SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, For use of
the Commission Only (as
permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
Fremont Mutual Funds, Inc.
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
- --------------------------------------------------------------------------------
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration no.:
Schedule 14A; 33-23453; 811-05632
- --------------------------------------------------------------------------------
(3) Filing Party: Fremont Mutual Funds, Inc.
- --------------------------------------------------------------------------------
(4) Date Filed: January __, 1998
- --------------------------------------------------------------------------------
<PAGE>
INDEX OF FILING
---------------
I. Wrapper
A. Shareholder Letter for Fremont International Growth Fund
1. Fremont International Growth Fund Proxy Statement
a. Exhibit A - Investment Advisory Agreement and
Administrative Services Agreement
b. Exhibit B - Investment Management Agreement (Sub-Advisory
Agreement)
c. Exhibit C - 12b-1 Share Marketing Plan
2. Proxy Voting Card
B. Shareholder Letter for Fremont Emerging Markets Fund
1. Fremont Emerging Markets Fund Proxy Statement
a. Exhibit A - 12b-1 Share Marketing Plan
2. Proxy Voting Card
<PAGE>
IMPORTANT PROXY VOTE
FOR FREMONT INTERNATIONAL GROWTH FUND SHAREHOLDERS.
PLEASE READ AND RESPOND PROMPTLY.
January ____, 1998
Dear Shareholder:
I am writing to inform you of a Special Meeting of Shareholders of the Fremont
International Growth Fund that will be held on February ____, 1998. The purpose
of this meeting is to vote on four significant proposals concerning the Fund. As
a shareholder, you have the opportunity to voice your opinion on these matters
that affect your Fund. Please read the enclosed materials and cast your vote on
the proxy card.
The Fremont Board of Directors recommends that each of the proxy proposals
presented below be approved and adopted by Fremont International Growth Fund
shareholders. For your convenience, we have briefly outlined the four proxy
proposals you are being asked to vote on:
1) Change of Manager: The Board of Directors of the Fund has decided to
strengthen the Fund's competitiveness by recommending that a new
sub-advisor, Capital Guardian Trust Company, be retained to manage the
Fund. Capital Guardian--a Los Angeles based investment manager with
over 240 investment professionals in 10 international research
offices--brings an excellent performance track record and extensive
investment management experience to the Fund.
2) Changes to the Fee Schedule: In an effort to improve disclosure of
fees, the fee schedule will also be changed. Note: This will not
increase the total expense ratio of the Fund. With shareholder
approval, the expenses will be changed from a unified fee arrangement
with a 1.50% expense ratio to an allocated arrangement with the
following fee schedule: Management fee -- 1.00%, Administrative fee --
.15%, Other fee -- .10%, and a new 12b-1 Marketing fee -- .25%. The
total fees for the fund will continue to be capped at 1.50%.
3) Implementation of 12b-1 Distribution Fee: Going forward, the Fund will
institute a .25% distribution fee. This fee will be used to cover the
costs to actively distribute the Fund, but the plan will not increase
the total expense ratio of the Fund.
4) Multi-Manager Exemption: Fremont Investment Advisors, Inc., (the
"Advisor") is responsible to the shareholders for the selection and
oversight of portfolio managers and sub-advisors for the Fremont Funds.
Currently, the Advisor may employ, terminate, or change portfolio
managers for the Fund only with shareholder approval. The Advisor is
requesting shareholder approval of a proposal to amend the Fund's
investment advisory agreement, which will permit the Advisor to hire
sub-advisors for the Fund or modify subadvisory agreements without a
shareholder vote. Implementing this policy could benefit shareholders
by reducing fund expenses, allowing for more timely sub-advisor changes
when warranted and improving operating efficiencies.
Voting by mail is quick and easy. Everything you need is enclosed. We encourage
you to exercise your rights as a shareholder and vote promptly. To cast your
vote, simply complete the proxy card and return it in the enclosed postage-paid
envelope no later than February 20. Or, if you would like to vote in person, you
may do so at the special shareholder meeting that will take place at 9:00 a.m.
on Friday, February ___, 1998 in the main conference room on the 26th Floor of
333 Market Street, San Francisco.
(over, please)
<PAGE>
If you have any questions about any of these materials, please call us at (800)
548-4539 ( press 1). Thank you for your participation and for investing with
Fremont Mutual Funds.
Sincerely,
Michael H. Kosich
President
P.S. Your vote is important, so please make sure that you complete the enclosed
proxy and mail it back to us in the postage-paid envelope before the February 20
response deadline.
2
<PAGE>
FREMONT MUTUAL FUNDS, INC.
FREMONT INTERNATIONAL GROWTH FUND
333 Market Street
26th Floor
San Francisco, CA 94105
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on February __, 1998
A Special Meeting of Shareholders (the "Meeting") of the FREMONT
INTERNATIONAL GROWTH FUND (the "Fund") will be held at the Fund's offices at 333
Market Street, 26th Floor, San Francisco, California 94105, on February __, 1998
at 10:00 a.m. for the following purposes:
1. To consider and act upon the approval of a new investment
advisory agreement between Fremont Mutual Funds, Inc. and
Fremont Investment Advisors, Inc., the investment manager of
the Fund.
2. To consider and act upon the approval of a new investment
subadvisory agreement between (i) Fremont Mutual Funds, Inc.,
(ii) Fremont Investment Advisors, Inc., the investment manager
of the Fund, and (iii) Capital Guardian Trust Company.
3. To consider and act upon the approval and adoption of a Plan
of Distribution pursuant to Rule 12b-1 of the Investment
Company Act of 1940, as amended.
4. To consider and act upon the approval of a proposal to permit
Fremont Investment Advisors, Inc. to hire and terminate
subadvisers or modify subadvisory agreements without
shareholder approval.
5. To transact such other business as may properly come before
the Meeting or any adjournments thereof.
The stock transfer books will not be closed but, in lieu thereof, the
Board of Directors has fixed the close of business on _____ __, 1998 as the
record date for the determination of shareholders of the Fund entitled to notice
of, and to vote at, the Meeting.
By order of the Board of Directors
Tina Thomas, Secretary
<PAGE>
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN PERSON OR BY
PROXY; IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE APPROPRIATE ENCLOSED PROXY OR PROXIES IN THE ACCOMPANYING
ENVELOPE PROVIDED FOR YOUR CONVENIENCE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
- --------------------------------------------------------------------------------
San Francisco, California
January __, 1998
2
<PAGE>
FREMONT MUTUAL FUNDS, INC.
FREMONT INTERNATIONAL GROWTH FUND
333 Market Street
26th Floor
San Francisco, CA 94105
(800) 548-4539
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY __, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of Fremont Mutual Funds, Inc. (the
"Company"), on behalf of the Fremont International Growth Fund (the "Fund") of
proxies to be voted at a Special Meeting of Shareholders of the Fund to be held
at the Fund's offices at 333 Market Street, 26th Floor, San Francisco,
California 94105, on February __, 1998 at 10:00 a.m. (the "Meeting") and at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders.
The costs of preparing, printing, mailing and soliciting the proxies
will be borne equally by Fremont Investment Advisors, Inc. (the "Investment
Manager") and the Fund. In addition, certain officers, directors and employees
of the Investment Manager and officers and directors of the Fund (none of whom
will receive additional compensation therefor) may solicit proxies in person or
by telephone, telegraph or mail. ADP Investor Communication Series has been
retained at its customary rates to solicit proxies.
All properly executed proxies received prior to the Meeting will be
voted at the Meeting in accordance with the instructions marked thereon or
otherwise as provided therein. Unless instructions to the contrary are marked,
shares represented by the proxies will be voted "FOR" all the proposals. All
shares in Fund-sponsored IRA accounts not voted by the account owner will be
voted by the IRA trustee in the same proportion (for, against and abstain) as
all other votes cast whether in person or by proxy. For purposes of determining
the presence of a quorum for transacting business at the Meeting, abstentions
and broker "non-votes" (that is, proxies from brokers or nominees indicating
that such persons have not received instructions from the beneficial owner or
other persons entitled to vote shares on a particular matter with respect to
which the brokers or nominees do not have discretionary power) will be treated
as shares that are present. However, broker non-votes are disregarded in
determining "votes cast" when the voting requirement is based on achieving a
percentage of the voting securities entitled to vote present in person or by
proxy at the Meeting. Any proxy may be revoked at any time prior to the exercise
thereof by submitting another proxy bearing a later date or by giving written
notice to the Secretary of the Company at the address indicated above or by
voting in person at the Meeting. Any proxy may be revoked at any time prior to
the exercise thereof by submitting another proxy bearing a later date or by
giving written notice to the Secretary of the Company at the address indicated
above or by voting in person at the Meeting. The affirmative vote of a majority
of the shares as defined under the Investment Company Act of 1940 as amended
(the "1940 Act") (a "Majority Vote") (either 67% of the shares present at the
Meeting, if holders of more than 50% of the
3
<PAGE>
outstanding shares are present in person or by proxy, or more than 50% of the
outstanding shares, whichever is less) of the Fund is necessary to approve the
Fund's new investment advisory agreement (Proposal I), to approve the Fund's new
investment subadvisory agreement (Proposal II), to approve the adoption of a
Plan of Distribution pursuant to Rule 12b-1 of the 1940 Act (Proposal III) and
to approve an arrangement to permit the Investment Manager to hire and terminate
subadvisers or modify subadvisory agreements without shareholder approval
(Proposal IV).
In the event that insufficient votes in favor of any of the items to be
considered at the Meeting are received by the time scheduled for the Meeting,
the Meeting may be held for the purpose of voting on those proposals for which
sufficient votes have been received, and the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of the proxies with respect to any proposals for which sufficient votes had not
been received. Any such adjournment will require the affirmative vote of a
majority of votes cast on the question in person or by proxy at the Meeting. The
persons named as proxies will vote against such adjournment only with respect to
those proxies that they are required to vote against such proposal.
Since the four Proposals are intrinsically related to one another, in
the event one or more of the Proposals are not approved by shareholders, the
Board of Directors, at its discretion, may decide not to implement any approved
Proposal until the time when all four Proposals were approved if the Board
determines that delaying such implementation is in the best interests of
shareholders.
The Board of Directors of the Company knows of no business other than
that specifically mentioned in the Notice of Meeting which will be presented for
consideration at the Meeting. If any other matters are properly presented, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment.
The Board of Directors of the Company has fixed the close of business
on _____ __, 1998 as the record date (the "Record Date") for the determination
of shareholders of the Fund entitled to notice of and to vote at the Meeting or
any adjournment thereof. Shareholders of the Fund on that date will be entitled
to one vote on each matter on which they are entitled to vote for each share
held and a fractional vote with respect to fractional shares, and shareholders
will not have cumulative voting rights. At the close of business on the Record
Date, the Fund had _________ outstanding shares, each with a par value of
$0.0001 per share.
The principal executive offices of the Company are located at 333
Market Street, 26th Floor, San Francisco, California 94105. The enclosed proxy
and this proxy statement are first being sent to the Fund's shareholders on or
about _____ __, 1998.
As of the Record Date, the [Investment Manager owned of record ____% of
the outstanding shares of the Fund; Fremont Group L.L.C.'s pension plan owned of
record ____% of the outstanding shares of the Fund; and Fremont Investors,
Inc.'s pension plan owned of record ____% of the outstanding shares of the
Fund.] As of the Record Date, to the best knowledge of the Fund, no other person
owned of record or beneficially more than 5% of the outstanding shares of the
Fund.
BACKGROUND
The Investment Manager is seeking shareholder approval to make certain changes
to the Fund's operations and fee structure. Since the Fund commenced operations
on March ___ 1994, the Fund has had limited success in attracting sufficient
assets to allow the Investment Manager to operate the Fund at a cost-efficient
level. As a result, the Investment Manager has proposed several changes which
the Investment Manager believes would assist in increasing the Fund's assets
(and thereby lower expenses on a per share basis over the long term). The first
proposed change would modify the Fund's current unitary fee structure and
replace
4
<PAGE>
it with an itemized fee structure, but without any increase in total operating
cost -- i.e., a structural change with no economic change. Such a change would
bring the Fund's fee structure in line with most other mutual funds advised by
the Investment Manager. The second change would be to approve the appointment of
an investment subadviser with recognized expertise in international growth
investment to subadvise the Fund. The Investment Manager has proposed, and the
Board preliminarily approved, that Capital Guardian Trust Company ("Capital
Guardian"), an investment management firm with $65 billion in assets under
management and currently the subadviser to three mutual funds that invest in
international securities as the subadviser to the Fund. The Investment Manager
believes that Capital Guardian, with its expertise in international investments,
would be able to provide excellent portfolio management for the Fund. The
Investment Manager also believes that if the subadviser produces improved
investment results, more assets will be attracted to the Fund. The third
proposed change would allow the Investment Manager to change subadvisers and
modify subadvisory agreements without approval of the Fund's shareholders (as
discussed in Proposal II and Proposal IV). As a fourth proposed change, the
Investment Manager also proposes the adoption of a Rule 12b-1 distribution plan
whereby a certain amount of the Fund's assets would be used in marketing and
distribution activities for the Fund.
PROPOSAL I
TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT FOR THE FUND TO CHANGE
THE FUND's FEE STRUCTURE FROM A UNITARY FEE STRUCTURE
TO AN ITEMIZED FEE STRUCTURE
The Investment Manager currently provides investment advisory services
to the Fund pursuant to an Investment Advisory and Administrative Services
Agreement (the "Current Agreement"). The Investment Manager, located at 333
Market Street, 26th Floor, San Francisco, CA 94105, has advised the Fund since
its inseption. The Investment manager currently has $______ of assets under
management. Under the Current Agreement, the Fund pays the Investment Manager an
all-inclusive unitary management fee at an annual rate of 1.50% of the Fund's
average daily net assets, and the Investment Manager in turn is responsible for
providing investment advisory and administrative services as well as paying all
of the Fund's other ordinary operating expenses. This Proposal I seeks
shareholders' approval for a new Investment Advisory Agreement (the "New
Agreement") that would modify the current contractual management fee arrangement
between the Fund and the Investment Manager by (i) replacing the all-inclusive
unitary fee structure with a fee structure under which the Fund (rather than the
Investment Manager) would pay all of its expenses, including its administrative
expenses and other operating expenses and (ii) reducing the management fee rate
from 1.50% of the Fund's average daily net assets to 1.00% of the Fund's average
net assets.
Comparison of the Current Agreement and the New Agreement
The initial shareholder of the Fund approved the Current Agreement
shortly before the Fund commenced operation on _________________.The Board of
Directors of the Company, including a majority of the "disinterested" Directors,
most recently approved continuation of the Current Agreement on
_________________. Under the Current Agreement, the Investment Manager is
entitled to receive from the Fund an all-inclusive unitary management fee of
1.50% of the average daily net assets of the Fund.
The New Agreement for the Fund is identical in all material respect to
the Current Agreement except that the New Agreement would change the fee
structure as well as the effective and termination dates and would add a
recapture period for waived fees and expenses as further discussed below. A form
of the New Agreement is attached to this Proxy Statement as Exhibit A. The
following description of the New Agreement is only a summary. You should refer
to Exhibit A for the complete New Agreement.
Under the New Agreement, the Investment Manager would oversee the
subadviser's provision of investment advisory services to the Fund, including
deciding what securities will be purchased and sold
5
<PAGE>
by the Fund, when such purchases and sales are to be made, and arranging for
those purchases and sales, all in accordance with the provisions of the
Investment Company Act of 1940 as amended and the rules thereunder, the
governing documents of the Company, the fundamental policies of the Fund, as
reflected in its registration statement, and any policies and determinations of
the Board of Directors.
Section 15 of the 1940 Act prohibits any person from serving as an
investment advisor to a registered investment company except pursuant to a
written contract that has been approved by the shareholders. Therefore, in order
for the Investment Manager to continue advising the Fund under the New
Agreement, the shareholders of the Fund must approve the New Agreement.
If approved by shareholders, the New Agreement will continue in effect
for two years from its effective date, and will continue in effect thereafter
for successive annual periods, provided its continuance is specifically approved
at least annually by (1) a majority vote, cast in person at a meeting called for
that purpose, of the Company's Board of Directors or (2) a vote of the holders
of a majority of the outstanding voting securities (as defined in the 1940 Act
and the rules thereunder) of the Fund, and (3) in either event by a majority of
the Directors who are not parties to the New Agreement or interested persons of
the Company or of any such party. The New Agreement provides that it may be
terminated at any time, without penalty, by either party upon 30-days' written
notice, provided that such termination by the Fund shall be directed or approved
by a vote of the Directors of the Company, or by a vote of holders of a majority
of the shares of the Company.
The advisory fee for both the Current Agreement and the New Agreement
are both expressed as an annual percentage of the Fund's average net assets,
calculated daily and paid monthly. Under the Current Agreement, the Fund pays
the Investment Manager a 1.50% all-inclusive fee (also called a unitary fee),
and the Investment Manager provides investment advisory services, administrative
services and pays all of the Fund's other expenses except for certain
extraordinary expenses. The Investment Manager is entitled to receive this
amount regardless of whether the actual expenses of the Fund are more or less
than this amount. Under the New Agreement, the Fund would pay the Investment
Manager a 1.00% Management Fee that is not all-inclusive; the Fund would pay
separately for all of the other expenses. However, the Investment Manager has
agreed to cap all ordinary Fund advisory and operating expenses at the current
unitary fee rate of 1.50% per annum until October 31, 1999. The following is a
comparison of the fee structure under the Current Agreement and the New
Agreement.
Current Agreement New Agreement
----------------- -------------
Management Fee 1.50% 1.00%
Administrative Fee None 0.15%
12b-1 Fee None 0.25%*
Other Expenses None 0.10%**
Total Operating Expenses 1.50% 1.50%**
* The 12b-1 Fee will be imposed only if Proposal III is approved by the
shareholders of the Fund.
** The Investment Manager anticipates waiving fees and reimbursing the Fund
for other expenses in order to limit total operating expenses of the Fund
to 1.50% of average daily net assets through the end of the Fund's fiscal
year ending October 31, 1999. To the extent management fees are waived
and/or other expenses are reimbursed by the Investment Manager, the
Investment Manager may elect to recapture such amounts subject to the
following conditions: the Investment Manager must request reimbursement
within three years from the year in which the initial waiver and/or
reimbursement is made, and the Board of Directors must approve the
reimbursement, and the Fund must be able to make the reimbursement and
still stay within the then current operating expense limitation.
6
<PAGE>
Although the Investment Manager is not required to do so, the New
Agreement permits the Investment Manager to reimburse the Fund to the extent
necessary so that the Fund's ratio of operating expenses to average net assets
will not exceed the voluntary expense limit of 1.50%. The Current Agreement does
not have an expense limit because in a unitary fee structure, the Investment
Manager is responsible for paying all expenses of the Fund. The expense limit
under the New Agreement is voluntary on the part of the Investment Manager. The
Investment Manager may remove these limitations at any time after October 31,
1999 by amending the prospectus and notifying shareholders. Shareholders should
note that even though the Investment Manager has agreed to limit expenses to
1.50% through the end of fiscal year 1999 (which ends on October 31, 1999) the
Investment Manager is under no obligation to continue the voluntary waiver after
the end of that period. If the Investment Manager ceases to continue such waiver
after that date, and if the Fund's actual total operating expenses exceed the
1.50% limit, the total operating expenses of the Fund might increase.
Furthermore, unlike the existing arrangement, fee waived and expenses reimbursed
by the Investment Manager are subject to recapture by the Investment Manager
within three years from the year in which the waiver and/or reimbursement is
made if certain conditions as set forth above in the footnote to the fee table
are satisfied. Similarly, if the Fund increases to a size where its annual
operating expenses are below 1.50% of average net assets (including payment of
any requested reimbursement to the Investment Manager), then shareholders will
receive the entire benefit of such reduced operating costs.
Both the New Agreement and the Current Agreement provide that the
Investment Manager would have no liability to the Fund or any shareholder of the
Fund for any act or omission in connection with rendering services under the
respective agreements, including any error of judgment, mistake of law or any
loss arising out of any investment, except for liability resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the Investment Manager of its duties under the agreements ("Disabling Conduct"),
and except to the extent specified in Section 36(b) of the Investment Company
Act with respect to a loss resulting from the breach of fiduciary duty with
respect to receipt of compensation for services. The New Agreement, like the
current Agreement, provides that the Fund shall indemnify the Investment Manager
and its employees, officers and directors from any liability arising from the
Investment Manager's conduct under the New Agreement, except for Disabling
Conduct, to the extent permitted by the Fund's governing documents and
applicable law.
During the fiscal year ended October 31, 1997, the Investment Manager
earned $_____________ in advisory fees under the Current Agreement.
Benefits to Shareholders
The following are the main reasons why the Investment Manager proposed
the change of fee structure:
(1) Improve Disclosure of Expenses. An all-inclusive unitary fee
structure does not provide a detailed breakdown of itemized fees. By commingling
all fees of the Fund under one single fee number, it is more difficult for the
Board of Directors to evaluate the fairness, reasonableness and competitive
nature of the fees. The Board of Directors historically has used profit analysis
and other approaches to try to determine whether the fee requested by the
Investment Manager is fair and reasonable as compared to the industry average
but over time has found it increasingly difficult to do so on an accurate
basis.[*] The Investment Manager believes a unitary number also may confuse
shareholders as to the true management fee paid to the Investment Manger for
investment advisory services and does not provide shareholders as much detailed
information as shareholders increasingly demand. By itemizing each major
category of expenses for the Fund, the new fee structure would make each fee
item more transparent to the Directors and shareholders. It is expected that
such additional disclosure would assist the Board in carrying out its fiduciary
duties and to help shareholders in their understanding of the costs of investing
in the Fund.
7
<PAGE>
(2) Enhance comparability of Expense with Other Mutual Funds. The
Investment Manager believes that by providing a detailed breakdown of each item
of expense, shareholders would be in a better position to compare the Fund's
expense structure with other mutual funds. By changing to an itemized structure,
shareholders would be able to better compare the Fund's expense structure with
other mutual funds.
(3) Potential Reduction in Expenses. As noted in Proposal III below,
the Investment Manager is proposing the adoption of a Rule 12b-1 Plan to improve
the marketing of the Fund's shares which is expected to result in increased
asset size and reduce per share total operating expenses for the Fund. Without
changing the fee structure of the Current Agreement, the imposition of a 12b-1
fee on the Fund at the rate of 0.25% (1/4 of 1%) of the Fund's average annual
net assets would have the effect of increasing the Fund's total operating
expense to 1.75%. The Investment Manager has agreed to reduce its fees in order
to maintain the total operating expenses of the Fund at the 1.50% level until
October 31, 1999 under the proposed non-unitary fee arrangement, thus making it
possible for the Fund would be in a position to add a new 12b-1 Plan without
increasing the total fees to be paid by shareholders.
Evaluation by the Board of Directors
On December 17, 1997, the independent directors of the Company's Board
met and discussed the proposal and evaluated the terms of the New Agreement.
After careful consideration, the Board decided on to preliminarily approve the
proposed New Agreement and to submit the proposed New Agreement to shareholders
for approval, subject to the Board's final approval at an in-person meeting,
which is expected to occur after the date the proxy materials were to be mailed
to shareholders but before the shareholder meeting date. (Currently scheduled to
be on January 30, 1998.) If the Board fails to approve this Proposal I in its
January 30, 1998 meeting, this Proposal I will be withdrawn from the
shareholders' meeting
In preliminarily approving the New Agreement, the Board considered
various factors, including (1) the improved disclosure of itemized expenses of
the Fund (2) the enhanced ability of for the Directors and shareholders to
compare the Fund's per-item expense ratios to other mutual funds (e.g. better
comparison of management fees, which under the New Agreement will be specified
as a separate item instead of being an aggregate number) and (3) the reduction
in Management Fee which allows the Fund to add a 12b-1 Plan without causing an
increase in total Fund operating expense. In determining to preliminarily
recommend that shareholders of the Fund vote to approve the New Agreement as
being in the best interest of the Fund's shareholders, the Board gave
substantial weight to management's representations and its conclusion that the
improved disclosure would result in a more transparent fee disclosure and
thereby better allow both the Board and the shareholders to compare the true
expenses of the Fund with other mutual funds.
Accordingly, after consideration of the above, and such other factors
and information as it deemed relevant, the Board of Directors, including all of
the directors who are not interested persons (as such term is defined by the
1940 Act), preliminarily approved the New Agreement and voted to recommend its
approval to the Fund's shareholders, subject to the Directors' formal approval
in an in-person meeting prior to the shareholders' meeting.
The Board of Directors recommends that shareholders vote "FOR" the
proposal to approve the New Agreement to change the Fund's fee structure from a
unitary fee structure to an itemized expense structure. If the shareholders of
the Fund do not approve this Proposal, the Current Agreement will continue.
8
<PAGE>
PROPOSAL II
TO CONSIDER A NEW SUBADVISORY AGREEMENT FOR THE FUND
Currently, the Investment Manager provides the Fund with investment
management and administrative services under an Investment Advisory and
Administrative Agreement (the as defined above the "Current Agreement"). The
Current 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 Investment Manager has recommended to the Board of Directors that the Fund
retain Capital Guardian Trust Company (as defined above, "Capital Guardian") to
serve as the investment subadviser for the Fund. The form of Portfolio
Management Agreement to be entered among the Fund, the Investment Adviser and
Capital Guardian (the "Subadvisory Agreement") is attached as Exhibit B. THE
SUBADVISORY AGREEMENT WILL NOT IN ANY MANNER INCREASE THE FEES OTHERWISE
INCURRED BY FUND SHAREHOLDERS.
Section 15 of the 1940 Act prohibits any person from serving as an
investment advisor to a registered investment company except pursuant to a
written contract that has been approved by the shareholders. Therefore, in order
for Capital Guardian to provide investment subadvisory services to the Fund, the
shareholders of the Fund must approve the new Subadvisory Agreement.
The Subadvisory Agreement, if approved by the Fund's shareholders, will
commence on or about March 1, 1998, following the approval of the Subadvisory
Agreement by the shareholders. Thereafter, the Subadvisory Agreement will remain
in effect for two years and will continue in effect thereafter successive for
annual periods if and so long as such continuance is specifically approved by
(a) the Board of Directors or (b) a Majority Vote of the Fund's shareholders,
provided that in either event, the continuance also is approved by a majority of
the directors who are not "interested persons" by vote cast in person at a
meeting called for the purpose of voting on such approval. If the Subadvisory
Agreement is not approved by shareholders, the Investment Manager will continue
to manage the Fund's assets directly until alternative arrangements can be made.
The Investment Subadviser
Capital Guardian, [located at One Market, Steuart Towers, Suite 1800,
San Francisco, California] will, upon approval by the Board and the
shareholders, serve as the Fund's investment subadviser in conformity with the
Fund's investment objectives and policies.
Capital Guardian is a wholly-owned subsidiary of The Capital Companies,
Inc., a non-operating holding company for a group of companies involved in
providing investment management for institutions around the world. The Capital
organization is one of the oldest major financial service firms in the United
States, dating back to 1931. Capital Guardian was chartered in 1968 under the
California State banking laws as a non-depository trust company. Its principal
business is providing investment management services, including international
investment management services to a limited number of large institutional
clients such as employee benefit funds, public funds, foundations, and endowment
funds. Capital Guardian has been managing domestic equity assets since its
founding in 1968, and now manages over $65 billion for institutional investors,
including over $28 billion in non-U.S. equity assets. The Capital organization's
commitment to international research and investing dates back to 1955 when its
sister company, Capital Research and Management Company, established an
international investment capability. The Capital organizations first non-U.S.
office was established in Geneva in 1962. The Capital organization currently
spends over $100 million annually on research. Capital Guardian has managed
international portfolios since 1978.
9
<PAGE>
Capital Guardian's principal executive officers and directors are shown
below. The address of each as it relates to his/her duties of Capital Guardian
is the same as that of Capital Guardian.
Name Position with Company
- ---- ---------------------
David I. Fisher Chairman
Robert Ronus President
John H. Seiter President Vice President-Client Relations and
Marketing
Eugene P. Stein Executive Vice President
[Directors name to be added]
The Subadvisory Agreement
Pursuant to the new Subadvisory Agreement among Capital Guardian, the
Investment Manager and the Fund, Capital Guardian will be retained to manage the
investments of the Fund and to provide such investment research, advice and
supervision, in conformity with the Fund's investment objectives and policies.
The Subadvisory Agreement for the Fund was discussed and preliminarily approved
by the Company's Board of Directors on December 17, 1997. Final approval of the
Board of Directors is expected to be given at the next meeting of the Board of
Directors, which is scheduled for [January 30, 1998]. The new Subadvisory
Agreement provides that the Investment Manager (not the Fund) shall pay to
Capital Guardian 0.75% of the first $25 million of Fund average daily net
assets, 0.60% of the next $25 million, 0.425% of the next $200 million and
0.375% of such assets in excess of $250 million.
The new Subadvisory Agreement gives Capital Guardian discretion with
respect to brokerage orders for the Fund's portfolio securities transactions.
Capital Guardian will seek to obtain the best available prices in the Fund's
portfolio transactions, taking into account the costs and promptness of
executions. Subject to this policy, Capital Guardian may direct transactions to
those broker-dealers who provide research, statistical and other information to
the Fund or the subadviser or who provide assistance with respect to the
distribution of Fund shares.
The Subadvisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence, reckless disregard of its obligations
thereunder and violation of any applicable law or regulations, Capital Guardian
is not liable to the Fund or any of the Fund's shareholders for any act or
omission by Capital Guardian in the supervision or management of its respective
investment activities or for any loss sustained by the Fund or the Fund's
shareholders, and that the Fund will indemnify Capital Guardian subject to the
requirements of the 1940 Act.
The Subadvisory Agreement may be terminated at any time by the Fund,
without the payment of any penalty, upon the vote of a majority of the Company's
Board of Directors or a majority of the outstanding voting securities of the
Fund or by Capital Guardian, on 30 days' written notice.
Benefits To Shareholders
The Board has identified the following benefits which the shareholders
are anticipated to realize as a result of the new Subadvisory Agreement:
1. The Fund would benefit from the high quality of global investment
management services that can be provided by Capital Guardian.
As discussed above, Capital Guardian has extensive experience in
international investments and currently advises three mutual funds investing in
international equity securities. Given the Fund's investment focus in the
international area, the Investment Manager believes that Capital Guardian would
be able to provide valuable investment advisory services to the Fund and its
shareholders.
10
<PAGE>
2. The advisory fees charged to the Fund will not increase as a
result of approving the Subadvisory Agreement
Even though, under the Subadvisory Agreement, both the Investment
Manager and Capital Guardian would be involved in providing advisory services to
the Fund, the Investment Manager (and not the Fund nor its shareholders) is
responsible for paying Capital Guardian's fees. Therefore, under this
arrangement, shareholders would receive an increased level of advisory services
without incurring any additional expense.
Evaluation by the Board of Directors
On December 17, 1997, the independent directors of the Company's Board
met and discussed the proposed new subadvisory arrangement and its possible
effect on the Fund and evaluated the Subadvisory Agreement. In evaluating the
proposed new subadvisory arrangement, the Board reviewed materials furnished by
Capital Guardian relevant to its decision. Those materials included information
regarding Capital Guardian, its affiliates, personnel, operations, financial
condition, global research capabilities, investment philosophy, method of
managing portfolios and long-term experience and investment results in global
investing. Management of the Company indicated that based on its separate review
of Capital Guardian, including its view of materials relating to Capital
Guardian, it was recommending to the Board that the Fund retain Capital Guardian
as the subadviser to the Fund. The Board considered the potential benefits to
shareholders. In its deliberations, the Board considered, among other things,
the terms of the proposed Subadvisory Agreement and Capital Guardian's long-term
experience and investment results in global investing, its global research
organization, its investment philosophy and the low turnover of its investment
professionals. In addition, the Board reviewed and discussed the terms and
provisions of the Subadvisory Agreement and compared fees and expenses under the
Subadvisory Agreement with those paid by other investment companies.
In determining to recommend that shareholders of the Fund vote to
approve the Subadvisory Agreement as being in the best interest of the Fund's
shareholders, the Board gave substantial weight to management's assurances that
the estimated expenses to be incurred by the Fund after the execution of the
Subadvisory Agreement will not be greater than those that would otherwise be
incurred by the Fund. The Board was also persuaded that Capital Guardian's
expertise in international investing would bring a substantial benefit to the
Fund.
Accordingly, after consideration of the above, and such other factors
and information as it deemed relevant, the Board of Directors, including a
majority of the directors who are not interested persons (as such term is
defined by the 1940 Act), preliminary approval the appointment of capital
Guardian and voted to recommend the approval of Capital Guardian to the Fund's
shareholders. On January 30, 1998, the Board is expected to formally approve
Capital Guardian as Subadviser.
The Board of Directors recommends that shareholders vote "FOR" the
proposal to permit Capital Guardian to serve as the Fund's subadviser.
11
<PAGE>
PROPOSAL III
APPROVAL OR DISAPPROVAL OF A RULE 12b-1 PLAN OF DISTRIBUTION
As part of the restructuring of the Fund, the Board of Directors is
recommending that the Fund adopt a Rule 12b-1 Plan of Distribution (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act in order to provide a mechanism to
finance broader distribution of the Fund. In reaching a recommendation in favor
of adoption of 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 would benefit the Fund and its
shareholders. The Board of Directors believes that expenditure of the Fund's
assets for distribution expenses under the Plan should assist in the growth of
the Fund, which will benefit the Fund and its shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification, and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Directors make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Fund's assets for distribution will be
realized. While the Plan is in effect, the costs to and expenses incurred by the
Investment Manager 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 Company are committed to the discretion of the
Independent Directors during such period.
Under the Plan, the Fund would be permitted to compensate the
Investment Manager 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 Fund's
underwriter. The Plan would permit payments in any fiscal year up to a maximum
of .25% (1/4 of 1%) of the average daily net assets of the Fund. No amounts may
be covered forward from one year to the next. It is possible that the Investment
Manager could receive compensation under the Plan that exceeds the Investment
Manager's costs and related distribution expenses, thus resulting in a profit to
the Investment Manager. However, the Investment Manager does not anticipate that
this would ever be the case. Rather, the Investment Manager anticipates that it
will freely use the entire amount received under the Plan to promote the
distribution of the Fund as well as continue its current practice of supporting
the Fund's distribution with the Investment Manager's own monies.
All payments made pursuant to the Plan will be made in accordance with
written agreements and will be reviewed by the Board of Directors at least
quarterly.
The Plan is a one-year plan that must be reconsidered and reviewed
annually by a vote of the Company's Board of Directors and by a vote of 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 Fund. In the event the Plan is terminated in
accordance with its terms, the Fund 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 Fund on not more than [60] days' written notice to any other party to the
Implementation Agreement. The Plan may not be amended to increase materially the
amount to be spent for distribution without shareholder approval. All material
amendments to the Plan must be approved by a vote of the Company's Board of
Directors and by a vote of the Independent Directors.
12
<PAGE>
As described in Proposal I, under the new Agreement, the Investment
Manager has voluntarily undertaken to limit the Fund's annual total operating
expenses (including the expense of the Plan) to 1.50%. In view of this expense
cap, approval of the Plan will not increase expenses incurred by the Fund.
However, the expense cap is voluntary and although the Investment Manager has no
current intention to terminate it, the cap could be terminated at any time
subsequent to October 31, 1999 in the sole discretion of the Investment Manager.
Accordingly, adoption of the Plan has the potential to impact the Fund's
expenses.
The Board of Directors recommends that shareholders vote "FOR" the
proposal to permit the adoption of a Rule 12b-1 Plan of Distribution.
PROPOSAL IV
APPROVAL OR DISAPPROVAL OF A PROPOSAL TO PERMIT THE INVESTMENT
MANAGER TO HIRE AND TERMINATE SUBADVISERS OR MODIFY SUBADVISORY
AGREEMENTS WITHOUT SHAREHOLDER APPROVAL
The Investment Manager currently serves as investment advisor to the
Fund pursuant to an Investment Advisory and Administrative Services Agreement
(as defined above, the "Current Agreement") with the Company. The Investment
Manager currently does not employ any subadviser with respect to the Fund.
However, if Proposal II is approved by shareholders of the Fund, Capital
Guardian will be appointed as a subadviser and the Investment Manager may engage
additional subadvisers in the future. The Company is proposing to permit the
Investment Manager to enter into, terminate, or modify subadvisory agreements on
behalf of the Fund with subadvisers without obtaining the prior approval of a
majority of the outstanding voting securities of the Fund, as is otherwise
required by Section 15 of the 1940 Act.
Section 15 of the 1940 Act requires that the shareholders of the Fund
approve the Fund's subadvisory agreement(s) and any amendments thereto. On
December 16, 1996, the Company and the Investment Manager received from the
Securities and Exchange Commission an order (the "SEC Order") exempting the Fund
from these provisions. The SEC Order permits the Investment Manager to hire new
subadvisers, terminate subadvisers, rehire existing subadvisers whose agreements
have been assigned (and, thus, automatically terminated), and modify subadvisory
agreements without the prior approval of shareholders. By eliminating
shareholder approval in these matters, the Investment Manager would have greater
flexibility in managing subadvisers, and shareholders would save the
considerable expenses involved in holding shareholder meetings and soliciting
proxies. Pursuant to the SEC Order, the Company and the Investment Manager have
agreed to the imposition of the following conditions:
(1) The Investment Manager will not enter into a subadvisory agreement
with a subadviser that is an "affiliated person," as defined in the 1940 Act, of
the Company or the Investment Manager (an "Affiliated Manager"), other than by
reason of serving as a subadviser to the Fund, without such agreement, including
the compensation to be paid thereunder, being approved by the shareholders of
the Fund.
(2) At all times, a majority of the Company's directors will be persons
each of whom is not an "interested person" of the Company as defined in the 1940
Act (as defined above, "Independent Directors"), and the nomination of new or
additional Independent Directors will be placed with the discretion of the then
existing Independent Directors.
(3) When a subadviser change is proposed for the Fund with an
Affiliated Manager, the Company's directors, including a majority of the
Independent Directors, will make a separate finding, reflected in the Company's
board minutes, that such change is in the best interests of the Fund and its
shareholders
13
<PAGE>
and does not involve a conflict of interest from which the Investment Manager or
the Affiliated Manager derives an inappropriate advantage.
(4) The Investment Manager will provide general management services to
the Company and the Fund and, subject to review and approval by the Company's
Board of Directors, will (i) set the Fund's overall investment strategies; (ii)
select subadviser(s); (iii) allocate and, when appropriate, reallocate the
Fund's assets among the Investment Manager and one or more subadvisers; (iv)
monitor and evaluate the performance of subadvisers; and (v) seek to ensure that
the subadvisers comply with the Fund's investment objectives, policies and
restrictions.
(5) Within 60 days of the hiring of any new subadviser or the
implementation of any proposed material change in a subadvisory agreement, the
Investment Manager will furnish shareholders all information about the new
subadviser or subadvisory agreement that would be included in a proxy statement.
Such information will include the fees paid by the Investment Manager to the
subadviser and any change in such disclosure caused by the addition of a new
subadviser or any proposed material change in a subadvisory agreement. The
Investment Manager will meet this condition by providing shareholders with an
information statement which meets the requirements of the proxy rules under
applicable federal securities laws.
(6) The Fund will disclose in its Prospectus the existence, substance
and effect of the SEC Order.
(7) Before the Fund may rely on the SEC Order, the operations of the
Fund in the manner described therein will be approved by a majority of the
Fund's outstanding voting securities, as defined in the 1940 Act.
(8) No director or officer of the Company or the Investment Manager
will own directly or indirectly (other than through a pooled investment vehicle
that is not controlled by any such director or officer) any interest in a
subadviser except for (i) ownership of interests in the Investment Manager or
any entity that controls, is controlled by or is under common control with the
Investment Manager; (ii) ownership of less than 1% of the outstanding securities
of any class of equity or debt of a publicly-traded company that is either a
subadviser or an entity that controls, is controlled by or is under common
control with a subadviser.
In accordance with condition (7), shareholder approval of this proposed
new arrangement is being sought. Even if the Fund's shareholders approve this
arrangement, any new subadvisers engaged or terminated or any change in a
subadvisory agreement will still require approval of the Board of Directors. In
order to approve new subadvisers, the Board will analyze the factors they deem
relevant, including the nature, quality and scope of services provided by
subadvisers to investment companies comparable to the Fund. The Board will
review the ability of the subadviser to provide its services to the Fund, as
well as its personnel, operation, financial condition or any other factor which
would affect the provision of these services. The Board will examine the
performance of the subadviser with respect to compliance and regulatory matters
over the past fiscal year. The Board will review the subadviser's investment
performance with respect to accounts deemed comparable. Finally, the Board will
consider other factors deemed relevant to the subadviser's performance as an
investment advisor. The Board believes that this review provides adequate
shareholder protection in the selection of subadvisers.
14
<PAGE>
The Board of Directors recommends that shareholders vote "FOR" the
proposal to permit the Investment Manager to hire and terminate subadvisers or
modify subadvisory agreements without shareholder approval. If the shareholders
of the Fund do not approve this Proposal, the Advisory Agreement will continue
and the terms and conditions of the SEC Order will not be applicable to the
Fund.
GENERAL INFORMATION
Officers and Directors of the Investment Manager
The Investment Manager's principal executive officers are set forth
below. The address of each as it relates to his/her duties at the Investment
Manager, is the same as the Investment Manager.
Name Position with the Investment Manager
---- ------------------------------------
David L. Redo President and Director
Michael H. Kosich Senior Vice President and Director
Albert W. Kirschbaum Senior Vice President and Director
Peter F. Landini Senior Vice President and Director
Other Matters to Come Before the Meeting
Management of the Company knows of no other matters which are to be
brought before the Meeting. However, if any other matters not now known or
determined properly come before the Meeting, it is the intention of the persons
named in the enclosed form of Proxy to vote such Proxy in accordance with their
best judgment on such matters.
All Proxies received will be voted in favor of all the proposals,
unless otherwise directed therein.
Shareholder Proposals
The Meeting is a special meeting of shareholders. The Fund is not
required to, nor does it intend to, hold regular annual meetings of its
shareholders. If such a meeting is called, any shareholder who wishes to submit
a proposal for consideration at the meeting should submit the proposal promptly
to the Company.
Reports to Shareholders
The Company will furnish, without charge, a copy of the most recent
Annual Report to Shareholders of the Company, and the most recent Semi-Annual
Report succeeding such Annual Report, if any, on request. Request for such
reports should be directed to the Company c/o Fremont Investment Advisors, Inc.,
333 Market Street, Suite 2900, San Francisco, California 94105-4022, or to (800)
548-4539.
15
<PAGE>
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
Very truly yours,
Tina Thomas
Secretary
JANUARY __, 1998
16
<PAGE>
EXHIBIT A
Form of new Investment Advisory and Administrative Services Agreement
17
<PAGE>
INVESTMENT ADVISORY
AND
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT, dated and effective as of this _____ day of ___
________,1998 is made and entered into by and between FREMONT MUTUAL FUNDS,
INC., a Maryland corporation (hereinafter called the "Company") and FREMONT
INVESTMENT ADVISORS, INC. a California corporation (hereinafter called the
"Advisor").
WHEREAS, the Company is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Advisor is engaged principally in the business of
rendering investment advisory and management services and is so registered under
the Investment Advisers Act of 1940; and
WHEREAS, the Company is authorized to, and does, issue shares of
capital stock in separate series with each such series representing interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Company has issued shares of capital stock in a separate
series called the International Growth Fund (the "Fund") and the Advisor is
current serving as advisor and administrator to the Fund pursuant to an Amended
and Restated Investment Advisory and Administrative Services Agreement; and
WHEREAS, the Company desires to retain the Advisor to continue to
render investment advisory services to the Fund hereunder and the Advisor is
willing to do so under a new fee arrangement as expressed in this agreement;
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the
parties hereto as follows:
1. The Company hereby appoints the Advisor to act as investment adviser
and administrator to the Fund for the period and on the terms herein set forth.
The Advisor accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided. The Advisor shall, for all
purposes herein, be deemed an independent contractor and not an agent of the
Company.
2. (a) The Advisor, as investment advisor to the Fund, agrees to
provide supervision of the portfolio of the Fund and to determine what
securities or other property shall be purchased or sold by the Fund, subject to
the engagement by the Advisor of any Sub-Advisor
- 1 -
<PAGE>
approved by the Board of Directors and (if required by applicable law) the
shareholders of the Company, giving due consideration to the policies of the
Fund as expressed in the Company's Articles of Incorporation, By-laws, Form N-1A
Registration Statement under the 1940 Act and under the Securities Act of 1933,
as amended (the "1933 Act"), and prospectus as in use from time to time, as well
as to the factors affecting the status of the Fund as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended. In its duties
hereunder, the Advisor shall further be bound by any and all determinations by
the Board of Directors of the Company relating to investment policy, which
determinations shall in writing be communicated to the Advisor. Subject to the
foregoing, the Advisor will exercise all voting rights with respect to portfolio
securities and may delegate such voting rights to any Sub-Advisor approved by
the Board of Directors.
(b) To the extent authorized by the Board of Directors of the
Company, the Advisor shall make decisions for the Fund as to foreign currency
matters and make determinations as to, and execute and perform, foreign exchange
contracts or may delegate such decisions to any Sub-Advisor approved by the
Board of Directors.
(c) (i) The Advisor shall provide adequate facilities and
qualified personnel for the placement of, and shall place orders for the
purchase, or other acquisition, and sale, or other disposition, of portfolio
securities for the Fund. With respect to such transactions, the Advisor, subject
to such direction as may be furnished from time to time by the Board of
Directors of the Company, shall endeavor as the primary objective to obtain the
most favorable prices and executions of orders. Subject to such primary
objective, the Advisor may place orders with brokerage firms which furnish
statistical and other information to the Advisor, taking into account the value
and quality of the brokerage services of such brokerage firms, including the
availability and quality of such statistical and other information. Receipt by
the Advisor of any such statistical and other information and services shall not
be deemed to give rise to any requirement for abatement of the advisory fee
payable to the Advisor pursuant to Section 6 hereof.
(ii) On occasions when the Advisor deems the purchase
or sale of a security to be in the best interests of the Fund as well as other
clients of the Advisor, the Advisor, to the extent permitted by applicable laws
and regulations, may aggregate the securities to be so sold or purchased when
the Advisor believes that to do so will be in the best interests of the Fund. In
such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in the manner
the Advisor considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
3. Subject to prior approval of the Board of Directors, the Advisor
may, but is not required to, retain one or more investment management
organizations ("Subadvisors") to make specific investment decisions with respect
to all or a portion of the assets of the Fund. The Advisor may allocate portions
of the Fund's assets among such Subadvisor(s) or among itself and
- 2 -
<PAGE>
such Subadvisor(s). The Advisor shall monitor the performance of such
Subadvisor(s), shall allocate and reallocate assets among Subadvisors of the
Fund with multiple Subadvisors, and shall recommend the employment or
termination of a particular Subadvisor when deemed advisable. The Advisor will
compensate such Subadvisor(s) from its own resources, at no additional cost to
te Company.
4. The Advisor, as administrator for the Fund, shall furnish the
services of persons to perform the executive, administrative, clerical, and
bookkeeping functions of the Company (other than services involving the custody
of portfolio securities), including the daily determination of net asset value
of the Fund. The Advisor shall also provide the Company with suitable office
space (which may be in the offices of the Advisor); all necessary small office
equipment and utilities; and general purpose accounting forms, supplies, and
postage used at the offices of the Company. These services are exclusive of the
necessary services and records at any dividend disbursing agent, transfer agent,
registrar or custodian, and accounting and bookkeeping services to be provided
by the custodian or other third-party service provider.
5. The Fund shall be responsible for paying for all costs and expenses
attendant to operating the Fund, including but not limited to (i) the
compensation payable hereunder to the Advisor for advisory and administrative
services; (ii) taxes; (iii) interest expense; (iv) portfolio transaction costs,
including, e.g., brokerage commissions and underwriting discounts; (v) any other
ordinary expenses incurred in the course of the regular and ongoing operations
of the Fund and (vi) any extraordinary costs or expenses such as legal,
accounting, or other costs or expenses not incurred in the course of the regular
and ongoing operations of the Fund.
6. (a) The Fund shall pay to the Advisor on or before the tenth (10th)
day of each month, as compensation for the services rendered by the Advisor
during the preceding month, an amount to be computed by applying to the total
net asset value of the Fund the applicable annual rates set forth on Appendix A
hereto.
(b) The fees on Appendix A shall be computed and accrued daily
at one three-hundred-sixty-fifth (1/365th) or one three-hundred-sixty-sixth
(1/366th), as appropriate, of the applicable rates set forth therein. The net
asset value of the Fund shall be determined in the manner set forth in the
Articles of Incorporation and applicable Prospectus of the Company after the
close of the New York Stock Exchange on each day on which said Exchange is open,
and in the case of Saturdays, Sundays, and other days on which said exchange
shall not be open in the manner further set forth in said Articles of
Incorporation and Prospectus. In the event of termination other than at the end
of a calendar month, the monthly fee shall be prorated for the portion of the
month prior to termination and paid on or before the tenth (10th) day subsequent
to termination.
7. The Advisor may reduce any portion of the compensation or
reimbursement of expenses due to it pursuant to this Agreement and may agree to
make payments to limit the
- 3 -
<PAGE>
expenses which are the responsibility of the Fund under this Agreement. Any such
reduction or payment shall be applicable only to such specific reduction or
payment and shall not constitute an agreement to reduce any future compensation
or reimbursement due to the Advisor hereunder or to continue future payments.
Any such reduction will be agreed to prior to accrual of the related expense or
fee and will be estimated daily and reconciled and paid on a monthly basis. To
the extent such an expense limitation has been agreed to by the Advisor and such
limit has been disclosed to shareholders of the Fund in a prospectus, the
Advisor may not change the limitation without first disclosing the change in an
updated prospectus. Any fee withheld pursuant to this Section 7 from the Advisor
shall be reimbursed by the Fund to the Advisor in the first, second, or third
(or any combination thereof) fiscal year next succeeding the first year of the
withholding if the aggregate expenses for the next succeeding fiscal year or
second succeeding fiscal year or third succeeding fiscal year do not exceed any
more restrictive limitation to which the Advisor has agreed. The Advisor
generally may request and receive reimbursement for the oldest reductions and
waivers before payment for fees and expenses for the current year.
8. Nothing contained in this Agreement shall be construed to prohibit
the Advisor from performing investment advisory, management, or distribution
services for other investment companies and other persons or companies, or to
prohibit affiliates of the Advisor from engaging in such businesses or in other
related or unrelated businesses.
9. The Company agrees (i) not to hold the Advisor or any of its
officers, directors, agents or employees liable for, and (ii) to indemnify or
insure the Advisor and its officers, directors, agents and employees
("Indemnified Parties") against any and all losses, claims, damages, liabilities
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under the 1933 Act, 1940 Act, the Advisors Act, under
any other statute, at common law or otherwise, which (1) arises out of an
investment decision or other action taken or omitted by one or more Indemnified
Parties in good faith exercise of authority hereunder or otherwise related to
this Agreement or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering the shares of the Company or the Fund or any amendment thereof or any
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if such a statement or omission was made in reliance
upon information furnished to the Indemnified Parties; provided, however, that
in no case is Company's indemnity in favor of Indemnified Parties deemed to
protect such Indemnified Parties against any liability to which any such
Indemnified Parties would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of his duties or by reason of
his reckless disregard of obligations and duties under this Agreement.
10. (a) This Agreement shall become effective with respect to the Fund
on the date hereof (the "Effective Date"). Unless terminated as herein provided,
this Agreement shall remain in full force and effect for two (2) years from the
Effective Date and shall continue in full force
- 4 -
<PAGE>
and effect for periods of one year thereafter with respect to the Fund so long
as such continuance with respect to the Fund is approved at least annually (i)
by either the Directors of the Company or by a vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Fund, and (ii) in
either event by the vote of a majority of the Directors of the Company who are
not parties to this Agreement or "interested persons" (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may be terminated with respect to the Fund
at any time, without payment of any penalty, by the Board of Directors of the
Company or by the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Company, on thirty (30) days' written
notice to the Advisor, or by the Advisor on like notice to the Company.
(c) This Agreement shall automatically and immediately
terminate in the event of its assignment.
(d) This Agreement shall be governed by the laws of the State
of California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder.
(e) No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought and no amendment of this Agreement shall be effective
until approved by a vote of a majority of the outstanding voting securities of
the Fund, if such approval is required by applicable law.
11. (a) This Agreement supersedes any prior agreement relating to the
subject matter hereof between the parties.
(b) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the date first above written.
FREMONT MUTUAL FUNDS, INC. FREMONT INVESTMENT ADVISORS, INC.
By: ______________________________ By: ______________________________
David L. Redo, Chairman David L. Redo, President
ATTEST: ATTEST:
__________________________________ _________________________________
Tina Thomas, Secretary Tina Thomas, Secretary
- 6 -
<PAGE>
APPENDIX A
to Investment Advisory
and Administrative Agreement
Investment Advisory Fee: 1.00% annually on the portion of daily total net
asset value
Administrative Fee: 0.15% annually on the portion of daily total net
asset value
- 7 -
<PAGE>
EXHIBIT B
Form of Subadvisory Agreement
18
<PAGE>
EXHIBIT B
PORTFOLIO MANAGEMENT AGREEMENT
THIS AGREEMENT dated and effective as of [ ] 1998, among Capital
Guardian Trust Company, a [California Trust] (the "Sub-advisor"); Fremont
Investment Advisors, Inc., a Delaware corporation (the "Advisor"); and Fremont
Mutual Funds, Inc., a Maryland corporation (the "Fund").
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company and is authorized to issue separate series (the "Series"),
each of which may offer a separate class of shares of beneficial interest, each
Series having its own investment objective, policies and limitations; and
WHEREAS, the Fund presently offers shares of a particular series named
the Fremont International Growth Fund (the "International Growth Series"); and
WHEREAS, the Fund has retained the Advisor to render investment
management and administrative services to the International Growth Series; and
WHEREAS, the Advisor and the Fund desire to retain the Sub-advisor to
furnish portfolio management services to the International Growth Series in
connection with Advisor's investment management activities on behalf of the
Series, and the Sub-advisor is willing to furnish such services to the Advisor
and the International Growth Series;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Sub-advisor, the Advisor and the Fund
as follows:
1 Appointment. The Advisor and the Fund hereby appoint Sub-advisor to
provide sub-investment advisory services to the Advisor and the Fund with
respect to certain assets of the International Growth Series for the periods and
on the terms set forth in this Agreement. The Sub-advisor accepts such
appointment and agrees to furnish the services herein set forth, for the
compensation herein provided.
2. Sub-advisor Duties. Subject to the supervision of the Advisor, the
Sub-advisor shall have full discretionary authority as agent and
attorney-in-fact with respect to the portion of assets of the International
Growth Series' portfolio assigned to the Sub-advisor, from time to time by the
Advisor or the Board of Directors, including authority to: (a) buy, sell,
exchange, convert or otherwise trade in any stocks without limitation and (b)
place orders for the execution of such securities transactions with or through
such brokers, dealers, or issuers as Sub-advisor may select. The Sub-advisor
will provide the services under this Agreement in accordance with the
International Growth Series' registration statement filed with the Securities
and Exchange Commission ("SEC"), as amended. The Advisor will provide the
Sub-advisor with a copy of each registration statement promptly after it has
been filed with the SEC. Investments by the Sub-advisor shall conform with the
provisions of Appendix B attached hereto, as such may be revised from time to
time at the discretion of the Advisor and the Fund. Subject to the foregoing,
the Sub-advisor will vote proxies with respect to the securities
<PAGE>
and investments purchased with the assets of the International Growth Series'
portfolio managed by the Sub-advisor. The Sub-advisor further agrees that it
will:
(a) conform with all applicable rules and regulations of the
Securities and Exchange Commission.
(b) select brokers and dealers to execute portfolio
transactions for the International Growth Series and select the markets on or in
which the transaction will be executed. In providing the International Growth
Series with investment management, it is recognized that the Sub-advisor will
give primary consideration to securing the most favorable price and efficient
execution considering all circumstances. Within the framework of this policy,
the Sub-advisor may consider the financial responsibility, research and
investment information and other research services and products provided by
brokers or dealers who may effect or be a party to any such transaction or other
transactions to which the Sub-advisor's other clients may be a party. It is
understood that it is desirable for the Fund that the Sub-advisor have access to
brokerage and research services and products and security and economic analysis
provided by brokers who may execute brokerage transactions at a higher cost to
the International Growth Series than broker-dealers that do not provide such
brokerage and research services. Therefore, in compliance with Section 28(e) of
the Securities Exchange Act of 1934 (the "1934 Act"), the Sub-advisor is
authorized to place orders for the purchase and sale of securities for the
International Growth Series with such brokers, that provide brokerage and
research products and/or services that charge an amount of commission for
effecting securities transactions in excess of the amount of commission another
broker would have charged for effecting that transaction, provided the
Sub-advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research products
and/or services provided by such broker viewed in terms of either that
particular transaction or the overall responsibilities of the Sub-advisor for
this or other advisory accounts, subject to review by the Fund from time to time
with respect to the extent and continuation of this practice. It is understood
that the information, services and products provided by such brokers may be
useful to the Sub-advisor in connection with the Sub-advisor's services to other
clients. On occasions when the Sub-advisor deems the purchase or sale of a
security to be in the best interest of the International Growth Series as well
as other clients of the Sub-advisor, the Sub-advisor, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be sold or purchased in order to obtain the most
favorable price of lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, shall be made by the Sub-advisor in the
manner the Sub-advisor considers to be the most equitable and consistent with
its fiduciary obligations to the International Growth Series and to such other
clients.
(c) make available to the Advisor and the Fund's Board of
Directors promptly upon their request all its investment records and ledgers
relating to the International Growth Series to assist the Advisor and the Fund
in their compliance with respect to the International Growth Series' securities
transactions as required by the 1940 Act and the Investment Advisers Act of 1940
("Advisers Act"), as well as other applicable laws. The Sub-advisor will furnish
the Fund's Board of Directors with respect to the International Growth Series
such periodic and special reports as the Advisor and the Directors may
reasonably request in writing.
(d) maintain detailed records of the assets managed by the
Sub-advisor as well as all investments, receipts, disbursements and other
transactions made with such assets. Such records shall be open to inspection and
audit during Sub-advisor's normal business hours upon reasonable notice by any
person designated by the Advisor or the Fund. The Sub-advisor shall provide to
the Advisor or the Fund and any other party designated by either the Advisor or
the Fund: (i) monthly statements of the activities with regard to the assets for
the month and of the assets showing each asset at its cost and, for each
security listed on any national securities exchange, its value at the last
<PAGE>
quoted sale price reported on the composite tape on the valuation date or, in
the cases of securities not so reported, by the principal exchange on which the
security traded or, if no trade was made on the valuation date or if such
security is not listed on any exchange, its value as determined by a nationally
recognized pricing service used by the Sub-advisor specified by such pricing
service on the valuation date, and for any other security or asset in a manner
determined in good faith by the Sub-advisor to reflect its then fair market
value; (ii) statements evidencing any purchases and sales as soon as practicable
after such transaction has taken place, and (iii) a quarterly review of the
assets under management.
3. Expenses. During the term of this Agreement, the Sub-advisor will
pay all expenses incurred by it, its staff and their activities, in connection
with its portfolio management activities under this Agreement. The Sub-advisor
shall not be responsible for any expense incurred by the Advisor or the Fund,
except as provided in Section 6 below.
4. Compensation. For the services provided to the International Growth
Series, the Advisor will pay the Sub-advisor the fees as set forth in Appendix A
hereto at the times set forth in Appendix A hereto.
5. Books and Records; Custody. (a) In compliance with the requirements
of Rule 31a-3 under the 1940 Act, the Sub-advisor hereby agrees that all records
which it maintains for the International Growth Series are the property of the
Fund and further agrees to surrender promptly to the Fund any of such records
upon the Fund's request. The Sub-advisor further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to preserve the records required
by Rule 204-2 under the Advisers Act for the period specified in the Rule.
(b) Title to all investments shall be made in the name of the
Fund, provided that for convenience in buying, selling, and exchanging
securities (stocks, bonds, commercial paper, etc.), title to such securities may
be held in the name of the Fund's custodian bank, or its nominee. The Fund shall
advise the Sub-advisor of the identity of its custodian bank and shall give the
Sub-advisor 15 days' written notice of any changes in such custody arrangements.
Neither the Sub-advisor, nor any parent, subsidiary or related
firm, shall take possession of or handle any cash, securities, mortgages or
deeds of trust, or other indicia of ownership of the Fund's investments, or
otherwise act as custodian of such investments. All cash and the indicia of
ownership of all other investments shall be held by the Fund's custodian bank.
The Fund shall instruct its custodian bank to (a) carry out
all investment instructions as may be directed by the Sub-advisor with respect
thereto (which may be orally given if confirmed in writing); and (b) provide the
Sub-advisor with all operational information necessary for the Sub-advisor to
trade on behalf of the Fund.
6. Indemnification. The Sub-advisor agrees to indemnify and hold
harmless the Advisor, the Fund, any affiliated person within the meaning of
Section 2(a)(3) of the 1940 Act ("affiliated person") of the Advisor or the Fund
(other than the Sub-advisor) and each person, if any, who, within the meaning of
Section 15 of the Securities Act of 1933 (the "1933 Act"), controls
("controlling person") the Advisor or the Fund against any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Advisor, the Fund or such affiliated person or
controlling person may become subject under the 1933 Act, 1940 Act, the Advisers
Act, or under any other statute, at common law or otherwise, which (1) may be
based upon any wrongful act or omission by the Sub-advisor, any of its employees
or representatives or any affiliate of or any
<PAGE>
person acting on behalf of the Sub-advisor or (2) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering the shares of the Fund or any
amendment thereof or any supplement thereto or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such a statement or omission was
made in reliance upon information furnished to the Fund or any affiliated person
of the Fund by the Sub-advisor or any affiliated person of the Sub-advisor;
provided, however, that in no case is the Sub-advisor's indemnity in favor of
the Advisor or the Fund or any affiliated person or controlling person of the
Advisor or the Fund deemed to protect such person against any liability to which
any such person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of his or its duties or by reason
of his or its reckless disregard of obligations and duties under this Agreement
or under any law.
The Fund agrees not to hold the Sub-advisor or any of its officers or
employees liable for, and to indemnify and hold harmless, the Sub-advisor and
its directors, officers, employees, affiliated persons and controlling persons
("Indemnified Parties") against, any act or omission of any other sub-advisor
providing investment management services to the Fund, and against any costs and
liabilities the Indemnified Parties may incur as a result of a claim against the
Indemnified Parties regarding actions taken in good faith exercise of their
powers hereunder excepting matters as to which the Indemnified Parties have been
grossly negligent, engaged in willful misfeasance, bad faith, reckless disregard
of the obligations and duties under this Agreement or have been in violation of
applicable law or regulations.
7. Other Investment Activities of Sub-advisor. The Fund and Advisor
acknowledge that Sub-advisor, or one or more of its affiliates, may have
investment responsibilities or render investment advice to, or perform other
investment advisory services for, other individuals or entities ("Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, the Fund agrees
that the Sub-advisor or its affiliates may give advice or exercise investment
responsibility and take other action with respect to other Affiliated Accounts
which may differ from advice given or the timing or nature of action taken with
respect to the International Growth Series; provided that the Sub-advisor acts
in good faith, and provided further that it is the Sub-advisor's policy to
allocate, within its reasonable discretion, investment opportunities to the
International Growth Series over a period of time on a fair and equitable basis
relative to the Affiliated Accounts, taking into account the investment
objectives and policies of the International Growth Series and any specific
investment restrictions applicable thereto. The Fund acknowledges that one or
more of the Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the International Growth Series may have an interest from time to time, whether
in transactions which may involve the International Growth Series or otherwise.
Sub-advisor shall have no obligation to acquire for the International Growth
Series a position in any investment which any Affiliated Account may acquire,
and the Fund shall have no first refusal, co-investment or other rights in
respect of any such investment either for the International Growth Series or
otherwise.
8. (a) Duration. This Agreement shall become effective on the date
hereof. Unless terminated as herein provided, this Agreement shall remain in
full force and effective for a period of two years from the date of this
Agreement, and shall continue in full force and effect for periods of one year
thereafter so long as such continuance is approved at least annually (i) by
either the Board of Directors of the Fund or by a vote of a majority (as defined
in the 1940 Act) of the outstanding voting securities of the International
Growth Series, and (ii) by the Advisor, and (iii) by the vote of a majority of
the Board of Directors of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
<PAGE>
(b) Termination. This Agreement may be terminated at any time,
without payment of any penalty, by the Board of Directors of the Fund or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the International Growth Series, or by the Advisor, on thirty (30)
days' written notice to the Sub-advisor, or by the Sub-advisor on like notice to
the Board of Directors of the Fund and to the Advisor. Payment of fees earned
through the date of termination shall not be construed as a penalty.
(c) Automatic Termination. This Agreement shall automatically
and immediately terminate in the event of its assignment.
9. Amendments. No provision of this agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought and no amendment of this Agreement shall be effective
until approved by a vote of a majority of the outstanding voting securities of
the International Growth Series, if such approval is required by applicable law.
10. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State
of California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder.
(b) The captions of this Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the
Sub-advisor as an agent of the Fund or the Advisor.
(e) This Agreement supersedes any prior agreement relating to
the subject matter hereof between the parties.
(f) This Agreement may be executed in counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered, shall be deemed an original and all of which
counterparts shall constitute but one and the same agreement.
11. Use of Name. It is understood that the name "Capital Guardian" or
the name of any of its affiliates, or any derivative associated with those
names, are the valuable property of the Sub-advisor and its affiliates and that
the Fund and/or the Fund's distributor have the right to use such name(s) or
derivative(s) in offering materials and sales literature of the Fund so long as
this Agreement is in effect. Upon termination of the Agreement the Fund shall
forthwith cease to use such name(s) or derivative(s).
12. Receipt of Brochure. The Advisor and the Fund have received from
Capital Guardian the disclosure statement or "brochure" required to be delivered
pursuant to Rule 204-3 of the Advisers Act, which
<PAGE>
disclosure statement or brochure was received by the Advisor and the Fund more
than 48 hours prior to entering into this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
CAPITAL GUARDIAN TRUST COMPANY
By:
(Title)
FREMONT INVESTMENT ADVISORS, INC.
By:
(Title)
FREMONT MUTUAL FUNDS, INC.
By:
(Title)
<PAGE>
APPENDIX A
TO PORTFOLIO MANAGEMENT AGREEMENT
Capital Guardian Trust Company
Sub-advisor to the Fremont International Growth Fund
SCHEDULE OF FEES
Fremont Investment Advisors, Inc. will pay to Capital Guardian a fee computed at
the annual rate of .75% (75 basis points) of the first $25 million of Fund
average value of the daily net assets, .60% (60 basis points) of the next $25
million, .425% (42.5 basis points) of the next $200 million and .375% (37.5
basis points) of the average value of the daily assets of the International
Growth Fund under management by Capital Guardian.
Fee will be billed after the end of each calendar month. Fees will be prorated
for any period less than one month. Fees shall be due and payable within thirty
(30) days after an invoice has been delivered to Fremont Investment Advisors,
Inc.
<PAGE>
APPENDIX B
TO PORTFOLIO MANAGEMENT AGREEMENT
Capital Guardian Trust Company
Sub-advisor to the Fremont International Growth Fund
INVESTMENT OBJECTIVES AND GUIDELINES
Overall Investment Objective:
The objective of the Fremont International Growth Fund is to achieve long-term
capital appreciation by investing, primarily in equity securities of issuers
domiciled outside the United States. Under normal market conditions, at least
90% of the Fund's assets will be invested in equity securities outside the
United States.
Policy and Guidelines for Sub-advisor:
The Sub-advisor will adhere to the Investment Objective and to policies in the
Fremont International Growth Fund prospectus.
Performance Objective for Sub-advisor:
The Sub-advisor is expected to achieve a competitive rate of return over a 3 to
5 year time horizon and/or a complete market cycle, relative to other funds as
compiled by Lipper Analytical Services and/or Morningstar. A competitive rate of
return is defined as Fund performance in the top one-third of such funds.
Performance will also be compared to the [_____________] Index.
<PAGE>
EXHIBIT C
Form of Share Marketing Plan
19
<PAGE>
FREMONT MUTUAL FUNDS, INC.
SHARE MARKETING PLAN
(Rule 12b-1 Plan)
(Fixed Compensation Plan)
This Share Marketing Plan (the "Plan") is adopted in
accordance with Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "Act"), by Fremont Mutual Funds, Inc., a Maryland
corporation (the "Corporation") with respect to certain series of its shares as
listed in Exhibit A (each such series, a "Fund"). The Plan has been approved by
a majority of the Corporation's Board of Directors, including a majority of the
Directors who are not interested persons of the Corporation and who have no
direct or indirect financial interest in the operation of the Plan (the
"independent Directors"), cast in person at a meeting called for the purpose of
voting on the Plan.
In reviewing the Plan, the Board of Directors considered the
proposed range and nature of payments and terms of the Investment Management
Agreement between the Corporation on behalf of each Fund and Fremont Investment
Advisors, Inc. (the "Advisor") and the nature and amount of other payments, fees
and commissions that may be paid to the Advisor, its affiliates and other agents
of the Corporation. The Board of Directors, including the independent Directors,
concluded that the proposed overall compensation of the Advisor and its
affiliates was fair and not excessive.
In its considerations, the Board of Directors also recognized
that uncertainty may exist from time to time with respect to whether payments to
be made by the Corporation to the Advisor, as the initial "distribution
coordinator," or other firms under agreements with respect to a Fund may be
deemed to constitute impermissible distribution expenses. As a general rule, an
investment company may not finance any activity primarily intended to result in
the sale of its shares, except pursuant to the Rule. Accordingly, the Board of
Directors determined that the Plan also should provide that payments by the
Corporation and expenditures made by others out of monies received from the
Corporation which are later deemed to be for the financing of any activity
primarily intended to result in the sale of Fund shares shall be deemed to have
been made pursuant to the Plan.
The approval of the Board of Directors included a
determination that in the exercise of the Directors' reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Corporation, the Fund to which the
Plan applies and its shareholders.
-1-
<PAGE>
The provisions of the Plan are:
1. Annual Fee. The Corporation will pay to Advisor, as the
Funds' distribution coordinator, an annual fee for the Advisor's services in
connection with the promotion and distribution of the Fund's shares and related
shareholder servicing. The annual fee paid to Advisor under the Plan will be
calculated daily and paid monthly by each Fund on the first day of each month
based on the average daily net assets of each Fund, as follows: an annual rate
of up to 0.25%. This fee is not tied exclusively to actual distribution and
service expenses, and the fee may exceed the expenses actually incurred.
2. Services Covered by the Plan. The fee paid under Section 1
of the Plan is intended to compensate the Advisor for performing the following
kinds of services: services primarily intended to result in the sale of the
Fund's shares ("distribution services"), including, but not limited to: (a)
making payments, including incentive compensation, to agents for and consultants
to Advisor, any affiliate of the Advisor or the Corporation, including pension
administration firms that provide distribution and shareholder related services
and broker-dealers that engage in the distribution of the Fund's shares; (b)
making payments to persons who provide support services in connection with the
distribution of a Fund's shares and servicing of a Fund's shareholders,
including, but not limited to, personnel of Advisor, office space and equipment,
telephone facilities, answering routine inquiries regarding the Fund, processing
shareholder transactions and providing any other shareholder services not
otherwise provided by the Corporation's transfer agency or other servicing
arrangements; (c) making payments pursuant to the form of Distribution Agreement
attached hereto as an exhibit; (d) formulating and implementing marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (e)
printing and distributing prospectuses, statements of additional information and
reports of the Fund to prospective shareholders of the Fund; (f) preparing,
printing and distributing sales literature pertaining to the Fund; and (g)
obtaining whatever information, analysis and reports with respect to marketing
and promotional activities that the Corporation may, from time to time, deem
advisable. Such services and activities shall be deemed to be covered by this
Plan whether performed directly by the Advisor or by a third party.
3. Written Reports. Advisor shall furnish to the Board of
Directors of the Corporation, for its review, on a quarterly basis, a written
report of the monies paid to it under the Plan with respect to each Fund, and
shall furnish the Board of Directors of the Corporation with such other
information as the Board of Directors may reasonably request in connection with
the payments made under the Plan in order to enable the Board of Directors to
make an informed determination of whether the Plan should be continued as to
each Fund.
4. Termination. The Plan may be terminated as to any Fund at
any time, without penalty, by vote of a majority of the outstanding voting
securities of a Fund, and any Distribution
-2-
<PAGE>
Agreement under the Plan may be likewise terminated on not more than sixty (60)
days' written notice. Once terminated, no further payments shall be made under
the Plan notwithstanding the existence of any unreimbursed current or carried
forward Distribution Expenses.
5. Amendments. The Plan and any Distribution Agreement may not
be amended to increase materially the amount to be spent for distribution and
servicing of Fund shares pursuant to Section 1 hereof without approval by a
majority of the outstanding voting securities of a Fund. All material amendments
to the Plan and any Distribution Agreement entered into with third parties shall
be approved by the independent Directors cast in person at a meeting called for
the purpose of voting on any such amendment. The Advisor may assign its
responsibilities and liabilities under the Plan to another party who agrees to
act as "distribution coordinator" for the Corporation with the consent of a
majority of the independent Directors.
6. Selection of Independent Directors. So long as the Plan is
in effect, the selection and nomination of the Corporation's independent
Directors shall be committed to the discretion of such independent Board of
Directors.
7. Effective Date of Plan. The Plan shall take effect at such
time as it has received requisite Director and shareholder approval and, unless
sooner terminated, shall continue in effect for a period of more than one year
from the date of its execution only so long as such continuance is specifically
approved at least annually by the Board of Directors of the Corporation,
including the independent Directors, cast in person at a meeting called for the
purpose of voting on such continuance.
8. Preservation of Materials. The Corporation will preserve
copies of the Plan, any agreements relating to the Plan and any report made
pursuant to Section 5 above, for a period of not less than six years (the first
two years in an easily accessible place) from the date of the Plan, agreement or
report.
9. Meanings of Certain Terms. As used in the Plan, the terms
"interested person" and "majority of the outstanding voting securities" will be
deemed to have the same meaning that those terms have under the Act and the
rules and regulations under the Act, subject to any exemption that may be
granted to the Corporation under the Act by the Securities and Exchange
Commission.
-3-
<PAGE>
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Corporation and Advisor, as distribution
coordinator, as evidenced by their execution hereof, as of this ____ day of
November 1997.
FREMONT MUTUAL FUNDS, INC.
By: _____________________________
Title: _____________________________
FREMONT INVESTMENT ADVISORS, INC.
as Distribution Coordinator
By: _____________________________
Title: _____________________________
-4-
<PAGE>
FREMONT MUTUAL FUNDS, INC.
------------------
EXHIBIT A TO SHARE MARKETING PLAN
The following Series of Fremont Mutual Funds, Inc. have
adopted the Share Marketing Plan:
Fund Date Adopted
---- ------------
Fremont U.S. Small Cap Fund September 24, 1997
Fremont Emerging Markets Fund ____________, 1998
Fremont International Growth Fund ____________, 1998
-5-
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Share Marketing Agreement
EXHIBIT ONLY
___________________________________
___________________________________
___________________________________
___________________________________
Ladies and Gentlemen:
This Share Marketing Agreement has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Company
Act"), by Fremont Mutual Funds, Inc., a Maryland business corporation (the
"Corporation"), on behalf of various series of the Corporation (each series, a
"Fund"), as governed by the terms of a Share Marketing Plan (Rule 12b-1 Plan)
(the "Plan").
The Plan has been approved by a majority of the Directors who
are not interested persons of the Corporation or the Funds and who have no
direct or indirect financial interest in the operation of the Plan (the
"independent Directors"), cast in person at a meeting called for the purpose of
voting on such Plan. Such approval included a determination that in the exercise
of the reasonable business judgment of the Board of Directors and in light of
the Directors' fiduciary duties, there is a reasonable likelihood that the Plan
will benefit each Fund and its shareholders.
1. To the extent you provide eligible shareholder services of
the type identified in the Plan to the Funds identified in the attached Schedule
(the "Schedule"), we shall pay you a monthly fee based on the average net asset
value of Fund shares during any month which are attributable to customers of
your firm, at the rate set forth on the Schedule.
2. In no event may the aggregate annual fee paid to you
pursuant to the Schedule
-6-
<PAGE>
exceed ____ percent of the value of the net assets of each Fund held in your
customers' accounts which are eligible for payment pursuant to this Agreement
(determined in the same manner as the Fund uses to compute its net assets as set
forth in its then effective Prospectus), without approval by a majority of the
outstanding shares of each Fund.
3. You shall furnish us and the Corporation with such
information as shall reasonably be requested by the Corporation's Board of
Directors with respect to the services performed by you and the fees paid to you
pursuant to the Schedule.
4. We shall furnish to the Board of Directors of the
Corporation, for its review, on a quarterly basis, a written report of the
amounts expended under the Plan by us with respect to each Fund and the purposes
for which such expenditures were made.
5. You agree to make shares of the Funds available only (a) to
your customers or entities that you service at the net asset value per share
next determined after receipt of the relevant purchase instruction or (b) to
each such Fund itself at the redemption price for shares, as described in each
Fund's then-effective Prospectus.
6. No person is authorized to make any representations
concerning a Fund or shares of a Fund except those contained in each Fund's
then-effective Prospectus or Statement of Additional Information and any such
information as may be released by a Fund as information supplemental to such
Prospectus or Statement of Additional Information.
7. Additional copies of each such Prospectus or Statement of
Additional Information and any printed information issued as supplemental to
each such Prospectus or Statement of Additional Information will be supplied by
each Fund to you in reasonable quantities upon request.
8. In no transaction shall you have any authority whatever to
act as agent of the Funds and nothing in this Agreement shall constitute you or
the Fund the agent of the other. You are not authorized to act as an underwriter
of shares of the Funds or as a dealer in shares of the Funds.
9. All communications to the Funds shall be sent to: Ms. Tina
Thomas, Fremont Investment Advisors, Inc., 333 market Street, Suite 2600, San
Francisco, California, 94105. Any notice to you shall be duly given if mailed or
telegraphed to you at your address as indicated in this Agreement.
10. This Agreement may be terminated by us or by you, by the
vote of a majority of the Directors of the Corporation who are independent
Directors, or by a vote of a majority of the outstanding shares of a Fund, on
sixty (60) days' written notice, all without payment of any penalty.
-7-
<PAGE>
It shall also be terminated automatically by any act that terminates the Plan.
11. The provisions of the Plan between the Corporation and us,
insofar as they relate to you, are incorporated herein by reference.
This Agreement shall take effect on the date indicated below,
and the terms and provisions thereof are hereby accepted and agreed to by us as
evidenced by our execution hereof.
Fremont Investment Advisors, Inc.
Distribution Coordinator
By: EXHIBIT ONLY
-------------------------------
Authorized Officer
Dated: ________________________
Agreed and Accepted:
____________________________
(Name)
By: ________________________
(Authorized Officer)
-8-
<PAGE>
FREMONT MUTUAL FUNDS, INC.
------------------
SCHEDULE TO SHARE MARKETING AGREEMENT
BETWEEN _____________________.
AND
FREMONT INVESTMENT ADVISORS, INC.
as distribution coordinator
Pursuant to the provisions of the Share Marketing Agreement
between the above parties with respect to Fremont Investment Advisors, Inc. as
Distribution Coordinator, shall pay a monthly fee to the above-named party based
on the average net asset value of shares of each Fund during the previous
calendar month the sales of which are attributable to the above-named party, as
follows:
Fund Fee
---- ---
-9-
<PAGE>
PROXY
Fremont International Growth Fund
SPECIAL MEETING OF SHAREHOLDERS
_____ __, 1998
SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
FREMONT MUTUAL FUNDS, INC.
The undersigned hereby appoints ________ and ________, and each of
them, as proxies of the undersigned, each with the power to appoint his
substitute, for the Special Meeting of Shareholders of Fremont International
Growth Fund (the "Fund"), a series of Fremont Mutual Funds, Inc. (the Company),
to be held on _____ __, 1998 at the offices of Fremont Mutual Funds, Inc., 333
Market Street, 26th Floor, San Francisco, California, 94105, or at any and all
adjournments thereof (the "Meeting"), to vote, as designated below, all shares
of the Fund, held by the undersigned at the close of business on _____ __, 1998.
Capitalized terms used without definition have the meanings given to them in the
accompanying Proxy Statement.
A SIGNED PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL LISTED BELOW UNLESS YOU
HAVE SPECIFIED OTHERWISE. PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY. YOU
MAY VOTE ONLY IF YOU HELD SHARES IN THE FUND AT THE CLOSE OF BUSINESS ON _____
__, 1998. YOUR SIGNATURE AUTHORIZES THE PROXIES TO VOTE IN THEIR DISCRETION UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, INCLUDING WITHOUT
LIMITATION ALL MATTERS INCIDENT TO THE CONDUCT OF THE MEETING.
1. Approval of the new Investment Advisory and Administrative Services
Agreement between the Fremont Investment Advisors, Inc., and the Fund:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Approval of the new Subadvisory Agreement among Fremont Mutual Funds,
Inc., Fremont Investment Advisors, Inc. and Capital Guardian Trust
Company;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of the Rule 12b-1 Plan of Distribution:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
20
<PAGE>
4. Approval to permit the Investment Manager to hire and terminate
subadvisers or modify subadvisory agreements without shareholder
approval:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated: ______________, 1998
___________________________
Signature
___________________________
Title (if applicable)
___________________________
Signature (if held jointly)
___________________________
Title (if applicable)
Please sign exactly as name or names appear on your shareholder account
statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give full title. If shares are
held jointly, each shareholder should sign.
21
<PAGE>
IMPORTANT PROXY VOTE
FOR FREMONT EMERGING MARKETS FUND SHAREHOLDERS.
PLEASE READ AND RESPOND PROMPTLY.
January ___, 1998
Dear Shareholder:
I am writing to inform you of a Special Meeting of Shareholders of the Fremont
Emerging Markets Fund that will be held on February _____, 1998. The purpose of
this meeting is to vote on a significant proposal concerning the Fund. As a
shareholder, you have the opportunity to voice your opinion on this matter that
affects your Fund. Please read the enclosed materials and cast your vote on the
proxy card.
The Fremont Board of Directors recommends that the proxy proposal presented
below be approved and adopted by Fremont Emerging Markets Fund shareholders. For
your convenience, we have briefly outlined the proxy proposal you are being
asked to vote on:
The Board of Directors unanimously recommends that, in accordance with
standard practice for the other Fremont Mutual Funds, distribution
expenses of 0.25% for the Fremont Emerging Markets Fund be handled on a
"compensation" basis rather that on the current "reimbursement" basis.
Under the new "compensation" plan, the Fund may not carry forward amounts
attributable to payments or expenses incurred in prior years by Fremont for
distribution and service related activities in excess of 0.25% of the Fund's
average daily net assets. The payments under the "compensation" plan are not
greater than the payments that could be requested under the "reimbursement"
plan.
By the way, you may be interested to know that the Fremont Emerging Markets Fund
has total expenses of 1.50%, which is below the average for no-load emerging
markets funds as tracked by Lipper Analytical Services. This change from a
"reimbursement" plan to a "compensation" plan is not expected to impact the
performance of the Fund in any way.
Voting by mail is quick and easy. Everything you need is enclosed. We encourage
you to exercise your rights as a shareholder and vote promptly. To cast your
vote, simply complete the proxy card and return it in the enclosed postage-paid
envelope no later than February 20. Or, if you would like to vote in person, you
may do so at the special shareholder meeting that will take place at 9:00 a.m.
on Friday, February _____, 1998 in the main conference room on the 26th Floor of
333 Market Street, San Francisco.
If you have any questions about any of these materials, please call us at (800)
548-4539 ( press 1). Thank you for your participation and for investing with
Fremont Mutual Funds.
Sincerely,
Michael H. Kosich
President
P.S. Your vote is important, so please make sure that you complete the enclosed
proxy and mail it back to us in the postage-paid envelope before the February 20
response deadline.
<PAGE>
FREMONT MUTUAL FUNDS, INC.
FREMONT EMERGING MARKETS FUND
333 Market Street
26th Floor
San Francisco, CA 94105
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on February __, 1998
A Special Meeting of Shareholders (the "Meeting") of the FREMONT
EMERGING MARKETS FUND (the "Fund") will be held at the Fund's offices at 333
Market Street, 26th Floor, San Francisco, California 94105, on February __, 1998
at 10:00 a.m. for the following purposes:
1. To consider and act upon the approval of an Amended Plan of
Distribution pursuant to Rule 12b-1 under the Investment
Company Act of 1940 as amended (the "1940 Act").
2. To transact such other business as may properly come before
the Meeting or any adjournments thereof.
The stock transfer books will not be closed but, in lieu thereof, the
Board of Directors has fixed the close of business on _____ __, 1998 as the
record date for the determination of shareholders of the Fund entitled to notice
of, and to vote at, the Meeting.
By order of the Board of Directors
Tina Thomas, Secretary
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN PERSON OR BY
PROXY; IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE APPROPRIATE ENCLOSED PROXY OR PROXIES IN THE ACCOMPANYING
ENVELOPE PROVIDED FOR YOUR CONVENIENCE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
- --------------------------------------------------------------------------------
San Francisco, California
January __, 1998
1
<PAGE>
FREMONT MUTUAL FUNDS, INC.
FREMONT EMERGING MARKETS FUND
333 Market Street
26th Floor
San Francisco, CA 94105
(800) 548-4539
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY __, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of Fremont Mutual Funds, Inc. (the
"Company"), on behalf of the Fremont Emerging Markets Fund (the "Fund") of
proxies to be voted at a Special Meeting of Shareholders of the Fund to be held
at the Fund's offices at 333 Market Street, 26th Floor, San Francisco,
California 94105, on February __, 1998 at 10:00 a.m. (the "Meeting") and at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders.
The costs of preparing, printing, mailing and soliciting the proxies
will be borne by Fremont Investment Advisors, Inc. (the "Investment Manager").
In addition, certain officers, directors and employees of the Investment Manager
and officers and directors of the Fund (none of whom will receive additional
compensation therefor) may solicit proxies in person or by telephone, telegraph
or mail. ADP Investor Communication Services has been retained at its customary
rates to solicit proxies.
All properly executed proxies received prior to the Meeting will be
voted at the Meeting in accordance with the instructions marked thereon or
otherwise as provided therein. Unless instructions to the contrary are marked,
shares represented by the proxies will be voted "FOR" all the proposals. All
shares in Fund-sponsored IRA accounts not voted by the account owner will be
voted by the IRA trustee in the same proportion (for, against and abstain) as
all other votes cast whether in person or by proxy. For purposes of determining
the presence of a quorum for transacting business at the Meeting, abstentions
and broker "non-votes" (that is, proxies from brokers or nominees indicating
that such persons have not received instructions from the beneficial owner or
other persons entitled to vote shares on a particular matter with respect to
which the brokers or nominees do not have discretionary power) will be treated
as shares that are present. However, broker non-votes are disregarded in
determining "votes cast" when the voting requirement is based on achieving a
percentage of the voting securities entitled to vote present in person or by
proxy at the Meeting. Any proxy may be revoked at any time prior to the exercise
thereof by submitting another proxy bearing a later date or by giving written
notice to the Secretary of the Company at the address indicated above or by
voting in person at the Meeting. Any proxy may be revoked at any time prior to
the exercise thereof by submitting another proxy bearing a later date or by
giving written notice to the Secretary of the Company at the address indicated
above or by voting in person at the Meeting. The affirmative vote of a majority
of the shares entitled to vote as defined under the 1940 Act (a "Majority Vote")
(either 67% of the shares present at the Meeting, if holders of more than 50% of
the outstanding shares are present in person or by proxy, or more than 50% of
the outstanding shares, whichever is less) of the Fund is necessary to approve
the Proposal.
2
<PAGE>
In the event that insufficient votes in favor of any of the items to be
considered at the Meeting are received by the time scheduled for the Meeting,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of the proxies with respect to the proposal. Any
such adjournment will require the affirmative vote of a majority of votes cast
on the question in person or by proxy at the Meeting. The persons named as
proxies will vote against such adjournment only with respect to those proxies
that they are required to vote against such proposal.
The Board of Directors of the Company knows of no business other than
that specifically mentioned in the Notice of Meeting which will be presented for
consideration at the Meeting. If any other matters are properly presented, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment.
The Board of Directors of the Company has fixed the close of business
on _____ __, 1998 as the record date (the "Record Date") for the determination
of shareholders of the Fund entitled to notice of and to vote at the Meeting or
any adjournment thereof. Shareholders of the Fund on that date will be entitled
to one vote on each matter on which they are entitled to vote for each share
held and a fractional vote with respect to fractional shares, and shareholders
will not have cumulative voting rights. At the close of business on the Record
Date, the Fund had _________ outstanding shares, each with a par value of
$0.0001 per share.
The principal executive offices of the Company are located at 333
Market Street, 26th Floor, San Francisco, California 94105. The enclosed proxy
and this proxy statement are first being sent to the Fund's shareholders on or
about _____ __, 1998.
As of the Record Date, the [Investment Manager owned of record ____% of
the outstanding shares of the Fund; Fremont Group L.L.C.'s pension plan owned of
record ____% of the outstanding shares of the Fund; and Fremont Investors,
Inc.'s pension plan owned of record ____% of the outstanding shares of the
Fund.] As of the Record Date, to the best knowledge of the Fund, no other person
owned of record or beneficially more than 5% of the outstanding shares of the
Fund.
PROPOSAL I
APPROVAL OR DISAPPROVAL OF A RULE 12b-1 PLAN OF DISTRIBUTION
The Fund currently has a Plan of Distribution (the "Current Plan"),
pursuant to Rule 12b-1 under the 1940 Act. The Current Plan allows the Fund to
reimburse the Investment Manager distribution expenses out of Fund assets in an
amount not to exceed 0.25% (25 basis points) of the Fund's average annual net
assets. The Current Plan was adopted on ___________ by the shareholders of the
Fund. For the fiscal year ended October 31, 1997, the Fund paid $________ in
distribution fees under the Current Plan (which amounts to ____% of the Fund's
average net assets during that period.
The Fund's Investment Manager and Distribution Coordinator under the
Plan, Fremont Investment Advisors, Inc., wishes to conform the structure of the
Current Plan to other Rule 12b-1 plans adopted by other Fremont Funds, without
increasing the amount that may be paid out. This restructuring, by way of the
adoption of an Amended Plan of Distribution (the "Amended Plan"), may be
considered a material change even though it does not cause an increase to the
Current Plan's 12b-1 fee. Therefore the Board of Directors, recognizing the
desirability of the proposed harmonization of the Plan, are requesting
shareholders' approval of the changes in the Amended Plan. A copy of the Amended
Plan is attached to this Proxy Statement as Exhibit A.
The Amended Plan differs from the Current Plan in that it is a
compensation type plan. This means that the Distribution Coordinator will
receive and the Fund will accrue a flat payment of 0.25% of the Fund's average
annual net assets regardless of actual amount expensed.
Comparison of the Current Plan and the Amended Plan
3
<PAGE>
Under both the Current Plan and the Amended Plan, the Fund would be
authorized to pay 0.25% on an annualized basis of the Fund's average daily net
assets as distribution and service fees to the Investment Manager for performing
the following kinds of services: services primarily intended to result in the
sale of the Fund's shares ("distribution services"), including, but not limited
to: (a) making payments, including incentive compensation, to agents for and
consultants to the Investment Manager, any affiliate of the Investment Manager
or the Company, including pension administration firms that provide distribution
and shareholder related services and broker-dealers that engage in the
distribution of the Fund's shares; (b) making payments to persons who provide
support services in connection with the distribution of the Fund's shares and
servicing of the Fund's shareholders, including, but not limited to, personnel
of the Investment Manager, office space and equipment, telephone facilities,
answering routine inquiries regarding the Fund, processing shareholder
transactions and providing any other shareholder services not otherwise provided
by the Company's transfer agency or other servicing arrangements; (c) making
payments pursuant to the form of Distribution Agreement attached hereto as an
exhibit; (d) formulating and implementing marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (e) printing and
distributing prospectuses, statements of additional information and reports of
the Fund to prospective shareholders of the Fund; (f) preparing, printing and
distributing sales literature pertaining to the Fund; and (g) obtaining whatever
information, analysis and reports with respect to marketing and promotional
activities that the Company may, from time to time, deem advisable. Such
services and activities shall be deemed to be covered by this Plan whether
performed directly by the Investment Manager or by a third party.
As with the Current Plan, the Amended Plan provides that the Board of
Directors will be provided on a quarterly basis with a written report specifying
in reasonable detail the amounts expended for distribution and service related
activities and the purposes for which such expenditures were made. The Amended
Plan, if approved, will remain in effect for one year from the date of such
approval, and thereafter from year to year so long as it is approved by a
majority of the Company's entire Board of Directors, including a majority of the
disinterested Directors, unless sooner terminated according to its terms. In
accordance with the requirements of Rule 12b-1 under the 1940 Act, the selection
and nomination of those Directors who are not interested persons of the Company
will be committed to the discretion of the disinterested Directors.
The only material difference between the Current Plan and the Amended
Plan is the fee structure. The Current Plan is a "reimbursement" plan, which
means the Fund reimburses the Investment Manager, as distribution coordinator,
the actual expenses incurred by the Investment Manager in connection with
distribution-related activities. Under the Amended Plan, which is a
"compensation" plan, the Investment Manager, as distribution coordinator, will
be paid 0.25% of the Fund's annual average daily net assets, regardless of the
actual expenses incurred by the Investment Manager in connection with
distribution-related activities. The next section describes in further details
the differences between the two structure and the benefits of a "compensation"
plan for shareholders.
Benefits to Shareholders
The Amended Plan is a "compensation" plan whereas the Current Plan was
a "reimbursement" plan. This means that payments will be made to the Investment
Manager even if the actual expenses that are incurred for distribution or
service related activities are less than the payments. However, at any given
time, the aggregate amount of expenses incurred by the Investment Manager in
connection with payments for distribution and service related activities may
exceed the total payments made by the Fund pursuant to the Plan. Like the
current "reimbursement" plan, the Fund may not carry forward amounts
attributable to payments or expenses incurred in prior years by the Investment
Manager for distribution and service related activities in excess of 0.25% of
the Fund's average daily net assets. Any such amounts in excess of this
percentage limitation would not have to be paid in future years. Furthermore,
the payments under the "compensation" plan are not greater than the payments
that could be requested under the "reimbursement" plan.
4
<PAGE>
Evaluation by the Board of Directors
On _____________, 1997, the independent directors of the Company's
Board met and discussed the proposal and evaluated the terms of the Amended
Plan. After careful consideration, the Board decided on _____________ by
unanimous written consent to preliminarily approve the proposed Amended Plan and
to submit the proposed Amended Plan to shareholders for approval, subject to the
Board's final approval and voting by an in-person meeting, which is expected to
occur after the date the proxy materials were to be mailed to shareholders but
before the shareholder meeting date. (Currently scheduled to be on January 30,
1998.) If the Board fails to approve this Proposal in its January 30, 1998
meeting, this Proposal will be withdrawn from the shareholders' meeting
In preliminarily approving the Amended 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 would
benefit the Fund and its shareholders. The Board of Directors believes that
expenditure of the Fund's assets for distribution expenses under the Plan should
assist in the growth of the Fund, which will benefit the Fund and its
shareholders through increased economies of scale, greater investment
flexibility, greater portfolio diversification, and less chance of disruption of
planned investment strategies. The Plan will be renewed only if the Directors
make a similar determination for each subsequent year of the Plan. There can be
no assurance that the benefits anticipated from the expenditure of the Fund's
assets for distribution will be realized. While the Plan is in effect, the costs
to and expenses incurred by the Investment Manager 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 Company are committed to
the discretion of the Independent Directors during such period.
Under the Plan, the Fund would be permitted to compensate the
Investment Manager 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 Fund's
underwriter. The Plan would permit payments in any fiscal year up to a maximum
of .25% of the average daily net assets of the Fund. It is possible that the
Investment Manager could receive compensation under the Plan that exceeds the
Investment Manager's costs and related distribution expenses, thus resulting in
a profit to the Investment Manager. However, the Investment Manager does not
anticipate that this would ever be the case. Rather, the Investment Manager
anticipates that it will continue its current practice of supporting the Fund's
distribution with the Investment Manager's own monies.
Accordingly, after consideration of the above, and such other factors
and information as it deemed relevant, the Board of Directors, including all of
the directors who are not interested persons (as such term is defined by the
1940 Act), unanimously preliminarily approved the Amended Plan and voted to
recommend its approval to the Fund's shareholders, subject to the Directors'
formal approval in an in-person meeting prior to the shareholders' meeting.
The Board of Directors recommends that shareholders vote "FOR" the
proposal to permit the adoption of the Amended Plan.
GENERAL INFORMATION
Officers and Directors of the Investment Manager
5
<PAGE>
The Investment Manager's principal executive officers are set forth
below. The address of each as it relates to his/her duties at the Investment
Manager, is the same as the Investment Manager.
Name Position with the Investment Manager
---- ------------------------------------
David L. Redo President and Director
Michael H. Kosich Senior Vice President and Director
Albert W. Kirschbaum Senior Vice President and Director
Peter F. Landini Senior Vice President and Director
Other Matters to Come Before the Meeting
Management of the Company knows of no other matters which are to be
brought before the Meeting. However, if any other matters not now known or
determined properly come before the Meeting, it is the intention of the persons
named in the enclosed form of Proxy to vote such Proxy in accordance with their
best judgment on such matters.
All Proxies received will be voted in favor of all the proposals,
unless otherwise directed therein.
Shareholder Proposals
The Meeting is a special meeting of shareholders. The Fund is not
required to, nor does it intend to, hold regular annual meetings of its
shareholders. If such a meeting is called, any shareholder who wishes to submit
a proposal for consideration at the meeting should submit the proposal promptly
to the Company.
Reports to Shareholders
The Company will furnish, without charge, a copy of the most recent
Annual Report to Shareholders of the Company, and the most recent Semi-Annual
Report succeeding such Annual Report, if any, on request. Request for such
reports should be directed to the Company c/o Fremont Investment Advisors, Inc.,
333 Market Street, Suite 2900, San Francisco, California 94105-4022, or to (800)
548-4539.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
Very truly yours,
Tina Thomas
Secretary
JANUARY __, 1998
6
<PAGE>
EXHIBIT A
Form of Amended Distribution Plan
7
<PAGE>
FREMONT MUTUAL FUNDS, INC.
SHARE MARKETING PLAN
(Rule 12b-1 Plan)
(Fixed Compensation Plan)
This Share Marketing Plan (the "Plan") is adopted in
accordance with Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "Act"), by Fremont Mutual Funds, Inc., a Maryland
corporation (the "Corporation") with respect to certain series of its shares as
listed in Exhibit A (each such series, a "Fund"). The Plan has been approved by
a majority of the Corporation's Board of Directors, including a majority of the
Directors who are not interested persons of the Corporation and who have no
direct or indirect financial interest in the operation of the Plan (the
"independent Directors"), cast in person at a meeting called for the purpose of
voting on the Plan.
In reviewing the Plan, the Board of Directors considered the
proposed range and nature of payments and terms of the Investment Management
Agreement between the Corporation on behalf of each Fund and Fremont Investment
Advisors, Inc. (the "Advisor") and the nature and amount of other payments, fees
and commissions that may be paid to the Advisor, its affiliates and other agents
of the Corporation. The Board of Directors, including the independent Directors,
concluded that the proposed overall compensation of the Advisor and its
affiliates was fair and not excessive.
In its considerations, the Board of Directors also recognized
that uncertainty may exist from time to time with respect to whether payments to
be made by the Corporation to the Advisor, as the initial "distribution
coordinator," or other firms under agreements with respect to a Fund may be
deemed to constitute impermissible distribution expenses. As a general rule, an
investment company may not finance any activity primarily intended to result in
the sale of its shares, except pursuant to the Rule. Accordingly, the Board of
Directors determined that the Plan also should provide that payments by the
Corporation and expenditures made by others out of monies received from the
Corporation which are later deemed to be for the financing of any activity
primarily intended to result in the sale of Fund shares shall be deemed to have
been made pursuant to the Plan.
The approval of the Board of Directors included a
determination that in the exercise of the Directors' reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Corporation, the Fund to which the
Plan applies and its shareholders.
-1-
<PAGE>
The provisions of the Plan are:
1. Annual Fee. The Corporation will pay to Advisor, as the
Funds' distribution coordinator, an annual fee for the Advisor's services in
connection with the promotion and distribution of the Fund's shares and related
shareholder servicing. The annual fee paid to Advisor under the Plan will be
calculated daily and paid monthly by each Fund on the first day of each month
based on the average daily net assets of each Fund, as follows: an annual rate
of up to 0.25%. This fee is not tied exclusively to actual distribution and
service expenses, and the fee may exceed the expenses actually incurred.
2. Services Covered by the Plan. The fee paid under Section 1
of the Plan is intended to compensate the Advisor for performing the following
kinds of services: services primarily intended to result in the sale of the
Fund's shares ("distribution services"), including, but not limited to: (a)
making payments, including incentive compensation, to agents for and consultants
to Advisor, any affiliate of the Advisor or the Corporation, including pension
administration firms that provide distribution and shareholder related services
and broker-dealers that engage in the distribution of the Fund's shares; (b)
making payments to persons who provide support services in connection with the
distribution of a Fund's shares and servicing of a Fund's shareholders,
including, but not limited to, personnel of Advisor, office space and equipment,
telephone facilities, answering routine inquiries regarding the Fund, processing
shareholder transactions and providing any other shareholder services not
otherwise provided by the Corporation's transfer agency or other servicing
arrangements; (c) making payments pursuant to the form of Distribution Agreement
attached hereto as an exhibit; (d) formulating and implementing marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (e)
printing and distributing prospectuses, statements of additional information and
reports of the Fund to prospective shareholders of the Fund; (f) preparing,
printing and distributing sales literature pertaining to the Fund; and (g)
obtaining whatever information, analysis and reports with respect to marketing
and promotional activities that the Corporation may, from time to time, deem
advisable. Such services and activities shall be deemed to be covered by this
Plan whether performed directly by the Advisor or by a third party.
3. Written Reports. Advisor shall furnish to the Board of
Directors of the Corporation, for its review, on a quarterly basis, a written
report of the monies paid to it under the Plan with respect to each Fund, and
shall furnish the Board of Directors of the Corporation with such other
information as the Board of Directors may reasonably request in connection with
the payments made under the Plan in order to enable the Board of Directors to
make an informed determination of whether the Plan should be continued as to
each Fund.
4. Termination. The Plan may be terminated as to any Fund at
any time, without penalty, by vote of a majority of the outstanding voting
securities of a Fund, and any Distribution
-2-
<PAGE>
Agreement under the Plan may be likewise terminated on not more than sixty (60)
days' written notice. Once terminated, no further payments shall be made under
the Plan notwithstanding the existence of any unreimbursed current or carried
forward Distribution Expenses.
5. Amendments. The Plan and any Distribution Agreement may not
be amended to increase materially the amount to be spent for distribution and
servicing of Fund shares pursuant to Section 1 hereof without approval by a
majority of the outstanding voting securities of a Fund. All material amendments
to the Plan and any Distribution Agreement entered into with third parties shall
be approved by the independent Directors cast in person at a meeting called for
the purpose of voting on any such amendment. The Advisor may assign its
responsibilities and liabilities under the Plan to another party who agrees to
act as "distribution coordinator" for the Corporation with the consent of a
majority of the independent Directors.
6. Selection of Independent Directors. So long as the Plan is
in effect, the selection and nomination of the Corporation's independent
Directors shall be committed to the discretion of such independent Board of
Directors.
7. Effective Date of Plan. The Plan shall take effect at such
time as it has received requisite Director and shareholder approval and, unless
sooner terminated, shall continue in effect for a period of more than one year
from the date of its execution only so long as such continuance is specifically
approved at least annually by the Board of Directors of the Corporation,
including the independent Directors, cast in person at a meeting called for the
purpose of voting on such continuance.
8. Preservation of Materials. The Corporation will preserve
copies of the Plan, any agreements relating to the Plan and any report made
pursuant to Section 5 above, for a period of not less than six years (the first
two years in an easily accessible place) from the date of the Plan, agreement or
report.
9. Meanings of Certain Terms. As used in the Plan, the terms
"interested person" and "majority of the outstanding voting securities" will be
deemed to have the same meaning that those terms have under the Act and the
rules and regulations under the Act, subject to any exemption that may be
granted to the Corporation under the Act by the Securities and Exchange
Commission.
-3-
<PAGE>
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Corporation and Advisor, as distribution
coordinator, as evidenced by their execution hereof, as of this ____ day of
November 1997.
FREMONT MUTUAL FUNDS, INC.
By: _____________________________
Title: _____________________________
FREMONT INVESTMENT ADVISORS, INC.
as Distribution Coordinator
By: _____________________________
Title: _____________________________
-4-
<PAGE>
FREMONT MUTUAL FUNDS, INC.
------------------
EXHIBIT A TO SHARE MARKETING PLAN
The following Series of Fremont Mutual Funds, Inc. have
adopted the Share Marketing Plan:
Fund Date Adopted
---- ------------
Fremont U.S. Small Cap Fund September 24, 1997
Fremont Emerging Markets Fund ____________, 1998
Fremont International Growth Fund ____________, 1998
-5-
<PAGE>
FREMONT MUTUAL FUNDS, INC.
Share Marketing Agreement
EXHIBIT ONLY
___________________________________
___________________________________
___________________________________
___________________________________
Ladies and Gentlemen:
This Share Marketing Agreement has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Company
Act"), by Fremont Mutual Funds, Inc., a Maryland business corporation (the
"Corporation"), on behalf of various series of the Corporation (each series, a
"Fund"), as governed by the terms of a Share Marketing Plan (Rule 12b-1 Plan)
(the "Plan").
The Plan has been approved by a majority of the Directors who
are not interested persons of the Corporation or the Funds and who have no
direct or indirect financial interest in the operation of the Plan (the
"independent Directors"), cast in person at a meeting called for the purpose of
voting on such Plan. Such approval included a determination that in the exercise
of the reasonable business judgment of the Board of Directors and in light of
the Directors' fiduciary duties, there is a reasonable likelihood that the Plan
will benefit each Fund and its shareholders.
1. To the extent you provide eligible shareholder services of
the type identified in the Plan to the Funds identified in the attached Schedule
(the "Schedule"), we shall pay you a monthly fee based on the average net asset
value of Fund shares during any month which are attributable to customers of
your firm, at the rate set forth on the Schedule.
2. In no event may the aggregate annual fee paid to you
pursuant to the Schedule
-6-
<PAGE>
exceed ____ percent of the value of the net assets of each Fund held in your
customers' accounts which are eligible for payment pursuant to this Agreement
(determined in the same manner as the Fund uses to compute its net assets as set
forth in its then effective Prospectus), without approval by a majority of the
outstanding shares of each Fund.
3. You shall furnish us and the Corporation with such
information as shall reasonably be requested by the Corporation's Board of
Directors with respect to the services performed by you and the fees paid to you
pursuant to the Schedule.
4. We shall furnish to the Board of Directors of the
Corporation, for its review, on a quarterly basis, a written report of the
amounts expended under the Plan by us with respect to each Fund and the purposes
for which such expenditures were made.
5. You agree to make shares of the Funds available only (a) to
your customers or entities that you service at the net asset value per share
next determined after receipt of the relevant purchase instruction or (b) to
each such Fund itself at the redemption price for shares, as described in each
Fund's then-effective Prospectus.
6. No person is authorized to make any representations
concerning a Fund or shares of a Fund except those contained in each Fund's
then-effective Prospectus or Statement of Additional Information and any such
information as may be released by a Fund as information supplemental to such
Prospectus or Statement of Additional Information.
7. Additional copies of each such Prospectus or Statement of
Additional Information and any printed information issued as supplemental to
each such Prospectus or Statement of Additional Information will be supplied by
each Fund to you in reasonable quantities upon request.
8. In no transaction shall you have any authority whatever to
act as agent of the Funds and nothing in this Agreement shall constitute you or
the Fund the agent of the other. You are not authorized to act as an underwriter
of shares of the Funds or as a dealer in shares of the Funds.
9. All communications to the Funds shall be sent to: Ms. Tina
Thomas, Fremont Investment Advisors, Inc., 333 market Street, Suite 2600, San
Francisco, California, 94105. Any notice to you shall be duly given if mailed or
telegraphed to you at your address as indicated in this Agreement.
10. This Agreement may be terminated by us or by you, by the
vote of a majority of the Directors of the Corporation who are independent
Directors, or by a vote of a majority of the outstanding shares of a Fund, on
sixty (60) days' written notice, all without payment of any penalty.
-7-
<PAGE>
It shall also be terminated automatically by any act that terminates the Plan.
11. The provisions of the Plan between the Corporation and us,
insofar as they relate to you, are incorporated herein by reference.
This Agreement shall take effect on the date indicated below,
and the terms and provisions thereof are hereby accepted and agreed to by us as
evidenced by our execution hereof.
Fremont Investment Advisors, Inc.
Distribution Coordinator
By: EXHIBIT ONLY
-------------------------------
Authorized Officer
Dated: ________________________
Agreed and Accepted:
____________________________
(Name)
By: ________________________
(Authorized Officer)
-8-
<PAGE>
FREMONT MUTUAL FUNDS, INC.
----------------
SCHEDULE TO SHARE MARKETING AGREEMENT
BETWEEN _____________________.
AND
FREMONT INVESTMENT ADVISORS, INC.
as distribution coordinator
Pursuant to the provisions of the Share Marketing Agreement
between the above parties with respect to Fremont Investment Advisors, Inc. as
Distribution Coordinator, shall pay a monthly fee to the above-named party based
on the average net asset value of shares of each Fund during the previous
calendar month the sales of which are attributable to the above-named party, as
follows:
Fund Fee
---- ---
-9-
<PAGE>
PROXY
Fremont Emerging Markets Fund
SPECIAL MEETING OF SHAREHOLDERS
_____ __, 1998
SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
FREMONT MUTUAL FUNDS, INC.
The undersigned hereby appoints ________ and ________, and each of
them, as proxies of the undersigned, each with the power to appoint his
substitute, for the Special Meeting of Shareholders of Fremont Emerging Markets
Fund (the "Fund"), a series of Fremont Mutual Funds, Inc. (the Company), to be
held on _____ __, 1998 at the offices of Fremont Mutual Funds, Inc., 333 Market
Street, 26th Floor, San Francisco, California, 94105, or at any and all
adjournments thereof (the "Meeting"), to vote, as designated below, all shares
of the Fund, held by the undersigned at the close of business on _____ __, 1998.
Capitalized terms used without definition have the meanings given to them in the
accompanying Proxy Statement.
A SIGNED PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL LISTED BELOW UNLESS YOU
HAVE SPECIFIED OTHERWISE. PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY. YOU
MAY VOTE ONLY IF YOU HELD SHARES IN THE FUND AT THE CLOSE OF BUSINESS ON _____
__, 1998. YOUR SIGNATURE AUTHORIZES THE PROXIES TO VOTE IN THEIR DISCRETION UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, INCLUDING WITHOUT
LIMITATION ALL MATTERS INCIDENT TO THE CONDUCT OF THE MEETING.
1. Approval of the an Amended Plan of Distribution:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated: ______________, 1998
___________________________
Signature
___________________________
Title (if applicable)
___________________________
Signature (if held jointly)
___________________________
Title (if applicable)
Please sign exactly as name or names appear on your shareholder account
statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give full title. If shares are
held jointly, each shareholder should sign.
1
