SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
THE MONTGOMERY FUNDS
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.: Schedule 14A; 33-34841;
811-6011
3) Filing Party: Registrant
4) Date Filed: January 14, 2000
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THE MONTGOMERY FUNDS
101 California Street
San Francisco, California 94111
(800) 572-FUND [3863]
Notice dated January 29, 2000
Montgomery Select 50 Fund
Notice of Special Meeting of Shareholders
A Special Meeting of Shareholders of the Montgomery Select 50 Fund (the
"Fund") will be held at the offices of The Montgomery Funds (the "Trust"), 101
California Street, 35th Floor, San Francisco, California 94111 on February 29,
2000 at 10:00 a.m. (local time) for the following purposes:
1. To approve a change in the investment objective of the Montgomery Select 50
Fund, which now seeks long-term capital appreciation by investing in a
portfolio of 50 securities with equal weighting in five different
investment disciplines to instead seek long-term capital appreciation by
investing in a concentrated portfolio of 20 to 30, but not fewer than 20,
securities of companies located throughout the world, including those in
developing international markets and the United States.
2. To approve a change of the Fund's sub-classification under the Investment
Company Act of 1940, as amended, from a diversified investment company to a
non-diversified investment company, and approve the elimination of the
Fund's corresponding investment restriction regarding diversification.
3. To transact such other business as may properly come before the Meeting, or
any adjournments thereto.
Shareholders of record at the close of business on December 31, 1999 are
entitled to notice of, and to vote at, the Meeting. The Fund is a series of The
Montgomery Funds, a Massachusetts business trust.
/s/ Dulce Daclison
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Dulce Daclison, Assistant Secretary
The Montgomery Funds
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THE MONTGOMERY FUNDS
Proxy Statement
For a Special Meeting of Shareholders
To Be Held on February 29, 2000
Montgomery Select 50 Fund
Introduction
This proxy statement is solicited by the Board of Trustees (the "Board") of
The Montgomery Funds (the "Trust") for voting at the special meeting of
shareholders of the Montgomery Select 50 Fund (the "Fund"), a series of the
Trust, to be held at 10:00 a.m. (local time) on February 29, 2000, at 101
California Street, 35th Floor, San Francisco, California 94111, and at any and
all adjournments thereof (the "Meeting"), for the purposes set forth in the
accompanying Notice of Special Meeting of Shareholders. This proxy statement was
first mailed to shareholders on or about January 29, 2000.
Each share of the Fund is entitled to one vote on each Proposal and on each
other matter that it is entitled to vote upon at the Meeting. Each valid proxy
that we receive will be voted in accordance with your instructions, and as the
persons named in the proxy determine on such other business as may come before
the Meeting. If no instructions are given on an executed proxy that has been
returned to us, that proxy will be voted FOR Proposal 1 and FOR Proposal 2.
Shareholders who execute proxies may revoke them at any time before they are
voted, either by writing to the Trust or by voting in person at the Meeting.
The presence in person or by proxy of shareholders entitled to cast 40% of
the votes eligible to be cast at the Shareholder Meeting will constitute a
quorum for the conduct of business. When a quorum is present, approval of each
Proposal will require the affirmative vote of the lesser of (i) 67% of the
shares represented at the Meeting if more than 50% of the outstanding shares is
represented, or (ii) shares representing more than 50% of the Fund's outstanding
shares. The Shareholder Meeting may be adjourned from time to time by a majority
of the votes properly voting on the question of adjourning a meeting to another
date and time, whether or not a quorum is present, and the meeting may be held
as adjourned within a reasonable time after the date set for the original
meeting without further notice. The persons named in the proxy will vote those
shares that they are entitled to vote in favor of adjournment if adjournment is
necessary to obtain a quorum or to obtain a favorable vote on any proposal. If
the adjournment requires setting a new record date or the adjournment is for
more than 60 days from the date set for the original meeting (in which case the
Board of Trustees will set a new record date), the Trust will give notice of the
adjourned meeting to the shareholders. Business may be conducted once a quorum
is present and may continue until adjournment of the meeting.
Proxies may be voted by mail or electronically by internet or telephone. If
voted electronically, the Fund or its agent will use reasonable procedures (such
as requiring an identification number) to verify the authenticity of the vote
cast. Each shareholder who casts an electronic vote also will be able to
validate that his or her vote was received correctly.
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All proxies voted, including abstentions and broker non-votes (where the
underlying holder has not voted and the broker does not have discretionary
authority to vote the shares), will be counted toward establishing a quorum.
Approval of each Proposal will occur only if a sufficient number of votes at the
Meeting are cast for that proposal. Abstentions do not constitute a vote "for"
and effectively result in a vote "against." However, while broker non-votes are
considered "present," they are disregarded in calculating the percentage of
votes cast in favor of or against a Proposal by those "voting securities
present" when the voting requirement is based on achieving a percentage of the
voting securities present in person or by proxy at the Meeting. In the case of
the Proposals, which must be passed by the required percentage of outstanding
shares, broker non-votes and abstentions effectively count as a vote against the
Proposals.
The Board of Trustees of The Montgomery Funds recommends that you vote in favor
of each Proposal.
The Board of Trustees of The Montgomery Funds has fixed the close of
business on December 31, 1999 as the record date (the "Record Date") for
determining holders of the Fund's shares entitled to notice of and to vote at
the Meeting. Each shareholder will be entitled to one vote for each share held.
At the close of business on the Record Date, the following shares were
outstanding:
Fund Total Fund Shares Outstanding
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Montgomery Select 50 Fund 5,786,199
The holders of 5% or more of the outstanding shares of the Fund on the
Record Date are listed on Exhibit A to this Proxy Statement. The officers and
Trustees of The Montgomery Funds, as a group, owned of record and beneficially
less than one percent of the outstanding voting securities of the Fund as of the
Record Date.
A. BACKGROUND TO THE PROPOSALS
The Fund currently invests in five different investment disciplines, with
each portfolio management team from the Montgomery Growth, U.S. Emerging Growth,
Equity Income, International Growth and Emerging Markets Funds selecting 10
stocks that they believe may offer the greatest capital appreciation potential
from their respective areas of expertise. Effective immediately after the close
of business on February 29, 2000, subject to shareholder approval before then,
the Montgomery Equity Income Fund is expected to be reorganized into the
Montgomery Balanced Fund by becoming an underlying fund. Therefore, U.S. equity
income will no longer be among the investment disciplines that the Fund invests
in.
Montgomery Asset Management, LLC (the "Manager"), the investment adviser to
the Fund, believes that the reorganization of the Equity Income Fund creates a
unique opportunity for the Manager to change further the Fund's investment
approach from one that invests in a portfolio of 50 securities with equal
weighting in five different investment disciplines to one that invests in a
concentrated portfolio of 20 to 30, but not fewer than 20, securities worldwide.
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The Manager has advised the Board of Trustees that the proposed change in
the Fund's investment approach would be in the best interests of shareholders
because this investment approach would provide the Manager with the ability to
maximize potential returns by investing a greater percentage of the Fund's
assets in fewer stocks whose investment potentials are believed to be especially
attractive.
In connection with that proposed change, the Manager is also asking
shareholders' approval to change the sub-classification of the Fund from a
diversified mutual fund to a non-diversified mutual fund so that it can
concentrate the Fund's investments in fewer stocks. Because Proposal 1 and
Proposal 2 are interrelated, the Board of Trustees has determined that neither
Proposal should be implemented (even if approved by Fund shareholders) until
such time as both Proposals have been approved by shareholders.
The Fund's current fundamental investment objective is to seek long-term
capital appreciation by investing in a portfolio of 50 securities with equal
weighting in five different investment disciplines. In addition, the Fund is
currently a diversified mutual fund, which means, with respect to 75% of its
total assets, it cannot invest in the securities of any one issuer (other than
the U.S. Government and its agencies and instrumentalities) if immediately after
and as a result of such investment more than 5% of the total assets of the Fund
would be invested in such issuer. Under the Investment Company Act of 1940, as
amended (the "1940 Act"), neither the investment objective nor the
diversification status can be changed without approval of a "majority" of the
outstanding shares within the meaning of the 1940 Act. Therefore, in order for
the Manager and the Trust to implement the proposed changes further described
below, shareholders must approve both proposals.
B. PROPOSAL 1:
Proposal 1 is to approve a change in the investment objective of the
Montgomery Select 50 Fund, which now seeks long-term capital appreciation by
investing in a portfolio of 50 securities with equal weighting in five different
investment disciplines, to instead seek long-term capital appreciation by
investing in a concentrated portfolio of 20 to 30, but not fewer than 20,
securities.
This change in investment objective and approach will be accompanied by
several changes in the Fund's principal investment strategies. The Manager will
allocate the Fund's assets among investments selected by the Manager's
International and Global Equity Team and the Manager's U.S. Growth Equity Team.
The International and Global Equity Team may buy securities of companies based
anywhere in the world including emerging markets and the United States. The U.S.
Growth Equity Team may buy securities with any market capitalization (ranging
from small capitalization stocks to mid-capitalization stocks to large
capitalization stocks) in the U.S. No more than 40% of the Fund's assets, or two
times the Fund's benchmark weight, whichever is greater, may be invested in any
one country. Investments in companies based in the United States are not subject
to that limit. Additionally, the Fund may concentrate up to 35% 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.
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The current benchmarks of the Fund are the S&P 500 Index and the MSCI World
Index. In connection with the change in the Fund's investment approach, the
Fund's performance will be measured only against the MSCI World Index, which the
Manager believes better represents the types of securities in which the Fund may
invest, and the name of the Fund will be changed to "Montgomery Global 20."
Before shareholders vote on the proposal, however, you should understand
these changes result in additional risks for your investment. For example, even
though the Fund currently invests a portion of its assets in emerging markets
and, therefore, is already exposed to the types of risks generally associated
with investing in those markets, the Manager, under Proposal 1, could invest up
to 40% of the Fund's assets or two times the Fund's benchmark weight, whichever
is greater, in any one emerging markets country. This concentration would
significantly magnify the Fund's exposure to those risks. Additionally, because
the Fund may concentrate its investments in the global communications industry,
its share value may be more volatile than that of more diversified funds, and
may reflect trends in the global communications industry, which may be subject
to greater changes in governmental policies and regulation than many other
industries.
C. PROPOSAL 2:
Proposal 2 is to approve a change of the Fund's sub-classification under
the 1940 Act from a diversified investment company to a non-diversified
investment company, and to approve the elimination of the Fund's corresponding
investment restriction regarding diversification.
The Fund is currently a diversified mutual fund. This means, with respect
to 75% of the Fund's total assets, it may not invest in the securities of any
issuer (other than the U.S. Government and its agencies and instrumentalities)
if immediately after and as a result of that investment more than 5% of the
total assets of the Fund would be invested in such issuer. The remaining 25% of
the Fund's total assets may be invested without being subject to that
restriction. The Manager has proposed, and the Board has approved, a change in
the Fund's sub-classification under Section 5(b) of the 1940 Act from
"diversified" to "non-diversified" status and the elimination of the investment
restriction described above. The Fund, however, intends to continue to comply
with the diversification and other requirements of the Internal Revenue Code of
1986, as amended (the "Code"), that are applicable to regulated investment
companies like the Fund so that it will not be subject to U.S. federal income
taxes on its net investment income.
The Manager believes that the requirements under the 1940 Act for
diversified funds may, at times, negatively affect the Fund's ability to invest
as high of a portion of the Fund's assets in suitable securities believed to be
attractive investments. The Manager believes the change to non-diversified
investment status would give the Fund the additional flexibility necessary to
invest its assets given the proposed change in the Fund's investment objective.
Accordingly, the Manager asks that shareholders approve the change of the Fund
from a diversified to a non-diversified fund.
Although the Fund would remain subject to the diversification standards
imposed by the Code, a change in the Fund's classification to a non-diversified
investment company would permit the Fund to concentrate its investments in fewer
issuers than is presently the case. While
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greater concentration may prove beneficial when the issuers in which the Fund
invests prove to be good investments, greater concentration in fewer issuers
will also magnify negative performance by any one position. Furthermore, because
the Fund would be able to invest a relatively higher percentage of its assets in
the stocks of a limited number of issuers, it may be more susceptible to any
single economic, political or regulatory event than it currently is as a
diversified fund. You should consider the greater risk of investing in a
non-diversified fund compared to more diversified mutual funds.
D. EVALUATION BY THE BOARD OF TRUSTEES
The Board of Trustees of the Trust met on November 16, 1999 to evaluate the
two Proposals. After careful consideration, the Board decided to approve
Proposals and authorized that both Proposals be submitted to shareholders for
their approval. In approving the two Proposals, the Board determined, in their
exercise of their business judgment and in light of their fiduciary duties as
Trustees, that the Proposals would be beneficial to shareholders.
Among the Board's considerations in deciding to approve the Proposals were
the following:
[ ] U.S. equity income will no longer be an investment discipline in which the
Fund may invest.
[ ] The revised investment objective better complements the Manager's
experience in global investing and preferred style of designing
concentrated portfolios.
[ ] The absence of any fee increase or other adverse change in the management
of the Fund.
[ ] The Manager will absorb the costs of the proposed changes, including the
preparation and distribution of proxy materials.
The Board of Trustees unanimously recommends that shareholders vote "FOR" each
of Proposal 1 and Proposal 2.
E. OTHER MATTERS TO COME BEFORE THE MEETING
The Trust knows of no other matters that are to be brought before the
Meeting. However, if any other matters not now known or determined properly come
before the Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote such Proxy in accordance with their best judgment on such
matters.
F. SHAREHOLDER PROPOSALS
The Meeting is a special meeting of shareholders. The Fund is not required
to, nor does it intend to, hold regular meetings of its shareholders. If such a
meeting is called, any shareholder who wishes to submit a proposal for
consideration at the meeting should submit the proposal promptly to the Trust.
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G. OTHER INFORMATION
You can find more information about The Montgomery Funds' investment
policies in the Prospectus and Statement of Additional Information (SAI), which
are available free of charge.
To request a free copy of the Prospectus or SAI, call us at (800) 572-FUND
[3863]. You can review and copy further information about The Montgomery Funds,
including the Prospectus or SAI, at the Securities and Exchange Commission's
(SEC's) Public Reference Room in Washington, D.C. To obtain information on the
operation of the Public Reference Room please call (202) 942-8090. Reports and
other information about The Montgomery Funds are available at the SEC's Web site
at www.sec.gov. You can also obtain copies of this information, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C., 20549-6009 or by e-mailing the SEC at [email protected].
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 the 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].
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Please complete, sign and return this proxy promptly. No postage is required if
mailed in the United States. You also may vote by Internet at www.proxyvote.com
(just follow the simple instructions once you have logged in) and by telephone
by calling (800) 609-6903).
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By order of the Board of Trustees,
/s/ Dulce Daclison
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Dulce Daclison, Assistant Secretary
The Montgomery Funds
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EXHIBIT A
LIST OF FIVE PERCENT SHAREHOLDERS
As of December 31, 1999, the following persons owned of record 5% or more
of the shares of the Fund:
Percentage
Name Shares Ownership
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Charles Schwab & Co., Inc. 1,582,786 27.35%
101 Montgomery Street
San Francisco, California 94104-4122
National Financial Services Corp. 417,907 7.74%
For the Exclusive Benefit of Our Customers
Attn Mutual Funds
P.O. Box 3730
Church Street Station
New York, New York 10008-1730
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FORM OF PROXY
[Shareholder Name]
[Title (if applicable)]
[Address]
[Address]
[Fund Name]
[Shares Held]
THE MONTGOMERY FUNDS
SPECIAL MEETING OF SHAREHOLDERS
MONTGOMERY SELECT 50 FUND
February 29, 2000
SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF
THE MONTGOMRY FUNDS
The undersigned hereby appoints Johanne Castro and Dulce Daclison, and each
of them, as proxies of the undersigned, each with the power to appoint a
substitute, for the Special Meeting of Shareholders of the Montgomery Select 50
Fund (the "Fund"), a separate series of The Montgomery Funds, to be held on
February 29, 1999, at 101 California Street, 35th Floor, San Francisco,
California 94111, and at any and all adjournments thereof (the "Meeting"), to
vote, as designated below, all shares of the Fund, held by the undersigned at
the close of business on December 31, 1999. Capitalized terms used without
definition have the meanings given to them in the accompanying Proxy Statement.
A signed proxy will be voted in favor of the Proposals listed below unless
you have specified otherwise. Please sign, date and return this proxy promptly.
You may vote only if you held shares in the Fund at the close of business on
December 31, 1999. Your signature authorizes the proxies to vote in their
discretion on such other business as may properly come before the Meeting
including, without limitation, all matters incident to the conduct of the
Meeting.
Please vote by filling in the boxes below.
Proposal 1: To approve a change in the investment objective of the
Montgomery Select 50 Fund, which now seeks long-term capital appreciation by
investing in a portfolio of 50 securities with equal weighting in five different
investment disciplines to instead seek long-term capital appreciation by
investing in a concentrated portfolio of 20 to 30, but not fewer than 20,
securities.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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Proposal 2: To approve a change of the Fund's sub-classification under the
Investment Company Act of 1940, as amended, from a diversified investment
company to a non-diversified investment company, and approve the elimination of
the Fund's corresponding investment restriction regarding diversification.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated: ________________________________________________________________, 2000
[Shareholder Name]
Dated: ________________________________________________________________, 2000
[Signature(s) (if held jointly)]
Please sign exactly as the name or names appear on your shareholder account
statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give your full title. If shares
are held jointly, each shareholder should sign.
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Please complete, sign and return this proxy promptly. No postage is required if
mailed in the United States. You also may vote by internet at www.proxyvote.com
(just follow the simple instructions once you have logged in) and by telephone
by calling (800) 609-6903).
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