<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997
File No. 333-8919
File No. 811-7729
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 1 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3 /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
J. Christopher Jackson, Esq.
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
- --------------------------------------------------------------------------------
----------------------------
It is proposed that this filing become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
- -----
on [date] pursuant to paragraph (b)
- -----
X 60 days after filing pursuant to paragraph (a)
- -----
on [date] pursuant to paragraph (a) of Rule 485
- -----
75 days after filing pursuant to paragraph (a)(2)
- -----
DECLARATION PURSUANT TO RULE 24F-2: Pursuant to Rule 24f-2 under the Investment
Company Act of 1940 the Registrant has registered an indefinite number or
amount of its shares of beneficial interest under the Securities Act of 1933.
The Rule 24f-2 Notice for the Registrant's fiscal year ended December 31, 1996
was filed on February 24, 1997.
- --------------------------------------------------------------------------------
----------------------------
<PAGE> 2
HANSBERGER INSTITUTIONAL SERIES
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PART A -
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Summary, Introduction
Item 3. Condensed Financial Information Financial Highlights
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 Securities Organization of the Trust and 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> 3
The Prospectus for the International Fund, Emerging Markets Fund, Foreign Small
Cap Fund, and All Countries Fund included as part of Pre-Effective Amendment
No. 2 to the Registrant's Registration Statement on Form N-1A (File No.
333-8919) filed with the Securities and Exchange Commission on October 18,
1996, is hereby incorporated by reference as if set forth in full herein.
<PAGE> 4
SUPPLEMENT DATED JUNE 30, 1997
TO THE PROSPECTUS DATED OCTOBER 18, 1996
OF
Hansberger Institutional Series
515 East Las Olas Boulevard
Suite 1300
Fort Lauderdale, Florida
Telephone No. 954-522-5150
The Prospectus dated October 18, 1996 of the Hansberger Institutional
Series (the "Trust") is hereby amended and supplemented as follows:
- - In the Introduction section on page 2, the last sentence under the heading
"How to Invest" is replaced with the following sentence.
CURRENTLY, SHARES OF FOREIGN SMALL CAP FUND ARE NOT BEING OFFERED OR SOLD.
- - The section on page 3, under the heading "FEE SUMMARY," is replaced in its
entirety with the following:
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>
SHAREHOLDER TRANSACTION EXPENSE EMERGING Foreign ALL
International MARKETS Small Cap COUNTRIES
Fund FUND Fund FUND (SM)
------------- --------- --------- -----------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchase None* None* None* None*
Redemption Fee 0.50%* 1.00%* 1.00%* 0.50%*
=============================================================================================================
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>
* Shareholders will be charged a transaction fee, which is payable
directly to the Fund, in connection with each purchase and redemption
of shares of the Fund. The transaction fee is intended to allocate
transaction costs associated with purchases and redemptions of shares
of the Fund to investors actually making such purchases and
redemptions rather than to the Fund's other shareholders. The
transaction fee represents the Adviser's estimate of such transaction
costs, which include the costs of acquiring and disposing of the
Fund's portfolio securities. The transaction fee is 1.00% for the
Emerging Markets and Foreign Small Cap Funds and 0.50% for the
International and All Countries Funds. THE TRANSACTION FEE IS NOT A
SALES CHARGE OR LOAD, AND IS RETAINED BY THE FUND. The fee does not
apply to, and is not charged in connection with, reinvestment of
dividends or capital gain distributions, or exchanges from one Fund to
another.
<PAGE> 5
** Reflects voluntary waivers and reimbursements of fees by the Adviser.
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.
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 anticipates voluntarily waiving fees and/or
bearing expenses that will result in total fund operating expenses as
set forth above, it is under no obligation to continue to do so. See
"MANAGEMENT OF THE FUNDS -- Investment Adviser."
- --------------------------------------------------------------------------------
EXAMPLE
The following example demonstrates the expenses you would pay on a
$1,000 investment assuming 5% annual return and either (1) complete redemption
at the end of each time period:
<TABLE>
<CAPTION>
1 year 3 years
-------- ---------
<S> <C> <C> <C>
International Fund $20 $43
Emerging Markets Fund $36 $68
Foreign Small Cap Fund $33 $61
All Countries Fund(SM) $20 $43
</TABLE>
- --------------------------------------------------------------------------------
or (2) no redemption at the end of each period:
<TABLE>
<CAPTION>
1 year 3 years
-------- ---------
<S> <C> <C> <C>
International Fund $15 $37
Emerging Markets Fund $25 $57
Foreign Small Cap Fund $23 $50
All Countries Fund(SM) $15 $37
</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 EXAMPLE ASSUMES THE DEDUCTION OF TRANSACTION FEES AT THE
TIME OF PURCHASE AND REDEMPTION. INVESTMENTS IN THE FUNDS PRIOR TO APRIL 15,
1997, WILL NOT BE SUBJECT TO THE TRANSACTION FEES.
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.
- -The following section is added at the top of Page 4.
FINANCIAL HIGHLIGHTS
2
<PAGE> 6
The following information for the period ended December 31, 1996, has been
audited by Arthur Andersen LLP, the Fund's independent public accountants, as
indicated in their report dated January 17, 1997, on the Fund's financial
statements as of December 31, 1996 incorporated by reference in the Fund's
Statement of Additional Information under "Financial Information." The
following information for the period ended March 31, 1997 is unaudited. This
table should be read in conjunction with the Fund's audited and unaudited
financial statements and notes thereto.
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
International Fund Emerging Markets Fund
- ------------------------------------------------------------------------------------------------------------------
1/1/97 12/30/96(1) 1/1/97 12/30/96(1)
TO TO TO TO
3/31/97 12/31/96 3/31/97 12/31/96
==================================================================================================================
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.12 $10.12 $10.12 $10.12
- ------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net Investment Income (Loss) . . . . . . . .03 -- .03 --
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . .22 -- .33 --
- ------------------------------------------------------------------------------------------------------------------
Total From Investment Operations . . . .25 -- .36 --
- ------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions From Net Investment Income . -- -- -- --
Dividends From Capital Gains . . . . . . . -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . $10.37 $10.12 $10.48 $10.12
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . 2.47% 0.00% 3.56% 0.00%
- ------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End Of Period (000) . . . . . . . $31,553 $4,296 $10,716 $5,233
Ratios Of Expenses To Average Net Assets . . 1.00%* 1.00%* 1.50%* 1.50%*
Ratio Of Expenses To Average Net Assets
(Excluding Waivers and Reimbursements) . . 3.87%* 77.13%* 4.89%* 65.28%*
Ratio Of Net Income (Loss)
To Average Net Assets . . . . . . . . . . 3.82%* 3.50%* 1.64%* 2.87%*
Ratio Of Net Income (Loss) To Average
Net Assets (Excluding Waivers and
Reimbursement) . . . . . . . . . . . . . . .96%* (72.63)% (1.75)%* (60.91)%*
Portfolio Turnover Rate . . . . . . . . . . . 1.21% 0.00% 3.13% 0.00%
Average Commission Rate Paid . . . . . . . . $0.0201 $0.00 $0.0050 $0.00
==================================================================================================================
</TABLE>
* Annualized
(1) International Fund and Emerging Markets Fund commenced operations on
December 30, 1996.
3
<PAGE> 7
- -The following sentence is added to the section under the heading "INVESTMENT
POLICIES COMMON TO EACH FUND" on page 5:
Each Fund may invest in securities of companies or investment trusts that
invest in, or securities backed by, mortgages , real estate or interests in
real estate, including, but not limited to, real estate investment trusts
("REITs").
- -The following paragraph is added at the end of the section under the heading
"INVESTMENT TECHNIQUES" on page 10:
REITS. REITs are trusts that invest primarily in commercial real estate
or real estate-related loans. The value of interests in REITs may be
affected by the value of the underlying property owned or the quality of the
loans held by the trust.
- In the section titled "PORTFOLIO MANAGERS" on pages 20 and 21:
- the heading "PORTFOLIO MANAGERS" is replaced with "PORTFOLIO MANAGEMENT
TEAM."
- the last sentence discussing THOMAS L. HANSBERGER is replaced with the
following:
He is the lead manager for the All Countries Fund(SM) and the Emerging
Markets Fund.
- the paragraph discussing WILKIN W. TAI is deleted.
- the paragraphs discussing MS. REEVES and MESSRS. ALZURU, TYURENKOV and
GULDEN are replaced with the following:
LAURETTA (RETZ) REEVES joined the Adviser in 1996 as a Managing Director,
portfolio manager and research analyst. 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 and a member
of the team that manages the International Fund.
FRANCISCO ALZURU joined the Adviser in 1994 as a Managing Director,
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 the
Foreign Small Cap Fund, the All Countries Fund(SM) and the Emerging Markets
Fund.
VICTORIA GRETZKY joined the Adviser in 1995 as a research analyst. Prior to
joining the Adviser, she was a research analyst for Optimum Consulting, a
Russian based firm which specialized in restructuring Russian Companies
during privatization. Ms. Gretzky is a member of the team that manages the
Emerging Markets Fund.
4
<PAGE> 8
CHARLES F. GULDEN joined the Adviser in 1996 as a Managing Director,
portfolio manager and research analyst. 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 is a
member of the teams that manage the Foreign Small Cap Fund and the All
Countries Fund(SM)
JOHN HOCK joined the Adviser in 1996 as a research analyst. Prior to
joining the adviser, he was a vice president and senior analyst in the
global securities research and economics group at Merrill Lynch. Mr. Hock
is a member of the teams that manage the International Fund and the All
Countries Fund.(SM)
ROBERT MAZUELOS joined the Adviser in 1995 as a research analyst. Prior to
joining the Adviser, he was a performance analyst at Templeton Investment
Counsel, Inc. where he was responsible for return analysis on separate
accounts and mutual funds. Mr. Mazuelos is a member of the teams that
manage the International Fund, Emerging Markets Fund and the Foreign Small
Cap Fund.
PATTRA PIRIYAPOKSOMBUT joined the Adviser in 1996 as a portfolio manager
and research analyst. Prior to joining the Adviser, she was a senior
analyst at Wheelock NatWest Securities where her research responsibilities
included building materials and property sectors. Ms. Piriyapoksombut is a
member of the team that manages the Emerging Markets Fund.
VLADIMIR TYURENKOV joined the Adviser in 1995 as Managing Director of
Eastern Europe and Russia, portfolio manager and research analyst. 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
teams that manage the Foreign Small Cap Fund, the All Countries Fund(SM) and
the Emerging Markets Fund.
DAVID WU joined the Adviser in 1995 as a research analyst. Prior to
joining the Adviser, Mr. Wu was an editor at Business Asia, an Economist
Group publication targeted at senior management for multinationals operating
in Asia. He is a member of the teams that manage the Emerging Markets Fund
and the Foreign Small Cap Fund.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
[HANSBERGER INSTITUTIONAL SERIES LOGO]
5
<PAGE> 9
STATEMENT OF ADDITIONAL INFORMATION
[HANSBERGER INSTITUTIONAL SERIES LOGO]
HANSBERGER INSTITUTIONAL SERIES
515 East Las Olas Boulevard
Suite 1300
Fort Lauderdale, Florida 33301
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 18, 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 June 30, 1997.
1
<PAGE> 10
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
INVESTMENT POLICIES AND TECHNIQUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Illiquid and Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Short Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
High Risk Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Depositary Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Forward Currency Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
When-Issued Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Foreign Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Mortgage Dollar Rolls and Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
FUND TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ADDITIONAL SHAREHOLDER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ORGANIZATION OF THE TRUST AND THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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> 11
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".
Capitalized terms not defined herein are defined in the Prospectus.
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
3
<PAGE> 12
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 than 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 debt 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 debt 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 OF PORTFOLIO 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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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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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 an advantageous 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 held in a
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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,
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
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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
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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 does not have 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
12
<PAGE> 21
currency contracts to shift exposure to foreign currency fluctuations from one
country to another. For 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 or 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> 22
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.
14
<PAGE> 23
BORROWING
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 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> 24
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 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, 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 engage in dollar roll
transactions and reverse repurchase agreements, and 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> 25
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. 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* (64) 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.
J. CHRISTOPHER JACKSON, ESQ.* (45) Vice President General Counsel, Hansberger Global
515 East Las Olas Blvd. and Trustee Investors, Inc. 1996 to present; Vice
Fort Lauderdale, FL President, Associate General Counsel and
Assistant Secretary, Van Kampen American
Capital, Inc. 1986 to 1996.
</TABLE>
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<PAGE> 26
<TABLE>
<S> <C> <C>
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
100 First Stamford Place Corporation, 1990 to present; Chief
Stamford, CT Executive Officer, 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. GULDEN (35) Vice President Managing Director, Hansberger Global
515 East Las Olas Blvd. Investors, Inc. 1996 to present; Vice
Fort Lauderdale, FL President and Director of Research &
Portfolio Management, Templeton
Worldwide, 1989 to 1996.
WESLEY E. FREEMAN (47) Vice President Managing Director, Hansberger Global
515 East Las Olas Blvd. Investors, Inc. 1996 to present;
Fort Lauderdale, FL Executive Vice President for
Institutional Business Development,
Templeton Worldwide, 1989 to 1996.
THOMAS A. CHRISTENSEN, Jr. (26) Treasurer Vice President and Controller, Hansberger
515 East Las Olas Blvd. Global Investors, Inc. 1996 to present;
Fort Lauderdale, FL Accountant, Arthur Andersen LLP, 1993 to
1996; student, University of Illinois,
1993 to 1994; student, University of
Florida School of Accountancy, 1989 to
1993.
KIMBERLEY SCOTT (34) Secretary Senior Vice President, Hansberger Global
515 East Las Olas Blvd. Investors, Inc. 1994 to present;
Fort Lauderdale, FL Executive Assistant and Portfolio
Supervisor, Templeton Worldwide, 1992 to
1994.
KARL O. HARTMANN, ESQ. (41) Assistant Senior Vice President and General
73 Tremont Street Secretary Counsel, Chase Global Funds Services
Boston, MA Company, 1991 to present.
</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 ("Disinterested Trustee"), an annual fee of $3500, plus $500 per Board
meeting. In addition, the Trust reimburses each Disinterested Trustee for
travel and other expenses 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 paid the following amounts to Trustees and Officers of the Trust:
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<PAGE> 27
<TABLE>
<CAPTION>
=============================================================================================================
Aggregate Pension or Total Compensation
Compensation From Retirement from Registrant and
Registrant for Benefits Accrued Estimated Annual Fund Complex Paid to
Name of Person, Fiscal Year Ended as Part of Fund Benefits Upon Directors for Fiscal
Position 1996 Expenses Retirement Year Ended 1996
=============================================================================================================
<S> <C> <C> <C> <C>
Stuart B, Ross, $1,375 N/A N/A $1,375 for service
Trustee on one board
- -------------------------------------------------------------------------------------------------------------
William F. Waters, $1,375 N/A N/A $1,375 for service
Trustee on one board
=============================================================================================================
</TABLE>
As of April 4, 1997, the officers and Trustees of the Trust, in the
aggregate, beneficially owned 77,117.537 shares ( 2.51% of the outstanding
shares) of International Fund.
PRINCIPAL SHAREHOLDERS
The following table sets forth the information concerning beneficial
ownership, as of April 4, 1997, of the Funds' shares by each person who
beneficially owned more than 5% of the voting securities of any Fund.
<TABLE>
<CAPTION>
Shares Percentage of
Name and Address Beneficially Outstanding
of Shareholder Fund Owned Shares Owned
------------------------------- ----------------- --------- ------------
<S> <C> <C> <C>
MAC & CO A/C LCSF8607772 International Fund 1,139,124.174 37%
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
BOVA & COMPANY International Fund 1,092,490.952 36%
P.O. Box 85539
Richmond, VA 23285-5539
BOST & CO W E RF 969002 Emerging Markets 299,553.482 22.2%
Mutual Funds Operations Fund
P.O. Box 3198
Pittsburgh, PA 15230-3198
General Employees Retirement Emerging Markets 280,636.109 20.8%
System of the City of Fort Lauderdale Fund
315 NE Third Avenue Suite 202
Fort Lauderdale, FL 33301
</TABLE>
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<PAGE> 28
<TABLE>
<CAPTION>
Shares Percentage of
Name and Address Beneficially Outstanding
of Shareholder Fund Owned Shares Owned
------------------------------- ----------------- ------------ ------------
<S> <C> <C> <C>
Alberto Cribiore Emerging Markets 98,814.229 7.3%
590 Madison Avenue Suite 18C Fund
New York, NY 10022
Donald J. Gogel Emerging Markets 98,814.229 7.3%
31 Masterton Road Fund
Bronxville, NY 10708
Max C. Chapman Jr. Emerging Markets 98,814.229 7.3%
P.O. Box 194 Fund
Scarborough, NY 10510
Hubbard C. Howe Emerging Markets 95,423.319 7.1%
and Gene S. Howe Fund
JTTEN
210 Gentry Way
Reno, NV 89502
</TABLE>
INVESTMENT ADVISER
Hansberger Global Investors, Inc. (the "Adviser") is the investment
adviser to each Fund. The Adviser, a Florida corporation, 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 17, 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 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, each
Fund is responsible for all its other expenses, including, without limitation,
interest charges, taxes, brokerage commissions, and similar
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<PAGE> 29
expenses, expenses of issue, sale, repurchase, or redemption of shares;
expenses of registering or qualifying shares for 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 record
keeping and shareholder relations, 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. For the fiscal year ended December 31, 1996,
the Adviser waived all fees payable to it by the Funds.
The organizational expenses of the International Fund, Emerging
Markets Fund, Foreign Small Cap Fund and All Countries Fund(SM) 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.
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 using 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 Conduct Rules 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.
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 Agreement, 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
21
<PAGE> 30
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 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 computer-generated data, computer 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).
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.
22
<PAGE> 31
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 was newly-organized, it paid no brokerage
commissions during the past fiscal year.
It is anticipated that the annual portfolio turnover rate of each Fund
will not exceed 100% under normal circumstances. For the fiscal period ended
December 31, 1996, the portfolio turnover rate was 0%.
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 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 Funds Services Company, the Trust's Administrator, acts as
transfer agent and dividend-disbursing agent for the Funds. The Administrator
is compensated under the Administration Agreement discussed in the Prospectus.
From time to time, the Funds, directly or indirectly through
arrangements with the Adviser or Administrator, may pay amounts to third
parties that provide transfer agent and other administrative services relating
to a Fund to persons who beneficially own interests in the Fund, such as
participants in 401(k) plans.
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<PAGE> 32
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 Administrator 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 shareholders 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..
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
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<PAGE> 33
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 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.
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<PAGE> 34
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.
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 (currently 4:00pm, Eastern time) 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 are used when
such values are believed to more accurately reflect the fair market value for
such securities. 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
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<PAGE> 35
remaining maturities of 60 days or less when purchased are valued by the
amortized cost method when the Board of Trustees has 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.
The calculation of net asset value does not usually take place
contemporaneously with the determination of the prices of the portfolio
securities used in such calculation. Trading in securities on foreign
securities exchanges and over-the-counter markets is normally completed well
before the regular close of trading on the NYSE on each business day on which
the NYSE is open for trading. In addition, foreign securities trading in a
particular country or countries may not take place on all business days the
NYSE is open. Furthermore, trading takes place in various foreign markets on
days which are not business days on which the NYSE is open and on which the
Funds' net asset values are not calculated. As a result, events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of the NYSE will not be reflected in a Fund's
calculation of net asset values unless the Adviser determines that the
particular event may materially affect net asset value, in which case an
adjustment will be made.
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 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
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<PAGE> 36
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.
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:
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<PAGE> 37
n
P(1+T) =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.
The average annual total return of the International Fund and the Emerging
Markets Fund for the period from inception to March 31, 1997 were 2.47% and
3.56%, respectively.
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 will
equal par value at maturity. Generally, the values of obligations with shorter
maturities will fluctuate less than those with longer maturities.
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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;
Morgan Stanley Capital International World Index; Morgan Stanley Capital
International All Country World Index; and Salomon Brothers World Index.
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.
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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 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.
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
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<PAGE> 40
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:
2
Standard deviation = the square root of #(x -x )
i m
---------
n-1
where # = "the sum of,"
x = each individual return during the time period,
i
x = the average return over the time period, and
m
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.
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.
32
<PAGE> 41
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, 225 Franklin Street, 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
The Trust's financial statements for the Funds, including the
Portfolios of Investments, Statements of Assets and Liabilities, Statements of
Operations, Statements of Changes in Net Assets, Notes to Financial Statements
and the Report of Independent Accountants, all of which are included in the
1996 Annual Report to Shareholders, are hereby incorporated by reference into
this Statement of Additional Information. A copy of the Annual Report to
Shareholders must accompany this Statement of Additional Information. The
unaudited financial statements for the period ended March 31, 1997 are attached
hereto.
33
<PAGE> 42
HANSBERGER INSTITUTIONAL SERIES
PORTFOLIO OF INVESTMENTS AS OF MARCH 31, 1997 (UNAUDITED)
INTERNATIONAL FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE A1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (79.2%)
ARGENTINA (2.4%)
45,000 Mirgor S.A.C.I.F.I.A. ADR $118,125
10,400 Telefonica de Argentina ADR S.A. 305,500
26,000 Transportadora de Gas del Sur ADR, S.A. 334,750
-------------------
758,375
-------------------
AUSTRALIA (2.7%)
152,146 Burns Philp & Co Ltd. 254,056
46,000 Coles Myer Ltd. 216,370
35,000 Gio Australia Holdings Ltd. 102,619
23,500 National Australia Bank Ltd. 297,529
-------------------
870,574
-------------------
BRAZIL (1.8%)
5,500 Aracruz Celulose ADR S.A. 100,375
63,000 Rhodia-Ster GDR S.A. 181,125
2,900 Telebras ADR 296,887
-------------------
578,387
-------------------
CANADA (0.6%)
14,500 London Insurance Group Inc. 199,169
-------------------
CHILE (1.0%)
16,000 Empresa Nacional Electricidad ADR S.A. 304,000
-------------------
CHINA (0.6%)
19,500 Shandong Huaneng Power Co. Ltd. ADR 204,750
-------------------
COLOMBIA (0.6%)
8,000 Banco Ganadero S.A. ADR 203,000
-------------------
CZECHOSLOVAKIA (2.0%)
3,000 Komercni Banka A.S. GDR 94,650
9,700 Skoda Plzen A.S. 317,605
750 SPT Telecom A.S. 89,181
8,500 Zivnobanka-Investicni Fond 137,106
-------------------
638,542
-------------------
DENMARK (1.2%)
3,200 Tele Danmark A/S, Class B 168,209
4,200 Unidanmark A/S, Class A (Registered) 225,401
-------------------
393,610
-------------------
FINLAND (2.0%)
22,300 Kemira Oy 241,385
23,500 Merita Ltd., Class A 80,678
41,700 Metsa-Serla Oy, Class B 303,166
-------------------
625,229
-------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 43
<TABLE>
<S> <C> <C> <C>
FRANCE (4.3%)
750 Alcatel Alsthom $ 90,569
3,467 AXA-UAP 229,898
2,052 Bail Investissement 309,929
7,300 Banque Nationale de Paris 325,181
3,240 Elf Acquitaine S.A. 332,974
3,300 Renault S.A. 83,580
-------------------
1,372,131
-------------------
GERMANY (1.5%)
2,900 Deutsche Bank AG 164,289
5,600 Gildemeister AG 310,533
-------------------
474,822
-------------------
HONG KONG (4.9%)
744,000 Cafe de Coral Holdings, Ltd. 204,034
33,000 Cheung Kong Holdings, Ltd. 290,662
59,000 Guoco Group Ltd. 291,623
54,000 Jardine Matheson Holdings, Ltd. 313,200
225,000 Swire Pacific Ltd., Class B 286,016
175,000 Tai Cheung Holdings 151,316
-------------------
1,536,851
-------------------
INDIA (0.9%)
109,000 India Cements Ltd. GDR 272,500
-------------------
INDONESIA (1.7%)
310,000 PT Indah Kiat Pulp & Paper Corp. (Foreign) 229,175
111,500 PT Indosat (Foreign) 297,209
-------------------
526,384
-------------------
ITALY (2.8%)
161,900 Banca Commercicle Italiana 324,334
31,500 Burgo (Cartiere) S.P.A. 164,184
18,000 Stet Di Risp (NCS) 63,914
153,000 Telecom Italia S.P.A. Di Risp (NCS) 326,235
-------------------
878,667
-------------------
JAPAN (2.9%)
13,800 Aoyama Trading Co. Ltd. 320,346
10,700 Chudenko Corp. 283,002
15,000 Yamanouchi Pharmaceutical Co. 310,592
-------------------
913,940
-------------------
KOREA (2.0%)
58,000 Cho Hung Bank Co. Ltd. 297,934
8,100 Shinsegae Department Store Co. 318,392
-------------------
616,326
-------------------
MEXICO (2.0%)
60,000 Cifra S.A. de CV ADR, Class B 84,120
767,000 Grupo Herdez S.A., Series B 285,080
6,500 Telefonos de Mexico, Class L ADR 250,250
-------------------
619,450
-------------------
NETHERLANDS (3.9%)
4,800 Ahrend Groep N.V. 306,870
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 44
<TABLE>
<S> <C> <C> <C>
2,100 Akzo Nobel N.V. $ 301,656
4,150 Eriks Holdings N.V. 307,580
9,600 Koninklijke Pakhoed N.V. 321,971
-------------------
1,238,077
-------------------
NEW ZEALAND (1.9%)
109,000 Air New Zealand, Ltd., Class B 296,831
330,000 Brierley Investments Ltd. 307,196
-------------------
604,027
-------------------
NORWAY (2.1%)
36,500 Fokus Banken A/S 320,938
6,500 Sparebanken NOR 187,226
11,500 Unitor ASA 149,933
-------------------
658,097
-------------------
PAKISTAN (0.5%)
2,100 Pakistan Telecom Ltd. GDR 151,946
-------------------
PERU (1.0%)
18,300 Southern Peru Copper Corp. 311,100
-------------------
POLAND (1.0%)
5,600 E. Wedel S.A. 315,108
-------------------
PORTUGAL (1.0%)
21,700 Banco Totta & Acores, Class B, S.A. 327,240
-------------------
RUSSIA (2.8%)
2,000 Lukoil Oil Co. ADR 113,220
27,000 Rostelecom 101,250
9,000 SKB Banka GDR 321,750
3,600 Surgutneftgaz ADR 135,000
1,150,000 Unified Energy System 219,880
-------------------
891,100
-------------------
SINGAPORE (1.0%)
34,000 City Development Ltd. 301,281
-------------------
SLOVAKIA (1.6%)
6,000 Nafta Gbely A.S. 304,347
9,300 Vychodoslovenske Zeleziarne A.S. 201,971
-------------------
506,318
-------------------
SOUTH AFRICA (1.0%)
42,000 SAPPI Ltd. 326,440
-------------------
SPAIN (5.7%)
1,600 Banco De Andalucia S.A. 211,219
5,350 Banco Pastor S.A. 306,742
10,600 Cortefiel S.A. 326,385
6,250 Gas y Electricidad S.A. 325,606
7,700 Repsol S.A. 321,571
12,670 Telefonica de Espana S.A. 306,268
-------------------
1,797,791
-------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 45
<TABLE>
<S> <C>
SWEDEN (1.3%)
2,780 ABB AB, Class B $ 315,305
3,550 Volvo AB 95,237
-------------------
410,542
-------------------
SWITZERLAND (3.1%)
165 Baloise Holdings 337,062
268 Julius Baer Holding AG 324,013
255 Novartis AG 316,447
-------------------
977,522
-------------------
THAILAND (2.6%)
46,000 Bangkok Bank Co. Ltd. 324,760
6,000 Siam Cement Co. Ltd. (Foreign) 156,270
16 Thai International Fund GDR 324,000
-------------------
805,030
-------------------
UNITED KINGDOM (9.9%)
74,000 BICC plc 328,064
44,100 British Telecommunications plc 323,187
70,600 BTR plc 309,507
95,000 Coats Viyella plc 210,972
101,000 Hillsdown Holdings plc 320,661
118,500 House of Fraser plc 307,995
22,400 Hyder plc 291,101
27,800 National Westminister Bank 313,945
20,000 Powergen plc 195,098
22,600 Reckitt & Colman plc 303,180
54,000 Waste Management International plc 215,414
-------------------
3,119,124
-------------------
UNITED STATES (0.9%)
30,000 Korean Investment Fund Inc. 228,750
1,500 Partnerre Holdings Ltd. 53,063
-------------------
281,813
-------------------
TOTAL COMMON STOCKS (COST $24,854,553) 25,009,263
-------------------
PREFERRED STOCKS (1.0%)
RUSSIA (1.0%)
74 Norilsk Nickel (COST $331,075) 305,250
-------------------
CONVERTIBLE PREFERRED STOCKS (0.9%)
HONG KONG (0.9%)
233,000 Jardine Strategic Holdings, Inc.,
IDR, 7.50%, 5/07/49 269,115
-------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $258,812) 269,115
-------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DISCOUNT
RATE
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (44.7%)
U.S. TREASURY BILLS (44.7%)
144,000 05/01/97 5.02% 143,397
13,000 05/08/97 4.98% 12,934
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 46
<TABLE>
<CAPTION>
<S> <C> <C>
3,057,000 06/05/97 5.04% $ 3,028,298
392,000 06/12/97 5.14% 387,923
10,655,000 06/19/97 5.25% 10,533,650
-------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $14,105,713) 14,106,202
-------------------
RIGHTS (0.0%) NO OF
RIGHTS
70 Novartis AG (COST $0) 5,034
-------------------
TOTAL INVESTMENTS (125.8%) (COST $39,550,153) (a) 39,694,864
NET OTHER ASSETS & LIABILITIES (-25.8%) (8,142,020)
-------------------
NET ASSETS (100%) $31,552,844
===================
<CAPTION>
(a) Aggregate cost for federal income tax purposes was $39,550,153; and net unrealized appreciation consisted of:
<S> <C>
Gross unrealized appreciation: $ 596,250
Gross unrealized depreciation: (451,539)
--------
Net unrealized appreciation: $ 144,711
--------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of foreign currency contracts open at March 31, 1997, the
Fund is obligated to receive foreign currency in exchange for U.S. dollars or
foreign currency as indicated below:
<TABLE>
<CAPTION>
IN NET
CURRENCY SETTLEMENT EXCHANGE UNREALIZED
TO DELIVER VALUE DATE FOR VALUE GAIN (LOSS)
- ------------------- ------------------ ------------------ ----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
U.S.$ 65,987 $65,987 4/01/97 DEM 110,343 $66,149 $162
322,547 322,547 4/01/97 HKD 2,499,284 322,543 (4)
306,887 306,887 4/01/97 JPY 37,866,813 306,279 (608)
184,279 184,279 4/01/97 ZAR 812,671 183,883 (396)
185,073 185,073 4/02/97 FIM 919,630 185,718 645
55,182 55,182 4/02/97 DEM 92,276 55,318 136
515,320 515,320 4/02/97 NLG 969,163 516,763 1,443
116,793 116,793 4/02/97 PTE 19,635,228 117,037 244
201,472 201,472 4/02/97 SGD 291,288 201,653 181
110,506 110,506 4/02/97 SEK 832,381 110,548 42
246,876 246,876 4/02/97 CHF 357,056 248,094 1,218
196,134 196,134 4/03/97 CZK 5,690,845 196,141 7
52,740 52,740 4/03/97 DKK 336,005 52,881 141
231,775 231,775 4/03/97 IDR 556,028,606 231,582 (193)
274,761 274,761 4/03/97 ITL 458,329,174 274,901 140
101,068 101,068 4/03/97 NOK 670,335 101,622 554
100,094 100,094 4/03/97 CHF 144,766 100,588 494
549,281 549,281 4/03/97 ESP 77,789,133 550,622 1,341
100,958 100,958 4/04/97 AUD 128,429 100,682 (276)
111,839 111,839 4/04/97 NZD 160,619 111,582 (257)
841,103 841,103 4/04/97 GBP 515,318 847,703 6,600
434,059 434,059 4/30/97 FRF 2,440,785 434,729 670
------------------ ----------------- -------------
$5,304,734 $5,317,018 $12,284
================== ================= =============
</TABLE>
ADR - American Depositary Receipt.
AUD - Australian Dollar
CHF - Seiss Franc
CZK - Czech Koruna
The accompanying notes are an integral part of the financial statements.
<PAGE> 47
DEM - Deutsche Mark
DKK - Danish Krone
ESP - Spanish Peseta
FIM - Finnish Markka
FRF - French Franc
GBP - British Pound
GDR - Global Depository Receipt.
HKD - Hong Kong Dollar
IDR - Indonesian Rupiah
ITL - Italian Lira
JPY - Japanese Yen
NCS - Non Convertible Shares.
NLG - Netherland Guilder
NOK - Norwegian Krone
NZD - New Zealand Dollar
PTE - Portuguese Escudo
SEK - Swedish Krona
SGD - Singapore Dollar
ZAR - South African Rand
The accompanying notes are an integral part of the financial statements.
<PAGE> 48
HANSBERGER INSTITUTIONAL SERIES
PORTFOLIO OF INVESTMENTS AS OF MARCH 31, 1997 (UNAUDITED)
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (91.6%)
ARGENTINA (4.1%)
38,000 Mirgor S.A.C.I.F.I.A. ADR $ 99,750
2,000 Telecom Argentina Stet- France Telecom ADR S.A. 92,000
6,000 Telefonica de Argentina ADR S.A. 176,250
5,500 Transportadora de Gas del Sur ADR S.A. 70,813
-------------------
438,813
-------------------
BRAZIL (4.5%)
4,000 Aracruz Celulose ADR S.A. 73,000
4,000 Companhia Vale do Rio Doce ADR 90,918
4,000 Petroleo Brasileiro ADR S.A. 79,600
20,000 Rhodia-Ster GDR S.A. 57,500
1,000 Telebras ADR 102,375
7,500 USIMINAS ADR 83,438
-------------------
486,831
-------------------
CHILE (0.8%)
4,500 Empresa Nacional Electricidad ADR S.A. 85,500
-------------------
CHINA (3.4%)
664,000 Harbin Power Equipment Co., Ltd. 101,973
12,000 Shandong Huaneng Power Co., Ltd. ADR 126,000
534,000 Shanghai Petrochemical Co., Ltd., Class H 137,830
-------------------
365,803
-------------------
COLOMBIA (1.3%)
5,500 Banco Ganadero S.A. ADR 139,563
-------------------
CZECHOSLOVAKIA (3.7%)
3,500 CKD Praha Holdings A.S. 105,552
3,000 Komercni Banka A.S. GDR 94,650
4,000 Skoda Plzen A.S. 130,971
600 SPT Telecom A.S. 71,345
-------------------
402,518
-------------------
HONG KONG (9.6%)
524,000 Cafe de Coral Holdings, Ltd. 143,702
81,000 Cathay Pacific Airways 121,259
7,000 Cheung Kong Holdings, Ltd. 61,655
130,000 Dairy Farm International Holdings Ltd. 98,150
106,000 Giordano Holdings Ltd. 64,295
20,000 Guoco Group Ltd. 98,855
95,000 Hopewell Holdings Ltd. 50,266
14,500 Jardine Matheson Holdings, Ltd. 84,100
25,500 Jardine Strategic Holdings Ltd. 88,230
590,000 Jingwei Textile Machinery Co., Ltd., Class H 87,563
528,000 Northeast Electrical Transmission & Transformation
Machinery Manufacturing Co., Ltd., Class H 70,185
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 49
<TABLE>
<S> <C> <C> <C>
500,000 Shanghai Haixing Shipping Co. $ 56,784
-------------------
1,025,044
-------------------
HUNGARY (2.7%)
3,000 BorsodChem Rt. 111,386
1,300 EGIS Rt. 80,655
2,200 Graboplast Rt. 98,910
-------------------
290,951
-------------------
INDIA (4.4%)
25,000 India Cements Ltd. GDR 62,500
9,000 Larsen & Toubro Ltd. GDR 128,250
18,600 Raymond Ltd. GDR 88,350
5,000 Reliance Industries GDR 88,750
80,000 Videocon International Ltd. GDR 100,000
-------------------
467,850
-------------------
INDONESIA (5.4%)
170,000 PT Indah Kiat Pulp & Paper Corp. (Foreign) 125,677
80,000 PT Indorama Synthetics (Foreign) 63,307
4,600 PT Indosat (Foreign) 123,050
119,000 PT Kalbe Farma (Foreign) 133,819
128,000 PT Pabrik Kertas Jiwi Kimia 127,947
-------------------
573,800
-------------------
KOREA (5.7%)
18,000 Cho Hung Bank Co. Ltd. GDR 96,300
10,000 Kookmin Bank 141,500
2,700 Pohang Iron 152,145
1,700 Samsung Electronics GDR 77,138
8,000 Ssangyong Oil Refining Co. Ltd. 144,724
-------------------
611,807
-------------------
MEXICO (5.4%)
73,000 Cifra S.A. de CV, Class B, ADR 102,346
14,000 ELAMEX S.A de C.V 126,000
250,000 Grupo Herdez S.A., Series B 92,920
3,500 Telefonos de Mexico, Class L, ADR 134,750
28,500 Transportacion Maritima Mexicana S.A. de C.V. ADR 124,688
-------------------
580,704
-------------------
PAKISTAN (0.7%)
1,000 Pakistan Telecom Ltd. GDR 72,355
-------------------
PERU (0.9%)
5,900 Southern Peru Copper Corp. 100,300
-------------------
PHILIPPINES (2.9%)
570,000 MRC Allied Industries, Inc. 77,830
120,000 Pilipino Telephone Corp. 71,686
316,000 Primetown Property Group, Inc. 101,878
300,000 Republic Glass Holdings Corp. 59,169
-------------------
310,563
-------------------
POLAND (5.3%)
4,000 Agros Holdings, Class C 100,829
3,000 Bank Rozwoju Eksportu S.A. 89,771
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 50
<TABLE>
<S> <C> <C> <C>
25,000 Mostostal-Warszawa S.A. $ 76,029
20,000 Polifarb Wroclaw S.A. 105,383
1,300 E. Wedel S.A. 73,150
5,200 Zaclady Metali Lekkich Kety 121,776
-------------------
566,938
-------------------
PORTUGAL (0.7%)
5,000 Banco Totta & Acores, Class B, S.A. 75,401
-------------------
RUSSIA (11.6%)
200,000 Irkutskenergo 51,400
1 Irkutskenergo (Registered) 50,500
1,470 Izhorskie Zavody 58,065
2,400 Lukoil Oil Co. ADR 135,864
2,000 Mosenergo ADR 76,000
30,000 Nizhnovsviyazinform 100,500
12,000 Norilsk Nickel 71,160
35,000 Primorsk Sea Shipping 93,625
30,000 Rostelecom 112,500
4,300 Seversky Tube Works ADR 122,550
4,500 SKB Banka GDR 160,875
3,000 Surgutneftgaz ADR 112,500
1,400 Tatneft ADR 97,249
-------------------
1,242,788
-------------------
SINGAPORE (0.8%)
10,000 City Development Ltd. 88,612
-------------------
SLOVAKIA (4.2%)
3,800 Drotovna A.S. 95,799
3,200 Nafta Gbely A.S. 162,318
2,500 Plastika Nitra 65,304
5,749 Vychodoslovenske Zeleziarne A.S. 124,853
-------------------
448,274
-------------------
SOUTH AFRICA (1.2%)
16,000 SAPPI Ltd. 124,358
-------------------
THAILAND (6.5%)
17,000 Bangkok Bank Co., Ltd. 120,020
20,000 Land & House (Foreign) 102,485
277,000 Sahaviriya Steel Industries (Foreign) 96,051
4,000 Siam Cement Co. Ltd. (Foreign) 104,180
26,000 Siam Commercial Bank 137,540
29,000 Thai Farmers Bank 133,400
-------------------
693,676
-------------------
TURKEY (2.4%)
900,000 Kartonsan Karton Sanayi 84,603
300,000 Netas Telekomunik 85,778
656,000 Tat Konserve 87,360
-------------------
257,741
-------------------
UNITED STATES (1.2%)
8,500 Pliva GDR 131,236
-------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 51
<TABLE>
<S> <C>
VENEZUELA (2.2%)
20,000 Mavesa S.A. ADR $ 132,500
38,000 Siderurgica Venez Sivens ADR 108,965
-------------------
241,465
-------------------
TOTAL COMMON STOCKS (COST $9,781,163) 9,822,891
-------------------
PREFFERED STOCKS (1.5%)
BRAZIL (0.8%)
312,000 Brasmotor S.A. 89,219
-------------------
RUSSIA (0.7%)
1,200 Samarasvyazinform 69,000
-------------------
TOTAL PREFERRED STOCKS (COST $ 167,276) 158,219
-------------------
</TABLE>
<TABLE>
<CAPTION>
FACE DISCOUNT
AMOUNT RATE
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (21.4%)
U.S. TREASURY BILLS (21.4%)
$ 114,000 05/01/97 5.02% 113,522
2,165,000 05/29/97 5.07% 2,146,862
31,000 06/05/97 5.04% 30,709
-------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $2,291,556) 2,291,093
-------------------
TOTAL INVESTMENTS (114.5%) (COST $12,239,995) (a) 12,272,203
NET OTHER ASSETS & LIABILITIES (-14.5%) (1,555,790)
-------------------
NET ASSETS (100%) $10,716,413
===================
</TABLE>
ADR - American Depositary Receipt.
GDR - Global Depository Receipt.
<TABLE>
<CAPTION>
(a) Aggregate cost for federal income tax purposes was $12,239,995; and net unrealized appreciation consisted of:
<S> <C> <C>
Gross unrealized appreciation: $ 568,219
Gross unrealized depreciation: (536,011)
--------
Net unrealized appreciation: $ 32,208
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 52
HANSBERGER INSTITUTIONAL SERIES
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
EMERGING
INTERNATIONAL MARKETS
FUND FUND
------------- ------------
<S> <C> <C>
ASSETS:
Investments, at cost - see accompanying portfolios................ $ 39,550,153 $ 12,239,995
============ ============
Investments, at value (Note A1)................................... $ 39,694,864 $ 12,272,203
Cash.............................................................. 700,354 -
Dividend Receivable............................................... 66,487 19,246
Net Unrealized Gain on Foreign Currency Exchange Contracts........ 12,284 -
Receivable for Investments sold................................... - 100,449
Receivable from Investment Adviser (Note B)....................... 80,107 63,505
Prepaid expenses.................................................. 3,727 3,740
Unamortized organization costs (Note A3).......................... 47,909 47,934
Other............................................................. 8,410 8,135
------------ ------------
TOTAL ASSETS................................................... 40,614,142 12,515,212
------------ ------------
LIABILITIES:
Payable for Investments Purchased................................. 8,753,480 1,163,187
Legal and audit fees payable...................................... 4,186 4,116
Administration Fees Payable....................................... 5,749 4,794
Custodian Fees Payable............................................ 56,545 47,180
Investment Advisory Fees Payable.................................. 20,981 18,413
Payable to Custodian.............................................. 208,770 552,893
Accrued Expenses and Other Liabilities............................ 11,587 8,216
------------ ------------
TOTAL LIABILITIES.............................................. 9,061,298 1,798,799
------------ ------------
NET ASSETS........................................................... $ 31,552,844 $ 10,716,413
============ ============
NET ASSETS CONSIST OF:
Paid-in capital................................................... $ 31,373,034 $ 10,614,585
Undistributed net investment income............................... 107,844 31,666
Accumulated net realized gain (loss).............................. (25,627) 38,531
Unrealized appreciation (depreciation) on investments and foreign
currency translations......................................... 97,593 31,631
------------ ------------
TOTAL NET ASSETS..................................................... $ 31,552,844 $ 10,716,413
============ ============
Shares of Beneficial Interest Outstanding
(unlimited authorization, no par value)........................... 3,042,772 1,022,730
NET ASSET VALUE PER SHARE ........................................ $10.37 $10.48
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 53
HANSBERGER INSTITUTIONAL SERIES
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
EMERGING
INTERNATIONA MARKETS
FUND FUND
------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income................................................ $ 86,226 23,571
Interest income................................................ 58,059 $ 35,187
Less foreign taxes withheld.................................... (9,411) -
------------ ------------
TOTAL INCOME................................................ 134,874 58,758
------------ ------------
EXPENSES:
Investment advisory fees (Note B):
Basic advisory fees......................................... 20,981 18,411
Less: Waived fees.......................................... (20,981) (18,411)
------------ ------------
Investment advisory fees, net.................................. -- --
Administration fees (Note C):
Basic administration fees................................... 9,462 8,348
Less: Waived fees.......................................... - -
------------ ------------
Administration fees, net....................................... 9,462 8,348
Custodian fees (Note D)........................................ 56,495 47,120
Shareholder reports............................................ 987 975
Registration and filing fees................................... 6,663 3,335
Legal and audit fees........................................... 6,345 6,275
Trustees' fees and expenses (Note E)........................... 1,633 1,620
Amortization of organization costs (Note A3)................... 2,224 2,199
Miscellaneous expenses......................................... 3,360 3,326
------------ ------------
TOTAL EXPENSES............................................... 87,169 73,198
Fees reimbursed by investment adviser (Note B)................. (59,126) (45,093)
------------ ------------
NET EXPENSES................................................ 28,043 28,105
------------ ------------
NET INVESTMENT INCOME............................................. 106,831 30,653
------------ ------------
NET REALIZED GAIN (LOSS):
Investments sold............................................... (10,687) 34,963
Foreign currency transactions (Note A4)........................ (14,940) 3,568
------------ ------------
Total net realized gain (loss).............................. (25,627) 38,531
------------ ------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments sold............................................... 144,711 32,208
Foreign currency transactions.................................. (47,118) (577)
------------ ------------
Total net change in unrealized appreciation (depreciation).. 97,593 31,631
------------ ------------
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED APPRECIATION (DEPRECIATION)......................... 71,966 70,162
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $ 178,797 $ 100,815
============ ============
</TABLE>
- -------------------
The accompanying notes are an integral part of these financial statements.
<PAGE> 54
HANSBERGER INSTITUTIONAL SERIES
INTERNATIONAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS
ENDED FOR THE PERIOD
MARCH 31,1997 ENDED
(UNAUDITED) DECEMBER 31,1996*
------------------ ------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income................................... $ 106,831 $ 412
Realized net gain (loss)................................ (25,627) -
Change in unrealized appreciation (depreciation)........ 97,593 -
------------------ ------------------
Net increase in net assets resulting from operations.... 178,797 412
------------------ ------------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed......................................... 27,078,212 4,244,847
------------------ ------------------
Increase in net assets from share transactions.......... 27,078,212 4,244,847
------------------ ------------------
Net increase in net assets.............................. 27,257,009 4,245,259
NET ASSETS:
Beginning of period (December 31, 1996).............. 4,295,835 50,576
------------------ ------------------
End of period (March 31, 1997)....................... $ 31,552,844 $ 4,295,835
================== ==================
Undistributed net investment income included in end
of period net assets................................. $ 107,844 $ 1,013
================== ==================
- -----------------------------
(1)Shares Issued........................................... 2,618,321 419,451
------------------ ------------------
Net Increase in shares outstanding................... 2,618,321 419,451
================== ==================
</TABLE>
* The International Fund commenced operations on December 30, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE> 55
HANSBERGER INSTITUTIONAL SERIES
EMERGING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS
ENDED FOR THE PERIOD
MARCH 31, 1997 ENDED
(UNAUDITED) DECEMBER 31,1996*
------------------ -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income..................................... $ 30,653 $ 412
Realized net gain (loss).................................. 38,531 -
Change in unrealized appreciation (depreciation).......... 31,631 -
---------------- ----------------
Net increase in net assets resulting from operations...... 100,815 412
---------------- ----------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed........................................... 5,383,062 5,181,548
---------------- ----------------
Increase in net assets from share transactions............ 5,383,062 5,181,548
---------------- ----------------
Net increase in net assets................................ 5,483,877 5,181,960
NET ASSETS:
Beginning of period ................................... 5,232,536 50,576
---------------- ----------------
End of period ......................................... $ 10,716,413 $ 5,232,536
================ ================
Undistributed net investment income included in end
of period net assets................................... $ 31,666 $ 1,013
================ ================
- -------------------------
(1)Shares Issued............................................. 505,719 512,011
---------------- ----------------
Net Increase in shares outstanding..................... 505,719 512,011
================ ================
</TABLE>
* The Emerging Markets Fund commenced operations on December 30, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE> 56
HANSBERGER INSTITUTIONAL SERIES
INTERNATIONAL FUND
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD +
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS
ENDED FOR THE PERIOD
MARCH 31, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996*
----------------- ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $10.12 $10.12
----------------- ------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income......................................... 0.03 --
Net Realized and Unrealized Gain on Investments............... 0.22 --
----------------- ------------------
Total from Investment Operations............................ 0.25 --
----------------- ------------------
NET ASSET VALUE, END OF PERIOD ................................. $10.37 $10.12
================= ==================
TOTAL RETURN.................................................... 2.47% 0.00%
================= ==================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (in Thousands)........................ $31,553 $4,296
Ratio of Expenses to Average Net Assets (1)..................... 1.00%** 1.00%**
Ratio of Net Investment Income to Average Net Assets (1)........ 3.82%** 3.50%**
Portfolio Turnover Rate......................................... 1.21% 0.00%
Average Commission Rate......................................... $0.0201 $0.0000
- --------------------------
(1)Effect of voluntary expense limitation during the period:
Ratio of Expenses to Average Net Assets..................... 3.87%** 77.13%**
Ratio of Net Investment Income (Loss) to Average Net Assets. 0.96%** (72.63)% **
</TABLE>
* The International Fund commenced operations on December 30, 1996.
**Annualized
+ The per share amounts for the two day period ended December 31, 1996 are
based on average outstanding shares.
The accompanying notes are an integral part of these financial statements.
<PAGE> 57
HANSBERGER INSTITUTIONAL SERIES
EMERGING MARKETS FUND
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD +
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS
ENDED FOR THE PERIOD
MARCH 31, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
--------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................................ $10.12 $10.12
--------------- -----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.............................................. 0.03 --
Net Realized and Unrealized Gain on Investments.................... 0.33 --
--------------- -----------------
Total from Investment Operations................................. 0.36 --
--------------- -----------------
NET ASSET VALUE, END OF PERIOD ...................................... $10.48 $10.12
=============== =================
TOTAL RETURN......................................................... 3.56% 0.00%
=============== =================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (in Thousands)............................. $10,716 $5,233
Ratio of Expenses to Average Net Assets (1).......................... 1.50%** 1.50%**
Ratio of Net Investment Income to Average Net Assets (1)............. 1.64%** 2.87%**
Portfolio Turnover Rate.............................................. 3.13% 0.00%
Average Commission Rate.............................................. $0.0050 $ 0.0000
- ---------------------------------------------------------------------
(1)Effect of voluntary expense limitation during the period:
Ratio of Expenses to Average Net Assets.......................... 4.89%** 65.28%**
Ratio of Net Investment Loss to Average Net Assets............... (1.75%) ** (60.91)%**
</TABLE>
* The Emerging Markets Fund commenced operations on December 30, 1996.
**Annualized
+ The per share amounts for the two day period ended December 31, 1996 are
based on average outstanding shares.
The accompanying notes are an integral part of these financial statements.
<PAGE> 58
HANSBERGER INSTITUTIONAL SERIES
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
Hansberger Institutional Series (the "Trust"), a Massachusetts business trust,
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. As of March 31, 1997, the Trust was
comprised of 2 separate active, diversified portfolios (individually referred to
as a "Fund", collectively as the "Funds"). The International Fund and the
Emerging Markets Fund, each a Fund of the Trust, began operations on December
30, 1996.
The 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. The
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.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Trust in the
preparation of the financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange are valued at
the latest quoted sales price on the valuation date. 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 readily available are valued at a price within a range not exceeding the
current asked price nor less than the current bid price. Bonds and other fixed
income securities may be valued according to the broadest and most
representative market. In addition, bonds and other fixed income securities may
be valued on the basis of prices provided by a pricing service which are based
primarily on institutional size trading in similar groups of 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. Debt securities purchased with remaining
maturities of 60 days or less are valued at amortized cost, if it approximates
market value. All other securities and assets for which market values are not
readily available, including restricted securities and unlisted foreign
securities, are valued at fair value as determined in good faith by the Board of
Trustees, although the actual calculations may be done by others.
2. TAXES: It is each Fund's intention to qualify as a regulated investment
company and distribute all of its taxable income. Accordingly, no provision for
Federal income taxes is required in the financial statements. The Funds may be
subject to taxes imposed by countries in which it invests. Such taxes are
generally based on income and/or capital gains earned or repatriated. Taxes are
accrued and applied to net investment income, net realized capital gains and net
unrealized appreciation as the income and/or capital gains are earned.
3. ORGANIZATIONAL COSTS: The organizational costs of the Funds are being
amortized on a straight-line basis over a period of five years beginning with
each Fund's commencement of operations. Hansberger Global Investors has agreed
that in the event any of its initial shares in a Fund are redeemed, the proceeds
on redemption will be reduced by the pro-rata portion of any unamortized
organizational costs in the same proportion as the number of shares redeemed
bears to the initial shares held at time of redemption.
<PAGE> 59
HANSBERGER INSTITUTIONAL SERIES
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The books and records
of the Funds are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the mean of the bid and asked prices of such
currencies against U.S. dollars last quoted by a major bank as follows:
- - investments, other assets and liabilities at the prevailing rates of exchange
on the valuation date;
- - investments transactions and investment income at the prevailing rates of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of securities sold during the period.
Accordingly, realized and unrealized foreign currency gains (losses) are
included in the reported net realized and unrealized gains (losses) on
investment transactions and balances. However, pursuant to U.S. Federal income
tax regulations, gains and losses from certain foreign currency transactions and
the foreign currency portion of gains and losses realized on sales and
maturities of foreign denominated debt securities are treated as ordinary income
for U.S. Federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from forward foreign currency exchange
contracts, disposition of foreign currencies, currency gains or losses realized
between the trade and settlement dates on securities transactions, and the
difference between the amount of investment income and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts actually
received or paid. Net unrealized currency gains (losses) from valuing foreign
currency denominated assets and liabilities at period end exchange rates are
reflected as a component of unrealized appreciation (depreciation) on the
Statement of Net Assets. The change in net unrealized currency gains (losses)
for the period is reflected on the Statement of Operations.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibility of lower
levels of governmental supervision and regulation of foreign securities markets
and the possibility of political or economic instability.
Prior governmental approval for foreign investments may be required under
certain circumstances in some countries, and the extent of foreign investments
in domestic companies may be subject to limitation in other countries. Foreign
ownership limitations also may be imposed by the charters of individual
companies to prevent, among other concerns, violation of foreign investment
limitations. As a result, an additional class of shares (identified as "Foreign"
in the Statement of Net Assets) may be created and offered for investment. The
"local" and "foreign" shares' market values may differ.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Funds may enter into forward
foreign currency exchange contracts to attempt to protect securities and related
receivables and payables against changes in future foreign currency exchange
rates. A forward foreign currency exchange contract is an agreement between two
parties to buy or sell currency at a set price on a future date. The market
value of the contract will fluctuate with changes in currency exchange rates.
The contract is marked-to-market daily using the forward rate and the change in
market value is recorded by the Funds as unrealized gain or loss. The Funds
record realized gains or losses when the contract is closed equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Risk may arise upon entering into these
contracts from the potential inability of
<PAGE> 60
HANSBERGER INSTITUTIONAL SERIES
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
counterparties to meet the terms of their contracts and is generally limited to
the amount of the unrealized gain on the contracts, if any, at the date of
default. Risks may also arise from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
6. OTHER: Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Dividend income
is recorded on the ex-date (except that certain dividends from foreign
securities where the ex-dividend date may have passed are recorded as soon as
the Fund is informed of the ex-dividend data in the exercise of reasonable
diligence) net of applicable withholding taxes where recovery of such taxes is
not reasonably assured. Interest income is recognized on the accrual basis
except where collection is in doubt. Discounts and premiums on securities
purchased are amortized according to the effective yield method over their
respective lives. Most expenses of the Trust can be directly attributed to a
particular Fund. Expenses which cannot be directly attributed are apportioned
among the Funds based upon relative net assets. Distributions for the Funds are
recorded on the ex-date. Income and capital gain distributions are determined in
accordance with U.S. Federal income tax regulations which may differ from
generally accepted accounting principles.
The amount and character of income and capital gain distributions to be paid by
the Trust are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatment for organizational expenses.
Permanent book and tax basis differences relating to shareholder distributions
may result in reclassifications among undistributed net investment income,
accumulated net realized gain and paid in capital.
Permanent book and tax basis differences, if any, are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the Financial Highlights.
B. ADVISER: Hansberger Global Investors, Inc. (the "Adviser") provides each Fund
with investment advisory services pursuant to an investment advisory agreement
at a monthly fee calculated at the annual rate of 0.75% and 1.00% of average
daily net assets of the International Fund and the Emerging Markets Fund,
respectively. The Adviser has voluntarily agreed to reduce advisory fees payable
to it and to reimburse the Funds, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios of 1.00% for the International Fund and 1.50% for the
Emerging Markets Fund. The Adviser, at its discretion, may revise or discontinue
the voluntary fee waivers and reimbursements at any time.
C. ADMINISTRATOR: Chase Global Funds Services Company (the "Administrator" or
"CGFSC"), a subsidiary of The Chase Manhattan Bank, provides the Trust with
administrative, dividend disbursing and transfer agent services pursuant to an
Administrative Agreement (the "Agreement"). Under the 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
of average daily net assets, 0.08% for the next $500 million of average daily
net assets, and 0.06% for average daily net assets over $1 billion. Certain
employees of CGFSC are officers of the Fund.
D. CUSTODIAN: The Chase Manhattan Bank serves as the Trust's custodian in
accordance with a custodian agreement. Custodian fees are computed and payable
monthly based on assets held, investment purchases and sales activity, an
account maintenance fee, plus reimbursement for certain out-of-pocket expenses.
<PAGE> 61
HANSBERGER INSTITUTIONAL SERIES
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
E. TRUSTEE FEES: The Trust pays each Trustee, who is not also an officer or
affiliated person, an annual fee plus travel and other expenses incurred in
attending Board meetings. Trustees who are also officers or affiliated persons
receive no remuneration for their service as Trustees.
Expenses for the period ended March 31, 1997 include legal fees paid to Morgan,
Lewis & Bockius LLP. A partner of that firm is a Trustee to the Trust.
F. PURCHASES AND SALES: During the period ended March 31, 1997, purchases and
sales of investment securities, other than long-term U.S. Government securities
and short-term investments, were:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- --------- --------- -----
<S> <C> <C>
International $ 25,566,884 $ 112,142
Emerging Markets 10,083,064 169,848
</TABLE>
There were no long term purchases of U.S. Government securities.
G. OTHER: From time to time, certain Funds of the Trust have shareholders that
hold a significant portion of a Fund's outstanding shares. Investment activities
of these shareholders could have a material impact on those Funds.
<PAGE> 62
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.
RATINGS APPENDIX - 1
<PAGE> 63
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.
RATINGS APPENDIX - 2
<PAGE> 64
C Assigned to short-term debt obligations with a doubtful capacity for
payment.
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.
RATINGS APPENDIX - 3
<PAGE> 65
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.
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.
RATINGS APPENDIX - 4
<PAGE> 66
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
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
RATINGS APPENDIX - 5
<PAGE> 67
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.
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.
RATINGS APPENDIX - 6
<PAGE> 68
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.
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.
RATINGS APPENDIX - 7
<PAGE> 69
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.
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.
RATINGS APPENDIX - 8
<PAGE> 70
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 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
RATINGS APPENDIX - 9
<PAGE> 71
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.
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.
RATINGS APPENDIX - 10
<PAGE> 72
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.
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.
RATINGS APPENDIX - 11
<PAGE> 73
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.
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
RATINGS APPENDIX - 12
<PAGE> 74
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.
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.
RATINGS APPENDIX - 13
<PAGE> 75
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.
D A bank which is currently under performing 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> 76
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
Part A: Financial Highlights
Part B: The following audited financial statements for Hansberger
Institutional Series as of December 31, 1996 and the report
of the independent auditors, Arthur Andersen, LLP dated
January 17, 1997 are incorporated by reference to the
Statement of Additional Information from Form N-30D filed
on February 25, 1997 with Accession Number
0000950109-97-001537.
Portfolio of Investments
Statement of Assets & Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
The following unaudited financial statements for Hansberger
Institutional Series as of March 31, 1997 are included in
the Statement of Additional Information
Portfolio of Investments
Statement of Assets & Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
(b) Exhibits
1(a) Agreement and Declaration of Trust of the Registrant, dated July
25, 1996 (incorporated herein by reference to Initial
Registration Statement filed on July 26, 1996).
1(b) Amendment to the Agreement and Declaration of Trust (incorporated
herein by reference to Pre-Effective Amendment No. 1 filed on
September 23, 1996).
1(c) Amended and Restated Agreement and Declaration of Trust of the
Registrant, dated October 4, 1996, (incorporated herein by
reference to Pre-Effective Amendment No. 2 filed on October 18,
1996).
2 By-Laws of the Registrant, dated (incorporated herein by
reference to Initial Registration Statement filed on July 26,
1996).
5 Form of Investment Advisory Agreement, (incorporated herein by
reference to Pre-Effective Amendment No. 2 filed on October 18,
1996).
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<PAGE> 77
8 Form of Custodian Agreement, (incorporated herein by reference to
Pre-Effective Amendment No. 2 filed on October 18, 1996).
9 Form of Administration Agreement, (incorporated herein by
reference to Pre-Effective Amendment No. 2 filed on October 18,
1996).
10 Opinion and Consent of Counsel, (incorporated herein by reference
to the 24f-2 Notice filed on February 24, 1997).
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.
Item 26. Number of Holders of Securities as of April 4, 1997:
<TABLE>
<S> <C>
International Fund 39
--
Emerging Markets Fund 46
--
Foreign Small Cap Fund 1
--
All Countries Fund 1
--
</TABLE>
Item 27. Indemnification:
Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1 to
the Registration Statement is incorporated by reference. Insofar as
indemnification for liability arising under the Securities Act of 1933, as
amended, may be permitted to trustees, directors, officers and controlling
persons of the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
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.
C-2
<PAGE> 78
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
Item 31. Management Services: None.
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<PAGE> 79
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 undertakes to furnish each person to whom a prospectus for
any series of the Registrant is delivered with a copy of the Registrant's
latest annual report to shareholders for such series; when such annual report
is issued containing information called for by Item 5A of Form N-1A, upon
request and without charge.
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<PAGE> 80
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
Post-Effective Amendment No. 1 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 28th day of April, 1997.
Hansberger Institutional Series
By: /s/ Thomas L. Hansberger
----------------------------
Thomas L. Hansberger
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 1 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 April 28, 1997
---------------------------- President
Thomas L. Hansberger
/s/ J. Christopher Jackson Trustee and Vice April 28, 1997
------------------------------ President
J. Christopher Jackson
/s/ Kathryn B. McGrath Trustee April 28, 1997
-----------------------------
Kathryn B. McGrath
/s/ Stuart B. Ross Trustee April 28, 1997
----------------------------------
Stuart B. Ross
/s/ William F. Waters Trustee April 28, 1997
-------------------------------
William F. Waters
/s/ Thomas A. Christensen Chief Financial April 28, 1997
---------------------------- Officer
Thomas A. Christensen
</TABLE>
C-5
<PAGE> 81
EXHIBIT INDEX
<TABLE>
<CAPTION>
Name Exhibit Page
---- ------- ----
<S> <C>
Agreement and Declaration of Trust of the Ex-99.B1(a)
Registrant, dated July 25, 1996, (incorporated
herein by reference to Initial Registration
Statement filed on July 26, 1996).
Amendment to the Agreement and Declaration Ex-99.B1(b)
of Trust, (incorporated herein by reference to
Pre-Effective Amendment No. 1, filed on
September 23, 1996).
Amended and Restated Agreement and Ex-99.B1(c)
Declaration of Trust of the Registrant, dated
October 4, 1996, (incorporated herein by reference
to Pre-Effective Amendment No. 2 filed on
October 18, 1996).
By-Laws of the Registrant, (incorporated Ex-99.B2
herein by reference to the Initial Registration
Statement filed on July 26, 1996).
Form of Investment Advisory Agreement, Ex-99.B5
(incorporated herein by reference to Pre-Effective
Amendment No. 2 filed on October 18, 1996).
Form of Custodian Agreement, (incorporated Ex-99.B8
herein by reference to Pre-Effective Amendment
No. 2 filed on October 18, 1996).
Form of Administration Agreement, (incorporated Ex-99.B9
herein by reference to Pre-Effective Amendment
No. 2 filed on October 18, 1996).
Opinion and Consent of Counsel, (incorporated Ex-99.B10
herein by reference to Pre-Effective Amendment
No. 2 filed on October 18, 1996).
Opinion and Consent of Public Accountants, Ex-99.B11
filed herewith.
Financial Data Schedule for the Emerging Markets Ex-99.B27.1
Fund, filed herewith.
Financial Data Schedule for the International Ex-99.B27.2
Equity Fund, filed herewith.
</TABLE>
C-6
<PAGE> 1
EXHIBIT 11
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 17, 1997
for Hansberger Institutional Series and to all references to our firm included
in or made a part of Post-Effective Amendment No. 1 and Amendment No. 3 to
Registration Statement File Nos. 333-8919 and 811-7729, respectively.
Boston, Massachusetts
April 28, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001019766
<NAME> HANSBERGER INSTITUTIONAL SERIES
<SERIES>
<NUMBER> 2
<NAME> EMERGING MARKETS FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 12,240
<INVESTMENTS-AT-VALUE> 12,272
<RECEIVABLES> 120
<ASSETS-OTHER> 123
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,515
<PAYABLE-FOR-SECURITIES> 1,163
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 636
<TOTAL-LIABILITIES> 1,799
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,615
<SHARES-COMMON-STOCK> 1,023
<SHARES-COMMON-PRIOR> 517
<ACCUMULATED-NII-CURRENT> 32
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 38
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31
<NET-ASSETS> 10,716
<DIVIDEND-INCOME> 24
<INTEREST-INCOME> 35
<OTHER-INCOME> 0
<EXPENSES-NET> 28
<NET-INVESTMENT-INCOME> 31
<REALIZED-GAINS-CURRENT> 39
<APPREC-INCREASE-CURRENT> 31
<NET-CHANGE-FROM-OPS> 101
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 506
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,484
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 92
<AVERAGE-NET-ASSETS> 7,598
<PER-SHARE-NAV-BEGIN> 10.12
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.48
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001019766
<NAME> HANSBERGER INSTITUTIONAL SERIES
<SERIES>
<NUMBER> 1
<NAME> INTERNATIONAL EQUITY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 39,550
<INVESTMENTS-AT-VALUE> 39,695
<RECEIVABLES> 147
<ASSETS-OTHER> 772
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 40,614
<PAYABLE-FOR-SECURITIES> 8,753
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 308
<TOTAL-LIABILITIES> 9,061
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,373
<SHARES-COMMON-STOCK> 3,043
<SHARES-COMMON-PRIOR> 425
<ACCUMULATED-NII-CURRENT> 108
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (26)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 98
<NET-ASSETS> 31,553
<DIVIDEND-INCOME> 86
<INTEREST-INCOME> 58
<OTHER-INCOME> (9)
<EXPENSES-NET> 28
<NET-INVESTMENT-INCOME> 107
<REALIZED-GAINS-CURRENT> (26)
<APPREC-INCREASE-CURRENT> 98
<NET-CHANGE-FROM-OPS> 179
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,618
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 27,257
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 108
<AVERAGE-NET-ASSETS> 11,345
<PER-SHARE-NAV-BEGIN> 10.12
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.22
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.37
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
