<PAGE> 1
MONTGOMERY INSTITUTIONAL SERIES:
EMERGING MARKETS PORTFOLIO
[PHOTO]
SEMI-ANNUAL REPORT
DECEMBER 31, 1995
<PAGE> 2
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
Portfolio Investments
December 31, 1995--(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
<S> <C> <C>
COMMON STOCKS--79.0%
ARGENTINA--3.3%
-----------------------------------------------------------------------------
932,900 Cresud+ (Real Estate) $1,268,554
1,273,740 Dalmine Siderca, S.A. (Steel) 1,235,342
119,282 Inversiones Y Representaciones (Real Estate) 300,545
3,954 Inversiones Y Representaciones, 100,827
499,788 Perez Companc, "A" Shares (Oil) 2,648,479
55,500 Telefonica de Argentina, ADR (Telecommunications) 1,512,375
----------
7,066,122
----------
BANGLADESH--0.1%
-----------------------------------------------------------------------------
8,700 Apex Tannery (Apparel and Textiles) 164,625
17,000 Eastern Housing Ltd. (Real Estate) 55,647
----------
220,272
----------
BRAZIL--2.2%
-----------------------------------------------------------------------------
42,350,000 Telebras (Telecommunications) 1,638,315
63,200 Telebras, ADR (Telecommunications) 2,994,000
----------
4,632,315
----------
CHILE--3.6%
-----------------------------------------------------------------------------
32,200 AFP Provida, ADR (Diversified Financial Services) 889,525
21,600 Compania de Telefonos de Chile, ADR (Telecommunications) 1,790,100
16,650 Concha Y Tora S.A., ADR (Food and Beverage) 299,700
92,727 Creditcorp Ltd. (Banks) 1,599,541
40,600 Enersis, S.A., ADR (Electric Utilities) 1,157,100
7,534 Sociedad Quimica Minera De Chile (Chemicals) 354,098
44,938 The Chile Fund (Mutual Funds) 1,168,388
26,620 The Moneda Chile Fund (Mutual Funds) 276,183
----------
7,534,635
----------
CHINA--2.6%
-----------------------------------------------------------------------------
1,199,250 Guangdong Investment Holdings Ltd. (Real Estate) 721,178
53,000 Huaneng Power International, ADS+ (Electric Utilities) 761,875
511,120 Johnson Electric Holdings Ltd., ORD (Electronics) 912,183
1,352,000 M.C. Packaging of Hong Kong (Containers and Packaging) 480,828
814,140 Shanghai Dazhong Taxi, Class B (Trucking) 622,003
41,600 Shanghai Diesel Engine, Class B (Machinery and Machine Tools) 15,392
574,100 Shangri-La Asia (Lodging) 701,616
1,606 Siu Fung Ceramic Holdings (Building Materials) 224
4,807,000 Tian An China Investments Company (Real Estate) 596,795
2,452,120 Yue Yuen Industrial Holdings (Footwear) 650,093
----------
5,462,187
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 1 ----------
<PAGE> 3
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
COLOMBIA--0.7%
-----------------------------------------------------------------------------
33,400 Banco de Edwards, ADR (Banks) $ 655,475
18,600 Banco Ganadero, Class C, ADR (Banks) 241,800
16,300 Banco Industrial Colombiano (Banks) 57,747
29,600 Banco Industrial Colombiano, ADR*** (Banks) 484,700
277,100 Construcel (Building Materials) 62,930
----------
17,170 Noel (Food and Beverage) 1,563,308
----------
CZECH REPUBLIC--2.2%
-----------------------------------------------------------------------------
2,892 Cokoladovny (Food and Beverage) 277,639
2,100 Elektrarny Opatovice (Electric Utilities) 251,613
4,900 Investicni Postovni Banka (Banks) 45,571
29,400 Komercni Banka IF, GDR (Banks) 535,080
38,709 PIF (Mutual Funds) 709,844
45,282 SP Cesky (Mutual Funds) 521,322
7,969 SPT Telecom (Telecommunications) 753,089
14,300 The Czech Value Fund (Mutual Funds) 731,088
63,926 Vseobecny IF (Mutual Funds) 321,236
75,311 Vynosovy IF (Mutual Funds) 395,393
----------
4,541,875
----------
GREECE--0.6%
-----------------------------------------------------------------------------
44,000 Aegek (Heavy Construction) 378,718
8,000 Hellenic Bottling Company (Food and Beverage) 261,592
9,080 Nikas S.A. (Food and Beverage) 129,490
34,630 The Greek Progress Fund (Mutual Funds) 293,685
19,450 Themeliodomi S.A. (Heavy Construction) 196,954
----------
1,260,439
----------
HONG KONG--3.3%
-----------------------------------------------------------------------------
1,480,000 ASM Pacific Technology (Semiconductors) 1,282,380
1,191,020 CDL Hotels International Ltd. (Real Estate) 600,708
429,000 Cheung Kong Holdings (Real Estate) 2,613,113
168,800 HSBC Holdings (Banks) 2,554,103
----------
7,050,304
----------
HUNGARY--0.3%
-----------------------------------------------------------------------------
27,123 Egis Gyogyszergyar (Healthcare/Pharmaceuticals) 602,491
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 2 ----------
<PAGE> 4
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INDIA--4.0%
-----------------------------------------------------------------------------
7,800 Arvind Mills, Ltd.** (Apparel and Textiles) $ 27,061
231,383 Arvind Mills, Ltd., GDS (Apparel and Textiles) 983,378
60,800 Bajaj Auto (Auto/Auto Parts) 1,244,874
33,800 Bharat Petroleum (Oil) 226,839
185,000 Carrier Aircon Ltd.** (Home Appliance) 894,355
316,600 Floatglass** (Glass) 306,111
27,750 Grasim Industries Ltd.** (Conglomerates) 424,556
17,125 Grasim Industries Ltd., GDR (Conglomerates) 351,063
8,400 Grasim Industries Ltd., GDS (Conglomerates) 172,200
14,640 Housing Development and Finance Corporation (Banks) 1,130,317
134,300 ICI Corporation** (Banks) 303,621
36,900 Lok Housing** (Building Materials) 82,898
174,900 Mahanogar Telephone Nigam Ltd. (Electric Utilities) 746,054
75,200 Tata Iron and Steel Company Ltd.+** (Steel) 420,213
31,000 The Indian Hotels Company, Ltd., GDS+ (Lodging) 596,750
23,100 The Indian Hotels Company, Ltd., Series S+ (Lodging) 444,675
----------
8,354,965
----------
INDONESIA--3.6%
-----------------------------------------------------------------------------
320,000 Asahimas Flat Glass+ (Glass) 311,393
77,700 Asia Pacific Resources, Class A+ (Pulp and Paper) 369,075
187,500 Astra International (F) (Auto/Auto Parts) 389,515
170,150 Bank Bali (F) (Banks) 334,868
194,500 Bank International Indonesia (F) (Banks) 644,364
531,000 Bimantara (F)+ (Conglomerates) 441,242
199,750 Dankos Laboratories (F) (Healthcare/Pharmaceuticals) 463,011
97,000 Hanjaya Mandala Sampoerna (F) (Tobacco) 1,009,665
9,050 Indonesian Satellite, ADR (Telecommunications) 330,325
263,800 Indorama (F) (Apparel and Textiles) 954,710
424,000 International Indorayon Utama (F) (Pulp and Paper) 445,047
111,480 Pabrik Kertas Tjiwi Kimia (F) (Pulp and Paper) 102,387
225,000 Sekar Bumi (F) (Food and Beverage) 196,807
299,500 Semen Gresik (F) (Building Materials) 838,312
42,000 Tambang Timah (Glass) 51,892
42,100 Tambang Timah, GDR*** (Glass) 511,515
5,500 Telekomunikas Indonesia, ADR (Telecommunications/ Networking) 138,875
----------
7,533,003
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 3 ----------
<PAGE> 5
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ISRAEL--1.3%
-----------------------------------------------------------------------------
195 Africa Israel+ (Real Estate) $ 235,118
15,471 ECI Telecommunications, Ltd. (Telecommunications) 353,899
2,601 Teva Pharmaceuticals (Healthcare/Pharmaceuticals) 1,185,552
19,197 Teva Pharmaceuticals, ADR (Healthcare/Pharmaceuticals) 889,061
-----------
2,663,630
-----------
JORDAN--0.4%
-----------------------------------------------------------------------------
48,650 Arab International Hotels (Lodging) 404,845
36,300 Dar Aldawa (Healthcare/Pharmaceuticals) 394,231
-----------
799,076
-----------
KOREA--5.4%
-----------------------------------------------------------------------------
12,389 Hanil Iron and Steel Company (Steel) 583,557
9,854 Hankook Tire Manufacturing (Auto/Auto Parts) 584,321
40 Hansol Paper, GDR (Pulp and Paper) 770
42,500 KEPCO (Electric Utilities) 1,857,489
11,100 KEPCO, ADR (Electric Utilities) 296,925
28,311 Korea Long Term Credit Bank (Banks) 837,205
1,855 Korean Mobile Telecommunications (Telecommunications) 2,076,078
16,660 Pohang Iron & Steel Company (Steel) 1,202,289
276 Samsung Electric Ltd., ADR (Electronics) 25,902
55 Samsung Electric Ltd., ADS*** (Electronics) 5,162
6,203 Samsung Electronics Ltd., GDS (Electronics) 494,133
10,000 Samsung Engineering and Construction, Ltd. (Heavy Construction) 87,500
6,007 Samsung Engineering and Construction, Ltd., New (Heavy Construction) 155,159
52,530 Samsung Engineering and Construction, Ltd., GDR*** (Heavy Construction) 521,588
12,908 Samsung Engineering and Construction, Ltd., New, GDR*** (Heavy Construction) 132,307
53,550 Shinhan Bank (Banks) 1,183,875
7,996 Shinhan Bank, New (Banks) 170,959
29,780 Shinil Engineering Company (Heavy Construction) 514,408
6,034 Shinil Engineering Company, New (Heavy Construction) 102,673
34,446 SsangYong Investments and Securities (Securities Brokerage) 621,649
-----------
11,453,949
-----------
MALAYSIA--11.8%
-----------------------------------------------------------------------------
1,083,000 Arab Malaysian Corporation** (Diversified Financial Services) 3,923,141
140,000 Arab Malaysian Finance (F)** (Diversified Financial Services) 595,346
171,000 Arab Malaysian Merchant Bank (Banks) 1,952,593
835,000 DCB Holdings Corporation** (Banks) 2,432,965
174,500 Genting Berhad (LeisureTime) 1,456,629
1,556,000 IJM Corporation Berhad** (Heavy Construction) 2,475,190
3,209,000 IOI Industrial Oxygen** (Agricultural Commodities) 3,146,202
20,790 BenPres Holdings, GDR+*** (Broadcasting/Advertising) 103,950
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 4 ----------
<PAGE> 6
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
353,000 Kwong Yik Bank** (Banks) $ 757,511
396,000 Metacorp Berhad** (Chemicals) 1,029,098
736,000 Petronas Gas (Oil) 2,506,753
330,000 Resorts World Berhad (LeisureTime) 1,767,138
189,000 Telekom Malaysia** (Telecommunications) 1,473,481
225,000 United Engineers Malaysia (Heavy Construction) 1,435,209
-----------
24,951,256
MEXICO--4.7%
-----------------------------------------------------------------------------
116,000 Cementos Mexicanos, S.A. (Building Materials) 381,905
605,000 Cementos Mexicanos, S.A., Series B (Building Materials) 2,195,723
610,000 Grupo Financiero Banamex, Series B+ (Banks) 1,021,542
294,000 Grupo Mexico, Class B (Metals and Mining) 1,242,307
601,306 Industrias Penoles CPO (Metals and Mining) 2,494,075
80,000 Kimberly Clark de Mexico, Class A (Pulp and Paper) 1,206,999
45,500 Telefonos de Mexico de CV S.A., Series A, ADR (Telecommunications) 1,450,313
-----------
9,992,864
-----------
PAKISTAN--0.7%
-----------------------------------------------------------------------------
59,090 Adamjee Insurance Company** (Insurance) 176,152
21,568 Dandot Cement+** (Building Materials) 11,504
185,240 DG Khan Cement+** (Building Materials) 162,416
63,380 Engro Chemical (Chemicals) 262,109
5,900 Hub Power Company, GDR+*** (Electric Utilities) 102,896
16,400 ICI Pakistan (Chemicals) 29,645
95,700 ICI Pakistan, New (Chemicals $172,992
70,356 Khadim Ali Shah Bikhari and Company** (Securities Brokerage) 52,434
170,367 Nishat Textile+** (Apparel and Textiles) 145,641
42,634 Pakistan State Oil** (Oil) 330,205
-----------
1,445,994
-----------
PERU--1.3%
-----------------------------------------------------------------------------
332,117 Ferreyros (Holding) 388,021
188,198 Southern Peru Copper Corporation (Metals and Mining) 661,258
599,682 Telefonica del Peru (Telecommunications) 1,268,907
157,100 Telefonica del Peru, "B" Shares (Telecommunications) 336,497
-----------
2,654,683
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 5 ----------
<PAGE> 7
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
PHILIPPINES--4.1%
-----------------------------------------------------------------------------
<S> <C> <C>
6,286,640 Aboitiz Equity Ventures+ (Conglomerates) $1,198,368
10,944 Ayala Corporation, Class B (Conglomerates) 13,351
234,687 Ayala Land Inc., Class B (Real Estate) 286,313
730,093 Bacnotan Cement (Building Materials) 501,017
20,790 BenPres Holdings, GDR+*** (Broadcasting/Advertising) 103,950
670,000 C & P Homes (Real Estate) 491,708
350,000 DMCI Holdings (Building Materials) 125,429
3,989,500 Fillinvest Land (Real Estate) 1,277,613
354,718 Keppel Shipyards, Inc., Class B (Shipping) 148,757
264,093,508 Manila Mining, Class B (Metals and Mining) 493,350
8,855,350 Metro Pacific Inc. (Conglomerates) 1,637,379
13,700 Philippine Long Distance Telephone (Telecommunications) 744,281
25,033 Philippine Long Distance Telephone, ADR (Telecommunications) 1,354,911
-----------
8,642,477
-----------
POLAND--0.1%
-----------------------------------------------------------------------------
15,600 Agros Holding (Food and Beverage) 130,975
-----------
PORTUGAL--3.0%
-----------------------------------------------------------------------------
11,970 Capital Portugal Fund (Mutual Funds) 1,057,661
87,562 Cimpor (Building Materials) 1,453,017
81,890 Electricas Empressa Fabril de Maquinas (Heavy Construction) 553,644
4,000 Estoril Sol, S.A. (Photography) 20,055
137,200 Portucal Industries Empresa+ (Pulp and Paper) 812,785
116,780 Sonae Investmentos (Conglomerates) 2,500,698
-----------
6,397,860
-----------
RUSSIA--0.6%
-----------------------------------------------------------------------------
9,152 Global Telesystems Group Inc.** (Telecommunications) 153,388
2 Irkutskenergo RDC (Oil Equipment and Services) 157,500
5 LukOil, RDC*** (Oil) 609,375
18,300 Mosenergo, ADS*** (Electric Utilities) 148,688
10,100 The Templeton Russia Fund (Mutual Funds) 138,875
-----------
1,207,826
-----------
SINGAPORE--1.3%
-----------------------------------------------------------------------------
390,000 Far East Levingston (Heavy Construction) 1,833,510
102,620 United Overseas Bank (F) (Banks) 986,661
-----------
2,820,171
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 6 ----------
<PAGE> 8
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
SOUTH AFRICA--6.4%
-----------------------------------------------------------------------------
20,100 Anglo American Corporation (Conglomerates) $1,213,002
82,130 Barlow Ltd. (Building Materials) 1,171,516
706,300 Clinic Holdings (Healthcare/Pharmaceuticals) 687,797
1,465,000 Highstone Property Fund (Real Estate) 743,451
556,100 Lonrho Plc (Conglomerates) 1,563,578
139,643 Malbak Limited, N.P.V. (Holding) 967,216
124,893 Murray and Roberts Holdings (Conglomerates) 882,182
119,800 Nampak Ltd.(Insurance) 665,464
24,300 Nampak Ltd., ADR (Insurance) 134,258
9,000 Pepsi International Bottlers+** (Food and Beverage) $900,000
128,859 Sasol Ltd.(Metals and Mining) 1,055,120
229,600 Servgro International (Consumer Services) 1,417,090
1,406,140 South Africa Iron and Steel Industrial Corporation (Steel) 1,265,160
263,000 Waltons Stationary+ (Retail Trade) 829,653
-----------
13,495,487
-----------
SRI LANKA--0.2%
-----------------------------------------------------------------------------
67,900 Aitken Spence and Company (Conglomerates) 234,918
21,600 Development Finance Corporation of Ceylon+ (Banks) 119,889
50,900 Habarana Lodge, Ltd. (Lodging) 28,252
-----------
383,059
-----------
TAIWAN--5.2%
-----------------------------------------------------------------------------
827,089 ASE+** (Electronics) 2,000,508
242,680 Cathay Life Insurance** (Insurance) 1,111,702
1,386,000 China Steel Corporation** (Steel) 1,107,297
47,248 China Steel Corporation, ADS*** (Steel) 820,934
697,170 Nan Ya Plastics** (Chemicals) 1,057,751
1,299,000 Pacific Construction** (Heavy Construction) 928,299
442,750 Phoenixtec Power+** (Electronics) 892,412
317,000 Taiwan Mask+** (Semiconductors) 755,121
484,200 Taiwan Semiconductor Company+** (Semiconductors) 1,517,173
500 United Microelectronics Corporation** (Semiconductors) 1,255
29,000 Yageo Corporation+** (Electronics) 54,733
81,825 Yageo Corporation, GDR+*** (Electronics) 741,539
-----------
10,988,724
-----------
THAILAND--4.5%
-----------------------------------------------------------------------------
81,200 Bangkok Bank Public Company Ltd. (Banks) 696,696
77,800 Bangkok Bank Public Company Ltd. (F) (Banks) 667,524
25,200 Bangkok Insurance Public Company, Ltd. (F) (Insurance) 430,171
470,800 Electricity Generating Company of Thailand (F) (Electric Utilities) $1,607,336
57,400 Land & House Public Company Ltd.(F) (Real Estate) 943,374
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 7 ----------
<PAGE> 9
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
36,700 Phatra Thanakit Company Ltd.(Securities Brokerage) $269,745
33,000 Phatra Thanakit Company Ltd. (F) (Securities Brokerage) 282,969
62,900 Regional Container Lines (F) (Shipping) 724,137
118,800 Sahaviriya Steel Industries (F) (Steel) 157,991
19,600 Siam Cement Public Company Ltd.(F) (Building Materials) 1,086,209
24,700 Thai Farmers Bank Public Company, Ltd. (Banks) 168,701
221,000 Thai Farmers Bank Public Company, Ltd. (F) (Banks) 1,509,430
50,400 United Communications Industry (F) (Telecommunications) 644,256
250,100 Wongpaitoon Footwear Public Company, Ltd. (F) (Footwear) 238,285
-----------
9,426,824
-----------
TURKEY--1.0%
-----------------------------------------------------------------------------
299,000 Alarko Holdings. (Holding) 120,287
521,300 Cimentas*** (Building Materials) 308,158
907,100 Efes Pilsen** (Food and Beverage) 61,469
36,900 Erciyas Biracilik ve Malt, ADR+ (Food and Beverage) 359,775
1,297,900 Kartonsan (Pulp and Paper) 340,992
2,678,100 Koc Holding (Holding) 382,586
632,792 Tat Konserve (Food and Beverage) 400,041
2,216,000 Trakya Cam Sanayil (Glass) 225,603
-----------
2,198,911
-----------
VENEZUELA--0.5%
-----------------------------------------------------------------------------
482,000 Sivensa (Steel) 153,620
342,000 Sivensa, ADR (Steel) 641,250
46,449 Venprecar, GDS+ (Steel) 171,165
-----------
966,035
-----------
VIETNAM--0.0%#
-----------------------------------------------------------------------------
7,000 The Vietnam Frontier Fund+(Mutual Funds) 71,575
------
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $169,998,701) 166,513,292
PREFERRED STOCKS--11.4%
BRAZIL--10.6%
384,075,000 Banco Bradesco (Banks) 3,358,853
2,940,000 Brahma (Food and Beverage) 1,209,969
1,255,000 Cimento Itau (Building Materials) 299,563
2,482,956 Coteminas (Apparel and Textiles) 830,249
18,015,000 Electrobras "B" (Electric Utilities) 4,874,680
14,715,000 Industrias Romi, S.A. (Machinery and Machine Tools) 310,363
9,400 Kepler Weber S.A. (Machinery and Machine Tools) 24,179
21,340,000 Lojas Renner S.A. (Retail Trade) 570,852
3,720,000 Marcopolo S.A., "B" Shares, NPV (Auto/Auto Parts) 551,139
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 8 ----------
<PAGE> 10
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
21,528,286 Petroleo Brasileiro (Oil) $1,838,194
677,510,500 Randon (Auto/Auto Parts) 411,267
2,301,500 Sadia Concordia (Food and Beverage) 1,704,903
4,760,000 Shultz (Steel) 139,575
46,423,872 Telebras (Telecommunications) 2,235,338
3,990,000 Telesp (Telecommunications) 587,036
20,577,000 Vale do Rio Doce (Metals and Mining) 3,387,335
-----------
22,333,495
-----------
GREECE--0.0%#
8,000 Aegek (Heavy Construction) 51,981
-----------
KOREA--0.7%
22,160 Mando Machinery Corporation (Auto/Auto Parts) 590,605
6,138 Samsung Electronics Ltd. (Electronics) 720,507
6,700 SsangYong Investments & Securities (Securities Brokerage) 70,390
-----------
1,381,502
PHILIPPINES--0.1%
5,600 Philippine Long Distance Telephone, "A" Shares (Telecommunications) 291,550
-----------
-----------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $24,944,073) 24,058,528
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
- ----------------
CONVERTIBLE BONDS--4.0%
<S> <C> <C>
$1,315,000 Bangkok Bank., 3.250% due 03/03/04 (Banks) 1,400,475
1,297,000 Ban Pu Coal, 3.500% due 08/25/04 (Coal) 1,593,689
180,000 Siam Sindorn, 2.000% due 07/31/00 (Real Estate) 156,600
1,055,000 U-Ming Marine, 1.500% due 02/07/01 (Shipping) 1,002,250
2,955,000 United Engineers, 2.000% due 03/01/04 (Heavy Construction) 3,357,619
444,000 United Microelectronics, 1.250% due 06/08/04 (Semiconductors) 559,440
210,000 United Microelectronics, 1.250% due 06/08/04*** (Semiconductors) 264,600
-----------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(Cost $8,874,877) 8,334,673
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
PRINCIPAL AMOUNT (NOTE 1)
- ---------------- --------
CORPORATE BONDS--0.5%
<S> <C> <C>
MYR 22,666 AMLB Loan Stock @ 7.500% (Diversified Financial Services) $14,904
MYR 109,000 AMMB Loan Stock @ 7.500% (Diversified Financial Services) 57,940
SAFR 590,000 Barlow Ltd. 7.000% due 09/20/04 (Building Materials) 935,150
-----------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $721,959) 1,007,994
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 9 ----------
<PAGE> 11
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
SHARES
- ------
RIGHTS--0.1%
BRAZIL--0.0%#
<S> <C> <C>
7,064,404 Banco Bradesco, Rights, Expire 02/15/96+ (Banks) $11,629
-------
KOREA-0.0%#
136 Samsung Electronics Ltd., Rights, Expire 01/01/96+ (Electronics) 23,473
-------
PAKISTAN--0.0%#
72,072 DG Khan Cement, Rights, Expire 01/01/96+(Building Materials) 25,277
-------
PHILIPPINES--0.1%
6,100 Philippine Long Distance Telephone, Rights, Expire 12/31/96+(Telecommunications) 190,915
-------
-----------------------------------------------------------------------------
TOTAL RIGHTS
(Cost $241,456) 251,294
-------
</TABLE>
<TABLE>
<CAPTION>
VALUE
PRINCIPAL AMOUNT (NOTE 1)
- ---------------- --------
WARRANTS--0.1%
<S> <C> <C> <C>
INDONESIA-0.0%#
41,800 Bank Bali (F), Warrants, Expire 08/29/00+ (Banks) 18,281
-----------
MALAYSIA--0.1%
192,000 DCB Holdings Corporation, Warrants, Expire 12/28/99+ (Banks) 190,511
19,000 Petronas Gas, Warrants, Expire 08/17/00+ (Oil) 30,823
-----------
221,334
-----------
-----------------------------------------------------------------------------
TOTAL WARRANTS
(Cost $179,580) 239,615
-----------
-----------------------------------------------------------------------------
TOTAL SECURITIES
(Cost $204,960,646) 200,405,396
-----------
REPURCHASE AGREEMENTS--5.2%
$5,453,000 Agreement with Chemical Bank Tri-Party, 6.000% dated 12/29/95
to be repurchased at $5,456,635, on 01/02/96 collateralized by
$5,562,170 market value of U.S. Government securities, having
various maturities and various interest rates $ 5,453,000
5,453,000 Agreement with Paine Webber Tri-Party, 6.000% dated 12/29/95
to be repurchased at $5,456,635, on 01/02/96 collateralized by
$5,562,271 market value of U.S. Government securities, having
various maturities and various interest rates 5,453,000
---------
-----------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $10,906,000) 10,906,000
----------
TOTAL INVESTMENTS
(Cost $215,866,646*) 100.3% $211,311,396
OTHER ASSETS AND LIABILITIES
(Net) (0.3) (670,160)
------------
NET ASSETS 100.0% $210,641,236
----- ------------
- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 10 ----------
<PAGE> 12
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
* Aggregate cost for Federal tax purposes.
** Illiquid or Special Situation Security (See Note 5 to Financial Statements).
*** Security exempt from registration under Rule 144A of the Securities Act of
1933.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
+ Non-income producing security.
# Amount represents less than 0.1%.
ABBREVIATIONS:
ADR American Depositary Receipt
ADS American Depositary Share
(F) Foreign or alien shares.
GDR Global Depositary Receipt
GDS Global Depositary Share
MYR Malaysian Ringgit
ORD Ordinary
RDC Russian Depositary Share
SAFR South African Financial Rand
The accompanying notes are an integral part of these financial statements.
---------- 11 ----------
<PAGE> 13
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
Statement of Assets and Liabilities
December 31, 1995 (Unaudited)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (Identified cost $215,866,646) (Note 1): $ 211,311,396
Cash 1,085,383
Foreign currency (Cost $4,397,350) 4,393,025
Forward foreign exchange contracts to buy, at value (Contract cost $3,189,849) (Note 3) 3,185,189
Receivables:
Investment securities sold 603,680
Dividends 236,864
Interest 108,005
Other Assets:
Organization costs (Note 1) 21,540
-------------
Total Assets 220,945,082
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Forward foreign currency exchange contracts to buy (Note 3) $ 3,189,849
Payables:
Investment securities purchased 6,972,151
Custodian fees 84,280
Management fee 23,038
Trustees' fees and expenses 2,470
Transfer agency and servicing fees 332
Accrued liabilities and expenses 31,726
-------------
Total Liabilities 10,303,846
-------------
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 210,641,236
NET ASSETS consist of:
Accumulated net investment loss $ (354,398)
Accumulated net realized loss on securities sold, forward foreign currency
exchange contracts and foreign currency transactions (17,085,993)
Net unrealized depreciation on securities, forward foreign currency exchange contracts,
foreign currency transactions and net other assets (4,565,404)
Shares of beneficial interest 49,283
Additional paid-in capital 232,597,748
TOTAL NET ASSETS $ 210,641,236
-------------
Net Asset Value, per share outstanding* $ 42.74
-------------
Maximum offering price per share (Note 4) ($42.74 / .9925) (based on maximum investment expense
reimbursement fee of 0.75% of the offering price) $ 43.06
-------------
Number of Fund shares outstanding 4,928,252
-------------
</TABLE>
- ----------
* Redemption price per share is equal to Net Asset Value less any applicable
investment expense reimbursement fee (Note 4).
The accompanying notes are an integral part of these financial statements.
---------- 12 ----------
<PAGE> 14
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
Statement of Operations
For the Six Months Ended December 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $141,638) $ 1,126,319
Interest 494,713
-----------
Total Income 1,621,032
- ------------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 2) $ 1,578,433
Custodian fees 275,778
Administration fee (Note 2) 48,928
Legal and audit fees 30,466
Amortization of organization costs (Note 1) 3,983
Trustees' fees and expenses 4,822
Transfer agency and servicing fees 1,160
Other 96,906
Fees deferred by Manager and expenses waived by Administrator (Note 2) (718,772)
-----------
Total Expenses 1,321,704
- ------------------------------------------------------------------------------------
NET INVESTMENT INCOME 299,328
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss from:
Securities transactions (1,960,330)
Forward foreign currency exchange contracts (315,355)
Foreign currency transactions (68,560)
Net realized loss on investments during the period (2,344,245)
-----------
Net change in unrealized depreciation of:
Securities (6,159,715)
Forward foreign currency exchange contracts (1,368)
Foreign currency and net other assets (2,109)
-----------
Net unrealized depreciation of investments during the period (6,163,192)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (8,507,437)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(8,208,109)
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 13 ----------
<PAGE> 15
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended 12/31/95 Year Ended
(Unaudited) 06/30/95
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income $ 299,328 $ 427,096
Net realized loss on securities transactions, forward foreign currency
exchange contracts and foreign currency transactions during the period (2,344,245) (10,528,300)
Net unrealized appreciation/(depreciation) of securities, forward foreign
currency exchange contracts, foreign currency and net other assets during
the period (6,163,192) 12,656,445
------------- -------------
Net increase/(decrease) in net assets resulting from operations (8,208,109) 2,555,241
Distributions to shareholders from net investment income (169,409) (40,810)
Net increase from beneficial interest transactions (Note 4) 32,353,238 57,066,548
------------- -------------
Net increase in net assets 23,975,720 59,580,979
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 186,665,516 127,084,537
------------- -------------
End of period (including accumulated net investment loss $(354,398) and
$(484,317), respectively) $ 210,641,236 $ 186,665,516
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------- 14 ----------
<PAGE> 16
THE MONTGOMERY FUNDS II
Financial Highlights
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
Six Months
Ended Year Period
12/31/95 Ended Ended
(Unaudited) 06/30/95 06/30/94*
----------- -------- ---------
<S> <C> <C> <C>
Net asset value--beginning of period $ 44.61 $ 43.71 $ 50.00
-------- -------- --------
Net investment income 0.02 0.13 0.09
Net realized and unrealized gain/(loss) on investments (1.91) 0.67 (6.67)
-------- -------- --------
Total from investment operations (1.89) 0.80 (6.58)
Effect of redemption expense reimbursement fee 0.06 0.11 0.29
Distributions from net investment income (0.04) (0.01) --
-------- -------- --------
Net asset value--end of period $ 42.74 $ 44.61 $ 43.71
-------- -------- --------
Total return** (4.11)% 2.09% (12.58)%
-------- -------- --------
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $210,641 $186,666 $127,085
Ratio of operating expenses to average net assets 1.35% 1.40% 1.40%
Ratio of net investment income to average net assets 0.31% 0.29% 0.47%
Portfolio turnover rate 48% 101% 33%
Ratio of operating expenses to average net assets before deferral
of fees by Manager and waiver of expenses by Administrator 2.08% 1.79% 1.81%
Net investment income/(loss) per share before deferral of fees by
Manager and waiver of expenses by Administrator $ (0.11) $ (0.05) $ 0.01
</TABLE>
- ----------
* The Montgomery Institutional Series: Emerging Markets Portfolio commenced
operations on December 17, 1993.
** Total return represents aggregate total return for the periods indicated.
+ Annualized.
++ Per share numbers have been calculated using the monthly average shares
method, which more appropriately represents the per share data for the year
since the use of the undistributed method does not accord with the results
of operations.
---------- 15 ----------
<PAGE> 17
THE MONTGOMERY FUNDS II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Montgomery Funds II (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-end
management investment company. As of December 31, 1995, the Trust had two
publicly offered series, the Montgomery Asset Allocation Fund and the Montgomery
Institutional Series: Emerging Markets Portfolio.
The Montgomery Funds II were organized as a Delaware business trust on
September 8, 1993 and commenced operations with the Montgomery Institutional
Series: Emerging Markets Portfolio. Prior to the public offerings of shares of
each Fund, a limited number of shares were sold to Montgomery Asset Management,
L.P. and/or affiliated persons of Montgomery Asset Management in private
placement offerings. Otherwise, no Fund had any significant operations prior to
the date on which it commenced operations (i.e., commenced selling shares to the
public). On December 1, 1995, the Montgomery Asset Allocation Fund commenced
offering Class P Shares. As of December 31, 1995, no Class P Shares had been
sold. Any shares outstanding prior to December 1, 1995 were designated as Class
R Shares.
Information presented in these financial statements pertains only to the
Montgomery Institutional Series: Emerging Markets Portfolio (the "Fund"). The
financial statements for the Montgomery Asset Allocation Fund have been
presented under separate cover.
The following is a summary of significant accounting policies:
a. PORTFOLIO VALUATION--The Fund's securities, including American Depositary
Receipts and European Depositary Receipts, which are traded on securities
exchanges, are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any reported sales and in the case of fixed income
securities, at the mean between the last available bid and asked price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Manager to be the primary market. Securities
traded in the over-the-counter market are valued at the mean between the last
available bid and asked price prior to the time of valuation.
Securities denominated in foreign currencies and traded on foreign exchanges
or in foreign markets will have their value translated into U.S. dollars at the
last price of their respective currency denomination against U.S. dollars quoted
by a major bank or, if no such quotation is available, at the rate of exchange
determined in accordance with policies established in good faith by the Board of
Trustees. Because the value of securities denominated in foreign currencies must
be translated into U.S. dollars, fluctuations in the value of such currencies in
relation to the U.S. dollar may affect the net asset value of Fund shares even
if there has not been any change in the foreign-currency denominated value of
such securities. Securities and assets for which market quotations are not
readily available (including restricted securities which are subject to
limitations as to their sale) are valued at fair value as determined in good
faith by or under the supervision of the Trust in accordance with methods which
are authorized by the Trust's Board of Trustees.
Short term debt obligations with remaining maturities in excess of 60 days
are valued at current market prices, as discussed above. Short-term securities
with 60 days or less remaining to maturity are, unless conditions indicate
otherwise, amortized to maturity based on their cost to the Fund if acquired
within 60 days of maturity or, if already held by the Fund on the 60th day,
based on the value determined on the 61st day.
b. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreements
individually or jointly through a joint repurchase account with other series of
the Trust pursuant to a joint repurchase agreement. Under the terms of a typical
repurchase agreement, the Fund writes a financial contract with a counterparty
and takes possession of a government or other debt obligation as collateral. The
Fund also agrees with the counterparty to allow the counterparty to repurchase
the financial contract at a specified date and price, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the Fund's holding
period. The value of the collateral is at least equal at all times to the total
amount of the repurchase obligations, including interest. In the event of
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There is potential loss to the Fund in the event the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of
---------- 16 ----------
<PAGE> 18
THE MONTGOMERY FUNDS II
the underlying securities during the period while the Fund seeks to assert its
rights. The Fund's investment manager, acting under the supervision of the Board
of Trustees, reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements to
evaluate potential risks. The Fund may also participate on an individual or
joint basis in tri-party repurchase agreements which involve a counterparty and
a custodian bank.
c. FOREIGN CURRENCY--Foreign currencies, investments and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period, and purchases and sales of investment securities, income
and expenses are translated on the respective dates of such transactions.
Unrealized gains and losses which result from changes in foreign currency
exchange rates on investments have been included in the unrealized
appreciation/(depreciation) of securities. Net realized foreign currency gains
and losses resulting from movement in exchange rates include foreign currency
gains and losses between trade date and settlement date on investment securities
transactions, foreign currency transactions and the difference between the
amounts of interest and dividends recorded on the books of the Fund and the
amount actually received and the portion of foreign currency gains and losses
related to fluctuations in exchange rates between the initial purchase trade
date and subsequent sale trade date.
d. FORWARD FOREIGN CURRENCY CONTRACTS--Forward foreign currency contracts
are valued at the forward rate and are marked-to-market daily. The change in
market value is recorded by the Fund as an unrealized gain or loss.
When the contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it was opened
and the value at the time it was closed. Forward foreign currency contracts have
been used solely to establish a rate of exchange for settlement of transactions.
Although forward foreign currency contracts limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Fund could be exposed to risks if the counterparties to the contracts are unable
to meet the terms of their contracts.
e. DIVIDENDS AND DISTRIBUTIONS--Dividends from net investment income of the
Fund are declared and paid annually.
Distributions of any short-term capital gains earned by the Fund are
distributed no less frequently than annually. Additional distributions of net
investment income and capital gains for the Fund may be made in order to avoid
the application of a 4% non-deductible excise tax on certain undistributed
amounts of ordinary income and capital gains. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments of income and gains on
various investment securities held by the Fund, timing differences and differing
characterization of distributions made by the Fund.
f. SECURITIES TRANSACTIONS AND INVESTMENT INCOME--Securities transactions
are recorded on a trade-date basis. Realized gain and loss from securities
transactions are recorded on the specific identified cost basis. Dividend income
is recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on short-term investments, is recognized on
an accrual basis. Dividend income on foreign securities is recognized as soon as
the Fund is informed of the ex-dividend date.
g. FEDERAL INCOME TAXES--The Fund has qualified and it is the intention of
the Fund to continue to qualify and elect treatment as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), by complying with the provisions available to certain investment
companies, as defined in applicable sections of the Code, and to make
distributions of taxable income to shareholders sufficient to relieve the Fund
from all or substantially all federal income taxes.
h. ORGANIZATION COSTS--Expenses incurred in connection with the organization
of the Fund, excluding the fees and expenses of registering and qualifying its
shares for distribution under federal and state securities regulations, are
amortized on a straight-line basis over a period of five years from December 17,
1993.
i. EXPENSES--Most expenses of the Trust can be directly attributed to a
Fund. Expenses which cannot be directly attributed are apportioned between the
Funds in the Trust.
---------- 17 ----------
<PAGE> 19
THE MONTGOMERY FUNDS II
2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
a. Montgomery Asset Management, L.P. is the Fund's Manager (the "Manager").
The Manager, a California limited partnership, is an investment adviser
registered with the Securities and Exchange Commission under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"). The general partner of
the Manager is Montgomery Asset Management, Inc. The sole limited partner of the
Manager is Montgomery Securities, the Fund's principal underwriter and
distributor. Under the Advisers Act, both Montgomery Asset Management, Inc. and
Montgomery Securities may be deemed controlling persons of the Manager. Although
the operations and management of the Manager are independent from those of
Montgomery Securities, it is expected that the Manager may draw upon the
research and administrative resources of Montgomery Securities at its discretion
in a manner consistent with applicable regulations.
Pursuant to an investment management agreement ("Investment Management
Agreement"), the Manager provides the Fund with advice on buying and selling
securities, manages the investments of the Fund including the placement of
orders for portfolio transactions, furnishes the Fund with office space and
certain administrative services, and provides the personnel needed by the Trust
with respect to the Manager's responsibilities under such Agreement. As
compensation, the Fund pays the Manager a monthly management fee (accrued daily)
based upon the average daily net assets of the Fund, at an effective annual rate
of 1.05% of average daily net assets before any deferral or recoupment of fees
for the period ending December 31, 1995. The Manager has agreed to reduce some
or all of its management fee or absorb Fund expenses if necessary to keep the
Fund's annual operating expenses, exclusive of interest or taxes, at or below
the lesser of 1.40% of average daily net assets or the maximum allowed by
applicable state expense limitations. Any reductions made for the Fund by the
Manager are subject to recovery within the following three years provided the
Fund is able to affect such reimbursement and remain in compliance with
applicable expense limitations. Any of the Manager's voluntary absorptions are
also subject to recovery. For the six months ending December 31, 1995, the
Manager recouped fees of $584,622, which had been deferred during prior fiscal
years.
For the six months ended December 31, 1995, the Manager has deferred fees as
follows:
<TABLE>
<CAPTION>
Fees
Deferred
--------
<S> <C>
Montgomery Institutional Series: Emerging Markets Portfolio $689,639
</TABLE>
As of December 31, 1995, the amount deferred management fees subject to
recoupment is $689,639.
b. Montgomery Asset Management, L.P., serves as the Fund's administrator
(the "Administrator"). The Administrator performs services with regard to
various aspects of the Fund's administrative operations. As compensation, the
Fund pays the Administrator a monthly fee at an annual rate of 0.05% of average
daily net assets. For the six months ended 12/31/95, the Administrator waived
fees of $29,133.
c. Certain officers and Trustees of the Trust are, with respect to the
Trust's Manager and/or principal underwriter, "affiliated persons" as defined in
the 1940 Act. Each Trustee of the Montgomery Funds II who is not an "affiliated
person" receives an annual retainer and quarterly meeting fees totalling $30,000
per annum, as well as reimbursement for expenses, for service as a Trustee of
all three Trusts advised by the Manager ($5,000 of which was allocated to the
Montgomery Funds II and the Montgomery Funds III, together).
d. The Fund has no sales load and does not pay distribution (Rule 12b-1)
fees to its distributor. Therefore, Montgomery Securities has received no direct
compensation for serving as the Fund's principal underwriter and distributor.
e. For the six months ended December 31, 1995, the Fund's securities
transactions generated commissions of $1,054,546, none of which was paid to
Montgomery Securities.
---------- 18 ----------
<PAGE> 20
THE MONTGOMERY FUNDS II
3. SECURITIES TRANSACTIONS:
a. The aggregate amount of purchases and sales of investment securities,
other than short-term securities, for the six months ended December 31, 1995,
was as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
Montgomery Institutional Series: Emerging Markets Portfolio $127,425,064 $86,433,557
</TABLE>
b. At December 31, 1995, aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there was an excess of
tax cost over value for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION
------------ ------------
<S> <C> <C>
Montgomery Institutional Series: Emerging Markets Portfolio $13,068,285 $17,623,535
</TABLE>
c. The Fund regularly trades forward foreign currency exchange contracts
with off-balance sheet risk in the normal course of its investing activities in
order to manage exposure to market risks such as interest rates and foreign
currency exchange rates.
The contractual amounts of these instruments represent the investment the
Fund has in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. Summaries of obligations under these
financial instruments at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Contract
Value Value
Date (Note 1)
---- --------
<S> <C> <C>
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO:
Forward Foreign Currency Exchange Contracts to Buy:
8,035,578 Hong Kong Dollars 01/02/96 $1,039,195
853,204 South African Financial Rand 01/02/96 234,043
4,547,609,965 Turkish Lira 01/02/96 74,673
75,343 Argentine Peso 01/03/96 75,332
118,151 Brazilian Real 01/03/96 121,561
2,529,856 Malaysian Ringgit 01/03/96 996,090
81,159 Argentine Peso 01/04/96 81,147
2,686,584 Philippine Peso 01/04/96 102,397
120,337,561 Indonesian Rupee 01/05/96 52,620
1,036,722 Malaysian Ringgit 01/09/96 408,131
----------
TOTAL FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS TO BUY
(Cost $3,189,849) $3,185,189
----------
</TABLE>
---------- 19 ----------
<PAGE> 21
THE MONTGOMERY FUNDS II
4. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST :
The Trust has authorized an unlimited number of shares of beneficial
interest which have a par value of $0.01. Transactions in shares of beneficial
interest for the periods indicated below were:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1995 June 30, 1994
------------- -------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
MONTGOMERY INSTITUTIONAL SERIES:
EMERGING MARKETS PORTFOLIO:
Shares Sold 821,322 $ 35,748,906 1,300,698 $ 58,240,51
Issued as reinvestment of dividends 3,176 129,186,719 719 32,717
Shares redeemed (80,730) (3,524,854) (24,246) (1,206,683)
------- ------------- --------- ------------
Net Increase 743,768 $ 32,353,238 1,277,171 $ 57,066,548
------- ------------- --------- ------------
</TABLE>
To the extent consistent with certain tax requirements, investment expense
reimbursement fees and redemption expense reimbursement fees of 0.75% may be
imposed on the purchase or redemption of Fund shares. Payment of such fees
reflected in the dollar amount above are paid in cash. This adjustment is not a
sales charge. It is kept in the Fund for the benefit of all shareholders. The
purpose of the adjustment is to prevent the performance of the Fund from being
adversely affected by the transaction costs created by the investment of cash
received by the Fund or the sale of securities to obtain cash.
5. ILLIQUID AND SPECIAL SITUATION SECURITIES:
The Fund may not invest more than 15% of its net assets in illiquid
securities. The following securities have been determined by the Manager to be
illiquid because they are restricted or there is an exceptionally low trading
volume in the primary trading market for the security at December 31, 1995.
<TABLE>
<CAPTION>
MARKET % OF
12/31/95 VALUE TOTAL
AQUISITION MARKET PER NET
SHARES SECURITY SHARES VALUE SHARE COST ASSETS
- ------ -------- ------ ----- ----- ---- ------
<S> <C> <C> <C> <C> <C> <C>
ASE 06/05/95 827,089 $ 2,000,508 $ 2.42 $ 1,883,412 0.95%
Cathay Life Insurance 06/15/95 242,680 1,111,702 4.58 1,173,619 0.53
China Steel Corporation 06/15/95 1,386,000 1,107,297 0.80 1,206,848 0.52
Efes Pilsen 07/12/94 907,100 61,469 0.07 67,992 0.03
Global Telesystems Group Inc 05/18/95 9,152 153,388 16.76 98,177 0.07
Nan Ya Plastics 07/18/95 697,170 1,057,751 1.52 1,244,226 0.50
Pacific Construction 07/10/95 1,299,000 928,299 0.71 926,136 0.44
Pepsi International Bottlers 12/27/95 9,000 900,000 100.00 900,000 0.43
Phoenixtec Power 07/18/95 442,750 892,412 2.02 965,699 0.42
Taiwan Mask 07/18/95 317,000 755,121 2.38 675,511 0.36
Taiwan Semiconductor Company 06/05/95 484,200 1,517,173 3.13 1,791,626 0.72
United Microelectronics Corporation 06/05/94 500 1,255 2.51 1,439 0.00#
Yageo Corporation 08/16/95 29,000 54,733 1.89 60,891 0.03
----------- ----
$10,541,108 5.00%
----------- ----
</TABLE>
- -------------
# Amount represents less than 0.01%.
---------- 20 ----------
<PAGE> 22
MONTGOMERY INSTITUTIONAL SERIES: EMERGING MARKETS PORTFOLIO
The following securities held by the Fund on December 31, 1995 are generally
unrestricted securities for which reliable market prices can be established.
These securities are valued at their market prices. However, because the process
of re-registering foreign securities in the Fund's name can take more than seven
days, the following shares of each of these securities were deemed restricted or
illiquid in the hands of the Fund at December 31, 1995. The Fund bears the cost
of re-registering these securities:
<TABLE>
<CAPTION>
MARKET % OF
12/31/95 VALUE TOTAL
AQUISITION MARKET PER NET
SHARES SECURITY SHARES VALUE SHARE COST ASSETS
- ------ -------- ------ ----- ----- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Adamjee Insurance Company 07/26/95 21,020 $ 62,662 $ 2.98 $ 14,396 0.03%
Arab Malaysian Corporation 11/15/95 205,000 742,607 3.62 713,248 0.35
Arab Malaysian Finance (F) 12/21/95 121,000 514,549 4.25 475,358 0.25
Arvind Mills, Ltd 07/18/95 480 1,665 3.47 2,222 0.00#
Carrier Aircon Ltd 06/27/95 3,284 15,876 4.83 16,034 0.01
Dandot Cement 03/07/95 10,500 5,600 0.53 33,755 0.00#
DCB Holdings Corporation 06/27/95 150,000 437,060 2.91 391,920 0.21
DG Khan Cement 09/09/95 59,940 52,555 0.88 68,478 0.03
Floatglass 07/14/95 8,600 8,315 0.97 11,789 0.00#
Grasim Industries Ltd 07/14/95 74 1,132 15.30 1,494 0.00#
IJM Corporation Berhad 09/12/95 77,000 122,487 1.59 134,954 0.06
ICI Corporation 05/17/95 1,395 3,154 2.26 2,899 0.00#
IOI Industrial Oxygen 06/07/95 323,000 316,679 0.98 407,357 0.15
Khadim Ali Shah Bikhari and Company 10/06/94 6,390 4,762 0.75 19,787 0.00#
Kwong Yik Bank 09/19/95 238,000 510,730 2.15 510,730 0.24
Lok Housing 05/17/95 100 225 2.25 424 0.00#
Metacorp Berhad 07/19/95 33,000 85,758 2.60 97,164 0.04
Nishat Textile 08/28/95 48,348 41,331 0.85 97,090 0.02
Pakistan State Oil 09/14/95 4,000 30,980 7.74 27,304 0.01
Tata Iron and Steel Company Ltd 07/18/95 14,743 82,383 5.59 112,010 0.04
Telekom Malaysia 06/07/95 89,000 693,861 7.80 719,388 0.33
---------- ----
$3,734,371 1.77%
---------- ----
</TABLE>
- -----------
# Amount represents less than 0.01%.
6. FOREIGN SECURITIES:
The Fund purchases securities in emerging market countries. Securities of
foreign companies and foreign governments involve special risks and
considerations not typically associated with investing in U.S. companies and the
U.S. government. These risks include re-evaluation of currencies, less reliable
information about issuers, differences in the clearance and settlement of
securities transactions practices, and future adverse political and economic
developments. These risks are heightened for investments in emerging market
countries. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. government.
7. CAPITAL LOSS CARRYFORWARD:
At June 30, 1995, the Montgomery Institutional Series: Emerging Markets
Portfolio had available for federal income tax purposes unused capital losses of
$4,067,977 expiring in 2002.
Under current tax law, net capital and currency losses realized after
October 31 may be deferred and treated as occurring on the first day of the
following fiscal year. In the fiscal year ended June 30, 1995, the Portfolio
elected to defer losses of $10,580,930 occurring between November 1, 1994 and
June 30, 1995.
Such deferred losses will be treated as arising on the first day of the
fiscal year ending June 30, 1996.
The accompanying notes are an integral part of these financial statements.
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MONTGOMERY ASSET MANAGEMENT
600 Montgomery Street, San Francisco, California 94111 Tel 415 627-2400
