SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 (Amendment No. )
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
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 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)(1) and 0-11.
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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 0-11 (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:
[ ] Fee paid previously with preliminary materials:
[ ] 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:
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2) Form, Schedule or Registration Statement No.: Schedule 14a;
33-23453; 811-05632
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3) Filing Party: Fremont Mutual Funds, Inc.
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4) Date Filed: January 8, 1999
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<PAGE>
INDEX OF FILING
I. Documents for Fremont Mutual Funds, Inc.
1. Shareholder Letter for Fremont Mutual Funds, Inc.
2. Fremont Mutual Funds, Inc. Proxy Statement
3. Exhibit A
4. Exhibit B
5. Proxy Voting Card
<PAGE>
Re: Proxy and Shareholders' Meeting
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.
You will be asked to vote and approve the following issues regarding the
management of your Fremont Mutual Fund investments:
+ To elect seven directors--three inside directors (David L. Redo, Chairman
and CEO of Fremont Investment Advisors, Inc., Michael Kosich, President of
Fremont Mutual Funds, Inc., and Peter F. Landini, Managing Director of
Fremont Investment Advisors, Inc.), and four outside directors (Richard E.
Holmes, David L. Egan, Donald C. Luchessa, and Kimun Lee). Each will serve
for an indefinite term.
+ To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of the Funds.
+ 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.
+ 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.
In this packet you will find the following items:
+ A proxy statement. This explains more about each of the proposals outlined
above, and provides the background and purpose of each of these
resolutions.
+ The proxy card(s)--to use as your ballot.
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.
If you do NOT plan to attend the special meeting of Fremont Mutual Funds
shareholders, it is very important that you exercise your voting rights by
completing and returning your proxy card in the enclosed postage-paid envelope
no later than Friday, February 26, 1999. Your prompt response will avoid the
cost of additional mailings to Fremont Funds shareholders.
The Board of Directors of Fremont Mutual Funds, Inc. unanimously recommends that
you vote in favor of the proposals outlined above.
If you have any questions about any of these materials, please call us at
800-548-4539 (press 2).
Sincerely,
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
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.
================================================================================
San Francisco, California
_______________, 1999
<PAGE>
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.
3
<PAGE>
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>
Name and Principal Occupation Beneficial Ownership Compensation During
During the Past Five Years and Date of Director of Shares of the Fiscal Year Ended
Directorship of Public Companies Birth Since the Company October 31, 1998
- -------------------------------- ----- ----- ----------- ----------------
<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.
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
RICHARD E. HOLMES 5-14-43 1988 * $18,000
Vice President and a director
of BelMar Advisors, Inc. (a
marketing firm for investment
advisors).
DONALD C. LUCHESSA 2-18-30 1991 * $18,000
Principal of DCL Advisory (a
marketing firm for investment
advisors).
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Occupation Beneficial Ownership Compensation During
During the Past Five Years and Date of Director of Shares of the Fiscal Year Ended
Directorship of Public Companies Birth Since the Company October 31, 1998
- -------------------------------- ----- ----- ----------- ----------------
<S> <C> <C> <C> <C>
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).
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.
KIMUN LEE 6-17-46 -- * $ 0.00
DBA 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.
</TABLE>
* As of _________, 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.
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.
5
<PAGE>
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.
6
<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 Price Waterhouse.
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.
7
<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
Investment Advisory 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 FEES IS BEING SOUGHT.
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 Emerging Markets 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.
8
<PAGE>
If approved by shareholders, the Amended 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 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
reimbursement, and the Emerging Markets Fund must be able to make the
reimbursement and still stay within the then current operating expense
limitation.
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 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.
9
<PAGE>
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.
10
<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 a new Investment Advisory 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 FEES IS BEING SOUGHT.
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 the CITF Fund has over $50 million in assets); (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 CITF
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.
11
<PAGE>
If approved by shareholders, the Amended 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 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 stay within the then current operating
expense limitation.
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 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.
12
<PAGE>
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.
13
<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 (Proposal I and II). The affirmative vote of a majority of the shares
of the affected mutual fund series is necessary to approve an arrangement to
permit the Advisor to modify the subadvisory agreements (Proposal III and IV).
For purposes of Proposal 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.
14
<PAGE>
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 xxx,xxx,xxx shares of common stock,
$0.0001 par value, of the Corporation outstanding, comprised of xx,xxx,xxx
shares of the Money Market Fund, xx,xxx,xxx shares of the California
Intermediate Tax-Free Fund, xx,xxx,xxx shares of the Bond Fund, xx,xxx,xxx
shares of the Growth Fund, xx,xxx,xxx shares of the International Growth Fund,
xx,xxx,xxx shares of the U.S. Micro-Cap Fund, xx,xxx,xxx shares of the
International Small Cap Fund, xx,xxx,xxx shares of the Emerging Markets Fund
xx,xxx,xxx shares of the Institutional U.S. Micro-Cap Fund, xx,xxx,xxx shares of
the U.S. Small Cap Fund, xx,xxx,xxx shares of the Real Estate Securities Fund
and xx,xxx,xxx 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, ________________________ owned XX% and
_________________ owned X% of the outstanding shares of the Fremont Emerging
Markets Fund, ____________ owned XX% and _________ owned XX% of the Fremont
California Intermediate Tax-Free Fund, and ___________ owned XX% 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.
15
<PAGE>
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/her 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 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
16
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
INVESTMENT ADVISORY
AND
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT, dated and effective as of this ____th day of
______________, 199__ is made and entered into by and between FREMONT MUTUAL
FUNDS, INC., a Maryland corporation (hereinafter called the "Company") and
FREMONT INVESTMENT ADVISORS, INC.(Formally known as Sierra Asset Management,
Inc.) a California corporation (hereinafter called the "Advisor"). This
Agreement amends and restates as to the Fremont Emerging Markets Fund the
agreement dated and effective November 11, 1998.
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, subject to
the engagement by the Advisor of any Sub-Advisor approved by the Board of
Directors and (if required by applicable law) the shareholders of the Company,
-1-
<PAGE>
EXHIBIT A
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 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 the Company.
-2-
<PAGE>
EXHIBIT A
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 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
-3-
<PAGE>
EXHIBIT A
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 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.
-4-
<PAGE>
EXHIBIT A
(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>
EXHIBIT A
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
-6-
<PAGE>
EXHIBIT A
APPENDIX A
TO INVESTMENT ADVISORY
AND ADMINISTRATIVE AGREEMENT
(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
-7-
<PAGE>
EXHIBIT B
AMENDED AND RESTATED
INVESTMENT ADVISORY
AND
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT, dated and effective as of this ___th day of
____________, 199__ is made and entered into by and between FREMONT MUTUAL
FUNDS, INC., a Maryland corporation (hereinafter called the "Company") and
FREMONT INVESTMENT ADVISORS, INC. .(Formally known as Sierra Asset Management,
Inc.) a California corporation (hereinafter called the "Advisor"). This
Agreement amends and restates as to the Fremont California Intermediate Tax Free
Fund the agreement dated and effective November 11, 1998.
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 California Intermediate Tax Free 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 approved by the Board of
Directors and (if required by applicable law) the shareholders of the Company,
-1-
<PAGE>
EXHIBIT B
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 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 the Company.
-2-
<PAGE>
EXHIBIT B
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 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
-3-
<PAGE>
EXHIBIT B
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 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.
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<PAGE>
EXHIBIT B
(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.
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<PAGE>
EXHIBIT B
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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<PAGE>
APPENDIX A
TO INVESTMENT ADVISORY
AND ADMINISTRATIVE AGREEMENT
(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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<PAGE>
PROXY
FREMONT MUTUAL FUNDS, INC.
SPECIAL MEETING OF SHAREHOLDERS
March 5, 1999
SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
FREMONT MUTUAL FUNDS, INC.
The undersigned hereby appoints Michael H. Kosich and Tina Thomas, 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 Mutual Funds,
Inc. (the "Company"), to be held on March 5, 1999, 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 Company, held by the undersigned at the
close of business on January 8, 1999. 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 JANUARY
8, 1999. 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. To elect seven directors, each to serve for an indefinite term:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of the Funds:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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 (FOR SHAREHOLDERS OF
FREMONT EMERGING MARKETS FUND ONLY):
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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 (FOR
SHAREHOLDERS OF FREMONT CALIFORNIA INTERMEDIATE TAX-FREE FUND ONLY):
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated:_____________, 1999
-----------------------------------
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.
