Fremont Institutional Micro-Cap Fund

Third Quarter 2008

The U.S. equity market experienced a difficult third quarter. The rapidly expanding credit crisis spread fear that frozen credit markets would have potentially disastrous implications for the U.S. economy. Performance suffered across a majority of sectors, most notably in previous stalwarts energy and materials where slowing demand pushed commodity prices way off previous highs in a relatively short time period. Consumer staples, health care, and utilities, which are traditionally defensive sectors, were the best performers during this period and actually delivered positive returns in a difficult market environment for the U.S. micro-cap universe of stocks. In general, micro-cap stocks and small-capitalization issues outperformed their mid- and large-capitalization counterparts for the quarter as investors struggled to find compelling growth stories among the bigger names. Volatility remained high as the market reacted sharply on almost a daily basis to the significant developments surrounding the financial services sector.

The Fund modestly underperformed the benchmark during the quarter, with a majority of the underperformance driven by the meaningful underweight to the financials sector, which rebounded sharply from weak performance during the first and second quarters. Each of the four subadvisors within the Fund maintains a considerably large underweight to the sector and still finds minimal quality growth opportunities in financial stocks in general. Despite the Fund's overall underperformance, there was strong stock selection within several areas of the market, including the consumer discretionary, information technology, and materials sectors. On the downside, several energy holdings that were previously among the best performers in the Portfolio were among the biggest detractors, as the potential for a prolonged global recession led to diminished short- and intermediate-term growth expectations for these companies. The energy weight for the Fund continues to remain broadly in line with the weight in the benchmark. At the subadvisor level, the growth subadvisors struggled during the third quarter, while the Fund's core and value managers each outperformed their respective benchmarks.

The portfolio managers' focus on companies that can self-finance their growth continues to be well-rewarded, particularly in the current market environment, as tight credit conditions do not bode well for companies that are highly dependent on outside financing for their long-term growth prospects. Broadly speaking, the Fund's subadvisors believe the Portfolio is positioned to take advantage of a global economic recovery when the fiscal and monetary actions taken over the past several months begin to take hold. In the meantime, the Fund maintains large absolute and relative overweights to biotech stocks, as well as to companies within the industrials and information technology sectors. The portfolio managers continue to believe that the high level of recent market volatility has created an excellent opportunity to add companies with solid business plans now selling at much more compelling valuations to the Portfolio.

Investors should carefully consider the fund's investment objectives, risks, charges, and expenses before investing. For this and other information, please call 800.835.3879 or download a free prospectus. Read it carefully before investing or sending money.

The performance shown represents past performance and is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. From time to time the advisor has waived fees or reimbursed expenses, which may have resulted in higher returns. The listed returns and yields on the Fund are net of expenses and the returns and yields on the indices exclude expenses. Current performance of the Fund may be lower or higher than the performance quoted.

The Fund is subject to the special risks associated with investments in micro-cap companies such as relatively short earnings history, competitive conditions, less publicly available corporate information, and a reliance on a limited number of products.

Any sectors, industries, or securities discussed should not be perceived as investment recommendations. The views expressed represent the opinions of Managers Investment Group and are not intended as a forecast or guarantee of future results. Any securities discussed may no longer be held in an account’s portfolio. It should not be assumed that any of the securities transactions discussed were or will prove to be profitable, or that the investment recommendations we make in the future will be profitable.

Unlike the Fund, the Index is unmanaged, is not available for investment and does not incur expenses. Please see Index Definitions for all our funds' benchmarks.

The Russell MicroCap® Index and Russell 2000® Growth Index are trademarks of the Frank Russell Company. Russell® is a trademark of the Frank Russell Company. An investment cannot be made directly into an Index.