonpayment (for example, "insufficient funds"), the shareholder
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

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.

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
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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.

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 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
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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 15 days.
Redemption proceeds will not be delayed when shares have been paid for by bank
wire or where the account holds a sufficient number of shares already paid for
with collected funds.

The Fund reserves the right to redeem mandatorily the shares in a shareholder's
account (other than a retirement plan account) if the balance is reduced to less
than $1,500 in net asset value through redemptions or other action by the
shareholder. Notice will be given to the shareholder at least 30 days prior to
the date fixed for such redemption, during which time the shareholder may
increase its holdings to an aggregate amount of $1,500 or more (with a minimum
purchase of $100 or more.) This minimum balance may be waived at the sole
discretion of the Advisor.

Redemption in Kind

The Investment Company reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
the 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
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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
about establishing these accounts. In accordance with industry practice, there
may be an annual account charge for participation in these plans. Information
regarding these charges is available from the Investment Company. Retirement
plan participants may receive additional services related to their plan at no
extra cost to any shareholder.

DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAXATION

Each Fund has qualified, and intends to continue to qualify to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
(the "Code"). For any tax year in which a Fund so qualifies and meets certain
other distribution requirements, it will not incur a federal tax liability. Such
qualification under the Code requires a Fund to, among other things, diversify
its investments so that, at the end of each fiscal quarter, (1) at least 50 % of
the market value of the Fund's assets is represented by cash, U.S. government
securities, securities of other regulated investment companies, and other
securities, limited, in respect to any one issuer, to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (2) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. government securities or the
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are engaged in the same or similar trades or
businesses.

Each Fund intends to distribute substantially all of its net investment income
according to the following schedule:

The Money Market Fund and the Bond 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
intend to distribute substantially all of its net investment income once each
year in October.
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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:

o to have all dividends and capital gain distributions automatically reinvested
in additional shares; or

o to receive the income dividends and short-term capital gains distributions in
cash and accept the long-term capital gains distributions in additional shares;
or

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

o to invest all dividend and capital gain distributions in another Fremont Fund
owned through an identically registered account.

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.

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.

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
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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
AND PUBLIC OFFERING PRICE

Each Fund's net asset value per share is computed by dividing the value of the
securities held by the Fund, plus any cash or other assets (including interest
accrued and dividends declared but not yet
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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). 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 attempts to maintain a stable net asset value of $1.00 per
share by valuing its assets on the basis of amortized cost. This involves
initially valuing a portfolio instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
Although the Money Market Fund attempts to maintain a stable net asset value of
$1.00 per share, there can be no assurance that a stable net asset value will be
maintained.

As is generally the case with other money market funds, on any day that the
Money Market Fund experiences a decline in net asset value below $1.00 per
share, the Fund may offset any such amount against the shareholder dividends
accrued during the month. Alternatively, to maintain the net asset value of its
shares at $1.00, the Money Market Fund may redeem or declare a dividend of
shares. Any such action would not change a shareholder's pro rata share of net
assets, but would reflect the increase or decrease in the value of the
shareholder's holdings which resulted from the change in net asset value.

EXECUTION OF PORTFOLIO TRANSACTIONS

Orders for each Fund's portfolio securities transactions are placed by the
Advisor or Sub-Advisor, as applicable. The Advisor and Sub-Advisors strive to
obtain the best available prices in the Funds' portfolio transactions, taking
into account the costs and promptness of executions. Subject to this policy,
transactions may be directed to those broker-dealers who provide research,
statistical and other information to the Funds, the Advisor or the Sub-Advisors
or who provide assistance with respect to the distribution of Fund shares. There
is no agreement or commitment to place orders with any broker-dealer.

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

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

The Investment Company, organized as a Maryland corporation on July 13, 1988, is
a fully managed open-end investment company. Currently, the Investment Company
has authorized several series of capital stock with equal dividend and
liquidation rights within each series. Investment Company shares are entitled to
one vote per share (with proportional voting for fractional shares) and are
freely transferable. Shareholders have no preemptive or conversion rights.
Shares may be voted in the election of directors and on other matters submitted
to the vote of shareholders. As permitted by Maryland law, there normally will
be no annual meeting of shareholders in any year, except as required under the
1940 Act. The 1940 Act requires that a meeting be held within 60 days in the
event that less than a majority of the directors holding office has been elected
by shareholders. Directors shall continue to hold office until their successors
are elected and have qualified. Investment Company shares do not have cumulative
voting rights, which means that the holders of a majority of the shares voting
for the election of directors can elect all of the directors. Shareholders
holding 10% of the outstanding shares may call a meeting of shareholders for any
purpose, including that of removing any director. A director may be removed upon
a majority vote of the shareholders qualified to vote in the election. The 1940
Act requires the Investment Company to assist shareholders in calling such a
meeting.

On any matter submitted to a vote of shareholders, such matter shall be voted by
a Fund's shareholders separately when the matter affects the specific interest
of the Fund (such as approval of the Advisory Agreement with the Advisor and the
Portfolio Management Agreement with a Sub-Advisor) except in matters where a
vote of all series in the aggregate is required by the 1940 Act or otherwise.

Pursuant to the Articles of Incorporation, the Investment Company may issue ten
billion shares. This amount may be increased or decreased from time to time in
the discretion of the Board of Directors. Each share of a series represents an
interest in that series only, has a par value of $0.0001 per share, represents
an equal proportionate interest in that series with other shares of that series
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to that series as may be declared at the discretion of the
Board of Directors. Shares of a series when issued are fully paid and are
non-assessable. The Board of Directors may, at its discretion, establish and
issue shares of additional series of the Investment Company.

Stephen D. Bechtel, Jr., and members of his family, including trusts for family
members, due to their shareholdings, may be considered controlling persons of
the Funds under applicable Securities and Exchange Commission regulations.
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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
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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
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<PAGE>
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.
65
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Fremont Mutual Funds, Inc.
Fremont California Intermediate Tax-Free Fund
March 1, 1998

TABLE OF CONTENTS

ITEM PAGE NO.

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

Financial Highlights ............................................

The Advisor and the Fund ........................................

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

Investment Results .............................................

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

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

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

Dividends, Distributions and
Income Taxation ............................................

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

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

General Information ............................................

Telephone Numbers and Addresses ................................
<PAGE>
PROSPECTUS

FREMONT CALIFORNIA INTERMEDIATE
TAX-FREE FUND

FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the Fremont California Intermediate Tax-Free
Fund, investing in tax-exempt securities of the State of California and its
political subdivisions.

FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND seeks to obtain as high a level of
interest income exempt from federal income tax and California personal income
tax as is consistent with prudent investment management.

There can be no assurance that the Fund will achieve its investment objective.
The Fund is a non-diversified fund as defined by the Investment Company Act of
1940,as amended (the "1940 Act").

Shares of the Fund are offered without a sales charge.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE SHARES INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is March 1, 1998.

FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
<PAGE>
SUMMARY OF FEES AND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(a) None
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(b)

Management Fee .30%
12b-1 Fees None
Other Expenses .19%
Total Fund Operating Expenses .49%

Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:

1 Year $ 5

3 Years 16

5 Years 27

10 Years 62

The purpose of the above table is to give you information and assistance in
understanding the various costs and expenses of the Fund that an investor may
bear directly or indirectly. Other expenses include, but are not limited to,
administrative and transfer agent fees paid to Fremont Investment Advisors,
Inc., custody, legal and audit, costs of registration of Fund shares under
applicable laws, and costs of printing and distributing reports to shareholders.
The percentages expressing annual fund operating expenses are based on actual
expenses incurred during the most recent fiscal year.

THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE EXPENSES OR
ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR LESS THAN
THOSE SHOWN ABOVE.

(a) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is currently
$10. See "How to Redeem Shares."

(b) The Advisor has voluntarily waived management and administrative fees.
Absent such waivers, the management fee, other expenses and total operating
expenses of the Fund would have been .36%, .33% and .69%, respectively, for
the fiscal year ended October 31, 1997.
<PAGE>
FINANCIAL HIGHLIGHTS

The financial highlights of the Fund presented below have been audited by
Coopers & Lybrand, L.L.P., independent accountants. Their report covering each
of the five fiscal years in the period ended October 31, 1997, is included in
the Fund's Annual Report. Further information about the Fund's performance is
contained in the Annual Report, which is included in the Fund's Statement of
Additional Information and which may be obtained without charge.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
---------------------------------------------------------- NOVEMBER 16, 1990
1997 1996 1995 1994 1993 1992 TO OCTOBER 31, 1991
---- ---- ---- ---- ---- ---- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.80 $ 10.86 $ 10.13 $ 11.10 $ 10.55 $ 10.39 $10.11
------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .51 .52 .53 .53 .55 .57 .58
Net realized and unrealized gain (loss) .20 (.03) .73 (.97) .62 .19 .34
------- ------- ------- ------- ------- ------- ------
Total investment operations .71 .49 1.26 (.44) 1.17 .76 .92
------- ------- ------- ------- ------- ------- ------
LESS DISTRIBUTIONS
From net investment income (.51) (.52) (.53) (.53) (.55) (.57) (.58)
From net realized gains (.01) (.03) -- -- (.07) (.03) (.06)
------- ------- ------- ------- ------- ------- ------
Total distributions (.52) (.55) (.53) (.53) (.62) (.60) (.64)
------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 10.99 $ 10.80 $ 10.86 $ 10.13 $ 11.10 $ 10.55 $10.39
======= ======= ======= ======= ======= ======= ======
TOTAL RETURN(1) 6.75% 4.63% 12.77% -3.94% 11.37% 7.37% 9.78%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $64,309 $51,156 $50,313 $58,305 $59,716 $44,305 $33,572
Ratio of expenses to average net assets(2) .49% .51% .50%* .51% .50% .54% .36%*
Ratio of net investment income to
average net assets(2) 4.72% 4.86%* 5.08% 4.94% 5.05% 5.38% 5.88%*
Portfolio turnover rate 6% 6%* 18% 21% 26% 18% 41%*
</TABLE>

*Annualized

(1) Total return would have been lower had the advisor not waived expenses.

(2) The Advisor is voluntarily reducing the advisory and administrative fees to
0.30% and 0.005% of average net assets, respectively.
<PAGE>
THE ADVISOR AND THE FUND

Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in the Fremont California
Intermediate Tax-Free Fund (the "Fund"). The Investment Company has other series
offered with a different prospectus, and the Board of Directors of the
Investment Company is permitted to create additional funds at any time. The Fund
has its own investment objective and policies and operates as a separate mutual
fund.

As compensation for its services to the Fund, the Advisor receives from the Fund
an advisory fee, computed daily and paid monthly, of .40% per annum of the first
$25 million of the Fund's average net assets, .35% of the next $25 million of
such assets, .30% of the next $50 million of such assets, .25% of the next $50
million of such assets and .20% of such assets in excess of $150 million. The
Advisory Agreement also provides that the Fund will pay to the Advisor an
administrative fee of .15% per annum of average net assets. The advisory and
administrative fees are currently being charged at voluntarily reduced rates of
.30% and .005%, respectively, of the Fund's average net assets.

The portfolio manager for the Fund since the Fund's inception is William M.
Feeney, Vice President of the Advisor. Will received his B.A. from the
University of Colorado and his M.B.A. from the University of San Francisco.

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

OTHER EXPENSES OF THE FUNDS. In addition to the fees described above, the Fund
pays all expenses not assumed by the Advisor. These expenses include, but are
not limited to, the following: custodian, stock transfer and dividend disbursing
fees and expenses; and shareholder servicing fees including fees to third party
servicing agents.

INVESTMENT OBJECTIVE, POLICIES
AND RISK CONSIDERATIONS

The investment objective of the Fund is to seek to obtain as high a level of
interest income exempt from federal income tax and California personal income
tax as is consistent with prudent investment management. The Fund seeks to
achieve its objective by investing in debt securities, the interest income from
which is not includable in gross income for federal income tax purposes ("exempt
from federal
<PAGE>
income tax") and is exempt from California personal income taxes. There is no
assurance that the Fund will achieve its investment objective. A portion of the
income received from the Fund may be included in the calculation of the federal
alternative minimum tax. The Fund may also invest in open-end and closed-end
investment companies which invest in securities whose income is exempt from
federal income tax and California personal income tax. It is the current
intention of the Fund to limit its investments in such investment companies to
not more than 5% of its net assets. Income received from these investments is
exempt from federal, but not California tax.

The term "municipal securities" as used in this Prospectus means obligations
issued by or on behalf of states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities. The term "California municipal securities" as used herein
refers to obligations that are issued by or on behalf of the State of California
and its political subdivisions. An opinion as to the tax-exempt status of the
interest paid on a municipal security is rendered to the issuer by the issuer's
bond counsel at the time of the issuance of the security.

The Fund invests primarily in California municipal securities which generally
have 3 to 20 years remaining to maturity at the time of acquisition. The
dollar-weighted average portfolio maturity is expected to range from 3 to 10
years. The Fund restricts its municipal securities investments to those within
or of a quality comparable to the four highest rating classifications of Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P").
Municipal bonds and notes and tax-exempt commercial paper would have, at the
date of purchase by the Fund, Moody's ratings of Aaa, Aa, A or Baa; MIG 1/VMIG1
or MIG2/VMIG2; P-1; or S&P's ratings of AAA, AA, A, or BBB; SP-1+, SP-1 or SP-2;
A-1+ or A-1, respectively. (See Appendix A in the Statement of Additional
Information for a description of these ratings.) The Fund's net asset value per
share will fluctuate as market conditions change.

Securities ratings are the opinions of the rating agencies issuing them and are
not absolute standards of quality. Because of the cost of ratings, certain
issuers do not obtain a rating for each issue. The Fund may purchase unrated
municipal securities which the Advisor determines to have a credit quality
comparable to that required for investment by the Fund (see the discussion of
securities ratings above).

Securities which are rated BBB by S&P or Baa by Moody's are considered
investment grade, but are more likely to have speculative characteristics, and
changes in economic conditions may lead to a weakened capacity to make principal
and interest payments than is the case with higher rated securities. As a matter
of operating policy, not more than 25% of the Fund's investments (other than
those guaranteed by the U.S. Government or any of its agencies or
instrumentalities) may be unrated securities. Such percentage shall apply only
at the time of acquisition of a security. To the extent that unrated municipal
securities may be less liquid, there may be somewhat greater market risk
incurred in purchasing them than in purchasing comparable rated securities. Any
unrated securities deemed to be not readily marketable by the Board of Directors
will be included in the calculation of the limitation of 15% of net assets which
may be invested in illiquid securities and other assets.
<PAGE>
The Fund is considered "non-diversified" because the Fund may invest more than
5% of its assets in the securities of a single California issuer, such as the
State of California. Since the Fund invests primarily in California municipal
securities, it may be advantageous to be able to invest more than 5% of such
assets in the securities of a particular issuer. This may result in additional
risk since changes in the value of the securities of one issuer may affect the
value of the Fund to a greater extent than would be the case with a diversified
fund. See "Special Risk Considerations In California." The Fund has qualified
and intends to continue to qualify to be treated as a "regulated investment
company" for purposes of the Internal Revenue Code ("the Code") and meet the
Code's separate requirements for portfolio diversification. See discussion of
taxes in "Dividends, Distributions and Income Taxation."

As a fundamental policy (i.e., the policy will not be changed without a majority
vote of its shareholders) the Fund will, under normal circumstances, invest up
to 100%, and not less than 80%, of its net assets in California municipal
securities, the interest on which is exempt from federal income tax and
California personal income tax and are not subject to the alternative minimum
tax. The Fund reserves the right to invest up to 20% of its net assets in
taxable U.S. Treasury securities which are secured by the "full faith and
credit" pledge of the U.S. Government, and in municipal securities of other
states which, although exempt from federal income taxes, are not exempt from
California income taxes. For temporary defensive purposes the Fund may invest in
excess of 20% of its net assets in these securities.

DESCRIPTION OF MUNICIPAL SECURITIES. Municipal securities may have fixed,
variable or floating rates of interest. Any variable or floating rate municipal
security not payable on demand within seven days will be deemed illiquid unless
the Advisor determines, according to procedures established by the Board of
Directors, that such securities are liquid. If held by the Fund, such securities
will be included in the calculation of the limitation of 15% of net assets which
may be invested in illiquid securities. Municipal bonds, which finance long-term
capital needs and generally have maturities of more than one year when issued,
are generally classified as either general obligation bonds or revenue bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, the proceeds of a special excise tax or other
specific revenue source. The Fund may also invest in certificates of
participation in general fund obligation leases of the State of California and
its political subdivisions. The staff of the Securities and Exchange Commission
may view such a security as illiquid. Unless the Board of Directors determines
that such a security is not illiquid, the Advisor will limit its investment in
such securities, together with all other illiquid securities and assets, to 15%
of the Fund's net assets.

The securities in which the Fund invests are subject to market and credit risk.
Market risk relates to the changes in market value that occur as a result of
variation in the level of prevailing interest rates and yield relationships in
the municipal securities market. In general, the longer the maturity of a
municipal security, the higher the yield and the greater the potential for
taxable capital appreciation or depreciation. Conversely, shorter maturities
tend to provide lower yields, but greater stability of principal. An increase in
interest rates will normally decrease the value of these longer-term
investments, while a decline in interest rates will normally increase the value
<PAGE>
of these investments. Generally, the shorter the average maturity of the Fund's
portfolio, the less its price will be affected by interest rate fluctuations.

In addition to the market risk of changing interest rates, municipal securities
are subject to credit risk relating to the operations of individual issuers. The
ability of the Fund to achieve its investment objective is dependent upon the
continuing ability of the issuers of municipal securities in which the Fund
invests to meet their obligations for the payment of principal and interest when
due.

SPECIAL RISK CONSIDERATIONS IN CALIFORNIA. The Fund's performance may be
especially affected by factors pertaining to the California economy, as well as
other factors affecting the ability of issuers of California municipal
securities to meet their obligations. As a result, the value of the Fund's
shares may fluctuate more widely than the value of shares of a portfolio
investing in securities relating to a number of different states. The amounts of
tax and other revenues available to issuers of California municipal securities
may be affected from time to time by economic, political, geographic and
demographic conditions.

There are additional risks associated with the Fund's investment in California
municipal obligations. These risks result from certain amendments to the
California Constitution and other statues that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial conditions of the State of California. These may impair the ability of
issuers of California municipal obligations to pay interest and principal on
their obligations.

California constitutional and statutory amendments and initiatives have imposed
certain limitations on taxes that may be levied against real property, as well
as place limits on the annual appropriations of the state and its political
subdivisions. These initiative measures approved by California voters have
resulted in a reduction in state and local government revenues and in spending
limits.

The payment of California municipal securities may be dependent on the ability
and willingness of the California Legislature to assist local governments in
paying bond obligations, and on the collection of ad valorem or special taxes by
local governments within the state. The continuing ability of the California
Legislature to increase the revenue of local governments, as well as to make
timely payments in connection with its own obligations, and the continuing
ability of local governments to raise revenue through taxation will affect the
ability of the state and local governments to pay debt service on these
obligations.

The payment of California municipal securities secured by general fund leases of
the state and local governments may depend on continued lease payments by the
lessor and continued use and occupancy of the leased property. California
municipal securities secured by payments from health care institutions are
subject to declining revenues of such institutions resulting from more stringent
cost controls by health insurers and by the federal, state and local governments
which reimburse such health institutions for indigent and Medicare patients,
which may adversely affect payment on those debt obligations.
<PAGE>
California municipal securities that are secured by mortgages or deeds of trust
on real property are subject to certain provisions of California law which limit
the remedies available to creditors in the case of a default and subsequent
foreclosure.

The California economy and general financial condition affect the ability of the
State and local governments to raise and redistribute revenues to assist issuers
of municipal securities to make timely payments on their obligations. California
has a diverse economy, with major employment in the agriculture, manufacturing,
high technology, services, trade, entertainment, and construction sectors.
Starting in mid-1990, the State entered a sustained economic recession, somewhat
later than the rest of the nation. It was the most severe recession in the State
since the 1930's, with job losses estimated at over 800,000, particularly in the
manufacturing (predominantly aerospace), services, and construction sectors. The
greatest effects were felt in Southern California.

Since the start of 1994, California's economy has been on a steady recovery. The
rate of economic growth in California ins 1996, in terms of job gains, exceeded
that of the rest of the United States. The state added nearly 350,000 jobs
during 1996, surpassing its pre-recession employment peak. The unemployment
rate, while still higher than the national average, fell to the low 6 percent
range in mi-1997, compared to over 10 percent during the recession. Many new
jobs were created in such industries as computer services, software design,
motion pictures and high technology manufacturing. Business serves, export trade
and other manufacturing also experienced growth. All major economies regions of
the state grew, with particularly large gains in the Silicon Valley region of
Northern California. California's economic recovery from the recession is
continuing at a strong pace. Recent economic reports indicate that, while the
rate of economic growth in California is expected to moderate over the next
three years, the increase in employment and income may exceed those of the
nation as a whole. The unsettled financial situation occurring in certain Asian
economies may adversely affect the state's export-related industries and,
therefore, the state's rate of economic growth.

On December 6, 1994, Orange County, California, together with its pooled
investment funds (the "Pools"), filed for protection under Chapter 9 of the
federal Bankruptcy Code, after reports that the Pools had suffered significant
market losses in their investments, causing a liquidity crisis for the Pools and
Orange County. One June 12, 1996, Orange County emerged from bankruptcy after
the successful sale of $880 million in municipal bonds allowed the county to pay
off the last of its creditors. On January 7, 1997, orange County returned to the
municipal bond market with a $136 million bond issue maturing in 13 years at an
insured yield of 7.3%.

An expanded discussion of investment considerations regarding investment in
California municipal obligations is contained in the Statement of Additional
Information.

WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction, but the settlement is delayed).
The Fund will not purchase securities the value of which is greater than 5% of
its net assets on a when-issued basis. The Fund, as purchaser, assumes the risk
of any decline in value of the security beginning on the date of the agreement
or purchase, and no interest accrues to the Fund until its accepts delivery of
the security. The Fund will not use such transactions for leveraging purposes,
<PAGE>
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.

FINANCIAL FUTURES CONTRACTS. The Fund may purchase and sell financial futures
contracts listed on a commodities board of trade to hedge its portfolio
investments against changes in value or as a temporary substitute for purchases
or sales of actual securities. The Fund is not a commodity pool and will engage
in futures transactions only for bona fide hedging purposes. Futures contracts
are agreements to buy or sell underlying securities at a specific future date
and price. The underlying instrument may be a security or an index of
securities. By buying or selling a futures contract, the Fund agrees to buy or
sell the underlying instrument or to deliver or receive cash settlement. Income
from financial futures trading is not exempt from federal or state income taxes.

Because fixed-income securities fluctuate in value inversely with the movement
of interest rates, a decline in value of a security can be hedged, or offset, by
an increase in value of an interest rate futures contract. Also, if the Advisor
anticipates that the value of a security will decline, it may purchase a futures
contract instead of the security to gain the benefit of the expected lower
price. Different trading strategies for futures have different risk and return
characteristics. The Advisor will choose among futures strategies based on its
judgment of how best to meet the Fund's goals. The judgment will be based on
factors such as current and anticipated interest rates, relative market
liquidity, and price levels in the futures markets compared to the underlying
securities markets. If the Advisor judges these factors incorrectly, or if price
changes in the futures positions are not well correlated with other investments,
the strategies may lower the Fund's return. These strategies involve certain
risks. There is no assurance that closing purchase transactions will be
available at favorable prices, resulting in possible reduction of the Fund's
income due to the use of hedging instruments, and possible loss in excess of the
initial margin. There may be imperfect correlation between the contract and the
underlying security and unsuccessful hedging transactions due to incorrect
market trend forecasts. A more thorough description of these investment
practices and their associated risks is contained in the Statement of Additional
Information.

When required by Securities and Exchange Commission guidelines, the Fund will
maintain a segregated account with the custodian with sufficient cash, U.S.
Government securities or other liquid securities to cover the potential
obligations created by futures. The Fund may invest up to 5% of its assets in
futures transactions represented by the aggregate "initial margin" (down
payment). The aggregate market value of securities underlying futures contracts
will not exceed 25% of the net assets of the Fund.

SHARES OF INVESTMENT COMPANIES. The Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
<PAGE>
investment companies which invest in securities whose income is exempt from
Federal and California state income taxes. Pursuant to the 1940 Act, the
percentage of Fund assets which may be so invested is not limited, provided that
the Fund and its affiliates do not acquire more than 3% of the shares of any
such investment company. The provisions of the 1940 Act may also impose certain
restrictions on redemption of the Fund's shares in other investment companies.
The Fund's purchase of shares of investment companies may result in the payment
by a shareholder of duplicative management fees. The Advisor will consider such
fees in determining whether to invest in other mutual funds. The Fund will
invest only in investment companies which do not charge a sales load; however,
the Fund may invest in such companies with distribution plans and fees under
Rule 12b-1 of the 1940 Act, and may pay customary brokerage commissions to buy
and sell shares of closed-end investment companies.

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

PORTFOLIO TURNOVER. The Fund expects to trade in securities for short-term gain
whenever deemed advisable by the Advisor in order to take advantage of anomalies
occurring in general market, economic or political conditions. Therefore, the
Fund may have a higher portfolio turnover rate than that of some other
investment companies, but it is anticipated that the annual portfolio turnover
rate of the Fund will not exceed 100%. The portfolio turnover rate is calculated
by dividing the lesser of sales or purchases of long-term portfolio securities
by the Fund's average month-end long-term investments. High portfolio turnover
involves correspondingly greater transaction costs in the form of dealer spreads
or brokerage commissions and other costs that the Fund will bear directly, and
may result in the realization of net capital gains, which are generally taxable
whether or not distributed to shareholders.

LOANS OF PORTFOLIO SECURITIES. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors up to
331/3% of its net assets. The borrower must maintain with the Fund's custodian
collateral consisting of cash, cash equivalents or U.S. Government securities
equal to at least 100% of the value of the borrowed securities, plus any accrued
interest. The Fund will receive any interest paid on the loaned securities and a
fee or a portion of the interest earned on the collateral. The risks in lending
portfolio securities, as with other extensions of secured

FREMONT MUTUAL FUNDS
<PAGE>
credit, consist of possible delay in receiving additional collateral or in the
recovery of the securities, or possible loss of rights in the collateral should
the borrower fail financially. The lender also may bear the risk of capital loss
on investment of the cash collateral, which must be returned in full to the
borrower when the loan is terminated. Loans will be made only to firms deemed by
the Advisor to be of good standing and will not be made unless, in the judgment
of the Advisor, the consideration to be earned from such loans would justify the
associated risk.

BORROWING. The Fund may borrow from banks up to 30% of the value of its total
assets for temporary or emergency purposes and enter into reverse repurchase
agreements. If the income and gains on securities purchased with the proceeds of
borrowings or reverse repurchase agreements exceed the cost of such borrowings
or agreements, the Fund's earnings or net asset value will increase faster than
otherwise would be the case; conversely, if the income and gains fail to exceed
the cost, earnings or net asset value would decline faster than otherwise would
be the case. If the 300% asset coverage required by the 1940 Act should decline
as a result of market fluctuation or other reasons, the Fund may be required to
sell some of its portfolio securities within three days to reduce the borrowings
and restore the 300% asset coverage, even though it may be disadvantageous from
an investment standpoint to sell securities at that time.

INVESTMENT RESTRICTIONS. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating the Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). In addition, a minimum of 80% of assets must be invested
in California municipal securities exempt from federal and California income
taxes and not subject to the alternative minimum tax on individuals. These
investment restrictions and the Fund's investment objective cannot be changed
without the approval of shareholders of the Fund; all other investment practices
described in this Prospectus and in the Statement of Additional Information can
be changed by the Board of Directors without shareholder approval.

INVESTMENT RESULTS

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

From time to time, the Fund may advertise its yield and "tax-equivalent" yield.
The Fund's yields are calculated according to methods that are standardized for
all mutual funds. Because yield calculation methods differ from the methods used
for other purposes, the Fund's yield may not equal its distribution rate, the
income paid to a shareholder s account, or the income reported in the Fund's
financial statements. The yield of the Fund refers to the income generated by an
investment in the Fund over a 30-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that period is assumed to be generated each
30 days over a 365-day period and is shown as a percentage of the investment.
The Fund may also advertise together with its yield a tax-equivalent yield which
reflects the yield which would be required of a taxable investment at a stated
income tax rate in order to equal the Fund's yield.

The Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses of
the Fund, so that any investment results reported by the Fund should not be
considered representative of what an investment in the Fund may earn in any
future period. When utilized, total return for the unmanaged indices described
in the Statement of Additional Information will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
recurring expenses such as advisory fees, brokerage costs or administrative
expenses. These factors and possible differences in calculation methods should
be considered when comparing the Fund's investment results with those published
for other investment companies, other investment vehicles and unmanaged indices.
The comparison of the Fund to an alternative investment should be made with
consideration of differences in features and expected performance. The Fund may
also be mentioned in newspapers, magazines, or other media from time to time.
The Fund assumes no responsibility for the accuracy of such data. The Fund's
results also should be considered relative to the risks associated with the
Fund's investment objective and policies. See "Investment Results" in the
Statement of Additional Information. The Fund may also be mentioned in
newpapers, magazines, or other media from time to time.

Additional performance information regarding the Fund is included in the Fund's
annual report, which will be mailed to shareholders without charge upon request.

HOW TO INVEST

The shares of the Fund may be purchased through the Transfer Agent by submitting
<PAGE>
payment by check, bank wire or electronic (Automated Clearing House or "ACH")
transfer and, in the case of new accounts, a completed account application form.
There is no sales load or contingent deferred sales load charged to purchase
shares of the Fund. All orders for the purchase of shares are subject to
acceptance or rejection by the Board of Directors or the Advisor. Purchases of
shares are made at the net asset value price next determined after the purchase
order is received by the Transfer Agent or by a selling agent of the Fund. All
investment checks are subject to a 10-day holding period. A minimum initial
investment of $2,000 is required to open a shareholder account. The minimum
initial investment is waived for accounts opened with the Automatic Investment
Plan and may be waived in other instances at the sole discretion of the Advisor.
(See "Automatic Investment Plan.") Each subsequent investment must be $100 or
more. There is a minimum continuing balance of $1,500 required (calculated on
the basis of original investment value). In some cases, the initial investment
minimum balance requirement may be waived.

Investors wishing to open a new account by bank wire must call the Transfer
Agent at 800-548-4539 to obtain an account number and detailed wire
instructions. Bank wire instructions are also provided in the last section of
this Prospectus. All bank wire investments received before 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 the Fund may also be purchased through broker-dealers or other
financial intermediaries who have made appropriate arrangements with the Fund.
Such agents are responsible for ensuring that the account documentation is
complete and that timely payment is made for the Fund shares purchased for their
customers pursuant to such orders. These agents may charge a reasonable
transaction fee to their customers. In some instances, all or a
portion of the transaction fee, or other selling charge, may be paid by the
Advisor. To the extent these agents perform shareholder servicing activities for
the Fund, they may receive fees from the Fund or the Advisor for such services.

From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor for such activities.

As a condition of this offering, if an order to purchase shares is cancelled due
to nonpayment (for example, a check returned for "insufficient funds"), the
person who made the order will be subject to a $20 charge and must reimburse the
Fund for any loss incurred by reason of such cancellation. For more information,
see Other Investment and Redemption Services in the Statement of Additional
Information.

First Funds Distributor, Inc., 4455 Camelback Road, Suite 261E, Phoenix, Arizona
85018, is the principal underwriter for the Fund.
<PAGE>
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

STATEMENTS AND REPORTS

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

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

EXCHANGES BETWEEN FUNDS

Shares of the Fund and of any other Fremont Fund may be exchanged for each other
at their respective net asset values, provided that the account registration
remains identical. Exchanges may only be made for shares of a

Fremont Fund then offered for sale in your state of residence. It is required
that (1) all shares in one Fund must be exchanged or (2) the remaining balance
must be at least $1,500. The minimum balance requirement may be waived. These
exchanges are not tax-free and will result in a shareholder realizing a gain or
loss for tax purposes.

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

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

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

TELEPHONE EXCHANGE PRIVILEGE

An investor may elect on the account application to authorize exchanges by
telephone. A shareholder may give instructions regarding exchanges by calling
800-548-4539. A shareholder wishing to initiate the telephone exchange privilege
should contact the Fund. This privilege will not be added to an account without
written instruction to do so from the shareholder. Telephone requests received
<PAGE>
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

AUTOMATIC INVESTMENT PLAN

A shareholder may authorize a withdrawal to be made automatically once or twice
each month from a credit balance in the shareholder's bank checking, savings,
negotiable on withdrawal (NOW) or similar account, with the proceeds to be used
to purchase shares of the Fund. The minimum initial investment is waived for
accounts opened with the Automatic Investment Plan. The amount of the monthly
investment must be at least $50, and is not otherwise subject to the $100
minimum for subsequent investments. There is no obligation to make additional
payments, and the plan may be terminated by the shareholder at any time.
Termination requests must be received in writing at least 5 days prior to the
regular draft date, or the drafts will not cease until the next cycle. The
Transfer Agent may impose a charge for this service, although no such charge
currently is contemplated. If a shareholder's order to purchase shares is
cancelled due to nonpayment (for example, "insufficient funds"), the
shareholder's account will be subject to a $20 charge and the shareholder will
be responsible for reimbursing the Fund for any loss incurred by reason of such
cancellation. A shareholder wishing to initiate the plan on a new or existing
account must fill out an Automatic Investment Plan form. The form is available
upon request.

HOW TO REDEEM SHARES

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
<PAGE>
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.

Because of market fluctuations, the amount a shareholder receives for shares
redeemed may be more or less than the amount paid for them.

Redemption of shares, exchanges and redemptions under an Automatic Withdrawal
Plan may result in taxable capital gains or losses.

TELEPHONE REDEMPTION PRIVILEGE

An investor may elect on the regular account application to authorize
redemptions by telephone. This privilege will not be added to an account without
written authorization to do so from the shareholder. A shareholder may then give
instructions regarding redemptions by calling 800-548-4539. Telephone requests
received by the close of trading on the New York Stock Exchange (currently 4:00
p.m., Eastern time), will be processed at the net asset value calculated that
same day. During times of drastic economic or market conditions, the telephone
redemption privilege may be difficult to implement. The Transfer Agent will make
its best effort to accommodate shareholders when its telephone lines are used to
capacity. Under these circumstances, a shareholder should consider using
overnight mail to send a written redemption request.

Neither the Investment Company, nor the Transfer Agent, nor their respective
affiliates, will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost or expense in
acting on such telephone instructions. The affected shareholder(s) will bear the
risk of any such loss. The Investment Company, or the Transfer Agent, or both,
will employ reasonable procedures to determine that telephone instructions are
genuine. If the Investment Company and/or the Transfer Agent do not employ such
procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
<PAGE>
written confirmation of the transactions, and/or tape recording telephone
instructions.

CHECK REDEMPTION PRIVILEGE

The Transfer Agent will, upon request, provide each shareholder with free checks
which may be made payable by shareholders to the order of anyone in any amount
of at least $250. The Fund will arrange for checks to be honored by The Fifth
Third Bank, Cincinnati, Ohio (the "Bank") for this purpose. The Bank has the
right to refuse any check which does not conform with its requirements. The
shareholder will be subject to the Bank's rules and regulations governing
checking accounts, including a $20 charge for refused checks. This charge may
change without notice. When such a check is presented to the Transfer Agent for
payment, the Transfer Agent, as the shareholder's agent, will cause the
Investment Company to redeem a sufficient number of full and fractional shares
in the shareholder's account to cover the amount of the check. Since it is not
possible to predict the exact value of a shareholder's account when a redemption
check is cleared, shareholders may not close an account with a check.

AUTOMATIC WITHDRAWAL PLAN

A shareholder may request redemptions of a specified dollar amount (minimum of
$100) on either a monthly, quarterly, or yearly basis. Currently, there is no
charge for this service. Redemptions will be made on the last business day of
the month. Because a redemption constitutes a liquidation of shares, the number
of shares owned in the account will be reduced. Automatic redemptions should not
reduce the account below the minimum balance required (currently $1,500).
Shareholders may terminate the Automatic Withdrawal Plan at any time, but not
less than five days before a scheduled payment date. When an exchange is made
between Fremont Funds, shareholders must specify if they desire the automatic
withdrawal option to be transferred to a new account opened by the exchange. As
an account balance declines to the minimum permitted, the shareholder must
advise the Transfer Agent if the automatic withdrawal feature is to be
transferred to another account of the shareholder. Shareholders should note that
if there is an Automatic Withdrawal Plan established for an account and the
entire account is exchanged into another fund, the automatic withdrawal option
must be renewed by written request to the Transfer Agent. A shareholder wishing
to initiate automatic redemptions must complete an Automatic Withdrawal Plan
form available from the Transfer Agent.

SIGNATURE GUARANTEE

To better protect the Fund and shareholders' accounts, a signature guarantee is
required for certain transactions. Signatures must be guaranteed by an "eligible
guarantor institution" as defined in applicable regulations. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. Signature guarantees will be accepted from any eligible guarantor
<PAGE>
institution which participates in a signature guarantee program. A notary public
is not an acceptable guarantor.

OTHER IMPORTANT REDEMPTION INFORMATION

Although it is anticipated that this process will be completed in less time, it
may take up to 15 days. Redemption proceeds will not be delayed when shares have
been paid for by bank wire or where the account holds a sufficient number of
shares already paid for with collected funds.

Except in extraordinary circumstances and as permissible under the 1940 Act,
payment for shares redeemed will be made promptly after receipt of a redemption
request, if in good order, but not later than seven calendar days after the
redemption request is received in proper form. Requests for redemption which are
subject to any special conditions or which specify an effective date other than
as provided herein cannot be accepted.

The Investment Company reserves the right to redeem mandatorily the shares in a
shareholder's account if the balance is reduced to less than $1,500 in net asset
value through redemptions or other action by the shareholder. Notice will be
given to the shareholder at least 30 days prior to the date fixed for such
redemption, during which time the shareholder may increase its holdings to an
aggregate amount of $1,500 or more (with a minimum purchase of $100 or more).
This minimum balance may be waived.

REDEMPTION IN KIND

The Investment Company reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
the Fund and valued as they are for purposes of computing the Fund's net asset
value (a redemption in kind). If payment is made in securities, a shareholder
may incur transaction expenses in converting these securities into cash.

TRANSFER AGENT

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.
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND INCOME TAXATION

The Fund has elected, and intends to continue to qualify to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
(the "Code"). For any tax year in which the Fund so qualifies and meets certain
other distribution requirements, it will not incur a federal tax liability. Such
qualification under the Code requires the Fund to diversify its investments so
that, at the end of each fiscal quarter, (1) at least 50% of the market value of
the Fund s assets is represented by cash, U.S. Government securities, securities
of other regulated investment companies and other securities, limited, in
respect to any one issuer, to an amount not greater than 5% of the Fund's assets
and 10% of the outstanding voting securities of such issuer, and (2) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.

The Fund declares dividends daily and will distribute its net investment income
monthly. The Fund intends to distribute substantially all of its net realized
capital gains, if any, at the end of the calendar year (on or about December
15). Dividend and capital gains distributions, if any, may be reinvested in
additional shares at net asset value on the day of reinvestment, or may be
received in cash. All taxable dividends and distributions are taxable to a
shareholder whether or not they are reinvested in shares of the Fund. Any
long-term or mid-term capital gains distributions are taxable to shareholders as
long-term or mid-term capital gains, respectively, regardless of how long
shareholders have held Fund shares. The maximum capital gains rate for
individuals is 28% with respect to assets held for more than 12 months, but not
more than 18 months, and 20% with respect to assets held more than 18 months.
The maximum capital gains rate for corporate shareholders is the same as the
maximum tax rate for ordinary income. Distributions of short-term capital gains
will be subject to the tax as ordinary income.

Shareholders may elect:

- - - to have all dividends and capital gain distributions automatically
reinvested in additional shares; or

- - - to receive the income dividends and short-term capital gains distributions
in cash and accept the long-term capital gains distributions in additional
shares; or

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

Automatic reinvestments will be made at net asset value on the day of
reinvestment. If no election is made by a shareholder, all dividends and capital
gain distributions will be automatically reinvested. These elections may be
changed by the shareholder at any time, but to be effective for a particular
dividend or capital gain distribution, the election must be received by the
Transfer Agent approximately 5 business days prior to the payment date to permit
the change to be entered into the shareholder account. The federal income tax
status of dividends and capital gains distributions is the same whether taken in
cash or reinvested in shares.

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

The Fund intends to invest in sufficient municipal securities so that it will
qualify to pay "exempt-income dividends" (as defined in the Code) to
shareholders. Exempt-interest dividends distributed to shareholders are not
includable in the shareholder's gross income for federal income tax purposes.
However, this favorable tax treatment may not apply to shareholders who are
"substantial users" (or "related persons" thereto) with respect to facilities
financed by securities held by the Fund.

To the extent that dividends are derived from interest on California municipal
securities, or from interest earnings on certain U.S. Government obligations,
and as long as at least 50% of the value of the total assets of the Fund
consists of bonds on which the interest is exempt from taxation under the laws
of California or the laws of the United States, such dividends will also be
exempt from California personal income taxes. For California income tax
purposes, capital gain distributions and any income from investment in taxable
securities (other than California municipal obligations and direct U.S.
Government obligations) are taxable as ordinary income. The Fund will inform
shareholders annually as to the portion of the distributions which constitutes
dividends exempt from California personal income tax. All distributions received
by a corporation doing business in California may be subject to California
franchise taxes.

Interest income (in the form of dividends) exempt from federal income tax is not
necessarily exempt under the income or other tax laws of state and local taxing
authorities. Shareholders should consult their tax advisors about the status of
distributions from the Fund in this regard.

The Tax Reform Act of 1986 restricts the federal tax exemption for interest
earned on certain municipal obligations. Under that law, interest on "private
activity" municipal bonds (for example, those issued to finance housing
projects) issued after the effective date is an item of "tax preference" subject
to the individual Alternative Minimum Tax. It is the current intention of the
Fund not to purchase bonds that are subject to the individual Alternative
Minimum Tax. Shareholders will be given prior notification if the Fund intends
to change this policy. Corporate shareholders may wish to consult their tax
advisors before investing in the Fund, since some of the interest on municipal
bonds held in the Fund's portfolio may be included in income subject to the
corporate Alternative Minimum Tax.

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

CALCULATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE

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

The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. For further information,
see "How to Invest," "How to Redeem Shares" and "Exchanges Between Funds" in
this Prospectus, and "How to Invest" and "Other Investment and Redemption
Services" in the Statement of Additional Information.

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

EXECUTION OF PORTFOLIO TRANSACTIONS

Orders for the Fund's portfolio securities transactions are placed by the
Advisor. The Advisor strives to obtain the best available prices in the Fund's
portfolio transactions, taking into account the costs and promptness of
executions. Subject to this policy, transactions may be directed to those
broker-dealers who provide research, statistical and other information to the
Fund or the Advisor or who provide assistance with respect to the distribution
of Fund shares. There is no agreement or commitment to place orders with any
broker-dealer.

Subject to the requirements of the 1940 Act and procedures adopted by the Board
of Directors, the Fund may execute portfolio transactions through any broker or
dealer and pay brokerage commissions to a broker which is an affiliated person
of the Investment Company, the Advisor, or an affiliated person of such person.

GENERAL INFORMATION

The Investment Company, organized as a Maryland corporation on July_13, 1988, is
a fully managed open-end investment company. Currently, the Investment Company
has authorized several series of capital stock with equal dividend and
liquidation rights within each series. Investment Company shares are entitled to
one vote per share (with proportional voting for fractional shares) and are
freely transferable. Shareholders have no preemptive or conversion rights.
Shares may be voted in the election of directors and on other matters submitted
to the vote of shareholders. As permitted by Maryland law, there normally will
be no annual meeting of shareholders in any year, except as required under the
1940 Act. The 1940 Act requires that a meeting be held within 60 days in the
event that less than a majority of the directors holding office has been elected
by shareholders. Directors shall continue to hold office until their successors
are elected and have qualified. Investment Company shares do not have cumulative
voting rights, which means that the holders of a majority of the shares voting
for the election of directors can elect all of the directors. Shareholders
holding 10% of the outstanding shares may call a meeting of shareholders for any
purpose, including that of removing any director. A director may be removed upon
a majority vote of the shareholders qualified to vote in the election. The 1940
Act requires the Investment Company to assist shareholders in calling such a
meeting.

On any matter submitted to a vote of shareholders, such matter shall be voted by
the Fund's shareholders separately when the matter affects the specific interest
of the Fund (such as approval of the Advisory Agreement with the Advisor) except
in matters where a vote of all series in the aggregate is required by the 1940
Act or otherwise.

Stephen D. Bechtel, Jr., and members of his family, including trusts for family
members, due to their shareholdings, may be considered controlling persons of
the Fund under applicable Securities and Exchange Commission regulations.
<PAGE>
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 or 415-284-8900

FREMONT MUTUAL FUNDS, INC.

Fremont Money Market Fund
Fremont California Intermediate Tax-Free Fund
Fremont Bond Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
Fremont International Small Cap Fund
<PAGE>
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,Inc.
50 Beale Street, Suite 100
San Francisco, CA 94105

ADVISOR/TRANSFER AGENT

Fremont Investment Advisors, Inc.
333 Market Street, Suite 2600
San Francisco, CA 94105

SUB-TRANSFER AGENT

Mailing Address:
National Financial Data Services
P.O. Box 419343
Kansas City, MO 64141-6343
800-548-4539

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
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Fund or the Advisor. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
<PAGE>
FREMONT MUTUAL FUNDS, INC.

Fremont Real Estate Securities Fund

March 1, 1998
<PAGE>
TABLE OF CONTENTS

Item Page No.

Summary of Fees and Expenses

The Advisor, the Sub-Advisor and the Fund

Investment Objective, Policies,
and Risk Considerations

General Investment Policies

Investment Results

How to Invest

Shareholder Account Services and Privileges

How to Redeem Shares

Retirement Plans

Dividends, Distributions,
and Federal Income Taxation

Plan of Distribution

Calculation of Net Asset Value and
Public Offering Price

Execution of Portfolio Transactions

General Information

Telephone Numbers and Addresses
<PAGE>
PROSPECTUS

FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the FREMONT REAL ESTATE SECURITIES FUND (the
"Fund").

FREMONT REAL ESTATE SECURITIES FUND seeks to provide total return through a
combination of income and long-term capital appreciation by investing primarily
in equity securities of companies in the real estate industry.

There can be no assurance that the Fund will achieve its investment objective.
The Fund is a non- diversified fund as defined by the Investment Company Act of
1940, as amended (the "1940 Act").

Shares of the Fund are offered without a sales charge.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is March.1, 1998.

FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
<PAGE>
SUMMARY OF FEES AND EXPENSES

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested
Dividends None
Deferred Sales Load None
Redemption Fees(1) None
Exchange Fee None

Annual Fund Operating Expenses (as a percentage of average net assets)(2)

Management Fee(3) None
12b-1 Expenses(4) .25%
Other Expenses after Reimbursement 1.25%
Total Fund Operating Expenses 1.00%

Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:

1 Year $5
3 Years $16

THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE EXPENSES OR
ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR LESS THAN
THOSE SHOWN ABOVE.

The purpose of the above table is to give you information and assistance in
understanding the various costs and expenses of the Fund that an investor may
bear directly or indirectly. Other expenses include, but are not limited to,
transfer agent fees paid to Fremont Investment Advisors, Inc.; custody, legal
and audit fees; costs of registration of Fund shares under applicable laws; and
costs of printing and distributing reports to shareholders. The percentages
expressing annual fund operating expenses of the Fund are based on estimated
expenses for the current fiscal year.

See "The Advisor, the Sub-Advisor and the Fund."

(1) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is currently $10.
See "How to Redeem Shares."

(2) The Advisor has agreed to limit the Fund's total operating expenses to
1.50% of average daily net assets. The Fund may reimburse the Advisor for any
reductions in the Advisor's fees during the three years following that reduction
if such reimbursement is requested by the Advisor, if such reimbursement can be
achieved within the foregoing expense limit, and if the Board of Directors
approves the reimbursement at the time of the request as not inconsistent with
the best interests of the Fund. The Advisor generally seeks to reimburse the
oldest reductions and waivers before payment of fees and expenses for the
current year. Absent reimbursements of expenses by the Advisor, other expenses
and total operating expenses are estimated to be .25% and 1.30%, respectively.

(3) The Advisor has voluntarily waived the management fee for the first six
months, until June 30, 1998, and will continue to waive fees until December 31,
1998 or until the assets in the Fund reach $25 million.
<PAGE>
(4) 12b-1 fees may be paid to financial intermediaries for services provided
through sales program(s). Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers. For more information on 12b-1 fees,
see "Plan of Distribution."

THE ADVISOR, THE SUB-ADVISOR AND THE FUND

Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in the Fremont Real
Estate Securities Fund. The Investment Company has other series offered under a
different prospectus, and the Board of Directors of the Investment Company is
permitted to create additional series at any time. The Fund has its own
investment objective and policies and operates as a separate mutual fund.

The management of the business and affairs of the Investment Company is the
responsibility of the Board of Directors. Fremont Investment Advisors, Inc. (the
"Advisor") provides the Fund with investment management services under an
Investment Advisory Agreement (the "Advisory Agreement") with the Investment
Company. The Advisory Agreement provides that the Advisor shall furnish advice
to the Fund with respect to its investments and shall, to the extent authorized
by the Board of Directors, determine what securities shall be purchased or sold
by the Fund. As described more fully below, the Advisor has retained Kensington
Investment Group (the "Sub-Advisor") to provide the Fund with portfolio
management services. The Advisor's Investment Committee oversees the portfolio
management of the Fund, including the services provided by the Sub-Advisor.

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

As compensation for its services to the Fund, the Advisor receives from the Fund
an advisory fee, computed daily and paid monthly, of 1.00% per annum of the
Fund's average net assets. This advisory fee is higher than for most mutual
funds. The Fund also pays the Advisor a 12b-1 fee of 0.25% per annum, subject to
the terms of a plan of distribution more fully described under "Plan of
Distribution." In addition to the fees described above, the Fund pays its own
operating expenses including, but not limited to: taxes, if any; brokerage and
commission expenses, if any; interest charges on any borrowings; transfer agent,
administrator, custodian, legal and auditing fees; shareholder servicing fees
including fees to third-party servicing agents; fees and expenses of Directors
who are not interested persons of the Advisor or the Sub-Advisor; costs and
expenses of calculating daily net asset value; costs and expenses of accounting,
bookkeeping and recordkeeping required under the 1940 Act; insurance premiums;
trade association dues; fees and expenses of registering and maintaining
registration of shares under federal and applicable state securities laws; all
costs associated with shareholders' meetings and the preparation and
dissemination of proxy materials, except for meetings called solely for the
benefit of the Advisor of its affiliates; printing and mailing prospectuses,
statements of additional information and reports to shareholders; and other
expenses relating to the Fund's operations, plus any extraordinary and
non-recurring expenses that are not expressly assumed by the Advisor.

The following table depicts the Sub-Advisors performance on those portions 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.

Average Annual Total Returns for Period Ended December 31, 1997

1 Year Inception to
Date(1)

Kensington Investment Group 29.14% 25.30%
NAREIT Total Return Index(2) 18.86% 19.48%
S&P 500 Index(3) 33.36% 27.79%

(1) "Inception To Date" returns incorporates the period July 10, 1994
through December 31, 1997.

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.
<PAGE>
As compensation for its services, the Advisor (not the Fund) pays the
Sub-Advisor a fee equal to .50% per annum of Fund assets managed by the
Sub-Advisor. Both the Advisor and the Sub-Advisor will waive their fees for the
first six months, and will then continue to waive fees until the earlier of
December 31, 1998 or until assets in the Fund reach $25 million. The Portfolio
Management Agreement with the Sub-Advisor may be terminated by the Advisor or
the Investment Company upon 30 days' written notice. The Advisor has day-to-day
authority to increase or decrease the amount of the Fund's assets under
management by the Sub-Advisor.

The Advisor will provide direct portfolio management services to the extent that
the Sub-Advisor does not provide these services. The Investment Company and the
Advisor have received from the Securities and Exchange Commission an order (the
"SEC Order") exempting the Fund from the provisions of the 1940 Act that require
the shareholders of the Fund to approve the Fund's sub-advisory agreement(s) and
any amendments thereto. The SEC Order permits the Advisor to hire new
sub-advisors, terminate sub-advisors, rehire existing sub-advisors whose
agreements have been re-assigned (and, thus, automatically terminated), and
modify sub-advisory agreements without the prior approval of shareholders. By
eliminating shareholder approval in these matters, the Advisor would have
greater flexibility in managing sub-advisors, and shareholders would save the
considerable expense involved in holding shareholder meetings and soliciting
proxies. The Advisor may in its discretion manage all or a portion of the Fund's
portfolio directly with or without the use of a sub-advisor.

Investment Company Administration Corporation (the "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 Administrator. For its services,
the Administrator receives an annual fee from the Advisor (not the Fund) equal
to 0.02% of the first $1 billion of the Investment Company's average daily net
assets and 0.015% thereafter, subject to a minimum annual fee of $20,000 per
Fund.

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

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of the Fund are stated below. The Fund is
intended for long-term investors, not for those who may wish to redeem their
shares after a short period of time.

All investments, including mutual funds, have risks, and no investment is
suitable for all investors. The Fremont Real Estate Securities Fund is not
intended to constitute a complete investment program. Investors should consult
with their financial and other advisors concerning the suitability of this
investment for their own particular circumstances. There is no assurance that
the Fund will achieve its investment objective.

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
<PAGE>
include: real estate investment trusts ("REITs"), real estate operating
companies, companies operating businesses which own a substantial amount of real
estate such as hotels and assisted living facilities and development companies.

A substantial portion of the Fund's assets will be invested in securities of
REITs. REITs pool investors' funds for investment primarily in income producing
real estate or real estate related loans or interests. A REIT is not taxed on
income distributed to shareholders if it complies with several requirements
relating to its organization, ownership, assets, and income and a requirement
that it distribute to its shareholders at least 95% of its taxable income (other
than net capital gains) for each taxable year. REITs can generally be classified
as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the
majority of their assets directly in real property, derive their income
primarily from rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their income primarily
from interest payments. Hybrid REITs combine the characteristics of both Equity
REITs and Mortgage REITs.
<PAGE>
The Fund will not invest in real estate directly, but only in securities issued
by real estate companies. However, the Fund may be subject to risks similar to
those associated with the direct ownership of real estate (in addition to
securities markets risks) because of its policy of concentration in the
securities of companies in the real estate industry. These risks include
declines in the value of real estate, risks related to general and local
economic conditions, dependency on management skill, increase in interest rates,
possible lack of availability of mortgage funds, overbuilding, extended
vacancies of properties, increased competition, increases in property taxes and
operating expenses, changes in zoning laws, losses due to costs resulting from
the clean-up of environmental problems, casualty or condemnation losses,
limitations on rents, changes in neighborhood values and the appeal of
properties to tenants. Certain REITs have relatively small capitalization, which
may tend to increase the volatility of the market price of securities issued by
such REITs.

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
<PAGE>
preferred stock obligations than would occur with bonds and preferred stocks in
higher categories. See Appendix A to the Statement of Additional Information for
a description of rating categories.

GENERAL INVESTMENT POLICIES

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

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

U.S. Government Securities. The Fund may invest in U.S. Government securities,
which are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as Treasury bills,
notes, and bonds and Government National Mortgage Association certificates, are
supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Mortgage Association, are supported by the right
of the issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities as described above in the future, other than as set forth
above, because it is not obligated to do so by law.

Shares of Investment Companies. The Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
investment companies to the extent that such investments may facilitate
achieving the objective of the Fund or to the extent that they afford the
primary or most practical means of access to a particular market or markets or
they represent attractive investments in their own right. The percentage of Fund
assets which may be so invested is not limited, provided that the Fund and its
affiliates do not acquire more than 3% of the shares of any such investment
company. The provisions of the 1940 Act may also impose certain restrictions on
redemption of the Fund's shares in other investment companies. The Fund's
purchase of shares of investment companies may result in the payment by a
shareholder of duplicative management fees. The Advisor and/or Sub-Advisor will
consider such fees in determining whether to invest in other mutual funds. The
Fund will invest only in investment companies which do not charge a sales load;
however, the Fund may invest in such companies with distribution plans and fees,
and may pay customary brokerage commissions to buy and sell shares of closed-end
investment companies.
<PAGE>
Repurchase Agreements. As part of its cash reserve position, the Fund may enter
into repurchase agreements through which the Fund acquires a security (the
"underlying security") from the seller, a well-established securities dealer or
a bank that is a member of the Federal Reserve System. At that time, the bank or
securities dealer agrees to repurchase the underlying security at the same
price, plus a specified amount of interest. Repurchase agreements are generally
for a short period of time, often less than a week. The seller must maintain
with the Fund's custodian collateral equal to at least 100% of the repurchase
price, including accrued interest, as monitored daily by the Advisor and/or
Sub-Advisor . The Fund will not enter into a repurchase agreement with a
maturity of more than seven business days if, as a result, more than 15% of the
value of its net assets would then be invested in such repurchase agreements.
The Fund will enter into repurchase agreements only where (1) the underlying
securities are issued or guaranteed by the U.S. Government, (2) the market value
of the underlying security, including accrued interest, will be at all times
equal to or in excess of the value of the repurchase agreement, and (3) payment
for the underlying securities is made only upon physical delivery or evidence of
book-entry transfer to the account of the custodian or a bank acting as agent.
In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses, including: (1) a possible decline in the value of the
underlying security during the period in which the Fund seeks to enforce its
rights thereto; (2) possible reduced levels of income and lack of access to
income during this period; and (3) expenses of enforcing the Fund's rights.

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

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

Borrowing. The Fund may borrow from banks an amount not exceeding 30% of the
value of its total assets for temporary or emergency purposes and may enter into
reverse repurchase agreements. If the income and gains on securities purchased
with the proceeds of borrowings or reverse repurchase agreements exceed the cost
of such borrowings or agreements, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the cost, earnings or net assets value would decline faster
than otherwise would be the case.

Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under federal securities laws, but can be offered and
sold to "qualified institutional buyers." However, the Fund will not invest more
than 15% of its assets in illiquid investments, which includes repurchase
agreements and fixed time deposits maturing in more than seven days, and
securities that are not readily
<PAGE>
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.

Options and Futures Contracts. When the Advisor and/or Sub-Advisor wishes to
hedge against market fluctuations, strategies such as buying puts, writing
calls, and selling futures may be used to reduce market exposure. Because most
stock index futures and options are based on broad stock market indices, their
performance tends to track the performance of common stocks generally, which may
or may not correspond to the types of securities in which the Fund invests. The
Fund will segregate cash, U.S. Government securities, or other liquid securities
(or, as permitted by applicable regulations, enter into certain offsetting
positions) to cover its obligations under options and futures contracts to avoid
leveraging.

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

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

The Fund will segregate cash, cash equivalents, or liquid securities, or hold a
covered position against any potential delivery or payment obligations under any
outstanding option or futures contacts.

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

Although these investment practices will be used primarily to generate income or
to minimize the fluctuation of principal, they do involve risks which are
different in some respects from the investment risks associated with similar
funds which do not engage in such activities. These risks may include the
following: futures contracts -- no assurance that closing purchase transactions
will be available at favorable prices, possible reduction of the Fund's income
due to the use of hedging, possible reduction in value of both the securities
hedged and the hedging instrument, possible loss in excess of the initial margin
payment; options and futures contracts -- imperfect correlation between the
contract and the underlying security, commodity, or index and unsuccessful
hedging transactions due to incorrect forecasts of market trends; writing
covered call options --inability to effect closing transactions at favorable
prices and inability to participate in the appreciation of the underlying
securities above the exercise price and premium received; and purchasing or
selling put and call options -- possible loss of the entire premium. A more
thorough description of these investment practices and their associated risks is
contained in the Statement of Addition Information.
<PAGE>
Investment Restrictions. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions and the Fund's investment objective
cannot be changed without the approval of shareholders of the Fund; all other
investment practices described in this Prospectus and in the Statement of
Additional Information, however, can be changed by the Board of Directors
without shareholder approval.

INVESTMENT RESULTS

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

The Fund may calculate performance on an average annual total return basis for
1-, 5-, and 10-year periods and over the life of the Fund, after such periods
have elapsed. Average annual total return will be computed by determining the
average annual compounded rate of return over the applicable period that would
equate the initial amount invested to the ending redeemable value of the
investment. Ending redeemable value includes dividends and capital gain
distributions, reinvested at net asset value at the reinvestment date determined
by the Board of Directors. The resulting percentages indicate the positive or
negative investment results that an investor would have experienced, including
reinvested income dividends and capital gain distributions and changes in share
price during the period. The average annual compounded rate of return over
various periods may also be computed by utilizing ending redeemable values as
determined above.

The Fund's investment results will vary from time to time depending upon, among
other things, economic conditions, market conditions, the composition of the
Fund's portfolio, and operating expenses of the Fund, so that any investment
results reported by the Fund should not be considered representative of what an
investment in the Fund may earn in any future period. When utilized, total
return for the unmanaged indices described in the Statement of Additional
Information will be calculated assuming reinvestment of dividends and interest,
but will not reflect any deductions for recurring expenses such as advisory
fees, brokerage costs, or administrative expenses. These factors and possible
differences in calculation methods should be considered when comparing the
Fund's investment results with those published for other investment companies,
other investment vehicles, and unmanaged indices. The comparison of the Fund to
an alternative investment should be made with consideration of differences in
features and expected performance. The Fund may also be mentioned in newspapers,
magazines, or other media from time to time. The Fund assumes no responsibility
for the accuracy of such data. The Fund's results also should be considered
relative to the risks associated with the Fund's investment objective and
policies. See "Investment Results" in the Statement of Additional Information.

Additional performance information regarding the Fund will be included in its
annual report, which will be mailed to shareholders without charge upon request.

HOW TO INVEST

The 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.
<PAGE>
The shares of the Fund may be purchased through the Transfer Agent by submitting
payment by check, bank wire, or electronic (Automated Clearing House or "ACH")
transfer and, in the case of new accounts, a completed account application form.
There is no sales load or contingent deferred sales load charged to purchase
shares of the Fund. All orders for the purchase of shares are subject to
acceptance or rejection by the Fund. Purchases of shares are made at the current
public offering price next determined after the purchase order is received by
the Transfer Agent or by a selling agent of the Fund. A minimum initial
investment of $2,000 is required to open a shareholder account, except for
retirement plans such as Individual Retirement Accounts (IRAs) and Keogh Plans.
Retirement plans are subject to a $1,000 minimum initial investment. The minimum
initial investment is waived for accounts opened with the Automatic Investment
Plan and may be waived in other instances at the sole discretion of the Advisor.
(See "Automatic Investment Plan.") Each subsequent investment in the Fund must
be $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 the
appropriate Fremont Fund. Third party checks, credit cards, and cash will not be
accepted. All investment checks are subject to a 10-day holding period.

Shares of the Fund may also be purchased through broker-dealers or other
financial intermediaries who have made appropriate arrangements with the Fund.
Such agents are responsible for ensuring that the account documentation is
complete and that timely payment is made for the Fund shares purchased for their
customers pursuant to such orders. These agents may charge a reasonable
transaction fee to their customers. In some instances, all or a portion of the
transaction fee or other selling charge may be paid by the Advisor. To the
extent these agents perform shareholder servicing activities for the Fund, they
may receive fees from the Fund or the Advisor for such services.

From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor for such activities.

As a condition of this offering, if an order to purchase shares is canceled due
to nonpayment (for example, a check returned for "insufficient funds"), the
person who placed the order must reimburse the Fund for any loss incurred by
reason of such cancellation. For more information, see "Other Investment and
Redemption Services" in the Statement of Additional Information.

First Fund Distributors, Inc., 4455 Camelback Road, Suite 261E, Phoenix,
Arizona, 85018, is the principal underwriter for the Fund.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

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

Shares are issued only in book-entry form (without certificates).
<PAGE>
The fiscal year of the Fund ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which contain
a schedule of the Fund's portfolio securities and financial statements. Annual
reports will include audited financial statements. The federal income tax status
of shareholder distributions also will be reported to the Fund's shareholders
after the end of the calendar year on Form 1099-DIV. See "Dividends,
Distributions and Federal Income Taxation" for further information.

Exchanges Between Funds. Shares of one Fremont Fund may be exchanged for shares
of another Fremont Fund at their respective net asset values, provided that the
account registration remains identical. Exchanges may only be made for shares of
a Fremont Fund that are offered for sale in your state of residence at the time
of 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 is can be
limited at the discretion of the Board of Directors, can be limited by the
Investment Company's refusal to accept further purchase and exchange orders from
a shareholder.

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

Telephone Exchange Privilege. An investor may elect on the account application
to authorize exchanges by telephone. A shareholder may give instructions
regarding exchanges by calling 800-548-4539. A shareholder wishing to initiate
the telephone exchange privilege should contact the Fund. This privilege will
not be added to an account without written instruction to do so from the
shareholder. Telephone requests received by the close of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), will be processed the same
day. During times of drastic economic or market conditions, the telephone
exchange privilege may be difficult to implement. The Transfer Agent will make
its best effort to accommodate shareholders when its telephone lines are used to
capacity. Under these circumstances, a shareholder should consider using
overnight mail to send a written exchange request.

See "Telephone Redemption Privilege" in the next section of this Prospectus.

Autobuy Privilege. The autobuy privilege allows shareholders to purchase
subsequent shares by moving money directly from their checking account to a
Fremont Fund. The Autobuy privilege is an ACH privilege. ACH privileges will not
be added to an account without written authorization from the shareholder. The
Autobuy privilege will be automatically added to an account when the shareholder
chooses any type of ACH privilege. A shareholder may then purchase additional
shares in an existing account by calling 800-548-4539 and instructing the
Transfer Agent as to the dollar amount wanting to be invested. The investment
will automatically be processed through the Automatic Clearing House (ACH)
system. There is no fee for this option. If the privilege was not established at
the time the account was opened, the shareholder must complete the appropriate
form. The form is available on request.

Automatic Investment Plan. A shareholder may authorize a withdrawal to be made
automatically once or twice each month from a credit balance in the
shareholder's bank checking, savings, negotiable on withdrawal (NOW), or similar
account, with the proceeds to be used to purchase shares of the Fund. The
minimum initial investment is waived for accounts opened with the Automatic
Investment Plan. The
<PAGE>
amount of the monthly investment must be at least $50, and is not otherwise
subject to the $100 minimum for subsequent investments. If the purchase falls on
a weekend or holiday, the purchase will be made on the previous business day.
Shareholders should note that if there is an Automatic Investment Plan
established for an account and the entire account is exchanged into another
Fund, the Automatic Investment Plan must be renewed by the shareholder to the
Transfer Agent. There is no obligation to make additional payments, and the plan
may be terminated by the shareholder at any time. Termination requests must be
received in writing at least 5 days prior to the regular draft date, or the
drafts will not cease until the next cycle. The Transfer Agent may impose a
charge for this service, although no such charge currently is contemplated. If a
shareholder's order to purchase shares is canceled due to nonpayment (for
example, "insufficient funds"), the shareholder will be responsible for
reimbursing the Fund for any loss incurred by reason of such cancellation. A
shareholder wishing to initiate the plan on a new or existing account must fill
out an Automatic Investment Plan form. The form is available on request.

HOW TO REDEEM SHARES

Shares are redeemed at 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, orders received by the
Transfer Agent will be entered at the next calculated net asset value.

Because of market fluctuations, the amount a shareholder receives for shares
redeemed may be more or less that the amount paid for them.
<PAGE>
Redemption of shares by exchanges, transfers and redemptions under an Automatic
Withdrawal Plan may result in taxable capital gains or losses.

Telephone Redemption Privilege. An investor may elect on the regular account
application to authorize redemptions by telephone. This privilege will not be
added to an account without written authorization to do so from the shareholder.
A shareholder may then give instructions regarding redemptions by calling
800-548-4539. (The Telephone Redemption Privilege is not available for IRA or
other retirement accounts.) Telephone requests received by the close of trading
on the New York Stock Exchange (currently 4:00 p.m., Eastern time), will be
processed at the net asset value calculated that same day. During times of
drastic economic or market conditions, the telephone redemption privilege may be
difficult to implement. The Transfer Agent will make its best effort to
accommodate shareholders when its telephone lines are used to capacity. Under
these circumstances, a shareholder should consider using overnight mail to send
a written redemption request.

Neither the Investment Company, the Transfer Agent, nor their respective
affiliates will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost, or expense in
acting on such telephone instructions. The affected shareholder(s) will bear the
risk of any such loss. The Investment Company, or the Transfer Agent, or both,
will employ reasonable procedures to determine that telephone instructions are
genuine. These procedures may include, among others, requiring forms of personal
identification prior to acting upon telephone instructions, providing written
confirmation of the transactions, and/or tape recording telephone instructions.

Automatic Withdrawal Plan. A shareholder may request redemptions of a specified
dollar amount (minimum of $100) on either a monthly, quarterly, or yearly basis.
Currently, there is no charge for this service. Redemptions by check will be
made on the 15th and/or the last business day of the month. Redemptions made by
electronic transfer will be made on any date the shareholder chooses.
Shareholders may also request automatic exchanges and transfers of a specified
dollar amount. Exchanges and transfers will be made on any date the shareholder
chooses. Because a redemption constitutes a liquidation of shares, the number of
shares owned in the account will be reduced. Automatic redemptions should not
reduce the account below the minimum balance required (currently $1,500). If the
redemption date falls on a weekend or holiday, the redemption will be made on
the previous business day. Shareholders may terminate the Automatic Withdrawal
Plan at any time, but not less than five days before a scheduled payment date.
When an exchange is made between Funds, shareholders must specify if they desire
the automatic withdrawal option to be transferred to a new account opened by the
exchange. As an account balance declines to the minimum permitted, the
shareholder must advise the Transfer Agent if the automatic withdrawal feature
is to be transferred to another account of the shareholder. Shareholders should
note that if there is an Automatic Withdrawal Plan established for an account
and the entire account is exchanged into another Fremont Fund, the automatic
withdrawal option must be renewed by the shareholder to the Transfer Agent. A
shareholder wishing to initiate automatic redemptions must complete an Automatic
Withdrawal Plan form available from the Transfer Agent.

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
<PAGE>
draft will be effected only after such check or draft has been collected.
Although it is anticipated that this process will be completed in less time, it
may take up to 15 days. Redemption proceeds will not be delayed when shares have
been paid for by bank wire or where the account holds a sufficient number of
shares already paid for with collected funds.

Redemption in Kind. The Investment Company reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for redemption
or repurchase order by making payment in whole or in part in readily marketable
securities chosen by the Fund and valued as they are for purposes of computing
the Fund's net asset value (a redemption in kind). If payment is made in
securities, a shareholder may incur transaction expenses in converting these
securities into cash.

Transfer Agent. The Advisor is the transfer agent of the Fund an has engaged
State Street Bank and Trust Company, c/o NFDS, P.O. Box 419343, Kansas City,
Missouri, 64141, to serve as Sub-Transfer and Dividend Disbursing Agent and
shareholder service agent. State Street Bank and Trust Company has contracted
with National Financial Data Services to serve as shareholder servicing agent. A
depository account has been established at United Missouri Bank of Kansas City
("United Missouri Bank") through which all payments for the funds will be
processed.

RETIREMENT PLANS

Shares of the Fund may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs); SEP-IRAs;
SIMPLE IRAs; Roth IRAs; corporate pension and profit-sharing plans; and Section
403(b) Plans, which are deferred compensation arrangements for employees of
public schools and certain charitable organizations. Forms for establishing
IRAs, SEP-IRAs, SIMPLE IRAs, Roth IRAs, and Qualified Retirement Plans are
available through the Investment Company, as are forms for corporate Pension and
Profit-Sharing plans. Please contact the Investment Company for more information
about establishing these accounts. In accordance with industry practice, there
may be an annual account charge for participation in these plans. Information
regarding these charges is available from the Investment Company.

Retirement plan participants may receive additional services related to their
plan at no extra cost to any shareholder.

DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION

The Fund intends to qualify and elect, and to continue to qualify, to be treated
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). For any tax year in which the Fund so
qualifies and meets distribution requirements, it will not incur a federal tax
liability. Such qualification under the Code requires a Fund, among other
things, to diversify its investments so that, at the end of each fiscal quarter,
(1) at least 50% of the market value of the Fund's assets is represented by
cash, U.S. government securities, securities of other regulated investment
companies, and other securities, limited, in respect to any one issuer, to an
amount not greater than 5%
<PAGE>
of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (2) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. government securities or the
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are engaged in the same or similar trades or
businesses.

The Fund intends to distribute substantially all of its net investment income in
October and December or January.

The Fund intends to distribute substantially all of its net realized capital
gains, if any, at the end of the calendar year. Net investment income and
capital gains distributions, if any, may be reinvested in additional shares at
net asset value on the day of reinvestment, or may be received in cash. All
dividends and distributions are taxable to a shareholder (except tax-exempt
shareholders who have not borrowed to acquire their shares) whether or not they
are reinvested in shares of the Fund. Any long-term or mid-term capital gains
distributions are taxable to shareholders as long-term or mid-term capital
gains, respectively, regardless of how long shareholders have held Fund shares.
The maximum capital gains rate for individuals is 28% with respect to assets
held for more than 12 months, but not more than 18 months, and 20% with respect
to assets held more than 18 months. The maximum capital gains rate for corporate
shareholders is the same as the maximum tax rate for ordinary income.
Distributions of short-term capital gains will be subject to the tax as ordinary
income.

Shareholders may elect:

o to have all dividends and capital gain distributions automatically
reinvested in additional shares;

o to receive the income dividends and short-term capital gains distributions
in cash and accept the long-term capital gains distributions in additional
shares;
<PAGE>
o to receive all distributions of income dividends and capital gains in cash;
or

o to invest all dividend and capital gain distributions in another Fremont
Fund owned through an identically registered account.

Dividends and capital gains generally are taxable to shareholders at the time
they are paid. However, dividends or capital gains declared in October,
November, or December by the Fund and paid in January are taxable as if paid in
December. (The Fund will provide to its shareholders federal tax information
annually by January 31, including information about dividends and distributions
paid during the year.) Because REITs invested in by the Fund do not provide
complete information about the taxability of their distributions until after the
calendar year end, Fremont Advisors may not be able to determine how much of the
Fund's distribution is taxable to shareholders until after the January 31
deadline for issuing Form 1099-DIV. As a result, the Fund may request permission
each year from the Internal Revenue Service for an extension of time to issue
Form 1099-DIV to February 28.

Distributions are taxable to you regardless of whether they are taken in cash or
reinvested, even if the value of your shares is below your cost. If you purchase
shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) remains the same. In addition, the share price at the time you purchase
shares may include unrealized gains in the securities held in the investment
portfolio of the Fund. If these portfolio securities are subsequently sold and
the gains are realized, they will, to the extent not offset by capital losses,
be paid to you as a distribution of capital gains and will be taxable to you as
short-term or long-term capital gains.

In the case of corporate shareholders, certain dividends may be eligible for the
dividends received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund. Dividends
received from REITs generally do not constitute qualifying dividends. A
corporation's dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of the Fund is financed with indebtedness.

Because of the nature of REIT investments, REITs may generate significant non
cash deductions (i.e. depreciation on real estate holdings) while having a
greater cash flow to distribute to its shareholders, If a REIT distributes more
cash than it has taxable income, a "return on capital" results. A "return of
capital" represents a portion of shareholder's original investment that is
generally non taxable when distributed (returned) to the investor. If you do not
reinvest distributions, the cost basis of your shares will be decreased by the
amount of return capital, which may result in a larger capital gain when you
sell your shares. Although a return of capital is generally non taxable to you
upon distribution, 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.

PLAN OF DISTRIBUTION

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

The annual limitation for compensation to the Advisor pursuant to the Plan is
.25% of the Fund's average daily net assets. All payments will be reviewed by
the Fund's Board of Directors. However, it is possible that in certain periods,
the amount of the Advisor's compensation could exceed the Advisor's distribution
expenses resulting in a profit to the Advisor. If the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Advisor after the date the Plan
terminates.

CALCULATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE

The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange, or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. Investments, including
options, are stated at value based on recorded closing sales on a national
securities exchange or, in the absence of a recorded sale, at the mean between
the last reported bid and asked prices or at fair value as determined by the
Board of Directors. Short-term notes and similar securities are included in
investments at amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the preceding
closing values of such securities on their respective exchanges or the most
recent price available where no closing value is availableThe Fund's portfolio
may include securities which trade primarily on non-U.S. exchanges or otherwise
in non-U.S. markets. Because of time zone differences, the prices of these
securities, as used for net asset value calculations, may be established
substantially in advance of the close of the New York
<PAGE>
Stock Exchange. Foreign securities may also trade on days when the New York
Stock Exchange is closed (such as a Saturday). The net asset value and public
offering price of the Fund, to the extent that it holds securities valued on
foreign markets, may vary during periods when the New York Stock Exchange is
closed. As a result, the value of the Fund's portfolio may be affected
significantly by such trading on days when a shareholder has no access to the
Fund. For further information, see "How to Invest," "How to Redeem Shares," and
"Exchanges Between Funds" in this Prospectus, and "How to Invest" and "Other
Investment and Redemption Services" in the Statement of Additional Information.

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

EXECUTION OF PORTFOLIO TRANSACTIONS

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

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
<PAGE>
the directors holding office has been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Investment Company shares do not have cumulative voting rights, which means that
the holders of a majority of the shares voting for the election of directors can
elect all of the directors. Shareholders holding 10% of the outstanding shares
may call a meeting of shareholders for any purpose, including that of removing
any director. A director may be removed upon a majority vote of the shareholders
qualified to vote in the election. The 1940 Act requires the Investment Company
to assist shareholders in calling such a meeting.

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.

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:

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 Real Estate Securities Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
Fremont Select Fund
Fremont U.S. Small Cap Fund
Fremont International Small Cap Fund
Fremont Emerging Markets Fund
Fremont U.S. Micro-Cap Fund
Fremont Institutional U.S. Micro-Cap Fund

For more information on the Fremont Mutual Funds please call 800-548-4539 or
write to:

Fremont Mutual Funds
50 Beale Street, Suite 100
San Francisco, CA 94105

Advisor/Transfer Agent

Fremont Investment Advisors, Inc.
333 Market Street, Suite 2600
San Francisco, CA 94105

Sub-Transfer Agent

Mailing Address:

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
<PAGE>
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

o International Growth Fund

March 1, 1998

1
<PAGE>
Table of Contents

Item Page No.

Summary of Fees and Expenses x

Financial Highlights x

The Advisor x

Investment Objectives, Policies and Risk Considerations x

General Investment Policies x

Investment Results x

How to Invest x

Shareholder Account Services and Privileges x

How to Redeem Shares x

Retirement Plans x

Dividends, Distributions and Federal Income Taxation x

Calculation of Net Asset Value and Public Offering Price x

Execution of Portfolio Transactions x

General Information x

Telephone Numbers and Addresses x
2
<PAGE>
PROSPECTUS

FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the Fremont International Growth Fund (the
"Fund").

FREMONT INTERNATIONAL GROWTH FUND seeks to achieve long-term growth of
capital by investing primarily in equity securities of issuers domiciled outside
the United States.

There can be no assurance that the Fund will achieve its investment
objective. The Fund is a diversified fund as defined by the Investment Company
Act of 1940, as amended (the "1940 Act").

Shares of the Fund are offered without a sales charge.

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.
3
<PAGE>
SUMMARY OF FEES AND EXPENSES

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(1) None
Exchange Fee None

Annual Fund Operating Expenses (as a percentage of average net assets)

Management Fee 1.50%(2)
12b-1 Expense None
Other Expenses after Reimbursement None
----
Total Fund Operating Expenses 1.50%
====

- --------------------------------------------------------------------------------
Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:

1 Year 3 Years 5 Years 10 Years
$15 $47 $82 $179

THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE EXPENSES OR
ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR LESS THAN
THOSE SHOWN ABOVE.

The purpose of the above table is to give you information and assistance in
understanding the various costs and expenses of the Fund that an investor may
bear directly or indirectly. Other expenses include, but are not limited to,
administrative and transfer agent fees paid to Fremont Investment Advisors,
Inc., custody, legal and audit, costs of registration of fund shares under
applicable laws, and costs of printing and distributing reports to shareholders.
The percentages expressing annual fund operating expenses of the Fund are based
on actual expenses incurred during the most recent fiscal year.

See "The Advisor and the Fund."

(1) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is currently
$10. See "How to Redeem Shares."

(2) The Fund is obligated, under the terms of the management agreement, to pay
the Advisor an annual management fee of 1.5% of average net assets.
However, the Advisor is obligated to pay all of the Fund's other ordinary
operating expenses.
4
<PAGE>
FINANCIAL HIGHLIGHTS

The following information has been audited by Coopers & Lybrand, L.L.P.,
independent accountants, whose unqualified opinion is included in the Fund's
Annual Report. Further information about the Fund's performance is contained in
the Annual Report, which is included in the Fund's Statement of Additional
Information and which may be obtained without charge.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
March 1, 1994 to
1997 1996 1995 OCTOBER 31, 1994

<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, beginning of period $ 10.40 $ 9.72 $ 9.79 $ 9.57
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) .02 (.02) .10 .02
Net realized and unrealized gain (loss) (.02) .71 (.09) .20
------------ ------------ ------------ ------------
Total investment operations -- .69 .01 .22
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS

From net investment income -- (.01) (.08) --
From net realized gains (.03) -- -- --
------------ ------------ ------------ ------------
Total distributions (.03) (.010 (.08) --
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 10.37 $ 10.40 $ 9.72 $ 9.79
============ ============ ============ ============

TOTAL RETURN # (.01)% 7.07% .13% 2.30%
RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000s omitted) $ 38,643 $ 35,273 $ 32,156 $ 29,725
Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.50%*

Ratio of net investment income (loss)
to average net assets .34% (.20)% 1.19% .35%*
Portfolio turnover rate 56% 74% 96% --
Average commission rate paid(1) $ .0173 $ .0150 -- --
</TABLE>

*Annualized

(1) Disclosure not required for year prior to 1996.
5
<PAGE>
THE ADVISOR AND THE FUND

Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in the Fremont
International Growth Fund (the "Fund"). The Investment Company has other series
offered under different prospectuses, and the Board of Directors of the
Investment Company is permitted to create additional Funds at any time. The Fund
has its own investment objective and policies and operates as a separate mutual
fund.

The management of the business and affairs of the Investment Company is the
responsibility of the Board of Directors. Fremont Investment Advisors, Inc. (the
"Advisor") provides the Fund with investment management and administrative
services under an Investment Advisory and Administrative Agreement (the
"Advisory Agreement") with the Investment Company. The Advisory Agreement
provides that the Advisor shall furnish advice to the Fund with respect to its
investments and shall, to the extent authorized by the Board of Directors,
determine what securities shall be purchased or sold by the Fund. The Advisor's
Investment Committee oversees the portfolio management of the Fund.

Under the terms of the Advisory Agreement, the Fund pays the Advisor a fee of
1.50% per annum of the Fund's average net assets, computed daily and paid
monthly. Under this Agreement the Advisor has agreed to bear all of the Fund's
expenses, except extraordinary expenses (as designated by a majority of the
Investment Company's disinterested directors) and interest, brokerage
commissions and other transaction charges relating to the investing activities
of the Fund.

The portfolio manager for the Fund since September 1995 is Andrew L. Pang.

o Andrew L. Pang is Vice President of the Advisor and a member of its
Investment Committee and Equity Committee. Andrew received his degree in
Finance from San Francisco State University and received an M.B.A. from
Golden Gate University, San Francisco, California

The Advisor currently provides direct portfolio management services to the Fund.
In the future, the Advisor may propose to the nvestment Company that a
sub-advisor(s) be engaged to provide investment advisory or portfolio management
services to the Fund. Prior to such engagement, any agreement with a sub-advisor
must be approved by the Board of Directors and, if required by law, by the
shareholders of the Fund. The Advisor may in its discretion manage all or a
portion of the Fund's portfolio directly with or without the use of a
sub-advisor.

Investment Company Administration Corporation (the "Administrator"), pursuant to
an administrative agreement with the Advisor, supervises the administration of
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
Administrator.

For its services, the Administrator receives an annual fee from the Advisor (not
the Fund) equal to 0.02% of the first $1 billion of the Investment company's
average daily net assets and 0.015% thereafter, subject to a minimum annual fee
of $20,000 per Fund.

For additional information about the Advisor, see "Investment Advisory and Other
Services" in the Statement of Additional Information.
6
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of the Fund are stated below. The Fund is
intended for long-term investors, not for those who may wish to redeem their
shares after a short period of time.

The Fund seeks to achieve long-term growth of capital by investing primarily in
equity securities of issuers domiciled outside the United States. The Fund is
designed for investors who wish to accept the risks entailed in investments in
foreign securities and securities denominated in various currencies. See
"General Investment Policies -- Risk Factors and Special Considerations for
International Investing."

Under normal market conditions, at least 90% of the Fund's assets will be
invested in equity securities of issuers domiciled outside the United States.
The Fund will be invested in a minimum of three countries excluding the United
States. The Fund's portfolio of equity securities consists of common and
preferred stock, warrants and debt securities convertible into common stock.
Included in this 90% total, up to 5% of the Fund's assets may be invested in
rights or warrants to purchase equity securities. For defensive purposes, the
Fund may temporarily have less than 90% of its assets invested in equity
securities domiciled outside the United States.

The Fund may invest up to 50% of its total assets in equity securities of
smaller to medium sized growth companies in both developed and emerging world
markets. For the developed markets, such investments include equity securities
of companies with market capitalizations of over $200 million but less than $2
billion. However, market capitalizations of smaller to medium sized company
equity securities in emerging markets are significantly smaller and currently
range between $25 million and $200 million. Emerging growth companies are small-
and medium-sized companies that the Advisor believes often have a potential for
earnings growth over time that is above the growth rate of more established
companies or are early in their life cycles and have the potential to become
major enterprises.
7
<PAGE>
As used in this Prospectus, international emerging markets are countries
categorized as emerging markets by the International Finance Corporation, the
World Bank's private sector division. Such countries currently include but are
not limited to Thailand, Indonesia, the Philippines, South Korea, Taiwan and
certain Latin American countries. Such markets tend to be in the less
economically developed regions of the world. General characteristics of emerging
market countries also include lower degrees of political stability, a high
demand for capital investment, a high dependence on export markets for their
major industries, a need to develop basic economic infrastructures and rapid
economic growth. The Advisor believes that investments in equity securities of
companies in international emerging markets offer the opportunity for
significant long-term investment returns. However, these investments involve
certain risks, as discussed below and in "General Investment Policies - Risk
Factors and Special Considerations for International Investing."

Investing in emerging growth companies involves certain special risks. Emerging
growth companies may have limited product lines, markets, or financial
resources, and their managements may be dependent on a limited number of key
individuals. The securities of emerging growth companies may have limited market
liquidity and may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general.

Whenever in the judgment of the Advisor market or economic conditions warrant,
the Fund may, for temporary defensive purposes, invest without limitation in
U.S. dollar-denominated or foreign currency denominated cash or in high-quality
debt securities with remaining maturities of one year or less. During times that
the Fund is investing defensively, the Fund will not be pursuing its stated
investment objective. For liquidity purposes, the Fund may normally also invest
up to 10% of its assets in U.S. dollar-denominated or foreign
currency-denominated cash or in high quality debt securities with remaining
maturities of one year or less.

In selecting portfolio investments, a company's growth prospects will be
considered, including the potential for superior appreciation due to growth in
earnings, relative valuation of its securities, and any risks associated with
such investment; the industry in which the company operates, with a view to
identification of international developments within industries, international
investment trends, and social, economic or political factors affecting a
particular industry; the country in which the company is based, as well as
historical and anticipated foreign currency exchange rate fluctuations; and the
feasibility of gaining access to the securities market in a country and of
implementing the necessary custodial arrangements. The investment program of the
Fund has been developed in the belief that research-based investment in a
portfolio of equity securities of companies in a number of foreign countries
will give shareholders a chance to participate on an international basis in the
opportunities available in the growing foreign securities markets.
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Investment will be made in those countries where the Advisor believes that
economic and political factors, including currency movements, are likely to
produce above average long-term investment returns. There is no limitation on
the percentage of the Fund's assets that may be invested at any one time in one
or more countries except that the Fund will normally be invested in at least
three countries outside the United States.

The Fund may enter into forward currency contracts and currency futures
contracts, and may purchase put and call options on currencies. See "General
Investment Policies -- Forward Currency, Futures and Options Transactions."

GENERAL INVESTMENT POLICIES

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

At the time of purchase, short-term securities must be rated in the top rating
category by at least two nationally recognized statistical rating organizations
("NRSROs") or by a single NRSRO in the case of a security rated by only one
NRSRO, or, if not rated by an NRSRO, must be of comparable quality as determined
by the Advisor or the Sub-Advisor. Generally, high quality short-term securities
must be issued by an entity with an outstanding debt issue rated A or better by
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. The Fund may invest in U.S. Government securities,
which are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as Treasury bills,
notes and bonds and Government National Mortgage Association ("GNMA")
certificates, are supported by the full faith and credit of the United States;
others, such as those of the Federal Home Loan Mortgage Corporation ("FHLMC"),
are supported by the right of the issuer to borrow from the Treasury; others,
such as those of the Federal National Mortgage Association ("FNMA"), are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government will provide financial
support to U.S. Government agencies or instrumentalities as described above in
the future, other than as set forth above, because it is not obligated to do so
by law.

When-Issued Securities and Firm Commitment Agreements. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction, but the settlement is delayed).
The
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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. The Fund, as
purchaser, assumes the risk of any decline in value of the security beginning on
the date of the agreement or purchase, and no interest accrues to the Fund until
it accepts delivery of the security. The Fund will not use such transactions for
leveraging purposes, and accordingly will segregate cash, cash equivalents or
liquid securities or hold a covered position in an amount sufficient to meet its
payment obligations thereunder.

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

Repurchase Agreements. As part of its cash reserve position, the Fund may enter
into repurchase agreements through which the Fund acquires a security (the
"underlying security") from the seller, a well-established securities dealer or
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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. The Fund
will not enter into a repurchase agreement with a maturity of more than seven
business days if, as a result, more than 15% (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. The Fund will only enter into repurchase agreements where
(1) the underlying securities are issued or guaranteed by the U.S. Government,
(2) the market value of the underlying security, including accrued interest,
will be at all times equal to or in excess of the value of the repurchase
agreement, and (3) payment for the underlying securities is made only upon
physical delivery or evidence of book-entry transfer to the account of the
custodian or a bank acting as agent. In the event of a bankruptcy or other
default of a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and losses, including: (1) a
possible decline in the value of the underlying security during the period in
which the Fund seeks to enforce its rights thereto; (2) possible subnormal
levels of income and lack of access to income during this period; and (3)
expenses of enforcing the Fund's rights.

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

Loans of Portfolio Securities. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in an
amount not exceeding 331/3% of its net assets. The borrower must maintain with
the Fund's custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities, or possible loss of
rights in the collateral should the borrower fail financially. The lender also
may bear the risk of capital loss on investment of the cash collateral, which
must be returned in full to the borrower when the loan is terminated. Loans will
be made only to firms deemed by the Advisor to be of good standing and will not
be made unless, in the judgment of the Advisor, the consideration to be earned
from such loans would justify the associated risk.

Borrowing. The Fund may borrow from banks an amount not exceeding 30% of the
value of its total assets for temporary or emergency purposes and enter into
reverse repurchase agreements. If the income and gains on securities purchased
11
<PAGE>
with the proceeds of borrowings or reverse repurchase agreements exceed the cost
of such borrowings or agreements, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the cost, earnings or net asset value would decline faster
than otherwise would be the case.

Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under federal securities laws, but can be offered and
sold to "qualified institutional buyers." However, the Fund will not invest more
than 15% of its assets in illiquid investments, which includes repurchase
agreements and fixed time deposits maturing in more than seven days, and
securities that are not readily marketable and restricted securities, unless the
Board of Directors determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are liquid. The Board of Directors may adopt guidelines and delegate to the
Advisor 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.

Options and Futures Contracts. When the Fund is not fully invested, strategies
such as buying calls, writing puts, and buying futures may be used to increase
its exposure to price changes in stocks or debt securities. When the Advisor
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 Fund invest. The Fund will maintain segregated accounts consisting of cash,
U.S. Government securities or other liquid securities (or, as permitted by
applicable regulations, enter into certain offsetting positions) to cover its
obligations under options and futures contracts to avoid leveraging.

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

The Fund may write put and call options. It will only do so by writing covered
put or call options, and the aggregate value of the securities underlying put
options, as of the date of sale of the options, will not exceed 50% of the net
assets of the Fund.
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<PAGE>
The Fund will set aside cash, cash equivalents, or liquid securities, or hold a
covered position against any potential delivery or payment obligations under any
outstanding option or futures contracts.

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

Forward Currency, Futures and Options Transactions. The Fund may enter into
forward currency contracts and currency futures contracts and may purchase put
or call options on currencies (each such arrangement sometimes referred to as a
"currency contract"). Forward contracts typically will involve the purchase or
sale of a foreign currency against the dollar. These techniques are designed
primarily to hedge against future changes in currency prices which might
adversely affect the value of the Fund's portfolio securities. The Fund may
attempt to accomplish objectives similar to those involved in its use of forward
currency contracts by purchasing put or call options on currencies or currency
futures. For a more detailed description of such arrangements, see the Statement
of Additional Information.

The Fund may enter into currency contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. For example,
when the Advisor anticipates making a purchase or sale of a security, the Fund
may enter into a currency contract in order to set the rate (either relative to
the U.S. dollar or another currency) at which a currency exchange transaction
related to the purchase or sale will be made. Further, when it is believed that
a particular currency may decline compared to the U.S. dollar or another
currency, the Fund may enter into a currency contract to sell the currency the
Advisor 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 feels demonstrate a correlation in exchange rate
movements. The practice of using correlated currencies is known as
"cross-hedging." When the Advisor believes that the U.S. dollar may suffer a
substantial decline against a foreign currency or currencies, the Fund may enter
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<PAGE>
into a currency contract to buy a foreign currency for a fixed dollar amount. By
entering into such transactions, however, the Fund may be required to forego the
benefits of advantageous changes in exchange rates. Currency contracts generally
are traded over-the-counter, and not on organized commodities or securities
exchanges. As a result, such contracts operate in a manner distinct from
exchange-traded instruments, and their use involves certain risks beyond those
associated with transactions in other futures contracts.

While the Fund enters into forward currency contracts and purchases currency
options or currency futures to reduce the risks of fluctuations in exchange
rates, these contracts cannot eliminate all such risks and do not eliminate
fluctuations in the prices of the Fund's portfolio securities. Purchasing
(selling) a currency forward limits the Fund's exposure to risk of loss from a
rise (decline) in the dollar value of the currency, but also limits its
potential for gain from a decline (rise) in the currency's dollar value. While
purchasing options can protect the Fund against certain exchange rate
fluctuations, the Fund is subject to the loss of its entire premium payment
where the option is allowed to expire without exercise.

To avoid leverage in connection with forward currency transactions, the Fund
will set aside with its Custodian cash, cash equivalents or liquid securities,
or hold a covered position against any potential delivery or payment obligations
under any outstanding contracts. To the extent the Fund enters into
over-the-counter options, the options and the assets so set aside to cover such
options are considered illiquid assets and, together with other illiquid assets
and securities, will not exceed 15% of the net assets of the Fund. In addition,
premiums paid for currency options held by the Fund may not exceed 5% of the
Fund's net assets.

Although the Fund will enter into currency contracts solely for hedging
purposes, their use does involve certain risks. For example, there can be no
assurance that a liquid secondary market will exist for any currency contract
purchased or sold, and the Fund may be required to maintain a position until
exercise or expiration, which could result in losses.

Swap Agreements. The Fund may enter into interest rate, index and currency
exchange rate swap agreements for purposes of attempting to obtain a particular
desired return at a lower cost to the Fund than if the Fund had invested
directly in an instrument that yielded that desired return. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on predetermined investments or instruments.
The gross returns to be exchanged or "swapped" between the parties are
calculated with respect to a "notional amount," i.e., the return on or increase
in value of a particular dollar amount invested at a particular interest rate,
in a particular foreign currency, or in a "basket" of securities representing a
particular index. Commonly used swap agreements include interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates exceed a specified rate; interest rate
floors, under which, in return for a premium, one party agrees to make payments
to the other to the extent that interest rates fall below a specified level; and
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<PAGE>
interest rate collars, under which a party sells a cap and purchases a floor or
vice versa in an attempt to protect itself against interest rate movements
exceeding minimum or maximum levels. Whether the Fund's use of swap agreements
will be successful in furthering its investment objective will depend on the
Advisor's or Sub-Advisor's ability to predict correctly whether certain types of
investments are likely to produce greater returns than other investments.

The Fund's obligations under a swap agreement will be accrued daily (offset
against amounts owed to the Fund) and any accrued but unpaid net amounts owed to
a swap counterparty will be covered by the maintenance of a segregated account
consisting of cash, U.S. Government securities or other liquid securities to
avoid any potential leveraging of the Fund's portfolio. Swap agreements having a
term of greater than seven days are considered illiquid assets and the Fund's
obligations under such agreements, together with other illiquid assets and
securities, will not exceed 15% of the net assets of the Fund.

Risk Factors and Special Considerations for International Investing. Investment
in securities of foreign entities and securities denominated in foreign
currencies involves risks typically not present to the same degree in domestic
investments. Likewise, investment in ADRs and EDRs presents similar risks, even
though the Fund will purchase, sell and be paid dividends on ADRs in U.S.
dollars. These risks include fluctuations in currency exchange rates, which are
affected by international balances of payments and other economic and financial
conditions; government intervention; speculation; and other factors. With
respect to certain foreign countries, there is the possibility of expropriation
or nationalization of assets, confiscatory taxation and political, social or
economic instability. The Fund may be required to pay foreign withholding or
other taxes on certain of its foreign investments, but investors may or may not
be able to deduct their pro rata shares of such taxes in computing their taxable
income, or take such shares as a credit against their U.S. income taxes. See
"Dividends, Distributions and Federal Income Taxation."

There may be less publicly available information about foreign issuers or
securities than about U.S. issuers or securities, and foreign issuers may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those of U.S. entities. With respect to unsponsored
ADRs, these programs cover securities of companies which are not required to
meet either the reporting or accounting standards of the United States. Many
foreign financial markets, while generally growing in volume, continue to have
substantially less volume than domestic markets, and securities of many foreign
companies are less liquid and their prices are more volatile than are securities
of comparable U.S. companies. Such markets may have longer settlement periods
than markets in the United States. In addition, brokerage commissions, custodial
services and other costs related to investment in foreign markets generally are
more expensive than in the United States, particularly with respect to emerging
markets. Such markets have different settlement and clearance procedures. In
certain markets, there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. The inability of the Fund to make intended securities
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Fund due to subsequent
declines in value of a portfolio security or, if the Fund had entered into a
contract to sell the security, could result in possible liability to the
purchaser. Settlement procedures in certain emerging markets also carry with
them a heightened risk of loss due to the failure of the broker or other service
provider to deliver cash or securities.
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<PAGE>
The risks of foreign investing are of greater concern in the case of investments
in emerging markets which may exhibit greater price volatility, have less
liquidity and have settlement arrangements which are less efficient than in
developed markets. Furthermore, the economies of emerging market countries
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade barriers, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. These emerging
market economies also have been and may continue to be adversely affected by
economic conditions in the countries with which they trade.

The value of the Fund's portfolio securities computed in U.S. dollars will vary
with increases and decreases in the exchange rate between the currencies in
which the Fund has invested and the U.S. dollar. A decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of the Fund's holdings of securities denominated in such currency
and, therefore, will cause an overall decline in the Fund's net asset value and
net investment income and capital gains, if any, to be distributed in U.S.
dollars to shareholders by the Fund.

The 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 nation. To the extent that the Fund invests in ADRs, the
depository bank generally pays cash dividends in U.S. dollars regardless of the
currency in which such dividends originally are paid by the issuer of the
underlying security.

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

Several of the countries in which the Fund may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital gains),
(ii) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation, (iii)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor, (iv) limitations on the types of
securities which a foreign investor may purchase and (v) restrictions on a
16
<PAGE>
foreign investor's right to invest in companies whose securities are not
publicly traded. In some circumstances, these restrictions may limit or preclude
investment in certain countries. Therefore, the Fund intends to invest in such
countries through the purchase of shares of investment companies organized under
the laws of such countries.

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

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

Investment Restrictions. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating the Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). These investment restrictions and the Fund's investment
objective cannot be changed without the approval of shareholders of that Fund;
all other investment practices described in this Prospectus and in the Statement
of Additional Information can be changed by the Board of Directors without
shareholder approval.

INVESTMENT RESULTS

The Fund may from time to time include information on its investment results
and/or comparisons of its investment results to various unmanaged indices or
results of other mutual funds or groups of mutual funds in advertisements, sales
literature, or reports furnished to present or prospective shareholders. All
such figures are based on historical performance data and are not intended to be
indicative of future performance. The investment return on and principal value
17
<PAGE>
of an investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.

The Fund may calculate performance on an average annual total return basis for
1-, 5-, and 10-year periods and over the life of the Fund, after such periods
have elapsed. Average annual total return will be computed by determining the
average annual compounded rate of return over the applicable period that would
equate the initial amount invested to the ending redeemable value of the
investment. Ending redeemable value includes dividends and capital gain
distributions, reinvested at net asset value at the reinvestment date determined
by the Board of Directors. The resulting percentages indicate the positive or
negative investment results that an investor would have experienced from
reinvested income dividends and capital gain distributions and changes in share
price during the period. The average annual compounded rate of return over
various periods may also be computed by utilizing ending redeemable values as
determined above.

The Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses of
the Fund, so that any investment results reported by the Fund should not be
considered representative of what an investment in the Fund may earn in any
future period. When utilized, total return for the unmanaged indices described
in the Statement of Additional Information will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
recurring expenses such as advisory fees, brokerage costs, or administrative
expenses. These factors and possible differences in calculation methods should
be considered when comparing the Fund's investment results with those published
for other investment companies, other investment vehicles, and unmanaged
indices. The comparison of the Fund to an alternative investment should be made
with consideration of differences in features and expected performance. The Fund
may also be mentioned in newspapers, magazines, or other media from time to
time. The Fund assumes no responsibility for the accuracy of such data. The
Fund's results also should be considered relative to the risks associated with
the Fund's investment objective and policies. See "Investment Results" in the
Statement of Additional Information.

Additional performance information regarding the Fund will be included in its
annual report, which will be mailed to shareholders without charge upon request.

HOW TO INVEST

The shares of the Fund may be purchased through the Transfer Agent by submitting
payment by check, bank wire, or electronic (Automated Clearing House or "ACH")
transfer and, in the case of new accounts, a completed account application form.
There is no sales load or contingent deferred sales load charged to purchase
shares of the Fund. All orders for the purchase of shares are subject to
acceptance or rejection by the Fund. Purchases of shares are made at the current
public offering price next determined after the purchase order is received by
the Transfer Agent or by a selling agent of the Fund. A minimum initial
investment of $2,000 is required to open a shareholder account, except for
retirement plans such as Individual Retirement Accounts (IRAs) and Keogh Plans.
Retirement plans are subject to a $1,000 minimum initial investment. The minimum
initial investment is waived for accounts opened with the Automatic Investment
Plan and may be waived in other instances at the sole discretion of the Advisor.
(See "Automatic Investment Plan.")
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<PAGE>
Each subsequent investment in the Fund must be $100 or more except in the case
of retirement plans or Automatic Investment Plans. There is a minimum 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. 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.

Shares of the Fund may also be purchased through broker-dealers or other
financial intermediaries who have made appropriate arrangements with the Fund.
Such agents are responsible for ensuring that the account documentation is
complete and that timely payment is made for the Fund shares purchased for their
customers pursuant to such orders. These agents may charge a reasonable
transaction fee to their customers. In some instances, all or a portion of the
transaction fee may be paid by the Advisor. To the extent these agents perform
shareholder servicing activities for the Fund, they may receive fees from the
Fund or the Advisor for such services.

From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor to do so.

As a condition of this offering, if an order to purchase shares is canceled due
to nonpayment (for example, a check returned for "insufficient funds"), the
person who made the order must reimburse the Fund for any loss incurred by
reason of such cancellation. For more information, see "Other Investment and
Redemption Services" in the Statement of Additional Information.

First Fund Distributors, Inc., 4455 Camelback Road, Suite 261E, Phoenix,
Arizona, 85018, is the principal underwriter for the Fund.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

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

The fiscal year of the Fund ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which contain
a schedule of the Fund's portfolio securities and financial statements. Annual
reports will include audited financial statements. The federal income tax status
of shareholder distributions also will be reported to the Fund's shareholders
after the end of the calendar year on Form 1099-DIV.
19
<PAGE>
Exchanges Between Funds. Shares of one Fremont Fund may be exchanged for shares
of another Fremont Fund at their respective net asset values, provided that the
account registration remains identical. Exchanges may only be made for shares of
a Fremont Fund then offered for sale in your state of residence. It is required
that (1) all shares in one Fund must be exchanged or (2) the remaining balance
must be at least $1,500. This minimum balance requirement may be waived. These
exchanges are not tax-free and will result in a shareholder realizing a gain or
loss for tax purposes, except in the case of tax-deferred retirement accounts or
other tax-exempt shareholders that have not borrowed to acquire the shares
exchanged. Exchanges by mail should be sent to the Transfer Agent at the address
set forth in the last section of this Prospectus.

Purchases, redemptions, and exchanges should be made for investment purposes
only. A pattern of frequent exchanges, purchases, and sales is not acceptable
and, at the discretion of the Fund, can be limited by the Investment Company's
refusal to accept further purchase and exchange orders from a shareholder. The
Investment Company reserves the right to modify or eliminate the exchange
privilege upon 60 days' written notice to shareholders.

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 Fund. The
minimum initial investment is waived for accounts opened with the Automatic
Investment Plan. The amount of the monthly investment must be at least $50, and
is not otherwise subject to the $100 minimum for subsequent investments. If the
purchase falls on a weekend or holiday, the purchase will be made on the
previous business day. Shareholders should note that if there is an Automatic
Investment Plan established for an account and the entire account is exchanged
20
<PAGE>
into another Fund, the Automatic Investment Plan must be renewed by the
shareholder to the Transfer Agent. There is no obligation to make additional
payments, and the plan may be terminated by the shareholder at any time.
Termination requests must be received in writing at least 5 days prior to the
regular draft date, or the drafts will not cease until the next cycle. The
Transfer Agent may impose a charge for this service, although no such charge
currently is contemplated. If a shareholder's order to purchase shares is
canceled due to nonpayment (for example, "insufficient funds"), the shareholder
will be responsible for reimbursing the Fund for any loss incurred by reason of
such cancellation. A shareholder wishing to initiate the plan on a new or
existing account must fill out an Automatic Investment Plan form. The form is
available on request.

HOW TO REDEEM SHARES

Redemption 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 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).

For written redemption requests for an amount greater than $25,000, or a
redemption request that directs proceeds to a party other than the registered
account owner(s), all signatures must be guaranteed (see "Signature Guarantee"
below). Because of market fluctuations, the amount a shareholder receives for
shares redeemed may be more or less that the amount paid for them. Redemption of
shares by exchanges, transfers and redemptions under an Automatic Withdrawal
Plan may result in taxable capital gains or losses.

Telephone Redemption Privilege. An investor may elect on the regular account
application to authorize redemptions by telephone. This privilege will not be
added to an account without written authorization to do so from the shareholder.
A shareholder may then give instructions regarding redemptions by calling
800-548-4539. (The Telephone Redemption Privilege is not available for IRA or
other retirement accounts.) Telephone requests received by the close of trading
21
<PAGE>
on 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.

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.
22
<PAGE>
Payment in redemption of shares is normally made within three business days
after receipt by the Transfer Agent of a request in proper form, provided that
payment in redemption of shares purchased by check or draft will be effected
only after such check or draft has been collected. Although it is anticipated
that this process will be completed in less time, it may take up to 15 days.
Redemption proceeds will not be delayed when shares have been paid for by bank
wire or where the account holds a sufficient number of shares already paid for
with collected funds.

Transfer Agent. The Advisor is transfer agent to the Fund 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 Fund will be processed.

RETIREMENT PLANS

Shares of the Fund may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs); SEP-IRAs;
ROTH IRAs; SIMPLE 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, ROTH IRAs; SIMPLE IRAs, and Qualified Retirement Plans are
available through the Investment Company, as are forms for corporate Pension and
Profit-Sharing plans. Please contact the Investment Company for more information
about establishing these accounts. In accordance with industry practice, there
may be an annual account charge for participation in these plans. Information
regarding these charges is available from the Investment Company.

Retirement plan participants may receive additional services related to their
plan at no extra cost to any shareholder.
23
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION

The Fund intends to qualify and elect, and to continue to qualify, to be treated
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). For any tax year in which the Fund so
qualifies and meets certain distribution requirements, it will not incur a
federal tax liability. Such qualification under the Code requires the Fund,
among other things, to diversify its investments so that, at the end of each
fiscal quarter, (1) at least 50% of the market value of the Fund's assets is
represented by cash, U.S. government securities, securities of other regulated
investment companies, and other securities, limited, in respect to any one
issuer, to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (2) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. government securities or the securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.

The Fund intends to distribute substantially all of its net investment income
and short-term net realized capital gains once each year in October.

The Fund intends to distribute substantially all of its long term 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. Corporate investors may be entitled to the "dividends received"
deduction on all or a portion of the dividends paid by the Fund. Availability of
the "dividends received" deduction is subject to certain holding period and
debt-financing limitations.

Shareholders may elect:

o to have all dividends and capital gain distributions automatically reinvested
in additional shares;

o to receive the income dividends and short-term capital gains distributions in
cash and accept the capital gains distributions in additional shares;

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

o to invest all dividend and capital gain distributions in another Fremont Fund
owned through an identically registered account.

Automatic reinvestments will be at net asset value on the day of reinvestment.
If no election is made by a shareholder, all dividends and capital gain
distributions will be automatically reinvested. These 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.
24
<PAGE>
Dividends and capital gains generally are taxable to shareholders at the time
they are paid. However, dividends or capital gains declared in October,
November, or December by the Fund and paid in January are taxable as if paid in
December. The Fund will provide to its shareholders federal tax information
annually by January 31, including information about dividends and distributions
paid during the year.

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

CALCULATION OF NET ASSET VALUE

The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange, or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. Investments, including
options, are stated at value based on recorded closing sales on a national
securities exchange or, in the absence of a recorded sale, at the mean between
the last reported bid and asked prices or at fair value as determined by the
Board of Directors. Short-term notes and similar securities are included in
investments at amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the preceding
closing values of such securities on their respective exchanges or the most
recent price available where no closing value is availableThe Fund's portfolio
may include securities which trade primarily on non-U.S. exchanges or otherwise
in non-U.S. markets. Because of time zone differences, the prices of these
securities, as used for net asset value calculations, may be established
substantially in advance of the close of the New York Stock Exchange. Foreign
securities may also trade on days when the New York Stock Exchange is closed
(such as a Saturday). The net asset value and public offering price of the Fund,
to the extent that it holds securities valued on foreign markets, may vary
during periods when the New York Stock Exchange is closed. As a result, the
value of the Fund's portfolio may be affected significantly by such trading on
days when a shareholder has no access to the Fund. For further information, see
"How to Invest," "How to Redeem Shares," and "Exchanges Between Funds" in this
Prospectus, and "How to Invest" and "Other Investment and Redemption Services"
in the Statement of Additional Information.
25
<PAGE>
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.

EXECUTION OF PORTFOLIO TRANSACTIONS

Orders for the Fund's portfolio securities transactions are placed by the
Advisor. The Advisor strives to obtain the best available prices in the Fund's
portfolio transactions, taking into account the costs and promptness of
executions. Subject to this policy, transactions may be directed to those
broker-dealers who provide research, statistical, and other information to the
Fund, the Advisor, or who provide assistance with respect to the distribution of
Fund shares. There is no agreement or commitment to place orders with any
broker-dealer.

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

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
26
<PAGE>
voting rights, which means that the holders of a majority of the shares voting
for the election of directors can elect all of the directors. Shareholders
holding 10% of the outstanding shares may call a meeting of shareholders for any
purpose, including that of removing any director. A director may be removed upon
a majority vote of the shareholders qualified to vote in the election. The 1940
Act requires the Investment Company to assist shareholders in calling such a
meeting.

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.

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:

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 Select Fund
Fremont U.S. Small Cap Fund
Fremont International Small Cap Fund
Fremont Emerging Markets Fund
Fremont U.S. Micro-Cap Fund
28
<PAGE>
Fremont Institutional U.S. Micro-Cap Fund
Fremont Real Estate Securities 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
29
<PAGE>
Auditors

Coopers & Lybrand, L.L.P.
333 Market Street
San Francisco, CA 94105

No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the 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.
30
<PAGE>
FREMONT MUTUAL FUNDS, INC.
INTERNATIONAL SMALL CAP FUND
March 1, 1998

TABLE OF CONTENTS

ITEM PAGE NO.

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

Financial Highlights ...............................................

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

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

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

Investment Results .................................................

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

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

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

Retirement Plans ...................................................

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

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

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

General Information ................................................

Telephone Numbers and Addresses ....................................
<PAGE>
PROSPECTUS

FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the Fremont International Small Cap Fund (the
"Fund").

FREMONT INTERNATIONAL SMALL CAP FUND seeks to achieve long-term capital
appreciation by investing primarily in equity securities of small cap companies
domiciled outside the United States.

There can be no assurance that the Fund will achieve its investment
objective. The Fund is a diversified fund as defined by the Investment Company
Act of 1940, as amended (the "1940 Act").

Shares of the Fund are offered without a sales charge.

The date of this Prospectus is March 1, 1998.

FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
<PAGE>
SUMMARY OF FEES AND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(1) None
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)

Management Fee(2) 1.50%
12b-1 Expenses None
Other Expenses None
----
Total Fund Operating Expenses 1.50%

Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:

1 YEAR 3 YEARS 5 YEARS 10 YEARS

International Small Cap Fund $15 $47 $82 $179

THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE EXPENSES OR
ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR LESS THAN
THOSE SHOWN ABOVE.

The purpose of the above tables is to give you information and assistance in
understanding the various costs and expenses of the Fund that an investor may
bear directly or indirectly. The percentages expressing annual fund operating
expenses of the Fund are based on actual expenses incurred during the most
recent fiscal year, except that the management fee of the Fund has been restated
to reflect the management fee currently being charged to the Fund.

See "The Advisor, the Sub-Advisor and the Fund."

(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."

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 PERIOD FROM
JUNE 30, 1994 TO
1997 1996 1995 OCTOBER 31, 1994
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, beginning of period $ 10.15 $ 9.00 $ 9.86 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) .14 .14 .10 (.01)
Net realized and unrealized gain (loss) (1.58) 1.08 (.88) (.13)
----------- ----------- ----------- -----------
Total investment operations (1.44) 1.22 (.78) (.14)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
From net investment income (.21) (.07) (.08) --
From net realized gains (.27) -- -- --
----------- ----------- ----------- -----------
Total distributions (.48) (.07) (.08) --
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 8.23 $ 10.15 $ 9.00 $ 9.86
=========== =========== =========== ===========
TOTAL RETURN # (14.56)% 13.69%(1) (7.96)%(1) (1.40)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 8,534 $ 9,214 $ 4,245 $ 1,768
Ratio of expenses to average net assets(2) 1.50% 1.81% 2.06% 2.50%*
Ratio of net investment income (loss)
to average net assets(2) 1.97% 1.61% 1.67% (.28)%*
Portfolio turnover rate 56% 74% 96% --
Average commission rate paid(3) $ .0005 $ .0003 -- --
</TABLE>

*Annualized

(1) Total return would have been lower had the advosr not waive expenses.
(2) Managemetn fees were voluntrily waived from Febrturay 1, 1995 to October
31, 1996.
(3) Disclosure not requred for years prior to 1996.
<PAGE>
THE ADVISOR, THE SUB-ADVISOR AND THE FUND

Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in the Fremont
International Small Cap Fund. The Investment Company has other series offered
with a different prospectus, and the Board of Directors of the Investment
Company is permitted to create additional funds at any time. The Fund has its
own investment objective and policies and operates as a separate mutual fund.

The management of the business and affairs of the Investment Company is the
responsibility of the Board of Directors. Fremont Investment Advisors, Inc. (the
"Advisor") provides the Fund with investment management and administrative
services under an Investment Advisory and Administrative Agreement (the
"Advisory Agreement") with the Investment Company. The Advisory Agreement
provides that the Advisor shall furnish advice to the Fund with respect to its
investments and shall, to the extent authorized by the Board of Directors,
determine what securities shall be purchased or sold by the Fund. As described
more fully below, the Advisor has retained an investment management firm (the
"Sub-Advisor") to provide the Fund with portfolio management services. The
Advisor's Investment Committee oversees the portfolio management of the Fund,
including the services provided by the Sub-Advisor.

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

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

Under the terms of the Advisory Agreement, the Fund pays the Advisor a fee,
computed daily and paid monthly, of 1.50% per annum of the Fund's average net
assets. Under this Agreement the Advisor has agreed to bear all of the Fund's
expenses, except extraordinary expenses (as designated by a majority of the
Investment Company's disinterested directors) and interest, brokerage
commissions and other transaction charges relating to the investing activities
of the Fund.

Acadian Asset Management, Inc. ("Acadian"), Two International Place, Boston,
Massachusetts, 02110, serves as Sub-Advisor to the Fund pursuant to a Portfolio
Management Agreement. Acadian is an international investment management firm and
currently manages approximately $3.9 billion in assets. Acadian is a
wholly-owned subsidiary of United Asset Management Corporation and provides
investment management services to corporations, pension and profit-sharing
plans, 401(k) and thrift plans, endowments, foundations and other institutions
and individuals. Dr. Gary L. Bergstrom, President of Acadian, oversees the
day-to-day investment decisions for the Fund and has done so since the Fund's
inception. Dr. Bergstrom founded Acadian's predecessor, Acadian Financial
Research, Inc., in 1977.
<PAGE>
Until terminated, the Portfolio Management Agreement between the Investment
Company (with respect to the Fund), the Advisor and Acadian provides that
Acadian will manage the investment and reinvestment of the assets of the Fund
and continually review, supervise and administer the Fund's investments. Acadian
pays all expenses of its staff and their activities in connection with its
portfolio management activities. As compensation for its services, the Advisor
(not the Fund) pays Acadian a fee equal to .75% per annum of the first $50
million of the Fund's average net assets, .65% of the next $50 million of such
assets, .50% of the next $100 million of such assets and .40% of such assets in
excess of $200 million. The Portfolio Management Agreement with Acadian may be
terminated by the Advisor or the Investment Company upon 30 days' written
notice. The Advisor has day-to-day authority to increase or decrease the amount
of the Fund's assets under management by Acadian Asset Management.

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

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of the Fund is stated below. The Fund is
intended for long-term investors, not for those who may wish to redeem their
shares after a short period of time.

The Fund seeks to achieve long-term capital appreciation by investing primarily
in small capitalization ("small cap") equity securities of issuers domiciled
outside the United States. The Fund selects its portfolio securities primarily
from among small cap companies in developed markets whose individual market
capitalizations would place them among the smallest 20% of market capitalization
in their respective markets. Developed markets will generally be defined as
those included in the Morgan Stanley Capital International Europe, Asia and Far
East (EAFE) Index. It is expected that the majority of the companies in which
the Fund invests will have a market capitalization of under $1 billion; however,
the Fund is likely to hold some companies with a market capitalization greater
than $1 billion. The Fund is designed for investors willing to accept the risks
entailed in investments in foreign securities of small companies and securities
denominated in various currencies. See "General Investment Policies - Special
Considerations for International Investing."

Under normal market conditions, at least 65% of the total assets of the Fund
will be invested in small cap equity securities of issuers domiciled outside the
United States with a market capitalization of under $1 billion. The Fund will be
invested in a minimum of three countries excluding the United States. The Fund's
portfolio of equity securities will consist of common and preferred stock,
warrants and debt securities convertible into common stock. Included in this 65%
total, up to 5% of the Fund's assets may be invested in rights or warrants to
purchase equity securities. For defensive purposes, the Fund may temporarily
have less than 65% of its total assets invested in small cap equity issuers
domiciled outside the United States.

In addition to investing directly in equity securities, the Fund may invest in
instruments such as sponsored and unsponsored American Depository Receipts
("ADRs") and European Depository Receipts ("EDRs"). See "General Investment
Policies" for a discussion of ADRs. EDRs are similar to ADRs but are designed
for use in the European securities markets.
<PAGE>
International small cap companies are smaller sized companies that the Advisor
and Sub-Advisor believe often have a potential for earnings growth over time
that is above the growth rate of more established companies or are early in
their life cycles and have the potential to become major enterprises. In
addition, some smaller companies may be undervalued because they are not as
closely followed by security analysts or institutional investors. The Advisor
and Sub-Advisor believe that an investment in shares of the Fund provides an
opportunity for greater rewards but will involve more risk than an investment in
a fund which seeks capital appreciation from investment in common stocks of
larger, better-known companies.

Investing in small companies involves certain special risks. Small companies may
have limited product lines, markets, or financial resources, and their
managements may be dependent on a limited number of key individuals. The
securities of small companies may have limited market liquidity and may be
subject to more abrupt or erratic market movements than securities of larger,
more established companies or the market averages in general.

Emphasis is placed on identifying securities of companies believed to be
undervalued in the marketplace in relation to factors such as the company's
revenues, earnings, assets and long-term competitive positions which over time
will enhance the equity value of the company. In selecting portfolio
investments, a company's growth prospects will be considered, including the
potential for superior appreciation due to growth in earnings, relative
valuation of its securities, and any risks associated with such investment; the
industry in which the company operates, with a view to identification of
international developments within industries, international investment trends,
and social, economic or political factors affecting a particular industry; the
country in which the company is based, as well as historical and anticipated
foreign currency exchange rate fluctuations; and the feasibility of gaining
access to the securities market in a country and of implementing the necessary
custodial arrangements.

Investments will be made in those countries where the Advisor and Sub-Advisor
believe that economic and political factors, including currency movements, are
likely to produce above average long-term investment returns. There is no
limitation on the percentage of the Fund's assets that may be invested at any
one time in one or more countries. However, except during times that the Fund is
in a temporary defensive posture, the Fund will invest at least 65% of its total
assets in the securities of issuers domiciled in at least three different
non-U.S. countries.

The Fund may invest in equity securities of companies domiciled in emerging
markets. As used in this prospectus, international emerging markets are
countries categorized as emerging markets by the International Finance
Corporation, the World Bank's private sector division. Such countries currently
include but are not limited to Thailand, Indonesia, the Philippines, South
Korea, Taiwan and certain Latin American countries.

Such markets tend to be in less economically developed regions of the world.
General characteristics of emerging market countries also include lower degrees
of political stability, a high demand for capital investment, a high dependence
on export markets for their major industries, a need to develop basic economic
infrastructures and rapid economic growth. The Advisor believes that investments
in equity securities of companies in international emerging markets offer the
opportunity for significant long-term investment returns. However, these
investments involve certain risks, as discussed below in "Risk Factors and
Special Considerations for International Investing."

The Fund's management anticipates that, from time to time, the Fund may have
more than 25% of its assets invested in securities of companies domiciled in the
countries of Japan, the United Kingdom and/or Germany. These are among the
leading industrial economies outside the United States and the values of their
stock markets account for a significant portion of the value of international
markets.
<PAGE>
Whenever in the judgment of the Advisor or Sub-Advisor market or economic
conditions warrant, the Fund may, for temporary defensive purposes, invest
without limitation in U.S. dollar-denominated or foreign currency-denominated
cash or in high quality debt securities with remaining maturities of one year or
less. During times that the Fund is investing defensively, the Fund will not be
pursuing its stated investment objective. For liquidity purposes, the Fund may
normally also invest up to 10% of its assets in U.S. dollar-denominated or
foreign currency-denominated cash or in high quality debt securities with
remaining maturities of one year or less. The Fund may also invest in
convertible debentures (convertible to equity securities) and preferred stocks
(which may or may not have a dividend yield). All preferred stocks and debt
securities, both foreign and domestic, in which the Fund invests must, at the
time of acquisition, be rated Aa or better by Moody's Investors Service, Inc.,
or AA or better by Standard & Poor's Ratings Group, or be of comparable quality
as determined by the Advisor or Sub-Advisor.

RISK FACTORS AND SPECIAL CONSIDERATIONS FOR INTERNATIONAL INVESTING. Investment
in securities of foreign entities and securities denominated in foreign
currencies involves risks typically not present to the same degree in domestic
investments. Likewise, investment in ADRs and EDRs presents similar risks, even
though the Fund will purchase, sell and be paid dividends on ADRs in U.S.
dollars. These risks include fluctuations in currency exchange rates, which are
affected by international balances of payments and other economic and financial
conditions; government intervention; speculation; and other factors. With
respect to certain foreign countries, there is the possibility of expropriation
or nationalization of assets, confiscatory taxation and political, social or
economic instability. The Fund may be required to pay foreign withholding or
other taxes on certain of its foreign investments, but investors may or may not
be able to deduct their pro rata shares of such taxes in computing their taxable
income, or take such shares as a credit against their U.S. income taxes. See
"Dividends, Distributions and Federal Income Taxation."

There may be less publicly available information about foreign issuers or
securities than about U.S. issuers or securities, and foreign issuers may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those of U.S. entities. With respect to unsponsored
ADRs, these programs cover securities of companies which are not required to
meet either the reporting or accounting standards of the United States. Many
foreign financial markets, while generally growing in volume, continue to have
substantially less volume than domestic markets, and securities of many foreign
companies are less liquid and their prices are more volatile than are securities
of comparable U.S. companies. Such markets may have longer settlement periods
than markets in the United States. In addition, brokerage commissions, custodial
services and other costs related to investment in foreign markets generally are
more expensive than in the United States, particularly with respect to emerging
markets. Such markets have different settlement and clearance procedures. In
certain markets, there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. The inability of the Fund to make intended securities
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Fund due to subsequent
declines in value of a portfolio security or, if the Fund had entered into a
contract to sell the security, could result in possible liability to the
purchaser. Settlement procedures in certain emerging markets also carry with
them a heightened risk of loss due to the failure of the broker or other service
provider to deliver cash or securities.
<PAGE>
The risks of foreign investing are of greater concern in the case of investments
in emerging markets which may exhibit greater price volatility, have less
liquidity and have settlement arrangements which are less efficient than in
developed markets. Furthermore, the economies of emerging market countries
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade barriers, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. These emerging
market economies also have been and may continue to be adversely affected by
economic conditions in the countries with which they trade.

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

Several of the countries in which the Fund may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital gains),
(ii) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation, (iii)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor, (iv) limitations on the types of
securities which a foreign investor may purchase and (v) restrictions on a
foreign investor's right to invest in companies whose securities are not
publicly traded. In some circumstances, these restrictions may limit or preclude
investment in certain countries. Therefore, the Fund intends to invest in such
countries through the purchase of shares of investment companies organized under
the laws of such countries.

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

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

U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. Government securities,
which are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as Treasury bills,
notes and bonds and Government National Mortgage Association ("GNMA")
certificates, are supported by the full faith and credit of the United States;
others, such as those of the Federal Home Loan Mortgage Corporation ("FHLMC"),
are supported by the right of the issuer to borrow from the Treasury; others,
such as those of the Federal National Mortgage Association ("FNMA"), are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government will provide financial
support to U.S. Government agencies or instrumentalities as described above in
the future, other than as set forth above, because it is not obligated to do so
by law.

WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction, but the settlement is delayed).
The Fund will not purchase securities the value of which is greater than 5% of
its net assets on a when-issued basis. The Fund, as purchaser, assumes the risk
of any decline in value of the security beginning on the date of the agreement
or purchase, and no interest accrues to the Fund until it accepts delivery of
the security. The Fund will not use such transactions for leveraging purposes,
and accordingly will segregate cash, cash equivalents or liquid securities or
hold a covered position in an amount sufficient to meet its payment obligations
thereunder.

There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business, which may take substantially more than three
business days for non-U.S. securities, are not treated by the Fund as
when-issued or forward commitment transactions and, accordingly, are not subject
to the foregoing limitations, even though some of the risks described above may
be present in such transactions.
<PAGE>
SHARES OF INVESTMENT COMPANIES. The Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
investment companies to the extent that such investmetns may facilitate
achieving the objective of the Fund or to the extent that they afford the
primary or most practical means of access to a particular market or markets or
they represent attractive investments in their own right. The percentage of Fund
assets which may be so invested is not limited, provided that the Fund and its
affiliates do not acquire more than 3% of the shares of any such investment
company. The provisions of the 1940 Act may also impose certain restrictions on
redemption of the Fund's shares in other investment companies. The Fund's
purchase of shares of investment companies may result in the payment by a
shareholder of duplicative management fees. The Advisor and/or Sub-Advisor will
consider such fees in determining whether to invest in other mutual funds. The
Fund will invest only in investment companies which do not charge a sales load;
however, the Fund may invest in such companies with distribution plans and fees,
and may pay customary brokerage commissions to buy and sell shares of closed-end
investment companies.

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

REPURCHASE AGREEMENTS. As part of its cash reserve position, the Fund may enter
into repurchase agreements through which the Fund acquires a security (the
"underlying security") from the seller, a well-established securities dealer or
a bank that is a member of the Federal Reserve System. At that time, the bank or
securities dealer agrees to repurchase the underlying security at the same
price, plus a specified amount of interest. Repurchase agreements are generally
for a short period of time, often less than a week. The seller must maintain
with the Fund's custodian collateral equal to at least 100% of the repurchase
price, including accrued interest, as monitored daily by the Advisor and/or
Sub-Advisor. The Fund will not enter into a repurchase agreement with a maturity
of more than seven business days if, as a result, more than 15% of the value of
its net assets, would then be invested in such repurchase agreements. The Fund
will only enter into repurchase agreements where (1) the underlying securities
are issued or guaranteed by the U.S. Government, (2) the market value of the
underlying security, including accrued interest, will be at all times equal to
or in excess of the value of the repurchase agreement, and (3) payment for the
underlying securities is made only upon physical delivery or evidence of
book-entry transfer to the account of the custodian or a bank acting as agent.
In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses, including: (1) a possible decline in the value of the
underlying security during the period in which the Fund seeks to enforce its
rights thereto; (2) possible reduced levels of income and lack of access to
income during this period; and (3) expenses of enforcing the Fund's rights.
<PAGE>
PORTFOLIO TURNOVER. The Fund expects to trade in securities for short-term gain
whenever deemed advisable by the Advisor and/or Sub-Advisor in order to take
advantage of anomalies occurring in general market, economic or political
conditions. Therefore, the Fund may have a higher portfolio turnover rate than
that of some other investment companies, but it is anticipated that the annual
portfolio turnover rate of the Fund will not exceed 200%. The portfolio turnover
rate is calculated by dividing the lesser of sales or purchases of long-term
portfolio securities by the Fund's average month-end long-term investments. High
portfolio turnover involves correspondingly greater transaction costs in the
form of dealer spreads or brokerage commissions and other costs that the Fund
will bear directly, and may result in the realization of net capital gains,
which are generally taxable whether or not distributed to shareholders.

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

BORROWING. The Fund may borrow from banks an amount not exceeding 30% of the
value of its total assets for temporary or emergency purposes and enter into
reverse repurchase agreements. If the income and gains on securities purchased
with the proceeds of borrowings or reverse repurchase agreements exceed the cost
of such borrowings or agreements, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the cost, earnings or net asset value would decline faster
than otherwise would be the case.

RESTRICTED SECURITIES. The Fund may purchase securities that are not registered
("restricted securities") under federal securities law, but can be offered and
sold to "qualified institutional buyers." However, the Fund will not invest more
than 15% of its assets in illiquid investments, which includes repurchase
agreements and fixed time deposits maturing in more than seven days, and
securities that are not readily marketable and restricted securities, unless the
Board of Directors determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are liquid. The Board of Directors may adopt guidelines and delegate to the
Advisor or Sub-Advisor the daily function of determining and monitoring
liquidity of restricted securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations.

WARRANTS OR RIGHTS. Warrants or rights may be acquired by the Fund in connection
with other securities or separately and provide the Fund with the right to
purchase other securities of the issuer at a later date. It is the present
intention of the Fund to limit its investments in warrants or rights, valued at
the lower of cost or market, to no more than 5% of the value of its net assets.
Warrants or rights acquired by the Fund in units or attached to securities will
be deemed to be without value for purposes of this restriction.

<PAGE>
OPTIONS AND FUTURES CONTRACTS. When the Fund is not fully invested, strategies
such as buying calls, writing puts, and buying futures may be used to increase
its exposure to price changes in stocks or debt securities. When the Advisor
and/or Sub-Advisor wishes to hedge against market fluctuations, strategies such
as buying puts, writing calls, and selling futures may be used to reduce market
exposure. Because most stock index futures and options are based on broad stock
market indices, their performance tends to track the performance of common
stocks generally - which may or may not correspond to the types of securities in
which the Fund invests. The Fund will maintain segregated accounts consisting of
cash, U.S. Government securities or other liquid securities (or, as permitted by
applicable regulations, enter into certain offsetting positions) to cover its
obligations under options and futures contracts to avoid leveraging.

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

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

FORWARD CURRENCY, FUTURES AND OPTIONS TRANSACTIONS. The Fund may enter into
forward currency contracts and currency futures contracts and may purchase put
or call options on currencies (each such arrangement sometimes referred to as a
"currency contract"). Forward contracts typically will involve the purchase or
sale of a foreign currency against the dollar. These techniques are designed
primarily to hedge against future changes in currency prices which might
adversely affect the value of the Fund's portfolio securities. The Fund may
attempt to accomplish objectives similar to those involved in its use of forward
currency contracts by purchasing put or call options on currencies or currency
futures. For a more detailed description of such arrangements, see the Statement
of Additional Information.
<PAGE>
The Fund may enter into currency contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. For example,
when the Advisor and/or Sub-Advisor anticipates making a purchase or sale of a
security, the Fund may enter into a currency contract in order to set the rate
(either relative to the U.S. dollar or another currency) at which a currency
exchange transaction related to the purchase or sale will be made. Further, when
it is believed that a particular currency may decline compared to the U.S.
dollar or another currency, the Fund may enter into a currency contract to sell
the currency the Advisor or Sub-Advisor expects to decline in the amount
approximating the value of some or all of the Fund's portfolio securities
denominated in that currency or related currencies that the Advisor and/or
Sub-Advisor feels demonstrate a correlation in exchange rate movements. The
practice of using correlated currencies is known as "cross-hedging." When the
Advisor and/or Sub-Advisor believes that the U.S. dollar may suffer a
substantial decline against a foreign currency or currencies, the Fund may enter
into a currency contract to buy a foreign currency for a fixed dollar amount. By
entering into such transactions, however, the Fund may be required to forego the
benefits of advantageous changes in exchange rates. Currency contracts generally
are traded over-the-counter, and not on organized commodities or securities
exchanges. As a result, such contracts operate in a manner distinct from
exchange-traded instruments, and their use involves certain risks beyond those
associated with transactions in other futures contracts.

SWAP AGREEMENTS. The Fund may enter into interest rate, index and currency
exchange rate swap agreements for purposes of attempting to obtain a particular
desired return at a lower cost to the Fund than if the Fund had invested
directly in an instrument that yielded that desired return. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
<PAGE>
rates of return) earned or realized on predetermined investments or instruments.
The gross returns to be exchanged or "swapped" between the parties are
calculated with respect to a "notional amount," i.e., the return on or increase
in value of a particular dollar amount invested at a particular interest rate,
in a particular foreign currency, or in a "basket" of securities representing a
particular index. Commonly used swap agreements include interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates exceed a specified rate; interest rate
floors, under which, in return for a premium, one party agrees to make payments
to the other to the extent that interest rates fall below a specified level; and
interest rate collars, under which a party sells a cap and purchases a floor or
vice versa in an attempt to protect itself against interest rate movements
exceeding minimum or maximum levels. Whether the Fund's use of swap agreements
will be successful in furthering its investment objective will depend on the
Advisor's or Sub-Advisor's ability to predict correctly whether certain types of
investments are likely to produce greater returns than other investments.

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

INVESTMENT RESTRICTIONS. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating the Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). These investment restrictions and the Fund's investment
objective cannot be changed without the approval of shareholders of the Fund;
all other investment practices described in this Prospectus and in the Statement
of Additional Information can be changed by the Board of Directors without
shareholder approval.
<PAGE>
INVESTMENT RESULTS

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

The Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses of
the Fund, so that any investment results reported by the Fund should not be
considered representative of what an investment in the Fund may earn in any
future period. When utilized, total return for the unmanaged indices described
in the Statement of Additional Information will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
recurring expenses such as advisory fees, brokerage costs or administrative
expenses. These factors and possible differences in calculation methods should
be considered when comparing the Fund's investment results with those published
for other investment companies, other investment vehicles and unmanaged indices.
The comparison of the Fund to an alternative investment should be made with
consideration of differences in features and expected performance. The Fund may
also be mentioned in newspapers, magazines, or other media from time to time.
The Fund assumes no responsibility for the accuracy of such data. The Fund's
results also should be considered relative to the risks associated with its
investment objective and policies. See "Investment Results" in the Statement of
Additional Information.

Additional performance information regarding the Fund will be included in its
annual report, which will be mailed to shareholders without charge upon request.

HOW TO INVEST

Shares of the Fund may be purchased through the Transfer Agent by submitting
payment by check, bank wire or electronic (Automated Clearing House or "ACH")
transfer and, in the case of new accounts, a completed account application form.
There is no sales load or contingent deferred sales load charged to purchase
shares of the Fund. All orders for the purchase of shares are subject to
acceptance or rejection by the Board of Directors or the Advisor. Purchases of
shares are made at the current net asset value next determined after the
purchase order is received by the Transfer Agent or by a selling agent of the
Fund. A minimum initial investment of $2,000 is required to open a shareholder
account, except for retirement plans such as Individual Retirement Accounts
(IRAs) and Keogh Plans. Retirement plans are subject to a $1,000 minimum initial
investment. The minimum initial investment is waived for accounts opened with
the Automatic Investment Plan and may be waived in other instances at the sole
<PAGE>
discretion of the Advisor. (See "Automatic Investment Plan.") Each subsequent
investment in the Fund must be $100 or more except in the case of retirement
plans or Automatic Investment Plans. There is a minimum continuing balance of
$1,500 required for non-retirement accounts (calculated on the basis of original
investment value). In some cases, the minimum balance requirement may be waived
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.

Investors wishing to open a new account by bank wire must call the Transfer
Agent at 800-548-4539 to obtain an account number and detailed wire
instructions. Bank wire instructions are also provided in the last section of
this Prospectus. All bank wire investments received before the close of trading
on the New York Stock Exchange (currently 4:00 p.m., Eastern time), will be
credited the same day. Otherwise, bank wire investments will be credited the
next business day. A bank wire investment is considered received when the
Transfer Agent is notified that the bank wire has been credited to its account.

Shares of the Fund may also be purchased through broker-dealers or other
financial intermediaries who have made appropriate arrangements with the Fund.
Such agents are responsible for ensuring that the account documentation is
complete and that timely payment is made for the Fund shares purchased for their
customers pursuant to such orders. These agents may charge a reasonable
transaction fee, or other selling charge to their customers. In some instances,
all or a portion of the transaction fee may be paid by the Advisor. To the
extent these agents perform shareholder servicing activities for the Fund, they
may receive fees from the Fund or the Advisor for such services.

From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor for such activities.

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 palced the order will be subject to a $20 charge and must reimburse
the Fund for any loss incurred by reason of such cancellation. For more
information, see "Other Investment and Redemption Services" in the Statement of
Additional Information.

First Funds Distributor, Inc., 4455 Camelback Road, Suite 261E, Phoenix,
Arizona, 85018, is the principal underwriter for the Fund.

SHAREHOLDER ACCOUNT
SERVICES AND PRIVILEGES

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

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

The fiscal year of the Fund ends on October 31 of each year. The Investment
Company issues to its shareholders semi-annual and annual reports, which contain
a schedule of the Fund's portfolio securities and financial statements. Annual
reports will include audited financial statements. The federal income tax status
of shareholder distributions also will be reported to the Fund's shareholders
after the end of the calendar year on Form 1099-DIV.
<PAGE>
EXCHANGES BETWEEN FUNDS. Shares of one Fremont Fund may be exchanged for shares
of another Fremont Fund at their respective net asset values, provided that the
account registration remains identical. Exchanges may only be made for shares of
a Fremont Fund then offered for sale in your state of residence. It is required
that (1) all shares in one Fund must be exchanged or (2) the remaining balance
must be at least $1,500. This minimum balance requirement may be waived. These
exchanges are not tax-free and will result in a shareholder realizing a gain or
loss for tax purposes, except in the case of tax-deferred retirement accounts or
other tax-exempt shareholders that have not borrowed to acquire shares
exchanged.

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

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

TELEPHONE EXCHANGE PRIVILEGE. An investor may elect on the account application
to authorize exchanges by telephone. A shareholder may give instructions
regarding exchanges by calling 800-548-4539. A shareholder wishing to initiate
the telephone exchange privilege should contact the Fund. This privilege will
not be added to an account without written instruction to do so from the
shareholder. Telephone requests received by the close of trading on the New York
Stocke Exchanges (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 Fund. The
minimum initial investment is waived for accounts opened with the Automatic
Investment Plan. The amount of the monthly investment must be at least $50, and
is not otherwise subject to the $200 minimum for subsequent investments. There
is no obligation to make additional payments, and the plan may be terminated by
the shareholder at any time. Termination requests must be received in writing at
least 5 days prior to the regular draft date, or the drafts will not cease until
<PAGE>
the next cycle. The Transfer Agent may impose a charge for this service,
although no such charge currently is contemplated. If a shareholder's order to
purchase shares is cancelled due to nonpayment (for example, "insufficient
funds"), the shareholder's account will be subject to a $20 charge and the
shareholder will be responsible for reimbursing the Fund for any loss incurred
by reason of such cancellation. A shareholder wishing to initiate the plan on a
new or existing account must fill out an Automatic Investment Plan form. The
form is available on request.

HOW TO REDEEM SHARES

Because of market fluctuations, the amount a shareholder receives for shares
redeemed may be more or less than the amount paid for them.

Redemption of shares, exchanges and redemptions under an Automatic Withdrawal
Plan may result in taxable capital gains or losses.

TELEPHONE REDEMPTION PRIVILEGE. An investor may elect on the regular account
application to authorize redemptions by telephone. This privilege will not be
added to an account without written authorization to do so from the shareholder.
A shareholder may then give instructions regarding redemptions by calling
800-548-4539. (The Telephone Redemption Privilege is not available for IRA or
other retirement accounts.) Telephone requests received by the close of trading
on the New York Stock Exchange (currently 4:00 p.m., Eastern time), will be
processed at the net asset value calculated that same day. During times of
drastic economic or market conditions, the telephone redemption privilege may be
difficult to implement. The Transfer Agent will make its best effort to
accommodate shareholders when its telephone lines are used to capacity. Under
these circumstances, a shareholder should consider using overnight mail to send
a written redemption request.
<PAGE>
Neither the Investment Company, the Transfer Agent, nor their respective
affiliates, will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost or expense in
acting on such telephone instructions. The affected shareholder(s) will bear the
risk of any such loss. The Investment Company, or the Transfer Agent, or both,
will employ reasonable procedures to determine that telephone instructions are
genuine. If the Investment Company and/or the Transfer Agent do not employ such
procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of the transactions, and/or tape recording telephone
instructions.

AUTOMATIC WITHDRAWAL PLAN. A shareholder may request redemptions of a specified
dollar amount (minimum of $100) on either a monthly, quarterly, or yearly basis.
Currently, there is no charge for this service. Redemptions will be made on the
last business day of the month. Because a redemption constitutes a liquidation
of shares, the number of shares owned in the account will be reduced. Automatic
redemptions should not reduce the account below the minimum balance required
(currently $1,500). Shareholders may terminate the Automatic Withdrawal Plan at
any time, but not less than five days before a scheduled payment date. When an
exchange is made between Fremont Funds, shareholders must specify if they desire
the automatic withdrawal option to be transferred to a new account opened by the
exchange. As an account balance declines to the minimum permitted, the
shareholder must advise the Transfer Agent if the automatic withdrawal feature
is to be transferred to another account of the shareholder. Shareholders should
note that if there is an Automatic Withdrawal Plan established for an account
and the entire account is exchanged into another Fremont Fund, the automatic
withdrawal option must be renewed by written request to the Transfer Agent. A
shareholder wishing to initiate automatic redemptions must complete an Automatic
Withdrawal Plan form available from the Transfer Agent.

SIGNATURE GUARANTEE. To better protect the Fund and shareholders' accounts, a
signature guarantee is required for certain transactions. Signatures must be
guaranteed by an "eligible guarantor institution" as defined in applicable
regulations. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. 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.
<PAGE>
The Fund reserves the right to redeem mandatorily the shares in a shareholder's
account (other than a retirement plan account) if the balance is reduced to less
than $1,500 in net asset value through redemptions or other action by the
shareholder. Notice will be given to the shareholder at least 30 days prior to
the date fixed for such redemption, during which time the shareholder may
increase its holdings to an aggregate amount of $1,500 or more (with a minimum
purchase of $100 or more). This minimum balance may be waived.

TRANSFER AGENT. The Advisor is the transfer agent for 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 Fund may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs); SEP-IRAs;
SIMPLE IRAs; Roth IRAs; Qualified Retirement Plans for self-employed persons and
their employees; corporate pension and profit-sharing plans; and Section 403(b)
Plans, which are deferred compensation arrangements for employees of public
schools and certain charitable organizations. Forms for establishing IRAs,
SEP-IRAs, SIMPLE IRAs, Roth IRAs, and Qualified Retirement Plans are available
through the Investment Company, as are forms for corporate Pension and
Profit-Sharing plans. Please contact the Investment Company for more information
about establishing these accounts. In accordance with industry practice, there
may be an annual account charge for participation in these plans. Information
regarding these charges is available from the Investment Company.

Retirement plan participants may receive additional services related to their
plan at no extra cost to any shareholder.

DIVIDENDS, DISTRIBUTIONS
AND FEDERAL INCOME
TAXATION

The Fund has qualified, and intends to continue to qualify to be treated as a
"regulated investment company" under Sub-chapter M of the Internal Revenue Code
(the "Code"). For any tax year in which the Fund so qualifies and meets certain
other distribution requirements, it will not incur a federal tax liability. Such
qualification under the Code requires a Fund to diversify its investments so
that, at the end of each fiscal quarter, (1) at least 50 % of the market value
of the Fund's assets is represented by cash, U.S. government securities,
securities of other regulated investment companies, and other securities,
limited, in respect to any one issuer, to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(2) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. government securities or the securities of
other regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.

The Fund intends to distribute substantially all of its net investment income
once each year in September.
<PAGE>
The Fund intends to distribute substantially all of its net realized capital
gains, if any, at the end of the calendar year (on or about December 15).
Dividend and capital gains distributions, if any, may be reinvested in
additional shares at net asset value on the day of reinvestment, or may be
received in cash. All dividends and distributions are taxable to a shareholder
(except tax-exempt shareholders who have not borrowed to acquire their shares)
whether or not they are reinvested in shares of the Fund. Any long-term or
mid-term capital gains distributions are taxable to shareholders as long-term or
mid-term capital gains, respectively, regardless of how long shareholders have
held Fund shares. The maximum capital gains rate for individuals is 28% with
respect to assets held for more than 12 months, but not more than 18 months, and
20% with respect to assets held more than 18 months. The maximum capital gains
rate for corporate shareholders is the same as the maximum tax rate for ordinary
income. Distributions of short-term capital gains will be subject to the tax as
ordinary income.

Shareholders may elect:

- -- 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.

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

If a shareholder has not furnished a certified correct taxpayer identification
number (generally a Social Security number) and has not certified that
withholding does not apply, or if the Internal Revenue Service has notified the
Fund that the taxpayer identification number listed on the account is incorrect
according to their records or that the shareholder is subject to backup
withholding, federal law generally requires the Fund to withhold 31% from any
dividends and/or redemptions (including exchange redemptions to the
shareholder). Amounts withheld are applied to the shareholder's federal tax
liability; a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. A shareholder should contact the
Transfer Agent if the shareholder is uncertain whether a proper taxpayer
identification number is on file with the Transfer Agent. Federal law also
requires the Fund to withhold 30%, or the applicable tax treaty rate, from
ordinary dividends paid to certain nonresident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts. Long-term capital gains distributions
may be subject to this withholding.
<PAGE>
Dividends and interest from foreign issuers earned by the Fund may give rise to
withholding and other taxes imposed by foreign countries, generally at rates
from 10% to 40%. Tax conventions between certain countries and the United States
may reduce or eliminate these taxes. Foreign countries generally do not impose
taxes on capital gains with respect to investments by non-resident investors.
Except as indicated below, to the extent that the Fund does pay foreign
withholding or other foreign taxes on certain of its investments, investors will
not be able to deduct their pro rata shares of such taxes in computing their
taxable income nor be able to take their shares of such taxes as a credit
against U.S. income taxes.

If more than 50% of the value of the Fund's total assets at the close of its
fiscal year consist of securities of foreign corporations, the Fund 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 Fund will
report annually to its shareholders the amount per share of such withholding, if
any.

CALCULATION OF NET ASSET VALUE

The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. Investments, including
options, are stated at value based on recorded closing sales on a national
securities exchange or, in the absence of a recorded sale, at the mean between
the last reported bid and asked prices or at fair value as determined by the
Board of Directors. Short-term notes and similar securities are included in
investments at amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the preceding
closing values of such securities on their respective exchanges or the most
recent price available where no closing value is available. The Fund's portfolio
may include securities which trade primarily on non-U.S. exchanges or otherwise
in non-U.S. markets. Because of time zone differences, the prices of these
securities, as used for net asset value calculations, may be established
substantially in advance of the close of the New York Stock Exchange. Foreign
securities may also trade on days when the New York Stock Exchange is closed
(such as a Saturday). The net asset value and public offering price of the Fund,
to the extent that it holds securities valued on foreign markets, may vary
during periods when the New York Stock Exchange is closed. As a result, the
value of the Fund's portfolio may be affected significantly by such trading on
days when a shareholder has no access to the Fund. For further information, see
"How to Invest," "How to Redeem Shares" and "Exchanges Between Funds" in this
Prospectus, and "How to Invest" and "Other Investment and Redemption Services"
in the "Statement of Additional Information."
<PAGE>
The net asset value and public offering price of the Fund will be determined as
of the close of the regular session of the New York Stock Exchange. The shares
of the Fund are offered at net asset value without a sales charge. Purchase,
redemption and exchange orders received in proper form by the Transfer Agent
before the close of trading on the New York Stock Exchange (currently 4:00 p.m.,
Eastern time), will be priced at the net asset value next determined on that day
(with certain limited exceptions discussed in the Statement of Additional
Information). Otherwise, orders received by the Transfer Agent will be entered
at the next calculated net asset value.

EXECUTION OF PORTFOLIO
TRANSACTIONS

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.

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
<PAGE>
voting rights, which means that the holders of a majority of the shares voting
for the election of directors can elect all of the directors. Shareholders
holding 10% of the outstanding shares may call a meeting of shareholders for any
purpose, including that of removing any director. A director may be removed upon
a majority vote of the shareholders qualified to vote in the election. The 1940
Act requires the Investment Company to assist shareholders in calling such a
meeting.

On any matter submitted to a vote of shareholders, such matter shall be voted by
the Fund's shareholders separately when the matter affects the specific interest
of the Fund (such as approval of the Advisory Agreement with the Advisor and the
Portfolio Management Agreement with the Sub-Advisor) except in matters where a
vote of all series in the aggregate is required by the 1940 Act or otherwise.

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:

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
<PAGE>
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 Institutional 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.
<PAGE>
FREMONT MUTUAL FUNDS, INC.
U.S. Micro-Cap Fund
March 1, 1998

TABLE OF CONTENTS

ITEM PAGE NO.

Summary of Fees and Expenses .........................................
Financial Highlights .................................................
The Advisor, The Sub-Advisor and the Fund ............................
Investment Objective, Policies and Risk Considerations ...............
General Investment Policies ..........................................
Investment Results ...................................................
How to Invest ........................................................
Shareholder Account Services and Privileges ..........................
How to Redeem Shares .................................................
Retirement Plans .....................................................
Dividends, Distributions and Federal Income Taxation .................
Calculation of Net Asset Value and Public Offering Price .............
Execution of Portfolio Transactions ..................................
General Information ..................................................
Telephone Numbers and Addresses ......................................
<PAGE>
PROSPECTUS

FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the Fremont U.S. Micro-Cap Fund (the "Fund").

FREMONT U.S. MICRO-CAP FUND seeks to achieve long-term capital appreciation
by investing primarily in equity securities of micro-cap companies domiciled
within the United States.

There can be no assurance that the Fund will achieve its investment
objective. The Fund is a diversified fund as defined by the Investment Company
Act of 1940, as amended (the "1940 Act").

Shares of the Fund are offered without a sales charge.

The date of this Prospectus is March 1, 1998.

FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.
<PAGE>
SUMMARY OF FEES AND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(1) None
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)

Management Fee(2) 1.88%
12b-1 Expenses None
Other Expenses None
----
Total Fund Operating Expenses 1.88%

Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:

1 YEAR 3 YEARS 5 YEARS 10 YEARS

U.S. Micro-Cap Fund $19 $59 $102 $221

THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE EXPENSES OR
ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR LESS THAN
THOSE SHOWN ABOVE.

See "The Advisor, the Sub-Advisor and the Fund."

(1) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is currently
$10. See "How to Redeem Shares."

(2) The 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.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED OCTOBER 31 JUNE 30, 1994 TO
1997 1996 1995 OCTOBER 31, 1994
---- ---- ---- ----------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
for one share outstanding during the period
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.63 $ 14.34 $10.34 $10.00
-------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(a) (.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 $102,48 $7,792 $2,052
Ratio of expenses to average net assets(2) 1.88% 1.96% 2.04% 2.50%*
Ratio of net investment income (loss) to average net assets(2) (.67) (.51)% (.67)% .68%*
Portfolio turnover rate 125% 81% 144% 129%*
Average commission rate paid $ .0505 $ .0541 -- --
</TABLE>

(1) total return would have been lower had the advisor not waived expenses.

(2) The Advisor is voluntarily limiting the advisory fee to a reduced rate of no
greater than 1.98% of average net assets.

*Annualized
<PAGE>
THE ADVISOR, THE SUB-ADVISOR AND THE FUND

Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in the Fremont U.S.
Micro-Cap Fund. The Investment Company has other series offered with a different
prospectus, and the Board of Directors of the Investment Company is permitted to
create additional funds at any time. The Fund has its own investment objective
and policies and operates as a separate mutual fund.

The management of the business and affairs of the Investment Company is the
responsibility of the Board of Directors. Fremont Investment Advisors, Inc. (the
"Advisor") provides the Fund with investment management and administrative
services under an Investment Advisory and Administrative Agreement (the
"Advisory Agreement") with the Investment Company. The Advisory Agreement
provides that the Advisor shall furnish advice to the Fund with respect to its
investments and shall, to the extent authorized by the Board of Directors,
determine what securities shall be purchased or sold by the Fund. As described
more fully below, the Advisor has retained an investment management firm (the
"Sub-Advisor") to provide the Fund with portfolio management services. The
Advisor's Investment Committee oversees the portfolio management of the Fund,
including the services provided by the Sub-Advisor.

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

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

Under the terms of the Advisory Agreement, the Fund pays the Advisor a fee,
computed daily and paid monthly, of 2.50% per annum of the Fund's average net
assets with respect to the first $30 million, 2.00% with respect to the next $70
million of such assets, and 1.50% of such assets in excess of $100 million.
Under this Agreement the Advisor has agreed to bear all of the Fund's expenses,
except extraordinary expenses (as designated by a majority of the Investment
Company's disinterested directors) and interest, brokerage commissions and other
transaction charges relating to the investing activities of the Fund.

- - Bob Kern, Managing Member, President and Chief Executive Officer of KCM,
has over 30 year of investment management experience was a Senior Vice
President of the Advisor from April 1997 to August 1997 and was employed by
Morgan Grenfell Asset Management, Inc. from 1986 through April 1997, where
he headed Morgan Grenfell's Smaller Capitalization Equities Team.
<PAGE>
- - 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 was employed as portfolio manager and from February
1997 until April 1997 was employed as Vice President of Founders Asset
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.

- - 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, from
June 1992 to June 1995 as a Senior Analyst at Fred Alger Management located
in New York.

For additional information se "Investment Advisory and Other Services" in the
Statement of Additional Information.

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of the Fund is stated below. The Fund is
intended for long-term investors, not for those who may wish to redeem their
shares after a short period of time.

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 over-the-counter (OTC) market. However, up to 25% of the Fund's total
assets, at the time of purchase, may be invested in securities of micro-cap
companies domiciled outside the United States, including sponsored and
unsponsored American Depository Receipts ("ADRs") and European Depository
Receipts ("EDRs"). See "General Investment Policies" for a discussion of ADRs.
EDRs are similar to ADRs but are designed for use in the European securities
market. The Fund may also invest in stock index futures contracts, options on
index futures and options on portfolio securities and stock indices.
<PAGE>
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. 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.

Although the Fund invests primarily in common stocks and securities convertible
into common stock, for liquidity purposes it will normally invest a portion of
its assets in high quality debt securities and money market instruments with
remaining maturities of one year or less, including repurchase agreements.
Whenever in the judgment of the Advisor or Sub-Advisor market or economic
conditions warrant, the Fund may, for temporary defensive purposes, invest
without limitation in these instruments. During times that the Fund is investing
defensively, the Fund will not be pursuing its stated investment objective. The
Fund may also hold other types of securities from time to time, including
non-convertible bonds and preferred stocks, in an amount not exceeding 5% of its
net assets. Preferred stocks and bonds will be rated at the time of purchase in
the top two categories of Moody's Investor Service, Inc. (Aaa or Aa) or Standard
& Poor's Ratings Group, (AAA or AA) or be of comparable quality as determined by
the Advisor or Sub-Advisor.
<PAGE>
GENERAL INVESTMENT POLICIES

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

WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction, but the settlement is delayed).
The Fund will not purchase securities the value of which is greater than 5% of
its net assets on a when-issued basis. The Fund, as purchaser, assumes the risk
of any decline in value of the security beginning on the date of the agreement
or purchase, and no interest accrues to the Fund until it accepts delivery of
the security. The Fund will not use such transactions for leveraging purposes,
and accordingly will segregate cash, cash equivalents or liquid securities or
hold a covered position in an amount sufficient to meet its payment obligations
thereunder.

There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business, which may take substantially more than three
business days for non-U.S. securities, are not treated by the Fund as
when-issued or forward commitment transactions and, accordingly, are not subject
to the foregoing limitations, even though some of the risks described above may
be present in such transactions.
<PAGE>
SHARES OF INVESTMENT COMPANIES. The Fund may invest some portion of its assets
in shares of other no-load, open-end investment companies and closed-end
investment companies to the extent that such 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 the Fund and its affiliates do
not acquire more than 3% of the shares of any such investment company. The
provisions of the 1940 Act may also impose certain restrictions on redemption of
the Fund's shares in other investment companies. The Fund's purchase of shares
of investment companies may result in the payment by a shareholder of
duplicative management fees. The Advisor and/or Sub-Advisor will consider such
fees in determining whether to invest in other mutual funds. The Fund will
invest only in investment companies which do not charge a sales load; however,
the Fund may invest in such companies with distribution plans and fees, and may
pay customary brokerage commissions to buy and sell shares of closed-end
investment companies.

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

LOANS OF PORTFOLIO SECURITIES. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in an
amount not exceeding 331/3% of its net assets. The borrower must maintain with
the Fund's custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of, 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.

RESTRICTED SECURITIES. The Fund may purchase securities that are not registered
("restricted securities") under federal securities laws, but can be offered and
sold to "qualified institutional buyers." However, the Fund will not invest more
than 15% of its assets in illiquid investments, which includes repurchase
agreements and fixed time deposits maturing in more than seven days, and
securities that are not readily marketable and restricted securities, unless the
Board of Directors determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are liquid. The Board of Directors may adopt guidelines and delegate to the
Advisor or Sub-Advisor the daily function of determining and monitoring
liquidity of restricted securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations.

OPTIONS AND FUTURES CONTRACTS. When the Fund is not fully invested, strategies
such as buying calls, writing puts, and buying futures may be used to increase
its exposure to price changes in stocks or debt securities. When the Advisor
and/or Sub-Advisor wishes to hedge against market fluctuations, strategies such
as buying puts, writing calls, and selling futures may be used to reduce market
exposure. Because most stock index futures and options are based on broad stock
market indices, their performance tends to track the performance of common
stocks generally -- which may or may not correspond to the types of securities
in which the Fund invests. The Fund will maintain segregated accounts consisting
of cash, U.S. Government securities or other liquid securities (or, as permitted
by applicable regulations, enter into certain offsetting positions) to cover its
obligations under options and futures contracts to avoid leveraging.
<PAGE>
In seeking appreciation or to reduce principal volatility, the Fund may also (1)
enter into futures contracts -- contracts for the future delivery of debt
securities, stock, stock index futures contracts with respect to the S&P 500
Index, small capitalization stock market indices or other similar broad-based
stock market indices, the initial margins of which are limited to 5% of the
Fund's assets; and (2) purchase put and call options on portfolio securities,
stock indices or stock index futures contracts -- the premiums of which are
limited to 5% of the Fund's assets.

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

RISK FACTORS AND SPECIAL CONSIDERATIONS FOR INTERNATIONAL INVESTING. Investment
in securities of foreign entities and securities denominated in foreign
currencies involves risks typically not present to the same degree in domestic
investments. Likewise, investment in ADRs and EDRs presents similar risks, even
though the Fund will purchase, sell and be paid dividends on ADRs in U.S.
dollars. These risks include, 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. The Fund may be required to pay
foreign withholding or other taxes on certain of its foreign investments, but
investors may or may not be able to deduct their pro rata shares of such taxes
in computing their taxable income, or take such shares as a credit against their
U.S. income taxes. See "Dividends, Distributions and Federal Income Taxation."

There may be less publicly available information about foreign issuers or
securities than about U.S. issuers or securities, and foreign issuers may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those of U.S. entities. With respect to unsponsored
ADRs, these programs cover securities of companies which are not required to
meet either the reporting or accounting standards of the United States. Many
<PAGE>
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 the Fund to make
intended securities purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security caused by settlement problems could result either in losses to the Fund
due to subsequent declines in value of a portfolio security or, if the Fund had
entered into a contract to sell the security, 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 operating expense ratio of the Fund when investing in foreign securities may
be higher than that of an investment company investing exclusively in U.S.
securities because certain expenses, such as custodial costs, may be higher.
<PAGE>
Several of the countries in which the Fund may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital gains),
(ii) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation, (iii)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor, (iv) limitations on the types of
securities which a foreign investor may purchase and (v) restrictions on a
foreign investor's right to invest in companies whose securities are not
publicly traded.

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

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

INVESTMENT RESTRICTIONS. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating the Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). These investment restrictions and the Fund's investment
objective cannot be changed without the approval of shareholders of the Fund;
all other investment practices described in this Prospectus and in the Statement
of Additional Information, however, can be changed by the Board of Directors
without shareholder approval.
<PAGE>
INVESTMENT RESULTS

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

The Fund's investment results will vary from time to time depending upon, among
other thing, economic condition, market conditions, the composition of the
Fund's portfolio, and operating expenses of the Fund, so that any investment
results reported by the Fund should not be considered representative of what an
investment in the Fund may earn in any future period. When utilized, total
return for the unmanaged indices described in the Statement of Additional
Information will be calculated assuming reinvestment of dividends and interest,
but will not reflect any deductions for recurring expenses such as advisory
fees, brokerage costs or administrative expenses. These factors and possible
differences in calculation methods should be considered when comparing the
Fund's investment results with those published for other investment companies,
other investment vehicles and unmanaged indices. The comparison of the Fund to
an alternative investment should be made with consideration of differences in
features and expected performance. The Fund may also be mentioned in newspapers,
magazines, or other media from time to time. The Fund assumes no responsibility
for the accuracy of such data. The Fund's results also should be considered
relative to the risks associated with its investment objective and policies. See
"Investment Results" in the Statement of Additional Information.

Additional performance information regarding the Fund will be included in its
annual report, which will be mailed to shareholders without charge upon request.

HOW TO INVEST

There is no sales load or contingent deferred sales load charged to purchase
shares of the Fund. All orders for the purchase of shares are subject to
acceptance or rejection by the Board of Directors or the Advisor. Purchases of
shares are made at the current net asset value next determined after the
purchase order is received by the Transfer Agent or by a selling agent of the
Fund. A minimum initial investment of $2,000 is required to open a shareholder
account, except for retirement plans such as Individual Retirement Accounts
(IRAs) and Keogh Plans. Retirement plans are subject to a $1,000 minimum initial
investment. The minimum initial investment is waived for accounts opened with
the Automatic Investment Plan and may be waived in other instances at the sole
discretion of the Advisor. (See "Automatic Investment Plan.") Each subsequent
investment in the Fund must be $100 or more except in the case of retirement
plans or Automatic Investment Plans. There is a minimum continuing balance of
$1,500 required for non-retirement accounts (calculated on the basis of original
investment value). In some cases, the minimum balance requirement may be waived
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.
<PAGE>
Investors wishing to open a new account by bank wire must call the Transfer
Agent at 800-548-4539 to obtain an account number and detailed wire
instructions. Bank wire instructions are also provided in the last section of
this Prospectus. All bank wire investments received before the close of trading
on the New York Stock Exchange (currently 4:00 p.m., Eastern time), will be
credited the same day. Otherwise, Fund shares will be credited the next business
day. A bank wire investment is considered received when the Transfer Agent is
notified that the bank wire has been credited to its account.

Shares of the Fund may also be purchased through broker-dealers or other
financial intermediaries who have made appropriate arrangements with the Fund.

Such agents are responsible for ensuring that the account documentation is
complete and that timely payment is made for the Fund shares purchased for their
customers pursuant to such orders. These agents may charge a reasonable
transaction fee to their customers. In some instances, all or a portion of the
transaction fee, or other selling charge, may be paid by the Advisor. To the
extent these agents perform shareholder servicing activities for the Fund, they
may receive fees from the Fund or the Advisor for such services.

From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor for such activities.

As a condition of this offering, if an order to purchase shares is cancelled due
to nonpayment (for example, a check returned for "insufficient funds"), the
person who placed the order will be subject to a $20 charge and must reimburse
the Fund for any loss incurred by reason of such cancellation. For more
information, see "Other Investment and Redemption Services" in the Statement of
Additional Information.

First Funds Distributor, Inc., 4455 Camelback Road, Suite 261E, Phoenix,
Arizona, 85018, is the principal underwriter for the Fund.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

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

EXCHANGES BETWEEN FUNDS. Shares of one Fremont Fund may be exchanged for shares
of another Fremont Fund at their respective net asset values, provided that the
account registration remains identical. Exchanges may only be made for shares of
a Fremont Fund that are offered for sale in your state of residence at the time
of 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.
<PAGE>
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, can be limited by the
Investment Company's refusal to accept further purchase and exchange orders from
the shareholder.

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

TELEPHONE EXCHANGE PRIVILEGE. An investor may elect on the account application
to authorize exchanges by telephone. A shareholder may give instructions
regarding exchanges by calling 800-548-4539. A shareholder wishing to initiate
the telephone exchange privilege should contact the Fund. This privilege will
not be added to an account without written instruction to do so from the
shareholder. Telephone requests received by the close of trading on the New York
Stokc 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

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

HOW TO REDEEM SHARES

Shares are redeemed at no charge (other than wire transfer fees, if any) at the
net asset value next determined after receipt by the Transfer Agent of proper
written redemption instructions. The current charge for a wire transfer is $8
per wire. This is subject to change by the Transfer Agent at any time, without
prior notification. See "Calculation of Net Asset Value and Public Offering
Price."
<PAGE>
Redemption orders received in proper form by the Transfer Agent, or other Fund
agent authorized to accept orders, before the close of trading of 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 entered
at the next calculated net asset value.

Because of market fluctuations, the amount a shareholder receives for shares
redeemed may be more or less than the amount paid for them.

Redemption of shares, exchanges and redemptions under an Automatic Withdrawal
Plan may result in taxable capital gains or losses.

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.
<PAGE>
AUTOMATIC WITHDRAWAL PLAN. A shareholder may request redemptions of a specified
dollar amount (minimum of $100) on either a monthly, quarterly, or yearly basis.
Currently, there is no charge for this service. Redemptions will be made on the
last business day of the month. Because a redemption constitutes a liquidation
of shares, the number of shares owned in the account will be reduced. Automatic
redemptions should not reduce the account below the minimum balance required
(currently $1,500). Shareholders may terminate the Automatic Withdrawal Plan at
any time, but not less than five days before a scheduled payment date. When an
exchange is made between Funds, shareholders must specify if they desire the
automatic withdrawal option to be transferred to a new account opened by the
exchange. As an account balance declines to the minimum permitted, the
shareholder must advise the Transfer Agent if the automatic withdrawal feature
is to be transferred to another account of the shareholder. Shareholders should
note that if there is an Automatic Withdrawal Plan established for an account
and the entire account is exchanged into another Fremont Fund, the automatic
withdrawal option must be renewed by written request to the Transfer Agent. A
shareholder wishing to initiate automatic redemptions must complete an Automatic
Withdrawal Plan form available from 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.

REDEMPTION IN KIND. The Investment Company reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for redemption
or repurchase order by making payment in whole or in part in readily marketable
securities chosen by the Fund and valued as they are for purposes of computing
the Fund's net asset value (a redemption in kind). If payment is made in
securities, a shareholder may incur transaction expenses in converting these
securities into cash.
<PAGE>
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 Transfer and Dividend Disbursing Agent and shareholder
service agent. State Street Bank and Trust Company has contracted with National
Financial Data Services to serve as shareholder servicing agent. A depository
account has been established at United Missouri Bank of Kansas City ("United
Missouri Bank") through which all payments for the funds will be processed.

RETIREMENT PLANS

Shares of the Fund may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs); SEP-IRAs;
SIMPLE IRAs; Roth IRAs; Qualified Retirement Plans for self-employed persons and
their employees; corporate pension and profit-sharing plans; and Section 403(b)
Plans, which are deferred compensation arrangements for employees of public
schools and certain charitable organizations. Forms for establishing IRAs,
SEP-IRAs, SIMPLE IRAs, Roth IRAs, and Qualified Retirement Plans are available
through the Investment Company, as are forms for corporate Pension and
Profit-Sharing plans. Please contact the Investment Company for more information
about establishing these accounts. In accordance with industry practice, there
may be an annual account charge for participation in these plans. Information
regarding these charges is available from the Investment Company.

Retirement plan participants may receive additional services related to their
plan at no extra cost to any shareholder.

DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION

The Fund has qualified, and intends to continue to qualify to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
(the "Code"). For any tax year in which the Fund so qualifies and meets certain
other distribution requirements, it will not incur a federal tax liability. Such
qualification under the Code requires a Fund to diversify its investments so
that, at the end of each fiscal quarter, (1) at least 50% of the market value of
the Fund's assets is represented by cash, U.S. government securities, securities
of other regulated investment companies, and other securities, limited, in
respect to any one issuer, to an amount not greater than 5% of the Fund's assets
and 10% of the outstanding voting securities of such issuer, and (2) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. government securities or the securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.

The Fund intends to distribute all of its net investment income once each year
in September.

The Fund intends to distribute 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 Fund. Availability of the "dividends
received" deduction is subject to certain holding period and debt-financing
limitations.
<PAGE>
Shareholders may elect:

- -- to have all dividends and capital gain distributions automatically
reinvested in additional shares; or

- -- to receive the income dividends and short-term capital gains distributions
in cash and accept the long-term capital gains distributions in additional
shares; or

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

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

Dividends and interest from foreign issuers earned by the Fund may give rise to
withholding and other taxes imposed by foreign countries, generally at rates
from 10% to 40%. Tax conventions between certain countries and the United States
may reduce or eliminate these taxes. Foreign countries generally do not impose
taxes on capital gains with respect to investments by non-resident investors.
Except as indicated below, to the extent that the Fund does pay foreign
withholding or other foreign taxes on certain of its investments, investors will
not be able to deduct their pro rata shares of such taxes in computing their
taxable income nor be able to take their shares of such taxes as a credit
against U.S. income taxes.

CALCULATION OF NET ASSET VALUE

The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. Investments, including
options, are stated at value based on recorded closing sales on a national
securities exchange or, in the absence of a recorded sale, at the mean between
the last reported bid and asked prices or at fair value as determined by the
Board of Directors. Short-term notes and similar securities are included in
investments at amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the preceding
closing values of such securities on their respective exchanges or the most
recent price available where no closing value is availableThe Fund's portfolio
may include securities which trade primarily on non-U.S. exchanges or otherwise
in non-U.S. markets. Because of time zone differences, the prices of these
securities, as used for net asset value calculations, may be established
substantially in advance of the close of the New York Stock Exchange. Foreign
securities may also trade on days when the New York Stock Exchange is closed
(such as a Saturday). The net asset value and public offering price of the Fund,
to the extent that it holds securities valued on foreign markets, may vary
during periods when the New York Stock Exchange is closed. As a result, the
value of the Fund's portfolio may be affected significantly by such trading on
days when a shareholder has no access to the Fund. For further information, see
"How to Invest," "How to Redeem Shares" and "Exchanges Between Funds" in this
Prospectus, and "How to Invest" and "Other Investment and Redemption Services"
in the Statement of Additional Information.

The net asset value and public offering price of the Fund will be determined as
of the close of the regular session of the New York Stock Exchange. The shares
of the Fund are offered at net asset value without a sales charge. Purchase,
redemption and exchange orders received in proper form by the Transfer Agent
before 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, the orders will be entered at the next calculated net
asset value.

EXECUTION OF PORTFOLIO TRANSACTIONS

Orders for the Fund's portfolio securities transactions are placed by the
Advisor or Sub-Advisor, as applicable. The Advisor and Sub-Advisor strive to
obtain the best available prices in the Fund's portfolio transactions, taking
into account the costs and promptness of executions. Subject to this policy,
transactions may be directed to those broker-dealers who provide research,
statistical and other information to the Fund, the Advisor or the Sub-Advisor or
who provide assistance with respect to the distribution of Fund shares. There is
no agreement or commitment to place orders with any broker-dealer.
<PAGE>
Debt securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. Government securities
issued by the United States and other countries and money market securities in
which the Fund may invest are generally traded in the OTC markets. In
underwritten offerings, securities usually are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid. Dealers may receive commissions on futures, currency and options
transactions. Commissions or discounts in foreign securities exchanges or OTC
markets typically are fixed and generally are higher than those in U.S.
securities exchanges or OTC markets. There is generally less government
supervision and regulation of foreign exchanges and brokers than in the United
States. Foreign security settlements may, in some instances, be subject to
delays and related administrative uncertainties.

GENERAL INFORMATION

On any matter submitted to a vote of shareholders, such matter shall be voted by
the Fund's shareholders separately when the matter affects the specific interest
of the Fund (such as approval of the Advisory Agreement with the Advisor and the
Portfolio Management Agreement with the Sub-Advisor) except in matters where a
vote of all series in the aggregate is required by the 1940 Act or otherwise.

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:

2. By telephone: 800-548-4539
Requires prior selection of telephone redemption option.

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
<PAGE>
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.
<PAGE>
Fremont Mutual Funds, Inc.
Institutional U.S. Micro-Cap Fund
March 1, 1998

TABLE OF CONTENTS

ITEM PAGE NO.

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

The Advisor and the Fund.......................................

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

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

Investment Results............................................

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

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

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

Retirement Plans..............................................

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

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

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

General Information...........................................

Telephone Numbers and Addresses...............................
<PAGE>
Prospectus

FREMONT MUTUAL FUNDS, INC. is an open-end investment company which under this
Prospectus is offering shares in the Fremont Institutional U.S. Micro-Cap Fund
(the "Fund").

FREMONT INSTITUTIONAL U.S. MICRO-CAP FUND seeks to achieve long-term capital
appreciation by investing primarily in equity securities of micro-cap companies
domiciled within the United States.

There can be no assurance that the Fund will achieve its investment objective.
The Fund is a diversified fund as defined by the Investment Company Act of 1940,
as amended (the "1940 Act").

Shares of the Fund are offered without a sales charge.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is March 1, 1998.
<PAGE>
FOR FURTHER INFORMATION OR TO REQUEST A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, CALL 800-548-4539.

SUMMARY OF FEES AND EXPENSES

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None

Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(1) None
Exchange Fee None

Estimated Annual Fund Operating Expenses (as a percentage of average
net assets)(2)

Management Fee 1.15%
12b-1 Expenses None
Other Expenses After Reimbursement .10%
Total Fund Operating Expenses 1.25%

Example: You would pay the following total expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:

1 Year 3 Years

Institutional U.S. Micro-Cap Fund $13 $40

THIS EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE EXPENSES OR
ANNUAL RETURNS. ACTUAL EXPENSES AND ANNUAL RETURNS MAY BE GREATER OR LESS THAN
THOSE SHOWN ABOVE.

The purpose of the above table is to give you information and assistance in
understanding the various costs and expenses of the Fund that an investor may
bear directly or indirectly. Other expenses include, but are not limited to,
transfer agent fees paid to Fremont Investment Advisors, Inc.; custody, legal
and audit fees, costs of registration of Fund shares under applicable laws; and
costs of printing and distributing reports to shareholders. The percentages
<PAGE>
expressing annual fund operating expenses of the Fund are based on estimated
expenses for the current fiscal year.

See "The Advisor and the Fund."

(1) A wire transfer fee is charged by the Transfer Agent in the case of
redemptions made by wire. Such fee is subject to change and is
currently $10. See "How to Redeem Shares."

(2) The Advisor has agreed to limit the Fund's total operating expenses to
1.25% of average daily net assets. The Fund may reimburse the Advisor
for any reductions in the Advisor's fees during the three years
following that reduction if such reimbursement is requested by the
Advisor, if such reimbursement can be achieved within the foregoing
expense limit, and if the Board of Directors approves the reimbursement
at the time of the request as not inconsistent with the best interests
of the Fund. The Advisor generally seeks to reimburse the oldest
reductions and waivers before payment of fees and expenses for the
current year. Absent reimbursements of expenses by the Advisor, other
expenses and total operating expenses would have been .34% and 1.49%,
respectively, for the fiscal year ended October 31, 1997.

Financial Highlights

(FOR THE PERIOD AUGUST 4, 1997, DATE OF INCEPTION, THROUGH OCTOBER 31, 1997)

SELECTED PER SHARE DATA
FOR ONE SHARE OUTSTANDING DURING THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-----------
INCOME FROM INVESTMENT OPERATIONS
Net realized and unrealized gain .09
-----------
Total investment operations .09
-----------
LESS DISTRIBUTIONS
From net realized gains (.31)
-----------
<PAGE>
Total distributions (.31)
-----------
NET ASSET VALUE, END OF PERIOD $ 9.78
===========
TOTAL RETURN# 0.90%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 40,545
Ratio of net expenses to average net assets(a) 1.25%*
Ratio of gross expenses to average net assets(a) 1.49%*
Ratio of net investment loss to average net assets(a) (0.21)%*
Portfolio turnover rate 28%
Average commission rate paid $ .0521

*Annualized
(a) See Note 2 of "Notes to Financial Statements."

# Total return would have been lower had the advisor not waived and/or
reimbursed expenses.

THE ADVISOR AND THE FUND

Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end investment
company which under this Prospectus is offering shares in the Fremont
Institutional U.S. Micro-Cap Fund. The Investment Company has other series
offered with a different prospectus, and the Board of Directors of the
Investment Company is permitted to create additional funds at any time. The Fund
has its own investment objective and policies and operates as a separate mutual
fund. The Fund is the successor to the post-venture Fund of Fund A of the
Bechtel Trust and Thrift Plan.

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") and Kern Capital Management, LLC (the "Sub-Advisor") provide the Fund
with investment management and administrative services under, respectively, an
Investment Advisory and Administrative Agreement (the "Advisory Agreement") with
the Investment Company and a Portfolio Management Agreement between the Advisor
and the Sub-Advisor. The Advisory Agreement and Portfolio Management Agreement
provide that the Advisor and Sub-Advisor, respectively, shall furnish advice to
the Fund with respect to its investments and shall, to the extent authorized by
the Board of Directors, determine what securities shall be purchased or sold by
the Fund.
<PAGE>
The professional staff of the Advisor has offered professional investment
management services regarding asset allocation in connection with securities
portfolios to the Bechtel Trust and Thrift Plan and the Bechtel Foundation since
1978 and to Fremont Investors, Inc. (formerly Fremont Group, Inc.) since 1987.
Similarly, the professional staff of the Sub-Advisor have over ten years of
experience with this particular Fund. The Advisor also provides investment
advisory services regarding asset allocation, investment manager selection and
portfolio diversification to a number of large Bechtel-related investors. The
Investment Company is one of its clients.

As compensation for its services to the Fund, the Advisor receives from the Fund
a management fee, computed daily and paid monthly, of 1.15% per annum of the
Fund's average net assets. In addition to the fees described above, the Fund
pays its own operating expenses including, but not limited to: the Advisor's
fees; taxes, if any; brokerage and commission expenses, if any; interest charges
on any borrowings; transfer agent, administrator, custodian, legal and auditing
fees; shareholder servicing fees including fees to third-party servicing agents;
fees and expenses of Directors who are not interested persons of the Advisor or
the Sub-Advisor; costs and expenses of calculating daily net asset value; costs
and expenses of accounting, bookkeeping and recordkeeping required under the
1940 Act; insurance premiums; trade association dues; fees and expenses of
registering and maintaining registration of shares under federal and applicable
state securities laws; all costs associated with shareholders' meetings and the
preparation and dissemination of proxy materials, except for meetings called
solely for the benefit of the Advisor 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
nonrecurring expenses that are not expressly assumed by the Advisor.

All operating expenses of the Fund are subject to a voluntary limitation of
1.25% per annum. 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 Robert E. Kern. The senior investment managers are
Robert E. Kern, Judy R. Finger and David G. Kern.
<PAGE>
- - Bob Kern, Managing Member, President and Chief Executive Officer of KCM, has
over 30 year of investment management experience was a Senior Vice President of
the Advisor from April 1997 to August 1997 and was employed by Morgan Grenfell
Asset Management, Inc. from 1986 through April 1997, where he headed Morgan
Grenfell's Smaller Capitalization Equities Team.

- - 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 was employed as portfolio manager and from February 1997 until
April 1997 was employed as Vice President of Founders Asset 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.

- - 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, 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 Fund), the Advisor and the Sub-Advisor provides
that the Sub-Advisor will manage the investment and reinvestment of 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 .75% per annum of Fund assets managed by the Sub-Advisor. The
Portfolio Management Agreement with Sub-Advisor may be terminated by the Advisor
or the Investment Company upon 30 days' written notice. The Advisor has
day-to-day authority to increase or decrease the amount of the Fund's assets
under management by the Sub-Advisor.

The Advisor will provide direct portfolio management services to the extent that
the Sub-Advisor does not provide these services. The Investment Company and the
Advisor have received from the Securities and Exchange Commission an order (the
"SEC Order") exempting the Fund from the provisions of the 1940 Act that require
the shareholders of the Fund to approve the Fund's subadvisory agreement(s) and
any amendments thereto. The SEC Order permits the Advisor to hire new
sub-advisors, terminate sub-advisors, rehire existing sub-advisors whose
agreements have been assigned (and, thus, automatically terminated), and modify
subadvisory agreements without the prior approval of shareholders. By
eliminating shareholder approval in these matters, the Advisor would have
greater flexibility in managing sub-advisors, and shareholders would save the
considerable expense involved in holding shareholder meetings and soliciting
proxies. The Advisor may in its discretion manage all or a portion of the Fund's
portfolio directly with or without the use of a sub-advisor.

Investment Company Administration Corporation (the "Sub-Administrator"),
pursuant to an administration 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.
<PAGE>
For additional information, see "Investment Advisory and Other Services" in the
Statement of Additional Information.

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of the Fund is stated below. The Fund is
intended for long-term investors, not for those who may wish to redeem their
shares after a short period of time.

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
<PAGE>
tend to be less publicly available information concerning such companies
compared to what is available for larger capitalization securities. Finally, the
securities of micro-cap companies traded in the OTC market may have fewer market
makers, wider spreads between their quoted bid and asked prices and lower
trading volumes, resulting in comparatively greater price volatility and less
liquidity than the securities of companies that have larger market
capitalizations and/or that are traded on the New York or American Stock
Exchanges or the market averages in general. Thus, the Fund may involve
considerably more risk than an investment company investing in the more liquid
equity securities of companies traded on the New York or American Stock
Exchanges.

The Advisor and Sub-Advisor believe that an investment in shares of the Fund
provides an opportunity for greater rewards but will involve more risk than an
investment in a fund which seeks capital appreciation from investment in common
stocks of larger, better-known companies. This is due to greater opportunities
for superior returns from companies with small stock market capitalizations
which are not as well-known to the general public. These shares may have less
investor following, and, therefore, may provide opportunities for investment
gains due to the inefficiencies in this sector of the marketplace.

The Fund seeks to invest in those companies which are in the early stages of an
emerging growth cycle, where the Advisor and Sub-Advisor believe earnings will
grow faster than both inflation and the economy in general and where it believes
such growth has not yet been fully reflected in the market price of these
stocks. In seeking investments, the Advisor and Sub-Advisor will give weight to
companies possessing a variety of characteristics including quality of
management, companies which have gone public in recent years, an entrepreneurial
management team, a narrow product line focus, or established companies where the
growth potential has been significantly enhanced by new product developments,
new market opportunities, mergers or divestitures, or new management. The
investable universe provides what the Advisor and Sub-Advisor believe is a broad
range of stock selection opportunities.

Although the Fund invests primarily in common stocks and securities convertible
into common stock, for liquidity purposes it will normally invest a portion of
its assets in high quality debt securities and money market instruments with
remaining maturities of one year or less, including repurchase agreements.
Whenever in the judgment of the Advisor or the 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
<PAGE>
the top two categories of Moody's Investor Service, Inc. (Aaa or Aa) or Standard
& Poor's Ratings Group, (AAA or AA) or be of comparable quality as determined by
the Advisor.

GENERAL INVESTMENT POLICIES

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

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

U.S. Government Securities. The Fund may invest in U.S. Government securities,
which are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as Treasury bills,
notes and bonds and Government National Mortgage Association ("GNMA")
certificates, are supported by the full faith and credit of the United States;
others, such as those of the Federal Home Loan Mortgage Corporation ("FHLMC") ,
are supported by the right of the issuer to borrow from the Treasury; others,
such as those of the Federal National Mortgage Association ("FNMA") , are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government will provide financial
support to U.S. Government agencies or instrumentalities as described above in
the future, other than as set forth above, because it is not obligated to do so
by law.

When-Issued Securities and Firm Commitment Agreements. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
<PAGE>
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction, but the settlement is delayed).
The Fund will not purchase securities the value of which is greater than 5% of
its net assets on a when-issued basis. The Fund, as purchaser, assumes the risk
of any decline in value of the security beginning on the date of the agreement
or purchase, and no interest accrues to the Fund until it accepts delivery of
the security. The Fund will not use such transactions for leveraging purposes,
and accordingly will segregate cash, cash equivalents or liquid securities or
hold a covered position in an amount sufficient to meet its payment obligations
thereunder.
<PAGE>
There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business, which may take substantially more than three
business days for non-U.S. securities, are not treated by the Fund as
when-issued or forward commitment transactions and, accordingly, are not subject
to the foregoing limitations, even though some of the risks described above may
be present in such transactions.

The return on the Fund's investments in investment companies will be reduced by
the operating expenses, including investment advisory and administrative fees,
of such companies. The Fund's investment in a closed-end investment company may
require the payment of a premium above the net asset value of the investment
company's shares, and the market price of the investment company thereafter may
decline without any change in the value of the investment company's assets. The
Fund, however, will not invest in any investment company or trust unless it is
<PAGE>
believed that the potential benefits of such investment are sufficient to
warrant the payment of any such premium. As an exception to the above, the Fund
has the authority to invest all of its assets in the securities of a single
open-end investment company with substantially the same fundamental investment
objectives, restrictions and policies as that of the Fund. The Fund will notify
its shareholders prior to initiating such an arrangement.

Repurchase Agreements. As part of its cash reserve position, the Fund may enter
into repurchase agreements through which the Fund acquires a security (the
"underlying security") from the seller, a well-established securities dealer or
a bank that is a member of the Federal Reserve System. At that time, the bank or
securities dealer agrees to repurchase the underlying security at the same
price, plus a specified amount of interest. Repurchase agreements are generally
for a short period of time, often less than a week. The seller must maintain
with the Fund's custodian collateral equal to at least 100% of the repurchase
price, including accrued interest, as monitored daily by the Advisor and/or the
Sub-Advisor. The Fund will not enter into a repurchase agreement with a maturity
of more than seven business days if, as a result, more than 15% of the value of
its net assets, would then be invested in such repurchase agreements. The Fund
will only enter into repurchase agreements where (1) the underlying securities
are issued or guaranteed by the U.S. Government, (2) the market value of the
underlying security, including accrued interest, will be at all times equal to
or in excess of the value of the repurchase agreement, and (3) payment for the
underlying securities is made only upon physical delivery or evidence of
book-entry transfer to the account of the custodian or a bank acting as agent.
In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses, including: (1) a possible decline in the value of the
underlying security during the period in which the Fund seeks to enforce its
rights thereto; (2) possible subnormal levels of income and lack of access to
income during this period; and (3) expenses of enforcing the Fund's rights.

Portfolio Turnover. The Fund expects to trade in securities for short-term gain
whenever deemed advisable by the Advisor and/or the Sub-Advisor in order to take
advantage of anomalies occurring in general market, economic or political
conditions. Therefore, the Fund may have a higher portfolio turnover rate than
that of some other investment companies, but it is anticipated that the annual
portfolio turnover rate of the Fund will not exceed 200%. The portfolio turnover
rate is calculated by dividing the lesser of sales or purchases of long-term
portfolio securities by the Fund's average month-end long-term investments. High
portfolio turnover involves correspondingly greater transaction costs in the
form of dealer spreads or brokerage commissions and other costs that the Fund
will bear directly, and may result in the realization of net capital gains,
which are generally taxable whether or not distributed to shareholders.
<PAGE>
Loans of Portfolio Securities. The Fund is authorized to make loans of its
portfolio securities to broker-dealers or to other institutional investors in an
amount not exceeding 331/3% of its net assets. The borrower must maintain with
the Fund's custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Fund will receive any interest or
dividends paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities, or possible loss of
rights in the collateral should the borrower fail financially. The lender also
may bear the risk of capital loss on investment of the cash collateral, which
must be returned in full to the borrower when the loan is terminated. Loans will
be made only to firms deemed by the Advisor to be of good standing and will not
be made unless, in the judgment of the Advisor, the consideration to be earned
from such loans would justify the associated risk.

Borrowing. The Fund may borrow from banks an amount not exceeding 30% of the
value of its total assets for temporary or emergency purposes and may enter into
reverse repurchase agreements. If the income and gains on securities purchased
with the proceeds of borrowings or reverse repurchase agreements exceed the cost
of such borrowings or agreements, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the cost, earnings or net asset value would decline faster
than otherwise would be the case.

Restricted Securities. The Fund may purchase securities that are not registered
under federal securities laws, but can be offered and sold to "qualified
institutional buyers" ("restricted securities"). However, the Fund will not
invest more than 15% of its net assets in illiquid investments, which includes
repurchase agreements and fixed time deposits maturing in more than seven days,
and securities that are not readily marketable and restricted securities, unless
the Board of Directors determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are liquid. The Board of Directors may adopt guidelines and delegate to the
Advisor or the Sub-Advisor the daily function of determining and monitoring
liquidity of restricted securities. The Board, however, will retain sufficient
oversight and ultimate responsibility for the determinations.

Warrants or Rights. Warrants or rights may be acquired by the Fund in connection
with other securities or separately and provide the Fund with the right to
purchase other securities of the issuer at a later date. It is the present
intention of the Fund to limit its investments in warrants or rights, valued at
the lower of cost or market, to no more than 5% of the value of its net assets.
Warrants or rights acquired by the Fund in units or attached to securities will
be deemed to be without value for purposes of this restriction.
<PAGE>
Options and Futures Contracts. When the Fund is not fully invested, strategies
such as buying calls, writing puts, and buying futures may be used to increase
its exposure to price changes in stocks or debt securities. When the Advisor
and/or the Sub-Advisor wishes to hedge against market fluctuations, strategies
such as buying puts, writing calls, and selling futures may be used to reduce
market exposure. Because most stock index futures and options are based on broad
stock market indices, their performance tends to track the performance of common
stocks generally - which may or may not correspond to the types of securities in
which the Fund invests. The Fund will maintain segregated accounts consisting of
cash, U.S. Government securities or other liquid securities (or, as permitted by
applicable regulations, enter into certain offsetting positions) to cover its
obligations under options and futures contracts to avoid leveraging.

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

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

There may be less publicly available information about foreign issuers or
securities than about U.S. issuers or securities, and foreign issuers may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those of U.S. entities. With respect to unsponsored
ADRs, these programs cover securities of companies which are not required to
meet either the reporting or accounting standards of the United States. Many
foreign financial markets, while generally growing in volume, continue to have
substantially less volume than domestic markets, and securities of many foreign
companies are less liquid and their prices are more volatile than are securities
of comparable U.S. companies. Such markets may have longer settlement periods
than markets in the United States. In addition, brokerage commissions, custodial
services and other costs related to investment in foreign markets generally are
more expensive than in the United States, particularly with respect to emerging
markets. Such markets have different settlement and clearance procedures. In
certain markets, there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
<PAGE>
such transactions. The inability of the Fund to make intended securities
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Fund due to subsequent
declines in value of a portfolio security or, if the Fund had entered into a
contract to sell the security, could result in possible liability to the
purchaser. Settlement procedures in certain emerging markets also carry with
them a heightened risk of loss due to the failure of the broker or other service
provider to deliver cash or securities.

The risks of foreign investing are of greater concern in the case of investments
in emerging markets which may exhibit greater price volatility, have less
liquidity and have settlement arrangements which are less efficient than in
developed markets. Furthermore, the economies of emerging market countries
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade barriers, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. These emerging
market economies also have been and may continue to be adversely affected by
economic conditions in the countries with which they trade.

Several of the countries in which the Fund may invest restrict, to varying
degrees, foreign investments in their securities markets. Governmental and
private restrictions take a variety of forms, including (i) limitation on the
amount of funds that may be invested into or repatriated from the country
(including limitations on repatriation of investment income and capital gains),
(ii) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation, (iii)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor, (iv) limitations on the types of
securities which a foreign investor may purchase and (v) restrictions on a
foreign investor's right to invest in companies whose securities are not
publicly traded. In some circumstances, these restrictions may limit or preclude
investment in certain countries. Therefore, the Fund intends to invest in such
countries through the purchase of shares of investment companies organized under
the laws of such countries.

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

Investment Restrictions. The Fund has certain fundamental policies that are
described in the Statement of Additional Information under "Investment
Restrictions." These investment restrictions include prohibitions against
borrowing money (except as described above) and against concentrating the Fund's
investments in issuers conducting their principal business activities in a
single industry (except that this limitation does not apply with respect to U.S.
Government securities). These investment restrictions and the Fund's investment
objective cannot be changed without the approval of shareholders of the Fund;
all other investment practices described in this Prospectus and in the Statement
of Additional Information, however, can be changed by the Board of Directors
without shareholder approval.

INVESTMENT RESULTS

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

The Fund may calculate performance on an average annual total return basis for
1-, 5- and 10-year periods and over the life of the Fund, after such periods
have elapsed. Average annual total return will be computed by determining the
average annual compounded rate of return over the applicable period that would
equate the initial amount invested to the ending redeemable value of the
investment. Ending redeemable value includes dividends and capital gain
distributions, reinvested at net asset value at the reinvestment date determined
by the Board of Directors. The resulting percentages indicate the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the period. The average annual compounded rate of return over various
periods may also be computed by utilizing ending redeemable values as determined
above.
<PAGE>
The Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses of
the Fund, so that any investment results reported by the Fund should not be
considered representative of what an investment in the Fund may earn in any
future period. When utilized, total return for the unmanaged indices described
in the Statement of Additional Information will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
recurring expenses such as advisory fees, brokerage costs or administrative
expenses. These factors and possible differences in calculation methods should
be considered when comparing the Fund's investment results with those published
for other investment companies, other investment vehicles and unmanaged indices.
The comparison of the Fund to an alternative investment should be made with
consideration of differences in features and expected performance. The Fund may
also be mentioned in newspapers, magazines, or other media from time to time.
The Fund assumes no responsibility for the accuracy of such data. The Fund's
results also should be considered relative to the risks associated with its
investment objective and policies. See "Investment Results" in the Statement of
Additional Information.

The Fund commenced operations upon the transfer to the Fund of assets held in
the post-venture Fund of Fund A of the Bechtel Trust and Thrift Plan (the
"Separate Account"), over which the Advisor has exercised portfolio supervision
responsibilities since the inception of the Separate Account in 1982. Mr. Robert
E. Kern, the Fund's portfolio manager, was employed by Morgan Grenfell Capital
Management, Inc. from 1986 through April 1997 and headed up their team that
managed the Separate Account. He currently is employed by the Advisor. The
investment policies, objective, guidelines and restrictions of the Fund are in
all material respects equivalent to those of the Separate Account, and the
management practices of the Fund are in all material respects identical to those
of the Separate Account. Assets in the Separate Account were transferred to the
Fund in exchange for an interest in the Fund. As a result of this transaction,
the investment holdings in the Fund were the same as the investment holdings in
the portfolio of the Separate Account immediately prior to the transfer. While
the Separate Account continues to exist, its assets consist solely of shares of
the Fund.

The Separate Account was not a registered investment company because it was
exempt from registration under the 1940 Act. However, the Separate Account was
managed in a fashion similar to a mutual fund and, while not subject to mutual
fund tax rules, would have qualified as a regulated investment company under
relevant tax rules in each year of its operation. Because, in a practical sense,
the Separate Account constitutes the "predecessor" of the Fund, the Fund
calculates its performance for periods commencing prior to the transfer of the
<PAGE>
Separate Account's assets to the Fund by including the Separate Account's total
return, adjusted to reflect the deduction of actual fees and expenses incurred
by the Separate Account. The fees and expenses incurred by the Separate Account
are higher than the fees and expenses, net of fee waivers, to be incurred by the
Fund.

The performance data set forth below includes the performance of the Separate
Account for periods before the Fund's registration statement became effective.
As noted above, the Separate Account was not registered under the 1940 Act and
thus was not subject to certain investment restrictions that are imposed by the
1940 Act. If the Separate Account had been registered under the 1940 Act, the
Separate Account's performance might have been adversely affected. Total return
for the Separate Account 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 Separate Account's performance would be substantially the same if it
was recalculated in accordance with mutual fund performance rules.

AVERAGE ANNUAL TOTAL RETURNS
for periods ended June 30, 1997

STANDARD & RUSSELL
SEPARATE ACCOUNT (1) POOR'S 500 INDEX 2000 INDEX

1 Year 21.41% 34.70% 16.33%
3 Years 33.56% 28.85% 20.06%
5 Years 25.96% 19.75% 17.87%
10 Years 17.56% 14.63% 11.14%

(1) Total return data for the Separate Account reflect the performance of
the pool of assets transferred on that date into the Fund, net of
actual fees and expenses.

Additional performance information regarding the Fund will be included in its
annual report, which will be mailed to shareholders without charge upon request.
<PAGE>
HOW TO INVEST

Investors wishing to open a new account by bank wire must call the Transfer
Agent at 800-548-4539 to obtain an account number and detailed wire
instructions. Bank wire instructions are also provided in the last section of
this Prospectus. All bank wire investments received before the close of trading
of the New York Stock Exchange (currently 4:00 p.m., Eastern time), will be
credited the same day. Otherwise, Fund shares will be credited the next business
day. A bank wire investment is considered received when the Transfer Agent is
notified that the bank wire has been credited to its account.

Shares of the Fund may also be purchased through broker-dealers or other
financial intermediaries who have made appropriate arrangements with the Fund.
Such agents are responsible for ensuring that the account documentation is
complete and that timely payment is made for the Fund shares purchased for their
customers pursuant to such orders. These agents may charge a reasonable
transaction fee to their customers. In some instances, all or a portion of the
transaction fee may be paid by the Advisor. To the extent these agents perform
shareholder servicing activities for the Fund, they may receive fees from the
Fund or the Advisor for such services.

From time to time the Advisor may engage third parties as "finders" for the
purpose of soliciting potential investors. Such parties may be compensated by
the Advisor to do so.

As a condition of this offering, if an order to purchase shares is cancelled due
to nonpayment (for example, a check returned for "insufficient funds"), the
person who made the order will be subject to a $20 charge and must reimburse the
Fund for any loss incurred by reason of such cancellation. For more information,
see "Other Investment and Redemption Services" in the Statement of Additional
Information.

First Funds Distributor, Inc., 4455 Camelback Road, Suite 261E, Phoenix,
Arizona, 85018, is the principal underwriter for the Fund.
<PAGE>
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

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

Exchanges Between Funds. Shares of one Fremont Fund may be exchanged for shares
of another Fremont Fund at their respective net asset values, provided that the
account registration remains identical. Exchanges may only be made for shares of
a Fremont Fund then offered for sale in your state of residence. 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.
Any exchanges into the Fremont Institutional U.S. Micro-Cap Fund must meet the
account minimums.

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

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
<PAGE>
the telephone exchange privilege should contact the Fund. This privilege will
not be added to an account without written instruction to do so from the
shareholder. Telephone requests received by the close of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), will be processed the same
day. During times of drastic economic or market conditions, the telephone
exchange privilege may be difficult to implement. The Transfer Agent will make
its best effort to accommodate shareholders when its telephone lines are used to
capacity. Under these circumstances, a shareholder should consider using
overnight mail to send a written exchange request.

See "Telephone Redemption Privilege" in the next section of this Prospectus.

Autobuy Privilege

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

HOW TO REDEEM SHARES

Shares are redeemed at no charge (other than wire transfer fees, if any) at the
<PAGE>
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."

For written redemption requests that direct 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
and exchanges may result in taxable capital gains or losses.

Telephone Redemption Privilege. An investor may elect on the regular account
application to authorize redemptions by telephone. This privilege will not be
added to an account without written authorization to do so from the shareholder.
A shareholder may then give instructions regarding redemptions by calling
800-548-4539. Telephone requests received by the close of trading on the New
York Stock Exchange (currently 4:00 p.m., Eastern time), will be processed at
the net asset value calculated that same day. During times of drastic economic
or market conditions, the telephone redemption privilege may be
<PAGE>
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.

Automatic Withdrawal Plan. A shareholder may request redemptions of a specified
dollar amount (minimum of $100) on either a monthly, quarterly, or yearly basis.
Currently, there is no charge for this service. Redemptions will be made on the
last business day of the month. Because a redemption constitutes a liquidation
of shares, the number of shares owned in the account will be reduced.
Shareholders may terminate the Automatic Withdrawal Plan at any time, but not
less than five days before a scheduled payment date. When an exchange is made
between Funds, shareholders must specify if they desire the automatic withdrawal
option to be transferred to a new account opened by the exchange. As an account
balance declines to the minimum permitted, the shareholder must advise the
Transfer Agent if the automatic withdrawal feature is to be transferred to
another account of the shareholder. Shareholders should note that if there is an
Automatic Withdrawal Plan established for an account and the entire account is
exchanged into another Fremont Fund, the automatic withdrawal option must be
renewed by written request to the Transfer Agent. A shareholder wishing to
initiate automatic redemptions must complete an Automatic Withdrawal Plan form
available from the Transfer Agent.

Signature Guarantee. To better protect the Fund and shareholders' accounts, a
signature guarantee is required for certain transactions. Signatures must be
guaranteed by an "eligible guarantor institution" as defined in applicable
regulations. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Signature guarantees
will be accepted from any eligible guarantor institution which participates in a
signature guarantee program. A notary public is not an acceptable guarantor.
<PAGE>
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.

Redemption In Kind. The Investment Company reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for redemption
or repurchase order by making payment in whole or in part in readily marketable
securities chosen by the Fund and valued as they are for purposes of computing
the Fund's net asset value (a redemption in kind). If payment is made in
securities, a shareholder may incur transaction expenses in converting these
securities into cash.

Transfer Agent. The Advisor is the transfer agent for 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 Fund may be purchased in connection with various tax-deferred
retirement plans. These include Individual Retirement Accounts (IRAs); SEP-IRAs;
SIMPLE IRAs; Qualified Retirement Plans for self-employed persons and their
employees; corporate pension and profit-sharing plans; and Section 403(b) Plans,
which are deferred compensation arrangements for employees of public schools and
certain charitable organizations. Forms for establishing IRAs, SEP-IRAs, SIMPLE
<PAGE>
IRAs, and Qualified Retirement Plans are available through the Investment
Company, as are forms for corporate Pension and Profit-Sharing plans. Please
contact the Investment Company for more information about establishing these
accounts. In accordance with industry practice, there may be an annual account
charge for participation in these plans. Information regarding these charges is
available from the Investment Company.

Retirement plan participants may receive additional services related to their
plan at no extra cost to any shareholder.

DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION

The Fund intends to qualify and elect, and to continue to qualify, to be treated
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). For any tax year in which the Fund so
qualifies and meets certain other distribution requirements, it will not incur a
federal tax liability. Such qualification under the Code requires a Fund to
diversify its investments so that, at the end of each fiscal quarter, (1) at
least 50% of the market value of the Fund's assets is represented by cash, U.S.
government securities, securities of other regulated investment companies, and
other securities, limited, in respect to any one issuer, to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (2) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. government
securities or the securities of other regulated investment companies), or in two
or more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses.

The Fund intends to distribute substantially all of its net 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
Fund. Availability of the "dividends received" deduction is subject to certain
holding period and debt-financing limitations.
<PAGE>
Shareholders may elect:

o to have all dividends and capital gains distributions automatically
reinvested in additional shares; or

o to receive the income dividends and short-term capital gains distributions
in cash and accept the long-term capital gains distributions in additional
shares; or

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

Automatic reinvestments will be at net asset value on the day of reinvestment.
If no election is made by a shareholder, all dividends and capital gains
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 gains distribution, the election must be received by the Transfer Agent
approximately 5 business days prior to the payment date to permit the change to
be entered into the shareholder account. The federal income tax status of
dividends and capital gains distributions is the same whether taken in cash or
reinvested in shares.

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

CALCULATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE

The Fund will calculate its net asset value and public offering price and
complete orders to purchase, exchange or redeem shares on a Monday through
Friday basis when the New York Stock Exchange is open. Investments, including
options, are stated at value based on recorded closing sales on a national
securities exchange or, in the absence of a recorded sale, at the mean between
the last reported bid and asked prices or at fair value as determined by the
Board of Directors. Short-term notes and similar securities are included in
investments at amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the preceding
closing values of such securities on their respective exchanges or the most
recent price available where no closing value is available. The Fund's portfolio
may include securities which trade primarily on
<PAGE>
non-U.S. exchanges or otherwise in non-U.S. markets. Because of time zone
differences, the prices of these securities, as used for net asset value
calculations, may be established substantially in advance of the close of the
New York Stock Exchange. Foreign securities may also trade on days when the New
York Stock Exchange is closed (such as a Saturday). The net asset value and
public offering price of the Fund, to the extent that it holds securities valued
on foreign markets, may vary during periods when the New York Stock Exchange is
closed. As a result, the value of the Fund's portfolio may be affected
significantly by such trading on days when a shareholder has no access to the
Fund. For further information, see "How to Invest," "How to Redeem Shares" and
"Exchanges Between Funds" in this Prospectus, and "How to Invest" and "Other
Investment and Redemption Services" in the Statement of Additional Information.

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

EXECUTION OF PORTFOLIO TRANSACTIONS

Orders for the Fund's portfolio securities transactions are placed by the
Advisor or the Sub-Advisor. The Advisor and the Sub-Advisor strive to obtain the
best available prices in the Fund's portfolio transactions, taking into account
the costs and promptness of executions. Subject to this policy, transactions may
be directed to those broker-dealers who provide research, statistical and other
information to the Fund, the Advisor or the Sub-Advisor or who provide
assistance with respect to the distribution of Fund shares. There is no
agreement or commitment to place orders with any broker-dealer.

Debt securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. Government securities
issued by the United States and other countries and money market securities in
which the Fund may invest are generally traded in the OTC markets. In
underwritten offerings, securities usually are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid. Dealers may receive commissions on futures, currency and options
transactions. Commissions or discounts in foreign securities exchanges or OTC
markets typically are fixed and generally are higher than those in U.S.
<PAGE>
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.

GENERAL INFORMATION

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
<PAGE>
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.

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
<PAGE>
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 Institutional 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
<PAGE>
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.
<PAGE>
FREMONT MUTUAL FUNDS, INC.

Fremont Money Market Fund
Fremont Bond Fund
Fremont Real Estate Securities Fund
Fremont Global Fund
Fremont Growth Fund
Fremont International Growth Fund
Fremont International Small Cap Fund
Fremont Select Fund
Fremont U.S. Small Cap Fund
Fremont Emerging Markets Fund
Fremont U.S. Micro-Cap Fund
Fremont California Intermediate Tax-Free Fund

Toll-Free: 800-548-4539

Part B

Statement of Additional Information

This Statement of Additional Information concerning Fremont Mutual Funds, Inc.
(the "Investment Company") is not a prospectus for the Investment Company. This
Statement supplements the Prospectus for the Investment Company dated March 1,
1998, and should be read in conjunction with the Prospectus. Copies of the
Prospectus are available without charge by calling the Investment Company at the
phone number printed above.

This Statement of Additional Information is dated March 1, 1998.
<PAGE>
TABLE OF CONTENTS
Page

Introduction To The Funds..................................................... x

Investment Objectives, Policies And Risk Considerations.......................xx

The Funds (Including The Fremont Money Market Fund) Generally.................xx

Investment Restrictions.......................................................xx

Investment Company Directors And Officers.....................................xx

Investment Advisory And Other Services........................................xx

Plan Of Distribution (U.S. Small Cap Fund, Real Estate Securities Fund,
Select Fund and Emerging Markets Fund only)..................................xx

Execution Of Portfolio Transactions...........................................xx

How To Invest.................................................................xx

Other Investment And Redemption Services......................................xx

Taxes - Mutual Funds .........................................................xx

Additional Information .......................................................xx

Investment Results............................................................xx

Information About Fremont Investment Advisors.................................xx

Appendix A: Description Of Ratings ...........................................xx

Appendix B: Annual Report.....................................................xx

(i)
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

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

Fremont Bond Fund, Fremont Real Estate Securities Fund, Fremont Global Fund,
Fremont Growth Fund, Fremont International Growth Fund, Fremont International
Small Cap Fund, Fremont Select Fund, Fremont U.S. Small Cap Fund, Fremont
Emerging Markets Fund and Fremont U.S. Micro-Cap Fund:

Writing Covered Call Options. The Fremont Bond Fund (formerly the Fremont Income
Fund), the Fremont Real Estate Securities Fund, the Fremont Global Fund
(formerly the Fremont Multi-Asset Fund), the Fremont Growth Fund (formerly the
Fremont Equity Fund), the Fremont International Growth Fund, the Fremont
International Small Cap Fund, the Fremont Select Fund, the Fremont U.S. Small
Cap Fund, the Fremont Emerging Markets Fund and the Fremont U.S. Micro-Cap Fund
(collectively, the "Funds") may write (sell) "covered" call options and purchase
options to close out options previously written by the Funds. The purpose of
writing covered call options is to generate additional premium income for the
Funds. This premium income will serve to enhance the Funds' total returns and
will reduce the effect of any price decline of the security or currency involved
in the option. Covered call options will generally be written on securities and
currencies which, in the opinion of Fremont Investment Advisors, Inc. (the "
Advisor") or a Fund's sub-advisor ("Sub-Advisor"), are not expected to make any
major price moves in the near future but which, over the long term, are deemed
to be attractive investments for the Funds.

A call option gives the holder (buyer) the "right to purchase" a security or
currency at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold. To secure his obligation to deliver the
underlying security or currency in the case of a call option, a writer is
required to deposit in escrow the underlying security or currency or other
assets in accordance with the rules of the Options Clearing Corporation. The
Funds will write only covered call options. This means that each Fund will only
write a call option on a security, index, or currency which that Fund already,
effectively, owns or has the right to acquire without additional cost.

Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with each
Fund's investment objectives. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in
contrast to the writing of naked or uncovered options, which no Fund will do),
but capable of enhancing a Fund's total return. When writing a covered call
option, a Fund, in return for the premium, gives up the opportunity for profit
from a price increase in the underlying security or currency above the exercise
price, but conversely retains the risk of loss should the price of the security
or currency decline. Unlike one who owns securities or currencies not subject to
an option, a Fund has no control over when it may be required to sell the
underlying securities or currencies, since it may be assigned an exercise notice
at any time prior to the expiration of its obligation as a writer. If a call
option which the Fund involved has written expires, that Fund will realize a
gain in the amount of the premium; however, such gain may be offset by a decline
in the market value of the underlying security or currency during the option
period. If the call option is exercised, the Fund involved will realize a gain
or loss from the sale of the underlying security or currency. The security or
currency covering the call will be maintained in a separate account by that
Fund's custodian. No Fund will consider a security or currency covered by a call
to be "pledged" as that term is used in its policy which limits the pledging or
mortgaging of its assets.
<PAGE>
The premium received is the market value of an option. The premium a Fund will
receive from writing a call option will reflect, among other things, the current
market price of the underlying security or currency, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security or currency, and the length of the option period. Once the
decision to write a call option has been made, the Advisor or Sub-Advisor, in
determining whether a particular call option should be written on a particular
security or currency, will consider the reasonableness of the anticipated
premium and the likelihood that a liquid secondary market will exist for those
options. The premium received by a Fund for writing covered call options will be
recorded as a liability in that Fund's statement of assets and liabilities. This
liability will be adjusted daily to the option's current market value, which
will be the latest sales price at the time at which the net asset value per
share of that Fund is computed (close of the regular trading session of the New
York Stock Exchange), or, in the absence of such sale, the latest asked price.
The liability will be extinguished upon expiration of the option, the purchase
of an identical option in a closing transaction, or delivery of the underlying
security or currency upon the exercise of the option.

Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Fund to write another
call option on the underlying security or currency with either a different
exercise price or expiration date or both. If a Fund desires to sell a
particular security or currency from its portfolio on which it has written a
call option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security or currency. There is, of course, no
assurance that the Fund involved will be able to effect such closing
transactions at a favorable price. If a Fund cannot enter into such a
transaction, it may be required to hold a security or currency that it might
otherwise have sold, in which case it would continue to be at market risk with
respect to the security or currency.
The Fund involved will pay transaction costs in connection with the writing of
options to close out previously written options. Such transaction costs are
normally higher than those applicable to purchases and sales of portfolio
securities.

Call options written by the Funds will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may be
below, equal to, or above the current market values of the underlying securities
or currencies at the time the options are written. From time to time, a Fund may
purchase an underlying security or currency for delivery in accordance with an
exercise notice of a call option assigned to it, rather than delivering such
security or currency from its portfolio. In such cases, additional costs will be
incurred.

A Fund will realize a profit or loss from a closing purchase transaction if the
cost of the transaction is less or more than the premium received from the
writing of the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying security
or currency, any loss resulting from the repurchase of a call option is likely
to be offset in whole or in part by appreciation of the underlying security or
currency owned by the Fund involved.

Federal Income Tax Treatment of Covered Call Options. Expiration of an option or
entry into a closing purchase transaction will result in capital gain or loss.
If the option was "in-the-money" (i.e., the option strike price was less than
the market value of the security or currency covering the option) at the time it
was written, any gain or loss realized as a result of the closing purchase
transaction will be long-term capital gain or loss if the security or currency
covering the option was held for more than 18 months prior to the writing of the
option. The holding period of the securities or currencies covering an
"in-the-money" option will not include the period of time the option is
outstanding. If the option is exercised, a Fund will realize a gain or loss from
the sale of the security or currency covering the call option, and in
determining such gain or loss the premium will be included in the proceeds of
the sale.
<PAGE>
If a Fund writes options other than "qualified covered call options," as defined
in the Internal Revenue Code of 1986, as amended (the "Code"), any losses on
such options transactions, to the extent they do not exceed the unrealized gains
on the securities or currencies covering the options, may be subject to deferral
until the securities or currencies covering the options have been sold. In
addition, any options written against securities other than bonds or currencies
will be considered to have been closed out at the end of the Fund's fiscal year;
and any gains or losses will be recognized for tax purposes at that time. Under
Code Section 1256, such gains or losses would be characterized as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Code Section 988
may also apply to currency transactions. Under Section 988, each foreign
currency gain or loss is generally computed separately and treated as ordinary
income or loss. In the case of overlap between Sections 1256 and 988, special
provisions determine the character and timing of any income, gain, or loss. Each
Fund will attempt to monitor Section 988 transactions to avoid an adverse tax
impact.

Writing Covered Put Options. The Funds may write covered put options. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) has the obligation to buy, the underlying security or currency at the
exercise price during the option period. So long as the obligation of the writer
continues, the writer may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring the writer to make payment of the
exercise price against delivery of the underlying security or currency. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.

The Funds may write put options only on a covered basis, which means that a Fund
would maintain in a segregated account cash and liquid securities in an amount
not less than the exercise price at all times while the put option is
outstanding. (The rules of the Clearing Corporation currently require that such
assets be deposited in escrow to secure payment of the exercise price.) A Fund
would generally write covered put options in circumstances where the Advisor or
Sub-Advisor wishes to purchase the underlying security or currency for that
Fund's portfolio at a price lower than the current market price of the security
or currency. In such event the Fund would write a put option at an exercise
price which, reduced by the premium received on the option, reflects the lower
price it is willing to pay. Since a Fund would also receive interest on debt
securities or currencies maintained to cover the exercise price of the option,
this technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security or currency would decline below the exercise price less
the premiums received.

Purchasing Put Options. The Funds may purchase put options. As the holder of a
put option, a Fund has the right to sell the underlying security or currency at
the exercise price at any time during the option period. Such Fund may enter
into closing sale transactions with respect to such options, exercise them, or
permit them to expire. A Fund may purchase put options for defensive purposes in
order to protect against an anticipated decline in the value of its securities
or currencies. An example of such use of put options is provided below.

The Funds may purchase a put option on an underlying security or currency (a
"protective put") owned as a defensive technique in order to protect against an
anticipated decline in the value of the security or currency. Such hedge
protection is provided only during the life of the put option when a Fund, as
the holder of the put option, is able to sell the underlying security or
currency at the put exercise price regardless of any decline in the underlying
security's market price or currency's exchange value. For example, a put option
may be purchased in order to protect unrealized appreciation of a security or
currency where the Advisor or Sub-Advisor deems it desirable to continue to hold
the security or currency because of tax considerations. The premium paid for the
put option and any transaction costs would reduce any capital gain otherwise
available for distribution when the security or currency is eventually sold.
<PAGE>
The Funds may also purchase put options at a time when a Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold when
it has remaining value, and if the market price of the underlying security or
currency remains equal to or greater than the exercise price during the life of
the put option, the Fund involved will lose its entire investment in the put
option. In order for the purchase of a put option to be profitable, the market
price of the underlying security or currency must decline sufficiently below the
exercise price to cover the premium and transaction costs, unless the put option
is sold in a closing sale transaction.

A Fund will commit no more than 5% of its assets to premiums when purchasing put
options. The premium paid by such Fund when purchasing a put option will be
recorded as an asset in that Fund's statement of assets and liabilities. This
asset will be adjusted daily to the option's current market value, which will be
the latest sale price at the time at which that Fund's net asset value per share
is computed (close of trading on the New York Stock Exchange), or, in the
absence of such sale, the latest bid price. The asset will be extinguished upon
expiration of the option, the selling (writing) of an identical option in a
closing transaction, or the delivery of the underlying security or currency upon
the exercise of the option.

Purchasing Call Options. The Funds may purchase call options. As the holder of a
call option, a Fund has the right to purchase the underlying security or
currency at the exercise price at any time during the option period. Each Fund
may enter into closing sale transactions with respect to such options, exercise
them, or permit them to expire. A Fund may purchase call options for the purpose
of increasing its current return or avoiding tax consequences which could reduce
its current return. A Fund may also purchase call options in order to acquire
the underlying securities or currencies. Examples of such uses of call options
are provided below.

Call options may be purchased by a Fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this fashion,
the purchase of call options enables the Fund involved to acquire the securities
or currencies at the exercise price of the call option plus the premium paid. At
times the net cost of acquiring securities or currencies in this manner may be
less than the cost of acquiring the securities or currencies directly. This
technique may also be useful to such Fund in purchasing a large block of
securities that would be more difficult to acquire by direct market purchases.
So long as it holds such a call option rather than the underlying security or
currency itself, the Fund involved is partially protected from any unexpected
decline in the market price of the underlying security or currency and in such
event could allow the call option to expire, incurring a loss only to the extent
of the premium paid for the option.

Each Fund will commit no more than 5% of its assets to premiums when purchasing
call options. A Fund may also purchase call options on underlying securities or
currencies it owns in order to protect unrealized gains on call options
previously written by it. A call option would be purchased for this purpose
where tax considerations make it inadvisable to realize such gains through a
closing purchase transaction. Call options may also be purchased at times to
avoid realizing losses that would result in a reduction of such Fund's current
return. For example, where a Fund has written a call option on an underlying
security or currency having a current market value below the price at which such
security or currency was purchased by that Fund, an increase in the market price
could result in the exercise of the call option written by that Fund and the
realization of a loss on the underlying security or currency with the same
exercise price and expiration date as the option previously written.

Description of Futures Contracts. A Futures Contract provides for the future
sale by one party and purchase by another party of a specified amount of a
specific financial instrument (security or currency) for a specified price at a
designated date, time and place. Brokerage fees are incurred when a Futures
Contract is bought or sold and margin deposits must be maintained.
<PAGE>
Although Futures Contracts typically require future delivery of and payment for
financial instruments or currencies, the Futures Contracts are usually closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical type of
financial instrument or currency and the same delivery date. If the offsetting
purchase price is less than the original sale price, the Fund involved realizes
a gain; if it is more, that Fund realizes a loss. Conversely, if the offsetting
sale price is more than the original purchase price, the Fund involved realizes
a gain; if it is less, that Fund realizes a loss. The transaction costs must
also be included in these calculations. There can be no assurance, however, that
a Fund will be able to enter into an offsetting transaction with respect to a
particular Futures Contract at a particular time. If a Fund is not able to enter
into an offsetting transaction, that Fund will continue to be required to
maintain the margin deposits on the Contract.

As an example of an offsetting transaction in which the financial instrument or
currency is not delivered, the contractual obligations arising from the sale of
one Contract of September Treasury Bills on an exchange may be fulfilled at any
time before delivery of the Contract is required (e.g., on a specified date in
September, the "delivery month") by the purchase of one Contract of September
Treasury Bills on the same exchange. In such instance the difference between the
price at which the Futures Contract was sold and the price paid for the
offsetting purchase, after allowance for transaction costs, represents the
profit or loss to the Fund involved.

The Funds may enter into interest rate, S&P Index (or other major market index),
or currency Futures Contracts as a hedge against changes in prevailing levels of
stock values, interest rates, or currency exchange rates in order to establish
more definitely the effective return on securities or currencies held or
intended to be acquired by such Fund. A Fund's hedging may include sales of
Futures as an offset against the effect of expected increases in currency
exchange rates, purchases of such Futures as an offset against the effect of
expected declines in currency exchange rates, and purchases of Futures in
anticipation of purchasing underlying index stocks prior to the availability of
sufficient assets to purchase such stocks or to offset potential increases in
the prices of such stocks. When selling options or Futures Contracts, a Fund
will segregate cash and liquid securities to cover any related liability.

The Funds will not enter into Futures Contracts for speculation and will only
enter into Futures Contracts which are traded on national futures exchanges and
are standardized as to maturity date and underlying financial instrument. The
principal Futures exchanges in the United States are the Board of Trade of the
City of Chicago and the Chicago Mercantile Exchange. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission. Futures are also traded in various overseas markets.

Although techniques other than sales and purchases of Futures Contracts could be
used to reduce a Fund's exposure to currency exchange rate fluctuations, a Fund
may be able to hedge its exposure more effectively and perhaps at a lower cost
through using Futures Contracts.

A Fund will not enter into a Futures Contract if, as a result thereof, more than
5% of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to "margin" (down payment) deposits on
such Futures Contracts.

A Stock Index contract such as the S&P 500 Stock Index Contract, for example, is
an agreement to take or make delivery at a specified future date of an amount of
cash equal to $500 multiplied by the difference between the value of the Stock
Index at purchase and at the close of the last trading day of the contract. In
order to close long positions in the Stock Index contracts prior to their
settlement date, the Fund will enter into offsetting sales of Stock Index
contracts.
<PAGE>
Using Stock Index contracts in anticipation of market transactions involves
certain risks. Although a Fund may intend to purchase or sell Stock Index
contracts only if there is an active market for such contracts, no assurance can
be given that a liquid market will exist for the contracts at any particular
time. In addition, the price of Stock Index contracts may not correlate
perfectly with the movement in the Stock Index due to certain market
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the Stock Index
and movements in the price of Stock Index contracts, a correct forecast of
general market trends may not result in a successful anticipatory hedging
transaction.

Futures Contracts Generally. Persons who trade in Futures Contracts may be
broadly classified as "hedgers" and "speculators." Hedgers, such as the Funds,
whose business activity involves investment or other commitments in debt
securities, equity securities, or other obligations, use the Futures markets
primarily to offset unfavorable changes in value that may occur because of
fluctuations in the value of the securities and obligations held or expected to
be acquired by them or fluctuations in the value of the currency in which the
securities or obligations are denominated. Debtors and other obligors may also
hedge the interest cost of their obligations. The speculator, like the hedger,
generally expects neither to deliver nor to receive the financial instrument
underlying the Futures Contract, but, unlike the hedger, hopes to profit from
fluctuations in prevailing interest rates, securities prices, or currency
exchange rates.

A public market exists in Futures Contracts covering foreign financial
instruments such as U.K. Pound, Japanese Yen, and German Mark, among others.
Additional Futures Contracts may be established from time to time as various
exchanges and existing Futures Contract markets may be terminated or altered as
to their terms or methods of operation.

The Funds' Futures transactions will be entered into for traditional hedging
purposes; that is, Futures Contracts will be sold to protect against a decline
in the price of securities or currencies that such Fund owns, or Futures
Contracts will be purchased to protect that Fund against an increase in the
price of securities or currencies it has a fixed commitment to purchase.

"Margin" with respect to Futures and Futures Contracts is the amount of funds
that must be deposited by the Fund with a broker in order to initiate Futures
trading and to maintain a Fund's open positions in Futures Contracts. A margin
deposit ("initial margin") is intended to assure such Fund's performance of the
Futures Contract. The margin required for a particular Futures Contract is set
by the exchange on which the Contract is traded, and may be significantly
modified from time to time by the exchange during the term of the Contract.
Futures Contracts are customarily purchased and sold on margins that may range
upward from less than 5% of the value of the Contract being traded.

If the price of an open Futures Contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin deposit ("margin
variation"). However, if the value of a position increases because of favorable
price changes in the Futures Contract so that the margin deposit exceeds the
required margin, the broker will pay the excess to that Fund. In computing daily
net asset values, that Fund will mark to market the current value of its open
Futures Contracts. The Fund expects to earn interest income on its margin
deposits.

The prices of Futures Contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates, which in turn are
affected by fiscal and monetary policies and national and international
political and economic events.
<PAGE>
At best, the correlation between changes in prices of Futures Contracts and of
the securities or currencies being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances such as: variations in
speculative market demand for Futures and for securities or currencies,
including technical influences in Futures trading; and differences between the
financial instruments being hedged and the instruments underlying the standard
Futures Contracts available for trading, with respect to interest rate levels,
maturities, and creditworthiness of issuers. A decision of whether, when, and
how to hedge involves skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or interest
rate trends.

Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss or
gain to the investor. For example, if at the time of purchase, 10% of the value
of the Futures Contract is deposited as margin, a subsequent 10% decrease in the
value of the Futures Contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit, if the Contract were closed out. Thus, a purchase or
sale of a Futures Contract may result in losses in excess of the amount invested
in the Futures Contract. However, a Fund would presumably have sustained
comparable losses if, instead of the Futures Contract, it had invested in the
underlying financial instrument and sold it after the decline. Furthermore, in
the case of a Futures Contract purchase, in order to be certain that such Fund
has sufficient assets to satisfy its obligations under a Futures Contract, the
Fund involved segregates and commits to back the Futures Contract with money
market instruments equal in value to the current value of the underlying
instrument less the margin deposit.

Most United States Futures exchanges limit the amount of fluctuation permitted
in Futures Contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a Futures Contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
Contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of Futures positions and
subjecting some Futures traders to substantial losses.

Federal Tax Treatment of Futures Contracts. Except for transactions the Funds
identified as hedging transactions, each Fund is required for federal income tax
purposes to recognize as income for each taxable year its net unrealized gains
and losses on Futures Contracts as of the end of the year as well as those
actually realized during the year. Identified hedging transactions would not be
subject to the mark to market rules and would result in the recognition of
ordinary gain or loss. Otherwise, unless transactions in Futures Contracts are
classified as part of a "mixed straddle," any gain or loss recognized with
respect to a Futures Contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to the holding
period of the Contract. In the case of a Futures transaction classified as a
"mixed straddle," the recognition of losses may be deferred to a later taxable
year.

Sales of Futures Contracts which are intended to hedge against a change in the
value of securities or currencies held by a Fund may affect the holding period
of such securities or currencies and, consequently, the nature of the gain or
loss on such securities or currencies upon disposition.
<PAGE>
In order for a Fund to continue to qualify for federal income tax treatment as a
regulated investment company, at least 90% of its gross income for a taxable
year must be derived from qualifying income, i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
currencies. It is anticipated that any net gain realized from the closing out of
Futures Contracts will be considered gain from the sale of securities or
currencies and therefore be qualifying income for purposes of the 90%
requirement.

The Funds will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Investment Company's fiscal year) on Futures
transactions. Such distributions will be combined with distributions of capital
gains realized on each Fund's other investments and shareholders will be advised
of the nature of the payments.

Options on Interest Rate and/or Currency Futures Contracts, and with Respect to
the Fremont Global Fund, Gold Futures Contracts. Options on Futures Contracts
are similar to options on fixed income or equity securities or options on
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put), rather than to purchase or sell the Futures Contract, at a
specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference on the expiration date between
the exercise price of the option and the closing level of the securities or
currencies upon which the Futures Contracts are based. Purchasers of options who
fail to exercise their options prior to the exercise date suffer a loss of the
premium paid.

As an alternative to purchasing call and put options on Futures, the Funds may
purchase call and put options on the underlying securities or currencies, or
with respect to the Global Fund, on gold or other commodities. Such options
would be used in a manner identical to the use of options on Futures Contracts.
To reduce or eliminate the leverage then employed by a Fund or to reduce or
eliminate the hedge position then currently held by that Fund, the Fund involved
may seek to close out an option position by selling an option covering the same
securities or contract and having the same exercise price and expiration date.

Forward Currency and Options Transactions. A forward currency contract is an
obligation to purchase or sell a currency against another currency at a future
date and price as agreed upon by the parties. The Funds may either accept or
make delivery of the currency at the maturity of the forward contract or, prior
to maturity, enter into a closing transaction involving the purchase or sale of
an offsetting contract. A Fund typically engages in forward currency
transactions in anticipation of, or to protect itself against, fluctuations in
exchange rates. The Fund might sell a particular currency forward, for example,
when it wanted to hold bonds denominated in that currency but anticipated, and
sought to be protected against, a decline in the currency against the U.S.
dollar. Similarly, the Fund might purchase a currency forward to "lock in" the
dollar price of securities denominated in that currency which it anticipated
purchasing.

A put option gives the Fund, as purchaser, the right (but not the obligation) to
sell a specified amount of currency at the exercise price until the expiration
of the option. A call option gives the Fund, as purchaser, the right (but not
the obligation) to purchase a specified amount of currency at the exercise price
until its expiration. The Fund might purchase a currency put option, for
example, to protect itself during the contract period against a decline in the
dollar value of a currency in which it holds or anticipates holding securities.
If the currency's value should decline against the dollar, the loss in currency
value should be offset, in whole or in part, by an increase in the value of the
put.
<PAGE>
If the value of the currency instead should rise against the dollar, any gain to
the Fund would be reduced by the premium it had paid for the put option. A
currency call option might be purchased, for example, in anticipation of, or to
protect against, a rise in the value against the dollar of a currency in which
the Fund anticipates purchasing securities.

Currency options may be either listed on an exchange or traded over-the-counter
(OTC). Listed options are third-party contracts (i.e., performance of the
obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. The Funds will not purchase an OTC option unless they believe that daily
valuation for such option is readily obtainable.

THE FUNDS (INCLUDING THE FREMONT MONEY MARKET FUND) GENERALLY

Diversification. Each Fund, except for the Real Estate Securities Fund, the
Fremont Select Fund, and the Fremont Emerging Markets Fund, intends to operate
as a "diversified" management investment company, as defined in the Investment
Company Act of 1940 (the "1940 Act"). A "diversified" investment company means a
company which meets the following requirements: At least 75% of the value of the
company's total assets is represented by cash and cash items (including
receivables), "Government Securities" (as defined below), securities of other
investment companies, and other securities for the purposes of this calculation
limited in respect of any one issuer to an amount not greater in value than 5%
of the value of the total assets of such management company and to not more than
10% of the outstanding voting securities of such issuer. "Government Securities"
means securities issued or guaranteed as to principal or interest by the United
States, or by a person controlled or supervised by and acting as an
instrumentality of the Government of the United States pursuant to authority
granted by the Congress of the United States.

The Fremont Real Estate Securities Fund, the Fremont Select Fund, and the
Fremont Emerging Markets Fund are non-diversified funds and are not subject to
the foregoing requirements.

Reverse Repurchase Agreements and Leverage. The Funds may enter into reverse
repurchase agreements which involve the sale of a security by a Fund and its
agreement to repurchase the security at a specified time and price. The Fund
involved will maintain in a segregated account with its custodian cash, cash
equivalents, or liquid securities in an amount sufficient to cover its
obligations under reverse repurchase agreements with broker-dealers (but not
with banks). Under the 1940 Act, reverse repurchase agreements are considered
borrowings by a Fund; accordingly, each Fund will limit its investments in these
transactions, together with any other borrowings, to no more than one-third of
its total assets. The use of reverse repurchase agreements by a Fund creates
leverage which increases the Fund's investment risk. If the income and gains on
securities purchased with the proceeds of these transactions exceed the cost, a
Fund's earnings or net asset value will increase faster than otherwise would be
the case; conversely, if the income and gains fail to exceed the costs, earnings
or net asset value would decline faster than otherwise would be the case. If the
300% asset coverage required by the 1940 Act should decline as a result of
market fluctuation or other reasons, a Fund may be required to sell some of its
portfolio securities within three days to reduce the borrowings (including
reverse repurchase agreements) and restore the 300% asset coverage, even though
it may be disadvantageous from an investment standpoint to sell securities at
that time. The Funds intend to enter into reverse repurchase agreements only if
the income from the investment of the proceeds is greater than the expense of
the transaction, because the proceeds are invested for a period no longer than
the term of the reverse repurchase agreement.
<PAGE>
Floating Rate and Variable Rate Obligations and Participation Interests. The
Funds may purchase floating rate and variable rate obligations, including
participation interests therein. Floating rate or variable rate obligations
provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate at a major commercial bank) or is
reset on a regular basis by a bank or investment banking firm to a market rate.
At specified times, the owner can demand payment of the obligation at par plus
accrued interest. Variable rate obligations provide for a specified periodic
adjustment in the interest rate, while floating rate obligations have an
interest rate which changes whenever there is a change in the external interest
rate. Frequently banks provide letters of credit or other credit support or
liquidity arrangements to secure these obligations. The quality of the
underlying creditor or of the bank, as the case may be, must meet the minimum
credit quality standards, as determined by the Advisor or Sub-Advisor,
prescribed for the Funds by the Board of Directors with respect to
counterparties in repurchase agreements and similar transactions.

The Funds may invest in participation interests purchased from banks in floating
rate or variable rate obligations owned by banks. A participation interest gives
a Fund an undivided interest in the obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the obligation,
and provides a demand repayment feature. Each participation is backed by an
irrevocable letter of credit or guarantee of a bank (which may be the bank
issuing the participation interest or another bank). The bank letter of credit
or guarantee must meet the prescribed investment quality standards for the
Funds. A Fund has the right to sell the participation instrument back to the
issuing bank or draw on the letter of credit on demand for all or any part of
the Fund's participation interest in the underlying obligation, plus accrued
interest.

Swap Agreements. The Funds may enter into interest rate, index, and currency
exchange rate swap agreements for purposes of attempting to obtain a particular
desired return at a lower cost to the Fund than if the Fund had invested
directly in an instrument that yielded that desired return. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Commonly used swap agreements include interest
rate caps, under which, in return for a premium, one party agrees to make
payments to the other to the extent that interest rates exceed a specified rate,
or "cap"; interest rate floors, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates fall
below a specified level, or "floor"; and interest rate collars, under which a
party sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding minimum or maximum levels.

The "notional amount" of the swap agreement is only a fictive basis on which to
calculate the obligations which the parties to a swap agreement have agreed to
exchange. Most swap agreements entered into by the Funds would calculate the
obligations of the parties to the agreement on a "net basis." Consequently a
Fund's obligations (or rights) under a swap agreement will generally be equal
only to the net amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the "net
amount"). A Fund's obligations under a swap agreement will be accrued daily
(offset against amounts owed to the Fund) and any accrued but unpaid net amounts
owed to a swap counterparty will be covered by the maintenance of a segregated
account consisting of cash, U.S. Government securities, or high grade debt
obligations, to avoid any potential leveraging of the Fund's portfolio. A Fund
will not enter into a swap agreement with any single party if the net amount
owed or to be received under existing contracts with that party would exceed 5%
of the Fund's net assets.
<PAGE>
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the Advisor's or the Sub-Advisor's ability
to predict correctly whether certain types of investments are likely to produce
greater returns than other investments. Because they are two-party contracts and
because they may have terms of greater than seven days, swap agreements will be
considered to be illiquid. Moreover, a Fund bears the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. The Advisor or Sub-Advisor will
cause a Fund to enter into swap agreements only with counterparties that would
be eligible for consideration as repurchase agreement counterparties under a
Fund's repurchase agreement guidelines. Certain restrictions imposed on the
Funds by the Internal Revenue Code may limit the Funds' ability to use swap
agreements. The swaps market is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect a Fund's ability to terminate existing swap agreements or
to realize amounts to be received under such agreements.

When-Issued Securities and Firm Commitment Agreements. A Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction but the settlement is delayed). A
Fund will not purchase securities the value of which is greater than 5% of its
net assets on a when-issued or firm commitment basis, except that this
limitation does not apply to the Fremont Bond Fund. A Fund, as purchaser,
assumes the risk of any decline in value of the security beginning on the date
of the agreement or purchase, and no interest accrues to the Fund until it
accepts delivery of the security. A Fund will not use such transactions for
leveraging purposes, and accordingly, will segregate cash, cash equivalents, or
liquid securities in an amount sufficient to meet its payment obligations
thereunder. Although these transactions will not be entered into for leveraging
purposes, to the extent a Fund's aggregate commitments under these transactions
exceed its holdings of cash and securities that do not fluctuate in value (such
as short-term money market instruments), the Fund temporarily will be in a
leveraged position (i.e., it will have an amount greater than its net assets
subject to market risk). Should market values of a Fund's portfolio securities
decline while the Fund is in a leveraged position, greater depreciation of its
net assets would likely occur than were it not in such a position. As the Fund's
aggregate commitments under these transactions increase, the opportunity for
leverage similarly increases. A Fund will not borrow money to settle these
transactions and, therefore, will liquidate other portfolio securities in
advance of settlement if necessary to generate additional cash to meet its
obligations thereunder.

Commercial Bank Obligations. For the purposes of each Fund's investment policies
with respect to bank obligations, obligations of foreign branches of U.S. banks
and of foreign banks may be general obligations of the parent bank in addition
to the issuing bank, or may be limited by the terms of a specific obligation and
by government regulation. As with investment in non-U.S. securities in general,
investments in the obligations of foreign branches of U.S. banks, and of foreign
banks may subject the Funds to investment risks that are different in some
respects from those of investments in obligations of domestic issuers. Although
a Fund will typically acquire obligations issued and supported by the credit of
U.S. or foreign banks having total assets at the time of purchase in excess of
$1 billion, this $1 billion figure is not a fundamental investment policy or
restriction of any Fund. For the purposes of calculating the $1 billion figure,
the assets of a bank will be deemed to include the assets of its U.S. and
non-U.S. branches.

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

Illiquid Securities. Each Fund (other than the Money Market Fund) may invest up
to 15% of its net assets in all forms of "illiquid securities." The Money Market
Fund may invest up to 10% of its net assets in "illiquid securities."

An investment is generally deemed to be "illiquid" if it cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which such securities are valued by the Fund. "Restricted" securities are
securities which were originally sold in private placements and which have not
been registered under the Securities Act of 1933 (the "1933 Act"). However, a
market exists for certain restricted securities (for example, securities
qualifying for resale to certain " qualified institutional buyers" pursuant to
Rule 144A under the 1933 Act). Additionally, the Advisor and the Funds believe
that a similar market exists for commercial paper issued pursuant to the private
placement exemption of Section 4(2) of the 1933 Act. The Funds may invest
without limitation in these forms of restricted securities if such securities
are determined by the Advisor or Sub-Advisor to be liquid in accordance with
standards established by the Investment Company's Board of Directors. Under
these standards, the Advisor or Sub-Advisor must consider (a) the frequency of
trades and quotes for the security, (b) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers, (c)
any dealer undertaking to make a market in the security, and (d) the nature of
the security and the nature of the marketplace trades (for example, the time
needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer).

It is not possible to predict with accuracy how the markets for certain
restricted securities will develop. Investing in restricted securities could
have the effect of increasing the level of a Fund's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.

Municipal Securities

Municipal securities are issued by or on behalf of states, territories, and
possessions of the United States and the District of Columbia and by their
political subdivisions, agencies, and instrumentalities. The interest on these
obligations is generally not includable in gross income of most investors for
federal income tax purposes. Issuers of municipal obligations do not usually
seek assurances from governmental taxing authorities with respect to the
tax-free nature of the interest payable on such obligations. Rather, issuers
seek opinions of bond counsel as to such tax status. See "Special Tax
Considerations" below.
<PAGE>
Municipal issuers of securities are not usually subject to the securities
registration and public reporting requirements of the Securities and Exchange
Commission and state securities regulators. As a result, the amount of
information available about the financial condition of an issuer of municipal
obligations may not be as extensive as that which is made available by
corporations whose securities are publicly traded. The two principal
classifications of municipal securities are general obligation securities and
limited obligation (or revenue) securities. There are, in addition, a variety of
hybrid and special types of municipal obligations as well as numerous
differences in the financial backing for the payment of municipal obligations
(including general fund obligation leases described below), both within and
between the two principal classifications. Long-term municipal securities are
typically referred to as "bonds" and short-term municipal securities are
typically called "notes."

Payments due on general obligation bonds are secured by the issuer's pledge of
its full faith and credit including, if available, its taxing power. Issuers of
general obligation bonds include states, counties, cities, towns and various
regional or special districts. The proceeds of these obligations are used to
fund a wide range of public facilities such as the construction or improvement
of schools, roads and sewer systems.

The principal source of payment for a limited obligation bond or revenue bond is
generally the net revenue derived from particular facilities financed with such
bonds. In some cases, the proceeds of a special tax or other revenue source may
be committed by law for use to repay particular revenue bonds. For example,
revenue bonds have been issued to lend the proceeds to a private entity for the
acquisition or construction of facilities with a public purpose such as
hospitals and housing. The loan payments by the private entity provide the
special revenue source from which the obligations are to be repaid.

Municipal Notes. Municipal notes generally are used to provide short-term
capital funding for municipal issuers and generally have maturities of one year
or less. Municipal notes of municipal issuers include tax anticipation notes,
revenue anticipation notes and bond anticipation notes:

Tax Anticipation Notes are issued to raise working capital on a short-term
basis. Generally, these notes are issued in anticipation of various seasonal tax
revenues being paid to the issuer, such as property, income, sales, use and
business taxes, and are payable from these specific future taxes.
<PAGE>
Revenue Anticipation Notes are issued in anticipation of the receipt of non-tax
revenue, such as federal revenues or grants.

Bond Anticipation Notes are issued to provide interim financing until long-term
financing can be arranged. In most cases, long-term bonds are issued to provide
the money for the repayment of these notes.

Commercial Paper. Issues of municipal commercial paper typically represent
short-term, unsecured, negotiable promissory notes. Agencies of state and local
governments issue these obligations in addition to or in lieu of notes to
finance seasonal working capital needs or to provide interim construction
financing and are paid from revenues of the issuer or are refinanced with
long-term debt. In most cases, municipal commercial paper is backed by letters
of credit, lending agreements, note repurchase agreements or other credit
facility agreements offered by banks or other institutions.

Lending of Portfolio Securities. For the purpose of realizing additional income,
a Fund may make secured loans of portfolio securities amounting to not more than
33-1/3% of its net assets. Securities loans are made to broker-dealers or
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value of
the securities lent marked to market on a daily basis. The collateral received
will consist of cash, short-term U.S. Government securities, bank letters of
credit, or such other collateral as may be permitted under a Fund's investment
program and by regulatory agencies and approved by the Board of Directors. While
the securities are being lent, a Fund will continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities, as well as
interest on the investment of the collateral or a fee from the borrower. The
Funds have a right to call each loan and obtain the securities on five business
days' notice. The Funds will not have the right to vote equity securities while
they are being lent, but it will call a loan in anticipation of any vote in
which it seeks to participate.

Particular Risk Factors Relating to California Municipal Securities (Fremont
California Intermediate Tax-Free Fund). Certain risks are associated with
California municipal securities in which the Fund predominantly will invest.
This summarized information is based on information drawn from official
statements and prospectuses relating to securities offerings of the state of
California and various local agencies in California, available prior to the date
of this Statement of Additional Information. While the Advisor has not
independently verified such information, it has no reason to believe that such
information is not correct in all material respects. In addition to this current
information, future California constitutional amendments, legislative measures,
executive orders, administrative regulations, and voter initiatives could have
an adverse effect on the debt obligations of California issuers.

Certain debt obligations held by the Fund may be obligations of issuers who rely
in whole or in substantial part on California state revenues for the continuance
of their operations and the payment of their obligations. In recent efforts to
assist California municipal issuers to raise revenues to pay their bond
obligations, the California legislature has passed measures which have provided
for the redistribution of California's General Fund surplus to local agencies,
the reallocation of revenues to local agencies, and the assumption of certain
local obligations by the state. It is not known whether additional revenue
redistribution legislation will be enacted in the future or, if enacted, whether
such legislation would provide sufficient revenue to allow such issuers to pay
their obligations. To the extent local entities do not receive money from the
state to pay for their operations and services, their ability to pay debt
service on obligations held by the Fund may be impaired.
<PAGE>
Certain debt obligations held by the Fund may be obligations of issuers who rely
in whole or in part on ad valorem real property taxes, on property-related
assessments, charges or fees, and on taxes such as utility user's taxes as
sources of revenue. The California Constitution limits the taxing and spending
powers of the state of California and its public agencies and, therefore, the
ability of California issuers to raise revenues through taxation, and to spend
such revenues over appropriations limits. Such limits may impair the ability of
such issuers to make timely payment on their obligations.

Certain debt obligations held by the Fund may be obligations payable solely from
lease payments on real property or personal property leased to the state,
cities, counties, or their various public entities. California law requires that
the lessee is not required to make lease payments during any period that it is
denied use and occupancy of the property leased in proportion to such loss.
Moreover, the lessee only agrees to include lease payments in its annual budget
for the current fiscal year. In case of a default under the lease, the only
remedy available against the lessee is that of reletting the property; no
acceleration of lease payments is permitted. Each of these factors presents a
risk that the lease financing obligations held by the Fund would not be paid in
a timely manner.

Certain debt obligations held by the Fund may be obligations which are payable
solely from the revenues of health care institutions. The method of
reimbursement for indigent care, California's selective contracting with health
care providers for such care, and selective contracting by health insurers for
care of their own beneficiaries now in effect under California and federal law
may adversely affect these revenues and, consequently, payment on those debt
obligations.

Debt obligations payable solely from revenues of health care institutions may
also be insured by the state of California pursuant to a mortgage insurance
program operated by the Office of Statewide Health Planning and Development (the
"Office"). If a default occurs on such insured debt obligations, the Office may
either continue to make debt service payments on the obligations, or foreclose
on the mortgage and request the State Treasurer to issue debentures payable from
a reserve fund established under the insurance program or from unappropriated
state funds. Reports and studies prepared most recently a decade ago indicated
that the reserve fund was under-funded. Moreover, moneys in the reserve fund may
be and have been reappropriated by the California Legislature for other purposes
in the past, and the California legislature reserves the right to do so in the
future. The Investment Company cannot predict what, if any, impact the
underfunding of the reserve fund may have on such debt obligations.

Certain debt obligations held by the Fund may be obligations which are secured
in whole or in part by a mortgage or deed of trust on real property. California
has five principal statutory provisions which limit the remedies of a creditor
secured by a mortgage or deed of trust. To limit the creditor's right to obtain
a deficiency judgment, one limitation is based on the method of foreclosure, and
the second on the type of debt secured. Under the former, a deficiency judgment
is barred when the foreclosure is accomplished by means of nonjudicial trustee's
sale. Under the latter, a deficiency judgment is barred when the foreclosed
mortgage or deed of trust secures certain purchase money obligations. A third
statutory provision, commonly known as the "one form of action" rule, requires
creditors secured by real property to exhaust their real property security by
foreclosure before bringing a personal action against the debtor. A fourth
statutory provision limits any deficiency judgment obtained by a creditor
secured by real property following a judicial sale of such property to the
excess of the outstanding debt over the fair value of the property at the time
of the sale, thus preventing the creditor from obtaining a large deficiency
judgment against the debtor as a result of low bids at a judicial sale. Finally,
a fifth statutory provision gives the debtor the right to redeem the real
property from any judicial foreclosure sale as to which a deficiency judgment
may be ordered against the debtor.
<PAGE>
Upon the default of a mortgage or deed of trust with respect to California real
property, the creditor's nonjudicial foreclosure rights under the power of sale
contained in the mortgage or deed of trust are subject to the constraints
imposed by California law upon transfers of title to real property by private
power of sale. During the three-month period beginning with the filing of a
formal notice of default, the debtor is entitled to reinstate the mortgage by
making any overdue payments. Under standard loan servicing procedures, the
filing of the formal notice of default does not occur unless at least three full
monthly payments have become due and remain unpaid. The power of sale is
exercised by posting and publishing a notice of sale for at least 20 days after
expiration of the three-month reinstatement period. Therefore, the effective
minimum period of foreclosing on a mortgage could be in excess of seven months
after the initial default. Such time delays in collections could disrupt the
flow of revenues available to an issuer for the payment of debt service on the
outstanding obligations if such defaults occur with respect to a substantial
number of mortgages or deeds of trust securing an issuer's obligations.

In addition, a court could find that there is sufficient involvement of the
issuer in the nonjudicial sale of property securing a mortgage for such private
sale to constitute "state action," and could hold that the private right-of-sale
proceedings violate the due process requirements of the federal or state
constitutions, consequently preventing an issuer from using the nonjudicial
foreclosure remedy described above.

Certain debt obligations held by the Fund may be obligations which finance the
acquisition of single-family home mortgages for low and moderate income
mortgagors. These obligations may be payable solely from revenues derived from
the home mortgages, and are subject to California's statutory limitations
described above applicable to obligations secured by real property. Under
California antideficiency legislation, there is no personal recourse against a
mortgagor of a single family residence purchased with the loan secured by the
mortgage, regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.

Under California law, mortgage loans secured by single-family, owner-occupied
dwellings may be prepaid at any time. Prepayment charges on such mortgage loans
may be imposed only with respect to voluntary prepayments made during the first
five years during the term of the mortgage loan, and cannot in any event exceed
six months' advance interest on the amount prepaid in excess of 20% of the
original principal amount of the mortgage loan. This limitation could affect the
flow of revenues available to an issuer for debt service on the outstanding debt
obligations which finance such home mortgages.

Guaranteed Investment Contracts (Fremont Global Fund). The Global Fund may enter
into agreements known as guaranteed investment contracts ("GICs") with banks and
insurance companies. GICs provide to the Fund a fixed rate of return for a fixed
period of time, similar to any fixed income security. While there is no ready
market for selling GICs and they typically are not assignable, the Fund will
only invest in GICs if the financial institution permits a withdrawal of the
principal (together with accrued interest) after the Fund gives seven days'
notice. Like any fixed income security, if market interest rates at the time of
such withdrawal have increased from the guaranteed rate, the Fund would be
required to pay a premium or penalty upon such withdrawal. If market rates
declined, the Fund would receive a premium on withdrawal. Since GICs are
considered illiquid, the Fund will not invest more than 15% of its net assets in
GICs and other illiquid assets.

Reduction in Bond Rating (Fremont Global Fund and Fremont Bond Fund). The Global
Fund and the Bond Fund may each invest up to 10% of its net assets in debt
securities rated below BBB or Baa, but not lower than B. In the event that the
rating for any security held by the Funds drops below the minimum acceptable
rating applicable to that Fund, the Fund's Advisor or Sub-Advisor will determine
whether the Fund should continue to hold such an obligation in its portfolio.
Bonds rated below BBB or Baa are commonly known as "junk bonds." These bonds are
subject to greater fluctuations in value and risk of loss of income and
<PAGE>
principal due to default by the issuer than are higher rated bonds. The market
values of junk bonds tend to reflect short-term corporate, economic, and market
developments and investor perceptions of the issuer's credit quality to a
greater extent than higher rated bonds. In addition, it may be more difficult to
dispose of, or to determine the value of, junk bonds. See Appendix A for a
complete description of the bond ratings.

Concentration (Fremont Real Estate Securities Fund). The Real Estate Securities
Fund will concentrate its investments in real estate investment trusts
("REITs"). As a result, an economic, political or other change affecting one
REIT also may affect other REITs. This could increase market risk and the
potential for fluctuations in the net asset value of the Fund's shares.

INVESTMENT RESTRICTIONS

Each Fund has adopted the following fundamental investment policies and
restrictions in addition to the policies and restrictions discussed in its
prospectus. With respect to each Fund, the policies and restrictions listed
below cannot be changed without approval by the holders of a "majority of the
outstanding voting securities" of that Fund (which is defined in the 1940 Act to
mean the lesser of (i) 67% of the shares represented at a meeting at which more
than 50% of the outstanding shares are represented or (ii) more than 50% of the
outstanding shares). These restrictions provide that no Fund may:

1. Invest 25% or more of the value of its total assets in the securities
of issuers conducting their principal business activities in the same
industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S.
Government or any of its agencies or instrumentalities, to tax exempt
securities issued by state governments or political subdivisions
thereof, or to investments by the Money Market Fund in securities of
domestic banks, of foreign branches of domestic banks where the
domestic bank is unconditionally liable for the security, and domestic
branches of foreign banks subject to the same regulation of domestic
banks, or to investments by the Real Estate Securities Fund in real
estate investment trusts. See "Investment Objective, Policies, And
Risk Considerations."

2. Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Funds may invest
in securities secured by real estate, or issued by companies which
invest in real estate or interests therein, including real estate
investment trusts, and may purchase and sell currencies (including
forward currency exchange contracts), gold, bullion, futures
contracts, and related options generally as described in the
Prospectus and Statement of Additional Information.

3. Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is
defined under the Securities Act of 1933.

4. Make loans, except that a Fund may purchase debt securities, enter
into repurchase agreements, and make loans of portfolio securities
amounting to not more than 33 1/3% of its net assets calculated at the
time of the securities lending.

5. Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. A Fund
will not purchase securities while such borrowings are outstanding.

6. Change its status as either a diversified or a non-diversified
investment company.
<PAGE>
7. Issue senior securities, except as permitted under the 1940 Act, and
except that the Investment Company and the Funds may issue shares of
common stock in multiple series or classes.

8. Notwithstanding any other fundamental investment restriction or
policy, each Fund may invest all of its assets in the securities of a
single open-end investment company with substantially the same
fundamental investment objectives, restrictions, and policies as that
Fund.
<PAGE>
Other current investment policies of the Funds, which are not fundamental and
which may be changed by action of the Board of Directors without shareholder
approval, are as follows. A Fund may not:

9. Invest in companies for the purpose of exercising control or
management.

10. Mortgage, pledge, or hypothecate any of its assets, provided that this
restriction shall not apply to the transfer of securities in
connection with any permissible borrowing.

11. Invest in interests in oil, gas, or other mineral exploration or
development programs or leases.

12. Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three
years continuous operation.

13. Purchase securities on margin, provided that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities, except that the Fund may make margin deposits
in connection with futures contracts.

14. Enter into a futures contract if, as a result thereof, more than 5% of
the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures
contract.

15. Acquire securities or assets for which there is no readily available
market or which are illiquid, if, immediately after and as a result of
the acquisition, the value of such securities would exceed, in the
aggregate, 15% of that Fund's net assets, except that the value of
such securities may not exceed 10% of the Money Market Fund's net
assets.

16. Make short sales of securities or maintain a short position, except
that a Fund may sell short "against the box."

17. Invest in securities of an issuer if the investment would cause a Fund
to own more than 10% of any class of securities of any one issuer.

18. Acquire more than 3% of the outstanding voting securities of any one
investment company.
<PAGE>
INVESTMENT COMPANY DIRECTORS AND OFFICERS

The Bylaws of Fremont Mutual Funds, Inc. (the "Investment Company"), the
Maryland investment company of which the Fund is a series, authorize a Board of
Directors of between three and 15 persons, as fixed by the Board of Directors. A
majority of directors may fill vacancies caused by the resignation or death of a
director, or the expansion of the Board of Directors. Any director may be
removed by vote of the holders of a majority of all outstanding shares of the
Investment Company qualified to vote at the meeting.

<TABLE>
<CAPTION>
Principal Occupations
Date of and Business Experience
Name and Address Birth Positions Held for Past Five Years

<S> <C> <C> <C>
David L. Redo(1)(2)(4) 9-1-37 Chairman, Chief Executive President and Director, Fremont
Fremont Investment, Advisors, Inc. Officer and Director Investment Advisors, Inc.;
333 Market Street, 26th Floor Managing Director, Fremont
San Francisco, CA 94105 Group, L.L.C. and Fremont
Investors, Inc.; Director,
Sequoia Ventures, Sit/Kim
International Investment
Associates, and J.P. Morgan
Securities Asia.

Michael H. Kosich(1)(2) 3-30-40 President and Director 7/96 - Present
Fremont Investment Advisors, Inc. Senior Vice President and
333 Market Street, 26th Floor Director, Fremont Investment
San Francisco, CA 94105 Advisors, Inc. 10/77 - 7/96 Senior Vice
President Business Development
Benham Management.

Richard E. Holmes(3) 5-14-43 Director Vice President and Director,
P.O. Box 479 BelMar Advisors, Inc.
Sanibel, FL 33957 (marketing firm).

Donald C. Luchessa(3) 2-18-30 Director Principal, DCL Advisory
DCL Advisory (marketer for investment
4105 Shelter Bay Avenue advisors).
Mill Valley, CA 94941

David L. Egan(3) 5-1-34 Director President, Fairfield Capital
Fairfield Capital Associates, Inc. Associates, Inc.
1640 Sylvaner Founding Partner of China Epicure, LLC
St. Helena, CA 94574 and Palisades Trading Company, LLC

Albert W. Kirschbaum(4) 8-17-38 Senior Vice President Senior Vice President and
Fremont Investment Advisors, Inc. Director, Fremont Investment
333 Market Street, 26th Floor Advisors, Inc.
San Francisco, CA 94105

Peter F. Landini(4) 5-10-51 Executive Vice President, Executive Vice President, COO and
Fremont Investment Advisors, Inc. Treasurer and Director Director, Fremont Investment
333 Market Street, 26th Floor Advisors, Inc.
San Francisco, CA 94105 Director, J.P. Morgan Securities, Asia

John Kosecoff 10-29-51 Vice President 10/96 - Present
Fremont Investment Advisors, Inc. Vice President, Fremont
333 Market Street, 26th Floor Investment Advisors, Inc.
San Francisco, CA 94105 12/93 - 9/96 Senior Analyst and Portfolio
Manager, RCM Capital Management
11/92 - 12/93 Hedge Fund Analyst and
Portfolio Manager, Omega Advisors
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
William M. Feeney 3-27-56 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Norman Gee 3-29-50 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Alexandra W. Kinchen(4) 4-25-45 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Andrew L. Pang(4) 4-15-49 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Robert J. Haddick(4) 2-26-60 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Tina Thomas 8-7-49 Vice President, Secretary, and 6/96 - Present Vice President, Secretary
Fremont Investment Advisors, Inc. Chief Compliance Officer and Chief Compliance Officer,
333 Market Street, 26th Floor Fremont Investment Advisors, Inc.
San Francisco, CA 94105 9/88 - 5/96 Chief Compliance
Officer and Vice President,
Bailard, Biehl & Kaiser, Inc.;
Treasurer, Bailard, Biehl & Kaiser International
Fund Group, Inc. and Bailard, Biehl & Kaiser Fund
Group; Principal, BB&K Fund Services, Inc.

Richard G. Thomas 1-7-57 Senior Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Gretchen Hollstein 3-23-67 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26h Floor
San Francisco, CA 94105

Allyn Hughes 6-12-60 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Greg Hand 10-9-61 Assistant Treasurer Assistant Treasurer.
Fremont Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Jack Gee 9-12-59 Vice President and 10/97 - Present, Vice President and
Fremont Investmetnt Avisors, Inc. Controller Controller, Fremont Investment
333 Market Street, 26th Floor Advisors, Inc.; 11/95-10/97, Chief
San Francisco, CA 94105 Financial Officer and Treauruer ,
Sife, Inc.;6/91-6/95, Controller,
Concord General Corp.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Dean Boebinger 11-21-55 Vice President 12/95 - Present
Fremont Investment Advisors, Inc. National Sales Manager,
3000 Post Oak Blvd., Suite 100 Fremont Investment
Houston, TX 77056 Advisors, Inc.
8/94 - 12/95 Regional Sales Manager
3/92 - 7/94 Certified Financial Planner
and Account Executive, GNA, Inc.
</TABLE>

(1) Director who is an "interested person" of the Company due to his
affiliation with the Company's investment manager.
(2) Member of the Executive Committee.
(3) Member of the Audit Committee and the Contracts Committee.
(4) Member of the Fremont Investment Committee.

During the fiscal year ended October 31, 1997, Richard E. Holmes, William W.
Jahnke, and David L. Egan each received $13,500 and Donald C. Luchessa received
$12,000 for serving as directors of the Investment Company.

As of ________, the officers and directors as a group owned in the aggregate
beneficially or of record less than 1% of the outstanding shares of the
Investment Company.
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES

Management Agreement. The Advisor, in addition to providing investment
management services, furnishes the services and pays the compensation and travel
expenses of persons who perform the executive, administrative, clerical, and
bookkeeping functions of the Investment Company, provides suitable office space,
necessary small office equipment and utilities, and general purpose accounting
forms, supplies, and postage used at the offices of the Investment Company.

The Advisor is responsible to pay sub-transfer agency fees when such entities
are engaged in connection with share holdings in the Funds acquired by certain
retirement plans.

Each Fund (other than the International Growth Fund, the International Small Cap
Fund and the U.S. Micro-Cap Fund) will pay all of its own expenses not assumed
by the Advisor, including, but not limited to, the following: custodian, stock
transfer, and dividend disbursing fees and expenses; taxes and insurance;
expenses of the issuance and redemption of shares of the Fund (including stock
certificates, registration or qualification fees and expenses); legal and
auditing expenses; and the costs of stationery and forms prepared exclusively
for the Fund.

With respect to the International Growth Fund and the International Small Cap
Fund, the Advisor has agreed to bear all of each Fund's ordinary operating
expenses in return for receiveing a monthly fee of 1.5% per annum of each Fund's
average daily net assets. With respect to the U.S. Micro-Cap Fund, the Advisor
has agreed to bear all of the Fund's ordinary operating expenses in return for
receiving a monthly fee of 2.5% per annum of the Fund's average daily net assets
with respect to the first $30 million, 2.0% with respect to the next $70
million, and 1.5% thereafter. Each Fund will bear all expenses relating to
interest, brokerage commissions, other transaction charges relative to investing
activities of the Fund, and extraordinary expenses (including for example,
litigation expenses, if any).

The allocation of general Investment Company expenses among the Funds is made on
a basis that the directors deem fair and equitable, which may be based on the
relative net assets of each Fund or the nature of the services performed and
relative applicability to each Fund.

The directors of the Advisor are David L. Redo, Jon S. Higgins, Peter F.
Landini, Michael H. Kosich and Albert W. Kirschbaum.

The Investment Advisory and Administration Agreement (the "Advisory Agreement")
with respect to each Fund may be renewed annually, provided that any such
renewal has been specifically approved by (i) the Board of Directors, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of a Fund, and (ii) the vote of a majority of directors who are not
parties to the Advisory Agreement or "interested persons" (as defined in the
1940 Act) of any such party, cast in person, at a meeting called for the purpose
of voting on such approval. The Advisory Agreement also provides that either
party thereto has the right with respect to any Fund to terminate it without
penalty upon sixty (60) days' written notice to the other party, and that the
Advisory Agreement terminates automatically in the event of its assignment (as
defined in the 1940 Act).
<PAGE>
The following table depicts the advisory fees (net of voluntary waivers) paid by
the Funds to the Advisor for the fiscal years ended October 31, 1997, 1996 and
1995:

Fiscal Year Ended October 31,
(In '000's)
-----------------------------
1997 1996 1995
---- ---- ----

Money Market Fund $ 837 $ 650 $ 621
Bond Fund 303 317 274
Real Estate Securities Fund -- -- --
Global Fund 3,850 3,198 2,735
Growth Fund 604 341 196
International Growth Fund 618 549 440
International Small Cap Fund 149 158 57
Select Fund -- -- --
U.S. Small Cap Fund 5 -- --
Emerging Markets Fund 17 Waived --
U.S. Micro-Cap Fund 3,050 890 77
CA Tax-Free Fund 183 153 164

The Advisory Agreements with respect to the Money Market Fund, the Bond Fund,
the Global Fund, the Growth Fund, and the Emerging Markets Fund also provide for
the payment of an administrative fee to the Advisor at the annual rate of .15%
of average net assets. The following table depicts the administrative fee (net
of voluntary waivers) paid by the Funds to the Advisor for the fiscal years
ended October 31, 1997, 1996 and 1995:

Fiscal Year Ended October 31,
(In '000's)
-----------------------------
1997 1996 1995
---- ---- ----

Money Market Fund Waived Waived Waived
Bond Fund Waived Waived Waived
Real Estate Securities Fund N/A N/A N/A
Global Fund 962 800 684
Growth Fund 181 102 43
International Growth Fund N/A N/A N/A
International Small Cap Fund N/A N/A N/A
Select Fund N/A N/A N/A
U.S. Small Cap Fund 1 N/A N/A
Emerging Markets Fund 3 Waived N/A
U.S. Micro-Cap Fund N/A N/A N/A
Ca Tax Free Fund 3 3 3

The Advisor's employees may engage in personal securities transactions. However,
the Investment Company and the Advisor have adopted a Code of Ethics for the
purpose of establishing standards of conduct for the Advisor's employees with
respect to such transactions. The Code of Ethics includes some broad
prohibitions against fraudulent conduct, and also includes specific rules,
restrictions, and reporting obligations with respect to personal securities
transactions of the Advisor's employees. Generally, each employee is required to
obtain prior approval from the Advisor's compliance officer in order to purchase
or sell a security for the employee's own account. Purchases or sales of
securities which are not eligible for purchase or sale by the Funds or any other
client of the Advisor are exempted from the prior approval requirement, as are
certain other transactions which the Advisor believes present no potential
conflict of interest. The Advisor's employees are also required to file with the
Advisor quarterly reports of their personal securities transactions.
<PAGE>
The Sub-Advisors - Fremont Bond Fund, Fremont Real Estate Securities Fund,
Fremont International Small Cap Fund, Fremont U.S. Small Cap Fund, Fremont
Emerging Markets Fund, Fremont U.S. Micro-Cap Fund.

The Advisory Agreements authorize the Advisor, at its option and at its sole
expense, to appoint a Sub-Advisor, which may assume all or a portion of the
responsibilities and obligations of the Advisor pursuant to the Advisory
Agreement as shall be delegated to the Sub-Advisor. Any appointment of a
Sub-Advisor and assumption of responsibilities and obligations of the Advisor by
such Sub-Advisor is subject to approval by the Board of Directors and, as
required by law, the shareholders of the affected Fund. Pursuant to this
authority, the following table summarizes the Sub-Advisor:

Fund Sub-Advisor
- ---- -----------
Bond Fund Pacific Investment Management Company

Real Estate Securities Fund Kensignton Investment Group

International Small Cap Fund Acadian Asset Management

U.S. Small Cap Fund Kern Capital Management LLC

Emerging Markets Fund Nicholas-Applegate Capital Management (HK) LLC

U.S. Micro-Cap fund Kern Capital Management LLC

The current Portfolio Management Agreements provide that the Sub-Advisors agree
to manage the investment of the Fund's assets, subject to the applicable
provisions of the Investment Company's Articles of Incorporation, Bylaws and
current registration statement (including, but not limited to, the investment
objective, policies, and restrictions delineated in the Funds' current
Prospectus and Statement of Additional Information), as interpreted from time to
time by the Board of Directors.

For their services under the Portfolio Management Agreements, the Advisor has
agreed to pay the Sub-Advisors an annual fee equal to the percentages set forth
below of the value of the applicable Fund's average net assets, payable monthly:

Bond Fund: .25% to Pacific Investment Management Company

Real Estate Securities Fund 0.50% to Kensington Investment Group

International Small Cap Fund: Acadian Asset Management, Inc.:
.75% on the first $50 million
.65% on the next $50 million
.50% on the next $100 million
.40% on assets in excess of $200 million

U.S. Small Cap Fund: 0.65% to Kern Capital Management LLC

Emerging Markets Fund: .50% to Nicholas Applegate Capital Management
(Hong Kong) LLC

U.S. Micro-Cap Fund: to Kern Capital Management LLC:
1.50% on the first $30 million
1.00% on the next $70 million
.75% on assets in excess of $100 million
<PAGE>
For the fiscal year ended October 31, 1997, Pacific Investment Management
Company, Sit Investment Associates, Inc., Morgan Grenfell Capital Management,
Inc., Kern Capitla Management LLC and Nicholas-Applegate Capital Management
received from the Advisor (not the Funds) subadvisory fees (net of voluntary fee
waivers) of $189,286, $11,699, $835,014, $359,873, and $15,039 respectively. For
the fiscal year ended October 31, 1996, Pacific Investment Management Company,
Sit Investment Associates, Inc., and Morgan Grenfell Capital Management, Inc.
received from the Advisor (not the Funds) subadvisory fees (net of voluntary fee
waivers) of $198,574, $81,991, and $364,583, respectively. Acadian Asset
Management, Inc. waived its subadvisory fees for the fiscal year ended October
31, 1997 and 1996. For the fiscal year ended October 31, 1995, Pacific
Investment Management Company, Sit Investment Associates, Inc., and Sit/Kim
International Investment Associates, Inc. received from the Advisor subadvisory
fees (net of voluntary waivers) of $181,386, $57,522 and $165,172, respectively.
Acadian Asset Management, Inc. and Morgan Grenfell Capital Management, Inc. each
waived its subadvisory fees for the fiscal year ended October 31, 1995.

The Portfolio Management Agreements for each Fund continue in effect from year
to year only as long as such continuance is specifically approved at least
annually by (i) the Board of Directors of the Investment Company or by the vote
of a majority of the outstanding voting shares of the Fund, and (ii) by the vote
of a majority of the directors of the Investment Company who are not parties to
the Agreement or interested persons of the Advisor or the Sub-Advisor or the
Investment Company. Each Agreement may be terminated at any time, without the
payment of any penalty, by the Board of Directors of the Investment Company or
by the vote of a majority of the outstanding voting shares of the Fund, or by
the Sub-Advisor or the Advisor, upon 30 days' written notice to the other party.
Additionally, each Agreement automatically terminates in the event of its
assignment.

Principal Underwriter. The Fund's principal underwriter is First Fund
Distributors, Inc., 4455 E. Camelback Road, Suite 261E, Phoenix, Arizona 85018
(the "Distributor"). The Distributor is engaged on a non-exclusive basis to
assist in the distribution of shares in various jurisdictions. The Distributor
receives compensation from the Advisor and is not paid either directly or
indirectly by the Investment Company. The Distributor will receive compensation
of $50,000 from the Advisor with respect to the fiscal year ended October 31,
1998 for services as Distributor.

Transfer Agent. The Advisor is the Funds transfer Agent 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. The Custodian is not involved in determining investment policies
of the Fund or its portfolio securities transactions. Its services do not
protect shareholders against possible depreciation of their assets. The fees of
State Street Bank and Trust Company are paid by the Fund and thus borne by the
Fund's shareholders. 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.

Administrator. The Advisor has retained Investment Company Administration
Corporation (the "Sub-Administrator"), with offices at 2025 East Financial Way,
Suite 101, Glendora, California 91741. The Administration Agreement provides
that the Sub-Administrator will prepare and coordinate reports and other
materials supplied to the Directors; prepare and/or supervise the preparation
and filing of securities filings, periodic financial reports, prospectuses,
statements of additional information, marketing materials, shareholder reports
and other regulatory reports or filings required of the Fund; prepare all
required filings necessary to maintain the Fund's notice filings to sell shares
in all states where the Fund currently does, or intends to do, business;
coordinate the preparation, printing and mailing of materials required to be
sent to shareholders; and perform such additional services as may be agreed upon
by the Advisor and the Sub-Administrator. For its services, the Advisor (not the
Fund) pays the Sub-Administrator an annual fee equal to .02% of the first $1
billion of the Fund's average daily net assets, 0.015% thereafter, subject to a
minimum annual fee of $20,000.
<PAGE>
PLAN OF DISTRIBUTION (U.S. SMALL CAP FUND, REAL ESTATE SECURTIES FUND, SELECT
FUND AND EMERGING MARKETS FUND ONLY)

As stated in the Prospectus, the above referenced Funds have adopted a plan of
distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act which
permits the Funds to compensate the Advisor for expenses incurred in the
distribution and promotion of the Fund's shares, including, but not limited to,
the printing of prospectuses, statements of additional information, and reports
used for sales purposes, advertisements, expenses of preparation and printing of
sales literature, promotion, marketing, and sales expenses, and other
distribution-related expenses, including any distribution fees paid to
securities dealers or other firms who have executed a distribution or service
agreement with the Underwriter. The Plan expressly permits payments in any
fiscal year up to a maximum of .25% of the average daily net assets of the
Funds. It is possible that the Advisor could receive compensation under the Plan
that exceeds the Advisor's costs and related distribution expenses, thus
resulting in a profit to the Advisor.

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

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

In approving the Plan, the Directors determined, in the exercise of their
business judgment and in light of their fiduciary duties as Directors, that
there is a reasonable likelihood that the Plan will benefit the Funds and its
shareholders. The Board of Directors believes that expenditure of the Fund's
assets for distribution expenses under the Plan should assist in the growth of
the Funds, which will benefit the Funds and its shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification, and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Directors make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Fund's assets for distribution will be
realized. While the Plan is in effect, the costs to and expenses incurred by the
Advisor pursuant to the Plan and the purposes underlying such cash and
expenditures must be reported quarterly to the Board of Directors for its
review. In addition, the selection and nomination of those Directors who are not
interested persons of the Investment Company are committed to the discretion of
the Independent Directors during such period.
<PAGE>
Pursuant to the Plan, the Funds may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling, or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Investment Company believes that the Glass-Steagall Act should not preclude a
bank from providing such services. However, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law. If a bank were prohibited from continuing to perform all or a part of
such services, management of the Investment Company believes that there would be
no material impact on the Funds or its shareholders. Banks may charge their
customers fees for offering these services to the extent permitted by regulatory
authorities, and the overall return to those shareholders availing themselves of
the bank services will be lower than to those shareholders who do not. The Funds
may from time to time purchase securities issued by banks which provide such
services; however, in selecting investments for the Funds, no preference will be
shown for such securities.

EXECUTION OF PORTFOLIO TRANSACTIONS

There are occasions on which portfolio transactions for a Fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other accounts served by the Advisor or Sub-Advisor, including other series of
the Investment Company. Although such concurrent authorizations potentially
could be either advantageous or disadvantageous to a Fund, they will be effected
only when the Advisor or Sub-Advisor believes that to do so will be in the best
interest of such Fund. When such concurrent authorizations occur, the objective
will be to allocate the executions in a manner which is deemed equitable to the
accounts involved, including the other series of the Investment Company.

The Bond Fund, the Global Fund, the Growth Fund, the International Growth Fund,
the International Small Cap Fund, the Select Fund, the Emerging Markets Fund,
and the U.S. Micro-Cap Fund contemplate purchasing foreign equity and/or
fixed-income securities in over-the-counter markets or stock exchanges located
in the countries in which the respective principal offices of the issuers of the
various securities are located, if that is the best available market. Fixed
commissions on foreign stock transactions and transaction costs with respect to
foreign fixed-income securities are generally higher than negotiated commissions
on United States transactions, although these Funds will endeavor to achieve the
best net results on their portfolio transactions. There is generally less
government supervision and regulation of foreign stock exchanges and brokers
than in the United States. Foreign security settlements may in some instances be
subject to delays and related administrative uncertainties.

Foreign equity securities may be held by the Global Fund, the Growth Fund, the
International Growth Fund, the International Small Cap Fund, the Select Fund,
the Emerging Markets Fund, and the U.S. Micro-Cap Fund in the form of American
Depository Receipts ("ADRs") or similar instruments. ADRs may be listed on stock
exchanges or traded in the over-the-counter markets in the United States. ADRs,
like other securities traded in the United States, will be subject to negotiated
commission rates. The government securities issued by the United States and
other countries and money market securities in which a Fund may invest are
generally traded in the over-the-counter markets.
<PAGE>
No brokerage commissions have been paid by the Money Market Fund during the last
three fiscal years. The aggregate dollar amount of brokerage commissions paid by
the other Funds during the last three years are as follows:

Fiscal Year Ended October 31,
----------------------------------------------
1997 1996 1995
---- ---- ----
Bond Fund $ 6,238 $ 11,855 $ 17,243
Global Fund 457,345,985 1,069,049 1,545,310
Growth Fund 133,423,420 141,414 102,857
International Growth Fund 68,701,854 344,243 99,089
International Small Cap Fund 11,444,571 8,854 11,850
U.S. Small Cap Fund 1,642,365 -- --
Emerging Markets Fund 27,789,638 20,196 --
U.S. Micro-Cap Fund 93,816,069 68,850 4,326

Subject to the requirement of seeking the best available prices and executions,
the Advisor or Sub-Advisor may, in circumstances in which two or more
broker-dealers are in a position to offer comparable prices and executions, give
preference to broker-dealers who have provided investment research, statistical,
and other related services to the Advisor or Sub-Advisor for the benefit of a
Fund and/or other accounts served by the Advisor or Sub-Advisor. Such
preferences would only be afforded to a broker-dealer if the Advisor determines
that the amount of the commission is reasonable in relation to the value of the
brokerage and research services provided by that broker-dealer and only to a
broker-dealer acting as agent and not as principal. The Advisor is of the
opinion that, while such information is useful in varying degrees, it is of
indeterminable value and does not reduce the expenses of the Advisor in managing
each Fund's portfolio.

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

As of October 31, 1997, the Money Market Fund owned securities of the Investment
Company's regular brokers or dealers or their parents (as defined in Rule 10b-1
promulgated under the 1940 Act) as follows: Goldman, Sachs & Co. - $4,990,000,
J.P. Morgan & Co. - $4,981,000 and Merrill Lynch & Co., Inc. -$4,879,000. As of
October 31, 1997, the Bond Fund owned securities of the Investment Company's
regular brokers or dealers or their parents (as defined in Rule 10b-1
promulgated under the 1940 Act) as follows: Salomon, Inc. - $3,501,000 and
Morgan Stanley - $1,012,000. As of October 31, 1997, the Global Fund owned
securities of the Investment Company's regular brokers or dealers or their
parents (as defined in Rule 10b-1 promulgated under the 1940 Act) as follows:
Merrill Lynch & Co., Inc. - $4,998,000, Lehman Brothers - $3,059,000, Salomon,
Inc. - $3,021,000 and HSBC Holdings PLC - $2,938,000. As of October 31, 1997,
the Growth Fund owned securities of the Investment Company's regular brokers or
dealers or their parents (as defined in Rule 10b-1 promulgated under the 1940
Act) as follows: J.P. Morgan & Co., Inc. - $889,000. As of October 31, 1997, the
International Growth Fund owned securities of the Investment Company's regular
brokers or dealers or their parents (as defined in Rule 10b-1 promulgated under
the 1940 Act) as follows: Merrill Lynch & Co., Inc. - $1,899,000.
<PAGE>
HOW TO INVEST

Price of Shares. The price to be paid by an investor for shares of a Fund, the
public offering price, is based on the net asset value per share which is
calculated once daily as of the close of trading (currently 4:00 p.m., Eastern
time) each day the New York Stock Exchange is open as set forth below. The New
York Stock Exchange is currently closed on weekends and on the following
holidays: (i) New Year's Day, Martin Luther King Day, Presidents' Day, Good
Friday, Memorial Day, July 4th, Labor Day, Thanksgiving, and Christmas Day; and
(ii) the preceding Friday when any one of those holidays falls on a Saturday or
the subsequent Monday when any one of those holidays falls on a Sunday. The
Money Market Fund will also observe additional federal holidays that are not
observed by the New York Stock Exchange: Columbus Day, and Veterans Day.

Each Fund will calculate its net asset value and complete orders to purchase,
exchange, or redeem shares only on a Monday through Friday basis (excluding
holidays on which the New York Stock Exchange is closed). The Bond Fund's, the
Global Fund's, the Growth Fund's, the International Growth Fund's, the
International Small Cap Fund's, the Select Fund's, the Emerging Market Fund's,
and the U.S. Micro-Cap Fund's portfolio securities may from time to time be
listed on foreign stock exchanges or otherwise traded on foreign markets which
may trade on other days (such as Saturday). As a result, the net asset value of
these Funds may be significantly affected by such trading on days when a
shareholder has no access to the Funds. See also in the Prospectus at "General
Investment Policies - Special Considerations in International Investing,"
"Calculation of Net Asset Value and Public Offering Price," "How to Invest,"
"How to Redeem Shares," and "Shareholder Account Services and Privileges -
Exchanges Between Funds."

1. Fixed-income obligations with original or remaining maturities in
excess of 60 days are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality,
and type. However, in circumstances where the Advisor deems it
appropriate to do so, prices obtained for the day of valuation from a
bond pricing service will be used. The Funds amortize to maturity all
securities with 60 days or less remaining to maturity based on their
cost to the Funds if acquired within 60 days of maturity or, if
already held by a Fund on the 60th day, based on the value determined
on the 61st day. Options on currencies purchased by the Funds are
valued at their last bid price in the case of listed options or at the
average of the last bid prices obtained from dealers in the case of
OTC options. Where market quotations are not readily available,
securities are valued at fair value pursuant to methods approved by
the Board of Directors

2. Equity securities, including ADRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last
available mean price. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as the
primary market. Securities traded in the over-the-counter market are
valued at the last available bid price in the over-the-counter market
prior to the time of valuation. Securities and assets for which market
quotations are not readily available (including restricted securities
which are subject to limitations as to their sale) are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors
<PAGE>
3. Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the
close of the business day in New York. In addition, European or Far
Eastern securities trading may not take place on all business days in
New York. Furthermore, trading takes place in Japanese markets on
certain Saturdays and in various foreign markets on days which are not
business days in New York and on which the Funds' net asset value is
not calculated. The calculation of net asset value may not take place
contemporaneously with the determination of the prices of securities
held by these Funds used in such calculation. Events affecting the
values of portfolio securities that occur between the time their
prices are determined and the close of the New York Stock Exchange
will not be reflected in these Funds' calculation of net asset value
unless the Board of Directors deems that the particular event would
materially affect net asset value, in which case an adjustment will be
made

4. With respect to the Global Fund, gold bullion and bullion-type coins
are valued at the closing price of gold on the New York Commodity
Exchange

5. The value of each security denominated in a currency other than U.S.
dollars will be translated into U.S. dollars at the prevailing market
rate as determined by the Advisor

6. Each Fund's liabilities, including proper accruals of taxes and other
expense items, are deducted from total assets and a net asset figure
is obtained

7. The net assets so obtained are then divided by the total number of
shares outstanding (excluding treasury shares), and the result,
rounded to the nearest cent, is the net asset value per share.

Fremont Money Market Fund:

It is the Money Market Fund's policy to use its best efforts to maintain a
constant per share price for the Money Market Fund equal to $1.00.

The portfolio instruments of the Money Market Fund are valued on the basis of
amortized cost. This involves valuing an instrument at its cost initially and,
thereafter, assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which the value, as determined by amortized cost,
is higher or lower than the price the Money Market Fund would receive if it sold
the instrument.

The valuation of the Money Market Fund's portfolio instruments based upon their
amortized cost and simultaneous maintenance of a per share net asset value at
$1.00 are permitted by Rule 2a-7 adopted by the Securities and Exchange
Commission ("SEC"). Under this rule, the Money Market Fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less as allowed by
regulations under the 1940 Act, and invest only in securities determined by the
Board of Directors to be of high quality with minimal credit risks. In
accordance with this rule the Board of Directors has established procedures
designed to stabilize, to the extent reasonably practicable, the Money Market
Fund's price per share as computed for the purpose of sales and redemptions at
$1.00. Such procedures include review of the portfolio holdings by the Board of
Directors at such intervals as it may deem appropriate, to determine whether the
net asset value of the Money Market Fund calculated by using available market
quotations or market equivalents deviates from $1.00 per share based on
amortized cost. The rule also provides that a deviation between the Money Market
Fund's net asset value based upon available market quotations or market
equivalents and $1.00 per share net asset value based on amortized cost
<PAGE>
exceeding $0.005 per share must be examined by the Board of Directors. In the
event the Board of Directors determines that the deviation may result in
material dilution or is otherwise unfair to investors or existing shareholders,
the Board of Directors must cause the Money Market Fund to take such corrective
action as it regards as necessary and appropriate, including: selling portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding dividends or paying distributions from
capital or capital gains; redeeming shares in kind; or establishing a net asset
value per share by using available market quotations.

In the event that a security meeting the Money Market Fund's quality
requirements is acquired and subsequently is assigned a rating below "First
Tier" by one or more of the rating organizations, the Board of Directors must
assess promptly whether the security presents minimal credit risks and direct
the Money Market Fund to take such action as the Board of Directors determines
is in the best interest of the Money Market Fund and its shareholders. This
responsibility cannot be delegated to the Advisor. However, this assessment by
the Board of Directors is not required if the security is disposed of (by sale
or otherwise) or matures within five Business Days of the time the Advisor
learns of the lower rating. However, in such a case the Board of Directors must
be notified thereafter.

In the event that a security acquired by the Money Market Fund either defaults
(other than an immaterial default unrelated to the issuer's financial
condition), or is determined no longer to present minimal credit risks, the
Money Market Fund must dispose of the security (by sale or otherwise) as soon as
practicable unless the Board of Directors finds that this would not be in the
Money Market Fund's best interest.

Fremont California Intermediate Tax-Free Fund:

Portfolio securities with original or remaining maturities in excess of 60 days
are valued at the mean of representative quoted bid and asked prices for such
securities or, if such prices are not available, at the equivalent value of
securities of comparable maturity, quality and type. However, in circumstances
where the Advisor deems it appropriate to do so, prices obtained for the day of
valuation from a bond pricing service will be used. The Fund amortizes to
maturity all securities with 60 days or less remaining to maturity based on
their cost to the Fund if acquired within 60 days of maturity or, if already
held by the Fund on the 60th day, based on the value determined on the 61st day.

The Fund deems the maturities of variable or floating rate instruments, or
instruments which the Fund has the right to sell at par to the issuer or dealer,
to be the time remaining until the next interest rate adjustment date or until
they can be resold or redeemed at par.

Where market quotations are not readily available, the Fund values securities
(including restricted securities which are subject to limitations as to their
sale) at fair value as determined in good faith by or under the direction of the
Board of Directors.

The fair value of any other assets is added to the value of securities, as
described above to arrive at total assets. The Fund's liabilities, including
proper accruals of taxes and other expense items, are deducted from total assets
and a net asset figure is obtained. The net assets so obtained are then divided
by the total number of shares outstanding (excluding treasury shares), and the
result, rounded to the nearest cent, is the net asset value per share.

OTHER INVESTMENT AND REDEMPTION SERVICES

The Open Account. When an investor makes an initial investment in a Fund, a
shareholder account is opened in accordance with the investor's registration
instructions. Each time there is a transaction in a shareholder account, such as
an additional investment, redemption, or distribution (dividend or capital
gain), the shareholder will receive from the Sub-Transfer Agent a confirmation
statement showing the current transaction in the shareholder account, along with
a summary of the status of the account as of the transaction date.
<PAGE>
Payment and Terms of Offering. Payment of shares purchased should accompany the
purchase order, or funds should be wired to the Sub-Transfer Agent as described
in the Prospectus. Payment, other than by wire transfer, must be made by check
or money order drawn on a U.S. bank. Checks or money orders must be payable in
U.S. dollars 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 ten day holding period.

As a condition of this offering, if an order to purchase shares is cancelled due
to nonpayment (for example, because of a check returned for "not sufficient
funds"), the person who made the order will be responsible for reimbursing the
Advisor for any loss incurred by reason of such cancellation. If such purchaser
is a shareholder, that Fund shall have the authority as agent of the shareholder
to redeem shares in the shareholder's account for the then-current net asset
value per share to reimburse that Fund for the loss incurred. Such loss shall be
the difference between the net asset value of that Fund on the date of purchase
and the net asset value on the date of cancellation of the purchase. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.

Redemption in Kind. The Investment Company may elect to redeem shares in assets
other than cash but must pay in cash all redemptions with respect to any
shareholder during any 90-day period in an amount equal to the lesser of (i)
$250,000 or (ii) 1% of the net asset value of a Fund at the beginning of such
period.

Suspension of Redemption Privileges. The Investment Company may suspend
redemption privileges with respect to any Fund or postpone the date of payment
for more than seven calendar days after the redemption order is received during
any period (1) when the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the Exchange is restricted as
determined by the SEC, (2) when an emergency exists, as defined by the SEC,
which makes it not reasonably practicable for the Investment Company to dispose
of securities owned by it or to fairly determine the value of its assets, or (3)
as the SEC may otherwise permit.

TAXES - MUTUAL FUNDS

Status as a "Regulated Investment Company." Each Fund will be treated under the
Code as a separate entity, and each Fund has elected and intends to continue to
qualify to be treated as a separate "regulated investment company" under
Subchapter M of the Code. To qualify for the tax treatment afforded a regulated
investment company under the Code, a Fund must annually distribute at least 90%
of the sum of its investment company taxable income (generally net investment
income and certain short-term capital gains), its tax-exempt interest income (if
any) and net capital gains, and meet certain diversification of assets and other
requirements of the Code. If a Fund qualifies for such tax treatment, it will
not be subject to federal income tax on the part of its investment company
taxable income and its net capital gain which it distributes to shareholders. To
meet the requirements of the Code, a Fund must (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or currencies;
and (b) diversify its holdings so that, at the end of each fiscal quarter, (i)
at least 50% of the market value of the Fund's total assets is represented by
cash, U.S. Government securities, securities of other regulated investment
companies, and other securities, limited, in respect of any one issuer, to an
<PAGE>
amount not greater than 5% of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or in two or more issuers which a Fund controls and which are
engaged in the same or similar trades or businesses. Income and gain from
investing in gold or other commodities will not qualify in meeting the 90% gross
income test.

Even though a Fund qualifies as a "regulated investment company," it may be
subject to certain federal excise taxes unless that Fund meets certain
additional distribution requirements. Under the Code, a nondeductible excise tax
of 4% is imposed on the excess of a regulated investment company's "required
distribution" for the calendar year over the "distributed amount" for such
calendar year. The term "required distribution" means the sum of (i) 98% of
ordinary income (generally net investment income) for the calendar year, (ii)
98% of capital gain net income (both long-term and short-term) for the one-year
period ending on October 31 of such year, and (iii) the sum of any untaxed,
undistributed net investment income and net capital gains of the regulated
investment company for prior periods. The term "distributed amount" generally
means the sum of (i) amounts actually distributed by a Fund from its current
year's ordinary income and capital gain net income and (ii) any amount on which
a Fund pays income tax for the year. Each Fund intends to meet these
distribution requirements to avoid the excise tax liability.

If for any taxable year a Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions would
be taxable to shareholders to the extent of earnings and profits.

Special Tax Considerations for the Real Estate Securities Fund. The Fund may
invest in REITs that hold residual interests in real estate mortgage investment
conduits ("REMICs"). Under Treasury regulations that have not yet been issued,
but which may apply retroactively, a portion of the Fund's income from a REIT
that is attributable to the REITs residual interest in a REMIC (referred to in
the Code as an "excess inclusion") will be subject to federal income tax in all
events. These regulations are also expected to provide that excess inclusion
income of a regulated investment company, such as the Fund, will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by such shareholders, with the same consequences as if the shareholders
held the related REMIC residual interest directly. In general, excess inclusion
income allocated to shareholders (i) cannot be offset by net operating losses
(subject to a limited exception for certain thrift institutions), (ii) will
constitute unrelated business taxable income to entities (including a qualified
pension plan, an individual retirement account, a 401(k) plan or other
tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might not be required to file a tax return, to file a tax return
and pay tax on such income, and (iii) in the case of a foreign shareholder, will
not qualify for any reduction in U.S. federal withholding tax. In addition, if
at any time during any taxable year a "disqualified organization" (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations.
<PAGE>
Even though the Fund intends to qualify as a "regulated investment company," it
may be subject to certain federal excise taxes unless the Fund meets certain
additional distribution requirements. Under the Code, a nondeductible excise tax
of 4% is imposed on the excess of a regulated investment company's "required
distribution" for the calendar year over the "distributed amount" for such
calendar year. The term "required distribution" means the sum of (i) 98% of
ordinary income (generally net investment income) for the calendar year, (ii)
98% of capital gain net income (both long-term and short-term) for the one-year
period ending on October 31 of such year, and (iii) the sum of any untaxed,
undistributed net investment income and net capital gains of the regulated
investment company for prior periods. The term "distributed amount" generally
means the sum of (i) amounts actually distributed by the Fund from its current
year's ordinary income and capital gain net income and (ii) any amount on which
the Fund pays income tax for the year. The Fund intends to meet these
distribution requirements to avoid the excise tax liability. It is possible that
the Fund will not receive cash distributions from the real estate investment
trusts ("REITs") in which it invests in sufficient time to allow the Fund to
satisfy its won distribution requirements using these REIT distributions.
Accordingly, the Fund might be required to generate cash to make its own
distributions, which may cause the Fund to sell securities at a time not
otherwise advantageous to do so, or to borrow money to fund a distribution.

Distributions of Net Investment Income. Dividends from net investment income
(including net short-term capital gains) are taxable as ordinary income.
Shareholders will be taxed for federal income tax purposes on dividends from a
Fund in the same manner whether such dividends are received as shares or in
cash. If a Fund does not receive any dividend income from U.S. corporations,
dividends from that Fund will not be eligible for the dividends received
deduction allowed to corporations. To the extent that dividends received by a
Fund would qualify for the dividends received deduction available to
corporations, the Fund must designate in a written notice to shareholders the
amount of the Fund's dividends that would be eligible for this treatment. The
maximum federal capital gains rate for individuals is 28% with respect to
capital assets held for more than 12 months, but not more than 18 months, and
20% with respect to capital assets held more than 18 months. The maximum capital
gains for corporate shareholders is the same as the maximum tax rate for
ordinary income.

Net Capital Gains. Any distributions designated as being made from a Fund's net
capital gains will be taxable as long-term capital gains or mid-term capital
gains, as the case may be, regardless of the holding period of the shareholders
of that Fund's shares. In order to qualify for the dividends received deduction,
a corporate shareholder must hold the Fund's shares paying the dividends, upon
which a dividend received deduction would be based, for at least 46 days during
the 90-day period that begins 45 days before the stock becomes ex-divided with
respect to the dividend without protection from risk of loss. Similar
requirements apply to the Fund with respect to each qualifying dividend the Fund
receives. Shareholders are advised to consult their tax advisor regarding
application of these rules to their particular circumstances.

Capital loss carryforwards result when a Fund has net capital losses during a
tax year. These are carried over to subsequent years and may reduce
distributions of realized gains in those years. Unused capital loss
carryforwards expire in eight years. Until such capital loss carryforwards are
offset or expire, it is unlikely that the Board of Directors will authorize a
distribution of any net realized gains.
<PAGE>
Non-U.S. Shareholders. Under the Code, distributions of net investment income by
a Fund to a shareholder who, as to the U.S., is a nonresident alien individual,
nonresident alien fiduciary of a trust or estate, foreign corporation, or
foreign partnership (a "foreign shareholder") will be subject to U.S. tax
withholding (at a 30% or lower treaty rate). Withholding will not apply if a
dividend paid by a Fund to a foreign shareholder is "effectively connected" with
a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents, or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.

Other Information. The amount of any realized gain or loss on closing out a
futures contract such as a forward commitment for the purchase or sale of
foreign currency will generally result in a realized capital gain or loss for
tax purposes. Under Code Section 1256, futures contracts held by a Fund at the
end of each fiscal year will be required to be "marked to market" for federal
income tax purposes, that is, deemed to have been sold at market value. Sixty
percent (60%) of any net gain or loss recognized on these deemed sales and sixty
percent (60%) of any net realized gain, or loss from any actual sales will be
treated as long-term capital gain or loss, and the remainder will be treated as
short-term capital gain or loss. Code Section 988 may also apply to currency
transactions. Under Section 988, each foreign currency gain or loss is generally
computed separately and treated as ordinary income or loss. In the case of
overlap between Sections 1256 and 988, special provisions determine the
character and timing of any income, gain, or loss. The Funds will attempt to
monitor Section 988 transactions to avoid an adverse tax impact. See also
"Investment Objectives, Policies, and Risk Considerations" in this Statement of
Additional Information.

Any loss realized on redemption or exchange of a Fund's shares will be
disallowed to the extent shares are reacquired within the 61 day period
beginning 30 days before and ending 30 days after the shares are redeemed or
exchanged.

Under the Code, a Fund's taxable income for each year will be computed without
regard to any net foreign currency loss attributable to transactions after
October 31, and any such net foreign currency loss will be treated as arising on
the first day of the following taxable year. A Fund may be required to pay
withholding and other taxes imposed by foreign countries generally at rates from
10% to 40% which would reduce such Fund's investment income. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. It is not anticipated that shareholders (except with respect to the
Global Fund, the International Growth Fund, the International Small Cap Fund,
and the Emerging Markets Fund) will be entitled to a foreign tax credit or
deduction for such foreign taxes.

With respect to the Global Fund, the International Growth Fund, the
International Small Cap Fund, or the Emerging Markets Fund, so long as it (i)
qualifies for treatment as a regulated investment company, (ii) is liable for
foreign income taxes, and (iii) more than 50% of its total assets at the close
of its taxable year consist of stock or securities of foreign corporations, it
may elect to "pass through" to its shareholders the amount of such foreign taxes
paid. If this election is made, information with respect to the amount of the
foreign income taxes that are allocated to the applicable Fund's shareholders
will be provided to them and any shareholder subject to tax on dividends will be
required (i) to include in ordinary gross income (in addition to the amount of
the taxable dividends actually received) its proportionate share of the foreign
taxes paid that are attributable to such dividends, and (ii) either deduct its
proportionate share of foreign taxes in computing its taxable income or to claim
that amount as a foreign tax credit (subject to applicable limitations) against
U.S. income taxes.
<PAGE>
The foregoing is a general abbreviated summary of present United States federal
income taxes on dividends and distributions by each Fund. Investors are urged to
consult their own tax advisors for more detailed information and for information
regarding any foreign, state, and local taxes applicable to dividends and
distributions received.

ADDITIONAL INFORMATION

Custodian. The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675, acts as Custodian for the Investment Company's assets, and as
such safekeeps the Funds' portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Investment Company's
request, and maintains records in connection with its duties.

Independent Auditors; Financial Statements. The Investment Company's independent
auditors are Coopers & Lybrand L.L.P., 333 Market Street, San Francisco,
California 94105. Coopers & Lybrand L.L.P. will conduct an annual audit of each
Fund, assist in the preparation of each Fund's federal and state income tax
returns, and consult with the Investment Company as to matters of accounting,
regulatory filings, and federal and state income taxation. The financial
statements of the Funds as of October 31, 1997 incorporated herein by reference
are audited. Such financial statements are included herein in reliance on the
opinion of Coopers & Lybrand L.L.P. given on the authority of said firm as
experts in auditing and accounting.

Use of Name. The Advisor has granted the Investment Company the right to use the
"Fremont" name and has reserved the rights to withdraw its consent to the use of
such name by the Investment Company at any time, or to grant the use of such
name to any other company, and the Investment Company has granted the Advisor,
under certain conditions, the use of any other name it might assume in the
future, with respect to any other investment company sponsored by the Advisor.

Shareholder Voting Rights. The Investment Company currently issues shares in
thirteen series and may establish additional classes or series of shares in the
future. When more than one class or series of shares is outstanding, shares of
all classes and series will vote together for a single set of directors, and on
other matters affecting the entire Investment Company, with each share entitled
to a single vote. On matters affecting only one class or series, only the
shareholders of that class or series shall be entitled to vote. On matters
relating to more than one class or series but affecting the classes and series
differently, separate votes by class and series are required. Shareholders
holding 10% of the shares of the Investment Company may call a special meeting
of shareholders.

Liability of Directors and Officers. The Articles of Incorporation of the
Investment Company provide that, subject to the provisions of the 1940 Act, to
the fullest extent permitted under Maryland law, no officer or director of the
Investment Company may be held personally liable to the Investment Company or
its shareholders.

Certain Shareholders. To the best knowledge of the Funds, shareholders owning 5%
or more of the outstanding shares of the Funds as of record are set forth below:
<PAGE>
<TABLE>
<CAPTION>
Shareholder % held as of
----------- ------------
Fund Name & Address February 19,1998
- ---- -------------- ----------------

<S> <C> <C>
Money Market Fund Bechtel Mast Trust for Qualifed Employees 51.83%
P.O. Box 1742
Church St. Station
New York, NY 10008-1742

Sequoia Ventures, Inc. 11.72%
50 Fremont Streeet, Ste 3600
San Francisco, Ca 94105-2239

Bond Fund Bechtel Mast Trust for Qualifed Employees 76.01%
P.O. Box 1742
Church St. Station
New York, NY 10008-1742

Sequoia Ventures, Inc. 5.32%
50 Fremont Streeet, Ste 3600
San Francisco, Ca 94105-2239

Real Estate Charles Schwab & Co., Inc. 40.22%
Securities Fund 101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services Corp 14.42%
FBO Sal Vella
200 Liberty Street
New York, NY 10281-1003

Donald Lufkin & Jenrette 12.52%
Mutual Funds, 7th Floor
1 Pershing Plaza
Jersey City, NJ 07399-0001

Fremont Investment Advisors, Inc. 10.00%
333 Market Street, Ste. 2600
San Francisco, Ca 94105-2127

Global Fund Bechtel Mast Trust for Qualifed Employees 43.33%
P.O. Box 1742
Church St. Station
New York, NY 10008-1742

BF Fund Limited 6.05%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

Growth Fund BF Fund Limited 54.01%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

International Growth BF Fund Limited 71.50%
Fund 50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

Fremont Investors, Inc. 5.11%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>

International Small Charles Schwab & Co., Inc. 18.72%
Cap Fund 101 Montgomery Street
San Francisco, CA 94104-4122

Fremont Investors, Inc. 15.92%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

Fremont Investment Advisors, Inc. 14.29%
333 Market Street, Ste. 2600
San Francisco, Ca 94105-2127

Fremont Group 11.31%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

Gary L. Bergstrom 8.21%
303 Marsh Street
Belmont MA 02178-1733

Select Fund Fremont Investors, Inc. 96.72%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

U.S. Small Cap Fund Fremont Investors, Inc. 83.23%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

Emerging Markets Charles Schwab & Co., Inc. 21.99%
Fund 101 Montgomery Street
San Francisco, CA 94104-4122

Fremont Investors, Inc. 15.04%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

Fremont Investment Advisors, Inc. 13.38%
333 Market Street, Ste. 2600
San Francisco, Ca 94105-2127

Fremont Group 10.69%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

U.S. Micro-Cap Fund Charles Schwab & Co., Inc. 29.36%
101 Montgomery Street
San Francisco, CA 94104-4122

Goodness Limited 12.73%
P.O. Box N-7776
Nassau, Bahamas

National Financial Services Corp 7.45%
FBO Sal Vella
200 Liberty Street
New York, NY 10281-1003

Donald Lufkin & Jenrette 6.32%
Mutual Funds, 7th Floor
1 Pershing Plaza
Jersey City, NJ 07399-0001
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
California BF Fund Limited 71.44%
Intermediate Tax- 50 Fremont Street, Ste. 3600
Free Fund San Francisco, CA 94105-2239

Charles Schwab & Co., Inc. 13.02%
101 Montgomery Street
San Francisco, CA 94104-4122

Willis S. Slusser and Marion B. Slusser 5.86%
200 Deer Valley Road, #1D
San Rafael, CA 94903-5513
</TABLE>

Other Investment Information. The Advisor directs the management of over $4.7
billion of assets and internally manages over $1.9 billion of assets for
retirement plans, foundations, private portfolios, and mutual funds. The
Advisor's philosophy is to apply a long-term approach to investing that balances
risk and return potential.

The Global Fund's investment objectives are similar to the objectives of Bechtel
Trust & Thrift Plan, Fund A. The Bond Fund's investment objectives are the same
as the objectives of Bechtel Trust & Thrift Plan, Fund B. The Money Market
Fund's investment objectives are the same as the objectives of Bechtel Trust &
Thrift Plan, Fund C.

Historical annual returns of various market indices may be used to represent the
returns of various asset classes as follows:

(1) U.S. Stocks: Standard & Poor's 500 Index;

(2) Foreign Stocks: Morgan Stanley Europe, Australia and Far East (EAFE)
Index;

(3) Intermediate U.S. Bonds: Lehman Brothers Intermediate
Government/Corporate Bond Index;

(4) Foreign Bonds: Salomon Brothers Non-U.S. Dollar Bond Index;

(5) Money Market Securities: 1980-1986, 90 day U.S. Treasury Bill rate:
1987-1997 Donoghue First Tier Money Market Fund Average; and

(6) The National Association of Real Estate Investment Trusts' (NAREIT)
Equity REIT Index.

The total returns for the above indices for the years 1980 through 1996 are as
follows (source: Fremont Investment Advisors, Inc.):
<PAGE>
<TABLE>
<CAPTION>
Money
Foreign Intermediate Foreign Market
U.S. Stocks Stock U.S. Bonds Bonds Securities NAREIT
----------- ----- ---------- ----- ---------- ------

The Bond Fund, the Real Estate Securities Fund, the Global Fund, the Growth
Fund, the International Growth Fund, the International Small Cap Fund, the
Select Fund, the U.S. Small Cap Fund, the Emerging Markets Fund, and the U.S.
Micro-Cap Fund are best suited as long-term investments. While they offer higher
potential total returns than certificates of deposit or money market funds
(including the Money Market Fund), they involve added return volatility or risk.
The prospective investor must weigh this potential for higher return against the
associated higher risk.

INVESTMENT RESULTS

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

Current yield for the Money Market Fund will be calculated based on the net
change, exclusive of capital changes, over a seven-day period, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7) with the resulting yield figure
carried to at least the nearest hundredth of one percent. As of October 31,
1997, the seven-day current yield for the Money Market Fund was 5.33%.

Effective Yield (or 7-day compound yield) for the Money Market Fund will be
calculated based on the net change, exclusive of capital changes, over a
seven-day period, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and then dividing the
difference by the value of the account, at the beginning of the base period to
obtain this base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to (365/7), and subtracting 1 from
the result, according to the following formula:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) -1].
<PAGE>
The resulting yield figure is carried to at least the nearest hundredth of one
percent. As of October 31, 1997, the effective yield for the Money Market Fund
was 5.47%.

With respect to the Bond Fund, the Global Fund, the Growth Fund, the
International Growth Fund, the International Small Cap Fund, the Emerging
Markets Fund, and the U.S. Micro-Cap Fund, the average annual rate of return
("T") for a given period is computed by using the redeemable value at the end of
the period ("ERV") of a hypothetical initial investment of $1,000 ("P") over the
period in years ("n") according to the following formula as required by the SEC:
n
P(1+T) = ERV

The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) reinvestment of dividends and distributions
at net asset value on the reinvestment date determined by the Board of
Directors; and (2) a complete redemption at the end of any period illustrated.
Each Fund will calculate total return for one, five, and ten-year periods after
such a period has elapsed, and may calculate total returns for other periods as
well. In addition, each Fund will provide lifetime average annual total return
figures.

The average annual total returns of the Funds for the periods ended October 31,
1997 are as follows:

Since
1 Year 5 Years Inception

Money Market Fund 5.39% 4.54% 5.51%
Bond Fund 9.54% -- 7.54%
Global Fund 13.01% 11.62% 10.44%
Growth Fund 29.26% 18.25% 17.96%
International Growth Fund (0.01)% -- 2.55%
International Small Cap Fund (14.56)% -- (3.71)%
U.S. Small Cap Fund -- -- (4.06)%*
Emerging Markets Fund 12.55% -- 6.61%
U.S. Micro-Cap Fund 28.80% -- 33.43%

*Unannualized

The Bond Fund may quote its yield, which is computed by dividing the net
investment income per share earned during a 30-day period by the maximum
offering price per share on the last day of the period, according to the
following formula:
6
YIELD = 2[((a - b)/cd + 1) - 1]

Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period

The Bond Fund's 30-day yield as of October 31, 1997 was 5.94%.

Each Fund's investment results will vary from time to time depending upon market
conditions, the composition of a Fund's portfolio and operating expenses of a
Fund, so that current or past yield or total return should not be considered
representations of what an investment in a Fund may earn in any future period.
These factors and possible differences in the methods used in calculating
investment results should be considered when comparing a Fund's investment
results with those published for other investment companies and other investment
vehicles. A Fund's results also should be considered relative to the risks
associated with such Fund's investment objective and policies.
<PAGE>
The Investment Company may from time to time compare the investment results of a
Fund with, or refer to, the following:

(1) Average of Savings Accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates (based on figures
supplied by the U.S. League of Savings Institutions). Savings accounts
offer a guaranteed rate of return on principal, but no opportunity for
capital growth. During certain periods, the maximum rates paid on some
savings deposits were fixed by law.

(2) The Consumer Price Index, which is a measure of the average change in
prices over time in a fixed market basket of goods and services (e.g.,
food, clothing, shelter, and fuels, transportation fares, charges for
doctors' and dentists' services, prescription medicines, and other
goods and services that people buy for day-to-day living).

(3) Statistics reported by Lipper Analytical Services, Inc., which ranks
mutual funds by overall performance, investment objectives, and
assets.

(4) Standard & Poor's "500" Index, which is a widely recognized index
composed of the capitalization-weighted average of the price of 500
large publicly traded U.S. common stocks.

(5) Dow Jones Industrial Average.

(6) CNBC/Financial News Composite Index.

(7) Russell 1000 Index, which reflects the common stock price changes of
the 1,000 largest publicly traded U.S. companies by market
capitalization.

(8) Russell 3000 Index, which reflects the common stock price changes of
the 3,000 largest publicly traded U.S. companies by market
capitalization.

(9) Wilshire 5000 Index, which reflects the investment return of the
approximately 5,000 publicly traded securities for which daily pricing
is available, weighted by market capitalization, excluding income.

(10) Salomon Brothers Broad Investment Grade Index, which is a widely used
index composed of U.S. domestic government, corporate, and
mortgage-backed fixed income securities.

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

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

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

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

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

(16) Lehman Brothers Government/Corporate Intermediate Bond Index, which is
a widely used index composed of investment quality U.S. government and
corporate fixed income securities with maturities between one and ten
years.
<PAGE>
(17) Salomon Brothers World Government Bond Index, which is a widely used
index composed of U.S. and non-U.S. government fixed income securities
of the major countries of the World.

(18) 90-day U.S. Treasury Bills Index, which is a measure of the
performance of constant maturity 90-day U.S. Treasury Bills.

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

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

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

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

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

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

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

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

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

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

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

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

(31) Bechtel Trust & Thrift Plan, Fund A (Global Multi-Asset Fund), Fund B
(Bond Fund), Fund C (Money Market Fund), and Fund D (U.S. Stock
Fund).*

* Bechtel Trust & Thrift Plan performance results include reinvestment of
dividends, interest, and other income, and are net of investment management
fees. Results for Fund A, Fund B, and Fund D were in part achieved through
the efforts of investment managers selected by Fremont Investment Advisors
or its predecessor organizations.

Indices prepared by the research departments of such financial organizations as
the Sub-Advisor of the Funds; J.P. Morgan; Lehman Brothers; S.G. Warburg;
Jardine Fleming; the Asian Development Bank; Bloomberg, L.P.; Morningstar, Inc;
Salomon Brothers, Inc.; Merrill Lynch, Pierce, Fenner & Smith, Inc.; Morgan
Stanley; Bear Stearns & Co., Inc.; and Ibbottson Associates of Chicago, Illinois
("Ibbotson") may be used, as well as information provided by the Federal Reserve
and the respective central banks of various countries.
<PAGE>
The Investment Company may use performance rankings and ratings reported
periodically in national financial publications such as, but not limited to,
Money Magazine, Forbes, The Wall Street Journal, Investor's Business Daily,
Fortune, Smart Money, Business Week, and Barron's.

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

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

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

A Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future. The Funds may be compared in advertising to
Certificates of Deposit (CDs), the Bank Rate Monitor National Index, an average
of the quoted rates for 100 leading banks and thrifts in ten U.S. cities chosen
to represent the ten largest Consumer Metropolitan statistical areas, or other
investments issued by banks. The Funds differ from bank investments in several
respects. The Funds may offer greater liquidity or higher potential returns than
CDs; but unlike CDs, the Funds will have a fluctuating share price and return
and are not FDIC insured.

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

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

Ibbottson provides historical returns of capital markets in the United States,
including common stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the CPI), and combinations of various
capital markets. The performance of these capital markets is based on the
returns of different indices.
<PAGE>
The Investment Company may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the Funds. The
Funds may also compare performance to that of other compilations or indices that
may be developed and made available in the future.

In advertising materials, the Advisor may reference or discuss its products and
services, which may include retirement investing, the effects of dollar-cost
averaging, and saving for college or a home. In addition, the Advisor may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.

A Fund may discuss its NASDAQ symbol, CUSIP number, and its current portfolio
management team.

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

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

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

The Funds may be available for purchase through retirement plans of other
programs offering deferral of or exemption from income taxes, which may produce
superior after-tax returns over time. For example, a $10,000 investment earning
a taxable return of 10% annually would have an after-tax value of $17,976 after
ten years, assuming tax was deducted from the return each year at a 39.6% rate.
An equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period.

A Fund may describe in its sales material and advertisements how an investor may
invest in the Fund through various retirement accounts and plans that offer
deferral of income taxes on investment earnings and may also enable an investor
to make pre-tax contributions. Because of their advantages, these retirement
accounts and plans may produce returns superior to comparable non-retirement
investments. The Funds may also discuss these accounts and plans which include
the following:
<PAGE>
Individual Retirement Accounts (IRAs): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or 100% of compensation, whichever is less). Married couples
with a non-working spouse or a spouse not covered by an employers plan can make
a completely deductible IRA contribution for that spouse as long as their
combined adjusted gross income does not exceed $150,000. Some individuals may be
able to take an income tax deduction for the contribution. Regular contributions
may not be made for the year after you become 70 1/2, or thereafter.

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

Roth IRA: The Roth IRA allows investment of after-tax dollars in a retirement
account that provides tax-free growth. Funds can be withdrawn without federal
income tax or penalty after the account has been open for five years and the age
of 591/2has been attained.

Profit sharing (including 401(k) and money purchase pension plans): Corporations
can sponsor these qualified defined contribution plans for their employees. A
401(k) plan, a type of profit sharing plan, additionally permits the eligible,
participating employees to make pre-tax salary reduction contributions to the
plan (up to certain limitations).

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

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

1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation, and Datastream.

2) Stock market trading volume: Morgan Stanley Capital International World
Indices, and International Finance Corporation.

3) The number of listed companies: International Finance Corporation, Salomon
Brothers, Inc., and S.G. Warburg.

4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World Indices.

5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates, and Salomon Brothers, Inc.

6) Stock market performance: Morgan Stanley Capital International World
Indices, International Finance Corporation, and Datastream.

7) The Consumer Price Index and inflation rate: The World Bank, Datastream,
and International Finance Corporation.
<PAGE>
8) Gross Domestic Product (GDP): Datastream and The World Bank.

9) GDP growth rate: International Finance Corporation, The World Bank, and
Datastream.

10) Population: The World Bank, Datastream, and United Nations.

11) Average annual growth rate (%) of population: The World Bank, Datastream,
and United Nations.

12) Age distribution within populations: Organization for Economic Cooperation
and Development and United Nations.

13) Total exports and imports by year: International Finance Corporation, The
World Bank, and Datastream.

14) Top three companies by country, industry, or market: International Finance
Corporation, Salomon Brothers, Inc., and S.G. Warburg.

15) Foreign direct investments to developing countries: The World Bank and
Datastream.

16) Supply, consumption, demand, and growth in demand of certain products,
services, and industries, including, but not limited to, electricity,
water, transportation, construction materials, natural resources,
technology, other basic infrastructure, financial services, health care
services and supplies, consumer products and services, and
telecommunications equipment and services (sources of such information may
include, but would not be limited to, The World Bank, OECD, IMF, Bloomberg,
and Datastream).

17) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.

18) Political and economic structure of countries: Economist Intelligence Unit.

19) Government and corporate bonds - credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.

20) Dividend for U.S. and non-U.S. companies: Bloomberg.

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

FREMONT INVESTMENT ADVISORS

Innovative Investment
Management and
Advisory Services

A subsidiary of Fremont Investors, Inc.
<PAGE>
THE FREMONT GROUP

The Fremont Group manages over $6 billion in four key business areas.

Fremont Investment Advisors, Inc. (FIA), is a subsidiary of Fremont
Investments, Inc., which is affiliated with The Fremont Group. Fremont
Investors, Inc. employs over 200 professionals in offices throughout the United
States and manages over $6 billion in four key business areas.

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

o Crown Pacific -- timber/lumber

o Petro Shopping Centers -- full-service truck stops

o Trinity Ventures -- venture capital

Real Estate - Fremont Properties, Inc., a subsidiary of Fremont Investors, Inc.
acquires and develops commercial, retail and industrial real estate. Fremont
Properties also manages over 6 million square feet of real estate in 29
properties across the U.S.

Energy - Activities of The Fremont Group's energy affiliate, Fremont Energy
L.P., include oil and natural gas exploration and development

Securities Management - Through its affiliated company, Fremont Investment
Advisors, The Fremont Group manages over $4.7 billion in global investment
portfolios.
<PAGE>
FREMONT INVESTMENT ADVISORS

Fremont Investment Advisors provides investment management services to both
institutional and individual clients.

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

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

-- defined benefit plans

-- defined contribution plans

-- foundations and trusts

-- high net worth individuals

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

FREMONT MUTUAL FUNDS

The Fremont Funds offer investors eleven no-load mutual funds in a
wide variety of investment areas.

Fremont Investment Advisors formed the Fremont Mutual Funds in 1988 in
response to retiring Bechtel employees who were taking their retirement savings
out of the Bechtel Retirement Plan. These employees were looking for low cost
mutual fund options for their personal investments and retirement plan
distributions.

The Fremont Family of Funds includes eleven no-load mutual funds in a
variety of investment disciplines. From conservative bond and money market funds
to aggressive U.S. micro-cap and international small cap stock funds, Fremont
Mutual Funds offer investors a full range of investment options.
<PAGE>
INNOVATIVE INVESTMENT MANAGEMENT

Fremont Investment Advisors utilizes both internal and external investment
management expertise.

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

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

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

FIA's current team of external managers includes:

International Stock Investments
--Acadian Asset Management

--Nicholas Applegate Capital Management (Hong Kong) LLC

Bond Investments
--Pacific Investment Management Company
(PIMCO)

-- U.S. Micro-Cap and Small Cap Investment
Kern Capital Management LLC
(KCM)

For more information about Fremont or the Fremont Funds,
please call 800-548-4539 (press 1).
<PAGE>
THE FREMONT GROUP
ORGANIZATION
| | | |
| | | |
| | | |
Direct Investments | | | |
| | |
Real Estate | | |
| |
Energy |
|
Securities Management
|
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Fremont Fremont
Investment -- Mutual
Advisors Funds
<PAGE>
APPENDIX A: DESCRIPTION OF RATINGS

Description of Commercial Paper Ratings:

Moody's Investors Service, Inc. employs the designation "Prime-1" to indicate
commercial paper having the highest capacity for timely repayment.

Issuers rated Prime-1 "have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protections; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity."

Standard & Poor's Ratings Group's ratings of commercial paper are graded into
four categories ranging from "A" for the highest quality obligations to "D" for
the lowest. Issues assigned the highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety.

A-1 - "This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation."

Fitch Investors Services, Inc.'s short-term ratings apply to debt obligations
that are payable on demand or have original maturities of generally up to three
years, including commercial paper, certificates of deposit, medium-term notes,
and municipal and investment notes. The short-term rating places greater
emphasis than a long-term rating on the existence of liquidity necessary to meet
the issuer's obligations in a timely manner.

F-1+ - "Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment."

F-1 - "Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+."

Duff & Phelps Credit Rating Co. employs the designation "D-1" to indicate
high-grade short-term debt.

D-1+ - "Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources or funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations."

Appendix-1
<PAGE>
D-1 - "Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor."

D-1- - "High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small."

IBCA Limited's short-term ratings range from "A1" for the highest quality
obligation to "C" for the lowest.

A1 - "Obligations supported by the highest capacity for timely repayment. Where
issues possess a particularly strong credit feature, a rating of 'A1+' is
assigned."

Thomson BankWatch assigns short-term debt ratings ranging from "TBW-1" to
"TBW-4." Important factors that may influence its assessment are the overall
financial health of the particular company, and the probability that the
government will come to the aid of a troubled institution in order to avoid a
default or failure.

TBW-1 - "The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis."

Description of Bond Ratings:

Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities from "Aaa" to "C." The ratings from "Aa" through "B" may be
modified by the addition of 1, 2 or 3 to show relative standing within the major
rating categories. Investment ratings are as follows:

Aaa - Best quality. These securities "carry the smallest degree of investment
risk and are generally referred to as 'gilt edge.' Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues."

Aa - High quality by all standards. "They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."

A - Upper medium grade obligations. These bonds possess many favorable
investment attributes. "Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future."

Appendix-2
<PAGE>
Baa - Medium grade obligations. "Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics as well."

Ba - "Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class."

B - "Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."

Standard & Poor's Ratings Group rates the long-term debt securities of various
entities in categories ranging from "AAA" to "D" according to quality. The
ratings from "AA" to "CCC" may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories. Investment
ratings are as follows:

AAA - Highest rating. "Capacity to pay interest and repay principal is extremely
strong."

AA - High grade. "Very strong capacity to pay interest and repay principal."

A - "Strong capacity to pay interest and repay principal," although "somewhat
more susceptible to the adverse effects of change in circumstances and economic
conditions than debt in higher rated categories."

BBB - "Adequate capacity to pay interest and repay principal." These bonds
normally exhibit adequate protection parameters, but "adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal than for debt in higher rated
categories."

BB, B, CCC, CC - "Debt rated BB, B, CCC, or CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions."

Appendix-3
<PAGE>
Fitch Investors Services, Inc. rates the long-term debt securities of various
entities in categories ranging from "AAA" to "D." The ratings from "AA" through
"C" may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories. Investment ratings are as follows:

AAA - "Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events."

AA - "Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated 'AAA.' Because bonds are rated 'AAA'
and 'AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated 'F-1+'."

A - "Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings."

BBB - "Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds and, therefore,
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings."

BB - "Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified, which could
assist the obligor in satisfying its debt service requirements."

B - "Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue."

Duff & Phelps Credit Rating Co. rates the long-term debt securities of various
entities in categories ranging from "AAA" to "DD." The ratings from "AA" through
"B" may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories. Investment ratings are as follows:

AAA - "Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt."

Appendix-4
<PAGE>
AA - "High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions."

A - "Protection factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress."

BBB - "Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles."

BB - "Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category."

B - "Below investment grade and possessing risk that obligations will not be met
when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade."

IBCA Limited rates the long-term debt securities of various entities in
categories ranging from "AAA" to "C." The ratings below "AAA" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories. Investment ratings are as follows:

AAA - "Obligations for which there is the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk substantially."

AA - "Obligations for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions may increase investment
risk, albeit not very significantly."

A - "Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk."

BBB - "Obligations for which there is currently a low expectation of investment
risk. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in other
categories."

Appendix-5
<PAGE>
BB - "Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest exists, but
is susceptible over time to adverse changes in business, economic or financial
conditions."

B - "Obligations for which investment risk exists. Timely repayment of principal
and interest is not sufficiently protected against adverse changes in business,
economic or financial conditions."

Thomson BankWatch rates the long-term debt securities of various entities in
categories ranging from "AAA" to "D." The ratings may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories. Investment ratings are as follows:

AAA - "Indicates that the ability to repay principal and interest on a timely
basis is extremely high."

AA - "Indicates a very strong ability to repay principal and interest on a
timely basis, with limited incremental risk compared to issues rated in the
highest category."

A - "Indicates the ability to repay principal and interest is strong. Issues
rated A could be more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings."

BBB - "The lowest investment-grade category; indicates an acceptable capacity to
repay principal and interest. BBB issues are more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings."

BB - "While not investment grade, the BB rating suggests that the likelihood of
default is considerably less than for lower-rated issues. However, there are
significant uncertainties that could affect the ability to adequately service
debt obligations."

B - "Issues rated B show a higher degree of uncertainty and therefore greater
likelihood of default than higher-rated issues. Adverse developments could
negatively affect the payment of interest and principal on a timely basis."

Appendix-6
<PAGE>
FREMONT MUTUAL FUNDS, INC.

Fremont Institutional U.S. Micro-Cap Fund
Toll-Free: 800-548-4539

Part B

Statement of Additional Information

This Statement of Additional Information concerning Fremont Mutual Funds, Inc.
(the "Investment Company") is not a prospectus for the Investment Company. This
Statement supplements the Prospectus for the Fremont Institutional U.S.
Micro-Cap Fund (the "Fund") dated March 1, 1998 and should be read in
conjunction with the Prospectus. Copies of the Prospectus are available without
charge by calling the Investment Company at the phone number printed above.

The date of this Statement of Additional Information is March 1, 1998.
<PAGE>
TABLE OF CONTENTS

Page

Investment Objective, Policies, And Risk
Considerations............................................................ x

Investment Restrictions..................................................... xx

Investment Company Directors And Officers................................... xx

Investment Advisory And Other Services...................................... xx

Execution Of Portfolio Transactions......................................... xx

How To Invest............................................................... xx

Other Investment And Redemption Services.................................... xx

Taxes - Mutual Funds........................................................ xx

Additional Information...................................................... xx

Investment Results.......................................................... xx

Information About Fremont Investment Advisors................................xx

Appendix A: Description Of Ratings.......................................... xx
<PAGE>
INVESTMENT OBJECTIVE, POLICIES, AND RISK CONSIDERATIONS

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

Writing Covered Call Options. The Fund may write (sell) "covered" call options
and purchase options to close out options previously written by the Fund. The
purpose of writing covered call options is to generate additional premium income
for the Fund. This premium income will serve to enhance the Fund's total return
and will reduce the effect of any price decline of the security or currency
involved in the option. Covered call options will generally be written on
securities and currencies which, in the opinion of Fremont Investment Advisors,
Inc. (the "Advisor"), are not expected to make any major price moves in the near
future but which, over the long term, are deemed to be attractive investments
for the Fund.

A call option gives the holder (buyer) the "right to purchase" a security or
currency at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold. To secure his obligation to deliver the
underlying security or currency in the case of a call option, a writer is
required to deposit in escrow the underlying security or currency or other
assets in accordance with the rules of the Options Clearing Corporation. The
Fund will write only covered call options. This means that the Fund will only
write a call option on a security, index, or currency which the Fund already
effectively owns or has the right to acquire without additional cost.

Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in
contrast to the writing of naked or uncovered options, which the Fund will not
do), but capable of enhancing the Fund's total return. When writing a covered
call option, the Fund, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security or currency above the
exercise price, but conversely retains the risk of loss should the price of the
security or currency decline. Unlike one who owns securities or currencies not
subject to an option, the Fund has no control over when it may be required to
sell the underlying securities or currencies, since it may be assigned an
exercise notice at any time prior to the expiration of its obligation as a
writer. If a call option which the Fund has written expires, the Fund will
realize a gain in the amount of the premium; however, such gain may be offset by
a decline in the market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security or currency. The security or
currency covering the call will be maintained in a separate account by the
Fund's custodian. The Fund will consider a security or currency covered by a
call to be "pledged" as that term is used in its policy which limits the
pledging or mortgaging of its assets.

The premium received is the market value of an option. The premium the Fund will
receive from writing a call option will reflect, among other things, the current
market price of the underlying security or currency, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security or currency, and the length of the option period. Once the
decision to write a call option has been made, the Advisor, in determining
whether a particular call option should be written on a particular security or
currency, will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options. The
<PAGE>
premium received by the Fund for writing covered call options will be recorded
as a liability in the Fund's statement of assets and liabilities. This liability
will be adjusted daily to the option's current market value, which will be the
latest sales price at the time at which the net asset value per share of the
Fund is computed (close of the regular trading session of the New York Stock
Exchange), or, in the absence of such sale, the latest asked price. The
liability will be extinguished upon expiration of the option, the purchase of an
identical option in a closing transaction, or delivery of the underlying
security or currency upon the exercise of the option.

Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to sell
a particular security or currency from its portfolio on which it has written a
call option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security or currency. There is, of course, no
assurance that the Fund will be able to effect such closing transactions at a
favorable price. If the Fund cannot enter into such a transaction, it may be
required to hold a security or currency that it might otherwise have sold, in
which case it would continue to be at market risk with respect to the security
or currency. The Fund will pay transaction costs in connection with the writing
of options to close out previously written options. Such transaction costs are
normally higher than those applicable to purchases and sales of portfolio
securities.

Call options written by the Fund will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may be
below, equal to, or above the current market values of the underlying securities
or currencies at the time the options are written. From time to time, the Fund
may purchase an underlying security or currency for delivery in accordance with
an exercise notice of a call option assigned to it, rather than delivering such
security or currency from its portfolio. In such cases, additional costs will be
incurred.

The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from the
writing of the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying security
or currency, any loss resulting from the repurchase of a call option is likely
to be offset in whole or in part by appreciation of the underlying security or
currency owned by the Fund.

If the Fund writes options other than "qualified covered call options," as
defined in the Internal Revenue Code of 1986, as amended (the "Code"), any
losses on such options transactions, to the extent they do not exceed the
unrealized gains on the securities or currencies covering the options, may be
subject to deferral until the securities or currencies covering the options have
been sold. In addition, any options written against securities other than bonds
<PAGE>
or currencies will be considered to have been closed out at the end of the
Fund's fiscal year, and any gains or losses will be recognized for tax purposes
at that time. Under Code Section 1256, such gains or losses would be
characterized as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Code Section 988 may also apply to currency transactions. Under
Section 988, each foreign currency gain or loss is generally computed separately
and treated as ordinary income or loss. In the case of overlap between Sections
1256 and 988, special provisions determine the character and timing of any
income, gain, or loss. The Fund will attempt to monitor Section 988 transactions
to avoid an adverse tax impact.

Writing Covered Put Options. The Fund may write covered put options. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) has the obligation to buy, the underlying security or currency at the
exercise price during the option period. So long as the obligation of the writer
continues, the writer may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring the writer to make payment of the
exercise price against delivery of the underlying security or currency. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.

The Fund may write put options only on a covered basis, which means that the
Fund would maintain in a segregated account cash and liquid securities in an
amount not less than the exercise price at all times while the put option is
outstanding. (The rules of the Options Clearing Corporation currently require
that such assets be deposited in escrow to secure payment of the exercise
price.) The Fund would generally write covered put options in circumstances
where the Advisor wishes to purchase the underlying security or currency for the
Fund's portfolio at a price lower than the current market price of the security
or currency. In such event the Fund would write a put option at an exercise
price which, reduced by the premium received on the option, reflects the lower
price it is willing to pay. Since the Fund would also receive interest on debt
securities or currencies maintained to cover the exercise price of the option,
this technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security or currency would decline below the exercise price less
the premiums received.

Purchasing Put Options. The Fund may purchase put options. As the holder of a
put option, the Fund has the right to sell the underlying security or currency
at the exercise price at any time during the option period. The Fund may enter
into closing sale transactions with respect to such options, exercise them, or
permit them to expire. The Fund may purchase put options for defensive purposes
in order to protect against an anticipated decline in the value of its
securities or currencies. An example of such use of put options is provided
below.

The Fund may purchase a put option on an underlying security or currency (a
"protective put") owned as a defensive technique in order to protect against an
anticipated decline in the value of the security or currency. Such hedge
protection is provided only during the life of the put option when the Fund, as
the holder of the put option, is able to sell the underlying security or
currency at the put exercise price regardless of any decline in the underlying
security's market price or currency's exchange value. For example, a put option
may be purchased in order to protect unrealized appreciation of a security or
currency where the Advisor deems it desirable to continue to hold the security
or currency because of tax considerations. The premium paid for the put option
and any transaction costs would reduce any capital gain otherwise available for
distribution when the security or currency is eventually sold.

The Fund may also purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold when
it has remaining value, and if the market price of the underlying security or
<PAGE>
currency remains equal to or greater than the exercise price during the life of
the put option, the Fund will lose its entire investment in the put option. In
order for the purchase of a put option to be profitable, the market price of the
underlying security or currency must decline sufficiently below the exercise
price to cover the premium and transaction costs, unless the put option is sold
in a closing sale transaction.

The Fund will commit no more than 5% of its assets to premiums when purchasing
put options. The premium paid by the Fund when purchasing a put option will be
recorded as an asset in the Fund's statement of assets and liabilities. This
asset will be adjusted daily to the option's current market value, which will be
the latest sale price at the time at which the Fund's net asset value per share
is computed (close of trading on the New York Stock Exchange), or, in the
absence of such sale, the latest bid price. The asset will be extinguished upon
expiration of the option, the selling (writing) of an identical option in a
closing transaction, or the delivery of the underlying security or currency upon
the exercise of the option.

Purchasing Call Options. The Fund may purchase call options. As the holder of a
call option, the Fund has the right to purchase the underlying security or
currency at the exercise price at any time during the option period. The Fund
may enter into closing sale transactions with respect to such options, exercise
them, or permit them to expire. The Fund may purchase call options for the
purpose of increasing its current return or avoiding tax consequences which
could reduce its current return. The Fund may also purchase call options in
order to acquire the underlying securities or currencies. Examples of such uses
of call options are provided below.

Call options may be purchased by the Fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this fashion,
the purchase of call options enables the Fund involved to acquire the securities
or currencies at the exercise price of the call option plus the premium paid. At
times the net cost of acquiring securities or currencies in this manner may be
less than the cost of acquiring the securities or currencies directly. This
technique may also be useful to the Fund in purchasing a large block of
securities that would be more difficult to acquire by direct market purchases.
So long as it holds such a call option rather than the underlying security or
currency itself, the Fund is partially protected from any unexpected decline in
the market price of the underlying security or currency and in such event could
allow the call option to expire, incurring a loss only to the extent of the
premium paid for the option.

The Fund will commit no more than 5% of its assets to premiums when purchasing
call options. The Fund may also purchase call options on underlying securities
or currencies it owns in order to protect unrealized gains on call options
previously written by it. A call option would be purchased for this purpose
where tax considerations make it inadvisable to realize such gains through a
closing purchase transaction. Call options may also be purchased at times to
avoid realizing losses that would result in a reduction of the Fund's current
return. For example, where the Fund has written a call option on an underlying
security or currency having a current market value below the price at which such
security or currency was purchased by the Fund, an increase in the market price
could result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency with the same
exercise price and expiration date as the option previously written.

Description of Futures Contracts. A Futures Contract provides for the future
sale by one party and purchase by another party of a specified amount of a
specific financial instrument (security or currency) for a specified price at a
designated date, time, and place. Brokerage fees are incurred when a Futures
Contract is bought or sold and margin deposits must be maintained.
<PAGE>
Although Futures Contracts typically require future delivery of and payment for
financial instruments or currencies, the Futures Contracts are usually closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical type of
financial instrument or currency and the same delivery date. If the offsetting
purchase price is less than the original sale price, the Fund realizes a gain;
if it is more, the Fund realizes a loss. Conversely, if the offsetting sale
price is more than the original purchase price, the Fund realizes a gain; if it
is less, the Fund realizes a loss. The transaction costs must also be included
in these calculations. There can be no assurance, however, that the Fund will be
able to enter into an offsetting transaction with respect to a particular
Futures Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to maintain the
margin deposits on the Contract.

The Fund may enter into interest rate, S&P Index (or other major market index),
or currency Futures Contracts as a hedge against changes in prevailing levels of
stock values, interest rates, or currency exchange rates in order to establish
more definitely the effective return on securities or currencies held or
intended to be acquired by the Fund. The Fund's hedging may include sales of
Futures as an offset against the effect of expected increases in currency
exchange rates, purchases of such Futures as an offset against the effect of
expected declines in currency exchange rates, and purchases of Futures in
anticipation of purchasing underlying index stocks prior to the availability of
sufficient assets to purchase such stocks or to offset potential increases in
the prices of such stocks. When selling options or Futures Contracts, the Fund
will segregate cash and liquid securities to cover any related liability.

The Fund will not enter into Futures Contracts for speculation and will only
enter into Futures Contracts which are traded on national futures exchanges and
are standardized as to maturity date and underlying financial instrument. The
principal Futures exchanges in the United States are the Board of Trade of the
City of Chicago and the Chicago Mercantile Exchange. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission. Futures are also traded in various overseas markets.

Although techniques other than sales and purchases of Futures Contracts could be
used to reduce the Fund's exposure to currency exchange rate fluctuations, the
Fund may be able to hedge its exposure more effectively and perhaps at a lower
cost through using Futures Contracts.

The Fund will not enter into a Futures Contract if, as a result thereof, more
than 5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to "margin" (down payment)
deposits on such Futures Contracts.

A Stock Index contract such as the S&P 500 Stock Index Contract, for example, is
an agreement to take or make delivery at a specified future date of an amount of
cash equal to $500 multiplied by the difference between the value of the Stock
Index at purchase and at the close of the last trading day of the contract. In
order to close long positions in the Stock Index contracts prior to their
settlement date, the Fund will enter into offsetting sales of Stock Index
contracts.
<PAGE>
Using Stock Index contracts in anticipation of market transactions involves
certain risks. Although the Fund may intend to purchase or sell Stock Index
contracts only if there is an active market for such contracts, no assurance can
be given that a liquid market will exist for the contracts at any particular
time. In addition, the price of Stock Index contracts may not correlate
perfectly with the movement in the Stock Index due to certain market
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the Stock Index
and movements in the price of Stock Index contracts, a correct forecast of
general market trends may not result in a successful anticipatory hedging
transaction.

Futures Contracts Generally. Persons who trade in Futures Contracts may be
broadly classified as "hedgers" and "speculators." Hedgers, such as the Fund,
whose business activity involves investment or other commitments in debt
securities, equity securities, or other obligations, use the Futures markets
primarily to offset unfavorable changes in value that may occur because of
fluctuations in the value of the securities and obligations held or expected to
be acquired by them or fluctuations in the value of the currency in which the
securities or obligations are denominated. Debtors and other obligors may also
hedge the interest cost of their obligations. The speculator, like the hedger,
generally expects neither to deliver nor to receive the financial instrument
underlying the Futures Contract, but, unlike the hedger, hopes to profit from
fluctuations in prevailing interest rates, securities prices, or currency
exchange rates.

The Fund's Futures transactions will be entered into for traditional hedging
purposes; that is, Futures Contracts will be sold to protect against a decline
in the price of securities or currencies that the Fund owns, or Futures
Contracts will be purchased to protect the Fund against an increase in the price
of securities or currencies it has a fixed commitment to purchase. "Margin" with
respect to Futures and Futures Contracts is the amount of funds that must be
deposited by the Fund with a broker in order to initiate Futures trading and to
maintain the Fund's open positions in Futures Contracts. A margin deposit
("initial margin") is intended to assure the Fund's performance of the Futures
Contract. The margin required for a particular Futures Contract is set by the
exchange on which the Contract is traded, and may be significantly modified from
time to time by the exchange during the term of the Contract. Futures Contracts
are customarily purchased and sold on margins that may range upward from less
than 5% of the value of the Contract being traded.

If the price of an open Futures Contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin deposit ("margin
variation"). However, if the value of a position increases because of favorable
price changes in the Futures Contract so that the margin deposit exceeds the
required margin, the broker will pay the excess to the Fund. In computing daily
net asset values, the Fund will mark to market the current value of its open
Futures Contracts. The Fund expects to earn interest income on its margin
deposits.

Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss or
gain to the investor. For example, if at the time of purchase, 10% of the value
of the Futures Contract is deposited as margin, a subsequent 10% decrease in the
value of the Futures Contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit, if the Contract were closed out. Thus, a purchase or
sale of a Futures Contract may result in losses in excess of the amount invested
in the Futures Contract. However, the Fund would presumably have sustained
comparable losses if, instead of the Futures Contract, it had invested in the
underlying financial instrument and sold it after the decline. Furthermore, in
the case of a Futures Contract purchase, in order to be certain that the Fund
has sufficient assets to satisfy its obligations under a Futures Contract, the
Fund segregates and commits to back the Futures Contract with money market
instruments equal in value to the current value of the underlying instrument
less the margin deposit.

Federal Tax Treatment of Futures Contracts. Except for transactions the Fund
identified as hedging transactions, the Fund is required for federal income tax
purposes to recognize as income for each taxable year its net unrealized gains
and losses on Futures Contracts as of the end of the year as well as those
actually realized during the year. Identified hedging transactions would not be
subject to the mark to market rules and would result in the recognition of
ordinary gain or loss. Otherwise, unless transactions in Futures Contracts are
classified as part of a "mixed straddle," any gain or loss recognized with
respect to a Futures Contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to the holding
period of the Contract. In the case of a Futures transaction classified as a
"mixed straddle," the recognition of losses may be deferred to a later taxable
year.

Sales of Futures Contracts which are intended to hedge against a change in the
value of securities or currencies held by the Fund may affect the holding period
of such securities or currencies and, consequently, the nature of the gain or
loss on such securities or currencies upon disposition.
<PAGE>
In order for the Fund to continue to qualify for federal income tax treatment as
a regulated investment company, at least 90% of its gross income for a taxable
year must be derived from qualifying income, i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
currencies. It is anticipated that any net gain realized from the closing out of
Futures Contracts will be considered gain from the sale of securities or
currencies and therefore be qualifying income for purposes of the 90%
requirement.

The Fund will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Investment Company's fiscal year) on Futures
transactions. Such distributions will be combined with distributions of capital
gains realized on the Fund's other investments and shareholders will be advised
of the nature of the payments.

Options on Interest Rate and/or Currency Futures Contracts. Options on Futures
Contracts are similar to options on fixed income or equity securities or options
on currencies, except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put), rather than to purchase or sell the Futures Contract, at a
specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference on the expiration date between
the exercise price of the option and the closing level of the securities or
currencies upon which the Futures Contracts are based. Purchasers of options who
fail to exercise their options prior to the exercise date suffer a loss of the
premium paid.

As an alternative to purchasing call and put options on Futures, the Fund may
purchase call and put options on the underlying securities or currencies. Such
options would be used in a manner identical to the use of options on Futures
Contracts. To reduce or eliminate the leverage then employed by the Fund or to
reduce or eliminate the hedge position then currently held by the Fund, the Fund
may seek to close out an option position by selling an option covering the same
securities or contract and having the same exercise price and expiration date.

Forward Currency and Options Transactions. A forward currency contract is an
obligation to purchase or sell a currency against another currency at a future
date and price as agreed upon by the parties. The Fund may either accept or make
delivery of the currency at the maturity of the forward contract or, prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. The Fund typically engages in forward currency transactions
in anticipation of, or to protect itself against, fluctuations in exchange
rates. The Fund might sell a particular currency forward, for example, when it
wanted to hold bonds denominated in that currency but anticipated, and sought to
be protected against, a decline in the currency against the U.S. dollar.
Similarly, the Fund might purchase a currency forward to "lock in" the dollar
price of securities denominated in that currency which it anticipated
purchasing.

Currency options may be either listed on an exchange or traded over-the-counter
(OTC). Listed options are third-party contracts (i.e., performance of the
obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. The Fund will not purchase an OTC option unless the Advisor believes that
daily valuation for such option is readily obtainable.

Diversification. The Fund intends to operate as a "diversified" management
investment company, as defined in the Investment Company Act of 1940 (the "1940
Act"). A "diversified" investment company means a company which meets the
following requirements: At least 75% of the value of the Fund's total assets is
represented by cash and cash items (including receivables), "Government
Securities" (as defined below), securities of other investment companies, and
other securities for the purposes of this calculation limited in respect of any
one issuer to an amount not greater in value than 5% of the value of the total
assets of the Fund and to not more than 10% of the outstanding voting securities
of such issuer. "Government Securities" means securities issued or guaranteed as
to principal or interest by the United States, or by a person controlled or
supervised by and acting as an instrumentality of the Government of the United
States pursuant to authority granted by the Congress of the United States

Reverse Repurchase Agreements and Leverage. The Fund may enter into reverse
repurchase agreements which involve the sale of a security by the Fund and its
agreement to repurchase the security at a specified time and price. The Fund
will maintain in a segregated account with its custodian cash, cash equivalents,
or liquid securities in an amount sufficient to cover its obligations under
reverse repurchase agreements with broker-dealers (but not with banks). Under
the 1940 Act, reverse repurchase agreements are considered borrowings by the
Fund; accordingly, the Fund will limit its investments in these transactions,
together with any other borrowings, to no more than one-third of its total
assets. The use of reverse repurchase agreements by the Fund creates leverage
which increases the Fund's investment risk. If the income and gains on
securities purchased with the proceeds of these transactions exceed the cost,
the Fund's earnings or net asset value will increase faster than otherwise would
be the case; conversely, if the income and gains fail to exceed the costs,
earnings or net asset value would decline faster than otherwise would be the
case. If the 300% asset coverage required by the 1940 Act should decline as a
result of market fluctuation or other reasons, the Fund may be required to sell
some of its portfolio securities within three days to reduce the borrowings
(including reverse repurchase agreements) and restore the 300% asset coverage,
even though it may be disadvantageous from an investment standpoint to sell
securities at that time. The Fund intends to enter into reverse repurchase
agreements only if the income from the investment of the proceeds is greater
than the expense of the transaction, because the proceeds are invested for a
period no longer than the term of the reverse repurchase agreement.

Floating Rate and Variable Rate Obligations and Participation Interests. The
Fund may purchase floating rate and variable rate obligations, including
participation interests therein. Floating rate or variable rate obligations
provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate at a major commercial bank) or is
reset on a regular basis by a bank or investment banking firm to a market rate.
At specified times, the owner can demand payment of the obligation at par plus
accrued interest. Variable rate obligations provide for a specified periodic
adjustment in the interest rate, while floating rate obligations have an
interest rate which changes whenever there is a change in the external interest
rate. Frequently banks provide letters of credit or other credit support or
liquidity arrangements to secure these obligations. The quality of the
underlying creditor or of the bank, as the case may be, must meet the minimum
credit quality standards, as determined by the Advisor, prescribed for the Fund
by the Board of Directors with respect to counterparties in repurchase
agreements and similar transactions.
<PAGE>
The Fund may invest in participation interests purchased from banks in floating
rate or variable rate obligations owned by banks. A participation interest gives
the Fund an undivided interest in the obligation in the proportion that the
Fund's participation interest bears to the total principal amount of the
obligation, and provides a demand repayment feature. Each participation is
backed by an irrevocable letter of credit or guarantee of a bank (which may be
the bank issuing the participation interest or another bank). The bank letter of
credit or guarantee must meet the prescribed investment quality standards for
the Fund. The Fund has the right to sell the participation instrument back to
the issuing bank or draw on the letter of credit on demand for all or any part
of the Fund's participation interest in the underlying obligation, plus accrued
interest.

Swap Agreements. The Fund may enter into interest rate, index, and currency
exchange rate swap agreements for purposes of attempting to obtain a particular
desired return at a lower cost to the Fund than if the Fund had invested
directly in an instrument that yielded that desired return. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Commonly used swap agreements include interest
rate caps, under which, in return for a premium, one party agrees to make
payments to the other to the extent that interest rates exceed a specified rate,
or "cap"; interest rate floors, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates fall
below a specified level, or "floor"; and interest rate collars, under which a
party sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding minimum or maximum levels.

Whether the Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the Advisor's ability to predict correctly
whether certain types of investments are likely to produce greater returns than
other investments. Because they are two-party contracts and because they may
have terms of greater than seven days, swap agreements will be considered to be
illiquid. Moreover, the Fund bears the risk of loss of the amount expected to be
received under a swap agreement in the event of the default or bankruptcy of a
swap agreement counterparty. The Advisor will cause the Fund to enter into swap
agreements only with counterparties that would be eligible for consideration as
repurchase agreement counterparties under the Fund's repurchase agreement
guidelines. Certain restrictions imposed on the Fund by the Internal Revenue
Code may limit the Fund's ability to use swap agreements. The swaps market is
largely unregulated. It is possible that developments in the swaps market,
including potential government regulation, could adversely affect the Fund's
ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.
<PAGE>
When-Issued Securities and Firm Commitment Agreements. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction but the settlement is delayed).
The Fund will not purchase securities the value of which is greater than 5% of
its net assets on a when-issued or firm commitment basis. The Fund, as
purchaser, assumes the risk of any decline in value of the security beginning on
the date of the agreement or purchase, and no interest accrues to the Fund until
it accepts delivery of the security. The Fund will not use such transactions for
leveraging purposes and, accordingly, will segregate cash, cash equivalents, or
liquid securities in an amount sufficient to meet its payment obligations
thereunder. Although these transactions will not be entered into for leveraging
purposes, to the extent the Fund's aggregate commitments under these
transactions exceed its holdings of cash and securities that do not fluctuate in
value (such as short-term money market instruments), the Fund temporarily will
be in a leveraged position (i.e., it will have an amount greater than its net
assets subject to market risk). Should market values of the Fund's portfolio
securities decline while the Fund is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. As the Fund's aggregate commitments under these transactions increase,
the opportunity for leverage similarly increases. The Fund will not borrow money
to settle these transactions and, therefore, will liquidate other portfolio
securities in advance of settlement if necessary to generate additional cash to
meet its obligations thereunder.

Commercial Bank Obligations. For the purposes of the Fund's investment policies
with respect to bank obligations, obligations of foreign branches of U.S. banks
and of foreign banks may be general obligations of the parent bank in addition
to the issuing bank, or may be limited by the terms of a specific obligation and
by government regulation. As with investment in non-U.S. securities in general,
investments in the obligations of foreign branches of U.S. banks, and of foreign
banks may subject the Fund to investment risks that are different in some
respects from those of investments in obligations of domestic issuers. Although
the Fund will typically acquire obligations issued and supported by the credit
of U.S. or foreign banks having total assets at the time of purchase in excess
of $1 billion, this $1 billion figure is not a fundamental investment policy or
restriction of the Fund. For the purposes of calculating the $1 billion figure,
the assets of a bank will be deemed to include the assets of its U.S. and
non-U.S. branches.

The return on the Fund's investments in investment companies will be reduced by
the operating expenses, including investment advisory and administrative fees,
of such companies. The Fund's investment in a closed-end investment company may
require the payment of a premium above the net asset value of the investment
company's shares, and the market price of the investment company thereafter may
decline without any change in the value of the investment company's assets. The
Fund, however, will not invest in any investment company or trust unless it is
believed that the potential benefits of such investment are sufficient to
warrant the payment of any such premium.
<PAGE>
As an exception to the above, the Fund has the authority to invest all of its
assets in the securities of a single open-end investment company with
substantially the same fundamental investment objectives, restrictions, and
policies as that of the Fund. The Fund will notify its shareholders prior to
initiating such an arrangement.

Illiquid Securities. The Fund may invest up to 15% of its net assets in all
forms of "illiquid securities."

An investment is generally deemed to be "illiquid" if it cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which such securities are valued by the Fund. "Restricted" securities are
securities which were originally sold in private placements and which have not
been registered under the Securities Act of 1933 (the "1933 Act"). However, a
market exists for certain restricted securities (for example, securities
qualifying for resale to certain " qualified institutional buyers" pursuant to
Rule 144A under the 1933 Act). Additionally, the Advisor, the Sub-Advisor and
the Fund believe that a similar market exists for commercial paper issued
pursuant to the private placement exemption of Section 4(2) of the 1933 Act. The
Fund may invest without limitation in these forms of restricted securities if
such securities are determined by the Advisor to be liquid in accordance with
standards established by the Investment Company's Board of Directors. Under
these standards, the Advisor must consider (a) the frequency of trades and
quotes for the security, (b) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers, (c) any dealer
undertaking to make a market in the security, and (d) the nature of the security
and the nature of the marketplace trades (for example, the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer).

It is not possible to predict with accuracy how the markets for certain
restricted securities will develop. Investing in restricted securities could
have the effect of increasing the level of the Fund's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.

Lending of Portfolio Securities. For the purpose of realizing additional income,
the Fund may make secured loans of portfolio securities amounting to not more
than 33-1/3% of its net assets. Securities loans are made to broker-dealers or
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value of
the securities lent marked to market on a daily basis. The collateral received
will consist of cash, short-term U.S. Government securities, bank letters of
credit, or such other collateral as may be permitted under the Fund's investment
program and by regulatory agencies and approved by the Board of Directors. While
the securities are being lent, the Fund will continue to receive the equivalent
of the interest or dividends paid by the issuer on the securities, as well as
interest on the investment of the collateral or a fee from the borrower. The
Fund has a right to call each loan and obtain the securities on five business
days' notice. The Fund will not have the right to vote equity securities while
they are being lent, but it will call a loan in anticipation of any vote in
which it seeks to participate.

Reduction in Bond Rating. In the event that the rating for any security held by
the Fund drops below the minimum acceptable rating applicable to the Fund, the
Advisor will determine whether the Fund should continue to hold such an
obligation in its portfolio. Bonds rated below BBB or Baa are commonly known as
"junk bonds." These bonds are subject to greater fluctuations in value and risk
of loss of income and principal due to default by the issuer than are higher
rated bonds. The market values of junk bonds tend to reflect short-term
corporate, economic, and market developments and investor perceptions of the
issuer's credit quality to a greater extent than higher rated bonds. In
addition, it may be more difficult to dispose of, or to determine the value of,
junk bonds. See Appendix A for a complete description of the bond ratings.
<PAGE>
INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental investment policies and
restrictions in addition to the policies and restrictions discussed in its
prospectus. The policies and restrictions listed below cannot be changed without
approval by the holders of a "majority of the outstanding voting securities" of
the Fund (which is defined in the 1940 Act to mean the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding shares
are represented or (ii) more than 50% of the outstanding shares). These
restrictions provide that the Fund may not:

2. Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in
securities secured by real estate, or issued by companies which invest
in real estate or interests therein, including real estate investment
trusts, and may purchase and sell currencies (including forward
currency exchange contracts), gold, bullion, futures contracts, and
related options generally as described in the Prospectus and Statement
of Additional Information.

4. Make loans, except that the Fund may purchase debt securities, enter
into repurchase agreements, and make loans of portfolio securities
amounting to not more than 33 1/3% of its net assets calculated at the
time of the securities lending.

5. Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The Fund
will not purchase securities while such borrowings are outstanding.

6. Change its status as a diversified investment company.

7. Issue senior securities, except as permitted under the 1940 Act, and
except that the Investment Company and the Fund may issue shares of
common stock in multiple series or classes.

8. Notwithstanding any other fundamental investment restriction or
policy, the Fund may invest all of its assets in the securities of a
single open-end investment company with substantially the same
fundamental investment objectives, restrictions, and policies as the
Fund.

Othercurrent investment policies of the Fund, which are not fundamental and
which may be changed by action of the Board of Directors without shareholder
approval, are as follows. The Fund may not:

9. Invest in companies for the purpose of exercising control or
management.

10. Mortgage, pledge or hypothecate any of its assets, provided that this
restriction shall not apply to the transfer of securities in
connection with any permissible borrowing.

11. Invest in interests in oil, gas, or other mineral exploration or
development programs or leases.
<PAGE>
12. Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three
years continuous operation.

16. Make short sales of securities or maintain a short position, except
that the Fund may sell short "against the box."

17. Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one
issuer.

18. Acquire more than 3% of the outstanding voting securities of any one
investment company.
<PAGE>
INVESTMENT COMPANY DIRECTORS AND OFFICERS

The Bylaws of Fremont Mutual Funds, Inc. (the "Investment Company"), the
Maryland investment company of which the Fund is a series, authorize a Board of
Directors of between three and 15 persons, as fixed by the Board of Directors. A
majority of directors may fill vacancies caused by the resignation or death of a
director or the expansion of the Board of Directors. Any director may be removed
by vote of the holders of a majority of all outstanding shares of the Investment
Company qualified to vote at the meeting.

<TABLE>
<CAPTION>
Principal Occupations
Date of and Business Experience
Name and Address Birth Positions Held for Past Five Years

<S> <C> <C> <C>
David L. Redo(1)(2)(4) 9-1-37 Chairman, Chief Executive President and Director, Fremont
Fremont Investment, Advisors, Inc. Officer and Director Investment Advisors, Inc.;
333 Market Street, 26th Floor Managing Director, Fremont
San Francisco, CA 94105 Group, L.L.C. and Fremont
Investors, Inc.; Director,
Sequoia Ventures, Sit/Kim International
Investment Associates, and J.P. Morgan
Securities Asia.

Richard E. Holmes(3) 5-14-43 Director Vice President and Director,
P.O. Box 479 BelMar Advisors, Inc.
Sanibel, FL 33957 (marketing firm).

Donald C. Luchessa(3) 2-18-30 Director Principal, DCL Advisory
DCL Advisory (marketer for investment
4105 Shelter Bay Avenue advisors).
Mill Valley, CA 94941

John Kosecoff 10-29-51 Vice President 10/96 - Present
Fremont Investment Advisors, Inc. Vice President, Fremont
333 Market Street, 26th Floor Investment Advisors, Inc.
San Francisco, CA 94105 12/93 - 9/96 Senior Analyst and Portfolio
Manager, RCM Capital Management
11/92 - 12/93 Hedge Fund Analyst and
Portfolio Manager, Omega Advisors
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
William M. Feeney 3-27-56 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Norman Gee 3-29-50 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Alexandra W. Kinchen(4) 4-25-45 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Andrew L. Pang(4) 4-15-49 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Robert J. Haddick(4) 2-26-60 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Tina Thomas 8-7-49 Vice President, Secretary, and 6/96 - Present Vice President, Secretaru
Fremont Investment Advisors, Inc. Chief Compliance Officer and Chief Compliance Officer,
333 Market Street, 26th Floor Fremont Investment Advisors, Inc.
San Francisco, CA 94105 9/88 - 5/96 Chief Compliance
Officer and Vice President,
Bailard, Biehl & Kaiser, Inc.;
Treasurer, Bailard, Biehl & Kaiser International
Fund Group, Inc. and Bailard, Biehl
& Kaiser Fund Group; Principal,
BB&K Fund Services, Inc.

Richard G. Thomas 1-7-57 Senior Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Gretchen Hollstein 3-23-67 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26h Floor
San Francisco, CA 94105

Allyn Hughes 6-12-60 Vice President Vice President, Fremont
Fremont Investment Advisors, Inc. Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Greg Hand 10-9-61 Assistant Treasurer Assistant Treasurer.
Fremont Investment Advisors, Inc.
333 Market Street, 26th Floor
San Francisco, CA 94105

Jack Gee 9-12-59 Vice President and 10/97 - Present, Vice President and
Fremont Investmetnt Avisors, Inc. Controller Controller, Fremont Investment
333 Market Street, 26th Floor Advisors, Inc.; 11/95-10/97, Chief
San Francisco, CA 94105 Financial Officer and Treauruer ,
Sife, Inc.;6/91-6/95, Controller,
Concord General Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Dean Boebinger 11-21-55 Vice President 12/95 - Present
Fremont Investment Advisors, Inc. National Sales Manager,
3000 Post Oak Blvd., Suite 100 Fremont Investment
Houston, TX 77056 Advisors, Inc.
8/94 - 12/95 Regional Sales Manager
3/92 - 7/94 Certified Financial
Planner and Account Executive,
GNA, Inc.
</TABLE>

As of _______, 1998, the officers and directors as a group owned in the
aggregate beneficially or of record less than 1% of the outstanding shares of
the Investment Company.
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES

For its services under the Investment Advisory and Administration Agreement (the
"Advisory Agreement"), the Advisor is paid a monthly fee at the annual rate of
1.15% of the Fund's average net assets. The Fund will pay all of its own
expenses not assumed by the Advisor, including, but not limited to, the
following: custodian, stock transfer, and dividend disbursing fees and expenses;
taxes and insurance; expenses of the issuance and redemption of shares of the
Fund (including stock certificates, registration or qualification fees and
expenses); legal and auditing expenses; and the costs of stationery and forms
prepared exclusively for the Fund.

The allocation of general Investment Company expenses among its series is made
on a basis that the Directors deem fair and equitable, which may be based on the
relative net assets of each series or the nature of the services performed and
relative applicability to each series.

As noted in the Prospectus, the Advisor has agreed to reduce some or all of its
fees under the Advisory Agreement if necessary to keep total operating expenses,
expressed on an annualized basis, at or below the rate of 1.25% of the Fund's
average net assets. Any reductions made by the Advisor in its fees are subject
to reimbursement by the Fund within the following three years provided the Fund
is able to effect such reimbursement and remain in compliance with the foregoing
expense limitation. The Advisor generally seeks reimbursement for the oldest
reductions before payment by the Fund for fees and expenses for the current
year. In considering approval of the Fund's Advisory Agreement, the Board of
Directors specifically considered and approved the provision which permits the
Advisor to seek reimbursement of any reduction made to its fees within the
three-year period. The Advisor's ability to request reimbursement is subject to
various conditions. First, any reimbursement is subject to the Fund's ability to
effect such reimbursement and remain in compliance with the 1.25% limitation on
annual operating expenses. Second, the Advisor must specifically request the
reimbursement from the Board of Directors. Third, the Board of Directors must
approve such reimbursement as appropriate and not inconsistent with the best
interests of the Fund and the shareholders at the time such reimbursement is
requested. 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 collection is probable; but
the full amount of the potential liability will appear in a footnote to the
Fund's financial statements. At such time as it appears probable that the Fund
is able to effect such reimbursement, that the Advisor intends to seek such
reimbursement and that the Board of Directors has or is likely to approve the
payment of such reimbursement, the amount of the reimbursement will be accrued
as an expense of the Fund for that current period.

The directors of the Advisor are David L. Redo, Jon S. Higgins, Peter F.
Landini, Michael H. Kosich and Albert W. Kirschbaum.

The Advisory Agreement with respect to the Fund may be renewed annually,
provided that any such renewal has been specifically approved by (i) the Board
of Directors, or by the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Fund, and (ii) the vote of a majority of
directors who are not parties to the Advisory Agreement or "interested persons"
(as defined in the 1940 Act) of any such party, cast in person, at a meeting
called for the purpose of voting on such approval. The Advisory Agreement also
provides that either party thereto has the right with respect to the Fund to
terminate it without penalty upon sixty (60) days' written notice to the other
party, and that the Advisory Agreement terminates automatically in the event of
its assignment (as defined in the 1940 Act).
<PAGE>
The Advisor's employees may engage in personal securities transactions. However,
the Investment Company and the Advisor have adopted a Code of Ethics for the
purpose of establishing standards of conduct for the Advisor's employees with
respect to such transactions. The Code of Ethics includes some broad
prohibitions against fraudulent conduct, and also includes specific rules,
restrictions, and reporting obligations with respect to personal securities
transactions of the Advisor's employees. Generally, each employee is required to
obtain prior approval of the Advisor's compliance officer in order to purchase
or sell a security for the employee's own account. Purchases or sales of
securities which are not eligible for purchase or sale by the Fund or any other
client of the Advisor are exempted from the prior approval requirement, as are
certain other transactions which the Advisor believes present no potential
conflict of interest. The Advisor's employees are also required to file with the
Advisor quarterly reports of their personal securities transactions.

The Sub-Advisor. The Advisory Agreement authorizes the Advisor, at its option
and at its sole expense, to appoint a Sub-Advisor, which may assume all or a
portion of the responsibilities and obligations of the Advisor pursuant to the
Advisory Agreement as shall be delegated to the Sub-Advisor. Any appointment of
a Sub-Advisor and assumption of responsibilities and obligations of the Advisor
by such Sub-Advisor is subject to approval by the Board of Directors and, if
required by the law, the shareholders of the Fund. Pursuant to this authority,
Kern Capital Management LLC ("the Sub-Advisor") serves as the Fund's
Sub-Advisor. The Sub-Advisor will be overseen by the members of the Fremont
Investment Committee. See "Investment Company Directors and Officers."

The Portfolio Management Agreement will provide that the Sub-Advisor agrees to
manage the investment of the Fund's assets, subject to the applicable provisions
of the Investment Company's Articles of Incorporation, Bylaws and current
registration statements (including, but not limited to, the investment
objective, policies, and restrictions delineated in the Fund's current
Prospectus and Statement of Additional Information), as interpreted from time to
time by the Board of Directors.

For its services under the Portfolio Management Agreement, the Advisor has
agreed to pay the Sub-Advisor a monthly fee equal to the annual rate of .75% of
the Fund's average net assets.

The Portfolio Management Agreement for the Fund continues in effect from year to
year only as long as such continuance is specifically approved at least annually
by (i) the Board of Directors of the Investment Company or by a vote of a
majority of the outstanding voting shares of the Fund, and (ii) by the vote of a
majority of the directors of the Investment Company who are not parties to the
Agreement or interested persons of the Advisor or the Sub-Advisor or the
Investment Company. The Agreement may be terminated at any time without the
payment of any penalty, by the Board of Directors of the Investment Company or
by the vote of a majority of the outstanding voting shares of the Fund, or by
the Sub-Advisor or the Advisor, upon 30 days' written notice to the other party.
Additionally, the Agreement automatically terminates in the event of its
assignment.

Transfer Agent. The Advisor is the Fund's transfer agent 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. The Custodian is not involved in determining investment policies
of the Fund or its portfolio securities transactions. Its services do not
<PAGE>
protect shareholders against possible depreciation of their assets. The fees of
State Street Bank and Trust Company are paid by the Fund and thus borne by the
Fund's shareholders. 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.

EXECUTION OF PORTFOLIO TRANSACTIONS

There are occasions on which portfolio transactions for the Fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other accounts served by the Advisor including other series of the Investment
Company. Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the Fund, they will be effected only when the
Advisor believes that to do so will be in the best interest of the Fund. When
such concurrent authorizations occur, the objective will be to allocate the
executions in a manner which is deemed equitable to the accounts involved,
including the Fund and the other series of the Investment Company.

The Fund contemplates purchasing foreign equity and/or fixed-income securities
in over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. Fixed commissions on foreign
stock transactions and transaction costs with respect to foreign fixed-income
securities are generally higher than negotiated commissions on United States
transactions, although the Fund will endeavor to achieve the best net results on
its portfolio transactions. There is generally less government supervision and
regulation of foreign stock exchanges and brokers than in the United States.
Foreign security settlements may in some instances be subject to delays and
related administrative uncertainties.

Foreign equity securities may be held by the Fund in the form of American
Depository Receipts ("ADRs") or similar instruments. ADRs may be listed on stock
exchanges or traded in the over-the-counter markets in the United States. ADRs,
like other securities traded in the United States, will be subject to negotiated
commission rates. The government securities issued by the United States and
other countries and money market securities in which the Fund may invest are
generally traded in the over-the- counter markets.

Subject to the requirement of seeking the best available prices and executions,
the Advisor may, in circumstances in which two or more broker-dealers are in a
position to offer comparable prices and executions, give preference to
broker-dealers who have provided investment research, statistical, and other
related services to the Advisor for the benefit of the Fund and/or other
accounts served by the Advisor. Such preferences would only be afforded to a
broker-dealer if the Advisor determines that the amount of the commission is
reasonable in relation to the value of the brokerage and research services
<PAGE>
provided by that broker-dealer and only to a broker-dealer acting as agent and
not as principal. The Advisor is of the opinion that, while such information is
useful in varying degrees, it is of indeterminable value and does not reduce the
expenses of the Advisor in managing the Fund's portfolio.

HOW TO INVEST

Price of Shares. The price to be paid by an investor for shares of the Fund, the
public offering price, is based on the net asset value per share which is
calculated once daily as of the close of trading (currently 4:00 p.m., Eastern
time) each day the New York Stock Exchange is open as set forth below. The New
York Stock Exchange is currently closed on weekends and on the following
holidays: (i) New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, July 4th, Labor Day, Thanksgiving, and Christmas Day; and
(ii) the preceding Friday when any one of those holidays falls on a Saturday or
the subsequent Monday when any one of those holidays falls on a Sunday.

The Fund will calculate its net asset value and complete orders to purchase,
exchange, or redeem shares only on a Monday through Friday basis (excluding
holidays on which the New York Stock Exchange is closed). The Fund's portfolio
securities may from time to time be listed on foreign stock exchanges or
otherwise traded on foreign markets which may trade on other days (such as
Saturday). As a result, the net asset value of the Fund may be significantly
affected by such trading on days when a shareholder has no access to the Fund.
See also in the Prospectus at "General Investment Policies - Special
Considerations in International Investing," "Calculation of Net Asset Value and
Public Offering Price," "How to Invest," "How to Redeem Shares," and
"Shareholder Account Services and Privileges - Exchanges Between Funds."

1. Fixed-income obligations with original or remaining maturities in
excess of 60 days are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality,
and type. However, in circumstances where the Advisor deems it
appropriate to do so, prices obtained for the day of valuation from a
bond pricing service will be used. The Fund amortizes to maturity all
securities with 60 days or less remaining to maturity based on their
cost to the Fund if acquired within 60 days of maturity or, if already
held by the Fund on the 60th day, based on the value determined on the
61st day. Options on currencies purchased by the Fund are valued at
their last bid price in the case of listed options or at the average
of the last bid prices obtained from dealers in the case of OTC
options. Where market quotations are not readily available, securities
are valued at fair value pursuant to methods approved by the Board of
Directors.

2. Equity securities, including ADRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last
available mean price. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as the
primary market. Securities traded in the over-the-counter market are
valued at the last available bid price in the over-the-counter market
prior to the time of valuation. Securities and assets for which market
quotations are not readily available (including restricted securities
which are subject to limitations as to their sale) are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors.
<PAGE>
3. Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the
close of the business day in New York. In addition, European or Far
Eastern securities trading may not take place on all business days in
New York. Furthermore, trading takes place in Japanese markets on
certain Saturdays and in various foreign markets on days which are not
business days in New York and on which the Fund's net asset value is
not calculated. The calculation of net asset value may not take place
contemporaneously with the determination of the prices of securities
held by the Fund used in such calculation. Events affecting the values
of portfolio securities that occur between the time their prices are
determined and the close of the New York Stock Exchange will not be
reflected in the Fund's calculation of net asset value unless the
Board of Directors deems that the particular event would materially
affect net asset value, in which case an adjustment will be made.

4. The value of each security denominated in a currency other than U.S.
dollars will be translated into U.S. dollars at the prevailing market
rate as determined by the Advisor.

5. The Fund's liabilities, including proper accruals of taxes and other
expense items, are deducted from total assets and a net asset figure
is obtained.

6. The net assets so obtained are then divided by the total number of
shares outstanding (excluding treasury shares), and the result,
rounded to the nearest cent, is the net asset value per share.

OTHER INVESTMENT AND REDEMPTION SERVICES

The Open Account. When an investor makes an initial investment in the Fund, a
shareholder account is opened in accordance with the investor's registration
instructions. Each time there is a transaction in a shareholder account, such as
an additional investment, redemption, or distribution (dividend or capital
gain), the shareholder will receive from the Sub-Transfer Agent a confirmation
statement showing the current transaction in the shareholder account, along with
a summary of the status of the account as of the transaction date.

Payment and Terms of Offering. Payment of shares purchased should accompany the
purchase order, or funds should be wired to the Sub-Transfer Agent as described
in the Prospectus. Payment, other than by wire transfer, must be made by check
or money order drawn on a U.S. bank. Checks or money orders must be payable in
U.S. dollars and 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.

As a condition of this offering, if an order to purchase shares is cancelled due
to nonpayment (for example, because of a check returned for "not sufficient
funds"), the person who made the order will be responsible for reimbursing the
Advisor for any loss incurred by reason of such cancellation. If such purchaser
is a shareholder, the Fund shall have the authority as agent of the shareholder
to redeem shares in the shareholder's account for the then-current net asset
value per share to reimburse the Fund for the loss incurred. Such loss shall be
the difference between the net asset value of the Fund on the date of purchase
and the net asset value on the date of cancellation of the purchase. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.

The Investment Company reserves the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent investments with
respect to any person or class of persons. An order to purchase shares is not
binding on the Investment Company until it has been confirmed in writing by the
Sub-Transfer Agent (or other arrangements made with the Investment Company, in
the case of orders utilizing wire transfer of funds) and payment has been
received. To protect existing shareholders, the Investment Company reserves the
right to reject any offer for a purchase of shares by any individual.
<PAGE>
Redemption in Kind. The Investment Company may elect to redeem shares in assets
other than cash but must pay in cash all redemptions with respect to any
shareholder during any 90-day period in an amount equal to the lesser of (i)
$250,000 or (ii) 1% of the net asset value of the Fund at the beginning of such
period.

Suspension of Redemption Privileges. The Investment Company may suspend
redemption privileges with respect to the Fund or postpone the date of payment
for more than seven calendar days after the redemption order is received during
any period (1) when the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the Exchange is restricted as
determined by the SEC, (2) when an emergency exists, as defined by the SEC,
which makes it not reasonably practicable for the Investment Company to dispose
of securities owned by it or to fairly determine the value of its assets, or (3)
as the SEC may otherwise permit.

TAXES - MUTUAL FUNDS

Status as a "Regulated Investment Company." The Fund will be treated under the
Code as a separate entity, and the Fund intends to qualify and elect, and to
continue to qualify, to be treated as a separate "regulated investment company"
under Subchapter M of the Code. To qualify for the tax treatment afforded a
regulated investment company under the Code, the Fund must annually distribute
at least 90% of the sum of its investment company taxable income (generally net
investment income and certain short-term capital gains), its tax-exempt interest
income (if any) and net capital gains, and meet certain diversification of
assets and other requirements of the Code. If the Fund qualifies for such tax
treatment, it will not be subject to federal income tax on the part of its
investment company taxable income and its net capital gain which it distributes
to shareholders. To meet the requirements of the Code, the Fund must (a) derive
at least 90% of its gross income from dividends, interest, payments with respect
to securities loans, and gains from the sale or other disposition of securities
or currencies; (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. Government securities, securities of other regulated
investment companies, and other securities, limited, in respect of any one
issuer, to an amount not greater than 5% of the Fund's total assets and 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses. Income and gain
from investing in gold or other commodities will not qualify in meeting the 90%
gross income test.

Even though the Fund intends to qualify as a "regulated investment company," it
may be subject to certain federal excise taxes unless the Fund meets certain
additional distribution requirements. Under the Code, a nondeductible excise tax
of 4% is imposed on the excess of a regulated investment company's "required
distribution" for the calendar year over the "distributed amount" for such
calendar year. The term "required distribution" means the sum of (i) 98% of
ordinary income (generally net investment income) for the calendar year, (ii)
98% of capital gain net income (both long-term and short-term) for the one-year
period ending on October 31 of such year, and (iii) the sum of any untaxed,
undistributed net investment income and net capital gains of the regulated
investment company for prior periods. The term "distributed amount" generally
means the sum of (i) amounts actually distributed by the Fund from its current
year's ordinary income and capital gain net income and (ii) any amount on which
the Fund pays income tax for the year. The Fund intends to meet these
distribution requirements to avoid the excise tax liability.

If for any taxable year the Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions would
be taxable to shareholders to the extent of earnings and profits.
<PAGE>
Distributions of Net Investment Income. Dividends from net investment income
(including net short-term capital gains) are taxable as ordinary income.
Shareholders will be taxed for federal income tax purposes on dividends from the
Fund in the same manner whether such dividends are received as shares or in
cash. If the Fund does not receive any dividend income from U.S. corporations,
dividends from the Fund will not be eligible for the dividends received
deduction allowed to corporations. To the extent that dividends received by the
Fund would qualify for the dividends received deduction available to
corporations, the Fund must designate in a written notice to shareholders the
amount of the Fund's dividends that would be eligible for this treatment. The
maximum federal capital gains rate for individuals 28% with respect to capital
assets held for more than 12 months, but not more than 18 months, and 20% with
respect to capital 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.

Net Capital Gains. Any distributions designated as being made from the Fund's
net capital gains will be taxable as long-term capital gains or mid-term capital
gains, as the case may be, regardless of the holding period of the shareholders
of the Fund's shares. In order to qualify for the dividends received deduction,
a corporate shareholder must hold the Fund's shares paying the dividends, upon
which a dividend received deduction would be based, for at least 46 days during
the 90-day period that begins 45 days before the stock becomes ex-dividend with
respect to the dividend without protection from risk of loss. Similar
requirements apply to the Fund with respect to each qualifying dividend the Fund
receives. Shareholders are advised to consult their tax advisor regarding
application of these rules to their particular circumstances.

Capital loss carryforwards result when the Fund has net capital losses during a
tax year. These are carried over to subsequent years and may reduce
distributions of realized gains in those years. Unused capital loss
carryforwards expire in eight years. Until such capital loss carryforwards are
offset or expire, it is unlikely that the Board of Directors will authorize a
distribution of any net realized gains.

Non-U.S. Shareholders. Under the Code, distributions of net investment income by
the Fund to a shareholder who, as to the U.S., is a nonresident alien
individual, nonresident alien fiduciary of a trust or estate, foreign
corporation, or foreign partnership (a "foreign shareholder") will be subject to
U.S. tax withholding (at a 30% or lower treaty rate). Withholding will not apply
if a dividend paid by the Fund to a foreign shareholder is "effectively
connected" with a U.S. trade or business, in which case the reporting and
withholding requirements applicable to U.S. citizens, U.S. residents, or
domestic corporations will apply. Distributions of net long-term capital gains
are not subject to tax withholding, but in the case of a foreign shareholder who
is a nonresident alien individual, such distributions ordinarily will be subject
to U.S. income tax at a rate of 30% if the individual is physically present in
the U.S. for more than 182 days during the taxable year.

Other Information. The amount of any realized gain or loss on closing out a
futures contract such as a forward commitment for the purchase or sale of
foreign currency will generally result in a realized capital gain or loss for
tax purposes. Under Code Section 1256, futures contracts held by the Fund at the
end of each fiscal year will be required to be "marked to market" for federal
income tax purposes, that is, deemed to have been sold at market value. Sixty
percent (60%) of any net gain or loss recognized on these deemed sales and sixty
percent (60%) of any net realized gain or loss from any actual sales will be
treated as long-term capital gain or loss, and the remainder will be treated as
short-term capital gain or loss. Code Section 988 may also apply to currency
transactions. Under Section 988, each foreign currency gain or loss is generally
computed separately and treated as ordinary income or loss. In the case of
overlap between Sections 1256 and 988, special provisions determine the
character and timing of any income, gain, or loss. The Fund will attempt to
monitor Section 988 transactions to avoid an adverse tax impact. See also
"Investment Objective, Policies, and Risk Considerations" in this Statement of
Additional Information.
<PAGE>
Any loss realized on redemption or exchange of the Fund's shares will be
disallowed to the extent shares are reacquired within the 61 day period
beginning 30 days before and ending 30 days after the shares are redeemed or
exchanged.

Under the Code, the Fund's taxable income for each year will be computed without
regard to any net foreign currency loss attributable to transactions after
October 31, and any such net foreign currency loss will be treated as arising on
the first day of the following taxable year. The Fund may be required to pay
withholding and other taxes imposed by foreign countries generally at rates from
10% to 40% which would reduce the Fund's investment income. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. It is not anticipated that shareholders will be entitled to a foreign tax
credit or deduction for such foreign taxes. The Fund may purchase the securities
of certain foreign investment funds or trusts called passive foreign investment
companies ("PFICs"). Currently, PFICs are the only or primary means by which the
Fund may invest in some countries. If the Fund invests in PFICs, it may be
subject to U.S. federal income tax on a portion of any "excess distribution" or
gain from the disposition of such shares even if such income is distributed as a
taxable dividend to shareholders. In addition to bearing their proportionate
share of the Fund's expenses, shareholders will also bear indirectly similar
expenses of PFICs in which the Fund has invested. Additional charges in the
nature of interest may be imposed on either the Fund or its shareholders in
respect of deferred taxes arising from such distributions or gains. Capital
gains on the sale of such holdings will be deemed to be ordinary income
regardless of how long such PFICs are held. If the Fund were to invest in a PFIC
and elect to treat the PFIC as a " qualified electing fund" under the Code, in
lieu of the foregoing requirements, the Fund might be required to include in
income each year a portion of the ordinary earnings and net capital gains of the
qualified electing fund, even if not distributed to the Fund, and such amounts
would be subject to the 90% and calendar year distribution requirements
described above.

The foregoing is a general abbreviated summary of present United States federal
income taxes on dividends and distributions by the Fund. Investors are urged to
consult their own tax advisors for more detailed information and for information
regarding any foreign, state, and local taxes applicable to dividends and
distributions received.

ADDITIONAL INFORMATION

Custodian. The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675, acts as Custodian for the Investment Company's assets, and as
such safekeeps the Fund's portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Investment Company's
request, and maintains records in connection with its duties.

Independent Auditors; Financial Statements. The Investment Company's independent
auditors are Coopers & Lybrand L.L.P., 333 Market Street, San Francisco,
California 94105. Coopers & Lybrand L.L.P. will conduct an annual audit of the
Fund, assist in the preparation of the Fund's federal and state income tax
returns, and consult with the Investment Company as to matters of accounting,
regulatory filings, and federal and state income taxation. The financial
statements of the Fund as of October 31, 1998 incorporated herein by reference
are audited. Such financial statements are included herein in reliance on the
opinion of Coopers & lybrand L.L.P. given on the authority of said firm as
experts in auditing and accounting.

Legal Opinions. The validity of the shares of common stock offered hereby will
be passed upon by Paul, Hastings, Janofsky & Walker LLP, 345 California Street,
San Francisco, California 94104. In addition to acting as counsel to the
Investment Company, Paul, Hastings, Janofsky & Walker LLP has acted and may
continue to act as counsel to the Advisor and its affiliates in various matters.
<PAGE>
Use of Name. The Advisor has granted the Investment Company the right to use the
"Fremont" name and has reserved the rights to withdraw its consent to the use of
such name by the Investment Company at any time, or to grant the use of such
name to any other company, and the Investment Company has granted the Advisor,
under certain conditions, the use of any other name it might assume in the
future, with respect to any other investment company sponsored by the Advisor.

Shareholder Voting Rights. The Investment Company currently issues shares in ten
series and may establish additional classes or series of shares in the future.
When more than one class or series of shares is outstanding, shares of all
classes and series will vote together for a single set of directors, and on
other matters affecting the entire Investment Company, with each share entitled
to a single vote. On matters affecting only one class or series, only the
shareholders of that class or series shall be entitled to vote. On matters
relating to more than one class or series but affecting the classes and series
differently, separate votes by class and series are required. Shareholders
holding 10% of the shares of the Investment Company may call a special meeting
of shareholders.

Certain Shareholders. To the best knowledge of the Fund, shareholders owning 5%
or more of the outstanding shares of the Fund as of record are set forth below:

Shareholder % held as of
----------- ------------
Name & Address February 19,1998
-------------- ----------------
Bechtel Mast Trust for Qualifed Employees 70.85%
P.O. Box 1742
Church St. Station
New York, NY 10008-1742

Charles Schwab & Co. 11.26%
101 Montgomery Street
San Francisco, Ca 94104-4122

BF Fund Limited 6.37%
50 Fremont Street, Ste. 3600
San Francisco, CA 94105-2239

Historical annual returns of various market indices may be used to represent the
returns of various asset classes as follows:

(1) U.S. Stocks: Standard & Poor's 500 Index;
(2) Foreign Stocks: Morgan Stanley Europe, Australia and Far East (EAFE)
Index;
(3) Intermediate U.S. Bonds: Lehman Brothers Intermediate
Government/Corporate Bond Index;
(4) Foreign Bonds: Salomon Brothers Non-U.S. Dollar Bond Index; and
(5) Money Market Securities: 1980-1986, 90 day U.S. Treasury Bill rate:
1987-1992 Donoghue First Tier Money Market Fund Average.
<PAGE>
The total returns for the above indices for the years 1980 through 1996 are as
follows (source: Fremont Investment Advisors, Inc.):

U.S. Foreign Intmdte Foreign Money Market
Stocks Stocks U.S. Bonds Bonds Securities

1980 32.4% 24.4% 6.4% 14.2% 11.8%
1981 (5.0)% (1.0)% 10.5% (4.6)% 16.1%
1982 21.3% (0.9)% 26.1% 11.9% 10.7%
1983 22.3% 24.6% 8.6% 4.4% 8.6%
1984 6.3% 7.9% 14.4% (1.9)% 10.0%
1985 31.8% 56.7% 18.1% 35.0% 7.5%
1986 18.7% 70.0% 13.1% 31.4% 5.9%
1987 5.1% 24.9% 3.7% 35.2% 6.0%
1988 16.8% 28.8% 6.7% 2.4% 6.9%
1989 31.4% 11.1% 12.8% (3.4)% 8.5%
1990 (3.2)% (23.0)% 9.2% 15.3% 7.5%
1991 30.6% 12.9% 14.6% 16.2% 5.5%
1992 7.7% (11.5)% 7.2% 4.8% 3.3%
1993 10.0% 33.3% 8.8% 15.1% 2.6%
1994 1.3% 8.1% (1.9)% 6.0% 3.6%
1995 37.5% 11.2% 15.3% 19.6% 5.3%
1996 23.0% 6.1% 4.1% 4.5% 4.8%
1997 33.4% 1.8% 7.9% (4.3)% 5.0%

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

The Investment Company offers shares in twelve additional series under separate
Prospectuses and Statements of Additional Information.

INVESTMENT RESULTS

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

The average annual rate of return ("T") for a given period is computed by using
the redeemable value at the end of the period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over the period in years ("n") according to the
following formula as required by the SEC:
n
P(1+T) = ERV

The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) reinvestment of dividends and distributions
at net asset value on the reinvestment date determined by the Board of
Directors; and (2) a complete redemption at the end of any period illustrated.
The Fund will calculate total return for one, five, and ten-year periods after
such a period has elapsed, and may calculate total returns for other periods as
well. In addition, the Fund will provide lifetime average annual total return
figures.

The Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses of
the Fund, so that current or past total return should not be considered
representations of what an investment in the Fund may earn in any future period.
These factors and possible differences in the methods used in calculating
investment results should be considered when comparing the Fund's investment
results with those published for other investment companies and other investment
vehicles. The Fund's results also should be considered relative to the risks
associated with the Fund's investment objective and policies.
<PAGE>
The Investment Company may from time to time compare the investment results of
the Fund with, or refer to, the following:

(3) Statistics reported by Lipper Analytical Services, Inc., which ranks
mutual funds by overall performance, investment objectives, and
assets.

(4) Standard & Poor's "500" Index, which is a widely recognized index
composed of the capitalization-weighted average of the price of 500
large publicly traded U.S. common stocks.

(5) Dow Jones Industrial Average.

(6) CNBC/Financial News Composite Index.

(7) Russell 1000 Index, which reflects the common stock price changes of
the 1,000 largest publicly traded U.S. companies by market
capitalization.

(8) Russell 2000 Index, which reflects the common stock price changes of
the 2,000 largest publicly traded U.S. companies by market
capitalization.

(9) Russell 3000 Index, which reflects the common stock price changes of
the 3,000 largest publicly traded U.S. companies by market
capitalization.

(10) Wilshire 5000 Index, which reflects the investment return of the
approximately 5,000 publicly traded securities for which daily pricing
is available, weighted by market capitalization, excluding income.

(11) Salomon Brothers Broad Investment Grade Index, which is a widely used
index composed of U.S. domestic government, corporate, and
mortgage-backed fixed income securities.

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

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

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

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

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

(17) Lehman Brothers Government/Corporate Intermediate Bond Index, which is
a widely used index composed of investment quality U.S. government and
corporate fixed income securities with maturities between one and ten
years.
<PAGE>
(18) Salomon Brothers World Government Bond Index, which is a widely used
index composed of U.S. and non-U.S. government fixed income securities
of the major countries of the World.

(19) 90-day U.S. Treasury Bills Index, which is a measure of the
performance of constant maturity 90-day U.S. Treasury Bills.

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

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

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

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

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

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

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

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

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

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

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

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

Indices prepared by the research departments of such financial organizations as
J.P. Morgan; Lehman Brothers; S.G. Warburg; Jardine Fleming; the Asian
Development Bank; Bloomberg, L.P.; Morningstar, Inc; Salomon Brothers, Inc.;
Merrill Lynch, Pierce, Fenner & Smith, Inc.; Morgan Stanley; Bear Stearns & Co.,
Inc.; Prudential Securities, Inc.; Smith Barney Inc.; and Ibbottson Associates
of Chicago, Illinois ("Ibbottson") may be used, as well as information provided
by the Federal Reserve and the respective central banks of various countries.

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

The Advisor believes the Fund is an appropriate investment for long-term
investment goals including, but not limited to, funding retirement, paying for
education, or purchasing a house. The Fund does not represent a complete
investment program, and investors should consider the Fund as appropriate for a
portion of their overall investment portfolio with regard to their long-term
investment goals.
<PAGE>
The Advisor believes that a growing number of consumer products, including, but
not limited to, home appliances, automobiles, and clothing, purchased by
Americans are manufactured abroad. The Advisor believes that investing globally
in the companies that produce products for U.S. consumers can help U.S.
investors seek protection of the value of their assets against the potentially
increasing costs of foreign manufactured goods. Of course, there can be no
assurance that there will be any correlation between global investing and the
costs of such foreign goods unless there is a corresponding change in value of
the U.S. dollar to foreign currencies. From time to time, the Investment Company
may refer to or advertise the names of such companies although there can be no
assurance that the Fund may own the securities of these companies.

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

The Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future. The Fund may be compared in advertising to Certificates
of Deposit (CDs), the Bank Rate Monitor National Index, an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities chosen to represent
the ten largest Consumer Metropolitan statistical areas, or other investments
issued by banks. The Fund differs from bank investments in several respects. The
Fund may offer greater liquidity or higher potential returns than CDs; but
unlike CDs, the Fund will have a fluctuating share price and return and is not
FDIC insured. The Fund's performance may be compared to the performance of other
mutual funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared by
Lipper Analytical Services, Inc. (Lipper), an independent service which monitors
the performance of mutual funds. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take sales
charges or redemption fees into consideration, and is prepared without regard to
tax consequences. In addition to the mutual fund rankings, the Fund's
performance may be compared to mutual fund performance indices prepared by
Lipper.

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

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

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

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

The Fund may be available for purchase through retirement plans of other
programs offering deferral of or exemption from income taxes, which may produce
superior after-tax returns over time. For example, a $10,000 investment earning
a taxable return of 10% annually would have an after-tax value of $17,976 after
ten years, assuming tax was deducted from the return each year at a 39.6% rate.
An equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period.

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

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

SEP-IRAs and SIMPLE IRAs: Simplified employee pension (SEP) plans and SIMPLE
plans provide employers and self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore lower annual administration
expenses.
<PAGE>
Roth IRA: The Roth IRA allows investment of after-tax dollars in a retirement
account that provides tax-free growth. Funds can be withdrawn without federal
income tax or penalty after the account has been open for five years and the age
of 59 1/2has been attained.

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

1) Stock market capitalization: Morgan Stanley Capital International
World Indices, International Finance Corporation, and Datastream.

2) Stock market trading volume: Morgan Stanley Capital International
World Indices, and International Finance Corporation.

3) The number of listed companies: International Finance Corporation,
Salomon Brothers, Inc., and S.G. Warburg.

4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley
Capital International World Indices.

5) International industry performance: Morgan Stanley Capital
International World Indices, Wilshire Associates, and Salomon
Brothers, Inc.

6) Stock market performance: Morgan Stanley Capital International World
Indices, International Finance Corporation, and Datastream.

7) The Consumer Price Index and inflation rate: The World Bank,
Datastream, and International Finance Corporation.

8) Gross Domestic Product (GDP): Datastream and The World Bank.

9) GDP growth rate: International Finance Corporation, The World Bank,
and Datastream.

10) Population: The World Bank, Datastream, and United Nations.

11) Average annual growth rate (%) of population: The World Bank,
Datastream, and United Nations.

12) Age distribution within populations: Organization for Economic
Cooperation and Development and United Nations.

13) Total exports and imports by year: International Finance Corporation,
The World Bank, and Datastream.

14) Top three companies by country, industry, or market: International
Finance Corporation, Salomon Brothers, Inc., and S.G. Warburg.
<PAGE>
15) Foreign direct investments to developing countries: The World Bank and
Datastream.

16) Supply, consumption, demand, and growth in demand of certain products,
services, and industries, including, but not limited to, electricity,
water, transportation, construction materials, natural resources,
technology, other basic infrastructure, financial services, health
care services and supplies, consumer products and services, and
telecommunications equipment and services (sources of such information
may include, but would not be limited to, The World Bank, OECD, IMF,
Bloomberg, and Datastream).

17) Standard deviation and performance returns for U.S. and non-U.S.
equity and bond markets: Morgan Stanley Capital International.

18) Political and economic structure of countries: Economist Intelligence
Unit.

19) Government and corporate bonds - credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.

20) Dividend for U.S. and non-U.S. companies: Bloomberg.

In advertising and sales materials, the Advisor may make reference to or discuss
its products, services, and accomplishments. Such accomplishments do not provide
any assurance that the Fund's investment objective will be achieved.
<PAGE>

FREMONT INVESTMENT ADVISORS

Innovative Investment
Management and
Advisory Services

A subsidiary of Fremont Investors, Inc.
<PAGE>
THE FREMONT GROUP

The Fremont Group manages over $6 billion in four key business areas.

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

o Crown Pacific -- timber/lumber

o Petro Shopping Centers -- full-service truck stops

o Trinity Ventures -- venture capital

Real Estate - Fremont Properties, Inc., a subsidiary of Fremont Investors,
Inc. acquires and develops commercial, retail and industrial real estate.
Fremont Properties also manages over 6 million square feet of real estate in 29
properties across the U.S.

Energy - Activities of The Fremont Group's energy affiliate, Fremont Energy
L.P., include oil and natural gas exploration and development

Securities Management - Through its affiliated company, Fremont Investment
Advisors, The Fremont Group manages over $4.7 billion in global investment
portfolios.
<PAGE>
FREMONT INVESTMENT ADVISORS

Fremont Investment Advisors provides investment management services to both
institutional and individual clients.

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

-- defined benefit plans

-- defined contribution plans

-- foundations and trusts

-- high net worth individuals

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

FREMONT MUTUAL FUNDS

The Fremont Funds offer investors nine no-load mutual funds in a wide
variety of investment areas.

The Fremont Family of Funds includes nine no-load mutual funds in a
variety of investment disciplines. From conservative bond and money market funds
to aggressive U.S. micro-cap and international small cap stock funds, Fremont
Mutual Funds offer investors a full range of investment options.
<PAGE>
INNOVATIVE INVESTMENT MANAGEMENT

Fremont Investment Advisors utilizes both internal and external
investment management expertise.

FIA's current team of external managers includes:

International Stock Investments
--Acadian Asset Management

Nicholas Applegate Capital Management (Hong Kong) LLC

Bond Investments
--Pacific Investment Management Company
(PIMCO)

-- U.S. Micro-Cap and Small Cap Investment
Kern Capital Management LLC
(KCM)

For more information about Fremont or the Fremont Funds,
please call 800-548-4539 (press 1).
<PAGE>
THE FREMONT GROUP
ORGANIZATION
| | | |
| | | |
| | | |
Direct Investments | | |
| | |
Real Estate | |
| |
Energy |
|
Securities Management
|
|
Fremont Fremont
Investment -- Mutual
Advisors Funds
<PAGE>
APPENDIX A: DESCRIPTION OF RATINGS