MONTGOMERY FUNDS II, 485APOS, 1997-04-15

MONTGOMERY FUNDS II
485APOS, 1997-04-15

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File Nos. 33-69686
811-8064

As filed with the Securities and Exchange Commission on April 15, 1997

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 19
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 21

THE MONTGOMERY FUNDS II
(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)

JACK G. LEVIN
600 Montgomery 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)
_____ 60 days after filing pursuant to Rule 485(a)(1)
_____ 75 days after filing pursuant to Rule 485(a)(2)
__X___ on June 30, 1997 pursuant to Rule 485(a)

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite number of securities under the
Securities Act of 1933. The Rule 24f-2 Notice for the Registrant's fiscal year
ended June 30, 1996 was filed on August 28, 1996.

----------

Please Send Copy of Communications to:

JULIE ALLECTA, ESQ.
DAVID A. HEARTH, ESQ.
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
(415) 772-6000

Total number of pages _____. Exhibit Index appears at _____.

<PAGE>

THE MONTGOMERY FUNDS II

CONTENTS OF REGISTRATION STATEMENT

This registration statement contains the following documents:*

Facing Sheet

Contents of Registration Statement

Cross-Reference Sheet for Each Fund

Part A - Prospectus for Class R shares of Montgomery Japan Small Cap Fund

Part A - Prospectus for Class P shares of Montgomery Japan Small Cap Fund

Part A - Prospectus for Class L shares of Montgomery Japan Small Cap Fund

Part A - Prospectus for Class R shares of Montgomery Latin America Fund

Part A - Prospectus for Class P shares of Montgomery Latin America Fund

Part A - Prospectus for Class L shares of Montgomery Latin America Fund

Part B - Statement of Additional Information for Montgomery Latin America Fund

Part B - Statement of Additional Information for Montgomery Japan
Small Cap Fund

Part C - Other Information

Signature Page

Exhibit

- ------------
* This Amendment does not relate to the following documents: the combined
prospectus and the combined statement of additional information for
Montgomery Asset Allocation Fund and the prospectuses for the Class R
shares, Class P shares and Class L shares and the statement of additional
information for Montgomery Institutional Series: Emerging Markets
Portfolio.

ii
<PAGE>
THE MONTGOMERY FUNDS II

CROSS REFERENCE SHEET

FORM N-1A
<TABLE>

Part A: Information Required in Prospectus
------------------------------------------
(Prospectus for each Fund)
<CAPTION>
Location in the
N-1A Registration Statement
Item No. Item by Heading
- -------- ---- ----------------------

<S> <C> <C>
1. Cover Page Cover Page

2. Synopsis "Fees and Expenses of the Fund"

3. Condensed Financial Not Applicable
Information

4. General Description Cover Page,
of Registrant "The Fund's Investment Objectives and Policies," "Portfolio
Securities," "Other Investment Practices," "Risk
Considerations" and "General Information"

5. Management of "The Fund's Investment Objectives and Policies,"
the Fund "Management of the Fund" and
"How to Invest in the Fund"

5A. Management's Discussion Not Applicable
of Fund Performance

6. Capital Stock and "Dividends and Distributions,"
Other Securities "Taxation" and "General Information"

7. Purchase of Securities "How to Invest in the Fund,"
Being Offered "How Net Asset Value is Determined,"
"General Information" and
"Backup Withholding Instructions"

8. Redemption or "How to Redeem an Investment in the Fund" and
Repurchase "General Information"

9. Pending Legal Not Applicable
Proceedings

</TABLE>
iii
<PAGE>
<TABLE>

PART B: Information Required in
Statement of Additional Information
---------------------------------------
(Statement of Additional Information for
each Fund)

<CAPTION>
Location in the
N-1A Registration Statement
Item No. Item by Heading
- -------- ---- ----------------------
<S> <C> <C>
10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information "The Trust" and "General Information"
and History

13. Investment Objectives "Investment Objective and Policies of
the Fund," "Risk Considerations" and
"Investment Restrictions"

14. Management of the "Trustees and Officers"
Registrant

15. Control Persons and "Trustees and Officers" and
Principal Holders of "General Information"
Securities

16. Investment Advisory "Investment Management and Other Services"
and Other Services

17. Brokerage Allocation "Execution of Portfolio Transactions"

18. Capital Stock and "The Trust" and "General Information"
Other Securities

19. Purchase, Redemption "Additional Purchase and Redemption Information"
and Pricing of and "Determination of Net Asset Value"
Securities Being
Offered

20. Tax Status "Distributions and Tax Information"

21. Underwriters "Principal Underwriter"

22. Calculation of "Performance Information"
Performance Data

23. Financial Statements "Financial Statements"

</TABLE>

<PAGE>

---------------------------------------------------------------------

PART A

PROSPECTUS FOR CLASS R SHARES

MONTGOMERY JAPAN SMALL CAP FUND

---------------------------------------------------------------------

<PAGE>

The Montgomery Funds
101 California Street
San Francisco, California 94111
(800) 572-FUND

Prospectus
June 30, 1997

Class R shares of the Montgomery Japan Small Cap Fund (the "Fund") are offered
in this Prospectus. The Fund seeks long-term capital appreciation through
investment primarily in equity securities of small Japanese companies. As is the
case for all mutual funds, attainment of the Fund's investment objective cannot
be assured.

The Fund's shares are sold at net asset value with no sales load, no
commissions, no Rule 12b-1 fees and no exchange fees. In general, the minimum
initial investment in the Fund is $1,000 and subsequent investments must be at
least $100. The Manager or the Distributor, under any circumstances that either
deems appropriate, may waive these minimums. See "How to Invest in the Fund."

The Fund, which is a separate series of The Montgomery Funds II, an open-end
management investment company, is managed by Montgomery Asset Management, L.P.
(the "Manager"), an affiliate of Montgomery Securities (the "Distributor").

Please read this Prospectus before investing and retain it for future reference.
A Statement of Additional Information dated June 30, 1997, as may be revised,
has been filed with the Securities and Exchange Commission, is incorporated by
this reference and is available without charge by calling (800) 572-FUND. If you
are viewing the electronic version of this prospectus through an on-line
computer service, you may request a printed version free of charge by calling
(800) 572-FUND.

The Internet address for The Montgomery Funds is www.xperts.montgomery.com/1.

The Fund may offer other classes of shares to investors eligible to purchase
those shares. The other classes of shares may have different fees and expenses
than the class of shares offered in this Prospectus, and those different fees
and expenses may affect performance. To obtain information concerning the other
classes of shares not offered in this Prospectus, call The Montgomery Funds at
(800) 572-FUND or contact sales representatives or financial intermediaries who
offer those classes.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

TABLE OF CONTENTS
================================================================================

Fees And Expenses Of The Fund 3
- --------------------------------------------------------------------------------

The Fund's Investment Objective And Policies 4
- --------------------------------------------------------------------------------

Portfolio Securities 4
- --------------------------------------------------------------------------------

Other Investment Practices 5
- --------------------------------------------------------------------------------

Risk Considerations 8
- --------------------------------------------------------------------------------

Management Of The Fund 10
- --------------------------------------------------------------------------------

How To Contact The Fund 12
- --------------------------------------------------------------------------------

How To Invest In The Fund 12
- --------------------------------------------------------------------------------

How To Redeem An Investment In The Fund 15
- --------------------------------------------------------------------------------

Exchange Privileges And Restrictions 16
- --------------------------------------------------------------------------------

Brokers and Other Intermediaries 17
- --------------------------------------------------------------------------------

How Net Asset Value Is Determined 17
- --------------------------------------------------------------------------------

Dividends And Distributions 17
- --------------------------------------------------------------------------------

Taxation 18
- --------------------------------------------------------------------------------

General Information 18
- --------------------------------------------------------------------------------

Backup Withholding Instructions 19
- --------------------------------------------------------------------------------

Glossary 21
- --------------------------------------------------------------------------------

<PAGE>

Fees And Expenses Of The Fund

Shareholder Transaction Expenses for the Fund

<TABLE>
An investor would pay the following charges when buying or redeeming shares of
the Fund:

<CAPTION>
Maximum Sales Load Maximum Sales Load Deferred Sales Load Redemption Fees Exchange Fees
Imposed on Purchases Imposed on Reinvested
Dividends
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
None None None None+ None
- ------------------------------------------------------------------------------------------------------
</TABLE>

Estimated Annual Operating Expenses (as a percentage of average net assets)

Montgomery Japan Small Cap Fund
- --------------------------------------------------------------------------------
Management Fee 1.25%
- --------------------------------------------------------------------------------
Other Expenses 0.65%
(after reimbursement)*
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.90%
- --------------------------------------------------------------------------------

+ Shareholders effecting redemptions via wire transfer may be required to pay
fees, including the wire fee and other fees, that will be directly deducted
from redemption proceeds. The Fund reserves the right, upon 60 days'
advance notice to shareholders, to impose a redemption fee of up to 1.00%
on shares redeemed within 90 days of purchase. See "How to Redeem an
Investment in the Fund."

* Expenses for the Fund are estimated. The Manager will reduce its fees and
may absorb or reimburse the Fund for certain expenses to the extent
necessary to limit total annual fund operating expenses to the amount
indicated in the table for the Fund. The Fund is required to reimburse the
Manager for any reductions in the Manager's fee only during the three years
following that reduction and only if such reimbursement can be achieved
within the foregoing expense limits. The Manager generally seeks
reimbursement for the oldest reductions and waivers before payment by the
Fund for fees and expenses for the current year. Absent the reduction,
actual total Fund operating expenses are estimated to be 3.25% (2.00% other
expenses). The Manager may terminate these voluntary reductions at any
time. See "Management of the Fund."

Example of Expenses for the Fund

Assuming, hypothetically, that the Fund's annual return is 5% and that its
operating expenses are as set forth above, an investor buying $1,000 of the
Fund's shares would have paid the following total expenses upon redeeming such
shares:

Montgomery Japan Small Cap Fund
- --------------------------------------------------------------------------------
1 Year $19
- --------------------------------------------------------------------------------
3 Years $60
- --------------------------------------------------------------------------------
5 Years N/A
- --------------------------------------------------------------------------------
10 Years N/A
- --------------------------------------------------------------------------------

This example is to help potential investors understand the effect of expenses.
Investors should understand that this example does not represent past or future
expenses or returns and that actual expenses and returns may vary.

<PAGE>

The Fund's Investment Objective And Policies

The investment objective and general investment policies of the Fund are
described below. Specific portfolio securities that may be purchased by the Fund
are described in "Portfolio Securities" beginning on page 4. Specific investment
practices that may be employed by the Fund are described in "Other Investment
Practices" beginning on page 5. Certain risks associated with investments in the
Fund are described in those sections as well as in "Risk Considerations"
beginning on page 8. CERTAIN TERMS USED IN THE PROSPECTUS ARE DEFINED IN THE
GLOSSARY FOUND AT THE END OF THE PROSPECTUS.

The investment objective of the Fund is long-term capital appreciation which,
under normal conditions, it seeks by investing at least 65% of its total assets
in equity securities of small Japanese companies. The portion of the Fund's
assets not invested in small Japanese issuers may be invested in securities of
other Japanese issuers with larger market capitalization or securities of
non-Japanese issuers. The Fund does not, except during temporary defensive
periods, intend to invest in securities of non-Japanese issuers. The Fund seeks
to achieve long-term capital return that is in excess of the return on the Tokyo
Stock Exchange Second Section Index and the JASDAQ OTC Index, calculated in U.S.
dollars. Dividend income will be a secondary consideration when making
investment decisions.

The Fund considers a company to be a Japanese company if its securities are
principally traded in the capital markets of Japan (both on an exchange or
over-the counter); it derives at least 50% of its total revenues from either
goods produced or services rendered in Japan or from sales made in Japan,
regardless of where the securities of such company are primarily traded; or it
is organized under the laws of, and with a principal office in, Japan. The Fund
considers a Japanese company to be a small Japanese company if the company has a
market capitalization in the bottom quartile of the companies traded on the
Japanese capital markets.

The Manager believes that Japanese industry is in the process of deregulation
and restructuring. The Fund is designed to provide an opportunity to participate
in the dynamic structural changes in the Japanese industrial system through
investment in higher growth companies that can be expected to benefit from these
changes. The Fund will seek to identify and invest in Japanese issuers that are
showing or are expected to show a rapid or high rate of growth, based on
comparisons with Japanese or non-Japanese companies in the same industry or
other considerations. The Fund will also invest in Japanese companies that the
Manager believes are undervalued based on price/earnings ratios, comparisons
with Japanese or non-Japanese companies or other factors. There are special
risks involved with investing in the Fund. For information on risks, see
"Portfolio Securities," "Risk Considerations" and the Statement of Additional
Information.

The Fund invests primarily in common stock but also may invest in other types of
equity and equity derivative securities. It also may invest up to 35% of its
total assets in high-yield debt securities, including up to 5% in high-yield
debt securities rated below investment grade (also known as "junk bonds"). The
debt securities may be dollar-denominated US securities or debt securities of
companies, governmental entities or political subdivisions of Japan. See
"Portfolio Securities" and "Risk Considerations." During the two-to-three month
period following the commencement of the Fund's operations, the Fund may have
its assets invested substantially in cash and cash equivalents.

From time to time, the Fund may hedge part or all of its exposure to the
Japanese yen, thereby reducing or substantially eliminating any favorable or
unfavorable impact of changes in the value of the yen in relation to the U.S.
dollar.

The Fund is managed by the Manager's International Growth Team, whose members
are John D. Boich and Oscar A. Castro. See "Management of the Fund."

Portfolio Securities

Equity Securities

The Fund emphasizes investments in common stock. The Fund may also invest in
other types of equity securities (such as preferred stocks or convertible
securities) and equity derivative securities.

Depositary Receipts, Convertible Securities and Securities Warrants

The Fund may invest in ADRs, EDRs and GDRs and convertible securities which the
Manager regards as a form of equity security. The Fund may also invest up to 5%
of its net assets in warrants, including up to 2% of net assets for those not
listed on a securities exchange.

<PAGE>

Privatizations

The Fund believes that foreign government programs of selling interests in
government-owned or controlled enterprises ("privatizations") may represent
opportunities for significant capital appreciation, and the Fund may invest in
privatizations. The ability of U.S. entities, such as the Fund, to participate
in privatizations may be limited by local law, or the terms of participating may
be less advantageous than for local investors. There can be no assurance that
privatization programs will be successful.

Special Situations

The Fund believes that carefully selected investments in joint ventures,
cooperatives, partnerships, private placements, unlisted securities and similar
vehicles (collectively, "special situations") could enhance its capital
appreciation potential. The Fund also may invest in certain types of vehicles or
derivative securities that represent indirect investments in foreign markets or
securities in which it is impractical for the Fund to invest directly.
Investments in special situations may be illiquid, as determined by the Manager
based on criteria reviewed by the Board. The Fund does not invest more an 15% of
its net assets in illiquid investments, including special situations.

Investment Companies

The Fund may invest up to 10% of its total assets in shares of other investment
companies investing exclusively in securities in which it may otherwise invest.
Because of restrictions on direct investments by U.S. entities in certain
countries, other investment companies may provide the most practical or only way
for the Fund to invest in certain markets. Such investments may involve the
payment of substantial premiums above the net asset value of those investment
companies' portfolio securities and are subject to limitations under the
Investment Company Act. The Fund also may incur tax liability to the extent it
invests in the stock of a foreign issuer that is a "passive foreign investment
company" regardless of whether such "passive foreign investment company" makes
distributions to the Fund. See the Statement of Additional Information. The Fund
does not intend to invest in other investment companies unless, in the Manager's
judgment, the potential benefits exceed associated costs. As a shareholder in an
investment company, the Fund bears its ratable share of that investment
company's expenses, including advisory and administration fees.

Debt Securities

The Fund may purchase debt securities that complement its objective of capital
appreciation through anticipated favorable changes in relative foreign exchange
rates, in relative interest rate levels, or in the creditworthiness of issuers.
In selecting debt securities, the Manager seeks out good credits and analyzes
interest rate trends and specific developments that may affect individual
issuers. As an operating policy which may be changed by the Board, the Fund will
not invest more than [25%] of its total assets in debt securities rated lower
than investment grade. Subject to this limitation, the Fund may invest in any
debt security, including securities in default. After its purchase by the Fund a
debt security may cease to be rated or its rating may be reduced below that
required for purchase by the Fund. A security downgraded below the minimum level
may be retained if determined by the Manager and the Board to be in the best
interests of the Fund. See "Risk Considerations."

In addition to traditional corporate, government and supranational debt
securities, the Fund may invest in external (i.e., to foreign lenders) debt
obligations issued by the governments, governmental entities and companies of
Latin American countries. The percentage distribution between equity and debt
will vary from country to country based on anticipated trends in inflation and
interest rates; expected rates of economic and corporate profits growth; changes
in government policy; stability, solvency and expected trends of government
finances; and conditions of the balance of payments and terms of trade.

U.S. Government Securities

The Fund may invest in fixed rate and floating or variable rate U.S. government
securities. Short-term U.S. government securities generally are considered to be
among the safest short-term investments. However, the U.S. government does not
guarantee the net asset value of the Fund's shares.

Other Investment Practices

The Fund also may engage in the investment practices described below, each of
which may involve certain special risks. The Statement of Additional
Information, under the heading "Investment Objective and Policies of the Fund,"
contains more detailed information about certain of these practices, including
limitations designed to reduce risks.

Repurchase Agreements

<PAGE>

the same security at a specified time and price. The repurchase price reflects
an agreed-upon rate of return not determined by the coupon rate on the
underlying security. Under the Investment Company Act, repurchase agreements are
considered to be loans by the Fund and must be fully collateralized by cash,
letters of credit, U.S. government securities or other high-grade liquid debt or
equity securities ("collateral assets"). If the seller defaults on its
obligation to repurchase the underlying security, the Fund may experience delay
or difficulty in exercising its rights to realize upon the security, may incur a
loss if the value of the security declines and may incur disposition costs in
liquidating the security.

Borrowing

The Fund may borrow money from banks and engage in reverse repurchase
transactions, in an amount not to exceed one-third of the value of its total
assets to meet temporary or emergency purposes, and the Fund may pledge its
assets in connection with such borrowings. The Fund may not purchase securities
if such borrowings exceed 10% of its total assets.

Reverse Repurchase Agreements

The Fund may enter into reverse repurchase agreements. In a reverse repurchase
agreement, the Fund sells to a financial institution a security that it holds
and agrees to repurchase the same security at an agreed-upon price and date.

Leverage

The Fund may leverage its portfolio to increase total return. Although leverage
creates an opportunity for increased income and gain, it also creates special
risk considerations. For example, leveraging may magnify changes in the net
asset values of the Fund's shares and in the yield on its portfolio. Although
the principal of such borrowings will be fixed, the Fund's assets may change in
value while the borrowing is outstanding. Leveraging creates interest expenses
that can exceed the income from the assets retained.

Securities Lending

The Fund may lend securities to brokers, dealers and other financial
organizations. These loans may not exceed the maximum percentage permitted by
law or the SEC, which currently is 30% of the Fund's total assets. Each
securities loan is collateralized with collateral assets in an amount at least
equal to the current market value of the loaned securities, plus accrued
interest. There is a risk of delay in receiving collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the borrower
of the securities fail financially.

Hedging and Risk Management Practices

In seeking to protect against the effect of adverse changes in financial markets
or against currency exchange rate or interest rate changes that are adverse to
the present or prospective positions of the Fund, the Fund may employ certain
risk management practices using certain derivative securities and techniques
(known as Derivatives). Markets in some countries currently do not have
instruments available for hedging transactions. To the extent that such
instruments do not exist, the Manager may not be able to hedge its investment
effectively in such countries. Furthermore, the Fund engages in hedging
activities only when the Manager deems it to be appropriate and does not
necessarily engage in hedging transactions with respect to each investment.

Hedging transactions involve certain risks. While the Fund may benefit from the
use of hedging positions, unanticipated changes in interest rates or securities
prices may result in poorer overall performance for the Fund than if it had not
entered into a hedging position. If the correlation between a hedging position
and a portfolio position is not properly protected, the desired protection may
not be obtained and the Fund may be exposed to risk of financial loss. In
addition, the Fund pays commissions and other costs in connection with such
investments.

Forward Currency Contracts

A forward currency contract is individually negotiated and privately traded by
currency traders and their customers and creates an obligation to purchase or
sell a specific currency for an agreed-upon price at a future date. The Fund
normally conducts its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate in the foreign currency exchange market at
the time of the transaction, or through entering into forward contracts to
purchase or sell foreign currencies at a future date. The Fund generally does
not enter into forward contracts with terms greater than one year.

<PAGE>

than one-third of total assets committed to such contracts (unless it owns the
currency that it is obligated to deliver or has caused its custodian to
segregate segregable assets having a value sufficient to cover its obligations).
Although forward contracts are used primarily to protect the Fund from adverse
currency movements, they involve the risk that currency movements will not be
accurately predicted.

Options on Securities, Securities Indices and Currencies

The Fund may purchase put and call options on securities and currencies traded
on U.S. exchanges and, to the extent permitted by law, foreign exchanges, as
well as in the over-the-counter market. The Fund may purchase call options on
securities which it intends to purchase (or on currencies in which those
securities are denominated) in order to limit the risk of a substantial increase
in the market price of such security (or an adverse movement in the applicable
currency. The Fund may purchase put options on particular securities (or on
currencies in which those securities are denominated) in order to protect
against a decline in the market value of the underlying security below the
exercise price less the premium paid for the option (or an adverse movement in
the applicable currency relative to the U.S. dollar). Put options allow the Fund
to protect unrealized gain in an appreciated security that it owns without
selling that security. Prior to expiration, most options are expected to be sold
in a closing sale transaction. Profit or loss from the sale depends upon whether
the amount received is more or less than the premium paid plus transactions
costs.

The Fund also may purchase put and call options on stock indices in order to
hedge against risks of stock market or industry-wide stock price fluctuations.
The Fund may purchase options on currencies in order to hedge its positions in a
manner similar to its use of forward foreign exchange contracts and futures
contracts on currencies.

Futures and Options on Futures

To protect against the effect of adverse changes in interest rates, the Fund may
purchase and sell interest rate futures contracts. An interest rate futures
contract is an agreement to purchase or sell debt securities, usually U.S.
government securities, at a specified date and price. In addition, the Fund may
purchase and sell put and call options on interest rate futures contracts in
lieu of entering into the underlying interest rate futures contracts. The Fund
will have collateral assets equal to the purchase price of the portfolio
securities represented by the underlying interest rate futures contracts it has
an obligation to purchase.

The Fund does not enter into any futures contracts or related options if the sum
of initial margin deposits on futures contracts, related options and premiums
paid for any such related options would exceed 5% of its total assets. The Fund
does not purchase futures contracts or related options if, as a result, more
than one-third of its total assets would be so invested.

Hedging Considerations

Hedging transactions involve certain risks. While the Fund may benefit from the
use of hedging transactions, unanticipated changes in interest rates or
securities prices may result in poorer overall performance for the Fund than if
it had not entered into a hedging position. If the correlation between a hedging
position and a portfolio position is not properly protected, the desired
protection may not be obtained and the Fund may be exposed to risk of financial
loss. In addition, the Fund pays commissions and other costs in connection with
such investments.

Illiquid Securities

The Fund may not invest more than 15% of its net assets in illiquid securities.
The Fund treats any securities subject to restrictions on repatriation for more
than seven days and securities issued in connection with foreign debt conversion
programs that are restricted as to remittance of invested capital or profit as
illiquid. The Fund also treats repurchase agreements with maturities in excess
of seven days as illiquid. Illiquid securities do not include securities that
meet the requirements of Rule 144A under the Securities Act of 1933 and that,
subject to the review by the Board and guidelines adopted by the Board, the
Manager has determined to be liquid.

Defensive Investments and Portfolio Turnover

Notwithstanding its investment objective, the Fund may adopt up to a 100% cash
or cash equivalent position for temporary defensive purposes to protect against
erosion of its capital base. Depending upon the Manager's analysis of the
various markets and other considerations, all or part of the assets of the Fund
may be held in cash and cash equivalents (denominated in U.S. dollars or foreign
currencies), such as U.S. government securities or obligations issued or
guaranteed by the government of a foreign country or by an international
organization designed or supported by multiple foreign governmental entities to
promote economic reconstruction or development, high-quality commercial paper,
time deposits, savings accounts, certificates of deposit, bankers' acceptances
and repurchase agreements with respect to all of the foregoing. Such investments

also may be made for temporary purposes pending investment in other securities
and following substantial new investment in the Fund.

<PAGE>

Portfolio securities are sold whenever the Manager believes it appropriate,
regardless of how long the securities have been held. The Manager therefore
changes the Fund's investments whenever it believes doing so will further the
Fund's investment objective or when it appears that a position of the desired
size cannot be accumulated. Portfolio turnover generally involves some expense
to the Fund, including brokerage commissions, dealer mark-ups and other
transaction costs, and may result in the recognition of capital gains that may
be distributed to shareholders. Portfolio turnover in excess of 100% is
considered high and increases such costs. The annual portfolio turnover for the
Fund is expected to be approximately 175%. Even if the portfolio turnover for
the Fund is in excess of 100%, the Fund would not consider portfolio turnover as
a limiting factor.

Investment Restrictions

The investment objective of the Fund is fundamental and may not be changed
without shareholder approval, but unless otherwise stated, the Fund's other
investment policies may be changed by the Board. If there is a change in the
investment objective or policies of the Fund, shareholders should consider
whether the Fund remains an appropriate investment in light of their
then-current financial positions and needs. The Fund is subject to additional
investment policies and restrictions described in the Statement of Additional
Information, some of which are fundamental.

The Fund has reserved the right, if approved by the Board, to convert in the
future to a "feeder" fund that would invest all of its assets in a "master" fund
having substantially the same investment objective, policies and restrictions.
At least 30 days' prior written notice of any such action would be given to all
shareholders if and when such a proposal is approved, although no such action
has been proposed as of the date of this Prospectus.

Risk Considerations

Small Companies

The Fund may make investments in smaller companies that may benefit from the
development of new products and services. Such smaller companies may present
greater opportunities for capital appreciation but may involve greater risk than
larger, more mature issuers. Such smaller companies may have limited product
lines, markets or financial resources, and their securities may trade less
frequently and in more limited volume than those of larger, more mature
companies. As a result, the prices of their securities may fluctuate more than
those of larger issuers.

Concentration in Japanese Securities

The Fund concentrates its investments in companies that have their principal
activities in Japan. Consequently, the Fund's share value may be more volatile
than that of mutual funds not sharing this geographic concentration. The value
of the Fund's shares may vary in response to political and economic factors
affecting companies in Japan. The Fund should be considered a vehicle for
diversification, but the Fund itself is not diversified.

Securities in Japan are denominated and quoted in yen. Yen are fully convertible
and transferable based on floating exchange rates into all readily convertible
currencies, without administrative or legal restrictions for both non-residents
and residents of Japan. In determining the net asset value of shares of the
Fund, assets or liabilities initially expressed in terms of Japanese yen will be
translated into U.S. dollars at the current selling rate of Japanese yen against
U.S. dollars. As a result, in the absence of a successful currency hedge, the
value of the Fund's assets as measured in U.S. dollars may be affected favorably
or unfavorably by fluctuations in the value of Japanese yen relative to the U.S.
dollar.

A significant portion of the Fund may be invested in securities traded through
JASDAQ. JASDAQ traded securities can be volatile, which may result in a Fund's
net asset value fluctuating in response. Trading of equity securities through
the JASDAQ market is conducted by securities firms in Japan, primarily through
an organization which acts as a "matching agent," as opposed to a recognized
stock exchange. Consequently, securities traded through JASDAQ may, from time to
time, and especially in falling markets, become illiquid and experience
short-term price volatility and wide spreads between bid and offer prices. This
combination of limited liquidity and price volatility may have an adverse effect
on the investment performance of the Fund. In periods of rapid price increases,
the limited liquidity of JASDAQ restricts the Fund's ability to adjust its
portfolio quickly in order to take full advantage of a significant market
increase, and conversely, during periods of rapid price declines, it restricts
the ability of the Fund to dispose of securities quickly in order to realize
gains previously made or to limit losses on securities held in its portfolio. In
addition, although JASDAQ has generally experienced sustained growth in
aggregate market capitalization and trading volume, there have been periods in
which aggregate market capitalization and trading volume have declined. The
Frontier Market is expected to present greater liquidity, volatility and trading
considerations than JASDAQ.

<PAGE>

profits of 10 yen per share (approximately $.08 per share as of February 14,
1997). JASDAQ has generally attracted small growth companies or companies whose
major shareholders wish to sell only a small portion of the company's equity.

The Frontier Market is a second over-the-counter market and is under the
jurisdiction of JASDAQ, which is overseen by the Japanese Securities and
Exchange Commission. The Frontier Market has less stringent entry requirements
than those described above for JASDAQ and is designed to enable early stage
companies access to capital markets. Frontier Market companies need not have a
history of earnings, provided their spending on research and development equals
at least 3% of net sales. In addition, companies traded through the Frontier
Market are not required to have 2 million shares outstanding at the time of
registration. As a result, investments in companies traded through the Frontier
Market may involve a greater degree of risk than investments in companies traded
through JASDAQ. The Frontier Market was created in July 1995, and as of the date
of this Prospectus, a limited number of issues were traded through this market.

The decline in the Japanese securities markets since 1989 has contributed to a
weakness in the Japanese economy, and the impact of a further decline cannot be
ascertained. The common stocks of many Japanese companies continue to trade at
high price-earnings ratios in comparison with those in the United States, even
after the recent market decline. Differences in accounting methods make it
difficult to compare the earnings of Japanese companies with those of companies
in other countries, especially the United States.

Japan is largely dependent on foreign economies for raw materials. International
trade is important to Japan's economy, as exports provide the means to pay for
many of the raw materials it must import. Because of the concentration of
Japanese exports in highly visible products such as automobiles, machine tools
and semiconductors, and the large trade surpluses ensuing therefrom, Japan has
entered a difficult phase in its relations with its trading partners,
particularly with respect to the United States, with whom the trade imbalance is
the greatest.

Japan has a parliamentary form of government. In 1993, a coalition government
was formed which, for the first time since 1955, did not include the Liberal
Democratic Party. Since mid-1993, there have been several changes in leadership
in Japan. What, if any, effect the current political situation will have on
prospective regulatory reforms on the economy in Japan cannot be predicted.
Recent and future developments in Japan and neighboring Asian countries may lead
to changes in policy that might adversely affect the Funds investing there. For
additional information, see "Japan and its Securities Markets" in the Statement
of Additional Information.

Non-Diversified Status

The Fund is classified as a non-diversified investment company under the 1940
Act, which means that the Fund is not limited by the 1940 Act in the proportion
of its assets that it may invest in the obligations of a single issuer. The Fund
will, however, comply with diversification requirements imposed by the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company. As a non-diversified investment company, the Fund may invest
a greater proportion of its assets in the obligations of a small number of
issuers and, as a result, may be subject to greater risk with respect to
portfolio securities. To the extent that a Fund assumes large positions in the
securities of a small number of issuers, its return may fluctuate to a greater
extent than that of a diversified company as a result of changes in the
financial condition or in the market's assessment of the issuers.

Foreign Securities

The Fund has the right to purchase securities in foreign countries. Accordingly,
shareholders should consider carefully the substantial risks involved in
investing in securities issued by companies and governments of foreign nations,
which are in addition to the usual risks of loss inherent in domestic
investments.

Foreign investments involve the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations (including,
for example, withholding taxes on interest and dividends) or other taxes imposed
with respect to investments in foreign nations, foreign exchange controls (which
may include suspension of the ability to transfer currency from a given country
and repatriation of investments), default in foreign government securities, and
political or social instability or diplomatic developments that could adversely
affect investments. In addition, there is often less publicly available
information about foreign issuers than those in the U.S. Foreign companies are
often not subject to uniform accounting, auditing and financial reporting
standards. Further, the Fund may encounter difficulties in pursuing legal
remedies or in obtaining judgments in foreign courts. Additional risk factors,
including use of domestic and foreign custodian banks and depositories, are
described elsewhere in the Prospectus and in the Statement of Additional
Information.

<PAGE>

entered into a contract to sell the security. In certain countries, there is
less government supervision and regulation of business and industry practices,
stock exchanges, brokers, and listed companies than in the U.S. The securities
markets of many of the countries in which the Fund may invest may also be
smaller, less liquid, and subject to greater price volatility than those in the
U.S.

Because the securities owned by the Fund may be denominated in foreign
currencies, the value of such securities will be affected by changes in currency
exchange rates and in exchange control regulations, and costs will be incurred
in connection with conversions between currencies. A change in the value of a
foreign currency against the U.S. dollar results in a corresponding change in
the U.S. dollar value of the Fund's securities denominated in the currency. Such
changes also affect the Fund's income and distributions to shareholders. The
Fund may be affected either favorably or unfavorably by changes in the relative
rates of exchange between the currencies of different nations, and the Fund may
therefore engage in foreign currency hedging strategies. Such strategies,
however, involve certain transaction costs and investment risks, including
dependence upon the Manager's ability to predict movements in exchange rates.

Some countries in which the Fund may invest may also have fixed or managed
currencies that are not freely convertible at market rates into the U.S. dollar.
Certain currencies may not be internationally traded. A number of these
currencies have experienced steady devaluation relative to the U.S. dollar, and
such devaluations in the currencies may have a detrimental impact on the Fund.

Many countries in which the Fund may invest have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuation in inflation rates may have negative effects on certain
economies and securities markets. Moreover, the economies of some countries may
differ favorably or unfavorably from the U.S. economy in such respects as the
rate of growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments.

Certain countries also limit the amount of foreign capital that can be invested
in their markets and local companies, creating a "foreign premium" on capital
investments available to foreign investors such as the Fund. The Fund may pay a
"foreign premium" to establish an investment position which it cannot later
recoup because of changes in that country's foreign investment laws.

Lower Quality Debt

The Fund is authorized to invest in medium-quality (rated or equivalent to BBB
by S&P or Fitch's or Baa by Moody's) and in limited amounts of high-risk, lower
quality debt securities (i.e., securities rated below BBB or Baa) or, if
unrated, deemed to be of equivalent investment quality as determined by the
Manager. Medium quality debt securities have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than with higher
grade debt securities.

As an operating policy, which may be changed by the Board without shareholder
approval, the Fund does not invest more than 5% of its total assets in debt
securities rated lower than BBB by S&P or Baa by Moody's or, if unrated, deemed
to be of comparable quality as determined by the Manager using guidelines
approved by the Board. The Board may consider a change in this operating policy
if, in its judgment, economic conditions change such that a higher level of
investment in high-risk, lower quality debt securities would be consistent with
the interests of the Fund and its shareholders. Unrated debt securities are not
necessarily of lower quality than rated securities but may not be attractive to
as many buyers. Regardless of rating levels, all debt securities considered for
purchase (whether rated or unrated) are analyzed by the Manager to determine, to
the extent reasonably possible, that the planned investment is sound. From time
to time, the Fund may purchase defaulted debt securities if, in the opinion of
the Manager, the issuer may resume interest payments in the near future.

Interest Rates

The market value of debt securities sensitive to prevailing interest rates is
inversely related to actual changes in interest rates. That is, a decline in
interest rates produces an increase in the market value of these securities
while an increase in interest rates produces a decrease. Moreover, the longer
the remaining maturity of a security, the greater the effect of interest rate
change. Changes in the ability of an issuer to make payments of interest and
principal and in the market's perception of its creditworthiness also affect the
market value of that issuer's debt securities.

Management Of The Fund

The Montgomery Funds II has a Board of Trustees that establishes the Fund's
policies and supervises and reviews its management. Day-to-day operations of the
Fund are administered by the officers of the Trust and by the Manager pursuant
to the terms of an investment management agreement with the Fund.

<PAGE>

Montgomery Asset Management, L.P., is the Fund's Manager. The Manager, a
California limited partnership, was formed in 1990 as an investment adviser
registered as such with the SEC under the Investment Advisers Act of 1940, as
amended, and since then has advised private accounts as well as the Fund. Its
general partner is Montgomery Asset Management, Inc., and its sole limited
partner is an affiliate of Montgomery Securities, the Fund's Distributor. Under
the Investment Company Act, both Montgomery Asset Management, Inc. and
Montgomery Securities may be deemed control persons of the Manager. Although the
operations and management of the Manager are independent from those of
Montgomery Securities, the Manager may draw upon the research and administrative
resources of Montgomery Securities in its discretion and consistent with
applicable regulations.

Portfolio Managers

John D. Boich is a managing director and senior portfolio manager. From 1990 to
1993, he was vice president and portfolio manager at The Boston Company
Institutional Investors Inc. From 1989 to 1990, he was the founder and
co-manager of The Common Goal World Fund, a global equity partnership. From 1987
to 1989, Mr. Boich worked as a financial adviser with Prudential-Bache
Securities and E.F. Hutton & Company.

Oscar A. Castro is a managing director and senior portfolio manager. Before
joining the Manager, he was vice president/portfolio manager at G.T. Capital
Management, Inc. from 1991 to 1993. From 1989 to 1990, he was co-founder and
co-manager of The Common Goal World Fund, a global equity partnership. From 1987
to 1989, he was deputy portfolio manager/analyst at Templeton International.

The Manager provides the Fund with advice on buying and selling securities,
manages the Fund's investments, including the placement of orders for portfolio
transactions, furnishes the Fund with office space and certain administrative
services, and provides personnel needed by the Fund with respect to the
Manager's responsibilities under the Manager's Investment Management Agreement
with the Fund. The Manager also compensates the members of the Board who are
interested persons of the Manager, and assumes the cost of printing prospectuses
and shareholder reports for dissemination to prospective investors. As
compensation, the Fund pays the Manager a monthly management fee (accrued daily
but paid when requested by the Manager) based upon the value of its average
daily net assets, according to the following table.

Average Daily Net Assets Annual Rate
- -------------------------------------- -------------------------- --------------
Montgomery Japan Small Cap Fund First $500 million 1.25%
Next $500 million 1.10%
Over $1 billion 1.00%
- -------------------------------------- -------------------------- --------------

The Manager also 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 the annual rate of seven one-hundredths of one percent (0.07%) of
average daily net assets (0.06% of daily net assets over $500 million).

The Fund is responsible for its own operating expenses including, but not
limited to: the Manager's fees; taxes, if any; brokerage and commission
expenses, if any; interest charges on any borrowings; transfer agent,
administrator, custodian, legal and auditing fees; shareholder servicing fees
including fees to third party servicing agents; fees and expenses of Trustees
who are not interested persons of the Manager; salaries of certain personnel;
costs and expenses of calculating its daily net asset value; costs and expenses
of accounting, bookkeeping and recordkeeping required under the Investment
Company Act; insurance premiums; trade association dues; fees and expenses of
registering and maintaining registration of its shares for sale under federal
and applicable state securities laws; all costs associated with shareholders
meetings and the preparation and dissemination of proxy materials, except for
meetings called solely for the benefit of the Manager or its affiliates;
printing and mailing prospectuses, statements of additional information and
reports to shareholders; and other expenses relating to the Fund's operations,
plus any extraordinary and nonrecurring expenses that are not expressly assumed
by the Manager.

The Manager has agreed to reduce its management fee if necessary to keep total
annual operating expenses at or below one and ninety hundredths of one percent
(1.90%) of the Fund's average net assets. The Manager also may voluntarily
reduce additional amounts to increase the return to the Fund's investors. The
Manager may terminate these voluntary reductions at any time. Any reductions
made by the Manager in its fees are subject to reimbursement by the Fund within
the following three years, provided that the Fund is able to effect such
reimbursement and remain in compliance with applicable expense limitations. The
Manager generally seeks reimbursement for the oldest reductions and waivers
before payment by the Fund for fees and expenses for the current year.

In addition, the Manager may elect to absorb operating expenses that the Fund is
obligated to pay in order to increase the return to the Fund's investors. To the
extent the Manager performs a service or assumes an operating expense for which
the Fund is obligated to pay and the performance of such service or payment of
such expense is not an obligation of the Manager under the Investment Management
Agreement, the Manager is entitled to seek reimbursement from the Fund for the
Manager's costs incurred in rendering such service or assuming such expense. The
Manager, out of its own funds, also may compensate broker-dealers who distribute
the Fund's shares as well as other service providers of shareholder and

<PAGE>

administrative services. In addition, the Manager, out of its own funds, may
sponsor seminars and educational programs on the Fund for financial
intermediaries and shareholders.

The Manager considers a number of factors in determining which brokers or
dealers to use for the Fund's portfolio transactions. While these factors are
more fully discussed in the Statement of Additional Information, they include,
but are not limited to, reasonableness of commissions, quality of services and
execution and availability of research that the Manager may lawfully and
appropriately use in its investment management and advisory capacities. Provided
the Fund receives prompt execution at competitive prices, the Manager also may
consider sale of the Fund's shares as a factor in selecting broker-dealers for
the Fund's portfolio transactions. It is anticipated that Montgomery Securities
may act as one of the Fund's brokers in the purchase and sale of portfolio
securities and, in that capacity, will receive brokerage commissions from the
Fund. The Fund will use Montgomery Securities as its broker only when, in the
judgment of the Manager and pursuant to review by the Board, Montgomery
Securities will obtain a price and execution at least as favorable as that
available from other qualified brokers. See "Execution of Portfolio
Transactions" in the Statement of Additional Information for further information
regarding Fund policies concerning execution of portfolio transactions.

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, serves as the master transfer agent for the Fund (the "Master Transfer
Agent") and performs certain recordkeeping and accounting functions. The Master
Transfer Agent delegates certain transfer agent functions to DST Systems, Inc.,
P.O. Box 419073, Kansas City, Missouri 64141-6073, the Fund's transfer agent
(the "Transfer Agent"). Morgan Stanley Trust Company, located at One Pierrepont
Plaza, Brooklyn, New York 11201, serves as the Fund's principal custodian (the
"Custodian").

How To Contact The Fund

For information on the Fund or your account, call a Montgomery Shareholder
Service Representative at:

(800) 572-3863

Mail your completed application, any checks, investment or redemption
instructions and correspondence to:

Regular Mail Express Mail or Overnight Service
The Montgomery Funds The Montgomery Funds
c/o DST Systems, Inc. c/o DST Systems, Inc.
P.O. Box 419073 1004 Baltimore St.
Kansas City, MO 64141-6073 Kansas City, MO 64105

Visit the Montgomery World Wide Web site at:

www.xperts.montgomery.com/1

How To Invest In The Fund

The Fund's shares are offered directly to the public, with no sales load, at
their next-determined net asset value after receipt of an order with payment.
The Fund's shares are offered for sale by Montgomery Securities, the Fund's
Distributor, 600 Montgomery Street, San Francisco, California 94111, (800)
572-3863, and through selected securities brokers and dealers.

If an order, together with payment in proper form, is received by the Transfer
Agent, Montgomery Securities or certain administrators of 401(k) and other
retirement plans by 4:00 p.m., New York time, on any day that the New York Stock
Exchange ("NYSE") is open for trading, Fund shares will be purchased at the
Fund's next-determined net asset value. Orders for Fund shares received after
the Fund's cutoff times will be purchased at the next-determined net asset value
after receipt of the order.

The minimum initial investment in the Fund is $1,000 (including IRAs) and $100
for subsequent investments. The Manager or the Distributor, in its discretion,
may waive these minimums. The Fund does not accept third party checks or cash
investments. Checks must be in U.S. dollars and, to avoid fees and delays, drawn
only on banks located in the U.S. Purchases may also be made in certain
circumstances by payment of securities. See the Statement of Additional
Information for further details.

<PAGE>

Initial Investments

Minimum Initial Investment (including IRAs): $1,000

Initial Investments by Check

o Complete the Account Application. Tell us in which Fund(s) you want to
invest and make your check payable to The Montgomery Funds.

o A charge may be imposed on checks that do not clear.

Initial Investments by Wire

o Call the Transfer Agent to tell them you intend to make your initial
investment by wire. Provide the Transfer Agent with your name, dollar
amount to be invested and Fund(s) in which you want to invest. They will
provide you with further instructions to complete your purchase.
Complete information regarding your account must be included in all wire
instructions to ensure accurate handling of your investment.

o Request your bank to transmit immediately available funds by wire for
purchase of shares in your name to the following:

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 Japan Small Cap Fund

o Your bank may charge a fee for any wire transfers.

o The Fund and the Distributor each reserve the right to reject any
purchase order in whole or in part.

Subsequent Investments

Minimum Subsequent Investment (including IRAs): $100

Subsequent Investments by Check

o Make your check payable to The Montgomery Funds. Enclose an investment
stub with your check. If you do not have an investment stub, mail your
check with written instructions indicating the Fund name and account
number to which your investment should be credited.

o A charge may be imposed on checks that do not clear.

Subsequent Investments by Wire

o You do not need to contact the Transfer Agent prior to making subsequent
investments by wire. Instruct your bank to wire funds to the Transfer
Agent's affiliated bank by using the bank wire information under
"Initial Investments by Wire."

Subsequent Investments by Telephone

o Shareholders are automatically eligible to make telephone purchases. To
make a purchase, call the Transfer Agent at (800) 572-3863 before the
Fund cutoff time. Shares for IRAs may not be purchased by phone.

o The maximum telephone purchase is an amount up to five times your
account value on the previous day.

<PAGE>

o Payments for shares purchased must be received by the Transfer Agent
within three business days after the purchase request. Write your
confirmed purchase number on your check or include it in your wire
instructions.

o You should do one of the following to ensure payment is received in
time:

o Transfer funds directly from your bank account by sending a letter
and a voided check or deposit slip (for a savings account) to the
Transfer Agent.

o Send a check by overnight or 2nd day courier service.

o Instruct your bank to wire funds to the Transfer Agent's affiliated
bank by using the bank wire information under the section titled
"Initial Investments by Wire."

Automatic Account Builder ("AAB")

o AAB will be established on existing accounts only. You may not use an
AAB investment to open a new account. The minimum automatic investment
amount is the Fund's subsequent investment minimum.

o Your bank must be a member of the Automated Clearing House.

o To establish AAB, attach a voided check (checking account) or preprinted
deposit slip (savings account) from your bank account to your Montgomery
account application or your letter of instruction. Investments will
automatically be transferred into your Montgomery account from your
checking or savings account.

o Investments may be transferred either monthly or quarterly on or up to
two business days before the 5th or 20th day of the month. If no day is
specified on your account application or your letter of instruction, the
20th of each month will be selected.

o You should allow 20 business days for this service to become effective.

o You may cancel your AAB at any time by sending a letter to the Transfer
Agent. Your request will be processed upon receipt.

Payroll Deduction

o Investments through payroll deduction will be established on existing
accounts only. You may not use payroll deduction to open a new account.
The minimum payroll deduction amount for the Fund is $100 per payroll
deduction period.

o You may automatically deposit a designated amount of your paycheck
directly into a Montgomery Fund account.

o Please call the Transfer Agent to receive instructions to establish this
service.

Telephone Transactions

You agree to reimburse the Fund for any expenses or losses incurred in
connection with transfers from your accounts, including any caused by your
bank's failure to act in accordance with your request or its failure to honor
your debit. If your bank makes erroneous payments or fails to make payment after
shares are purchased on your behalf, any such purchase may be canceled and this
privilege terminated immediately. This privilege may be discontinued at any time
by the Fund upon 30-days' written notice or at any time by you by written notice
to the Fund. Your request will be processed upon receipt.

Although Fund shares are priced at the net asset value next-determined after
receipt of a purchase request, shares are not purchased until payment is
received. Should payment not be received when required, the Transfer Agent will
cancel the telephone purchase request and you may be responsible for any losses
incurred by the Fund. The Fund and the Transfer Agent will not be liable for
following instructions communicated by telephone reasonably believed to be
genuine. The Fund employs reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include recording
certain telephone calls, sending a confirmation and requiring the caller to give
a special authorization number or other personal information not likely to be
known by others. The Fund and Transfer Agent may be liable for any losses due to
unauthorized or fraudulent telephone transactions only if such reasonable
procedures are not followed.

<PAGE>

Retirement Plans

Shares of the Fund are available for purchase by any retirement plan, including
Keogh plans, 401(k) plans, 403(b) plans and IRAs. The Fund may be available for
purchase through administrators for retirement plans. Investors who purchase
shares as part of a retirement plan should address inquiries and seek investment
servicing from their plan administrators. Plan administrators may receive
compensation from the Fund for performing shareholder services.

Share Certificates

Share certificates will not be issued by the Fund. All shares are held in
non-certificated form registered on the books of the Fund and the Transfer Agent
for the account of the shareholder.

How To Redeem An Investment In The Fund

The Fund will redeem all or any portion of an investor's outstanding shares upon
request. Redemptions can be made on any day that the NYSE is open for trading.
The redemption price is the net asset value per share next determined after the
shares are validly tendered for redemption and such request is received by the
Transfer Agent or, in the case of repurchase orders, Montgomery Securities or
other securities dealers. Payment of redemption proceeds is made promptly
regardless of when redemption occurs and normally within three days after
receipt of all documents in proper form, including a written redemption order
with appropriate signature guarantee. Redemption proceeds will be mailed or
wired in accordance with the shareholder's instructions. The Fund may suspend
the right of redemption under certain extraordinary circumstances in accordance
with the rules of the SEC. In the case of shares purchased by check and redeemed
shortly after the purchase, the Transfer Agent will not mail redemption proceeds
until it has been notified that the monies used for the purchase have been
collected, which may take up to 15 days from the purchase date. Shares tendered
for redemptions through brokers or dealers (other than the Distributor) may be
subject to a service charge by such brokers or dealers. Procedures for
requesting a redemption are set forth below.

Redeeming by Written Instruction

o Write a letter giving your name, account number, the name of the Fund
from which you wish to redeem and the dollar amount or number of shares
you wish to redeem.

o Signature guarantee your letter if you want the redemption proceeds to
go to a party other than the account owner(s), your predesignated bank
account or if the dollar amount of the redemption exceeds $50,000.
Signature guarantees may be provided by an eligible guarantor
institution such as a commercial bank, an NASD member firm such as a
stock broker, a savings association or national securities exchange.
Contact the Transfer Agent for more information.

o If you do not have a predesignated bank account and want to wire your
redemption proceeds, include a voided check or deposit slip with your
letter. The minimum amount that may be wired is $500 (wire charges, if
any, will be deducted from redemption proceeds). The Fund reserves the
right to permit lesser wire amounts or fees in the Manager's discretion.

Redeeming By Telephone

o Unless you have declined telephone redemption privileges on your account
application, you may redeem shares up to $50,000 by calling the Transfer
Agent before the Fund cutoff time.

o If you included bank wire information on your account application or
made subsequent arrangements to accommodate bank wire redemptions, you
may request that the Transfer Agent wire your redemption proceeds to
your bank account. Allow at least two business days for redemption
proceeds to be credited to your bank account. If you want to wire your
redemption proceeds to arrive at your bank on the same business day
(subject to bank cutoff times), there is a $10 fee. Telephone redemption
privileges will be suspended 30 days after an address change. All
redemption requests during this period must be in writing with a
guaranteed signature.

o Telephone redemption privileges may be cancelled after an account is
opened by instructing the Transfer Agent in writing. Your request will
be processed upon receipt. This service is not available for IRA
accounts.

<PAGE>

appoints a designee on the Account Application or by other written
authorization, the shareholder agrees to be bound by the telephone redemption
instructions given by the shareholder's designee. The Fund may change, modify or
terminate these privileges at any time upon 60-days' notice to shareholders. The
Fund will not be responsible for any loss, damage, cost or expense arising out
of any transaction that appears on the shareholder's confirmation after 30 days
following mailing of such confirmation. See discussion of Fund telephone
procedures and liability under "Telephone Transactions."

Shareholders may experience delays in exercising telephone redemption privileges
during periods of abnormal market activity. During periods of volatile economic
or market conditions, shareholders may wish to consider transmitting redemption
orders by telegram (not available for IRAs) or overnight courier.

Systematic Withdrawal Plan

Under a Systematic Withdrawal Plan, a shareholder with an account value of
$1,000 or more in the Fund may receive (or have sent to a third party) periodic
payments (by check or wire). The minimum payment amount is $100 from the Fund
account. Payments may be made either monthly or quarterly on the 1st of each
month. Depending on the form of payment requested, shares will be redeemed up to
five business days before the redemption proceeds are scheduled to be received
by the shareholder. The redemption may result in the recognition of gain or loss
for income tax purposes.

Small Accounts

Due to the relatively high cost of maintaining smaller accounts, the Fund will
redeem shares from any account if at any time, because of redemptions by the
shareholder, the total value of a shareholder's account is less than $1,000. If
the Fund decides to make an involuntary redemption, the shareholder will first
be notified that the value of the shareholder's account is less than the minimum
level and will be allowed 30 days to make an additional investment to bring the
value of that account at least to the minimum investment required to open an
account before the Fund takes any action.

Exchange Privileges And Restrictions

You may exchange shares from another fund in the Montgomery Funds family with
the same registration, taxpayer identification number and address. An exchange
may result in a recognized gain or loss for income tax purposes. See the
discussion of Fund telephone procedures and limitations of liability under
"Telephone Transactions."

Purchasing and Redeeming Shares by Exchange

o You are automatically eligible to make telephone exchanges with your
Montgomery account.

o Exchange purchases and redemptions will be processed using the
next-determined net asset value (with no sales charge or exchange fee)
after your request is received. Your request is subject to the Fund's
cut-off times.

o Exchange purchases must meet the minimum investment requirements of the
fund you intend to purchase.

o You may exchange for shares of a fund only in states where that
Montgomery fund's shares are qualified for sale and only after you have
reviewed a prospectus of that fund.

o You may not exchange for shares of a Montgomery fund that is not open to
new shareholders unless you have an existing account with that fund.

o Because excessive exchanges can harm a fund's performance, the Trust
reserves the right to terminate your exchange privileges if you make
more than four exchanges out of any one fund during a twelve-month
period. The Fund may also refuse an exchange into a fund from which you
have redeemed shares within the previous 90 days (accounts under common
control and accounts with the same taxpayer identification number will
be counted together). A shareholder's exchanges may be restricted or
refused if the Fund receives, or the Manager anticipates, simultaneous
orders affecting significant portions of the Fund's assets and, in
particular, a pattern of exchanges coinciding with a "market timing"
strategy. The Trust reserves the right to refuse exchanges by any person
or group if, in the Manager's judgment, a fund would be unable to
effectively invest the money in accordance with its investment objective
and policies, or would otherwise be potentially adversely affected.
Although the Trust attempts to provide prior notice to affected
shareholders when it is reasonable to do so, they may impose these
restrictions at any time. The exchange limit may be modified for
accounts in certain institutional retirement plans to conform to plan
exchange limits and U.S. Department of Labor regulations (for those
limits, see plan materials). The Trust reserves the right to terminate
or modify the exchange privileges of Fund shareholders in the future.

<PAGE>

Automatic Transfer Service ("ATS")

You may elect systematic exchanges out of the fixed income funds (which include
the Montgomery Short Government Bond Fund, the Montgomery Government Reserve
Fund, the Montgomery Total Return Bond Fund, the Montgomery Federal Tax-Free
Money Fund, the Montgomery California Tax-Free Intermediate Bond Fund and the
California Tax-Free Money Fund) into the Fund. The minimum exchange is $100.
Periodically investing a set dollar amount into the Fund is also referred to as
dollar-cost averaging because the number of shares purchased will vary depending
on the price per share. Your account with the Fund must meet the applicable
minimum of $1,000. Exchanges out of the fixed income funds are exempt from the
four exchanges limit policy.

Brokers and Other Intermediaries

Investing through Securities Brokers, Dealers and Financial Intermediaries

Investors may purchase shares of the Fund from other selected securities
brokers, dealers or through financial intermediaries such as benefit plan
administrators. Investors should contact these agents directly for appropriate
instructions, as well as information pertaining to accounts and any service or
transaction fees that may be charged by these agents. Purchase orders through
securities brokers, dealers and other financial intermediaries are effected at
the next-determined net asset value after receipt of the order by such agent,
provided the agent transmits such order on a timely basis to the Transfer Agent
so that it is received by 4:00 p.m., New York time, on days that the Fund issues
shares. Orders received after that time will be purchased at the next-determined
net asset value. To the extent that these agents perform shareholder servicing
activities for the Fund, they may receive fees from the Fund for such services.

Redemption Orders Through Brokerage Accounts

Shareholders also may sell shares back to the Fund by wire or telephone through
Montgomery Securities or selected securities brokers or dealers. Shareholders
should contact their securities broker or dealer for appropriate instructions
and for information concerning any transaction or service fee that may be
imposed by the broker or dealer. Shareholders are entitled to the net asset
value next determined after receipt of a redemption order by such broker-dealer,
provided the broker-dealer transmits such order on a timely basis to the
Transfer Agent so that it is received by 4:00 p.m., New York time, on a day that
the Fund redeems shares. Orders received after that time are entitled to the net
asset value next determined after receipt.

How Net Asset Value Is Determined

The net asset value of the Fund is determined once daily as of 4:00 p.m., New
York time, on each day that the NYSE is open for trading. Per-share net asset
value is calculated by dividing the value of the Fund's total net assets by the
total number of the Fund's shares then outstanding.

As more fully described in the Statement of Additional Information, portfolio
securities are valued using current market valuations: either the last reported
sales price or, in the case of securities for which there is no reported last
sale and fixed income securities, the mean between the closing bid and asked
price. Securities for which market quotations are not readily available or which
are illiquid are valued at their fair values as determined in good faith under
the supervision of the Trust's officers, and by the manager and the Pricing
Committee of the Board respectively, in accordance with methods that are
specifically authorized by the Board. Short-term obligations with maturities of
60 days or less are valued at amortized cost as reflecting fair value.

The value of securities denominated in foreign currencies and traded on foreign
exchanges or in foreign markets will be 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 values of
such securities.

Because foreign securities markets may close prior to the time the Fund
determines its net asset values, events affecting the value of portfolio
securities occurring between the time prices are determined and the time the
Fund calculates its net asset values may not be reflected in the Fund's
calculation of net asset values unless the Manager, under supervision of the
Board, determines that a particular event would materially affect the Fund's net
asset values.

Dividends And Distributions

<PAGE>

earned during the one-year period ended October 31 of such calendar year.
Another distribution of any undistributed capital gains may also be made
following the Fund's fiscal year end (June 30). The amount and frequency of Fund
distributions are not guaranteed and are at the discretion of the Board.

Unless investors request cash distributions in writing at least seven business
days prior to the distribution, or on the Account Application, all dividends and
other distributions will be reinvested automatically in additional shares of the
Fund and credited to the shareholder's account at the closing net asset value on
the reinvestment date.

Taxation

The Fund intends to qualify and elect as soon as possible to be treated as a
regulated investment company under Subchapter M of the Code, by distributing
substantially all of its net investment income and net capital gains to its
shareholders and meeting other requirements of the Code relating to the sources
of its income and diversification of assets. Accordingly, the Fund generally
will not be liable for federal income tax or excise tax based on net income
except to the extent its earnings are not distributed or are distributed in a
manner that does not satisfy the requirements of the Code pertaining to the
timing of distributions. If the Fund is unable to meet certain requirements of
the Code, it may be subject to taxation as a corporation. The Fund may also
incur tax liability to the extent it invests in "passive foreign investment
companies." See the Statement of Additional Information.

For federal income tax purposes, any dividends derived from net investment
income and any excess of net short-term capital gain over net long-term capital
loss that investors (other than certain tax-exempt organizations that have not
borrowed to purchase Fund shares) receive from the Fund are considered ordinary
income. Part of the distributions paid by the Fund may be eligible for the
dividends-received deduction allowed to corporate shareholders under the Code.
Distributions of the excess of net long-term capital gain over net short-term
capital loss from transactions of the Fund are treated by shareholders as
long-term capital gains regardless of the length of time the Fund's shares have
been owned. Distributions of income and capital gains are taxed in the manner
described above, whether they are taken in cash or are reinvested in additional
shares of the Fund.

Furthermore, the Manager believes that the operations of the Fund will not
subject the Fund to any Japanese income, capital gains or other taxes except for
withholding taxes on interest and dividends paid to the Fund by Japanese
corporations and securities transaction taxes payable in the event of sales of
portfolio securities in Japan.

The Fund will inform its investors of the source of their dividends and
distributions at the time they are paid, and will promptly after the close of
each calendar year advise investors of the tax status of those distributions and
dividends. Investors (including tax-exempt and foreign investors) are advised to
consult their own tax advisers regarding the particular tax consequences to them
of an investment in shares of the Fund. Additional information on tax matters
relating to the Fund and its shareholders is included in the Statement of
Additional Information.

General Information

The Trust

The Fund is a series of The Montgomery Funds II, a Delaware business trust
organized on September 10, 1993 (the "Trust"). The Trust's Agreement and
Declaration of Trust permits the Board to issue an unlimited number of full and
fractional shares of beneficial interest, $.01 par value, in any number of
series. The assets and liabilities of each series within the Trust are separate
and distinct from those of each other series.

This Prospectus relates only to the Class R shares of the Fund. The Fund has
designated other classes of shares and may in the future designate other classes
of shares for specific purposes.

Shareholder Rights

<PAGE>

solely affecting such class; (d) each class may have different exchange
privileges; and (e) each class may provide for the automatic conversion of that
class into another class. While the Trust is not required and does not intend to
hold annual meetings of shareholders, such meetings may be called by the Board
at its discretion, or upon demand by the holders of 10% or more of the
outstanding shares of the Trust for the purpose of electing or removing
Trustees. Shareholders may receive assistance in communicating with other
shareholders in connection with the election or removal of Trustees pursuant to
the provisions of Section 16(c) of the Investment Company Act.

Performance Information

From time to time, the Fund may publish its total return, such as in
advertisements and communications to investors. Total return information
generally will include the Fund's average annual compounded rate of return over
the most recent four calendar quarters and over the period from the Fund's
inception of operations. The Fund may also advertise aggregate and average total
return information over different periods of time. The Fund's average annual
compounded rate of return is determined by reference to a hypothetical $1,000
investment that includes capital appreciation and depreciation for the stated
period according to a specific formula. Aggregate total return is calculated in
a similar manner, except that the results are not annualized. Total return
figures will reflect all recurring charges against the Fund's income.

Investment results of the Fund will fluctuate over time, and any presentation of
the Fund's total return for any prior period should not be considered as a
representation of what an investor's total return or current yield may be in any
future period.

Legal Opinion

The validity of shares offered by this Prospectus will be passed on by Heller
Ehrman White & McAuliffe, 333 Bush Street, San Francisco, California 94104.

Shareholder Reports and Inquiries

Unless otherwise requested, only one copy of each shareholder report or other
material sent to shareholders will be mailed to each household with accounts
under common ownership and the same address regardless of the number of
shareholders or accounts at that household or address. A confirmation statement
will be mailed to your record address each time you request a transaction except
for pre-authorized automatic investment and redemption services (quarterly). All
transactions are recorded on quarterly account statements which you will receive
at the end of each calendar quarter. Your fourth-quarter account statement will
be a year-end statement, listing all transaction activity for the entire year.
Retain this statement for your tax records.

In general, shareholders who redeemed shares from a qualifying Montgomery
account should expect to receive an Average Cost Statement in February of the
following year. Your statement will calculate your average cost using the
average cost single-category method.

Any questions should be directed to The Montgomery Funds at 800-572-FUND
(800-572-3863).

Backup Withholding Instructions

Shareholders are required by law to provide the Fund with their correct Social
Security or other Taxpayer Identification Number ("TIN"), regardless of whether
they file tax returns. Failure to do so may subject a shareholder to penalties.
Failure to provide a correct TIN or to check the appropriate boxes in the
Account Application and to sign the shareholder's name could result in backup
withholding by the Fund of an amount of federal income tax equal to 31% of
distributions, redemptions, exchanges and other payments made to a shareholder's
account. Any tax withheld may be credited against taxes owed on a shareholder's
federal income tax return.

A shareholder who does not have a TIN should apply for one immediately by
contacting the local office of the Social Security Administration or the IRS.
Backup withholding could apply to payments made to a shareholder's account while
awaiting receipt of a TIN. Special rules apply for certain entities. For
example, for an account established under the Uniform Gifts to Minors Act, the
TIN of the minor should be furnished. If a shareholder has been notified by the
IRS that he or she is subject to backup withholding because he or she failed to
report all interest and dividend income on his or her tax return and the
shareholder has not been notified by the IRS that such withholding will cease,
the shareholder should cross out the appropriate item in the Account
Application. Dividends paid to a foreign shareholder's account by the Fund may
be subject to up to 30% withholding instead of backup withholding.

A shareholder that is an exempt recipient should furnish a TIN and check the
appropriate box. Exempt recipients include certain corporations, certain
tax-exempt entities, tax-exempt pension plans and IRAs, governmental agencies,
financial institutions, registered securities and commodities dealers and
others. For further information, see Section 3406 of the Code and consult with a
tax adviser.

<PAGE>

---------------------------------

This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No salesman, dealer or other person
is authorized to give any information or make any representation other than
those contained in this Prospectus, the Statement of Additional Information, or
in the Fund's official sales literature.

<PAGE>

Glossary

o Cash Equivalents. Cash equivalents are short-term, interest bearing
instruments or deposits and may include, for example, commercial paper,
certificates of deposit, repurchase agreements, bankers' acceptances, U.S.
Treasury bills, bank money market deposit accounts, master demand notes and
money market mutual funds. These consist of high-quality debt obligations,
certificates of deposit and bankers' acceptances rated at least A-1 by S&P or
Prime-1 by Moody's, or the issuer has an outstanding issue of debt securities
rated at least A by S&P or Moody's, or are of comparable quality in the
opinion of the Manager.

o Collateral assets include cash, letters of credit, U.S. government securities
or other high-grade liquid debt or equity securities. Collateral assets are
separately identified and rendered unavailable for investment or sale.

o Convertible security. A convertible security is a fixed income security (a
bond or preferred stock) that may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the
same or a different issuer. Convertible securities are senior to common stock
in a corporation's capital structure but are usually subordinated to similar
non-convertible securities. The price of a convertible security is influenced
by the market value of the underlying common stock.

o Covered call option. A call option is "covered" if the Fund owns the
underlying securities, has the right to acquire such securities without
additional consideration, has collateral assets sufficient to meet its
obligations under the option, or owns an offsetting call option.

o Covered put option. A put option is "covered" if the Fund has collateral
assets with a value not less than the exercise price of the option or holds a
put option on the underlying security.

o Depositary receipts include American depositary receipts ("ADRs"), European
depositary receipts ("EDRs"), global depositary receipts ("GDRs") and other
similar instruments. Depositary receipts are receipts typically issued in
connection with a U.S. or foreign bank or trust company and evidence
ownership of underlying securities issued by a foreign corporation.

o Derivatives include forward currency exchange contracts, currency options,
futures contracts, swaps and options on futures contracts on U.S. government
and foreign government securities and currencies.

o Equity derivative securities include, among other things, options on equity
securities, warrants and future contracts on equity securities.

o Equity swaps. Equity swaps allow the parties to exchange the dividend income
or other components of return on an equity investment (e.g., a group of
equity securities or an index) for a component of return on another
non-equity or equity investment. Equity swaps transitions may be volatile and
may present the Fund with counterparty risks.

o Highly rated debt securities. Debt securities rated within the three highest
grades by Standard & Poor's Corporation ("S&P") (AAA to A), Moody's Investors
Services, Inc. ("Moody's") (Aaa to A) or Fitch Investor Services, Inc.
("Fitch") (AAA to A), or in unrated debt securities deemed to be of
comparable quality by the Manager using guidelines approved by the Board of
Trustees. See the Appendix to the Statement of Additional Information for a
description of these ratings.

o Illiquid securities. The Fund treats any securities subject to restrictions
on repatriation for more than seven days and securities issued in connection
with foreign debt conversion programs that are restricted as to remittance of
invested capital or profit as illiquid. The Fund also treats repurchase
agreements with maturities in excess of seven days as illiquid. Illiquid
securities do not include securities that are restricted from trading on
formal markets for some period of time but for which an active informal
market exists, or securities that meet the requirements of Rule 144A under
the Securities Act of 1933 and that, subject to the review by the Board and
guidelines adopted by the Board, the Manager has determined to be liquid.

o JASDAQ OTC Index. A capitalization weighted index of all Japan stocks traded
over-the-counter except The Bank of Japan and all managed issues. The index
was developed with a base value of 100 as of October 28, 1991.

o Investment grade. Investment grade debt securities are those rated within the
four highest grades by S&P (at least BBB), Moody's (at least Baa) or Fitch
(at least Baa) or in unrated debt securities deemed to be of comparable
quality by the Manager using guidelines approved by the Board of Trustees.

o Leverage. Some Funds may use leverage in an effort to increase return.
Although leverage creates an opportunity for increased income and gain, it
also creates special risk considerations. Leveraging also creates interest
expenses that can exceed the income from the assets retained.

o Repurchase agreement. With a repurchase agreement, a Fund acquires a U.S.
government security or other high-grade liquid debt instrument (for the Money
Market Funds, the instrument must be rated in the highest grade) from a
financial institution that simultaneously agrees to repurchase the same
security at a specified time and price.

o Reverse dollar roll transactions. When a Fund engages in a reverse dollar
roll, it purchases a security from a financial institution and concurrently
agrees to resell a similar security to that institution at a later date at an
agreed-upon price.

o Reverse repurchase agreement. In a reverse repurchase agreement, a Fund sells
to a financial institution a security that it holds and agrees to repurchase
the same security at an agreed-upon price and date.

o Securities lending. A fund may lend securities to brokers, dealers and other
financial organizations. Each securities loan is collateralized with
collateral assets in an amount at least equal to the current market value of
the loaned securities, plus accrued interest. There is a risk of delay in
receiving collateral or in recovering the securities loaned or even a loss of
rights in collateral should the borrower fail financially.

o Tokyo Stock Exchange Second Section Index. A capitalization weighted index of
all the companies listed on the Second Section of the Tokyo Stock Exchange.
The index was developed with a base value of 100 as of Jan 4, 1968.

<PAGE>

o U.S. government securities include U.S. Treasury bills, notes, bonds and
other obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities.

o Warrant. A warrant typically is a long-term option that permits the holder to
buy a specified number of shares of the issuer's underlying common stock at a
specified exercise price by a particular expiration date. A warrant not
exercised or disposed of by its expiration date expires worthless.

<PAGE>

Investment Manager
Montgomery Asset Management, L.P.
101 California Street
San Francisco, California 94111
1-800-572-FUND

Distributor
Montgomery Securities
600 Montgomery Street
San Francisco, California 94111
1-415-627-2485

Custodian
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11201

Transfer Agent
DST Systems, Inc.
P.O. Box 419073
Kansas City, Missouri 64141-6073
1-800-447-4210

Legal Counsel
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, California 94104

<PAGE>

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PART A

PROSPECTUS FOR CLASS P SHARES

MONTGOMERY JAPAN SMALL CAP FUND

---------------------------------------------------------------------

<PAGE>

The Montgomery Funds
101 California Street
San Francisco, California 94111
(800) 572-FUND

Prospectus
June 30, 1997

Class P shares of the Montgomery Japan Small Cap Fund (the "Fund") are offered
in this Prospectus. The Fund seeks long-term capital appreciation through
investment primarily in equity securities of small Japanese companies. As is the
case for all mutual funds, attainment of the Fund's investment objective cannot
be assured.

The Fund's Class P shares are only sold through financial intermediaries and
financial professional at net asset value with no sales load, no commissions,
and no exchange fees. The Class P shares are subject to a Rule 12b-1
distribution fee as described in this Prospectus. In general, the minimum
initial investment in the Fund is $1,000 and subsequent investments must be at
least $100. The Manager or the Distributor, under any circumstances that either
deems appropriate, may waive these minimums. See "How to Invest in the Fund."