FREMONT MUTUAL FUNDS, INC.
INTERNATIONAL
SMALL CAP FUND
ANNUAL REPORT
[GRAPHIC OMITTED]
October 31, 1999
FREMONT [LOGO]
FUNDS
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TABLE OF CONTENTS
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Fund Profile and Letter to Shareholders ................................... 2
Report of Independent Accountants ......................................... 4
Statement of Investments .................................................. 5
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ....................................... 6
Statement of Operations ................................................... 7
Statement of Changes in Net Assets ........................................ 8
FINANCIAL HIGHLIGHTS ...................................................... 9
NOTES TO FINANCIAL STATEMENTS ............................................. 10
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FREMONT INTERNATIONAL SMALL CAP FUND
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Bee & Associates, Inc.
Portfolio Managers of the Fund
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FUND PROFILE
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The Fremont International Small Cap Fund is a concentrated global portfolio
of small cap equities believed to be undervalued relative to growth prospects
and intrinsic value measurements.
Through intensive fundamental analysis and "kick the tires" research, Fund
management seeks to identify a few extraordinary small companies with the
potential to grow much larger. Value--as determined by traditional measurements
like price earnings, price cash flow and price/book value ratios, cross border
comparisons, and the analysis of transactions within the target company's
industry-- is a primary consideration in the stock selection process.
Please note: On December 16, 1999, the assets of the Fremont International Small
Cap Fund were merged into the Fremont International Growth Fund. Because the
Fremont International Small Cap Fund was still in existence at the end of our
fiscal year (October 31st), we are providing you with a final annual report for
this Fund. You should have already received a statement from Fremont which
showed the number of shares of the Fremont International Growth Fund that you
received as a result of this merger.
To Our Shareholders,
We are pleased with the Fund's results during this reporting period,
especially considering two factors that had a negative impact on absolute and
relative returns. First, we had very limited exposure to Asian markets, which
were by far the best performers in fiscal 1999. We recognized the potential in
these markets, but could not find quality companies at opportunistic valuations
that had sufficient liquidity for us to build meaningful positions. Secondly,
because we don't hedge currencies, weaker European currencies restrained dollar
denominated performance. If we calculated performance in local currency terms,
the Fund's returns would have been approximately 5% higher this fiscal year. The
fact that the Fund was able to post very competitive performance relative to its
benchmark was a testament to our stock selection.
After two dismal years "lowlighted" by the collapse of emerging market Asia
in 1997 and the Russian economic meltdown and U.S. hedge fund debacle in 1998,
international small cap stocks made quite a comeback in fiscal 1999. Corporate
buyers helped turn the tide by taking advantage of business bargains in the
market. Increased merger and acquisition activity alerted institutional
investors to value, and concern over excessive valuations of large cap stocks
here and abroad, further motivated institutions to "think small". The end result
was for the first time in five years, the MSCI EAFE Small Cap Index outper-
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GROWTH OF $10,000 (1)
[GRAPHIC OMITTED]
10/31/99
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FREMONT INTERNATIONAL SMALL CAP FUND $8,829
MSCI EAFE SMALL CAP INDEX $8,405
AVERAGE ANNUAL RETURNS FOR PERIODS ENDED 10/31/99
1 YEAR 3 YEARS SINCE INCEPTION (6/30/94)
- ------------------------------------------------
20.31% -5.07% -2.31%
ANNUAL RETURNS TOP TEN HOLDINGS
6/30/94-10/31/94* -1.40% Tecnomatix Technologies Ltd. ........... 8.5%
11/01/94-10/31/95 -7.96% Synthes-Stratec, Inc. .................. 7.3%
11/01/95-10/31/96 +13.69% P4 Radio Hele Norge ASA ................ 6.5%
11/01/96-10/31/97 -14.56% Geberit International AG ............... 6.2%
11/01/97-10/31/98 -16.76% Industria Macchine Automatiche ......... 5.4%
11/01/98-10/31/99 +20.31% The Selecta Group ...................... 5.2%
Lectra Systems ......................... 5.1%
Nobel Biocare .......................... 5.0%
Photobition Group ...................... 4.7%
Norsk Lotteridrift ASA ................. 4.6%
TOTAL ........................ 58.5%
*Unannualized 1Assumes Assumes initial investment of $10,000 on inception date,
June 30, 1994. Performance data illustrated is historical. Past performance is
not predictive of future performance. Share price and return will vary so that a
gain or loss may be realized when shares are sold. All performance figures
assume reinvestment of dividends. Management fees and other expenses are 8 8
included in the Fund's performance; however, fees and expenses are not
incorporated in the Morgan Stanley Europe, Australia and Far East (EAFE) Small
Cap Index.
2 FREMONT MUTUAL FUNDS
<PAGE>
formed its large cap counterpart. Despite good performance this year,
international small cap stocks remain quite cheap. This may foreshadow an
extended period of superior performance over the next several years.
Our portfolio was a primary beneficiary of accelerating deal activity in
the international small cap arena. Four of twenty one portfolio companies
(Electronic Resources, Ltd., Investec-Consultoria International SA., JBA
Holdings, PLC., and Saville Systems PLC.) were taken over this year at generous
premiums to market price.
Several others benefited from corporate makeovers. The Selecta Group, a
Swiss vending machine sales and service company, performed quite well as the
UK's Compass Group increased its stake in the company to 33%--just short of the
level at which Swiss law mandates a tender offer for all outstanding shares.
Selecta's profit margins are expanding and earnings should accelerate in the
year ahead. We think eventually Compass will buy
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FREMONT INTERNATIONAL SMALL CAP FUND
GEOGRAPHIC DIVERSIFICATION
AS OF 10/31/99
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[GRAPHIC OMITTED]
CANADA 3.0%
UNITED STATES 8.1%
EUROPE 76.3%
MIDDLE EAST 8.5%
PACIFIC RIM 4.1%
the whole company. In the interim, Selecta Group stock should continue to
perform well based on its own fundamentals.
Stratec Holdings, a Swiss manufacturer of orthopedic surgical components,
(the pins and screws used to fix broken bones), merged with Synthes, a U.S.
company in the same business. The combined companies now have a more global
franchise that could be further extended by adding an Asian partner, who to-date
has been playing hard to get, but may eventually see the wisdom in joining the
alliance.
We had some disappointments as well. United Pan Am Financial, a U.S.
mortgage originator, suffered as secondary market buyers of home mortgages
pulled in their horns following last fall's liquidity crisis. Margins in the
industry are still under pressure, but United Pan Am is lowering its costs and
positioning itself for a return to profitability when mortgage pricing improves.
Today, United Pan Am stock is trading at $1.50 per share and has $2.25 per share
in cash. Owning cash at a discount is generally a good value opportunity.
McBride, a UK producer of private label cleaning products got caught in the
crossfire of a price war between Unilever and Proctor & Gamble. This skirmish is
ending and McBride's margins and earnings should rebound. Selling at just 8
times earnings and yielding 8%, we think the stock is a good bargain.
In closing, the future of the international small cap asset class looks
considerably brighter than it has in recent years. We believe this sector will
perform well and that our stock specific approach will enhance returns.
Sincerely,
/S/ Adam Schor
Adam Schor
Managing Director
Bee & Associates, Inc.
FREMONT MUTUAL FUNDS 3
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REPORT OF INDEPENDENT ACCOUNTANTS
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TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF FREMONT MUTUAL FUNDS, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments in securities and net assets, and the related
statement of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Fremont International Small Cap Fund (one of the portfolios consisting
Fremont Mutual Funds, Inc.) (hereafter referred to as the "Fund"), at October
31, 1999, and the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
December 9, 1999
4 FREMONT MUTUAL FUNDS
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FREMONT INTERNATIONAL SMALL CAP FUND
OCTOBER 31, 1999
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
Country Value
Shares Security Description Code (Note 1)
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STOCKS 93.1%
BUSINESS EQUIPMENT & SERVICES 8.8%
900,000 Hung Hing Printing Group Ltd. HK $ 344,639
100,000 Photobition Group UK 390,355
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734,994
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CAPITAL GOODS 18.9%
* 59,000 Lectra Systems FR 425,473
60,000 Industria Macchine Automatiche IT 451,662
16,500 Kverneland ASA NO 379,252
33,500 IRO AB SW 332,625
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1,589,012
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CONSUMER DURABLES 9.1%
* 44,350 Shermag, Inc. CN 248,683
* 1,750 Geberit International AG SZ 516,329
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765,012
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CONSUMER NON-DURABLES 8.4%
6,500 Van Melle NV NL 352,927
250,000 McBride PLC UK 349,265
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702,192
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CONSUMER SERVICES 21.2%
3,500 Endemol Entertainment Holding NV NL 119,927
125,000 Norsk Lotteridrift ASA NO 383,083
112,600 P4 Radio Hele Norge ASA NO 542,784
1,225 The Selecta Group SZ 433,878
61,000 Dorling Kindersley Holdings PLC UK 295,263
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1,774,935
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FINANCIAL SERVICES 1.5%
* 95,000 United Panam Financial Corp. US 130,625
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130,625
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HEALTH CARE 12.3%
30,000 Nobel Biocare SW 416,657
* 1,650 Synthes-Stratec, Inc. SZ 613,681
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1,030,338
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RAW MATERIALS 4.4%
147,500 Victrex PLC UK 372,132
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372,132
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Share/ Country Value
Face Amount Security Description Code (Note 1)
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SHELTER 0.0%
* 9,275 Century City International Holding Ltd.
(Warrants) HK $ 12
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12
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TECHNOLOGY (SOFTWARE) 8.5%
* 32,500 Tecnomatix Technologies Ltd. IS 710,938
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710,938
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TOTAL STOCKS (Cost $7,949,814) 7,810,190
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SHORT-TERM SECURITIES, 6.3%
$ 23,984 Repurchase Agreement, State Street Bank &
Trust Co., 5.050%, 11/01/99 (Maturity Value
$524,204) (Cost $523,984) Collateral:
FNMA 5.875%, 04/23/04 US 523,984
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TOTAL SHORT-TERM SECURITIES (Cost $523,984) 523,984
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TOTAL INVESTMENTS (Cost $8,473,798), 99.4% 8,334,174
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OTHER ASSETS AND LIABILITIES, NET, 0.6% 47,156
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NET ASSETS, 100.0% $ 8,381,330
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Country Codes:
CN Canada
FR France
HK Hong Kong
IS Israel
IT Italy
NL Netherlands
NO Norway
SW Sweden
SZ Switzerland
UK United Kingdom
US United States
*Non income producing securities
The accompanying notes are an integral part of these financial statements.
FREMONT MUTUAL FUNDS 5
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
OCTOBER 31, 1999
STATEMENT OF ASSETS AND LIABILITIES
(ALL NUMBERS IN THOUSANDS EXCEPT NET ASSET VALUE PER SHARE)
ASSETS:
Investments in securities at cost $ 8,474
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Investments in securities at value (Note 1) 8,334
Cash 2
Dividends and interest receivable 27
Receivable from sale of fund shares 32
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TOTAL ASSETS 8,395
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LIABILITIES:
Payable for fund shares redeemed 2
Accrued expenses:
Investment advisory and administrative fees 10
Other 2
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TOTAL LIABILITIES 14
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NET ASSETS $ 8,381
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Net assets consist of:
Paid in capital $ 10,274
Unrealized depreciation on investments (140)
Accumulated net realized loss (1,753)
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NET ASSETS $ 8,381
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SHARES OF CAPITAL STOCK OUTSTANDING 1,062
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NET ASSET VALUE PER SHARE $ 7.89
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The accompanying notes are an integral part of these financial statements.
6 FREMONT MUTUAL FUNDS
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FREMONT INTERNATIONAL SMALL CAP FUND
YEAR ENDED OCTOBER 31, 1999
STATEMENT OF OPERATIONS
(ALL NUMBERS IN THOUSANDS)
INVESTMENT INCOME:
Interest $ 18
Dividends 144
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TOTAL INCOME 162
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EXPENSES:
Investment advisory and administrative fees (Note 2) 116
Shareholder servicing fees 24
Custody fees 5
Accounting fees 12
Audit and legal fees 22
Directors' fees (Note 2) 5
Registration fees 14
Reports to shareholders 5
Other 1
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TOTAL EXPENSES BEFORE REDUCTIONS 204
Expenses reimbursed by Advisor (Note 2) (81)
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TOTAL NET EXPENSES 123
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NET INVESTMENT INCOME 39
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REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investments 373
Foreign currency transactions (26)
Net unrealized appreciation (depreciation) on:
Investments 1,018
Translation of assets and liabilities in foreign currenci es (2)
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Net realized and unrealized gain from investments
and foreign currency 1,363
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,402
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The accompanying notes are an integral part of these financial statements.
FREMONT MUTUAL FUNDS 7
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
OCTOBER 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
(ALL NUMBERS IN THOUSANDS) YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
INCREASE (DECREASE) IN NET ASSETS: ---------------- ----------------
<S> <C> <C>
From operations:
Net investment income $ 39 $ 57
Net realized gain (loss) from investments 373 (1,915)
Net realized loss from foreign currency transactions (26) (52)
Net unrealized appreciation on investments 1,018 513
Net unrealized depreciation on translation of
assets and liabilities in foreign currencies (2) (2)
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Net increase (decrease) in net assets from operations 1,402 (1,399)
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Distributions to shareholders from:
Net investment income (24) (210)
Net realized gains -- (77)
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Total distributions to shareholders (24) (287)
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From capital share transactions:
Proceeds from shares sold 5,760 6,320
Payments for shares redeemed (4,474) (7,741)
Reinvested dividends 23 267
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Net increase (decrease) in net assets
from capital share transactions 1,309 (1,154)
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Net increase (decrease) in net assets 2,687 (2,840)
Net assets at beginning of period 5,694 8,534
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NET ASSETS AT END OF PERIOD $ 8,381 $ 5,694
============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 799 863
Redeemed (605) (1,073)
Reinvested dividends 3 38
------------ ------------
Net increase (decrease) from capital share transactions $ 197 $ (172)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8 FREMONT MUTUAL FUNDS
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
FINANCIAL HIGHLIGHTS - OCTOBER 31, 1999
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
for one share outstanding during the period ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.58 $ 8.23 $ 10.15 $ 9.00 $ 9.86
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .04 .04 .14 .14 .10
Net realized and unrealized gain (loss) 1.29 (1.40) (1.58) 1.08 (.88)
--------- --------- --------- --------- ---------
Total investment operations 1.33 (1.36) (1.44) 1.22 (.78)
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
From net investment income (.02) (.21) (.21) (.07) (.08)
From net realized gains -- (.08) (.27) -- --
========= ========= ========= ========= =========
Total distributions (.02) (.29) (.48) (.07) (.08)
========= ========= ========= ========= =========
NET ASSET VALUE, END OF PERIOD $ 7.89 $ 6.58 $ 8.23 $ 10.15 $ 9.00
========= ========= ========= ========= =========
TOTAL RETURN 20.31%(1) -16.76%(1) -14.56% 13.69%(1) -7.96%(1)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 8,381 $ 5,694 $ 8,534 $ 9,214 $ 4,245
Ratio of net expenses to average net assets (2,3) 1.50% 1.50% 1.50% 1.81% 2.06%
Ratio of gross expenses to average net assets (2,3) 2.48% 2.55% 1.50% 2.50% 2.50%
Ratio of net investment income to average net assets .47% .91% 1.97% 1.61% 1.67%
Portfolio turnover rate 52% 148% 56% 74% 96%
</TABLE>
1 Total return would have been lower had the advisor not waived and/or
reimbursed expenses.
2 See Note 2 of "Notes to Financial Statements."
3 Management fees were voluntarily waived from February 1, 1995 to October 31,
1996.
The accompanying notes are an integral part of these financial statements.
FREMONT MUTUAL FUNDS 9
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FREMONT INTERNATIONAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
Fremont Mutual Funds, Inc. (the "Investment Company") is an open-end
investment company authorized to issue ten billion shares of $.0001
par value capital stock. These shares are currently offered in twelve
series, one of which, the International Small Cap Fund (the Fund), is
covered by this report. The Fund has its own investment objective and
policies and operates as a separate mutual fund.
On September 28, 1999 the Board of Directors of the Investment Company
approved a proposal to merge the Fund into the Fremont International
Growth Fund, subject to shareholder approval.
Significant accounting policies followed by the Fund are in conformity
with generally accepted accounting principles for investment companies
and are summarized below.
A. SECURITY VALUATION
Investments, including options, are stated at value based on recorded
closing sales on a national securities exchange or, in the absence of
a recorded sale, at the mean between the last reported bid and asked
prices or at fair value as determined by the Board of Directors.
Short-term notes and similar securities are included in investments at
amortized cost, which approximates value. Securities which are
primarily traded on foreign exchanges are generally valued at the
closing values of such securities on their respective exchanges or the
most recent price available where no closing value is available.
B. SECURITY TRANSACTIONS
Security transactions are accounted for as of trade date. Realized
gains and losses on security transactions are determined on the basis
of specific identification for both financial statement and federal
income tax purposes.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Dividends are recorded on the ex-dividend date, except that certain
dividends from foreign securities are recorded when the Fund is
informed of the ex-dividend date. Interest income and estimated
expenses are accrued daily. Distributions to shareholders are recorded
on the ex-dividend date. The Investment Company accounts for the
assets of the Fund and allocates general expenses of the Investment
Company to the Fund based upon the relative net assets of the Fund or
the nature of the services performed and their applicability to the
Fund.
D. INCOME TAXES
The Fund's policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all taxable income and net capital gains, if any, to
shareholders. Therefore, no income tax provision is required. The Fund
is treated as a separate entity in the determination of compliance
with the Internal Revenue Code and distributes taxable income and net
realized gains, if any, in accordance with schedules described in the
prospectus.
Income dividends and capital gain distributions paid to shareholders
are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles and, therefore,
may differ from the information presented in the financial statements.
These differences are primarily due to differing treatments for losses
deferred due to wash sale rules.
Permanent differences will be reclassified to paid in capital.
Temporary differences, which will reverse in subsequent periods, will
not be reclassified. Any taxable income or gain remaining at fiscal
year end is distributed in the following year.
For Federal income tax purposes, the Fund has a capital loss carryover
at October 31, 1999. Capital loss carryovers result when a fund has
net capital losses during a tax year. These are carried over to
subsequent years and may reduce distributions of realized gains in
those years. Unused capital loss carryovers expire in eight years. The
fund has a capital loss carryover of $1,753,102 at October 31, 1999
which will expire in 2006.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of
income and expense during the reporting period. Actual results could
differ from those estimates.
F. FOREIGN CURRENCY TRANSLATION
The market values of foreign securities, currency holdings, and other
assets and liabilities are translated to U.S. dollars based on the
daily exchange rates. Purchases and sales of securities, income and
expenses are translated at the exchange rate on the transaction date.
Income and withholding taxes are translated at prevailing exchange
rates when accrued or incurred. Foriegn currency gain (loss) will
occur when such securities and transactions are translated into U.S.
dollars.
10 FREMONT MUTUAL FUNDS
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
OCTOBER 31, 1999
Certain transactions which result in realized currency gain (loss) are
reported on the Statements of Operations as Net Realized Gain (Loss)
from Foreign Currency Transactions. These are: currency gain (loss)
from the sale or maturity of forward currency contracts and from the
disposition of foreign currency; and the realization of currency
fluctuations between trade and settlement dates on security
transactions and between accrual and receipt dates on net investment
income.
Realized currency gain (loss) from the sale, maturity or disposition
of foreign securities is not separately reported from the economic or
market component of the gain (loss) and is included under the caption
Net Realized Gain (Loss) from Investments. Activity related to foreign
currency futures and options on foreign currency is, likewise,
reported under this heading, as these instruments are used to hedge
the foreign currency risks associated with investing in foreign
securities. Consistent with the method of reporting realized currency
gain (loss), unrealized currency gain (loss) on investments is not
separately reported from the underlying economic or market component,
but included under the caption Net Unrealized Appreciation
(Depreciation) on Investments. Unrealized currency gain (loss) on
other net assets is reported under Net Unrealized Appreciation
(Depreciation) on Translation of Assets and Liabilities in Foreign
Currencies.
G. REPURCHASE AGREEMENTS
As part of its cash reserve position, the Fund may enter into
repurchase agreements through which the Fund acquires a security (the
"underlying security") from the seller, a well-established securites
dealer, or a bank that is a member of the Federal Reserve System. At
that time, the bank or securities dealer agrees to repurchase the
underlying security at the same price, plus a specified amount of
interest at a later date, generally for a period of less than one
week. The seller must maintain on a daily basis, with the Fund's
custodian, collateral equal to at least 100% of the repurchase price,
including accrued interest. At October 31, 1999, all outstanding
repurchase agreements held by the Fund, had been entered into on
October 29, 1999.
2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
INVESTMENT ADVISOR
The Fund has entered into an investment management and administrative
services agreement with Fremont Investment Advisors, Inc. (the
Advisor), a majority-owned subsidiary of Fremont Investors, Inc. Under
this agreement, the Advisor supervises and implements the Fund's
investment activities and provides administrative services as
necessary to conduct Fund business. For its advisory and
administrative services, the Advisor receives a management fee based
on the average daily net assets of the Fund at an annual rate of
1.25%.
The Advisor has agreed to limit the Fund's total operating expenses to
1.50% of average daily net assets. The Fund may reimburse the Advisor
for any reductions in the Fund's expenses during the three years
following that reduction if such reimbursement is requested by the
Advisor, if such reimbursement can be achieved within the foregoing
expense limit, and if the Board of Directors approves the
reimbursement at the time of the request as not inconsistent with the
best interests of the Fund. Because of these substantial
contingencies, the potential reimbursements will be accounted for as
contingent liabilities that are not recordable on the balance sheet of
the Fund until payment is probable. The Advisor has not recouped
$95,087 of reimbursements as of October 31, 1999.
Investors Fiduciary Trust Company ("IFTC") serves as custodian and
investment accounting agent for the Fund. All fees charged by IFTC are
paid by the Fund, subject to the limitations listed above. Fees for
custody services are subject to reductions by credits earned on the
cash balances of the Fund held by IFTC as custodian.
Ratios of expenses have been disclosed both before and after the
impact of these various waivers, reimbursements and credits under the
Fund's Financial Highlights table.
OTHER RELATED PARTIES
At October 31, 1999, Fremont Investors, Inc. and its affiliated
companies including their employee retirement plans, its principal
shareholder and members of his family, including trusts, owned
directly or indirectly approximately 12% of the Fund.
Certain officers and/or directors of the Fund are also officers and/or
directors of the Advisor and/or Fremont Investors, Inc. None of the
officers and/or directors so affiliated receive compensation for
services as officers and/or directors of the Fund.
FREMONT MUTUAL FUNDS 11
<PAGE>
FREMONT INTERNATIONAL SMALL CAP FUND
OCTOBER 31, 1999
3. PURCHASES AND SALES OF INVESTMENT SECURITIES
Aggregate purchases and aggregate proceeds from sales of securities
for the year ended October 31, 1999 were as follows:
PURCHASES PROCEEDS
Long-term securities: $5,133,156 $4,061,531
4. PORTFOLIO CONCENTRATIONS
Although the Fund has a diversified investment portfolio, there are
certain investment concentrations of risk which may subject the Fund
more significantly to economic changes occurring in certain segments,
industries or countries.
5. UNREALIZED APPRECIATION (DEPRECIATION) - TAX BASIS
At October 31, 1999, the cost of securities for federal income tax
purposes was $8,473,798 and the net unrealized depreciation based on
that cost were as follows:
Unrealized appreciation $ 1,242,830
Unrealized depreciation (1,382,454)
-------------
Net unrealized depreciation $ (139,624)
=============
6. LINE OF CREDIT
The Investment Company has a Line of Credit Arrangement ("LOC") with
State Street Bank and Trust Company, to be used for extraordinary or
emergency purposes, primarily to cover redemption payments. The Fund's
borrowings cannot exceed 20% of its net assets. Combined borrowings of
all Funds cannot exceed the $75 million limit on the total line of
credit. The Fund is subject to the annual fees and interest on the
unpaid balance based on prevailing market rates as defined in the LOC.
The Fund's borrowings averaged $301,571 during the periods the LOC was
utiized. The Fund's maximum amount outstanding was $552,000, and the
total interest expense incurred was $584. At October 31, 1999, there
were no such borrowings outstanding.
12 FREMONT MUTUAL FUNDS
<PAGE>
FREMONT [LOGO]
FUNDS
50 Beale Street, Suite 100
San Francisco, CA 94105
www.fremontfunds.com
[GRAPHIC OMITTED]
Distributed by First Fund Distributors, Inc., San Francisco, CA 94105
BR057-9912
