As filed with the Securities and Exchange Commission on November 25, 1998
File Nos. 33-34841
811-6011
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 63
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 64
THE MONTGOMERY FUNDS
(Exact Name of Registrant as Specified in its Charter)
101 California Street
San Francisco, California 94111
(Address of Principal Executive Office)
(415) 572-3863
(Registrant's Telephone Number, Including Area Code)
Greg M. Siemons, Assistant Secretary
101 California Street
San Francisco, California 94111
(Name and Address of Agent for Service)
-------------------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to Rule 485(b)
___ on ______________ pursuant to Rule 485(b)
X 60 days after filing pursuant to Rule 485(a)(1)
___ 75 days after filing pursuant to Rule 485(a)(2)
___ on ______________ pursuant to Rule 485(a)
----------
Please Send Copy of Communications to:
JULIE ALLECTA, ESQ.
DAVID A. HEARTH, ESQ.
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, California 94104
(415) 835-1600
<PAGE>
THE MONTGOMERY FUNDS
CONTENTS OF POST-EFFECTIVE AMENDMENT
This post-effective amendment to the registration statement of the Registrant
contains the following documents:
Facing Sheet
Contents of Post-Effective Amendment
Part A - Amendment to Prospectus for Class R shares of Montgomery
Emerging Asia Fund,
Part A - Prospectus for Class R shares of Montgomery Growth Fund,
Montgomery Equity Income Fund, Montgomery Small Cap Fund,
Montgomery Small Cap Opportunities Fund, Montgomery U.S.
Emerging Growth Fund, Montgomery Global Opportunities Fund,
Montgomery Global Communications Fund, Montgomery
International Small Cap Fund, Montgomery International Growth
Fund, Montgomery Latin America Fund, Montgomery Emerging Asia
Fund, Montgomery Emerging Markets Fund, Montgomery Select 50
Fund, Montgomery U.S. Asset Allocation Fund, Montgomery Short
Duration Government Bond Fund, Montgomery Total Return Bond
Fund, Montgomery Government Reserve Fund, Montgomery Federal
Tax-Free Money Fund, Montgomery California Tax-Free
Intermediate Bond Fund and Montgomery California Tax-Free
Money Fund.
Part B - Combined Statement of Additional Information for Class R
and Class P shares of Montgomery Growth Fund, Montgomery
Equity Income Fund, Montgomery Small Cap Fund, Montgomery
Small Cap Opportunities Fund, Montgomery U.S. Emerging Growth
Fund, Montgomery Global Opportunities Fund, Montgomery Global
Communications Fund, Montgomery International Small Cap Fund,
Montgomery International Growth Fund, Montgomery Latin America
Fund, Montgomery Emerging Asia Fund, Montgomery Emerging
Markets Fund, Montgomery Select 50 Fund, Montgomery U.S. Asset
Allocation Fund, Montgomery Short Duration Government Bond
Fund, Montgomery Total Return Bond Fund, Montgomery Government
Reserve Fund, Montgomery Federal Tax-Free Money Fund,
Montgomery California Tax-Free Intermediate Bond Fund and
Montgomery California Tax-Free Money Fund is hereby
incorporated by reference to Post-Effective Amendments
previously filed with the Commission
Part C - Other Information
Signature Page
Exhibits
<PAGE>
---------------------------------------------------------------------
PART A
AMENDMENT TO PROSPECTUS FOR CLASS R SHARES OF
MONTGOMERY EMERGING ASIA FUND
---------------------------------------------------------------------
<PAGE>
The Montgomery Funds
Amendment dated ______________, 19__
to the Combined Prospectus for Class R Shares
(formerly dated October 31, 1998)
For the Montgomery Emerging Asia Fund only:
Effective December __, 1998, this Fund will charge a redemption fee of 2% on
shares held for less than 6 months. Shares purchased before that date will not
be subject to this redemption fee.
This fee is intended to compensate the Fund for the increased expenses to
longer-term shareholders and the disruptive effect on the Fund's portfolio
caused by short-term investments. The redemption fee will be assessed on the net
asset value of the shares redeemed and will be deducted from the redemption
proceeds otherwise payable to the shareholder. The Fund will retain the fee
charged.
<TABLE>
The following table should be read instead of the table that appears on page 25:
<CAPTION>
<S> <C>
Fund Fees and Expenses
Shareholder Fees (fees paid directly from your investment)
Redemption Fee* 2.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 1.25%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 1.02%
- -------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.27%
Fee Waiver and/or Expense Reimbursement 0.36%
Net Expenses 1.91%
<FN>
* Deducted from the net proceeds of shares redeemed (or exchanged) within 6 months after purchase.
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or absorb expenses to
limit the Fund's total annual operating expenses (excluding interest and tax expenses) to 1.90%.
This contract has a one-year term, renewable at the end of each fiscal year.
</FN>
</TABLE>
1
<PAGE>
---------------------------------------------------------------------
PART A
PROSPECTUS FOR CLASS R SHARES OF
MONTGOMERY GROWTH FUND
MONTGOMERY EQUITY INCOME FUND
MONTGOMERY SMALL CAP FUND
MONTGOMERY SMALL CAP OPPORTUNITIES FUND
MONTGOMERY U.S. EMERGING GROWTH FUND
MONTGOMERY GLOBAL OPPORTUNITIES FUND
MONTGOMERY GLOBAL COMMUNICATIONS FUND
MONTGOMERY INTERNATIONAL SMALL CAP FUND
MONTGOMERY INTERNATIONAL GROWTH FUND
MONTGOMERY LATIN AMERICA FUND
MONTGOMERY EMERGING ASIA FUND
MONTGOMERY EMERGING MARKETS FUND
MONTGOMERY SELECT 50 FUND
MONTGOMERY U.S. ASSET ALLOCATION FUND
MONTGOMERY SHORT DURATION GOVERNMENT BOND FUND
MONTGOMERY TOTAL RETURN BOND FUND
MONTGOMERY GOVERNMENT RESERVE FUND
MONTGOMERY FEDERAL TAX-FREE MONEY FUND
MONTGOMERY CALIFORNIA TAX-FREE INTERMEDIATE BOND
FUND~MONTGOMERY CALIFORNIA TAX-FREE MONEY FUND
---------------------------------------------------------------------
<PAGE>
Prospectus Rule 497(e)
__________, 1998 The Montgomery Funds File Nos. 33-34841 and 811-6011
The Montgomery Funds II File Nos. 33-69686 and 811-8064
The Montgomery Funds(SM)
U.S. Equity Funds
Growth Fund
Small Cap Opportunities Fund
Small Cap Fund
(closed to new investors)
U.S. Emerging Growth Fund
Equity Income Fund
International & Global Equity Funds
International Growth Fund
International Small Cap Fund
Global Opportunities Fund
Global Communications Fund
Emerging Markets Fund
Emerging Asia Fund
Latin America Fund
Multi-Strategy Funds
Select 50 Fund
U.S. Asset Allocation Fund
U.S. Fixed-Income & Money Market Funds
Total Return Bond Fund
Short Duration Government Bond Fund
Government Reserve Fund
Federal Tax-Free Money Fund
California Tax-Free Intermediate Bond Fund
California Tax-Free Money Fund
The Montgomery Funds have registered each mutual fund offered in this prospectus
with the U.S. Securities and Exchange Commission (SEC). That registration does
not imply, however, that the SEC endorses the Funds.
The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
1====
<PAGE>
[inside front cover of prospectus]
This prospectus contains important information about the investment objectives,
strategies and risks of The Montgomery Funds that you should know before you
invest in them. Please read it carefully and keep it on hand for future
reference.
Please be aware that The Montgomery Funds:
o Are not bank deposits.
o Are not guaranteed, endorsed or insured by any financial institution or
government entity such as the Federal Deposit Insurance Corporation (FDIC).
o May not achieve their stated goal(s).
You should also know that:
o The Funds' shares may rise and fall in value.
o You could lose money by investing in the Funds.
This prospectus describes only the Funds' Class R shares. The Montgomery Funds
offer other classes of shares to eligible investors.
2====
<PAGE>
[Table of Contents]
TABLE OF CONTENTS
U.S. Equity Funds
Montgomery Growth Fund...................................................4
Montgomery Small Cap Opportunities Fund..................................6
Montgomery Small Cap Fund (closed to new investors)......................8
Montgomery U.S. Emerging Growth Fund....................................10
Montgomery Equity Income Fund...........................................12
International and Global Equity Funds
Montgomery International Growth Fund....................................14
Montgomery International Small Cap Fund.................................16
Montgomery Global Opportunities Fund....................................18
Montgomery Global Communications Fund...................................20
Montgomery Emerging Markets Fund........................................22
Montgomery Emerging Asia Fund...........................................24
Montgomery Latin America Fund...........................................26
Multi-Strategy Funds
Montgomery Select 50 Fund...............................................28
Montgomery U.S. Asset Allocation Fund...................................30
U.S. Fixed-Income and Money Market Funds
Montgomery Total Return Bond Fund.......................................32
Montgomery Short Duration Government Bond Fund..........................34
Montgomery Government Reserve Fund......................................36
Montgomery Federal Tax-Free Money Fund..................................38
Montgomery California Tax-Free Intermediate Bond Fund...................40
Montgomery California Tax-Free Money Fund...............................42
Portfolio Management.........................................................44
Additional Investment Strategies and Related Risks...........................48
Montgomery Latin America Fund...........................................48
The Euro: Single European Currency.....................................49
Defensive Investments...................................................49
Portfolio Turnover......................................................50
The Year 2000...........................................................50
Alternative Structures..................................................51
Financial Highlights.........................................................52
Account Information..........................................................62
Becoming a Montgomery Shareholder.......................................63
How Fund Shares are Priced..............................................63
Buying Additional Shares................................................64
Exchanging Shares.......................................................66
Selling Shares..........................................................67
Other Policies..........................................................68
Tax Information.........................................................69
<PAGE>
After You Invest........................................................70
[Sidebar]
- -------------------------
How to Contact Us
- -------------------------
Montgomery Shareholder
Service Representatives
800.572.FUND [3863]
Available 5 A.M. to 5 P.M.
Pacific time
Montgomery Web Site
www.montgomeryfunds.com
Address General
Correspondence to:
The Montgomery Funds
101 California Street
San Francisco, CA
94111-9361
3====
<PAGE>
Growth Fund | MNGFX
Objective
o Seeks long-term capital appreciation by investing in growth-oriented U.S.
companies of any size
[Graphic indicating Montgomery Growth Fund has a potential risk/reward profile
that is slightly more than that of the S&P 500.] This Fund's potential
risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund may invest in U.S. companies of any size, but invests at least 65% of
its total assets in those companies whose shares have a total stock market value
(market capitalization) of at least $1 billion.
The Fund's strategy is to identify well-managed U.S. companies whose share
prices appear to be undervalued relative to the firms' growth potential. The
managers rigorously analyze all prospective holdings by subjecting them to the
following three steps of their investment process:
o Identify companies with improving business fundamentals
o In-depth analysis of each company's current business and future prospects
o Analyze each company's price to determine whether its growth prospects have
been discovered by the market
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. As with any stock fund, the
value of your investment will fluctuate on a day-to-day basis with movements in
the stock market, as well as in response to the activities of individual
companies. To the extent that the Fund is overweighted in certain market sectors
compared with the Standard and Poor's 500 Composite Price Index, the Fund may be
more volatile than the S&P 500.
When the Fund's portfolio managers think that market conditions are not
favorable or when they are unable to locate attractive investments, they may
temporarily increase the Fund's cash position. Larger cash positions can be a
defensive measure in adverse market conditions. Should the market advance,
however, the Fund may not participate as much as it might have if more of its
assets were invested in stocks.
4====
<PAGE>
Past Fund Performance The chart at the left below, shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1994 1995 1996 1997
- ------------------- ----------------- ---------------- -----------------
20.91% 23.65% 20.20% 24.16%
Average Annual Returns through 12/31/97.
Growth Fund 24.16% 25.67%
S&P 500 Index 33.35% 22.11%
- -----------------------------------------------------------------------------
1 Year Inception (9/30/93)
During the four-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+15.70%) and its worst quarter was Q4 1997 (-5.77%). The
Fund's 1998 return through 9/30/98 was -12.70%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads and does not charge shareholders for exchanging shares or reinvesting
dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fee 0.91%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.29%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.20%
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$122 $380 $658 $1,450
PORTFOLIO MANAGEMENT [clipart] [sidebar]
Roger Honour, Kathryn Peters, Andrew Pratt For financial highlights,
For more details see page 44. see page 52
5====
<PAGE>
Small Cap Opportunities Fund | MNSOX
Objective
o Seeks long-term capital appreciation by investing in growth-oriented U.S.
small-cap companies
[Graphic indicating Montgomery Small Cap Opportunities Fund has a potential
risk/reward profile that is significantly more than that of the S&P 500.] This
Fund's potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 65% of its total assets in the stocks of U.S.
companies whose shares have a total stock market value (market capitalization)
of $1.5 billion or less.
The Fund's strategy is to identify well-managed U.S. companies whose share
prices appear to be undervalued relative to their growth potential. The managers
rigorously analyze all prospective holdings by subjecting them to the following
three steps of their investment process:
o Identify companies with improving business fundamentals
o In-depth analysis of each company's current business and future prospects
o Analyze each company's price to determine whether its growth have been
discovered by the market
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. As with any stock fund, the
value of your investment will fluctuate on a day-to-day basis with movements in
the stock market, as well as in response to the activities of individual
companies. To the extent that the Fund is overweighted in certain market sectors
compared with the Russell 2000 Index, the Fund may be more volatile than the
Russell 2000.
The Fund's focus on small-cap stocks may expose shareholders to additional
risks. Smaller companies typically have more-limited product lines, markets and
financial resources than larger companies, and their securities may trade less
frequently and in more-limited volume than those of larger, more mature
companies. As a result, small-cap stocks--and therefore the Fund--may fluctuate
significantly more in value than larger-cap stocks and funds that focus on them.
6====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1996 1997
- ------------------- -----------------
37.28% 16.45%
Average Annual Returns through 12/31/97
Small Cap Opportunities Fund 16.45% 26.36%
Russell 2000 Index 22.36% 19.39%
- --------------------------------------------------------------------------------
1 Year Inception (12/29/95)
During the two-year period described above in the bar chart, the Fund's best
quarter was Q1 1996 (+22.92%) and its worst quarter was Q1 1997 (-10.32%). The
Fund's 1998 return through 9/30/98 was -23.32%.
FEES & EXPENSES [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of this Fund. Montgomery does not impose any front-end or deferred sales
loads on this fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 1.20%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.58%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.78%
Fee Waiver and/or Expense Reimbursement 0.28%
Net Expenses 1.50%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 1.50%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$152 $473 $816 $1,784
PORTFOLIO MANAGEMENT [clipart]
Roger Honour, Kathryn Peters, Andrew Pratt [sidebar]
For more details see page 44. For financial highlights,
see page 53
7====
<PAGE>
Small Cap Fund | MNSCX
The Montgomery Small Cap Fund is currently closed to new investors*
Objective
o Seeks long-term capital appreciation by investing in rapidly growing U.S.
small-cap companies
[Graphic indicating Montgomery Small Cap Fund has a potential risk/reward
profile that is significantly more than that of the S&P 500.] This Fund's
potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 65% of its total assets in the stocks of U.S.
companies whose shares have a total stock market value (market capitalization)
of $1.5 billion or less.
The Fund's portfolio managers follow a growth strategy to invest in potentially
attractive small-cap companies that are at an early or transitional stage of
their development. The managers look for companies that they believe can thrive
even in adverse economic conditions. Specifically, they search for companies
that they think have the potential to:
o Gain market share within their industries
o Deliver consistently high profits to shareholders
o Increase their corporate earnings each quarter
o Provide solutions for current or impending problems in their respective
industries or in society overall.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. As with any stock fund, the
value of your investment will fluctuate on a day-to-day basis with movements in
the stock market, as well as in response to the activities of individual
companies. To the extent that the Fund is overweighted in certain market sectors
compared with the Russell 2000 Index, the Fund may be more volatile than the
Russell 2000.
The Fund's focus on small-cap stocks may expose shareholders to additional
risks. Smaller companies typically have more-limited product lines, markets and
financial resources than larger companies, and their securities may trade less
frequently and in more-limited volume than those of larger, more mature
companies. As a result, small-cap stocks--and therefore the Fund--may fluctuate
significantly more in value than larger-cap stocks and funds that focus on them.
[Footnote to page] *From time to time, Montgomery may reopen and close the Small
Cap Fund to new investors at its discretion. Current shareholders who maintain
open accounts in the Fund may make additional investments in it. Please be
advised that if you redeem your total investment in the Small Cap Fund, your
account will be closed and you will not be able to make any additional
investments in the Fund.
8====
<PAGE>
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's performance to the most commonly used index for
its market segment. Of course, past performance is no guarantee of future
results.
1991 1992 1993 1994 1995 1996 1997
- --------- ----------- ----------- ------------ ----------- --------- ----------
98.75% 9.59% 24.31% -9.96% 35.12% 18.69% 23.86%
<TABLE>
<CAPTION>
Average Annual Returns through 12/31/97
<S> <C> <C> <C>
Small Cap Fund 23.86% 17.33% 21.47%
Russell 2000 Index 22.36% 16.40% 15.38%*
- ---------------------------------------------------------------------------------------------------------
<FN>
*calculated from 6/30/90 1 Year 5 Years Inception (7/13/90)
</FN>
</TABLE>
During the seven-year period described above in the bar chart, the Fund's best
quarter was Q1 1991 (+39.57%) and its worst quarter was Q1 1997 (-11.68%). The
Fund's 1998 return through 9/30/98 was -28.62%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this Fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fee 1.00%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.24%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.24%
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$126 $393 $679 $1,495
PORTFOLIO MANAGEMENT [clipart] [sidebar]
Stuart Roberts, Brad Kidwell, Cam Philpott For financial highlights
For more details see page 44-45. see page 53
9====
<PAGE>
U.S. Emerging Growth Fund | MNMCX
Objective
o Seeks long-term capital appreciation by investing in growth-oriented U.S.
smaller-cap companies
[Graphic indicating Montgomery U.S. Emerging Growth Fund has a potential
risk/reward profile that is significantly more than that of the S&P 500.] This
Fund's potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 65% of its total assets in the stocks of U.S.
companies whose shares have a total stock market value (market capitalization)
of $1 billion or less.
The Fund's strategy is to identify well-managed U.S. companies whose share
prices appear to be undervalued relative to their growth potential. The managers
rigorously analyze all prospective holdings by subjecting them to the following
three steps of their investment process:
o Identify companies with improving business fundamentals
o In-depth analysis of each company's current business and future prospects
o Analyze each company's price to determine whether its growth prospects have
been discovered by the market
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. As with any stock fund, the
value of your investment will fluctuate on a day-to-day basis with movements in
the stock market, as well as in response to the activities of individual
companies. To the extent that the Fund is overweighted in certain market sectors
compared with the Russell 2000 Index, the Fund may be more volatile than the
Russell 2000.
The Fund's focus on micro- and small-cap stocks may expose shareholders to
additional risks. Small companies typically have more-limited product lines,
markets and financial resources than larger companies, and their securities may
trade less frequently and in more-limited volume than those of larger, more
mature companies. This is especially true of micro-cap companies. As a result,
micro-cap stocks--and therefore the Fund--may fluctuate significantly more in
value than larger-cap stocks and funds that focus on them.
10====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1995 1996 1997
- ------------------- ----------------- ----------------
28.66% 19.12% 27.05%
Average Annual Returns through 12/31/97
U.S. Emerging Growth Fund 27.05% 24.85%
Russell 2000 Index 22.36% 22.34%
- --------------------------------------------------------------------------------
1 Year Inception (12/30/94)
During the three-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+18.82%) and its worst quarter was Q1 1997 (-5.44%). The
Fund's 1998 return through 9/30/98 was -10.88%
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of this Fund. Montgomery does not impose any front-end or deferred sales
loads on this Fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fee 1.33%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.24%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.57%
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$159 $495 $853 $1,860
PORTFOLIO MANAGEMENT [clipart] [sidebar]
Roger Honour, Kathryn Peters, Andrew Pratt For financial highlights,
For more details see page 44. see page 54
11====
<PAGE>
Equity Income Fund | MNEIX
Objective
o Seeks current income and long-term capital appreciation while striving to
minimize portfolio volatility by investing in large, dividend-paying U.S.
companies
[Graphic indicating Montgomery Equity Income Fund has a potential risk/reward
profile that is a little less than that of the S&P 500.] This Fund's potential
risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund seeks to provide a greater yield than the average yield of Standard &
Poor's 500 Composite Price Index stocks by investing at least 65% of its total
assets in dividend-paying stocks of large U.S. companies.
The Fund's strategy is to identify mature companies that have a history of
paying regular dividends to shareholders and offer a dividend yield well above
their historical average and/or the market's average. (Dividend yield is
calculated by dividing the dividend a company pays out per share of common stock
by the stock market price of those shares.) The Fund typically invests in
companies for two to four years. The manager usually will begin to reduce the
Fund's position in a company as its share price moves up and its dividend yield
drops to the lower end of its historical range. He may also pare back or sell
the Fund's position in a company that reduces or eliminates its dividend, or if
he believes that the company is about to do so.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. As with any stock fund, the
value of your investment will fluctuate on a day-to-day basis with movements in
the stock market, as well as in response to the activities of individual
companies. Increased interest rates may reduce the value of your investment in
this Fund. Although the Fund seeks to provide a consistent level of income to
shareholders, its yield may fluctuate significantly in the short term.
12====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1995 1996 1997
- ------------------- ----------------- ----------------
35.17% 18.34% 26.10%
Average Annual Returns through 12/31/97
Equity Income Fund 26.10% 23.74%
S&P 500 Index 33.35% 28.42%
- --------------------------------------------------------------------------------
1 Year Inception (9/30/94)
During the three-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+10.49%) and its worst quarter was Q1 1997 (+2.42%). The
Fund's 1998 return through 9/30/98 was -1.81%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads and does not charge shareholders for exchanging shares or reinvesting
dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 0.60%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.78%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.38%
Fee Waiver and/or Expense Reimbursement 0.52%
Net Expenses 0.86%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 0.85%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$87 $274 $475 $1,058
PORTFOLIO MANAGER [clipart] [sidebar]
William King For financial highlights,
For more details see page 44. see page 54
13====
<PAGE>
International Growth Fund | MNIGX
Objective
o Seeks long-term capital appreciation by investing in medium- and large-cap
companies in developed stock markets outside the United States
[Graphic indicating Montgomery International Growth Fund has a potential
risk/reward profile that is a little more than that of the S&P 500.] This Fund's
potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 65% of its total assets in the common stocks of
companies outside the United States whose shares have a stock market value
(market capitalization) of more than $1 billion. The Fund currently concentrates
its investments in the stock markets of western Europe, particularly the United
Kingdom, France, Germany, Italy and the Netherlands, as well as developed
markets in Asia, such as Japan and Hong Kong. The Fund typically invests in at
least three countries outside the United States, with no more than 40% of its
assets in any one country.
The portfolio managers seek well-managed companies that they believe will be
able to increase their sales and corporate earnings on a sustained basis. In
addition, the portfolio managers must consider the shares of these companies to
be under- or reasonably-valued relative to their long-term prospects. The
managers favor companies that they believe have a competitive advantage, offer
innovative products or services and may profit from such trends as deregulation
and privatization. On a strategic basis, the Fund's assets may be allocated
among countries in an attempt to take advantage of market trends. The Fund's
portfolio managers and analysts frequently travel to the countries in which the
Fund invests or may invest to gain firsthand insight into the economic,
political and social trends that affect investments in those countries.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. As with any stock fund, the
value of your investment will fluctuate on a day-to-day basis with movements in
the stock market, as well as in response to the activities of individual
companies.
By investing primarily in foreign stocks, the Fund may expose shareholders to
additional risks. Foreign stock markets tend to be more volatile than the U.S.
market due to economic and political instability and regulatory conditions in
some countries.
In addition, most of the foreign securities in which the Fund invests are
denominated in foreign currencies, whose value may decline against the U.S.
dollar. Furthermore, the January 1, 1999, introduction by the European Union of
a single European currency (the "euro") may cause market uncertainties and even
market disruptions that could negatively affect the Fund's investments in
European companies.
14====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1996 1997
- ------------------- -----------------
20.96% 10.15%
Average Annual Returns through 12/31/97
International Growth Fund 10.15% 17.18%
MSCI EAFE Index 1.78% 6.48%
- --------------------------------------------------------------------------------
*calculated from 6/30/95 1 Year Inception (7/3/95)
During the two-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+10.77%) and its worst quarter was Q4 1977 (-5.98%). The
Fund's 1998 return through 9/30/98 was +4.61%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads and does not charge shareholders for exchanging shares or reinvesting
dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 1.10%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 1.03%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.13%
Fee Waiver and/or Expense Reimbursement 0.47%
Net Expenses 1.66%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 1.65%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------
$168 $522 $900 $1,958
PORTFOLIO MANAGEMENT [clipart] [sidebar]
John Boich, Oscar Castro For financial highlights,
For more details see page 45. see page 55
15====
<PAGE>
International Small Cap Fund | MNISX
Objective
o Seeks long-term capital appreciation by investing in small-cap companies in
developed stock markets outside the United States
[Graphic indicating Montgomery International Small Cap Fund has a potential
risk/reward profile that is much more than that of the S&P 500.] This Fund's
potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 65% of its total assets in the stocks of companies
outside the United States whose shares have a market value (market
capitalization) of less than $1 billion. The Fund typically invests most of its
assets in the developed stock markets of western Europe and Asia, particularly
the United Kingdom, France, Germany, Italy, Sweden and Japan. The Fund invests
in at least three different countries outside the United States, with no more
than 40% of its assets in any one country.
The Fund's portfolio managers seek well-managed, small-cap companies that they
believe will be able to increase sales and corporate earnings on a sustained
basis. The portfolio managers must consider the shares of these companies to be
under- or reasonably valued relative to their long-term prospects and favor
companies that they believe have a competitive advantage, offer innovative
products or services and may profit from such trends as deregulation and
privatization. On a strategic basis, the Fund's assets may be allocated among
countries in an attempt to take advantage of market trends. The Funds portfolio
managers and analysts frequently travel to the countries in which the Fund
invests or may invest to gain firsthand insight into the economic, political and
social trends that affect investments in those countries.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. As with any stock fund, the
value of your investment will fluctuate on a day-to-day basis with movements in
the stock market, as well as in response to the activities of individual
companies.
In addition, foreign stock markets tend to be more volatile than the U.S. market
due to economic and political instability and regulatory conditions in some
countries. Most of the foreign securities in which the Fund invests are
denominated in foreign currencies, whose value may decline against the U.S.
dollar. Other risks of focusing on small foreign companies include limited or
inaccurate information, limited product lines, markets or financial resources;
and securities that may trade less frequently and in limited volume. As a
result, small-cap stocks--and therefore the Fund--may fluctuate significantly
more in value than funds that focus on larger-cap stocks. Furthermore, the
January 1, 1999, introduction by the European Union of a single European
currency (the "euro") may cause market uncertainties and even market disruptions
that could affect negatively the Fund's investments in European companies.
16====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1994 1995 1996 1997
- ------------------- ----------------- ---------------- -----------------
-13.29% 11.72% 14.97% -0.78%
Average Annual Returns through 12/31/97
International Small Cap Fund -0.78% 5.46%
Salomon Smith Barney World Extended
(ex-U.S.) Market Index -6.61% 2.51%
- -------------------------------------------------------------------------------
1 Year Inception (9/30/93)
During the four-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+9.93%) and its worst quarter was Q4 1997 (11.22%). The
Fund's 1998 return through 9/30/98 was -0.24%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this Fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 1.25%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 1.28%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.53%
Fee Waiver and/or Expense Reimbursement 0.61%
Net Expenses 1.92%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 1.90%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$194 $602 $1,034 $2,234
PORTFOLIO MANAGEMENT [clipart] [sidebar]
John Boich For financial highlights,
For more details see page 45. see page 55
17====
<PAGE>
Global Opportunities Fund | MNGOX
Objective
o Seeks long-term capital appreciation by investing in companies of any size
in the United States and abroad
[Graphic indicating Montgomery Global Opportunities Fund has a potential
risk/reward profile that is a little more than that of the S&P 500.] This Fund's
potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 65% of its total assets in the stocks of companies of
any size throughout the world. The portfolio managers typically invest most of
the Fund's assets in the United States and in the developed stock markets of
western Europe and Asia, particularly the United Kingdom, France, Germany,
Italy, the Netherlands and Japan. The Fund invests in at least three different
countries, one of which may be the United States. With the exception of the
United States, no country may represent more than 40% of its total assets.
The portfolio managers seek well-managed companies that they believe will be
able to increase their sales and corporate earnings on a sustained basis. In
addition, the portfolio managers must consider the shares of these companies to
be under- or reasonably valued relative to their long-term prospects. The
managers favor companies that they believe have a competitive advantage, offer
innovative products or services and may profit from such trends as deregulation
and privatization. On a strategic basis, the Fund's assets may be allocated
among countries in an attempt to take advantage of market trends. The Fund's
portfolio managers and analysts frequently travel to the countries in which the
Fund invests or may invest to gain firsthand insight into the economic,
political and social trends that may affect investments in those countries.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. As with any stock fund, the
value of your investment will fluctuate on a day-to-day basis with movements in
the stock market, as well as in response to the activities of individual
companies.
By investing in foreign stocks, the Fund exposes shareholders to additional
risks. Foreign stock markets tend to be more volatile than the U.S. market due
to economic and political instability and regulatory conditions in some
countries. In addition, most of the foreign securities in which the Fund invests
are denominated in foreign currencies, whose value may decline against the U.S.
dollar. Furthermore, the January 1, 1999, introduction by the European Union of
a single European currency (the "euro") may cause market uncertainties and even
market disruptions which can affect negatively the Fund's investments in
European companies.
18====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1994 1995 1996 1997
- ------------------- ----------------- ---------------- -----------------
-8.55% 17.26% 20.18% 11.05%
Average Annual Returns through 12/31/97
Global Opportunities Fund 11.05% 13.23%
MSCI World Index 15.76% 13.19%*
- --------------------------------------------------------------------------------
1 Year Inception (9/30/93)
During the 4-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+12.83%) and its worst quarter was Q4 1997 (-7.94%). The
Fund's 1998 return through 9/30/98 was +4.44%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads and does not charge shareholders for exchanging shares or reinvesting
dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 1.25%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 1.12%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.37%
Fee Waiver and/or Expense Reimbursement 0.41%
Net Expenses 1.96%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 1.90%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$198 $614 $1,054 $2,275
PORTFOLIO MANAGEMENT [clipart] [sidebar]
John Boich, Oscar Castro For financial highlights,
For more details see page 45. see page 55
19====
<PAGE>
Global Communications Fund | MNGCX
Objective
o Seeks long-term capital appreciation by investing in companies involved in
the communications industry in the United States and abroad
[Graphic indicating Montgomery Global Communications Fund has a potential
risk/reward profile that is significantly more than that of the S&P 500.] This
Fund's potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund concentrates its investments in the global communications industry by
investing at least 65% of its total assets in the stocks of communications
companies worldwide, including companies involved in telecommunications,
broadcasting, publishing, computer systems and the Internet, among other
industries.
The Fund seeks well-managed communications companies that the portfolio manager
believes will be able to increase their sales and corporate earnings on a
sustained basis. The portfolio manager must consider the shares of these
companies to be under- or reasonably valued relative to their long-term
prospects and favors companies that he believes have a competitive advantage,
offer innovative products or services and may profit from such trends as
deregulation and privatization. On a strategic basis, the Fund's assets may be
allocated among countries in an attempt to take advantage of market trends. The
portfolio manager and analysts frequently travel to the countries in which the
Fund invests or may invest to gain firsthand insight into the economic,
political and social trends that affect investments in those countries.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. As with any stock fund, the
value of your investment will fluctuate on a day-to-day basis with movements in
the stock market, as well as in response to the activities of individual
companies.
Because the Fund concentrates its investments in the global communications
industry, its share value may be more volatile than that of more-diversified
funds. The Fund's share value will reflect trends in the global communications
industry, which may be subject to greater changes in governmental policies and
regulation than many other industries.
In addition, Foreign stock markets tend to be more volatile than the U.S. market
due to greater economic and political instability in some countries. In
addition, most of the foreign securities in which the Fund invests are
denominated in foreign currencies, whose value may decline against the U.S.
dollar. Furthermore, the January 1, 1999, introduction by the European Union of
a single European currency (the "euro") may cause market uncertainties and even
market disruptions which can affect negatively the Fund's investments in
European companies.
20====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1994 1995 1996 1997
- ------------------- ----------------- ---------------- -----------------
-13.41% 16.88% 8.02% 15.83%
Average Annual Returns through 12/31/97
Global Communications Fund 15.83% 12.39%
MSCI Telecom Index 19.33% 10.82%*
- --------------------------------------------------------------------------------
1 Year Inception (6/1/93)
During the four-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+16.05%) and its worst quarter was Q4 1994 (-9.84%). The
Fund's 1998 return through 9/30/98 was +17.28%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads and does not charge shareholders for exchanging shares or reinvesting
dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 1.23%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.70%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.93%
<FN>
+ Montgomery Asset Management has
contractually agreed to reduce its fees and/or absorb expenses to limit the
Fund's total annual operating expenses (excluding interest and tax expenses) to
1.90%. This contract has a one-year term, renewable at the end of each fiscal
year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$195 $605 $1,039 $2,244
PORTFOLIO MANAGEMENT [clipart] [sidebar]
Oscar Castro For financial highlights,
For more details see page 45. see page 56
21====
<PAGE>
Emerging Markets Fund | MNEMX
Objective
o Seeks long-term capital appreciation by investing in companies based or
operating primarily in developing economies throughout the world
[Graphic indicating Montgomery Emerging Markets Fund has a potential risk/reward
profile that is much more than that of the S&P 500.] This Fund's potential
risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 65% of its total assets in the stocks of companies
based in the world's developing economies. The Fund typically maintains
investments in at least six of these countries at all times, with no more than
35% of its assets in any single one of them. These may include:
o Latin America: Argentina, Brazil, Chile, Colombia, Costa Rica, Jamaica,
Mexico, Peru, Trinidad and Tobago, Uruguay and Venezuela
o Asia: Bangladesh, China/Hong Kong, India, Indonesia, Malaysia, Pakistan,
the Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and
Vietnam
o Europe: Czech Republic, Greece, Hungary, Kazakhstan, Poland, Portugal,
Romania, Russia, Slovakia, Slovenia, Turkey and Ukraine
o The Middle East: Israel and Jordan n Africa: Egypt, Ghana, Ivory Coast,
Kenya, Morocco, Nigeria, South Africa, Tunisia and Zimbabwe
The Fund's strategy combines computer-based screening techniques with in-depth
financial review and on-site analysis of companies, countries and regions to
identify potential investments. The Fund's portfolio managers and analysts
frequently travel to the emerging markets to gain firsthand insight into the
economic, political and social trends that affect investments in those
countries. The portfolio managers strive to keep the Fund well diversified
across individual stocks, industries and countries to reduce its overall risk.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in a stock market. In addition, the risks of
investing in emerging markets are considerable. Emerging stock markets tend to
be much more volatile than the U.S. market due to the relative immaturity, and
occasional instability, of their political and economic systems. In the past
many emerging markets restricted the flow of money into or out of their stock
markets, and some continue to impose restrictions on foreign investors. These
markets tend to be less liquid and offer less regulatory protection for
investors. The economies of emerging countries may be predominantly based on
only a few industries or on revenue from particular commodities, international
aid and other assistance. In addition, most of the foreign securities in which
the Fund invests are denominated in foreign currencies, whose value may decline
against the U.S. dollar.
22====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1993 1994 1995 1996 1997
- --------------- --------------- -------------- --------------- ----------------
58.66% -7.72% -9.08% 12.32% -3.14%
<TABLE>
<CAPTION>
Average Annual Returns through 12/31/97
<S> <C> <C> <C>
Emerging Markets Fund -3.14% 7.69% 6.61%
IFC Global Index -14.54% 6.13% 3.26%
- ---------------------------------------------------------------------------------------------------------
1 Year 5 Years Inception (3/1/92)
</TABLE>
During the five-year period described above in the bar chart, the Fund's best
quarter was Q4 1993 (+29.14%) and its worst quarter was Q4 1997 (-17.07%). The
Fund's 1998 return through 9/30/98 was -42.54%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this Fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fee 1.07%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.58%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.65%
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$167 $519 $895 $1,947
PORTFOLIO MANAGEMENT [clipart] [sidebar]
Josephine Jimenez, Bryan Sudweeks, Frank Chiang, For financial highlights,
Jesus Duarte, Jose Fiuza, Stuart Quint see page 57
For more details see page 45-46.
23====
<PAGE>
Emerging Asia Fund | MNEAX
Objective
o Seeks long-term capital appreciation by investing in companies based or
operating primarily in developing economies of Asia
[Graphic indicating Montgomery Emerging Asia Fund has a potential risk/reward
profile that is far more than that of the S&P 500.] This Fund's potential
risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund's strategy is to identify potential investments in the Asian markets by
conducting in-depth financial reviews and on-site analyses of companies and
countries in that region. The Fund invests at least 65% of its total assets in
the stocks of companies that are based or operate mainly in developing Asian
countries:
o Bangladesh o Indonesia o South Korea
o China/Hong Kong o Malaysia o Sri Lanka
China/Hong Kong is considered o Pakistan o Taiwan
to be a single emerging Asian o The Philippines o Thailand
country. o Singapore o Vietnam
o India
The Fund typically invests in at least three emerging Asia countries at all
times, with no more than one-third of its assets in any one country. The two
exceptions are China/Hong Kong and Malaysia, where the Fund may invest more than
90% of its assets. Usually, the Fund will not invest in Japan, Australia or New
Zealand, but the portfolio manager may choose to do so as a defensive strategy.
The manager frequently travels to the countries in which the Fund invests or may
invest to gain firsthand insight into the economic, political and social trends
that affect investments in those countries. The portfolio manager strives to
keep the Fund diversified across individual stocks and industries to reduce its
overall risk.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in a stock market. Also, the Fund's volatility may
be magnified by its heavy concentration in emerging Asia markets, particularly
China/Hong Kong and Malaysia, as they tend to be much more volatile than the
U.S. market due to the relative immaturity and occasional instability. For
example, the economies of emerging countries may be predominantly based on only
a few industries or on revenue from particular commodities, international aid
and other assistance. Some emerging Asia countries, such as Malaysia in 1998,
have restricted the flow of money into or out of the country. Emerging markets
also tend to be less liquid and offer less regulatory protection for investors.
Since mid-1997, Asia has faced serious economic problems and disruptions causing
the devastating losses for some investors. Please note that most of the
securities in which the Fund invests are denominated in foreign currencies,
whose value may decline against the U.S. dollar.
24====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1997
- -------------------
-28.30%
Average Annual Returns through 12/31/97
Emerging Asia Fund -28.30% -10.71%
MSCI All-Country
Asia Free (ex-Japan) Index -40.31% -32.56%
- --------------------------------------------------------------------------------
1 Year Inception (9/30/96)
During the one-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+18.87%) and its worst quarter was Q4 1997 (-38.16%). The
Fund's 1998 return through 9/30/98 was -36.56%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this Fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 1.25%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 1.02%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.27%
Fee Waiver and/or Expense Reimbursement 0.36%
Net Expenses 1.91%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 1.90%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------
$193 $599 $1,029 $2,223
PORTFOLIO MANAGEMENT [clipart] [sidebar]
Frank Chiang For financial highlights,
For more details see page 45. see page 57
25====
<PAGE>
Latin America Fund | MNLAX
Objective
o Seeks long-term capital appreciation by investing in companies based in or
operating primarily in Latin America
[Graphic indicating Montgomery Latin America Fund has a potential risk/reward
profile that is far more than that of the S&P 500.] This Fund's potential
risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund's strategy is to identify potential investments by conducting in-depth
financial reviews and on-site analyses of the companies and countries in that
region. The Fund invests at least 65% of its total assets in the stocks of
companies that are located in Mexico, Central America, South America and the
Caribbean. The Fund invests in at least three Latin American countries at all
times, with no more than 50% of its assets in any one of them. The two
exceptions are Brazil and Mexico, which are not subject to this limit.
The manager frequently travels to the countries in which the Fund invests, or
may invest, to gain firsthand insight into the economic, political and social
trends that affect investments in those countries. These techniques help
determine in which stocks and countries the Fund will invest. The portfolio
manager strives to keep the Fund well diversified across individual stocks,
industries and countries to reduce its overall risk. In managing the Latin
America Fund, the portfolio manager is supported by the Emerging Markets team.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. In addition, the risks of
investing in emerging markets, and especially of concentrated exposure to Latin
America, are considerable. Latin American stock markets tend to be much more
volatile than the U.S. market due to the relative immaturity, and occasional
instability, of their political and economic systems. In the past many Latin
American countries restricted the flow of money into or out of their stock
markets, and some continue to impose restrictions on foreign investors. These
markets tend to be less liquid and offer less regulatory protection for
investors. The economies of emerging countries may be predominantly based on
only a few industries or on revenue from particular commodities, international
aid and other assistance. Please note, most of the securities in which the Fund
invests are denominated in foreign currencies, whose value may decline against
the U.S. dollar. Investors should also note the particular risks of investing in
Brazil and Mexico (which include government controls and currency devaluations),
because the Fund may place, respectively, up to 75% and 67% of its assets in
these countries. The risks peculiar to Brazil and Mexico are discussed in
"Additional Investment Strategies and Related Risks" on pages 48-49.
26====
<PAGE>
Past Fund Performance The Montgomery Latin America Fund was launched on June 30,
1997. Fund performance results has not been provided because it has not yet been
in existence one full calendar year.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 1.25%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 1.79%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 3.04%
Fee Waiver and/or Expense Reimbursement 1.14%
Net Expenses 1.90%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 1.90%. This contract has a one-year term,
renewable at the end of each fiscal year. The actual expenses for the Fund
(after reimbursement including interest and tax expenses) were 0.26%.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$192 $595 $1,024 $2,213
PORTFOLIO MANAGEMENT [clipart] [sidebar]
Jesus Duarte For financial highlights,
For more details see page 45 see page 57
27====
<PAGE>
Select 50 Fund | MNSFX
Objective
o Seeks long-term capital appreciation by investing in 10 companies from each
of five different investment disciplines, for a total of 50 securities
[Graphic indicating Montgomery Select 50 Fund has a potential risk/reward
profile that is a little more than that of the S&P 500.] This Fund's potential
risk/reward relative to other Montgomery Funds
Strategy [clipart]
Five of Montgomery's portfolio management teams each select approximately 10
stocks that they believe may offer the greatest capital appreciation potential
from their respective areas of expertise. These currently include:
o U.S. growth o U.S. equity income o Emerging markets
o U.S. emerging growth o International equity
The result is a concentrated portfolio of at least 50 stocks that is allocated
approximately equally among Montgomery's five equity disciplines and is well
diversified with typically 60% allotted to U.S. securities of all capitalization
ranges and 40% invested internationally. For details about the teams' individual
strategies, please see the sections on the Montgomery Growth, U.S. Emerging
Growth, Equity Income, International Growth and Emerging Markets Funds in this
prospectus.
Risks [clipart]
By investing in stocks, the Fund may expose you to certain risks that could
cause you to lose money, particularly a sudden decline in a holding's share
price or an overall decline in the stock market. Although the Select 50 Fund
diversifies its assets across different industries, market segments and
countries, it typically invests in just 50 securities. As a result, the value of
shares in the Fund may vary more than those of mutual funds investing in a
greater number of securities.
In addition, the Fund invests in companies in emerging and developed foreign
markets (each typically 20%), which may expose it to additional risks. Foreign
and emerging stock markets tend to be more volatile than the U.S. market due to
economic and political instability and regulatory conditions. This risk is
heightened in the case of emerging markets because of their relative economic
and political immaturity and, in many instances, dependence on only a few
industries. They also tend to be less liquid, more volatile, and offer less
regulatory protection for investors. Also, most of the securities in which the
Fund invests are denominated in foreign currencies, whose value may decline
against the U.S. dollar.
The Fund also invests a significant portion of its assets (typically 20%) in
smaller companies, which may offer greater capital appreciation potential than
larger companies but at potentially greater risk. Smaller companies may have
more-limited product lines, markets or financial resources than larger
companies, and their securities may trade less frequently and in more-limited
volume than those of larger, more mature companies. As a result, small-cap
stocks--and therefore the Fund--may fluctuate significantly more in value than
larger-cap stocks and funds that focus exclusively on them.
28====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1996 1997
- ------------------- -----------------
20.46% 29.27%
Average Annual Returns through 12/31/97
Select 50 Fund 29.27% 30.01%
S&P 500 Index 33.35% 27.85%*
- --------------------------------------------------------------------------------
*calculated since 9/30/95 1 Year Inception (10/2/95)
During the two-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+18.82%) and its worst quarter was Q4 1997 (-8.31%). The
Fund's 1998 return through 9/30/98 was -7.59%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads and does not charge shareholders for exchanging shares or reinvesting
dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 1.23%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.58%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.81%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 1.80%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$183 $568 $977 $2,118
PORTFOLIO MANAGEMENT (Fund Oversight) [clipart] [sidebar]
Kevin Hamilton (Fund Oversight) For financial highlights,
For more details see page 46. see page 58
29====
<PAGE>
U.S. Asset Allocation Fund | MNAAX
Objective
o Seeks to provide shareholders with high total return (consisting of both
capital appreciation and income) while also seeking to reduce risk by
actively allocating its assets among stocks, bonds and money market
securities
[Graphic indicating Montgomery U.S. Asset Allocation Fund has a potential risk
/reward profile that is a little less than that of the S&P 500.] This Fund's
potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
As a "fund-of-funds," the Montgomery U.S. Asset Allocation Fund currently
invests its assets in three underlying Montgomery Funds:
o Montgomery Growth Fund, for U.S. equity exposure
o Montgomery Total Return Bond Fund, for U.S. bond exposure
o Montgomery Government Reserve Fund (a money market fund), for cash exposure
The Fund's strategy is to analyze various market factors, including relative
risk and return, using a proprietary computer program to help the portfolio
manager determine what he believes is an optimal asset allocation among stocks,
bonds and cash.
The Fund's total equity and bond exposure may both range from 20 to 80% of its
assets. It may invest anywhere from 0 to 50% of its assets in a Montgomery Money
Market Fund. At times, the Fund may invest in other Montgomery Funds that have
similar investment exposure to the Funds listed above.
The Fund's portfolio manager regularly adjusts the proportion of assets allotted
to the underlying portfolios in response to changing market conditions.
Risks [clipart]
By investing a substantial portion of its assets in stock and bond mutual funds,
the Fund may expose you to certain risks that could cause you to lose money. The
value of the Fund's investments in the Montgomery Growth Fund, like investments
in any stock fund, will fluctuate on a daily basis with movements in the stock
market, as well as in response to the activities of the individual companies in
which the Montgomery Growth Fund invests. The value of the Fund's investment in
the Total Return Bond Fund will fluctuate along with interest rates. When
interest rates rise, a bond's market price generally declines. When interest
rates fall, the bond's price usually increases. In addition, if the manager does
not accurately predict changing market conditions and other economic factors,
the Fund's assets might be allocated in a manner that is disadvantageous to you.
30====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1995 1996 1997
- ------------------- ----------------- ----------------
32.61% 12.85% 19.01%
Average Annual Returns through 12/31/97
U.S. Asset Allocation Fund 19.01% 22.39%
S&P 500 Index 33.35% 25.93%
Lehman Brothers Aggregate Bond
Index 9.65% 8.23%
- --------------------------------------------------------------------------------
1 Year Inception (3/31/94)
During the three-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+11.94%) and its worst quarter was Q4 1997 (-1.51%). The
Fund's 1998 return through 9/30/98 was -0.72%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 0.00%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses
Top Fund Expenses 0.31%
Underlying Fund Expenses 1.25%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.56%
Fee Waiver and/or Expense Reimbursement 0.26%
Net Expenses 1.30%
<FN>
+ In addition to the 0.31% total operating expenses of the Fund, a shareholder
also indirectly bears the Fund's pro rata share of the fees and expenses
incurred by each underlying Fund. The total expense ratio before reimbursement,
including indirect expenses for the fiscal year ended June 30, 1998, was 1.56%,
calculated based on the Fund's total operating expense ratio (0.31%) plus a
weighted average of the expense ratios of its underlying Funds (1.25%).
Montgomery has contractually agreed to reduce its fees and/or absorb expenses to
limit the Fund's total annual operating expenses (excluding interest and tax
expenses) to 1.30% (including the expenses of the underlying Funds). This
contract has a one-year term, renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$132 $411 $711 $1,563
PORTFOLIO MANAGEMENT (Asset Allocation) [clipart] [sidebar]
Kevin Hamilton For financial highlights,
For more details see page 46. see page 58
31====
<PAGE>
Total Return Bond Fund | MNTRX
Objective
o Seeks maximum total return consisting of both income and capital
appreciation, while striving to preserve shareholders' initial investment
(principal) by investing in investment-grade bonds
[Graphic indicating Montgomery Total Return Bond Fund has a potential
risk/reward profile that is much less than that of the S&P 500.] This Fund's
potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 65% of its total assets in a broad range of
investment-grade bonds, including U.S. government securities, corporate bonds,
mortgage-related securities, asset-backed securities--bonds backed by the income
stream from sources such as car loans or credit-card payments--and money market
securities. Investment-grade bonds are those rated within the four highest
grades by rating agencies such as Standard & Poor's (at least BBB), Moody's (at
least Baa) or Fitch (at least BBB). From time to time the Fund may also invest
in unrated bonds that the portfolio manager believes are comparable to
investment-grade securities.
The Fund may include bonds of any maturity, but generally the portfolio's
overall interest rate sensitivity--duration--ranges between four and
five-and-a-half years. Typically, a lower duration means that the bond or
portfolio has less sensitivity to interest rates. The Fund invests in bonds that
the portfolio manager believes offer attractive yields and are undervalued
relative to issues of similar credit quality and interest rate sensitivity.
Risks [clipart]
By investing in bonds, the Fund may expose you to certain risks that could cause
you to lose money. As with most bond funds, the value of shares in the
Montgomery Total Return Bond Fund will fluctuate along with interest rates. When
interest rates rise, a bond's market price generally declines. When interest
rates fall, the bond's price usually increases. A fund, such as this one, which
invests most of its assets in bonds, will behave largely the same way. As a
result, the Fund is not appropriate for investors whose primary investment
objective is absolute principal stability. The Montgomery Total Return Bond Fund
is not a money market fund.
32====
<PAGE>
Past Fund Performance The Montgomery Total Return Bond Fund was launched on June
30, 1997. Fund performance results have not been provided because it has not yet
been in existence for a full calendar year.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 0.50%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.84%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.34%
Fee Waiver and/or Expense Reimbursement 0.05%
Net Expenses 1.29%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 0.70%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$131 $408 $706 $1,551
PORTFOLIO MANAGEMENT [clipart] [sidebar]
William Stevens For financial highlights,
For more details see page 46. see page 59
33====
<PAGE>
Short Duration Government Bond Fund | MNSGX
Objective
o Seeks maximum total return consisting of both income and capital
appreciation, while striving to preserve shareholders' initial investment
(principal) by investing in short-term U.S. government securities.
[Graphic indicating Montgomery Short Duration Government Bond Fund has a
potential risk/reward profile that is far less than that of the S&P 500.] This
Fund's potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 65% of its total assets in short-term U.S. government
securities, which may include Treasuries in addition to bonds and notes issued
by government agencies such as the Federal Home Loan Bank, Government National
Mortgage Association (GNMA or "Ginnie Mae"), Federal National Mortgage
Association (FNMA or "Fannie Mae") and Student Loan Marketing Association (SLMA
or "Sallie Mae").
The Fund may purchase bonds of any maturity, but generally the portfolio's
overall interest rate sensitivity--effective duration--is comparable to that of
a three-year U.S. Treasury note. Typically, a lower duration means that the bond
or portfolio has less sensitivity to interest rates. The Fund invests in bonds
that the portfolio manager believes offer attractive yields and are undervalued
relative to issues of similar credit quality and interest rate sensitivity.
Risks [clipart]
By investing in bonds, the Fund may expose you to certain risks that could cause
you to lose money. As with most bond funds, the value of shares in the
Montgomery Short Duration Government Bond Fund will fluctuate along with
interest rates. When interest rates rise, a bond's market price generally
declines. When interest rates fall, the bond's price usually increases. A fund
such as this one, which invests most of its assets in bonds will behave largely
the same way. As a result, the Fund is not appropriate for investors whose
primary investment objective is absolute principal stability. The Montgomery
Short Duration Government Bond Fund is not a money market fund.
34====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1993 1994 1995 1996 1997
- ---------------- -------------- ------------- -------------- -------------
8.09% 1.13% 11.51% 5.14% 6.97%
<TABLE>
<CAPTION>
Average Annual Returns through 12/31/97
<S> <C> <C> <C>
Short Duration Gov't Bond Fund 6.97% 6.51% 6.56%
Lehman Brothers Gov't. Bond 1-3 Yr. Index
(calculated from 12/31/98) 6.65% 5.65% 5.64%
- ---------------------------------------------------------------------------------------------------------
1 Year 5 Years Inception (12/18/92)
</TABLE>
During the five-year period described above in the bar chart, the Fund's best
quarter was Q1 1995 (+3.39%) and its worst quarter was Q1 1994 (-0.23%). The
Fund's 1998 return through 9/30/98 was +6.75%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 0.50%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 1.23%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.73%
Fee Waiver and/or Expense Reimbursement 0.58%
Net Expenses 1.15%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 0.70%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$117 $365 $632 $1,393
PORTFOLIO MANAGEMENT [clipart] [sidebar]
William Stevens For financial highlights,
For more details see page 46. see page 59
35====
<PAGE>
Government Reserve Fund | MNGXX
Objective
o Money Market Fund: Seeks to provide shareholders with current income
consistent with liquidity and preservation of capital by investing in
short-term U.S. government securities
[Graphic indicating Montgomery Government Reserve Fund has a potential
risk/reward profile that is far less than that of the S&P 500.] This Fund's
potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests exclusively in short-term U.S. government securities, which may
include bills, notes and bonds issued by government agencies such as the Federal
Home Loan Bank, Federal National Mortgage Association (FNMA or "Fannie Mae") and
Student Loan Marketing Association (SLMA or "Sallie Mae"), and in repurchase
agreements for U.S. Government securities and similar money market funds.
The Fund invests in short-term U.S. government securities that the portfolio
manager believes offer attractive yields and are undervalued relative to issues
of similar credit quality and interest rate sensitivity.
Risks [clipart]
Although the Fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in this Fund. Also a decline in
short-term interest rates would lower the Fund's yield and the return on your
investment. An investment in The Montgomery Government Reserve Fund is neither
insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or
any other government agency.
36====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1993 1994 1995 1996 1997
- ----------------- --------------- -------------- --------------- --------------
2.83% 3.78% 5.54% 5.04% 5.16%
Call (800) 572-FUND [3863] between 5 A.M. and 5 P.M. Pacific time for the
current yield.
Average Annual Returns through 12/3/97
5.16% 4.40% 5.32%
- ----------------- ------------------------ ----------------------------
One year Inception 9/14/92 7-day yield as of 12/31/97
During the five-year period described above in the bar chart, the Fund's best
quarter was Q2 1995 (+1.39%) and its worst quarters were Q3 & Q4 1993 (+0.68%).
The Fund's 1998 return through 9/30/98 was 3.91%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fee 0.30%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.23%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.53%
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$54 $170 $296 $664
PORTFOLIO MANAGEMENT [clipart] [sidebar]
William Stevens For financial highlights,
For more details see page 46. see page 60
37====
<PAGE>
Federal Tax-Free Money Fund | MFFXX
Objective
o Money Market Fund: Seeks to provide shareholders with current income
consistent with liquidity and preservation of capital by investing in
short-term municipal bonds
[Graphic indicating Montgomery Federal Tax-Free Money Fund has a potential
risk/reward profile that is far less than that of the S&P 500.] This Fund's
potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 80% of its net assets in short-term, high-quality
municipal bonds and notes. High-quality bonds are those rated within the two
highest short-term grades by rating agencies such as Standard & Poor's (at least
AA), Moody's (at least Aa) or Fitch (at least AA). The Fund may also invest in
unrated bonds that the portfolio manager believes are comparable to high-quality
bonds and notes.
The Fund invests in short-term municipal bonds that the portfolio manager
believes offer attractive yields and are undervalued relative to issues of
similar credit quality and interest rate sensitivity. The portfolio manager
strives to diversify the portfolio across bonds from several different states,
sectors and issuers.
Risks [clipart]
Although the Fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in this Fund. Also, a decline
in short-term interest rates would lower the Fund's yield and the return on your
investment. An investment in the Montgomery Federal Tax-Free Money Fund is not
insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any
other government agency. The Fund's objective is to provide income exempt from
federal income taxes, but some of its income may be subject to the alternative
minimum tax.
38====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1997
- -------------------
3.18%
3.18% 3.32% 3.47%
- ------------------- ------------------------------ --------------------------
One year Inception 9/14/92 7-day yield as of 12/31/97
During the one-year period described above in the bar chart, the Fund's best
quarter was Q2 1997 (+0.81%) and its worst quarter was Q1 1997 (+0.75%). The
Fund's 1998 return through 9/30/98 was +2.29%.
[sidebar] Call (800) 572-FUND [3863] between 6 a.m. and 5 p.m. PACIFIC TIME for
the current yield.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 0.40%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.41%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.81%
Fee Waiver and/or Expense Reimbursement 0.21%
Net Expenses 0.60%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 0.60%. This contract has a one-year term,
renewable at the end of each fiscal year.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$61 $192 $334 $749
PORTFOLIO MANAGEMENT [clipart] [sidebar]
William Stevens For financial highlights,
For more details see page 46. see page 60
39====
<PAGE>
California Tax-Free Intermediate Bond Fund | MNCTX
Objective
o Seeks to provide shareholders with maximum income exempt from federal and
California state personal income taxes, while striving to preserve
shareholders' initial investment (principal) by investing in
intermediate-maturity California municipal bonds
[Graphic indicating Montgomery California Tax-Free Intermediate Bond Fund has a
potential risk/reward profile that is much less than that of the S&P 500.] This
Fund's potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 80% of its net assets in intermediate-term,
high-quality California municipal bonds. High-quality bonds are those rated
within the four highest grades by rating agencies such as Standard & Poor's (at
least BBB), Moody's (at least Baa) or Fitch (at least BBB). From time to time
the Fund may also invest in unrated bonds that the portfolio manager believes
are comparable to investment-grade securities.
The Fund may purchase bonds of any maturity, but generally the portfolio's
average dollar-weighted maturity ranges from 5 to 10 years. The Fund's portfolio
managers invest in California municipal bonds that offer attractive yields and
are considered to be under-valued relative to issues of similar credit quality
and interest rate sensitivity. Although the Fund concentrates its assets in
California municipal bonds, the portfolio manager strives to diversify the
portfolio across sectors and issuers within that market.
Risks [clipart]
By investing in bonds, the Fund may expose you to certain risks that could cause
you to lose money. As with most bond funds, the value of shares in the
Montgomery California Tax-Free Intermediate Bond Fund will fluctuate along with
interest rates. When interest rates rise, a bond's market price generally
declines. When interest rates fall, a bond's price usually increases. A fund
such as this one, which invests most of its assets in bonds, will behave largely
the same way. As a result, the Fund is not appropriate for investors whose
primary investment objective is absolute principal stability. The Montgomery
California Tax-Free Intermediate Bond Fund is not a money market fund.
The Fund's concentration in California municipal bonds may expose shareholders
to additional risks. In particular, the Fund will be vulnerable to any
development in California's economy that may weaken or jeopardize the ability of
California municipal-bond issuers to pay interest and principal on their bonds.
As a result, the Fund's shares may fluctuate more widely in value than those of
a fund investing in municipal bonds from a number of different states. The
Fund's objective is to provide income exempt from federal and California state
personal income taxes, but some of its income may be subject to the alternative
minimum tax.
40====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right compares the Fund's performance to the most commonly used
index for its market segment. Of course, past performance is no guarantee of
future results.
[bar chart]
1994 1995 1996 1997
- ------------------- ----------------- ---------------- -----------------
0.05% 11.41% 4.51% 7.50%
<TABLE>
<CAPTION>
Average Annual Returns through 12/31/97
<S> <C> <C>
CA Tax-Free Intermediate Bond Fund 7.50% 5.67%
Merrill Lynch CA Municipal Intermediate Bond Index 6.55% 4.73%*
- -------------------------------------------------------------------------------------------------
<FN>
*calculated from 6/30/93 1 Year Inception (7/1/93)
</FN>
</TABLE>
During the four-year period described above in the bar chart, the Fund's best
quarter was Q1 1995 (+3.37%) and its worst quarter was Q1 1994 (-1.43%). The
Fund's 1998 return through 9/30/98 was 5.66%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 0.50%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.69%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.19%
Fee Waiver and/or Expense Reimbursement 0.49%
Net Expenses 0.70%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 0.70%. This contract has a one-year term,
renewable at the end of each fiscal year. The actual expenses for the Fund
(after reimbursement including interest and tax expenses) were 0.69%.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
$71 $223 $389 $869
PORTFOLIO MANAGEMENT [clipart] [sidebar]
William Stevens For financial highlights,
For more details see page 46. see page 61
41====
<PAGE>
California Tax-Free Money Fund | MCFXX
Objective
o Money Market Fund: Seeks to provide shareholders with current income exempt
from federal income taxes consistent with liquidity and preservation of
capital by investing in short-term California municipal bonds
[Graphic indicating Montgomery California Tax-Free Money Fund has a potential
risk/reward profile that is far less than that of the S&P 500.] This Fund's
potential risk/reward relative to other Montgomery Funds
Strategy [clipart]
The Fund invests at least 80% of its net assets in short-term, high-quality
municipal bonds and notes, and at least 65% of its total assets in debt
securities, the interest from which is expected to be exempt from California
personal income taxes. High quality bonds are those rated within the two highest
grades by rating agencies such as Standard & Poor's (at least AA), Moody's (at
least Aa) or Fitch (at least AA). From time to time the Fund may also invest in
unrated bonds that the portfolio manager believes are comparable to high-quality
bonds and notes.
The Fund focuses its investments in short-term California municipal bonds that
offer attractive yields and are considered to be undervalued relative to issues
of similar credit quality and interest rate sensitivity. Although the Fund
concentrates its assets in California municipal bonds, its portfolio manager
strives to diversify the portfolio across sectors and issuers within that
market.
Risks [clipart]
Although the Fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in this Fund. Also, a
short-term decline in interest rates may lower the Fund's yield and the return
on your investment. An investment in The Montgomery California Tax-Free Money
Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation
(FDIC) or any other government agency.
The Fund's concentration in California municipal bonds may expose shareholders
to additional risks. In particular, the Fund will be vulnerable to any
development in California's economy that may weaken or jeopardize the ability of
California municipal-bond issuers to pay interest and principal on their bonds.
Although the Fund's objective is to provide income exempt from federal and
California State personal income taxes, some of its income may be subject to the
alternative minimum tax.
42====
<PAGE>
Past Fund Performance The chart at the left below shows the risks of investing
in the Fund and how the Fund's total return has varied from year-to-year. The
chart at the right shows the Fund's seven-day yield as of 12/31/97. Yield will
fluctuate.
[bar chart]
1995 1996 1997
- ------------------- ----------------- ----------------
3.36% 2.90% 3.03%
Call (800) 572-FUND [3863] between 5 A.M.. AND 5 P.M. Pacific time for the
current yield.
3.03% 3.14% 3.39%
- --------------------- ------------------------- --------------------------------
One year Inception 9/14/92 7-day yield as of 12/31/97
During the three-year period described above in the bar chart, the Fund's best
quarter was Q1 1995 (+0.87%) and its worst quarter was Q1 1996 (+0.69%). The
Fund's 1998 return through 9/30/98 was +2.17%.
Fees & Expenses [clipart]
<TABLE>
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. Montgomery does not impose any front-end or deferred sales
loads on this Fund and does not charge shareholders for exchanging shares or
reinvesting dividends.
<CAPTION>
Fund Fees and Expenses
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Redemption Fee 0.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management Fee 0.40%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses 0.28%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.68%
Fee Waiver and/or Expense Reimbursement 0.08%
Net Expenses 0.60%
<FN>
+ Montgomery Asset Management has contractually agreed to reduce its fees and/or
absorb expenses to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 0.60%. This contract has a one-year term,
renewable at the end of each fiscal year. The actual expenses for the Fund
(after reimbursement including interest and tax expenses) were 0.58%.
</FN>
</TABLE>
Example of Fund expenses: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds. The
table below shows what you would pay in expenses over time, whether or not you
sold your shares at the end of each period. It assumes a $10,000 initial
investment, 5% total return each year and no changes in expenses. This example
is for comparison purposes only. It does not necessarily represent the Fund's
actual expenses or returns.
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------
$61 $192 $334 $749
PORTFOLIO MANAGEMENT [clipart] [sidebar]
William Stevens For financial highlights,
For more details see page 46. see page 61
43====
<PAGE>
PORTFOLIO MANAGEMENT
The investment manager of the Montgomery Funds is Montgomery Asset Management,
LLC. Founded in 1990, Montgomery Asset Management is a subsidiary of Commerzbank
AG, one of the largest publicly held commercial banks in Germany. As of June 30,
1998, Montgomery Asset Management managed approximately $5.5 billion on behalf
of some 300,000 investors in The Montgomery Funds.
U.S. Equity Funds
[photo] ROGER HONOUR, senior portfolio manager of the Montgomery Growth (since
1993), Small Cap Opportunities (since 1995) and U.S. Emerging Growth Funds
(since 1994). Prior to joining Montgomery in June 1993, Roger Honour was a vice
president and portfolio manager at Twentieth Century Investors in Kansas City,
Missouri. From 1990 to 1992, he served as vice president and portfolio manager
at Alliance Capital Management.
[photo] BRADFORD KIDWELL, portfolio manager of the Montgomery Small Cap Fund
(since 1991). Prior to joining Montgomery in 1991, Bradford Kidwell was the sole
general partner and portfolio manager of Oasis Financial Partners. From 1987 to
1989, he covered the savings and loan industry for Dean Witter Reynolds.
[photo] WILLIAM KING, CFA, senior portfolio manager of the Montgomery Equity
Income Fund (since 1994). Before joining Montgomery in 1994, Bill King gained
analytical and portfolio management experience at Merus Capital Management.
Previously, he was a financial analyst/manager for SEI and a division controller
and financial analyst for Kaiser Aluminum and Kaiser Industries.
[photo] KATHRYN PETERS, portfolio manager of the Montgomery Growth Funds (since
1995), Small Cap Opportunities (since 1995) and U.S. Emerging Growth Funds
(since 1996). Kathy Peters joined Montgomery in 1995. From 1992 to 1995, she was
an associate in the investment banking division of Donaldson, Lufkin & Jenrette
in New York. Prior to that she analyzed mezzanine investments for Barclays de
Zoete Wedd.
[photo] JEROME "CAM" PHILPOTT, CFA, portfolio manager of the Montgomery Small
Cap Fund (since 1991). Before joining Montgomery in 1991, Cam Philpott was a
securities analyst with Boettcher & Company in Denver.
[photo] ANDREW PRATT, CFA, portfolio manager of the Montgomery Growth (since
1993), Small Cap Opportunities (since 1995), and U.S. Emerging Growth Funds
(since 1994). Andrew Pratt joined Montgomery in 1993 from Hewlett-Packard
Company, where, as an equity analyst, he managed a portfolio of small-cap
technology companies and researched private placement and venture capital
investments.
44====
<PAGE>
[photo] STUART ROBERTS, senior portfolio manager of the Montgomery Small Cap
Fund (since 1990). Stuart Roberts has specialized in small-cap investing since
1993. Prior to joining Montgomery in 1990, he was a portfolio manager and
analyst at Founders Asset Management in Denver, where he managed three
growth-oriented mutual funds.
International and Global Equity Funds
[photo] JOHN BOICH, CFA, senior portfolio manager of the Montgomery
International Growth (since 1995), International Small Cap (since 1993) and
Global Opportunities Funds (since 1993). John Boich joined Montgomery in 1993.
From 1990 to 1993, John Boich was a vice president and portfolio manager at The
Boston Company Institutional Investors, Inc. From 1989 to 1990, he was
co-founder and co-manager of The Common Goal World Fund, a global equity
partnership.
[photo] OSCAR CASTRO, CFA, senior portfolio manager of the Montgomery
International Growth (since 1995), Global Opportunities (since 1993) and Global
Communications Funds (since 1993). Oscar Castro joined Montgomery in 1993. From
1991 to 1993 he was a vice president and portfolio manager at G.T. Capital
Management, Inc. From 1989 to 1990, he was co-founder and co-manager of The
Common Goal World Fund, a global equity partnership.
[photo] FRANK CHIANG, portfolio manager of the Montgomery Emerging Asia (since
1996) and Emerging Markets Funds (since 1996). Frank Chiang joined Montgomery in
1996. From 1993 to 1996, he was a portfolio manager and managing director at TCW
Asia Ltd. in Hong Kong. Prior to that he was associate director and portfolio
manager at Wardley Investment Services, Hong Kong.
[photo] JESUS ISIDORO DUARTE, portfolio manager of the Montgomery Latin America
(since 1997) and Emerging Markets Funds (since 1997). Prior to joining
Montgomery in 1997, Jesus Duarte was a director and vice president at Latinvest,
where he was responsible for research and portfolio management for the firm's
Latin American funds. Previous to Latinvest, Mr. Duarte worked at W.I. Carr in
Tokyo as a securities analyst of Japanese equities.
45====
<PAGE>
[photo] JOSE DE GUSMAO FIUZA, portfolio manager of the Montgomery Emerging
Markets Fund (since 1996). Jose Fiuza began his investment career in 1987
covering the Portuguese market at Banco Portugues do Atlantico. He then moved to
Banco Espirito Santo, Schroder Securities (as manager) and Carnegie
International (as managing director). Mr. Fiuza joined Montgomery in 1995.
[photo] JOSEPHINE JIMENEZ, CFA, senior portfolio manager of the Montgomery
Emerging Markets Fund (since 1992). Before joining the Montgomery in 1991,
Josephine Jimenez worked at Emerging Markets Investors Corp./Emerging Markets
Management in Washington, D.C., as a senior analyst and portfolio manager. The
research and analysis methods she helped develop--including a proprietary stock
valuation model for hyperinflationary economies--are the foundation of her
investment strategy.
[photo] STUART PATTERSON QUINT, CFA, portfolio manager of the Montgomery
Emerging Markets Fund (since 1997). Stuart Quint joined Montgomery from Sanford
C. Bernstein & Company, where he was a research associate for the U.S. financial
services industry.
[photo] BRYAN SUDWEEKS, PH.D., CFA, senior portfolio manager of the Montgomery
Emerging Markets Fund (since 1992). Before joining Montgomery in 1991, Bryan
Sudweeks was a senior analyst and portfolio manager at Emerging Markets
Investors Corp./Emerging Markets Management in Washington, D.C. Prior to that he
was a professor of international finance and investments at George Washington
University.
Multi-Strategy Funds
[photo] KEVIN HAMILTON, CFA, chair of Montgomery Asset Management's Investment
Oversight Committee. Kevin Hamilton coordinates and oversees the investment
decisions of Montgomery's portfolio management teams. He is responsible for
allocating assets among the underlying funds of the Montgomery U.S. Asset
Allocation Fund (since 1994) and also has oversight responsibilities for the
Montgomery Select 50 Fund (since 1995). Prior to joining Montgomery Asset
Management in 1991, he was a senior vice president and portfolio manager at
Analytic Investment Management.
U.S. Fixed-Income and Money Market Funds
[photo] WILLIAM STEVENS, senior portfolio manager of the Montgomery Fixed-Income
Funds (since 1992). Prior to joining Montgomery in 1992, Bill Stevens worked at
Barclays de Zoete Wedd Securities, where he started its collateralized mortgage
obligation (CMO) and asset-backed securities trading. From 1990 to 1991, Mr.
Stevens traded stripped mortgage securities and mortgage-related interest rate
swaps for the First Boston Company.
46====
<PAGE>
Management Fees
The table below shows the management fee rate paid to Montgomery Asset
Management over the last fiscal year.
FUND ANNUAL RATE
- --------------------------------------------------------------------------------
U.S. Equity Funds
Montgomery Growth Fund 0.91%
Montgomery Small Cap Opportunities Fund 1.10%
Montgomery Small Cap Fund (closed to new investors) 1.00%
Montgomery U.S. Emerging Growth Fund 1.33%
Montgomery Equity Income Fund 0.39%
International and Global Equity Funds
Montgomery International Growth Fund 1.06%
Montgomery International Small Cap Fund 1.29%
Montgomery Global Opportunities Fund 1.26%
Montgomery Global Communications Fund 1.33%
Montgomery Emerging Markets Fund 1.06%
Montgomery Emerging Asia Fund 1.12%
Montgomery Latin America Fund 0.00%
Multi-Strategy Funds
Montgomery Select 50 Fund 1.29%
Montgomery U.S. Asset Allocation Fund 0.00%
U.S. Fixed-Income and Money Market Funds
Montgomery Total Return Bond Fund 0.45%
Montgomery Short Duration Government Bond Fund 0.00%
Montgomery Government Reserve Fund 0.33%
Montgomery Federal Tax-Free Money Fund 0.42%
Montgomery California Tax-Free Intermediate Bond Fund 0.31%
Montgomery California Tax-Free Money Fund 0.41%
47====
<PAGE>
Additional Investment Strategies and Related Risks
Montgomery Latin America Fund
Because of its geographic concentration in Latin American countries, the Latin
American Fund is exposed to certain risks that have been associated with these
markets. For example, most of the region's economies have experienced
considerable difficulties in the past decade, such as extremely high rates of
inflation. This problem, coupled with rapid fluctuation in interest rates, has
had negative effects on the economics and securities markets of several Latin
American countries and may continue to do so in the future.
In addition, certain Latin American countries are among the world's largest
debtors to commercial banks and foreign governments. In the past, some Latin
American governments defaulted on their bonds. Should the portfolio manager
choose to invest in these bonds, the Fund may be requested to participate in the
rescheduling of such debt and to extend further loans to governmental entities.
If a Latin American government or other issuer defaults on this debt, the Fund
might not be able to collect its outstanding principal or interest because of
Latin America's weak creditors' protection laws.
Despite a trend in Latin America toward less government involvement in business,
several governments in the region continue to exercise substantial influence
over commerce. In a few cases, the government still owns or controls many
companies, including some of the largest enterprises in the country. Future
government intervention could have a negative impact on Latin American
economies, stock markets and, ultimately, the Fund.
Due to the risks associated with these markets, the Latin America Fund's
portfolio manager limits its investment in any one Latin American country to 10
times that country's weighting in a broad-based Latin America stock index. These
weightings reflect each stock market's total value (market capitalization) in
U.S. dollar terms. The larger a country's market capitalization, the larger its
weighting in the index. As of June 30, 1998, the market capitalization of the
top five Latin America markets was as follows:
Country Market Capitalization (in US$ millions)
------------------------------------------------------------------------
Brazil $ 143,334
Mexico $ 96,075
Chile $ 39,798
Argentina $ 47,675
Venezuela $ 4,015
Source: Datastream Note: Because Latin American stock markets are volatile,
the market capitalizations shown above can change frequently and
dramatically.
48====
<PAGE>
Investors should note the particular risks of investing in Brazil and Mexico,
because the Fund may place, respectively, up to 75% and 67% of its assets in
these countries. In the past Brazil's government exerted control in foreign
investment in the country's stock market and may again do so in the future. The
Fund may also be unable to readily exchange Brazilian currency (reals) for U.S.
dollars, which could make it more difficult for the portfolio manager to sell a
security at an opportune time. Although Brazil's stock market is Latin America's
largest (in terms of market capitalization), quite a few of its securities trade
infrequently and/or in low volumes.
The Fund's investments in Mexican securities also involve certain risks. As in
other Latin American countries, the Mexican government exerted control over the
Mexican economy in the past. If the government again intervenes in the
economy--especially by exercising control over state-owned enterprises-the
Mexican stock market could decline dramatically.
The Euro: Single European Currency
On January 1, 1999, the European Union will introduce a single European currency
called the "euro." The first group of countries that will begin to convert their
currencies to the euro includes Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The
introduction of the euro causes three primary uncertainties:
o Will the payment and operational systems of banks and other financial
institutions be ready by the scheduled launch date?
o After January 1, 1999, what are the legal implications of outstanding
financial contracts that refer to currencies that were replaced by the
euro?
o How will suitable clearing and settlement payment systems for the euro be
developed?
These, and other factors (including political and economic risks), could cause
market disruptions before or after the introduction of the euro. We understand
that our key service providers are taking steps to address euro-related issues
but they have not provided any guarantees.
Defensive Investments
At the discretion of its portfolio manager(s), each Montgomery Fund may invest
up to 100% of its assets in cash for temporary defensive purposes. Such as
stance may help a Fund minimize or avoid losses during adverse market, economic
or political conditions. During such a period, a Fund may not achieve its
investment objective. For example, should the market advance during this period,
a Fund may not participate as much as it would have if it had been more fully
invested.
49====
<PAGE>
Portfolio Turnover
The Fund's portfolio managers will sell a security when they believe it is
appropriate to do so, regardless of how long a Fund has owned that security.
Buying and selling securities generally involves some expense to a Fund, such as
commission paid to brokers and other transaction costs. By selling a security, a
Fund may realize taxable capital gains that it will subsequently distribute to
shareholders. Generally speaking, the higher a Fund's annual portfolio turnover,
the greater its brokerage costs and the greater the likelihood that it will
realize taxable capital gains. Increased brokerage costs may adversely affect a
Fund's performance. Also, unless you are a tax-exempt investor or you purchase
shares through a tax-exempt investor or you purchase shares through a
tax-deferred account, the distribution of capital gains may affect your
after-tax return. Annual portfolio turnover of 100% or more is considered high.
The following Montgomery Funds that invest in stocks will typically have annual
turnover in excess of that rate because of their portfolio managers' investment
style: Growth, Small Cap Opportunities, International Growth, International
Small Cap, Global Opportunities, Emerging Asia, Latin America, Select 50, and
U.S. Asset Allocation. See "Financial Highlights," beginning on page 52, for
each Fund's historical portfolio turnover.
The Year 2000
Montgomery and our service providers depend on the smooth functioning of our
computer systems. Unfortunately, because of the way dates are encoded and
calculated, many computer systems in use today cannot recognize the year 2000,
but revert to 1900 or another incorrect date. A computer failure due to the year
2000 problem could negatively impact the handling of securities trades, pricing
and account services.
Our software vendors and service providers have assured us that their systems
will be adapted in sufficient time to avoid serious problems. There can be no
guarantee, however, that all of these computer systems will be adapted in time.
We do not expect year 2000 conversion costs to be substantial for the Funds,
because those costs are borne by our vendors and service providers and not
directly by the Funds. Furthermore, brokers and other intermediaries that hold
shareholder accounts may still experience incompatibility problems. It is also
important to keep in mind that year 2000 issues may negatively impact the
companies in which the Funds invest and by extension the value of the shares
held in The Montgomery Funds. We are in the process of putting in place a
contingency plan to evaluate other vendors and service providers if the existing
vendors and service providers fail to adequately adapt their systems in a timely
manner.
50====
<PAGE>
Alternative Structures
In the future each Fund has reserved the right, if approved by the Board of
Directors, to convert to a "Master/Feeder" structure. In this structure, the
assets of mutual funds with common investment objectives and similar parameters
are combined into a pool, rather than being managed separately. The individual
funds are know as "feeder" funds and the pool as the "master" fund. Although
combining assets in the way allows for economies of scale and other advantages,
this change will not affect the investment objectives, philosophies or
disciplines currently employed by The Montgomery Funds. You would receive prior
notice before we took any such action. As of the date of this prospectus, we
have not proposed instituting alternative structures for any of The Montgomery
Funds.
51====
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
The following selected per-share data and ratios for the period ended June 30,
1998, were audited by PricewaterhouseCoopers LLP. Their August 14, 1998, report
appears in the 1998 Annual Report of the Funds. Information for the periods
ended June 30, 1991, through June 30, 1997, was audited by other independent
accountants. Their report is not included here.
<CAPTION>
[table]
- ---------------------------------------------------------------------------------------------------------
U.S. Equity Funds
- ---------------------------------------------------------------------------------------------------------
Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR 1998## 1997## 1996 1995 1994(a)
THE YEAR OR PERIOD ENDED JUNE 30:
<S> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Year $ 23.07 $ 21.94 $ 19.16 $ 15.27 $ 12.00
Net investment income/(loss) 0.17 0.15 0.17 0.12 0.04
Net realized and unrealized gain/(loss) on
investments 3.51 3.90 4.32 3.91 3.31++
Net increase/(decrease) in net assets
resulting from investment operations 3.68 4.05 4.49 4.03 3.35
Distributions:
Dividends from net investment income (0.15) (0.15) (0.17) (0.07) (0.01)
Distribution from net realized capital gains (2.92) (2.77) (1.54) (0.07) --
Distribution in excess of net realized
capital gains -- -- -- -- (0.07)
Total Distributions (3.07) (2.92) (1.71) (0.14) (0.08)
Net Asset Value - End of Year $ 23.68 $ 23.07 $ 21.94 $ 19.16 $ 15.27
Total Return** 17.31% 20.44% 24.85% 26.53% 27.98%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data
Net assets, end of year (in 000's) $ 1,382,874 $ 1,137,343 $ 926,382 $ 878,776 $ 149,103
Ratio of net investment income/(loss) to
average net assets 0.71% 0.69% 0.78% 0.98% 1.09%+
Net investment income/(loss) before deferral
of fees by Manager $ 0.17 -- -- -- $ 0.03
Portfolio turnover rate 53.68% 61.10% 118.14% 128.36% 110.65%
Expense ratio before deferral of fees by
Manager, including interest and tax expense 1.20% -- -- -- 1.79%+
Expense ratio including interest and tax
expense 1.20% 1.27% 1.35% 1.50% 1.49%+
Expense ratio excluding interest and tax
expense 1.19% -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
** Total return represents aggregate total for the periods indicated.
+ Annualized.
++ The amount shown here for each share outstanding throughout the period may
not agree with the net realized and unrealized gain/(loss) for the period
due to the timing of purchases and withdrawal of shares in relation to the
fluctuating market values of the portfolio.
# Amount represents less than $0.01 per share.
## Per-share numbers have been calculated using the average share method, which
more appropriately represents the per-share data for the period, as the use
of the undistributed income method did not accord with the results of
operations.
</FN>
</TABLE>
52====
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
U.S. Equity Funds
- ----------------------------------------------------------------------------------------------
Small Cap Opportunities Fund
- ----------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR 1998## 1997 1996(b)##
THE YEAR OR PERIOD ENDED JUNE 30:
<S> <C> <C> <C>
Net Asset Value - Beginning of Year $ 17.53 $ 15.80 $ 12.00
Net investment income/(loss) (0.20) (0.13) 0.02
Net realized and unrealized gain/(loss) on
investments 2.25 1.86 3.78++
Net increase/(decrease) in net assets 2.05 1.73 3.80
resulting from investment operations
Distributions:
Dividends from net investment income -- (0.00)# --
Distribution from net realized capital gains (0.42) -- --
Distribution in excess of net realized
capital gains -- -- --
Total Distributions (0.42) (0.00)# --
Net Asset Value - End of Year $ 19.16 $ 17.53 $ 15.80
Total Return** 11.86% 10.97% 31.67%
- -------------------------------------------------------------------------------------------------
Ratios To Average Net Assets/
Supplemental Data
Net assets, end of year (in 000's) $ 201,738 $ 226,318 $ 136,140
Ratio of net investment income/(loss) to
average net assets (1.05)% (0.86)% 0.23%+
Net investment income/(loss) before
deferral of fees by Manager $ (0.26) $ (0.16) $ (0.04)
Portfolio turnover rate 82.47% 154.50% 81.29%
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 1.78% 1.75% 2.16%+
Expense ratio including interest and tax
expense 1.50% 1.50% 1.50%+
Expense ratio excluding interest and tax
expense 1.50% -- --
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Equity Funds
- --------------------------------------------------------------------------------------------------------------------------------
Small Cap Fund
- --------------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR 1998## 1997 1996 1995 1994 1993 1992 1991 1991(c)
THE YEAR OR PERIOD ENDED JUNE 30:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Year $19.52 $21.55 $17.11 $15.15 $16.83 $12.90 $13.24 $10.05 $10.62
Net investment income/(loss) (0.15) (0.18) (0.09) (0.10) (0.12) (0.11) (0.06) (0.06) (0.07)
Net realized and unrealized gain/(loss)
on investments. 4.33 1.43 6.31 3.04 (0.47) 4.04 3.25 3.27 2.71
Net increase/(decrease) in net assets
resulting from investment operations 4.18 1.25 6.22 2.94 (0.59) 3.93 3.19 3.21 |2.64
Distributions:
Dividends from net investment income -- -- -- -- -- -- -- -- --
Distribution from net realized capital
gains (2.97) (3.28) (1.78) (0.98) (1.09) -- (2.75) (0.02) (0.02)
Distribution in excess of net realized
capital gains -- -- -- -- -- -- (0.78) -- --
Total Distributions (2.97) (3.28) (1.78) (0.98) (1.09) -- (3.53) (0.02) (0.02)
Net Asset Value - End of Year $20.73 $19.52 $21.55 $17.11 $15.15 $16.83 $12.90 $13.24 $13.24
Total Return** 23.23% 6.81% 39.28% 20.12% (1.59)% 30.47% 27.69% 31.97% 24.89%
- --------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year
(in 000's) $203,437 $198,298 $275,062 $202,399 $209,063 $219,968 $176,588 $27,181 $27,181
Ratio of net investment
income/(loss) to average
net assets (0.70)% (0.78)% (0.47)% (0.57)% (0.68)% (0.69)% (0.44)% (0.47)% (0.45)%+
Net investment income/(loss)
before deferral of fees by
Manager $ (0.15) -- -- -- -- -- -- -- --
Portfolio turnover rate 68.65% 58.71% 80.00% 85.07% 95.22% 130.37% 80.67% 194.63% 188.16%
Expense ratio including interest
expense 1.24% 1.20% 1.24% 1.37% 1.35% 1.40% 1.50% 1.50% 1.45%+
Expense ratio before deferral of
fees by
Manager, including interest
expense 1.24% -- -- -- -- -- -- -- --
Expense ratio excluding interest
expense 1.24% -- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) The Growth Fund's Class R shares started operations on September 30, 1993.
(b) The Small Cap Opportunities Fund's Class R shares commenced operations on
December 29, 1995.
(c) The Small Cap Fund's Class R shares became available for investment by the
public on July 13, 1990.
</FN>
</TABLE>
53====
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Equity Funds
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Emerging Growth Fund Equity Income Fund
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR 1998## 1997 1996 1995(a)## 1998 1997## 1996 1995(b)
THE YEAR OR PERIOD ENDED JUNE 30:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Year $19.00 $17.82 $13.75 $12.00 $17.91 $16.09 $13.38 $12.00
Net investment income/(loss) (0.18) (0.13) (0.04) 0.09 0.44 0.49 0.43 0.31
Net realized and unrealized gain/(loss) on
investments. 4.21 2.54 4.26 1.66 2.27 3.35 2.82 1.38
Net increase/(decrease) in net assets
resulting from investment operations 4.03 2.41 4.22 1.75 2.71 3.84 3.25 1.69
Distributions:
Dividends from net investment income -- -- (0.04) -- (0.44) (0.46) (0.42) (0.31)
Distribution from net realized capital gains (1.14) (1.23) (0.11) -- (1.91) (1.56) (0.12) --
Distribution in excess of net realized
capital gains -- -- -- -- -- -- -- --
Total distributions -- -- -- -- (2.35) (2.02) (0.54) (0.31)
Net Asset Value - End of Year $21.89 $19.00 $17.82 $13.75 $18.27 $17.91 $16.09 $13.38
Total Return** 22.18% 14.77% 30.95% 14.58% 15.83% 26.02% 24.56% 14.26%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data
Net assets, end of year (in 000's) $391,973 $317,812 $306,217 $162,949 $40,260 $38,595 $19,312 $6,383
Ratio of net investment income/(loss) to
average net assets (0.84)% (0.75)% (0.11)% 1.40%+ 2.32% 2.93% 3.03% 4.06%+
Net investment income/(loss) before
deferral of fees by Manager $(0.18) -- $(0.05) $0.07 $0.34 $0.39 $0.34 $0.13
Portfolio turnover rate 23.63% 79.00% 88.98% 36.81% 68.23% 62.31% 89.77% 29.46%
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 1.57% -- 1.79% 2.07%+ 1.38% 1.46% 1.45% 3.16%+
Expense ratio including interest expense 1.57% 1.71% 1.75% 1.75%+ 0.86% -- -- --
Expense ratio excluding interest expense 1.56% -- -- -- 0.85% 0.86% 0.85% 0.84%+
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
** Total return represents aggregate total for the periods indicated.
+ Annualized.
++ The amount shown here for each share outstanding throughout the period may
not be in accord with the net realized and unrealized gain/(loss) for the
period due to the timing of purchases and withdrawal of shares in relation
to the fluctuating market values of the portfolio.
# Amount represents less than $0.01 per share.
## Per-share numbers have been calculated using the average share method, which
more appropriately represents the per-share data for the period, as use of
the undistributed income method did not accord with the results of
operations.
</FN>
</TABLE>
54====
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
International and Global Equity Funds
- ---------------------------------------------------------------------------------------------------------------------------
International Growth Fund International Small Cap Fund
- ---------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR
THE YEAR OR PERIOD ENDED JUNE 30: 1998## 1997## 1996(c) 1998## 1997 1996 1995 1994(d)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $16.24 $15.31 $12.00 $17.16 $14.86 $11.75 $12.02 $12.00
Net investment income/(loss) 0.04 0.08 0.02 (0.01) (0.05) 0.03 0.12 0.00#
Net realized and unrealized gain/(loss)
on investments 3.48 2.53 3.29 0.31 2.35 3.10 (0.39) 0.02
Net increase/(decrease) in net assets
resulting from investment operations 3.52 2.61 3.31 0.30 2.30 3.13 (0.27) 0.02
Distributions:
Dividends from net investment income (0.02) -- -- -- -- (0.02) (0.00)# --
Distributions in excess of net
investment income (0.00)# -- -- -- -- -- -- --
Distributions from net realized capital
gains (1.07) (1.68) -- -- -- -- -- --
Distributions in excess of net realized
capital gains -- -- -- (2.19) -- -- -- --
Total distributions (1.09) (1.68) -- (2.32) -- (0.02) (0.00)# --
Net Asset Value-End of Year $18.67 $16.24 $15.31 $15.14 $17.16 $14.86 $11.75 $12.02
Total Return** 23.27% 19.20% 27.58% 4.46% 15.48% 26.68% (2.23)% 0.17%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year (in 000's) $64,820 $33,912 $18,303 $50,491 $53,602 $41,640 $28,516 $34,555
Ratio of net investment income/(loss)
to average net assets 0.22% 0.57% 0.26%+ (0.03)% (0.34)% 0.20% 0.95% 0.04%+
Net investment income/(loss) before
deferral of fees by Manager $(0.04) $(0.02) $(0.07) $(0.10) $(0.14) $(0.08) $0.05 $(0.02)
Portfolio turnover rate 127.13% 95.02% 238.91% 110.58% 84.91% 177.36% 156.13% 123.50%
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 2.13% 2.37% 2.91%+ 2.53% 2.60% 2.76% 2.50% 2.32%+
Expense ratio including interest and tax 1.66% -- -- 1.92% -- 1.96% 1.91% 1.99%+
Expense ratio excluding interest and tax 1.65% 1.66% 1.65%+ 1.90% 1.90% 1.90% 1.90% 1.90%+
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
(a) The U.S. Emerging Growth Fund's Class R shares commenced operations on
December 30, 1994.
(b) The Equity Income Fund's Class R shares commenced operations on September
30, 1994.
(c) The International Growth Fund's Class R shares commenced operations on July
3, 1995.
(d) The International Small Cap Fund's Class R shares commenced operations on
September 30, 1993.
(e) The Global Opportunities Fund's Class R shares commenced operations on
September 30, 1993.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
International and Global Equity Funds
- ---------------------------------------------------------------------------------------------------------
Global Opportunities Fund
- ---------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR 1998## 1997 1996 1995 1994(e)
THE YEAR OR PERIOD ENDED JUNE 30:
<S> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Year $19.17 $16.96 $13.25 $12.92 $12.00
Net investment income/(loss) 0.00# (0.11) (0.06) 0.13 0.01
Net realized and unrealized gain/(loss)
on investments. 3.87 3.14 3.84 0.70 0.91
Net increase/(decrease) in net assets
resulting from investment operations 3.87 3.03 3.78 0.83 0.92
Distributions:
Dividends from net investment income -- -- (0.07) -- --
Distributions in excess of net investment
Income -- -- -- -- --
Distributions from net realized capital gains (3.85) (0.82) -- (0.50) --
Total distributions (3.85) (0.82) (0.07) (0.50) --
Net Asset Value-End of Year $19.19 $19.17 $16.96 $13.25 $12.92
Total Return 27.12% 18.71% 28.64% 6.43% 7.67%
- ---------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year (in 000's) $96,412 $32,371 $28,496 $13,677 $12,504
Ratio of net investment income/(loss) to
average net assets (0.02)% (0.62)% (0.56)% 1.03% 0.02%+
Net investment income/(loss) before deferral
of fees by Manager $0.00 $(0.23) $(0.16) $(0.01) $(0.05)
Portfolio turnover rate 135.03% 117.10% 163.80% 118.75% 67.22%
Expense ratio before deferral of fees by
Manager including interest and tax expense 2.37% 2.62% 3.10% 2.99% 2.75%+
Expense ratio including interest and tax
expense 1.96% -- 2.05% 1.91% 1.99%+
Expense ratio excluding interest and tax
expense 1.90% 1.90% 1.90% 1.90% 1.90%+
- ---------------------------------------------------------------------------------------------------------
</TABLE>
55====
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
International and Global Equity Funds
- ---------------------------------------------------------------------------------------------------------------------
Global Communications Fund
- ---------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR
THE YEAR OR PERIOD ENDED JUNE 30: 1998## 1997 1996 1995 1994 1993(a)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $19.61 $18.05 $15.42 $14.20 $12.45 $12.00
Net investment income/(loss) (0.17) (0.25) (0.20) (0.03) (0.05) 0.00#
Net realized and unrealized gain/(loss)
on investments 7.19 2.72 2.83 1.28 1.80++ 0.45
Net increase/(decrease) in net assets
resulting from investment operations 7.02 2.47 2.63 1.25 1.75 0.45
Distributions:
Dividends from net investment income -- -- -- -- -- --
Distributions in excess of net investment
Income -- -- -- -- -- --
Distributions from net realized capital gains (3.75) (0.91) -- -- -- --
Distributions in excess of net realized
capital gains -- -- -- (0.03) -- --
Total distributions (3.75) (0.91) -- (0.03) -- --
Net Asset Value-End of Year $22.88 $19.16 $18.05 $15.42 $14.20 $12.45
Total Return** 45.45% 14.43% 17.06% 8.83% 14.06% 3.75%
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year (in 000's) $267,113 $153,995 $206,671 $209,644 $234,886 $4,670
Ratio of net investment income/(loss) to
average net assets (0.85)% (1.05)% (1.01)% (0.10)% (0.46)% (0.05)%+
Net investment income/(loss) before deferral
of fees by Manager $(0.17) $(0.27) $(0.22) $(0.07) $(0.06) $(0.04)
Portfolio turnover rate 79.67% 75.79% 103.73% 50.17% 29.20% 0.00%
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 1.93% 2.00% 2.11% 2.09% 2.04% 8.96%+
Expense ratio including interest and tax
expense 1.93% -- 2.01% 1.91% 1.94% --
Expense ratio excluding interest and tax
expense 1.90% 1.91% 1.90% 1.90% 1.90% 1.90%+
- ---------------------------------------------------------------------------------------------------------------------
<FN>
** Total return represents aggregate total for the periods indicated.
+ Annualized.
++ The amount shown in this caption for each share outstanding throughout the
periods may not be in accord with the net realized and unrealized
gain/(loss) for the period due to the timing of purchases and withdrawal of
shares in relation to the fluctuating market values of the portfolio.
# Amount represents less than $0.01 per share.
## Per-share numbers have been calculated using the average share method, which
more appropriately represents the per-share data for the period, as use of
the undistributed income method did not accord with the results of
operations.
</FN>
</TABLE>
56====
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
International and Global Equity Funds
- -----------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund
- -----------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR
THE YEAR OR PERIOD ENDED JUNE 30: 1998 1997 1996 1995## 1994 1993 1992(b)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $16.85 $14.19 $13.17 $13.68 $11.07 $9.96 $10.00
Net investment income/(loss) 0.07 0.07 0.08 0.03 (0.03) 0.07 0.03
Net realized and unrealized gain/(loss)
on investments (6.58) 2.66 0.94 0.25++ 2.92 1.05 (0.07)
Net increase/(decrease) in net assets
resulting from investment operations (6.51) 2.73 1.02 0.28 2.89 1.12 (0.04)
Distributions:
Dividends from net investment income (0.15) (0.07) -- -- -- (0.01) --
Distributions in excess of net investment
income -- -- -- -- -- -- --
Distributions from net realized capital gains (0.33) -- -- (0.42) (0.28) (0.00)# --
Distributions in excess of net realized
capital gains -- -- -- (0.37) -- -- --
Total distributions (0.48) (0.07) -- (0.79) (0.28) (0.01) --
Net Asset Value-End of Year $9.86 $16.85 $14.19 $13.17 $13.68 $11.07 $9.96
Total Return** (39.20)% 19.34% 7.74% 1.40% 26.10% 11.27% (0.40)%
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year (in 000's) $758,911 $1,259,457 $994,378 $998,083 $654,960 $206,617 $54,625
Ratio of net investment income/(loss)
to average net assets 0.55% 0.48% 0.58% 0.23% (0.14)% 0.66% 1.70%+
Net investment income/(loss) before deferral
of fees by Manager $0.07 -- -- -- -- $0.06 $0.01
Portfolio turnover rate 96.76% 83.08% 109.92% 92.09% 63.79% 21.40% 0.19%
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 1.65% -- -- -- -- 1.93% 2.80%+
Expense ratio including interest and tax
expense 1.65% -- -- -- -- -- --
Expense ratio excluding interest and tax
expense 1.60% 1.67% 1.72% 1.80% 1.85% 1.90% 1.90%+
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
International and Global Equity Funds
- ---------------------------------------------------------------------------------------------------------------
Emerging Asia Fund Latin America Fund
- ---------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR 1998 1997(c) 1998(d)
THE YEAR OR PERIOD ENDED JUNE 30:
<S> <C> <C> <C>
Net Asset-Value Beginning of Year $18.91 $12.00 $12.00
Net investment income/(loss) 0.13 (0.01) 0.33
Net realized and unrealized gain/(loss) on
investments (11.74) 6.95 (3.34)
Net increase/(decrease) in net assets
resulting from investment operations (11.61) 6.94 (3.01)
Distributions:
Dividends from net investment income (0.17) -- (0.07)
Distribution in excess of net investment
income (0.00)# (0.03) --
Distribution from net realized capital gains (0.95) -- --
Distribution in excess of net realized
capital gains -- -- (0.15)
Total distributions (1.12) (0.03) (0.22)
Net Asset Value-End of Year $6.18 $18.91 $8.77
Total Return** (63.45)% 57.80% (25.42)%
- ---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data
Net assets, end of year (in 000's) $24,608 $68,095 $4,465
Ratio of net investment income/(loss)
to average net assets 0.22% (0.42)%+ 3.18%
Net investment income/(loss) before
deferral of fees by Manager $(0.08) $(0.02) $0.04
Portfolio turnover rate 153.97% 72.18% 168.18%
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 2.27% 2.69%+ 3.04%
Expense ratio including interest and tax
expense 1.91% 2.20%+ 0.26%
Expense ratio excluding interest and tax
expense 1.90% 1.80%+ 0.00%
- ---------------------------------------------------------------------------------------------------------------
<FN>
(a) The Global Communications Fund's Class R shares commenced operations on
June 1, 1993.
(b) The Emerging Markets Fund's Class R shares commenced operations on March 1,
1992.
(c) The Emerging Asia Fund's Class R shares commenced operations on September
30, 1996.
(d) The Latin America Fund's Class R shares commenced operations on June 30,
1997.
</FN>
</TABLE>
57====
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Multi-Strategy Funds
- ------------------------------------------------------------------------------------------------
Select 50 Fund
- ------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR
THE YEAR OR PERIOD ENDED JUNE 30: 1998## 1997## 1996(a)
<S> <C> <C> <C>
Net Asset Value-Beginning of Year $20.01 $16.46 $12.00
Net investment income/(loss) 0.12 0.01 0.06
Net realized and unrealized gain/(loss) on
investments 2.70 4.16 4.45
Net increase/(decrease) in net assets
resulting from investment operations 2.82 4.17 4.51
Distributions:
Dividends from net investment income -- (0.10) (0.04)
Distributions in excess of net investment
Income -- -- --
Distributions from net realized capital gains (1.85) (0.52) --
Distributions in excess of net realized
capital gains -- -- (0.01)
Distributions from capital -- -- --
Total distributions (1.85) (0.62) (0.05)
Net Asset Value-End of Year $20.98 $20.01 $16.46
Total Return** 15.44% 26.35% 37.75%
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year (in 000's) $269,667 $172,509 $77,955
Ratio of net investment income/(loss) to
average net assets 0.58% 0.04% 0.42%+
Net investment income/(loss) before deferral
of fees by Manager $0.12 $(0.01) $0.02
Portfolio turnover rate 151.43% 157.93% 105.98%
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 1.81% 1.92% 2.11%+
Expense ratio including interest and tax
expense 1.81% -- --
Expense ratio excluding interest and tax
expense 1.80% 1.82% 1.80%+
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Multi-Strategy Funds
- ----------------------------------------------------------------------------------------------------------
U.S. Asset Allocation Fund
- ----------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR
THE YEAR OR PERIOD ENDED JUNE 30: 1998 1997## 1996 1995 1994(b)
<S> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $19.89 $19.33 $16.33 $12.24 $12.00
Net investment income/(loss) 1.66 0.48 0.26 0.25 0.06
Net realized and unrealized gain/(loss) on
investments 0.99 2.13 3.54 4.11 0.18
Net increase/(decrease) in net assets
resulting from investment operations 2.65 2.61 3.80 4.36 0.24
Distributions:
Dividends from net investment income (0.93) (0.39) (0.25) (0.17) --
Distributions in excess of net investment
Income (0.70) -- -- -- --
Distributions from net realized capital gains (1.83) (1.66) (0.55) (0.10) --
Distributions in excess of net realized
capital gains -- -- -- -- --
Total distributions (3.46) (2.05) (0.80) (0.27) --
Net Asset Value-End of Year $19.08 $19.89 $19.33 $16.33 $12.24
Total Return** 14.67% 14.65% 23.92% 35.99% 2.00%
- ----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year (in 000's) $128,075 $127,214 $132,511 $60,234 $1,548
Ratio of net investment income/(loss) to
average net assets 3.10% 2.55% 1.85% 3.43% 2.54%+
Net investment income/(loss) before deferral
of fees by Manager $1.63 $0.47 $0.24 $0.19 $(0.11)
Portfolio turnover rate 84.23% 168.51% 225.91% 95.75% 190.94%
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 0.31%ss. 1.49% 1.55% 2.07% 9.00%+
Expense ratio including interest and tax
expense 0.26%ss. 1.43% 1.42% 1.31% 1.43%+
Expense ratio excluding interest and tax
expense 0.25%ss. 1.31% 1.30% 1.30% 1.30%+
- ----------------------------------------------------------------------------------------------------------
<FN>
** Total return represents aggregate total for the periods indicated.
+ Annualized.
++ The amount shown here for each share outstanding throughout the period may
not agree with the net realized and unrealized gain/(loss) for the period
due to the timing of purchases and withdrawal of shares in relation to the
fluctuating market values of the portfolio.
# Amount represents less than $0.01 per share.
## Per-share numbers have been calculated using the average share method, which
more appropriately represents the per-share data for the period, as use of
the undistributed income method did not accord with the results of
operations.
ss. The expense ratios reflect only the direct expenses of the U.S. Asset
Allocation Fund and do not include the expenses of the underlying funds.
</FN>
</TABLE>
58====
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
U.S. Fixed-Income and Money Market Funds
- -------------------------------------------------------------------------------------------------------------------------
Total Return
Bond Fund Short Duration Government Bond Fund
- -------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR
THE YEAR OR PERIOD ENDED JUNE 30: 1998(c) 1998 1997## 1996 1995 1994 1993(d)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $12.00 $9.99 $9.92 $9.95 $9.80 $10.23 $10.00
Net investment income/(loss) 0.72 0.57 0.59 0.60 0.62 0.61 0.33
Net realized and unrealized gain/(loss) on
investments 0.56 0.16 0.07 (0.04) 0.16 (0.34) 0.23
Net increase/(decrease) in net assets
resulting from investment operations 1.28 0.73 0.66 0.56 0.78 0.27 0.56
Distributions:
Dividends from net investment income (0.72) (0.56) (0.59) (0.59) (0.62) (0.56) (0.33)
Distributions in excess of net investment
income (0.00)# -- (0.00)# (0.00)# -- (0.07) --
Distributions from net realized capital gains (0.12) (0.02) -- -- -- -- --
Distributions in excess of net realized
capital gains -- -- -- -- -- (0.07) --
Distributions from capital -- -- -- -- (0.01) -- (0.00)#
Total distributions (0.84) (0.58) (0.59) (0.59) (0.63) (0.70) (0.33)
Net Asset Value-End of Year $12.44 $10.14 $9.99 $9.92 $9.95 $9.80 $10.23
Total Return** 10.92% 7.56% 6.79% 5.74% 8.28% 2.49% 5.66%
- -------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year (in 000's) $77,694 $66,357 $47,265 $22,681 $17,093 $21,937 $22,254
Ratio of net investment income/(loss) to
average net assets 5.81% 5.83% 5.87% 5.88% 6.41% 5.93% 6.02%+
Net investment income/(loss) before
deferral of fees by Manager $0.71 $0.51 $0.54 $0.52 $0.54 $0.51 $0.27
Portfolio turnover rate 390.08% 502.23% 450.98% 349.62% 284.23% 603.07% 213.22%
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 1.34% 1.73% 2.05% 2.31% 2.23% 1.75% 2.07%+
Expense ratio including interest and tax
expense 1.29% 1.15% 1.55% 1.55% 1.38% 0.71% _
Expense ratio excluding interest and tax 0.70% 0.28% 0.60% 0.60% 0.47% 0.25% 0.22% +
- -------------------------------------------------------------------------------------------------------------------------
<FN>
(a) The Select 50 Fund's Class R shares commenced operations on October 2,
1995.
(b) The U.S. Asset Allocation Fund's Class R shares commenced operations on
March 31, 1994.
(c) The Total Return Bond Fund's Class R shares commenced operations on June
30, 1997. (d) The Short Duration Government Bond Fund's Class R shares
commenced operations on December 18, 1992.
</FN>
</TABLE>
59====
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
U.S. Fixed Income and Money Market Fund
- ----------------------------------------------------------------------------------------------------------------------
Government Reserve Fund
- ----------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR
THE YEAR OR PERIOD ENDED JUNE 30: 1998 1997 1996 1995 1994 1993(a)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income/(loss) 0.052 0.049 0.052 0.049 0.029 0.024
Net realized and unrealized gain/(loss) on
investments 0.000### 0.000### 0.000### 0.000### 0.000### 0.000###
Net increase/(decrease) in net assets
resulting from investment operations 0.052 0.049 0.052 0.049 0.029 0.024
Distributions:
Dividends from net investment income (0.052) (0.049) (0.052) (0.049) (0.029) (0.024)
Distributions in excess of net investment
income -- -- -- -- -- --
Distributions from net realized capital gains -- -- -- -- -- --
Total distributions $(0.052) (0.049) (0.052) (0.049) (0.029) (0.024)
Net Asset Value-End of Year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total Return** 5.27% 5.03% 5.28% 4.97% 2.96% 2.41%
- ----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year (in 000's) $724,619 $473,154 $439,423 $258,956 $211,129 $124,795
Ratio of net investment income/(loss) to
average net assets 5.15% 4.93% 5.17% 4.92% 2.99% 2.96%+
Net investment income/(loss) before deferral
of fees by Manager $0.052 $0.049 $0.050 $0.047 $0.028 $0.013
Portfolio turnover rate -- -- -- -- -- --
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 0.48% 0.62% 0.74% 0.79% 0.71% 0.77%+
Expense ratio including interest and tax
expense 0.53% -- -- 0.63% -- --
Expense ratio excluding interest and tax
expense 0.53% 0.60% 0.60% 0.60% 0.60% 0.38%+
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
U.S. Fixed Income and Money Market Funds
- --------------------------------------------------------------------------------
Federal Tax-Free
Money Fund
- --------------------------------------------------------------------------------
SELECTED PER-SHARE DATA FOR
THE YEAR OR PERIOD ENDED JUNE 30: 1998 1997(b)
Net Asset Value-Beginning of Year $1.00 $1.00
Net investment income 0.031 0.032
Net realized and unrealized gain/(loss) on
investments. 0.000### 0.000###
Net increase in net assets
resulting from investment operations 0.031 0.032
Distributions:
Dividends from net investment income (0.031) (0.032)
Distribution sin excess of net investment
income -- (0.000)###
Distributions from net realized capital gains -- --
Total distributions (0.31) (0.032)+
Net Asset Value-End of Period $1.00 $1.00
Total Return** 3.12% 3.26%
- --------------------------------------------------------------------------------
Ratios to Average Net Assets/
Supplemental Data
Net assets, end of year (in 000's) $117,283 $114,197
Ratio of net investment income/(loss) to
average net assets 3.08% 3.24%+
Net investment income/(loss) before deferral
of fees by Manager $0.031 $0.030
Portfolio turnover rate -- --
Expense ratio before deferral of fees by
Manager, including interest and tax
expense 0.81% 0.69%+
Expense ratio including interest and tax
expense 0.60% 0.33%+
Expense ratio excluding interest and tax
expense 0.60% --
- --------------------------------------------------------------------------------
** Total return represents aggregate total return for the periods indicated.
+ Annualized.
++ The amount shown in this caption for each share outstanding throughout the
period may not be in accord with the net realized and unrealized
gain/(loss) for the period due to the timing of purchases and withdrawals
of shares
in relation to the fluctuating market values of the portfolio.
# Amount represents less than $0.01 per share.
## Per-share numbers have been calculated using the average share method,
which more appropriately represents the per-share data for the period, as
use of the undistributed income method did not accord with results of
operations.
### Amount represents less than $0.001 per share.
60====
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Fixed Income and Money Market Funds
California Tax-Free California Tax-Free Money Fund
Intermediate Bond Fund
SELECTED PER-SHARE DATA FOR
THE YEAR OR PERIOD ENDED JUNE 30: 1998 1997 1996 1995 1994(c) 1998 1997 1996 1995(d)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $12.53 $12.23 $12.04 $11.79 $12.00 $1.00 $1.00 $1.00 $1.00
Net investment income 0.51 0.53 0.54 0.44 0.41 0.029 0.029 0.030 0.027
Net realized and unrealized gain/(loss) on
investments 0.33 0.30 0.19 0.25 (0.21) 0.000### 0.000###0.000### 0.000###
Net increase/(decrease) in net assets
resulting from investment operations 0.84 0.83 0.73 0.69 0.20 0.029 0.029 0.030 0.027
Distributions:
Dividends from net investment income (0.51) (0.53) (0.54) (0.44) (0.41) (0.029) (0.029) (0.030) (0.027)
Distributions in excess of net investment
Income -- -- -- (0.00)# -- -- -- -- (0.000)###
Distributions from net realized capital gains -- -- -- -- -- -- -- -- --
Total Distributions (0.51) (0.53) (0.54) (0.44) (0.41) (0.029) (0.029) (0.030) (0.027)
Net Asset Value-End of Year $12.86 $12.53 $12.23 $12.04 $11.79 $1.00 $1.00 $1.00 $1.00
Total Return** 6.85% 6.91% 6.11% 6.03% 1.65% 3.00% 2.95% 3.03% 2.68%
Ratios to Average Net Assets/
Supplemental Data:
Net assets, end of year (in 000's) $35,667 $21,681 $13,948 $5,153 $11,556 $187,216 $118,723$98,134 $64,780
Ratio of net investment income to
average net assets 4.03% 4.27% 4.34% 3.71% 3.44%+ 2.96% 2.91% 2.99% 3.55%+
Net investment income/(loss) before deferral
of fees by Manager $0.44 $0.47 $0.43 $0.34 $0.25 $0.029 $0.028 $0.028 $0.023
Portfolio turnover rate 42.36% 25.60% 58.11% 37.93% 77.03% -- -- -- --
Expense ratio before deferral of fees by
Manager, including interest and tax expense 1.19% 1.18% 1.43% 1.41% 1.63%+ 0.68% 0.73% 0.80% 0.86%+
Expense ratio including interest and tax
expense 0.69% 0.68% 0.61% 0.56% 0.23%+ 0.58% 0.58% 0.59% 0.33%+
Expense ratio excluding interest and tax
expense 0.68% -- -- -- -- 0.58% -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) The Government Reserve Fund's Class R shares commenced operations on
September 14, 1992.
(b) The Federal Tax-Free Money Fund's Class R shares commenced on July 15,
1996.
(c) The California Tax-Free Intermediate Bond Fund's Class R shares commenced
operations on July 1, 1993.
(d) The California Tax-Free Money Fund's Class R shares commenced operations on
September 30, 1994.
</FN>
</TABLE>
61====
<PAGE>
Account Information
[table]
Investment Options
o Trade requests received after 1 p.m. PST (4 p.m. eastern time) will be
executed at the following business day's closing price.
Checks should be made payable to:
The Montgomery Funds
The minimum initial investment for each fund is $1,000. The minimum subsequent
investment is $100.
o To open a new account, complete and mail the New Account application in the
back of this Prospectus.
Once an account is established, you can:
o Buy, sell or exchange shares by phone. Contact The Montgomery Funds at
800.572.FUND [3863]. Press (1) for a shareholder service representative.
Press (2) for the automated Montgomery Star System.
o Buy, sell or exchange shares online. Go to www.montgomeryfunds.com. Follow
online instructions to enable this service.
o Buy or sell shares by mail
Mail buy/sell order(s) with your check:
By regular mail
The Montgomery Funds
c/o DST Systems, Inc.
P.O. Box 419073
Kansas City, MO 64141-6073
By express or overnight service:
The Montgomery Funds
c/o DST Systems, Inc.
210 West 10th Street, 7th Floor
Kansas City, MO 64105-1614
o Buy or sell shares by wiring funds
To: Investors Fiduciary Trust Company
ABA #101003621
For: DST Systems, Inc.
Account #7526601
Attention: The Montgomery Funds
For Credit to: [shareholder(s) name]
Shareholder account number:
[shareholder(s) account number]
Name of Fund: [Montgomery Fund name]
62====
<PAGE>
What You Need to Know About Your Montgomery Account
You pay no sales charge to invest in The Montgomery Funds. The minimum initial
investment for each Fund is $1,000. The minimum subsequent investment is $100.
Under certain conditions we may waive these minimums. If you buy shares through
a broker or investment advisor, different requirements may apply. All
investments must be made in U.S. dollars.
We must receive payment from you within three business days of your purchase. In
addition, we reserve the right to reject any purchase.
Becoming a Montgomery Shareholder
To open a new account:
o By Mail Send your completed application, with a check payable to The
Montgomery Funds, to the appropriate address at right. Your check must be in
U.S. dollars and drawn only on a bank located in the United States. We do not
accept third-party checks, "starter" checks, credit-card checks, instant-loan
checks or cash investments. We may impose a charge on checks that do not clear.
Note that if you are investing in a U.S. Fixed-Income or Money Market Fund,
dividends will not begin to accrue on your account until your check clears.
o By Wire Call us at (800) 572-FUND [3863] to let us know that you intend to
make your initial investment by wire. Tell us your name, the amount you want to
invest and the fund(s) in which you want to invest. We will give you further
instructions and a fax number to which you should send your completed New
Account application. To ensure that we handle your investment accurately,
include complete account information in all wire instructions.
Then request your bank to wire money from your account to the attention of:
Investors Fiduciary Trust Company
ABA #101003621
For: DST Systems, Inc.
and include the following:
Account #7526601
Attention: The Montgomery Funds
For credit to: [shareholder(s) name]
Shareholder Account Number:
[shareholder(s) account number]
Name of Fund: [Montgomery Fund]
Please note: Your bank may charge a wire transfer fee.
o By Phone To make an initial investment by phone, you must have been a current
Montgomery shareholder for at least 30 days. Shares for Individual Retirement
Accounts (IRAs) may not be purchased by phone. Your purchase of a new fund must
meet its investment minimum and is limited to the total value of your existing
accounts or $10,000, whichever is greater. To complete the transaction, we must
receive payment within three business days. We reserve the right to collect any
losses from your account if we do not receive payment within that time.
How Fund Shares Are Priced
How and when we calculate the Funds' price or net asset value (NAV) determines
the price at which you
<PAGE>
will buy or sell shares. We calculate a fund's NAV by dividing the total value
of its assets by the number of outstanding shares. We base the value of the
Funds' investments on their market value, usually the last price reported for
each security before the close of market that day. A market price may not be
available for securities that trade infrequently. Occasionally, an event that
affects a security's value may occur after the market closes. This is more
likely to happen for foreign securities traded in foreign markets that have
different time zones from the United States. Major developments affecting the
price of those securities may happen after the foreign markets in which such
securities trade have closed but before the Fund calculates its NAV. In this
case, Montgomery, in consultation with the Fund's Board of Trustees, will make a
good-faith estimate of the security's "fair value", which may be higher or lower
than security's closing price in its relevant market. More details about how we
calculate the Funds' NAV are in the Statement of Additional Information.
[sidebar]
Getting Started
To invest, complete the New Account application at the back of this prospectus.
Send it with a check payable to The Montgomery Funds.
Regular Mail
The Montgomery Funds
P.O. Box 419073
Kansas City, MO 64141-6073
Express Mail or Overnight Courier
The Montgomery Funds
210 West 10th Street
7th Floor
Kansas City, MO 64105-1614
Foreign Investors:
Foreign citizens and resident aliens of the United States living abroad may not
invest in The Montgomery Funds.
63====
<PAGE>
We calculate the net asset value (NAV) of each Montgomery Fund after the close
of trading on the New York Stock Exchange (NYSE) every day the NYSE is open. We
do not calculate NAVs on the days on which the NYSE is closed for trading.
Certain exceptions apply as described below. If we receive your order by the
close of trading on the NYSE, you can purchase shares at the price calculated
for that day. The NYSE usually closes at 4 p.m. on weekdays, except for
holidays. If your order and payment are received after the NYSE has closed, your
shares will be priced at the next NAV we determine after receipt of your order.
> Money Market Funds. The price of the Money Market Funds is determined at 12
noon eastern time on most business days. If we receive your order by that
time, your shares will be priced at the NAV calculated at 12 noon that day.
If we receive your order after 12 noon eastern time, you will pay the next
price we determine after receiving your order.
> Foreign Funds. Several of our Funds invest in securities denominated in
foreign currencies and traded on foreign exchanges. To determine their
value, we convert their foreign-currency price into U.S. dollars by using
the exchange rate last quoted by a major bank. Exchange rates fluctuate
frequently and may affect the U.S. dollar value of foreign-denominated
securities, even if their market price does not change. In addition, some
foreign exchanges are open for trading when the U.S. market is closed. As a
result, a Fund's foreign securities--and its price--may fluctuate during
periods when you can't buy, sell or exchange shares in the Fund.
> Bank Holidays. On bank holidays we will not calculate the price of the U.S.
Fixed-Income and Money Market Funds, even if the NYSE is open that day.
Shares in these funds will be sold at the next NAV we determine after
receipt of your order.
Buying Additional Shares
o By Mail Complete the form at the bottom of any Montgomery statement and mail
it with your check payable to The Montgomery Funds. Or mail the check with a
signed letter noting the name of the Fund in which you want to invest, your
account number and telephone number. We will mail you a confirmation of your
investment. Note that we may impose a charge on checks that do not clear.
[Sidebar]
TRADING TIMES
Whether buying, exchanging or selling shares, transaction requests received
after 1 p.m. Pacific time (4 p.m. eastern time) will be executed at the next
business day's closing price.
64====
<PAGE>
www.montgomeryfunds.com
Manage your account online Our online Shareholder Service Center offers free,
secure access to your Montgomery Funds account(s) around-the-clock. Shareholders
can:
o Check current account balances
o Buy, exchange or sell shares
o View the most recent account activity and up to 80 records of account
history within the past two years
o Order duplicate statements and tax forms
o Reorder checkbooks
[clipart]
Get in-depth information Our Web site is a good source of in-depth information
on The Montgomery Funds, as well as useful information about investing in
general. Click on:
o Funds & Performance for daily performance and net asset values, plus
in-depth information on any of our Funds, including audio broadcasts of
portfolio manager commentaries
o Meet Our Experts to gain weekly insight into market events, browse through
a vast archive of commentaries and read portfolio manager biographies
o Resource Center for answers to your investment questions, a glossary of
financial terms, our online bookstore, plus 11 calculators to help you meet
your investment goals
o Montgomery College Prep to learn how to invest for your children's or
grandchildren's education
o Retirement Planning to start investing for your golden years now
To register call 800.572.FUND [3863] and press (1) to speak with a shareholder
service representative.
65====
<PAGE>
o By Phone Current shareholders are automatically eligible to buy shares by
phone. To buy shares in a Fund you currently own or to invest in a new Fund,
call (800) 572-FUND [3863]. Shares for IRAs may not be purchased by phone. There
are restrictions on the dollar amount of shares you may buy by phone.
We must receive payment for your purchase within three business days of your
request. To ensure that we do, you can:
> Transfer money directly from your bank account by mailing a written request
and a voided check or deposit slip (for a savings account).
> Send us a check by overnight or second-day courier service.
> Instruct your bank to wire money to our affiliated bank using the
information in "Becoming A Montgomery Shareholder" (page 65).
o Online To buy shares online, you must first set up an Electronic Link
(described in the sidebar on p. 64). Then visit our Web site,
www.montgomeryfunds.com, where you can purchase up to $25,000 per day in
additional shares of any Fund, except those held in a retirement account. The
cost of the shares will be automatically deducted from your bank account.
o By Wire There is no need to contact us when buying additional shares by wire.
Instruct your bank to wire funds to our affiliated bank using the information
under "Becoming a Montgomery Shareholder" (page 63).
Exchanging Shares
Montgomery shareholders may exchange Class R shares in one Fund for Class R
shares in another with the same registration, Taxpayer Identification number and
address. There is a $100 minimum to exchange into a fund you currently own and a
$1,000 minimum for investing in a new Fund. Note that an exchange may result in
a realized gain or loss for tax purposes. You may exchange shares by phone, at
(800) 572-FUND [3863] or through our online shareholder service center at
www.montgomeryasset.com.
Other Exchange Policies
o Depending on what time we receive your request, we will process your exchange
order at the next-calculated NAV.
o You may exchange shares only in Funds that are qualified for sale in your
state and that are offered in this prospectus. You may not exchange shares in
one Fund for shares of another that is currently closed to new shareholders
unless you are already a shareholder in the closed fund.
o Because excessive exchanges can harm a Fund's performance, we reserve the
right to terminate your exchange privileges if you make more than four exchanges
out of any one fund during a 12-month period. We may also refuse an exchange
into a fund from which you have sold shares within the previous 90 days
(accounts under common control and accounts having the same Taxpayer
Identification number will be counted together). Exchanges out of the
Fixed-Income and Money Market Funds are exempt from this restriction.
[sidebar]
Our Electronic Link program allows us to automatically debit or credit your bank
account for transactions made by phone or online. To take advantage of this
service, simply mail us a voided check or preprinted deposit slip from your bank
account along with a request to establish an Electronic Link.
66====
<PAGE>
o We may restrict or refuse your exchanges if we receive, or anticipate
receiving, simultaneous orders affecting a large portion of a Fund's assets or
if we detect a pattern of exchanges that suggests a market-timing strategy.
o We reserve the right to refuse exchanges into a Fund by any person or group
if, in our judgment, the Fund would be unable to effectively invest the money in
accordance with its investment objective and policies, or might be adversely
affected in other ways.
Selling Shares
You may sell some or all of your fund shares on days that the New York Stock
Exchange is open for trading (except bank holidays for the Fixed-Income and
Money Market Funds).
Your shares will be sold at the next NAV we calculate for the Fund after
receiving your order. We will promptly pay the proceeds to you, normally within
three business days of receiving your order and all necessary documents
(including a written redemption order with the appropriate signature guarantee).
We will mail or wire you the proceeds, depending on your instructions. If you
purchase shares and sell them shortly thereafter, we will not mail the proceeds
until 15 days from the date you first purchased the shares.
Generally, we will not charge you any fees when you sell your shares, although
there are some minor exceptions:
o Shareholders who sell shares by wire pay a $10 wire transfer fee that will be
deducted directly from their proceeds.
o Shareholders who want redemption checks sent by Federal Express must pay a $10
fee, deducted directly from their redemption proceeds.
In accordance with the rules of the Securities and Exchange Commission (SEC) we
reserve the right to suspend redemptions under extraordinary circumstances.
Shares can be sold in several ways:
o By Mail Send us a letter including your name, Montgomery account number, the
Fund from which you would like to sell shares and the dollar amount or number of
shares you want to sell. You must sign the letter the same way your account is
registered. If you have a joint account, all accountholders must sign the
letter.
If you want the proceeds to go to a party other than the account owner(s) or
your predesignated bank account, or if the dollar amount of your redemption
exceeds $50,000, you must obtain a signature guarantee (not a notarization),
available from many commercial banks, savings associations, stock brokers and
other NASD member firms.
If you want to wire your redemption proceeds but do not have a predesignated
bank account, include a voided check or deposit slip with your letter. The
minimum wire amount is $500. Wire charges, if any, will be deducted from the
redemption proceeds. We may permit lesser wire amounts or fees at our
discretion. Call (800) 572-FUND [3863] for more details.
[sidebar]
Shareholder service is available Monday through Friday from 5 a.m. to 5 p.m.
Pacific time. Shareholders can get information or perform transactions
around-the-clock through the Montgomery Star System or www.montgomeryfunds.com.
67====
<PAGE>
o By Check If you have check writing privileges in your account, you may write a
check to redeem some of your shares, but not to close your account in the
Fixed-Income or Money Market Funds. This option is not available for funds in an
IRA. Checks may not be written for amounts below $250. Checks require only one
signature unless otherwise indicated. We will return your checks at the end of
the month. Note that we may impose a charge for a stop-payment request.
o By Phone You may accept or decline telephone redemption privileges on your New
Account application. If you accept, you will be able to sell up to $50,000 in
shares through one of our shareholder service representatives or through our
automated Star System at (800) 572-FUND [3863]. You may not buy, sell or
exchange shares in an IRA account by phone. If you included bank wire
information on your New Account application or made arrangements later for wire
redemptions, proceeds can be wired to your bank account. Please allow at least
two business days for the proceeds to be credited to your bank account. If you
want proceeds to arrive at your bank on the same business day (subject to bank
cutoff times), there is a $10 fee. For more information about our telephone
transaction policies, see "Other Policies."
o Online You can sell up to $50,000 in shares in a regular account through our
online Shareholder Service Center at www.montgomeryfunds.com.
Other Policies
Minimum Account Balances
Due to the cost of maintaining small accounts, we require a minimum combined
account balance of $1,000. If your account balance falls below that amount for
any reason other than market fluctuations, we will ask you to add to your
account. If your account balance is not brought up to the minimum or you do not
send us other instructions, we will redeem your shares and send you the
proceeds. We believe that this policy is in the best interests of all our
shareholders.
Uncashed Redemption Checks
If you receive your Fund redemption proceeds or distributions by check (instead
of by wire) and it does not arrive within a reasonable period of time, call us
at (800) 572-FUND [3863]. Please note that we are responsible only for mailing
redemption or distribution checks and are not responsible for tracking uncashed
checks or determining why checks are uncashed. If your check is returned to us
by the U.S. Postal Service or other delivery service, we will hold it on your
behalf for a reasonable period of time. We will not invest the money in any
interest-bearing account. No interest will accrue on uncashed distribution or
redemption proceeds.
[sidebar]
Buying and Selling Shares Through Securities Brokers and Benefit Plan
Administrators
You may purchase and sell shares through securities brokers and benefit plan
administrators or their subagents. You should contact them directly for
information regarding how to invest or redeem through them. They may also charge
you service or transaction fees. If you purchase or redeem shares through them,
you will receive the NAV calculated after receipt of the order by them
(generally, 4:00 p.m. eastern time) on any day the NYSE is open. If your order
is received by them after that time, it will be purchased or redeemed at the
next-calculated NAV. Brokers and benefit plan administrators who perform
shareholder servicing for the Fund may receive fees from the Funds or Montgomery
for providing these services.
Telephone Transactions
By buying, selling or exchanging shares over the phone, you agree to reimburse
the Funds for any expenses or losses incurred in connection with transfers of
money from your account. This includes any losses or expenses caused by your
bank's failure to honor your debit or act in accordance with your instructions.
If your bank makes erroneous payments or fails to make payment after you buy
shares, we
<PAGE>
may cancel the purchase and immediately terminate your telephone transaction
privilege. In addition, we may discontinue these privileges at any time upon 30
days' written notice. You may discontinue phone privileges at any time.
68====
<PAGE>
The shares you purchase by phone will be priced at the first net asset value we
determine after receiving your purchase. You will not actually own the shares,
however, until we receive your payment in full. If we do not receive your
payment within three business days of your request, we will cancel your
purchase. You may be responsible for any losses incurred by the Fund as a
result.
Please note that we cannot be held liable for following telephone instructions
that we reasonably believe to be genuine. We use several safeguards to ensure
that the instructions we receive are accurate and authentic, such as:
> recording certain calls,
> requiring a special authorization number or other personal information not
likely to be known by others, and
> sending a transaction confirmation to the investor.
The Funds and our Transfer Agent may be held liable for any losses due to
unauthorized or fraudulent telephone transactions only if we have not followed
these reasonable procedures.
We reserve the right to revoke the telephone privilege of any shareholder at any
time if he or she has used abusive language or misused the phone privilege by
making purchases and redemptions that appear to be part of a systematic
market-timing strategy.
If you notify us that your address has changed, we will temporarily suspend your
telephone redemption privileges until 30 days after your notification to protect
you and your account. We require all redemption requests made during this period
to be in writing with a signature guarantee.
Shareholders may experience delays in exercising telephone redemption privileges
during periods of volatile economic or market conditions. In these cases you may
want to transmit your redemption request:
> using the automated Star System
> online
> by overnight courier
> by telegram
Tax Withholding Information
Be sure to complete the Taxpayer Identification Number (TIN) section of the New
Account application. If you don't have a Social Security Number or TIN, apply
for one immediately by contacting your local office of the Social Security
Administration or the Internal Revenue Service (IRS). If you do not provide us
with a TIN or a certified Social Security number, federal tax law may require us
to withhold 31% of your taxable dividends, capital-gains distributions, and
redemption and exchange proceeds (unless you qualify as an exempt payee under
certain rules).
Other rules about TINs apply for certain investors. For example, if you are
establishing an account for a minor under the Uniform Gifts to Minors Act, you
should furnish the minor's TIN. If the IRS has notified you that you are subject
to backup withholding because you failed to report all interest and dividend
income on your tax return, you must check the appropriate item on the New
Account application. Foreign shareholders should note that any dividends the
Funds pay to them may be subject to up to 30% withholding instead of backup
withholding.
[sidebar]
Investment Minimums
For regular accounts and IRAs, the minimum initial investment is $1,000. Minimum
subsequent investment is $100.
69====
<PAGE>
After You Invest
Taxes
IRS rules require that the Funds distribute all of their net investment income
and capital gains, if any, to shareholders. Capital gains may be taxable at
different rates depending upon the length of time the Fund holds its assets. We
will inform you about the source of any dividends and capital gains upon
payment. After the close of each calendar year, we will advise you of their tax
status. The Funds' distributions, whether received in cash or reinvested, may be
taxable. Furthermore, any exchange of a Fund's shares for another Fund will be
treated as a sale, and any gain may be taxable.
Additional information about tax issues relating to the Funds can be found in
our Statement of Additional Information, available free by calling (800)
572-FUND [3863]. Consult your tax advisor about the potential tax consequences
of investing in the Funds.
A Note on the Montgomery Tax-Free Funds
The Montgomery Federal Tax-Free Money, California Tax-Free Money and California
Tax-Free Intermediate Bond Funds intend to continue paying what the IRS calls
"exempt-interest dividends" to shareholders by maintaining, as of the close of
each quarter of their taxable year, at least 50% of the value of their assets in
municipal bonds. If the Funds satisfy this requirement, any distributions paid
to shareholders from their net investment income will be exempt from federal
income, to the extent that they derive their net investment income from interest
on municipal bonds. Any distributions paid from other sources of net investment
income, such as market discounts on certain municipal bonds, will be treated as
ordinary income by the IRS.
Dividends and Distributions
As a shareholder in The Montgomery Funds, you may receive dividends and
distributions for which you will owe taxes (unless you invest solely through a
tax-advantaged account such as an IRA or a 401k plan). Dividends and
distributions are paid to all shareholders who maintain accounts with each Fund
as of its "record date."
If you would like to receive distributions in cash, indicate that choice on your
New Account application. Otherwise, the distribution will be reinvested in
additional Fund shares.
Keeping You Informed
After you invest you will receive our Shareholder Services Guide, which includes
more information about buying, exchanging and selling shares in the Montgomery
Funds. It also describes in more detail useful tools for investors such as the
Montgomery Star System and online transactions.
[sidebar]
Our Partners
As a Montgomery shareholder, you may see the names of our partners on a regular
basis. We all work together to ensure that your investments are handled
accurately and efficiently. Funds Distributor, Inc., located in New York City
and Boston, distributes The Montgomery Funds.
Investors Fiduciary Trust Company, located in Kansas City, Missouri, is the
Funds' master transfer agent. It performs certain record keeping and accounting
functions for the Funds.
DST Systems, also located in Kansas City, Missouri, assists Investors Fiduciary
Trust with certain record keeping and accounting functions for the Funds.
70====
<PAGE>
<TABLE>
[table]
<CAPTION>
Dividends Distributions
<S> <C> <C>
Equity Funds (except the Declared and paid in the last Declared and paid in the last
Equity Income Fund) quarter of each calendar year* quarter of each calendar year*
Equity Income Fund Declared and paid on or about the Declared and paid in the last
last business day of each quarter quarter of each calendar year*
Multi-Strategy Funds Declared and paid in the last Declared and paid in the last
quarter of each calendar year* quarter of each calendar year*
U.S. Fixed-Income and Money Declared daily and paid monthly on Declared and paid in the last
Market Funds or about the last business day of quarter of each calendar year*
each month
<FN>
*Following their fiscal year end (June 30), the Funds may make additional
distributions to avoid the imposition of a tax.
</FN>
</TABLE>
During the year, we will also send you the following communications:
o Confirmation statements
o Account statements-Mailed after the close of each calendar quarter.
o Annual and semiannual reports Mailed approximately 60 days after June 30
and December 31.
o 1099 tax form-Sent by January 31.
o Annual updated prospectus-Mailed to existing shareholders in the Fall.
To save you money, we will send only one copy of each shareholder report or
other mailing to your household if you hold accounts under common ownership or
at the same address (regardless of the number of shareholders or accounts at
that household or address), unless you request additional copies.
[sidebar]
How to avoid "buying a dividend"
If you plan to purchase shares in a Fund, check if it is planning to make a
distribution in the near future. Here's why: If you buy shares of a Fund just
before a distribution, you'll pay full price for the shares but receive a
portion of your purchase price back as a taxable distribution. This is called
"buying a dividend." Unless you hold the Fund in a tax-deferred account, you
will have to include the distribution in your gross income for tax purposes,
even though you may not have participated in the increase of the Fund's
appreciation.
71====
<PAGE>
[Outside back cover: The Montgomery Family of Funds (complete listing); Contact
Info; Logo]
You can find more information about The Montgomery Funds' investment policies in
the Statement of Additional Information (SAI), which is available free of
charge.
To request a copy, please call us at (800) 572-FUND [3863]. If you have access
to the Internet, you can also view a copy of The Montgomery Funds' SAI at the
Security and Exchange Commission's Web site: www.sec.gov. You may also request a
copy by writing to the Public Reference Section of the SEC, Washington, D.C.,
20549-6009. The SEC charges a duplicating fee for this service. You can also
visit the SEC's Public Reference Room (telephone 800.SEC.0330)
You can find further information about The Montgomery Funds in our annual and
semiannual shareholder reports, which discuss the market conditions and
investment strategies that significantly affected each Fund's performance during
its most recent fiscal period. To request a copy of the most recent annual or
semiannual report, please call us at (800) 572-FUND [3863].
Corporate Headquarters:
The Montgomery Funds
101 California Street
San Francisco, CA 94111-9361
(800) 572-FUND [3863]
www.montgomeryfunds.com
SEC File Nos.: The Montgomery Funds 811-6011
The Montgomery Funds II 811-8064
Funds Distributor, Inc. 10/98
<PAGE>
----------------------------------------------------
PART C
OTHER INFORMATION
---------------------------------------------------
<PAGE>
THE MONTGOMERY FUNDS
--------------
FORM N-1A
--------------
PART C
--------------
Item 23. Exhibits
(a) Amended and Restated Agreement and Declaration of Trust as
incorporated by reference to Post-Effective Amendment No. 61
to the Registration Statement as filed with the Commission on
October 29, 1998 ("Post-Effective Amendment No. 61").
(b) Amended and Restated By-Laws is incorporated by reference to
Post-Effective Amendment No. 61.
(c) Instruments Defining Rights of Security Holder--Not
applicable.
(d) Investment Advisory Contracts--Form of Investment Management
Agreement is incorporated by reference to Post-Effective
Amendment No. 52 to the Registration Statement as filed with
the Commission on July 31, 1997 ("Post-Effective Amendment No.
52").
(e) Form of Underwriting Agreement is incorporated by reference to
Post-Effective Amendment No. 52.
(f) Bonus or Profit Sharing Contracts--Not applicable.
(g) Form of Custody Agreement is incorporated by reference to
Post-Effective Amendment No. 61.
(h) Other Material Contracts:
(1) Form of Administrative Services Agreement is incorporated by
reference to Post-Effective Amendment No. 52.
(2) Form of Shareholder Services Plan is incorporated by reference
to Post-Effective Amendment No. 61.
(i) Form of Opinion of Counsel as to legality of shares is
incorporated by reference to Post-Effective Amendment No. 61.
(j) Other Opinions: Independent Auditors' Consent.
(k) Omitted Financial Statements - Not applicable.
(l) Initial Capital Agreements: Letter of Understanding re:
Initial Shares is incorporated by reference to Post-Effective
Amendment No. 61.
(m) Rule 12b-1 Plan: Form of Share Marketing Plan (Rule 12b-1
Plan) is incorporated by reference to Post-Effective Amendment
No. 52.
(n) Financial Data Schedule. Financial Data Schedules are
incorporated by reference to Form NSAR-B filed on August 31,
1998.
(o) 18f-3 Plan--Form of Amended and Restated Multiple Class Plan
is incorporated by reference to Post-Effective Amendment No.
61.
Item 24. Persons Controlled by or Under Common Control with the Fund
Montgomery Asset Management, LLC, a Delaware limited liability company,
is the manager of each series of the Registrant, of The Montgomery Funds II, a
Delaware business trust, and of The Montgomery Funds III, a Delaware business
trust. Montgomery Asset Management, LLC is a subsidiary of Commerzbank AG based
in Frankfurt, Germany. The Registrant, The Montgomery Funds II and The
Montgomery Funds III are deemed to be under the common control of each of those
two entities.
Item 25. Indemnification
Article VII of the Agreement and Declaration of Trust empowers the
Trustees of the Trust, to the full extent permitted by law, to purchase with
Trust assets insurance for indemnification from liability and to pay for all
expenses reasonably incurred or paid or expected to be paid by a Trustee or
officer in connection with any claim, action, suit or proceeding in which he or
she becomes involved by virtue of his or her capacity or former capacity with
the Trust.
<PAGE>
Article VI of the By-Laws of the Trust provides that the Trust shall
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding by reason of the fact that such person is and other amounts or
was an agent of the Trust, against expenses, judgments, fines, settlement and
other amounts actually and reasonable incurred in connection with such
proceeding if that person acted in good faith and reasonably believed his or her
conduct to be in the best interests of the Trust. Indemnification will not be
provided in certain circumstances, however, including instances of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the duties
involved in the conduct of the particular office involved.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to the Trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable in the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of the Investment Adviser
Effective July 31, 1997, Montgomery Asset Management, L.P. completed
the sale of substantially all of its assets to the current investment manager,
Montgomery Asset Management, LLC ("MAM, LLC"), a subsidiary of Commerzbank A.G.
Information about the officers and directors of MAM, LLC is provided below. The
address for the following persons is 101 California Street, San Francisco,
California 94111.
R. Stephen Doyle Chairman of the Board of Directors and
Chief Executive Officer of MAM, LLC
Mark B. Geist President and Director of MAM, LLC
Kevin Hamilton Executive Vice President of MAM, LLC
Scott Tuck Executive Vice President of MAM, LLC
David E. Demarest Secretary, Treasurer, Chief Administrative
Officer and Managing Director of MAM, LLC
The following directors of MAM, LLC also are officers of Commerzbank
AG. The address for the following persons is Neue Mainzer Strasse 32-36,
Frankfurt am Main, Germany.
Heinz Josef Hockmann Director of MAM, LLC
Dietrich-Kurt Frowein Director of MAM, LLC
Andreas Kleffel Director of MAM, LLC
Before July 31, 1997, Montgomery Securities, which is a broker-dealer
and the prior principal underwriter of The Montgomery Funds II, was the sole
limited partner of the prior investment manager, Montgomery Asset Management,
L.P. ("MAM, L.P."). The general partner of MAM, L.P. was a corporation,
Montgomery Asset Management, Inc. ("MAM, Inc."), certain of the officers and
directors of which now serve in similar capacities for MAM, LLC.
Item 27. Principal Underwriter
(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies.
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
C-2
<PAGE>
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
BJB Investment Funds
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick-Cendant Investment Trust
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
Funds Distributor is registered with the Securities and
Exchange Commission as a broker-dealer and is a member of the
National Association of Securities Dealers. Funds Distributor
is located at 60 State Street, Suite 1300, Boston,
Massachusetts 02109. Funds Distributor is an indirect
wholly owned subsidiary of Boston Institutional Group, Inc., a
holding company all of whose outstanding shares are owned by
key employees.
<TABLE>
(b) The following is a list of the executive officers, directors
and partners of Funds Distributor, Inc.
<CAPTION>
<S> <C>
Director, President and Chief Executive Officer Marie E. Connolly
Executive Vice President George A. Rio
Executive Vice President Donald R. Roberson
Executive Vice President William S. Nichols
Senior Vice President, General Counsel, Chief Margaret W. Chambers
Compliance Officer, Secretary and Clerk
Senior Vice President Michael S. Petrucelli
Director, Senior Vice President, Treasurer and Joseph F. Tower, III
Chief Financial Officer
Senior Vice President Paula R. David
Senior Vice President Allen B. Closser
Senior Vice President Bernard A. Whalen
Chairman and Director William J. Nutt
</TABLE>
C-3
<PAGE>
(c) Not Applicable.
Item 28. Location of Accounts and Records.
The accounts, books, or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended (the "Investment
Company Act") will be kept by the Registrant's Transfer Agent, DST Systems,
Inc., P.O. Box 1004 Baltimore, Kansas City, Missouri 64105, except those records
relating to portfolio transactions and the basic organizational and Trust
documents of the Registrant (see Subsections (2)(iii), (4), (5), (6), (7), (9),
(10) and (11) of Rule 31a-1(b)), which will be kept by the Registrant at 101
California Street, San Francisco, California 94111.
Item 29. Management Services.
There are no management-related service contracts not discussed in
Parts A and B.
Item 30. Undertakings.
(a) Not applicable.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's last
annual report to Shareholders, upon request and without
charge.
(c) Registrant has undertaken to comply with Section 16(a) of the
Investment Company Act which requires the prompt convening of
a meeting of shareholders to elect trustees to fill existing
vacancies in the Registrant's Board of Trustees in the event
that less than a majority of the trustees have been elected to
such position by shareholders. Registrant has also undertaken
promptly to call a meeting of shareholders for the purpose of
voting upon the question of removal of any Trustee or Trustees
when requested in writing to do so by the record holders of
not less than 10 percent of the Registrant's outstanding
shares and to assist its shareholders in communicating with
other shareholders in accordance with the requirements of
Section 16(c) of the Investment Company Act.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Francisco, the State of California, on this
24th day of November, 1998.
THE MONTGOMERY FUNDS
By: Margaret W. Chambers*
--------------------
Margaret W. Chambers
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registrant's Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
R. Stephen Doyle * Chairman of the November 24, 1998
- ------------------ Board of Trustees
R. Stephen Doyle
Andrew Cox * Trustee November 24, 1998
- ------------
Andrew Cox
Cecilia H. Herbert * Trustee November 24, 1998
- --------------------
Cecilia H. Herbert
John A. Farnsworth * Trustee November 24, 1998
- --------------------
John A. Farnsworth
* By: /s/ Julie Allecta
-----------------
Julie Allecta, Attorney-in-Fact
pursuant to Powers of Attorney previously filed.
C-5
<PAGE>
------------------------------------------------------------------------------
Item 23 (j)
Independent Auditors Consent
------------------------------------------------------------------------------
C-6
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this Post-Effective
Amendment No. 63 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated August 14, 1998, relating to the financial
statements and financial highlights appearing in the June 30, 1998 Annual Report
to Shareholders of Montgomery Growth Fund, Montgomery Small Cap Opportunities
Fund, Montgomery Small Cap Fund, Montgomery U.S. Emerging Growth Fund (formerly
Montgomery Micro Cap Fund), Montgomery Equity Income Fund, Montgomery
International Growth Fund, Montgomery International Small Cap Fund, Montgomery
Emerging Markets Fund, Montgomery Emerging Asia Fund, Montgomery Latin America
Fund, Montgomery Global Opportunities Fund, Montgomery Global Communications
Fund, Montgomery Select 50 Fund, Montgomery Total Return Bond Fund, Montgomery
Short Duration Government Bond Fund, Montgomery Government Reserve Fund,
Montgomery California Tax-Free Intermediate Bond Fund, Montgomery California
Tax-Free Money Fund, Montgomery Federal Tax-Free Money Fund (all portfolios of
The Montgomery Funds), which is also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectuses and under the heading
"Investment Management and Other Services" in the Statements of Additional
Information.
PricewaterhouseCoopers LLP
San Francisco, CA
November 24, 1998
