As filed with the Securities and Exchange Commission on
November 1, 1996.
File Nos. 333-09431,811-7739
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. X
Post-Effective Amendment No.
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. _1_
HARDING, LOEVNER FUNDS, INC.
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(Exact name of registrant as specified in charter)
600 FIFTH AVENUE, 26th FLOOR
NEW YORK, NEW YORK 10020
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(Address of principal executive offices)
Registrant's telephone number: 800-762-4848
WILLIAM E. VASTARDIS, Senior Vice President
AMT Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, New York 10020
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(Name and address of agent for service)
With a copy to:
William Goodwin, Esq.
Dechert Price & Rhoads
477 Madison Avenue
New York, Ny 10022-5891
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
It is proposed that this filing will become effective:
X immediately upon filing pursuant to Rule 485(b)
on ___ pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
75 days after filing pursuant to Rule 485(a)
on _____ pursuant to Rule 485(a)
The registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with the provision of Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant hereby elects to register an indefinite number of shares of Capital
Stock, $.001 par value per share, of all series of the Registrant, now
existing or hereafter created. The amount of the registration fee required by
Rule 24f-2 is $500.
HARDING, LOEVNER FUNDS, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Under the Securities Act of 1933
Form N-1A Item No. Location
Part A. Prospectus Caption
Item 1. Cover Page Cover Page
Item 2. Synopsis The Fund's Expenses
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description
of Registrant Description of the Fund;
Investment Policies; Investment
Restrictions; Risks Associated
with the Fund's Investment
Policies and Investment
Techniques
Item 5. Management of the Fund Management of the Fund
Item 5A.Management's Discussion Not Applicable
of Fund Performance
Item 6. Capital Stock and Other Shareholder Information; Tax
Considerations; Dividends
Item 7. Purchase of Securities Purchase and Redemption of
Offered Shares; Offered Dividends;
Determination of Net Asset Value;
Distribution of Fund Shares
Item 8. Redemption or Repurchase Purchase and Redemption of Shares
Item 9. Pending Legal Proceedings Not Applicabl
N-1A Item No. Statement of Additional Information Caption
Part B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Organization of the Fund
Item 13. Investment Objectives and Policies Supplemental Descriptions of
Investments; Supplemental
Investment Techniques;
Supplemental Discussion of Risks
Associated With the Fund's
Investment Policies and
Investment Techniques; Investment
Restrictions
Item 14. Management of the Fund Management of the Fund
Item 15. Control Persons and Principal Not Applicable
Holders of Securities
Item 16. Investment Advisory and Other
Services Management of the Fund
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Securities Shareholder Information; Tax
Considerations;
Organization of the Fund
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered Net Asset Value
Item 20. Tax Status Tax Considerations
Item 21. Underwriters Distribution of Fund Shares
Item 22. Calculation of Performance Data Calculation of Performance Data
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement
HARDING, LOEVNER FUNDS, INC.
Prospectus - November 1, 1996
Harding, Loevner Funds, Inc. (the "Fund") is a no-load, open-end management
investment company (a "mutual fund") that currently has four separate
diversified portfolios (each a "Portfolio"), each of which has distinct
investment objectives and policies. There is no sales charge for purchase of
shares. Shares of each Portfolio may be purchased through AMT Capital Services,
Inc. ("AMT Capital"), the Fund's exclusive distributor. The minimum initial
investment in any Portfolio is $100,000. Additional investments or redemptions
may be of any amount. The Portfolios and their investment objectives are:
International Equity Portfolio - to seek long-term capital appreciation
through investments in equity securities of companies based outside the
United States.
Global Equity Portfolio - to seek long-term capital appreciation through
investments in equity securities of companies based both in and outside
the United States.
Emerging Markets Portfolio - to seek long-term capital appreciation
through investments in equity securities of companies based in developing
markets outside the United States. (This Portfolio has not commenced
operations.)
Multi-Asset Global Portfolio - to seek long-term capital appreciation and
a growing stream of current income through investments in equity and debt
securities of companies based both inside and outside the United States
and debt securities of the United States and foreign governments and their
agencies and instrumentalities.
No assurance can be given that a Portfolio's investment objectives will be
attained
This Prospectus sets forth concisely the information that a prospective
investor should know before investing. It should be read and retained for future
reference. A Statement of Additional Information dated November 1, 1996,
containing additional information about the Fund (the "Statement of Additional
Information"), has been filed with the Securities and Exchange Commission (the
"Commission") and is incorporated by reference into this Prospectus. It is
available without charge and can be obtained by calling or writing AMT Capital
at the telephone numbers or address listed on the cover of this Prospectus.
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.
TABLE OF CONTENTS
Prospectus Highlights..............................................
Fund Expenses......................................................
Financial Highlights...............................................
The Fund .........................................................
Investment Policies................................................
Descriptions of Investments........................................
Risks Associated with the Fund's Investment
Policies and Investment Techniques...............................
Investment Restrictions............................................
Brokerage Practices................................................
Yields and Total Return............................................
Distribution of Fund Shares........................................
Determination of Net Asset Value...................................
Purchase and Redemption of Shares..................................
Dividends..........................................................
Management of the Fund.............................................
Tax Considerations.................................................
Shareholder Information............................................
Other Parties......................................................
Shareholder Inquiries..............................................
PROSPECTUS HIGHLIGHTS
Harding, Loevner Funds, Inc. is a no-load, open-end management investment
company that currently has four separate diversified Portfolios, each of which
has distinct investment objectives and policies. There is no assurance that a
Portfolio will achieve its investment objective. See "Investment Objectives"
below.
The Fund and its Investment Objectives
Name of Portfolio Investment Objective
International Equity Portfolio To seek long-term capital appreciation through
investments in equity securities of companies
based outside the United States.
Global Equity Portfolio To seek long-term capital appreciation through
investments in equity securities of companies
based both in and outside the United States.
Emerging Markets Portfolio To seek long-term capital appreciation through
investments in equity securities of companies
based in developing markets outside the United
States.
Multi-Asset Global Portfolio To seek long-term capital appreciation and a
growing stream of current income through
investments in equity and debt securities of
companies based both inside and outside the
United States and debt securities of the
United States and foreign governments and
their agencies and instrumentalities.
Investment Adviser
Harding, Loevner Management, L.P. ("HLM"), which manages approximately $1
billion in assets for private investors and institutions, serves as investment
adviser to the Fund. HLM provides the Fund with business and asset management
services, including investment research and advice and determining which
portfolio securities shall be purchased or sold on behalf of the Fund.
Administrator and Distributor
AMT Capital serves as Administrator to the Fund, supervising the general day-to-
day business activities and operations of the Fund other than investment
advisory activities. AMT Capital also serves as the exclusive distributor of
shares of the Fund's Portfolios. For more information, refer to "Management of
the Fund."
How to Invest
Shares of each Portfolio may be purchased without any sales charges at their net
asset value next determined after receipt of the order by submitting an Account
Application to AMT Capital and wiring federal funds to AMT Capital's "Fund
Purchase Account" at Investors Bank & Trust Company (the "Transfer Agent"). The
Portfolios are not available for sale in all states. For information about the
Fund's availability, contact an account representative at AMT Capital.
The minimum initial investment per Portfolio is $100,000. There is no minimum
amount for subsequent investments. There are no sales commissions (loads) or
12b-1 fees. For more information, refer to "Purchase and Redemption of
Shares."
How to Redeem Shares
Shares of each Portfolio may be redeemed, without charge, at their next
determined net asset value after receipt by either the Transfer Agent or AMT
Capital of the redemption request. For more information, refer to "Purchase and
Redemption of Shares."
Risks
Prospective investors should consider certain risks associated with an
investment in any Portfolio. There is no assurance that a Portfolio will
achieve its investment objective. The Fund invests in securities of companies
based outside of the United States. Investments in foreign securities involve
risks not associated with investments in securities issued by United States
entities. For more information, refer to "Investment Policies", "Descriptions
of Investments", and "Risks Associated with the Fund's Investment Policies and
Investment Techniques".
FUND EXPENSES
The following table illustrates the expenses and fees that a shareholder of the
Fund can expect to incur. The purpose of this table is to assist the investor in
understanding the various expenses that an investor in the Fund will bear
directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
Annual Fund Operating Expenses (after expense reimbursements, shown as a
percentage of average net assets)
Other Expenses
-------------------------------------------
Total
Other Other
Expenses Expenses Total
(after (after Operating
Adminis- expense expense Expenses
Advisory 12b-1 tration reimbur- reimbur-
Fees Fees Fees sment) sment)
________ _____ ________ _________ ________ _________
International
Equity
Portfolio 0.75% None 0.15% 0.10% (a) 0.25%(a) 1.00% (a)
Global
Portfolio 1.00% None 0.15% 0.10% (a) 0.25% (a) 1.25% (a)
Emerging
Markets
Portfolio 1.25% None 0.15% 0.35% (a) 0.50% (a) 1.75% (a)
Multi-Asset
Global
Portfolio 1.00% None 0.15% 0.10% (a) 0.25% (a) 1.25% (a)
(a) HLM has voluntarily agreed to cap the total operating expenses at 1.00%,
1.25%, 1.75% and 1.25% (on an annualized basis) of the average daily net assets
of the International Equity Portfolio, Global Equity Portfolio, Emerging Markets
Portfolio and Multi-Asset Global Portfolio, respectively. Without such cap, the
total operating expenses (on an annualized basis) for International Equity
Portfolio, Global Equity Portfolio, Emerging Market Portfolio and Multi-Asset
Global Portfolio are estimated to be 1.10%, 1.50%, 2.00% and 1.50%,
respectively, of their average daily net assets (of which 0.20%, 0.35%, 0.60%
and 0.35% is "other expenses").
The following table illustrates the expenses that an investor would pay on each
$1,000 increment of its investment over various time periods, assuming a 5%
annual return. As noted in the table above, the Fund charges no redemption fees
of any kind.
Expenses Per $1,000 Investment (including expense waivers and reimbursements)
1 Year 3 Years
------ -------
International Equity Portfolio $10 $32
Global Equity Portfolio $13 $40
Emerging Markets Portfolio $18 $57
Multi-Asset Global Portfolio $13 $40
These examples should not be considered a representation of future expenses or
performance. Actual operating expenses and annual returns may be greater or
less than those shown.
At the discretion of and until further notice from HLM, expenses of the
International Equity, Global Equity, Emerging Markets and Multi-Asset Global
Portfolios will not exceed 1.00%, 1.25%, 1.75% and 1.25%, respectively, of each
such Portfolio's average daily net assets for any fiscal year. Certain portions
of the transaction expenses (i.e., brokerage commissions) are not included in
the expenses subject to the cap described above. See "Investment Policies -
Portfolio Turnover".
FINANCIAL HIGHLIGHTS
The International Equity Portfolio commenced operations on November 1, 1996.
Prior to that date the Portfolio's operating history was that of AMT Capital
Fund, Inc. - HLM International Equity Portfolio (the "AMT Capital Portfolio").
Shareholders of the AMT Capital Portfolio approved a reorganization of the AMT
Capital Portfolio into the International Equity Portfolio on October 30, 1996.
The financial information for the period ended December 31, 1995 in the
following table has been audited in conjunction with the audit of the financial
statements of the AMT Capital Portfolio by Ernst & Young LLP, independent
auditors. The audited financial statements for the period ended December 31,
1995 are incorporated by reference in the Statement of Additional Information.
The unaudited financial statements for the AMT Capital Portfolio for the six
months ended June 30, 1996 are incorporated by reference in the Statement of
Additional Information. The financial information should be read in conjunction
with the financial statements which can be obtained upon request without charge.
HLM International Equity Portfolio
--------------------------------------------------
(unaudited)
June 30, 1996 Dec. 31, 1995 Dec. 31, 1994*
Per Share Data $ 10.77 $ 9.71 $ 10.00
Net asset value, beginning
of period
Increases (Decreases) From
Investment Operations
Investment income, net 0.09 0.10 0.04
Net realized and unrealized
gain (loss) on investments
and foreign currency-
related transactions 1.18 1.06 (0.29)
Net increase (decrease)
from investment operations 1.27 1.16 (0.25)
Less Distributions From
Investment income, net - 0.10 0.03
Temporary overdistribution
of net realized gain on
investments and foreign
currency-related transactions - - 0.01
Total distributions - - 0.04
Net asset value, end of period $ 12.04 $ 10.77 $ 9.71
Total Return 11.79% 11.99% (2.47%)(b)
Ratios/Supplemental Data
Net assets, end of period - $ 67,726,552 $ 8,903,878
Ratio of expenses to average
net assets 1.00% (a) 0.99% 0.95% (a)
Ratio of expense income, net 2.20% (a) 1.30% 1.13% (a)
to average net assets
Decrease reflected in above
ratios due to waiver of
investment advisory
and administration fees and
reimbursement of other expenses 0.22% (a) 0.54% 1.33% (a)
Portfolio turnover 8.35% (b) 27.71% 27.49%
(a) Annualized
(b) Not annualized
* Commencement of Operations was May 11, 1994
THE FUND
Harding, Loevner Funds, Inc. is a no-load, open-end management investment
company that currently has four separate diversified portfolios, each of which
has distinct investment objectives and policies. There is no assurance that a
Portfolio will achieve its investment objective.
The investment objective and policies of each Portfolio are described below.
Except as otherwise indicated, the investment policies may be changed at any
time by the Fund's Board of Directors to the extent that such changes are
consistent with the investment objective of the applicable Portfolio. However,
each Portfolio's investment objective is fundamental and may not be changed
without a majority vote of the Portfolio's outstanding shares, which is defined
as the lesser of (a) 67% of the shares of the applicable Portfolio present or
represented if the holders of more than 50% of the shares are present or
represented at the shareholders' meeting, or (b) more than 50% of the shares of
the applicable Portfolio (hereinafter, "majority vote"). The investment
objective of each of the Portfolios is:
Name of Portfolio Investment Objective
- --------------------------------------------------------------------------------
International Equity Portfolio To seek long-term capital appreciation through
investments in equity securities of companies
based outside the United States.
Global Equity Portfolio To seek long-term capital appreciation through
investments in equity securities of companies
based both in and outside the United States.
Emerging Markets Portfolio To seek long-term capital appreciation through
investments in equity securities of companies
based in developing markets outside the United
States.
Multi-Asset Global Portfolio To seek long-term capital appreciation and a
growing stream of current income through
investments in equity and debt securities of
companies based both inside and outside the
United States and debt securities of the
United States and foreign governments and
their agencies and instrumentalities.
INVESTMENT POLICIES
International Equity Portfolio
The International Equity Portfolio invests at least 65% of its total assets in
common stocks, securities convertible into such common stocks [including
American Depository Receipts ("ADRs") and European Depository Receipts
("EDRs")], closed-end investment companies, and rights and warrants issued by
companies that are based outside the United States. The Portfolio may invest in
forward foreign currency exchange contracts, equity derivative securities such
as options on common stocks and options, futures and options on futures on
foreign common stock indices. The Portfolio may also invest in securities of
U.S. companies which derive, or are expected to derive, a significant portion of
their revenues from their foreign operations, although under normal
circumstances not more than 15% of the Portfolio's assets will be invested in
securities of U.S. companies. The Portfolio may also invest up to 35% of its
assets in the types of short-term securities and in other debt securities
described under the caption "Descriptions of Investments" below.
The Portfolio may invest up to 20% of its assets in convertible securities
and debt securities which are rated below investment-grade, that is, rated below
Baa by Moody's Investors Service, Inc. ("Moody's") or below BBB by Standard &
Poors Corporation ("Standard & Poors", or "S&P") ["junk bonds"] and in unrated
securities judged to be of equivalent quality as determined by HLM.
The Portfolio will invest broadly in the available universe of common stocks
of companies domiciled in one country in each of at least three of the following
groups: (1) Europe, including Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden,
Switzerland, and the United Kingdom; (2) the Pacific Rim, including Australia,
Hong Kong, Japan, Malaysia, New Zealand, and Singapore; (3) Canada; and (4)
countries with "emerging markets" as defined by Morgan Stanley Capital
International ("MSCI"). At least 65% of these securities will be denominated in
one of at least three currencies other than the U.S. dollar.
HLM's international equity investment approach is "bottom up". The approach
seeks to identify companies with excellent long-term business prospects, and
then to select from among them those whose stocks appear to offer attractive
absolute returns. HLM's investment criteria include both growth and value
considerations. HLM seeks companies that it believes have strong balance sheets,
sustainable internal growth, superior financial returns and defensible business
franchises. Typically, HLM will only invest in companies that it has analyzed
for a number of years. Country allocation and sector weightings reflect the
results of stock selection, which itself is strongly influenced by HLM's
cyclical and secular outlook for various industries, sectors, and national
economies. Explicit country or sector allocation decisions are taken only when
necessary to ensure that portfolios are well-diversified. HLM hedges foreign
currency exposure infrequently, on those occasions when it has a strong view on
the prospects for a particular currency. Currency hedging is done through the
use of forward contracts or options.
Portfolio Turnover. Portfolio turnover will depend on factors such as
volatility in the markets that the Portfolio invests in, or the variability of
cash flows into and out of the Portfolio. Portfolio turnover is expected to be
low, generally below 50%, due to the emphasis on stock selection.
Global Equity Portfolio
The Global Equity Portfolio invests at least 65% of its total assets in common
stocks, securities convertible into such common stocks (including ADRs and
EDRs), closed-end investment companies, and rights and warrants issued by
companies that are based both in and outside the United States. The Portfolio
may invest in forward foreign currency exchange contracts, equity derivative
securities such as options on common stocks and options, futures and options on
futures on foreign common stock indices. The Portfolio may also invest up to
35% of its assets in the types of short-term securities and in other debt
securities described under the caption "Descriptions of Investments" below.
The Portfolio may invest up to 20% of its assets in convertible securities and
debt securities which are rated below investment-grade.
The Portfolio will invest broadly in the available universe of common stocks of
companies domiciled in one of at least three countries including the United
States and countries listed above in International Equity Portfolio's investment
policies.
HLM's "bottom up" approach is also utilized for this Portfolio. HLM hedges
foreign currency exposure infrequently, on those occasions when it has a strong
view on the prospects for a particular currency. Currency hedging is done
through the use of forward contracts or options.
Portfolio Turnover. Portfolio turnover will depend on factors such as
volatility in the markets that the Portfolio invests in, or the variability of
cash flows into and out of the Portfolio. Portfolio turnover is expected to be
low, generally below 50%, due to the emphasis on stock selection.
Emerging Markets Portfolio
The Emerging Markets Portfolio invests at least 65% of its total assets in
common stocks, securities convertible into such common stocks (including ADRs
and EDRs), closed-end investment companies, and rights and warrants issued by
companies that are based in developing markets outside the United States. The
Portfolio may invest in forward foreign currency exchange contracts, equity
derivative securities such as options on common stocks and options, futures and
options on futures on foreign common stock indices. The Portfolio may also
invest in securities of U.S. companies which derive, or are expected to derive,
a significant portion of their revenues from their foreign operations, although
under normal circumstances not more than 15% of the Portfolio's assets will be
invested in securities of U.S. companies. The Portfolio may also invest up to
35% of its assets in the types of short-term securities and in other debt
securities described under the caption "Descriptions of Investments" below.
The Portfolio may invest up to 20% of its assets in convertible securities and
debt securities which are rated below investment-grade.
The Portfolio will invest broadly in the available universe of common stocks of
companies domiciled in one of at least three countries listed below under the
caption "Description of Investments - Emerging Markets Securities".
HLM's "bottom up" approach is also utilized for this Portfolio. HLM hedges
foreign currency exposure infrequently, on those occasions when it has a strong
view on the prospects for a particular currency. Currency hedging is done
through the use of forward contracts or options.
Portfolio Turnover. Portfolio turnover will depend on factors such as
volatility in the markets that the Portfolio invests in, or the variability of
cash flows into and out of the Portfolio. Portfolio turnover is expected to be
below 100% due to the emphasis on stock selection.
Multi-Asset Global Portfolio
The Multi-Asset Global Portfolio invests assets in common stocks, securities
convertible into such common stocks (including ADRs and EDRs), closed-end
investment companies, debt securities and rights and warrants issued by
companies that are based both in and outside the United States and debt
securities of the United States and foreign governments and their agencies and
instrumentalities. The Portfolio may invest in forward foreign currency exchange
contracts, equity and debt derivative securities such as options, futures and
options on futures. The Portfolio may also invest its assets in the types of
short-term securities described under the caption "Descriptions of Investments"
below.
The Portfolio will invest broadly in the available universe of equity and debt
securities of companies and debt securities of the United States and foreign
governments and their agencies and instrumentalities domiciled in at least three
countries including the United States. HLM's "bottom up" approach is utilized
for the selection of equity and fixed income investments for this Portfolio.
While the Portfolio will generally emphasize equity investments, the allocation
of the Portfolio among equity, fixed income and cash equivalent investments may
range widely, and will vary over time according to HLM's current assessment of
the relative risk and potential return of alternative investments.
From time to time, HLM may hedge a portion of the foreign currency exposure of
the Portfolio. Currency hedging is done through the use of forward contracts or
options.
Portfolio Turnover. Portfolio turnover will depend on factors such as
volatility in the markets that the Portfolio invests in, or the variability of
cash flows into and out of the Portfolio. Portfolio turnover is expected to be
low, generally below 50%, due to the emphasis on security selection.
DESCRIPTIONS OF INVESTMENTS
The following briefly describes some of the different types of securities in
which each Portfolio, unless otherwise specified, may invest and investment
techniques in which each Portfolio may engage, subject to each Portfolio's
investment objective and policies. For a more extensive description of certain
of these assets and the risks associated with them, see the Statement of
Additional Information.
Equity Securities. The Portfolios will invest in various types of equity
securities, including common stocks, preferred stocks, convertible securities,
ADRs, EDRs, rights and warrants. The stocks that the Portfolios will invest in
may be either growth-oriented or value-oriented. Growth-oriented stocks are the
stocks of companies that are believed to have internal strengths, such as good
financial resources, a satisfactory rate of return on capital, a favorable
industry position, and superior management. Value-oriented stocks have lower
price multiples (either price/earnings or price/book) than other stocks in their
industry and can sometimes also display weaker fundamentals such as growth of
earnings and dividends. Rights and warrants are instruments which give the
holder the right to purchase the issuer's securities at a stated price during a
stated term.
Foreign Securities. The Portfolios will invest in foreign securities.
Foreign securities include equity, foreign-fixed income, or derivative
securities denominated in currencies other than the U.S. dollar, including any
single currency or multi-currency units, plus sponsored and unsponsored ADRs and
EDRs. ADRs typically are issued by a U.S. bank or trust company and evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depositary Receipts, are receipts
issued in Europe, typically by foreign banks and trust companies, that evidence
ownership of either foreign or domestic underlying securities. Unsponsored ADRs
and EDRs differ from sponsored ADRs and EDRs in that the establishment of
unsponsored ADRs and EDRs is not approved by the issuer of the underlying
securities. Risks associated with investing in foreign securities are described
under the caption "Risks Associated with the Fund's Investment Policies and
Investment Techniques -Foreign Investments" below.
Emerging Markets Securities. For purposes of its investment policies, the Fund
defines an emerging market as any country, the economy and market of which is
generally considered to be emerging or developing by MSCI or, in the absence of
an MSCI classification, by the World Bank. Under this definition, the Fund
considers emerging markets to include all markets except Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, the United Kingdom, and the United States.
Emerging Markets Debt Instruments. The Emerging Markets Portfolio and the
Multi-Asset Global Portfolio may invest in zero coupon securities and
convertible debt or other debt securities acquired at a discount. A portion of
the Portfolio's sovereign debt securities may be acquired at a discount. The
Portfolio will only purchase such securities to the extent consistent with the
Portfolio's investment objectives.
Foreign Governments and International and Supranational Agency Securities. The
Portfolios may purchase, for temporary purposes, debt obligations issued or
guaranteed by foreign governments or their subdivisions, agencies and
instrumentalities, and debt obligations issued or guaranteed by international
agencies and supranational entities.
Convertible Securities. The Portfolios may invest in convertible preferred and
debt securities which are securities that may be converted into or exchanged
for, at either a stated price or stated rate, underlying shares of common
stock. Convertible securities have general characteristics similar to both
fixed-income and equity securities. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible fixed
income securities tends to decline as interest rates increase and, conversely,
tends to increase as interest rates decline. In addition, because of the
conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stocks and
therefore also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
Foreign Currency Transactions. The Portfolios hedge foreign currency exposure
infrequently, on those occasions when HLM has a strong view on the prospects for
a particular currency. Each Portfolio will conduct its currency transactions
either on a spot (cash) basis at the rate prevailing in the currency exchange
market, or through entering into forward contracts to purchase or sell currency.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. The use of forward currency contracts does not eliminate
fluctuations in the underlying prices of the securities, but it does establish a
rate of exchange that can be achieved in the future. In addition, although
forward currency contracts limit the risk of loss due to a decline in the value
of the hedged currency, at the same time, they also limit any potential gain
that might result should the value of the currency increase. Each Portfolio
will segregate cash, U.S. Government securities or other high-grade liquid debt
obligations with the custodian in an amount at all times equal to or exceeding
their commitment with respect to contracts that are not part of a designated
hedge.
Warrants. The Portfolios may invest up to 10% of the value of their net
assets (valued at the lower of cost or market) in warrants for equity
securities, which are securities permitting, but not obligating, their holder
to subscribe for other equity securities. Warrants do not carry with them the
right to dividends or voting rights with respect to the securities that they
entitle their holder to purchase, and they do not represent any rights in the
assets of the issuer. As a result, an investment in warrants may be considered
more speculative than certain other types of investments. In addition, the
value of a warrant does not necessarily change with the value of the
underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date.
U.S. Treasury and other U.S. Government and Government Agency Securities. Each
Portfolio may purchase securities issued by or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities and supported
by the full faith and credit of the United States ("U.S. Government
Securities"). Each Portfolio may also purchase securities issued by a U.S.
Government-sponsored enterprise or federal agency that is supported either by
its ability to borrow from the U.S. Treasury (e.g., Student Loan Marketing
Association) or by its own credit standing (e.g., Federal National Mortgage
Association). Such securities do not constitute direct obligations of the
United States but are issued, in general, under the authority of an Act of
Congress.
Bank Obligations. Each Portfolio may invest in obligations of domestic and
foreign banks, including time deposits, certificates of deposit, bankers'
acceptances, letters of credit, bank notes, deposit notes, Eurodollar or
Yankeedollar time deposits, Eurodollar or Yankeedollar certificates of deposit,
variable rate notes, loan participations, variable amount master demand notes
and custodial receipts. Domestic bank obligations are defined as instruments:
issued by U.S. (domestic) banks; U.S. branches of foreign banks, if such
branches are subject to the same regulation as U.S. banks; and foreign branches
of U.S. banks, if HLM determines that the investment risk associated with
investing in instruments issued by such branches is the same as that of
investing in instruments issued by the U.S. parent bank, in that the U.S. parent
bank would be unconditionally liable in the event that the foreign branch failed
to pay on its instruments. Other than the allowable 20% of a Portfolio's assets
invested in below-investment grade convertible and other debt securities, all
investments in bank obligations will be rated at least "B" by Thomson Bankwatch
or similarly rated by IBCA Ltd., or of comparable quality as determined by HLM.
Corporate Debt Instruments. Each Portfolio may purchase commercial paper,
short-term notes and other obligations of U.S. and foreign corporate issuers
meeting the Portfolio's credit quality standards (including variable rate
notes). Other than the allowable 20% of a Portfolio's assets invested in below-
investment grade convertible and other debt securities, all investments in
corporate debt instruments will be rated at least "BBB" or "A-1" (in the case of
commercial paper) by S&P, "Baa" or "P-1" (in the case of commercial paper) by
Moody's, or of comparable quality as determined by HLM.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements
under which a bank or securities firm (that is a dealer in U.S. Government
Securities reporting to the Federal Reserve Bank of New York) agrees, upon
entering into the contract, to sell U.S. Government Securities to a Portfolio
and repurchase such securities from the Portfolio at a mutually agreed-upon
price and date. Repurchase agreements will generally be restricted to those that
mature within seven days. Securities subject to repurchase agreements will be
held by the Company's custodian, sub-custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by the Portfolio under the Investment Company Act of 1940, as amended,
(the "1940 Act"). The Portfolios will engage in such transactions with parties
selected on the basis of such party's creditworthiness and will enter into
repurchase agreements only with financial institutions which are deemed by HLM
to be in good financial standing and which have been approved by the Board of
Directors.
Reverse Repurchase Agreements. Each Portfolio may enter into reverse repurchase
agreements under which a primary or reporting dealer in U.S. Government
Securities purchases U.S. Government Securities from a Portfolio and the
Portfolio agrees to repurchase the securities at an agreed-upon price and date.
Commission rules require either that securities sold by a Portfolio under a
reverse repurchase agreement be segregated pending repurchase or that the
proceeds be segregated on that Portfolio's books and records pending repurchase.
The Fund will maintain for each Portfolio a segregated custodial account
containing cash, U.S. Government Securities or other appropriate high-grade debt
securities having an aggregate value at least equal to the amount of such
commitments to repurchase, including accrued interest, and will subsequently
monitor the account to ensure such equivalent value is maintained until payment
is made. Reverse repurchase agreements will generally be restricted to those
that mature within seven days. The Portfolios will engage in such transactions
with parties selected on the basis of such party's creditworthiness.
When-Issued Securities. The Portfolios may purchase securities on a firm
commitment basis, including when-issued securities. Securities purchased on a
firm commitment basis are purchased for delivery beyond the normal settlement
date at a stated price and yield. Such securities are recorded as an asset and
are subject to changes in value based upon changes in the general level of
interest rates. The Portfolios will only make commitments to purchase securities
on a firm commitment basis with the intention of actually acquiring the
securities but may sell them before the settlement date if it is deemed
advisable.
When a Portfolio purchases securities on a when-issued or forward commitment
basis, the Portfolio's custodian will maintain in a segregated account cash and
liquid high-grade debt securities having a value (determined daily) at least
equal to the amount of the Portfolio's purchase commitments. In the case of a
forward commitment to sell portfolio securities, the custodian will hold the
portfolio securities themselves in a segregated account while the commitment is
outstanding. These procedures are designed to ensure that the Portfolio will
maintain sufficient assets at all times to cover its obligations under when-
issued purchases and forward commitments.
Derivatives. The Portfolios are authorized to use various hedging and
investment strategies described below to hedge broad or specific market
movements, or to seek to increase the Portfolios' income or gains. The
Portfolios may purchase and sell (or write) exchange-listed and
over-the-counter put and call options on securities, financial futures
contracts, equity indices and other financial instruments and enter into
financial futures contracts (collectively, these transactions are referred to
in this Prospectus as "Derivatives").
Derivatives may be used to attempt to protect against possible changes in the
market value of securities held or to be purchased by a Portfolio resulting
from securities market movements to protect the Portfolio's unrealized gains
in the value of its securities, to facilitate the sale of those securities for
investment purposes, to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities or to
seek to enhance the Portfolio's income or gain. The Portfolios may use any or
all types of Derivatives at any time; no particular strategy will dictate the
use of one type of transaction rather than another, as use of any Derivatives
will be a function of numerous variables, including market conditions. The
ability of a Portfolio to utilize Derivatives successfully will depend on, in
addition to the factors described above, HLM's ability to predict pertinent
market movements, which cannot be assured. These skills are different from
those needed to select the Portfolio's securities. The Portfolios are not
"commodity pools" (i.e., pooled investment vehicles which trade in commodity
futures contracts and options thereon and the operator of which is registered
with the Commodity Futures Trading Commission (the "CFTC")) and Derivatives
involving futures contracts and options on futures contracts will be
purchased, sold or entered into only for bona fide hedging purposes, provided
that a Portfolio may enter into such transactions for purposes other than bona
fide hedging if, immediately thereafter, the sum of the amount of its initial
margin and premiums on open contracts and options would not exceed 5% of the
liquidation value of the Portfolio's portfolio, provided, further, that, in
the case of an option that is in-the-money, the in-the-money amount may be
excluded in calculating the 5% limitation. The use of certain Derivatives will
require that the Portfolio segregate cash, liquid high grade debt obligations
or other assets to the extent the Portfolio's obligations are not otherwise
"covered" through ownership of the underlying security or financial
instrument.
Futures Contracts. The Portfolios may use stock index futures contracts
("futures contracts") as a hedge against the effects of changes in the market
value of the stocks comprising the relevant index. In managing its cash flows,
a Portfolio may also use futures contracts as a substitute for holding the
designated securities underlying the futures contract. A futures contract is an
agreement to purchase or sell a specified amount of designated securities for a
set price at a specified future time. At the time the Portfolio enters into a
futures transaction, it is required to make a performance deposit ("initial
margin") of cash or liquid securities in a segregated account in the name of the
futures broker. Subsequent payments of "variation margin" are then made on a
daily basis, depending on the value of the futures position which is continually
marked to market. The Portfolios will segregate cash, U.S. Government
securities or other high grade debt obligations in an amount sufficient to meet
its obligations under these transactions.
If the Portfolio enters into a short position in a futures contract as a hedge
against anticipated adverse market movements and the market then rises, the
increase in the value of the hedged securities will be offset in whole or in
part, by a loss on the futures contract. If instead the Portfolio purchases a
futures contract as a substitute for investing in the designated underlying
securities, the Portfolio will experience gains or losses that correspond
generally to gains or losses in the underlying securities. The latter type of
futures contract transactions permits the Portfolio to experience the results of
being fully invested in a particular asset class, while maintaining the
liquidity needed to manage cash flows into or out of the Portfolio (e.g.,
purchases and redemptions of Portfolio shares). Under normal market conditions,
futures contracts positions may be closed out on a daily basis.
Stock Index Options. The Portfolios may purchase or sell options on stock
indices on U.S. and foreign exchanges or in the over-the-counter markets. An
option on a stock index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the difference
between the closing price of the index and the exercise price of the option. The
Portfolios will segregate cash, U.S. Government securities or other high grade
debt obligations in an amount sufficient to meet its obligations under these
transactions.
Options on Futures Contracts. The Portfolios may purchase or sell options on
futures contracts as an alternative to buying or selling futures contracts.
Options on futures contracts are similar to options on the security underlying
the futures contracts except that options on stock index futures contracts give
the purchaser the right to assume a position at a specified price in a stock
index futures contract at any time during the life of the option. The
Portfolios will segregate cash, U.S. Government securities or other high grade
debt obligations in an amount sufficient to meet its obligations under these
transactions.
A detailed discussion of Derivatives, including applicable requirements of the
CFTC, and special risks associated with such strategies, appears in the
Statement of Additional Information.
Securities Lending. Although, the Fund has no current plans to do so, each
Portfolio may lend securities to banks, broker-dealers or other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by any combination of cash, securities of the U.S. government and its
agencies or other high quality liquid investments, that at all times equal at
least 102% of the market value of the loaned securities. Such loans will not be
made if, as a result, the aggregate amount of all outstanding securities loans
for any Portfolio exceeds 33 1/3% of its total assets. A Portfolio continues to
receive interest on the securities loaned and simultaneously earns either
interest on the investment of the cash collateral or fee income if the loan is
otherwise collateralized. However, a Portfolio normally pays lending fees and
related expenses from the interest earned on invested collateral. Should the
borrower of the securities fail financially, there is a risk of delay in
recovery of the securities or loss of rights in the collateral. However, loans
are made only to borrowers which are approved by the Board of Directors and are
deemed by HLM to be of good financial standing. A Portfolio may invest cash
collateral it receives in connection with a loan of securities in securities of
the U.S. Government and its agencies and other high quality short-term debt
instruments. For purposes of complying with each Portfolio's investment
policies and restrictions, collateral received in connection with securities
loans will not be deemed an asset of a Portfolio unless otherwise required by
law. See the Statement of Additional Information for further information
regarding loan transactions.
RISKS ASSOCIATED WITH THE FUND'S INVESTMENT POLICIES
AND INVESTMENT TECHNIQUES
A more detailed discussion of the risks associated with the investment policies
and investment techniques of the Portfolios appears in the Statement of
Additional Information.
Foreign Investments. Securities issued by foreign governments, foreign
corporations, international agencies and obligations of foreign banks involve
risks not associated with securities issued by U.S. entities. With respect to
certain foreign countries, there is the possibility of expropriation of assets,
confiscatory taxation and political or social instability or diplomatic
developments that could affect investment in those countries. There may be less
publicly available information about a foreign financial instrument than about a
United States instrument and foreign entities may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to those
of United States entities. A Portfolio could encounter difficulties in obtaining
or enforcing a judgment against the issuer in certain foreign countries. In
addition, certain foreign investments may be subject to foreign withholding or
other taxes, although the Portfolio will seek to minimize such withholding taxes
whenever practical. Investors may be able to deduct such taxes in computing
their taxable income or to use such amounts as credits against their United
States income taxes if more than 50% of the Portfolio's total assets at the
close of any taxable year consist of stock or securities of foreign
corporations. Ownership of unsponsored ADRs may not entitle the Portfolio to
financial or other reports from the issuer to which it would be entitled as the
owner of sponsored ADRs. See "Tax Considerations".
Emerging Markets Securities. The risks of investing in foreign securities may
be intensified in the case of investments in issuers domiciled or doing
substantial business in emerging markets or countries with limited or developing
capital markets. Security prices in emerging markets can be significantly more
volatile than in the more developed nations of the world, reflecting the greater
uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, present the risk of sudden adverse government action and even
nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of property
rights than more developed countries. The economies of countries with emerging
markets may be predominantly based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. Local securities markets
may trade a small number of securities and may be unable to respond effectively
to increases in trading volume, potentially making prompt liquidation of
substantial holdings difficult or impossible at times. Transaction settlement
and dividend collection procedures may be less reliable in emerging markets than
in developed markets. Securities of issuers located in countries with emerging
markets may have limited marketability and may be subject to more abrupt or
erratic price movements.
Derivatives and Hedging. The Portfolios may engage in hedging and other
strategic transactions and certain other investment practices which may entail
certain risks.
Derivatives involve special risks, including possible default by the other
party to the transaction, illiquidity and, to the extent HLM's view as to
certain market movements is incorrect, the risk that the use of Derivatives
could result in greater losses than if they had not been used. Use of put and
call options could result in losses to a Portfolio, force the purchase or sale
of portfolio securities at inopportune times or for prices higher or lower
than current market values or cause the Portfolio to hold a security it might
otherwise sell. The use of options and futures transactions entails certain
special risks. In particular, the variable degree of correlation between
price movements of futures contracts and price movements in the related
portfolio position of a Portfolio could create the possibility that losses on
the Derivative will be greater than gains in the value of the Portfolio's
position. The loss from investing in futures transactions which are unhedged
or uncovered, is potentially unlimited. In addition, futures and options
markets could be illiquid in some circumstances and certain over-the-counter
options could have no markets. A Portfolio might not be able to close out
certain positions without incurring substantial losses. To the extent a
Portfolio utilizes futures and options transactions for hedging, such
transactions should tend to minimize the risk of loss due to a decline in the
value of the hedged position and, at the same time, limit any potential gain
to the Portfolio that might result form an increase in value of the position.
Finally, the daily variation margin requirements for futures contracts create
a greater ongoing potential financial risk than would purchases of options, in
which case the exposure is limited to the cost of the initial premium and
transaction costs. Losses resulting from the use of Derivatives will reduce
the Portfolio's net asset value, and possibly income, and the losses may be
greater than if Derivatives had not been used. Additional information
regarding the risks and special considerations associated with Derivatives
appears in the Statement of Additional Information.
High Yield/High Risk Securities. Each Portfolio may invest up to 20% of its
assets in convertible securities and debt securities rated lower than Baa by
Moody's or BBB by S&P, or of equivalent quality as determined by HLM (commonly
referred to as "junk bonds"). The lower the ratings of such debt securities,
the greater their risks render them like equity securities. Each Portfolio will
invest no more than 10% of its assets in securities rated B or lower by Moody's
or S&P, or of equivalent quality, but may invest in securities rated C by
Moody's or D by S&P, or the equivalent, which may be in default with respect to
payment of principal or interest.
Illiquid and Restricted Securities. Each Portfolio will not invest more
than 15% of the value of its net assets in illiquid securities. Illiquid
securities are securities which may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value at which a
Portfolio has valued the investments, and include securities with legal or
contractual restrictions on resale, time deposits, repurchase agreements
having maturities longer than seven days and securities that do not have
readily available market quotations. In addition, a Portfolio may invest in
securities that are sold in private placement transactions between their
issuers and their purchasers and that are neither listed on an exchange nor
traded over-the counter. These factors may have an adverse effect on the
Portfolio's ability to dispose of particular securities and may limit a
Portfolio's ability to obtain accurate market quotations for purposes of
valuing securities and calculating net asset value and to sell securities at
fair value. If any privately placed securities held by a Portfolio are
required to be registered under the securities laws of one or more
jurisdictions before being resold, the Portfolio may be required to bear the
expenses of registration. A Portfolio may also purchase securities that are
not registered under the Securities Act of 1933, as amended (the "1933 Act"),
but which can be sold to qualified institutional buyers in accordance with
Rule 144A under that Act ("Rule 144A securities"). Rule 144A securities
generally must be sold to other qualified institutional buyers. A Portfolio
may also invest in commercial obligations issued in reliance on the so-called
"private placement" exemption from registration afforded by Section 4(2) of
the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws, and generally is sold to
institutional investors such as the Portfolio who agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors like
the Portfolio through or with the assistance of the issuer or investment
dealers who make a market in the Section 4(2) paper, thus providing liquidity.
If a particular investment in Rule 144A securities, Section 4(2) paper or
private placement securities is not determined to be liquid, that investment
will be included within the 15% limitation on investment in illiquid
securities. Not all Rule 144A securities can be deemed liquid; HLM will
monitor the liquidity of such restricted securities under the supervision of
the Board of Directors.
Repurchase and Reverse Repurchase Agreements. In the event the other party to
a repurchase agreement or a reverse repurchase agreement becomes subject to a
bankruptcy or other insolvency proceeding or such party fails to satisfy its
obligations thereunder, a Portfolio could (i) experience delays in recovering
cash or the securities sold (and during such delay the value of the underlying
securities may change in a manner adverse to the Portfolio) or (ii) lose all or
part of the income, proceeds or rights in the securities to which the Portfolio
would otherwise be entitled. Reverse repurchase agreements involve the risk
that the market value of the portfolio securities sold by a Portfolio may
decline below the price of the securities the Portfolio is obligated to
repurchase.
INVESTMENT RESTRICTIONS
The following investment restrictions apply to each Portfolio and may be changed
with respect to a particular Portfolio only by the majority vote of that
Portfolio's outstanding shares. Accordingly, no Portfolio may:
(a) invest more than 5% of its total assets in securities of any one
issuer, other than securities issued by the U.S. Government, its agencies
and instrumentalities, or purchase more than 10% of the voting securities
of any one issuer, with respect to 75% of a Portfolio's total assets;
(b) invest more than 25% of its total assets in the securities of
companies primarily engaged in any one industry other than the U.S.
Government, its agencies or instrumentalities. Finance companies as a
group are not considered a single industry for purposes of this policy;
(c) borrow money, except through reverse repurchase agreements or from a
bank for temporary or emergency purposes in an amount not exceeding one
third of the value of its total assets nor will the Portfolios borrow for
leveraging purposes. In addition, although not a fundamental policy, the
Portfolios will repay any money borrowed before any additional portfolio
securities are purchased. See the Statement of Additional Information
for a further description regarding reverse repurchase agreements;
(e) purchase or sell real estate (other than marketable securities
representing interests in, or backed by, real estate and securities of
companies that deal in real estate or mortgages) or real estate limited
partnerships, or purchase or sell physical commodities or contracts
relating to physical commodities; or
(f) purchase or retain the securities of any open-end investment companies.
The above percentage limits are based upon current asset values at the time of
the applicable transaction; accordingly, a subsequent change in asset values
will not affect a transaction which was in compliance with the investment
restrictions at the time such transaction was effected. See the Statement of
Additional Information for other investment limitations.
BROKERAGE PRACTICES
HLM will place its own orders to execute the securities transactions which are
designed to implement the applicable investment objective and policies of the
Portfolios. HLM will use its reasonable efforts to execute all purchases and
sales with brokers, dealers and banks on a best available price and most
favorable execution basis. The full range and quality of services offered by
the executing broker or dealer is considered when making these determinations.
Neither HLM nor any of its officers, affiliates, or employees will act as
principal or receive any compensation from the Portfolios in connection with the
purchase or sale of investments for the Portfolios.
YIELDS AND TOTAL RETURN
The Portfolios' yield for any 30-day (or one month) period is computed by
dividing the net investment income per share earned during such period by the
maximum public offering price per share on the last day of the period, and then
annualizing such 30-day (or one month) yield in accordance with a formula
prescribed by the Commission which provides for compounding on a semiannual
basis.
The Portfolios may from time to time advertise their total return. Any total
return quotations advertised will reflect the average annual compounded rate of
return during the designated time period based on a hypothetical initial
investment and the redeemable value of that investment at the end of the period.
The Portfolios will at times compare their performance to applicable published
indices, and may also disclose their performance as ranked by certain analytical
services. See the Statement of Additional Information for more information
about the calculation of yields and total returns. Performance figures are
based upon historical earnings and are not intended to indicate future
performance.
DISTRIBUTION OF FUND SHARES
Shares of the Fund are distributed by AMT Capital pursuant to a Distribution
Agreement (the "Distribution Agreement") dated as of October 14, 1996 between
the Fund and AMT Capital. No fees are payable by the Fund pursuant to the
Distribution Agreement.
Under a sales incentive fee agreement dated October 14, 1996 between AMT
Capital Advisers, an affiliate of AMT Capital and HLM, HLM has agreed to pay AMT
Capital Advisers a monthly sales incentive fee at an annual rate of 0.25% of the
average daily value of shares of the Fund purchased as a result of the efforts
of AMT Capital Advisers or its affiliates.
DETERMINATION OF NET ASSET VALUE
The "net asset value" per share of each Portfolio is calculated as of the close
of business on days when the New York Stock Exchange is open for business,
(hereinafter, "Business Day"). Each Portfolio determines its net asset value
per share by subtracting that Portfolio's liabilities (including accrued
expenses and dividends payable) from the total value of the Portfolio's
investments and other assets and dividing the result by the total outstanding
shares of the Portfolio.
For purposes of calculating each Portfolio's net asset value, securities are
valued as follows: (1) all portfolio securities for which over-the-counter
("OTC") market quotations are readily available are valued at their last sale
price, or if there are no trades, at the latest bid price; (2) deposits and
repurchase agreements are valued at their cost plus accrued interest unless HLM
determines in good faith, under procedures established by and under the general
supervision of the Fund's Board of Directors, that such value does not
approximate the fair value of such assets; (3) U.S. securities listed or traded
on an exchange are valued at their last sale price on that exchange, or if there
are no trades, at the mean between the latest bid and asked prices; (4) Non-U.S.
securities listed or traded on an exchange are valued at their last sale price
on that exchange, or if there are no trades, at the last closing price on that
exchange, (5) securities which are traded both in the OTC market and on a
stock exchange will be valued according to the broadest and most
representative market; (6) short-term obligations with maturities of 60 days
or less are valued at amortized cost, which constitutes fair value as
determined by the Fund's Board of Directors. Amortized cost involves valuing
an instrument at its original cost to the Portfolio and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the
instrument; and (7) the value of other assets for which market quotations are
not readily available will be determined in good faith by HLM at fair value
under procedures established by and under the general supervision of the Fund's
Board of Directors. Quotations of foreign securities denominated in a foreign
currency are converted to a U.S. dollar-equivalent at exchange rates obtained
from an automated pricing service at the bid price except for the Royal
Currencies (United Kingdom, Ireland, European Currency Unit, Australia and New
Zealand), which are valued at the ask price.
PURCHASE AND REDEMPTION OF SHARES
Purchases
There is no sales charge imposed by the Fund. The minimum initial investment
in any Portfolio of the Fund is $100,000; additional purchases or redemptions
may be of any amount. With respect to purchases of Fund shares through brokers:
1) a broker may charge transaction fees, 2) duplicate mailings of Fund material
to shareholders who reside at the same address may be eliminated, and 3) the
minimum initial investment through a broker is less than a direct purchase with
the Fund.
The offering of shares of the Fund is continuous and purchases of shares of the
Fund may be made on any Business Day. The Fund offers shares at a public
offering price equal to the net asset value next determined after receipt of a
purchase order.
Purchases of shares must be made by wire transfer of Federal funds. Share
purchase orders are effective on the date when AMT Capital receives a completed
Account Application Form (and other required documents) and Federal funds become
available to the Fund in the Fund's account with the Transfer Agent as set forth
below. The shareholder's bank may impose a charge to execute the wire transfer.
The wiring instructions are:
Investors Bank & Trust Company, Boston, MA
ABA#: 011-001-438
Account Name: AMT Capital Services, Inc.
- Fund Purchase Account
Account #: 933333333
Reference: Harding, Loevner Funds, Inc. - (designate Portfolio)
In order to purchase shares on a particular Business Day, a purchaser must
call AMT Capital at or (212) 332-5210 prior to the close of business
(normally 4:00 p.m. Eastern time) to inform the Fund of the incoming wire
transfer and must clearly indicate which Portfolio is to be purchased. If
Federal funds are received by the Fund that same day, the order will be
effective on that day. If the Fund receives notification after the above-
mentioned cut-off times, or if Federal funds are not received by the Transfer
Agent, such purchase order shall be executed as of the date that Federal funds
are received.
Redemptions
The Fund will redeem all full and fractional shares of the Fund upon request
of shareholders. The redemption price is the net asset value per share next
determined after receipt by the Transfer Agent of proper notice of redemption as
described below. If such notice is received by the Transfer Agent by the close
of business (normally 4:00 p.m. Eastern time) on any Business Day, the
redemption will be effective on the date of receipt. Payment will ordinarily be
made by wire on the next Business Day but within no more than seven days from
the date of receipt. If the notice is received on a day that is not a Business
Day or after the above-mentioned cut-off times, the redemption notice will be
deemed received as of the next Business Day.
There is no charge imposed by the Fund to redeem shares of the Fund; however, a
shareholder's bank may impose its own wire transfer fee for receipt of the wire.
Redemptions may be executed in any amount requested by the shareholder up to the
amount such shareholder has invested in the Fund.
To redeem shares, a shareholder or any authorized agent (so designated on the
Account Application Form) must provide the Transfer Agent with the dollar or
share amount to be redeemed, the account to which the redemption proceeds should
be wired (which account shall have been previously designated by the shareholder
on its Account Application Form), the name of the shareholder and the
shareholder's account number. Shares redeemed receive dividends up to and
including the day preceding the day the redemption proceeds are wired.
A shareholder may change its authorized agent or the account designated to
receive redemption proceeds at any time by writing to the Transfer Agent with an
appropriate signature guarantee. Further documentation may be required when
deemed appropriate by the Transfer Agent.
A shareholder may request redemption by calling the Transfer Agent at (800) 247-
0473. Telephone redemption is made available to shareholders of the Fund on the
Account Application Form. The Fund or the Transfer Agent employ reasonable
procedures designed to confirm that instructions communicated by telephone are
genuine. If either the Fund or the Transfer Agent does not employ such
procedures, it may be liable for losses due to unauthorized or fraudulent
instructions. The Fund or the Transfer Agent may require personal
identification codes and will only wire funds through pre-existing bank account
instructions. No bank instruction changes will be accepted via telephone.
Exchange Privilege
Shares of each Portfolio may be exchanged for shares of another Portfolio based
on the respective net asset values of the shares involved in the exchange,
assuming that shareholders wishing to exchange shares reside in states where
these mutual funds are qualified for sale. The Fund's Portfolio minimum amounts
of $100,000 would still apply. An exchange order is treated the same as a
redemption followed by a purchase. Investors who wish to make exchange requests
should telephone AMT Capital or the Transfer Agent.
DIVIDENDS
Each Portfolio will declare and pay a dividend from its net investment income on
an annual basis. Each Portfolio will distribute its realized net short-term
capital gains (i.e. with respect to assets held one year or less) and net long-
term capital gains (i.e. with respect to assets held more than one year) at
least annually by automatically reinvesting (unless a shareholder has elected to
receive cash) such short-term or long-term capital gains in additional shares of
the Portfolio at the net asset value on the ex-date of the distribution.
MANAGEMENT OF THE FUND
Board of Directors
The Board of Directors of the Fund are responsible for the overall
management and supervision of the Fund. The Fund's Directors are James C.
Brady III, Jane A. Freeman, David R. Loevner and Carl W. Schafer. Additional
information about the Directors and the Fund's executive officers may be found
in the Statement of Additional Information under the heading "Management of the
Fund - Board of Directors".
Investment Adviser
Subject to the direction and authority of the Fund's Board of Directors,
HLM provides investment advisory services to each Portfolio pursuant to the
Investment Advisory Agreement dated October 14, 1996. Under the Investment
Advisory Agreement, HLM is responsible for providing investment research and
advice, determining which portfolio securities shall be purchased or sold by
each Portfolio of the Fund, purchasing and selling securities on behalf of the
Portfolios and determining how voting and other rights with respect to the
portfolio securities of the Portfolios are exercised in accordance with each
Portfolio's investment objective, policies, and restrictions. HLM also provides
office space, equipment, and personnel necessary to manage the Fund.
HLM, established in 1989, is a registered investment adviser that
specializes in global investment management for private investors and
institutions. HLM currently has approximately $1 billion in assets under
management. HLM is located at 50 Division Street, Suite 401, Somerville, NJ
08876. HLM manages assets for several other registered investment companies.
HLM bears the expense of providing the above services to the Fund. For its
services, each of the International Equity Portfolio, Global Equity Portfolio,
Emerging Markets Portfolio and Multi-Asset Global Portfolio pay HLM a monthly
fee at an annual rate of 0.75%, 1.00%, 1.25% and 1.00%, respectively, of its
average daily net assets. The advisory fee paid by each Portfolio is higher
than that charged by most funds which invest primarily in U.S. securities, but
not necessarily higher than the fees charged to funds with investment objectives
similar to those of the Portfolios.
Portfolio Managers
Daniel D. Harding (responsible for global portfolio management), co-founder
of HLM and a director of its general partner, is the firm's chief investment
officer, with overall responsibility for investment policy. Dan served for
twelve years as a senior investment manager with Rockefeller & Co.,
investment adviser to the Rockefeller family and related institutions. As
manager of the family's flagship equity, fixed income and balanced fund
portfolios, he set investment strategy and provided investment counseling to
family members, trusts and private businesses. In this capacity he also
spearheaded the diversification of the firm's investments into overseas
markets. Dan began his career as a trust investment officer at American
National Bank & Trust in Morristown, NJ. He is an honors graduate in history
and international relations from Colgate University, a Chartered Financial
Analyst, and a Chartered Investment Counselor. Dan is a trustee and treasurer
of the Peck School.
David R. Loevner, co-founder, is the chief executive officer of HLM and a
director of the firm's general partner. He serves on the investment
committee, and is responsible for operations, administration, compliance, and
client service. His prior experience includes nine years with Rockefeller and
Co., where he managed equity portfolios, counseled family members, and
developed new financial planning and asset allocation tools. David also
managed a number of professional service units with the Rockefeller family
office, including the Rockefeller Insurance Company, which he established in
1985. In 1987, David established Rockefeller's first Asian office, in Hong
Kong, from which he directed a region-wide investment program comprising small
company and venture investments. Before Rockefeller, David worked for the
World Bank, as country economist for Brazil. He graduated summa cum laude
from Princeton University and, as a Sachs Scholar, received graduate degrees
in statistics and in economics from Oxford University. David is a director of
the Princeton University Investment Company and an advisory trustee of Outward
Bound USA.
Alexander T. Walsh, portfolio manager, is a member of the investment
committee and a principal of the firm. From 1979 through 1982, he worked in
money market trading and operations for J. Henry Schroder Bank & Trust Co., New
York. Alec joined Merrill Lynch, New York in 1982 as an account executive.
In 1987 he moved to Paine Webber, where he built an institutional equity
clientele comprising Fortune 100 accounts and investment advisers. Promoted
to 1st Vice President in 1992, he remained with the firm until joining HLM in
1994. Alec is a 1978 graduate of McGill University with a BA in North
American Studies.
Simon Hallett (responsible for international portfolio management), senior
portfolio manager and a director of the firm's general partner, serves as the
chair of the investment committee. Simon has managed global portfolios for
individuals and institutions since 1979, when he joined the investment
management department of London-based Buckmaster and Moore. In 1981 he moved
to Hong Kong, where he began to concentrate on Asian markets, and in 1984
joined Jardine Fleming Investment Management, one of Asia's largest and most
respected investment management companies. Simon's ultimate position at
Jardine Fleming was director in charge of a team of six portfolio managers
investing in the markets of South East and North Asia for a diverse clientele
comprising European pension plans, governments, and private clients,
Rockefeller & Co. among them. He joined HLM in 1991. A British subject,
Simon is an honors graduate of Oxford University in Politics, Philosophy and
Economics.
G. "Rusty" Johnson III, research analyst, is a member of the investment
committee and a principal of the firm. He began his career in Hong Kong in
1986, developing computer-based arbitrage programs for Chin Tung Futures,
subsequently a subsidiary of Standard Chartered Bank. The following year he
joined Jardine Fleming Research to concentrate on Asian equities. After three
years in Hong Kong and two years in Bangkok, Rusty moved to Jardine Fleming's
parent company, Robert Fleming, in New York as an institutional broker of
Asian equities. He spent a further year in institutional equity sales in New
York with Peregrine Securities before joining HLM in 1994. Rusty is a magna
cum laude graduate in economics of Washington and Lee University, where his
program included studies at Fu Jen University, Taiwan, and the Chinese
University of Hong Kong. Rusty is a Chartered Financial Analyst.
Ferrill D. Roll, portfolio manager, has fifteen years' experience across a
wide range of international markets. Prior to joining Harding, Loevner in
1996, he was general partner of Cesar Montemayor Capital, L.P., a global
investment partnership investing in fixed income, currency, and equity
markets, since 1992. For six years before that, he worked in international
equity sales, first at First Boston (1985-1989) and later at Baring Securities
(1989-1992), working primarily on European markets. During 1990, he acted as
head of Baring's German equity research, in Frankfurt. Prior to joining First
Boston, Ferrill worked for five years at JP Morgan, where he advised corporate
clients on foreign exchange markets and set up the currency options trading
department. He graduated from Stanford University in 1980 with a degree in
economics.
Administrator
Pursuant to an Administration Agreement between the Fund and AMT Capital
Services, Inc., dated as of October 14, 1996 AMT Capital provides for
administrative services to, and assists in managing and supervising all
aspects of, the general day-to-day business activities and operations of the
Fund other than investment advisory activities, including custodial, transfer
agency, dividend disbursing, accounting, auditing, compliance and related
services.
The Fund pays AMT Capital a monthly fee at an annual rate of 0.15% on the
first $500 million of the average daily net assets of the Fund, 0.10% on the
next $500 million of the average daily net assets of the Fund, and 0.05% on
the average daily net assets over $1 billion. Each Portfolio pays a
proportionate share of the fee based on its relative net assets.
Founded in early 1992, AMT Capital Services, a Delaware corporation, is a
registered broker-dealer whose senior managers are former officers of Morgan
Stanley and the Vanguard Group, where they were responsible for the
administration and distribution of The Pierpont Funds, a $5 billion fund complex
now owned by J.P. Morgan, and the private label administration group of
Vanguard, which administered nearly $10 billion in assets for 45 portfolios,
respectively.
Direct Expenses
Those fees and expenses paid directly by the Fund may include the fees of
independent auditors, transfer agent and dividend disbursing agent, and
custodian; the expense of obtaining quotations for calculating the value of each
Portfolio's net assets; taxes, if any, and the preparation of each Portfolio's
tax returns; brokerage fees and commissions; interest; costs of Board of
Director and shareholder meetings; the expense of printing and mailing
prospectuses and reports to existing shareholders; fees for filing reports with
regulatory bodies and the maintenance of the Fund's existence; legal fees; fees
to federal and state authorities for the registration of shares; fees and
expenses of members of the Board of Directors who are not directors, officers,
employees or stockholders of HLM or its affiliates; insurance and fidelity bond
premiums; and any extraordinary expenses of a nonrecurring nature.
TAX CONSIDERATIONS
The following discussion is for general information only. An investor should
consult with his or her own tax adviser as to the tax consequences of an
investment in a Portfolio, including the status of distributions from each
Portfolio under applicable state or local law.
Federal Income Taxes
Each Portfolio intends to qualify for and to elect to be treated as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended.
To qualify, a Portfolio must meet certain income, distribution and
diversification requirements. In any year in which a Portfolio qualifies as a
RIC and distributes all of its taxable income and substantially all of its net
tax-exempt interest income on a timely basis, the Portfolio will not pay U.S.
federal income or excise tax. If in any year a Portfolio should fail to qualify
as a regulated investment company, the Portfolio would be subject to federal
income tax in the same manner as an ordinary corporation, and distributions to
shareholders would be taxable to such holders as ordinary income to the extent
of the earnings and profits of the Portfolio. Distributions in excess of
earnings and profits will be treated as a tax-free return of capital, to the
extent of a holder's basis in its shares, and any excess, as a long- or short-
term capital gain.
Each Portfolio intends to distribute all of its taxable income and net tax-
exempt interest income by automatically reinvesting such amount in additional
shares of the Portfolio and distributing those shares to its shareholders,
unless a shareholder elects, on the Account Application Form, to receive cash
payments for such distributions. Shareholders receiving distributions from the
Fund in the form of additional shares will be treated for federal income tax
purposes as receiving a distribution in an amount equal to the fair market
value of the additional shares on the date of such a distribution.
Dividends paid by a Portfolio from its investment company taxable income
(including interest and net short-term capital gains) will be taxable to a U.S.
shareholder as ordinary income, whether received in cash or in additional Fund
shares. Distributions of net capital gains (the excess of net long-term capital
gains over net short-term capital losses) are generally taxable to shareholders
as long-term capital gain, regardless of how long they have held their Portfolio
shares. If a portion of a Portfolio's income consists of dividends paid by U.S.
corporations, a portion of the dividends paid by the Portfolio may be eligible
for the corporate dividends-received deduction.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by a Portfolio in October, November or December with a
record date in any such month and paid by the Portfolio during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received. Each Portfolio will
inform shareholders of the amount and tax status of all amounts treated as
distributed to them not later than 60 days after the close of each calendar
year.
Any gain or loss realized by a shareholder upon the sale or other disposal of
shares of a Portfolio, or upon receipt of a distribution in a complete
liquidation of the Portfolio, generally will be a capital gain or loss which
will be long-term or short-term, generally depending upon the shareholder's
holding period for the shares. A loss realized on a sale or exchange of shares
may be disallowed if other shares are acquired within a 61-day period
beginning 30 days before the ending 30 days after the date that the shares are
disposed of.
Each Portfolio may be required to withhold U.S. federal income tax at the
rate of 31% of all taxable distributions payable to shareholders who fail to
provide the Portfolio with their correct taxpayer identification number or to
make required certifications, or who have been notified by the IRS that they are
subject to backup withholding. Backup withholding is not an additional tax.
Any amounts withheld may be credited against the shareholder's U.S. federal
income tax liability. Income received by a Portfolio from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. In certain circumstances, a Portfolio may be
eligible and may elect to "pass through" to the Portfolio's shareholders the
amount of foreign income and similar taxes paid by the Portfolio. Each
shareholder will be notified within 60 days after the close of a Portfolio's
taxable year whether the foreign taxes paid by the Portfolio will "pass through"
for the year. Further information relating to tax consequences is contained in
the Statement of Additional Information.
Ordinary income dividends paid by the Fund to shareholders who are non-
resident aliens or foreign entities will be subject to a 30% withholding tax
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law or the income is "effectively connected" with a
U.S. trade or business. Generally, subject to certain exceptions, capital
gain dividends paid to non-resident shareholders or foreign entities will not
be subject to U.S. tax. Non-resident shareholders are urged to consult their
own tax advisers concerning the applicability of the U.S. withholding tax.
The foregoing discussion is only a brief summary of the important federal tax
considerations generally affecting the Fund and its shareholders. As noted
above, IRAs receive special tax treatment. No attempt is made to present a
detailed explanation of the federal, state or local income tax treatment of
the Fund or its shareholders, and this discussion is not intended as a
substitute for careful tax planning. Accordingly, potential investors in the
Fund should consult their tax advisers with specific reference to their own
tax situation.
State and Local Taxes
A Portfolio may be subject to state, local or foreign taxation in any
jurisdiction in which the Portfolio may be deemed to be doing business.
Portfolio distributions may be subject to state and local taxes. Distributions
of a Portfolio which are derived from interest on obligations of the U.S.
Government and certain of its agencies, authorities and instrumentalities may be
exempt from state and local taxes in certain states. Shareholders should
consult their own tax advisers regarding the particular tax consequences of an
investment in a Portfolio.
SHAREHOLDER INFORMATION
Description of the Fund
The Fund was established under Maryland law by the filing of its Articles of
Incorporation on July 31, 1996. The Fund's Articles of Incorporation permit the
Directors to authorize the creation of additional Portfolios, each of which may
issue separate classes of shares. Currently, the Fund has four separate
Portfolios.
Voting Rights
Each share of common stock of a Portfolio or class is entitled to one vote for
each dollar of net asset value and a proportionate fraction of a vote for each
fraction of a dollar of net asset value. Generally, shares of each Portfolio
and class vote together on any matter submitted to shareholders, except when
otherwise required by the 1940 Act or when a matter affects the interests of
each Portfolio or class in a different way, in which case the shareholders of
each Portfolio or class vote separately. If the Directors determine that a
matter does not affect the interests of a Portfolio or class, then the
shareholders of that Portfolio or class will not be entitled to vote on that
matter. Approval of the investment advisory agreements are matters to be
determined separately by each Portfolio (but not by each class of a Portfolio).
The election of the Fund's Board of Directors and the approval of the Fund's
independent auditors are voted upon by shareholders on a Fund-wide basis. As a
Maryland corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's or a Portfolio's operation and for the election of Directors under
certain circumstances.
Directors may be removed by shareholders at a special meeting. A special
meeting of the Fund shall be called by the Directors upon written request of
shareholders owning at least 10% of the Fund's outstanding shares. Shareholders
will be assisted in communicating with other shareholders in connection with
removing a Director as if Section 16(c) of the 1940 Act were applicable.
OTHER PARTIES
Custodian and Accounting Agent
Investors Bank & Trust Company, P.O. Box 1537, Boston, Massachusetts 02205-1537,
is Custodian for the securities and cash of the Fund and Accounting Agent for
the Fund.
Transfer and Dividend Disbursing Agent
Investors Bank & Trust Company, P.O. Box 1537, Boston, Massachusetts 02205-1537,
is Transfer Agent for the shares of the Fund, and Dividend Disbursing Agent for
the Fund.
Legal Counsel
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C. 20005-1208, are
legal counsel for the Fund.
Independent Auditors
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019 are the
independent auditors for the Fund.
SHAREHOLDER INQUIRIES
Inquiries concerning the Fund may be made by writing to AMT Capital
Services, Inc., 600 Fifth Avenue, 26th Floor New York, New York
10020-2302 or by calling AMT Capital at (212) 332-5210.
STATEMENT OF ADDITIONAL INFORMATION
Harding, Loevner Funds, Inc.
Distributed By: AMT Capital Services, Inc.
600 Fifth Avenue
26th Floor
New York, NY 10020
(212) 332-5210
Harding, Loevner Funds, Inc. (the "Fund") is a no-load, open-end management
investment company consisting of four diversified portfolios: International
Equity Portfolio, Global Equity Portfolio, Emerging Markets Portfolio and Multi-
Asset Global Portfolio (each a "Portfolio"). There is no sales charge for
purchase of shares. Each Portfolio is managed by Harding, Loevner Management,
L.P. ("HLM"). Shares of each Portfolio may be purchased through AMT Capital
Services, Inc. ("AMT Capital").
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of the Fund, dated November 1, 1996
(the "Prospectus"), which has been filed with the Securities and Exchange
Commission (the "Commission") and can be obtained, without charge, by calling or
writing AMT Capital at the telephone number or address stated above. This
Statement of Additional Information incorporates by reference the Prospectus.
November 1, 1996
TABLE OF CONTENTS
Page
Organization of the Fund
Management of the Fund
Board of Directors and Officers
Investment Adviser
Administrator
Distribution of Fund Shares
Principal Holders of Securities
Supplemental Descriptions of Investments
Supplemental Investment Techniques
Supplemental Discussion of Risks Associated With the
Fund's Investment Policies and Investment Techniques
Investment Restrictions
Portfolio Transactions
Net Asset Value
Tax Considerations
Shareholder Information
Calculation of Performance Data
Ratings Descriptions
ORGANIZATION OF THE FUND
The authorized capital stock of the Fund consists of 2,500,000,000 shares
with $.001 par value, allocated as follows: (i) 500,000,000 shares to the
International Equity Portfolio; (ii) 500,000,000 shares to the Global Equity
Portfolio; (iii) 500,000,000 shares to the Emerging Markets Portfolio; (iv)
500,000,000 shares to the Multi-Asset Global Portfolio and (v) 500,000,000
shares not yet allocated to any Portfolio. Holders of shares of a Portfolio have
one vote for each dollar, and a proportionate fraction of a vote for each
fraction of a dollar, of net asset value held by a shareholder. All shares
issued and outstanding are fully paid and non-assessable, transferable, and
redeemable at net asset value at the option of the shareholder. Shares have no
preemptive or conversion rights.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors can
elect 100% of the Directors if they choose to do so, and, in such event, the
holders of the remaining less than 50% of the shares voting for the election of
Directors will not be able to elect any person or persons to the Board of
Directors.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS AND OFFICERS
The Fund is managed by its Board of Directors. The individuals listed below are
the officers and directors of the Fund. An asterisk (*) has been placed next to
the name of each director who is an "interested person" of the Fund, as such
term is defined in the Investment Company Act of 1940, as amended (the "1940
Act"), by virtue of his or her affiliation with the Fund or HLM.
Name and Address Position with Principal Occupation
the Company During Past Five Years
- -----------------------------------------------------------------------------
Carl W. Schafer
The Atlantic Foundation
P.O. Box 1164
Princeton, NJ 08542 Director The Atlantic Foundation,
President
1990-present.
Jane A. Freeman
Rockerfeller & Co.
30 Rockerfeller Plaza
Suite 5425
NY, NY 10112 Director Rockerfeller & Co.,
Investment
Manager 1988- present.
James C. Brady III
Brady Realty Company
Box 351 Gladstone
NJ 07934 Director Brady Realty Company
1988-present.
*David R. Loevner
Harding Loevner Management, L.P.
50 Division Street Suite 401,
Somerville, NJ 08876 Director Harding Loevner
Management, L.P.
President and CEO
7/89 - present;
Rockerfeller & Co.,
Investment Manager
1/81-7/89
William E. Vastardis
AMT Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, NY 10020 Secretary and
Treasurer AMT Capital
Services, Inc.,
Senior Vice President
7/92 - present;
Vanguard Group Inc.,
Vice President,
1/87 - 4/92.
Richard Reiter
Harding Loevner
Management, L.P.
50 Division Street
Suite 401,
Somerville, NJ 08876 Assistant Secretary Harding, Loevner
Management, L.P.
Product Manager
4/96-present;
Harris Trust,
Vice President
4/91-4/96.
Carla E. Dearing,
AMT Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, NY 10020 Assistant Treasurer
AMT Capital
Services, Inc.,
Managing Director,
Principal and Director,
1/92 - present;
AMT Capital
Advisers, Inc.,
Principal and Senior
Vice President,
1/92 - present;
Morgan Stanley & Co.,
Vice President,
11/88 - 1/92.
No employee of HLM or AMT Capital receives any compensation from the Fund
for acting as an officer or director of the Fund. The Fund pays each director
who is not a director, officer or employee of HLM and AMT Capital or any of
their affiliates, a fee of $1,000 for each meeting attended, and each of the
Directors receives an annual retainer of $10,000 which is paid in quarterly
installments at the end of each quarter.
Director's Compensation Table
Director Aggregate Pension or Estimated Total
Compensation Retirement Annual Compensation
From Benefits Accrued Benefits From Registrant
Registrant* As Part of Fund Upon and Fund
Expenses Retirement Complex Paid
to Directors*
David R. Loevner $0 $0 $0 $0
Jane A. Freeman $15, 000 $0 $0 $15, 000
Carl W. Schafer $15, 000 $0 $0 $15, 000
James C. Brady III $15, 000 $0 $0 $15, 000
*Estimated Director's Compensation for Fiscal Year Ended October 31, 1997
By virtue of the responsibilities assumed by HLM and AMT Capital and their
affiliates under their respective agreements with the Fund, the Fund itself
requires no employees in addition to its officers.
INVESTMENT ADVISER
HLM provides investment advisory services to the Fund. The terms of the
investment advisory agreements (the "Advisory Agreements") between the Fund, on
behalf of each Portfolio, and HLM obligate HLM to provide investment advisory
and portfolio management services to the Portfolios. HLM is a registered
investment adviser organized in 1989. HLM provides investment advisory services
to private investors and institutions.
The Advisory Agreements will remain in effect for two years following their date
of execution and thereafter will automatically continue for successive annual
periods, so long as such continuance is specifically approved at least annually
by (a) the Board of Directors or (b) the vote of a "majority" (as defined in the
1940 Act) of a Portfolio's outstanding shares voting as a single class;
provided, that in either event the continuance is also approved by at least a
majority of the Board of Directors who are not "interested persons" (as defined
in the 1940 Act) of the Fund by vote cast in person at a meeting called for the
purpose of voting on such approval.
The Advisory Agreements are terminable without penalty on not less than 60 days'
notice by the Board of Directors or by a vote of the holders of a majority of
the relevant Portfolio's outstanding shares voting as a single class, or upon
not less than 60 days' notice by HLM. Each of the Advisory Agreements will
terminate automatically in the event of its "assignment" (as defined in the 1940
Act).
HLM pays all of its own expenses arising from the performance of its obligations
under the Advisory Agreements. Under its Advisory Agreements, HLM also pays all
executive salaries and expenses of the Directors and Officers of the Fund who
are employees of HLM or its affiliates and office rent of the Fund. Subject to
the expense reimbursement provisions described in the Prospectus under "Fund
Expenses", other expenses incurred in the operation of the Fund are borne by the
Fund, including, without limitation, investment advisory fees, brokerage
commissions, interest, fees and expenses of independent attorneys, auditors,
custodians, accounting agents, transfer agents, taxes, cost of stock
certificates and any other expenses (including clerical expenses) of issue,
sale, repurchase or redemption of shares, expenses of registering and qualifying
shares of the Fund under federal and state laws and regulations, expenses of
printing and distributing reports, notices and proxy materials to existing
shareholders, expenses of printing and filing reports and other documents filed
with governmental agencies, expenses of annual and special shareholders'
meetings, expense of printing and distributing prospectuses, fees and expenses
of Directors of the Fund who are not employees of HLM or its affiliates,
membership dues in the Investment Company Institute, insurance premiums and
extraordinary expenses such as litigation expenses. Fund expenses directly
attributable to a Portfolio are charged to that Portfolio; other expenses are
allocated proportionately among all the Portfolios in relation to the net assets
of each Portfolio.
As compensation (subject to expense caps as described under "Fund Expenses" in
the Prospectus) for the services rendered by HLM under the Advisory Agreements,
each Portfolio pays HLM a monthly advisory fee calculated by applying the
following annual percentage rates to such Portfolio's average daily net assets
for the month:
Rate
International Equity 0.75%
Global Equity 1.00%
Emerging Markets 1.25%
Multi-Asset Global 1.00%
ADMINISTRATOR
Pursuant to its terms, the administration agreement (the "Administration
Agreement") between the Fund and AMT Capital, as Administrator, obligates the
Administrator to manage and supervise all aspects of the general day-to-day
business activities and operations of the Fund other than investment advisory
activities, including custodial, transfer agency, dividend disbursing,
accounting, auditing, compliance and related services. The Administration
Agreement will remain in effect for five years following the date of execution
and thereafter will automatically continue unless terminated on notice.
DISTRIBUTION OF FUND SHARES
Shares of the Fund are distributed by AMT Capital pursuant to a Distribution
Agreement (the "Distribution Agreement") between the Fund and AMT Capital. The
Fund and AMT Capital have agreed to indemnify one another against certain
liabilities. The Distribution Agreement will remain in effect for two years
following the date of execution and thereafter will continue for successive
annual periods only if its continuance is approved annually by a majority of the
Board of Directors who are not parties to such agreements or "interested
persons" of any such party and either by votes of a majority of the Directors or
a majority of the outstanding voting securities of the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of November 1, 1996, no shareholder is deemed a "control persons" of the Fund
as such term is defined in the 1940 Act.
As of November 1, 1996, the following persons held 5 percent or more of the
outstanding shares of the International Equity Portfolio:
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Portfolio
Common Stock, The National Gallery Direct Ownership 12.20%
$.001 per share of Art, Sixth and
Constitution Avenue
Washington, DC 20565
Common Stock, The Bank of New York Direct Ownership 12.09%
$.001 per Share (nominee) Mutual Fund/
Reorg. Dept., P.O. Box
1066, Wall Street
Station, New York, NY
10268
Common Stock Children's Hospital of Direct Ownership 10.78%
$.001 per Share Philadelphia, 34th and
Civic Center Blvd.,
Philadelphia, PA 19104
Common Stock The Principia Direct Ownership 6.46%
$.001 per Share Corporation, Treasurers
Office, 13201 Clayton
Road, St. Louis, MO
63131-1099
Common Stock Public Welfare Direct Ownership 5.96%
$.001 per Share Foundation Inc., 2600
Virginia Ave., NW
Suite 505, Washington,
DC 20037-1977
Common Stock State Street Bank & Direct Ownership 5.37%
$.001 per Share Trust Co., Trustee for
Turlock Irrigation
District, P.O. Box
949, Turlock, CA 95381
SUPPLEMENTAL DESCRIPTIONS OF INVESTMENTS
The different types of securities in which the Portfolios may invest, subject to
their respective investment objective, policies and restrictions, are described
in the Prospectus under "Descriptions of Investments". Additional information
concerning the characteristics of certain of the Portfolios' investments are set
forth below.
U.S. Treasury and U.S. Government Agency Securities. U.S. Government Securities
include instruments issued by the U.S. Treasury, including bills, notes and
bonds. These instruments are direct obligations of the U.S. Government and, as
such, are backed by the full faith and credit of the United States. They differ
primarily in their interest rates, the lengths of their maturities and the dates
of their issuances. In addition, U.S. Government Securities include securities
issued by instrumentalities of the U.S. Government, such as the Government
National Mortgage Association ("GNMA"), which are also backed by the full faith
and credit of the United States. U.S. Government Agency Securities include
instruments issued by instrumentalities established or sponsored by the U.S.
Government, such as the Student Loan Marketing Association ("SLMA"), the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC"). While these securities are issued, in general, under
the authority of an Act of Congress, the U.S. Government is not obligated to
provide financial support to the issuing instrumentalities.
Bank Obligations. The Fund limits its investments in U.S. bank obligations to
obligations of U.S. banks that in HLM's opinion meet sufficient creditworthiness
criteria. The Fund limits its investments in foreign bank obligations to
obligations of foreign banks (including U.S. branches of foreign banks) that, in
the opinion of HLM, are of an investment quality comparable to obligations of
U.S. banks in which each Portfolio may invest. Other than the allowable 20% of
a Portfolio's assets invested in below-investment grade convertible and other
debt securities, all investments in bank obligations will be rated at least "B"
by Thomson Bankwatch or similarly rated by IBCA Ltd., or of comparable quality
as determined by HLM.
Corporate Debt Instruments. Corporate debt securities of domestic and foreign
issuers include such instruments as corporate bonds, debentures, notes,
commercial paper, medium-term notes, variable rate notes and other similar
corporate debt instruments. Other than the allowable 20% of a Portfolio's assets
invested in below-investment grade convertible and other debt securities, all
investments in corporate debt instruments will be rated at least "BBB" or "A-1"
(in the case of commercial paper) by Standard & Poors Corporation ("S&P"), "Baa"
or "P-1" (in the case of commercial paper) by Moody's Investors Service, Inc.
("Moody's"), or of comparable quality as determined by HLM.
Brady Bonds. Each Portfolio, subject to limitations, may invest in "Brady
Bonds", which are debt securities issued or guaranteed by foreign governments in
exchange for existing external commercial bank indebtedness under a plan
announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989. To date,
over $154 billion (face amount) of Brady Bonds have been issued by the
governments of thirteen countries, the largest proportion having been issued by
Argentina, Brazil, Mexico and Venezuela. Brady Bonds have been issued only
recently, and accordingly, they do not have a long payment history. Brady Bonds
may be collateralized or uncollateralized, are issued in various currencies
(primarily the U.S. dollar) and are actively traded in the over-the-counter
secondary market.
Each Portfolio may invest in either collateralized or uncollateralized Brady
Bonds. U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed
rate par bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on such bonds generally are collateralized by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at the time and is adjusted at regular intervals
thereafter. Brady Bonds which have been issued to date are rated BB or B by S&P
or Ba or B by Moody's or, in cases in which a rating by S&P or Moody's has not
been assigned, are generally considered by the Adviser to be of comparable
quality.
Repurchase Agreements. When participating in repurchase agreements, a Portfolio
buys securities from a vendor (e.g., a bank or securities firm) with the
agreement that the vendor will repurchase the securities at the same price plus
interest at a later date. Repurchase agreements may be characterized as loans
secured by the underlying securities. Such transactions afford an opportunity
for the Portfolio to earn a return on available cash at minimal market risk,
although the Portfolio may be subject to various delays and risks of loss if the
vendor becomes subject to a proceeding under the U.S. Bankruptcy Code or is
otherwise unable to meet its obligation to repurchase. The securities
underlying a repurchase agreement will be marked to market every business day so
that the value of such securities is at least equal to the value of the
repurchase price thereof, including the accrued interest thereon.
Reverse Repurchase Agreements. When participating in reverse repurchase
agreements, a Portfolio sells U.S. Government securities and simultaneously
agrees to repurchase them at an agreed upon price and date. The difference
between the amount the Portfolio receives for the securities and the amount it
pays on repurchase is deemed to be a payment of interest. The Fund will
maintain for each Portfolio a segregated custodial account containing cash, U.S.
Government securities or other appropriate high-grade debt securities having an
aggregate value at least equal to the amount of such commitments to repurchase,
including accrued interest, until payment is made. Reverse repurchase
agreements create leverage, a speculative factor, and will be considered as
borrowings for the purposes of limitations on borrowings.
SUPPLEMENTAL INVESTMENT TECHNIQUES
Borrowing. Each Portfolio may borrow money temporarily from banks when (i) it
is advantageous to do so in order to meet redemption requests, (ii) a Portfolio
fails to receive transmitted funds from a shareholder on a timely basis, (iii)
the custodian of the Fund fails to complete delivery of securities sold or (iv)
a Portfolio needs cash to facilitate the settlement of trades made by the
Portfolio. In addition, each Portfolio may, in effect, lend securities by
engaging in reverse repurchase agreements and may, in effect, borrow money by
doing so. Securities may be borrowed by engaging in repurchase agreements. See
"Investment Restrictions" and "Supplemental Descriptions of Investments".
Securities Lending. Although, the Fund has no current plans to do so, each
Portfolio is authorized to lend securities from its investment portfolios, with
a value not exceeding 33 1/3% of its total assets, to banks, brokers and other
financial institutions if it receives collateral in cash, U.S. Government
Securities or other high grade liquid investments which will be maintained at
all times in an amount equal to at least 102% of the current market value of the
loaned securities. The loans will be terminable at any time by the Fund and the
relevant Portfolio will then receive the loaned securities within five days.
During the period of such a loan, the Portfolio receives the income on the
loaned securities and a loan fee and may thereby increase its total return.
Foreign Currency Hedging. The Portfolios may enter into forward foreign
currency contracts (a "forward contract") and may purchase and write (on a
covered basis) exchange-traded or over-the-counter ("OTC") options on
currencies, foreign currency futures contracts, and options on foreign currency
futures contracts primarily to protect against a decrease in the U.S. dollar
equivalent value of its foreign currency portfolio securities or the payments
thereon that may result from an adverse change in foreign currency exchange
rates. The Portfolios may at times hedge all or some portion of their currency
exchange risk. Conditions in the securities, futures, options, and foreign
currency markets will determine whether and under what circumstances a Portfolio
will employ any of the techniques or strategies described below and in the
section of the Prospectus entitled "Descriptions of Investments". A Portfolio's
ability to pursue certain of these strategies may be limited by applicable
regulations of the Commodity Futures Trading Commission ("CFTC") and the federal
tax requirements applicable to regulated investment companies (see "Tax
Considerations").
Forward Contracts. Sale of currency for dollars under such a contract
establishes a price for the currency in dollars. Such a sale insulates returns
from securities denominated in that currency from exchange rate fluctuations to
the extent of the contract while the contract is in effect. A sale contract
will be advantageous if the currency falls in value against the dollar and
disadvantageous if it increases in value against the dollar. A purchase
contract will be advantageous if the currency increases in value against the
dollar and disadvantageous if it falls in value against the dollar.
The Portfolios may use forward contracts to insulate existing security positions
against exchange rate movement ("position hedges") or to insulate proposed
transactions against such movement ("transaction hedges"). For example, to
establish a position hedge, a forward contract on a foreign currency might be
sold to protect against the decline in the value of that currency against the
dollar. To establish a transaction hedge, a foreign currency might be purchased
on a forward basis to protect against an anticipated increase in the value of
that currency against the dollar.
Futures Contracts. The Portfolios may enter into contracts for the purchase or
sale for future delivery (a "futures contract") of contracts based on financial
indices including any index of common stocks. The Portfolios may also enter into
futures contracts based on foreign currencies. U.S. futures contracts have been
designed by exchanges which have been designated as "contracts markets" by the
CFTC, and must be executed through a futures commission merchant, or brokerage
firm, that is a member of the relevant contract market. Futures contracts trade
on a number of exchange markets and, through their clearing corporations, the
exchanges guarantee performance of the contracts as between the clearing members
of the exchange. The Portfolios may also enter into futures contracts that are
based on securities that would be eligible investments for the Portfolios. The
Portfolios may enter into contracts that are denominated in currencies other
than the U.S. dollar.
Although futures contracts by their terms call for the actual delivery or
acquisition of securities or currency, in most cases the contractual obligation
is fulfilled before the date of the contract without having to make or take
delivery of the securities or currency. The offsetting of a contractual
obligation is accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for delivery in the
same month. Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of the securities or
currency. Since all transactions in the futures market are made, offset, or
fulfilled through a clearinghouse associated with the exchange on which the
contracts are traded, a Portfolio will incur brokerage fees when it purchases or
sells futures contracts.
At the time a futures contract is purchased or sold, a Portfolio must allocate
cash or securities as a deposit payment ("initial margin"). It is expected that
the initial margin on U.S. exchanges may range from approximately 3% to
approximately 15% of the value of the securities or commodities underlying the
contract. Under certain circumstances, however, such as periods of high
volatility, the Portfolio may be required by an exchange to increase the level
of its initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. An outstanding futures
contract is valued daily and the payment in cash of ("variation margin")
generally will be required, a process known as "marking to the market". Each
day the Portfolio will be required to provide (or will be entitled to receive)
variation margin in an amount equal to any decline (in the case of a long
futures position) or increase (in the case of a short futures position) in the
contract's value from the preceding day.
Options on Foreign Currencies. The Portfolios may purchase and sell (or write)
put and call options on foreign currencies to protect against a decline in the
U.S. dollar-equivalent value of their portfolio securities or payments due
thereon or a rise in the U.S. dollar-equivalent cost of securities that they
intend to purchase. A foreign currency put option grants the holder the right,
but not the obligation, at a future date to sell a specified amount of a foreign
currency to its counterparty at a predetermined price. Conversely, a foreign
currency call option grants the holder the right, but not the obligation, to
purchase at a future date a specified amount of a foreign currency at a
predetermined price.
Options on Futures Contracts. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security or currency. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying securities or currency, it may or may not be less
risky than ownership of the futures contract or the underlying securities or
currency. As with the purchase of futures contracts, when a Portfolio is not
fully invested it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates or a change in foreign
exchange rates.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio will incur a loss that will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Portfolio's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some respects
to the purchase of protective put options on portfolio securities.
Restrictions on the Use of Futures Contracts and Options on Futures Contracts.
Regulations of the CFTC applicable to the Portfolios require that all of the
Portfolios' futures and options on futures transactions constitute bona fide
hedging transactions, except that a transaction may not constitute a bona fide
hedging transaction entered into for other purposes if, immediately thereafter,
the sum of the amount of initial margin deposits on a Portfolio's existing
futures positions and premiums paid for related options would not exceed 5% of
the value of the Portfolio's total assets.
Illiquid Securities. Although each of the Portfolios may invest up to 15% of
the value of its net assets in illiquid assets, it is not expected that any
Portfolio will invest a significant portion of its assets in illiquid
securities. All repurchase agreements and time deposits maturing in more than
seven days are treated as illiquid assets.
SUPPLEMENTAL DISCUSSION OF RISKS
ASSOCIATED WITH THE FUND'S INVESTMENT
POLICIES AND INVESTMENT TECHNIQUES
Additional information concerning risks associated with certain of the
Portfolios' investments is set forth below.
Creditworthiness. In general, certain obligations which the Portfolios may
invest in are subject to credit risks such as the loss of credit ratings or
possible default. After purchase by a Portfolio of the Fund, a security may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. Neither event will require a sale of such security by
the Portfolio. However, HLM will consider such event in its determination of
whether a Portfolio should hold the security. To the extent that the ratings
given by S&P or Moody's may change as a result of changes in such organizations
or their rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in the Prospectus and in this Statement of Additional Information.
Foreign Bank Obligations. Obligations of foreign banks involve somewhat
different investment risks than those affecting obligations of United States
banks, including the possibilities that their liquidity could be impaired
because of future political and economic developments, that their obligations
may be less marketable than comparable obligations of United States banks, that
a foreign jurisdiction might impose withholding taxes on interest income payable
on those obligations, that foreign deposits may be seized or nationalized, that
foreign governmental restrictions such as exchange controls may be adopted that
might adversely affect the payment of principal and interest on those
obligations and that the selection of those obligations may be more difficult
because there may be less publicly available information concerning foreign
banks or the accounting, auditing and financial reporting standards, practices
and requirements applicable to foreign banks may differ from those applicable to
United States banks. Foreign banks are not generally subject to examination by
any United States government agency or instrumentality. Also, investments in
commercial banks located in several foreign countries are subject to additional
risks due to the combination in such banks of commercial banking and diversified
securities activities.
High Yield/High Risk Debt Securities. Each Portfolio may invest up to 20% of
its assets in convertible securities and debt securities which are rated below
investment-grade - that is, rated below Baa by Moody's or BBB by S&P and in
unrated securities judged to be of equivalent quality by HLM. Below investment
grade securities carry a high degree of risk (including the possibility of
default or bankruptcy of the issuers of such securities), generally involve
greater volatility of price and risk of principal and income, and may be less
liquid, than securities in the higher rating categories and are considered
speculative. The lower the ratings of such debt securities, the greater their
risks render them like equity securities. See "Ratings Descriptions" in this
Statement of Additional Information for a more complete description of the
ratings assigned by ratings organizations and their respective characteristics.
Economic downturns have disrupted in the past, and could disrupt in the
future, the high yield market and impaired the ability of issuers to repay
principal and interest. Also, an increase in interest rates would have a
greater adverse impact on the value of such obligations than on comparable
higher quality debt securities. During an economic downturn or period of rising
interest rates, highly leveraged issues may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations. Prices and yields of high yield securities will fluctuate
over time and, during periods of economic uncertainty, volatility of high yield
securities may adversely affect a Portfolio's net asset value. In addition,
investments in high yield zero coupon or pay-in-kind bonds, rather than income-
bearing high yield securities, may be more speculative and may be subject to
greater fluctuations in value due to changes in interest rates.
The trading market for high yield securities may be thin to the extent that
there is no established retail secondary market or because of a decline in the
value of such securities. A thin trading market may limit the ability of a
Portfolio to accurately value high yield securities in its portfolio and to
dispose of those securities. Adverse publicity and investor perceptions may
decrease the values and liquidity of high yield securities. These securities
may also involve special registration responsibilities, liabilities and costs.
Credit quality in the high yield securities market can change suddenly and
unexpectedly, and even recently issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield security. For these reasons, it
is the policy of HLM not to rely exclusively on ratings issued by established
credit rating agencies, but to supplement such ratings with its own independent
and on-going review of credit quality. The achievement of a Portfolio's
investment objective by investment in such securities may be more dependent on
HLM's credit analysis than is the case for higher quality bonds. Should the
rating of a portfolio security be downgraded, HLM will determine whether it is
in the best interest of the Portfolio to retain or dispose of such security.
Prices for below investment-grade securities may be affected by legislative and
regulatory developments.
Foreign Securities. Foreign financial markets, while growing in volume, have,
for the most part, substantially less volume than United States markets, and
securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable domestic companies. The foreign markets
also have different clearance and settlement procedures, and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct such
transactions. Delivery of securities may not occur at the same time as payment
in some foreign markets. Delays in settlement could result in temporary periods
when a portion of the assets of a Portfolio is uninvested and no return is
earned thereon. The inability of a Portfolio to make intended security
purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to a
Portfolio due to subsequent declines in value of the portfolio security or, if
the Portfolio has entered into a contract to sell the security, could result in
possible liability to the purchaser.
As foreign companies are not generally subject to uniform accounting, auditing
and financial reporting standards and practices comparable to those applicable
to domestic companies, there may be less publicly available information about
certain foreign companies than about domestic companies. There is generally
less government supervision and regulation of exchanges, financial institutions
and issuers in foreign countries than there is in the United States. A foreign
government may impose exchange control regulations which may have an impact on
currency exchange rates, and there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries.
Although HLM will use reasonable efforts to obtain the best available price
and the most favorable execution with respect to all transactions, HLM will
consider the full range and quality of services offered by the executing broker
or dealer when making these determinations. Fixed commissions on many foreign
stock exchanges are generally higher than negotiated commissions on U.S.
exchanges. Certain foreign governments levy withholding taxes against dividend
and interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received by the Portfolios on these investments. However, these
foreign withholding taxes are not expected to have a significant impact on the
Portfolios, since each Portfolio's investment objective is to seek long-term
capital appreciation and any income should be considered incidental.
Foreign Currency Hedging. The success of currency hedging will depend on the
ability of HLM to predict exchange rate fluctuations. Predicting such
fluctuations is extremely difficult and thus the successful execution of a
hedging strategy is highly uncertain. An incorrect prediction will cause poorer
Portfolio performance than would otherwise be the case. Forward contracts that
protect against anticipated losses have the corresponding effect of canceling
possible gains if the currency movement prediction is incorrect.
Precise matching of forward contract amounts and the value of portfolio
securities is generally not possible because the market value of the protected
securities will fluctuate while forward contracts are in effect. Adjustment
transactions are theoretically possible but time consuming and expensive, so
contract positions are likely to be approximate hedges, not perfect.
The cost to a Portfolio of engaging in foreign currency forward contracts
will vary with factors such as the foreign currency involved, the length of the
contract period, and the market conditions then prevailing, including general
market expectations as to the direction of the movement of various foreign
currencies against the U.S. dollar. Furthermore, HLM may not be able to
purchase forward contracts with respect to all of the foreign currencies in
which a Portfolio's securities may be denominated. In those circumstances the
correlation between the movements in the exchange rates of the subject currency
and the currency in which the portfolio security is denominated may not be
precise. Moreover, if the forward contract is entered into in an over-the-
counter transaction, as will usually be the case, the Portfolio generally will
be exposed to the credit risk of its counterparty. If the Portfolio enters into
such contracts on a foreign exchange, the contract will be subject to the rules
of that foreign exchange. Foreign exchanges may impose significant restrictions
on the purchase, sale, or trading of such contracts, including the imposition of
limits on price moves. Such limits may significantly affect the ability to
trade such a contract or otherwise to close out the position and could create
potentially significant discrepancies between the cash and market value of the
position in the forward contract. Finally, the cost of purchasing forward
contracts in a particular currency will reflect, in part, the rate of return
available on instruments denominated in that currency. The cost of purchasing
forward contracts to hedge portfolio securities that are denominated in
currencies that in general yield high rates of return may thus tend to reduce
that rate of return toward the rate of return that would be earned on assets
denominated in U.S. dollars.
Futures Contracts. Futures contracts entail special risks. Among other things,
the ordinary spreads between values in the cash and futures markets, due to
differences in the character of these markets, are subject to distortions
relating to: (1) investors' obligations to meet additional variation margin
requirements; (2) decisions to make or take delivery, rather than entering into
offsetting transactions; and (3) the difference between margin requirements in
the securities markets and margin deposit requirements in the futures market.
The possibility of such distortion means that a correct forecast of general
market or foreign exchange rate trends may still not result in a successful
transaction.
Although the Fund believes that the use of such contracts and options
thereon will benefit the Portfolios, if predictions about the general direction
of securities market movements or foreign exchange rates is incorrect, a
Portfolio's overall performance would be poorer than if it had not entered into
any such contracts or purchased or written options thereon.
A Portfolio's ability to establish and close out positions in futures contracts
and options on futures contracts will be subject to the development and
maintenance of a liquid market. Although the Portfolio generally will purchase
or sell only those futures contracts and options thereon for which there appears
to be a liquid market, there is no assurance that a liquid market on an exchange
will exist for any particular futures contract or option thereon at any
particular time. Where it is not possible to effect a closing transaction in a
contract to do so at a satisfactory price, the Portfolio would have to make or
take delivery under the futures contract or, in the case of a purchased option,
exercise the option. In the case of a futures contract that the Portfolio has
sold and is unable to close out, the Portfolio would be required to maintain
margin deposits on the futures contract and to make variation margin payments
until the contract is closed.
Under certain circumstances, exchanges may establish daily limits in the amount
that the price of a futures contract or related option contract may vary either
up or down from the previous day's settlement price. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because
the limit may prevent the liquidation of unfavorable positions. Futures or
options contract prices could move to the daily limit for several consecutive
trading days with little or no trading and thereby prevent prompt liquidation of
positions and subject some traders to substantial losses.
Buyers and sellers of foreign currency futures contracts are subject to the same
risks that apply to the use of futures generally. In addition, there are risks
associated with foreign currency futures contracts and their use as hedging
devices similar to those associated with forward contracts on foreign
currencies. Further, settlement of a foreign currency futures contract must
occur within the country issuing the underlying currency. Thus, a Portfolio
must accept or make delivery of the underlying foreign currency in accordance
with any U.S. or foreign restrictions or regulations regarding the maintenance
of foreign banking arrangements by U.S. residents and may be required to pay any
fees, taxes or charges associated with such delivery that are assessed in the
country of the underlying currency.
Options on Foreign Currency. As in the case of other types of options, the
benefit to a Portfolio deriving from the purchase of foreign currency options
will be reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, the Portfolio could sustain losses on transactions in
foreign currency options that would require them to forego a portion or all of
the benefits of advantageous changes in such rates.
A Portfolio may write options on foreign currencies for hedging purposes. For
example, where the Portfolio anticipates a decline in the dollar value of
foreign currency denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised, and the decrease in value of portfolio securities will be
offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar costs of securities to be acquired, a Portfolio could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Portfolio to hedge such
increased costs up to the amount of the premium. As in the case of other types
of options, however, the writing of a foreign currency option will constitute
only a partial hedge up to the amount of the premium, and only if rates move in
the expected direction. If this movement does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be fully offset by the amount of the premium.
Through the writing of options on foreign currencies, the Portfolio also may be
required to forego all or a portion of the benefits that might otherwise have
been obtained from favorable movements in exchange rates.
Options on Futures Contracts. The amount of risk a Portfolio assumes when it
purchases an option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation risks discussed
above, the purchase of an option also entails the risk that changes in the value
of the underlying futures contract will not be fully reflected in the value of
the option purchased. Options on foreign currency futures contracts may involve
certain additional risks. Trading options on foreign currency futures contracts
is relatively new. The ability to establish and close out positions in such
options is subject to the maintenance of a liquid secondary market. To mitigate
this problem, a Portfolio will not purchase or write options on foreign currency
futures contracts unless and until, in HLM's opinion, the market for such
options has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with transactions in the
underlying foreign currency futures contracts. Compared to the purchase or sale
of foreign currency futures contracts, the purchase of call or put options
thereon involves less potential risk to the Portfolio because the maximum amount
at risk is the premium paid for the option (plus transaction costs). However,
there may be circumstances when the purchase of a call or put option on a
foreign currency futures contract would result in a loss, such as when there is
no movement in the price of the underlying currency or futures contract, when
use of the underlying futures contract would not result in a loss.
Lower-Rated Debt Securities ("Junk Bonds"). The market value of lower-rated
debt securities tend to reflect individual corporate developments to a greater
extent than do higher-rated securities, which react primarily to fluctuations in
the general level of interest rates. Lower-rated debt securities also tend to
be more sensitive to general economic conditions than are higher-rated debt
securities.
INVESTMENT RESTRICTIONS
The Fund has adopted the investment restrictions listed below relating
to the investment of each Portfolio's assets and its activities. These are
fundamental policies that may not be changed without the approval of the holders
of a majority of the outstanding voting securities of a Portfolio (which for
this purpose and under the 1940 Act means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares). None of the
Portfolios may:
(1) invest more than 5% of its total assets (taken at market value) in
securities of any one issuer, other than securities issued by the U.S.
Government, its agencies and instrumentalities, or purchase more than 10% of the
voting securities of any issuer, with respect to 75% of a Portfolio's total
assets;
(2) invest more than 25% of its total assets in the securities of companies
primarily engaged in any one industry other than the U.S. Government, its
agencies and instrumentalities. Finance companies as a group are not considered
a single industry for purposes of this policy;
(3) borrow money, except through reverse repurchase agreements or from a bank
for temporary or emergency purposes in an amount not exceeding one third of the
value of its total assets nor will it borrow for leveraging purposes;
(4) issue senior securities (other than as specified in clause (3));
(5) make loans, except (a) through the purchase of all or a portion of an issue
of debt securities in accordance with its investment objective, policies and
limitations, or (b) by engaging in repurchase agreements with respect to
portfolio securities, or (c) by lending securities to other parties, provided
that no securities loan may be made, if, as a result, more than 33 1/3% of the
value of its total assets would be lent to other parties;
(6) underwrite securities of other issuers;
(7) invest in companies for the purpose of exercising control or management;
(8) purchase or sell real estate (other than marketable securities representing
interests in, or backed by, real estate or securities of companies which deal in
real estate or mortgages);
(9) purchase or sell physical commodities or related commodity contracts;
(10) invest directly in interests in oil, gas or other mineral exploration or
development programs or mineral leases;
(11) invest more than 10% of its total assets in warrants; or
Whenever an investment policy or limitation states a maximum percentage of a
Portfolio's assets that may be invested in any security or other asset or sets
forth a policy regarding quality standards, such standard or percentage
limitation shall be determined immediately after and as a result of the
Portfolio's acquisition of such security or other asset. Accordingly, any later
increase or decrease in a percentage resulting from a change in values, net
assets or other circumstances will not be considered when determining whether
that investment complies with the Portfolio's investment policies and
limitations.
Each Portfolio's investment objectives and other investment policies not
designated as fundamental in this Statement of Additional Information are non-
fundamental and may be changed at any time by action of the Board of Directors.
Although a non-fundamental policy, each Portfolio may not purchase securities
on margin or make short sales, unless, by virtue of its ownership of other
securities, it has the right to obtain securities equivalent in kind and amount
to the securities sold and, if the right is conditional, the sale is made upon
the same conditions, except that the Fund may obtain such short-term credits as
may be necessary for the clearance of purchases and sales of securities.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize HLM to select the brokers or dealers that will
execute the purchases and sales of investment securities for each of the Fund's
Portfolios and HLM to use reasonable efforts to obtain the best available price
and the most favorable execution with respect to all transactions for the
Portfolios. HLM will consider the full range and quality of services offered by
the executing broker or dealer when making these determinations.
Some securities considered for investment by the Fund's Portfolios may also be
appropriate for other clients advised by HLM. If the purchase or sale of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients advised by HLM is considered at or about the same
time, transactions in such securities will be allocated among the Portfolio and
clients in a manner deemed fair and reasonable by HLM, as the case may be.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by HLM, and the results of such allocations, are
subject to periodic review by the Board of Directors.
Brokers are selected on a basis of their overall assistance in terms of
execution capabilities and research services, provided that their commission
schedules are competitive with other firms providing similar services.
No trades will be executed with HLM, its affiliates, officers or employees
acting as principal or agent for others, although such entities and persons may
be trading contemporaneously in the same or similar securities.
NET ASSET VALUE
As used in the Prospectus, "Business Day" refers to those days when the New York
Stock Exchange is open for business, which is Monday through Friday except for
holidays. As of the date of this Statement of Additional Information, such
holidays are: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day.
TAX CONSIDERATIONS
The following summary of tax consequences, which does not purport to be
complete, is based on U.S. federal tax laws and regulations in effect on the
date of this Statement of Additional Information, which are subject to change by
legislative or administrative action.
Qualification as a Regulated Investment Company. Each Portfolio intends to
qualify for and to elect to be treated as, a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify as a RIC, a Portfolio must, among other things, (a) derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income derived from its business of
investing in securities (the "Qualifying Income Requirement"); (b) derive less
than 30% of its gross income each taxable year from sales or other dispositions
of certain assets (namely, (i) securities; (ii) options, futures and forward
contracts [other than those on foreign currencies]; and (iii) foreign currencies
[including options, futures and forward contracts on such currencies] not
directly related to the Portfolio's principal business of investing in stocks or
securities [or options and futures with respect to stocks or securities]) held
less than three months (the "30% Limitation"); (c) diversify its holdings so
that, at the end of each quarter of the Portfolio's taxable year, (i) at least
50% of the market value of the Portfolio's assets is represented by cash and
cash items (including receivables), U.S. Government securities, securities of
other RICs and other securities, with such other securities of any one issuer
limited to an amount not greater than 5% of the value of the Portfolio's total
assets and not greater than 10% of the outstanding voting securities of such
issuer and (ii) not more than 25% of the value of the Portfolio's total assets
is invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other RICs); and (d) distribute at least 90% of
its investment company taxable income (which includes, among other items,
interest and net short-term capital gains in excess of net long-term capital
losses) and its net tax-exempt interest income each taxable year.
If for any taxable year a Portfolio does not qualify as a RIC, all of its
taxable income will be taxed to the Portfolio at corporate rates. For each
taxable year that the Portfolio qualifies as a RIC, it will not be subject to
federal income tax on that part of its investment company taxable income and net
capital gains (the excess of net long-term capital gain over net short-term
capital loss) that it distributes to its shareholders. In addition, to avoid a
nondeductible 4% federal excise tax, the Portfolio must distribute during each
calendar year an amount at least equal to the sum of 98% of its ordinary income
(not taking into account any capital gains or losses) determined on a calendar
year basis, 98% of its capital gains in excess of capital losses determined in
general on an October 31 year-end basis, and any undistributed amounts from
previous years. The 30% Limitation may require that a Portfolio defer closing
out certain positions beyond the time when it otherwise would be advantageous to
do so, in order not to be disqualified as a RIC. Each Portfolio will monitor
its compliance with all of the rules set forth in the preceding paragraph.
Distributions. Each Portfolio's automatic reinvestment of its taxable
investment income, net short-term capital gains and net long-term capital gains
in additional shares of the Portfolio and distribution of such shares to
shareholders will be taxable to the Portfolio's shareholders. In general, such
shareholders will be treated as if such income and gains had been distributed to
them by the Portfolio and then reinvested by them in shares of the Portfolio,
even though no cash distributions have been made to shareholders. The automatic
reinvestment of taxable investment income and net realized short-term capital
gains of the Portfolio will be taxable to the Portfolio's shareholders as
ordinary income. Each Portfolio's automatic reinvestment of any net long-term
capital gains designated by the Portfolio as capital gain dividends will be
taxable to the shareholders as long-term capital gain, regardless of how long
they have held their Portfolio shares. If a portion of a Portfolio's income
consists of dividends paid by U.S. corporations, a portion of the dividends paid
by the Portfolio may be eligible for the corporate dividend-received deduction.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by a Portfolio in October, November or December with a
record date in such a month and paid by the Portfolio during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than in the
calendar year in which the distributions are received. Each Portfolio will
inform shareholders of the amount and tax status of all amounts treated as
distributed to them not later than 60 days after the close of each calendar
year.
Sale of Shares. Upon the sale or other disposition of shares of a Portfolio, or
upon receipt of a distribution in complete liquidation of a Portfolio, a
shareholder generally will realize a capital gain or loss which will be long-
term or short-term, generally depending upon the shareholder's holding period
for the shares. Any loss realized on the sale or exchange will be disallowed to
the extent the shares disposed of are replaced (including shares acquired
pursuant to a dividend reinvestment plan) within a period of 61 days beginning
30 days before and ending 30 days after disposition of the shares. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by the shareholder on a disposition of
Portfolio shares held by the shareholder for six months or less will be treated
as a long-term capital loss to the extent of any distributions of net capital
gains deemed received by the shareholder with respect to such shares.
Under the Code, a shareholder may not deduct that portion of interest on
indebtedness incurred or continued to purchase or carry shares of an investment
company paying exempt-interest dividends which bears the same ratio to the total
of such interest as the exempt-interest dividends bear to the total dividends
(excluding net capital gain dividends) received by the shareholder. In
addition, under rules issued by the Internal Revenue Service for determining
when borrowed funds are considered to be used to purchase or carry particular
assets, the purchase of such shares may be considered to have been made with
borrowed funds even though the borrowed funds are not directly traceable to such
purchase.
Zero Coupon Securities. Investments by a Portfolio in zero coupon
securities (other than tax-exempt zero coupon securities) will result in income
to the Portfolio equal to a portion of the excess of the face value of the
securities over their issue price (the "original issue discount") each year that
the securities are held, even though the Portfolio receives no cash interest
payments. This income is included in determining the amount of income which the
Portfolio must distribute to maintain its status as a RIC and to avoid the
payment of federal income tax and the 4% excise tax. Similarly, investments in
tax-exempt zero coupon securities will result in a Portfolio accruing tax-exempt
income each year that the securities are held, even though the Portfolio
receives no cash payments of tax-exempt interest. This tax-exempt income is
included in determining the amount of net tax-exempt interest income which a
Portfolio must distribute to maintain its status as a regulated investment
company.
Backup Withholding. A Portfolio may be required to withhold U.S. federal
income tax at the rate of 31% of all amounts deemed to be distributed as a
result of the automatic reinvestment by the Portfolio of its income and gains
in additional shares of the Portfolio and, all redemption payments made to
shareholders who fail to provide the Portfolio with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
will be credited against a shareholder's U.S. federal income tax liability.
Corporate shareholders and certain other shareholders are exempt from such
backup withholding.
Tax Treatment of Hedging Transactions. The taxation of equity options and
over-the-counter options on debt securities is governed by the Code section
1234. Pursuant to Code section 1234, the premium received by a Portfolio for
selling a put or call option is not included in income at the time of receipt.
If the option expires, the premium is short-term capital gain to the Portfolio.
If the Portfolio enters into a closing transaction, the difference between the
amount paid to close out its position and the premium received is short-term
capital gain or loss. If a call option written by the Portfolio is exercised,
thereby requiring the Portfolio to sell the underlying security, the premium
will increase the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by a Portfolio, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term,
depending upon the holding period of the option. If the option is exercised,
the cost of the option, in the case of a call option, is added to the basis of
the purchased security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Certain options, futures, and forward contracts in which a Portfolio may invest
are "section 1256 contracts." Gains and losses on section 1256 contracts are
generally treated as 60% long-term and 40% short-term capital gains or losses
("60/40 treatment"), regardless of the Portfolio's actual holding period for the
contract. Also, a section 1256 contract held by the Portfolio at the end of
each taxable year (and generally, for the purposes of the 4% excise tax, on
October 31 of each year) must be treated as if the contract had been sold at its
fair market value on that day ("mark to market treatment"), and any deemed gain
or loss on the contract is subject to 60/40 treatment. Foreign currency gain or
loss (discussed below) arising from section 1256 contracts may, however, be
treated as ordinary income or loss.
The hedging transactions undertaken by a Portfolio may result in "straddles" for
federal income tax purposes. The straddle rules may affect the character of
gains or losses realized by the Portfolio. In addition, losses realized by the
Portfolio on positions that are part of a straddle may be deferred under the
straddle rules rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Further, the
Portfolio may be required to capitalize, rather than deduct currently, any
interest expense on indebtedness incurred or continued to purchase or carry any
positions that are part of a straddle. Because only a few regulations
implementing the straddle rules have been implemented, the tax consequences to
the Portfolio of engaging in hedging transactions are not entirely clear.
Hedging transactions may increase the amount of short-term capital gain realized
by a Portfolio which is taxed as ordinary income when distributed to members.
The Portfolio may make one or more of the elections available under the Code
that are applicable to straddles. If the Portfolio makes any of the elections,
the amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
may accelerate the recognition of gains or losses from the affected straddle
positions.
Because the straddle rules may affect the amount, character, and timing of gains
or losses from the positions that are part of a straddle, the amount of
Portfolio income that is distributed to members and that is taxed to them as
ordinary income or long-term capital gain may be increased or decreased as
compared to a fund that did not engage in such hedging transactions.
Tax Treatment of Foreign Currency-Related Transactions. Gains or losses
attributable to fluctuations in exchange rates that occur between the time a
Portfolio accrues receivables or liabilities denominated in a foreign currency
and the time the Portfolio actually collects such receivables, or pays such
liabilities, generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of certain options, futures, and forward contracts and
on disposition of debt securities denominated in a foreign currency, gains or
losses attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "section 988" gains or losses, may increase or decrease the amount
of the Portfolio's investment company taxable income to be distributed to
members as ordinary income.
Tax Treatment of Passive Foreign Investment Companies. If a Portfolio invests
in stock of certain foreign investment companies, the Portfolio may be subject
to U.S. federal income taxation on a portion of any "excess distribution" with
respect to, or gain from the disposition of, such stock. The tax would be
determined by allocating on a pro rata basis such distribution or gain to each
day of the Portfolio's holding period for the stock. The distribution or gain
so allocated to any taxable year of the Portfolio, other than the taxable year
of the excess distribution or disposition, would be taxed to the Portfolio at
the highest ordinary income rate in effect for such year, and the tax would be
further increased by an interest charge to reflect the value of the tax deferral
deemed to have resulted from the ownership of the foreign company's stock. Any
amount of distribution or gain allocated to the taxable year of the distribution
or disposition would be included in the Portfolio's investment company taxable
income and, accordingly, would not be taxable to the Portfolio to the extent
distributed by the Portfolio as a dividend to its shareholders.
A Portfolio may be able to make an election, in lieu of being taxable in the
manner described above, to include annually in income its pro rata share of the
ordinary earnings and net capital gain of any foreign investment company in
which it invests, regardless of whether it actually received any distributions
from the foreign company. These amounts would be included in the Portfolio's
investment company taxable income and net capital gain which, to the extent
distributed by the Portfolio as ordinary or capital gain dividends, as the case
may be, would not be taxable to the Portfolio. In order to make this election,
the Portfolio would be required to obtain certain annual information from the
foreign investment companies in which it invests, which in many cases may be
difficult to obtain. Other elections may become available to the Portfolio that
would provide alternative tax treatment for investments in foreign investment
companies.
Foreign Shareholders. U.S. taxation of a shareholder who, as to the United
States, is a non-resident alien individual, a foreign trust or estate, foreign
corporation, or foreign partnership ("foreign shareholder") depends on whether
the income from the Portfolio is "effectively connected" with a U.S. trade or
business carried on by such shareholder.
If the income from a Portfolio is not "effectively connected" with a U.S. trade
or business carried on by the foreign shareholder, deemed distributions by the
Portfolio of investment company taxable income will be subject to a U.S. tax of
30% (or lower treaty rate), which tax is generally withheld from such
distributions. Deemed distributions of capital gain dividends and any gain
realized upon redemption, sale or exchange of shares will not be subject to U.S.
tax at the rate of 30% (or lower treaty rate) unless the foreign shareholder is
a nonresident alien individual who is physically present in the U.S. for more
than 182 days during the taxable year and meets certain other requirements.
However, this 30% tax on capital gains of non-resident alien individuals who are
physically present in the United States for more than the 182-day period only
applies in exceptional cases because any individual present in the United States
for more than 182 days during the taxable year is generally treated as a
resident for U.S. federal income tax purposes. In that case, he or she would be
subject to U.S. federal income tax on his or her worldwide income at the
graduated rates applicable to U.S. citizens, rather than the 30% U.S. tax. In
the case of a foreign shareholder who is a non-resident alien individual, the
Portfolio may be required to withhold U.S. federal income tax at a rate of 31%
of deemed distributions of net capital gains and redemption payments unless the
foreign shareholder certifies his or her non-U.S. status under penalties of
perjury or otherwise establishes an exemption. See "Backup Withholding" above.
If the income from a Portfolio is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then deemed distributions of
investment company taxable income and capital gain dividends and any gain
realized upon the redemption, sale or exchange of shares of the Portfolio will
be subject to U.S. federal income tax at the graduated rates applicable to U.S.
citizens or domestic corporations. Foreign corporate shareholders may also be
subject to the branch profits tax at a 30% rate.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are advised to consult their own advisers with respect to the
particular tax consequences to them of an investment in a Portfolio.
Foreign Withholding Taxes. Income received by a Portfolio from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries. If more than 50% of the value of the Portfolio's total assets at the
close of its taxable year consists of securities of foreign corporations, the
Portfolio will be eligible and may elect to "pass through" to the Portfolio's
shareholders the amount of foreign taxes paid by the Portfolio. Pursuant to
this election, a shareholder will be required to include in gross income (in
addition to dividends actually received) its pro rata share of the foreign taxes
paid by the Portfolio, and may be entitled either to deduct its pro rata share
of the foreign taxes in computing its taxable income or to use the amount as a
foreign tax credit against its U.S. federal income tax liability, subject to
limitations. Each shareholder will be notified within 60 days after the close
of the Portfolio's taxable year whether the foreign taxes paid by the Portfolio
will "pass through" for that year. If a Portfolio is not eligible to make the
election to "pass through" to its shareholders its foreign taxes, the foreign
taxes it pays will reduce its investment company taxable income and
distributions by the Portfolio will be treated as U.S. source income.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the shareholder's U.S. tax attributable to its foreign source taxable
income. For this purpose, if the pass-through election is made, the source of
the Portfolio's income flows through to its shareholders. With respect to the
Portfolios, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains, including fluctuation gains
from foreign currency denominated debt securities, receivables and payables,
will be treated as ordinary income derived from U.S. sources. The limitation on
the foreign tax credit is applied separately to foreign source passive income
(as defined for purposes of the foreign tax credit), including the foreign
source passive income passed through by the Portfolios. Shareholders who are
not liable for federal income taxes will not be affected by any such "pass
through" of foreign tax credits.
Other Taxes A Portfolio may be subject to state, local or foreign taxes in any
jurisdiction in which the Portfolio may be deemed to be doing business. In
addition, shareholders of a Portfolio may be subject to state, local or foreign
taxes on distributions from the Portfolio. In many states, Portfolio
distributions which are derived from interest on certain U.S. Government
obligations may be exempt from taxation.
Shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Portfolio.
SHAREHOLDER INFORMATION
Certificates representing shares of a particular Portfolio will not be issued to
shareholders. Investors Bank & Trust Company, the Fund's Transfer Agent, will
maintain an account for each shareholder upon which the registration and
transfer of shares are recorded, and any transfers shall be reflected by
bookkeeping entry, without physical delivery. Detailed confirmations of each
purchase or redemption are sent to each shareholder. Monthly statements of
account are sent which include shares purchased as a result of a reinvestment of
Portfolio distributions.
The Transfer Agent will require that a shareholder provide requests in writing,
accompanied by a valid signature guarantee form, when changing certain
information in an account (i.e., wiring instructions, telephone privileges,
etc.).
Fund management reserves the right to waive the minimum initial investment in
any Portfolio.
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order with
respect to shares of a Portfolio by making payment in whole or in part in
readily marketable securities chosen by the Fund and valued as they are for
purposes of computing the Portfolio's net asset value (redemption-in-kind). If
payment is made in securities, a shareholder may incur transaction expenses in
converting theses securities to cash. The Fund has elected, however, to be
governed by Rule 18f-1 under the 1940 Act as a result of which the Fund is
obligated to redeem shares with respect to any one shareholder during any 90-day
period, solely in cash up to the lesser of $250,000 or 1% of the net asset value
of a Portfolio at the beginning of the period.
CALCULATION OF PERFORMANCE DATA
The Portfolios may, from time to time, include the 30-day yield in
advertisements or reports to shareholders or prospective investors. Quotations
of yield for will be based on all investment income per share during a
particular 30-day (or one month) period (including dividends and interest), less
expenses accrued during the period ("net investment income"), and are computed
by dividing net investment income by the maximum offering price per share on the
last day of the period, according to the following formula which is prescribed
by the Commission:
6
YIELD = 2 x { [ ((a - b) / (c x d)) + 1] - 1 }
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares of a Portfolio
outstanding during the period that were entitled to receive
dividends; and
d = the maximum offering price per share on the last day of the
period.
Each of the Portfolios may, from time to time, include "total return" in
advertisements or reports to shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average annual
compounded rate of return of a hypothetical investment in a Portfolio of the
Fund over periods of 1, 5 and 10 years (up to the life of the Portfolio),
calculated pursuant to the following formula which is prescribed by the
Commission:
n
P(1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the period.
All total return figures assume that all dividends are reinvested when paid.
The International Equity Portfolio commenced operations on November 1, 1996.
Prior to that date the Portfolio's operating history was that of AMT Capital
Fund, Inc. - HLM International Equity Portfolio (the "AMT Capital Portfolio").
Shareholders of the AMT Capital Portfolio approved a reorganization of the AMT
Capital Portfolio into the International Equity Portfolio on October 30, 1996.
For the 12 months ended June 30, 1996, the AMT Capital Portfolio had a total
return of 17.62%. On an annualized basis since its inception of May 11, 1994,
the Portfolio had a total return of 9.78% through June 30, 1996.
RATINGS DESCRIPTIONS
Standard & Poors Corporation
AAA. Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay principal and interest.
AA. Bonds rated AA also qualify as high-quality obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A. Bonds rated A have a strong capacity to pay principal and interest, although
they are more susceptible to the adverse effects of changes in circumstances and
economic conditions.
BBB. Bonds rated BBB are regarded as having adequate capacity to pay interest or
principal. Although these bonds normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and principal.
BB and Lower. Bonds rated BB, B, CCC, CC, C and D are regarded, on balance, as
predominately speculative with respect to the issuer's capacity to pay interest
and principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and D the highest degree of speculation. While
such bonds may have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
The ratings AA to D may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
A-1. Standard & Poors Commercial Paper ratings are current assessments of the
likelihood of timely payments of debts having original maturity of no more than
365 days. The A-1 designation indicates the degree of safety regarding timely
payment is very strong.
A-2. Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Moody's Investors Service, Inc.
Aaa. Bonds are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities.
A. Bonds which are rated A possess many favorable investment attributes and may
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa. Baa rated bonds are considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements because
their future cannot be considered as well assured. Uncertainty of position
characterizes bonds in this class, because the protection of interest and
principal payments may be very moderate and not well safeguarded.
B and Lower. Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the security over any long period of time may be
small. Bonds which are rated Caa are of poor standing. Such securities may be
in default of there may be present elements of danger with respect to principal
or interest. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings. Bonds which are rated C are the lowest rated class of
bonds and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through C in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Moody's ratings for state and municipal and other short-term obligations will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in short-
term borrowing, while various factors of the first importance in long-term
borrowing risk are of lesser importance in the short run.
MIG-1. Notes bearing this designation are of the best quality enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2. Notes bearing this designation are of favorable quality, with all
security elements accounted for, but lacking the undeniable strength of the
previous grade. Market access for refinancing, in particular, is likely to be
less well established.
P-1. Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. The designation "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.
P-2. Issuers have a strong capacity for repayment of short-term promissory
obligations.
Thompson Bankwatch, Inc.
A. Company possess an exceptionally strong balance sheet and earnings record,
translating into an excellent reputation and unquestioned access to its natural
money markets. If weakness or vulnerability exists in any aspect of the
company's business, it is entirely mitigated by the strengths of the
organization.
A/B. Company is financially very solid with a favorable track record and no
readily apparent weakness. Its overall risk profile, while low, is not quite as
favorable as companies in the highest rating category.
IBCA Limited
A1. Short-term obligations rated A1 are supported by a very strong capacity for
timely repayment. A plus sign is added to those issues determined to possess
the highest capacity for timely payment.
Fitch Investors Service, Inc.
F-1. The rating F-1 is the highest rating assigned by Fitch. Among the factors
considered by Fitch in assigning this rating are: (1) the issuer's liquidity;
(2) its standing in the industry; (3) the size of its debt; (4) its ability to
service its debt; (5) its profitability; (6) its return on equity; (7) its
alternative sources of financing; and (8) its ability to access the capital
markets. Analysis of the relative strength or weakness of these factors and
others determines whether an issuer's commercial paper is rated F-1.
FINANCIAL STATEMENTS
The International Equity Portfolio commenced operations on November 1, 1996.
Prior to that date the Portfolio's operating history was that of AMT Capital
Portfolio. Shareholders of the AMT Capital Portfolio approved a reorganization
of the AMT Capital Portfolio into the International Equity Portfolio on October
30, 1996. The AMT Capital Portfolio's audited Financial Statements, including
the Financial Highlights, for the period ended December 31, 1995 appearing in
the Annual Report to Shareholders and the report thereon of Ernst & Young LLP,
independent auditors, appearing therein are hereby incorporated by reference in
this Statement of Additional Information. The AMT Capital Portfolio's unaudited
Financial Statements, including the Financial Highlights, for the period ended
June 30, 1996 appearing in the Semi-Annual Report to Shareholders are hereby
incorporated by reference in this Statement of Additional Information. Both
reports to Shareholders are delivered with this Statement of Additional
Information to shareholders requesting this Statement.
Part C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements and Schedules:
The financial statements, notes to financial statements and reports
set forth below are filed herewith by the Registrant, and are
specifically incorporated by reference in Part B.
- Report of Independent Auditors dated February 9, 1996
for the AMT Capital Fund, Inc.
- Statements of Net Assets dated December 31, 1995 for
the AMT Capital Fund, Inc.
- Statements of Operations for the year ended December
31, 1995 for the AMT Capital Fund, Inc.
- Statements of Changes in Net Assets for the years
ended December 31, 1995 and December 31, 1994 for the
AMT Capital Fund, Inc.
- Financial Highlights for the years ended December 31,
1995, December 31, 1994 and December 31, 1993 for the
AMT Capital Fund, Inc.
- (Unaudited) Statement of Net Assets dated June 30,
1996 for the AMT Capital Fund, Inc.
- (Unaudited) Statement of Operations for the six months
ended June 30, 1996 for the AMT Capital Fund, Inc.
- (Unaudited) Statements of Changes in Net Assets for
the six months ended June 30, 1996 for the AMT Capital
Fund, Inc.
- (Unaudited) Financial Highlights for the six months
ended June 30, 1996 for the AMT Capital Fund, Inc.
(b) Exhibits:
Exhibit Number Description
- -------------- -----------
1(a) (1) Articles of Incorporation, dated July 31, 1996 (previously
filed as Exhibit (1) to Registrant's Registration Statement on
Form N-1A, File Nos. 333-09341, 811-07739) and incorporated
herein by reference.
2 (2) By-laws (previously filed as Exhibit (2) to Registrant's
Registration Statement on Form N-1A, File Nos. 333-09341,
811-07739) and incorporated herein by reference.
3 None
4(a) None
5(a) Advisory Agreement, dated October 14, 1996 between the
Registrant (International Equity Portfolio) and Harding,
Loevner Management, L.P. (Filed herewith)
5(b) Advisory Agreement, dated October 14, 1996 between the
Registrant (Global Equity Portfolio) and Harding, Loevner
Management, L.P. (Filed herewith)
5(c) Advisory Agreement, dated October 14, 1996 between the
Registrant (Multi-Asset Global Portfolio) and Harding, Loevner
Management, L.P. (Filed herewith)
5(d) Advisory Agreement, dated October 14, 1996 between the
Registrant (Emerging Markets Portfolio) and Harding, Loevner
Management, L.P. (Filed herewith)
6(a) Distribution Agreement, dated October 14, 1996 between
Registrant and AMT Capital Services, Inc. (Filed herewith)
7 None
8 Form of Custodian Agreement, dated October 28, 1996 between
Registrant and Investors Bank & Trust Company (Filed herewith)
9(a) Administration Agreement, dated October 14, 1996 between
Registrant and AMT Capital Services, Inc. (Filed herewith)
9(b) Form of Transfer Agency Agreement, dated October 28, 1996
between Registrant and Investors Bank & Trust Company (Filed
herewith)
10 Opinion and Consent of Dechert Price & Rhoads (Filed herewith)
11 Consent of Ernst & Young (Filed herewith)
12 None
13(a) Share Purchase Agreement, dated October 14, 1996 between
Registrant and David R. Loevner for the International Equity
Portfolio (Filed herewith)
13(b) Share Purchase Agreement, dated October 14, 1996 between
Registrant and David R. Loevner for the Emerging Markets
Portfolio (Filed herewith)
13(c) Share Purchase Agreement, dated October 14, 1996 between
Registrant and David R. Loevner for the Multi-Asset Global
Portfolio (Filed herewith)
13(d) Share Purchase Agreement, dated October 14, 1996 between
Registrant and David R. Loevner for the Global Equity Portfolio
(Filed herewith)
14 None
15 Not Applicable
16 Performance Information Schedule (Filed herewith)
Item 25. Persons Controlled by or Under Common Control with Registrant
Not Applicable.
Item 26. Number of Holders of Securities
Title of Class Number of Record Holders
Global Equity Portfolio None
International Equity Portfolio 157
Emerging Markets Portfolio None
Multi-Asset Global Portfolio None
Item 27. Indemnification
The Registrant shall indemnify directors, officers, employees and
agents of the Registrant against judgments, fines, settlements and
expenses to the fullest extent allowed, and in the manner
provided, by applicable federal and Maryland law, including
Section 17(h) and (i) of the Investment Company Act of 1940. In
this regard, the Registrant undertakes to abide by the provisions
of Investment Company Act Releases No. 11330 and 7221 until
amended or superseded by subsequent interpretation of legislative
or judicial action.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
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 Act 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 director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, 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 Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Harding, Loevner Management, L.P. (the "Investment Adviser") is a
limited partnership organized under the laws of the State of New
Jersey and it is an investment adviser registered under the
Investment Advisers Act of 1940 (the "Advisers Act").
The list required by this Item 28 of officers and directors of the
Investment Adviser, together with information as to any other
business, profession, vocation or employment of a substantial
nature engaged in by such officers and directors during the past
two years, is incorporated by reference to Schedules A and D of
Form ADV filed by the Investment Adviser pursuant to the Advisers
Act (SEC File No. 801-36845).
Item 29. Principal Underwriter
(a) In addition to Registrant, AMT Capital Services, Inc. ("AMT
Capital") currently acts as principal underwriter to FFTW
Funds, Inc., TIFF Investment Program, Inc., Holland Series
Fund, Inc. and AMT Capital Fund, Inc. AMT Capital is
registered with the Securities and Exchange Commission as a
broker/dealer and is a member of the National Association of
Securities Dealers, Inc.
(b) For each director or officer of AMT Capital Services, Inc.:
Name and Principal
Business Address Positions and Offices Position and Offices
with Underwriter with Registrant
Alan M. Trager Director, Chairman None
600 Fifth Avenue Treasurer
26th Floor
New York, NY 10020
Carla E. Dearing Director, President Assistant Treasurer
600 Fifth Avenue
26th Floor
New York, NY 10020
Ruth L. Lansner Secretary None
Gilbert, Segall & Young
430 Park Avenue
11th Floor
New York, NY 10022
William E. Vastardis Senior Vice President Secretary
600 Fifth Avenue
26th Floor
New York, NY 10020
Treasurer
(c) Not Applicable.
Item 30. Location of Accounts and Records
All accounts, book and other documents required to be maintained
by Section 31(a) of an Investment Company Act of 1940 and the
Rules (17 CFR 270.32a-l to 3la-3) promulgated thereunder will be
maintained by the following:
Accounting and Custodial Records - Investors Bank & Trust
Company, P.O. Box 1537, Boston, Massachusetts 02205-1537.
Dividend Disbursing Agent and Transfer Agent - Investors
Bank & Trust Company, P.O. Box 1537, Boston, Massachusetts
02205-1537.
Balance of Accounts and Records: AMT Capital Services, Inc.,
600 Fifth Avenue, 26th Floor, New York, New York 10020, and
Harding, Loevner Management, L.P., 50 Division Street, Suite
401, Somerville, N.J. 08876.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable
(b) Registrant hereby undertakes to file a post-effective
amendment, containing financial statements as of a reasonably
current date which need not be certified, within four to six
months from the date of commencement of investment operations of
the Fund
(c) The Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of one or
more of the Registrant's directors when requested in writing to
do so by the holders of at least 10% of Registrant's outstanding
shares, and in connection with such meeting, to assist in
communications with other shareholders in this regard, as
provided under Section 16(c) of the 1940 Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Somerville, State of New Jersey on the 1st day of
November, 1996.
HARDING, LOEVNER FUNDS, INC.
By: /s/ David R. Loevner
David R. Loevner, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement had been signed below by the following persons in the capacities
indicated on the 1st day of November 1996.
Signature Title
/s/ David R. Loevner
David R. Loevner Director and President (Principal Executive,
Financial and Accounting Officer)
/s/ William E. Vastardis
William E. Vastardis Secretary and Treasurer
/ *
Jane A. Freeman Director
/ *
Carl W. Schafer Director
/ *
James C. Brady III Director
* Attorney-in-Fact /s/William E. Vastardis
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
EXHIBITS
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND THE
INVESTMENT COMPANY ACT OF 1940
________________________________
HARDING, LOEVNER FUNDS, INC.
HARDING, LOEVNER FUNDS, INC.
EXHIBIT INDEX
Exhibit Number Description of Exhibit
5(a) Advisory Agreement, dated October 14, 1996 between
the Registrant (International Equity Portfolio) and Harding,
Loevner Management, L.P.
5(b) Advisory Agreement, dated October 14, 1996 between
the Registrant (Global Equity Portfolio) and Harding, Loevner
Management, L.P.
5(c) Advisory Agreement, dated October 14, 1996 between
the Registrant (Multi-Asset Global Portfolio) and Harding,
Loevner Management, L.P.
5(d) Advisory Agreement, dated October 14, 1996 between
the Registrant (Emerging Markets Portfolio) and Harding,
Loevner Management, L.P.
6(a) Distribution Agreement, dated October 14, 1996
between Registrant and AMT Capital Services, Inc.
8 Form of Custodian Agreement, dated between Registrant and
Investors Bank & Trust Company
9(a) Administration Agreement, dated October 14, 1996
between Registrant and AMT Capital Services, Inc.
9(b) Form of Transfer Agency Agreement between Registrant and
Investors Bank & Trust Company
10 Opinion and Consent of Dechert Price & Rhoads
11 Consent of Ernst & Young
13(a) Share Purchase Agreement, dated October 14, 1996
between Registrant and Harding, Loevner Management, L.P. for
the International Equity Portfolio
13(b) Share Purchase Agreement, dated October 14, 1996
between Registrant and Harding, Loevner Management, L.P. for
the Emerging Markets Portfolio
13(c) Share Purchase Agreement, dated October 14, 1996
between Registrant and Harding, Loevner Management, L.P. for
the Multi-Asset Global Portfolio
13(d) Share Purchase Agreement, dated October 14, 1996
between Registrant and Harding, Loevner Management, L.P. for
the Global Equity Portfolio
16 Performance Information Schedule
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated October 14, 1996, between Harding, Loevner Funds,
Inc., a Maryland corporation (the "Fund"), and Harding, Loevner Management,
L.P., a New Jersey limited partnership (the "Adviser").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. Attorney-in-Fact. The Fund appoints the Adviser as its attorney-in-
fact to invest and reinvest the assets of the International Equity Portfolio
(the "Portfolio"), as fully as the Fund itself could do. The Adviser hereby
accepts this appointment.
2. Duties of the Adviser. (a) The Adviser shall be responsible for
managing the investment portfolio of the Portfolio, including, without
limitation, providing investment research, advice and supervision, determining
which portfolio securities shall be purchased or sold by the Portfolio,
purchasing and selling securities on behalf of the Portfolio and determining how
voting and other rights with respect to portfolio securities of the Portfolio
shall be exercised, subject in each case to the control of the Board of
Directors of the Fund (the "Board") and in accordance with the objective,
policies and principles of the Portfolio set forth in the Registration
Statement, as amended, of the Fund, the requirements of the Investment Company
Act of 1940, as amended, (the "Act") and other applicable law. In performing
such duties, the Adviser shall provide such office space, and such executive and
other personnel as shall be necessary for the investment operations of the
Portfolio. In managing the Portfolio in accordance with the requirements set
forth in this paragraph 2, the Adviser shall be entitled to act upon advice of
counsel to the Fund or counsel to the Adviser.
(b) Subject to Section 36 of the Act, the Adviser shall not be liable to
the Fund for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the Portfolio
and the performance of its duties under this Agreement except for losses arising
out of the Adviser's willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement. It is agreed that the Adviser
shall have no responsibility or liability for the accuracy or completeness of
the Fund's Registration Statement under the Act and the Securities Act of 1933
except for information about the Adviser contained in the Prospectus included as
part of such Registration Statement supplied by the Adviser for inclusion
therein. The Fund agrees to indemnify and hold the Adviser harmless from and
against all claims, losses, costs, damages and expenses, including reasonable
fees and expenses for counsel, incurred by it resulting from any claim, demand,
action or suit in connection with or arising out of any action or omission by
the Adviser in the performance of this Agreement except for those claims,
losses, costs, damages and expenses resulting from the Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Adviser and its officers may act and continue to act as
investment advisers and managers for others (including, without limitation,
other investment companies), and nothing in this Agreement will in any way be
deemed to restrict the right of the Adviser to perform investment management or
other services for any other person or entity, and the performance of such
services for others will not be deemed to violate or give rise to any duty or
obligation to the Fund.
(d) Except as provided in Section 5, nothing in this Agreement will limit
or restrict the Adviser or any of its officers, affiliates or employees from
buying, selling or trading in any securities for its or their own account or
accounts. The Fund acknowledges that the Adviser and its officers, affiliates
or employees, and its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at the same time being
acquired or disposed of for the account of the Portfolio. The Adviser will have
no obligation to acquire for the Portfolio a position in any investment which
the Adviser, its officers, affiliates or employees may acquire for its or their
own accounts or for the account of another client, if in the sole discretion of
the Adviser, it is not feasible or desirable to acquire a position in such
investment for the account of the Portfolio, provided that the Adviser shall
have acted in good faith and in a manner deemed equitable to the Portfolio. The
Adviser represents that it has adopted a code of ethics governing personal
trading that complies in all material respects with the recommendations
contained in the Investment Company Institute "Report of the Advisory Group on
Personal Investing," dated May 9, 1994, and the Adviser agrees to furnish a copy
of such code of ethics to the Directors of the Fund.
(e) If the purchase or sale of securities consistent with the investment
policies of the Portfolio and one or more other clients serviced by the Adviser
is considered at or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair and reasonable
by the Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the Board.
3. Expenses. The Adviser shall pay all of its expenses arising from
the performance of its obligations under this Agreement. Except as provided
below, the Adviser shall not be required to pay any other expenses of the Fund
(including out-of-pocket expenses, but not including the Adviser's overhead or
employee costs), including without limitation, organization expenses of the
Fund; brokerage commissions; maintenance of books and records which are required
to be maintained by the Fund's custodian or other agents of the Fund; telephone,
telex, facsimile, postage and other communications expenses; expenses relating
to investor and public relations; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; indemnification
of Directors and officers of the Fund; travel expenses (or an appropriate
portion thereof) of Directors and officers of the Fund to the extent that such
expenses relate to attendance at meetings of the Board of Directors of the Fund
or any committee thereof or advisors thereto held outside of Somerville, New
Jersey; interest, fees and expenses of independent attorneys, auditors,
custodians, accounting agents, transfer agents, dividend disbursing agents and
registrars; payment for portfolio pricing or valuation service to pricing
agents, accountants, bankers and other specialists, if any; taxes and government
fees; cost of stock certificates and any other expenses (including clerical
expenses) of issue, sale, repurchase or redemption of shares; expenses of
registering and qualifying shares of the Fund under Federal and state laws and
regulations; expenses of printing and distributing reports, notices, dividends
and proxy materials to existing stockholders; expenses of printing and filing
reports and other documents filed with governmental agencies, expenses of
printing and distributing prospectuses; expenses of annual and special
stockholders' meetings; costs of stationery, fees and expenses (specifically
including travel expenses relating to Fund business) of Directors of the Fund
who are not employees of the Adviser or its affiliates; membership dues in the
Investment Company Institute; insurance premiums and extraordinary expenses such
as litigation expenses.
4. Compensation. (a) As compensation for the services performed and
the facilities and personnel provided by the Adviser pursuant to this Agreement,
the Fund will pay to the Adviser promptly at the end of each calendar month, a
fee, calculated on each day during such month, at an annual rate of 0.75% of the
Portfolio's average daily net assets. The Adviser shall be entitled to receive
during any month such interim payments of its fee hereunder as the Adviser shall
request, provided that no such payment shall exceed 50% of the amount of such
fee then accrued on the books of the Portfolio and unpaid.
(b) If the Adviser shall serve hereunder for less than the whole of any
month, the fee payable hereunder shall be prorated.
(c) For purposes of this Section 4, the "average daily net assets" of the
Portfolio shall mean the average of the values placed on the Portfolio's net
assets on each day pursuant to the applicable provisions of the Fund's
Registration Statement, as amended.
5. Purchase and Sale of Securities. The Adviser shall purchase
securities from or through and sell securities to or through such persons,
brokers or dealers as the Adviser shall deem appropriate in order to carry out
the policy with respect to the allocation of portfolio transactions as set forth
in the Registration Statement of the Fund, as amended, or as the Board may
direct from time to time. The Adviser will use its reasonable efforts to
execute all purchases and sales with dealers and banks on a best net price
basis. The Adviser will consider the full range and quality of services offered
by the executing broker or dealer when making these determinations. Neither the
Adviser nor any of its officers, affiliates or employees will act as principal
or receive any compensation from the Portfolio in connection with the purchase
or sale of investments for the Portfolio other than the fee referred to in
Paragraph 4 hereof.
6. Term of Agreement. This Agreement shall continue in full force and
effect until two years from the date hereof, and will continue in effect from
year to year thereafter if such continuance is approved in the manner required
by the Act, provided that this Agreement is not otherwise terminated. The
Adviser may terminate this Agreement at any time, without the payment of any
penalty, upon 60 days' written notice to the Fund. The Fund may terminate this
Agreement with respect to the Portfolio at any time, without the payment of any
penalty, on 60 days' written notice to the Adviser by vote of either the
majority of the non-interested members of the Board or a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the Act) of the
Portfolio. This Agreement will automatically terminate in the event of its
assignment (the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the Act).
7. Changes in Membership. The Adviser is a limited partnership and,
pursuant to the New Jersey Uniform Securities Law and the Investment Advisers
Act of 1940, shall notify the Fund of any change in the membership of such
partnership within a reasonable time after the change.
8. Notices. Any notice or other communication authorized or required
hereunder shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed to the Fund at 50 Division
Street, Suite 401, Somerville, New Jersey 08876, Attention: President; and to
AMT Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New York
10020, Attention: Carla E. Dearing. Either party may designate a different
address by notice to the other party. Any such notice or other communication
shall be deemed given when actually received.
9. Amendment. This Agreement may be amended by the parties hereto
with respect to the Portfolio only if such amendment is specifically approved
(i) by the Board of Directors of the Fund or by the vote of a majority of
outstanding shares of the Portfolio ("Shares"), and (ii) by the Director(s)
who are not interested persons (the term "non interested" for this purpose
having the meaning defined in section 2 (a) (19) of the Act) of the Fund
("Non-Interested Director(s)"), which vote must be ast in person at a meeting
called for the purpose of voting on such approval.
10. Right of Adviser In Corporate Name. The Adviser and the Fund each
agree that the phrase "HLM," which comprises a component of the Portfolio's
corporate name, is a property right of the Adviser. The Fund agrees and
consents that (i) it will only use the phrase "HLM" as a component of its
corporate name and for no other purpose; (ii) it will not purport to grant to
any third party the right to use the phrase "HLM" for any purpose; (iii) the
Adviser or any corporate affiliate of the Adviser may use or grant to others the
right to use the phrase "HLM" or any combination or abbreviation thereof, as all
or a portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company, and at the
request of the Adviser, the Fund will take such action as may be required to
provide its consent to such use or grant; and (iv) upon the termination of any
investment advisory agreement into which the Adviser and the Fund may enter, the
Fund shall, upon request by the Adviser, promptly take such action, at its own
expense, as may be necessary to change the Portfolio's corporate name to one not
containing the phrase "HLM" and following such a change, shall not use the
phrase "HLM" or any combination thereof, as part of the Portfolio's corporate
name or for any other commercial purpose, and shall use its reasonable efforts
to cause its officers, directors and stockholders to take any and all actions
which the Adviser may request to effect the foregoing and recovery to the
Adviser any and all rights to such phrase.
11. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require or to
impose any duty upon either of the parties to do anything in violation of any
applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed by their duly authorized officers as of the date first written
above.
ATTEST HARDING, LOEVNER FUNDS, INC.
By:_______________________________ By:_____________________________
William E. Vastardis, Secretary David R. Loevner, President
ATTEST HARDING, LOEVNER MANAGEMENT, L.P.
BY: HLM HOLDINGS, INC., GENERAL PARTNER
By:_______________________ By:___________________________
David R. Loevner, President
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated October 14, 1996, between Harding, Loevner Funds,
Inc., a Maryland corporation (the "Fund"), and Harding, Loevner Management,
L.P., a New Jersey limited partnership (the "Adviser").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. Attorney-in-Fact. The Fund appoints the Adviser as its attorney-in-
fact to invest and reinvest the assets of the Global Equity Portfolio (the
"Portfolio"), as fully as the Fund itself could do. The Adviser hereby accepts
this appointment.
2. Duties of the Adviser. (a) The Adviser shall be responsible for
managing the investment portfolio of the Portfolio, including, without
limitation, providing investment research, advice and supervision, determining
which portfolio securities shall be purchased or sold by the Portfolio,
purchasing and selling securities on behalf of the Portfolio and determining how
voting and other rights with respect to portfolio securities of the Portfolio
shall be exercised, subject in each case to the control of the Board of
Directors of the Fund (the "Board") and in accordance with the objective,
policies and principles of the Portfolio set forth in the Registration
Statement, as amended, of the Fund, the requirements of the Investment Company
Act of 1940, as amended, (the "Act") and other applicable law. In performing
such duties, the Adviser shall provide such office space, and such executive and
other personnel as shall be necessary for the investment operations of the
Portfolio. In managing the Portfolio in accordance with the requirements set
forth in this paragraph 2, the Adviser shall be entitled to act upon advice of
counsel to the Fund or counsel to the Adviser.
(b) Subject to Section 36 of the Act, the Adviser shall not be liable to
the Fund for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the Portfolio
and the performance of its duties under this Agreement except for losses arising
out of the Adviser's willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement. It is agreed that the Adviser
shall have no responsibility or liability for the accuracy or completeness of
the Fund's Registration Statement under the Act and the Securities Act of 1933
except for information about the Adviser contained in the Prospectus included as
part of such Registration Statement supplied by the Adviser for inclusion
therein. The Fund agrees to indemnify and hold the Adviser harmless from and
against all claims, losses, costs, damages and expenses, including reasonable
fees and expenses for counsel, incurred by it resulting from any claim, demand,
action or suit in connection with or arising out of any action or omission by
the Adviser in the performance of this Agreement except for those claims,
losses, costs, damages and expenses resulting from the Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Adviser and its officers may act and continue to act as
investment advisers and managers for others (including, without limitation,
other investment companies), and nothing in this Agreement will in any way be
deemed to restrict the right of the Adviser to perform investment management or
other services for any other person or entity, and the performance of such
services for others will not be deemed to violate or give rise to any duty or
obligation to the Fund.
(d) Except as provided in Section 5, nothing in this Agreement will limit
or restrict the Adviser or any of its officers, affiliates or employees from
buying, selling or trading in any securities for its or their own account or
accounts. The Fund acknowledges that the Adviser and its officers, affiliates
or employees, and its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at the same time being
acquired or disposed of for the account of the Portfolio. The Adviser will have
no obligation to acquire for the Portfolio a position in any investment which
the Adviser, its officers, affiliates or employees may acquire for its or their
own accounts or for the account of another client, if in the sole discretion of
the Adviser, it is not feasible or desirable to acquire a position in such
investment for the account of the Portfolio, provided that the Adviser shall
have acted in good faith and in a manner deemed equitable to the Portfolio. The
Adviser represents that it has adopted a code of ethics governing personal
trading that complies in all material respects with the recommendations
contained in the Investment Company Institute "Report of the Advisory Group on
Personal Investing," dated May 9, 1994, and the Adviser agrees to furnish a copy
of such code of ethics to the Directors of the Fund.
(e) If the purchase or sale of securities consistent with the investment
policies of the Portfolio and one or more other clients serviced by the Adviser
is considered at or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair and reasonable
by the Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the Board.
3. Expenses. The Adviser shall pay all of its expenses arising from
the performance of its obligations under this Agreement. Except as provided
below, the Adviser shall not be required to pay any other expenses of the Fund
(including out-of-pocket expenses, but not including the Adviser's overhead or
employee costs), including without limitation, organization expenses of the
Fund; brokerage commissions; maintenance of books and records which are required
to be maintained by the Fund's custodian or other agents of the Fund; telephone,
telex, facsimile, postage and other communications expenses; expenses relating
to investor and public relations; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; indemnification
of Directors and officers of the Fund; travel expenses (or an appropriate
portion thereof) of Directors and officers of the Fund to the extent that such
expenses relate to attendance at meetings of the Board of Directors of the Fund
or any committee thereof or advisors thereto held outside of Somerville, New
Jersey; interest, fees and expenses of independent attorneys, auditors,
custodians, accounting agents, transfer agents, dividend disbursing agents and
registrars; payment for portfolio pricing or valuation service to pricing
agents, accountants, bankers and other specialists, if any; taxes and government
fees; cost of stock certificates and any other expenses (including clerical
expenses) of issue, sale, repurchase or redemption of shares; expenses of
registering and qualifying shares of the Fund under Federal and state laws and
regulations; expenses of printing and distributing reports, notices, dividends
and proxy materials to existing stockholders; expenses of printing and filing
reports and other documents filed with governmental agencies, expenses of
printing and distributing prospectuses; expenses of annual and special
stockholders' meetings; costs of stationery, fees and expenses (specifically
including travel expenses relating to Fund business) of Directors of the Fund
who are not employees of the Adviser or its affiliates; membership dues in the
Investment Company Institute; insurance premiums and extraordinary expenses such
as litigation expenses.
4. Compensation. (a) As compensation for the services performed and
the facilities and personnel provided by the Adviser pursuant to this Agreement,
the Fund will pay to the Adviser promptly at the end of each calendar month, a
fee, calculated on each day during such month, at an annual rate of 1.00% of the
Portfolio's average daily net assets. The Adviser shall be entitled to receive
during any month such interim payments of its fee hereunder as the Adviser shall
request, provided that no such payment shall exceed 50% of the amount of such
fee then accrued on the books of the Portfolio and unpaid.
(b) If the Adviser shall serve hereunder for less than the whole of any
month, the fee payable hereunder shall be prorated.
(c) For purposes of this Section 4, the "average daily net assets" of the
Portfolio shall mean the average of the values placed on the Portfolio's net
assets on each day pursuant to the applicable provisions of the Fund's
Registration Statement, as amended.
5. Purchase and Sale of Securities. The Adviser shall purchase
securities from or through and sell securities to or through such persons,
brokers or dealers as the Adviser shall deem appropriate in order to carry out
the policy with respect to the allocation of portfolio transactions as set forth
in the Registration Statement of the Fund, as amended, or as the Board may
direct from time to time. The Adviser will use its reasonable efforts to
execute all purchases and sales with dealers and banks on a best net price
basis. The Adviser will consider the full range and quality of services offered
by the executing broker or dealer when making these determinations. Neither the
Adviser nor any of its officers, affiliates or employees will act as principal
or receive any compensation from the Portfolio in connection with the purchase
or sale of investments for the Portfolio other than the fee referred to in
Paragraph 4 hereof.
6. Term of Agreement. This Agreement shall continue in full force and
effect until two years from the date hereof, and will continue in effect from
year to year thereafter if such continuance is approved in the manner required
by the Act, provided that this Agreement is not otherwise terminated. The
Adviser may terminate this Agreement at any time, without the payment of any
penalty, upon 60 days' written notice to the Fund. The Fund may terminate this
Agreement with respect to the Portfolio at any time, without the payment of any
penalty, on 60 days' written notice to the Adviser by vote of either the
majority of the non-interested members of the Board or a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the Act) of the
Portfolio. This Agreement will automatically terminate in the event of its
assignment (the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the Act).
7. Changes in Membership. The Adviser is a limited partnership and,
pursuant to the New Jersey Uniform Securities Law and the Investment Advisers
Act of 1940, shall notify the Fund of any change in the membership of such
partnership within a reasonable time after the change.
8. Notices. Any notice or other communication authorized or required
hereunder shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed to the Fund at 50 Division
Street, Suite 401, Somerville, New Jersey 08876, Attention: President; and to
AMT Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New York
10020, Attention: Carla E. Dearing. Either party may designate a different
address by notice to the other party. Any such notice or other communication
shall be deemed given when actually received.
9. Amendment. This Agreement may be amended by the parties hereto
with respect to the Portfolio only if such amendment is specifically approved
(i) by the Board of Directors of the Fund or by the vote of a majority of
outstanding shares of the Portfolio ("Shares"), and (ii) by the Director(s)
who are not interested persons (the term "non interested" for this purpose
having the meaning defined in section 2 (a) (19) of the Act) of the Fund
("Non-Interested Director(s)"), which vote must be ast in person at a meeting
called for the purpose of voting on such approval.
10. Right of Adviser In Corporate Name. The Adviser and the Fund each
agree that the phrase "HLM," which comprises a component of the Portfolio's
corporate name, is a property right of the Adviser. The Fund agrees and
consents that (i) it will only use the phrase "HLM" as a component of its
corporate name and for no other purpose; (ii) it will not purport to grant to
any third party the right to use the phrase "HLM" for any purpose; (iii) the
Adviser or any corporate affiliate of the Adviser may use or grant to others the
right to use the phrase "HLM" or any combination or abbreviation thereof, as all
or a portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company, and at the
request of the Adviser, the Fund will take such action as may be required to
provide its consent to such use or grant; and (iv) upon the termination of any
investment advisory agreement into which the Adviser and the Fund may enter, the
Fund shall, upon request by the Adviser, promptly take such action, at its own
expense, as may be necessary to change the Portfolio's corporate name to one not
containing the phrase "HLM" and following such a change, shall not use the
phrase "HLM" or any combination thereof, as part of the Portfolio's corporate
name or for any other commercial purpose, and shall use its reasonable efforts
to cause its officers, directors and stockholders to take any and all actions
which the Adviser may request to effect the foregoing and recovery to the
Adviser any and all rights to such phrase.
11. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require or to
impose any duty upon either of the parties to do anything in violation of any
applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed by their duly authorized officers as of the date first written
above.
ATTEST HARDING, LOEVNER FUNDS, INC.
By:_______________________________ By:_____________________________
William E. Vastardis, Secretary
ATTEST HARDING, LOEVNER MANAGEMENT, L.P.
BY: HLM HOLDINGS, INC., GENERAL PARTNER
By:_______________________ By:___________________________
David R. Loevner, President
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated October 14, 1996, between Harding, Loevner
Funds, Inc., a Maryland corporation (the "Fund"), and Harding, Loevner
Management, L.P., a New Jersey limited partnership (the "Adviser").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. Attorney-in-Fact. The Fund appoints the Adviser as its attorney-in-
fact to invest and reinvest the assets of the Multi-Asset Global Portfolio (the
"Portfolio"), as fully as the Fund itself could do. The Adviser hereby accepts
this appointment.
2. Duties of the Adviser. (a) The Adviser shall be responsible for
managing the investment portfolio of the Portfolio, including, without
limitation, providing investment research, advice and supervision, determining
which portfolio securities shall be purchased or sold by the Portfolio,
purchasing and selling securities on behalf of the Portfolio and determining how
voting and other rights with respect to portfolio securities of the Portfolio
shall be exercised, subject in each case to the control of the Board of
Directors of the Fund (the "Board") and in accordance with the objective,
policies and principles of the Portfolio set forth in the Registration
Statement, as amended, of the Fund, the requirements of the Investment Company
Act of 1940, as amended, (the "Act") and other applicable law. In performing
such duties, the Adviser shall provide such office space, and such executive and
other personnel as shall be necessary for the investment operations of the
Portfolio. In managing the Portfolio in accordance with the requirements set
forth in this paragraph 2, the Adviser shall be entitled to act upon advice of
counsel to the Fund or counsel to the Adviser.
(b) Subject to Section 36 of the Act, the Adviser shall not be liable to
the Fund for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the Portfolio
and the performance of its duties under this Agreement except for losses arising
out of the Adviser's willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement. It is agreed that the Adviser
shall have no responsibility or liability for the accuracy or completeness of
the Fund's Registration Statement under the Act and the Securities Act of 1933
except for information about the Adviser contained in the Prospectus included as
part of such Registration Statement supplied by the Adviser for inclusion
therein. The Fund agrees to indemnify and hold the Adviser harmless from and
against all claims, losses, costs, damages and expenses, including reasonable
fees and expenses for counsel, incurred by it resulting from any claim, demand,
action or suit in connection with or arising out of any action or omission by
the Adviser in the performance of this Agreement except for those claims,
losses, costs, damages and expenses resulting from the Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Adviser and its officers may act and continue to act as
investment advisers and managers for others (including, without limitation,
other investment companies), and nothing in this Agreement will in any way be
deemed to restrict the right of the Adviser to perform investment management or
other services for any other person or entity, and the performance of such
services for others will not be deemed to violate or give rise to any duty or
obligation to the Fund.
(d) Except as provided in Section 5, nothing in this Agreement will limit
or restrict the Adviser or any of its officers, affiliates or employees from
buying, selling or trading in any securities for its or their own account or
accounts. The Fund acknowledges that the Adviser and its officers, affiliates
or employees, and its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at the same time being
acquired or disposed of for the account of the Portfolio. The Adviser will have
no obligation to acquire for the Portfolio a position in any investment which
the Adviser, its officers, affiliates or employees may acquire for its or their
own accounts or for the account of another client, if in the sole discretion of
the Adviser, it is not feasible or desirable to acquire a position in such
investment for the account of the Portfolio, provided that the Adviser shall
have acted in good faith and in a manner deemed equitable to the Portfolio. The
Adviser represents that it has adopted a code of ethics governing personal
trading that complies in all material respects with the recommendations
contained in the Investment Company Institute "Report of the Advisory Group on
Personal Investing," dated May 9, 1994, and the Adviser agrees to furnish a copy
of such code of ethics to the Directors of the Fund.
(e) If the purchase or sale of securities consistent with the investment
policies of the Portfolio and one or more other clients serviced by the Adviser
is considered at or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair and reasonable
by the Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the Board.
3. Expenses. The Adviser shall pay all of its expenses arising from
the performance of its obligations under this Agreement. Except as provided
below, the Adviser shall not be required to pay any other expenses of the Fund
(including out-of-pocket expenses, but not including the Adviser's overhead or
employee costs), including without limitation, organization expenses of the
Fund; brokerage commissions; maintenance of books and records which are required
to be maintained by the Fund's custodian or other agents of the Fund; telephone,
telex, facsimile, postage and other communications expenses; expenses relating
to investor and public relations; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; indemnification
of Directors and officers of the Fund; travel expenses (or an appropriate
portion thereof) of Directors and officers of the Fund to the extent that such
expenses relate to attendance at meetings of the Board of Directors of the Fund
or any committee thereof or advisors thereto held outside of Somerville, New
Jersey; interest, fees and expenses of independent attorneys, auditors,
custodians, accounting agents, transfer agents, dividend disbursing agents and
registrars; payment for portfolio pricing or valuation service to pricing
agents, accountants, bankers and other specialists, if any; taxes and government
fees; cost of stock certificates and any other expenses (including clerical
expenses) of issue, sale, repurchase or redemption of shares; expenses of
registering and qualifying shares of the Fund under Federal and state laws and
regulations; expenses of printing and distributing reports, notices, dividends
and proxy materials to existing stockholders; expenses of printing and filing
reports and other documents filed with governmental agencies, expenses of
printing and distributing prospectuses; expenses of annual and special
stockholders' meetings; costs of stationery, fees and expenses (specifically
including travel expenses relating to Fund business) of Directors of the Fund
who are not employees of the Adviser or its affiliates; membership dues in the
Investment Company Institute; insurance premiums and extraordinary expenses such
as litigation expenses.
4. Compensation. (a) As compensation for the services performed and
the facilities and personnel provided by the Adviser pursuant to this Agreement,
the Fund will pay to the Adviser promptly at the end of each calendar month, a
fee, calculated on each day during such month, at an annual rate of 1.00% of the
Portfolio's average daily net assets. The Adviser shall be entitled to receive
during any month such interim payments of its fee hereunder as the Adviser shall
request, provided that no such payment shall exceed 50% of the amount of such
fee then accrued on the books of the Portfolio and unpaid.
(b) If the Adviser shall serve hereunder for less than the whole of any
month, the fee payable hereunder shall be prorated.
(c) For purposes of this Section 4, the "average daily net assets" of the
Portfolio shall mean the average of the values placed on the Portfolio's net
assets on each day pursuant to the applicable provisions of the Fund's
Registration Statement, as amended.
5. Purchase and Sale of Securities. The Adviser shall purchase
securities from or through and sell securities to or through such persons,
brokers or dealers as the Adviser shall deem appropriate in order to carry out
the policy with respect to the allocation of portfolio transactions as set forth
in the Registration Statement of the Fund, as amended, or as the Board may
direct from time to time. The Adviser will use its reasonable efforts to
execute all purchases and sales with dealers and banks on a best net price
basis. The Adviser will consider the full range and quality of services offered
by the executing broker or dealer when making these determinations. Neither the
Adviser nor any of its officers, affiliates or employees will act as principal
or receive any compensation from the Portfolio in connection with the purchase
or sale of investments for the Portfolio other than the fee referred to in
Paragraph 4 hereof.
6. Term of Agreement. This Agreement shall continue in full force and
effect until two years from the date hereof, and will continue in effect from
year to year thereafter if such continuance is approved in the manner required
by the Act, provided that this Agreement is not otherwise terminated. The
Adviser may terminate this Agreement at any time, without the payment of any
penalty, upon 60 days' written notice to the Fund. The Fund may terminate this
Agreement with respect to the Portfolio at any time, without the payment of any
penalty, on 60 days' written notice to the Adviser by vote of either the
majority of the non-interested members of the Board or a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the Act) of the
Portfolio. This Agreement will automatically terminate in the event of its
assignment (the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the Act).
7. Changes in Membership. The Adviser is a limited partnership and,
pursuant to the New Jersey Uniform Securities Law and the Investment Advisers
Act of 1940, shall notify the Fund of any change in the membership of such
partnership within a reasonable time after the change.
8. Notices. Any notice or other communication authorized or required
hereunder shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed to the Fund at 50 Division
Street, Suite 401, Somerville, New Jersey 08876, Attention: President; and to
AMT Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New York
10020, Attention: Carla E. Dearing. Either party may designate a different
address by notice to the other party. Any such notice or other communication
shall be deemed given when actually received.
9. Amendment. This Agreement may be amended by the parties hereto
with respect to the Portfolio only if such amendment is specifically approved
(i) by the Board of Directors of the Fund or by the vote of a majority of
outstanding shares of the Portfolio ("Shares"), and (ii) by the Director(s)
who are not interested persons (the term "non interested" for this purpose
having the meaning defined in section 2 (a) (19) of the Act) of the Fund
("Non-Interested Director(s)"), which vote must be ast in person at a meeting
called for the purpose of voting on such approval.
10. Right of Adviser In Corporate Name. The Adviser and the Fund each
agree that the phrase "HLM," which comprises a component of the Portfolio's
corporate name, is a property right of the Adviser. The Fund agrees and
consents that (i) it will only use the phrase "HLM" as a component of its
corporate name and for no other purpose; (ii) it will not purport to grant to
any third party the right to use the phrase "HLM" for any purpose; (iii) the
Adviser or any corporate affiliate of the Adviser may use or grant to others the
right to use the phrase "HLM" or any combination or abbreviation thereof, as all
or a portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company, and at the
request of the Adviser, the Fund will take such action as may be required to
provide its consent to such use or grant; and (iv) upon the termination of any
investment advisory agreement into which the Adviser and the Fund may enter, the
Fund shall, upon request by the Adviser, promptly take such action, at its own
expense, as may be necessary to change the Portfolio's corporate name to one not
containing the phrase "HLM" and following such a change, shall not use the
phrase "HLM" or any combination thereof, as part of the Portfolio's corporate
name or for any other commercial purpose, and shall use its reasonable efforts
to cause its officers, directors and stockholders to take any and all actions
which the Adviser may request to effect the foregoing and recovery to the
Adviser any and all rights to such phrase.
11. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require or to
impose any duty upon either of the parties to do anything in violation of any
applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed by their duly authorized officers as of the date first written
above.
ATTEST HARDING, LOEVNER FUNDS, INC.
By:______________________________ By:_____________________________
William E. Vastardis, Secretary David R. Loevner, President
ATTEST HARDING, LOEVNER MANAGEMENT, L.P.
BY: HLM HOLDINGS, INC., GENERAL PARTNER
By:_______________________ By:___________________________
David R. Loevner, President
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated October 14, 1996, between Harding, Loevner Funds,
Inc., a Maryland corporation (the "Fund"), and Harding, Loevner Management,
L.P., a New Jersey limited partnership (the "Adviser").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. Attorney-in-Fact. The Fund appoints the Adviser as its attorney-in-
fact to invest and reinvest the assets of the Emerging Markets Portfolio (the
"Portfolio"), as fully as the Fund itself could do. The Adviser hereby accepts
this appointment.
2. Duties of the Adviser. (a) The Adviser shall be responsible for
managing the investment portfolio of the Portfolio, including, without
limitation, providing investment research, advice and supervision, determining
which portfolio securities shall be purchased or sold by the Portfolio,
purchasing and selling securities on behalf of the Portfolio and determining how
voting and other rights with respect to portfolio securities of the Portfolio
shall be exercised, subject in each case to the control of the Board of
Directors of the Fund (the "Board") and in accordance with the objective,
policies and principles of the Portfolio set forth in the Registration
Statement, as amended, of the Fund, the requirements of the Investment Company
Act of 1940, as amended, (the "Act") and other applicable law. In performing
such duties, the Adviser shall provide such office space, and such executive and
other personnel as shall be necessary for the investment operations of the
Portfolio. In managing the Portfolio in accordance with the requirements set
forth in this paragraph 2, the Adviser shall be entitled to act upon advice of
counsel to the Fund or counsel to the Adviser.
(b) Subject to Section 36 of the Act, the Adviser shall not be liable to
the Fund for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the Portfolio
and the performance of its duties under this Agreement except for losses arising
out of the Adviser's willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement. It is agreed that the Adviser
shall have no responsibility or liability for the accuracy or completeness of
the Fund's Registration Statement under the Act and the Securities Act of 1933
except for information about the Adviser contained in the Prospectus included as
part of such Registration Statement supplied by the Adviser for inclusion
therein. The Fund agrees to indemnify and hold the Adviser harmless from and
against all claims, losses, costs, damages and expenses, including reasonable
fees and expenses for counsel, incurred by it resulting from any claim, demand,
action or suit in connection with or arising out of any action or omission by
the Adviser in the performance of this Agreement except for those claims,
losses, costs, damages and expenses resulting from the Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Adviser and its officers may act and continue to act as
investment advisers and managers for others (including, without limitation,
other investment companies), and nothing in this Agreement will in any way be
deemed to restrict the right of the Adviser to perform investment management or
other services for any other person or entity, and the performance of such
services for others will not be deemed to violate or give rise to any duty or
obligation to the Fund.
(d) Except as provided in Section 5, nothing in this Agreement will limit
or restrict the Adviser or any of its officers, affiliates or employees from
buying, selling or trading in any securities for its or their own account or
accounts. The Fund acknowledges that the Adviser and its officers, affiliates
or employees, and its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at the same time being
acquired or disposed of for the account of the Portfolio. The Adviser will have
no obligation to acquire for the Portfolio a position in any investment which
the Adviser, its officers, affiliates or employees may acquire for its or their
own accounts or for the account of another client, if in the sole discretion of
the Adviser, it is not feasible or desirable to acquire a position in such
investment for the account of the Portfolio, provided that the Adviser shall
have acted in good faith and in a manner deemed equitable to the Portfolio. The
Adviser represents that it has adopted a code of ethics governing personal
trading that complies in all material respects with the recommendations
contained in the Investment Company Institute "Report of the Advisory Group on
Personal Investing," dated May 9, 1994, and the Adviser agrees to furnish a copy
of such code of ethics to the Directors of the Fund.
(e) If the purchase or sale of securities consistent with the investment
policies of the Portfolio and one or more other clients serviced by the Adviser
is considered at or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair and reasonable
by the Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the Board.
3. Expenses. The Adviser shall pay all of its expenses arising from
the performance of its obligations under this Agreement. Except as provided
below, the Adviser shall not be required to pay any other expenses of the Fund
(including out-of-pocket expenses, but not including the Adviser's overhead or
employee costs), including without limitation, organization expenses of the
Fund; brokerage commissions; maintenance of books and records which are required
to be maintained by the Fund's custodian or other agents of the Fund; telephone,
telex, facsimile, postage and other communications expenses; expenses relating
to investor and public relations; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; indemnification
of Directors and officers of the Fund; travel expenses (or an appropriate
portion thereof) of Directors and officers of the Fund to the extent that such
expenses relate to attendance at meetings of the Board of Directors of the Fund
or any committee thereof or advisors thereto held outside of Somerville, New
Jersey; interest, fees and expenses of independent attorneys, auditors,
custodians, accounting agents, transfer agents, dividend disbursing agents and
registrars; payment for portfolio pricing or valuation service to pricing
agents, accountants, bankers and other specialists, if any; taxes and government
fees; cost of stock certificates and any other expenses (including clerical
expenses) of issue, sale, repurchase or redemption of shares; expenses of
registering and qualifying shares of the Fund under Federal and state laws and
regulations; expenses of printing and distributing reports, notices, dividends
and proxy materials to existing stockholders; expenses of printing and filing
reports and other documents filed with governmental agencies, expenses of
printing and distributing prospectuses; expenses of annual and special
stockholders' meetings; costs of stationery, fees and expenses (specifically
including travel expenses relating to Fund business) of Directors of the Fund
who are not employees of the Adviser or its affiliates; membership dues in the
Investment Company Institute; insurance premiums and extraordinary expenses such
as litigation expenses.
4. Compensation. (a) As compensation for the services performed and
the facilities and personnel provided by the Adviser pursuant to this Agreement,
the Fund will pay to the Adviser promptly at the end of each calendar month, a
fee, calculated on each day during such month, at an annual rate of 1.25% of the
Portfolio's average daily net assets. The Adviser shall be entitled to receive
during any month such interim payments of its fee hereunder as the Adviser shall
request, provided that no such payment shall exceed 50% of the amount of such
fee then accrued on the books of the Portfolio and unpaid.
(b) If the Adviser shall serve hereunder for less than the whole of any
month, the fee payable hereunder shall be prorated.
(c) For purposes of this Section 4, the "average daily net assets" of the
Portfolio shall mean the average of the values placed on the Portfolio's net
assets on each day pursuant to the applicable provisions of the Fund's
Registration Statement, as amended.
5. Purchase and Sale of Securities. The Adviser shall purchase
securities from or through and sell securities to or through such persons,
brokers or dealers as the Adviser shall deem appropriate in order to carry out
the policy with respect to the allocation of portfolio transactions as set forth
in the Registration Statement of the Fund, as amended, or as the Board may
direct from time to time. The Adviser will use its reasonable efforts to
execute all purchases and sales with dealers and banks on a best net price
basis. The Adviser will consider the full range and quality of services offered
by the executing broker or dealer when making these determinations. Neither the
Adviser nor any of its officers, affiliates or employees will act as principal
or receive any compensation from the Portfolio in connection with the purchase
or sale of investments for the Portfolio other than the fee referred to in
Paragraph 4 hereof.
6. Term of Agreement. This Agreement shall continue in full force and
effect until two years from the date hereof, and will continue in effect from
year to year thereafter if such continuance is approved in the manner required
by the Act, provided that this Agreement is not otherwise terminated. The
Adviser may terminate this Agreement at any time, without the payment of any
penalty, upon 60 days' written notice to the Fund. The Fund may terminate this
Agreement with respect to the Portfolio at any time, without the payment of any
penalty, on 60 days' written notice to the Adviser by vote of either the
majority of the non-interested members of the Board or a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the Act) of the
Portfolio. This Agreement will automatically terminate in the event of its
assignment (the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the Act).
7. Changes in Membership. The Adviser is a limited partnership and,
pursuant to the New Jersey Uniform Securities Law and the Investment Advisers
Act of 1940, shall notify the Fund of any change in the membership of such
partnership within a reasonable time after the change.
8. Notices. Any notice or other communication authorized or required
hereunder shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed to the Fund at 50 Division
Street, Suite 401, Somerville, New Jersey 08876, Attention: President; and to
AMT Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New York
10020, Attention: Carla E. Dearing. Either party may designate a different
address by notice to the other party. Any such notice or other communication
shall be deemed given when actually received.
9. Amendment. This Agreement may be amended by the parties hereto
with respect to the Portfolio only if such amendment is specifically approved
(i) by the Board of Directors of the Fund or by the vote of a majority of
outstanding shares of the Portfolio ("Shares"), and (ii) by the Director(s)
who are not interested persons (the term "non interested" for this purpose
having the meaning defined in section 2 (a) (19) of the Act) of the Fund
("Non-Interested Director(s)"), which vote must be ast in person at a meeting
called for the purpose of voting on such approval.
10. Right of Adviser In Corporate Name. The Adviser and the Fund each
agree that the phrase "HLM," which comprises a component of the Portfolio's
corporate name, is a property right of the Adviser. The Fund agrees and
consents that (i) it will only use the phrase "HLM" as a component of its
corporate name and for no other purpose; (ii) it will not purport to grant to
any third party the right to use the phrase "HLM" for any purpose; (iii) the
Adviser or any corporate affiliate of the Adviser may use or grant to others the
right to use the phrase "HLM" or any combination or abbreviation thereof, as all
or a portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company, and at the
request of the Adviser, the Fund will take such action as may be required to
provide its consent to such use or grant; and (iv) upon the termination of any
investment advisory agreement into which the Adviser and the Fund may enter, the
Fund shall, upon request by the Adviser, promptly take such action, at its own
expense, as may be necessary to change the Portfolio's corporate name to one not
containing the phrase "HLM" and following such a change, shall not use the
phrase "HLM" or any combination thereof, as part of the Portfolio's corporate
name or for any other commercial purpose, and shall use its reasonable efforts
to cause its officers, directors and stockholders to take any and all actions
which the Adviser may request to effect the foregoing and recovery to the
Adviser any and all rights to such phrase.
11. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require or to
impose any duty upon either of the parties to do anything in violation of any
applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed by their duly authorized officers as of the date first written
above.
ATTEST HARDING, LOEVNER FUNDS, INC.
By:_______________________________ By:_____________________________
William E. Vastardis, Secretary David R. Loevner, President
ATTEST HARDING, LOEVNER MANAGEMENT, L.P.
BY: HLM HOLDINGS, INC., GENERAL PARTNER
By:_______________________ By:___________________________
David R. Loevner, President
DISTRIBUTION AGREEMENT
AGREEMENT dated as of October 14, 1996 by and between Harding, Loevner
Funds, Inc., an open-end management investment company organized as a
corporation under the laws of the State of Maryland (the "Fund"), and AMT
Capital Services, Inc., a Delaware corporation ("AMT Capital").
WHEREAS, the Fund desires that AMT Capital shall be, for the period of
this Agreement, the distributor of shares of the Fund (the "Shares");
WHEREAS, the Fund offers shares of three separate series (individually,
a "Series," and collectively, the "Series"), which have been registered under
the Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the Fund desires to appoint AMT Capital as the distributor of
the Shares, and AMT Capital wishes to become the distributor of the Shares.
NOW, THEREFORE, in consideration of the above premises and of other good
and valuable consideration, the parties hereto, intending to be legally bound,
agree as follows:
1. Appointment of Distributor
The Fund hereby appoints AMT Capital as the distributor of the Fund's
Shares for the period and on the terms set forth in this Agreement. This
appointment applies to each existing Series of Shares, as well as any future
series provided (i) the Fund does not object to AMT Capital in writing on any
basis or (ii) AMT Capital does not object to the Fund in writing on the basis
of the capabilities of AMT Capital. AMT Capital accepts such appointment and
agrees to render the services and provide, at its own expense, the office
space, furnishings and equipment, and the personnel required by it to perform
the services on the terms herein provided.
2. Representation and Warranties of AMT Capital
AMT Capital represents and warrants to the Fund that:
A. AMT Capital is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full power and
authority, corporate and otherwise, to consummate the transactions contemplated
by this Agreement. AMT Capital is duly qualified to carry out its business, and
is in good standing, in the State of New York.
B. The Board of Directors and stockholders of AMT Capital have taken all
action required by law and AMT Capital's Certificate of Incorporation and By-
Laws to authorize the execution and delivery of this Agreement by AMT Capital
and the consummation on behalf of AMT Capital of the transactions contemplated
by this Agreement. This Agreement constitutes a legal, valid and binding
obligation of AMT Capital enforceable in accordance with its terms. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will result in a breach of, or constitute a
default under, or with lapse of time or giving of notice or both will result in
a breach of or constitute a default under, or otherwise give any party thereto
the right to terminate (a) any mortgage, indenture, loan or credit agreement or
any other agreement or instrument evidencing indebtedness for money borrowed to
which AMT Capital is a party or by which AMT Capital or any of its properties is
bound or affected, or pursuant to which AMT Capital has guaranteed the
indebtedness of any person, or (b) any lease, license, contract or other
agreement to which AMT Capital is a party or by which AMT Capital or any of its
properties is bound or affected. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
result in, or require, the creation or imposition of any mortgage, deed or
trust, pledge, lien, security interest, or other charge or encumbrance of any
nature upon or with respect to any of the properties now or hereafter owned by
AMT Capital.
C. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate any provision
of the Certificate of Incorporation or By-Laws of AMT Capital.
D. Except such as have been obtained and as are in full force and
effect and subject to no dispute, claim or challenge, no permit, license,
franchise, approval, authorization, qualification or consent of, registration or
filing with, or notice to, any governmental authority is required in connection
with the execution and delivery by AMT Capital of this Agreement or in
connection with the consummation by AMT Capital of any transactions contemplated
by this Agreement, and no such permit, license, franchise, approval,
authorization, qualification or consent of, registration or filing with, or
notice to any federal, state or local governmental authority is required in
connection with AMT Capital's business or operations as currently conducted or
as currently contemplated to be conducted. AMT Capital has conducted its
business and operations in compliance with all applicable laws and regulations.
E. AMT Capital is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and is a member of the
National Association of Securities Dealers, Inc. (the "NASD").
3. Duties of the Fund
The Fund shall use its reasonable efforts to cooperate in the
maintenance by the investment adviser or other service provider of the
registration of the Fund's securities under the 1940 Act and the 1933 Act, and
the Fund and/or such service providers shall bear all expenses in connection
therewith. It is understood that this Agreement shall not require AMT Capital
to bear any expenses related to the Fund's registration or maintenance of the
Fund's registration.
The Fund shall cooperate in the qualification by the investment adviser
or other service provider of the Fund of each Series of Shares under the laws
of such states and other jurisdictions of the United States as the Fund shall
determine and shall execute and deliver such documents as may reasonably be
required for such purpose, but the Fund shall not be required to qualify as a
foreign business entity in any jurisdiction, nor effect any modification of
its policies or practices without prior approval of the Fund's Board of
Directors. The Fund's officers, subject to the direction of the Board of
Directors of the Fund and with the advice of AMT Capital, shall determine
whether it is desirable to qualify or continue to offer Shares of any Series
in any jurisdiction. AMT Capital shall have no obligation hereunder to assist
in the qualification of Shares of any Series in any jurisdiction or in the
maintenance of any qualification, other than its obligation to serve as
registered agent to the Fund and execute required filings.
The Fund will deliver to AMT Capital copies of each of the following
documents and will deliver to AMT Capital all future amendments and
supplements, if any:
A. a certified copy of the Articles of Incorporation of the Fund as
amended and currently in effect ("Charter");
B. a copy of the Fund's By-laws as amended and currently in effect
("By-laws") certified by the Secretary of the Fund;
C. the Fund's prospectus and statement of additional information
(including supplements thereto) which relate to the Shares (the "Prospectus"
and "SAI"); and
D. the Fund's current Registration Statement on Form N-1A as filed
under the 1940 and 1933 Acts, as such shall be amended from time to time (the
"Registration Statement").
The Fund and/or other service providers to the Fund shall also furnish
AMT Capital, with respect to a Series or the Fund, as applicable:
E. annual audit reports of the Fund's books and accounts made by
independent public accountants regularly retained by the Fund;
F. such additional copies of the Prospectus and SAI and annual, semi-
annual and other reports and communications to shareholders which relate to
the Shares as AMT Capital may reasonably require for sales purposes;
G. a monthly itemized list of the securities held by each Series;
H. monthly balance sheets of the Fund as soon as practicable after
the end of each month;
I. a survey indicating the states and jurisdictions in which each
Series is qualified for sale or exempt from the requirements of the securities
laws of such state or jurisdiction and the amounts of Shares of such Series
that may be sold in such states and jurisdictions, as such may be amended from
time to time ("Blue Sky Report"); and
J. from time to time such additional information regarding the Fund's
financial condition or the financial condition of a Series of Shares as AMT
Capital may reasonably request.
4. Duties of AMT Capital
AMT Capital shall act as agent for the distribution of, and shall use
appropriate efforts to solicit orders to purchase Shares of each Series. AMT
Capital agrees that all solicitations of orders to purchase and all sales of
Shares of each Series shall be made in accordance with the Charter, By-Laws,
and the Registration Statement, to the extent such documents have been
provided to AMT Capital, and in accordance with the Prospectus and the SAI,
and shall not at any time or in any manner violate any provisions of the laws
of the United States or of any state or other jurisdiction in which
solicitations are then being made, or of any rules and regulations made or
adopted by duly authorized agencies thereunder, including without limitation
those promulgated by the U.S. Securities and Exchange Commission (the "SEC")
and the NASD; provided that AMT Capital shall not be deemed to have violated
any state securities laws if it has acted in good faith and in accordance with
the Blue Sky Report.
AMT Capital will transmit any orders received by it for purchase or
redemption of Shares of any Series to the transfer agent and custodian for
that Series.
AMT Capital acknowledges that the only information provided to it by the
Fund is that contained in the Registration Statement, the Prospectus, the SAI,
and reports and financial information referred to in Section 2 herein.
Neither AMT Capital nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in such
documents and any sales literature or advertisements approved by appropriate
representatives of the Fund.
AMT Capital may undertake or arrange for such advertising and promotion
as it believes reasonable in connection with the solicitation of orders to
purchase Shares; provided, however, that it shall provide the Fund with and
obtain the Fund's approval of copies of any advertising and promotional
materials approved, produced or used by AMT Capital prior to their use. AMT
Capital shall file such materials with the SEC and the NASD to the extent
required by the 1934 Act and the 1940 Act and the rules and regulations
thereunder, and by the rules of the NASD.
In carrying out its obligations hereunder, AMT Capital shall take, on
behalf of the Fund, all actions which appear to the Fund necessary to carry
into effect the distribution of the Shares of each Series.
5. Distribution of Shares of each Series
The price at which Shares of each Series may be sold shall be the net
asset value per Share of such Series computed in the manner set forth in the
Fund's Prospectus and SAI in effect at the time of sale of the Shares of such
Series.
It is mutually understood and agreed that AMT Capital does not undertake
to sell all or any specific portion of the Shares of any Series. The Fund
shall not sell Shares of any Series except through AMT Capital, except that
the Fund may issue Shares of any Series at their net asset value to any
shareholder of the Fund (i) purchasing Shares with dividends or other
distributions received from the Fund pursuant to an offer made to all
shareholders, (ii) in connection with a pro rata distribution directly to the
shareholders of any Series, and (iii) otherwise in accordance with any then-
current Prospectus of the Fund. In addition, the Fund may issue Shares in
connection with the merger or consolidation of any other investment company or
series thereof with the Fund or one of its Series, or in connection with its
acquisition, by purchase or otherwise, of all or substantially all of the
assets of any investment company or series thereof or all or substantially all
of the outstanding shares of any such company or series thereof. Without
limitation of the foregoing, the phrase "any investment company" as used in
this paragraph shall include any private investment company organized as a
limited partnership or other entity.
AMT Capital may, and when requested by the Fund shall, suspend its
efforts to effectuate sales of Shares of any Series at any time when in the
opinion of AMT Capital or of the Fund no sales should be made because of
market or other economic considerations or abnormal circumstances of any kind.
The Fund may withdraw the offering of Shares of any Series at any time with or
without the consent of AMT Capital and shall withdraw the offering of Shares
of any Series when so required by the provisions of any statute or of any
order, rule or regulation of any governmental body having jurisdiction.
Whenever in the judgment of the Fund's officers such action is warranted
by unusual market, economic or political conditions, or by abnormal
circumstances of any kind, the Fund's officers may decline to accept any
orders for, or make any sales of the Shares of any Series until such time as
those officers deem it advisable to accept such orders and to make such sales.
In the event of such suspension of sales and until AMT Capital receives
written notification from the Fund that AMT Capital may resume accepting
orders for and making sales of the Shares of such Series, AMT Capital's duty
to distribute Shares of such Series shall be suspended.
AMT Capital will act only on its own behalf as principal if it chooses
to enter into selling arrangements with selected dealers or others.
6. Effectiveness of Registration
None of the Shares of any Series shall be offered by either AMT Capital
or the Fund under any of the provisions of this Agreement and no orders for
the purchase or sale of the Shares of any Series shall be accepted by the Fund
if and so long as the effectiveness of the Registration Statement then in
effect or any necessary amendments thereto shall be suspended under any of the
provisions of the 1933 Act or if and so long as a current Prospectus as
required by Section 5(b)(2) of the 1933 Act is not on file with the SEC;
provided, however, that nothing contained in this paragraph shall in any way
restrict or have application to or bearing upon the Fund's obligation to
repurchase Shares of any Series from any shareholder in accordance with the
provisions of the Prospectus, SAI, or Charter.
The Fund agrees to advise AMT Capital as soon as reasonably practicable
in writing:
(a) of any request by the SEC for amendments to the Registration
Statement, Prospectus or SAI then in effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement, Prospectus or SAI
then in effect or the initiation by service of process on the Fund of any
proceeding for that purpose; and
(c) of the happening of any event that makes untrue any statement of a
material fact made in the Registration Statement, Prospectus or SAI then in
effect or that requires the making of a change in such Registration Statement,
Prospectus or SAI in order to make the statement therein not misleading in any
material respect.
For the purpose of this Section, informal requests by or action of the staff
of the SEC shall not be deemed requests by or actions of the SEC.
7. Expenses
The expenses connected with the Fund shall be allocable between the Fund
and AMT Capital as follows:
(a) AMT Capital shall furnish, at its expense and without cost to the
Fund, the services of personnel to the extent that such services are required
to carry out its obligations under this Agreement.
(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, with limitation: the fees of the Fund's
investment adviser; the charges and expenses of any registrar, any custodian
or depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any stock transfer, dividend or accounting
agent or agents appointed by the Fund; the fees of any Fund administrator;
brokers' commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; any fee paid pursuant to
any distribution plan, if and when adopted by the Fund pursuant to Rule 12b-1
under the 1940 Act; all taxes, including securities issuance and initial
transfer taxes, and corporate fees payable by the Fund to federal, state or
other governmental agencies; all costs and expenses in connection with the
organization of the Fund and the Series and the registration of the Shares
with the SEC and under state securities laws and in connection with
maintenance of registration of the Fund, Series and the Shares with the SEC
and various states and other jurisdictions (including filing fees and legal
fees and disbursements of counsel); the expenses of printing, including
printing setup charges, and distributing Prospectuses and SAIs of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors
who are not interested persons (as such term is defined in the 1940 Act) of
the Fund ("Non-Interested Directors") or members of any advisory board or
committee established by the Non-Interested Directors; all expenses incident
to the payment of any dividend, distribution, withdrawal or redemption,
whether in Shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's Shares; charges and expenses of legal counsel to the
Fund and to the Non-Interested Directors, and of independent accountants to
the Fund, in connection with any matter relating to the Fund; membership dues
paid by the Fund to industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and directors) of the Fund which inure to its benefit; extraordinary
expenses of the Fund (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise
explicitly provided herein.
8. Indemnity by Fund
The Fund agrees to indemnify and hold AMT Capital, its officers and
directors and each person (if any) who controls AMT Capital within the meaning
of Section 15 of the 1933 Act harmless from and against any losses, claims,
damages or liabilities to which any of such persons may become subject, under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, the Prospectus, or the SAI or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in any material respect, and will reimburse such persons for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such action or claim; provided, however, that
the Fund shall not be liable in any case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Prospectus or the SAI in reliance upon and in
conformity with written information furnished to the Fund by AMT Capital
expressly for use therein. AMT Capital, its officers, directors and control
persons shall be entitled to advances from the Fund for payment of the
reasonable expenses incurred by it or them in connection with the matter as to
which it or they are seeking indemnification in the manner and to the fullest
extent permissible under the Maryland General Corporation law.
AMT Capital agrees that, promptly upon its receipt of notice of the
commencement of any action against AMT Capital, its officers and/or directors
or against any person so controlling AMT Capital, in respect of which
indemnity or reimbursement may be sought from the Fund on account of its
agreement in the preceding paragraph, notice in writing will be given to the
Fund within 10 days after the summons or other first legal process shall have
been served. The failure to notify the Fund of any such action shall not
relieve the Fund from any liability which the Fund may have to the person
against whom such action is brought other than by reason of the indemnity
agreement contained in this Section 7. Thereupon, the Fund shall be entitled
to participate, to the extent that it shall wish (including the selection of
counsel with AMT Capital's reasonable approval), in defense thereof. In the
event the Fund elects to assume the defense of any such suit and retain
counsel of good standing reasonably approved by AMT Capital, the defendant or
defendants in such suit shall bear the expense of any additional counsel
retained by any of them; but in the case the Fund does not elect to assume the
defense of any such suit or in the case AMT Capital does not reasonably
approve of counsel chosen by the Fund, the Fund will reimburse AMT Capital,
its officers and directors or the controlling person or persons named as
defendant or defendants in such suit for the fees and expenses of any one
counsel or firm which may be retained on behalf of AMT Capital, its officers
and directors and such control persons.
In the event that any such claim for indemnification is made by any
director or person in control of AMT Capital who is also an officer or
director of the Fund, the Fund, at its expense to the extent permitted by law,
will submit to a court of appropriate jurisdiction the question of whether or
not indemnification by it is against public policy as expressed in the 1933
Act, the 1934 Act, and the 1940 Act, and the Fund and AMT Capital will be
governed by the final adjudication of such question.
The Fund's indemnification agreement contained in this Section and the
Fund's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of AMT Capital, its officers and directors or any control person and
shall survive the sale of any of the Shares made pursuant to this Agreement.
This agreement of indemnity will inure exclusively to the benefit of AMT
Capital, its officers, directors and control persons, and to the extent
permitted by the 1940 Act to the benefit of any of their successors and
assigns. The Fund agrees promptly to notify AMT Capital of the commencement
of any litigation or proceeding against the Fund in connection with the issue
and sale of any Shares.
9. Indemnity by AMT Capital
AMT Capital agrees to indemnify and hold harmless the Fund, its officers
and directors and persons who control the Fund with the meaning of Section 15
of the 1933 Act from and against any losses, claims, damages or liabilities to
which any of such persons may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof), arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus, or the SAI or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in any
material respect, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, the Prospectus or the SAI in
reliance upon and in conformity with written information furnished to the Fund
by AMT Capital expressly for use therein; and will reimburse such persons for
any legal or other expenses reasonably incurred by such persons in connection
with investigating or defending any such action or claim. AMT Capital also
agrees to indemnify and hold harmless the Fund, its officers and directors and
control persons from and against any and all losses, claims, damages and
liabilities arising by reason of any person acquiring any Shares, which may be
based upon the 1933 Act or any other statute or at common law, on account of
any unauthorized or wrongful sales activities of AMT Capital or any of its
registered representatives, as defined under the By-Laws of the NASD,
including any failure to conform with any requirement of any state and federal
law relating to the sale of such Shares. Notwithstanding anything contained
herein to the contrary, AMT Capital shall not be responsible to the Fund for
and shall not indemnify and hold harmless the Fund, its officers and directors
and control persons from and against any such losses, claims, damages or
liabilities arising solely as a result of actions taken or omitted by AMT
Capital in good faith reliance on, and in conformity with, the Blue Sky
Report.
AMT Capital shall also indemnify and hold harmless the Fund, its
officers and directors and control persons for any liability to the Fund or to
the holders of Shares by reason of AMT Capital's willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement.
The Fund, its officers, directors and control persons shall be entitled
to advances from AMT Capital for payment of the reasonable expenses incurred
by it or them in connection with the matters as to which it or they are
seeking indemnification in the manner and to the fullest extent permissible
under the Delaware General Corporation Law.
In case any action shall be brought against the Fund, its officers and
directors and control persons in respect of which it may seek indemnity or
reimbursement from AMT Capital on account of the agreement of AMT Capital
contained in this Section 8, AMT Capital shall have the rights and duties
given to the Fund, and the Fund, its officers and directors and control
persons shall have the rights and duties given to AMT Capital in the second
and third paragraphs of Section 8.
AMT Capital's indemnification agreement contained in this Section and
its representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Fund, its officers and directors or any control person and shall
survive the sale of any of the Shares made pursuant to this Agreement. This
agreement of indemnity will inure exclusively to the benefit of the Fund, its
officers, directors and control persons, and to the extent permitted by the
1940 Act to the benefit of any of their successors and assigns. AMT Capital
agrees promptly to notify the Fund of the commencement of any litigation or
proceeding against AMT Capital in connection with the issue and sale of any
Shares.
10. Services Not Exclusive
AMT Capital shall be deemed to be an independent contractor and shall,
unless otherwise expressly provided herein or authorized by the Fund from time
to time, have no authority to act or represent the Fund in any way or otherwise
be deemed an agent of the Fund.
Nothing herein shall be deemed to limit or restrict AMT Capital's right
or that of any of its affiliates or employees, to engage in any other business
or to devote time and attention to the distribution or other related aspects
of any other registered investment company or to render services of any kind
to any other corporation, firm, individual or association.
11. Term
This Agreement shall become effective at the close of business on the
date hereof and shall continue in full force and effect, subject to Section 14
hereof, for two years and thereafter as provided in Section 12 hereof.
12. Renewal
This Agreement shall continue in full force and effect from year to year
with respect to a Series, provided that such continuance is specifically
approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities (as defined in Section 2(a)(42)
of the 1940 Act) that constitute Shares of such Series; and
(b) by the affirmative vote of a majority of the Non-Interested
Directors of the Fund by votes cast in person at a meeting specifically called
for the purpose of voting on such approval.
13. Amendment
This Agreement may be amended by the parties hereto with respect to a
Series only if such amendment is specifically approved (i) by the Board of
Directors of the Fund or by the vote of a majority of outstanding Shares, and
(ii) by a majority of the Non-Interested Directors of the Fund, which vote
must be cast in person at a meeting called for the purpose of voting on such
approval.
14. Termination
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Fund's Board of Directors, by vote of a majority of
outstanding Shares (as defined in Section 2(a)(42) of the 1940 Act), or by AMT
Capital, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment, the
term "assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act.
15. Confidentiality
AMT Capital agrees on behalf of itself and its directors, officers and
employees to treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund and its prior, present
or potential shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities hereunder, except after
prior notification to and approval in writing by the Fund, which approval
shall not be unreasonably withheld when requested to divulge such information
by duly constituted authorities and may not be withheld where AMT Capital
would be exposed to civil or criminal contempt proceedings for failure to
comply, and AMT Capital shall disclose all such records and information to the
investment adviser to the Fund when so requested by the adviser or the Fund.
16. Notices
Any notice or other communication authorized or required hereunder shall
be in writing or by confirming telegram, cable, telex or facsimile sending
device. Notice shall be addressed to the Fund at 50 Division Street, Suite
401, Somerville, New Jersey 08876, Attention: President; and to AMT Capital
Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New York 10020,
Attention: Carla E. Dearing. Either party may designate a different address by
notice to the other party. Any such notice or other communication shall be
deemed given when actually received.
17. Interpretation: Governing Law
Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC issued pursuant to the
1940 Act. In addition, where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. Otherwise, the provisions of this Agreement
shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: HARDING, LOEVNER FUNDS, INC.
BY:___________________ BY:_______________________
David R. Loevner
Secretary President
ATTEST: AMT CAPITAL SERVICES, INC.
BY:____________________ BY:_______________________
William E. Vastardis Carla E. Dearing
Senior Vice President President
IBT draft 8/28/96
Form Agreement
Full Custody/Foreign Securities
(Yield Calculation)
Company Form (Series)
CUSTODIAN AGREEMENT
BETWEEN
Harding, Loevner Funds, Inc.
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
Page
1. Bank Appointed Custodian 1
2. Definitions 1
2.1 Authorized Person 1
2.2 Board 1
2.3 Security 1
2.4 Portfolio Security 1
2.5 Officers' Certificate 1
2.6 Book-Entry System 2
2.7 Depository 2
2.8 Proper Instructions 2
3. Separate Accounts 2
4. Certification as to Authorized Persons 2
5. Custody of Cash 3
5.1 Purchase of Securities 3
5.2 Redemptions 3
5.3 Distributions and Expenses of Fund 3
5.4 Payment in Respect of Securities 3
5.5 Repayment of Loans 3
5.6 Repayment of Cash 3
5.7 Foreign Exchange Transactions 4
5.8 Other Authorized Payments 4
5.9 Termination 4
6. Securities 4
6.1 Segregation and Registration 4
6.2 Voting and Proxies 5
6.3 Corporate Action 5
6.4 Book-Entry System 6
6.5 Use of a Depository 6
6.6 Use of Book-Entry System for Commercial Paper 7
6.7 Use of Immobilization Programs 8
6.8 Eurodollar CDs 8
6.9 Options and Futures Transactions 8
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter 8
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges 9
6.10 Segregated Account 9
6.11 Interest Bearing Call or Time Deposits 10
6.12 Transfer of Securities 10
7. Redemptions 12
8. Merger, Dissolution, etc. of Fund 12
9. Actions of Bank Without Prior Authorization 12
10. Collection and Defaults 13
11. Maintenance of Records and Accounting Services 13
12. Fund Evaluation and Yield Calculation 13
12.1 Fund Evaluation 13
12.2 Yield Calculation 14
13. Additional Services 15
14. Duties of the Bank 15
14.1 Performance of Duties and
Standard of Care 15
14.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States 15
14.3 Duties of the Bank with Respect to Property
Held Outside of the United States 16
14.4 Insurance 18
14.5 Fees and Expenses of Bank 18
14.6 Advances by Bank 18
15. Limitation of Liability 19
16. Termination 20
17. Confidentiality 21
18. Notices 21
19. Amendments 21
20. Parties 21
21. Governing Law 22
22. Counterparts 22
23. Entire Agreement 22
APPENDICES
Appendix A Fee Schedule
Appendix B Wire Transfer Agreement
Appendix C Additional Services
Appendix D Select Foreign Sub-Custodians
Appendix E Reports
CUSTODIAN AGREEMENT
AGREEMENT made as of this first day of October, 1996, between Harding,
Loevner Funds, Inc. a company organized under the laws of [ ] (the
"Fund") and INVESTORS BANK & TRUST COMPANY (the "Bank").
The Fund, an open-end management investment company, desires to place
and maintain all of its portfolio securities and cash in the custody of the
Bank. The Bank has at least the minimum qualifications required by Section
17(f)(1) of the Investment Company Act of 1940 (the "1940 Act") to act as
custodian of the portfolio securities and cash of the Fund, and has indicated
its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth. For the services rendered pursuant to this
Agreement the Fund agrees to pay to the Bank the fees set forth on Appendix A
hereto.
2. Definitions. Whenever used herein, the terms listed below will have
the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on
behalf of the Fund by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the Board of
Trustees of the Fund, as the case may be.
2.3 Security. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or participation
in any profit sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral rights, any put,
call, straddle, option, or privilege on any security, certificate of deposit,
or group or index of securities (including any interest therein or based on
the value thereof), or any put, call, straddle, option, or privilege entered
into on a national securities exchange relating to a foreign currency, or, in
general, any interest or instrument commonly known as a "security", or any
certificate of interest or participation in, temporary or interim certificate
for, receipt for, guarantee of, or warrant or right to subscribe to, or
option contract to purchase or sell any of the foregoing, and futures,
forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security
owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank,
its successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934
("Exchange Act"), its successor or successors and its nominee or nominees.
The term "Depository" shall further mean and include any other person
authorized to act as a depository under the 1940 Act, its successor or
successors and its nominee or nominees, specifically identified in a
certified copy of a resolution of the Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized
Person, such instructions to be given in such form and manner as the Bank and
the Fund shall agree upon from time to time, and (ii) instructions (which may
be continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions
if the Bank reasonably believes them to have been given by an Authorized
Person. The Fund shall cause all oral instructions to be promptly confirmed
in writing. The Bank shall act upon and comply with any subsequent Proper
Instruction which modifies a prior instruction and the sole obligation of the
Bank with respect to any follow-up or confirmatory instruction shall be to
make reasonable efforts to detect any discrepancy between the original
instruction and such confirmation and to report such discrepancy to the Fund.
The Fund shall be responsible, at the Fund's expense, for taking any action,
including any reprocessing, necessary to correct any such discrepancy or
error, and to the extent such action requires the Bank to act, the Fund shall
give the Bank specific Proper Instructions as to the action required. Upon
receipt by the Bank of an Officers' Certificate as to the authorization by
the Board accompanied by a detailed description of procedures approved by the
Fund, Proper Instructions may include communication effected directly between
electro-mechanical or electronic devices provided that the Board and the Bank
agree in writing that such procedures afford adequate safeguards for the
Fund's assets.
3. Separate Accounts. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of each series or portfolio to
which this Agreement relates into a separate account for each such series or
portfolio containing the assets of such series or portfolio (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Fund shall be
deemed to refer to the Fund acting on behalf of one or more of its series,
any reference in this Agreement to any assets of the Fund, including, without
limitation, any portfolio securities and cash and earnings thereon, shall be
deemed to refer only to assets of the applicable series, any duty or
obligation of the Bank hereunder to the Fund shall be deemed to refer to
duties and obligations with respect to such individual series and any
obligation or liability of the Fund hereunder shall be binding only with
respect to such individual series, and shall be discharged only out of the
assets of such series.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank,
of (i) the names and signatures of the Authorized Persons and (ii) the names
of the members of the Board, it being understood that upon the occurrence of
any change in the information set forth in the most recent certification on
file (including without limitation any person named in the most recent
certification who is no longer an Authorized Person as designated therein),
the Secretary or Assistant Secretary of the Fund will sign a new or amended
certification setting forth the change and the new, additional or omitted
names or signatures. The Bank will be entitled to rely and act upon any
Officers' Certificate given to it by the Fund which has been signed by
Authorized Persons named in the most recent certification received by the
Bank.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the
name of the Bank, as Custodian of the Fund, and will deposit to the account
of the Fund all of the cash of the Fund, except for cash held by a
subcustodian appointed pursuant to Sections 14.2 or 14.3 hereof, including
borrowed funds, delivered to the Bank, subject only to draft or order by the
Bank acting pursuant to the terms of this Agreement. Pursuant to the Bank's
internal policies regarding the management of cash accounts, the Bank may
segregate certain portions of the cash of the Fund into a separate savings
deposit account upon which the Bank reserves the right to require seven (7)
days notice prior to withdrawal of cash from such an account. Upon receipt
by the Bank of Proper Instructions (which may be continuing instructions) or
in the case of payments for redemptions and repurchases of outstanding shares
of common stock of the Fund, notification from the Fund's transfer agent as
provided in Section 7, requesting such payment, designating the payee or the
account or accounts to which the Bank will release funds for deposit, and
stating that it is for a purpose permitted under the terms of this Section 5,
specifying the applicable subsection, the Bank will make payments of cash
held for the accounts of the Fund, insofar as funds are available for that
purpose, only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for
the Fund, against contemporaneous receipt of such securities by the Bank or
against delivery of such securities to the Bank in accordance with generally
accepted settlement practices and customs in the jurisdiction or market in
which the transaction occurs registered in the name of the Fund or in the
name of, or properly endorsed and in form for transfer to, the Bank, or a
nominee of the Bank, or receipt for the account of the Bank pursuant to the
provisions of Section 6 below, each such payment to be made at the purchase
price shown on a broker's confirmation (or transaction report in the case of
Book Entry Paper (as that term is defined in Section 6.6 hereof)) of purchase
of the securities received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank before such payment
is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for repurchase
or redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the
account of the Fund of dividends or other distributions to shareholders as
may from time to time be declared by the Board, interest, taxes, management
or supervisory fees, distribution fees, fees of the Bank for its services
hereunder and reimbursement of the expenses and liabilities of the Bank as
provided hereunder, fees of any transfer agent, fees for legal, accounting,
and auditing services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection
with the conversion, exchange or surrender of Portfolio Securities or
securities subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for
the purpose of collateralizing the obligation to return to the Fund
certificates borrowed from the Fund representing Portfolio Securities, but
only upon redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts
or options to purchase and sell foreign currencies for spot and future
delivery (collectively, "Foreign Exchange Agreements")which may be entered
into by the Bank on behalf of the Fund upon the receipt of Proper
Instructions, such Proper Instructions to specify the currency broker or
banking institution (which may be the Bank, or any other subcustodian or
agent hereunder, acting as principal) with which the contract or option is
made, and the Bank shall have no duty with respect to the selection of such
currency brokers or banking institutions with which the Fund deals or for
their failure to comply with the terms of any contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign
Exchange Agreement, in and to any property at any time held by the Bank for
the Fund's benefit or in which the Fund has an interest and which is then in
the Bank's possession or control (or in the possession or control of any
third party acting on the Bank's behalf). The Fund authorizes the Bank, in
the Bank's sole discretion, at any time to charge any such payment due under
any Foreign Exchange Agreement against any balance of account standing to the
credit of the Fund on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions
of the Fund, or other obligations of the Fund incurred for proper Fund
purposes; provided that before making any such payment the Bank will also
receive a certified copy of a resolution of the Board signed by an Authorized
Person (other than the Person certifying such resolution) and certified by
its Secretary or Assistant Secretary, naming the person or persons to whom
such payment is to be made, and either describing the transaction for which
payment is to be made and declaring it to be an authorized transaction of the
Fund, or specifying the amount of the obligation for which payment is to be
made, setting forth the purpose for which such obligation was incurred and
declaring such purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 16 of this Agreement.
In connection with transfers or orders made by the Bank pursuant to
this Section 5, and otherwise under this Agreement, the Fund and the Bank
shall enter into a Wire Transfer Agreement substantially in the form attached
as Appendix B hereto.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, the Bank as custodian
will receive and hold pursuant to the provisions hereof, in a separate
account or accounts and physically segregated at all times from those of
other persons, any and all Portfolio Securities which may now or hereafter be
delivered to it by or for the account of the Fund. All such Portfolio
Securities will be held or disposed of by the Bank for, and subject at all
times to, the instructions of the Fund pursuant to the terms of this
Agreement. Subject to the specific provisions herein relating to Portfolio
Securities that are not physically held by the Bank, the Bank will register
all Portfolio Securities (unless otherwise directed by Proper Instructions or
an Officers' Certificate), in the name of a registered nominee of the Bank as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, and will execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or
to register in the name of its registered nominee, any Portfolio Securities
which may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the
Bank will vote any of the Portfolio Securities held hereunder, except in
accordance with Proper Instructions or an Officers' Certificate. The Bank
will execute and deliver, or cause to be executed and delivered, to the Fund
all notices, proxies and proxy soliciting materials delivered to the Bank
with respect to such Securities, such proxies to be executed by the
registered holder of such Securities (if registered otherwise than in the
name of the Fund), but without indicating the manner in which such proxies
are to be voted.
6.3 Corporate Action. If at any time the Bank is notified that
an issuer of any Portfolio Security has taken or intends to take a corporate
action (a "Corporate Action") that affects the rights, privileges, powers,
preferences, qualifications or ownership of a Portfolio Security, including
without limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or
stock dividend, which Corporate Action requires an affirmative response or
action on the part of the holder of such Portfolio Security (a "Response"),
the Bank shall notify the Fund promptly of the Corporate Action, the Response
required in connection with the Corporate Action and the Bank's deadline for
receipt from the Fund of Proper Instructions regarding the Response (the
"Response Deadline"). The Bank shall forward to the Fund via telecopier
and/or overnight courier all notices, information statements or other
materials relating to the Corporate Action within twenty-four (24) hours of
receipt of such materials by the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Fund no later than 5:00
p.m. on the date specified as the Response Deadline and only if the Bank (or
its agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required Response
if Proper Instructions relating to such Response and all necessary
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding, the Bank may, in its sole discretion,
use its best efforts to act upon a Response for which Proper Instructions
and/or necessary Securities, consents or other materials are received by the
Bank after 5:00 p.m. on the date specified as the Response Deadline, it being
acknowledged and agreed by the parties that any undertaking by the Bank to
use its best efforts in such circumstances shall in no way create any duty
upon the Bank to complete such Response prior to its expiration.
(c) In the event that the Fund notifies the Bank of a Corporate
Action requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be 48 hours prior to the
Response expiration time set by the depository processing such Corporate
Action.
(d) Section 14.3(g) of this Agreement shall govern any Corporate Action
involving Foreign Portfolio Securities held by a Selected Foreign Sub-Custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
of Fund assets in the Book-Entry System, and (ii) for any subsequent changes
to such arrangements following such approval, the Board has reviewed and
approved the arrangement and has not delivered an Officer's Certificate to
the Bank indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry the Portfolio Securities which are
included with other securities deposited in the Account and shall at all
times during the regular business hours of the Bank (or such agent) be open
for inspection by duly authorized officers, employees or agents of the Fund.
Where securities are transferred to the Fund's account, the Bank shall also,
by book entry or otherwise, identify as belonging to the Fund a quantity of
securities in a fungible bulk of securities (i) registered in the name of the
Bank or its nominee, or (ii) shown on the Bank's account on the books of the
Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the return
of Portfolio Securities loaned by the Fund upon (i) receipt of advice from
the Book-Entry System that such Securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of the Fund. The
Bank (or its agent) shall transfer securities sold or loaned for the account
of the Fund upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the records of the Bank (or
its agent) to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Book-Entry System of transfers of securities
for the account of the Fund shall identify the Fund, be maintained for the
Fund by the Bank and shall be provided to the Fund at its request. The Bank
shall send the Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act,
of any transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
in DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and
remit to the Bank on behalf of the Fund all income and other payments thereon
and to take all steps necessary and proper in connection with the collection
thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the
account of the Fund and the Fund shall pay cash collateral against the return
of Portfolio Securities loaned by the Fund only upon delivery of the
Securities to or for the account of the Fund; and upon any sale of Portfolio
Securities, delivery of the Securities will be made only against payment
therefor or, in the event Portfolio Securities are loaned, delivery of
Securities will be made only against receipt of the initial cash collateral
to or for the account of the Fund; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such Security
is lost, destroyed, wrongfully taken or otherwise not available to be
returned to the Bank upon its request;
(ii) Proxy materials received by a Depository with respect
to Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank
such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably request
in order to verify the Portfolio Securities held by such Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i)
the Bank has received a certified copy of a resolution of the Board
specifically approving participation in a system maintained by the Bank for
the holding of commercial paper in book-entry form ("Book-Entry Paper") and
(ii) for each year following such approval the Board has received and
approved the arrangements, upon receipt of Proper Instructions and upon
receipt of confirmation from an Issuer (as defined below) that the Fund has
purchased such Issuer's Book-Entry Paper, the Bank shall issue and hold in
book-entry form, on behalf of the Fund, commercial paper issued by issuers
with whom the Bank has entered into a book-entry agreement (the "Issuers").
In maintaining procedures for Book-Entry Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the
Fund in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to the Fund's purchase
of Book-Entry Paper through the Bank will identify, by book-entry, commercial
paper belonging to the Fund which is included in the Book-Entry System and
shall at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the
Issuer that such sale of Book-Entry Paper has been effected, and (ii) the
making of an entry on the records of the Bank to reflect such payment and
transfer for the account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation upon
the maturity thereof upon contemporaneous (i) receipt of advice that payment
for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Fund; and
(e) The Bank will send to the Fund such reports on its system
of internal accounting control with respect to the Book-Entry Paper as the
Fund may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated
by a bank which meets the requirements of Section 26(a)(1) of the 1940 Act,
and (ii) for each year following such approval the Board has reviewed and
approved the arrangement and has not delivered an Officer's Certificate to
the Bank indicating that the Board has withdrawn its approval, the Bank shall
enter into such immobilization program with such bank acting as a subcustodian
hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Portfolio Securities are identified on the books of the
Bank as belonging to the Fund and that the books of the Bank identify the
European Branch holding such Portfolio Securities. Notwithstanding any other
provision of this Agreement to the contrary, except as stated in the first
sentence of this subsection 6.8, the Bank shall be under no other duty with
respect to such Eurodollar CDs belonging to the Fund.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or Over-the-
Counter.
(i) The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the Fund regarding
escrow or other arrangements (i) in accordance with the provisions of any
agreement entered into upon receipt of Proper Instructions among the Bank,
any broker-dealer registered with the National Association of Securities
Dealers, Inc. (the "NASD"), and, if necessary, the Fund, relating to the
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations.
(ii) Unless another agreement requires it to do so, the
Bank shall be under no duty or obligation to see that the Fund has deposited
or is maintaining adequate margin, if required, with any broker in connection
with any option, nor shall the Bank be under duty or obligation to present
such option to the broker for exercise unless it receives Proper Instructions
from the Fund. The Bank shall have no responsibility for the legality of any
put or call purchased or sold on behalf of the Fund, the propriety of any
such purchase or sale, or the adequacy of any collateral delivered to a
broker in connection with an option or deposited to or withdrawn from a
Segregated Account (as defined in subsection 6.10 below). The Bank
specifically, but not by way of limitation, shall not be under any duty or
obligation to: (i) periodically check or notify the Fund that the amount of
such collateral held by a broker or held in a Segregated Account is
sufficient to protect such broker or the Fund against any loss; (ii) effect
the return of any collateral delivered to a broker; or (iii) advise the Fund
that any option it holds, has or is about to expire. Such duties or
obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Fund in accordance
with the provisions of any agreement entered into upon the receipt of Proper
Instructions among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.
(ii) The responsibilities of the Bank as to futures, puts
and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in
subparagraph (a)(2) of this Section 6.8 as if such subparagraph referred to
Futures Commission Merchants rather than brokers, and Futures and puts and
calls thereon instead of options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and
on behalf of the Fund.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any agreement
among the Fund, the Bank and a broker-dealer registered under the Exchange
Act and a member of the NASD or any Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of
the Options Clearing Corporation and of any registered national securities
exchange or the Commodity Futures Trading Commission or any registered
Contract Market, or of any similar organizations regarding escrow or other
arrangements in connection with transactions by the Fund;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less
than the aggregate purchase price due on the settlement dates of all the
Fund's then outstanding forward commitment or "when-issued" agreements
relating to the purchase of Portfolio Securities and all the Fund's then
outstanding commitments under reverse repurchase agreements entered into with
broker-dealer firms;
(iv) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in the
case of this clause (e), upon receipt of, in addition to Proper Instructions,
a certified copy of a resolution of the Board, or of the executive committee
of the Board signed by an officer of the Fund and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes of such
Segregated Account and declaring such purposes to be proper corporate
purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with
the provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii)
or (a)(iv) above, for sale or delivery to meet the Fund's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward
commitment or when-issued agreements for the purchase of portfolio securities
or reverse repurchase agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund other than those in
the Segregated Account;
(v) for delivery upon settlement of a forward commitment
or when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (e)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect
to the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the
"Deposit Bank"), and shall retain such forms of advice or receipt evidencing
the deposit, if any, as may be forwarded to the Bank by the Deposit Bank.
Such deposits shall be deemed Portfolio Securities of the Fund and the
responsibility of the Bank therefore shall be the same as and no greater than
the Bank's responsibility in respect of other Portfolio Securities of the
Fund.
6.12 Transfer of Securities. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section only upon receipt
of Proper Instructions. The Proper Instructions shall state that such
transfer, exchange or delivery is for a purpose permitted under the terms of
this Section 6.11, and shall specify the applicable subsection, or describe
the purpose of the transaction with sufficient particularity to permit the
Bank to ascertain the applicable subsection. After receipt of such Proper
Instructions, the Bank will transfer, exchange, deliver or release Portfolio
Securities only in the following circumstances:
(a) Upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in
full, or against payment to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the Bank
before such payment is made;
(b) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided, however, that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for
failure to so tender in a timely manner unless such Proper Instructions are
received by the Bank at least two business days prior to the date required
for tender, and unless the Bank (or its agent or subcustodian hereunder) has
actual possession of such Security at least two business days prior to the
date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their terms
into other securities;
(d) For the purpose of redeeming in-kind shares of the Fund upon
authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for presentation
to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or retired or
otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund
by any bank, including the Bank; provided, however, that such Portfolio
Securities will be released only upon payment to the Bank for the account of
the Fund of the moneys borrowed, provided further, however, that in cases
where additional collateral is required to secure a borrowing already made,
and such fact is made to appear in the Proper Instructions, Portfolio
Securities may be released for that purpose without any such payment. In the
event that any pledged Portfolio Securities are held by the Bank, they will
be so held for the account of the lender, and after notice to the Fund from
the lender in accordance with the normal procedures of the lender and any
loan agreement between the fund and the lender that an event of deficiency or
default on the loan has occurred, the Bank may deliver such pledged Portfolio
Securities to or for the account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions
received by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund
to a bank or broker dealer, but only against receipt in accordance with
street delivery custom except as otherwise provided herein, of adequate
collateral as agreed upon from time to time by the Fund and the Bank, and
upon receipt of payment in connection with any repurchase agreement relating
to such securities entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the
Bank will also receive a certified copy of resolutions of the Board, signed
by an authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to
be an authorized transaction of the Fund or such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment
shall be made in accordance with the Articles of Incorporation or Declaration
of Trust and By-laws of the Fund (the "Articles"), from assets available for
said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of
the Fund into or the consolidation of the Fund with another investment
company, the sale by the Fund of all, or substantially all, of its assets to
another investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities
held by it under this Agreement and disburse cash only upon the order of the
Fund set forth in an Officers' Certificate, accompanied by a certified copy
of a resolution of the Board authorizing any of the foregoing transactions.
Upon completion of such delivery and disbursement and the payment of the
fees, disbursements and expenses of the Bank, this Agreement will terminate
and the Bank shall be released from any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an
Officers' Certificate to the contrary, the Bank will take the following
actions without prior authorization or instruction of the Fund or the
transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name
of the Fund all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Fund and hold for the account of the Fund all income,
dividends, interest and other payments or distributions of cash with respect
to the Portfolio Securities held thereunder;
9.2 Present for payment all coupons and other income items held by
it for the account of the Fund which call for payment upon presentation and
hold the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership
and other certificates and affidavits required by the Internal Revenue Code
or the regulations of the Treasury Department issued thereunder, or by the
laws of any state, now or hereafter in effect, inserting the Fund's name on
such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so and as may be required to obtain payment in
respect thereof. The Bank will execute and deliver such certificates in
connection with Portfolio Securities delivered to it or by it under this
Agreement as may be required under the provisions of the Internal Revenue
Code and any Regulations of the Treasury Department issued thereunder, or
under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it
upon payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for
definitive securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for
redemption, offer of exchange, right of subscription, reorganization or other
proceedings affecting such Securities. If Portfolio Securities upon which
such income is payable are in default or payment is refused after due demand
or presentation, the Bank will notify the Fund in writing of any default or
refusal to pay within two business days from the day on which it receives
knowledge of such default or refusal.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is
responsible pursuant to the terms and conditions of this Agreement, and in
compliance with the applicable rules and regulations of the 1940 Act. The
Bank will furnish to the Fund such reports at such times as are set forth on
Appendix E hereto. The books and records of the Bank pertaining to its
actions under this Agreement and reports by the Bank or its independent
accountants concerning its accounting system, procedures for safeguarding
securities and internal accounting controls will be open to inspection and
audit at reasonable times by officers of or auditors employed by the Fund and
will be preserved by the Bank in the manner and in accordance with the
applicable rules and regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of
account and render statements or copies from time to time as reasonably
requested by the Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. Fund Evaluation and Yield Calculation
12.1 Fund Evaluation. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the
New York Stock Exchange on each day on which said Exchange is open for
unrestricted trading and as of such other days, or hours, if any, as may be
authorized by the Board, the net asset value and the public offering price
of a share of capital stock of the Fund, such determination to be made in
accordance with the provisions of the Articles and By-laws of the Fund and
Prospectus and Statement of Additional Information relating to the Fund, as
they may from time to time be amended, and any applicable resolutions of the
Board at the time in force and applicable; and promptly to notify the Fund,
the proper exchange and the NASD or such other persons as the Fund may
request of the results of such computation and determination. In computing
the net asset value hereunder, the Bank may rely in good faith upon
information furnished to it by any Authorized Person in respect of (i) the
manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the
Bank, (ii) reserves, if any, authorized by the Board or that no such reserves
have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security
for which no price quotations are available, and (v) the method of
computation of the public offering price on the basis of the net asset value
of the shares, and the Bank shall not be responsible for any loss occasioned
by such reliance or for any good faith reliance on any quotations received
from a source pursuant to (iii) above.
12.2. Yield Calculation. The Bank will compute the performance
results of the Fund (the "Yield Calculation") in accordance with the
provisions of Release No. 33-6753 and Release No. IC-16245 (February 2, 1988)
(the "Releases") promulgated by the Securities and Exchange Commission, and
any subsequent amendments to, published interpretations of or general
conventions accepted by the staff of the Securities and Exchange Commission
with respect to such releases or the subject matter thereof ("Subsequent
Staff Positions"), subject to the terms set forth below:
(a) The Bank shall compute the Yield Calculation for the Fund
for the stated periods of time as shall be mutually agreed upon, and
communicate in a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive
the items of data necessary for the computation from the records it generates
and maintains for the Fund pursuant Section 11 hereof. The Bank shall have
no responsibility to review, confirm, or otherwise assume any duty or
liability with respect to the accuracy or correctness of any such data
supplied to it by the Fund, any of the Fund's designated agents or any of the
Fund's designated third party providers.
(c) At the request of the Bank, the Fund shall provide, and the
Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Fund. In the event that the computation methods in the Releases
or the Subsequent Staff Positions or the application to the Fund of a
standard or guideline is not free from doubt or in the event there is any
question of interpretation as to the characterization of a particular
security or any aspect of a security or a payment with respect thereto (e.g.,
original issue discount, participating debt security, income or return of
capital, etc.) or otherwise or as to any other element of the computation
which is pertinent to the Fund, the Fund or its designated agent shall have
the full responsibility for making the determination of how the security or
payment is to be treated for purposes of the computation and how the
computation is to be made and shall inform the Bank thereof on a timely
basis. The Bank shall have no responsibility to make independent
determinations with respect to any item which is covered by this Section, and
shall not be responsible for its computations made in accordance with such
determinations so long as such computations are mathematically correct.
(d) The Fund shall keep the Bank informed of all publicly
available information and of any non-public advice, or information obtained
by the Fund from its independent auditors or by its personnel or the
personnel of its investment adviser, or Subsequent Staff Positions related to
the computations to be undertaken by the Bank pursuant to this Agreement and
the Bank shall not be deemed to have knowledge of such information (except as
contained in the Releases) unless it has been furnished to the Bank in
writing.
13. Additional Services. The Bank shall perform the additional
services for the Fund as are set forth on Appendix C hereto. Appendix C may
be amended from time to time upon agreement of the parties to include further
additional services to be provided by the Bank to the Fund, at which time the
fees set forth in Appendix A shall be appropriately increased.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any,
the Bank will be entitled to receive and act upon the advice of independent
counsel of its own selection, which may be counsel for the Fund, and will be
without liability for any action taken or thing done or omitted to be done in
accordance with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will
not be liable for:
(a) the validity of the issue of any Portfolio Securities purchased
by or for the Fund, the legality of the purchases thereof or the propriety
of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of
the Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund
or the legality of the distribution of any Portfolio Securities as payment in
kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it
pursuant to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held
by it for the account of the Fund are such as may properly be held by the
Fund under the provisions of its Articles, By-laws, any federal or state
statutes or any rule or regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the Fund
Held in the United States. The Bank may employ agents in the performance of
its duties hereunder and shall be responsible for the acts and omissions of
such agents as if performed by the Bank hereunder. Without limiting the
foregoing, certain duties of the Bank hereunder may be performed by one or
more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ
subcustodians, provided that any such subcustodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in
the United States. The Bank shall have no liability to the Fund or any other
person by reason of any act or omission of any subcustodian and the Fund
shall indemnify the Bank and hold it harmless from and against any and all
actions, suits and claims, arising directly or indirectly out of the
performance of any subcustodian. Upon request of the Bank, the Fund shall
assume the entire defense of any action, suit, or claim subject to the
foregoing indemnity. The Fund shall pay all fees and expenses of any
subcustodian.
14.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Bank to employ as sub-custodians for the Fund's
Portfolio Securities and other assets maintained outside the United States
the foreign banking institutions and foreign securities depositories
designated on the Schedule attached hereto (each, a "Selected Foreign Sub-
Custodian"). Upon receipt of Proper Instructions, together with a certified
resolution of the Fund's Board of Trustees, the Bank and the Fund may agree
to designate additional foreign banking institutions and foreign securities
depositories to act as Selected Foreign Sub-Custodians hereunder. Upon
receipt of Proper Instructions, the Fund may instruct the Bank to cease the
employment of any one or more such Selected Foreign Sub-Custodians for
maintaining custody of the Fund's assets, and the Bank shall so cease to
employ such sub-custodian as soon as alternate custodial arrangements have
been implemented.
(b) Foreign Securities Depositories. Except as may otherwise
be agreed upon in writing by the Bank and the Fund, assets of the Fund shall
be maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign
Sub-Custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the provisions
set forth in subparagraph (d) hereof. Notwithstanding the foregoing, except
as may otherwise be agreed upon in writing by the Bank and the Fund, the Fund
authorizes the deposit in Euro-clear, the securities clearance and depository
facilities operated by Morgan Guaranty Trust Company of New York in Brussels,
Belgium, of Foreign Portfolio Securities eligible for deposit therein and the
use of Euro-clear in connection with settlements of purchases and sales of
securities and deliveries and returns of securities, until notified to the
contrary pursuant to subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
Selected Foreign Sub-Custodian. Each agreement pursuant to which the Bank
employs a foreign banking institution shall require that such institution
establish a custody account for the Bank and hold in that account Foreign
Portfolio Securities and other assets of the Fund, and, in the event that
such institution deposits Foreign Portfolio Securities in a foreign
securities depository, that it shall identify on its books as belonging to
the Bank the securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of
the Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially
in the form attached as Appendix D hereto and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (b) beneficial ownership of the
Fund's assets will be freely transferable without the payment of money or
value other than for custody or administration (including, without
limitation, any fees or taxes payable upon transfers or reregistration of
securities); (c) adequate records will be maintained identifying the assets
as belonging to the Bank; (d) officers of or auditors employed by, or other
representatives of the Bank, including to the extent permitted under
applicable law, the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Bank; and (e) assets of
the Fund held by the Selected Foreign Sub-Custodian will be subject only to
the instructions of the Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon
request of the Fund, the Bank will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign banking institution employed as a Selected Foreign
Sub-Custodian insofar as such books and records relate to the performance of
such foreign banking institution under its Foreign Sub-Custodian Agreement.
(f) Reports by Bank. The Bank will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by Selected Foreign Sub-
Custodians, including but not limited to an identification of entities having
possession of the Foreign Portfolio Securities and other assets of the Fund.
(g) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Fund held by a Selected Foreign Sub-Custodian
shall be effected pursuant to Proper Instructions from the Fund to the Bank
and shall be effected in accordance with the applicable Foreign Sub-Custodian
Agreement. If at any time any Foreign Portfolio Securities shall be
registered in the name of the nominee of the Selected Foreign Sub-Custodian,
the Fund agrees to hold any such nominee harmless from any liability by
reason of the registration of such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities received
for the account of the Fund and delivery of Foreign Portfolio Securities
maintained for the account of the Fund may be effected in accordance with the
customary established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such securities
from such purchaser or dealer.
In connection with any action to be taken with respect to
the Foreign Portfolio Securities held hereunder, including, without
limitation, the exercise of any voting rights, subscription rights,
redemption rights, exchange rights, conversion rights or tender rights, or
any other action in connection with any other right, interest or privilege
with respect to such Securities (collectively, the "Rights"), the Bank shall
promptly transmit to the Fund such information in connection therewith as is
made available to the Bank by the Foreign Sub-Custodian, and shall promptly
forward to the applicable Foreign Sub-Custodian any instructions, forms or
certifications with respect to such Rights, and any instructions relating to
the actions to be taken in connection therewith, as the Bank shall receive
from the Fund pursuant to Proper Instructions. Notwithstanding the
foregoing, the Bank shall have no further duty or obligation with respect to
such Rights, including, without limitation, the determination of whether the
Fund is entitled to participate in such Rights under applicable U.S. and
foreign laws, or the determination of whether any action proposed to be taken
with respect to such Rights by the Fund or by the applicable Foreign Sub-
Custodian will comply with all applicable terms and conditions of any such
Rights or any applicable laws or regulations, or market practices within the
market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and
to indemnify, and hold harmless, the Bank and each Fund from and against
certain losses, damages, costs, expenses, liabilities or claims arising out
of or in connection with the institution's performance of such obligations,
all as set forth in the applicable Foreign Sub-Custodian Agreement. The Fund
acknowledges that the Bank, as a participant in Euro-clear, is subject to the
Terms and Conditions Governing the Euro-Clear System, a copy of which has
been made available to the Fund. The Fund acknowledges that pursuant to such
Terms and Conditions, Morgan Guaranty Brussels shall have the sole right to
exercise or assert any and all rights or claims in respect of actions or
omissions of, or the bankruptcy or insolvency of, any other depository,
clearance system or custodian utilized by Euro-clear in connection with the
Fund's securities and other assets.
(i) Monitoring Responsibilities. The Bank shall furnish
annually to the Fund information concerning the Selected Foreign Sub-
Custodians employed hereunder for use by the Fund in evaluating such Selected
Foreign Sub-Custodians to ensure compliance with the requirements of Rule
17f-5 of the Act. In addition, the Bank will promptly inform the Fund in the
event that the Bank is notified by a Selected Foreign Sub-Custodian that
there appears to be a substantial likelihood that its shareholders' equity
will decline below US$200 million (or the equivalent thereof) or that its
shareholders' equity has declined below US$200 million (in each case computed
in accordance with generally accepted U.S. accounting principles) or any
other capital adequacy test applicable to it by exemptive order, or if the
Bank has actual knowledge of any material loss of the assets of the Fund held
by a Foreign Sub-Custodian.
(j) Tax Law. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the
Bank as custodian of the Fund by the tax laws of any jurisdiction, and it
shall be the responsibility of the Fund to notify the Bank of the obligations
imposed on the Fund or the Bank as the custodian of the Fund by the tax law
of any non-U.S. jurisdiction, including responsibility for withholding and
other taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Selected Foreign Sub-
custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such information.
14.4 Insurance. The Bank shall use the same care with respect to
the safekeeping of Portfolio Securities and cash of the Fund held by it as it
uses in respect of its own similar property but it need not maintain any
special insurance for the benefit of the Fund.
14.5. Fees and Expenses of the Bank. The Fund will pay or
reimburse the Bank from time to time for any transfer taxes payable upon
transfer of Portfolio Securities made hereunder, and for all necessary proper
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or
expense to the Bank as provided above. For the services rendered by the Bank
hereunder, the Fund will pay to the Bank such compensation or fees at such
rate and at such times as shall be agreed upon in writing by the parties from
time to time. The Bank will also be entitled to reimbursement by the Fund for
all reasonable expenses incurred in conjunction with termination of this
Agreement.
14.6 Advances by the Bank. The Bank may, in its sole discretion,
advance funds on behalf of the Fund to make any payment permitted by this
Agreement upon receipt of any proper authorization required by this Agreement
for such payments by the Fund. Should such a payment or payments, with
advanced funds, result in an overdraft (due to insufficiencies of the Fund's
account with the Bank, or for any other reason) this Agreement deems any such
overdraft or related indebtedness a loan made by the Bank to the Fund payable
on demand. Such overdraft shall bear interest at the current rate charged by
the Bank for such loans unless the Fund shall provide the Bank with agreed
upon compensating balances. The Fund agrees that the Bank shall have a
continuing lien and security interest to the extent of any overdraft or
indebtedness, in and to any property at any time held by it for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's
sole discretion, at any time to charge any overdraft or indebtedness,
together with interest due thereon, against any balance of account standing
to the credit of the Fund on the Bank's books.
15. Limitation of Liability.
15.1 Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank or any of its officers, directors, employees or
agents (collectively, the "Indemnified Parties") be liable to the Fund or any
third party, and the Fund shall indemnify and hold the Bank and the
Indemnified Parties harmless from and against any and all loss, damage,
liability, actions, suits, claims, costs and expenses, including legal fees,
(a "Claim") arising as a result of any act or omission of the Bank or any
Indemnified Party under this Agreement, except for any Claim resulting solely
from the gross negligence, willful misfeasance or bad faith of the Bank or
any Indemnified Party. Without limiting the foregoing, neither the Bank nor
the Indemnified Parties shall be liable for, and the Bank and the Indemnified
Parties shall be indemnified against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party in good faith
reliance upon the terms of this Agreement, any Officer's Certificate, Proper
Instructions, resolution of the Board, telegram, telecopier, notice, request,
certificate or other instrument reasonably believed by the Bank to genuine;
(b) Any act or omission of any subcustodian selected by or at the
direction of the Fund;
(c) Any act or omission of a Selected Foreign Sub-Custodian for
to the extent which such Selected Foreign Sub-Custodian is not liable to the
Bank;
(d) Any Corporate Action requiring a Response for which the
Bank has not received Proper Instructions or obtained actual possession of
all necessary Securities, consents or other materials by 5:00 p.m. on the
date specified as the Response Deadline;
(e) Any act or omission of any European Branch of a U.S.
banking institution that is the issuer of Eurodollar CDs in connection with
any Eurodollar CDs held by such European Branch;
(f) Information relied on in good faith by the Bank and supplied
by any Authorized Person in connection with the calculation of (i)
the net asset value and public offering price of the shares of capital stock
of the Fund or (ii) the Yield Calculation; or
(g) Any acts of God, earthquakes, fires, floods, storms or
other disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation or computers (hardware or software)
and computer facilities, the unavailability of energy sources and other
similar happenings or events.
15.2 Notwithstanding anything to the contrary in this Agreement, in
no event shall the total liability of the Bank and the Indemnified Parties
under this Agreement exceed in general money damages a total cumulative
maximum amount of one hundred percent of the amounts actually paid by the
Fund to the Bank under this Agreement. The existence of more than one Claim
will not enlarge or extend this limit.
15.3 Notwithstanding anything to the contrary in this Agreement,
in no event shall the Bank or the Indemnified Parties be liable to the Fund
or any third party for lost profits or lost revenues or any special,
consequential, punitive or incidental damages of any kind whatsoever in
connection with this Agreement or any activities hereunder.
16. Termination.
16.1 The term of this Agreement shall be three years commencing
upon the effective date of the Fund's registration statement] (the "Initial
Term"), unless earlier terminated as provided herein. After the expiration
of the Initial Term, the term of this Agreement shall automatically renew for
successive one-year terms (each a "Renewal Term") unless notice of non-
renewal is delivered by the non-renewing party to the other party no later
than sixty days prior to the expiration of the Initial Term or any Renewal
Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the
violating party does not cure such violation within 90 days of receipt of
such notice.
(b) Either party may terminate this Agreement during any
Renewal Term upon sixty days written notice to the other party. Any
termination pursuant to this paragraph 16.1(b) shall be effective upon
expiration of such sixty days, provided, however, that the effective date of
such termination may be postponed to a date not more than ninety days after
delivery of the written notice: (i) at the request of the Bank, in order to
prepare for the transfer by the Bank of all of the assets of the Fund held
hereunder; or (ii) at the request of the Fund, in order to give the Fund an
opportunity to make suitable arrangements for a successor custodian.
16.2 In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of notice
of termination, commence and prosecute diligently to completion the transfer
of all cash and the delivery of all Portfolio Securities duly endorsed and
all records maintained under Section 11 to the successor custodian when
appointed by the Fund. The obligation of the Bank to deliver and transfer
over the assets of the Fund held by it directly to such successor custodian
will commence as soon as such successor is appointed and will continue until
completed as aforesaid. If the Fund does not select a successor custodian
within ninety (90) days from the date of delivery of notice of termination
the Bank may, subject to the provisions of subsection (16.3), deliver the
Portfolio Securities and cash of the Fund held by the Bank to a bank or trust
company of the Bank's own selection which meets the requirements of Section
17(f)(1) of the 1940 Act and has a reported capital, surplus and undivided
profits aggregating not less than $2,000,000, to be held as the property of
the Fund under terms similar to those on which they were held by the Bank,
whereupon such bank or trust company so selected by the Bank will become the
successor custodian of such assets of the Fund with the same effect as though
selected by the Board. Thereafter, the Bank shall be released from any and
all obligations under this Agreement.
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of
the Fund advising that a successor custodian cannot be found willing and able
to act upon reasonable and customary terms and that there has been submitted
to the shareholders of the Fund the question of whether the Fund will be
liquidated or will function without a custodian for the assets of the Fund
held by the Bank. In that event the Bank will deliver the Portfolio
Securities and cash of the Fund held by it, subject as aforesaid, in
accordance with one of such alternatives which may be approved by the
requisite vote of shareholders, upon receipt by the Bank of a copy of the
minutes of the meeting of shareholders at which action was taken, certified
by the Fund's Secretary and an opinion of counsel to the Fund in form and
content satisfactory to the Bank. Thereafter, the Bank shall be released
from any and all obligations under this Agreement.
16.4 The Fund shall reimburse the Bank for any reasonable expenses
incurred by the Bank in connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Fund
may, upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably
damage the other party and accordingly agree that each of them is entitled,
in addition to all other remedies at low or in equal to an injunction or
injunctions without bond or other security to prevent breaches of this
provision.
18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) had delivery with signature to such party at its office
at the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
[ ]
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: [ ]
or at such other place as such party may from time to time
designate in writing.
19. Amendments. This Agreement may not be altered or amended, except
by an instrument in writing, executed by both parties.
20. Parties. This Agreement will be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement will not be assignable by the
Fund without the written consent of the Bank or by the Bank without the
written consent of the Fund, authorized and approved by its Board; and
provided further that termination proceedings pursuant to Section 16 hereof
will not be deemed to be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will
be governed by the laws of the Commonwealth of Massachusetts, without regard
to conflict of laws provisions.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any
conflicting terms or provisions of any other instrument and terminates and
supersedes any and all prior agreements and undertakings between the parties
relating to the subject matter herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
[ ]
By:_________________________
Name:
Title:
Investors Bank & Trust Company
By:__________________________
Name:
Title:
ADMINISTRATION AGREEMENT
AGREEMENT dated as of October 14, 1996 by and between Harding, Loevner
Funds, Inc., a Maryland corporation (the "Fund"), and AMT Capital Services,
Inc., a Delaware corporation ("AMT Capital").
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and offers shares of three separate series of its common stock, par value $.001
per share, which have been registered under the Securities Act of 1933, as
amended;
WHEREAS, AMT Capital is a service company which provides management,
administrative and other services to investment companies and other entities;
and
WHEREAS, the Fund desires to retain AMT Capital to render certain
management and administrative services, including supervision of certain third
party vendors to the Fund.
NOW, THEREFORE, in consideration of the above premises and of other good
and valuable consideration the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Appointment of Administrator
The Fund hereby appoints AMT Capital to act as administrator to the Fund
for the period and on the terms set forth in this Agreement. This appointment
applies to each existing series of the Fund, as well as any future series
provided (i) the Fund does not object to AMT Capital in writing on any basis or
(ii) AMT Capital does not object to the Fund in writing on the basis of the
capabilities of AMT Capital. AMT Capital accepts such appointment and agrees
to render the services and provide, at its own expense, the office space,
furnishings and equipment, and the personnel required by it to perform the
services on the terms and for the compensation herein provided.
As further delineated on Schedule A of this Agreement, which may be
amended by the parties from time to time, AMT Capital shall provide for, or
assist in managing and supervising all aspects of, the general day-to-day
business activities and operations of the Fund except for investment advisory
services, including custodial, transfer agency, dividend disbursing, accounting,
auditing and legal services. AMT Capital shall discharge such responsibilities
subject to the supervision and direction of the Fund's officers and Board of
Directors, and in compliance with the objectives, policies and limitations set
forth in the Fund's registration statement, Articles of Incorporation, By-Laws
and applicable laws and regulations. All agreements with third parties shall
be subject to review and approval by the Fund's executive officers or Board of
Directors.
AMT Capital will perform all of its obligations under this Agreement in
accordance with applicable law, including without limitation laws against
discrimination.
2. Representation and Warranties of AMT Capital
AMT Capital represents and warrants to the Fund that:
A. AMT Capital is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full power and
authority, corporate and otherwise, to consummate the transactions contemplated
by this Agreement. AMT Capital is duly qualified to carry out its business, and
is in good standing, in the State of New York.
B. The Board of Directors and stockholders of AMT Capital have taken all
action required by law and AMT Capital's Certificate of Incorporation and By-
Laws to authorize the execution and delivery of this Agreement by AMT Capital
and the consummation on behalf of AMT Capital of the transactions contemplated
by this Agreement. This Agreement constitutes a legal, valid and binding
obligation of AMT Capital enforceable in accordance with its terms. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will result in a breach of, or constitute a
default under, or with lapse of time or giving of notice or both will result in
a breach of or constitute a default under, or otherwise give any party thereto
the right to terminate (a) any mortgage, indenture, loan or credit agreement or
any other agreement or instrument evidencing indebtedness for money borrowed to
which AMT Capital is a party or by which AMT Capital or any of its properties is
bound or affected, or pursuant to which AMT Capital has guaranteed the
indebtedness of any person, or (b) any lease, license, contract or other
agreement to which AMT Capital is a party or by which AMT Capital or any of its
properties is bound or affected. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
result in, or require, the creation or imposition of any mortgage, deed or
trust, pledge, lien, security interest, or other charge or encumbrance of any
nature upon or with respect to any of the properties now or hereafter owned by
AMT Capital.
C. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate any provision
of the Certificate of Incorporation or By-Laws of AMT Capital.
D. Except such as have been obtained and as are in full force and effect
and subject to no dispute, claim or challenge, no permit, license, franchise,
approval, authorization, qualification or consent of, registration or filing
with, or notice to, any governmental authority is required in connection with
the execution and delivery by AMT Capital of this Agreement or in connection
with the consummation by AMT Capital of any transactions contemplated by this
Agreement, and no such permit, license, franchise, approval, authorization,
qualification or consent of, registration or filing with, or notice to any
federal, state or local governmental authority is required in connection with
AMT Capital's business or operations as currently conducted or as currently
contemplated to be conducted. AMT Capital has conducted its business and
operations in compliance with all applicable laws and regulations.
3. Duties of the Fund
A. The Fund will deliver to AMT Capital copies of each of the following
documents and will deliver to AMT Capital all future amendments and supplements,
if any:
(1) A certified copy of the Articles of Incorporation of the Fund as
amended and currently in effect;
(2) A copy of the Fund's By-Laws as amended and currently in effect,
certified by the Secretary of the Fund;
(3) A copy of the resolution of the Fund's Board of Directors
authorizing this Agreement, certified by the Secretary of the Fund;
(4) The Fund's registration statement on Form N-1A as filed with, and
declared effective by, the U.S. Securities and Exchange Commission
("SEC"), and all amendments thereto;
(5) Each resolution of the Board of Directors of the Fund authorizing
the original issue of its shares, certified by the Secretary of the Fund;
(6) Copies of the resolutions of the Fund's Board of Directors
authorizing: (i) certain officers and employees of AMT Capital to give
instructions to the Fund's custodian and transfer agent as required by
agreements with such parties, and (ii) certain officers and employees of
AMT Capital to sign checks and pay expenses on behalf of the Fund,
certified by the Secretary of the Fund;
(7) A copy of the current Investment Advisory Agreement between the Fund
and Harding, Loevner Management, L.P.;
(8) A copy of the Custodian Agreement and Transfer Agency Agreement
relating to the Fund; and
(9) Such other certificates, documents or opinions which AMT Capital
may, in its reasonable discretion, deem necessary or appropriate in the
proper performance of its duties.
B. The Fund will cooperate in providing AMT Capital with all
information reasonably necessary to permit AMT Capital to perform its duties
hereunder.
C. The Fund certifies to AMT Capital that, as of the close of business
on the date of this Agreement, it has authorized capitalization of 2,500,000,000
shares of its common stock, $.01 par value (the "Shares"), divided among its
series, and agrees that AMT Capital will be promptly notified from time to time
when the Fund takes corporate action to increase the number of authorized
shares, including restoring redeemed shares held in its treasury to the status
of authorized and unissued shares.
4. Services To Be Obtained Independently By the Fund
The Fund shall, at its own expense, provide for any of its own:
A. Organizational expenses;
B. Services of an independent accountant;
C. Services of outside legal counsel (including such counsel's review
of the Fund's registration statement, proxy materials and other reports and
materials prepared by AMT Capital under this Agreement);
D. Services contracted for by the Fund directly from parties other than
AMT Capital acting as administrator (or subcontracted for by AMT Capital on
behalf of the Fund, subject to review and approval by the Fund's executive
officers or Board of Directors);
E. Trading operations and brokerage fees, commissions and transfer
taxes in connection with the purchase and sale of securities for its investment
portfolio;
F. Investment advisory services;
G. Taxes, insurance premiums and other fees and expenses applicable to
its operation;
H. Costs incidental to any meeting of shareholders including, but not
limited to, legal and accounting fees, proxy filing fees and costs incidental to
the preparation, printing and mailing of any proxy materials;
I. Cost incidental to Directors' meetings, including fees and expenses
of Directors;
J. The salary and expenses of any officer or employee of the Fund who
is not also an officer or employee of AMT Capital;
K. Custodian and depository banks, and all services related thereto;
L. Costs incidental to the preparation, printing and distribution of
its registration statement and any amendments thereto, and shareholder reports,
including printing setup, printing and mailing costs;
M. All registration fees and filing fees required under the securities
laws of the United States and state regulatory authorities;
N. Fidelity bond and director's and officers' liability insurance;
O. Record retention costs of third parties;
P. Distribution fees pursuant to any distribution plan, if and when
adopted pursuant to Rule 12b-1 under the 1940 Act; and
Q. Litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business.
5. Price, Charges and Instructions
In consideration of the services rendered and expenses assumed by AMT
Capital pursuant to this Agreement, the Fund will pay AMT Capital (i) a monthly
fee at the annual rate of 0.15 % of the Fund's first $500 million of average
daily net assets; 0.10% of the Fund's next $500 million of average daily net
assets; and 0.05% of the Fund's average daily net assets over $1 billion. Such
sum shall be paid in monthly installments by the tenth day of each month for the
previous month.
For purposes of this Section 5, the "average daily net assets" of the
Portfolio shall mean the average of the values placed on the Portfolio's net
assets on each day pursuant to the applicable provisions of the Fund's
Registration Statement, as amended.
In addition, AMT Capital shall be reimbursed for the reasonable cost of
any and all forms, including blank checks and proxies, used by it in
communicating with shareholders, directors, Fund management, or any regulatory
agencies on behalf of the Fund, or especially prepared for use in connection
with its obligations hereunder, as well as the reasonable cost of postage,
telephone, telex and telecopy used in communicating with shareholders,
directors, Fund management, or any regulatory agencies on behalf of the Fund,
travel-related expenses when incurred on official Fund business and microfilm
used each year to record the previous year's transactions in shareholder
accounts and computer tapes used for reasonable permanent storage of records,
permanent storage costs for hard copy Fund records and reasonable cost of
insertion of materials in mailing envelopes by outside firms. Prior to ordering
any forms in such supply as it estimates will be adequate for more than two
years' use, AMT Capital shall obtain the written consent of the Fund. All forms
for which AMT Capital has received reimbursement from the Fund shall be and
remain the property of the Fund until used.
At any time AMT Capital may apply to any executive officer of the Fund or
executive officer of the Fund's investment adviser for instructions, and may
consult with legal counsel for the Fund, if consented to by an executive officer
of the Fund at the expense of the Fund, with respect to any matter arising in
connection with the services to be performed by AMT Capital under this Agreement
and AMT Capital shall not be liable and shall be indemnified by the Fund for any
action taken or omitted by it in good faith in reliance upon such instructions
or upon the opinion of such counsel. AMT Capital shall be protected and
indemnified in acting upon any paper or document of the Fund reasonably believed
by it to be genuine and to have been signed by the proper person or persons and
shall not be held to have notice of any change of authority of any
representative of the Fund, until receipt of written notice thereof from the
Fund, unless an officer of AMT Capital shall have actual knowledge of such
change. AMT Capital shall also be protected and indemnified, except where a
stop order is in effect, in recognizing transfer documents which AMT Capital
reasonably believes to bear the proper manual or facsimile signature of the
officers of the Fund, and the proper counter-signatures of any present or former
transfer agent.
6. Limitation of Liability and Indemnification
A. AMT Capital shall provide its services in a professional manner
customarily provided by leading mutual fund administration companies. AMT
Capital shall be responsible for the performance of only such duties as are set
forth or contemplated herein or contained in instructions given to it by the
Fund which are not contrary to this Agreement. AMT Capital shall have no
liability for any loss or damage resulting from the performance or non-
performance of its duties hereunder unless caused by or resulting from the gross
negligence, bad faith or willful misconduct of AMT Capital, its officers or
employees or the violation by any of such persons of this Agreement. In no
event, however, shall AMT Capital be liable for any consequential damages
including, without limitation, any taxes, penalties, litigation expenses or
other loss or damage resulting from the failure by other persons providing
services to the Fund to conform to applicable legal or regulatory requirements,
or to the Fund's investment policies and restrictions as set forth in its
registration statement, notwithstanding that AMT Capital, in the course of
carrying out its monitoring duties hereunder, failed to discover such failure.
B. The Fund shall indemnify and hold AMT Capital harmless from all
loss, cost, damage and expense, including reasonable expenses for counsel,
incurred by it resulting from any claim, demand, action or suit in connection
with any action or omission by it in the performance of its duties hereunder, or
as a result of acting upon any instructions reasonably believed by it to have
been executed by a duly authorized officer of the Fund, provided that this
indemnification shall not apply to actions or omissions of AMT Capital, its
officers or employees in cases of its or their own negligence or misconduct or
the violation by any of such persons of this Agreement.
C. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any liability subject to the indemnification provided above, and if the
Fund elects to assume the defense, such defense shall be conducted by counsel
chosen by the Fund. In the event the Fund elects to assume the defense of any
such suit and retain such counsel, AMT Capital or any of its affiliated persons,
named as defendant or defendants in the suit, may retain additional counsel at
its or their own expense, except that, if the Fund shall have specifically
authorized the retaining of such counsel, then the reasonable expenses for such
counsel shall be reimbursed by the Fund.
7. Confidentiality
AMT Capital agrees on behalf of itself and its directors, officers and
employees to treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund and its prior, present
or potential shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities hereunder, except (i)
after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld when requested to divulge such
information by duly constituted authorities and may not be withheld where AMT
Capital may be exposed to civil or criminal contempt proceedings for failure
to comply, and AMT Capital shall disclose all such records and information to
the investment adviser to the Fund when so requested by the adviser or the
Fund.
8. Compliance With Governmental Rules and Regulations
The Fund assumes full responsibility for complying with all applicable
requirements of the Securities Act of 1933, the 1940 Act and the Securities
Exchange Act of 1934, all as amended, and any laws, rules and regulations of
governmental authorities having jurisdiction, except to the extent that AMT
Capital specifically assumes any such obligations under the terms of this
Agreement.
AMT Capital shall maintain and preserve for the period prescribed, such
records relating to the services to be performed by AMT Capital under this
Agreement as are required pursuant to the 1940 Act and the Securities Exchange
Act of 1934, all as amended, and the rules and regulations thereunder. All such
records shall at all times remain the respective properties of the Fund, shall
be readily accessible during normal business hours and shall be promptly
surrendered upon the termination of this Agreement or otherwise on written
request. Records shall be surrendered in usable machine readable form.
9. Status of AMT Capital
AMT Capital shall be deemed to be an independent contractor and shall,
unless otherwise expressly provided herein or authorized by the Fund from time
to time, have no authority to act or represent the Fund in any way or otherwise
be deemed an agent of the Fund.
Nothing herein shall be deemed to limit or restrict AMT Capital's right or
that of any of its affiliates or employees, to engage in any other business or
to devote time and attention to the administration or other related aspects of
any other registered investment company or to render services of any kind to any
other corporation, firm, individual or association.
10. Printed Matter Concerning the Fund or AMT Capital
Neither the Fund nor AMT Capital shall publish and circulate any printed
matter which contains any reference to the other party without its prior written
approval, excepting such printed matter as refers in accurate terms to AMT
Capital's appointment under this Agreement and/or any other agreement between
the Fund and AMT Capital, and excepting as may be required by applicable laws or
regulations.
11. Term, Amendment and Termination
This Agreement may be modified or amended from time to time by mutual
agreement between the parties hereto. The Agreement shall remain in effect for
a period of five years from the date hereof, and shall automatically continue in
effect thereafter unless terminated by either party at the end of such period or
thereafter on 120 days' prior written notice. Upon termination of the
Agreement, the Fund shall pay to AMT Capital such compensation as may be due
under the terms hereof on the date of such termination.
12. Default
If either party materially breaches, materially neglects or materially
fails, in whole or in part, to perform its duties and/or observe its obligations
hereunder (a "Default"), that party is in Default hereunder (the "Defaulting
Party"). The other party hereto may give written notice to the Defaulting Party
and if such Default shall not have been remedied within thirty (30) days after
such written notice is given, then the party giving such notice may terminate
this Agreement by thirty (30) days written notice of such termination to the
Defaulting Party, but such termination shall not affect any rights or
obligations of either party arising from or relating to such Default under the
terms hereof.
Not in limitation of the foregoing, the Fund may terminate this Agreement
prior to the end of the initial five (5) year term of this Agreement, other than
for a Default by AMT Capital, upon ninety (90) days written notice to AMT
Capital and payment of liquidated damages to AMT Capital as follows: The
liquidated damages amount shall be equal to (i) the aggregate of monthly fees
due or paid to AMT Capital under this Agreement for the last six (6) months
prior to receipt of notice of termination, if this Agreement is so terminated by
the Fund in its first or second year, or (ii) the aggregate of the monthly fees
dues to AMT Capital under this Agreement for the last two (2) months prior to
receipt of notice of termination, if this Agreement is so terminated by the Fund
in its third, fourth, or fifth year. Upon payment of such sum, AMT Capital
shall have no further claim to fees due under this Agreement for periods after
the termination date.
The provisions of this Section 12 shall not limit either party's
termination rights under Section 11 of this Agreement. The provisions of
Section 11 and this Section 12 shall govern the method of termination of this
Agreement, but shall not limit any other rights or remedies of either party in
the event of any breach of this Agreement by the other party.
13. Notices
Any notice or other communication authorized or required hereunder shall
be in writing or by confirming telegram, cable, telex or facsimile sending
device. Notice shall be addressed to the Fund at 50 Division Street, Suite
401, Somerville, New Jersey 08876, Attention: President; and to AMT Capital
Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New York 10020,
Attention: Carla E. Dearing. Either party may designate a different address by
notice to the other party. Any such notice or other communication shall be
deemed given when actually received.
14. Non-Assignability
This Agreement shall not be assigned by either of the parties hereto
without the prior consent in writing of the other party. Any purported
assignment in violation of this Agreement shall be void and of no effect.
15. Successors
This Agreement shall be binding on and shall inure to the benefit of the
Fund and AMT Capital, and their respective successors and permitted assigns.
16. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: HARDING, LOEVNER FUNDS, INC.
_______________________ By:_________________________
David R. Loevner,
Secretary President
ATTEST: AMT CAPITAL SERVICES, INC.
______________________ By:_________________________
William E. Vastardis, Carla E. Dearing,
Senior Vice President President
<PAGE>
SCHEDULE A
to
ADMINISTRATION AGREEMENT
between
HARDING, LOEVNER FUNDS, INC.
and
AMT CAPITAL SERVICES, INC.
Pursuant to the attached Administration Agreement, AMT Capital Services, Inc.
("AMT Capital") will provide the following services to Harding, Loevner Funds,
Inc. (the "Fund"):
1) Supervision of all third party vendors to the Fund - AMT Capital
will supervise the quality of service and competitiveness of fees of
all Fund vendors, except the investment adviser. AMT Capital will
develop day-to-day working relationships with existing vendors as
well as evaluate alternative vendor candidates, as reasonably
requested by the Fund's officers. The vendors that AMT Capital will
be responsible for include:
a) Transfer and Dividend Disbursing Agent, Fund Accounting Agent
and Custodian - AMT Capital will make necessary efforts to
ensure that all legally required functions are performed at a
high quality level and at a competitive fee. AMT Capital will
strive to enhance the service levels as well as reporting
capabilities.
b) Outside Counsel, Independent Accountant and Other Vendors -
AMT Capital will coordinate communications with all other Fund
vendors with a goal of enhancing service levels while
controlling costs.
c) Insurance Providers - AMT Capital will identify potential
insurance providers and evaluate the comparative terms and
costs of fidelity bond, E&O and D&O coverage. AMT Capital
will continually monitor the appropriateness of the chosen
providers and coverage.
2) Monitor and Report on Compliance - AMT Capital will monitor the
Fund's compliance with the regulations of Sub-Chapter M of the
Internal Revenue Code with particular emphasis on the asset
diversification, income and short-short tests. AMT Capital will
monitor the Fund's compliance with the securities laws, particularly
the Investment Company Act of 1940, with particular emphasis on the
diversification and voting stock tests. AMT Capital will monitor
all Prospectus, Statement of Additional Information and Board-
imposed compliance limitations. AMT Capital will report compliance
status in all required areas in a format and at a frequency mutually
agreed upon between Fund officers and directors and AMT Capital,
including a quarterly review and reporting pursuant to the Fund's
Code of Ethics policy.
3) Prepare and Monitor Annual Compliance and Administrative Calendar -
AMT Capital will prepare an annual calendar which will include key
dates in the operations of the Fund, such as Board and Audit
Committee meetings and mailings, filing dates, compliance monitoring
and other mutually agreed upon events. AMT Capital will monitor the
calendar and report on status of activity on a regular basis to Fund
officers.
4) Board of Directors' Meetings - AMT Capital will prepare and mail all
necessary Resolutions, Agenda, Powers of Attorney and other material
in advance of each Board meeting, and will prepare and mail all
Board written consents. AMT Capital will do a presentation to the
Board of the status of all administrative and operations functions
at each meeting. AMT Capital will coordinate other Vendor
presentations to the Board when required. AMT Capital will pay all
required directors' fees and expenses, from the Fund's accounts
maintained with its custodian, on a timely and accurate basis.
5) Monthly Fund Management Reporting - AMT Capital will collect, review
and summarize all Vendor reports. AMT Capital will prepare a
monthly administrative report which will include the financial
statements, a compliance summary, expense ratio calculations,
portfolio turnover ratio calculations and performance calculations,
and will prepare other reasonably requested activity reports.
6) Shareholder Reports - AMT Capital will prepare the semi-annual and
annual financial reports and footnotes required by SEC regulation
for reporting to the shareholders and the SEC. AMT Capital will
coordinate with the Investment Adviser and Independent Accountants
to obtain the appropriate letters to the shareholders. AMT Capital
will coordinate the printing of the reports and mail to the
shareholders as well as file copies with the appropriate regulatory
authorities. AMT Capital will respond to any shareholder inquiries
under the direction of the Fund's officers.
7) Tax Filings - AMT Capital will prepare for Fund officer review all
necessary tax returns and file such returns on a timely basis with
the appropriate regulatory authorities. These will include all
Federal corporate and excise tax returns, state returns, and 1099
MISC returns for directors fees, and if required, for fees to third
party vendors.
8) SEC Filings - AMT Capital will prepare for Fund officer review all
necessary filings and make such filings on a timely basis with the
SEC. These will include Form N-SAR, Rule 24e-2 and 24f-2 filings,
proxy materials, post-effective amendments to Form N-1A and any
other SEC filings.
9) Blue Sky Monitoring and Filings - AMT Capital will monitor Blue Sky
compliance in each jurisdiction and perform all administrative
functions, including the making of necessary filings on behalf of
the Fund, under the supervision of the Fund's Distributor. AMT
Capital will report the status of the Fund's registration of each
series of Shares on a regular basis to the Fund's directors and
officers.
10) Other Filings - On behalf of the Fund, AMT Capital will prepare and
file any other required documents with the appropriate jurisdiction,
including abandoned property reports and state corporate law filings.
11) Holdings Reconciliations - AMT Capital will review holdings
reconciliations between the Custodian and Fund Accounting Agent and
between the Investment Adviser and the Custodian/Fund Accounting
Agent. All discrepancies will be researched and reported promptly
to the Fund's officers or directors.
12) Proxy Statement and Annual Meeting - AMT Capital will prepare all
proxy materials, file them with the SEC and mail them to the
shareholders. AMT Capital will set up the Annual Meeting, prepare
the agenda and script, tabulate and solicit votes if requested to do
so by the Fund's officers or directors and perform the duties of the
inspector of elections.
13) Fund Expenses - AMT Capital will review all Fund expenses and strive
to create efficiencies and economies of scale wherever possible.
AMT Capital, under supervision and direction of Fund officers, will
pay all Fund bills in an accurate and timely manner from the Fund's
accounts maintained with its custodian.
14) New Series Registration - AMT Capital will assist management in the
preparation of and filing with the SEC of all new Series or other
changes to the Fund's prospectus and Statement of Additional
Information.
15) General - AMT Capital will make its staff available to Fund
management to assist in or to respond to any reasonable request for
Fund- or industry-related information. If requested, AMT Capital
will make its facilities available for meetings of the Fund's
officers or directors. AMT Capital will assist in any examination
of the Fund by the SEC, IRS or any other regulatory agency.
TRANSFER AGENCY AND SERVICE AGREEMENT
Between
Harding, Loevner Funds,Inc.
and
INVESTORS BANK & TRUST COMPANY
FORM OF
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT effective as of the first day of October, 1996 by and
between Harding, Loevner Funds, Inc., a corporation organized under
the laws of [State of Incorporation] (the "Company"), and INVESTORS
BANK & TRUST COMPANY, a Massachusetts trust company (the "Bank").
WHEREAS, the Company desires to appoint the Bank as its transfer
agent, dividend disbursing agent and agent in connection with certain
other activities, and the Bank desires to accept such appointment;
WHEREAS, the Bank is duly registered as a transfer agent as
provided in Section 17A(c) of the Securities Exchange Act of 1934, as
amended, (the "1934 Act");
WHEREAS, the Company is authorized to issue shares in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Company intends to initially offer shares in
[number] series, [name of each series] (such series, together with all
other series subsequently established by the Company and made subject
to this Agreement in accordance with Article 17, being herein referred
to as the "Fund(s)");
NOW, THEREFORE, in consideration of the mutual covenants herein
set forth, the Company and the Bank agree as follows:
ARTICLE 1. Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this
Agreement, the Company on behalf of the Funds hereby employs and
appoints the Bank to act, and the Bank agrees to act, as transfer
agent for each of the Fund(s)' authorized and issued shares of
beneficial interest ("Shares"), dividend disbursing agent and agent in
connection with any accumulation, open-account or similar plans
provided to the shareholders of the Company ("Shareholders") and set
out in the currently effective prospectus and statement of additional
information, as each may be amended from time to time, (the
"Prospectus") of the Company, including without limitation any
periodic investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following
services:
(a) In connection with procedures established from time to
time by agreement between the Company and the Bank, the Bank shall:
(i) Receive for acceptance orders for the purchase of
Shares and promptly deliver payment and appropriate documentation
therefor to the custodian of theCompany appointed by the Board of
Directors of the Company (the "Custodian");
(ii) Pursuant to purchase orders, issue the
appropriate number of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate documentation
therefor to the Custodian;
(iv) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered
owners thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Company on behalf of a Fund;
(vii) Create and maintain all necessary records
including those specified in Article 10 hereof, in accordance with all
applicable laws, rules and regulations, including but not limited to
records required by Section 31(a) of the Investment Company Act of
1940, as amended (the "1940 Act"), and those records pertaining to the
various functions performed by it hereunder. All records shall be
available for inspection and use by the Company. Where applicable,
such records shall be maintained by the Bank for the periods and in
the places required by Rule 31a-2 under the 1940 Act;
(viii) Make available during regular business hours all
records and other data created and maintained pursuant to this Agreement
for reasonable audit and inspection by the Company, or any person
retained by the Company. Upon reasonable notice by the Company, the
Bank shall make available during regular business hours its facilities
and premises employed in connection with its performance of this Agreement
for reasonable visitation by the Company, or any person retained by the
Company;
(ix) At the expense of and at the request of the
Company, maintain an adequate supply of blank share certificates for
each Fund providing for the issuance of certificates to meet the
Bank's requirements therefor. Such share certificates shall be
properly signed by facsimile. The Company agrees that,
notwithstanding the death, resignation, or removal of any officer of
the Company whose signature appears on such certificates, the Bank may
continue to countersign certificates which bear such signatures until
otherwise directed by the Company. Share certificates may be issued
and accounted for entirely by the Bank and do not require any third
party registrar or other endorsing party;
(x) Issue replacement share certificates in lieu of
certificates which have been lost, stolen, mutilated or destroyed,
without any further action by the Board of Directors or any officer
of the Company, upon receipt by the Bank of properly executed
affidavits and lost certificate bonds, in form satisfactory to the
Bank with the Company and the Bank as obligees under the bond. At the
discretion of the Bank, and at its sole risk, the Bank may issue
replacement certificates without requiring the affidavits and lost
certificate bonds described above and the Company agrees to indemnify
the Bank against any and all losses or claims which may arise by
reason of the issuance of such new certificates in the place of the
ones allegedly lost, stolen or destroyed; and
(xi) Record the issuance of Shares of the Company and
maintain, pursuant to Rule 17Ad-10(e) under the 1934 Act, a record of
the total number of Shares of the Company which are authorized, based
upon data provided to it by the Company, and issued and outstanding.
The Bank shall also provide the Company on a regular basis with the
total number of Shares which are authorized and issued and outstanding
and shall have no obligation, when recording the issuance of Shares,
to monitor the issuance of such Shares or to take cognizance of any
laws relating to the issue or sale of such Shares, which functions
shall be the sole responsibility of the Company.
(b) In addition to and not in lieu of the services set
forth in the above paragraph (a) or in any Schedule hereto, the Bank
shall: (i) perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant, agent in connection
with accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal
program); including but not limited to maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies,
receiving and tabulating proxies, mailing Shareholder reports and
prospectuses to current Shareholders, withholding taxes on all
accounts, including nonresident alien accounts, preparing and filing
U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, responding to Shareholder telephone calls and
Shareholder correspondence, preparing and mailing activity statements
for Shareholders, and providing Shareholder account information; and
(ii) provide a system which will enable the Company to monitor the
total number of shares sold in each State. The Company shall (i)
identify to the Bank in writing those transactions and assets to be
treated as exempt from blue sky reporting for each State and (ii)
verify the establishment of transactions for each State on the system
prior to activation and thereafter monitor the daily activity for each
State. The responsibility of the Bank for a Fund's blue sky state
registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by such Fund(s) and the
reporting of such transactions to the Fund(s) as provided above.
(c) Additionally, the Bank shall utilize a system to
identify all share transactions which involve purchase and redemption
orders that are processed at a time other than the time of the
computation of net asset value per share next computed after receipt
of such orders, and shall compute the net effect upon the Fund(s) of
such transactions so identified on a daily and cumulative basis.
ARTICLE 2. Sale of Company Shares
2.01 Whenever the Company shall sell or cause to be sold any
Shares of a Fund, the Company shall deliver or cause to be delivered
to the Bank a document duly specifying: (i) the name of the Fund
whose Shares were sold; (ii) the number of Shares sold, trade date,
and price; (iii) the amount of money to be delivered to the Custodian
for the sale of such Shares and specifically allocated to such Fund;
and (iv) in the case of a new account, a new account application or
sufficient information to establish an account.
2.02 The Bank will, upon receipt by it of a check or other
payment identified by it as an investment in Shares of one of the
Funds and drawn or endorsed to the Bank as agent for, or identified as
being for the account of, one of the Funds, promptly deposit such
check or other payment to the appropriate account postings necessary
to reflect the investment. The Bank will notify the Company, or its
designee, and the Custodian of all purchases and related account
adjustments.
2.03 Under procedures as established by mutual agreement between
the Company and the Bank, the Bank shall issue to the purchaser or its
authorized agent such Shares, computed to the nearest three decimal
points, as he is entitled to receive, based on the appropriate net
asset value of the Funds' Shares, determined in accordance with the
prospectus and any applicable federal law or regulation. In issuing
Shares to a purchaser or its authorized agent, the Bank shall be
entitled to rely upon the latest directions, if any, previously
received by the Bank from the purchaser or its authorized agent
concerning the delivery of such Shares.
2.04 The Bank shall not be required to issue any Shares of the
Company where it has received a written instruction from the Company
or written notification from any appropriate federal or state
authority that the sale of the Shares of the Fund(s) in question has
been suspended or discontinued, and the Bank shall be entitled to
rely upon such written instructions or written notification.
2.05 Upon the issuance of any Shares of any Fund(s) in
accordance with foregoing provisions of this Section, the Bank shall
not be responsible for the payment of any original issue or other
taxes, if any, required to be paid by the Company in connection with
such issuance.
2.06 The Bank may establish such additional rules and
regulations governing the transfer or registration of Shares as it may
deem advisable and consistent with such rules and regulations
generally adopted by transfer agents, or with the written consent of
the Company, any other rules and regulations.
ARTICLE 3. Returned Checks
3.01 In the event that any check or other order for the transfer
of money is returned unpaid for any reason, the Bank will take such
steps as the Bank may, in its discretion, deem appropriate to protect
the Company from financial loss or as the Company or its designee may
instruct. Provided that the standard procedures, as agreed upon from
time to time, between the Company and the Bank, regarding purchases
and redemptions of Shares, are adhered to by the Bank, the Bank shall
not be liable for any loss suffered by a Fund as a result of returned
or unpaid purchase or redemption transactions. Legal or other
expenses incurred to collect amounts owed to a Fund as a consequence
of returned or unpaid purchase or redemption transactions shall be an
expense of that Fund.
ARTICLE 4 . Redemptions
4.01 Shares of any Fund may be redeemed in accordance with the
procedures set forth in the Prospectus of the Company and the Bank
will duly process all redemption requests.
ARTICLE 5. Transfers and Exchanges
5.01 The Bank is authorized to review and process transfers of
Shares of each Fund, exchanges between Funds on the records of the
Funds maintained by the Bank, and exchanges between the Company and
any other entity as may be permitted by the Prospectus of the Company.
If Shares to be transferred are represented by outstanding
certificates, the Bank will, upon surrender to it of the certificates
in proper form for transfer, and upon cancellation thereof,
countersign and issue new certificates for a like number of Shares and
deliver the same. If the Shares to be transferred are not represented
by outstanding certificates, the Bank will, upon an order therefor by
or on behalf of the registered holder thereof in proper form, credit
the same to the transferee on its books. If Shares are to be
exchanged for Shares of another Fund, the Bank will process such
exchange in the same manner as a redemption and sale of Shares,
except that it may in its discretion waive requirements for
information and documentation.
ARTICLE 6. Right to Seek Assurances
6.01 The Bank reserves the right to refuse to transfer or redeem
Shares until it is satisfied that the requested transfer or
redemption is legally authorized, and it shall incur no liability for
the refusal, in good faith, to make transfers or redemptions which the
Bank, in its judgment, deems improper or unauthorized, or until it is
satisfied that there is no basis for any claims adverse to such
transfer or redemption. The Bank may, in effecting transfers, rely
upon the provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the
same may be amended from time to time, which in the opinion of legal
counsel for the Company or the Bank's own legal counsel, do not
require certain documents in connection with the transfer or
redemption of Shares of any Fund, and the Company shall indemnify the
Bank for any act done or omitted by it in reliance upon such laws or
opinions of counsel of the Company or of the Bank.
ARTICLE 7. Distributions
7.01 The Company will promptly notify the Bank of the
declaration of any dividend or distribution. The Company shall
furnish to the Bank a resolution of the Board of Directors of the
Company certified by the Secretary (a "Certificate"): (i) authorizing
the declaration of dividends on a specified periodic basis and
authorizing the Bank to rely on oral instructions or a Certificate
specifying the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
Shareholders entitled to payment shall be determined and the amount
payable per share to Shareholders of record as of such record date
and the total amount payable to the Bank on the payment date; or (ii)
setting forth the date of the declaration of any dividend or
distribution by a Fund, the date of payment thereof, the record date
as of which Shareholders entitled to payment shall be determined, and
the amount payable per share to the Shareholders of record as of
that date and the total amount payable to the Bank on the payment
date.
7.02 The Bank, on behalf of the Company, shall instruct the
Custodian to place in a dividend disbursing account funds equal to the
cash amount of any dividend or distribution to be paid out. The Bank
will calculate, prepare and mail checks to (at the address as it
appears on the records of the Bank), or (where appropriate) credit
such dividend or distribution to the account of, Fund Shareholders,
and maintain and safeguard all underlying records.
7.03 The Bank will replace lost checks at its discretion and in
conformity with regular business practices.
7.04 The Bank will maintain all records necessary to reflect the
crediting of dividends which are reinvested in Shares of the Company,
including without limitation daily dividends.
7.05 The Bank shall not be liable for any improper payments made
in accordance with a resolution of the Board of Directors of the
Company.
7.06 If the Bank shall not receive from the Custodian sufficient
cash to make payment to all Shareholders of the Company as of the
record date, the Bank shall, upon notifying the Company, withhold
payment to all Shareholders of record as of the record date until such
sufficient cash is provided to the Bank and shall not be liable for
any claim arising out of such withholding.
ARTICLE 8. Other Duties
8.01 In addition to the duties expressly provided for herein,
the Bank shall perform such other duties and functions and shall be
paid such amounts therefor as may from time to time be agreed to in
writing.
ARTICLE 9. Taxes
9.01 It is understood that the Bank shall file such appropriate
information returns concerning the payment of dividends and capital
gain distributions and tax withholding with the proper Federal, State
and local authorities as are required by law to be filed by the
Company and shall withhold such sums as are required to be withheld by
applicable law.
ARTICLE 10. Books and Records
10.01 The Bank shall maintain confidential records showing for
each Shareholder's account the following: (i) names, addresses and tax
identification numbers; (ii) numbers of Shares held; (iii)
historical information (as available from prior transfer agents)
regarding the account of each Shareholder, including dividends paid
and date and price of all transactions on a Shareholder's account;
(iv) any stop or restraining order placed against a Shareholder's
account; (v) information with respect to withholdings; (vi) any
capital gain or dividend reinvestment order, plan application,
dividend address and correspondence relating to the current
maintenance of a Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; (viii) any
information required in order for the Bank to perform the calculations
contemplated or required by this Agreement; and (ix) such other
information and data as may be required by applicable law.
10.02 Any records required to be maintained by Rule 31a-1 under
the 1940 Act will be preserved for the periods prescribed in Rule 31a-
2 under the 1940 Act. Such records may be inspected by the Company
during regular business hours upon reasonable notice. The Bank may,
at its option at any time, and shall forthwith upon the Company's
demand, turn over to the Company and cease to retain in the Bank's
files, records and documents created and maintained by the Bank in
performance of its service or for its protection. At the end of the
six-year retention period, such documents will either be turned over
to the Company, or destroyed in accordance with the Company's
authorization.
10.03 Procedures applicable to the services to be performed
hereunder may be established from time to time by agreement between
the Fund(s) and the Bank. The Bank shall have the right to utilize
any shareholder accounting and recordkeeping systems which, in its
opinion, qualifies to perform any services to be performed hereunder.
The Bank shall keep records relating to the services performed
hereunder, in the form and manner as it may deem advisable.
ARTICLE 11. Fees and Expenses.
11.01 For performance by the Bank pursuant to this Agreement,
the Fund(s) agree to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached as
Appendix A hereto. Such fees and out-of-pocket expenses and advances
identified under Section 11.02 below may be changed from time to time
subject to mutual written agreement between the Fund(s) and the Bank.
11.02 In addition to the fee paid under Section 11.01 above,
the Fund(s) agree to reimburse the Bank for out-of-pocket expenses or
advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by
the Bank at the request or with the consent of the Fund(s) including,
without limitation, any equipment or supplies which the Company
specifically orders or requiresthe Bank to purchase, will be
reimbursed by the Fund(s).
11.03 The Fund(s) agree to pay all fees and reimbursable
expenses within thirty days following the mailing of the respective
billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be
advanced to the Bank by the Fund(s) at least seven (7) days prior to
the mailing date of such materials. Any waiver or extension by the
Bank of the five and seven day time periods enumerated in this section
2.03 shall not constitute a dismissal of any monies due under this
Agreement nor shall such waiver or extension apply to any future
monies due to the Bank hereunder.
ARTICLE 12. Representations and Warranties of the Bank
The Bank represents and warrants to the Company that:
12.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.
12.02 It is empowered under applicable laws and by its charter
and by-laws to enter into and perform this Agreement.
12.03 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
12.04 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
ARTICLE 13. Representations and Warranties of the Company
The Company represents and warrants to the Bank that:
13.01 It is a corporation duly organized and existing and in
good standing under the laws of the State of its incorporation as set
forth in the preamble hereto.
13.02 It is empowered under applicable laws and by its charter
documents and by-laws to enter into and perform this Agreement.
13.03 All proceedings required by said charter documents and by-
laws have been taken to authorize it to enter into and perform this
Agreement.
13.04 It is a open-end investment company registered under the
1940 Act.
13.05 A registration statement on Form N-1A (including a
prospectus and statement of additional information) under the
Securities Act of 1933 and the 1940 Act is currently effective and
will remain effective, and appropriate state securities law filings
have been made and will continue to be made, with respect to all
Shares of the Company being offered for sale.
13.06 When Shares are hereafter issued in accordance with the
terms of the Prospectus, such Shares shall be validly issued, fully
paid and nonassessable by the Fund(s).
ARTICLE 14. Indemnification
14.01 Except as set forth in subparagraph (f) hereof, the Bank
shall not be responsible for, and the Company shall indemnify and hold
the Bank harmless from and against, any and all losses, damages,
costs, charges, legal fees, payments, expenses and liability arising
out of or attributable to:
(a) All actions taken or omitted to be taken by the Bank
or its agents or subcontractors in good faith in reliance on or use by
the Bank or its agents or subcontractors of information, records and
documents which (i) are received by the Bank or its agents or
subcontractors and furnished to such party by or on behalf of the
Fund(s), (ii) have been prepared and/or maintained by the Fund(s) or
any other person or firm on behalf of the Fund(s), or (iii) were
received by the Bank or its agents or subcontractors from a prior
transfer agent.
(b) Any action taken or omitted to be taken by the Bank in
good faith reliance upon any law, act, regulation (a "Regulation") or
interpretation of a Regulation even though such Regulation may
thereafter have been altered, changed, amended or repealed.
(c) The Fund(s)' refusal or failure to comply with the
terms of this Agreement, or which arise out of the Funds' lack of good
faith, negligence or willful misconduct or which arise out of the
breach of any representation or warranty of the Fund(s) hereunder.
(d) The reliance on, or the carrying out by the Bank or
its agents or subcontractors of any instructions or requests, whether
written or oral, of the Fund(s).
(e) The offer or sale of Shares by the Company in violation
of (i) any requirement under the federal securities laws or
regulations; (ii) any requirement under the securities laws or
regulations of any state; or (iii) any stop order or other
determination or ruling by any federal or state agency with respect to
the offer or sale of such Shares.
14.02 The Bank shall indemnify and hold the Fund(s) harmless
from and against any and all losses, damages, costs, charges, legal
fees, payments, expenses and liability arising out of or attributed to
any action or failure or omission to act by the Bank as a result of
the Bank's lack of good faith, gross negligence, willful misconduct,
knowing violation of law or fraud.
14.03 At any time the Bank may apply to any officer of the
Company for instructions, and may consult with legal counsel of the
Bank or the Company with respect to any matter arising in connection
with the services to be performed by the Bank under this Agreement,
and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Company for any action taken or omitted
by it in reliance upon such instructions or upon the opinion of such
counsel except for a knowing violation of law. The Bank, its agents
and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Fund(s),
reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data,
records or documents provided to the Bank or its agents or
subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund(s), and the Bank, its
agents and subcontractors shall not be held to have notice of any
change of authority of any person, until receipt of written notice
thereof from the Fund(s). The Bank, its agents and subcontractors
shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual
or facsimile signatures of an officer of the Company, and one proper
countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
14.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, interruption of electrical power or other utilities,
equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party
shall not be liable to the other for any damages resulting from such
failure to perform or otherwise from such causes.
14.05 Neither party to this Agreement shall be liable to the
other party for special, incidental or consequential damages, even if
the other party has been advised of the possibility of such damages,
under any provision of this Agreement or for any act or failure to act
hereunder as contemplated by this Agreement.
14.06 Notwithstanding anything to the contrary in this
Agreement, in no event shall the Bank's liability under this Agreement
exceed in general money damages a total cumulative maximum amount of
one hundred percent of the amounts actually paid by the Company to the
Bank under this Agreement. The existence of more than one claim shall
not enlarge or extend this limit.
14.07 In order that the indemnification provisions contained in
this Article 14 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party seeking
the indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party seeking
indemnification shall give the indemnifying party full and complete
authority, information and assistance to defend such claim or
proceeding, and the indemnifying party shall have, at its option, sole
control of the defense of such claim or proceeding and all negotiations
for its compromise or settlement.The party seeking indemnification shall
in no case confess any claim or make any compromise in any case in which
the other party may be required to indemnify it except with the other
party's prior written consent, which consent shall not be unreasonably
withheld.
ARTICLE 15. Covenants of the Company and the Bank
15.01 The Company shall promptly furnish to the Bank the
following:
(a) A certified copy of the resolution of the Directors of
the Company authorizing the appointment of the Bank and the execution
and delivery of this Agreement.
(b) A copy of the charter documents and by-laws of the
Company and all amendments thereto.
(c) Copies of each vote of the Directors designating
authorized persons to give instructions to the Bank, and a Certificate
providing specimen signatures for such authorized persons.
(d) Certificates as to any change in any officer or Director
of the Company.
(e) If applicable a specimen of the certificate of Shares
in each Fund of the Company in the form approved by the Directors,
with a Certificate as to such approval.
(f) Specimens of all new certificates for Shares,
accompanied by the Directors' resolutions approving such forms.
(g) All account application forms and other documents
relating to shareholder accounts or relating to any plan, program or
service offered by the Company.
(h) A list of all Shareholders of the Fund(s) with the
name, address and tax identification number of each Shareholder, and
the number of Shares of the Fund(s) held by each, certificate numbers
and denominations ( if any certificates have been issued), lists of
any account against which stops have been placed, together with the
reasons for said stops, and the number of Shares redeemed by the
Fund(s).
(i) An opinion of counsel for the Company with respect to
the validity of the Shares and the status of such Shares under the
Securities Act of 1933.
(j) Copies of the Fund(s) registration statement on Form N-
1A (if applicable)as amended and declared effective by the Securities
and Exchange Commission and all post-effective amendments thereto.
(k) Such other certificates, documents or opinions as the
Bank may deem necessary or appropriate for the Bank in the proper
performance of its duties hereunder.
15.02 The Bank hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Company for
safekeeping of stock certificates, check forms and facsimile signature
imprinting devices, if any; and for the preparation or use, and for
keeping account of, such certificates, forms and devices.
15.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable.
To the extent required by Section 31 of the 1940 Act and the Rules
thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the
Bank hereunder are the confidential property of the Company and will
be preserved, maintained and made available in accordance with such
Section and Rules, and will be surrendered to the Company on and in
accordance with its request.
15.04 The Bank and the Company agree that all books, records,
information and data pertaining to the business of the other party
which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement shall remain confidential, and shall
not be voluntarily disclosed to any other person, except as may be
required by law.
15.05 In case of any requests or demands for the inspection of
the Shareholder records of the Company, the Bank will endeavor to
notify the Company and to secure instructions from an authorized
officer of the Company as to suchrequest or demand. The Bank reserves
the right, however, to exhibit the Shareholder records to any person
whenever it is advised by its counsel that it may be subject to
enforcement or other action by any court or regulatory body for the
failure to exhibit the Shareholder records to such person.
ARTICLE 16. Term of Agreement
16.01 Termination of Agreement. The term of this Agreement shall
be three years commencing upon the date first above written (the
"Initial Term"), unless earlier terminated as provided herein. After
the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive one-year terms (each a "Renewal
Term") unless notice of non-renewal is delivered by the non-renewing
party to the other party no later than sixty days prior to the
expiration of the Initial Term or any Renewal Term, as the case may
be.
(a) Either party hereto may terminate this Agreement prior
to the expiration of the Initial Term in the event the other party
violates any material provision of this Agreement, provided that the
non-violating party gives written notice of such violation to the
violating party and the violating party does not cure such violation
within 90 days of receipt of such notice.
(b) Either party may terminate this Agreement during any
Renewal Term upon sixty days written notice to the other party. Any
termination pursuant to this paragraph 16.01(b) shall be effective
upon expiration of such sixty days, provided, however, that the
effective date of such termination may be postponed to a date not more
than ninety days after delivery of the written notice: (i) at the
request of the Bank, in order to prepare for the transfer by the Bank
of its duties hereunder; or (ii) at the request of the Fund, in order
to give the Fund an opportunity to make suitable arrangements for a
successor transfer agent.
16.02 Should the Company exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
material will be borne by the Company. Additionally, the Bank
reserves the right to recover from the Company any other reasonable
expenses associated with such termination.
ARTICLE 17. Additional Funds
17.01 In the event that the Company establishes one or more
series of Shares in addition to the initial series with respect to
which it desires to have the Bank render services as transfer agent
under the terms hereof, it shall so notify the Bank in writing, and if
the Bank agrees in writing to provide such services, such series of
Shares shall become a Fund hereunder.
ARTICLE 18. Assignment
18.01 Except as provided in Section 18.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by
either party without the written consent of the other party.
18.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and
assigns.
18.03 The Bank, may without further consent on the part of the
Company, subcontract for the performance of any of the services to be
provided hereunder to third parties, including any affiliate of the
Bank, provided that the Bank shall remain liable hereunder for any
acts or omissions of any subcontractor as if performed by the Bank.
ARTICLE 19. Amendment
19.01 This Agreement may be amended or modified only by a written
agreement executed by both parties.
ARTICLE 20. Governing Law
20.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts, without regard to its conflict of laws provisions.
ARTICLE 21. Merger of Agreement and Severability
21.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
21.02 In the event any provision of this Agreement shall be held
unenforceable or invalid for any reason, the remainder of the Agreement shall
remain in full force and effect.
21.03 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such counterparts shall
together, constitute only one instrument.
ARTICLE 22. Notices
22. 01 Any notice or other instrument in writing authorized or required
by this Agreement to be given to either party hereto will be sufficiently
given if addressed to such party and mailed or delivered to it at its office
at the address set forth below:
For the Fund(s): [ ]
Attention:
For the Bank: Investors Bank & Trust Company
P.O. Box 1537
Boston, Massachusetts 02205-1537
Attention:
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their names and on their behalf under their seals by
and through their duly authorized officers, as of the day and the year
first above written.
[Name of Investment Company]
By: __________________________
Name:
Title:
INVESTORS BANK & TRUST COMPANY
By: __________________________
Name:
Title:
Dechert Price & Rhoads
477 Madison Ave
NY, NY 10022-5891
October 21, 1996
Harding, Loevner Funds, Inc.
600 Fifth Avenue, 26th Floor
New York, NY 10020
Dear Sir or Madam:
We have acted as counsel for Harding, Loevner Funds, Inc., a
Maryland corporation (the "Company"), in connection with the
organization of the Company, the registration of the Company
under the Investment Company Act of 1940 and the registration
under the Securities Act of 1933 of an indefinite number of
shares of common stock, $.001 par value, of the Company of the
various series authorized.
As counsel for the Company, we have participated in the
preparation of the registration statement on Form N-1A relating
to such shares and have examined and relied upon such records of
the Company and such other documents we have deemed to be
necessary to render the opinion expressed herein. Based on such
examination, we are of the opinion that:
(i) The Company is a corporation duly organized and
existing under the laws of the State of Maryland;
(ii) The Company is authorized to issue two billion
five hundred million (2,500,000,000) shares of
common stock, par value $.001 per share, of which
500,000,000 Shares have been initially allocated
to each of International Equity Portfolio, Global
Equity Portfolio, Emerging Markets Portfolio and
Multi-Asset Global Portfolio (the remaining
500,000,000 are currently unallocated), and that
such shares have been duly and validly authorized
by all requisite action of the Directors of the
Company, and no action of the shareholders is
required in such connection;
(iii) Assuming that the Company or its agent receives
consideration for such shares in accordance with
the terms of the prospectus forming a part of the
Company's registration statement and the
provisions of its Articles of Incorporation, the
shares will be legally and validly issued and will
be fully paid, and non-assessable by the Company.
We hereby consent to the use of this opinion as an exhibit
to the Company's Registration Statement on Form N-1A filed with
the Securities and Exchange Commission (File No. 333-9341) for
the registration under the Securities Act of 1933 of an
indefinite number of shares of the four series of the Company,
and to the use of our name in the prospectus and statement of
additional information contained therein, and any amendments
thereto. In giving such consent, we do not hereby admit that we
are within the category of persons whose consent is required by
Section 7 of the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
Very truly yours,
/s/ Dechert Price & Rhoads
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors" in the Prospectus and to the
incorporation by reference of our report dated February 9, 1996 of AMT Capital
Fund, Inc. in this Registration Statement (Form N-1A No. 333-09341) of the
Harding, Loevner Funds, Inc.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
November 1, 1996
PURCHASE AGREEMENT
HARDING, LOEVNER FUNDS, INC.
Harding, Loevner Funds, Inc. (the "Fund"), an open-end management
investment company, and David R. Loevner (the "Purchaser"), intending to be
legally bound, hereby agree as follows:
1. In order to provide the Fund on behalf of its International Equity
Portfolio (the "Portfolio") with its initial capital, the Fund hereby sells to
Purchaser and Purchaser purchases 1 share of the Portfolio, par value $0.001
per share, at a price of $10.00 per share. The Fund hereby acknowledges
receipt from Purchaser of funds in the amount of $10.00 in full payment for 1
Share of the Portfolio.
2. Purchaser represents and warrants to the Fund that the shares are
being acquired for investment and not with a view to distribution thereof.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
14th day of October, 1996.
HARDING, LOEVNER FUNDS, INC.
By: ____________________________
William E. Vastardis
Secretary
PURCHASER
____________________________
David R. Loevner
PURCHASE AGREEMENT
HARDING, LOEVNER FUNDS, INC.
Harding, Loevner Funds, Inc. (the "Fund"), an open-end management
investment company, and David R. Loevner (the "Purchaser"), intending to be
legally bound, hereby agree as follows:
1. In order to provide the Fund on behalf of its Emerging Markets
Portfolio (the "Portfolio") with its initial capital, the Fund hereby sells to
Purchaser and Purchaser purchases 1 share of the Portfolio, par value $0.001
per share, at a price of $10.00 per share. The Fund hereby acknowledges
receipt from Purchaser of funds in the amount of $10.00 in full payment for 1
Share of the Portfolio.
2. Purchaser represents and warrants to the Fund that the shares are
being acquired for investment and not with a view to distribution thereof.
3. IN WITNESS WHEREOF, the parties have executed this agreement as of
the 14th day of October, 1996.
HARDING, LOEVNER FUNDS, INC.
By: ____________________________
William E. Vastardis
Secretary
PURCHASER
By: _____________________________
David R. Loevner
PURCHASE AGREEMENT
HARDING, LOEVNER FUNDS, INC.
Harding, Loevner Funds, Inc. (the "Fund"), an open-end management
investment company, and David R. Loevner (the "Purchaser"), intending to be
legally bound, hereby agree as follows:
1. In order to provide the Fund on behalf of its Multi-Asset Global
Portfolio (the "Portfolio") with its initial capital, the Fund hereby sells
to Purchaser and Purchaser purchases 1 share of the Portfolio, par value $0.001
per share, at a price of $10.00 per share. The Fund hereby acknowledges
receipt from Purchaser of funds in the amount of $10.00 in full payment for
1 Share of the Portfolio.
2. Purchaser represents and warrants to the Fund that the shares are
being acquired for investment and not with a view to distribution thereof.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
14th day of October, 1996.
HARDING, LOEVNER FUNDS, INC.
By: ____________________________
William E. Vastardis
Secretary
PURCHASER
_____________________________
David R. Loevner
PURCHASE AGREEMENT
HARDING, LOEVNER FUNDS, INC.
Harding, Loevner Funds, Inc. (the "Fund"), an open-end management
investment company, and David R. Loevner (the "Purchaser"), intending to be
legally bound, hereby agree as follows:
1. In order to provide the Fund on behalf of its Global Equity
Portfolio (the "Portfolio") with its initial capital, the Fund hereby sells to
Purchaser and Purchaser purchases 1 share of the Portfolio, par value $0.001
per share, at a price of $10.00 per share. The Fund hereby acknowledges
receipt from Purchaser of funds in the amount of $10.00 in full payment for 1
Share of the Portfolio.
2. Purchaser represents and warrants to the Fund that the shares are
being acquired for investment and not with a view to distribution thereof.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
14th day of October, 1996.
HARDING, LOEVNER FUNDS, INC.
By: ____________________________
William E. Vastardis
Secretary
PURCHASER
_____________________________
David R. Loevner
Performance Information Schedule
Total Return
Date of Net Cap. Shares Returns
Distribution Income Gains. Reinvested NAV Inception 1 Year
AMT Capital Fund, Inc.
HLM International Equity Portfolio
5/11/94 10.00 1000.00
12/31/94 0.03158 0.01167 0.445 9.71 973.32
4/25/95 0.01500 0.00000 0.152 10.32 1038.16
6/30/95 0.00000 0.00000 0.000 10.32 1038.16 1000.00
7/25/95 0.05500 0.00000 0.529 10.46 1057.78 1018.90
10/23/95 0.01880 0.00000 0.183 10.41 1054.63 1015.86
12/29/95 0.01166 0.00000 0.110 10.77 1092.28 1052.13
6/30/96 0.00000 0.00000 0.000 12.04 1221.08 1176.20
