SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Fremont Mutual Funds, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE>
Fremont
Funds [LOGO]
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Important Proxy Vote for Fremont Funds Shareholders
Please Read and Respond Promptly.
January 26, 1999
Dear Fremont Mutual Funds Shareholder:
PLEASE READ THIS LETTER... IMPORTANT DOCUMENTS ENCLOSED.
I am writing to inform you of a proxy vote involving Fremont Mutual Funds
shareholders. It is important that all Fremont Funds shareholders exercise their
right to vote on these significant issues concerning their investments.
Please read the enclosed materials and cast your vote promptly. For your
convenience you can now vote via the telephone or the Internet. (Turn over for
instructions.)
You will be asked to vote and approve the following issues regarding the
management of your Fremont Mutual Funds investments. The Board of Directors of
Fremont Mutual Funds, Inc., unanimously recommends that you vote in favor of
these proposals:
For all shareholders:
o To elect a Board of Directors --The Board of Directors oversees the
portfolio management of each fund. Some examples of their responsibilities
include: monitoring fund performance and compliance with investment
policies, reviewing contractual arrangements, and overseeing fund policies
for conducting pricing and valuation of securities. You are being asked to
elect four independent directors and three inside directors; each will
serve for an indefinite term.
o To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of the Funds. Auditors report on the Funds' annual financial
statements and also provide tax-related services.
For Fremont Emerging Markets Fund shareholders only:
o To approve a new investment advisory agreement for the Fremont Emerging
Markets Fund. This new advisory agreement will permit the Advisor, Fremont
Investment Advisors, Inc., to recapture waived fees and expenses under
certain conditions.
For Fremont California Intermediate Tax-Free Fund shareholders only:
o To approve a new investment advisory agreement for the Fremont California
Intermediate Tax-Free Fund. This new advisory agreement will permit the
Advisor, Fremont Investment Advisors, Inc., to recapture waived fees and
expenses under certain conditions.
How to vote on these resolutions
- --------------------------------
If you would like to cast your vote in person you may do so at the special
shareholder meeting that will take place at 9:00 a.m. on Friday, March 5, 1999,
in the main conference room on the 26th floor of 333 Market Street, in San
Francisco.
(Over, please)
Fremont Mutual Funds, Inc.
50 Beale Street, Suite 100, San Francisco, CA 94105 o www.fremontfunds.com
P.O. Box 193663, San Francisco, CA 94119-3663 o Telephone 800-548-4539
Distributed by First Fund Distributors, Inc., San Francisco, CA 94105
L038-9901
<PAGE>
Fremont Funds Shareholder Proxy
Page 2
If you do NOT plan to attend the special meeting of Fremont Mutual Funds
shareholders, we've created three ways for you to vote for these items:
o Using a secure Internet web site,
o By calling our automated telephone voting service, or
o By completing and mailing the proxy card in the enclosed postage-paid
envelope.
To vote by the Internet:
------------------------
1. Read the Proxy Statement and have your Proxy Card at hand.
2. Go to website www.proxyvote.com
3. Enter the 12-digit Control Number located on your Proxy Card.
4. Follow the simple instructions. If you choose, you may receive an
e-mail which confirms your voting instructions.
To vote by telephone:
---------------------
1. Read the Proxy Statement and have your Proxy Card at hand.
2. Call the toll-free 800 telephone number printed on your Proxy Card.
3. Enter the 12-digit Control Number located on your Proxy Card.
4. Follow the simple recorded instructions.
Do not mail the Proxy Card if you are voting by Internet or telephone.
Please Note: It is important that you vote by February 26, 1999, to save the
expense of additional solicitations.
If you have any questions about any of these materials, please call us at
800-548-4539 (press 2).
Sincerely,
/s/ Michael H. Kosich
Michael H. Kosich
President
<PAGE>
FREMONT MUTUAL FUNDS, INC.
333 Market Street
26th Floor
San Francisco, CA 94105
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on March 5, 1999
A Special Meeting of Shareholders (the "Meeting") of FREMONT MUTUAL FUNDS,
INC. (the "Company") will be held at the Funds' offices at 333 Market Street,
26th Floor, San Francisco, California 94105, on Friday, March 5, 1999, at 9:00
a.m. for the following purposes:
1. To elect seven directors, each to serve for an indefinite term; and
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of the Funds; and
3. To approve an amended investment advisory agreement between (i) Fremont
Mutual Funds, Inc., and (ii) Fremont Investment Advisors, Inc. for the
Fremont Emerging Markets Fund which would allow the Advisor to recapture
waived fees and expenses under certain conditions.
4. To approve an amended investment advisory agreement between (i) Fremont
Mutual Funds, Inc., and (ii) Fremont Investment Advisors, Inc. for the
Fremont California Intermediate Tax-Free Fund which would allow the Advisor
to recapture waived fees and expenses under certain conditions.
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 January 8, 1999, as the record date
for the determination of shareholders of the Funds entitled to notice of, and to
vote at, the Meeting.
By order of the Board of Directors
/s/ Tina Thomas
Tina Thomas, Secretary
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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.
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San Francisco, California
January 19, 1999
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FREMONT MUTUAL FUNDS, INC.
333 Market Street
26th Floor
San Francisco, CA 94105
800-548-4539
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
To Be Held on March 5, 1999
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")
of proxies to be voted at a Special Meeting of Shareholders of the Funds to be
held at the Funds' offices at 333 Market Street, 26th Floor, San Francisco,
California 94105, on Friday, March 5, 1999 at 9:00 a.m. (the "Meeting") and at
any adjournment thereof, for the purposes set forth in the accompanying Notice
of Special Meeting of Shareholders.
PROPOSAL I
BACKGROUND
The Board of Directors, of whom four were elected by shareholders and two were
appointed by the Board to fill interim vacancies, is currently comprised of six
individuals. The Board of Directors recently nominated a seventh individual to
serve on the Board to fill the vacancy created by the resignation of a director
who resigned in 1998. At least two-thirds of the individuals serving on the
Board of Directors are required by the Investment Company Act of 1940 (the "1940
Act") to have been elected by shareholders. Although the Board generally has the
authority pursuant to the Articles of Incorporation and Bylaws to elect and
replace directors, the Board of Directors cannot elect a seventh member because
shareholders of the Corporation would not then have elected two-thirds of the
directors. Consequently, the purpose of the special meeting is to elect, or
re-elect as the case may be, all seven directors (the six current directors and
the nominee for the vacant directorship), each to serve on the Board for an
indefinite term. The following table sets forth certain information regarding
each nominee for election as a director by shareholders.
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The Election Of David L. Redo, Michael H. Kosich, Peter F. Landini, Richard E.
Holmes, Donald C. Luchessa, David L. Egan And Kimun Lee As Directors Of Fremont
Mutual Funds, Inc.
<TABLE>
<CAPTION>
Beneifical Compensation
Name and Principal Occupation During Ownership During the Fiscal
the Past Five Years and Date of Director Shares of the Year Ended
Directorship of Public Companies Birth Since Company October 31, 1998
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<S> <C> <C> <C> <C>
DAVID L. REDO** 9-1-37 1988 * $0.00
President, Chief Executive Officer and a
director of Fremont Investment Advisors,
Inc. (the investment advisor to the Funds)
and Managing Director of Fremont Group LLC,
Fremont Investors, Inc., and Sequoia
Ventures, Inc. He is also a director of
Sit/Kim International Investment Associates
and Kern Capital Management, LLC. Mr. Redo
also was formerly a Director of J.P. Morgan
Securities, Asia.
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MICHAEL H. KOSICH** 3-30-40 1996 * $0.00
President and director of Fremont Mutual
Funds, Inc. Managing Director of Fremont
Investment Advisors, Inc. (the investment
advisor to the Funds). He formerly was a
Senior Vice President of Business
Development of Benham Management
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RICHARD E. HOLMES 5-14-43 1988 * $18,000
Vice President and a director of BelMar
Advisors, Inc. (a marketing firm for
investment advisors).
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DONALD C. LUCHESSA 2-18-30 1991 * $18,000
Principal of DCL Advisory (a marketing firm
for investment advisors).
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DAVID L. EGAN 5-1-34 1996 * $18,000
Founding Partner of China Epicure, LLC and
Palisades Trading Company, LLC. He was
formerly President of Fairfield Capital
Associates, Inc. (an investment advisor)
and Fairfield Capital Funding, Inc. (a
registered broker-dealer).
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PETER F. LANDINI 5-10-51 1997 * $0.00
Managing Director and Chief Operating
Officer of Fremont Investment Advisors,
Inc. (the investment advisor to the
Funds). He formerly was Director of J.P.
Morgan Securities, Asia.
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KIMUN LEE 6-17-46 -- * $0.00
Doing business as Resources Consolidated (a
consulting and registered investment
advisory business). He formerly handled
treasury duties for Castle and Cooke, Inc.
Mr. Lee also serves on the board of
trustees of the San Francisco Ballet, the
Chinese Performing Arts Foundation and
University of California, Berkeley's Cal
Performances.
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</TABLE>
*As of January 19, 1999, each individual director or nominee owns of record or
beneficially less than 1% of the outstanding shares of each of the Funds and of
the Company as a whole.
**Messrs. Redo, Kosich and Landini, as affiliated persons of Fremont Investment
Advisors, Inc., the Company's investment advisor, are "interested persons" of
the Company within the meaning of Section 2(a)(19) of the Investment Company Act
of 1940. Messrs. Redo, Kosich and Landini may directly or indirectly receive
benefits from such affiliation.
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<PAGE>
All nominees have consented to being named in this proxy statement and have
agreed to serve if elected. Directors on the Board who are not interested
persons of the Company receive an annual retainer of $8,000, an additional
$2,000 for each Board meeting attended, and reimbursement for expenses incurred
in attending the meeting.
The Company has an Executive Committee comprised of Mr. Redo, Mr. Kosich and Mr.
Landini. The Executive Committee is responsible for managing the day-to-day
business affairs of the Company. The Company also has an Audit Committee and a
Contracts Committee, each will consist of David L. Egan, Richard E. Holmes,
Kimun Lee and Donald C. Luchessa. The Audit and Contracts Committees make
recommendations to the Board of Directors as deemed necessary concerning the
review of the Company's investment advisory agreements and other service
contracts, the selection of the Company's independent public accountants, and
other matters related to the provision of services to the Company. Committee
members receive no additional compensation for attending a Committee meeting.
During the fiscal year ended October 31, 1998, the Board of Directors held three
meetings and the Audit and Contracts Committees each held two meetings. During
such fiscal year, each director attended at least 75% of the aggregate of (i)
the total number of meetings of the Board of Directors and (ii) the total number
of meetings held by all committees of the Board of Directors on which he served.
The directors of the Company intend to vote all of their shares in favor of the
Board nominees listed in this proxy.
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<PAGE>
PROPOSAL II
BACKGROUND
By a vote of the Directors who are not "interested persons" of the Company or
Fremont Investment Advisors, Inc. (the "Independent Directors"),
PricewaterhouseCoopers LLP has been selected as independent auditors for the
Company to sign or certify any financial statements of the Funds required by any
law or regulation to be certified by an independent accountant and filed with
the Securities and Exchange Commission (SEC) or any state. Pursuant to the 1940
Act, such selection may be ratified by shareholders. PricewaterhouseCoopers LLP
is the professional services firm formed in July 1998 by the merger of Coopers &
Lybrand International and Price Waterhouse. The former independent auditors for
the Funds was Coopers & Lybrand.
To Ratify The Selection Of PricewaterhouseCoopers LLP As Independent Auditors Of
The Funds.
The independent auditors examine annual financial statements for the Funds and
provide other audit and tax-related services. In recommending the selection of
the Funds' auditors, the Audit Committee reviewed the nature and scope of the
services to be provided (including non-audit services) and whether the
performance of such services would affect the auditors' independence.
Representatives of PricewaterhouseCoopers LLP are not expected to be present at
the Meeting, but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their presence.
PricewaterhouseCoopers LLP has advised the Funds that they have no direct or
material indirect ownership interest in the Funds.
In order to ratify the selection of PricewaterhouseCoopers LLP as the auditors
for the 1999 fiscal year, the proposal must receive at least a majority of the
votes cast, either in person or by proxy, in favor of such ratification. The
Board of Directors recommends a vote "FOR" the ratification of
PricewaterhouseCoopers LLP as auditors for the 1999 fiscal year.
5
<PAGE>
PROPOSAL III
For Shareholders Of Fremont Emerging Markets Fund Only
BACKGROUND
Fremont Investment Advisors, Inc. (the "Advisor") currently provides investment
advisory services to the Fremont Emerging Markets Fund pursuant to an Investment
Advisory and Administrative Services Agreement (the "Current Agreement"). The
Advisor, located at 333 Market Street, 26th Floor, San Francisco, California
94105, has advised the Fremont Emerging Markets Fund since its inception. This
Proposal III seeks shareholders' approval for an Amended and Restated Investment
Advisory and Administrative Services Agreement (the "Amended Agreement") that
would modify the current contractual management arrangement between the Fremont
Mutual Funds, Inc. and the Advisor, allowing the Advisor to recapture waived
fees and expenses under certain conditions as set forth. No increase in the
Advisory fee rate is being sought. In the event that actual expenses drop below
1.50%, the shareholders may not receive the benefit of these lower costs to the
extent that reimbursement is being made.
To Approve An Amended Investment Advisory Agreement Between (i) Fremont Mutual
Funds, Inc., And (ii) Fremont Investment Advisors, Inc. For The Fremont Emerging
Markets Fund Which Allows The Advisor To Recapture Waived Fees And Expenses
Under Certain Conditions
The Amended Agreement for the Fremont Emerging Markets Fund (the "Emerging
Markets Fund") is substantially identical in all material respect to the Current
Agreement except that the Amended Agreement (i) is restated in a separate
agreement to which other Fremont Funds are not parties; (ii) removes any dollar
limit on the amount of administrative fee that may be paid to the Advisor when
the Emerging Markets Fund is operating at asset levels below $50 million+ (the
limit on administrative fees is no longer necessary because of the annual limit
on operating expenses); and (iii) would add a recapture period for waived fees
and expenses as further discussed below. A form of the Amended Agreement is
attached to this Proxy Statement as Exhibit A. The following description of the
Amended Agreement is only a summary. You should refer to Exhibit A for the
complete Amended Agreement.
Under the Amended Agreement, the Advisor would continue to oversee the
investment advisory services to the Emerging Markets Fund, including deciding
what securities will be purchased and sold by the Emerging Markets 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 Emerging Markets 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 Advisor
to continue advising the Emerging Markets Fund under the Amended Agreement, the
shareholders of the Emerging Markets Fund must approve the Amended Agreement.
If approved by shareholders, the Amended Agreement will continue in effect for
no more than one year from its effective date and, if renewed, will continue in
effect thereafter for successive one-year 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 Emerging Markets Fund,
and (3) in either event by a majority of the Independent Directors. The Amended
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
Emerging Markets 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 fees charged to the Emerging Markets Fund will not increase as a
result of approving the Amended Agreement. Moreover, the general operations of
the Emerging Markets Fund, which includes management and administration) will
continue to be subject to the current operating expense limit which is 1.50% of
the Emerging Markets Fund's average annual net assets. However, to the extent
management fees (or administrative fees) are waived and/or other expenses are
reimbursed by the Advisor, the Advisor may elect to recapture such amounts
subject to the following conditions: the Advisor 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
reimburse-
+Under the Current Agreement, administrative fees will not exceed $24,000 per
annum until the total net asset value of the Fund equals or exceeds $30 million
and will not exceed $40,000 per annum until the total net asset value of the
Fund equals or exceeds $50 million.
6
<PAGE>
ment, and the Emerging Markets Fund must be able to make the reimbursement and
still stay within the then current operating expense limitation. Current
operating expenses must be paid (or accrued for) before reimbursements are taken
into account.
The advisor has agreed not to seek recapture for any amounts waived or
reimbursed by the Advisor before the effective date of the Amended Agreement.
Both the Amended Agreement and the Current Agreement provide that the Advisor
may appoint a Sub-Advisor, and that the Advisor and any sub-advisor would have
no liability to the Emerging Markets Fund or any shareholder of the Emerging
Markets 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 Advisor 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 Amended Agreement, like the
current Agreement, provides that the Emerging Markets Fund shall indemnify the
Advisor and its employees, officers and directors from any liability arising
from the Advisor's conduct under the Amended Agreement, except for Disabling
Conduct, to the extent permitted by the Emerging Markets Fund's governing
documents and applicable law.
Evaluation by the Board of Directors
On December 11, 1998, the Independent Directors of the Company's Board met and
discussed the proposal and evaluated the terms of the Amended Agreement.
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), approved the Amended Agreement and voted to recommend its approval to the
Emerging Markets Fund's shareholders.
The Board of Directors recommends that shareholders vote "FOR" the proposal to
approve the Amended Agreement to allow the Advisor to recapture waived fees and
expenses under certain conditions as discussed above. If the shareholders of the
Emerging Markets Fund do not approve this Proposal, the Current Agreement will
continue.
7
<PAGE>
PROPOSAL IV
For Shareholders Of Fremont California Intermediate Tax-Free Fund Only
BACKGROUND
Fremont Investment Advisors, Inc. (the "Advisor") currently provides investment
advisory services to the Fremont California Intermediate Tax-Free Fund pursuant
to an Investment Advisory and Administrative Services Agreement (the "Current
Agreement"). The Advisor, located at 333 Market Street, 26th Floor, San
Francisco, California 94105, has advised the Fremont California Intermediate
Tax-Free Fund since its inception. This Proposal IV seeks shareholders' approval
for an Amended and Restated Investment Advisory and Administrative Services
Agreement (the "Amended Agreement") that would modify the current contractual
management arrangement between the Fremont Mutual Funds, Inc. and the Advisor,
allowing the Advisor to recapture waived fees and expenses under certain
conditions as set forth. No increase in the Advisory fee rate is being sought.
In the event that actual expenses drop below 0.49%, the shareholders may not
receive the benefit of these lower costs to the extent that reimbursement is
being made.
To Consider And Act Upon The Approval Of A New Investment Advisory Agreement
Between (i) Fremont Mutual Funds, Inc., And (ii) Fremont Investment Advisors,
Inc., Allowing The Advisor To Recapture Waived Fees And Expenses Under Certain
Conditions
The Amended Agreement for the Fremont California Intermediate Tax-Free Fund (the
"CITF Fund") is substantially identical in all material respect to the Current
Agreement except that the Amended Agreement (i) is restated in a separate
agreement to which other Fremont Funds are not parties; (ii) removes any dollar
limit on the amount of administrative fees that may be paid to the Advisor when
the CITF Fund is operating at asset levels below $50 million++ (the limit on
administrative fees is no longer necessary because of the annual limit on
operating expenses and because the CITF Fund has exceeded $50 million in
assets); and (iii) would add a recapture period for waived fees and expenses as
further discussed below. A form of the Amended Agreement is attached to this
Proxy Statement as Exhibit B. The following description of the Amended Agreement
is only a summary. You should refer to Exhibit B for the complete Amended
Agreement.
Under the Amended Agreement, the Advisor would continue to oversee the
investment advisory services to the CITF Fund, including deciding what
securities will be purchased and sold by the CITF 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 CITF 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 Advisor
to continue advising the CITF Fund under the Amended Agreement, the shareholders
of the CITF Fund must approve the Amended Agreement.
If approved by shareholders, the Amended Agreement will continue in effect for
no more than one year from its effective date and, if renewed, will continue in
effect thereafter for successive one-year 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 CITF Fund, and (3) in
either event by a majority of the Independent Directors. The Amended 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 CITF 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 fees charged to the CITF Fund will not increase as a result of
approving the Amended Agreement. Moreover, the general operations of the CITF
Fund, which includes management and administration, will continue to be subject
to the current operating expense limitations which is 0.49% of the CITF Fund's
average annual net assets. However, to the extent management fees (or
administrative fees) are waived and/or other expenses are reimbursed by the
Advisor, the Advisor may elect to recapture such amounts subject to the
following conditions: the Advisor 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 CITF Fund must be
able to make the reimbursement and still
++Under the Current Agreement, administrative fees will not exceed $24,000 per
annum until the total net asset value of the Fund equals or exceeds $30 million
and will not exceed $40,000 per annum until the total net asset value of the
Fund equals or exceeds $50 million.
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<PAGE>
stay within the then current operating expense limitation. Current operating
expenses must be paid (or accrued for) before reimbursements are taken into
account
The Advisor has agreed not to seek recapture for any amounts waived or
reimbursed by the Advisor before the effective date of the Amended Agreement.
Both the Amended Agreement and the Current Agreement provide that the Advisor
may appoint a Sub-Advisor, and that the Advisor and any sub-advisor would have
no liability to the CITF Fund or any shareholder of the CITF 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 Advisor 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 Amended Agreement, like the current Agreement, provides that the
CITF Fund shall indemnify the Advisor and its employees, officers and directors
from any liability arising from the Advisor's conduct under the Amended
Agreement, except for Disabling Conduct, to the extent permitted by the CITF
Fund's governing documents and applicable law.
Evaluation by the Board of Directors
- ------------------------------------
On December 11, 1998, the Independent Directors of the Company's Board met and
discussed the proposal and evaluated the terms of the Amended Agreement.
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), approved the Amended Agreement and voted to recommend its approval to the
CITF Fund's shareholders.
The Board of Directors recommends that shareholders vote "FOR" the proposal to
approve the Amended Agreement to allow the Advisor to recapture waived fees and
expenses under certain conditions as discussed above. If the shareholders of the
CITF Fund do not approve this Proposal, the Current Agreement will continue.
9
<PAGE>
GENERAL INFORMATION
The costs of preparing, printing, mailing and soliciting the proxies will be
born by Fremont Mutual Funds, Inc. In addition, certain officers, directors and
employees of the Advisor and officers and directors of the Company (none of whom
will receive additional compensation therefor) may solicit proxies in person, by
telephone, telegraph, or mail. ADP Investor Communication Services has been
retained at its customary rates to solicit proxies on behalf of the omnibus
accounts.
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. The affirmative vote of a majority of all shares present in
person or by proxy without reference to specific mutual fund series is required
to elect directors and ratify the selection of independent auditors (Proposals I
and II). The affirmative vote of a majority of the shares of the affected mutual
fund series is necessary to approve the proposed amendments to the advisory
agreements (Proposals III and IV). For purposes of Proposals III and IV, a
Majority Vote is considered to be 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.
To establish a quorum at least half the shares issued and outstanding, counted
without reference to particular mutual fund series, must be present in person or
by proxy. In the event that insufficient votes to establish quorum or 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 still 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 have 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 require them 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 January
8, 1999 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 Funds 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. The Corporation is comprised of 13 separate
funds, the Fremont Global Fund, the Fremont Money Market Fund, the Fremont
California Intermediate Tax-Free Fund, the Fremont Bond Fund, the Fremont Growth
Fund, the Fremont International Growth Fund, the Fremont U.S. Micro-Cap Fund,
the Fremont International Small Cap Fund, the Fremont Emerging Markets Fund, the
Fremont Institutional U.S. Micro-Cap Fund, the Fremont U.S. Small Cap Fund, the
Fremont Real Estate Securities Fund and the Fremont Select Fund (individually a
"Fund" and collectively the "Funds"), each of which is represented by a separate
series of the Corporation's shares. At the close of business on the Record Date,
there were 1,326,444,251 shares of common stock, $0.0001 par value, of the
Corporation outstanding, comprised of 70,043,623 shares of the Global Fund,
1,167,635,736 shares of the Money Market Fund, 10,363,171 shares of the
California Intermediate Tax-Free Fund, 22,505,355 shares of the Bond Fund,
15,888,602 shares of the Growth Fund, 7,728,588 shares of the International
Growth Fund, 10,858,228 shares of the U.S. Micro-Cap Fund, 1,155,838 shares of
the International Small Cap Fund, 1,711,250 shares of the Emerging Markets Fund,
9,914,501 shares of the Institutional U.S. Micro-Cap Fund, 921,948 shares of the
U.S. Small Cap Fund,
10
<PAGE>
7,119,557 shares of the Real Estate Securities Fund and 597, 854 shares of the
Select Fund.
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 January
27, 1999.
As of the Record Date, Fremont Investors, Inc. owned 15.01%, Charles Schwab &
Co. owned 14.40%, Fremont Investment Advisors, Inc. owned 13.50%, and Fremont
Group LLC owned 10.79% of the outstanding shares of the Fremont Emerging Markets
Fund, BF Fund Limited owned 40.37% of the Fremont California Intermediate
Tax-Free Fund, and Bechtel Master Trust for Qualified Employees owned 68.60%, BF
Fund Limited owned 13.07%, and Charles Schwab & Co. owned 10.61% of the Company.
As of the Record Date, to the best knowledge of the Funds, no other person owned
of record, according to information available to the Corporation, or
beneficially more than 5% of the outstanding shares of the Company or any Fund.
- --------------------------------------------------------------------------------
Officers and Directors of the Advisor
The Advisor's principal executive officers are set forth below. The address of
each as it relates to his duties at the Advisor, is the same as the Advisor.
Name Position with the Advisor Position with the Company
- ---- ------------------------- -------------------------
David L. Redo President and Director Chairman, Chief Executive
Officer and Director
Michael H. Kosich Managing Director President and Director
Peter F. Landini Managing Director Executive Vice President
and Director
Albert W. Kirschbaum Managing Director Senior Vice President
- --------------------------------------------------------------------------------
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 on request. Request for such report should
be directed to the Company c/o Fremont Investment Advisors, Inc., 333 Market
Street, Suite 2600, 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,
/s/ Tina Thomas
Tina Thomas
Secretary
11
<PAGE>
EXHIBIT A
Amended and Restated Investment Advisory and Administrative Services Agreement
THIS AGREEMENT, dated and effective as of this ____th day of __________________
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"), on behalf of
the Fremont Emerging Markets Fund (the "Fund"). This agreement amends and
restates as to the Fremont Emerging Markets Fund the agreement dated and
effective November 11, 1988.
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 Emerging Markets 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. To assist in its
duties, the Advisor may engage a Sub-Advisor approved by the Board of
Directors and (if required by applicable law) the shareholders of the
Company. In overseeing the Fund's portfolio, the Advisor (and any
Sub-Advisor) shall give 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 (and any Sub-Advisor engaged by 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, or Sub-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 or Sub-Advisor may place orders with brokerage firms
which furnish statistical and other information to the Advisor or
Sub-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 or
Sub-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
12
<PAGE>
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
("Sub-Advisors") to make specific investment decisions with respect to all
or a portion of the assets of the Fund. If a Sub-Advisor is engaged, all
references in this Agreement to the Advisor shall be deemed applicable to
such Sub-Advisor as necessary and appropriate. The Advisor may allocate
portions of the Fund's assets among such Sub-Advisor(s) or among itself and
such Sub-Advisor(s). The Advisor shall monitor the performance of such
Sub-Advisor(s), shall allocate and reallocate assets among Sub-Advisors of
the Fund with multiple Sub-Advisors, and shall recommend the employment or
termination of a particular Sub-Advisor when deemed advisable. The Advisor
will compensate such Sub-Advisor(s) from its own resources, at no
additional cost to the 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) to the extent such services have not been contracted
for with third parties. The Advisor, as administrator for the Fund, shall
oversee the performance of third parties. The Advisor shall also provide
the Fund 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
Fund. 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 Fund as of
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. (a) The Advisor may voluntarily waive fees, reduce any portion of other
compensation or pay expenses owed to it which are the responsibility of the
Fund under this Agreement. Any such reduction, waiver, or payment
(collectively "subsidies") shall be applicable only to such specific
subsidy and shall not constitute an agreement to continue such subsidy in
the future. Any such subsidy 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. The Advisor may also agree contractually to limit the
Fund's operating expenses. To the extent such a voluntary or contractual
expense limitation has been agreed to by the Advisor and such limit has
been disclosed to shareholders of the Fund in a prospectus, the limit
cannot be changed without first disclosing the change in an updated
prospectus.
(b) The Advisor may seek reimbursement in a subsequent fiscal year of any
reductions or payments of Fund expenses or fee waivers made by the Advisor
either voluntarily or pursuant to contract. The reimbursement of any
subsidy must be approved by the Company's Board of Directors and must be
sought no later than the end of the third fiscal year following the year to
which the subsidy relates. The Advisor may not request and receive
reimbursement for any subsidies before payment of the Fund's ordinary
operating expenses for the current year and cannot cause the Fund to exceed
any agreed upon expense limitation for that year in making such
reimbursement.
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.
13
<PAGE>
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 or
Fund'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
effective date designated herein (the "Effective Date"). Unless terminated
as herein provided, this Agreement shall remain in full force and effect
for one (1) year from the Effective Date and shall continue in full force
and effect for periods of one year after the effective date of any renewal
so long as such renewal 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 the Advisor, 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.
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:
-------------------------- ------------------------------
Michael H. Kosich, President David L. Redo, President
ATTEST: ATTEST:
By: By:
-------------------------- ------------------------------
Tina Thomas, Secretary Tina Thomas, Secretary
14
<PAGE>
APPENDIX A
to Investment Advisory and Administrative Agreement
(Fremont Emerging Markets Fund)
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
15
<PAGE>
EXHIBIT B
Amended and Restated Investment Advisory and Administrative Services Agreement
THIS AGREEMENT, dated and effective as of this ____th day of __________________
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"), on behalf of
the Fremont california intermediate tax-free Fund (the "Fund"). This agreement
amends and restates as to the Fremont California Intermediate Tax-Free Fund the
agreement dated and effective November 11, 1988.
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 Emerging Markets 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. To assist in its
duties, the Advisor may engage a Sub-Advisor approved by the Board of
Directors and (if required by applicable law) the shareholders of the
Company. In overseeing the Fund's portfolio, the Advisor (and any
Sub-Advisor) shall give 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 (and any Sub-Advisor engaged by 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, or Sub-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 or Sub-Advisor may place orders with brokerage firms
which furnish statistical and other information to the Advisor or
Sub-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 or
Sub-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
16
<PAGE>
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
("Sub-Advisors") to make specific investment decisions with respect to all
or a portion of the assets of the Fund. If a Sub-Advisor is engaged, all
references in this Agreement to the Advisor shall be deemed applicable to
such Sub-Advisor as necessary and appropriate. The Advisor may allocate
portions of the Fund's assets among such Sub-Advisor(s) or among itself and
such Sub-Advisor(s). The Advisor shall monitor the performance of such
Sub-Advisor(s), shall allocate and reallocate assets among Sub-Advisors of
the Fund with multiple Sub-Advisors, and shall recommend the employment or
termination of a particular Sub-Advisor when deemed advisable. The Advisor
will compensate such Sub-Advisor(s) from its own resources, at no
additional cost to the 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) to the extent such services have not been contracted
for with third parties. The Advisor, as administrator for the Fund, shall
oversee the performance of third parties. The Advisor shall also provide
the Fund 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
Fund. 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 Fund as of
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. (a) The Advisor may voluntarily waive fees, reduce any portion of other
compensation or pay expenses owed to it which are the responsibility of the
Fund under this Agreement. Any such reduction, waiver, or payment
(collectively "subsidies") shall be applicable only to such specific
subsidy and shall not constitute an agreement to continue such subsidy in
the future. Any such subsidy 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. The Advisor may also agree contractually to limit the
Fund's operating expenses. To the extent such a voluntary or contractual
expense limitation has been agreed to by the Advisor and such limit has
been disclosed to shareholders of the Fund in a prospectus, the limit
cannot be changed without first disclosing the change in an updated
prospectus.
(b) The Advisor may seek reimbursement in a subsequent fiscal year of any
reductions or payments of Fund expenses or fee waivers made by the Advisor
either voluntarily or pursuant to contract. The reimbursement of any
subsidy must be approved by the Company's Board of Directors and must be
sought no later than the end of the third fiscal year following the year to
which the subsidy relates. The Advisor may not request and receive
reimbursement for any subsidies before payment of the Fund's ordinary
operating expenses for the current year and cannot cause the Fund to exceed
any agreed upon expense limitation for that year in making such
reimbursement.
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
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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 or
Fund'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
effective date designated herein (the "Effective Date"). Unless terminated
as herein provided, this Agreement shall remain in full force and effect
for one (1) year from the Effective Date and shall continue in full force
and effect for periods of one year after the effective date of any renewal
so long as such renewal 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 the Advisor, 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.
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:
-------------------------- ------------------------------
Michael H. Kosich, President David L. Redo, President
ATTEST: ATTEST:
By: By:
-------------------------- ------------------------------
Tina Thomas, Secretary Tina Thomas, Secretary
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APPENDIX A
to Investment Advisory and Administrative Agreement
(Fremont California Intermediate Tax-Free Fund)
Investment Advisory Fee: Annually, based on average daily total net assets:
First $25 million 0.40%
Next $25 million 0.35%
Next $50 million 0.30%
Next $50 million 0.25%
In excess of $150 million 0.20%
Administrative Fee: 0.15% annually on the portion of daily total
net asset value
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