FREMONT [LOGO]
FUNDS
FREMONT MUTUAL FUNDS, INC.
INSTITUTIONAL
U.S. MICRO-CAP
SEMI-ANNUAL
REPORT
April 30, 2000
<PAGE>
A MESSAGE FROM MICHAEL H. KOSICH, PRESIDENT OF FREMONT MUTUAL FUNDS, INC.
[PHOTO]
Mike Kosich
Dear Fellow Shareholder,
Stock market volatility has become a fact of life. Money flows into and out of
equities at the speed of light depending on the latest economic data (often
substantially revised or contradicted by new data released shortly thereafter),
the most recent pronouncements from Wall Street gurus (who are generally wrong
as often as right), and the latest earnings reports (if earnings are a penny on
either side of expectations, stocks can gain or lose 20% or more in a day).
Volatility feeds on itself, as is evidenced by the enormous intra-day price
swings we have seen recently.
Investors, (who we define as people with the good sense to understand that a
patient, consistent, long term oriented investment strategy is the best way to
achieve their individual financial goals) see market volatility for what it
really is--static or "white noise" that should be ignored. I am not suggesting
investors play a pat hand. In fact, periodically everyone should rebalance their
portfolio and make reasoned judgments on which asset class or investment style
offers the best intermediate term opportunity. However, they should avoid the
temptation of trading stocks or mutual funds based on short term performance
trends.
This leads me to a sensitive issue that most folks in my shoes are reluctant to
talk about--mutual fund cash flows. Sharp fluctuations in cash flows--money
pouring in and out of a fund based on short term performance--is a portfolio
manager's worst nightmare. It pressures them to buy stocks when they are most
expensive and forces them to sell stocks when they are more attractively valued.
This is the exact reverse of what every portfolio manager is trying to
accomplish--buying cheap and selling dear.
We put no restrictions on buying or selling our funds. No front end loads or
back-end lockups of any description. After all, this is America, Land of the
Free and Home of the Brave. However, we try to discourage all our fund
shareholders from acting like traders--moving in and out of funds based on the
most recent quarterly results. The market smiles on different investment styles
and capitalization sectors at different times. Piling into funds with the best
recent performance and abandoning funds with less impressive recent results
often translates into buying dear and selling cheap--the antithesis of smart
long term investing.
Sincerely,
/s/ Michael H. Kosich
Michael H. Kosich
President
<PAGE>
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TABLE OF CONTENTS
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Fund Profile and Letter to Shareholders .................................... 2
Statement of Investments ................................................... 4
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ........................................ 6
Statement of Operations .................................................... 6
Statement of Changes in Net Assets ......................................... 7
FINANCIAL HIGHLIGHTS ....................................................... 7
NOTES TO FINANCIAL STATEMENTS .............................................. 8
<PAGE>
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FREMONT INSTITUTIONAL U.S. MICRO-CAP FUND
--------------------------------------------------------------------------------
Robert E. Kern, Jr.
Portfolio Manager
Kern Capital Management LLC
[PHOTO]
Robert E. Kern, Jr.
------------
FUND PROFILE
------------
The U.S. micro-cap stock market is a breeding ground for entrepreneurially-
managed companies with exceptional growth prospects. With minimal Wall Street
research coverage and low institutional ownership, micro-cap stocks represent
the least efficient sector of the domestic equities market. This inefficiency
creates attractive investment opportunities for the research-driven stock
pickers managing the Fremont Institutional U.S. Micro-Cap Fund.
Since the investment potential of micro-cap stocks is largely determined by the
business prospects for individual companies rather than macro-economic trends,
the Fund's focus is on bottom-up stock selection. Fund management analyzes
financial statements, the company's competitive position, and meets with key
corporate decision makers to discuss strategies for future growth.
Robert E. Kern, Jr. is nationally recognized as a pioneer and leading
practitioner of micro-cap research and portfolio management.
To Our Shareholders,
For the six months ended April 30, 2000, the Fremont Institutional U.S.
Micro-Cap Fund gained 60.69% compared to the Russell 2000's 18.71% advance. We
are pleased to have once again achieved excellent absolute and relative returns.
We experienced two very different market environments in first half fiscal
2000--what could be described as a buyers' panic (particularly in the tech
sector) from November through February, and a sharp, but rather orderly
correction in March and April. Our portfolio excelled through the first four
months of this reporting period. At the end of February, the Fund was up 73.37%
versus a 35.23% gain for the Russell 2000 benchmark. Perhaps more importantly,
the portfolio held up relatively well in March and April--declining 10.70%
compared to the Russell 2000's 12.21% retreat.
We have a long history of adding value when the market is trending up and
holding our own during the down drafts. This is testament to our team's research
intensive stock selection discipline and particularly our success identifying
promising companies not yet "discovered" by Wall Street or other institutional
investors. In our opinion, finding fundamentally attractive stocks ahead of the
competition and avoiding mistakes is the key to superior micro-cap performance
throughout the market cycles.
The team's focus on the most innovative sectors of the economy has also
contributed to our success. During the first half of fiscal 2000, our technology
holdings posted the most impressive gains and were responsible for approximately
two thirds of the Fund's total return. At the end of the reporting period,
technology stocks comprised 24% of portfolio assets, down from 33% at the end of
fiscal 1999. This reflects profit taking in a sector in which we believe
valuations had become extended. Our healthcare holdings, principally medical
device companies and selected biotechs, also contributed to returns. Although
just 10% of portfolio assets, three of our healthcare investments were on our
top ten performance list. Our consumer and services holdings (11% and 14% of
assets respectively) lagged. Reflecting what has been a difficult environment
for consumer stocks, our allocation was reduced from 20% of portfolio assets
over the course of this reporting period. The remainder of the portfolio
allocation is 8% in special situations and 30% in cash reserves.
Cash reserves had increased significantly due to the rapid influx of new
investment in late 1999/early 2000 and our willingness to take profits in
holdings that we believed had gotten "ahead of themselves." Having some "dry
powder" to take advantage of evolving opportunities in this volatile market is a
terrific advantage, which we believe will be clearly demonstrated in the year
ahead.
Where do micro-cap stocks go from here? We don't know. We are somewhat
concerned that even after the substantial haircut endured over the last several
months, in general, valuations of many micro-cap growth companies remain
relatively high. However, our investment team is still finding some
fundamentally compelling investment opportunities. During challenging market
environments, we focus on stocks we believe have the greatest potential to
attract favorable investor attention when the market stabilizes--a strategy that
has worked quite well for us in the past--most recently following the sharp
decline in micro-cap stocks in third quarter 1998.
In closing, as you well know, the micro-cap stock market has undergone a
significant correction in recent months. However, market declines create some
exceptional long term investment opportunities. We are fortunate to have
sufficient cash reserves to build positions in opportunities evolving every day,
and are very pleased that the Fund's shareholder base has remained stable during
the recent correction. We believe more and more of our institutional
shareholders understand that volatility is a fact of life in the micro-cap stock
market and that staying the course is the most reliable way to earn superior
long term returns.
Sincerely,
/s/ Robert E. Kern, Jr.
Robert E. Kern, Jr.
Portfolio Manager
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FREMONT INSTITUTIONAL
U.S. MICRO-CAP FUND
PORTFOLIO DIVERSIFICATION
AS OF 4/30/00
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[GRAPHIC OMITTED]
BUSINESS EQUIPMENT & SERVICES (15.6%)
CASH (29.7%)
OTHER (3.4%)
CONSUMER SERVICES (3.5%)
CONSUMER DURABLES (3.6%)
TECHNOLOGY (EQUIPMENT) (10.3%)
TECHNOLOGY (COMPONENTS) (9.7%)
HEALTH CARE (9.5%)
CAPITAL GOODS (5.3%)
RETAIL (5.1%)
TECHNOLOGY (SOFTWARE) (4.3%)
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GROWTH OF $10,000 (1)
[GRAPHIC OMITTED]
FREMONT INSTITUTIONAL RUSSELL 2000
U.S. MICRO-CAP FUND INDEX
------------------- -----
31-Oct-88 10,000 10,000
30-Nov-88 9,326 9,667
31-Dec-88 10,203 10,046
31-Jan-89 10,303 10,494
28-Feb-89 10,228 10,572
31-Mar-89 10,597 10,820
30-Apr-89 11,387 11,292
31-May-89 12,217 11,777
30-Jun-89 11,592 11,509
31-Jul-89 11,895 11,957
31-Aug-89 13,128 12,247
30-Sep-89 12,990 12,286
31-Oct-89 12,528 11,558
30-Nov-89 12,614 11,632
31-Dec-89 12,610 11,678
31-Jan-90 11,670 10,659
28-Feb-90 12,184 10,989
31-Mar-90 12,723 11,420
30-Apr-90 12,560 11,046
31-May-90 13,739 11,829
30-Jun-90 13,900 11,859
31-Jul-90 14,188 11,340
31-Aug-90 13,020 9,823
30-Sep-90 11,998 8,949
31-Oct-90 11,243 8,403
30-Nov-90 11,888 9,044
31-Dec-90 12,576 9,399
31-Jan-91 13,572 10,246
28-Feb-91 15,243 11,396
31-Mar-91 17,155 12,195
30-Apr-91 16,766 12,164
31-May-91 16,652 12,743
30-Jun-91 15,089 12,006
31-Jul-91 17,137 12,426
31-Aug-91 17,939 12,884
30-Sep-91 18,518 12,984
31-Oct-91 20,767 13,328
30-Nov-91 19,949 12,711
31-Dec-91 22,311 13,728
31-Jan-92 24,486 14,841
29-Feb-92 23,995 15,275
31-Mar-92 23,222 14,758
30-Apr-92 21,483 14,240
31-May-92 21,254 14,429
30-Jun-92 19,025 13,751
31-Jul-92 20,349 14,230
31-Aug-92 19,523 13,827
30-Sep-92 20,411 14,145
31-Oct-92 20,631 14,592
30-Nov-92 22,744 15,710
31-Dec-92 23,601 16,256
31-Jan-93 24,309 16,806
28-Feb-93 23,765 16,418
31-Mar-93 26,048 16,950
30-Apr-93 25,191 16,485
31-May-93 26,696 17,213
30-Jun-93 27,007 17,321
31-Jul-93 27,327 17,560
31-Aug-93 29,305 18,318
30-Sep-93 29,320 18,835
31-Oct-93 29,314 19,319
30-Nov-93 28,568 18,691
31-Dec-93 28,270 19,329
31-Jan-94 30,102 19,934
28-Feb-94 30,117 19,863
31-Mar-94 28,391 18,816
30-Apr-94 27,271 18,927
31-May-94 26,412 18,715
30-Jun-94 25,317 18,084
31-Jul-94 25,138 18,381
31-Aug-94 25,339 19,405
30-Sep-94 26,397 19,339
31-Oct-94 26,199 19,261
30-Nov-94 24,306 18,483
31-Dec-94 23,443 18,978
31-Jan-95 24,407 18,739
28-Feb-95 25,027 19,518
31-Mar-95 26,280 19,853
30-Apr-95 26,839 20,294
31-May-95 27,646 20,643
30-Jun-95 29,430 21,714
31-Jul-95 30,985 22,964
31-Aug-95 33,399 23,440
30-Sep-95 34,492 23,858
31-Oct-95 33,853 22,790
30-Nov-95 34,601 23,749
31-Dec-95 36,156 24,376
31-Jan-96 37,732 24,350
29-Feb-96 40,208 25,109
31-Mar-96 41,378 25,620
30-Apr-96 47,052 26,990
31-May-96 52,830 28,052
30-Jun-96 49,677 26,899
31-Jul-96 44,441 24,551
31-Aug-96 47,846 25,977
30-Sep-96 49,841 26,991
31-Oct-96 48,068 26,574
30-Nov-96 51,703 27,670
31-Dec-96 55,061 28,393
31-Jan-97 59,103 28,962
28-Feb-97 55,509 28,258
31-Mar-97 51,322 26,925
30-Apr-97 49,957 27,000
31-May-97 55,827 30,004
30-Jun-97 60,312 31,291
31-Jul-97 62,456 32,747
31-Aug-97 64,694 33,496
30-Sep-97 70,320 35,947
31-Oct-97 64,502 34,368
30-Nov-97 63,645 34,145
31-Dec-97 62,523 34,743
31-Jan-98 61,101 34,195
28-Feb-98 65,504 36,723
31-Mar-98 68,213 38,237
30-Apr-98 69,162 38,449
31-May-98 65,504 36,378
30-Jun-98 63,201 36,454
31-Jul-98 57,375 33,503
31-Aug-98 44,166 26,998
30-Sep-98 45,182 29,111
31-Oct-98 50,940 30,298
30-Nov-98 58,323 31,885
31-Dec-98 65,978 33,858
31-Jan-99 72,345 34,308
28-Feb-99 67,875 31,529
31-Mar-99 70,110 32,021
30-Apr-99 77,087 34,890
31-May-99 83,522 35,400
30-Jun-99 93,141 37,000
31-Jul-99 95,241 35,986
31-Aug-99 94,970 34,654
30-Sep-99 103,573 34,661
31-Oct-99 111,101 34,804
30-Nov-99 129,212 36,881
31-Dec-99 158,520 41,056
31-Jan-00 172,486 40,395
29-Feb-00 224,019 47,064
31-Mar-00 199,927 43,963
30-Apr-00 178,530 41,316
AVERAGE ANNUAL RETURNS FOR PERIODS ENDED 4/30/00
1 YEAR 5 YEARS 10 YEARS
---------------------------------
131.59% 46.08% 30.40%
ANNUAL RETURNS TOP TEN HOLDINGS
11/01/88-10/31/89 +25.28% Arthrocare Corp. ...................... 4.2%
11/01/89-10/31/90 -10.25% TeleTech Holdings, Inc. ............... 3.3%
11/01/90-10/31/91 +84.70% Netopia, Inc. ......................... 3.1%
11/01/91-10/31/92 -0.65% Spectra-Physics Lasers, Inc. .......... 3.1%
11/01/92-10/31/93 +42.08% Anaren Microwave, Inc. ................ 2.9%
11/01/93-10/31/94 -10.62% California Micro Devices Corp. ........ 2.7%
11/01/94-10/31/95 +29.21% Aaon, Inc. ............................ 2.4%
11/01/95-10/31/96 +41.99% Rent-Way, Inc. ........................ 2.2%
11/01/96-10/31/97 +34.19% MDSI Mobile Data Solutions, Inc. ...... 2.2%
11/01/97-10/31/98 -21.03% Keithley Instruments, Inc. ............ 2.0%
11/01/98-10/31/99 +118.10% TOTAL ...................... 28.1%
11/01/99-4/30/00* +60.69%
* Unannualized (1) Assumes initial investment of $10,000 on November 1, 1988.
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. Performance for the Fremont Institutional U.S.
Micro-Cap Fund reflects the performance of the post-venture fund of Fund A of
the Bechtel Trust & Thrift, whose assets were transferred into the Fremont
Institutional U.S.Micro-Cap Fund on 8/6/97, net of actual fees and expenses. The
post-venture fund imposed higher fees and expenses than that of the Fremont
Institutional U.S. Micro-Cap Fund and was not registered with the Securities and
Exchange Commission and therefore was not subject to the investment restrictions
imposed on registered mutual funds. Management fees and other expenses are
included in the Fund's performance; however, fees and expenses are not
incorporated in the Russell 2000 Index. The returns shown were achieved during a
period of generally rising market values, expecially in the technology sector.
Investors should not expect that such favorable returns can be achieved
consistently. Past performance does not guarantee future results. Share price
and return will vary so that your shares when redeemed may be worth more or less
than their original value. All performance figures assume the reinvestment of
all dividends and capital gains. Investments in newly emerging companies are
subject to erratic earning patterns, competitive conditions within the industry,
limited earnings history and the reliance on one or a limited number of
products. Unlike the Fremont U.S. Micro-Cap Fund, the Russell 2000, an index of
small capitalization U.S. equities is not available for investment and does not
incur expenses.
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2 and 3 FREMONT MUTUAL FUNDS
<PAGE>
FREMONT INSTITUTIONAL U.S. MICRO-CAP FUND
APRIL 30, 2000 (UNAUDITED)
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
Value
Shares Security Description (Note 1)
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STOCKS 70.3%
BUSINESS EQUIPMENT & SERVICES 16.0%
* 190,000 Boston Communications Group, Inc. $ 1,733,750
* 131,700 Championship Auto Racing Teams, Inc. 2,666,925
* 68,700 COMARCO, Inc. 2,563,369
* 60,200 Computer Outsourcing Services, Inc. 1,275,487
* 30,400 Corporate Exec. Board Co. 1,786,000
* 69,100 CoStar Group, Inc. 1,657,320
* 22,200 infoUSA, Inc. 129,037
* 43,400 Interep National Radio Sales, Inc. 249,550
* 43,700 Leapnet, Inc. 180,263
* 15,000 Media 100, Inc. 362,813
* 127,800 Metawave Communications Corp. 1,693,350
* 28,900 NetCreations, Inc. 989,825
* 116,700 Nucentrix Broadband Networks, Inc. 2,910,206
* 12,400 NuCO2, Inc. 94,550
68,300 Oshkosh Truck Corp. 2,151,450
* 137,500 Princeton Video Image, Inc. 1,031,250
* 143,800 Romac International, Inc. 1,482,937
* 40,400 Shuffle Master, Inc. 499,950
* 151,400 Spectrum Control, Inc. 1,523,463
* 214,400 TeleTech Holdings, Inc. 6,994,800
* 208,900 The Netplex Group, Inc. 822,544
* 91,000 United Shipping and Technology, Inc. 1,052,188
* 107,700 VTEL Corp. 450,994
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34,302,021
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CAPITAL GOODS 5.3%
* 240,200 Aaon, Inc. 5,044,200
* 103,300 Adept Technology, Inc. 1,213,775
* 111,200 IMPCO Technologies, Inc. 2,251,800
* 107,900 Zygo Corp. 2,751,450
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11,261,225
-------------
CONSUMER DURABLES 3.5%
* 167,600 Jore Corp. 984,650
* 129,800 Spectra-Physics Lasers, Inc. 6,619,800
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7,604,450
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CONSUMER NON-DURABLES 1.0%
* 496,500 Hanover Direct, Inc. 868,875
* 111,600 McNaughton Apparel Group, Inc. 955,575
* 26,400 Tefron Ltd. 404,250
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2,228,700
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CONSUMER SERVICES 4.2%
* 120,450 American Classic Voyages Co. 2,416,528
263,400 Cash America International, Inc. 2,370,600
* 82,400 Cinar Corp. (Class B) 288,400
* 191,300 Homeseekers.com, Inc. 1,410,838
* 49,800 Internet.com Corp. 946,200
* 88,000 LoJack Corp. 632,500
* 93,800 ZipLink, Inc. 838,338
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8,903,404
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ENERGY 0.8%
* 46,500 UTI Energy Corp. $ 1,615,875
-------------
1,615,875
-------------
HEALTH CARE 10.3%
* 87,450 ArthroCare Corp. 8,908,969
* 64,600 Cytyc Corp. 2,890,850
* 98,400 Endocare, Inc. 1,623,600
* 154,000 Fusion Medical Technologies, Inc. 2,695,000
* 145,100 Gene Logic, Inc. 3,899,563
* 172,500 InnerDyne, Inc. 751,992
* 80,900 NeoPharm, Inc. 1,238,781
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22,008,755
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RAW MATERIALS 0.3%
101,900 Northern Technologies International Corp. 700,562
-------------
700,562
-------------
RETAIL 5.3%
* 107,800 Buca, Inc. 1,623,737
* 91,200 David's Bridal, Inc. 1,048,800
* 135,000 Genesco, Inc. 1,746,563
* 28,800 InterTAN, Inc. 397,800
* 182,100 Rent-Way, Inc. 4,723,219
* 23,500 REX Stores Corp. 590,437
* 17,200 SkyMall, Inc. 60,200
* 35,200 The Children's Place Retail Stores, Inc. 783,200
* 51,200 Twinlab Corp. 384,000
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11,357,956
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SHELTER 0.6%
* 136,600 Modtech Holdings, Inc. 1,340,388
-------------
1,340,388
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TECHNOLOGY (COMPONENTS) 9.5%
* 28,000 Merix Corp. 612,500
* 60,500 Anaren Microwave, Inc. 6,292,000
* 75,800 Blue Wave Systems, Inc. 971,187
* 63,000 California Amplifier, Inc. 1,701,000
* 275,300 California Micro Devices Corp. 5,781,300
* 54,800 CyberOptics Corp. 2,096,100
* 141,700 Datalink Corp. 2,355,762
* 26,200 Internet Commerce Corp. 587,863
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20,397,712
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TECHNOLOGY (EQUIPMENT) 8.8%
* 83,900 Ancor Communications, Inc. 2,532,731
* 127,700 Information Resource Engineering, Inc. 3,288,275
77,300 Keithley Instruments, Inc. 4,309,475
* 28,400 MTI Technology Corp. 440,200
* 160,000 Netopia, Inc. 6,680,000
* 49,900 Nova Measuring Instruments Ltd. 717,313
* 10,200 Photon Dynamics, Inc. 754,800
* 1,100 Tricord Systems, Inc. 13,750
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18,736,544
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* Non-income producing securities
The accompanying notes are an integral part of these financial statements.
4 Fremont mutual funds
<PAGE>
FREMONT INSTITUTIONAL U.S. MICRO-CAP FUND
APRIL 30, 2000 (UNAUDITED)
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
Shares/ Value
Face Amount Security Description (Note 1)
--------------------------------------------------------------------------------
TECHNOLOGY (SOFTWARE) 3.9%
* 112,000 Exigent International, Inc. $ 273,000
* 132,600 MDSI Mobile Data Solutions, Inc. 4,641,000
* 28,500 New Era of Networks, Inc. 894,187
* 30,300 PC-Tel, Inc. 1,015,050
* 34,100 Puma Technology, Inc. 1,044,312
* 26,200 VocalTec Communications Ltd. 465,050
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8,332,599
-------------
UTILITIES 0.8%
* 229,700 Cadiz, Inc. 1,665,325
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1,665,325
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TOTAL STOCKS (Cost $115,661,466) 150,455,516
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SHORT-TERM SECURITIES 31.0%
$ 6,452,595 Repurchase Agreement, State Street Bank and
Trust Co., 5.400%, 05/01/00 (Maturity Value
$66,482,008) (Cost $66,452,595) Collateral:
FHLB 6.372%, 02/07/01, FNMA 0.000%, 06/15/00 66,452,595
-------------
TOTAL SHORT-TERM SECURITIES (Cost $66,452,595), 66,452,595
-------------
TOTAL INVESTMENTS (Cost $182,114,061), 101.3% 216,908,111
-------------
OTHER ASSETS AND LIABILITIES, NET, (1.3)% (2,854,816)
-------------
NET ASSETS, 100.0% $ 214,053,295
=============
* Non-income producing securities
The accompanying notes are an integral part of these financial statements.
Fremont mutual funds 5
<PAGE>
FREMONT INSTITUTIONAL U.S. MICRO-CAP FUND
APRIL 30, 2000 (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
(ALL NUMBERS IN THOUSANDS EXCEPT NET ASSET VALUE PER SHARE)
ASSETS:
Investments in securities at cost $ 182,114
==========
Investment is securities at value 216,908
Cash 66
Dividends and interest receivable 36
Receivable for securities sold 767
Receivable from sale of fund shares 479
Prepaid Expenses 14
Unamortized organization costs 12
----------
TOTAL ASSETS $ 218,282
----------
LIABILITIES:
Payable for securities purchased 4,035
Payable of fund shares redeemed 4
Accrued expenses
Investment advisory, administrative and distribution fees 189
Other 1
----------
TOTAL LIABILITIES $ 4,229
----------
NET ASSETS $ 214,053
==========
Net assets consist of:
Paid in capital $ 128,901
Undistributed net investment income 87
Accumulated net realized gain (loss) 50,271
Unrealized appreciation on investments 34,794
----------
NET ASSETS $ 214,053
==========
SHARES OF CAPITAL STOCK OUTSTANDING 9,790
==========
NET ASSET VALUE PER SHARE $ 21.86
==========
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2000
(All numbers in thousands)
INVESTMENT INCOME:
Interest $ 1,199
Dividends 30
----------
TOTAL INCOME 1,229
----------
EXPENSES:
Investment advisory and administrative fees 1,050
Shareholder servicing fees 10
Custody fees 26
Accounting fees 16
Audit and legal fees 11
Directors' fees 3
Registration fees 8
Reports to shareholders 3
Other 6
----------
TOTAL EXPENSES BEFORE REDUCTIONS 1,133
Earned credits (Note 2) (3)
Expenses recouped (Note 2) 12
----------
TOTAL NET EXPENSES 1,142
----------
NET INVESTMENT INCOME 87
----------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain from investments 50,363
Net unrealized appreciation on investments 11,347
----------
Net realized and unrealized gain from investments 61,710
----------
Net increase in net assets resulting from operations $ 61,797
==========
The accompanying notes are an integral part of these financial statements.
6 FREMONT MUTUAL FUNDS
<PAGE>
FREMONT INSTITUTIONAL U.S. MICRO-CAP FUND
APRIL 30, 2000
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
(ALL NUMBERS IN THOUSANDS) Six Months
Ended Year Ended
April 30, October 31,
INCREASE (DECREASE) IN NET ASSETS: 2000 1999
From operations: ---------- ----------
Net investment income (loss) $ 87 $ (342)
Net realized gain from investments 50,363 20,874
Net unrealized appreciation on investments 11,347 27,929
---------- ----------
Net increase in net assets from operations 61,797 48,461
---------- ----------
Distributions to shareholders from:
Net realized gains (756) (16,721)
---------- ----------
Total distributions to shareholders (756) (16,721)
---------- ----------
From capital share transactions:
Proceeds from shares sold 111,709 30,562
Reinvested dividends 712 15,424
Payments for shares redeemed (64,380) (10,102)
---------- ----------
Net increase in net assets
from capital share transactions 48,041 35,884
---------- ----------
Net increase in net assets 109,082 67,624
Net assets at beginning of period 104,971 37,347
---------- ----------
NET ASSETS AT END OF PERIOD $ 214,053 $ 104,971
========== ==========
CAPITAL TRANSACTIONS IN SHARES:
Sold 5,284 2,321
Reinvested dividends 41 1,180
Redeemed (3,138) (797)
---------- ----------
Net increase from capital share transactions 2,187 2,704
========== ==========
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited) Year Ended October 31, Period from
Six Months ended --------------------- August 4, 1997(1) to
SELECTED PER SHARE DATA April 30, 2000 1999 1998 October 31, 1997
for one share outstanding during the period -------------- ------ ------ ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.68 $ 7.52 $ 9.78 $ 10.00
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) .01 (.04) (.04) --
Net realized and unrealized gain (loss) 8.27 8.80 (1.98) .09
--------- --------- --------- ---------
Total from investment operations 8.28 8.76 (2.02) .09
--------- --------- --------- ---------
LESS DISTRIBUTIONS
From net realized gains (.10) (2.60) (.24) (.31)
--------- --------- --------- ---------
Total distributions (.10) (2.60) (.24) (.31)
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 21.86 $ 13.68 $ 7.52 $ 9.78
========= ========= ========= =========
TOTAL RETURN2 60.69% 118.10% -21.03% 0.90%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 214,053 $ 104,971 $ 37,347 $ 40,545
Ratio of net expenses to average net assets3 1.25%* 1.25% 1.25% 1.25%*
Ratio of gross expenses to average net assets3 1.24%* 1.35% 1.38% 1.49%*
Ratio of net investment loss to average net assets3 .09%* -.53% -.44% -.21%*
Portfolio turnover rate 139% 155% 187% 28%
</TABLE>
1 Fund's date of inception
2 Total return would have been lower had the advisor not waived and/or
reimbursed expenses.
3 See Note 2 of "Notes to Financial Statements."
* Annualized
The accompanying notes are an integral part of these financial statements.
FREMONT MUTUAL FUNDS 7
<PAGE>
FREMONT INSTITUTIONAL U.S. MICRO-CAP FUND
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 2000 (UNAUDITED)
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 eleven series,
one of which, the Institutional U.S. Micro-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. The following is a summary
of significant accounting policies followed by the Fund. These policies are
in conformity with generally accepted accounting principles for investment
companies.
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 in good faith by the Board of Directors.
Short-term notes and similar securities are included in investments at
amortized cost, which approximates value.
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. 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.
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 and classification of gains/losses related to certain currency,
futures and options transactions.
Permanent difference will be reclassified to paid in capital. Temporary
differences, which will reverse in subsequent periods, will not be
reclassified and will remain in undistributed net investment income. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
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
for the reporting period. Actual results could differ form those estimates.
F. REPURCHASE AGREEMENTS
As part of its cash reserve position, the Fund may enter into repurchase
agreements through which the Fund acquires a security (the "underlying
security") from the seller, a well-established securities dealer, or a bank
that is a member of the Federal Reserve System. At that time, the bank or
securities dealer agrees to repurchase the underlying security at the same
price, plus a specified amount of interest 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 April 30, 2000, all
outstanding repurchase agreements held by the Fund, had been entered into
on April 28, 2000.
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 1.15%.
The accompanying notes are an integral part of these financial statements.
8 FREMONT MUTUAL FUNDS
<PAGE>
FREMONT INSTITUTIONAL U.S. MICRO-CAP FUND
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 2000 (UNAUDITED)
The Advisor has agreed to limit the Fund's total operating expenses to
1.25% of average daily net assets. The Fund may reimburse the Advisor for
any reductions in the 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. As of April 30, 2000,
the Advisor has not recouped $137,010 of the cumulative reimbursements.
State Street Bank & Trust Company ("State Street") serves as custodian and
investment accounting agent for the Fund. All fees charged by State Street
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 State Street 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 April 30, 2000, 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 48% 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.
3. ORGANIZATION COSTS
Costs incurred by the Fund, if any, in connection with its organization
have been deferred and are amortized on a straight-line basis over a period
of five years (60 months).
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
Aggregate purchases and aggregate proceeds from sales of securities for the
six months ended April 30, 2000 were as follows:
Purchases Proceeds
Long-term securities: $104,851,185 $100,459,842
5. 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 or
industries.
6. UNREALIZED APPRECIATION (DEPRECIATION) - TAX BASIS
At April 30, 2000, the cost of securities for federal income tax purposes
was $182,206,408 and the net unrealized appreciation based on that cost
were as follows:
Unrealized appreciation $ 46,980,335
Unrealized depreciation (12,278,632)
---------------
Net unrealized appreciation $ 34,701,703
===============
7. 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 did not incur such
borrowings during the year.
The accompanying notes are an integral part of these financial statements.
FREMONT MUTUAL FUNDS 9
<PAGE>
FREMONT [LOGO]
FUNDS
50 Beale Street, Suite 100
San Francisco, CA 94105
www.fremontfunds.com
[LOGO]
Distributed by First Fund Distributors, Inc., San Francisco, CA 94105
BR001b-0006
