<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 1996
File No. 333-8919
File No. 811-7729
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 2 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 2 [X]
HANSBERGER INSTITUTIONAL SERIES
--------------
(Exact Name of Registrant as Specified in Charter)
515 East Las Olas Boulevard
Suite 1300
Fort Lauderdale, Florida 33301
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, including Area Code (954) 522-5150
Thomas L. Hansberger
515 East Las Olas Boulevard
Suite 1300
Ft. Lauderdale, Florida 33301
(Name and Address of Agent for Service)
Copies to:
W. John McGuire, Esq.
MORGAN, LEWIS & BOCKIUS LLP
1800 M Street, N.W.
Washington, D.C. 20036
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[X] Approximate date of Proposed Public Offering:
As soon as practicable after the
effective date of this Registration Statement
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Registrant hereby amends this Registration Statement 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 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 said Section 8(a)
may determine.
Pursuant to the provisions of Rule 24f-2 under the Investment Act of 1940, an
indefinite number of units of beneficial interest is being registered by this
Registration Statement.
----------------------------------------------------------------
<PAGE>
HANSBERGER INSTITUTIONAL SERIES
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- --------------------------------------------------------------------------------
<S> <C>
PART A -
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Summary, Introduction
Item 3. Condensed Financial Information Not Applicable
Item 4. General Description of Registrant Introduction; Investment Objectives
and Policies; General Information;
Investment Limitations
Item 5. Management of the Fund Management of the Fund
Item 5A. Management's Discussion of Fund
Performance Not Applicable
Item 6. Capital Stock and Other Securities Valuation of Shares; Dividends
and Capital Gains Distributions;
Taxes; Portfolio Transactions;
Performance Information
Item 7. Purchase of Securities Being Offered Purchase and Redemption of Shares
Item 8. Redemption or Repurchase Purchase and Redemption of Shares
Item 9. Pending Legal Proceedings Not Applicable
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 Trust and
the Funds
Item 13. Investment Objectives and Policies Investment Policies and Techniques;
Investment Restrictions
Item 14. Management of the Registrant Trustees and Officers of the Trust
Item 15. Control Persons and Principal
Holders of Securities Principal Shareholders
Item 16. Investment Advisory and Other
Services Investment Adviser; Custodian;
Transfer Agent and Dividend-
Disbursing Agent
Item 17. Brokerage Allocation Fund Transactions and Brokerage
Item 18. Capital Stock and Other Organization of the Trust and
Securities the Funds
Item 19. Purchase, Redemption, and
Pricing of Securities Being
Offered Determination of Net Asset Value
Item 20. Tax Status Taxes
Item 21. Underwriters Transfer Agent and Dividend
Disbursing Agent
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
<PAGE>
[LOGO OF PROSPECTUS APPEARS HERE]
Hansberger Institutional Series
515 East Las Olas Boulevard
Suite 1300
Fort Lauderdale, Florida
Telephone No. 954-522-5150
Hansberger Institutional Series (the "Trust"), a diversified management
investment company, is designed to provide institutional investors with multi-
national investment opportunities professionally managed by Hansberger Global
Investors, Inc. (the "Adviser"). The Trust currently consists of four separate
investment series (the "Funds") offering a range of investment choices. The
Funds and their investment objectives are:
INTERNATIONAL FUND. Seeks to achieve long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments outside the United States including developing countries.
EMERGING MARKETS FUND. Seeks to achieve long-term capital growth through a
policy of investing primarily in publicly traded equity securities of companies
located in emerging markets.
FOREIGN SMALL CAP FUND. Seeks to achieve long-term capital growth through a
policy of investing primarily in equity securities of issuers with relatively
small market capitalizations located outside the United States.
ALL COUNTRIES FUND. Seeks to achieve long-term capital growth through a
policy of investing primarily in securities of companies of any country,
including the United States.
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in a Fund, nor can
there be any assurance that a Fund's investment objective will be attained. Each
Fund may invest without limit in developing countries, borrow money for
investment purposes, invest in a variety of derivative instruments, and may
invest up to 15% of its net assets in illiquid securities, each of which may
involve greater risk and/or increased Fund expenses. In addition, investments in
foreign securities involve certain risks which are not normally involved in
investment in U.S. securities. See "RISK FACTORS." Investors should carefully
consider these risks before investing.
This Prospectus sets forth concisely information about the Funds that you
should know before investing. You should read it carefully and retain it for
future reference. Additional information about the Funds appears in a Statement
of Additional Information ("SAI"), dated October 1, 1996 and incorporated in
this Prospectus by reference. The SAI is available upon request and without
charge; write or call the Trust at the address or telephone number provided
above.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
The date of this Prospectus is October 1, 1996.
<PAGE>
INTRODUCTION
This Prospectus describes International Fund, Emerging Markets Fund,
Foreign Small Cap Fund and All Countries Fund (the "Funds"), four diversified
series of shares offered by the Hansberger Institutional Series (the "Trust"),
an open-end management investment company. Each Fund's investment objective is
long-term capital growth, but follows different investment policies, and invests
primarily in certain securities consistent with those policies in attempting to
meet its objective. See "INVESTMENT OBJECTIVE AND POLICIES."
Investment Adviser
Hansberger Global Investors, Inc. (the "Adviser") serves as investment
adviser to the Funds. See "MANAGEMENT OF THE FUNDS -- Investment Adviser."
Investment Risks
There can be no assurance that any Fund will achieve its investment
objectives. In addition, special risks may be presented by the particular
investment policies of each Fund. For example, each Fund has the right to
purchase securities in any foreign country, developed or developing. Investors
should consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations, which are in
addition to the usual risks inherent in domestic investments. Each of the Funds'
investment strategies involves specific risks described in this Prospectus under
"INVESTMENT OBJECTIVES AND POLICIES" and "RISK FACTORS," and under "INVESTMENT
POLICIES AND TECHNIQUES" in the SAI.
How to Invest
You may purchase shares at the Offering Price by check or by wire directly
from the Trust. The Offering Price is the net asset value per share next
determined after the Fund's transfer agent receives your order. See "FEE
SUMMARY." Your minimum initial investment in the Trust is normally $1,000,000,
and each subsequent investment must be at least $10,000. At its discretion, the
Adviser may waive minimum investment requirements for certain investors, clients
and employees. No minimum applies to automatic reinvestment of dividends and
capital gains distributions. You may be charged a fee if you effect transactions
through a broker or agent. See "PURCHASE AND REDEMPTION OF SHARES." Currently,
shares of Foreign Small Cap Fund and All Countries Fund(SM) are not being
offered or sold.
How to Redeem Shares
You may redeem your shares of a Fund at any time at the net asset value per
share next determined after the Trust receives your redemption request in "good
order." Each Fund's net asset value per share fluctuates, so a share's
redemption price may be more or less than its purchase price. If you reduce your
total investment in a Fund to less than the minimum required initial investment
amount, your investment may be subject to redemption. See "PURCHASE AND
REDEMPTION OF SHARES."
Dividends and Other Distributions
Each Fund expects to pay dividends and distribute capital gains at least
annually. Unless you provide written notice to the Fund to the contrary,
dividends and distributions will be automatically reinvested. See "DIVIDENDS AND
CAPITAL GAINS DISTRIBUTIONS."
-2-
<PAGE>
FEE SUMMARY
The following table and example are intended to assist you in understanding
the expenses and fees that a shareholder of a Fund will incur:
<TABLE>
<CAPTION>
Emerging Foreign All
International Markets Small Cap Countries
Fund Fund Fund Fund
-------------- --------- ---------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSE None None None None
ANNUAL FUND OPERATING
EXPENSES (as a percentage
of average net assets)
Management Fees 0.75% 1.00% 0.90% 0.75%
12b-1 Fees None None None None
Other Expenses (after
voluntary waivers)* 0.25% 0.50% 0.35% 0.25%
-------------- --------- ---------- ----------
Total Fund Operating
Expenses (after voluntary
waivers)** 1.00% 1.50% 1.25% 1.00%
================================================================================
</TABLE>
* Reflects voluntary waivers and reimbursements of fees by the Adviser and
Administrator. In the absence of such voluntary waivers or reimbursements,
Other Expenses for each of the following Funds are estimated to be:
International Fund - 0.45%; Emerging Markets Fund -0.55%; Foreign Small Cap
Fund - 0.40%; and All Countries Fund(SM) - 0.45%.
** Reflects voluntary waivers and reimbursements of fees by the Adviser and
Administrator. In the absence of such voluntary waivers or reimbursements,
Total Fund Operating Expenses for each of the following Funds are estimated
to be: International Fund - 1.20%; Emerging Markets Fund - 1.55%; Foreign
Small Cap Fund - 1.30; and All Countries Fund(SM) -1.20%. Although the
Adviser and Administrator anticipate voluntarily waiving fees and/or bearing
expenses that will result in total fund operating expenses as set forth
above, they are under no obligation to continue to do so. The Adviser has
agreed to waive its fees or reimburse Fund expenses if in any fiscal year a
Fund's expenses exceed the limit set by applicable state laws. See
"MANAGEMENT OF THE FUNDS -Investment Adviser."
- --------------------------------------------------------------------------------
Example
The following example demonstrates the expenses you would pay on a $1,000
investment assuming (1) 5% annual return and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
1 year 3 year
-------- -------
<S> <C> <C>
International Fund $10 $32
Emerging Markets Fund $15 $47
Foreign Small Cap Fund $13 $40
All Countries Fund(SM) $10 $32
- --------------------------------------------------------------------------------
</TABLE>
The example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. "Other
Expenses" are based on estimated amounts for the current fiscal year. The
assumption of a 5% annual return is required by the U.S. Securities and Exchange
Commission (the "SEC"), and is not a prediction of a Fund's future performance.
The Adviser may direct a Fund's securities transactions to brokers who may
agree to assume (or to arrange for third parties to assume) certain expenses of
the Fund.
-3-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective and the investment restrictions set forth
under "INVESTMENT RESTRICTIONS" in the SAI are fundamental and may not be
changed without Shareholder approval. All other investment policies and
practices described in this Prospectus are not fundamental, and may be changed
by the Board of Trustees without Shareholder approval.
International Fund
The Fund's investment objective is long-term capital growth. The Fund seeks
to achieve its objective by investing in stocks and debt obligations of
companies and governments outside the United States which the Adviser believes
are undervalued. Income will be an incidental consideration.
The Adviser's portfolio investment decisions rely heavily on a fundamental
analysis of securities with a long-term investment perspective. The Adviser
seeks to increase the scope and effectiveness of this fundamental investment
approach by extending the search for value into many countries around the world.
This global search provides the Adviser with more diverse opportunities and
flexibility to shift portfolio investments not only from company to company and
industry to industry, but also country to country, in search of undervalued
securities. Under normal market conditions, the Fund will invest more than 80%
of its assets in issuers located in at least three countries other than the
United States. This 80% does not include the cash position of the Fund.
Emerging Markets Fund
The Fund's investment objective is long-term capital growth. The Fund seeks
to achieve this goal by investing primarily in a diversified portfolio of
publicly traded equity securities of companies located in emerging markets that
the Adviser believes are undervalued. The Fund may also, to a lesser degree,
invest in private placement emerging market equity securities. Dividend and
interest income from portfolio securities is largely an incidental
consideration.
The Adviser's portfolio investment decisions rely heavily on a fundamental
analysis of securities with a long-term investment perspective. The Adviser
seeks to increase the scope and effectiveness of this fundamental investment
approach by extending the search for value into many countries around the world.
This global search provides the Adviser with more diverse opportunities and
flexibility to shift portfolio investments not only from company to company and
industry to industry, but also country to country, in search of undervalued
securities.
Under normal circumstances, the Fund will invest at least 70% of the the
value of its total assets in securities of issuers located in emerging market
countries. As used in this Prospectus, the terms "emerging market country",
"emerging country", or "developing country" apply to any country that, in the
Adviser's opinion, is generally considered to be an emerging or developing
country in the international financial community, which includes the
International Bank for Reconstruction and Development (the "World Bank") and the
International Finance Corporation. There are currently over 130 countries that
are emerging or developing countries under this standard; approximately 40 of
these countries currently have stock markets. These countries generally include
every nation in the world except the Unites States, Canada, Japan, Australia,
New Zealand and most nations located in Western Europe. Securities of issuers
located in emerging market countries or traded in emerging markets present
greater liquidity risks and other risks than securities of issuers located in
developed countries and trade in more established markets.
By engaging in its own research and by reviewing research obtained through
outside sources, the Adviser seeks to identify appropriate investments for the
Fund. The Adviser considers a number of factors in evaluating potential
investments including political risks, classic macro-economic variables and
equity market valuations.
-4-
<PAGE>
The Adviser also focuses on the quality of a company's management, the company's
growth prospects, and the financial well being of the company. The Fund's
investments generally will reflect a broad cross-section of countries,
industries, and companies in order to minimize risk. In situations where the
market for a particular security is determined by the Adviser to be sufficiently
liquid, the Fund may engage in short sales. These investment techniques are
described below under "Investment Techniques" and "RISK FACTORS," and under the
heading "INVESTMENT POLICIES AND TECHNIQUES" in the SAI.
Foreign Small Cap Fund
The Fund's investment objective is to provide long-term capital growth. It
seeks to achieve its objective by investing primarily in equity securities of
issuers with relatively small market capitalizations (share price times number
of equity securities outstanding) located outside the United States which the
Adviser believes are undervalued. Income will be an incidental consideration.
The Adviser's portfolio investment decisions rely heavily on a fundamental
analysis of securities with a long-term investment perspective. The Adviser
seeks to increase the scope and effectiveness of this fundamental investment
approach by extending the search for value into many countries around the world.
This global search provides the Adviser with more diverse opportunities and
flexibility to shift portfolio investments not only from company to company and
industry to industry, but also country to country, in search of undervalued
securities. Under normal market conditions, the Fund will invest at least 70% of
the value of its total assets in (1) companies located in developing countries
with individual market capitalizations of less than $1.5 billion USD (at the
time of purchase) and (2) companies located in developed countries, other than
the United States, with individual market capitalizations of less than $750
million USD (at the time of purchase).
All Countries Fund(SM)
The Fund's investment objective is long-term capital growth. The Fund seeks
to achieve its objective by investing in stocks and debt obligations of
companies and governments in any country which the adviser believes are
undervalued. Income will be an incidental consideration.
The Adviser's portfolio investment decisions rely heavily on a fundamental
analysis of securities with a long-term investment perspective. The Adviser
seeks to increase the scope and effectiveness of this fundamental investment
approach by extending the search for value into many countries around the world.
This global search provides the Adviser with more diverse opportunities and
flexibility to shift portfolio investments not only from company to company and
industry to industry, but also country to country, in search of undervalued
securities. Under normal market conditions the Fund will invest its assets in at
least three countries, which may include the United States.
Investment Policies Common to Each Fund
Although each Fund generally invests in common stock, a Fund may also
invest in preferred stocks and certain debt securities, rated or unrated, such
as convertible bonds and bonds selling at a discount, when the Adviser believes
the potential for appreciation will equal or exceed that available from
investments in common stock. Each Fund may also invest in warrants or rights to
subscribe to or purchase such securities, and sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") and other depository receipts (collectively,
"Depositary Receipts"). Each Fund may also lend its portfolio securities and
borrow money for investment purposes (i.e., "leverage" its portfolio). In
----
addition, each Fund may invest in closed-end investment companies holding
foreign securities, and enter into transactions in options on securities,
securities indices and foreign currencies, forward foreign currency contracts,
and futures contracts and related options. When deemed appropriate by the
Adviser, the Fund may invest cash balances in repurchase agreements and other
money market investment to maintain liquidity in an amount
-5-
<PAGE>
sufficient to meet expenses or for day-to-day operating purposes. These
investment techniques are described below under "Investment Techniques" and
"Risk Factors," and under the heading "INVESTMENT POLICIES AND TECHNIQUES" in
the SAI. Whenever, in the judgment of Adviser, market or economic conditions
warrant, each Fund may adopt a temporary defensive position and may invest
without limit in money market securities denominated in U.S. dollars or in the
currency of any foreign country. See "Investment Techniques -- Temporary
Investments."
Investment Techniques
Unless specified to the contrary, each Fund may engage in the investment
techniques and make the types of investments described and discussed in this
section.
Depositary Receipts. Each Fund may purchase sponsored and unsponsored Depositary
Receipts that are or become available, including ADRs, GDRs, EDRs and other
Depository Receipts. Depositary Receipts are typically issued by a financial
institution ("depository") and evidence ownership interests in a security or a
pool of securities ("underlying securities") that have been deposited with the
depository. In ADRs, the depository is typically a U.S. financial institution
and the underlying securities are issued by a foreign issuer. In other
Depositary Receipts, the depository may be a foreign or a U.S. entity, and the
underlying securities may have a foreign or a U.S. issuer. Depositary Receipts
will not necessarily be denominated in the same currency as their underlying
securities. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. For purposes of a Fund's investment policies,
investments in Depositary Receipts will be deemed to be investments in the
underlying securities. Thus, a Depositary Receipt representing ownership of
common stock will be treated as common stock.
Sovereign Debt. Each Fund may invest in Sovereign Debt, which may trade at a
substantial discount from face value. The Fund may hold and trade Sovereign Debt
of emerging market countries in appropriate circumstances and to participate in
debt conversion programs. Emerging country Sovereign Debt involves a high degree
of risk, is generally lower-quality debt, and is considered speculative in
nature. The issuer or governmental authorities that control Sovereign Debt
repayment ("sovereign debtors") may be unable or unwilling to repay principal or
interest when due in accordance with the terms of the debt. A sovereign debtor's
willingness or ability to repay principal and interest due in a timely manner
may be affected by, among other factors, its cash flow situation, the extent of
its foreign reserves, the availability of sufficient foreign exchange on the
date a payment is due, the relative size of the debt service burden to the
economy as a whole, the sovereign debtor's policy towards the International
Monetary Fund (the "IMF") and the political constraints to which the sovereign
debtor may be subject. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and others abroad
to reduce principal and interest arrearage on their debt. The commitment of
these third parties to make such disbursements may be conditioned on the
sovereign debtor's implementation of economic reforms or economic performance
and the timely service of the debtor's obligations. The sovereign debtor's
failure to meet these conditions may cause these third parties to cancel their
commitments to provide funds to the sovereign debtor, which may further impair
the debtor's ability or willingness to timely service its debts. In certain
instances, a Fund may invest in Sovereign Debt that is in default as to payments
of principal or interest. A Fund holding non-performing Sovereign Debt may incur
additional expenses in connection with any restructuring of the issuer's
obligations or in otherwise enforcing its rights thereunder.
Brady Bonds. Each Fund may invest in Brady Bonds as part of its investment in
Sovereign Debt of countries that have restructured or are in the process of
restructuring their Sovereign Debt pursuant to the Brady Plan.
-6-
<PAGE>
Brady Bonds are issued under the framework of the Brady Plan, an initiative
announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a
mechanism for debtor nations to restructure their outstanding external
indebtedness. The Brady Plan contemplates, among other things, the debtor
nation's adoption of certain economic reforms and the exchange of commercial
bank debt for newly issued bonds. In restructuring its external debt under the
Brady Plan framework, a debtor nation negotiates with its existing bank lenders
as well as the World Bank or IMF. The World Bank or IMF supports the
restructuring by providing funds pursuant to loan agreements or other
arrangements that enable the debtor nation to collateralize the new Brady Bonds
or to replenish reserves used to reduce outstanding bank debt. Under these loan
agreements or other arrangements with the World Bank or IMF, debtor nations have
been required to agree to implement certain domestic monetary and fiscal
reforms. The Brady Plan sets forth only general guiding principles for economic
reform and debt reduction, emphasizing that solutions must be negotiated on a
case-by-case basis between debtor nations and their creditors.
Brady Bonds are recent issues and do not have a long payment history.
Agreements implemented under the Brady Plan are designed to achieve debt and
debt-service reduction through specific options negotiated by a debtor nation
with its creditors. As a result, each country offers different financial
packages. Options have included the exchange of outstanding commercial bank debt
for bonds issued at 100% of face value of such debt, bonds issued at a discount
of face value of such debt, and bonds bearing an interest rate that increases
over time and the advancement of the new money for bonds. The principal of
certain Brady Bonds has been collateralized by U.S. Treasury zero coupon bonds
with a maturity equal to the final maturity of the Brady Bonds. Collateral
purchases are financed by the IMF, World Bank and the debtor nations' reserves.
Interest payments may also be collateralized in part in various ways.
Brady Bonds are often viewed as having three or four valuation components:
(i) the collateralized repay ment of principal at final maturity; (ii) the
collateralized interest payments; (iii) the uncollateralized interest payments;
and (iv) any uncollateralized and of principal at maturity (these
uncollateralized amounts constitute the "residual risk"). In light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, investments in Brady Bonds can be viewed as
speculative.
Investment Funds. Some emerging countries have laws and regulations that
preclude direct foreign investment in the securities of companies located there.
However, indirect foreign investment in the securities of companies listed and
traded on the stock exchanges in these countries is permitted by certain
emerging countries through specifically authorized investment funds. Each Fund
may invest in these investment funds, as well as other closed-end investment
companies (collectively, "Investment Funds"), subject to the provisions of the
Investment Company Act of 1940 and rules thereunder (the "1940 Act") and other
applicable laws as discussed below under "INVESTMENT LIMITATIONS." If a Fund
invests in investment funds, shareholders will bear not only their proportionate
share of the Fund's expenses (including operating expenses and the fees of the
Adviser), but also, indirectly, the similar expenses of the underlying
investment funds.
Repurchase Agreements. Each Fund may enter into repurchase agreements with
brokers, dealers or banks ("counterparties") that the Adviser has determined
meet the credit guidelines established by the Board of Trustees. Repurchase
agreements will be fully collateralized, and may be viewed for purposes of the
1940 Act as a loan of money by the Fund to the counterparty. The Fund may incur
a loss if the counterparty defaults and the collateral value declines, or if
bankruptcy proceedings are commenced regarding the counterparty and the Fund's
realization upon the collateral is be delayed or limited. Each Fund's aggregate
investment in certain illiquid repurchase agreements and other investments is
limited as set forth under "INVESTMENT LIMITATIONS."
Securities Lending. Each Fund is authorized to lend up to 33 1/3% of the total
market value of its portfolio securities to brokers, dealers, domestic and
foreign banks or other financial institutions for the purpose of increasing its
net investment income; however, currently, no Fund intends to engage in such
lending. Any such loan must be fully secured; however, there may be risks of
delay in recovery of the securities or even loss of rights
-7-
<PAGE>
in the collateral should the borrower of the securities fail financially. For
more detailed information about securities lending, see "INVESTMENT POLICIES AND
TECHNIQUES" in the SAI.
Temporary Investments. Each Fund may make money market investments pending other
investment or settlement for liquidity, or in adverse market conditions. These
money market investments include obligations of the U.S. Government and its
agencies and instrumentalities, obligations of foreign sovereignties, other debt
securities, commercial paper including bank obligations, certificates of deposit
(including Eurodollar certificates of deposit) and repurchase agreements.
For temporary defensive purposes, during periods in which the Adviser
believes changes in economic, financial or political conditions make it
advisable, each Fund may reduce its holdings in equity and other securities and
may invest up to 100% of its assets in certain short-term (less than twelve
months to maturity) and medium-term (not greater than five years to maturity)
debt securities and in cash (U.S. dollars, foreign currencies, or multicurrency
units). These short-term and medium-term debt securities consist of (a)
obligations of governments, agencies or instrumentalities of any member state of
the Organization for Economic Cooperation and Development ("OECD"), (b) bank
deposits and bank obligations (including certificates of deposit, time deposits
and bankers' acceptances) of banks organized under the laws of any member state
of the OECD, denominated in any currency; (c) floating rate securities and other
instruments denominated in any currency issued by international development
agencies; (d) finance company and corporate commercial paper and other short-
term corporate debt obligations of corporations organized under the laws of any
member state of the OECD meeting the Fund's credit quality standards; and (e)
repurchase agreements with banks and broker-dealers covering any of the
foregoing securities. The short-term and medium-term debt securities in which a
Fund may invest for temporary defensive purposes will be those that the Adviser
believes to be of high quality, i.e., subject to relatively low risk of loss of
interest or principal (there is currently no rating system for debt securities
in most emerging countries). If rated, these securities will be rated in one of
the three highest rating categories by rating services such as Moody's Investors
Service, Inc. or Standard & Poor's Corporation (i.e., rated at least A).
----
"When-Issued" Securities. Each Fund may purchase securities on a when-issued or
delayed delivery basis. The price of debt obligations purchased on a when-issued
basis is fixed at the time the Fund commits to purchase, but delivery and
payment for the securities ("settlement") takes place at a later date. The price
of these securities may be expressed in yield terms; the Funds will enter into
these transactions in order to lock in the yield (price) available at the time
of commitment.
Between purchase and settlement, the Fund assumes the ownership risk of the
when-issued securities, including the risk of fluctuations in the securities'
market value due to, among other factors, a change in the general level of
interest rates. However, no interest accrues to the Fund during this period.
Forward Foreign Currency Exchange Contracts and Options on Foreign Currencies.
Each Fund may enter into forward foreign currency exchange contracts ("forward
contracts"), providing for the purchase of or sale of an amount of a specified
currency at a future date. Each Fund may use forward contracts to protect
against a foreign currency's decline against the U.S. dollar between the trade
date and settlement date for a securities transaction, or to lock in the U.S.
dollar value of dividends declared on securities it holds, or generally to
protect the U.S. dollar value of the securities it holds against exchange rate
fluctuations. Each Fund may also use forward contracts to protect against
fluctuating exchange rates and exchange control regulations. Forward contracts
may limit a Fund's losses due to exchange rate fluctuation, but they will also
limit any gains that the Fund might otherwise have realized. Each Fund may also
enter into foreign currency futures contracts ("currency futures").
Except where segregated accounts are not required by the 1940 Act, when a
Fund enters into a forward contract or currency future, the Custodian will place
cash, U.S. government securities, or high-grade debt securities into a
segregated account of the Fund in an amount equal to the value of the Fund's
total assets committed to consummation of forward contracts and currency
futures. If the value of these segregated securities declines, additional cash
or securities will be placed in the account on a daily basis so that the account
value is
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<PAGE>
at least equal to the Fund's commitments to such contracts. See "INVESTMENT
POLICIES AND TECHNIQUES -- Forward Currency Contracts" in the SAI.
Each Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by the Funds are traded on U.S. and foreign exchanges or over-the-
counter.
Non-Publicly Traded Securities. Each Fund may invest in securities that are
neither listed on a stock exchange nor traded over the counter, including
privately placed securities. These securities may present a higher degree of
business and financial risk, which can result in substantial losses. In the
absence of a public trading market for these securities, they may be less liquid
than publicly traded securities. Although these securities may be resold in
privately negotiated transactions, the prices realized from these sales could be
less than those originally paid by the Fund or less than what the Fund may
consider the fair value of such securities. Further, companies whose securities
are not publicly traded may not be subject to disclosure and other investor
protection requirements that might apply if their securities were publicly
traded. If such securities are required to be registered under the securities
laws of one or more jurisdictions before being resold, the Fund may be required
to bear the costs of registration. As a general matter, each Fund may not invest
more than 15% of its net assets in illiquid securities, including securities for
which there is no readily available secondary market, nor more than 10% of its
total assets in securities that are restricted from sale to the public without
registration ("Restricted Securities") under the Securities Act of 1933, as
amended (the "1933 Act"). Subject to these limits, however, a Fund may invest up
to 25% of its total assets in Restricted Securities that can be offered and sold
to qualified institutional buyers under Rule 144A under the 1933 Act ("144A
Securities"). The Board of Trustees has adopted guidelines and delegated to the
Adviser, subject to the Board's supervision, the daily function of determining
and monitoring the liquidity of 144A Securities. Rule 144A Securities may become
illiquid if qualified institutional buyers are not interested in acquiring them.
Investors should note that investments of 5% of a Fund's total assets may be
considered a speculative activity and may involve greater risk and expense to
the Fund.
Borrowing and Other Forms of Leverage. Each Fund may borrow money from U.S.-
regulated banks. The 1940 Act and each Fund's fundamental investment policies
restrict such borrowing to 33 1/3% of the Fund's total assets (including the
amount borrowed) less all liabilities and indebtedness other than the borrowing.
Borrowing creates leverage, which is a speculative characteristic; leverage from
borrowing will magnify declines as well as increases in a Fund's net asset value
per share and net yield. A Fund will borrow only on a secured basis, and only
when the Adviser believes that borrowing will benefit the Fund after taking into
account considerations such as the costs of borrowing and the likely investment
returns on securities purchased with borrowed monies.
Options Transactions. Each Fund may seek to hedge all or a portion of its
investments through options on other securities in which it may invest. Options
in which a Fund may transact will be traded on a recognized securities or
futures exchange or over the counter. Options markets in emerging countries are
currently limited and the nature of the strategies adopted by the Adviser and
the extent to which those strategies are used will depend on the development of
such markets.
Each Fund may write (i.e., sell) covered call options. A call gives the
----
purchaser the right to buy the security underlying the option from the Fund at
the stated exercise price, on or before a specified date (the "termination
date") that is usually not more than nine months from the date the option is
issued. A "covered" call
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<PAGE>
means that so long as the Fund is obligated as the writer of the option, it will
own (i) the securities underlying the option, or (ii) securities convertible or
exchangeable (without the payment of any consideration) into the securities
underlying the option.
Each Fund may also write (i.e., sell) covered put options. The writer of a
put incurs an obligation to buy the security underlying the option from the
put's purchaser at the exercise price at any time on or before the termination
date, at the purchaser's election (certain options a Fund writes will be
exercisable by the purchaser only on a specific date). Generally, a put is
"covered" if the Fund maintains cash, U.S. government securities or other liquid
high grade debt obligations equal to the exercise price of the option or if the
Fund holds a put on the same underlying security with a similar or higher
exercise price.
Each Fund may also purchase put or call options on individual securities or
baskets of securities. When a Fund purchases a call, it acquires the right to
buy the underlying security at the exercise price on or before the termination
date, and when a Fund purchases a put, it acquires the right to sell the
underlying security at the exercise price on or before the termination date.
The primary risks associated with the use of options on securities are (i)
imperfect correlation between the change in market value of the securities the
Fund holds and the prices of options relating to the securities purchased or
sold by the Fund; and (ii) possible lack of a liquid secondary market for an
option. Options not traded on an exchange (OTC options) are often considered
illiquid and may be difficult to value. The Adviser believes that each Fund will
minimize its risk of being unable to close out an options contract by
transacting in options only if there appears to be a liquid secondary market for
those options.
Futures Contracts. Each Fund may buy and sell financial futures contracts, stock
and bond index futures contracts, foreign currency futures contracts and options
on any of the foregoing for hedging purposes only. A financial futures contract
is an agreement between two parties to buy or sell a specified debt security at
a set price on a future date. An index futures contract is an agreement to take
or make delivery of an amount of cash based on the difference between the value
of the index at the beginning and at the end of the contract period. A futures
contract on a foreign currency is an agreement to buy or sell a specified amount
of a currency for a set price on a future date.
When a Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency fluctuates,
either party to the contract is required to make additional margin payments,
known as "variation margin," to cover any additional obligation it may have
under the contract. In addition, when the Fund enters into a futures contract,
it will segregate assets or "cover" its position in accordance with the 1940
Act. See "INVESTMENT POLICIES AND TECHNIQUES Derivative Instruments -- Futures
Contracts" in the SAI. With respect to positions in futures and related options
that do not constitute "bona fide hedging" positions as defined in regulations
of the Commodity Futures Trading Commission, the Fund will not enter into a
futures contract or related option contract if, immediately thereafter, the
aggregate initial margin deposits relating to such positions plus premiums paid
by it for open futures option positions, less the amount by which any such
options are "in-the-money," would exceed 5% of the Fund's total assets. The
value of the underlying securities on which futures contracts will be written at
any one time will not exceed 25% of the total assets of the Fund.
The primary risks associated with the use of futures and options on futures
are (i) imperfect correlation between the change in market value of the
securities held by the Fund and the prices of related futures and options on
futures purchased or sold by the Fund, and (ii) possible lack of a liquid
secondary market for a futures contract (or related option) and the resulting
inability to close a futures position, which could have an adverse impact on the
Fund's ability to hedge. The risk of loss in trading on futures contracts and
related options in some strategies can be substantial, due both to the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing. Gains and losses on futures and related options depend on the
Adviser's ability to predict correctly the direction of stock prices, interest
rates, and other economic factors. In the opinion of the
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<PAGE>
Trustees, the risk that Fund will be unable to close out a futures position or
related options contract will be minimized by only entering into futures
contracts or related options transactions for which there appears to be a liquid
secondary market. For more detailed information about futures transactions see
"INVESTMENT POLICIES AND TECHNIQUES" in the SAI.
Short Sales. Each Fund may from time to time sell securities short without
limitation, although initially it has no intention to sell securities short. In
a short sale, a Fund sells securities it does not own (but has borrowed) in
anticipation of a decline in the securities' market price. All short sales by a
Fund will be fully collateralized. Short sales involve certain risks and special
considerations; possible losses from short sales may be unlimited, whereas
losses from purchases of securities are limited to the total amount invested.
Each Fund may also sell short "against the box," that is, sell a security that
the Fund owns or has the right to acquire, for delivery at a specified date in
the future.
RISK FACTORS
Foreign Investment
Investment in securities of foreign issuers and in foreign branches of
domestic banks, involves some risks different from, or in addition to, those
affecting investments in securities of U.S. issuers:
Information Publicly available information about
foreign issuers and economies may be
limited. Foreign issuers are not
generally subject to uniform
accounting, auditing and financial
and other reporting standards and
requirements comparable to those
applicable to U.S. companies.
Statistical information about the
economy in an emerging market country
may be unavailable, or if available
may be unreliable or not directly
comparable to information regarding
the economy of the U.S. or other more
developed countries.
Regulation There may be less government
supervision and regulation of foreign
securities exchanges, brokers and
listed companies than in the U.S.
Liquidity and Many foreign securities markets have
Concentration substantially less volume than U.S.
national securities exchanges.
Available investments in emerging
countries may be highly concentrated
in a small number of issuers, or the
issuers may be unseasoned and/or have
significantly smaller market
capitalization than in the U.S. or
more developed countries.
Consequently, securities of foreign
issuers may be less liquid and more
volatile than those of comparable
domestic issuers.
Brokerage Brokerage commissions and other
transaction costs on foreign
securities exchanges are generally
higher than in the U.S.
Taxes Dividends and interest paid by
foreign issuers may be subject to
withholding and other foreign taxes,
which may decrease the net return on
foreign investments as compared to
dividends and interest paid to the
Fund by U.S. companies. It is
expected that the Funds' shareholders
will be able to claim a credit for
U.S. tax purposes for any such
foreign taxes, although there can be
no assurance that they will be able
to do so. See "TAXES."
Political/Economy Political and economic developments
may present risks. A foreign juris-
diction might impose or change
withholding taxes on income payable in
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<PAGE>
connection with foreign securities.
There are risks of seizure,
nationalization or expropriation of a
foreign issuer or foreign deposits, and
adoption of foreign governmental
restrictions such as exchange controls.
Many emerging or developing countries
have less stable political and economic
environments than some more developed
countries, and may face external
stresses (including war) as well as
internal ones (including hyperinflation,
currency depreciation, limited resource
self-sufficiency, and balance of
payments issues and associated social
unrest). It may be more difficult to
obtain a judgment in a court outside the
U.S.
Currency Exchange Securities of foreign issuers are
frequently denominated in foreign
currencies, and a Fund may temporarily
hold uninvested reserves in bank
deposits in foreign currencies. The
exchange rates between the U.S. dollar
and the currencies of emerging markets
countries may be volatile, and changes
in currency rates and exchange control
regulations may affect (favorably or
unfavorably) the value of a Fund's
assets in U.S. dollars. A Fund may incur
costs in converting between currencies.
Repatriation Foreign governments may delay or
Restrictions restrict repatriation of a Fund's
investment income or other assets. If,
for any reason, a Fund were unable,
through borrowing or otherwise, to
distribute an amount equal to
substantially all of its investment
company taxable income (as defined for
U.S. tax purposes) within required time
periods, the Fund would cease to qualify
for the favorable tax treatment afforded
regulated investment companies under the
U.S. Internal Revenue Code of 1986, as
amended (the "Code").
Foreign Custodians and Securities Depositories
Rules adopted under the 1940 Act, permit the Funds to maintain its foreign
securities and cash in the custody of certain eligible non-U.S. banks and
securities depositories ("foreign custodians"). Pursuant to these rules, each
Fund's assets invested in foreign countries may be held by foreign custodians
that are approved by the Fund's Board of Trustees. The Board will consider a
number of factors in selecting foreign custodians, including but not limited to
the reliability and financial stability of the institution, the ability of the
institution to capably perform custodial services for the Fund, the reputation
of the institution in its national market, the political and economic stability
of the countries in which the foreign custodian is located, and risks of
potential nationalization or expropriation of Fund assets. In addition, foreign
custodians must, among other things, meet minimum requirements for shareholder
equity, have no lien on Fund assets, and maintain adequate and accessible
records. Certain banks in foreign countries may not be eligible foreign
custodians for the Funds, which may preclude a Fund from purchasing securities
in which it would otherwise invest; banks that are eligible foreign custodians
may be recently organized or otherwise lack extensive operating experience.
Investing in Smaller Capitalization Stocks
The Adviser believes that the issuers of smaller capitalization stocks
often have sales and earnings growth rates which exceed those of larger
companies, and that such growth rates may in turn be reflected in more rapid
share price appreciation. However, investing in smaller capitalization stocks
can involve greater risk than is customarily associated with investing in stocks
of larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources, may
be dependent for management on one or a few key persons, and can be more
susceptible to losses. Also, their securities may be thinly traded (and
therefore have to be sold at a discount from current prices or sold in small
lots over an extended period of time), may be followed by fewer investment
research analysts and may be subject to wider price swings
-12-
<PAGE>
and thus may create a greater chance of loss than securities of larger
capitalization companies. Transaction costs in stocks of smaller capitalization
companies may be higher than those of larger capitalization companies.
Investing in Lower Rated Debt Securities
Each Fund may invest in lower rated or unrated debt securities. Debt
considered below investment grade may be referred to as "junk bonds" or "high
risk" securities. The emerging country debt securities in which the Fund may
invest are subject to significant risk and will not be required to meet any
minimum rating standard or equivalent. Debt securities are subject to the risk
of the issuer's inability to meet principal and interest payments (credit risk)
and may also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the issuer's creditworthiness and general
market liquidity (market risk). Lower rated or unrated securities are more
likely to react to developments affecting market and credit risk than are more
highly rated securities, which react primarily to movements in general levels of
interest rates. The market values of debt securities tend to vary inversely with
interest rate levels. Yields and market values of lower rated and unrated debt
will fluctuate over time, reflecting not only changing interest rates but also
the market's perception of credit quality and the outlook for economic growth.
When economic conditions appear to be deteriorating, medium to lower rated
securities may decline in value due to heightened concern over credit quality,
regardless of prevailing interest rates. The Adviser will consider credit risk
and market risk in making debt security investment decisions for each Fund.
Investors should carefully consider the relative risks of investing in a Fund
that purchases lower rated and unrated debt securities, and should understand
that such securities are not generally meant for short-term investing.
The U.S. market for lower rated and unrated corporate debt is relatively
new and its recent growth paral leled a long period of economic expansion and an
increase in merger, acquisition and leveraged buyout activity. In addition,
trading markets for debt securities of issuers located in emerging countries may
be limited. Adverse economic developments may disrupt the market for U.S.
corporate lower rated and unrated debt securities and for emerging country debt
securities. Such disruptions may severely affect the ability of issuers,
especially highly leveraged issuers, to service their debt obligations or to
repay their obligations upon maturity. In addition, the secondary market for
lower rated and unrated debt securities, which is concentrated in relatively few
market makers, may not be as liquid as the secondary market for more highly
rated securities. As a result, the Adviser could find it more difficult to sell
these securities or may be able to sell the securities only at prices lower than
if such securities were widely traded. Prices realized upon the sale of such
lower rated or unrated securities, under these circumstances, may be less than
the prices used in calculating a Fund's net asset value.
Other Investment Risk Factors
Each of the Funds' investment strategies involves specific risks. Further
information about these specific risks can be found in this Prospectus under
"INVESTMENT OBJECTIVES AND POLICIES - Investment Techniques" and under
"INVESTMENT POLICIES AND TECHNIQUES" in the SAI.
INVESTMENT LIMITATIONS
Each Fund has adopted certain fundamental investment policies and
restrictions. A Fund may not change its investment objective or any fundamental
policy or restriction without approval of the holders of a majority of the
Fund's outstanding shares. Each Fund has also instituted non-fundamental
operating policies. Although the Board of Trustees may change operating policies
without shareholder approval, the Trust will promptly notify shareholders of any
material change in non-fundamental operating policies. See "INVESTMENT
RESTRICTIONS" in the SAI.
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<PAGE>
Each Fund is a diversified investment company under the 1940 Act and is
therefore subject to the following limitations:
. as to 75% of its total assets, the Fund may not invest more than 5% of
its total assets in the securities of any one issuer, except obligations
of or securities guaranteed by the U.S. Government and its agencies and
instrumentalities, and
. the Fund may not own more than 10% of the outstanding voting
securities of any one issuer.
Each Fund also intends to comply with the diversification requirements imposed
by the Internal Revenue Code of 1986, as amended (the "Code"), for qualification
as a regulated investment company. See "TAXES."
Under each Fund's non-fundamental restrictions, a Fund may not (i) invest
more than 15% of the market value of its net assets in investments for which
market quotations are not readily available or that are otherwise illiquid; (ii)
mortgage, pledge or hypothecate any assets except in connection with any such
borrowing in amounts up to 33 1/3% of the value of the Fund's net assets at the
time of borrowing; or (iii) invest more than 5% of its net assets in warrants
(exclusive of amounts acquired in units or attached to securities). Each Fund
may invest no more than 15% of its total assets in securities issued by any one
company or government, exclusive of U.S. Government securities.
Each Fund will not invest 25% or more of the total value of its assets in a
particular industry. For purposes of this investment restriction, a foreign
government (but not the United States government) is deemed to be an "industry,"
and therefore investments in the obligations of any one foreign government may
not equal or exceed 25% of the Fund's assets.
Each Fund's investment techniques are described herein under "Investment
Techniques" and "RISK FACTORS," and under the heading "INVESTMENT POLICIES AND
TECHNIQUES" in the SAI. Each Fund invests for long-term growth of capital and
does not intend to place emphasis upon short-term trading profits. Accordingly,
each Fund normally expects to have an annual portfolio turnover rate of less
than 50%.
PURCHASE AND REDEMPTION OF SHARES
You may purchase and redeem shares of each Fund on any day when the New
York Stock Exchange ("NYSE") is open for business (a "business day") so long as
the Custodian is also open for business that day. The purchase price of shares
is a Fund's net asset value per share next determined after receipt of your
purchase order, plus any applicable sales load; the amount of any sales load is
deducted from the total amount of your investment, and the remaining amount of
your investment is invested in the Fund. The redemption price of shares is a
Fund's net asset value per share next determined after receipt of your
redemption request in "good order." Each Fund's net asset value per share is
determined on each business day at the regular close of trading of the NYSE
(currently 4:00 p.m., Eastern time). Purchase orders and redemption requests
received prior to this time on any business day will be executed at the price
computed on that day; orders and requests received after the regular close of
the NYSE will be executed at the price computed on the next business day. The
Trust reserves the right to refuse any order for purchase of Shares.
How to Purchase Shares
How to Open an Account. To open an account, you must complete an Account
Registration Form and send it to the Trust, and either send in your check or
arrange for a wire transfer. Your initial investment must be for at least
$1,000,000 unless you have received a waiver from the Adviser. For purposes of
meeting the required minimum investments, the Trust will aggregate all accounts
under common ownership or control, including
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<PAGE>
accounts of spouses and minor children. There is no minimum for employer
sponsored 401(k) plans that have more than 100 employee participants.
<TABLE>
<S> <C>
By Check Make your check (or other negotiable bank draft or money
order) payable to:"Hansberger Institutional Series," and
mail it with your completed and signed Account
Registration Form to:
Hansberger Institutional Series
c/o Chase Global Funds Services Company
P.O. Box 2973
73 Tremont Street
Boston, MA 02208
Checks must be drawn on U.S. banks.
By Wire Have your bank send a Federal Funds wire or a bank wire
to the Trust, and mail your completed and signed Account
Registration Form to:
Hansberger Institutional Series
c/o Chase Global Funds Services Company
P.O. Box 2973
73 Tremont Street
Boston, MA 02208
The Trust will accept your purchase order before
receiving your Account Registration Form only if you
have provided certain information with your wire.
You must follow these steps to purchase shares by wire:
-------------------------------------------------------
First, telephone the Trust at 1-800-414-6927 to receive
a wire control number. To be issued your account number,
you will need to provide a written application with your
name, address, telephone number, Social Security or Tax
Identification Number, the amount being wired, and the
name of the bank sending the wire. Second, instruct your
bank to wire the specified amount to the following
account (be sure to have your bank include your account
number and the Fund's name):
The Chase Manhattan Bank
ABA Number 021000021
DDA Number 910 2 777076
Attn: Hansberger Institutional Series
Ref: (Fund name, account number,
account name, wire control number).
Federal Funds wires cannot be made on any federal
holiday restricting wire transfers, even if the NYSE is
open on that day. Liability of the Fund or its agents
for fraudulent or unauthorized wire instructions may be
limited. See "Telephone Transactions."
Your bank may charge a service fee for sending a Federal
Funds wire or bank wire.
</TABLE>
Letter of Intent. You may make an initial investment of less than $1
million if you execute a letter of intent ("Letter") which expresses your
intention to invest at least $1 million in the Funds within 13 months. The
minimum initial investment under a Letter is $100,000. If you do not invest at
least $1 million in shares of the Funds or other funds advised by the Adviser
within the 13-month period from execution of the Letter, the shares actually
purchased may be involuntarily redeemed and the proceeds sent to you at your
address of record. Any
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<PAGE>
redemptions you make during the 13-month period will be subtracted from the
amount of Shares purchased for purposes of determining whether the terms of the
Letter have been completed.
How to Add to Your Investment. You may purchase additional shares for your
account at any time by mailing a check or by wiring funds to the Fund according
to the procedures above. If wiring funds, please call 1-800-414-6927 to receive
a wire control number. Your check, a cover letter, or your wire instructions
-----------------------------------------------------
must specify the name of the Fund, the name on your account and your account
- ----------------------------------------------------------------------------
number, and you must call the Fund before wiring funds. Your check or wire must
- ------------------------------------------------------
be for at least $100,000.
Other Purchase Information
Payment for shares of a Fund must be in United States dollars, unless you
have received the Fund's prior written approval to make payment in other
currencies or by tendering securities.
No share certificates will be issued. All shares purchased for your account
will be confirmed to you and credited to your account on the Fund's books
maintained by the Transfer Agent.
To ensure that checks are collected, you may not redeem shares purchased by
check until payment for the purchase has been received; receipt may take up to
eight business days after purchase. If your purchase is cancelled due to
nonpayment or because your check does not clear, you will be responsible for any
loss incurred by the Trust or its agents, and you may be restricted from making
future investments in the Trust. If you are already a shareholder, the Trust may
redeem shares from your account(s) as reimbursement for any such loss.
If an investment in the Funds is made through a broker that has executed a
dealer agreement with the Trust, the Adviser or one of its affiliates may make a
payment out of its own resources to such dealer in an amount not to exceed 0.25%
of the amount invested. Dealers may contact the Adviser for additional
information.
Investors may also purchase shares of a Fund through banks and registered
broker-dealers who do not have a dealer agreement with the Funds. Those banks
and broker-dealers, who make purchases for their customers, may charge a fee for
such services.
The Trust reserves the right to reject any purchase order for shares if the
Trust or its agents determine that accepting such order would not be in the best
interest of a Fund or its existing shareholders.
How to Redeem Shares
You may withdraw all or any portion of the amount in your account by
redeeming your shares at any time. Redemption proceeds may be more or less than
the purchase price of your shares depending on, among other factors, the market
value of the investment securities held by the Fund at the time you redeem.
Please note that purchases made by check cannot be redeemed until payment has
been collected, which may take up to eight business days after purchase. You may
redeem shares of the Funds by mail or telephone.
By Mail Send your redemption request to: Hansberger Institutional Series
c/o Chase Global Funds Services
Company
P.O. Box 2973
73 Tremont Street
Boston, MA 02208
"Good order" means that your redemption request includes the
following documentation:
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<PAGE>
. A letter of instruction or a stock assignment specifying the
number of shares or dollar amount to be redeemed, signed by all
registered owners of the shares in the exact names in which
they are registered.
. Any required signature guarantees (see "Further Redemption
Information" below).
. Other supporting legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations,
pension and profit sharing plans and other organizations.
If you are uncertain of requirements for redemption of your
shares, consult with a representative of the Trust.
By Telephone If you have telephone transaction privileges, you can request a
redemption of your shares by calling the Fund prior to 4:00 P.M.
Eastern Time, to receive that day's closing net asset value;
redemption proceeds will be mailed to you or wired to your bank.
When placing a redemption order by telephone, you should have
ready the name and address on your account and the account number
from which you want to redeem shares, and your Social Security or
Tax I.D. number; additional personal identification information
may also be required. If you experience difficulty placing a
redemption order by telephone, you may send your request by
regular or express mail and it will be effective at the net asset
value next determined after it is received in good order. The
Fund's and the Transfer Agent's liability for fraudulent or
unauthorized telephone redemption requests may be limited. See
"SHAREHOLDER SERVICES -- Telephone Transaction Privilege."
To change a bank or bank account designated to receive your
redemption proceeds by wire, you must send a written request to
the Fund at the address above. Each shareholder must sign any
request to change the bank or bank account, and each signature
must be guaranteed.
Further Redemption Information
Normally the Funds make payment for all shares redeemed within one business
day after receiving the request in good order; payment may be delayed, but not
for more than seven days, except in the case of redemptions of shares purchased
by check, as discussed above. A Fund may suspend redemptions or postpone the
effective date of redemptions at times when the NYSE is closed, or under any
emergency circumstances as determined by the SEC.
Each Fund may, although it does not intend to do so under normal
circumstances, pay redemption proceeds in whole or in part by a distribution in
kind of securities held in its portfolio, in conformity with applicable SEC
rules.
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to redeem all of your shares if your redemptions cause your
account value to drop below the minimum required investment. The Trust will not
redeem an account whose value has dropped solely because of market reductions in
net asset value. If at any time your account value does not equal or exceed the
required minimum, you may be notified of this fact. You will be allowed at least
60 days to add to your investment before any involuntary redemption is
processed.
To protect your account, the Trust and its agents from fraud, signature
guarantees are required for certain redemptions to verify the identity of the
person who has authorized a redemption from your account. A signature guarantee
is not required for redemptions of $50,000 or less, requested by and payable to
all Shareholders of
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<PAGE>
record. Please contact the Trust for further information. See "ADDITIONAL
SHAREHOLDER INFORMATION" in the SAI.
SHAREHOLDER SERVICES
Exchange Privilege
You may exchange your shares of a Fund for shares of any other available
Fund without charge once every six months. Call the Trust to find out what Funds
are available. An exchange is treated as a redemption followed by a purchase,
and is subject to all requirements that apply to redemptions and purchases. An
exchange request will normally be effective at the net asset value next
determined after it is received in "good order." An exchange will be considered
a taxable event for shareholders subject to tax. Before you make an exchange,
you should read the prospectus disclosure relating to the new Fund(s) in which
you seek to invest. Shares of the new Fund(s) must be registered for sale in
your state of residence for the exchange privilege to be available.
You may exchange shares by mail and, if you have telephone transaction
privileges, by telephone. See "Telephone Transaction Privilege."
<TABLE>
<S> <C>
By Mail Send your exchange request to: Hansberger Institutional Series
c/o Chase Global Funds Services
Company
P.O. Box 2973
73 Tremont Street
Boston, MA 02208
Your exchange request must be in "good order" (see "How To Redeem
Shares -- By Mail" above), and must also include the name of the
new Fund(s) into which you wish to exchange your shares.
By Telephone If you have telephone transaction privileges, you may exchange
shares by calling the Trust. You should have ready the account name
and address and the account number of the Fund account from which
you intend to exchange shares, the name of the Fund into which you
intend to exchange shares, and your Social Security or Tax I.D.
number; additional personal identification information may also be
required. If you experience difficulty placing an exchange order by
telephone, you may send your request by regular or express mail and
it will be effective at the net asset value next determined after
it is received in good order. The Trust's and the Transfer Agent's
liability for fraudulent or unauthorized telephone transactions may
be limited. See "Telephone Transaction Privilege."
</TABLE>
In order to prevent abuse of the exchange privilege to the disadvantage of other
shareholders, the Trust reserves the right to terminate the exchange privilege
of any shareholder at the Trust's sole discretion.
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<PAGE>
Purchases or Exchanges by Timing Accounts
Market timing or allocation services ("Timing Accounts") generally include
accounts administered so as to redeem or purchase Shares based upon certain
predetermined market indicators. The Trust reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any Timing Account or any person whose transactions seem to follow a
timing pattern. In addition, the Trust reserves the right to refuse the purchase
side of a redemption and purchase request by any Timing Account, person, or
group if, in the Adviser's judgement, a Fund would be unable to invest
effectively in accordance with its investment objectives and policies, or would
otherwise potentially be adversely affected. A Shareholder's exchanges into a
Fund may be restricted or refused if a Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges, purchases and redemptions that coincides with a "market
timing" strategy may be disruptive to a Fund and therefore may be refused.
Telephone Transaction Privilege
When you open your account, you may elect to have telephone transaction
privileges by completing the "Telephone Transaction" section of the Account
Registration Form. You may have telephone access to certain information
regarding your account, such as your current share value, even if you do not
want the ability to make transactions by telephone.
During periods of drastic economic or market changes, telephone redemption
and exchange options may be difficult to implement, and you may need to send
your requests by mail.
The Funds and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring you to provide certain personal identification
information when you open your account and prior to effecting each transaction
requested by telephone. In addition, all telephone transaction requests will be
recorded and you may be required to provide additional written instructions by
facsimile. Neither the Funds nor the Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by
telephone that either of them reasonably believes to be genuine. The Fund or the
Transfer agent may be liable for any losses due to unauthorized or fraudulent
instructions in the event reasonable procedures are not followed.
Transfer of Registration
You may transfer registration of any of your shares in a Fund to another
person by writing to the Transfer Agent at Hansberger Institutional Series, c/o
Chase Global Fund Services Company, 73 Tremont Street, Boston, MA 02108-3913.
Your written request must be in "good order" before any transfer can be
effective. For a description of "good order," see "How to Redeem Shares--By
Mail" above.
MANAGEMENT OF THE FUND
Trustees and Officers
The Board of Trustees decides upon matters of general policy and reviews
the actions of each Fund's Adviser and Administrator. The officers of the Trust
conduct and supervise its daily business operations. See "TRUSTEES AND OFFICERS
OF THE TRUST" in the SAI.
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<PAGE>
Investment Adviser
Hansberger Global Investors is the Investment Adviser to the Trust. The
Adviser, with principal offices at 515 East Las Olas Blvd., Fort Lauderdale,
Florida, conducts a worldwide portfolio management business that provides a
broad range of portfolio management services to customers in the United States
and abroad. See "INVESTMENT ADVISER" in the SAI.
The Adviser provides each Fund with investment advice and portfolio
management services pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"), and, subject to the supervision of the Board of Trustees, makes
each Fund's day-to-day investment decisions, arranges for the execution of
portfolio transactions and generally manages each Fund's investments. Under the
terms of its Advisory Agreement, each Fund pays the Adviser a monthly advisory
fee, accrued daily based on the Fund's average daily net assets, at the annual
rates set forth in the table below. Because each Fund invests internationally,
these advisory fees are higher than those of most investment companies, but the
Adviser believes the fees are comparable to those of investment companies with
similar objectives and policies.
<TABLE>
<CAPTION>
Fund Advisory Fee
- ---- -------------
<S> <C>
International Fund 0.75%
Emerging Markets Fund 1.00%
Foreign Small Cap Fund 0.90%
All Countries Fund(SM) 0.75%
</TABLE>
The Adviser also advises Hansberger Global Fund PLC, an investment company
offered and sold off shore. This is relevant because Hansberger Global Fund PLC
is the only comparable account managed by the Adviser with substantially similar
investment objectives, policies and strategies as the Emerging Markets Fund.
Hansberger Global Fund PLC reported an average annual total return for the one
year period ended September 30, 1996 of 29.00%, and for the period from the
beginning of its operations, December 31, 1994 to September 30, 1996, of
16.60%. Of course, past performance is not necessarily indicative of future
performance.
Portfolio Managers
Thomas L. Hansberger is the Chairman and Chief Executive Officer of the
Adviser and the Trust. Before forming the Adviser, Mr. Hansberger had
served as Chairman, President and Chief Executive Officer of Templeton
Worldwide, Inc, the parent holding company of the Templeton group of
companies. While at Templeton, Mr. Hansberger served as director of
research and was an officer, director or primary portfolio manager for
several Templeton Mutual Funds. He is the lead manager for the All
Countries Fund(SM).
James E. Chaney joined the Adviser in 1996 as Chief Investment Officer and
is primarily responsible for the day to day management of the
International Fund. Prior to joining the Adviser, he was Executive Vice
President for Templeton Worldwide and a senior member of its Portfolio
Management/Strategy Committee. While at Templeton, Mr. Chaney managed
numerous accounts, including the $2.5 billion Templeton Institutional
Funds Inc. Foreign Equity Series. The Templeton Institutional Funds Inc.
Foreign Equity Series reported an average annual total return of 16.89%
for the one year period ended June 30, 1996, and 13.59% for the period of
Mr. Chaney's tenure as portfolio
- -----------------------
*/ Chase Global Funds Services - Dublin, Performance data was calculated
using the SEC standardized method of calculating average annual total return.
See "PERFORMANCE INFORMATION" in the S.A.I.
- ---
-20-
<PAGE>
manager, October 1,1993 to June 30, 1996, of XXXXX This is relevant
because the Templeton Institutional Funds Inc. Foreign Equity Series was
the only comparable account managed by Mr. Chaney with substantially
similar investment objectives, policies and strategies as the
International Fund. Of course, past performance is not necessarily
indicative of future performance.
Wilkin W. Tai joined the Adviser in 1996 as a portfolio manager and
research analyst. He is director of emerging markets research and has
primary responsibility for coverage of the Asian markets. Prior to
joining the Adviser, Mr. Tai was a portfolio manager for G.T. Management
and, prior to that, was a portfolio manager and research analyst for
Templeton Investment Management in Singapore. He is the lead manager
for the Emerging Markets Fund and a member of the team that manages
Foreign Small Cap Fund.
Lauretta (Retz) Reeves joined the Adviser in 1996 as a portfolio manager
and Managing Director. Prior to joining the Adviser she was Senior Vice
President of Templeton Worldwide in the research and portfolio
management group with primary responsibility for numerous industries and
countries, including global chemicals and European banks. Ms. Reeves is
the lead manager for the Foreign Small Cap Fund.
Francisco Alzuru joined the Adviser in 1994 as a portfolio manager and
research analyst, specializing in Latin America. Prior to joining the
Adviser, he worked at Vestcorp Partners as their Latin American analyst.
Mr. Alzuru is a member of the team that manages Foreign Small Cap Fund
and assists in the management of All Countries Fund(SM).
Vladimir Tyurenkov joined the Adviser in 1995 as Managing Director of
Eastern Europe and Russia. Prior to joining the Adviser, he spent
several years working for the Russian Government and worked extensively
on the Pepperdine University Russian Conversion and Privatization
Program. Mr. Tyurenkov is a member of the team that manages Foreign
Small Cap Fund.
Charles F. Gulden joined the Adviser in 1996 as a portfolio manager and
Managing Director. Prior to joining the Adviser, he was Vice President
and Director of Templeton Worldwide in the research and portfolio
management group with primary research responsibility for global health
care services and agricultural chemical sectors. Mr. Gulden assists in
the management of All Countries Fund(SM).
Administrator and Transfer Agent
Chase Global Funds Services Company, a subsidiary of The Chase Manhattan
Bank, 73 Tremont Street, Boston MA 02108-3913, (the "Administrator" or "Transfer
Agent") provides administrative services to the Fund pursuant to an
Administration Agreement (the "Administration Agreement"). Services provided
under the Administration Agreement are subject to supervision by officers of the
Trust and the Board of Trustees, and include day-to-day administration of
matters related to the existence of the Fund, maintenance of its records,
preparation of reports, supervision of the Fund's arrangements with its
custodian, and assistance in preparing the Fund's registration statements under
federal and state laws. Also under the Administration Agreement, the
Administrator (through its agents) provides dividend disbursing and transfer
agent services to the Fund. For additional information regarding the
Administration Agreement, see "TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT" in
the SAI. For its services under the Administration Agreement, the Trust pays the
Administrator a monthly fee in proportion to the Funds combined average daily
net assets at the following annual rate: 0.12% of the first $500 million in
average daily net assets, 0.08% for the next $500 million, and 0.06 for average
-------
net assets over $1 billion.
- --------------------------
**/ Morningstar Principia(TM) for Mutual Funds, July 1996. Performance data
was calculated using the SEC standardized method of calculating average annual
total return. See "PERFORMANCE INFORMATION" in the SAI.
---
-21-
<PAGE>
Expenses
Each Fund is responsible for payment of certain other fees and expenses
(including legal fees, accountant's fees, custodial fees and printing and
mailing costs) specified in the Advisory and Administration Agreements. Each
Fund will also bear a portion of its operating costs, including amortized
organizational costs.
VALUATION OF SHARES
The net asset value per share of a Fund is determined by dividing the total
market value of the Fund's investments and other assets, less any liabilities,
by the total number of the Fund's outstanding shares. Net asset value per share
is determined as of the regular close of the NYSE on each day that the NYSE is
open for business. Price information on listed securities is taken from the
exchange where the security is primarily traded. Securities listed on a U.S.
securities exchange for which market quotations are available are valued at the
last quoted sale price on the day the valuation is made. Securities listed on a
foreign exchange are valued at their closing price. Unlisted securities and
listed securities not traded on the valuation date for which market quotations
are not readily available are valued at a price within a range not exceeding the
current asked price nor less than the current bid price. The current bid and
asked prices are determined based on the average bid and asked prices quoted on
such valuation date by reputable brokers.
Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the over-the-
counter market. Net asset value includes interest on fixed income securities,
which is accrued daily. In addition, bonds and other fixed income securities may
be valued on the basis of prices provided by a pricing service when such prices
are believed to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last sale
prices but take into account institutional size trading in similar groups of
securities and any developments related to the specific securities. Securities
not priced in this manner are valued at the most recently quoted bid price, or,
when securities exchange valuations are used, at the latest quoted sale price on
the day of valuation. If there is no such reported sale, the latest quoted bid
price will be used. Securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. In the event
that amortized cost does not approximate market value, market prices as
determined above will be used.
The value of other assets and securities for which no quotations are
readily available (including restricted and unlisted foreign securities) and
those securities for which it is inappropriate to determine the prices in
accordance with the above-stated procedures are determined in good faith using
methods determined by the Board of Trustees. For purposes of calculating net
asset value per share, all assets and liabilities initially expressed in foreign
currencies will be translated into U.S. dollars at the mean of the bid price and
asked price for such currencies against the U.S. dollar last quoted by any major
bank.
PERFORMANCE INFORMATION
Each Fund may advertise its "total return," which shows what an investment
in the Fund would have earned over a specified period of time (such as one, five
or ten years) assuming that all distributions and dividends by the Fund were
reinvested on the reinvestment dates during the period. Total return does not
take into account any federal or state income taxes that may be payable on
dividends and distributions or on redemption. The Funds may also include
comparative performance information in advertising or marketing a Fund's shares,
including data from Lipper Analytical Services, Inc., other industry
publications, business periodicals, rating services and market indices.
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<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All income dividends and capital gains distributions will automatically be
reinvested in additional shares at net asset value unless the shareholder has
elected to receive income dividends and capital gains distributions in cash. A
shareholder may make this election by providing written notice to the Fund or by
checking off the appropriate box in the Distribution Option Section on the
Account Registration Form.
Each Fund expects to distribute substantially all of its net investment
income in the form of dividends at least annually. Net capital gains, if any,
will be distributed annually.
Undistributed net investment income is included in a Fund's net assets for
the purpose of calculating net asset value per share. Therefore, on the "ex-
dividend" date, the net asset value per share excludes the dividend (i.e., is
reduced by the per share amount of the dividend). Dividends paid shortly after
the purchase of shares by an investor, although in effect a return of capital,
are taxable to shareholders subject to income tax.
TAXES
The following summary of United States federal income tax consequences is
based on current tax laws and regulations, which may be changed by legislative,
judicial, or administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of a Fund or its shareholders. Accordingly,
shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state and local income taxes.
Each Fund is treated as a separate entity for federal income tax purposes.
Each Fund intends to qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal Revenue Code of 1986, as
amended (the"Code"), so that each Fund will be relieved of federal income tax on
that part of its net investment income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) that is distributed to
shareholders.
Each Fund distributes substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to shareholders.
Dividends from a Fund's net investment income are taxable to shareholders as
ordinary income, whether received in cash or in additional shares. Such
dividends paid by a Fund will generally qualify for the 70% dividends-received
deduction for corporate shareholders only to the extent of the aggregate
qualifying dividend income received by the Fund from U.S. corporations. Each
Fund will report annually to its shareholders the amount of dividend income
qualifying for such treatment.
Distributions of net capital gain are taxable to shareholders as long-term
capital gain, regardless of how long shareholders have held their shares. Each
Fund sends reports annually to its shareholders of the federal income tax status
of all distributions made during the preceding year.
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary income and capital gain net income (the excess of short-term and
long-term capital gains over short-term and long-term capital losses), including
any available capital loss carryforwards, prior to the end of each calendar year
to avoid liability for federal excise tax.
Dividends and other distributions declared by a Fund in October, November
or December of any year and payable to shareholders of record on a date in such
month will be deemed to have been paid by the Fund and received by the
shareholders on the last day of that year if the distributions are paid by the
Fund at any time during the following January.
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<PAGE>
The sale or redemption of shares may result in taxable gain or loss to the
redeeming shareholder, depend ing upon whether the fair market value of the
redemption proceeds exceeds or is less than the Shareholder's adjusted basis in
the redeemed shares. If capital gain distributions have been made in respect of
shares that are sold at a loss after being held for six months or less, then the
loss is treated as a long-term capital loss to the extent of the capital gain
distributions.
Shareholders are urged to consult with their tax advisors concerning the
application of state and local income taxes to investments in a Fund, which may
differ from the federal income tax consequences described above.
Investment income received by a Fund from sources within foreign countries
may be subject to foreign income taxes withheld at the source. Information on
taxation of a Fund by certain foreign countries is set out in the SAI. To the
extent that a Fund is liable for foreign income taxes so withheld, the Fund
intends to operate so as to meet the requirements of the Code to pass through to
the shareholders credit for foreign income taxes paid. Although each Fund
intends to meet Code requirements to pass through credit for such taxes, there
can be no assurance that each Fund will be able to do so.
A Fund may be required to withhold Federal income tax at the rate of 31% of
all taxable distributions (including redemptions) paid to Shareholders who fail
to provide the Fund with their correct taxpayer identification number or to make
required certifications or where the Fund or the Shareholder has been notified
by the Internal Revenue Service that the Shareholder is subject to backup
withholding. Corporate Shareholders and certain other Shareholders specified in
the Code are exempt from backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be credited against the Shareholders'
Federal income tax liability.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISERS
ABOUT THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE FUND.
PORTFOLIO TRANSACTIONS
Each Fund's Advisory Agreement authorizes the Adviser to select the brokers
or dealers that will execute the purchases and sales of investment securities
for the Fund and directs the Adviser to use its best efforts to obtain the best
available price and most favorable execution on all transactions for the Fund.
Each Fund has authorized the Adviser to pay higher commissions in recognition of
brokerage services which, in the opinion of the Adviser, are necessary for the
achievement of better execution, provided the Adviser believes this to be in the
best interest of the Fund.
Since shares of the Funds are not marketed through intermediary brokers or
dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of shares which may be made through such firms.
However, the Adviser may place portfolio orders with qualified broker-dealers
who recommend the Funds or who act as agents in the purchase of shares of the
Funds for their clients.
In purchasing and selling securities for a Fund, it is the Fund's policy to
seek to obtain quality execution at the most favorable prices, through
responsible broker-dealers. In selecting broker-dealers to execute the
securities transactions for a Fund, consideration will be given to such factors
as the price of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing broker-dealers, and
the brokerage and research services which they provide to the Fund. Some
securities considered for investment by the Fund may also be appropriate for
other clients served by the Adviser. If purchase or sale of securities
consistent with the investment policies of the Fund and one or more of these
other clients served by the Adviser is considered at or about the same time,
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<PAGE>
transactions in such securities will be allocated among the Fund and such other
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 of Trustees.
GENERAL INFORMATION
Organization of the Trust and the Funds; Description of Shares
The Trust was organized as a Massachusetts business trust under a
Declaration of Trust dated July 25, 1996. The Declaration of Trust permits the
Trust to issue an indefinite number of units of beneficial interest ("shares"),
with or without par value.
The Trust may issue shares in any number of "series"; each series of the
Trust is a separate portfolio and functions as a separate mutual fund, although
the Funds would share a common board of trustees, and may share an adviser,
administrator, transfer agent, or custodian. All consideration received by the
Trust for shares of any series, and all assets of that series, belong only to
that series and are subject to that series' liabilities. The Funds are currently
the only series of the Trust. Each Fund currently offers only one class of
shares. The trustees may, however, create and issue additional series of shares
and may create and issue shares of additional classes of one or more series.
Except as described below, the shares of each Fund, when issued, will be
fully paid, non-assessable, fully transferable and redeemable at the option of
the holder. The shares have no preference as to conversion, exchange, dividends,
retirement or other features and have no preemptive rights. Each share entitles
the shareholder of record to one vote. All shareholders of a Fund may vote as a
single class on each matter presented to shareholders for action except with
respect to any matter that affects one or more series or class solely or in a
manner different from others, in which case the shares of the affected series or
class are entitled to vote separately. The shares of the Trust have non-
cumulative rights, which means that the holders of more than 50% of the shares
voting for the election of Trustees can elect 100% of the Trustees if they
choose to do so. Persons or organizations owning 25% or more of the outstanding
shares of a Fund may be presumed to "control" (as defined in the 1940 Act) the
Fund.
The Trust is not required to hold annual shareholder meetings; shareholder
meetings will be held from time to time for the election of Trustees under
certain circumstances, or to seek approval for changes to the operations of the
Trust or a Fund. A Trustee may be removed from office by the remaining Trustees,
or by the shareholders at a special meeting called on the written request of
shareholders owning at least 10% of the Trust's outstanding shares.
Reports and Statements to Shareholders
Each Fund's fiscal year ends on December 31st of each year. Each Fund will
send annual, semi-annual, and quarterly reports to its shareholders; the
financial statements appearing in annual reports are audited by the Trust's
independent accountants.
Custodian
The Chase Manhattan Bank serves as each Fund's custodian. For more
information on the custodians see "CUSTODIAN" in the SAI.
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<PAGE>
Independent Accountants
Arthur Andersen LLP, One International Place, Boston, Massachusetts 02110,
serves as independent accountants for the Trust and audits its annual financial
statements.
-26-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[LOGO OF HANSBERGER INSTITUTIONAL SERIES APPEARS HERE]
HANSBERGER INSTITUTIONAL SERIES
515 East Las Olas Boulevard
Suite 1300
Fort Lauderdale, Florida
Telephone No. 954-522-5150
Hansberger Institutional Series (the "Trust") is an open-end management
investment company currently consisting of four series, International Fund,
Emerging Markets Fund, Foreign Small Cap Fund and All Countries Fund/sm/ (each
individually referred to as a "Fund" or collectively referred to as the
"Funds"), each of which is described in this Statement of Additional
Information. The investment adviser of each Fund is Hansberger Global
Investors, Inc. (the "Adviser")
This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the prospectus offering shares of the Trust
dated October 10, 1996, as it may be amended or supplemented from time to time
(the "Prospectus"). A copy of the Prospectus may be obtained without charge by
writing to, or calling, the Trust at the address and telephone number listed
above.
This Statement of Additional Information is dated October 10, 1996.
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
INVESTMENT POLICIES AND TECHNIQUES...............................
Illiquid and Restricted Securities..........................
Short Sales.................................................
Warrants....................................................
Debt Obligations............................................
High Risk Debt Securities...................................
Lending of Portfolio Securities.............................
Depository Receipts.........................................
Derivative Instruments......................................
Foreign Currency Hedges.....................................
Forward Currency Contracts..................................
Foreign Currency Transactions...............................
When-Issued Securities......................................
Foreign Investment Companies................................
Repurchase Agreements.......................................
Borrowing...................................................
Mortgage Dollar Rolls and Reverse Repurchase Agreements.....
INVESTMENT RESTRICTIONS..........................................
TRUSTEES AND OFFICERS OF THE TRUST...............................
PRINCIPAL SHAREHOLDERS...........................................
INVESTMENT ADVISER...............................................
FUND TRANSACTIONS AND BROKERAGE..................................
CUSTODIAN........................................................
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT.....................
TAXES............................................................
DETERMINATION OF NET ASSET VALUE.................................
ADDITIONAL SHAREHOLDER INFORMATION...............................
ORGANIZATION OF THE TRUST AND THE FUNDS..........................
PERFORMANCE INFORMATION..........................................
GENERAL INFORMATION..............................................
INDEPENDENT ACCOUNTANTS..........................................
LEGAL COUNSEL....................................................
FINANCIAL STATEMENTS.............................................
Appendix of Ratings.............................................A-1
</TABLE>
---------------------------------
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and the Prospectus and, if given or made, such information or
representations may not be relied upon as having been authorized by the Trust.
This Statement of Additional Information does not constitute an offer to
sell securities.
2
<PAGE>
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of each Fund's
investment objectives, policies and techniques that are described in detail in
the Prospectus under the caption "Investment Objectives and Policies".
Illiquid and Restricted Securities
Certain securities exempt, or issued in transactions exempt, from
registration under the 1933 Act, including 144A Securities, may be considered
illiquid. The Board of Trustees is responsible for determining, to the extent
permissible under the federal securities laws, which securities are illiquid;
the Board has delegated this responsibility to the Adviser, who will make the
day-to-day determinations of the liquidity of securities. The Board retains
oversight and ultimate responsibility for these determinations. Although no
definitive liquidity criteria are used, the Board of Trustees has directed the
Adviser to examine factors such as (i) the nature of the market (including the
institutional private resale market) for a security, (ii) the terms of certain
instruments permitting disposition to the issuer thereof or a third party (e.g.,
certain repurchase obligations and demand instruments), (iii) availability of
market quotations (e.g., for securities quoted in PORTAL system), and (iv) other
permissible relevant factors.
Restricted Securities may be sold only in privately negotiated transactions
or in a public offering under an effective registration statement under the 1933
Act. If registration becomes necessary, the Fund may have to pay all or part of
the registration costs; in addition, considerable time may elapse between the
Fund's decision to sell and the time it may be permitted to sell a security
under an effective registration statement. If adverse market conditions
developed during such a period, the Fund might obtain a less favorable price
than prevailed when it decided to sell. Restricted Securities will be priced at
fair value, determined in good faith by the Board of Trustees.
If, through appreciation of Restricted Securities or depreciation of other
securities, a Fund finds that more than 15% of its net assets are invested in
illiquid securities, including illiquid Restricted Securities, it will take such
steps, if any, as the Trustees deem advisable to protect liquidity.
Each Fund may sell OTC options and may need to segregate assets or cover
its obligations as writer of such options. Assets used as cover for OTC options
written by a Fund will be considered illiquid unless such options are sold to
qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure will
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the OTC option.
Short Sales
When a Fund sells short, it borrows the securities that it needs to deliver
to the buyer. The Fund must arrange through a broker to borrow these securities
and will become obligated to replace the borrowed securities at whatever their
market price may be at the time of replacement. The Fund may have to pay a
premium to borrow the securities and must pay any dividends or interest payable
on the securities until they are replaced.
A Fund's obligation to replace the securities borrowed in connection with a
short sale will be secured. The proceeds a Fund receives from the short sale
will be held on behalf of the broker until the Fund replaces the borrowed
securities, and the Fund will deposit collateral with the broker; this
collateral will consist of
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cash or liquid, high grade debt obligations. In addition, the Fund will deposit
collateral in a segregated account with the Custodian; this collateral will
consist of cash or liquid, high grade debt obligations equal to any difference
between the market value of (1) the securities sold at the time they were sold
short and (2) any collateral deposited with the broker in connection with the
short sale (not including the proceeds of the short sale).
Each Fund may sell securities short against the box to hedge unrealized
gains on portfolio securities. If a Fund sells securities short against the box,
it may protect unrealized gains, but will lose the opportunity to profit on such
securities if the price rises.
Warrants
Each Fund may buy warrants, which give the holder the right, but not the
obligation, to buy stock of an issuer ("underlying stock") at a given price
(usually higher that the price of the underlying stock when the warrant is
issued) prior to a specified expiration date or perpetually. Warrants may trade
separately or in connection with the acquisition of securities. A Fund will not
purchase warrants, valued at the lower of cost or market value, in excess of 5%
of the Fund's net assets; this limit includes warrants that are not listed on
any stock exchange, and such warrants are limited to 2% of the Fund's net
assets. Warrants acquired by a Fund in units or attached to securities are not
subject to these limits. Warrants do not carry dividend or voting rights on the
underlying stock, and do not represent any rights in the assets of the issuer.
As a result, warrants may be considered more speculative than certain other
investments. A warrant's value does not necessarily change with the value of
the underlying stock. A warrant ceases to have value if it expires unexercised.
Debt Obligations: General
Each Fund may invest in debt obligations. Issuers of debt obligations are
contractually obliged to pay interest at a specified rate on specified dates and
to repay principal on a specified maturity date. Certain debt obligations
(usually intermediate- and long-term bonds) allow the issuer to redeem or "call"
a bond before its maturity. Issuers are most likely to call debt when interest
rates are falling.
Price Volatility. The market value of debt generally varies inversely to
----------------
changes in interest rates; when interest rates decline, a debt obligation's
price usually rises, and when interest rates rise, a debt obligation's price
usually declines.
Maturity. In general, the longer the maturity of a debt obligation, the
--------
higher its yield and the more sensitive it is to changes in interest rates.
Conversely, the shorter the maturity, the lower the yield but the greater the
price stability. "Commercial paper" is generally considered the shortest form
of debt, and "bond" generally refers to securities with maturities over two
years. Bonds with maturities of three years or less are considered short-term,
bonds with maturities between three and seven years are considered intermediate-
term, and bonds with maturities greater than seven years are considered long-
term.
Credit Quality. The value of debt may also be affected by changes in the
--------------
issuer's credit rating or financial condition. Lower quality ratings indicate a
higher degree of risk as to payment of interest and return of principal. To
compensate investors for taking on increased risk, issuers considered less
creditworthy generally must offer investors higher interest rates than issuers
with better credit ratings.
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In conducting its credit research and analysis, the Adviser considers both
qualitative and quantitative factors to evaluate creditworthiness of individual
issuers. The Adviser also relies, in part, on credit ratings compiled by a
number of rating organizations. See the Ratings Appendix.
High Risk Debt Securities ("Junk Bonds")
Each Fund may invest up to 20% of its net assets in non-investment grade
debt securities. Debt securities rated below Baa by Moody's or BBB by S&P, or
of comparable quality, are considered below investment grade. Non-investment
grade debt securities ("high risk securities") may include (i) debt not in
default but rated as low as C by Moody's, S&P, or Fitch Investors Service, Inc.
("Fitch"), CC by Thomson BankWatch ("TBW") or ICBA, or CCC by Duff & Phelps,
Inc. ("D&P"); (ii) commercial paper rated as low as C (or D if in default) by
S&P, Not Prime by Moody's, F-S (or D if in default) by Fitch, Duff 4 (or Duff 5
if in default) by Duff, TBW-4 by TBW, or D by ICBA; and (iii) unrated debt
securities of comparable quality. Each Fund may also buy debt in default (rated
D by S&P or TBW or Fitch, C by ICBA, DD by Duff, or of comparable quality) and
commercial paper in default (rated D by S&P or Fitch, Not Prime by Moody's, Duff
5 by Duff, TBW-4 by TBW, D by ICBA, or of comparable quality). Such securities,
while generally offering higher yields than investment grade securities with
similar maturities, involve greater risks, including the possibility of (or
actual) default or bankruptcy. They are regarded as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal. See
the Ratings Appendix for a description of ratings.
The market for high risk securities is relatively new and its growth has
paralleled a long economic expansion. It is not clear how this market would
withstand a prolonged recession or economic downturn, which could severely
disrupt this market and adversely affect the value of such securities.
Market values of high risk debt securities tend to reflect individual
corporate developments to a greater extent, and tend to be more sensitive to
economic conditions, than do higher rated securities. As a result, high risk
debt securities generally involve more credit risks than higher rated debt.
During an economic downturn or a sustained period of rising interest rates,
highly leveraged issuers of high risk debt may experience financial stress and
may not have sufficient revenues to meet their payment obligations. An issuer's
ability to service its debt obligations may also be adversely affected by
specific corporate developments, its own inability to meet specific projected
business forecasts, or unavailability of additional financing. The risk of loss
due to default by an issuer is significantly greater for high risk debt than for
higher rated debt because the high risk debt is generally unsecured and often
subordinated.
If the issuer of high risk debt defaulted, the Fund might incur additional
expenses in seeking recovery. Periods of economic uncertainty and changes would
also generally result in increased volatility in the market prices of these
securities and thus in a Fund's net asset value.
If a Fund invested in high risk debt experiences unexpected net redemptions
in a rising interest rate market, it may be forced to liquidate a portion of its
portfolio without regard to their investment merits. Due to the limited
liquidity of high risk debt securities, the Fund may be forced to liquidate
these securities at a substantial discount. Any such liquidation would reduce
the Fund's asset base over which expenses could be allocated and could result in
a reduced rate of return for the Fund.
Payment Expectations. During periods of falling interest rates, issuers
--------------------
of high risk debt securities that contain redemption, call or prepayment
provisions are likely to redeem or repay the securities and refinance with other
debt at a lower interest rate. If a Fund holds debt securities that are
refinanced or
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otherwise redeemed, it may have to replace the securities with a lower yielding
security, which would result in a lower return.
Credit Ratings. Credit ratings evaluate safety of principal and interest
--------------
payments, but do not evaluate the market value risk of high risk securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
rating agencies may not make timely changes in a rating to reflect changes in
the economy or in the condition of the issuer that affect the market value of
the security. Consequently, credit ratings are used only as a preliminary
indicator of investment quality. Investments in high risk securities will
depend more heavily on the Adviser's credit analysis than investment-grade debt
securities. The Adviser will monitor each Fund's investments and evaluate
whether to dispose of or retain high risk securities whose credit quality may
have changed.
Liquidity and Valuation. A Fund may have difficulty disposing of certain
-----------------------
high risk securities with a thin trading market. Not all dealers maintain
markets in all these securities, and for many such securities there is no
established retail secondary market. The Adviser anticipates that such
securities may be sold only to a limited number of dealers or institutional
investors. To the extent a secondary trading market does exist, it is generally
not as liquid as that for higher-rated securities; a lack of a liquid secondary
market may adversely affect the market price of a security, which may in turn
affect a Fund's net asset value and ability to dispose of particular securities
in order to meet liquidity needs or to respond to a specific economic event, or
may make it difficult for the Fund to obtain accurate market quotations for
valuation purposes. Market quotations on many high risk securities may be
available only from a limited number of dealers and may not necessarily
represent firm bids or prices for actual sales. During periods of thin trading,
the spread between bid and asked prices is likely to increase significantly, and
adverse publicity and investor perceptions (whether or not based on fundamental
analysis) may decrease the value and liquidity of a high risk security.
Legislation. Legislation has from time to time been or may be proposed
-----------
that is designed to limit the use of certain high risk debt. It is not possible
to predict the effect of such legislation on the market for high risk debt.
However, any legislation that may be proposed or enacted could have a material
adverse effect on the value of these securities, the existence of a secondary
trading market for the securities and, as a result, a Fund's net asset values.
Lending Fund Securities
Each Fund may lend portfolio securities to qualified borrowers. In
determining whether to lend securities to a particular investor, the Adviser
will consider, and during the period of the loan will monitor, all relevant
facts and circumstances, including the borrower's creditworthiness. The
borrower must maintain collateral with the Custodian, either in cash, money
market instruments, or a letter of credit, in an amount at least equal to the
market value of the securities loaned, plus accrued interest and dividends or
other income, determined on a daily basis and adjusted accordingly.
Each Fund will retain authority to terminate any loan of its portfolio
securities at any time. A Fund may pay reasonable administrative and custodial
fees in connection with a loan and may pay the borrower or placing broker a
negotiated portion of the interest earned on cash or money market instruments
held as collateral. On any loan, a Fund will receive reasonable interest or a
flat fee from the borrower and amounts equivalent to any dividends, interest or
other distributions on the securities loaned. The Fund will retain record
ownership of loaned securities to exercise beneficial rights, such as voting and
subscription rights and rights to dividends, interest or other distributions,
when retaining such rights is considered to be in the Fund's interest.
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<PAGE>
Depositary Receipts
Generally, ADRs are issued in registered form, denominated in U.S. dollars,
and designed for use in the U.S. securities markets. Other Depositary Receipts
may be issued in bearer form and denominated in other currencies, and are
generally designed for use in securities markets outside the U.S. ADR
facilities include American Depositary Shares and New York Shares, and may be
established as either "unsponsored" or "sponsored." While the two types of ADR
facilities are similar, there are differences regarding ADR holders' rights and
obligations and the practices of market participants. A depositary may
establish an unsponsored facility without participation by (or acquiescence of)
the underlying issuer; typically, however, the depositary requests a letter of
non-objection from the underlying issuer prior to establishing the facility.
Holders of unsponsored ADRs generally bear all the costs of the ADR facility.
The depositary usually charges fees upon the deposit and withdrawal of the
underlying securities, the conversion of dividends into U.S. dollars, the
disposition of non-cash distribution, and the performance of other services.
The depositary of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the underlying issuer or to
pass through voting rights to ADR holders in respect of the underlying
securities.
Sponsored ADR facilities are created in generally the same manner as
unsponsored facilities, except that sponsored ADRs are established jointly by a
depositary and the underlying issuer through a deposit agreement. The deposit
agreement sets out the rights and responsibilities of the underlying issuer, the
depositary and the ADR holders. With sponsored facilities, the underlying
issuer typically bears some of the costs of the ADR (such as dividend payment
fees of the depositary), although ADR holders may bear costs such as deposit and
withdrawal fees. Depositories of most sponsored ADRs agree to distribute
notices of shareholder meetings, voting instructions, and other shareholder
communications and information to the ADR holders at the underlying issuer's
request.
Derivative Instruments
General Description. Each Fund may invest in a variety of derivative
-------------------
instruments, including options, futures contracts (sometimes referred to as
"futures"), options on futures contacts, and forward contracts to hedge its
other investments, or for risk management.
The use of these instruments is subject to regulation by the SEC, options
and futures exchanges upon which the instruments may be traded, the Commodity
Futures Trading Commission ("CFTC") and state regulatory authorities. In
addition, the Fund's ability to use these instruments will be limited by tax
considerations.
In addition to the investments and techniques described below and in the
Prospectus, the Adviser may use additional instruments and other hedging
techniques as they become available, to the extent that they are consistent with
a Fund's investment limitations and applicable regulation.
Special Risks of These Instruments. Derivative instruments present special
----------------------------------
considerations and risks. Risks pertaining to particular individual instruments
are described in following sections.
First, successful use of these instruments depends on the Adviser's ability
to predict movements in the overall securities and currency markets, which
requires different skills than predicting changes in the prices of individual
securities. There can be no assurance that any particular strategy adopted will
succeed.
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<PAGE>
Second, correlation between the price movements of a hedging instrument and
the price movements of the investment being hedged may be imperfect or even non-
existent. For example, if the value of an instrument used in a short hedge
(such as writing a call option, buying a put option, or selling a futures
contract) increased by less than the decline in value of the hedged investment,
the hedge would not be fully successful. Imperfect correlation could be due to
factors unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which these instruments are
traded. The effectiveness of any hedge using instruments on indices will depend
on the degree of correlation between price movements in the index and price
movements in the hedged investments.
Third, while successful hedging strategies can reduce the risk of loss,
they can also reduce opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged investments. For example, if a Fund
entered into a short hedge because the Adviser projected a decline in the price
of a portfolio security, but the price of that security increased, the Fund's
gain from that increase could be offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined by more
then the increase in the price of the hedged security, the Fund could suffer a
loss.
Fourth, if a Fund is unable to close out its positions in derivative
instruments, assets maintained as "cover" might be required to continue to be
maintained until the hedge position expired or matured. The requirements might
impair the Fund's ability to sell a portfolio security at a disadvantageous
time. A Fund's ability to close out a position in an instrument prior to
expiration or maturity depends on the existence of a liquid secondary market or,
in the absence of such a market, the ability and willingness of the counterparty
to the transaction to close out the position. There is no assurance that any
hedging position can be closed out at a time and price favorable to the Fund.
General Limitation on Certain Derivative Transactions. The Trust has filed
-----------------------------------------------------
a notice of eligibility for exclusion from the definition of the term "commodity
pool operator" with the CFTC and the National Futures Association, which
regulate trading in the futures markets. Pursuant to Rule 4.5 of the
regulations under the Commodity Exchange Act (the "CEA"), the notice of
eligibility includes representations that a Fund will use futures contracts and
related options solely for bona fide hedging purposes within the meaning of CFTC
regulation, provided that a Fund may hold other positions in futures contracts
and related options that do not qualify as a bona fide hedging position if the
aggregate initial margin deposits and premiums required to establish these
positions, less the amount by which any such options positions are "in the
money," do not exceed 5% of the Fund's net assets. Adoption of these guidelines
does not limit the percentage of the Fund's assets at-risk to 5%.
In addition, (i) the aggregate value of securities underlying call options
on securities written by a Fund or obligations underlying put options on
securities written by a Fund determined as of the date of the options are
written will not exceed 25% of the Fund's net assets, (ii) the aggregate
premiums paid on all options purchase by a Fund and which are being held will
not exceed 20% of the Fund's net assets; (iii) a Fund will not purchase put or
call options, other than hedging positions, if, as a result thereof, more than
5% of its total assets would be so invested; and (iv) the aggregate margin
deposit required on all futures and options on futures transactions being held
will not exceed 5% of a Fund's total assets.
Transactions using options (other than purchased options) expose a Fund to
counterparty risk. To the extent required by SEC guidelines, each Fund will not
enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, other options, or futures or (2) cash and
liquid high grade debt obligations with value sufficient at all times to cover
its potential obligations to the extent not covered as provided in (1) above.
Each Fund will also set aside cash and/or appropriate liquid assets in segregate
custodial account if required to do so by the SEC and CFTC regulations. Assets
used as cover or
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<PAGE>
held in a segregated account cannot be sold while the position in the
corresponding option or futures contract is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of a Fund's
assets to segregated accounts as a cover could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.
Options. As described in the Prospectus, each Fund may write covered call
-------
options and covered put options. As a matter of operating policy, the value of
the underlying securities on which a Fund will write options will not, at any
one time, exceed 5% of the Fund's total assets.
For writing a call, a Fund will receive a premium, which increases the
Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit; however, by writing the call, the Fund
also limits its opportunity to profit from an increase in the market value of
the underlying security above the exercise price of the option for as long as
the Fund's obligation as writer of the option continues. Thus, the Fund's total
return when it is writing covered calls may be more or less than the total
return would have been from its underlying securities had it not written the
calls.
Each Fund may sell puts to receive the premiums paid by purchasers and to
close out long put positions. In addition, when the Adviser wishes to purchase
a security at a price lower than its current market price, the Fund may write a
covered put at an exercise price reflecting the lower purchase price sought.
Each Fund may purchase calls to close out covered call positions or to
protect against an increase in the price of a security it anticipates
purchasing. Each Fund may purchase puts on securities that it holds only to
protect itself against a decline in the value of those securities. If a Fund
were to purchase a put on a security it holds, and the value of that underlying
security were to fall below the exercise price of the put, in an amount greater
than the premium paid for the option, the Fund would incur no additional loss.
Each Fund may also purchase puts to close out written put positions in a manner
similar to call option closing purchase transactions. There are no other limits
on each Fund's ability to purchase call and put options.
Each Fund may purchase or write put and call options on securities, on
indices, and foreign currency, and enter into closing transactions with respect
to such options to terminate an existing position. The purchase of call options
serves as a long hedge, and the purchase of put options serves as a short hedge.
Writing put or call options can enable the Fund to enhance income by reason of
the premiums paid by the purchaser of such options. Writing call options serves
as a limited short hedge because declines in the value of the hedged investment
would be offset to the extent of the premium received for writing the option.
However, if the security appreciates to a price higher than the exercise price
of the call option, it can be expected that the option will be exercised and the
Fund will be obligated to sell the security at less than its market value or
will be obligated to purchase the security at a price greater than that at which
the security must be sold under the option. All or a portion of any assets used
as cover for OTC options written by the Fund would be considered illiquid to the
extent described above under "Illiquid and Restricted Securities." Writing put
options serves as a limited long hedge because increases in the value of the
hedged investment would be offset to the extent of the premium received for
writing the option. However, if the security depreciates to a price lower than
the exercise price of the put option, it can be expected that the put option
will be exercised and the Fund will be obligated to purchase the security at
more than its market value.
The value of an option position will reflect, among other things, the
historical price volatility of the underlying investment, the current market
value of the underlying investment, the time remaining until expiration, the
relationship of the exercise price to the market price of the underlying
investment, and general market conditions. Options that expire unexercised have
no value. Options used by the Fund may include
9
<PAGE>
European-style options, which are exercisable only at expiration. American-
style options are exercisable at any time prior to the expiration date.
A Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, a Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, a Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Fund to realize the profit or
limit the loss on an option position prior to its exercise or expiration.
Each Fund may purchase or write both exchange-traded and OTC options.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed that, in effect, guarantees
completion of every exchange-traded option transaction. OTC options are
contracts between the Fund and the counterparty to the transaction (usually a
securities dealer or a bank) with no clearing organization guarantee. Thus,
when a Fund purchases or writes an OTC option, it relies on the counterparty to
make or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
A Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. Each Fund intends to
purchase or write only those exchange-traded options for which there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. Although a Fund
will enter into OTC options only with counterparties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund will in fact be able to close out an OTC option at a
favorable price prior to expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an OTC option position at
any time prior to its expiration.
If a Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by a Fund could cause material losses because the Fund would be unable
to sell the investment used as a cover for the written option until the option
expires or is exercised.
Each Fund may engage in options transactions on indices in much the same
manner as the options on securities discussed above, except that index options
may serve as a hedge against overall fluctuations in the securities markets in
general.
The writing and purchasing of options is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Imperfect correlation between the
options and securities markets may detract the effectiveness of attempted
hedging.
Futures Contracts. Each Fund may enter into futures contracts, including
-----------------
interest rate, index, and currency futures. Each Fund may also purchase put and
call options, and write covered put and call options, on futures in which it is
allowed to invest. The purchase of futures or call options thereon can serve as
a long hedge, and the sale of futures or the purchase of put options thereon can
serve as a short hedge. Writing covered call options on futures contracts can
serve as a limited short hedge, and writing covered put options on futures
contracts can serve as a limited long hedge, using a strategy similar to that
used for writing covered
10
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options in securities. A Fund's hedging may include purchases of futures as an
offset against the effect of expected increases in securities prices or currency
exchange rates and sales of futures as an offset against the effect of expected
declines in securities prices or currency exchange rates. A Fund's futures
transactions may be entered into for hedging purposes or risk management. Each
Fund may also write put options on futures contracts while at the same time
purchasing call options on the same futures contracts in order to create
synthetically a long futures contract position. Such options would have the
same strike prices and expiration dates. A Fund will engage in this strategy
only when the Adviser believes it is more advantageous to the Fund than is
purchasing the futures contract.
To the extent required by regulatory authorities, each Fund will only enter
into futures contracts that are traded on national futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading are regulated under the CEA by the CFTC. Although
techniques other than sales and purchases of futures contracts could be used to
reduce a Fund's exposure to market, currency, or interest rate fluctuations, the
Fund may be able to hedge its exposure more effectively and perhaps at a lower
cost through using futures contracts.
A futures contract provides for the future sale by one party and purchase
by another party of a specified amount of a specific financial instrument (e.g.,
debt security) or currency for a specified price at a designated date, time, and
place. An index futures contract is an agreement pursuant to which the parties
agree to take or make delivery of an amount of cash equal to the difference
between the value of the index at the close of the last trading day of the
contract and the price at which the index futures contract was originally
written. Transactions costs are incurred when a futures contract is bought or
sold and margin deposits must be maintained. A futures contract may be
satisfied by delivery or purchase, as the case may be, of the instrument, the
currency, or by payment of the change in the cash value of the index. More
commonly, futures contracts are closed out prior to delivery by entering into an
offsetting transaction in a matching futures contract. Although the value of an
index might be a function of the value of certain specified securities, no
physical delivery of those securities is made. If the offsetting purchase price
is less than the original sale price, the Fund realizes a gain; if it is more,
the Fund realizes a loss. Conversely, if the offsetting sale price is more than
the original purchase price, the Fund realizes a gain; if it is less, the Fund
realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that a Fund will be able to
enter into an offsetting transaction with respect to a particular futures
contract at a particular time. If a Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the futures contract.
No price is paid by a Fund upon entering into a futures contract. Instead,
at the inception of a futures contract, the Fund is required to deposit in a
segregated account with its custodian, in the name of the futures broker through
whom the transaction was effected, "initial margin" consisting of cash, U.S.
government securities or other liquid, high grade debt obligations, in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in accordance
with applicable exchange rules. Unlike margin in securities transactions,
initial margin on futures contracts does not represent a borrowing, but rather
is in the nature of a performance bond or good-faith deposit that is returned to
the Fund at the termination of the transaction if all contractual obligations
have been satisfied. Under certain circumstances, such as periods of high
volatility, the Fund may be required by an exchange to increase the level of its
initial margin payment, and initial margin requirements might be increased
generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking to market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker.
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When the Fund purchases an option on a future, the premium paid plus transaction
costs is all that is at risk. In contrast, when a Fund purchases or sells a
futures contract or writes a call or put option thereon, it is subject to daily
variation margin calls that could be substantial in the event of adverse price
movements. If the Fund has sufficient cash to meet daily variation margin
requirements, it might need to sell securities at a time when such sales are
disadvantageous. Purchasers and sellers of futures positions and options on
futures can enter into offsetting closing transactions by selling or purchasing,
respectively, an instrument identical to the instrument held or written.
Positions in futures and options on futures may be closed only on an exchange or
board of trade that provides a secondary market. Each Fund intends to enter
into futures transactions only on exchanges or boards of trade where there
appears to be a liquid secondary market. However, there can be no assurance
that such a market will exist for a particular contract at a particular time.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a future or option on a futures contract can
vary from the previous day's settlement price; once that limit is reached, no
trades may be made that day at a price beyond the limit. Daily price limits do
not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
If a Fund were unable to liquidate a futures or option on a futures
contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain cash
or securities in a segregated account.
Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or options on futures contracts
might not correlate perfectly with movements in the prices of the investments
being hedged. For example, all participants in the futures and options on
futures contracts markets are subject to daily variation margin calls and might
be compelled to liquidate futures or options on futures contracts positions
whose prices are moving unfavorably to avoid being subject to further calls.
These liquidations could increase price volatility of the instruments and
distort the normal price relationship between the futures or options and the
investments being hedged. Also, because initial margin deposit requirements in
the futures markets are less onerous than margin requirements in the securities
markets, there might be increased participation by speculators in the future
markets. This participation also might cause temporary price distortions. In
addition, activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.
Forward Currency Contracts
Each Fund may enter into forward currency contracts; such transactions may
serve as long hedges (for example, if the Fund seeks to buy a security
denominated in a foreign currency, it may purchase a forward currency contract
to lock in the $US price of the security) or as short hedges (the Fund
anticipates selling a security denominated in a foreign currency may sell a
forward currency contract to lock in the $US equivalent of the anticipated sale
proceeds).
A Fund may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or a basket of
currencies, the value of which the Adviser believes will have a positive
correlation to the values of the currency being hedged. In addition, a Fund may
use forward currency contracts to shift exposure to foreign currency
fluctuations from one country to another. For
12
<PAGE>
example, if a Fund owns securities denominated in a foreign currency and the
Adviser believes that currency will decline relative to another currency, it
might enter into a forward contract to sell an appropriate amount of the first
foreign currency, with payment to be made in the second currency. Transactions
that use two foreign currencies are sometimes referred to as "cross hedges."
Use of different foreign currency magnifies the risk that movements in the price
of the instrument will not correlate or will correlate unfavorably with the
foreign currency being hedged.
The cost to a Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
When a Fund enters into a forward currency contract, it relies on the
counterparty to make to take delivery of the underlying currency at the maturity
of the contract. Failure by the counterparty to do so would result in the loss
of any expected benefit of the transaction.
As is the case with future contracts, holders and writers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures, by selling or purchasing, respectively, an
instrument identical to the instrument held or written. Secondary markets
generally do not exist for forward currency contracts, with the result that
closing transactions generally can be made for forward currency contracts only
by negotiating directly with the counterparty. Thus, there can be no assurance
that a Fund will in fact be able to close out a forward currency contract at a
favorable price prior to maturity. In addition, in the event of insolvency of
the counterparty, the Fund might be unable to close out a forward currency
contract at any time prior to maturity. In either event, the Fund would
continue to be subject to market risk with respect to the position, and would
continue to be required to maintain a position in securities denominated in the
foreign currency or to maintain cash or securities in a segregated account.
The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, a Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
Foreign Currency Transactions
Although each Fund values its assets daily in U.S. dollars, the Funds are
not required to convert their holdings of foreign currencies to U.S. dollars on
a daily basis. Each Fund's foreign currencies generally will be held as
"foreign currency call accounts" at foreign branches of foreign or domestic
banks. These accounts bear interest at negotiated rates and are payable upon
relatively short demand periods. If a bank became insolvent, a Fund could
suffer a loss of some or all of the amounts deposited. Each Fund may convert
foreign currency to U.S. dollars from time to time. Although foreign exchange
dealers generally do not charge a stated commission or fee for conversion, the
prices posted generally include a "spread," which is the difference between the
prices at which the dealers are buying and selling foreign currencies.
When-Issued Securities
Normally, the settlement date on when-issued securities occurs within one
month of purchase commitment, but may take longer, albeit not more than 120 days
after the trade date.
13
<PAGE>
At the time a Fund commits to purchase a security on a when-issued basis,
it will record the transaction and reflect the value of that security in
determining its net asset value. The Adviser does not believe that any Fund's
net asset value will be adversely affected by purchases of securities on a when-
issued basis.
While when-issued securities may be sold prior to settlement, the Adviser
intends to purchase such securities with the purpose of actually acquiring them
unless a sale appears desirable for investment reasons. Each Fund will maintain
a separate account with the Custodian, with a segregated portfolio of cash and
marketable securities at least equal in value to that Fund's commitments to
purchase when-issued securities. Such segregated securities will mature (or, if
necessary, be sold) on or before the settlement date. When the time comes for a
Fund to pay for when-issued securities, it will meet its obligations from the
then-available cash flow, the sale of the securities held in this separate
account, the sale of other securities; although it would not normally expect to
do so, the Fund may also meet this obligation from the sale of the when-issued
securities themselves, which may have increased or decreased in market value.
When a Fund commits to purchase when-issued securities, it increases its
exposure to fluctuations in, e.g., market interest rates. Each Fund's current
---
policy is to limit its aggregate when-issued commitments to 15% of the market
value of its total assets less liabilities, other than the obligations created
by these commitments.
Foreign Investment Companies
Some of the countries in which the Funds may invest may not permit, or may
place economic restrictions on, direct investment by outside investors.
Investments in such countries may only be permitted through foreign government-
approved or -authorized investment vehicles, which may include other investment
companies. The Funds may also invest in registered or unregistered closed-end
investment companies that invest in foreign securities. Investing through such
vehicles may involve frequent or layered fees or expenses and may also be
subject to limitation under the 1940 Act. Under the 1940 Act, a Fund may invest
up to 10% of its assets in shares of investment companies and up to 5% of its
assets in any one investment company as long as the investment does not
represent more than 3% of the voting stock of the acquired investment company.
Repurchase Agreements
In a repurchase agreement, a Fund buys a security from a counterparty that
has agreed to repurchase it at a mutually agreed upon date and repurchase price,
reflecting the interest rate effective for the term of the repurchase agreement.
The term of a repurchase agreement is usually from overnight to one week and
never exceeds one year; repurchase agreements with a maturity in excess of seven
days are considered illiquid. The counterparty's obligation to repurchase is
secured by the value of the underlying security; when the Fund enters into a
repurchase agreement, it always receives, as collateral, underlying securities
with a market value at least equal to the purchase price (including accrued
interest), and the Adviser will monitor, on an ongoing basis, the value of the
underlying securities to ensure that such value always equals or exceeds the
repurchase price plus accrued interest.
A Fund may, under certain circumstances, deem repurchase agreements
collateralized by U.S. government securities to be investments in U.S.
government securities.
Borrowing
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<PAGE>
Borrowing by a Fund will create the opportunity for increased net income
but, at the same time, will involve special risk considerations. Each Fund will
secure all borrowings; either the Custodian will segregate the Fund's assets
securing the borrowing for the benefit of the lenders or similar arrangements
will be made with a suitable sub-custodian. If assets used to secure the
borrowing decrease in value, the Fund may be required to pledge additional
collateral to the lender in the form of cash or securities to avoid liquidation
of those assets. Proceeds of borrowing may be used for investment purposes or
to pay dividends.
Each Fund may also engage in dollar roll transactions and reverse
repurchase agreements, which may be considered a form of borrowing. In
addition, each Fund may borrow up to an additional one-third of its total assets
from banks for temporary or emergency purposes. A Fund will not purchase
securities when bank borrowings exceed one-third of its total assets.
Mortgage Dollar Rolls and Reverse Repurchase Agreements
Each Fund may engage in reverse repurchase agreements to facilitate
portfolio liquidity, a practice common in the mutual fund industry, or for
arbitrage transactions discussed below. In a reverse repurchase agreement, the
Fund would sell a security and enter into an agreement to repurchase the
security at a specified future date and price. The Fund generally retains the
right to interest and principal payments on the security. Since the Fund
receives cash upon entering into a reverse repurchase agreement, it may be
considered a borrowing. (See "Borrowing" above.) When required by guidelines
of the SEC, the Fund will set aside permissible liquid assets in a segregated
account to secure its obligations to repurchase the security.
Each Fund may also enter into mortgage dollar rolls, in which the Fund
would sell mortgage-backed securities for delivery in the current month and
simultaneously contract to purchase substantially similar securities on a
specified future date. While the Fund would forego principal and interest paid
on the mortgage-backed securities during the roll period, it would be
compensated by the difference between the current sales price and the lower
price for the future purchase as well as by any equivalent to a lower forward
price. At the time the Fund would enter into a mortgage dollar roll, it would
set aside permissible liquid assets in a segregated account to secure its
obligation for the forward commitment to buy mortgage-backed securities.
Mortgage dollar roll transactions may be considered a borrowing by the funds.
(See "Borrowing" above.)
The mortgage dollar rolls and reverse repurchase agreements entered into by
the Funds may be used as arbitrage transactions in which a Fund will maintain an
offsetting position in investment grade debt obligations or repurchase
agreements that mature on or before the settlement date on the related mortgage
dollar roll or reverse repurchase agreements. Since the Fund will receive
interest on the securities or repurchase agreements in which it invests the
transaction proceeds, such transactions may involve leverage. However, since
such securities or repurchase agreements will be high quality and will mature on
or before the settlement date of the mortgage dollar roll or reverse repurchase
agreement, the Adviser believes that such arbitrage transactions do not present
the risks to the Fund that are associated with other types of leverage.
INVESTMENT RESTRICTIONS
The following are fundamental investment limitations of the each Fund.
These fundamental limitations may not be changed without shareholder approval.
In accordance with these limitations, each Fund will not:
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<PAGE>
1. Invest in real estate or mortgages on real estate (although a Fund may
invest in marketable securities secured by real estate or interests therein
or issued by companies or investment trusts which invest in real estate or
interests therein); invest in other open-end investment companies (except
in connection with a merger, consolidation, acquisition or reorganization);
invest in interests (other than debentures or equity stock interests) in
oil, gas or other mineral exploration or development programs; or purchase
or sell commodity contracts (except futures contracts as described in the
Fund's prospectus).
2. Purchase any security (other than obligations of the U.S. Government, its
agencies or instrumentalities) if, as a result, as to 75% of the Fund's
total assets (i) more than 5% of the Fund's total assets would then be
invested in securities of any single issuer, or (ii) the Fund would then
own more than 10% of the voting securities of any single issuer.
3. Act as an underwriter; issue senior securities except as set forth in
investment restrictions 5 and 6 below; or purchase on margin or sell short,
except that a Fund may make margin payments in connection with futures,
options and currency transactions.
4. Loan money, except that a Fund may (i) purchase a portion of an issue of
publicly distributed bonds, debentures, notes and other evidences of
indebtedness, (ii) enter into repurchase agreements and (iii) lend its
portfolio securities.
5. Borrow money, except that a Fund may borrow money from banks in an amount
not exceeding one-third of the value of its total assets (including the
amount borrowed).
6. Mortgage, pledge or hypothecate its assets (except as may be necessary in
connection with permitted borrowings); provided, however, this does not
prohibit escrow, collateral or margin arrangements in connection with its
use of options, futures contracts and options on future contracts.
7. Invest 25% or more of its total assets in a single industry. For purposes
of this restriction, a foreign government is deemed to be an "industry"
with respect to securities issued by it.
If a Fund receives from an issuer of securities held by the Fund
subscription rights to purchase securities of that issuer, and if the Fund
exercises such subscription rights at a time when the Fund's portfolio holdings
of securities of that issuer would otherwise exceed the limits set forth in
Investment Restrictions 2 or 7 above, it will not constitute a violation if,
prior to receipt of securities upon exercise of such rights, and after
announcement of such rights, the Fund has sold at least as many securities of
the same class and value as it would receive on exercise of such rights.
Additional Restrictions
Each Fund has adopted the following additional restrictions which are not
fundamental and which may be changed without Shareholder approval, to the extent
permitted by applicable law, regulation or regulatory policy. Under these
restrictions, each Fund may not:
1. Purchase or retain securities of any company in which Trustees or officers
of the Trust or of the Investment Manager, individually owning more than
1/2 of 1% of the securities of such company, in the aggregate own more than
5% of the securities of such company.
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<PAGE>
2. Invest more than 5% of the value of its total assets in securities of
issuers which have been in continuous operation less than three years.
3. Invest more than 5% of its net assets in warrants whether or not listed on
the New York or American Stock Exchanges, and more than 2% of its net
assets in warrants that are not listed on those exchanges. Warrants
acquired in units or attached to securities are not included in this
restriction.
4. Purchase or sell real estate limited partnership interests.
5. Purchase or sell interests in oil, gas and mineral leases (other than
securities of companies that invest in or sponsor such programs).
6. Invest for the purpose of exercising control over management of any
company.
7. Purchase more than 10% of a company's outstanding voting securities.
8. Invest more than 15% of the Fund's net assets in securities that are not
readily marketable (including repurchase agreements maturing in more than
seven days and over-the-counter options purchased by the Fund). Rule 144A
securities determined by the Board of Trustees to be liquid are not subject
to this limitation.
Whenever any investment policy or investment restriction states a maximum
percentage of a Fund's assets which may be invested in any security or other
property, it is intended that such maximum percentage limitation be determined
immediately after and as a result of that Fund's acquisition of such security or
property. The value of a Fund's assets is calculated as described in its
Prospectus under the heading "Valuation of Shares."
TRUSTEES AND OFFICERS OF THE TRUST
The name, age, address, principal occupation during the past five years and
other information about each Trustee and officer of the Trust is shown below.
Each Trustee who is considered to be an "interested person," as defined in the
1940 Act, of the Trust is indicated by an asterisk.
<TABLE>
<CAPTION>
Offices with Principal Occupation
Name and Address the Trust During Past Five Years
- ---------------- ----------- ----------------------
<S> <C> <C>
THOMAS L. HANSBERGER* (65) President and Chairman and Chief Executive Officer,
515 East Las Olas Blvd. Trustee Hansberger Global Investors, Inc., 1994
Fort Lauderdale, FL to present; Chairman and Chief
Executive Officer, Templeton
Worldwide, 1992 to 1993; Director and
Chief Executive Officer, Templeton,
Galbraith & Hansberger Ltd., 1985 to 1992.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
J. CHRISTOPHER JACKSON, ESQ.* (45) Vice President General Counsel,Hansberger Global Investors, Inc.
515 East Las Olas Blvd. and Trustee 1996 to present; Associate General Counsel and
Fort Lauderdale, FL Assistant Secretary, Van Kampen-American Capital,
1992 to 1996.
KATHRYN B. MCGRATH, ESQ.* (52) Trustee Partner, Morgan, Lewis & Bockius LLP,
1800 M Street, N.W. 1990 to present.
Washington, DC
STUART B. ROSS (59) Trustee Executive Vice President, Xerox Corporation,
100 First Stamford Place 1990 to present; Chief Executive Officer,
Stamford, CT Xerox Financial Services, Inc., 1990 to present.
WILLIAM F. WATERS, ESQ. (64) Trustee Retired; former Senior Vice President,
640 Hollow Tree Ridge Road Merrill Lynch & Co., 1984 to 1996.
Darien, CT
CHARLES F. GUILDEN (34) Vice President Managing Director, Hansberger Global Investors, Inc.
515 East Las Olas Blvd. 1996 to present; Vice President and Director of Research
Fort Lauderdale, FL & Portfolio Management, Templeton Worldwide, 1991 to 1996.
WESLEY E. FREEMAN (46) Vice President Managing Director, Hansberger Global Investors, Inc.
515 East Las Olas Blvd. 1996 to present; Executive Vice President for Institutional
Fort Lauderdale, FL Business Development, Templeton Worldwide, 1992 to 1996.
THOMAS A. CHRISTENSEN, Jr. (26) Treasurer Vice President and Controller, Hansberger Global Investors,
515 East Las Olas Blvd. Inc. 1996 to present; Accountant, Arthur Andersen LLP,
Fort Lauderdale, FL 1993 to 1996; student, University of Illinois, 1993 to 1994;
student, University of Florida School of Accountancy,
1989 to 1993.
KIMBERLEY SCOTT (33) Secretary Senior Vice President, Hansberger Global Investors, Inc.
515 East Las Olas Blvd. 1994 to present; Executive Assistant and Portfolio
Fort Lauderdale, FL Supervisor, Templeton Worldwide, 1992 to 1994.
KARL O. HARTMANN, ESQ. (41) Assistant Senior Vice President and General Counsel, Chase Global
73 Tremont Street Secretary Funds Services Company, 1991 to present.
Boston, MA
</TABLE>
The Trust pays each Trustee who is not a director, officer, partner or
employee of the Adviser, any affiliated company, or legal counsel to the
Adviser, an annual fee of $3500, plus $500 per Board meeting. In addition, the
Trust reimburses each disinterested Trustee for travel and other expenses
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<PAGE>
incurred in connection with attendance at such meetings. Other officers and
Trustees receive no compensation or expense reimbursement from the Trust. For
the fiscal year ending December 31, 1996, the Trust anticipates paying the
following amounts to Trustees and Officers of the Trust:
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Total Compensation
Compensation Benefits from Registrant and
From Registrant Accrued as Part Estimated Annual Fund Complex Paid to
Name of Person, for Fiscal Year of Fund Benefits Upon Directors for Fiscal
Position Ended 1996 Expenses Retirement Year Ended 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stuart B. Ross, $1,375 N/A N/A $1,375 for service on
Trustee the board
- ------------------------------------------------------------------------------------------------------------------------------------
William F. Waters, $1,375 N/A N/A $1,375 for service on
Trustee the board
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of October 1, 1996, the officers and Trustees of the Trust, in the
aggregate, beneficially owned less than 1% of its outstanding shares.
PRINCIPAL SHAREHOLDERS
As of October 1, 1996, Hansberger Global Investors, Inc. was the sole
shareholder of each Fund.
INVESTMENT ADVISER
Hansberger Global Investors, Inc. (the "Adviser") is the investment adviser
to each Fund. The Adviser is owned and controlled by Mr. Thomas L. Hansberger
who founded the Adviser in 1994. In addition to the Funds, the Adviser is
currently the investment manager of the Hansberger Global Fund plc., an
investment company incorporated in Ireland. A brief description of the
investment advisory agreement ("Advisory Agreement") is set forth in the
Prospectus under "MANAGEMENT OF THE FUND--Investment Adviser."
The Advisory Agreement, dated October 4, 1996, was approved by the sole
shareholder of the International Fund and the Emerging Markets Fund on October
4, 1996. The Advisory Agreement will continue in effect for two years following
its effective date, and will continue in effect thereafter only if such
continuance is approved annually by either the Board of Trustees or by vote of a
majority of each Fund's outstanding voting securities (as defined in the 1940
Act), and in either case by the vote of a majority of the Trust's trustees who
are neither parties to the Advisory Agreement nor interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement is terminable, without penalty, on 60 days'
written notice by the Board of Trustees, by vote of a majority of the Fund's
outstanding voting securities, or by the Adviser, and will terminate
automatically in the event of its assignment.
The Adviser is responsible for investment decisions and supplies investment
research and portfolio management. At its expense, the Adviser provides office
space and all necessary office facilities, equipment
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<PAGE>
and personnel for servicing the investments of the Fund. The Adviser places all
orders for the purchase and sale of each Fund's portfolio securities at that
Fund's expense.
Except for expenses assumed by the Adviser as set forth above or by the
Distributor as described below with respect to the distribution of each Fund's
shares, each Fund is responsible for all its other expenses, including, without
limitation, interest charges, taxes, brokerage commissions, and similar
expenses, expenses of issue, sale, repurchase, or redemption of shares; expenses
of registering or qualifying shares of sale; expenses for printing and
distribution costs of Prospectuses and quarterly financial statements mailed to
existing shareholders; and charges of custodians, transfer agents (including the
printing and mailing of reports and notices to shareholders); registrars;
auditing and legal services, clerical services related to recordkeeping and
shareholder relations, printing stock certificates, and fees for trustees who
are not "interested persons" of the Adviser.
As compensation for its services, each Fund pays to the Adviser a fee as
described in the Prospectus.
The organizational expenses of each Fund in the amounts of $44,614,
$44,614, $19,594, and $19,594, respectively, were advanced by the Adviser and
will be reimbursed by the Fund over a period of not more than 60 months from the
date that Fund commenced operations.
The Adviser will reimburse a Fund in the event that the expenses and
charges payable by that Fund in any fiscal year, including the advisory fee but
excluding taxes, interest, brokerage commissions, and similar fees and to the
extent permitted extraordinary expenses, exceed a certain percentage of the
average net asset value of the Fund for such year. Such excess is determined by
valuations made as of the close of each business day of the year. This "certain
percentage" is the most restrictive percentage provided by the laws of the
various states in which the Fund's shares are qualified for sale. The most
restrictive percentage limitation currently applicable to the Fund is 2.5% of
its average daily net assets up to $30,000,000, 2% on the next $70,000,000 of
its average daily net assets and 1.5% of its average daily net assets in excess
of $100,000,000. Reimbursement of expenses in excess of the applicable
limitation will be made on a monthly basis and will be paid to the Fund by
reduction of the Adviser's fee, subject to later adjustment, month by month, for
the remainder of the fund's fiscal year. The Adviser may from time to time
voluntarily absorb expenses for the Fund in addition to the reimbursement of
expenses in excess of application limitations.
FUND TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for
each Fund and for the placement of a Fund's investment business and the
negotiation of the commissions to be paid on such transactions. It is the
policy of the Adviser to seek the best execution at the best security price
available with respect to each transaction, in light of the overall quality of
brokerage and research services provided to the Adviser or the Fund. In over-
the-counter transactions, orders are placed directly with a principal market
maker unless it is believed that better price and execution can be obtained
during a broker. The best price to a Fund means the best net price without
regard to the mix between purchase or sale price and commissions, if any. In
selecting broker-dealers and in negotiating commissions, the Adviser considers a
variety of factors, including best price and execution, the full range of
brokerage services provided by the broker, as well as its capital strength and
stability, and the quality of the research and research services provided by the
broker. Consistent with the foregoing primary considerations, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. and such other
policies as the Trustees may determine, the Adviser may consider sales of shares
of the Funds as a factor in the selection of broker-dealers to execute the
Funds' portfolio transactions.
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<PAGE>
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an account
to pay a broker or dealer a commission for effecting a transaction in excess of
the amount of commission another broker or dealer would have charged for
effecting the transaction in recognition of the value of the brokerage and
research services provided by the broker or dealer. Brokerage and research
services include (a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement, and custody).
In carrying out the provisions of the Advisory Agreements, the Adviser may
cause a Fund to pay, to a broker that provides brokerage and research services
to the Adviser, a commission for effecting a securities transaction in excess of
the amount another broker would have charged for effecting the transaction. The
Adviser believes it is important to its investment decision-making process to
have access to independent research. The Advisory Agreements provide that such
higher commissions will not be paid by a Fund unless (a) the Adviser determines
in good faith that the amount is reasonable in relation to the services in terms
of the particular transaction or in terms of the Adviser's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion; (b) such payment is made in compliance with provisions of
Section 28(e), other applicable state and federal laws, and the Advisory
Agreement; and (c) in the opinion of the Adviser, the total commissions paid by
the Fund will be reasonable in relation to the benefits to the Fund over the
long term. The investment advisory fees paid by each Fund under its Advisory
Agreement are not reduced as a result of the Adviser's receipt of research
services.
Generally, research services provided by brokers may include information on
the economy, industries, groups of securities, individual companies, statistical
information, accounting and tax law interpretations, political developments,
legal developments affecting portfolio securities, technical market action,
pricing and appraisal services, credit analysis, risk measurement analysis,
performance analysis, and analysis of corporate responsibility issues. Such
research services are received are primarily in the form of written reports,
telephone contacts, and personal meetings with security analysts. In addition,
such research services may be provided in the form of access to various
computed-generated data, computed hardware and software, and meetings arranged
with corporate and industry spokesperson, economists, academicians, and
government representatives. In some cases, research services are generated by
third parties but are provided to the Adviser by or through brokers. Such
brokers may pay for all or a portion of computer hardware and software costs
relating to the pricing of securities.
Where the Adviser itself receives both administrative benefits and research
and brokerage services from the services provided by brokers, it makes a good
faith allocation between the administrative benefits and the research and
brokerage services, and will pay for any administrative benefits with cash. In
making good faith allocations of costs between administrative benefits and
research and brokerage services, a conflict of interest may exist by reason of
the Adviser's allocation of the costs of such benefits and services between
those that primarily benefit the Adviser and those that primarily benefit the
funds and other advisory clients.
From time to time, the Adviser may purchase securities for a Fund in a
fixed price offering. In these situations, the seller may be a member of the
selling group that will, in addition to selling the securities to the Funds and
other advisory clients, provide the Adviser with research. The National
Association of Securities Dealers has adopted rules expressly permitting these
types of arrangements under certain circumstances. Generally, the seller will
provide research "credits" in these situations at a rate that is higher than the
rate available for typical secondary market transactions. These arrangements
may not fall within the safe harbor of Section 28(e).
21
<PAGE>
Each year, the Adviser will consider the amount and nature of research and
research services provided by brokers, as well as the extent to which such
services are relied upon, and attempts to allocate a portion of the brokerage
business of the Fund and other advisory clients on the basis of that
consideration. In addition, brokers may suggest a level of business they would
like to receive in order to continue to provide such services. The actual
brokerage business received by a broker may be more or less than the suggested
allocations, depending upon the Adviser's evaluation of all applicable
considerations.
The Adviser may direct the purchase of securities on behalf of each Fund
and other advisory clients in secondary market transactions, in public offerings
directly from an underwriter, or in privately negotiated transactions with an
issuer. When the Adviser believes the circumstances so warrant, securities
purchased in public offerings may be resold shortly after acquisition in the
immediate aftermarket for the security in order to take advantage of price
appreciation from the public offering price or for other reasons. Short-term
trading of securities acquired in public offerings, or otherwise, may result in
higher portfolio turnover and associated brokerage expenses.
The Adviser is responsible for selecting brokers in connection with foreign
securities transactions. The fixed commissions paid in connection with most
foreign stock transactions are usually higher than negotiated commissions on
U.S. stock transactions. Foreign stock exchanges and brokers are subject to
less government supervision and regulation as compared with the U.S. exchanges
and brokers. In addition, foreign security settlements may in some instances be
subject to delays and related administrative uncertainties.
The Adviser places portfolio transactions for other advisory accounts,
including other mutual funds managed by the Adviser. Research services
furnished by firms through which each Fund effects its securities transactions
may be used by the Adviser in servicing all of its accounts; not all of such
services may be used by the Adviser in connection with each Fund. In the
opinion of the Adviser, it is not possible to measure separately the benefits
from research services to each of the accounts (including the Funds) managed by
the Adviser. Because the volume and nature of the trading activities of the
accounts are not uniform, the amount of commissions in excess of those charged
by another broker paid by each account for brokerage and research services will
vary. However, in the opinion of the Adviser, such costs to each Fund will not
be disproportionate to the benefits received by it on a continuing basis.
The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by a Fund and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Fund. In
making such allocations between a Fund and other advisory accounts, the main
factors considered by the Adviser are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held, and the opinions of the persons responsible for recommending the
investment.
Because each Fund is newly-organized, it paid no brokerage commissions
during the past fiscal year.
It is anticipated that the annual turnover rate of each Fund will not
exceed 100% under normal circumstances.
CUSTODIAN
The Chase Manhattan Bank, 4 Chase Metro Tech Center, 18th Floor, Brooklyn,
New York 11245, serves as custodian of the assets of the Trust and has custody
of all of its securities and cash. The
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Custodian delivers and receives payment for securities sold, receives and pays
for securities purchased, collects income from investments, and performs other
duties, all as directed by the officers of the Trust. In addition, the Trust,
with the approval of the Board of Trustees and subject to the rules of the SEC,
may have sub-custodians in those foreign countries in which it invests its
assets. The Custodian and sub-custodians are in no way responsible for any of
the investment policies or decisions of a Fund.
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Chase Global Fund Services Company, the Trust's administrator, acts as
transfer agent and dividend-disbursing agent for the Fund. The Transfer Agent
is compensated under the Administration Agreement discussed in the Prospectus.
From time to time, the Fund, directly or indirectly through arrangements
with the Adviser, may pay amounts to third parties that provide transfer agent
and other administrative services relating to the Fund to persons who
beneficially own interests in the Fund, such as participants in 401(k) plans.
These services may include, among other things, sub-accounting services,
answering inquiries relating to the Fund, transmitting, on behalf of the Fund,
proxy statements, annual reports, updated Prospectuses, other communications
regarding the Fund, and related services as the Fund or beneficial owners may
reasonably request. In such cases, the Fund will not pay fees at a rate that is
greater than the rate the Fund is currently paying the Adviser for providing
these services to Fund shareholders.
TAXES
General
As indicated under "Taxes" in the Prospectus, each Fund intends to continue
to qualify annually for treatment as a regulated investment company ("RIC")
under the Code. This qualification does not involve government supervision of a
Fund's management practices or policies.
In order to qualify for treatment as a RIC under the Code, each Fund must
distribute to its shareholder for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must
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 (including
gains from options, futures, or forward contracts) derived with respect to its
business of investing in securities of those currencies ("Income Requirement");
(2) the Fund must derive less than 30% of its gross income each taxable year
from the sale or other disposition of securities, or any of the following that
were held for less than three months - options or futures (other than those on
foreign currencies), or foreign currencies (or options and futures with respect
to securities) ("30% Limitation"); (3) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs, and other securities, with these other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (4) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer or two or more issuers engaged in
same or similar businesses if the Fund owns at least 20% of the voting power of
such issuers.
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If shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
Foreign Transactions
Dividends and interest received by a Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of a
Fund's total assets at the close of its taxable year consists of securities of
foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that would enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions income taxes paid by the Fund. Pursuant to the elections, the
Funds would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as paid
by him, his proportionate share of those taxes, (2) treat his share of those
taxes and any dividend paid by the Fund that represents income from foreign or
U.S. possessions sources as his own income from those sources, and (3) either
deduct the taxes deemed paid by him in computing his taxable income, or,
alternatively, use the foregoing information in calculating the foreign tax
credit against his federal income tax. Each Fund will report to its
shareholders shortly after each taxable year their respective shares of its
income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
Each Fund maintains its accounts and calculates its income in U.S. dollars.
In general, gain or loss (1) from the disposition of foreign currencies and
forward currency contracts, (2) from the disposition of foreign-currency-
denominated debt securities that are attributable to fluctuations in exchange
rates between the date the securities are acquired and their disposition date,
and (3) attributable to fluctuations in exchange rates between the time the Fund
accrues interest or other receivables or expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects those
receivables or pays those liabilities, will be treated as ordinary income or
loss. A foreign-currency-denominated debt security acquired by a Fund may bear
interest at a high normal rate that takes into account expected decreases in the
value of the principal amount of the security due to anticipated currency
devaluations; in that case, the Fund would be required to include the interest
in income as it accrues but generally would realize a currency loss with respect
to the principal only when the principal was received (through disposition or
upon maturity).
Each Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of
the following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock or of any gain on disposition of the stock (collectively, "PFIC income"),
plus interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be included
in the Fund's investment company taxable income and, accordingly, will not be
taxable to it to the extent that income is distributed to its shareholders. If a
Fund invests in a PFIC and elects to treat the PFIC as a "qualified electing
fund," then in lieu of the foregoing tax and interest obligation, the Fund will
be required to include in income each year its pro rata
24
<PAGE>
share of the qualified electing fund's annual ordinary earnings and net capital
gain (the excess of net long-term capital gain over net short-term capital loss)
- - which probably would have to be distributed to its shareholders to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax - even if those
earnings and gain were not received by the Fund. In most instances it will be
very difficult, if not impossible, to make this election because of certain of
its requirements.
Pursuant to proposed regulations, open-end RICs such as the Funds would be
entitled to elect to "mark-to-market" their stock in certain PFICs. "Marking-
to-market," in this context, means recognizing as gain for each taxable year the
excess, as of the end of that year, of the fair market value of each such PFIC's
stock over the adjusted basis in that stock (including mark-to-market gain for
each prior year for which an election was in effect).
Derivative Instruments
The use of derivatives strategies, such as purchasing and selling (writing)
options and futures and entering into forward currency contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and income from
transaction in options, futures, and forward currency contracts derived by a
Fund with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
However, income from the disposition of options and futures (other than those on
foreign currencies) will be subject to the 30% Limitation if they are held for
less than three months. Income from the disposition of foreign currencies, and
options, futures, and forward contracts on foreign currencies, that are not
directly related to a Fund's principal business of investing in securities (or
options and futures with respect to securities) also will be subject to the 30%
Limitation if they are held for less than three months.
If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
30% Limitation. Thus, only the net gain (if any) from the designated hedge will
be included in gross income for purposes of that limitation. Each Fund intends
that, when it engages in hedging strategies, the hedging transactions will
qualify for this treatment, but at the present time it is not clear whether this
treatment will be available for all of the Fund's hedging transactions. To the
extent this treatment is not available or is not elected, a Fund may be forced
to defer the closing out of certain options, futures, or forward currency
contracts beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.
For federal income tax purposes, each Fund is required to recognize as
income for each taxable year its net unrealized gains and losses on options,
futures, or forward currency contracts that are subject to section 1256 of the
Code ("Section 1256 Contracts") and are held by the Fund as of the end of the
year, as well as gains and losses on Section 1256 Contracts actually realized
during the year. Except for Section 1256 Contracts that are part of a "mixed
straddle" and with respect to which a Fund makes a certain election, any gain or
loss recognized with respect to Section 1256 Contracts is considered to be 60%
long-term capital gain or loss and 40% short-term capital gain or loss, without
regard to the holding period of the Section 1256 Contract. Unrealized gains on
Section 1256 Contracts that have been held by a Fund for less than three months
as of the end of its taxable year, and that are recognized for federal income
tax purposes as described above, will not be considered gains on investments
held for less than three months for purposes of the 30% Limitation.
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<PAGE>
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the caption "Valuation of Shares" the
net asset value of each Fund will be determined as of the regular close of
trading on each day the New York Stock Exchange (the "NYSE") is open for
trading. The NYSE is open for trading Monday through Friday except on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. Additionally, if any of the holidays
falls on a Sunday, the NYSE will not be open for trading on the succeeding
Monday, unless unusual business conditions exist, such as the ending of a
monthly or yearly accounting period.
Debt securities are valued by a pricing service that utilizes electronic
data processing techniques to determine values for normal institutional-sized
trading units of debt securities without regard to sale or bid prices when such
values are believed to more accurately reflect the fair market value for such
securities. Otherwise, sale or bid prices when such values are believed to more
accurately reflect the fair market value for such securities. Otherwise, sale
or bid prices are used. Any securities or other assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by the Board of Trustees. Debt securities having remained maturities
of 60 days or less when purchased are valued by the amortized cost method when
the Board of Trustees determined that the fair value of such securities is their
amortized cost. Under this method of valuation, a security is initially valued
at its acquisition cost, and thereafter, accretion of any discount or
amortization of any premium is assumed each day, regardless of the impact of the
fluctuating rates on the market value of the instrument.
ADDITIONAL SHAREHOLDER INFORMATION
Telephone Exchange and Redemption Privileges
Shares of a Fund and any other mutual funds sponsored by the Adviser may be
exchanged for each other without charge at relative net asset values once per
six month period. Exchanges will be effected by redemption of shares of the
Fund held and purchase of shares of the fund for which Fund shares are being
exchanged (the "New Fund"). For federal income tax purposes, any such exchange
constitutes a sale upon which a capital gain or loss will be realized, depending
upon whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. If you are interested in exercising any of
these exchange privileges, you should obtain Prospectuses of other sponsored
funds from the Adviser. Upon a telephone exchange, the transfer agent
establishes a new account in the New Fund with the same registration and
dividend and capital gains options as the redeemed account, unless otherwise
specified, and confirms the purchase to you.
The Telephone Exchange and Redemption Privileges are available only in
states where shares of the New Fund may be sold, and may be modified or
discontinued at any time. Additional information regarding the Telephone
Exchange and Redemption Privileges is contained in the Prospectus.
Signature Guarantees
The signature(s) of redeeming shareholders must generally be guaranteed by
an "eligible guarantor," including: (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; (3) securities broker-
dealers which are members of a national
26
<PAGE>
securities exchange or clearing agency or which have minimum net capital of
$100,000, or (4) institutions that participate in the Securities Transfer Agent
Medallion Program ("STAMP") or other recognized signature medallion program. A
notarized signature will not be sufficient. If share are registered in more
than one name, the signature of each of the redeeming Shareholders must be
guaranteed.
Redemptions in Kind
If the Board of Trustees determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment wholly
or partly in cash, the Fund may pay the redemption proceeds in whole or in part
by a distribution in-kind of portfolio securities, in conformity with applicable
rules of the SEC. Distributions-in-kind will be made in readily marketable
securities. Investors may incur brokerage charges on the sale of portfolio
securities received in distributions in kind.
ORGANIZATION OF THE TRUST AND THE FUNDS
The Funds are separate series of an open-end investment company organized
as a trust under the laws of the Commonwealth of Massachusetts, of a type
commonly known as a Massachusetts business trust. The Board of Trustees may
allocate assets, liabilities, income and expenses to the Trust's separate series
(and classes, if any), and may divide or redivide any unissued shares of the
Trust into one or more additional series. Fractional shares have the same
rights proportionately as do full shares. Shares have no subscription or
preemptive rights and only such conversion or exchange rights as the Board of
Trustees may grant in its discretion.
When issued for payment as described in the Prospectus and this SAI, each
Fund's shares will be fully paid and non-assessable, subject only to the
possibility of shareholder liability described in the Prospectus. All
consideration received by the Trust for shares of any Fund and all assets in
which such consideration is invested belong to that Fund and would be subject to
the liabilities related thereto.
Limitation of Trustees' Liability
The Declaration of Trust provides that a Trustee shall be liable only for
his or her own willful defaults and, if reasonable care has been exercised in
the selection of officers, agents, employees or investment advisers, shall not
be liable for any neglect or wrongdoing of any such person. The Declaration of
Trust also provides that the Trust will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with actual or
threatened litigation in which they may be involved because of their offices
with the Trust unless it is determined in the manner provided in the Declaration
of Trust that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust. However, nothing in the
Declaration of Trust shall protect or indemnify a Trustee against any liability
for his or her willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties.
PERFORMANCE INFORMATION
As described under "Performance Information" in the Prospectus, each Fund's
historical performance or return may be shown in the form of "average annual
total return," "total return," and "cumulative total return." From time to
time, the Adviser may voluntarily waive all or a portion of its management fee
and/or absorb certain expenses for a Fund. Without waivers and absorption of
expenses, performance results will be lower. No historical performance
represents the future performance of a Fund.
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<PAGE>
Average Annual Total Return
The average annual total return of a Fund is computed by finding the
average annual compounded rates of return over designated time periods that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)/n/=ERV
P= a hypothetical initial payment of $10,000.
T= average annual total return.
n= number of years.
ERV= ending redeemable value of a hypothetical $10,000 payment made at
the beginning of the stated periods at the end of the stated periods.
Total Return
Calculation of a Fund's total return is not subject to a standardized
formula. Total return performance for a specific period is calculated by first
taking an investment (assumed below to be $10,000) ("initial investment") in the
Fund's shares on the first day of the period and computing the "ending value" of
that investment at the end of the period. The total return percentage is then
determined by subtracting the initial investment from the ending value and
dividing the remainder by the initial investment and expressing the result as a
percentage. The calculation assumes that all income and capital gains dividends
paid by the Fund have been reinvested at net asset value on the reinvestment
dates during the period. Total return may also be shown as the increased dollar
value of the hypothetical investment over the period.
Cumulative Total Return
Cumulative total return represents the simple change in value of an
investment over a stated period and may be quoted as a percentage or as a dollar
amount. Total returns and cumulative total returns may be broken down into
their components of income and capital (including capital gains and changes in
share price) in order to illustrate the relationship between these factors and
their contributions to total return.
The Funds' performance figures will be based upon historical results and
will not represent future performance. Each Fund's shares are sold at net asset
value per share. Each Fund's returns and net asset value will fluctuate and
shares are redeemable at the then current net asset value, which may be more or
less than original cost. Factors affecting a Fund's performance include general
market conditions, operating expenses, and investment management. Any
additional fees charged by a dealer or other financial services firm will reduce
the returns described in this section.
Comparisons
U.S. Treasury Bills, Notes, or Bonds. Investors may want to compare the
------------------------------------
performance of a Fund to that of U.S. Treasury bills, notes or bonds, which are
issued by the U.S. government. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the United States Treasury. The market value of such instruments will generally
fluctuate inversely with interest rates prior to maturity and
28
<PAGE>
will equal par value at maturity. Generally, the values of obligations with
shorter maturities will fluctuate less than those with longer maturities.
Certificates of Deposit. Investors may want to compare a Fund's
-----------------------
performance to that of certificates of deposit offered by banks and other
depositary institutions. Certificates of deposit may offer fixed or variable
interest rates and principal is guaranteed and may be insured. Withdrawal of
the deposits prior to maturity normally will be subject to a penalty. Rates
offered by banks and other depositary institutions are subject to change at any
time specified by the issuing institution.
Money Market Fund. Investors may want to compare performance of a Fund to
-----------------
that of money market funds. Money market fund yields will fluctuate and shares
are not insured, but share values usually remain stable.
Lipper Analytical Services, Inc. ("Lipper") and Other Independent Ranking
-------------------------------------------------------------------------
Organizations. From time to time, in marketing and other fund literature, a
- -------------
Fund's performance may be compared to the performance of other mutual funds in
general or to the performance of particular types of mutual funds, with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, may be
cited. Lipper performance figures are based on changes in net asset value, with
all income and capital gain dividends reinvested. Such calculations do not
include the effect of any sales charges imposed by other funds. Each Fund will
be compared to Lipper's appropriate funding category, that is, by fund objective
and portfolio holdings. Each Fund's performance may also be compared to the
average performance of its Lipper category.
Morningstar, Inc. Each Fund's performance may also be compared to the
-----------------
performance of other mutual funds by Morningstar, Inc., which ranks funds on the
basis of historical risk and total return. Morningstar's rankings range from
five stars (highest) to one star (lowest) and represent Morningstar's assessment
of the historical risk level and total return of a fund as a weighted average
for 3, 5, and 10 year periods. Rankings are not absolute and do not represent
future results.
Independent Sources. Evaluations of Fund performance made by independent
-------------------
sources may also be used in advertisements concerning a Fund, including reprints
of, or selections from, editorials or articles about the Fund, especially those
with similar objectives. Sources for Fund performance information and articles
about the Funds may include publications such as Money, Forbes, Kiplinger's,
Smart Money, Morningstar, Inc.; Financial World; Business Week; U.S. News and
World Report, The Wall Street Journal, Barron's and a variety of investment
newsletters.
Indices. A Fund may compare its performance to a wide variety of indices
-------
including the Consumer Price Index; Dow Jones Average of 30 Industrials; NASDAQ
Over-the-Counter Composite Index; Standard & Poor's 500 Stock Index; Standard &
Poor's 400 Mid-Cap Stock Index; Standard & Poor's 600 Small-Cap Index; Wilshire
4500 Index; Wilshire 5000 Index; Wilshire Small Cap Index; Wilshire Small Cap
Growth Index; Wilshire Small Cap Value Index; Wilshire Midcap 750 Index;
Wilshire Midcap Growth Index; Wilshire Midcap Value Index; Wilshire Large Cap
Growth Index; Russell 1000 Index; Russell 1000 Growth Index; Russell 2000 Index;
Russell 2000 Small Stock Index; Russell 2000 Growth Index; Russell 2000 Value
Index; Russell 2500 Index; Russell 3000 Stock Index; Russell Mid Cap Index;
Russell Mid Cap Growth Index; Russell Mid Cap Value Index; Value Line Index;
Morgan Stanley Capital International EAFE(R) Index (Net Dividend, Gross
Dividend, and Price-Only); and Morgan Stanley Capital International World Index.
29
<PAGE>
In addition, a Fund may compare its performance to certain other indices
that measure stock market performance in geographic areas in which the Fund may
invest. The market prices and yields of the stocks in these indexes will
fluctuate. A Fund may also compare its portfolio weighting to the EAFE Index
weighting, which represents the relative capitalization of the major overseas
markets on a dollar-adjusted basis.
There are differences and similarities between the investments that the
Fund may purchase for its portfolio and the investments measured by these
indices.
Historical Information. Because each Fund's investments are denominated
----------------------
primarily in foreign currencies, the strength or weakness of the U.S. dollar as
against these currencies may account for part of the Fund's investment
performance. Historical information regarding the value of the dollar versus
foreign currencies may be used from time to time in advertisements concerning a
Fund. Such historical information is not indicative of future fluctuations in
the value of the U.S. dollar against these currencies. Marketing materials may
cite country and economic statistics and historical stock market performance for
any of the countries in which the Fund invests, including the following:
population growth, gross domestic product, inflation rate, average stock market
price earnings ratios and the total value of stock markets. Sources for such
statistics may include official publications of various foreign governments,
exchanges, or investment research firms. In addition, marketing materials may
cite the Adviser's views or interpretations of such statistical data or
historical performance.
Historical Asset Class Returns. From time to time, marketing materials may
------------------------------
portray the historical returns of various asset classes. Such presentations
will typically compare the average annual rates of return of inflation, U.S.
Treasury bills, bonds, common stocks, and small stocks. There are important
differences between each of these investments that should be considered in
viewing any such comparison. The market value of stocks will fluctuate with
market conditions, and small-stock prices generally will fluctuate more than
large-stock prices. Bond prices generally will fluctuate inversely with
interest rates and other market conditions, and the prices of bonds with longer
maturities generally will fluctuate more than those of shorter-maturity bonds.
Interest rates for bonds may be fixed at the time of issuance, and the payment
of principal and interest may be guaranteed by the issuer and, in the case of
U.S. Treasury obligations, backed by the full faith and credit of the U.S.
Treasury.
Other Fund Advised by Hansberger. Hansberger Global Investors, Inc.
--------------------------------
advises a number of mutual funds investing in a variety of markets. The Fund
may be compared, from time to time, to other mutual funds advised by Hansberger
Global Investors, Inc. based on a risk/reward profile. In general, the degree
of risk associated with any investment product is varies directly with that
product's potential level of reward. This correlation or any Fund's individual
profile may be described or discussed in marketing materials; this discussion
will not be used to compare the risk and reward potential of the Fund with that
of any mutual fund or investment product other than those advised by Hansberger
Global Investors, Inc. Marketing materials may also discuss the relationship
between risk and reward as it relates to an individual investor's portfolio.
Additional Fund Information
Portfolio Characteristics. In order to present a more complete picture of
-------------------------
a Fund's portfolio, marketing materials may include various actual or estimated
portfolio characteristics, including but not limited to median market
capitalizations, earnings per share, alphas, betas, price/earnings ratios,
returns on equity, dividend yields, capitalization ranges, growth rates,
price/book ratios, top holdings, sector breakdowns, asset allocations, quality
breakdowns, and breakdowns by geographic region.
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Measures of Volatility and Relative Performance. Occasionally statistics
-----------------------------------------------
may be used to specify Fund volatility or risk. The general premise is that
greater volatility connotes greater risk undertaken in achieving performance.
Measure of volatility or risk are generally used to compare the Fund's net asset
value or performance relative to a market index. One measure of volatility is
beta. Beta is the volatility of a fund relative to the total market as
represented by the Standard & Poor's 500 Stock Index. A beta of more than 1.00
indicated volatility greater than the market, and a beta of less than 1.00
indicates volatility less than the market. Another measures of volatility or
risk is standard deviation. Standard deviation is a statistical tool that
measures the degree to which a fund's performance has varied from its average
performance during a particular time period.
Standard deviation is calculated using the following formula:
Standard deviation=the square root of E (x\\i\\ - x\\m\\)/2/
----------------------
n-1
where E = "the sum of,"
x\\i\\= each individual return during the time period,
x\\m\\= the average return over the time period, and
n = the number of individual returns during the time period.
Statistics may also be used to discuss a Fund's relative performance. One
such measure is alpha. Alpha measures the actual return of a fund compared to
the expected return of a fund given its risk (as measured by beta). The expected
return is based on how the market as a whole performed, and how the particular
fund has historically performed against the market. Specifically, alpha is the
actual return less the expected return. The expected return is computed by
multiplying the advance or decline in a market representation by the fund's
beta. A positive alpha quantifies the value that the fund manager has added, and
a negative alpha quantifies the value that the fund manager has lost.
Other measures of volatility and relative performance may be used as
appropriate. However, all such measures will fluctuate and do not represent
future results.
GENERAL INFORMATION
Business Philosophy
The Adviser is an independent investment adviser, owned by professionals
active in its management. Recognizing that the investors are the focus of its
business, the Adviser strives for excellence both in investment management and
in the service provided to investors. This commitment affects many aspects of
the business, including professional staffing, product development, investment
management, and service delivery.
The increasing complexity of the capital markets requires specialized
skills and processes for each asset class and style. Therefore, the Adviser
believes that active management should produce greater returns than a passively
managed index. The Adviser has brought together a group of top-flight
investment professionals with diverse product expertise, and each concentrates
on their investment specialty. The Adviser believes that people are the firm's
most important asset. For this reason, continuity of professionals is critical
to the firm's long-term success.
31
<PAGE>
Investment Environment
Discussions of economic, social and political conditions and their impact
on the Funds may be used in advertisements and sales materials. Such factors
that may affect a Fund include changes in interest rates, political
developments, the competitive environment, consumer behavior, industry trends,
technological advances, macroeconomic trends, and the supply and demand of
various financial instruments. In addition, marketing materials may cite the
Adviser's views or interpretations of such factors.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, One International Place, Boston, MA 02110, are the
independent accountants for the Trust, providing audit services and assistance
and consultation with respect to the preparation of filings with the SEC.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, D.C. 20036,
acts as legal counsel for the Trust.
FINANCIAL STATEMENTS
32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of the
Hansberger Institutional Series:
We have audited the accompanying balance sheets of Hansberger Institutional
Series (a Massachusetts business trust) comprised of the Hansberger
International Fund and the Hansberger Emerging Markets Fund, as of October 10,
1996. These balance sheets are the responsibility of the Company's management.
Our responsibility is to express an opinion on these balance sheets based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the balance sheets referred to above present fairly, in all
materials respects, the financial position of each of the respective funds
constituting the Hansberger Institutional Series, as of October 10, 1996 in
conformity with generally accepted accounting principles.
Boston, Massachusetts /s/ Arthur Anderson LLP
October 11, 1996
<PAGE>
Hansberger Institutional Series
International Fund
STATEMENT OF ASSETS AND LIABILITIES
October 10, 1996
Assets:
Cash $ 590
Investments at market value 49,431
Deferred organization costs (Note 1) 44,614
------
Total Assets: 94,635
Liabilities:
Organization costs payable 44,614
Net Assets:
Common Stock, no par value, unlimited shares
authorized, 5,000 shares issued and outstanding 50,000
Unrealized Appreciation on Investments 21
--
Total Net Assets $ 50,021
Net Asset Value per Share: $ 10.00
Note 1 Organization
Hansberger Institutional Series (the "Trust") was organized in
Massachusetts on July 25, 1996, and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, as an
open-end management investment company with diversified series ("Funds"). The
Trust has had no operations other than the issuance of shares of its common
stock of the International Fund and Emerging Markets Fund to Hansberger Global
Investors, Inc. ("HGI") on October 7, 1996. Organization costs estimated at
$44,614 will be deferred and amortized on a straight-line basis over a 60-month
period from the date the Fund commences operations.
Note 2 Agreements
The Trust has entered into an Investment Advisory Agreement with HGI
pursuant to which HGI will be responsible for providing investment management
services to the Trust with respect to the International Fund. For its services
under the Investment Advisory Agreement, HGI will receive an annual fee,
calculated and payable quarterly, at the rate of .75% of average daily net
assets of the Fund.
The Trust has entered into an Administrative Agreement with The Chase
Manhattan Bank ("Chase") pursuant to which Chase will be responsible for
providing administrative services to the Trust with respect to the International
Fund. For its services under the Administrative Agreement, Chase will receive
an annual fee, calculated and payable monthly, at the rate of .12% of the first
$500 million of average daily net assets, .08% of the next $500 million of
average daily net assets, and .06% of average daily net assets in excess of $1
billion.
The Trust has entered into a Custody Agreement with Chase. The Custody
Agreement will provide for an annual fee based on the amount of assets under
custody plus transactional charges.
<PAGE>
Hansberger Institutional Series
Emerging Markets Fund
STATEMENT OF ASSETS AND LIABILITIES
October 10, 1996
Assets:
Cash $ 590
Investments at market value 49,431
Deferred organization costs (Note 1) 44,614
------
Total Assets: 94,635
Liabilities:
Organization costs payable 44,614
Net Assets:
Common Stock, no par value, unlimited shares
authorized, 5,000 shares issued and outstanding 50,000
Unrealized Appreciation on Investments 21
--
Total Net Assets $ 50,021
------
Net Asset Value per Share: $ 10.00
-----
Note 1 Organization
Hansberger Institutional Series (the "Trust") was organized in
Massachusetts on July 25, 1996, and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, as an
open-end management investment company with diversified series ("Funds"). The
Trust has had no operations other than the issuance of shares of its common
stock of the Emerging Markets Fund and International Fund to Hansberger Global
Investors, Inc. ("HGI") on October 7, 1996. Organization costs estimated at
$44,614 will be deferred and amortized on a straight-line basis over a 60-month
period from the date the Fund commences operations.
Note 2 Agreements
The Trust has entered into an Investment Advisory Agreement with HGI
pursuant to which HGI will be responsible for providing investment management
services to the Trust with respect to the Emerging Markets Fund. For its
services under the Investment Advisory Agreement, HGI will receive an annual
fee, calculated and payable quarterly, at the rate of 1.00% of average daily net
assets of the Fund.
The Trust has entered into an Administrative Agreement with The Chase
Manhattan Bank ("Chase") pursuant to which Chase will be responsible for
providing administrative services to the Trust with respect to the Emerging
Markets Fund. For its services under the Administrative Agreement, Chase will
receive an annual fee, calculated and payable monthly, at the rate of .12% of
the first $500 million of average daily net assets, .08% of the next $500
million of average daily net assets, and .06% of average daily net assets in
excess of $1 billion.
The Trust has entered into a Custody Agreement with Chase. The Custody
Agreement will provide for an annual fee based on the amount of assets under
custody, plus transactional charges.
<PAGE>
RATINGS APPENDIX
STANDARD & POOR'S
- -----------------
A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a
security, as it does not comment on market price or suitability for a particular
investor.
The ratings are based, in varying degrees, on the following considerations:
(1) Likelihood of default. The rating assesses the obligor's capacity and
willingness as to timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
(2) The obligation's nature and provisions.
(3) Protection afforded to, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under bankruptcy laws
and other laws affecting creditors' rights.
Likelihood of default is indicated by an issuer's senior debt rating. If
senior debt is not rated, an implied senior debt rating is determined.
Subordinated debt usually is rated lower than senior debt to better reflect
relative position of the obligation in bankruptcy. Unsecured debt, where
significant secured debt exists, is treated similarly to subordinated debt.
LONG-TERM RATINGS DEFINITIONS: The ratings from "AA" to "CCC" may be modified
by the addition of a plus (+) or minus (-) sign to show relative standing within
the major rating categories.
Investment Grade
AAA Highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA Very strong capacity to pay interest and repay principal and differs from
the highest rated debt only in small degree.
A Strong capacity to pay interest and repay principal, although it is
somewhat more susceptible to adverse effects of changes in circumstances
and economic conditions than debt in higher-rated categories.
BBB Adequate capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for debt in this category than in higher
rated categories.
Speculative Grade
BB Less near-term vulnerability to default than other speculative grade debt.
However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions that could lead to inadequate
capacity to meet timely interest and principal payments. The "BB" rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied "BBB-" rating.
B Greater vulnerability to default but presently has the capacity to meet
interest payments and principal repayments. Adverse business, financial, or
economic conditions would likely impair capacity or willingness to pay
interest and repay principal. The "B" rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or
"BB-" rating.
Rating Appendix-1
<PAGE>
CCC Current identifiable vulnerability to default, and is dependent on
favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category
also is used for debt subordinated to senior debt that is assigned an
actual or implied "B" or "B-" rating.
CC Typically applied to debt subordinated to senior debt which is assigned an
actual or implied "CCC" rating.
C Typically applied to debt subordinated to senior debt which is assigned an
actual or implied "CCC-" debt rating. The "C" rating may be used to cover
a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI Reserved for income bonds on which no interest is being paid.
D Issue is in payment default, or the obligor has filed for bankruptcy. The
"D" rating is used when interest or principal payments are not made on the
date due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.
NOTES: An S&P note rating reflects the liquidity factors and market access
risks unique to notes. Notes due in three years or less will likely receive a
note rating. Notes maturing beyond three years will most likely receive a long-
term debt rating. The following criteria will be used in making that
assessment: Amortization schedule - the larger the final maturity relative to
other maturities, the more likely it will be treated as a note; Source of
payment - the more dependent the issue is on the market for its refinancing, the
more likely it will be treated as a note.
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus(+)
designation.
SP-1 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3 Speculative capacity to pay principal and interest.
COMMERCIAL PAPER/SHORT TERM RATING DEFINITIONS: A Standard & Poor's short term
rating is a current assessment of the likelihood of timely payment of debt with
an original maturity of no more than 365 days, such as commercial paper. It is
also assigned to remarketed long term debt with a provision that allows the
holder to put the debt back to the company in less than one year, in addition to
the usual long term rating. (Medium term note programs are assigned long term
ratings.)
A-1 Highest category; degree of safety regarding timely payment is strong.
Debt determined to possess extremely strong safety characteristics is
denoted with a plus sign (+) designation.
A-2 Capacity for timely payment is satisfactory. However, the relative degree
of safety is not as high as for issues designated "A-1".
A-3 Adequate capacity for timely payment. It is, however, more vulnerable to
the adverse effects of changes in circumstances than obligations carrying
the higher designations.
B Regarded as having only speculative capacity for timely payment.
C Assigned to short-term debt obligations with a doubtful capacity for
payment.
Ratings Appendix-2
<PAGE>
D Obligation is in payment default.
MOODY'S
- -------
Moody's bond ratings, where specified, are applied to senior bank obligations
and insurance company senior policyholder and claims obligations with an
original maturity in excess of one year. Obligations relying upon support
mechanisms such as letters-of-credit and bonds of indemnity are excluded unless
explicitly rated.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's sovereign rating. Such branch obligations are
rated at the lower of the bank's rating or Moody's sovereign rating for the bank
deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by the actions of the government controlling the currency of
denomination. In addition, risk associated with bilateral conflicts between an
investor's home country and either the issuer's home country or the country
where an issuer branch is located are not incorporated into Moody's ratings.
Moody's makes no representation that rated bank obligations or insurance company
obligations are exempt from registration under the U.S. Securities Act of 1933
or issued in conformity with any other applicable law or regulation. Nor does
Moody's represent that any specific bank or insurance company obligation is
legally enforceable or is a valid senior obligation of a rated issuer.
Moody's ratings are opinions, not recommendations to buy or sell, and their
accuracy is not guaranteed. A rating should be weighed solely as one factor in
an investment decision and you should make your own study and evaluation of any
issuer whose securities or debt obligations you consider buying or selling.
LONG TERM: Moody's applies numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B. 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.
Aaa Judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edged". Interest
payments 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 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 fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A Possess many favorable investment attributes and are to 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 some time in the future.
Baa Considered as 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.
Ratings Appendix-3
<PAGE>
Ba Judged to have speculative elements; their future cannot be considered as
well-assured. Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B Generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa Of poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.
Ca Speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C Lowest rated class of bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
SHORT-TERM:
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations which have an original maturity not exceeding
one year. Obligations relying upon support mechanisms such as letters-of-credit
and bonds of indemnity are excluded unless explicitly rated.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced
by many of the following characteristics: Leading market
positions in well-established industries; high rates of return
on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and
high internal cash generation; and well-established access to a
range of financial markets and assured sources of alternate
liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings
and profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME Issuers rated Not Prime do not fall within any of the Prime
rating categories.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's sovereign rating. Such branch obligations are
rated at the lower of the bank's rating or Moody's sovereign rating for bank
deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
Ratings Appendix - 4
<PAGE>
affected by actions of the government controlling the currency of denomination.
In addition, risks associated with bilateral conflicts between an investor's
home country and either the issuer's home country or the country where an
issuer's branch is located are not incorporated into Moody's short-term debt
ratings.
Moody's makes no representation that rated bank or insurance company obligations
are exempt from registration under the U.S. Securities Act of 1933 or issued in
conformity with any other applicable law or regulation. Nor does Moody's
represent that any specific bank or insurance company obligation is legally
enforceable or a valid senior obligation of a rated issuer.
When an issuer represents to Moody's that its short-term debt obligations are
supported by the credit of another entity or entities, then the names of such
supporting entities are listed with the name of the issuer, or indicated with a
footnote reference, in Moody's publications. In assigning ratings to such
issuer's, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment. Moody's
makes no representation and gives no opinion on the legal validity or
enforceability of any support arrangements.
Moody's ratings are opinions, not recommendations to buy or sell, and their
accuracy is not guaranteed. A rating should be weighed solely as one factor in
an investment decision and you should make your own study and evaluation of any
issuer whose securities or debt obligations you consider buying or selling.
THOMSON BANKWATCH
- -----------------
Thomson BankWatch ("TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization, including holding
company and operating subsidiaries.
SHORT-TERM RATINGS: TBW's short-term ratings do not consider any collateral or
security as the basis for the rating, although some securities may in fact have
collateral. Further, these ratings do not incorporate consideration of the
possible sovereign risk associated with a foreign deposit (defined as a deposit
taken in a branch outside the country in which the rated entity is
headquartered) of the rated entity. TBW's short-term ratings are intended to
assess the likelihood of an untimely or incomplete payment of principal or
interest.
TBW-1 Highest category; very high likelihood that principal and interest will
be paid on a timely basis.
TBW-2 Second-highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".
TBW-3 Lowest investment-grade category; while the obligation is more
susceptible to adverse developments (both internal and external) than
those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.
TBW-4 Lowest rating category; regarded as non-investment grade and therefore
speculative.
LONG-TERM DEBT RATINGS: TBW's long-term debt ratings apply to specific issues
of long-term debt and preferred stock. They specifically assess the likelihood
of an untimely repayment of principal or interest over the term to maturity of
the rated instrument. Ratings may include a plus (+) or minus (-) designation,
which indicates where within the respective category the issue is placed.
Investment Grade
AAA Highest category; ability to repay principal and interest on a timely
basis is very high.
AA Second-highest category; superior ability to repay principal and
interest on a timely basis, with limited incremental risk compared to
issues rated in the highest category.
Ratings Appendix - 5
<PAGE>
A Third-highest category; ability to repay principal and interest is strong.
Issues rated "A" could be more vulnerable to adverse developments (both
internal and external) than obligations with higher ratings.
BBB Lowest investment-grade category; acceptable capacity to repay principal
and interest. Issues rated "BBB" are, however, more vulnerable to adverse
developments (both internal and external) than obligations with higher
ratings.
Non-Investment Grade
BB Suggests that likelihood of default is considerably less than for lower-
rated issues. However, there are significant uncertainties that could
affect the ability to adequately service debt obligations.
B Higher degree of uncertainty and therefore greater likelihood of default
than higher-rated issues. Adverse developments could well negatively
affect the payment of interest and principal on a timely basis.
CCC Clearly have a high likelihood of default, with little capacity to address
further adverse changes in financial circumstances.
CC Applied to issues that are subordinate to other obligations rated "CCC"
and are afforded less protection in the event of bankruptcy or
reorganization.
D Default
IBCA
- ----
LONG-TERM RATINGS: "+" or "-" may be appended to a rating to denote relative
status within major rating categories.
AAA Lowest expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial, such that adverse changes in
business, economic or financial conditions are unlikely to increase
investment risk substantially.
AA Very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk, albeit not
very significantly.
A Low expectation of investment risk. Capacity for timely repayment of
principal and interest is strong, although adverse changes in business,
economic or financial conditions may lead to increased investment risk.
BBB Currently low expectation of investment risk. Capacity for timely
repayment of principal and interest is adequate, although adverse changes
in business, economic or financial conditions are more likely to lead to
increased investment risk than for obligations in other categories.
BB Possibility of investment risk developing. Capacity for timely repayment
of principal and interest exists, but is susceptible over time to adverse
changes in business, economic or financial conditions.
B Investment risk exists. Timely repayment of principal and interest is not
sufficiently protected against adverse changes in business, economic or
financial conditions.
CCC Current perceived possibility of default. Timely repayment of principal
and interest is dependent on favorable business, economic or financial
conditions.
CC Highly speculative or have a high risk of default.
Ratings Appendix - 6
<PAGE>
C Currently in default.
SHORT-TERM RATINGS:
A1+ Highest capacity for timely repayment.
A1 Strong capacity for timely repayment.
A2 Satisfactory capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic, or financial
conditions.
A3 Adequate capacity for timely repayment. Such capacity is more susceptible
to adverse changes in business, economic, or financial conditions than for
obligations in higher categories.
B Capacity for timely repayment is susceptible to adverse changes in
business, economic, or financial conditions.
C Inadequate capacity to ensure timely repayment.
D High risk of default or currently in default.
FITCH
- -----
INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided
by insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not
used in the "AAA" category.
Ratings Appendix - 7
<PAGE>
AAA Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in
the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+".
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
SPECULATIVE GRADE BOND RATINGS
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since rating categories cannot fully reflect the
differences in degrees of credit risk.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not
used in the "DDD", "DD", or "D" categories.
BB Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited
margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation
Ratings Appendix - 8
<PAGE>
or reorganization of the obligor. "DDD" represents the lowest
potential for recovery on these bonds, and "D" represents the
lowest potential for recovery.
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+"
F-2 Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned "F-1+" and "F-1" ratings.
F-3 Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be
rated below investment grade.
F-S Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.
D Default. Issues assigned this rating are in actual or imminent payment
default.
DUFF & PHELPS
- -------------
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
which may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition,
government action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
Each rating also takes into account the legal form of the security, (e.g., first
mortgage bonds, subordinated debt, preferred stock, etc.). The extent of rating
dispersion among the various classes of securities is determined by several
factors including relative weightings of the different security classes in the
capital structure, the overall credit strength of the issuer, and the nature of
covenant protection. Review of indenture restrictions is important to the
analysis of a company's operating and financial constraints.
The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if necessary). Ratings of "BBB" and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities.
LONG-TERM DEBT:
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
Ratings Appendix - 9
<PAGE>
AA+, AA or AA- High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of
economic conditions.
A+, A or A- Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of
economic stress.
BBB+, BBB or BBB- Below average protection factors but still considered
sufficient for prudent investment. Considerable variability
in risk during economic cycles.
BB+, BB or BB- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial
protection factors fluctuate according to industry
conditions or company fortunes. Overall quality may move up
or down frequently within this category.
B+, B or B- Below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for
frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal,
interest or preferred dividends. Protection factors are
narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
SHORT-TERM DEBT:
Duff & Phelps' short-term ratings are consistent with the rating criteria
utilized by money market participants. The ratings apply to all obligations
with maturities of under one year, including commercial paper, the uninsured
portion of certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which we define as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps' short-term ratings is the
refinement of the traditional "1" category. The majority of short-term debt
issuers carry the highest rating, yet quality differences exist within that
tier. As a consequence, Duff & Phelps has incorporated gradations of "1+"(one
plus) and "1-" (one minus) to assist investors in recognizing those differences.
Duff & Phelps' ratings are recognized by the SEC for broker-dealer requirements,
specifically capital computation guidelines. Our ratings meet Department of
Labor ERISA guidelines governing pension and profit sharing investments. State
regulators also recognize Duff & Phelps' ratings for insurance company
investment portfolios.
Duff 1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection
factors. Risk factors are minor.
Ratings Appendix - 10
<PAGE>
Duff 1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
Duff 3 Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.
Non-Investment Grade
Duff 4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a
high degree of variation.
Duff 5 Default. Issuer failed to meet scheduled principal and/or
interest payments.
SPECIALIZED RATINGS
TBW COUNTRY RATINGS
- -------------------
TBW's Country Ratings represent TBW's assessment of the overall political
and economic stability of a country in which a bank is domiciled.
TBW considers factors other than the financial strength of the individual
company. In particular, the context of the company--country risk and the
complexion of its domestic financial system--becomes critical. TBW focuses on
both political risk--the willingness to meet external debt obligations--and
economic risk--the ability to repay external debts.
I An industrialized country with a long history of political stability,
effective economic management, sustainable financial conditions, and
continuing access to global capital markets on favorable terms. Short-
run risk of default is nonexistent.
I/II An industrialized country with a long history of political and economic
stability that is currently experiencing some short-term political
and/or economic difficulties. It enjoys continuing access to global
capital markets, though at somewhat higher margins. Short-run risk of
default is very low.
II An industrialized country with a history of political and economic
stability that is currently experiencing serious political and/or
economic difficulties. It enjoys continuing access to global capital
markets, though at significantly higher margins. Short-run risk of
default is low.
II/III A newly industrialized country with a generally healthy economy that
currently enjoys wide access to global capital markets. Short-run risk
of default is very low.
III A newly industrialized country with a generally healthy economy but with
some significant political and/or economic difficulties. It currently
enjoys some access to global capital markets. Short-run risk of default
is low.
III/IV A newly industrialized country experiencing serious political and/or
economic difficulties. It enjoys only very limited access to global
capital markets. Short-run risk of default is low to medium.
IV A non-industrialized country that has limited access to world capital
markets. Short-run risk of default is low.
Ratings Appendix - 11
<PAGE>
IV/V A non-industrialized country with a history of external debt servicing
problems that is currently experiencing serious political and/or
economic difficulties. It enjoys only limited access to world capital
markets. Short-run risk of default is low to medium.
V A non-industrialized country with no access to world capital markets and
which is considered in default on some or all of its external debt.
Short-run risk of default is medium to high.
TBW INTRA-COUNTRY ISSUER RATINGS
- --------------------------------
TBW's Intra-Country Issuer Ratings provide a relative assessment of each
bank's financial performance and its ability to meet its obligations within the
context of the local market. These ratings are not directly comparable from
country to country.
Further, sovereign risk is not factored into the Intra-Country Ratings.
However, the ratings do incorporate systemic risks which may be prevalent within
certain banking systems that could preclude any bank within the system from
achieving the top rating.
TBW assigns only one Intra-Country Issuer Rating to each company,
factoring consolidated financials into the overall assessment.
The ratings are assigned using an intermediate time horizon. Intra-
Country Issuer Ratings incorporate an overall assessment of the company's
financial strength, in addition to TBW's opinion of the vulnerability of the
company to adverse developments (which may affect the market's perception of the
company, thereby its access to funding and the marketability of its securities).
IC-A Company possesses an exceptionally strong balance sheet and earnings
record, translating into an excellent reputation and very good access to
its natural money markets. If weakness or vulnerability exists in any
aspect of the company's business, it is entirely mitigated by other
consideration.
IC-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 for companies in the highest rating category.
IC-B A strong company with a solid financial record and well received by its
natural money markets. Some minor weaknesses may exist, but any
deviation from the company's historical performance levels should be
both limited and short-lived. The likelihood of a significant problem
developing is small, yet slightly greater than for a higher-rated
company.
IC-B/C Company is clearly viewed as a good credit. While some shortcomings are
apparent, they are not serious and/or are quite manageable in the short-
term.
IC-C Company is inherently a sound credit with no serious deficiencies, but
financials reveal at least one fundamental area of concern that prevents
a higher rating. Company may recently have experienced a period of
difficulty, but those pressures should not be long-term in nature. The
company's ability to absorb a surprise, however, is less than that for
organizations with better operating records.
IC-C/D While still considered an acceptable credit, the company has some
meaningful deficiencies. Its ability to deal with further deterioration
is less than that of better-rated companies.
IC-D Company's financials suggest obvious weaknesses, most likely created by
asset quality considerations and/or a poorly structured balance sheet. A
meaningful level of uncertainty and vulnerability exists going forward.
The ability to address further unexpected problems must be questioned.
IC-D/E Company has areas of major weakness that may include funding and/or
liquidity difficulties. A high degree of uncertainty exists about the
company's ability to absorb incremental problems.
Ratings Appendix - 12
<PAGE>
IC-E Very serious problems exist for the company, creating doubt about its
continued viability without some form of outside assistance, regulatory
or otherwise.
ICBA
- ----
ICBA's bank rating sheets provide both specialist bank ratings and, in
most cases, short-and long-term ratings. The former were specifically developed
for banks and are designed to assess the current performance of a bank and
whether, in ICBA's opinion, it would receive support if it ran into
difficulties. ICBA assesses these two issues by means of the INDIVIDUAL RATING
and the LEGAL RATING.
LEGAL RATING: Banking differs from other industries in that it is invariably
dependent on depositor confidence. A bank may have excellent ratios but, if it
cannot maintain this confidence, it will have a liquidity crisis. Because of
the role that banks play in the financial system they are heavily regulated and,
as part and parcel of this regulation, central banks are seen as potential
lenders of last resort. Much interbank lending is done on the basis of this
lender of last resort role, and this consideration is assessed in ICBA's Legal
Rating.
The support provided by central banks or shareholders is rarely a
statutory requirement. Consequently, it is necessary to visit and study the
country concerned in order to gain a full understanding of the history and
traditions of its banking system and of the precedents which have been
established there. It is also necessary to assess the possible support a bank
might receive as a result of its ownership and/or economic and international
significance.
In all countries covered, IBCA has discussions with the supervisory
authorities. ICBA also analyzes their past behavior and keep abreast of all
relevant banking legislation. On these bases, ICBA assigns Legal Ratings to
particular banks. These ratings constitute IBCA's opinions alone and are not
submitted to the authorities for their comment or endorsement. A legal rating of
2, 3 or 4 may be qualified by the suffix "T," which indicates significant
existing or potential transfer risk of economic and/or political origin that
might prevent support for foreign currency creditors.
1 A bank for which there is a clear legal guarantee on the part of a state
to provide support OR a bank of such importance both internationally and
domestically that, in our opinion, support from a state would be
forthcoming, if necessary. The state in question must clearly be
prepared and able to support its principal banks.
2 A bank for which, in ICBA's opinion, state support would be forthcoming,
even in the absence of a legal guarantee. This could be, for example,
because of the bank's importance to the economy or its historic
relationship with the authorities.
3 A bank which has institutional owners of sufficient reputation and
possessing such resources that, in our opinion, shareholder support wold
be forthcoming, if necessary.
4 A bank for which support is likely but not certain.
5 A bank which cannot rely on outside assistance.
INDIVIDUAL RATING: ICBA's individual performance rating of banks attempts to
answer the question: "If the bank were entirely independent and could not rely
on support from the state authorities or its owners, how would it be viewed?".
Thus, the Individual bank rating permits an evaluation of banks divorced
entirely from consideration of support. ICBA may use gradations among these
ratings, i.e., A/B, B/C, C/D and D/E.
----
A A bank of impeccable financial condition, with a consistent record of
above average performance.
B A bank with a sound risks profile and without significant problems. The
bank's performance has generally been in line with or better than that
of its peers.
C A bank which has an adequate risks profile but possesses one or more
troublesome aspects, giving rise to the possibility of risk developing,
or which has generally failed to perform in line with its peers.
Ratings Appendix - 13
<PAGE>
D A bank which is currently underperforming in some notable manner. Its
financial condition is likely to be below average and its profitability
poor. The bank has the capability of recovering using its own resources,
but this is likely to take some time.
E A bank with very serious problems which either requires or is likely to
require external support.
Ratings Appendix - 14
<PAGE>
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
--------------------
[X] Report of Independent Certified Public Accountant
[X] Statement of Assets and Liabilities
(b) Exhibits
--------
1(a) Agreement and Declaration of Trust of the Registrant, dated
July 25, 1996./1/
1(b) Amendment to the Agreement and Declaration of Trust./2/
1(c) Amended and Restated Agreement and Declaration of Trust of the
Registrant, dated October 4, 1996.
2 By-Laws of the Registrant/1/
5 Form of Investment Advisory Agreement, filed herewith.
8 Form of Custodian Agreement, filed herewith.
9 Form of Administration Agreement, filed herewith.
10 Opinion and Consent of Counsel, filed herewith.
11 Opinion and Consent of Independent Public Accountants, filed
herewith.
17 Financial Data Schedules, filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant:
See the Prospectus and the Statement of Additional Information regarding
the Registrant's control relationships.
<TABLE>
<S> <C> <C>
Item 26. Number of Holders of Securities: International Fund 1
-
Emerging Markets Fund 1
-
Foreign Small Cap Fund 0
-
All Countries Fund 0
-
</TABLE>
Item 27. Indemnification: Reference is made to Articles VIII and IX of the
Registrant's Declaration of Trust
- --------------------------
/1/ Filed with initial registration statement on July 26, 1996.
/2/ Filed with Pre-Effective Amendment No. 1 on September 23, 1996.
C-1
<PAGE>
Item 28. Business and Other Connections of Investment Adviser:
ADVISER
- -------
Hansberger Global Investors, Inc. (the "Adviser") is the investment adviser for
the Trust. The principal address is 515 East Las Olas Boulevard, Ft.
Lauderdale, Florida 33301. The Adviser is an investment adviser registered
under the Advisers Act.
The list required by this Item 28 of officers and directors of the Adviser,
together with information as to any other business profession, vocation or
employment of 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 Adviser under the Advisers Act (SEC File No. 801-46059).
Item 29. Principal Underwriters: None
Item 30. Location of Accounts and Records:
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the rules promulgated thereunder,
are maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records will be
maintained at the offices of Registrant's Custodian:
The Chase Manhattan Bank, N.A.
4 Chase Metro Tech Center
18th Floor
Brooklyn, New York 11245
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D);
(4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and
records are maintained at the offices of Registrant's Administrator:
Chase Global Funds Services Company
73 Tremont Street
Boston, Massachusetts 02108
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f),
the required books and records are maintained at the principal offices of
the Registrant's Adviser:
Hansberger Global Investors, Inc.
515 East Las Olas Boulevard
Suite 1300
Fort Lauderdale, Florida 33301
C-2
<PAGE>
Item 31. Management Services: None.
Item 32. Undertakings:
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940 inform the
Board of Directors of their desire to communicate with Shareholders of the
Corporation, the Directors will inform such Shareholders as to the approximate
number of Shareholders of record and the approximate costs of mailing or afford
said Shareholders access to a list of Shareholders.
Registrant hereby undertakes to call a meeting of Shareholders for the
purpose of voting upon the question of removal of a Director(s) when requested
in writing to do so by the holders of at least 10% of Registrant's outstanding
shares and in connection with such meetings to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940.
Registrant hereby undertakes to file a post-effective amendment, including
financial statements which need not be audited, within 4-6 months from the
effective date of the Registrant's 1933 Act Registration Statement.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this Pre-
effective Amendment No. 2 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York on the 4th day of October, 1996.
Hansberger Institutional Series
By: /s/ Thomas L. Hansberger
---------------------------------
Thomas L. Hansberger
President
Pursuant to the requirements of the Securities Act of 1933, this Pre-effective
Amendment No. 2 to the Registration Statement has been signed below by the
following person in the capacity on the dates indicated:
<TABLE>
<S> <C> <C>
/s/ Thomas L. Hansberger Trustee and October 4, 1996
- ------------------------------ President
Thomas L. Hansberger
/s/ J. Christopher Jackson Trustee and Vice October 4, 1996
- ------------------------------ President
J. Christopher Jackson
/s/ Kathryn B. McGrath Trustee October 4, 1996
- ------------------------------
Kathryn B. McGrath
/s/ Stuart B. Ross Trustee October 4, 1996
- ------------------------------
Stuart B. Ross
/s/ William F. Waters Trustee October 4, 1996
- ------------------------------
William F. Waters
/s/ Thomas A. Christensen Chief Financial October 4, 1996
- ------------------------------ Officer
Thomas A. Christensen
</TABLE>
C-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Name Exhibit Page
- ---- ------------
<S> <C>
Amended and Restated Agreement and
Declaration of Trust, filed herewith Ex-99.B1(c)
Form of Investment Advisory
Agreement, filed herewith Ex-99.B5
Form of Custodian Agreement,
filed herewith Ex-99.B8
Form of Administration Agreement,
filed herewith Ex-99.B9
Opinion and Consent of Counsel,
filed herewith Ex-99.B10
Opinion and Consent of Public Accountants,
filed herewith Ex-99.B11
Financial Data Schedules
filed herewtih Ex-99.B27
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> EMERGING MARKETS FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-10-1996
<PERIOD-END> OCT-10-1996
<INVESTMENTS-AT-COST> 50,000
<INVESTMENTS-AT-VALUE> 50,021
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 44,614
<TOTAL-ASSETS> 94,635
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44,614
<TOTAL-LIABILITIES> 44,614
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
<SHARES-COMMON-STOCK> 5,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21
<NET-ASSETS> 50,021
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,021
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 50,021
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-10-1996
<PERIOD-END> OCT-10-1996
<INVESTMENTS-AT-COST> 50,000
<INVESTMENTS-AT-VALUE> 50,021
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 44,614
<TOTAL-ASSETS> 94,635
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44,614
<TOTAL-LIABILITIES> 44,614
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,000
<SHARES-COMMON-STOCK> 5,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21
<NET-ASSETS> 50,021
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,021
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 50,021
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
HANSBERGER INSTITUTIONAL SERIES
AGREEMENT AND DECLARATION OF TRUST
Dated July 25, 1996
As Amended and Restated
October 4, 1996
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST dated as of the 4th
day of October, 1996, by Thomas L. Hansberger, J. Christopher Jackson, Kathryn
B. McGrath, Stuart B. Ross and William F. Waters, the Trustees hereunder, and by
the holders of Shares of beneficial interest to be issued hereunder as
hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has heretofore been formed to carry on the business of
an investment company; and
WHEREAS, the Trustees, and any successor Trustees elected in accordance
with Article IV hereof, have agreed to manage all property coming into their
hands as trustees of a Massachusetts voluntary association with transferable
Shares in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees, and any successor Trustees elected in
accordance with Article IV hereof, hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same for the
pro rata benefit of the holders from time to time of Shares in this Trust issued
hereunder on the terms and conditions hereinafter set forth.
ARTICLE I
Name, Principal Place of Business and Resident Agent, and Definitions
Name
- ----
Section l. This Trust shall be known as the Hansberger Institutional
---------
Series, and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine.
<PAGE>
Principal Place of Business and Resident Agent
- ----------------------------------------------
Section 2. The principal place of business of the Trust is 515 East Las
---------
Olas Blvd., Suite 1300, Fort Lauderdale, Florida 33301. The name of the Trust's
resident agent in the Commonwealth of Massachusetts is Chase Global Funds
Services Company at 73 Tremont Street, Boston, Massachusetts 02108.
Definitions
- -----------
Section 3. Whenever used herein, unless otherwise required by the context
---------
or specifically provided:
(a) The "Trust" refers to the Hansberger All Countries Trust, the trust
created hereby.
(b) "Trustee" or "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article IV hereof and then in
office.
(c) "Shares" refers to units of beneficial interest in the assets of the
Trust, when used in relation to any particular series established by
the Trustees hereunder refers to units of beneficial interest in the
assets specifically allocated to that series, and includes fractional
as well as whole Shares.
(d) "Shareholder" means a record owner of Shares.
(e) "Affiliated Person," "Assignment," "Interested Person," and "Principal
Underwriter" shall have the meanings given them in the 1940 Act
(f) "Majority Shareholder Vote" shall have the same meaning as "vote of a
majority of the outstanding voting securities" as that phrase is
defined in the 1940 Act, except that such term may be used herein with
respect to the Shares of the Trust as a whole or the Shares of a
particular series, as the context may require.
(g) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time, provided that
reference made in this Agreement and Declaration of Trust to "hereby,"
"hereof," "herein," "hereunder" or similar terms shall be deemed to
refer to this Declaration of Trust rather than the Article or Section
in which such words appear, unless the context otherwise requires.
(h) "By-Laws" shall mean the By-Laws of the Trust referred to in Article
IV, Section 3 hereof, as amended from time to time.
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(i) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time.
(j) "Disinterested Trustees" shall mean Trustees who are not "interested
persons" as such term is defined in the 1940 Act (including any
Trustee who has been exempted from being an "interested person" by any
rule, regulation or order of the Commission). In limitation of the
foregoing, however, as used in Article VIII hereof, a "Disinterested
Trustee" shall mean a Disinterested Trustee against whom, at the time
of the votes to be taken pursuant to said Article VIII, none of the
actions, suits or other proceedings referred to in such Article VIII,
nor any other action, suit or other proceeding on the same or similar
grounds is or has been pending.
ARTICLE II
Purpose
The purpose of the Trust is to provide investors with one or more
investment portfolio(s) consisting primarily of securities, including debt
instruments or obligations.
ARTICLE III
Shares
Division of Beneficial Interest
- -------------------------------
Section 1. The Trustees may divide the beneficial interest in the Trust
---------
into an unlimited number of Shares and authorize the issuance of Shares without
prior Shareholder approval. Shares may be issued in series and, if so, Shares of
any series will constitute units of beneficial interest in assets of the Trust
specifically allocated to such series. Shares of the Trust, or any series
thereof, shall have no par value, shall represent equal and proportionate
interests in the Trust, or such series, with none having priority or preference
over any other except as specifically set forth in this Article III, and shall
be transferable. All Shares issued hereunder, including any Shares issued in
payment of dividends or other distributions or in connection with any split of
Shares, shall be fully paid and non-assessable. Shares of the Trust or of any
series may be issued in two or more classes, as the Trustees may, without
Shareholder approval, authorize. Shares of any class shall be identical to
those of any other class of the Trust or such series except that, if the
Trustees have authorized the issuance of Shares of any particular series in two
or more classes, then such classes may, consistent with the 1940 Act, or
pursuant to any exemptive order issued by the Commission and other applicable
law, have such variations as to dividends, redemption charges, conversion,
voting rights, net asset value, expenses borne by the class, and other matters
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as the Trustees shall have determined. The Trustees may from time to time,
without Shareholder approval, divide or combine the Shares of a series into a
greater or lesser number without thereby changing their proportionate beneficial
interests in assets allocated to such series.
Ownership of Shares
- -------------------
Section 2. The ownership of Shares shall be recorded on the books of the
---------
Trust or its transfer or similar agent. No certificates certifying the ownership
of Shares shall be issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider appropriate for
the issuance of Share certificates, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any transfer or similar
agent of the Trust, as the case may be, shall be conclusive as to who are the
Shareholders of each series or class and as to the number of Shares of each
series or class held from time to time by each Shareholder.
Investments in the Trust: Assets of the Series
- ----------------------------------------------
Section 3. The Trustees may accept investments in the Trust from such
---------
persons and on such terms and, subject to any requirements of law, for such
consideration, which may consist of cash or tangible or intangible property or a
combination thereof, as they may from time to time authorize.
All consideration received by the Trust for the issue or sale of Shares of
each series, together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to, subject only to the
rights of creditors, and shall be so recorded upon the books of account of the
Trust and are herein referred to as "assets of", such series. In addition, any
assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular series shall
be allocated by the Trustees between and among one or more of the series in such
manner as they, in their sole discretion, deem fair and equitable. Each such
allocation to any series shall be conclusive and binding upon the Shareholders
of all series for all purposes, and shall be referred to as assets belonging to
that series. No holder of Shares of any particular series shall have any claim
on or right to any assets allocated or belonging to any other series.
Establishment of Class or Series
- --------------------------------
Section 4. The establishment and designation of any class or series of
---------
Shares shall be effective upon the adoption of a resolution by a majority of the
Trustees (or of a committee thereof) setting forth such establishment and
designation and the relative rights and preferences of the Shares of such class
or series. Such establishment and designation shall not constitute an amendment
to this Declaration of Trust, although the Trustees may, at their option, set
forth such
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establishment and designation in a written instrument signed by them or by an
officer of the Trust. The Trustees (or a committee thereof) may by majority vote
amend such establishment and designation. At any time, if no Shares are
outstanding of a particular class or series previously so established and
designated, the Trustees (or a committee thereof) may by majority vote abolish
such class or series and said establishment and designation thereof.
No Preemptive Rights
- --------------------
Section 5. Shareholders shall have no preemptive or other right to receive,
---------
purchase or subscribe for any additional Shares or other securities issued by
the Trust, except as otherwise provided herein or as the Trustees in their sole
discretion shall have determined by resolution.
Status of Shares and Limitation of Personal Liability
- -----------------------------------------------------
Section 6. Shares shall be deemed to be personal property giving only the
---------
rights provided in this instrument. Every Shareholder by virtue of having become
a Shareholder shall be held to have expressly assented and agreed to the terms
of this Declaration of Trust and to have become a party hereto. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the same nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said decedent under this Trust. Ownership
of Shares shall not entitle the Shareholder to any title in or to the whole or
any part of the Trust property or right to call for a partition or division of
the same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholder, nor, except as specifically provided herein, to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
Trustees and Officers as Shareholders
- -------------------------------------
Section 7. Any Trustee, officer or other agent of the Trust may acquire,
---------
own and dispose of Shares of the Trust to the same extent as if he or she were
not a Trustee, officer or agent; and the Trustees may issue and sell or cause to
be issued and sold Shares to and buy such Shares from any such person of any
firm or company in which he is interested, subject only to the general
limitations herein contained as to the sale and purchase of such Shares; and all
subject to any restrictions which may be contained in the By-Laws.
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ARTICLE IV
The Trustees
Qualification; Number of Trustees; Election
- -------------------------------------------
Section 1. Each Trustee shall be a natural person and may, but need not,
---------
be a Shareholder. A Trustee may be elected either by the Trustees or the
Shareholders subject to the limitations of the 1940 Act. Each Trustee shall hold
office during the lifetime of this Trust until the election and qualification of
his or her successor, or until he or she sooner dies, resigns or is removed. The
initial Trustee shall be Thomas L. Hansberger. The number of Trustees shall be
fixed from time to time by a vote of a majority of the Trustees then in office,
except that, commencing with the first Shareholders' meeting at which Trustees
are elected, there shall be not fewer than three nor more than fifteen Trustees.
The number of Trustees so fixed may be increased either by the Shareholders or
by the Trustees by a vote of a majority of the Trustees then in office. The
number of Trustees so fixed may be decreased either by the Shareholders or by
the Trustees by vote of a majority of the Trustees then in office, but only to
eliminate vacancies existing by reason of the death, resignation or removal of
one or more Trustees.
In case of the declination, death, resignation, retirement, removal,
incapacity, or inability of any of the Trustees, or in case a vacancy shall
exist by reason of an increase in number, or for any other reason, the remaining
Trustees shall fill such vacancy by appointing such other person as they in
their discretion shall see fit consistent with the 1940 Act. Until any such
vacancy is filled as provided in this Section l, the Trustees then in office
shall, regardless of their number, have all powers granted to and discharge all
duties imposed on the Trustees hereby. Such appointment shall be evidenced by a
written instrument signed by a majority of the Trustees in office, even though
less than a quorum, or by recording in the records of the Trust, and shall take
effect upon such signing or recording and the acceptance of such appointment by
the Trustee so appointed. An appointment of a Trustee may be made by the
Trustees then in office in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees.
Removal and Resignation
- -----------------------
Section 2. By vote of the Shareholders holding a majority of the shares
---------
entitled to vote, the Shareholders may remove a Trustee with or without cause.
By vote of a majority of the Trustees then in office, the Trustees may remove a
Trustee with or without cause. Any Trustee may resign at any time by written
instrument signed by him or her and delivered to any officer of the Trust, to
each other Trustee or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee resigning and no Trustee
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removed shall have any right to any compensation for any period following his or
her resignation or removal, or any right to damages on account of such removal.
Effect of Death, Resignation, Etc. of a Trustee
- -----------------------------------------------
Section 3. The death, declination, resignation, retirement, removal, or
---------
incapacity of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.
Powers
- ------
Section 4. Subject to the provisions of this Declaration of Trust, the
---------
Trustees shall manage the business of the Trust as an investment company, and
they shall have all powers necessary or convenient to carry out that
responsibility. Without limiting the foregoing, the Trustees may adopt By-Laws
not inconsistent with this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent that such By-
Laws do not reserve that right to the Shareholders; they may fill vacancies in
their number, including vacancies resulting from increases in their number, and
may elect and remove such and appoint and terminate such agents as they consider
appropriate; they may appoint their own number, and terminate, any one or more
committees consisting of two or more Trustees, including an executive committee
which may, when the Trustees are not in session exercise some or all of the
powers and authority of the Trustees as the Trustees may determine; they may
appoint an advisory board, the members of which shall not be Trustees and need
not be Shareholders; they may employ one or more investment advisers or
administrators as provided in Section 9 of this Article IV; they may employ one
or more custodians of the assets of the trust and may authorize such custodians
to employ subcustodians and to deposit all or any part of such assets in a
system or systems for the central handling of securities, retain a transfer
agent or a Shareholder servicing agent, or both, provide for the distribution of
Shares by the Trust, through one or more principal underwriters or otherwise,
set record dates for the determination of Shareholders with respect to various
matters, and in general delegate such authority as they consider desirable to
any officer of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian or underwriter; and they may
elect and remove such officers and appoint and terminate such agents as they
consider appropriate.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property, and to execute and
deliver proxies or powers of
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attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in the
name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depositary or a nominee or nominees or
otherwise;
(f) To establish separate and distinct series of shares with separately
defined investment objectives, policies and purposes, and with
separately defined relative powers, rights, privileges and
liabilities, and to allocate assets, liabilities and expenses of the
Trust to a particular series of Shares or to apportion the same among
two or more series, provided that any liability or expense determined
by the Trustees to have been incurred by a particular series of Shares
shall be payable solely out of the assets of that series and to
establish separate classes of shares of each series, all in accordance
with Article III hereof;
(g) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or
property of which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect
to any security held in the Trust;
(h) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power
and authority with relation to any security (whether or not so
deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees
shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not
limited to claims for taxes;
(j) To enter into joint ventures, general or limited partnerships and any
other combinations or associations;
(k) To borrow funds;
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(l) To endorse or guarantee the payment of any notes or other obligations
of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and
pledge the Trust property or any part thereof to secure any or all of
such obligations;
(m) To purchase and pay for entirely out of Trust property such insurance
as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring
the assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment
advisers or administrators, principal underwriters, or independent
contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person as
Shareholder, Trustee, officer, employee, agent, investment adviser or
administrator, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power
to indemnify such person against such liability;
(n) To pay pensions for faithful service, as deemed appropriate by the
Trustees and to adopt, establish and carry out pension, profit-
sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all
of the Trustees, officers, employees and agents of the Trust;
(o) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon giving
notice to such Shareholder;
(p) To enter into contracts of any kind and description;
(q) To name, or to change the name or designation of the Trust or any
series or class of the Trust;
(r) To take whatever action may be necessary to enable the Trust to comply
with any applicable Federal, state or local statute, rule or
regulation; and
(s) To engage in any other lawful act or activity in which corporations
organized under the Massachusetts Business Corporation Law may engage.
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The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees.
Manner of Acting
- ----------------
Section 5. Except as otherwise provided herein or from time to time in the
---------
By-Laws, any action to be taken by the Trustees, or a committee thereof, may be
taken by a majority of the Trustees present at a meeting of Trustees, or of the
committee members present at a meeting of such committee (if in either case a
quorum be present), within or without Massachusetts, including any meeting held
by means of a conference telephone or other communications equipment by means of
which all persons participating in the meeting can communicate with each other
simultaneously and participation by such means shall constitute presence in
person at a meeting, or by written consent of a majority of the Trustees, or
members of such committee, then in office. At any meeting of the Trustees, or a
committee thereof, a majority of the Trustees or members of such committee, as
the case may be, shall constitute a quorum. If a quorum is present when a duly
called or held meeting is convened, the Trustees present there at may, following
the withdrawal of one or more Trustees originally present, continue to transact
business until adjournment thereof, even though such Trustees would not
otherwise constitute a quorum. Meetings of the Trustees, or a committee thereof,
may be called orally or in writing by the Chairman of the Trustees or of such
committee or by any two other Trustees or committee members, as the case may be.
Notice of the time, date and place of all meeting of the Trustees, or a
committee thereof, shall be given to each Trustee or committee member as
provided in the By-Laws.
Notice of any meeting need not be given to any Trustee (or committee
member) who attends that meeting without objecting to the lack of notice or who
executes a written waiver of notice with respect to the meeting. Subject to the
requirements of the 1940 Act the Trustees by majority vote may delegate to any
one of their number the authority to approve particular matters or take
particular actions on behalf of the Trust.
Payment of Expenses by the Trust
- --------------------------------
Section 6. The Trustees are authorized to pay or to cause to be paid out of
---------
the principal or income of the Trust, or partly out of principal and partly out
of income, as they deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, or in connection with the
management thereof including, but not limited to, the Trustees' compensation, as
authorized pursuant to Article VII, Section l hereof, and reimbursement for
expenses and disbursements and such expenses and charges for the services of the
Trust's officers, employees, investment adviser or administrator, principal
underwriter, auditor, counsel, custodian, transfer agent, Shareholder servicing
agent, and such other agents or independent contractors and such other expenses
and charges as the Trustees may deem necessary or proper to incur, provided,
--------
however, that all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with a particular series of Shares or class as determined
by the Trustees consistent with applicable
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law, shall be payable solely out of the assets of that series or class. Any
general liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular series shall be
allocated and charged by the Trustees between or among any one or more of the
series in such manner as the Trustees in their sole discretion deem fair and
equitable. Any such allocation shall be conclusive and binding upon the
Shareholders of all series for all purposes. Any creditor of any series may look
only to the assets of that series to satisfy such creditor's debt.
Section 7. The Trustees shall have the power, as frequently as they may
---------
determine, to cause each Shareholder to pay directly, in advance or arrears for
any and all expenses of the Trust, an amount fixed from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends owed such Shareholder and/or by reducing the number of
Shares in the account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such charges due
from such Shareholder.
Ownership of Assets of the Trust
- --------------------------------
Section 8. Title to all of the assets of each series of Shares and the
---------
Trust shall at all times be considered as vested in the Trustees as joint
tenants. The right, title and interest of the Trustees in such assets shall vest
automatically in each person who may hereafter become a Trustee, and upon any
Trustees' death, resignation or removal, such Trustee shall automatically cease
to have any right, title or interest in such assets. Vesting and cessation of
title as set forth in this Section 8 shall be effective notwithstanding the
absence of execution and delivery of any conveyancing documents.
Advisory, Administration and Distribution
- -----------------------------------------
Section 9. The Trustees may, at any time and from time to time, contract
---------
with respect to the Trust or any series thereof for exclusive or nonexclusive
advisory and/or administration services with Hansberger Global Investors, Inc.,
and/or any other corporation, trust, association or other organization, every
such contract to comply with such requirements and restrictions as may be set
forth in the By-Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and restrictions as the
Trustees may determine, including, without limitation, in the case of a contract
for advisory or sub-advisory services, authority to determine from time to time
what investments shall be purchased, held, sold or exchanged and what portion,
if any, of the assets of the Trust or any series thereof shall be held
uninvested and to make changes in the investments of the Trust or any series
thereof. Any contract for advisory services shall be subject to such Shareholder
approval as is required by the 1940 Act. The Trustees may also, at any time and
from time to time, contract with any corporation, trust, association or other
organization, appointing it exclusive or nonexclusive distributor or principal
underwriter for the Shares, every such contract to comply with such requirements
and restrictions as may be set forth in the By-Laws, and any such contract may
contain such other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
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The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee,
administrator, adviser, principal underwriter, or distributor or agent
of or for any corporation, trust, association, or other organization,
or, of or for any parent or affiliate of any organization, with which
an advisory or administration or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract may have been or may hereafter be made, or that any
such organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with which
an advisory or administration or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract may have been or may hereafter be made also has an
advisory or administration contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract with one or more other corporations, trusts,
associations, or other organizations, or has other businesses or
interests
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
The Shareholders shall have power to vote only (i) for the election or
removal of Trustees as provided in Article IV, Section 1 hereof, (ii) with
respect to any investment adviser as provided in Article IV, Section 7 hereof,
(iii) with respect to any termination of the Trust or any series or class to the
extent and as provided in Article IX, Section 4 hereof, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in Article
IX, Section 7 hereof, (v) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, (vi) with
respect to any merger, consolidation, sale of assets, or incorporation of the
Trust or any series to the extent and as provided in Article IX, Sections 6 and
7 hereof, and (vii) with respect to such additional matters relating to the
Trust as may be required by law, by this Declaration of Trust, by the By-Laws or
by any registration of the Trust with the Securities and Exchange Commission or
any state, or as the Trustees may consider necessary or desirable.
Notwithstanding any other provisions of this Declaration of Trust, on any matter
submitted to a vote of Shareholders, all Shares of the Trust then entitled to
vote shall be voted by individual series or class, except that (1)
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when so required by the 1940 Act, then Shares shall be voted in the aggregate
and not by individual series or class, and (2) when the Trustees have determined
that the matter affects only the interests of one or more series or class, then
only Shareholders of such series or class(es) shall be entitled to vote thereon.
The Shareholders may hold meetings and take action as provided in the By-Laws,
subject to the requirements of the 1940 Act where applicable. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
ARTICLE VI
Distributions, Redemptions, Repurchases
and Determination of Net Asset Value
Distributions
- -------------
Section 1. The Trustees may, but need not, distribute from time to time to
---------
the Shareholders of each series such income and gains, accrued or realized, as
the Trustees may determine, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with good accounting practices. The Trustees shall have full
discretion to determine which items shall be treated as income and which items
as capital and their determination shall be binding upon the Shareholders.
Distributions of each year's income of each series, if any be made, in one or
more payments, which shall be in Shares, in cash or otherwise and on a date or
dates determined by the Trustees. At any time and from time to time in their
discretion, the Trustees may distribute to the Shareholders of any one or more
series as of a record date or dates determined by the Trustees, in Shares, in
cash or otherwise, all or part of any gains realized on the sale or disposition
of property of the series or otherwise, or all or part of any other principal of
the Trust attributable to the series. Each distribution pursuant to this
Section 1 shall be made ratable according to the number of Shares of the series
or class held by the several Shareholders on the applicable record date thereof,
provided that no distributions need be made on Shares purchased pursuant to
orders received, or for which payment is made, after such time or times as the
Trustees may determine. Any such distribution paid in Shares will be paid at
the net asset value thereof as determined in accordance with this Declaration of
Trust.
Redemptions and Repurchases
- ---------------------------
Section 2. Any holder of Shares of the Trust may, by presentation of a
---------
written request, together with his or her certificates, if any, for such Shares,
in proper form for transfer, at the office of the Trust, the adviser, the
underwriter or the distributors, or at a principal office of a transfer or
Shareholder services agent appointed by the Trust (as the Trustees may
determine), or in accordance with such other procedures for redemption as the
Trustees may from time to time authorize, redeem his or her Shares in accordance
with the provisions of this Section 2 for the net
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asset value thereof determined and computed in accordance with the By-Laws, less
any redemption charge the Trustees may establish including any contingent
deferred sales charge to which redemption of such Shares may be subject. Upon
receipt of such written request for redemption of Shares by the Trust, the
adviser, the underwriter or the distributor, or the Trust's transfer or
Shareholder services agent, the Trust shall purchase such Shares and shall pay
therefore the net asset value thereof next determined after such receipt or, in
the case of Shares for which certificates have been issued, the net asset value
thereof next determined after such Shares are tendered in proper form for
transfer to the Trust or, in either case, the net asset value thereof determined
as of such other time fixed by the Trustees, as may be permitted or required by
the 1940 Act.
The obligation of the Trust to redeem its Shares as set forth in this
Section 2 shall be subject to the condition that, during any time of emergency,
as hereinafter defined, such obligation may be suspended by the Trust by or
under authority of the Trustees for such period or periods during such time of
emergency as shall be determined by or under authority of the Trustees. If
there is such a suspension, any Shareholder may withdraw any demand for
redemption and any tender or Shares which has been received by the Trust during
any such period and any tender of Shares the applicable net asset value of which
would but for such suspension be calculated as of a time during such period.
Upon such withdrawal, the Trust shall return to the Shareholder the certificates
therefor, if any. Shareholders who do not so withdraw any such demand shall
receive payment based on the net asset value next determined after the
termination of such suspension. For the purposes of any such suspension "time of
emergency" shall mean, either with respect to all Shares or any series of
Shares, as appropriate, any period during which:
(a) the New York Stock Exchange is closed other than for customary weekend
and holiday closings; or
(b) the Trustees or authorized officers of the Trust shall have determined
in compliance with any applicable rules and regulations or orders of
the Commission either that trading on the New York Stock Exchange is
restricted or that an emergency exists as a result of which (i)
disposal by the Trust of securities owned by it is not reasonably
practicable or (ii) it is not reasonably practicable for the Trust
fairly to determine the current value of the net assets of the Trust
or of a series: or
(c) the suspension or postponement of such obligations is permitted by
order of the Commission.
The Trust may also purchase, repurchase or redeem Shares in accordance with
such other methods, upon such other terms and subject to such other conditions
as the Trustees may from time to time authorize at a price not exceeding the net
asset value of such Shares in effect when the purchase or repurchase or any
contract to purchase or repurchase is made.
14
<PAGE>
Payment in Kind
- ---------------
Section 3. Subject to any generally applicable limitation imposed by the
---------
Trustees, any payment on redemption, purchase or repurchase by the Trust of
Shares may, if authorized by the Trustees, be made wholly or partly in kind,
instead of in cash. Such payment in kind shall be made by distributing
securities or other property, constituting, in the opinion of the Trustees, a
fair representation of the various types of securities and other property then
held by the series of Shares being redeemed, purchased or repurchased (but not
necessarily involving a portion of each of that series' holdings) and taken at
their value used in determining the net asset value of the Shares in respect of
which payment is made.
Additional Provisions Relating to Redemptions and Repurchases
- -------------------------------------------------------------
Section 4. The completion of redemption, purchase or repurchase of Shares
---------
shall constitute a full discharge of the Trust and the Trustees with respect to
such Shares and the Trustees may require that any certificate or certificates
issued by the Trust to evidence the ownership of such Shares shall be
surrendered to the Trustees for cancellation or notation.
Assets Available for Dividends Distributions. Redemptions and Repurchases
- -------------------------------------------------------------------------
Section 5. No dividend or distribution (including, without limitation, any
---------
distribution paid upon termination of the Trust or of any series) with respect
to, nor any redemption or repurchase of, the Shares of any series shall be
effected by the Trust other than from the assets of such series.
Redemptions at the Option of the Trust
- --------------------------------------
Section 6. The Trustees shall have the power at any time to redeem Shares,
---------
of any class of any series, of a Shareholder at a redemption price determined in
accordance with the provisions of Section 2 of this Article if at such time the
aggregate net asset value of the Shares of that class of that series in such
Shareholder's account is less than the minimum investment amount established by
the Trustees for that class of that series. A Shareholder shall be notified
prior to any such redemption and shall be allowed 60 days to make additional
investments in Shares of that class of that series before such redemption is
effected.
15
<PAGE>
ARTICLE VII
Compensation and Limitation
of Liability of Trustees
Compensation
- ------------
Section 1. The Trustees as such shall be entitled to reasonable
---------
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, administration, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Limitation of Liability
- -----------------------
Section 2. The Trustees shall not be responsible or liable in any
---------
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser or administrator, principal underwriter or custodian, nor shall any
Trustee be responsible for the act or omission of any other Trustee, but nothing
herein contained shall protect any Trustee against any liability to which he or
she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office.
Every note, bond, contract, instrument, certificate, Share or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
ARTICLE VIII
Indemnification
Subject to the exceptions and limitations contained in this Article
every person who is, or has been, a Trustee or officer of the Trust shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim. action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Trustee or
officer:
(a) against any liability to the Trust or its Shareholders by reason
of a final adjudication by the court or other body before which
the proceeding was brought
16
<PAGE>
that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interests of the Trust;
(c) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and
resulting in a payment by a Trustee or officer, unless there has
been either a determination that such Trustee or officer did not
engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or
other disposition or a reasonable determination, based on a
review of readily available facts (as opposed to a full trial-
type inquiry) that he did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter);
or
(ii) by written opinion of independent legal counsel.
The rights of indemnification hereinafter provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel other than Trustees and
officers may be entitled by contract or otherwise under law.
Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in the next to the last
paragraph of this Article shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Article, provided that either:
(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against
losses arising out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested
Trustees then in office act on the matter) or independent
legal counsel in a written opinion shall determine, based
upon a review of the readily available facts (as opposed to
a full trial-type
17
<PAGE>
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Article, the words "claim," "action", "suit" or
proceeding" shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include without limitation, attorney's fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled to be
held harmless from and indemnified against all loss and expenses arising from
such liability, but only out of the assets of the particular series of Shares of
which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, Etc. Not Personally Liable: Notice
- ----------------------------------------------------------
Section l. All persons extending credit to, contracting with or having
---------
any claim against the Trust or a particular series or class of Shares shall look
only to the assets of the Trust or the assets of that particular series of
Shares for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally liable therefore.
Nothing in this Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officers or officer shall give notice
that this Declaration of Trust is on file with the Secretary of the Commonwealth
of Massachusetts and shall recite that the same was executed or made by or on
behalf of the Trust or by them as Trustees or Trustee or as officers or officer
and not individually and that the obligations of such instrument are not binding
upon any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further recital as he or
she or they may deem appropriate, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
Trustees' Good Faith Action, Expert Advice; No Bond or Surety
- -------------------------------------------------------------
18
<PAGE>
Section 2. The exercise by the Trustees of their powers and discretion
---------
hereunder shall be binding upon everyone interested. A Trustee shall be liable
for his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
- ------------------------------------------------
Section 3. No person dealing with the Trustees shall be bound to make
---------
any inquiry concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
Duration and Termination of Trust
- ---------------------------------
Section 4. Unless terminated as provided herein, the Trust shall
---------
continue without limitation of time. The Trust may be terminated at any time by
vote of Shareholders holding at least a majority of the Shares entitled to vote
or by the Trustees by written notice to the Shareholders. Any series of Shares
may be terminated at any time by vote of Shareholders holding at least a
majority of the Shares of such series entitled to vote or by the Trustees by
written notice to the Shareholders of such series. Upon termination of the Trust
or of any one or more series of Shares, after paying or otherwise providing for
all charges, taxes, expenses and liabilities, whether due or accrued or
anticipated, of the Trust or of the particular series as may be determined by
the Trustees, the Trust shall, in accordance with such procedures as the
Trustees consider appropriate, reduce the remaining assets to distributable form
in cash or Shares or other securities, or any combination thereof, and
distribute the proceeds to the Shareholders of the series involved, ratably
according to the number of Shares of such series held by the several
Shareholders of such series on the date of termination.
Section 5. The original or a copy of this instrument and of each
---------
amendment hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of each amendment
hereto shall be filed by the Trust with the Secretary of the Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made and as to any matters in connection with
the Trust hereunder; and. with the same effect as if it were the original, may
rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in such amendment,
references to this instrument, and the expression "herein," "hereof," and
"hereunder" shall be deemed to refer to this instrument as amended from time to
time. Headings are placed herein for convenience of reference only and shall not
be taken as part hereof or control or affect
19
<PAGE>
the meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Merger, Consolidation and Sale of Assets
- ----------------------------------------
Section 6. The Trust may merge or consolidate with any other
---------
corporation, association, trust or other organization or may sell, lease or
exchange all or substantially all of the assets of the Trust (or all or
substantially all of the assets allocated or belonging to a particular series of
the Trust) including its good will, upon such terms and conditions and for such
consideration when and as authorized, at any meeting of Shareholders called for
such purpose, by the vote or written consent of the Shareholders of all series
of the Trust voting as a single class, or of the affected series of the Trust,
as the case may be; and any such merger, consolidation, sale, lease or exchange
shall be deemed for all purposes to have been accomplished under and pursuant to
the statutes of the Commonwealth of Massachusetts. Nothing contained herein
shall be construed as requiring approval of Shareholders for any sale of assets
in the ordinary course of the business of the Trust. Holders of Shares of any
series or class shall have no appraisal rights with respect to their Shares.
Incorporation, Reorganization
- -----------------------------
Section 7. With the approval of the Shareholders, the Trustees may
---------
cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction, or any other trust, unit investment trust,
partnership, association or other organization to take over the assets of the
Trust or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer such assets to
any such corporation, trust, partnership, association or organization in
exchange for the shares or securities thereof or otherwise, and to lend money
to, subscribe for the shares or securities of, and enter into any contracts with
any such corporation, trust, partnership, association or organization in which
the Trust holds or is about to acquire shares or any other interest. Subject to
Section 6 of this Article IX, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section shall be construed as
requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the assets of
the Trust to such organization or entities.
With the approval of Shareholders of any series the Trustees may sell
lease or exchange all of the assets allocated or belonging to that series, or
cause to be organized or assist in organizing a corporation or corporations
under the laws of any other jurisdiction, or any other trust, unit investment
trust, partnership, association or other organization, to take over all of the
assets allocated or belonging to that series and to sell, convey or transfer
such assets to any such corporation, trust, unit investment trust, partnership,
association, or other organization in exchange for the shares or securities
thereof or otherwise.
20
<PAGE>
Applicable Law
- --------------
Section 8. The Trust shall be of the type commonly called a
---------
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
This Declaration of Trust is to be governed by and construed and administered
according to the laws of said Commonwealth.
Amendments
- ----------
Section 9. This Declaration of Trust may be amended at any time by an
---------
instrument in writing signed by a majority of the then Trustees when authorized
to do so by a vote or written consent of Shareholders, except that an amendment
which shall affect the holders of one or more series or classes of Shares but
not the holders of all outstanding series or classes shall be authorized by vote
or written consent of the Shareholders of each series or classes affected and no
vote of Shareholders of a series or classes not affected shall be required.
Amendments having the purpose of changing the name of the Trust or of supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote.
21
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this document this
4th day of October, 1996.
/s/ Thomas L. Hansberger
-------------------------------
Thomas L. Hansberger, as Trustee
and not individually
/s/ J. Christopher Jackson
-----------------------------------
J. Christopher Jackson, as Trustee
and not individually
/s/ Kathryn B. McGrath
----------------------------------
Kathryn B. McGrath, as Trustee
and not individually
/s/ Stuart B. Ross
---------------------------------------
Stuart B. Ross, as Trustee
and not individually
/s/ William F. Waters
-------------------------------------
William F. Waters, as Trustee
and not individually
22
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ___th day of October, 1996, by and between Hansberger
Institutional Series (the "Trust"), a business trust organized under the laws of
the Commonwealth of Massachusetts, and Hansberger Global Investors, Inc. (the
"Adviser").
1. Duties of Adviser. The Trust hereby appoints the Adviser to act as
investment adviser to each of the Funds listed on Schedule A hereto (the
"Funds"), for the period and on such terms set forth in this Agreement. The
Trust employs the Adviser to manage the investment and reinvestment of the
assets of the Funds, to continuously review, supervise and administer the
investment program of each of the Funds, to determine in its discretion the
securities to be purchased or sold and the portion of each such Fund's assets to
be held uninvested, to provide the Trust with records concerning the Adviser's
activities which the Trust is required to maintain, and to render regular
reports to the Trust's officers and Board of Trustees concerning the Adviser's
discharge of the foregoing responsibilities. The Adviser shall discharge the
foregoing responsibilities subject to the control of the officers and the Board
of Trustees of the Trust, and in compliance with the objectives, policies and
limitations set forth in the Trust's prospectus and applicable laws and
regulations. The Adviser accepts such employment and agrees to render the
services and to 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 provided herein.
2. Fund Transactions. The Adviser is authorized to select the brokers
or dealers that will execute the purchases and sales of securities for each of
the Funds and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Subject to
policies established by the Board of Trustees of the Trust, the Adviser may also
be authorized to effect individual securities transactions at commission rates
in excess of the minimum commission rates available, if the Adviser determines
in good faith that such amount of commission is reasonable in relation to the
value of the brokerage or research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the accounts as to which the Adviser exercises
investment discretion. The execution of such transactions shall not be deemed to
represent an unlawful act or breach of any duty created by this Agreement or
otherwise. The Adviser will promptly communicate to the officers and Trustees of
the Trust such information relating to Fund transactions as they may reasonably
request.
<PAGE>
3. Compensation of the Adviser. For the services to be rendered by
the Adviser as provided in Section 1 of this Agreement, the Trust shall pay to
the Adviser at the end of each of the Trust's fiscal quarters, an advisory fee
calculated by applying a quarterly rate, based on the annual percentage rates
set forth opposite each Fund's name on Schedule A hereto, to each Fund's average
daily net assets for the quarter.
In the event of termination of this Agreement, the fee provided
under this Section shall be computed on the basis of the period ending on the
last business day on which this Agreement is in effect subject to a pro rata
--- ----
adjustment based on the number of days elapsed in the current fiscal quarter as
a percentage of the total number of days in such quarter.
4. Other Services. At the request of the Trust, the Adviser, in its
discretion may make available to the Trust office facilities, equipment,
personnel and other services. Such office facilities, equipment, personnel and
services shall be provided for or rendered by the Adviser and billed to the
Trust at the Adviser's cost.
5. Reports. The Trust and the Adviser agree to furnish to each other
current prospectuses, proxy statements, reports to shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs as each may reasonably request.
6. Status of Adviser. The services of the Adviser to the Trust are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others so long as its services to the Trust are not impaired
thereby.
7. Liability of Adviser. In the absence of (i) willful misfeasance,
bad faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard by the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the Investment Company Act of 1940 ("Investment
Company Act"), the Adviser shall not be subject to any liability whatsoever to
the Trust, or to any shareholder of the Trust, for any error or judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of any Fund of the Trust.
8. Permissible Interests. Subject to and in accordance with the
Declaration of Trust of the Trust and the Articles of Incorporation (or other
governing or organizational documents) of the Adviser, Trustees, agents and
shareholders of the Trust are or may be interested in the Adviser (or any
successor thereof) as officers, directors or otherwise; officers, agents and
directors of the Adviser are or may be interested in the Trust as Trustees,
officers, shareholders or otherwise; and the Adviser (or any successor) is or
may be interested in the Trust as a shareholder or otherwise. The effect of
<PAGE>
any such interrelationships shall be governed by said Declaration of Trust or
Articles of Incorporation (or other governing or organizational documents) and
provisions of the Investment Company Act.
9. Declaration of Trust. The Adviser is hereby expressly put on
notice of the limitation of shareholder and Trustee liability as set forth in
Articles III and VII of the Declaration of Trust of the Trust and agrees that
the obligations assumed by the Trust pursuant to this Agreement shall be limited
in all cases to the Trust and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of
the Trust. Nor shall the Adviser seek satisfaction of any such obligations from
the Trustees or any individual Trustee.
10. Duration and Termination. This Agreement, unless sooner terminated
as provided herein, shall continue until October ___, 1998 and thereafter for
additional periods of one year from the anniversary thereof, but only so long as
such continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Board of Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of each Fund of the Trust; provided, however, that
-------- -------
if the holders of any Fund fail to approve the Agreement as provided herein, the
Adviser may continue to serve in such capacity in the manner and to the extent
permitted by the Investment Company Act and Rules thereunder. This Agreement may
be terminated by any Fund of the Trust at any time, without the payment of any
penalty, by vote of a majority of the entire Board of Trustees of the Trust or
by vote of a majority of the outstanding voting securities of the Fund on 60
days' written notice to the Adviser. This Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 60 days' written
notice to the Trust. This Agreement will automatically and immediately terminate
in the event of its assignment. Any notice under this Agreement shall be given
in writing, addressed and delivered or mailed postpaid, to the other party at
any office of such party.
As used in this Section 10, the terms "assignment," "interested
persons," and "a vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and
Section 2(a)(42) of the Investment Company Act.
11. Amendment of Agreement. This Agreement may be amended by mutual
consent, but the consent of the Trust must be approved (a) by a vote of a
majority of those members of the Board of Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such amendment, and (b)
by vote of a majority of the outstanding voting securities of each Fund of the
Trust.
12. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this __th day of October, 1996.
HANSBERGER GLOBAL INVESTORS, INC. HANSBERGER INSTITUTIONAL SERIES
By ____________________________ By ____________________________
Name __________________________ Name: _________________________
Title: ________________________ Title:_________________________
<PAGE>
Schedule A
Fund Rate
- ---- ----
International Fund 0.75%
Emerging Markets Fund 1.00%
Foreign Small Cap Fund 0.90%
All Countries Fund/SM/ 0.75%
<PAGE>
[LOGO OF CHASE
APPEARS HERE]
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective ___________________, 199_, and is between
THE CHASE MANHATTAN BANK ("Bank") and _________________________________________
_________________________________________________________________ ("Customer").
1. Customer Accounts.
Bank agrees to establish and maintain the following accounts ("Accounts"):
(a) A custody account in the name of Customer ("Custody Account") for any
and all stocks, shares, bonds, debentures, notes, mortgages or other obligations
for the payment of money, bullion, coin and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase or subscribe for
the same or evidencing or representing any other rights or interests therein and
other similar property whether certificated or uncertificated as may be received
by Bank or its Subcustodian (as defined in Section 3) for the account of
Customer ("Securities"); and
(b) A deposit account in the name of Customer ("Deposit Account") for any
and all cash in any currency received by Bank or its Subcustodian for the
account of Customer, which cash shall not be subject to withdrawal by draft or
check.
Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between Bank and Customer, additional Accounts may
be established and separately accounted for as additional Accounts hereunder.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable
to Bank:
(a) Securities shall be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash shall be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
<PAGE>
Cash may be held pursuant to Instructions in either interest or non-
interest bearing accounts as may be available for the particular currency. To
the extent Instructions are issued and Bank can comply with such Instructions,
Bank is authorized to maintain cash balances on deposit for Customer with itself
or one of its "Affiliates" at such reasonable rates of interest as may from time
to time be paid on such accounts, or in non-interest bearing accounts as
Customer may direct, if acceptable to Bank. For purposes hereof, the term
"Affiliate" shall mean an entity controlling, controlled by, or under common
control with, Bank.
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by Bank and Customer.
3. Subcustodians and Securities Depositories.
Bank may act hereunder through the subcustodians listed in Schedule A
hereof with which Bank has entered into subcustodial agreements
("Subcustodians"). Customer authorizes Bank to hold Assets in the Accounts in
accounts which Bank has established with one or more of its branches or
Subcustodians. Bank and Subcustodians are authorized to hold any of the
Securities in their account with any securities depository in which they
participate.
Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to
Schedule A. Upon request by Customer, Bank shall identify the name, address and
principal place of business of any Subcustodian of Customer's Assets and the
name and address of the governmental agency or other regulatory authority that
supervises or regulates such Subcustodian.
4. Use of Subcustodian.
(a) Bank shall identify the Assets on its books as belonging to Customer.
(b) A Subcustodian shall hold such Assets together with assets belonging
to other customers of Bank in accounts identified on such Subcustodian's books
as custody accounts for the exclusive benefit of customers of Bank.
(c) Any Assets in the Accounts held by a Subcustodian shall be subject
only to the instructions of Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian.
(d) Any agreement Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets shall not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets shall be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
Customer with any particular Subcustodian.
5. Deposit Account Transactions.
(a) Bank or its Subcustodians shall make payments from the Deposit Account
upon receipt of Instructions which include all information required by Bank.
2
<PAGE>
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, Bank, in its discretion, may advance
Customer such excess amount which shall be deemed a loan payable on demand,
bearing interest at the rate customarily charged by Bank on similar loans.
(c) If Bank credits the Deposit Account on a payable date, or at any time
prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If Customer does not promptly return any
amount upon such notification, Bank shall be entitled, upon oral or written
notification to Customer, to reverse such credit by debiting the Deposit Account
for the amount previously credited. Bank or its Subcustodian shall have no duty
or obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for Customer upon Instructions after
consultation with Customer.
6. Custody Account Transactions.
(a) Securities shall be transferred, exchanged or delivered by Bank or
its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to Bank.
(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions shall be
credited or debited to the Accounts on the date cash or Securities are actually
received by Bank and reconciled to the Account.
(i) Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, Bank may reverse the credits and debits
of the particular transaction at any time.
7. Actions of Bank.
Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank shall:
(i) Present for payment any Securities which are called, redeemed
or retired or otherwise become payable and all coupons and other income
items which call for payment upon presentation, to the extent that Bank or
Subcustodian is actually aware of such opportunities.
(ii) Execute in the name of Customer such ownership and other
certificates as may be required to obtain payments in respect of
Securities.
3
<PAGE>
(iii) Exchange interim receipts or temporary Securities for
definitive Securities.
(iv) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, Affiliates of Bank or any
Subcustodian.
(v) Issue statements to Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
Bank shall send Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. Unless
Customer sends Bank a written exception or objection to any Bank statement
within sixty (60) days of receipt, Customer shall be deemed to have approved
such statement. In such event, or where Customer has otherwise approved any such
statement, Bank shall, to the extent permitted by law, be released, relieved and
discharged with respect to all matters set forth in such statement or reasonably
implied therefrom as though it had been settled by the decree of a court of
competent jurisdiction in an action where Customer and all persons having or
claiming an interest in Customer or Customer's Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of Customer.
Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by Bank or by its Subcustodians of any payment, redemption or
other transaction regarding Securities in the Custody Account in respect of
which Bank has agreed to take any action hereunder.
8. Corporate Actions; Proxies; Tax Reclaims.
(a) Corporate Actions. Whenever Bank receives information concerning the
-----------------
Securities which requires discretionary action by the beneficial owner of the
Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), Bank
shall give Customer notice of such Corporate Actions to the extent that Bank's
central corporate actions department has actual knowledge of a Corporate Action
in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, Bank shall endeavor to obtain Instructions from
Customer or its Authorized Person, but if Instructions are not received in time
for Bank to take timely action, or actual notice of such Corporate Action was
received too late to seek Instructions, Bank is authorized to sell such rights
entitlement or fractional interest and to credit the Deposit Account with the
proceeds or take any other action it deems, in good faith, to be appropriate in
which case it shall be held harmless for any such action.
(b) Proxy Voting. Bank shall provide proxy voting services, if elected by
------------
Customer, in accordance with the terms of the proxy voting services rider
hereto. Proxy voting services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Affiliates of
Bank).
(c) Tax Reclaims.
------------
(i) Subject to the provisions hereof, Bank shall apply for a
reduction of withholding tax and any refund of any tax paid or tax credits
which apply in each applicable market in respect of
4
<PAGE>
income payments on Securities for the benefit of Customer which Bank
believes may be available to such Customer.
(ii) The provision of tax reclaim services by Bank is conditional
upon Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from Bank). Customer
acknowledges that, if Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation shall be
deducted from all income received in respect of Securities issued outside
the United Kingdom and that U.S. non-resident alien tax or U.S. backup
withholding tax shall be deducted from U.S. source income. Customer shall
provide to Bank such documentation and information as it may require in
connection with taxation, and warrants that, when given, this information
shall be true and correct in every respect, not misleading in any way, and
contain all material information. Customer undertakes to notify Bank
immediately if any such information requires updating or amendment.
(iii) Bank shall not be liable to Customer or any third party for
any tax, fines or penalties payable by Bank or Customer, and shall be
indemnified accordingly, whether these result from the inaccurate
completion of documents by Customer or any third party, or as a result of
the provision to Bank or any third party of inaccurate or misleading
information or the withholding of material information by Customer or any
other third party, or as a result of any delay of any revenue authority or
any other matter beyond the control of Bank.
(iv) Customer confirms that Bank is authorized to deduct from any
cash received or credited to the Deposit Account any taxes or levies
required by any revenue or governmental authority for whatever reason in
respect of the Securities or Cash Accounts.
(v) Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to
Customer from time to time and Bank may, by notification in writing, at its
absolute discretion, supplement or amend the markets in which the tax
reclaim services are offered. Other than as expressly provided in this
sub-clause, Bank shall have no responsibility with regard to Customer's tax
position or status in any jurisdiction.
(vi) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental body in
relation to Customer or the Securities and/or Cash held for Customer.
(vii) Tax reclaim services may be provided by Bank or, in whole or
in part, by one or more third parties appointed by Bank (which may be
Affiliates of Bank); provided that Bank shall be liable for the performance
of any such third party to the same extent as Bank would have been if it
performed such services itself.
9. Nominees.
Securities which are ordinarily held in registered form may be registered
in a nominee name of Bank, Subcustodian or securities depository, as the case
may be. Bank may without notice to Customer cause any such Securities to cease
to be registered in the name of any such nominee and to be registered in the
name of Customer. In the event that any Securities registered in a nominee name
are called for partial redemption by the issuer, Bank may allot the called
portion to the respective beneficial holders of such class of security in any
manner Bank deems to be fair and equitable. Customer shall hold Bank,
Subcustodians,
5
<PAGE>
and their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.
10. Authorized Persons.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank receives
Instructions from Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Bank may specify. Unless
otherwise expressly provided, all Instructions shall continue in full force and
effect until canceled or superseded.
Any Instructions delivered to Bank by telephone shall promptly thereafter
be confirmed in writing by an Authorized Person (which confirmation may bear the
facsimile signature of such Person), but Customer shall hold Bank harmless for
the failure of an Authorized Person to send such confirmation in writing, the
failure of such confirmation to conform to the telephone instructions received
or Bank's failure to produce such confirmation at any subsequent time. Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account. Customer shall be
responsible for safeguarding any testkeys, identification codes or other
security devices which Bank shall make available to Customer or its Authorized
Persons.
12. Standard of Care; Liabilities.
(a) Bank shall be responsible for the performance of only such duties as
are set forth herein or expressly contained in Instructions which are consistent
with the provisions hereof as follows:
(i) Bank shall use reasonable care with respect to its obligations
hereunder and the safekeeping of Assets. Bank shall be liable to Customer
for any loss which shall occur as the result of the failure of a
Subcustodian to exercise reasonable care with respect to the safekeeping of
such Assets to the same extent that Bank would be liable to Customer if
Bank were holding such Assets in New York. In the event of any loss to
Customer by reason of the failure of Bank or its Subcustodian to utilize
reasonable care, Bank shall be liable to Customer only to the extent of
Customer's direct damages, to be determined based on the market value of
the property which is the subject of the loss at the date of discovery of
such loss and without reference to any special conditions or circumstances.
Bank shall have no liability whatsoever for any consequential, special,
indirect or speculative loss or damages (including, but not limited to,
lost profits) suffered by Customer in connection with the transactions
contemplated hereby and the relationship established hereby even if Bank
has been advised as to the possibility of the same and regardless of the
form of the action. Bank shall not be responsible for the insolvency of
any Subcustodian which is not a branch or Affiliate of Bank.
6
<PAGE>
(ii) Bank shall not be responsible for any act, omission, default
or the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.
(iii) Bank shall be indemnified by, and without liability to
Customer for any action taken or omitted by Bank whether pursuant to
Instructions or otherwise within the scope hereof if such act or omission
was in good faith, without negligence. In performing its obligations
hereunder, Bank may rely on the genuineness of any document which it
believes in good faith to have been validly executed.
(iv) Customer agrees to pay for and hold Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes
or other governmental charges, and any related expenses with respect to
income from or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the advice
of counsel (who may be counsel for Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.
(vi) Bank need not maintain any insurance for the benefit of
Customer.
(vii) Without limiting the foregoing, Bank shall not be liable for
any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from malfunction, interruption of or error in
the transmission of information caused by any machines or system or
interruption of communication facilities, abnormal operating conditions,
nationalization, expropriation or other governmental actions; regulation of
the banking or securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the orderly execution of
securities transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war (whether declared or undeclared) or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation, or acts of
God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to Customer or
an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments
or the retention of Securities;
(iii) advise Customer or an Authorized Person regarding any default
in the payment of principal or income of any security other than as
provided in Section 5(c) hereof;
(iv) evaluate or report to Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to
which Securities are delivered or payments are made pursuant hereto; and
7
<PAGE>
(v) review or reconcile trade confirmations received from brokers.
Customer or its Authorized Persons (as defined in Section 10) issuing
Instructions shall bear any responsibility to review such confirmations
against Instructions issued to and statements issued by Bank.
(c) Customer authorizes Bank to act hereunder notwithstanding that Bank or
any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Securities, act as a lender to the issuer of Securities, act in the
same transaction as agent for more than one customer, have a material interest
in the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
Customer agrees to pay Bank for its services hereunder the fees set forth
in Schedule B hereto or such other amounts as may be agreed upon in writing,
together with Bank's reasonable out-of-pocket or incidental expenses, including,
but not limited to, legal fees. Bank shall have a lien on and is authorized to
charge any Accounts of Customer for any amount owing to Bank under any provision
hereof
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
------------------------------
Customer's trading and investment activity, Bank is authorized to enter into
spot or forward foreign exchange contracts with Customer or an Authorized Person
for Customer and may also provide foreign exchange through its subsidiaries,
Affiliates or Subcustodians. Instructions, including standing instructions, may
be issued with respect to such contracts but Bank may establish rules or
limitations concerning any foreign exchange facility made available. In all
cases where Bank, its subsidiaries, Affiliates or Subcustodians enter into a
foreign exchange contract related to Accounts, the terms and conditions of the
then current foreign exchange contract of Bank, its subsidiary, Affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply to
such transaction.
(b) Certification of Residency, etc. Customer certifies that it is a
--------------------------------
resident of the United States and agrees to notify Bank of any changes in
residency. Bank may rely upon this certification or the certification of such
other facts as may be required to administer Bank's obligations hereunder.
Customer shall indemnify Bank against all losses, liability, claims or demands
arising directly or indirectly from any such certifications.
(c) Access to Records. Bank shall allow Customer's independent public
------------------
accountant reasonable access to the records of Bank relating to the Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under applicable law, Bank shall
also obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the examination
of Customer's books and records.
(d) Governing Law; Successors and Assigns, Captions THIS AGREEMENT SHALL
-----------------------------------------------
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN NEW YORK and shall not be assignable by either party, but
shall bind the successors in interest of Customer and Bank. The captions given
to the sections and subsections of this Agreement are for convenience of
reference only and are not to be used to interpret this Agreement.
8
<PAGE>
(e) Entire Agreement; Applicable Riders. Customer represents that the
------------------------------------
Assets deposited in the Accounts are (Check one):
Employee Benefit Plan or other assets subject to the Employee
---- Retirement Income Security Act of 1974, as amended ("ERISA");
X Mutual Fund assets subject to certain Securities and Exchange
---- Commission ("SEC") rules and regulations;
Neither of the above.
----
This Agreement consists exclusively of this document together with
Schedules A and B, Exhibits I - _______ and the following Rider(s) [Check
applicable rider(s)]:
ERISA
----
X MUTUAL FUND
----
X PROXY VOTING
----
SPECIAL TERMS AND CONDITIONS
----
There are no other provisions hereof and this Agreement supersedes any
other agreements, whether written or oral, between the parties. Any amendment
hereto must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions hereof are held
-------------
invalid, illegal or unenforceable in any respect on the basis of any particular
circumstances or in any jurisdiction, the validity, legality and enforceability
of such provision or provisions under other circumstances or in other
jurisdictions and of the remaining provisions shall not in any way be affected
or impaired.
(g) Waiver. Except as otherwise provided herein, no failure or delay on
-------
the part of either party in exercising any power or right hereunder operates as
a waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision hereof, or waiver of any breach or default,
is effective unless in writing and signed by the party against whom the waiver
is to be enforced.
(h) Representations and Warranties. (i) Customer hereby represents and
------------------------------
warrants to Bank that: (A) it has full authority and power to deposit and
control the Securities and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement is its
legal, valid and binding obligation, enforceable in accordance with its terms;
(D) it shall have full authority and power to borrow moneys and enter into
foreign exchange transactions; and (E) it has not relied on any oral or written
representation made by Bank or any person on its behalf, and acknowledges that
this Agreement sets out to the fullest extent the duties of Bank. (ii) Bank
hereby represents and warrants to Customer that: (A) it has the power and
authority to perform its obligations hereunder, (B) this Agreement constitutes a
legal, valid and binding obligation on it; enforceable in accordance with its
terms; and (C) that it has taken all necessary action to authorize the execution
and delivery hereof.
(i) Notices. All notices hereunder shall be effective when actually
--------
received. Any notices or other communications which may be required hereunder
are to be sent to the parties at the following addresses or such other addresses
as may subsequently be given to the other party in writing: (a) Bank: The
9
<PAGE>
Chase Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, NY 11245, Attention:
Global Custody Division; and (b)Customer_______________________________________,
_______________________________________________________________,
______________________________________________________________
(j) Termination. This Agreement may be terminated by Customer or Bank by
------------
giving sixty (60) days written notice to the other, provided that such notice to
Bank shall specify the names of the persons to whom Bank shall deliver the
Assets in the Accounts. If notice of termination is given by Bank, Customer
shall, within sixty (60) days following receipt of the notice, deliver to Bank
Instructions specifying the names of the persons to whom Bank shall deliver the
Assets. In either case Bank shall deliver the Assets to the persons so
specified, after deducting any amounts which Bank determines in good faith to be
owed to it under Section 13. If within sixty (60) days following receipt of a
notice of termination by Bank, Bank does not receive Instructions from Customer
specifying the names of the persons to whom Bank shall deliver the Assets, Bank,
at its election, may deliver the Assets to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions hereof, or to Authorized Persons, or may continue to hold the Assets
until Instructions are provided to Bank.
(k) Money Laundering. Customer warrants and undertakes to Bank for itself
----------------
and its agents that all Customer's customers are properly identified in
accordance with U.S. Money Laundering Regulations as in effect from time to
time.
(l) Imputation of certain information. Bank shall not be held responsible
---------------------------------
for and shall not be required to have regard to information held by any person
by imputation or information of which Bank is not aware by virtue of a 'Chinese
Wall' arrangement. If Bank becomes aware of confidential information which in
good faith it feels inhibits it from effecting a transaction hereunder Bank may
refrain from effecting it.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first-above written.
CUSTOMER
By:
--------------------------------------------
Title:
Date:
THE CHASE MANHATTAN BANK
By:
--------------------------------------------
Title:
Date:
78111
10
<PAGE>
STATE OF )
: ss.
COUNTY OF )
On this day of , 199 , before me
personally came , to me known, who being
by me duly sworn, did depose and say that he/she resides in
at , that he/she is
of ,
the entity described in and which executed the foregoing instrument; that
he/she knows the seal of said entity, that the seal affixed to said instrument
is such seal, that it was so affixed by order of said entity, and that he/she
signed his/her name thereto by like order.
-------------------------------
Sworn to before me this ______________
day of ______________, 199_.
- -----------------------------------
Notary
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this day of , 199 ,
before me personally came , to me known, who being by me
duly sworn, did depose and say that he/she resides in
at ; that
he/she is a Vice President of THE CHASE MANHATTAN BANK, the corporation
described in and which executed the foregoing instrument; that he/she knows the
seal of said corporation, that the seal affixed to said instrument is such
corporate seal, that it was so affixed by order of the Board of Directors of
said corporation, and that he/she signed his/her name thereto by like order.
-------------------------------
Sworn to before me this ______________
day of ______________, 199_.
- -----------------------------------
Notary
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
------------------------------------
effective __________________
Customer represents that the Assets being placed in Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except to the extent that Bank has specifically agreed to comply with
a condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to Bank (1940 Act, Release No. 12053, November 20, 1981), as
amended, or unless Bank has otherwise specifically agreed, Customer shall be
solely responsible to assure that the maintenance of Assets hereunder complies
with such rules, regulations, interpretations or exemptive order promulgated by
or under the authority of the Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
------------------------------------------
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used herein
shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are
further defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined
in Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution
or trust company incorporated or organized under the laws of a country
other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders'
equity in excess of $200 million in U.S. currency (or a foreign
currency equivalent thereof), (ii) a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100
million in U.S. currency (or a foreign currency equivalent thereof)
(iii) a banking institution or trust company incorporated or organized
under the laws of a country other than the United States or a majority
owned direct or indirect subsidiary of a qualified U.S. bank or bank
holding company that is incorporated or organized under the laws of a
country other than the United States which has such other
qualifications as shall be specified in Instructions and approved by
Bank; or (iv) any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the
laws of a country other than the United States, which operates (i) the
central system for handling securities or equivalent book-entries in
that country, or (ii) a transnational system for the central handling
of securities or equivalent book-entries.
<PAGE>
Customer represents that its Board of Directors has approved each of the
Subcustodians listed in Schedule A hereto and the terms of the subcustody
agreements between Bank and each Subcustodian, which are attached as Exhibits I
through _____ of Schedule A, and further represents that its Board has
determined that the use of each Subcustodian and the terms of each subcustody
agreement are consistent with the best interests of the Fund(s) and its (their)
shareholders. Bank shall supply Customer with any amendment to Schedule A for
approval. Customer has supplied or shall supply Bank with certified copies of
its Board of Directors resolution(s) with respect to the foregoing prior to
placing Assets with any Subcustodian so approved.
Section 11. Instructions.
-------------
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made pursuant to
Section 5 and 6 hereof may be made only for the purposes listed below.
Instructions must specify the purpose for which any transaction is to be
made and Customer shall be solely responsible to assure that Instructions
are in accord with any limitations or restrictions applicable to Customer
by law or as may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any
restrictions applicable to Customer;
(i) For the purpose of redeeming shares of the capital stock of Customer
and the delivery to, or the crediting to the account of, Bank, its
Subcustodian or Customer's transfer agent, such shares to be purchased or
redeemed;
(j) For the purpose of redeeming in kind shares of Customer against
delivery to Bank, its Subcustodian or Customer's transfer agent of such
shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement among
Customer, Bank and a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of The National Association of Securities Dealers,
Inc., relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organ-
2
<PAGE>
ization or organizations, regarding escrow or other arrangements in
connection with transactions by Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only
upon payment to Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or
at expiration, Bank shall receive from brokers the Securities previously
deposited. Bank shall act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and shall have no
responsibility or liability for any such Securities which are not returned
promptly when due other than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related
transactions;
(n) For other proper purposes as may be specified in Instructions issued
by an officer of Customer which shall include a statement of the purpose
for which the delivery or payment is to be made, the amount of the payment
or specific Securities to be delivered, the name of the person or persons
to whom delivery or payment is to be made, and a certification that the
purpose is a proper purpose under the instruments governing Customer; and
(o) Upon the termination hereof as set forth in Section 14(j).
Section 12. Standard of Care; Liabilities.
------------------------------
Add the following at the end of Section as 12:
(d) Bank hereby warrants to Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and
each eligible foreign securities depository holding Customer's Securities
pursuant hereto afford protection for such Securities at least equal to
that afforded by Bank's established procedures with respect to similar
securities held by Bank and its securities depositories in New York.
Section 14. Access to Records.
------------------
Add the following language to the end of Section 14(c):
-------------------------------------------------------
Upon reasonable request from Customer, Bank shall furnish Customer such
reports (or portions thereof) of Bank's system of internal accounting
controls applicable to Bank's duties hereunder. Bank shall endeavor to
obtain and furnish Customer with such similar reports as it may reasonably
request with respect to each Subcustodian and securities depository holding
Assets.
3
<PAGE>
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
AND
________________ (the "Customer")
dated 199_.
1. Global Proxy Services (the "Services") shall be provided for the countries
listed in the procedures and guidelines ("Procedures") furnished to
Customer, as the same may be amended by Bank from time to time on prior
notice to Customer. The Procedures are incorporated by reference herein
and form a part of this Rider.
2. The Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by Bank
to Customer of the dates of pending shareholder meetings, resolutions to be
voted upon and the return dates as may be received by Bank or provided to
Bank by its Subcustodians or third parties, and (b) voting by Bank of
proxies based on Customer Directions. Original proxy materials or copies
thereof shall not be provided. Notifications shall generally be in English
and, where necessary, shall be summarized and translated from such non-
English materials as have been made available to Bank or its Subcustodian.
In this respect Bank's only obligation is to provide information from
sources it believes to be reliable and/or to provide materials summarized
and/or translated in good faith. Bank reserves the right to provide
Notifications, or parts thereof, in the language received. Upon reasonable
advance request by Customer, backup information relative to Notifications,
such as annual reports, explanatory material concerning resolutions,
management recommendations or other material relevant to the exercise of
proxy voting rights shall be provided as available, but without
translation.
3. While Bank shall attempt to provide accurate and complete Notifications,
whether or not translated, Bank shall not be liable for any losses or other
consequences that may result from reliance by Customer upon Notifications
where Bank prepared the same in good faith.
4. Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the
Agreement, in performing Services Bank shall be acting solely as the agent
of Customer, and shall not exercise any discretion with regard to such
Services.
5. Proxy voting may be precluded or restricted in a variety of circumstances,
including, without limitation, where the relevant Financial Assets are: (i)
on loan; (ii) at registrar for registration or reregistration; (iii) the
subject of a conversion or other corporate action; (iv) not held in a name
subject to the control of Bank or its Subcustodian or are otherwise held in
a manner which precludes voting; (v) not capable of being voted on account
of local market regulations or practices or restrictions by the issuer; or
(vi) held in a margin or collateral account.
6. Customer acknowledges that in certain countries Bank may be unable to vote
individual proxies but shall only be able to vote proxies on a net basis
(e.g., a net yes or no vote given the voting instructions received from all
---
customers).
<PAGE>
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall in
no event sell, license, give or otherwise make the information provided
hereunder available, to any third party, and shall not directly or
indirectly compete with Bank or diminish the market for the Services by
provision of such information, in whole or in part, for compensation or
otherwise, to any third party.
8. The names of Authorized Persons for Services shall be furnished to Bank in
accordance with (S)10 of the Agreement. Fees for the Services shall be
agreed as set forth in (S)13 of the Agreement or separately agreed.
2
<PAGE>
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
GLOBAL CUSTODY AGREEMENT
WITH ___________________________________
DATE ___________________________________
<PAGE>
DOMESTIC ONLY
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
Domestic Corporate Actions and Proxies
- --------------------------------------
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions shall apply rather than the provisions of Section
8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody Account,
such proxies (signed in blank, if issued in the name of Bank's nominee or
the nominee of a central depository) and communications with respect to
Securities in the Custody Account as call for voting or relate to legal
proceedings within a reasonable time after sufficient copies are received
by Bank for forwarding to its customers. In addition, Bank shall follow
coupon payments, redemptions, exchanges or similar matters with respect to
Securities in the Custody Account and advise Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of
which Bank has received notice from the issuer of the Securities, or as to
which notice is published in publications routinely utilized by Bank for
this purpose.
Fees
- ----
The fees referenced in Section 13 hereof cover only domestic and euro-dollar
holdings. There shall be no Schedule A hereto, as there are no foreign assets
in the Accounts.
<PAGE>
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
Domestic Corporate Actions and Proxies
- --------------------------------------
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions shall apply rather than the pertinent provisions
of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody Account,
such proxies (signed in blank, if issued in the name of Bank's nominee or
the nominee of a central depository) and communications with respect to
Securities in the Custody Account as call for voting or relate to legal
proceedings within a reasonable time after sufficient copies are received
by Bank for forwarding to its customers. In addition, Bank shall follow
coupon payments, redemptions, exchanges or similar matters with respect to
Securities in the Custody Account and advise Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of
which Bank has received notice from the issuer of the Securities, or as to
which notice is published in publications routinely utilized by Bank for
this purpose.
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
. Fund Administration Services
. Fund Accounting Services
. Transfer Agency Services
CHASE GLOBAL FUNDS SERVICES COMPANY
September ______, 1996
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
Table of Contents
-----------------
Section Page
- ------- ----
1. Appointment................................ 1
2. Representations and Warranties............. 1
3. Delivery of Documents...................... 3
4. Services Provided.......................... 4
5. Fees and Expenses.......................... 5
6. Limitation of Liability
and Indemnification...................... 7
7. Term....................................... 10
8. Notices.................................... 10
9. Waiver..................................... 11
10. Force Majeure.............................. 11
12. Amendments................................. 11
12. Severability............................... 11
13. Governing Law.............................. 11
Signatures........................................ 12
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
Table of Contents (continued)
-----------------------------
Page
----
Schedule A -- Fees and Expenses......................... A-1
Schedule B -- Fund Administration Services Description.. B-1
Schedule C -- Fund Accounting Services Description...... C-1
Schedule D -- Transfer Agency Services Description...... D-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
AGREEMENT made as of September ____, 1996 by and between Hansberger
Institutional Series (the "Fund"), a Massachusetts business trust, and Chase
Global Funds Services Company ("Chase"), a Delaware corporation.
W I T N E S S E T H:
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
WHEREAS, the Fund wishes to contract with Chase to provide certain
services with respect to the Fund;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Chase to provide services for
the Fund, as described hereinafter, subject to the supervision of the Board of
Trustees of the Fund (the "Board"), for the period and on the terms set forth in
this Agreement. Chase accepts such appointment and agrees to furnish the
services herein set forth in return for the compensation as provided in Section
5 of and Schedule A to this Agreement.
2. Representations and Warranties.
(a) Chase represents and warrants to the Fund that:
(i) Chase is a corporation, duly organized and existing under the
laws of the State of Delaware;
(ii) Chase is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
1
<PAGE>
(iii) Chase is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(iv) all requisite corporate proceedings have been taken to
authorize Chase to enter into and perform this Agreement;
(v) Chase has, and will continue to have, access to the
facilities, personnel and equipment required to fully perform its duties and
obligations hereunder;
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair Chase's ability to perform its duties and
obligations under this Agreement; and
(vii) Chase's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of Chase or any law or regulation applicable to Chase;
(b) The Fund represents and warrants to Chase that:
(i) the Fund is a Massachusetts business trust, duly organized
and existing and in good standing under the laws of Massachusetts;
(ii) the Fund is empowered under applicable laws and by its
Charter Document and By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the
Fund to enter into and perform this Agreement;
(iv) the Fund is an investment company properly registered under
the 1940 Act;
(v) a registration statement under the Securities Act of 1933, as
amended ("1933 Act") and the 1940 Act on Form N-1A has been filed and will be
effective and will remain effective during the term of this Agreement, and all
necessary filings under the laws of the states will have been made and will be
current during the term of this Agreement;
2
<PAGE>
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair the Fund's ability to perform its duties and
obligations under this Agreement;
(vii) the Fund's registration statements comply in all material
respects with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and none of the Fund's prospectuses and/or statements of additional
information contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements therein not misleading; and
(viii)the Fund's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of the Fund or any law or regulation applicable to it.
3. Delivery of Documents. The Fund will promptly furnish to Chase such
copies, properly certified or authenticated, of contracts, documents and other
related information that Chase may request or requires to properly discharge its
duties. Such documents may include but are not limited to the following:
(a) Resolutions of the Board authorizing the appointment of Chase to
provide certain services to the Fund and approving this Agreement;
(b) The Fund's Charter Document;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission ("SEC");
(e) The Fund's registration statement including exhibits, as amended,
on Form N-1A (the "Registration Statement") under the 1933 Act and the 1940 Act,
as filed with the SEC;
(f) Copies of the Investment Advisory Agreement between the Fund and
its investment adviser (the "Advisory Agreement");
(g) Opinions of counsel and auditors' reports;
3
<PAGE>
(h) The Fund's prospectus(es) and statement(s) of additional
information relating to all funds, series, portfolios and classes, as
applicable, and all amendments and supplements thereto (such Prospectus(es) and
Statement(s) of Additional Information and supplements thereto, as presently in
effect and as from time to time hereafter amended and supplemented, herein
called the "Prospectuses"); and
(i) Such other agreements as the Fund may enter into from time to time
including securities lending agreements, futures and commodities account
agreements, brokerage agreements and options agreements.
4. Services Provided.
(a) Chase will provide the following services subject to the control,
direction and supervision of the Board and in compliance with the objectives,
policies and limitations set forth in the Fund's Registration Statement, Charter
Document and By-Laws; applicable laws and regulations; and all resolutions and
policies implemented by the Board:
(i) Fund Administration,
(ii) Fund Accounting, and
(iii) Transfer Agency.
A detailed description of each of the above services is contained in Schedules
B, C and D, respectively, to this Agreement.
(b) Chase will also:
(i) provide office facilities with respect to the provision of the
services contemplated herein (which may be in the offices of Chase or a
corporate affiliate of Chase);
(ii) provide the services of individuals to serve as officers of
the Fund who will be designated by Chase and elected by the Board subject to
reasonable Board approval;
(iii) provide or otherwise obtain personnel sufficient for
provision of the services contemplated herein;
4
<PAGE>
(iv) furnish equipment and other materials, which are necessary or
desirable for provision of the services contemplated herein; and
(v) keep records relating to the services provided hereunder in such
form and manner as Chase may deem appropriate or advisable. To the extent
required by Section 31 of the 1940 Act and the rules thereunder, Chase agrees
that all such records prepared or maintained by Chase relating to the services
provided hereunder are the property of the Fund and will be preserved for the
periods prescribed under Rule 31a-2 under the 1940 Act, maintained at the Fund's
expense, and made available in accordance with such Section and rules.
5. Fees and Expenses.
(a) As compensation for the services rendered to the Fund pursuant to
this Agreement the Fund shall pay Chase monthly fees determined as set forth in
Schedule A to this Agreement. Such fees are to be billed monthly and shall be
due and payable upon receipt of the invoice. Upon any termination of the
provision of services under this Agreement before the end of any month, the fee
for the part of the month before such termination shall be prorated according to
the proportion which such part bears to the full monthly period and shall be
payable upon the date of such termination.
(b) For the purpose of determining fees calculated as a function of
the Fund's assets, the value of the Fund's assets and net assets shall be
computed as required by its currently effective Prospectus, generally accepted
accounting principles, and resolutions of the Board.
(c) The Fund may request additional services, additional processing,
or special reports, with such specifications and requirements documentation as
may be reasonably required by Chase . If Chase elects to provide such services
or arrange for their provision, it shall be entitled to additional fees and
expenses at its customary rates and charges.
5
<PAGE>
(d) Chase will bear its own expenses in connection with the
performance of the services under this Agreement except as provided herein or as
agreed to by the parties. The Fund agrees to promptly reimburse Chase for any
services, equipment or supplies ordered by or for the Fund through Chase and for
any other expenses that Chase may incur on the Fund's behalf at the Fund's
request or as consented to by the Fund. Such other expenses to be incurred in
the operation of the Fund and to be borne by the Fund, include, but are not
limited to: taxes; interest; brokerage fees and commissions; salaries and fees
of officers and trustees who are not officers, directors, shareholders or
employees of Chase, or the Fund's investment adviser or distributor; SEC and
state Blue Sky registration and qualification fees, levies, fines and other
charges; EDGAR filing fees', processing services and related fees; postage and
mailing costs; costs of share certificates; advisory and administration fees;
charges and expenses of pricing and data services, independent public
accountants and custodians; insurance premiums including fidelity bond premiums;
legal expenses; consulting fees; customary bank charges and fees; costs of
maintenance of trust existence; expenses of typesetting and printing of
Prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund (the Fund's distributor to bear the expense of all
other printing, production, and distribution of Prospectuses, and marketing
materials); expenses of printing and production costs of shareholders' reports
and proxy statements and materials; expenses of proxy solicitation, proxy
tabulation and annual meetings; costs and expenses of Fund stationery and forms;
costs and expenses of special telephone and data lines and devices; costs
associated with trust, shareholder, and Board meetings; trade association dues
and expenses; reprocessing costs to Chase caused by third party errors; and any
extraordinary expenses and other customary Fund expenses. In addition, Chase may
utilize one or more independent pricing services to obtain securities prices and
to act as backup to the primary pricing services, in connection with determining
the net asset values of the Fund. The Fund will reimburse Chase for the Fund's
share of the cost of such services based upon the actual usage, or a pro-rata
estimate of the use, of the services for the benefit of the Fund.
6
<PAGE>
(e) All fees, out-of-pocket expenses, or additional charges of Chase
shall be billed on a monthly basis and shall be due and payable upon receipt of
the invoice.
(f) Chase will render, after the close of each month in which services
have been furnished, a statement reflecting all of the charges for such month.
Charges remaining unpaid after thirty (30) days shall bear interest in finance
charges equivalent to, in the aggregate, the Prime Rate (as determined by Chase)
plus two percent per year and all costs and expenses of effecting collection of
any such sums, including reasonable attorney's fees, shall be paid by the Fund
to Chase.
(g) In the event that the Fund is more than sixty (60) days delinquent
in its payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the Fund),
this Agreement may be terminated upon thirty (30) days' written notice to the
Fund by Chase. The Fund must notify Chase in writing of any contested amounts
within thirty (30) days of receipt of a billing for such amounts. Disputed
amounts are not due and payable while they are being investigated.
6. Limitation of Liability and Indemnification.
(a) Chase shall not be liable for any error of judgment or mistake of
law or for any loss or expense suffered by the Fund, in connection with the
matters to which this Agreement relates, except for a loss or expense solely
caused by or resulting from willful misfeasance, bad faith or negligence on
Chase's part in the performance of its duties or from reckless disregard by
Chase of its obligations and duties under this Agreement. In no event shall
Chase be liable for any indirect, incidental, special or consequential losses or
damages of any kind whatsoever (including but not limited to lost profits), even
if Chase has been advised of the likelihood of such loss or damage and
regardless of the form of action.
7
<PAGE>
(b) Subject to Section 6(a) above, Chase shall not be responsible for,
and the Fund shall indemnify and hold Chase harmless from and against, any and
all losses, damages, costs, reasonable attorneys' fees and expenses, payments,
expenses and liabilities incurred by Chase, any of its agents, or the Fund's
agents in the performance of its/their duties hereunder, including but not
limited to those arising out of or attributable to:
(i) any and all actions of Chase or its officers or agents
required to be taken pursuant to this Agreement;
(ii) the reliance on or use by Chase or its officers or agents of
information, records, or documents which are received by Chase or its officers
or agents and furnished to it or them by or on behalf of the Fund, and which
have been prepared or maintained by the Fund or any third party on behalf of the
Fund;
(iii) the Fund's refusal or failure to comply with the terms of
this Agreement or the Fund's lack of good faith, or its actions, or lack
thereof, involving negligence or willful misfeasance;
(iv) the breach of any representation or warranty of the Fund
hereunder;
(v) the taping or other form of recording of telephone
conversations or other forms of electronic communications with investors and
shareholders, or reliance by Chase on telephone or other electronic instructions
of any person acting on behalf of a shareholder or shareholder account for which
telephone or other electronic services have been authorized;
(vi) the reliance on or the carrying out by Chase or its officers
or agents of any proper instructions reasonably believed to be duly authorized,
or requests of the Fund or recognition by Chase of any share certificates which
are reasonably believed to bear the proper signatures of the officers of the
Fund and the proper countersignature of any transfer agent or registrar of the
Fund;
8
<PAGE>
(vii) any delays, inaccuracies, errors in or omissions from
information or data provided to Chase by data, corporate action pricing services
or securities brokers and dealers;
(viii)the offer or sale of shares by the Fund in violation of any
requirement under the Federal securities laws or regulations or the securities
laws or regulations of any state, or in violation of any stop order or other
determination or ruling by any Federal agency or any state agency with respect
to the offer or sale of such shares in such state (1) resulting from activities,
actions, or omissions by the Fund or its other service providers and agents, or
(2) existing or arising out of activities, actions or omissions by or on behalf
of the Fund prior to the effective date of this Agreement;
(ix) any failure of the Fund's registration statement to comply
with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and any other applicable laws, or any untrue statement of a material
fact or omission of a material fact necessary to make any statement therein not
misleading in a Fund's prospectus;
(x) the actions taken by the Fund, its investment adviser, and
its distributor in compliance with applicable securities, tax, commodities and
other laws, rules and regulations, or the failure to so comply; and
(xi) all actions, inactions, omissions, or errors caused by third
parties to whom Chase or the Fund has assigned any rights and/or delegated any
duties under this Agreement at the request of or as required by the Fund, its
investment advisers, distributor, administrator or sponsor.
9
<PAGE>
(c) In performing its services hereunder, Chase shall be entitled to
rely on any oral or written instructions, notices or other communications,
including electronic transmissions, from the Fund and its custodians, officers
and directors, investors, agents and other service providers which Chase
reasonably believes to be genuine, valid and authorized, and shall be
indemnified by the Fund for any loss or expense caused by such reliance. Chase
shall also be entitled to consult with and rely on the advice and opinions of
outside legal counsel retained by the Fund, as necessary or appropriate.
7. Term. This Agreement shall become effective on the date first
hereinabove written and may be modified or amended from time to time by mutual
agreement between the parties hereto. The Agreement shall continue in effect
unless terminated by either party on 180 days' prior written notice. Upon
termination of this Agreement, the Fund shall pay to Chase such compensation and
any out-of-pocket or other reimbursable expenses which may become due or payable
under the terms hereof as of the date of termination or after the date that the
provision of services ceases, whichever is later.
8. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed effective on the date of personal delivery (by
private messenger, courier service or otherwise) or upon confirmed receipt of
telex or facsimile, whichever occurs first, or upon receipt if by mail to the
parties at the following address (or such other address as a party may specify
by notice to the other):
If to the Fund:
Attention:
Fax:
If to Chase:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
Attention: Karl O. Hartmann, General Counsel
Fax: 617-557-8616
10
<PAGE>
9. Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
10. Force Majeure. Chase shall not be responsible or liable for any harm,
loss or damage suffered by the Fund, its investors, or other third parties or
for any failure or delay in performance of Chase's obligations under this
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond Chase's control. In the event of a force majeure, any resulting harm,
loss, damage, failure or delay by Chase will not give the Fund the right to
terminate this Agreement.
11. Amendments. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.
12. Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
HANSBERGER INSTITUTIONAL
SERIES
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
CHASE GLOBAL FUNDS
SERVICES COMPANY
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
12
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE A
FEES AND EXPENSES
Fund Administration and Accounting Fees
A. For the services rendered under this Agreement, the Fund shall pay to the
Administrator an annual fee based on the following schedule:
12 basis points on the first $500 million in total assets, plus
8 basis points on the next $500 million in total assets, plus
6 basis points on the total assets in excess of $1 billion
B. The foregoing calculation is based on the average daily net assets of the
Fund. The fees will be computed, billed and payable monthly.
C. The Fund shall pay to the Administrator a minimum fee based on the
following schedule:
Year 1 No Minimum
Year 2 $2,500.00 per month per Portfolio of the Fund
Year 3 $5,000.00 per month per Portfolio of the Fund
D. Out-of-pocket expenses, including but not limited to those in Section
5(d), and travel and lodging expenses for Fund officers to attend Board
Meetings, will be computed, billed and payable monthly.
Transfer Agency Fees
A. For transfer agency services, the Fund shall pay an annual fee of $15.00
per account that is maintained on the shareholder services system.
B. Out-of-pocket expenses, including but not limited to those in Section
5(d), and the cost of forms, statements and confirms, telecommunications
facilities, microfiche, proxy processing, and voice response unit usage,
and customary bank charges and offsets and customized systems and
technology charges, which will be computed, billed and payable monthly.
A-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE B
GENERAL DESCRIPTION OF FUND ADMINISTRATION SERVICES
I. Financial and Tax Reporting
A. Prepare management reports and Board of Trustees materials, such as
unaudited financial statements and summaries of dividends and
distributions.
B. Report Fund performance to outside services as directed by Fund
management.
C. Calculate dividend and capital gain distributions in accordance with
distribution policies detailed in the Fund's prospectus(es). Assist
Fund management in making final determinations of distribution
amounts.
D. Estimate and recommend year-end dividend and capital gain
distributions necessary to establish Fund's status as a regulated
investment company ("RIC") under Section 4982 of the Internal Revenue
Code of 1986, as amended (the "Code") regarding minimum distribution
requirements.
E. Working with the Fund's public accountants or other professionals,
prepare and file Fund's Federal tax return on Form 1120-RIC along with
all state and local tax returns where applicable. Prepare and file
Federal Excise Tax Return (Form 8613).
F. Prepare and file Fund's Form N-SAR with the SEC.
G. Prepare and coordinate printing of Fund's Semiannual and Annual
Reports to Shareholders.
H. In conjunction with transfer agent, notify shareholders as to what
portion, if any, of the distributions made by the Fund's during the
prior fiscal year were exempt-interest dividends under Section 852
(b)(5)(A) of the Code.
I. Provide Form 1099-MISC to persons other than corporations (i.e.,
Trustees) to whom the Fund paid more than $600 during the year.
B-1
<PAGE>
J. Prepare and file California State Expense Limitation Report, if
applicable.
K. Provide financial information for Fund proxies and prospectuses
(Expense Table).
II. Portfolio Compliance
A. Assist with monitoring each Investment Fund's compliance with
investment restrictions (e.g., issuer or industry diversification,
etc.) listed in the current prospectus(es) and Statement(s) of
Additional Information, although primary responsibility for such
compliance shall remain with the Fund's investment adviser or
investment manager.
B. Assist with monitoring each Investment Fund's compliance with the
requirements of Section 851 of the Code for qualification as a RIC
(i.e., 90% Income, 30% Income - Short Three, Diversification Tests),
although primary responsibility for such compliance shall remain with
the Fund's investment adviser or investment manager.
C. Assist with monitoring investment manager's compliance with Board
directives such as "Approved Issuers Listings for Repurchase
Agreements", Rule 17a-7, and Rule 12d-3 procedures, although primary
responsibility for such compliance shall remain with the Fund's
investment adviser or investment manager.
D. Mail quarterly requests for "Securities Transaction Reports" to the
Fund's Trustees and Officers and "access persons" under the terms of
the Fund's Code of Ethics and SEC regulations.
III. Regulatory Affairs and Corporate Governance
A. Prepare and file post-effective amendments to the Fund's registration
statement and supplements as needed.
B. Prepare and file proxy materials and administer shareholder meetings.
C. Prepare and file all state registrations of the Fund's securities
including annual renewals; registering new funds, portfolios, or
classes; preparing and filing sales reports; filing copies of the
registration statement, prospectus and statement of additional
information; and increasing registered amounts of securities in
individual states.
B-2
<PAGE>
D. Prepare Board materials for Board meetings.
E. Assist with the review and monitoring of fidelity bond and errors and
omissions insurance coverage and the submission of any related
regulatory filings.
F. Prepare and update documents such as charter document, by-laws, and
foreign qualification filings.
G. Provide support with respect to routine regulatory examinations or
investigations of the Fund.
H. File copies of financial reports to shareholders with the SEC under
Rule 30b2-1.
IV. General Administration
A. Furnish officers of the Fund, subject to reasonable Board approval.
B. Prepare fund, portfolio or class expense projections, establish
accruals and review on a periodic basis, including expenses based on a
percentage of average daily net assets (advisory and administrative
fees) and expenses based on actual charges annualized and accrued
daily (audit fees, registration fees, directors' fees, etc.).
C. For new funds, portfolios and classes, obtain Employer or Taxpayer
Identification Number and CUSIP numbers, as necessary. Estimate
organizational costs and expenses and monitor against actual
disbursements.
D. Coordinate all communications and data collection with regard to any
regulatory examinations and yearly audits by independent accountants.
B-3
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE C
DESCRIPTION OF FUND ACCOUNTING SERVICES
I. General Description
Chase shall provide the following accounting services to the Fund:
A. Maintenance of the books and records for the Fund's assets, including
records of all securities transactions.
B. Calculation of each funds', portfolios' or classes' Net Asset Value in
accordance with the Prospectus, and after the fund, portfolio or class
meets eligibility requirements, transmission to NASDAQ and to such other
entities as directed by the Fund.
C. Accounting for dividends and interest received and distributions made by
the Fund.
D. Coordinate with the Fund's independent auditors with respect to the
annual audit, and as otherwise requested by the Fund.
E. As mutually agreed upon, Chase will provide domestic and/or international
reports.
C-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE D
DESCRIPTION OF TRANSFER AGENCY SERVICES
The following is a general description of the transfer agency services
Chase shall provide to the Fund.
A. Shareholder Recordkeeping. Maintain records showing for each Fund
shareholder the following: (i) name, address, appropriate tax
certification and tax identifying number; (ii) number of shares of
each fund, portfolio or class; (iii) historical information including,
but not limited to, dividends paid, date and price of all transactions
including individual purchases and redemptions, based upon appropriate
supporting documents; and (iv) any dividend reinvestment order,
application, specific address, payment and processing instructions and
correspondence relating to the current maintenance of the account.
B. Shareholder Issuance. Record the issuance of shares of each fund,
portfolio or class. Except as specifically agreed in writing between
Chase and the Fund, Chase shall have no obligation when countersigning
and issuing and/or crediting shares to take cognizance of any other
laws relating to the issue and sale of such shares except insofar as
policies and procedures of the Stock Transfer Association recognize
such laws.
C. Transfer, Purchase and Redemption Orders. Process all orders for the
transfer, purchase and redemption of shares of the Fund in accordance
with the Fund's current prospectus and customary transfer agency
policies and procedures, including electronic transmissions which the
Fund acknowledges it has authorized, or in accordance with any
instructions of the Fund or its agents which Chase reasonably believes
to be authorized.
D. Shareholder Communications. Transmit all communications by the Fund
to its shareholders promptly following the delivery by the Fund of the
material to be transmitted by mail, telephone, courier service or
electronically.
E. Proxy Materials. Assist with the mailing or transmission of proxy
materials, tabulating votes, and compiling and certifying voting
results. Services may include the provision of inspectors of election
at any meeting of shareholders.
D-1
<PAGE>
F. Share Certificates. If permitted by Fund policies, and if a
shareholder of the Fund requests a certificate representing shares,
Chase as Transfer Agent, will countersign and mail a share certificate
to the investor at his/her address as it appears on the Fund's
shareholder records.
G. Returned Checks. In the event that any check or other negotiable
instrument for the payment of shares is returned unpaid for any
reason, Chase will take such steps, as Chase may, in its discretion,
deem appropriate and notify the Fund of such action. However, the
Fund remains ultimately liable for any returned checks or negotiable
instruments of its shareholders.
H. Shareholder Correspondence. Acknowledge all correspondence from
shareholders relating to their share accounts and undertake such other
shareholder correspondence as may from time to time be mutually agreed
upon.
I. Tax Reporting. Chase shall issue appropriate shareholder tax forms as
required.
J. Dividend Disbursing. Chase will prepare and mail checks, place wire
transfers or credit income and capital gain payments to shareholders.
The Fund will advise Chase of the declaration of any dividend or
distribution and the record and payable date thereof at least five (5)
days prior to the record date. Chase will, on or before the payment
date of any such dividend or distribution, notify the Fund's Custodian
of the estimated amount required to pay any portion of such dividend
or distribution payable in cash, and on or before the payment date of
such distribution, the Fund will instruct its Custodian to make
available to Chase sufficient funds for the cash amount to be paid
out. If a shareholder is entitled to receive additional shares by
virtue of any such distribution or dividend, appropriate credits will
be made to each shareholder's account.
K. Escheatment. Chase shall provide escheatment services only with
respect to the escheatment laws of the Commonwealth of Massachusetts,
including those which relate to reciprocal agreements with other
states.
L. Telephone Services. Chase will provide staff coverage, training and
supervision in connection with the Fund's telephone line for
shareholder inquiries, and will respond to inquiries concerning
shareholder records, transactions processed by Chase, procedures to
effect the shareholder records and inquiries of a general nature
relative to shareholder services. All other telephone calls will be
referred to the Fund, as appropriate.
D-2
<PAGE>
M. Fulfillment Services. As directed by the Fund, the Fund Adviser or the
Distributor, or upon the request of prospective shareholders either by
telephone or in writing, Chase will mail reasonable quantities of
prospectuses, applications to purchase shares, and other information
normally sent to prospective shareholders.
D-3
<PAGE>
APPENDIX 1
Yield Computation [may also be used for any complex or unusual item requested by
clients]
L. (1) CGFSC shall compute the yield, or tax equivalent yield, for
the Fund for the periods of time as agreed to by the parties;
(2) CGFSC shall have no responsibility to review, confirm or
otherwise assume any duty with respect to the accuracy or
correctness of any data, including but not limited to security
attributes, pricing data, and tax equivalent data, supplied to it
by the Fund, any of the Fund's agents including the investment
adviser, or by third party providers. CGFSC is entitled to rely on
information or data provided to it by the Fund's agents or
investment advisers, or by third party providers and will not be
liable for any loss or expense suffered by the Fund caused by such
reliance;
(3) The Fund shall provide, from time to time as may be
appropriate, and CGFSC shall be entitled to rely on, the written
standards and guidelines to be followed by CGFSC in interpreting
and applying the computation methods set forth in the SEC Releases,
industry standards and regulatory guidelines regarding yield as
they specifically apply to the Fund, as well as information
relating to any and all of the Fund's assets. The Fund shall keep
CGFSC informed of all publicly available information and of any
non-public advice or information obtained by the Fund from its
accountants, its personnel or its investment adviser related to
industry standards, or regulatory guidelines regarding the
computations to be undertaken by CGFSC pursuant to this Agreement
and CGFSC shall not be charged with knowledge of such information
unless it has been furnished to CGFSC in writing; and
(4) The Fund shall indemnify CGFSC for any expenses, assessments,
claims or liabilities which it may incur in connection with this
Amendment, except as may arise from CGFSC's gross negligence, bad
faith or willful misconduct. In no event shall CGFSC be liable for
any indirect, incidental, special or consequential loss or damage
of any kind whatsoever (including but not limited to lost profits),
even if Chase has been advised of the likelihood of such loss or
damage and regardless of the form of action.
CHASE GLOBAL FUNDS SERVICES [THE FUND]
---------------------------
COMPANY
By: By:
------------------------ ----------------------------
<PAGE>
APPENDIX 2
Authorized Personnel
The following personnel are authorized to give written or oral
instructions to Chase, subject to the provisions of Section 6(b)(vi):
1.
2.
3.
4.
5.
It is the sole responsibility of the ______ Fund to notify Chase of any
changes to this list in writing.
CHASE GLOBAL FUNDS SERVICES [THE FUND]
-----------
COMPANY
By: By:
------------------------- -----------------------------
<PAGE>
EXHIBIT 10
[LETTERHEAD OF MORGAN, LEWIS & BOCKIUS APPEARS HERE]
October 17, 1996
Hansberger Institutional Series
515 East Las Olas Boulevard
Suite 1300
Fort Lauderdale, Florida 33301
Ladies and Gentlemen:
We are furnishing this opinion with respect to the proposed offer and sale from
time to time of an indefinite number of units of beneficial interest, without
par value (the "Shares"), of Hansberger Institutional Series (the "Trust"), a
Massachusetts business trust, in registration under the Securities Act of 1933
by a Registration Statement on Form N-1A (File No. 333-8919; 811-7729) as
amended from time to time (the "Registration Statement").
We have acted as counsel to the Trust since its inception, and we are familiar
with the actions taken by its Trustees to authorize the issuance of the Shares.
We have reviewed the Declaration of Trust, the By-laws, and the minute books of
the Trust, and such other certificates, documents and opinions of counsel as we
deem necessary for the purpose of this opinion.
We have reviewed the Trust's Notification of Registration on Form N-8A under
the Investment Company Act of 1940. We have assisted in the preparation of the
Trust's Registration Statement, including all pre-effective amendments thereto,
filed or to be filed with the Securities and Exchange Commission.
In our review we have assumed the genuineness of all signatures, the
authenticity and completeness of all documents purporting to be originals
(whether reviewed by us in original or in copy form), and the conformity to the
originals of all documents purporting to be copies.
We have assumed the appropriate action will be taken to register or qualify the
sale of the Shares under any applicable state and federal laws regulating sales
and offerings of securities.
<PAGE>
Based upon the foregoing, we are of the opinion that:
1. The Trust is a business trust validly existing under the laws of the
Commonwealth of Massachusetts. The Trust is authorized under its
Declaration of Trust to issue an unlimited number of Shares in series
representing interests in the International Fund, Emerging Markets Fund,
Foreign Small Cap Fund, All Countries Fund and in such other series or
classes as the Trustees may hereafter duly authorize.
2. Upon the issuance of any Shares of any of the series or classes of the
Trust for payment therefor as described in, and in accordance with, the
Registration Statement and the Declaration of Trust and By-laws of the
Trust, the Shares so issued will be validly issued, fully paid and non-
assessable, except that, as set forth in the Registration Statement,
shareholders of the Shares of the Trust may under certain circumstances be
held personally liable for its obligations.
This opinion is intended only for your use in connection with the offering
of Shares and may not be relied upon by any other person.
We hereby consent to the inclusion of this opinion as Exhibit 10 to the
Trust's Pre-Effective Amendment No. 2 to be filed with the Securities and
Exchange Commission and to the reference to our firm under the caption
"Legal Counsel" in the Statement of Additional Information filed as part of
such Amendment.
Very truly yours,
/s/Morgan, Lewis & Bockius LLP
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of the
Hansberger Institutional Series:
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made as part of this
registration statement.
Boston, Massachusetts
October 11, 1996 /s/ Arthur Andersen LLP