<PAGE>
Montgomery Institutional Series:
International Growth Portfolio
Semi - Annual Report
December 31, 1998
[LOGO APPEARS HERE]
Invest wisely.(R)
MONTGOMERY ASSET MANAGEMENT(SM)
<PAGE>
Montgomery Institutional Series:
International Growth Portfolio
Semi-Annual Report
December 31, 1998
Montgomery Institutional Series: International Growth Portfolio
Portfolio Highlights
December 31, 1998
Montgomery Institutional Series: International Growth Portfolio
Portfolio of Investments
December 31, 1998 (unaudited)
Top Five Countries as of 12/31/98
(as a percentage of total net assets):
United Kingdom 17.2%
Japan 11.8
Germany 8.1
France 8.1
Netherlands 7.3
Top Ten Industries as of 12/31/98
(as a percentage of total net assets):
Banks 12.5%
Telephone/Networks 9.0
Pharmacy/Drugs 6.5
Cosmetics and Personal Care 6.3
Telephone/Wireless 6.2
Food and Beverage 6.1
Telecommunications/Other 5.2
Auto/Auto Parts 4.5
Machinery and Tools 3.9
Electric Utilities 3.1
Top Ten Holdings as of 12/31/98
(as a percentage of total net assets):
KAO Corporation 2.9%
NTT Mobile Communications 2.8
Kirin Brewery Company 2.8
Cap Gemini S.A. 2.6
Vivendi 2.5
Swisscom AG 2.5
Mannesmann AG 2.4
Koninklije KPN, N.V. 2.4
Union Electrica Fenosa S.A. 2.4
Novartis AG 2.3
<PAGE>
Portfolio Management
John Boich, CFA
Senior Portfolio Manager
Oscar Castro, CFA
Senior Portfolio Manager
Fund Performance
Cumulative total returns for the period
ended 12/31/98
Montgomery Institutional Series: International Growth Portfolio
Since inception (6/30/98) 1.10%
MSCI EAFE Index
Since 6/30/98 3.51%
Past performance is no guarantee of future results. Net asset value, investment
return and principal value will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
The Morgan Stanley Capital International EAFE Index is composed of 21 developed
market countries in Europe, Australia and the Far East. The return is presented
net of dividend withholding taxes.
<TABLE>
<CAPTION>
Common Stocks - 84.1% Value
Shares (Note 1)
<S> <C>
Australia - 3.3%
236,000 Australia & New Zealand Bank Group, ORD (Banks) $1,544,550
594,900 Cable & Wireless Optus Ltd. (Telephone/Wireless) 1,250,422
2,794,972
Canada - 0.1%
1,800 Cognos Inc.+ (Software Systems) 44,550
China/Hong Kong - 0.8%
385,000 China Telecom (Hong Kong) Ltd.+ (Telephone/Wireless) 665,884
Finland - 2.0%
13,760 Nokia Corporation AB, Series A (Telecommunications Equipment) 1,668,541
France - 8.1%
51,400 Alstom + (Machinery and Tools) 1,204,328
400 Alstom, ADR + (Machinery and Tools) 9,300
13,925 Cap Gemini S.A. (Business Services) 2,234,077
28,600 Renault S.A.+ (Auto/Auto Parts) 1,283,956
8,330 Vivendi (Conglomerates) 2,160,347
6,892,008
Germany - 7.0%
17,520 Bayerische Vereinsbank A.G. (Banks) 1,372,077
17,970 Mannesmann A.G. (Machinery and Tools) 2,059,753
3,490 Muenchener Rueckver A.G. (Insurance) 1,690,179
9,800 Veba A.G. (Electric Utilities) 586,347
3,380 Volkswagen A.G. (Auto/Auto Parts) 269,775
5,978,131
Greece - 3.7%
61,800 Hellenic Telecommunication Organization S.A.+(Telephone/Networks) 1,645,027
6,830 National Bank of Greece (Banks) 1,537,409
3,182,436
Ireland - 3.3%
53,313 Bank of Ireland (Banks) 1,185,422
23,750 Elan Corporation PLC, ADR+(Pharmacy/Drugs) 1,652,109
2,837,531
</TABLE>
<PAGE>
Italy - 3.3%
89,000 Saipem SpA+ (Oilfield Equipment) 375,711
77,900 Telecom Italia SpA+(Telephone/Networks) 664,302
72,800 Telecom Italia di Risp (Telephone/Networks) 457,903
171,500 Telecom Italia Mobile SpA (Telephone/Wireless) 1,265,415
Japan - 11.8%
59,000 Bridgestone Corporation (Auto/Auto Parts) 1,339,189
108,000 KAO Corporation (Cosmetics and Personal Care) 2,437,060
Montgomery Institutional Series: International Growth Portfolio
Portfolio of Investments
December 31, 1998 (unaudited)
Common Stocks (continued) Value
Shares (Note 1)
Japan - 11.8% (continued)
184,000 Kirin Brewery Company (Food and Beverage) $ 2,344,675
58 NTT Mobile Communications (Telecommunications/Other) 2,386,620
17,000 TDK Corporation (Electronics) 1,554,003
10,061,547
Netherlands - 7.3%
16,400 Equant N.V. (Software Systems) 1,112,125
18,400 International Nederlanden Groep N.V. (Banks) 1,121,414
40,400 Koninklijke KPN, N.V. (Telecommunications/Other) 2,021,397
23,400 Unilever N.V., ADR (Cosmetics and Personal Care) 1,940,738
6,195,674
Norway - 1.0%
247,900 Christiania Bank O.G. (Banks) 861,302
Portugal - 1.8%
33,550 Portugal Telecom S.A. (Telephone/Networks) 1,538,949
Spain - 6.1%
77,000 Argentaria (Banks) 1,991,099
26,900 Telefonica de Espana, ORD (Telephone/Networks) 1,194,336
115,200 Union Electrica Fenosa S.A.+(Electric Utilities) 2,006,192
5,191,627
Sweden - 0.9%
32,900 Ericsson (L.M.) Telephone Company, Class B (Telecommunications
Equipment) 781,525
Switzerland - 6.4%
384 Baer (Julius) Holdings AG-B (Diversified Financial Services) 1,276,272
1,014 Novartis AG (Pharmacy/Drugs) 1,993,302
5,107 Swisscom AG (Telephone/Networks) 2,137,988
5,407,562
United Kingdom - 17.2%
29,700 Abbey National PLC (Banks) 1,020,700
79,100 Allied Zurich PLC (Diversified Financial Services) 1,182,984
139,000 Amvescap PLC (Investment Management) 1,074,655
63,200 Colt Telecom Group PLC (Telephone/Regional-Local) 924,700
55,630 Glaxo Wellcome PLC (Pharmacy/Drugs) 1,911,836
159,600 Orange PLC (Telephone/Wireless) 1,841,593
70,000 Railtrack Group PLC (Railroad) 1,829,582
75,000 Reckitt and Coleman PLC (Cosmetics and Personal Care) 990,109
170,000 Sainsbury PLC (Food and Beverage) 1,322,099
<PAGE>
<TABLE>
<S> <C>
225,700 Somerfield PLC (Food and Beverage) 1,502,918
93,100 The Great Universal Stores PLC (Retail Trade) 974,421
14,575,597
Total Common Stocks (Cost $64,779,287) 71,441,167
Montgomery Institutional Series: International Growth Portfolio
Portfolio of Investments
December 31, 1998 (unaudited)
<CAPTION>
Common Stocks (continued) Value
Shares (Note 1)
<S> <C>
Preferred Stocks - 1.4%
Brazil - 0.3%
6,240,000 Telesp Celular S.A. (Telephone/Wireless) $ 274,235
Germany - 1.1%
401 Porsche A.G. (Auto/Auto Parts) 914,454
Total Preferred Stocks (Cost $1,443,937) 1,188,689
Rights - 0.0%# (Cost $0)
Spain - 0.0%#
26,000 Telefonica S.A., Rights, Expire 01/30/99+ (Telephone/Networks) 23,848
Total Securities (Cost $66,223,224) 72,653,704
</TABLE>
Principal Amount
Repurchase Agreements - 11.7% (Cost $9,949,000)
$9,949,000 Agreement with Greenwich Capital Markets, Tri-Party, 5.150%
dated 12/31/98,to be repurchased at $9,954,693 on
01/04/99,collateralized by $10,147,980 market value of U.S.
government securities, having various maturities and various
interest rates. 9,949,000
Total Investments (Cost $76,172,224*) 97.2% 82,602,704
Other Assets and Liabilities (Net) 2.8 2,362,631
Net Assets 100.0% $84,965,335
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
# Amount represents less than 0.1%.
Abbreviations:
ADR American Depositary Receipt
ORD Ordinary
Montgomery Institutional Series: International Growth Portfolio
Statement of Assets and Liabilities
December 31, 1998 (unaudited)
Assets:
Investment in securities, at value (Identified cost $76,172,224)(Note 1)
Securities $72,653,704
Repurchase agreements 9,949,000
Total investments 82,602,704
Foreign currency (Cost $388,429) 385,920
Receivables:
Shares of beneficial interest sold 3,949,662
Dividends 28,329
Due from Manager 24,882
Interest 1,423
Other Assets:
Deferred organization costs (Note 1) 26,991
Total Assets 87,019,911
Liabilities:
Forward foreign currency exchange contracts:
<PAGE>
Net unrealized depreciation of forward foreign currency
contracts (Note 3) $ 16,965
Payables:
Investment securities purchased 1,893,902
Cash overdrafts payable to Custodian 40,388
Organization costs payable 30,000
Administration fee (Note 2) 19,056
Audit fee 16,545
Trustees' fees and expenses (Note 2) 2,600
Accrued liabilities and expenses 35,120
Total Liabilities 2,054,576
Net Assets $84,965,335
Net Assets consist of:
Undistributed net investment income $ 138,315
Accumulated net realized loss on securities sold, forward foreign
currency exchange contracts and foreign currency transactions
(1,713,046)
Net unrealized appreciation of investments, forward foreign currency
exchange contracts, foreign currency transactions and net other assets
6,420,885
Shares of beneficial interest 84,028
Additional paid-in capital 80,035,153
Net Assets $84,965,335
Net Asset Value, offering and redemption price per share outstanding*
$ 10.11
Number of Fund shares outstanding 8,402,832
* Redemption price per share is equal to Net Asset Value less any applicable
redemption fees.
Montgomery Institutional Series: International Growth Portfolio
Statement of Operations
For the Period Ended December 31, 1998 (unaudited)
Net Investment Income:
Interest (net of foreign withholding taxes of $74) $ 204,022
Dividends (net of foreign withholding taxes of $21,271) 114,500
Total Income 318,522
Expenses:
Management fee (Note 2) $ 148,684
Registration and filing fees 32,711
Custodian fees 27,754
Legal and audit fees 19,052
Accounting fees (Note 2) 16,851
Amortization of organization costs (Note 1) 3,009
Trustees' fees and expenses (Note 2) 2,758
Transfer agency and servicing fees 991
Other 15,493
Total Expenses 267,303
Fees deferred by Manager (Note 2) (87,096)
Net Expenses 180,207
Net Investment Income 138,315
Realized and Unrealized Gain/(Loss) on Investments:
Net realized loss from:
<PAGE>
Securities transactions (1,438,431)
Forward foreign currency exchange contracts (54,714)
Foreign currency transactions (219,901)
Net realized loss on investments during the period
(1,713,046)
Net change in unrealized appreciation/(depreciation)of:
Securities 6,430,480
Forward foreign currency exchange contracts (16,965)
Foreign currency and net other assets 7,370
Net unrealized appreciation of investments during the period
6,420,885
Net Realized and Unrealized Gain on Investments 4,707,839
Net Increase in Net Assets Resulting from Operations $ 4,846,154
* The Montgomery Institutional Series: International Growth Portfolio commenced
operations on June 30, 1998.
Montgomery Institutional Series: International Growth Portfolio
Statement of Changes in Net Assets (unaudited)
Period Ended
12/31/98
Net Increase in Net Assets Resulting From Operations:
Net investment income. $ 138,315
Net realized loss on securities transactions, forward foreign
currency exchange contracts and foreign currency
transactions during the year (1,713,046)
Net unrealized appreciation of securities, forward
foreign currency exchange contracts, foreign currency and
net other assets during the year 6,420,885
Net increase in net assets resulting from operations 4,846,154
Distributions to shareholders from net investment income --
Distributions to shareholders from net realized gains on investments --
Net increase from beneficial interest transactions (Note 4) 80,119,181
Net increase in net assets. 84,965,335
Net Assets:
Beginning of period 0
End of period (including undistributed net investment income
of $138,315) $84,965,335
Financial Highlights (unaudited)
Selected Per Share Data for the Period Ended:
12/31/98*
(unaudited)
Net asset value beginning of period $ 10.00
Net investment income 0.02
Net realized and unrealized gain on investments 0.09
Net increase in net assets resulting from
investment operations 0.11
Effect of redemption expense reimbursement fee --
Distributions from net investment income --
Distributions from net realized gains on investments --
Net asset value end of period $ 10.11
Total return** 1.10%
Ratios to Average Net Assets/Supplemental Data:
Net assets, end of period (in 000's) $ 84,965
<PAGE>
Ratio of net investment income to average net assets 0.69%+
Ratio of operating expenses to average net assets including
interest and tax expenses 0.90%+
Portfolio turnover rate 41%
Net investment income before deferral of fees by Manager
including interest and tax expenses. $ 0.01
Ratio of expenses before deferral of fees by Manager
including interest and tax expenses. 1.34%+
* The Montgomery Institutional Series: International Growth Portfolio
commenced operations on June 30, 1998.
** Total return represents aggregate total return for the period indicated.
+ Annualized.
The Montgomery Funds II
Notes to Financial Statements
The Montgomery Funds II (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as a diversified, open-end management
investment company and was organized as a Delaware business trust on September
8, 1993 and commenced operations with the Montgomery Institutional Series:
Emerging Markets Portfolio. As of December 31, 1998, the Trust had seven
publicly offered series, the Montgomery U.S. Asset Allocation Fund, the
Montgomery Global Long-Short Fund, the Montgomery Emerging Markets Focus Fund,
the Montgomery Small Cap Systematic Value Fund, the Montgomery Macro Cap
Systematic Value Fund, the Montgomery Institutional Series: Emerging Markets
Portfolio and the Montgomery Institutional Series: International Growth
Portfolio. Prior to the public offerings of shares of each Fund, a limited
number of shares were sold to Montgomery Asset Management, LLC (or its
predecessor) and/or affiliated persons of Montgomery Asset Management in private
placement offerings. Otherwise, no Fund had any significant operations prior to
the date on which it commenced operations (i.e., commenced selling shares to the
public). Information presented in these financial statements pertains only to
the Montgomery Institutional Series: International Growth Portfolio (the
"Fund"). The financial statements for the other funds in the Trust have been
presented under separate cover.
1. Significant Accounting Policies:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies.
a. Portfolio Valuation
The Fund's 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 in the case of fixed income securities, the mean
between the closing bid and asked price. Securities and assets for which market
quotations are not readily available (including restricted securities which are
subject to limitations as to their sale) are valued at fair value by management
as determined in good faith in accordance with methods which are authorized by
the Trust's Board of Trustees.
Portfolio securities which are traded primarily on foreign securities
exchanges or for which market quotations are readily available are generally
valued at the last reported sales price on the respective exchanges or markets,
except that when an occurrence subsequent to the time that a value was so
established is likely to have changed said value, the fair value of those
securities will be determined by consideration of other factors by or under the
direction of the Board of Trustees or its delegates. Securities traded on the
over-the-counter market are valued at the mean between the last available bid
and ask price prior to the time of valuation.
Short-term securities with maturities of 60 days or less are valued at
amortized cost which approximates fair value.
<PAGE>
b. Repurchase Agreements
The Fund may engage in repurchase agreements individually or jointly
through a joint repurchase account with other series of the Trust and affiliated
series of another registered investment company pursuant to a joint repurchase
agreement. Under the terms of a typical repurchase agreement, the Fund takes
possession of a government debt obligation as collateral. The Fund also agrees
with the counterparty to allow the counterparty to repurchase, and the Fund to
resell, the obligation at a specified date and price, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the Fund's holding
period. The value of the collateral is at least equal at all times to the total
amount of the repurchase obligation, including interest. In the event of
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There could be potential loss to the Fund in the event the Fund
is delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period in which the Fund seeks to assert its
rights. The Fund's investment manager, acting under the supervision of the Board
of Trustees, reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements to
evaluate potential risks. The Fund may also participate on an individual or
joint basis in tri-party repurchase agreements which involve a counterparty and
a custodian bank.
The Montgomery Funds II
Notes to Financial Statements
(continued)
c. Foreign Currency
Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions. Unrealized gains and
losses which result from changes in foreign currency exchange rates on
investments have been included in the unrealized appreciation/(depreciation) of
securities. Net realized foreign currency gains and losses resulting from
movement in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amount actually received and
the portion of foreign currency gains and losses related to fluctuations in
exchange rates between the initial purchase trade date and subsequent sale trade
date.
d. Forward Foreign Currency Exchange Contracts
The Fund may engage in forward foreign currency exchange contracts with off
balance sheet risk in the normal course of investing activities in order to
manage exposure to market risks. Forward foreign currency exchange contracts are
valued at the forward rate and are marked-to-market daily. The change in market
value is recorded by the Fund as an unrealized gain
or loss.
When the contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it was opened
and the value at the time it was closed. Forward foreign currency exchange
contracts have been used solely to establish a rate of exchange for settlement
of transactions. Although forward foreign currency contracts limit the risk of
loss due to a decline in the value of the hedged currency, they also limit any
potential gain that might result should the value of the currency increase. In
addition, the Fund could be exposed to risks if the counterparties to the
contracts are unable to meet the terms of their contracts.
e. Dividends and Distributions
Dividends from net investment income of the Fund are declared and paid
annually.
<PAGE>
Distributions of any short-term capital gains earned by the Fund are
distributed no less frequently than annually. Additional distributions of net
investment income and capital gains for the Fund may be made in order to avoid
the application of a 4% non-deductible excise tax on certain undistributed
amounts of ordinary income and capital gains. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments of income and gains on
various investment securities held by the Fund, timing differences and differing
characterization of distributions made by the Fund.
f. Securities Transactions and Investment Income
Securities transactions are recorded on a trade-date basis. Realized gain
and loss from securities transactions are recorded on the specific identified
cost basis. Dividend income is recognized on the ex-dividend date and interest
income, including, where applicable, amortization of discount on short-term
investments, is recognized on an accrual basis. Dividend income on foreign
securities is recognized as soon as the Fund is informed of the ex-dividend
date.
g. Federal Income Taxes
The Fund has elected and qualified, and it is the intention of the Fund to
continue to qualify, to be treated as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), by
complying with the provisions available to certain investment companies, as
defined in applicable sections of the Code, and to make distributions of taxable
income to shareholders sufficient to relieve the Fund from all or substantially
all federal income taxes.
h. Organization Costs
Expenses incurred in connection with the organization of the Fund are
amortized on a straight-line basis over a period of five years from the
commencement of operations.
i. Expenses
Most expenses of the Trust can be directly attributed to a Fund. Expenses
which cannot be directly attributed are apportioned among the Funds in the Trust
based upon relative net assets.
The Montgomery Funds II
Notes to Financial Statements
(continued)
2. Management Fees and Other Transactions with Affiliates:
a. Montgomery Asset Management, LLC. is the Fund's Manager (the "Manager"). The
Manager, a Delaware liability company, is an investment adviser registered with
the Securities and Exchange Commission under the Investment Advisers Act of
1940, as amended (the "Advisers Act"). The Manager is a subsidiary of
Commerzbank AG.
Pursuant to an investment management agreement ("Investment Management
Agreement"), the Manager provides the Fund with advice on buying and selling
securities, manages the investments of the Fund including the placement of
orders for portfolio transactions, furnishes the Fund with office space and
certain administrative services, and provides the personnel needed by the Trust
with respect to the Manager's responsibilities under such agreement. As
compensation, the Fund pays the Manager a monthly management fee (accrued daily)
based upon the average daily net assets of the Fund, at an effective annual rate
of 0.75% of average daily net assets before any reduction of fees for the period
ending December 31, 1998, (the effective rate including the effect of current
period fee reduction was 0.31% for the period ending December 31, 1998.) The
Manager has agreed to reduce some or all of its management fee or absorb Fund
expenses if necessary to keep the Fund's annual operating expenses, exclusive of
interest or taxes, at or below 0.90% of average daily net assets. Any reductions
made for the Fund by the Manager in its fees are subject to recovery within the
following three years provided the Fund is able to affect such reimbursement and
<PAGE>
remain in compliance with applicable expense limitations. Any of the Manager's
voluntary expense absorptions are also subject to recovery.
For the period ended December 31, 1998, the Manager has reduced fees by
$87,096.
As of December 31, 1998, the reduced management fee subject to recoupment
is $87,096.
b. Montgomery Asset Management, LLC serves as the Fund's administrator (the
"Administrator"). The Administrator performs services with regard to various
aspects of the Fund's administrative operations. As compensation, the Fund pays
the Administrator a monthly fee at an annual rate of 0.05% of average daily net
assets. For the period ended December 31, 1998, the Administrator did not waive
fees.
c. Certain officers and Trustees of the Trust are, with respect to the Trust's
Manager and/or principal underwriter, "affiliated persons" as defined in the
1940 Act. Each Trustee of the Montgomery Funds II who is not an "affiliated
person" receives an annual retainer and quarterly meeting fees totalling $55,000
per annum, as well as reimbursement for expenses, for service as a Trustee of
all Trusts advised by the Manager ($15,000 of which was allocated to the
Montgomery Funds II).
3. Securities Transactions:
a. The aggregate amount of purchases and sales of investment securities, other
than short-term securities, for the period ended December 31, 1998, were
$82,128,435 and $14,467,937, respectively.
b. At December 31, 1998, aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there was an excess of
tax cost over value for federal income tax purposes were $7,677,513 and
$1,247,033 respectively.
The Montgomery Funds II
Notes to Financial Statements
(continued)
c. The schedules of forward foreign currency exchange contracts at December 31,
1998 were as follows:
Foreign Currency Settlement In Exchange Net Unrealized
Amount Date For (US$) (Depreciation)
Forward Foreign Currency Exchange Contracts to Receive:
907,410 British Pound $1,508,461 $(16,965)
Total Forward Foreign Currency
Exchange Contracts to Receive
(Contract cost $1,525,426)
d. Under an unsecured Revolving Credit Agreement with DeutscheBank (New York),
the Fund, along with other funds of The Montgomery Funds, The Montgomery Funds
II and The Montgomery Funds III, may for one year from August 31, 1998 borrow
(consistent with applicable law and its investment policies) up to 10% of its
net asset value, provided that the aggregate principal amount of outstanding
loans under the agreement to all Funds does not exceed $175,000,000. The fund
pays its pro-rata share of the quarterly commitment fee of 0.08% per annum of
the unutilized credit line balance. For the period ended December 31, 1998,
there were no borrowings under this agreement.
4. Transactions in Shares of Beneficial Interest:
The Trust has authorized an unlimited number of shares of beneficial interest
which have a par value of $0.01. Transactions in shares of beneficial interest
for the periods indicated below were:
<PAGE>
<TABLE>
<CAPTION>
Period Ended
December 31, 1998
Shares Amount
<S> <C> <C>
Shares Sold 8,702,235 $82,898,668
Issued as reinvestment of dividends -- --
Shares redeemed 299,403 2,779,488
Net Increase 8,402,832 $80,119,181
</TABLE>
5. Foreign Securities:
The Fund purchases securities on foreign securities exchanges. Securities
of foreign companies and foreign governments involve special risks and
considerations not typically associated with investing in U.S. companies and the
U.S. government. These risks include revaluation of currencies, less reliable
information about issuers, different securities transactions clearance and
settlement practices, and potential future adverse political and economic
developments. These risks are heightened for investments in emerging market
countries. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those securities of comparable U.S. companies and the U.S. government.
