As filed with the Securities and Exchange Commission on July 31, 1997
Registration Nos. 33-84450
811-8782
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 6
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7
THE MONTGOMERY FUNDS III
(Exact Name of Registrant as Specified in its Charter)
101 California Street
San Francisco, California 94111
(Address of Principal Executive Office)
1-800-232-2197
(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 the filing will become effective:
___ immediately upon filing pursuant to Rule 485(b)
X on July 31, 1997 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)
___ on ________________, 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. Pursuant to paragraph (b)(2) of Rule 24f-2, the
Registrant is not required to file a Rule 24f-2 Notice for the Registrant's
fiscal year ended December 31, 1996, because it sold no securities in reliance
on the rule during such fiscal year.
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Please Send Copy of Communications to:
JULIE ALLECTA, ESQ. JOAN E. BOROS, ESQ.
DAVID A. HEARTH, ESQ. Katten Muchin & Zavis
Paul, Hastings, Janofsky & Walker 1025 Thomas Jefferson Street, N.W.
345 California Street East Lobby - Suite 700
San Francisco, CA 94104 Washington, D.C. 20007-5201
(415) 835-1600 (202) 625-3500
Total number of pages _____. Exhibit Index appears at _____.
<PAGE>
THE MONTGOMERY FUNDS III
CONTENTS OF POST EFFECTIVE AMENDMENT
This post-effective amendment to the registration statement of the Registrant
contains the following documents:
Facing Sheet
Contents of Post-Effective Amendment
Cross-Reference Sheet for The Montgomery Funds III
Part A - Supplement to Prospectus for Montgomery Variable Series:
Growth Fund
Part A - Supplement to Prospectus for Montgomery Variable Series:
Emerging Markets Fund
Part A - Supplement to Prospectus for Montgomery Variable Series:
International Small Cap Fund
Part A - Supplement to Prospectus for Montgomery Variable Series:
Small Cap Opportunities Fund
Part B - Supplement to Combined Statement of Additional Information
for Montgomery Variable Series: Growth Fund, Montgomery
Variable Series: Emerging Markets Fund, Montgomery Variable
Series: International Small Cap Fund, and Montgomery
Variable Series: Small Cap Opportunities Fund
Part C - Other Information
Signature Page
<PAGE>
THE MONTGOMERY FUNDS III
CROSS REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
------------------------------------------
<TABLE>
(Supplement to Prospectuses for Montgomery Variable Series: Growth Fund,
Montgomery Variable Series: Emerging Markets Fund, Montgomery Variable Series:
International Small Cap Fund, Montgomery Variable Series: Small Cap
Opportunities Fund)
<CAPTION>
Location in the
N-1A Registration Statement
Item No. Item by Heading
- -------- ----- -----------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Financial Highlights
Information
4. General Description Cover Page,
of Registrant "The Fund's Investment Objective and Policies,"
"Portfolio Securities," "Other Investment Practices,"
"Risk Considerations," and "General Information"
5. Management of "The Fund's Investment Objective 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," and
"General Information"
8. Redemption or "How to Redeem an Investment in the Fund" and
Repurchase "General Information"
9. Pending Legal Not Applicable
Proceedings
</TABLE>
<PAGE>
<TABLE>
PART B: Information Required in
Statement of Additional Information
(Supplement to Combined Statement of Additional Information
for Montgomery Variable Series: Growth Fund,
Montgomery Variable Series: Emerging Markets Fund, Montgomery Variable Series:
International Small Cap Fund, and Montgomery Variable Series: Small Cap Opportunities 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 Objectives and Policies of the Funds,"
"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 Securities and "Determination of Net Asset Value"
Being Offered
20. Tax Status "Distributions and Tax Information"
21. Underwriters Not applicable
22. Calculation of "Performance Information"
Performance Data
23. Financial Statements "Financial Statements"
</TABLE>
<PAGE>
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PART A
SUPPLEMENT TO PROSPECTUS FOR MONTGOMERY VARIABLE SERIES:
GROWTH FUND
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<PAGE>
THE MONTGOMERY FUNDS III
Additional Supplement dated July 31, 1997 to
Prospectus dated April 30, 1997
For the Montgomery Variable Series: Growth Fund
On July 31, 1997, Montgomery Asset Management, L.P. completed the sale of
substantially all of its assets to Montgomery Asset Management, LLC, a
subsidiary of Commerzbank AG (the "New Manager"). At a special meeting of
shareholders on June 23, 1997, the shareholders of the Fund approved a new
Investment Management Agreement with the New Manager, effective July 31, 1997
for an initial two-year period.
Commerzbank, the third largest publicly held commercial bank in Germany, has
total assets of approximately $268 billion. Commerzbank and its affiliates had
over $79 billion in assets under management as of June 30, 1997. Commerzbank's
asset management operations involve more than 1,000 employees in 13 countries
worldwide.
The New Manager has not changed how the Fund is managed or the services offered
to shareholders.
At the special meeting of shareholders on June 23, 1997, the shareholders
authorized the Board of Trustees, if appropriate, to convert the Fund to a
feeder fund in a master-feeder structure. The Board of Trustees would approve a
conversion of the Fund only if it believes that such a conversion is in the best
interests of the Fund and its shareholders. Shareholders of the Fund would be
given at least 30 days' prior written notice of any such action.
Also at that special meeting of shareholders, the shareholders approved two
changes in the fundamental investment restrictions to the Fund so that the Fund
may (1) enter into borrowings not to exceed one-third of total Fund assets and
(2) engage in securities lending not to exceed 30% of total Fund assets.
Shareholders of each Fund should note that there is an increased risk of loss
when a Fund uses a larger portion of its assets to engage in borrowing and
securities lending transactions. Shareholders are reminded that borrowing
involves certain risks including interest rate risk and increased expenses to
the Fund. Securities lending also involves certain risks including potential
default of the counterparty, which may cause loss to the Fund.
<PAGE>
------------------------------------------------------------
PART A
SUPPLEMENT TO PROSPECTUS FOR MONTGOMERY VARIABLE SERIES:
EMERGING MARKETS FUND
------------------------------------------------------------
<PAGE>
THE MONTGOMERY FUNDS III
Additional Supplement dated July 31, 1997 to
Prospectus dated April 30, 1997
For the Montgomery Variable Series: Emerging Markets Fund
On July 31, 1997, Montgomery Asset Management, L.P. completed the sale of
substantially all of its assets to Montgomery Asset Management, LLC, a
subsidiary of Commerzbank AG (the "New Manager"). At a special meeting of
shareholders on June 23, 1997, the shareholders of the Fund approved a new
Investment Management Agreement with the New Manager, effective July 31, 1997
for an initial two-year period.
Commerzbank, the third largest publicly held commercial bank in Germany, has
total assets of approximately $268 billion. Commerzbank and its affiliates had
over $79 billion in assets under management as of June 30, 1997. Commerzbank's
asset management operations involve more than 1,000 employees in 13 countries
worldwide.
The New Manager has not changed how the Fund is managed or the services offered
to shareholders.
At the special meeting of shareholders on June 23, 1997, the shareholders
authorized the Board of Trustees, if appropriate, to convert the Fund to a
feeder fund in a master-feeder structure. The Board of Trustees would approve a
conversion of the Fund only if it believes that such a conversion is in the best
interests of the Fund and its shareholders. Shareholders of the Fund would be
given at least 30 days' prior written notice of any such action.
Also at that special meeting of shareholders, the shareholders approved two
changes in the fundamental investment restrictions to the Fund so that the Fund
may (1) enter into borrowings not to exceed one-third of total Fund assets and
(2) engage in securities lending not to exceed 30% of total Fund assets.
Shareholders of each Fund should note that there is an increased risk of loss
when a Fund uses a larger portion of its assets to engage in borrowing and
securities lending transactions. Shareholders are reminded that borrowing
involves certain risks including interest rate risk and increased expenses to
the Fund. Securities lending also involves certain risks including potential
default of the counterparty, which may cause loss to the Fund.
<PAGE>
------------------------------------------------------------
PART A
SUPPLEMENT TO PROSPECTUS FOR MONTGOMERY VARIABLE SERIES:
INTERNATIONAL SMALL CAP FUND
------------------------------------------------------------
<PAGE>
THE MONTGOMERY FUNDS III
Additional Supplement dated July 31, 1997 to
Prospectus dated April 30, 1997
For the Montgomery Variable Series: International Small Cap Fund
On July 31, 1997, Montgomery Asset Management, L.P. completed the sale of
substantially all of its assets to Montgomery Asset Management, LLC, a
subsidiary of Commerzbank AG (the "New Manager"). At a special meeting of
shareholders on June 23, 1997, the shareholders of the Fund approved a new
Investment Management Agreement with the New Manager, effective July 31, 1997
for an initial two-year period.
Commerzbank, the third largest publicly held commercial bank in Germany, has
total assets of approximately $268 billion. Commerzbank and its affiliates had
over $79 billion in assets under management as of June 30, 1997. Commerzbank's
asset management operations involve more than 1,000 employees in 13 countries
worldwide.
The New Manager has not changed how the Fund is managed or the services offered
to shareholders.
At the special meeting of shareholders on June 23, 1997, the shareholders
authorized the Board of Trustees, if appropriate, to convert the Fund to a
feeder fund in a master-feeder structure. The Board of Trustees would approve a
conversion of the Fund only if it believes that such a conversion is in the best
interests of the Fund and its shareholders. Shareholders of the Fund would be
given at least 30 days' prior written notice of any such action.
Also at that special meeting of shareholders, the shareholders approved two
changes in the fundamental investment restrictions to the Fund so that the Fund
may (1) enter into borrowings not to exceed one-third of total Fund assets and
(2) engage in securities lending not to exceed 30% of total Fund assets.
Shareholders of each Fund should note that there is an increased risk of loss
when a Fund uses a larger portion of its assets to engage in borrowing and
securities lending transactions. Shareholders are reminded that borrowing
involves certain risks including interest rate risk and increased expenses to
the Fund. Securities lending also involves certain risks including potential
default of the counterparty, which may cause loss to the Fund.
<PAGE>
------------------------------------------------------------
PART A
SUPPLEMENT TO PROSPECTUS FOR MONTGOMERY VARIABLE SERIES:
SMALL CAP OPPORTUNITIES FUND
------------------------------------------------------------
<PAGE>
THE MONTGOMERY FUNDS III
Additional Supplement dated July 31, 1997 to
Prospectus dated June 30, 1997
For the Montgomery Variable Series: Small Cap Opportunities Fund
On July 31, 1997, Montgomery Asset Management, L.P. completed the sale of
substantially all of its assets to Montgomery Asset Management, LLC, a
subsidiary of Commerzbank AG (the "New Manager"). At a special meeting of
shareholders on June 23, 1997, the shareholders of the Fund approved a new
Investment Management Agreement with the New Manager, effective July 31, 1997
for an initial two-year period.
Commerzbank, the third largest publicly held commercial bank in Germany, has
total assets of approximately $268 billion. Commerzbank and its affiliates had
over $79 billion in assets under management as of June 30, 1997. Commerzbank's
asset management operations involve more than 1,000 employees in 13 countries
worldwide.
The New Manager has not changed how the Fund is managed or the services offered
to shareholders.
At the special meeting of shareholders on June 23, 1997, the shareholders
authorized the Board of Trustees, if appropriate, to convert the Fund to a
feeder fund in a master-feeder structure. The Board of Trustees would approve a
conversion of the Fund only if it believes that such a conversion is in the best
interests of the Fund and its shareholders. Shareholders of the Fund would be
given at least 30 days' prior written notice of any such action.
Also at that special meeting of shareholders, the shareholders approved two
changes in the fundamental investment restrictions to the Fund so that the Fund
may (1) enter into borrowings not to exceed one-third of total Fund assets and
(2) engage in securities lending not to exceed 30% of total Fund assets.
Shareholders of each Fund should note that there is an increased risk of loss
when a Fund uses a larger portion of its assets to engage in borrowing and
securities lending transactions. Shareholders are reminded that borrowing
involves certain risks including interest rate risk and increased expenses to
the Fund. Securities lending also involves certain risks including potential
default of the counterparty, which may cause loss to the Fund.
<PAGE>
-----------------------------------------------------------------------
PART B
SUPPLEMENT TO COMBINED STATEMENT OF ADDITIONAL INFORMATION
MONTGOMERY VARIABLE SERIES: GROWTH FUND
MONTGOMERY VARIABLE SERIES: EMERGING MARKETS FUND
MONTGOMERY VARIABLE SERIES: INTERNATIONAL SMALL CAP FUND
MONTGOMERY VARIABLE SERIES: SMALL CAP OPPORTUNITIES FUND
------------------------------------------------------------------------
<PAGE>
THE MONTGOMERY FUNDS III
Supplement dated July 31, 1997 to
Statement of Additional Information dated June 30,
1997
For the Montgomery Variable Series: Growth Fund; Montgomery
Variable Series: Emerging Markets Fund; Montgomery Variable Series:
International Small Cap Fund and Montgomery Variable Series: Small Cap
Opportunities Fund
On July 31, 1997, Montgomery Asset Management, L.P. completed the sale of
substantially all of its assets to Montgomery Asset Management, LLC, a
subsidiary of Commerzbank AG (the "New Manager"). At a special meeting of
shareholders on June 23, 1997, the shareholders of each Fund approved a new
Investment Management Agreement with the New Manager, effective July 31, 1997
for an initial two-year period.
Officers
Federal banking laws require that, because of the New Manager's affiliation with
Commerzbank, no officer or employee of the New Manager may serve as a senior
officer of the Funds or the Trusts and only a limited number of employees of the
New Manager may serve as junior officers. Effective July 31, 1997, the following
persons have been elected as officers by the Boards of Trustees to replace the
former officers in order to comply with that requirement:
Richard W. Ingram, President and Treasurer (Age 41)
60 State Street, Suite 1300, Boston, Massachusetts 02109. Mr. Ingram is the
Executive Vice President and Director of Client Services and Treasury
Administration of FDI; Senior Vice President of Premier Mutual Fund Services,
Inc., an affiliate of FDI ("Premier Mutual") and an officer of certain
investment companies advised or administered by JP Morgan ("Morgan"), Dreyfus
Corporation ("Dreyfus"), Waterhouse Asset Management, Inc. ("Waterhouse"), RCM
Capital Management L.L.C. ("RCM") and Harris Trust and Savings Bank ("Harris")
or their respective affiliates. Prior to April 1997, Mr. Ingram was Senior Vice
President and Director of Client Services and Treasury Administration of FDI.
From March 1994 to November 1995, Mr. Ingram was Vice President and Division
Manager of First Data Investor Services Group, Inc. From
1
<PAGE>
1989 to 1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director - Mutual Funds of The Boston Company, Inc.
Karen Jacoppo-Wood, Vice President and Assistant Secretary (Age 30)
60 State Street, Suite 1300, Boston, Massachusetts 02109. Ms. Jacoppo-Wood is
the Assistant Vice President of FDI and an officer of certain investment
companies advised or administered by Morgan, Waterhouse, RCM and Harris or their
respective affiliates. From June 1994 to January 1996, Ms. Jacoppo-Wood was a
Manager, SEC Registration, Scudder, Stevens & Clark, Inc. From 1988 to May 1994,
Ms. Jacoppo-Wood was a Senior Paralegal at The Boston Company Advisers, Inc.
("TBCA").
Elizabeth A. Keeley, Vice President and Assistant Secretary (Age 27)
200 Park Avenue, New York, New York 10166. Ms. Keeley is the Vice President and
Senior Counsel of FDI and Premier Mutual, and an officer of certain investment
companies advised or administered by Morgan, Dreyfus, RCM, Waterhouse and Harris
or their respective affiliates. Prior to August 1996, Ms. Keeley was Assistant
Vice President and Counsel of FDI and Premier Mutual. Prior to September 1995,
Ms. Keeley was enrolled at Fordham University School of Law and received her
J.D. in May 1995. Prior to September 1992, Ms. Keeley was an Assistant at the
National Association for Public Interest Law.
Christopher J. Kelley, Vice President and Assistant Secretary (Age 32)
60 State Street, Suite 1300, Boston, Massachusetts 002109. Mr. Kelley is the
Vice President and Associate General Counsel of FDI and Premier Mutual, and an
officer of certain investment companies advised or administered by Morgan,
Waterhouse and Harris or their respective affiliates. From April 1994 to July
1996, Mr. Kelley was Assistant Counsel at Forum Financial Group. From 1992 to
1994, Mr. Kelley was employed by Putnam Investments in Legal and Compliance
capacities. Prior to 1992, Mr. Kelley attended Boston College Law School, from
which he graduated in May 1992.
Mary A. Nelson, Vice President and Assistant Treasurer (Age 33)
60 State Street, Suite 1300, Boston, Massachusetts 02109. Ms. Nelson is the Vice
President and Manager of Treasury Services and Administration of FDI and Premier
Mutual, and an officer of certain investment companies advised or administered
by Morgan, Dreyfus, Waterhouse, RCM and Harris or their respective affiliates.
From 1989 to 1994 Ms. Nelson was Assistant Vice President and Client Manager for
The Boston Company, Inc.
2
<PAGE>
John E. Pelletier, Vice President and Secretary (Age 33)
60 State Street, Suite 1300, Boston, Massachusetts 02109. Mr. Pelletier is the
Senior Vice President, General Counsel, Secretary and Clerk of FDI and Premier
Mutual, and an officer of certain investment companies advised or administered
by Morgan, Dreyfus, Waterhouse, RCM and Harris or their respective affiliates.
From February 1992 to April 1994, Mr. Pelletier served as Counsel for TBCA. From
August 1990 to February 1992, Mr. Pelletier was employed as an Associate at
Ropes & Gray (a Boston law firm).
Gary S. MacDonald, Vice President and Assistant Treasurer (Age 32)
60 State Street, Suite 1300, Boston, Massachusetts 02109. Mr. MacDonald is the
Vice President of FDI with which he has been associated since November 1996. He
also is an officer of certain investment companies advised or administered by
RCM. From September 1992 to November 1996 he was Vice President of BayBanks
Investment Management/Bay Bank Financial Services; and from April 1989 to
September 1992 he was an Analyst at Wellington Management Company.
Marie E. Connolly, Vice President and Assistant Treasurer (Age 40)
60 State Street, Suite 1300, Boston, Massachusetts 02109. Ms. Connolly is the
President, Chief Executive Officer, Chief Compliance Officer and Director of FDI
and Premier Mutual, and an officer of certain investment companies advised or
administered by Morgan and Dreyfus or their respective affiliates. From December
1991 to July 1994, Ms. Connolly was President and Chief Compliance Officer of
FDI. Prior to December 1991, Ms. Connolly served as Vice President and
Controller, and later Senior Vice President of TBCA.
Douglas C. Conroy, Vice President and Assistant Treasurer (Age 28)
60 State Street, Suite 1300, Boston, Massachusetts 02109. Mr. Conroy is the
Assistant Vice President and Manager of Treasury Services and Administration of
FDI and an officer of certain investment companies advised or administered by
Morgan and Dreyfus or their respective affiliates. Prior to April 1997, Mr.
Conroy was Supervisor of Treasury Services and Administration of FDI. From April
1993 to January 1995, Mr. Conroy was a Senior Fund Accountant for Investors Bank
& Trust Company. From December 1991 to March 1993, Mr. Conroy was employed as a
Fund Accountant at The Boston Company, Inc.
3
<PAGE>
Joseph F. Tower, III, Vice President and Assistant Treasurer (Age 35)
60 State Street, Suite 1300, Boston, Massachusetts 02109. Mr. Tower is the
Executive Vice President, Treasurer and Chief Financial Officer, Chief
Administrative Officer and Director of FDI; Senior Vice President, Treasurer and
Chief Financial Officer, Chief Administrative Officer and Director of Premier
Mutual, and an officer of certain investment companies advised or administered
by Morgan, Dreyfus and Waterhouse or their respective affiliates. Prior to April
1997, Mr. Tower was Senior Vice President, Treasurer and Chief Financial
Officer, Chief Administrative Officer and Director of FDI. From July 1988 to
November 1993, Mr. Tower was Financial Manager of The Boston Company, Inc.
Trustees
Jerome S. Markowitz, a Senior Managing Director of Montgomery Securities, has
resigned as a Trustee of TMF II and TMF III and as a Trustee-designate of TMF,
effective July 31, 1997. R. Stephen Doyle, Andrew Cox, John A. Farnsworth and
Cecilia H. Herbert will continue their service as Trustees of the Trusts.
Other Items
At the special meeting of shareholders on June 23, 1997, the shareholders
authorized the Board of Trustees, if appropriate, to convert the Fund to a
feeder fund in a master-feeder structure. The Board of Trustees would approve a
conversion of the Fund only if it believes that such a conversion is in the best
interests of the Fund and its shareholders. Shareholders of the Fund would be
given at least 30 days' prior written notice of any such action.
Also at that special meeting of shareholders, the Shareholders approved two
changes in the fundamental investment restrictions to each Fund so that each
Fund may (1) enter into borrowings not to exceed one-third of total Fund assets
and (2) engage in securities lending not to exceed 30% of total Fund assets. The
exact wording of the restrictions are as follows:
Borrowing Limitation "[A Fund may not] borrow money, except for temporary or
emergency purposes from a bank, or pursuant to reverse repurchase agreements or
dollar roll transactions for a Fund that uses such investment techniques and
then not in excess of one-third of the value of its total assets (at the lower
of cost or fair market value). Any such borrowing will be made only if
immediately thereafter there is an asset coverage of at least 300% of all
borrowings (excluding any fully collateralized reverse repurchase agreements and
4
<PAGE>
dollar roll transactions the Fund may enter into), and no additional investments
may be made while any such borrowings are in excess of 10% total assets."
Securities Lending Restrictions "[A Fund may not] make loans to others, except
(a) through the purchase of debt securities in accordance with its investment
objective and policies, (b) through the lending of its portfolio securities up
to the maximum amount permitted by law, currently 30% of total fund assets, as
described above in its Prospectus, or (c) to the extent the entry into a
repurchase agreement or a reverse dollar roll transaction is deemed to be a
loan."
5
<PAGE>
---------------------------------------------------
PART C
OTHER INFORMATION
---------------------------------------------------
<PAGE>
THE MONTGOMERY FUNDS III
--------------
FORM N-1A
--------------
PART C
--------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Portfolio Investments as of December 31, 1996;
Statements of Assets and Liabilities as of December
31, 1996; Statements of Operations for the Period
Ended December 31, 1996; Statements of Changes in Net
Assets for the Period Ended December 31, 1996;
Financial Highlights for a Fund share outstanding
throughout the Period ended December 31, 1996, for
each of Montgomery Variable Series: Growth Fund,
Montgomery Variable Series: Emerging Markets Fund and
Montgomery Variable Series: International Small Cap
Fund; Notes to Financial Statements; Independent
Auditors' Report on the foregoing, all incorporated
by reference to the Annual Report to Shareholders of
the above-named funds.
(b) Exhibits:
(1) Agreement and Declaration of Trust is incorporated by
reference to the Registrant's Registration Statement
as filed with the Commission on September 27, 1994
("Registration Statement").
(2) By-Laws are incorporated by reference to the
Registration Statement.
(3) Voting Trust Agreement - Not applicable.
(4) Specimen Share Certificate - Not applicable.
(5) Investment Management Agreement
(6) Form of Underwriting Agreement - Not applicable.
(7) Benefit Plan(s) - Not applicable.
(8) Custody Agreement is incorporated by reference to
Pre-Effective Amendment No. 1.
(9)(A) Form of Administrative Services Agreement is
incorporated by reference to Pre-Effective Amendment
No. 1.
(B) Form of Participation Agreement is incorporated by
reference to Pre-Effective Amendment No. 1.
(10) Consent and Opinion of Counsel as to legality of
shares is incorporated by reference to Pre-Effective
Amendment No. 1.
(11) Consent of Independent Public Accountants.
(12) Financial Statements omitted from Item 23 - Not
applicable.
(13) Letter of Understanding re: Initial Capital is
incorporated by reference to Pre-Effective Amendment
No. 1.
(14) Model Retirement Plan Documents - Not applicable.
C-1
<PAGE>
(15) Rule 12b-1 Plan - Not applicable.
(16) Performance Computation Schedule for Montgomery
Variable Series: International Small Cap Fund is
incorporated by reference to Post-Effective Amendment
Number 2 to the Registrant's Registration Statement
as filed with the Commission on April 26, 1996
("Post-Effective Amendment No. 2"). Performance
Computation Schedule for Montgomery Variable Series:
Growth Fund and Montgomery Variable Series: Emerging
Markets Fund is incorporated by reference to
Pre-Effective Amendment No. 1.
(17) Power of Attorney is incorporated by reference to
Post-Effective Amendment Number 1 to the Registrant's
Registration Statement as filed with the Commission
on January 16, 1996 ("Post-Effective Amendment No.
1").
(18) Specimen Price Make Up Sheets (Item 19(b)5 of N 1A)
for Montgomery Variable Series: Growth Fund and
Montgomery Variable Series: Emerging Markets Fund are
incorporated by reference to Pre-Effective Amendment
No. 1.
(19) Financial Data Schedule is incorporated by reference
to Form N-SAR filed for the period ended December 31,
1996.
Item 25. Persons Controlled by or Under Common Control with Registrant.
Montgomery Asset Management, L.P., a California limited
partnership, is the manager of each series of the Registrant, The Montgomery
Funds (a Massachusetts business trust) and The Montgomery Funds II (a Delaware
business trust). Montgomery Asset Management, Inc., a California corporation is
the general partner of Montgomery Asset Management, L.P., and Montgomery
Securities is its sole limited partner. The Registrant, The Montgomery Funds and
The Montgomery Funds II are deemed to be under the common control of each of
those three entities.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of June 30, 1997
- -------------- ------------------------
Shares of Beneficial
Interest, $0.01 par value
Montgomery Variable Series: Growth Fund 5
Montgomery Variable Series: Emerging Markets Fund 9
Montgomery Variable Series: International Small Cap Fund 2
Montgomery Variable Series: Small Cap Opportunities Fund 0
Item 27. Indemnification
Article VII, Section 3 of the Agreement and Declaration of
Trust empowers the Trustees of the Trust, to the full extent permitted by law,
to purchase with Trust assets insurance for indemnification from liability and
to pay for all expenses reasonably incurred or paid or expected to be paid by a
Trustee or officer in connection with any claim, action, suit or proceeding in
which he or she becomes involved by virtue of his or her capacity or former
capacity with the Trust.
Article VI of the By-Laws of the Trust provides that the Trust
shall indemnify any person who was or is a party or is threatened to be made a
party to any proceeding by reason of the fact that such person is or was an
agent of the Trust, against expenses, judgments, fines, settlements, and other
amounts actually and reasonable incurred in connection with such proceeding if
that person acted in good faith and reasonably believed his or her conduct to be
in the best interests of the Trust. Indemnification will not be provided in
certain circumstances, however, including instances of willful
C-2
<PAGE>
misfeasance, bad faith, gross negligence, and reckless disregard of the duties
involved in the conduct of the particular office involved.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to the Trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable in the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such Trustee, officer, or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser.
Montgomery Securities, which is a broker-dealer and principal
underwriter of The Montgomery Funds I and II, is the sole limited partner of the
investment manager, Montgomery Asset Management, L.P. ("MAM, L.P."). The general
partner of MAM, L.P. is a corporation, Montgomery Asset Management, Inc. ("MAM,
Inc."), certain of the officers and directors of which serve in similar
capacities for MAM, L.P. One of these officers and directors, Mr. R. Stephen
Doyle, also is a capital limited partner of Montgomery Securities, and Mr. Jack
G. Levin, Secretary of The Montgomery Funds III, is a Managing Director of
Montgomery Securities. R. Stephen Doyle is the Chairman and Chief Executive
Officer of MAM, L.P.; Mark B. Geist is the President; John T. Story is the
Managing Director of Mutual Funds and Executive Vice President; David E.
Demarest is Chief Administrative Officer; Mary Jane Fross is Manager of Mutual
Fund Administration and Finance; and Josephine Jimenez, Bryan L. Sudweeks,
Stuart O. Roberts, John H. Brown, William C. Stevens, Roger Honour, Oscar A.
Castro, and John D. Boich are Managing Directors of MAM, L.P. Information about
the individuals who function as officers of the Registrant (namely, Messrs.
Doyle, Geist, Story, and Demarest, Mary Jane Fross, and five of the eight
Managing Directors, Josephine Jimenez and Messrs. Sudweeks, Honour, Castro, and
Boich) is set forth in Part B. Mr. Roberts is a Portfolio Manager for MAM, L.P.,
and has been employed there since 1990. Mr. Brown is a Senior Portfolio Manager
for MAM, L.P. Prior to joining MAM, L.P. in May 1994, Mr. Brown was an analyst
and portfolio manager at Merus Capital Management in San Francisco, California.
Mr. Stevens is a Portfolio Manager for MAM, L.P.
Item 29. Principal Underwriter - Not applicable.
Item 30. Location of Accounts and Records.
The accounts, books, or other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 will be kept
by the Registrant's Transfer Agent, DST Systems, Inc., 1004 Baltimore, Kansas
City, Missouri 64105, except those records relating to portfolio transactions
and the basic organizational and Trust documents of the Registrant (see
Subsections (2)(iii), (4), (5), (6), (7), (9), (10) and (11) of Rule 31a-1(b)),
which will be kept by the Registrant at 101 California Street, San Francisco,
California 94111.
Item 31. Management Services.
There are no management-related service contracts not
discussed in Parts A and B.
Item 32. Undertakings.
(a) Not applicable.
(b) Registrant hereby undertakes to file a post-effective
amendment including financial statements of Montgomery Variable Series: Small
Cap Opportunities Fund, which need not be certified, within four to six months
after the effective date of that series of the Registrant.
(c) Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's last annual
report to Shareholders, upon request and without charge.
C-3
<PAGE>
(d) Registrant has undertaken to comply with Section 16(a) of
the Investment Company Act of 1940, as amended, which requires the prompt
convening of a meeting of shareholders to elect trustees to fill existing
vacancies in the Registrant's Board of Trustees in the event that less than a
majority of the trustees have been elected to such position by shareholders.
Registrant has also undertaken promptly to call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee or Trustees
when requested in writing to do so by the record holders of not less than 10
percent of the Registrant's outstanding shares and to assist its shareholders in
communicating with other shareholders in accordance with the requirements of
Section 16(c) of the Investment Company Act of 1940, as amended.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of San Francisco, and
the State of California, on this 28th day of July, 1997.
THE MONTGOMERY FUNDS III
By: R. Stephen Doyle*
------------------------
R. Stephen Doyle
Chairman and Principal Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
R. Stephen Doyle* Principal Executive July 28, 1997
- ----------------- Officer; Principal
R. Stephen Doyle Financial and Accounting
Officer; and Trustee
Andrew Cox* Trustee July 28, 1997
- -----------
Andrew Cox
Cecilia H. Herbert* Trustee July 28, 1997
- -------------------
Cecilia H. Herbert
John A. Farnsworth* Trustee July 28, 1997
- -------------------
John A. Farnsworth
Jerome S. Markowitz* Trustee July 28, 1997
- --------------------
Jerome S. Markowitz
* By: /s/ JULIE ALLECTA
-------------------
Julie Allecta, Attorney-in-Fact
pursuant to Power of Attorney previously filed
<PAGE>
THE MONTGOMERY FUNDS III
EXHIBIT INDEX
No. Exhibit
- --- -------
(5) Investment Management Agreement
EXHIBIT NO. 5
INVESTMENT MANAGEMENT AGREEMENT
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made as of the 31st day of July,
1997, by and between THE MONTGOMERY FUNDS III, a Delaware business trust
(hereinafter called the "Trust"), on behalf of each series of the Trust listed
in Appendix A hereto, as may be amended from time to time (hereinafter referred
to individually as a "Fund" and collectively as the "Funds") and MONTGOMERY
ASSET MANAGEMENT, LLC, a limited liability company organized and existing under
the laws of the State of Delaware (hereinafter called the "Manager").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is engaged in the business of
supplying investment advice, investment management and administrative services,
as an independent contractor; and
WHEREAS, the Trust desires to retain the Manager to render advice and
services to the Funds pursuant to the terms and provisions of this Agreement,
and the Manager is interested in furnishing said advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:
1
<PAGE>
1. Appointment of Manager. The Trust hereby employs the Manager and the
Manager hereby accepts such employment, to render investment advice and
management services with respect to the assets of the Funds for the period and
on the terms set forth in this Agreement, subject to the supervision and
direction of the Trust's Board of Trustees.
2. Duties of Manager.
(a) General Duties. The Manager shall act as investment
manager to the Funds and shall supervise investments of the Funds on behalf of
the Funds in accordance with the investment objectives, programs and
restrictions of the Funds as provided in the Trust's governing documents,
including, without limitation, the Trust's Agreement and Declaration of Trust
and By-Laws, or otherwise and such other limitations as the Trustees may impose
from time to time in writing to the Manager. Without limiting the generality of
the foregoing, the Manager shall: (i) furnish the Funds with advice and
recommendations with respect to the investment of each Fund's assets and the
purchase and sale of portfolio securities for the Funds, including the taking of
such other steps as may be necessary to implement such advice and
recommendations; (ii) furnish the Funds with reports, statements and other data
on securities, economic conditions and other pertinent subjects which the
Trust's Board of Trustees may reasonably request; (iii) manage the investments
of the Funds, subject to the ultimate supervision and direction of the Trust's
Board of Trustees; (iv) provide persons satisfactory to the Trust's Board of
Trustees to act as officers and employees of the Trust and the Funds (such
officers and employees, as well as certain trustees, may be trustees, directors,
officers, partners, or employees of the Manager or its affiliates) but not
including personnel to provide administrative service or distribution services
to the Fund; and (v) render to the Trust's Board of Trustees such periodic
2
<PAGE>
and special reports with respect to each Fund's investment activities as the
Board may reasonably request.
(b) Brokerage. The Manager shall place orders for the purchase
and sale of securities either directly with the issuer or with a broker or
dealer selected by the Manager. In placing each Fund's securities trades, it is
recognized that the Manager will give primary consideration to securing the most
favorable price and efficient execution, so that each Fund's total cost or
proceeds in each transaction will be the most favorable under all the
circumstances. Within the framework of this policy, the Manager may consider the
financial responsibility, research and investment information, and other
services provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which other clients of the Manager may be a
party.
It is also understood that it is desirable for the Funds that the
Manager have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also understood that
brokers providing such services may execute brokerage transactions at a higher
cost to the Funds than might result from the allocation of brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the purchase and sale of securities for the Funds may be
made with brokers who provide such research and analysis, subject to review by
the Trust's Board of Trustees from time to time with respect to the extent and
continuation of this practice to determine whether each Fund benefits, directly
or indirectly, from such practice. It is understood by both parties that the
Manager may select broker-dealers for the execution of the Funds' portfolio
transactions who provide research and analysis as the Manager may lawfully and
appropriately use in its investment management
3
<PAGE>
and advisory capacities, whether or not such research and analysis may also be
useful to the Manager in connection with its services to other clients.
On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of one or more of the Funds as well as of other
clients, the Manager, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Manager in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Funds and to such other clients.
(c) Administrative Services. The Manager shall oversee the
administration of the Funds' business and affairs although the provision of
administrative services, to the extent not covered by subparagraphs (a) or (b)
above, is not the obligation of the Manager under this Agreement.
Notwithstanding any other provisions of this Agreement, the Manager shall be
entitled to reimbursement from the Funds for all or a portion of the reasonable
costs and expenses, including salary, associated with the provision by Manager
of personnel to render administrative services to the Funds.
3. Best Efforts and Judgment. The Manager shall use its best judgment
and efforts in rendering the advice and services to the Funds as contemplated by
this Agreement.
4. Independent Contractor. The Manager shall, for all purposes herein,
be deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized to
4
<PAGE>
do so, have no authority to act for or represent the Trust or the Funds in any
way, or in any way be deemed an agent for the Trust or for the Funds. It is
expressly understood and agreed that the services to be rendered by the Manager
to the Funds under the provisions of this Agreement are not to be deemed
exclusive, and the Manager shall be free to render similar or different services
to others so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
5. Manager's Personnel. The Manager shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Manager shall be
deemed to include persons employed or retained by the Manager to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Manager or the Trust's Board of Trustees may desire and reasonably request.
6. Reports by Funds to Manager. Each Fund will from time to time
furnish to the Manager detailed statements of its investments and assets, and
information as to its investment objective and needs, and will make available to
the Manager such financial reports, proxy statements, legal and other
information relating to each Fund's investments as may be in its possession or
available to it, together with such other information as the Manager may
reasonably request.
5
<PAGE>
7. Expenses.
(a) With respect to the operation of each Fund, the Manager is
responsible for (i) the compensation of any of the Trust's trustees, officers,
and employees who are affiliates of the Manager (but not the compensation of
employees performing services in connection with expenses which are the Fund's
responsibility under Subparagraph 7(b) below), (ii) the expenses of printing and
distributing the Funds' prospectuses, statements of additional information, and
sales and advertising materials (but not the legal, auditing or accounting fees
attendant thereto) to prospective investors (but not to existing shareholders),
and (iii) providing office space and equipment reasonably necessary for the
operation of the Funds.
(b) Each Fund is responsible for and has assumed the
obligation for payment of all of its expenses, other than as stated in
Subparagraph 7(a) above, including but not limited to: fees and expenses
incurred in connection with the issuance, registration and transfer of its
shares; brokerage and commission expenses; all expenses of transfer, receipt,
safekeeping, servicing and accounting for the cash, securities and other
property of the Trust for the benefit of the Funds including all fees and
expenses of its custodian, shareholder services agent and accounting services
agent; interest charges on any borrowings; costs and expenses of pricing and
calculating its daily net asset value and of maintaining its books of account
required under the 1940 Act; taxes, if any; expenditures in connection with
meetings of each Fund's Shareholders and Board of Trustees that are properly
payable by the Fund; salaries and expenses of officers and fees and expenses of
members of the Trust's Board of Trustees or members of any advisory board or
committee who are not members of, affiliated with or interested persons of the
Manager; insurance premiums on property or personnel of each Fund which inure to
its benefit,
6
<PAGE>
including liability and fidelity bond insurance; the cost of preparing and
printing reports, proxy statements, prospectuses and statements of additional
information of the Fund or other communications for distribution to existing
shareholders; legal, auditing and accounting fees; trade association dues; fees
and expenses (including legal fees) of obtaining and maintaining any required
registration or notification for its shares for sale under federal and
applicable state and foreign securities laws; all expenses of maintaining and
servicing shareholder accounts, including all charges for transfer, shareholder
recordkeeping, dividend disbursing, redemption, and other agents for the benefit
of the Funds, if any; and all other charges and costs of its operation plus any
extraordinary and non-recurring expenses, except as herein otherwise prescribed.
(c) To the extent the Manager incurs any costs by assuming
expenses which are an obligation of a Fund as set forth herein, such Fund shall
promptly reimburse the Manager for such costs and expenses, except to the extent
the Manager has otherwise agreed to bear such expenses. To the extent the
services for which a Fund is obligated to pay are performed by the Manager, the
Manager shall be entitled to recover from such Fund to the extent of the
Manager's actual costs for providing such services.
8. Investment Advisory and Management Fee.
(a) Each Fund shall pay to the Manager, and the Manager agrees
to accept, as full compensation for all administrative and investment management
and advisory services furnished or provided to such Fund pursuant to this
Agreement, a management fee as set forth in the Fee Schedule attached hereto as
Appendix B, as may be amended in writing from time to time by the Trust and the
Manager.
7
<PAGE>
(b) The management fee shall be accrued daily by each Fund and
paid to the Manager upon its request.
(c) The initial fee under this Agreement shall be payable on
the first business day of the first month following the effective date of this
Agreement and shall be prorated as set forth below. If this Agreement is
terminated prior to the end of any month, the fee to the Manager shall be
prorated for the portion of any month in which this Agreement is in effect which
is not a complete month according to the proportion which the number of calendar
days in the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.
(d) The Manager may reduce any portion of the compensation or
reimbursement of expenses due to it pursuant to this Agreement and may agree to
make payments to limit the expenses which are the responsibility of a Fund under
this Agreement. Any such reduction or payment shall be applicable only to such
specific reduction or payment and shall not constitute an agreement to reduce
any future compensation or reimbursement due to the Manager hereunder or to
continue future payments. Any such reduction will be agreed to prior to accrual
of the related expense or fee and will be estimated daily and reconciled and
paid on a monthly basis. To the extent such an expense limitation has been
agreed to by the Manager and such limit has been disclosed to shareholders of a
Fund in a prospectus, the Manager may not change the limitation without first
disclosing the change in an updated prospectus. Any fee withheld pursuant to
this paragraph from the Manager shall be reimbursed by the appropriate Fund to
the Manager in the first, second or third (or any combination thereof) fiscal
year next succeeding the fiscal year of the withholding if the aggregate
expenses for the next succeeding
8
<PAGE>
fiscal year or second succeeding fiscal year or third succeeding fiscal year do
not exceed any more restrictive limitation to which the Manager has agreed. The
Manager generally may request and receive reimbursement for the oldest
reductions and waivers before payment for fees and expenses for the current
year.
(e) The Manager may agree not to require payment of any
portion of the compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement prior to the time such compensation or reimbursement
has accrued as a liability of the Fund. Any such agreement shall be applicable
only with respect to the specific items covered thereby and shall not constitute
an agreement not to require payment of any future compensation or reimbursement
due to the Manager hereunder.
9. Fund Share Activities of Managers Partners, Officers and Employees.
The Manager agrees that neither it nor any of its partners, officers or
employees shall take any short position in the shares of the Funds. This
prohibition shall not prevent the purchase of such shares by any of the officers
and partners or bona fide employees of the Manager or any trust, pension,
profit-sharing or other benefit plan for such persons or affiliates thereof, at
a price not less than the net asset value thereof at the time of purchase, as
allowed pursuant to rules promulgated under the 1940 Act.
10. Conflicts with Trust's Governing Documents and Applicable Laws.
Nothing herein contained shall be deemed to require the Trust or the Funds to
take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation,
9
<PAGE>
or to relieve or deprive the Board of Trustees of the Trust of its
responsibility for and control of the conduct of the affairs of the Trust and
Funds.
11. Manager's Liabilities.
(a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the Trust
or the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security by the
Funds.
(b) The Funds shall indemnify and hold harmless the Manager,
its general partner and the shareholders, directors, officers and employees of
each of them (any such person, an "Indemnified Party") against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.
(c) No provision of this Agreement shall be construed to
protect any Trustee or officer of the Trust, or partner or officer of the
Manager, from liability in violation of Sections 17(h) and (i) of the 1940 Act.
10
<PAGE>
12. Non-Exclusivity. The Trust's employment of the Manager is not an
exclusive arrangement, and the Trust may from time to time employ other
individuals or entities to furnish it with the services provided for herein. In
the event this Agreement is terminated with respect to any Fund, this Agreement
shall remain in full force and effect with respect to all other Funds listed on
Appendix A hereto, as the same may be amended.
13. Term. This Agreement shall become effective on the date that is the
latest of (1) the execution of this Agreement, (2) the approval of this
Agreement by the Board of Trustees of the Trust and (3) the approval of this
Agreement by the shareholders of each Fund in a special meeting of shareholders
of the Fund. This Agreement shall remain in effect for a period of two (2)
years, unless sooner terminated as hereinafter provided. This Agreement shall
continue in effect thereafter for additional periods not exceeding one (l) year
so long as such continuation is approved for each Fund at least annually by (i)
the Board of Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of each Fund and (ii) the vote of a majority of
the Trustees of the Trust who are not parties to this Agreement nor interested
persons thereof, cast in person at a meeting called for the purpose of voting on
such approval.
14. Termination. This Agreement may be terminated by the Trust on
behalf of any one or more of the Funds at any time without payment of any
penalty, by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of a Fund, upon sixty (60) days' written notice to
the Manager, and by the Manager upon sixty (60) days' written notice to a Fund.
11
<PAGE>
15. Termination by Assignment. This Agreement shall terminate
automatically in the event of any transfer or assignment thereof, as defined in
the 1940 Act.
16. Transfer, Assignment. This Agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged without the affirmative
vote or written consent of the holders of a majority of the outstanding voting
securities of each Fund.
17. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
18. Definitions. The terms "majority of the outstanding voting
securities" and "interested persons" shall have the meanings as set forth in the
1940 Act.
19. Notice of Declaration of Trust. The Manager agrees that the Trust's
obligations under this Agreement shall be limited to the Funds and to their
assets, and that the Manager shall not seek satisfaction of any such obligation
from the shareholders of the Funds nor from any trustee, officer, employee or
agent of the Trust or the Funds.
20. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
21. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be
12
<PAGE>
inconsistent with, any federal law, regulation or rule, including the 1940 Act
and the Investment Advisors Act of 1940 and any rules and regulations
promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers, all on the day and
year first above written.
THE MONTGOMERY FUNDS III MONTGOMERY ASSET MANAGEMENT, LLC
By: ____________________________ By: _____________________________________
Title: ___________________________ Title: ____________________________________
13
<PAGE>
Appendix A
Fund Schedule
o Montgomery Variable Series: Growth Fund o Montgomery Variable Series:
Emerging Markets Fund
o Montgomery Variable Series: International o Montgomery Variable Series:
Small Cap Fund Small Cap Opportunities
14
<PAGE>
Appendix B
Fee Schedule
Montgomery Variable Series: 1.00% of the first $500 million of net
Growth Fund assets; plus 0.90% of the next $500
million of net assets; plus 0.80%
of net assets over $1 billion.
Montgomery Variable Series: 1.25% of the first $250 million of net
Emerging Markets Fund assets; plus 1.00% of net assets over
$250 million.
Montgomery Variable Series: 1.25% of the first $250 million of net
International Small Cap Fund assets; plus 1.00% of net assets over
$250 million.
Montgomery Variable Series: 1.20% of the first $200 million of net
Small Cap Opportunities Fund assets; plus 1.10% of the next $300
million of net assets; plus 1.00% of
net assets over $500 million.
15
