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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.
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TABLE OF CONTENTS PAGE
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INVESTMENT POLICIES AND TECHINIQUES...............................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
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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.
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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
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Fund replaces the borrowed securities, and the Fund will deposit collateral with
the broker; this collateral will consist of 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
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securities and refinance with other debt at a lower interest rate. If a Fund
holds debt securities that are refinanced or 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
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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.
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.
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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.
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.
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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 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
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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 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.
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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 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
<PAGE>
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.
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
<PAGE>
markets. This participation also might cause temporary price distortions. In
addition, activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.
FORWARD CURRENCY CONTRACTS
Each Fund may enter into forward currency contracts; such transactions
may serve as long hedges (for example, if the Fund seeks to buy a security
denominated in a foreign currency, it may purchase a forward currency contract
to lock in the $US price of the security) or as short hedges (the Fund
anticipates selling a security denominated in a foreign currency may sell a
forward currency contract to lock in the $US equivalent of the anticipated sale
proceeds).
A Fund may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or a basket of
currencies, the value of which the Adviser believes will have a positive
correlation to the values of the currency being hedged. In addition, a Fund may
use forward currency contracts to shift exposure to foreign currency
fluctuations from one country to another. For 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.
<PAGE>
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.
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.
<PAGE>
REPURCHASE AGREEMENTS
In a repurchase agreement, a Fund buys a security from a counterparty
that has agreed to repurchase it at a mutually agreed upon date and repurchase
price, reflecting the interest rate effective for the term of the repurchase
agreement. The term of a repurchase agreement is usually from overnight to one
week and never exceeds one year; repurchase agreements with a maturity in excess
of seven days are considered illiquid. The counterparty's obligation to
repurchase is secured by the value of the underlying security; when the Fund
enters into a repurchase agreement, it always receives, as collateral,
underlying securities with a market value at least equal to the purchase price
(including accrued interest), and the Adviser will monitor, on an ongoing basis,
the value of the underlying securities to ensure that such value always equals
or exceeds the repurchase price plus accrued interest.
A Fund may, under certain circumstances, deem repurchase agreements
collateralized by U.S. government securities to be investments in U.S.
government securities.
Borrowing 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.)
<PAGE>
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:
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.
<PAGE>
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.
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."
<PAGE>
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>
NAME AND ADDRESS OFFICES WITH PRINCIPAL OCCUPATEION
THE TRUST DURING THE PAST FIVE YEARS
<S> <C> <C>
J. CHRISTOPHER JACKSON, Vice President and General Counsel,
ESQ.* (45) Trustee Hansberger Global
515 East Las Olas Blvd. Investors, Inc. 1996 to
Fort Lauderdale, FL present; Vice President,
Associate General Counsel
and Assistant Secretary,
Van Kampen American
Capital, Inc. 1986 to
1996.
KATHRYN B. MCGRATH, ESQ.* Trustee Partner, Morgan, Lewis &
(52) Bockius LLP, 1990 to
1800 M Street, N.W. present
Washington, DC
STUART B. ROSS (59) Trustee Executive Vice President,
100 First Stamford Place Xerox Corporation, 1990
Stamford, CT to present; Chief
Executive Officer, Xerox
Financial Services, Inc.,
1990 to present.
WILLIAM F. WATERS, ESQ. Trustee Retired; former Senior
(64) Vice President, Merrill
640 Hollow Tree Ridge Road Lynch & Co., 1984 to 1996.
Darien, CT
CHARLES F. GULDEN (35) Vice President Managing Director,
515 East Las Olas Blvd. Hansberger Global
Fort Lauderdale, FL Investors, Inc. 1996 to
present; Vice President
and Director of Research
& Portfolio Management,
Templeton Worldwide, 1989
to 1996.
WESLEY E. FREEMAN (47) Vice President Managing Director,
515 East Las Olas Blvd. Hansberger Global
Fort Lauderdale, FL Investors, Inc. 1996 to
present; Executive Vice
President for
Institutional Business
Development, Templeton
Worldwide, 1989 to 1996.
THOMAS A. CHRISTENSEN, Jr. Treasurer Vice President and
(26) Controller, Hansberger
515 East Las Olas Blvd. Global Investors, Inc.
Fort Lauderdale, FL 1996 to present;
Accountant, Arthur
Andersen LLP, 1993 to
1996; student, University
of Illinois, 1993 to
1994; student, University
of Florida School of
Accountancy, 1989 to 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
KIMBERLEY SCOTT (34) Secretary Senior Vice President,
515 East Las Olas Blvd. Hansberger Global Investors,
Fort Lauderdale, FL Inc. 1994 to present;
Executive Assistant and
Portfolio Supervisor,
Templeton Worldwide, 1992 to
1994.
KARL O. HARTMANN, ESQ. (41) Assistant Secretary Senior Vice President and
73 Tremont Street General Counsel, Chase Global
Boston, MA Funds Services 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: 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.
================================================================================
<TABLE>
<CAPTION>
Aggregate Pension Total
Compensation or Compensation
From Retirement Estimated from Registrant
Registrant Benefits Annual and Fund
for Fiscal Accrued as Benefits Complex Paid to
Name of Person, Year Ended Part of Upon Directors for Fiscal
Position 1996 Fund Expenses Retirement Year Ended 1996
========================================================================================
<S> <C> <C> <C> <C>
Stuart B, Ross, $1,375 N/A N/A $1,375 for
Trustee service on
one board
William F. Waters, $1,375 N/A N/A $1,375 for
Trustee service on
one board
========================================================================================
</TABLE>
<PAGE>
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>
Name and Address Fund Shares Percentage of
of Shareholder Beneficially Outstanding
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 Fund 299,553.482 22.2%
Mutual Funds Operations
P.O. Box 3198 Pittsburgh,
PA 15230-3198
General Employees Emerging Markets Fund 280,636.109 20.8%
Retirement
System of the City of Fort
Lauderdale
315 NE Third Avenue
Suite 202
Fort Lauderdale, FL 33301
Alberto Cribiore Emerging Markets Fund 98,814.229 7.3%
590 Madison Avenue
Suite 18C
New York, NY 10022
Donald J. Gogel Emerging Markets Fund 98,814.229 7.3%
31 Masterton Road
Bronxville, NY 10708
Max C. Chapman Jr. Emerging Markets Fund 98,814.229 7.3%
P.O. Box 194
Scarborough, NY 10510
</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."
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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.
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.
<PAGE>
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 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
<PAGE>
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
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
<PAGE>
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:
P(1+T)/n/=ERV
P = a hypothetical initial payment of $10,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $10,000 payment made
at the
<PAGE>
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.
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
is beta. Beta is the volatility of a fund relative to the total market as
represented by the Standard & Poor's 500 Stock Index. A beta of more than 1.00
indicated volatility greater than the market, and a beta of less than 1.00
indicates volatility less than the market. Another measures of volatility or
risk is standard deviation. Standard deviation is a statistical tool that
measures the degree to which a fund's performance has varied from its average
performance during a particular time period.
Standard deviation = the square root of (Sigma)(x\\i\\-x\\m\\)/2/
----------------------
n-1
where (Sigma) = "the sum of,"
x\\i\\ = each individual return during the time period,
x\\m\\ = the average return over the time period, and
n = the number of individual returns during the time period.
Statistics may also be used to discuss a Fund's relative performance. One
such measure is alpha. Alpha measures the actual return of a fund compared to
the expected return of a fund given its risk (as measured by beta). The
expected return is based on how the market as a whole performed, and how the
particular fund has historically performed against the market. Specifically,
alpha is the actual return less the expected return. The expected return is
computed by multiplying the advance or decline in a market representation by the
fund's beta. A positive alpha quantifies the value that the fund manager has
added, and a negative alpha quantifies the value that the fund manager has lost.
Other measures of volatility and relative performance may be used as
appropriate. However, all such measures will fluctuate and do not represent
future results.
GENERAL INFORMATION
BUSINESS PHILOSOPHY
The Adviser is an independent investment adviser, owned by professionals
active in its management. Recognizing that the investors are the focus of its
business, the Adviser strives for excellence both in investment management and
in the service provided to investors. This commitment affects many aspects of
the business, including professional staffing, product development, investment
management, and service delivery.
The increasing complexity of the capital markets requires specialized
skills and processes for each asset class and style. Therefore, the Adviser
believes that active management should produce greater returns than a passively
managed index. The Adviser has brought together a group of top-flight
investment professionals with diverse product expertise, and each concentrates
on their investment specialty. The Adviser believes that people are the firm's
most important asset. For this reason, continuity of professionals is critical
to the firm's long-term success.
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
<PAGE>
instruments. In addition, marketing materials may cite the Adviser's views or
interpretations of such factors.
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.
<PAGE>
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>
<TABLE>
<S> <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>
<TABLE>
<S> <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>
<TABLE>
<S> <C> <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 Discount
Amount Rate
<S> <C> <C> <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>
<TABLE>
<S> <C> <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
================
</TABLE>
(a) Aggregate cost for federal income tax purposes was $39,550,153; and net
unrealized appreciation consisted of:
<TABLE>
<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>
<TABLE>
<S> <C>
ADR - American Depositary Receipt.
AUD - Australian Dollar
CHF - Seiss Franc
CZK - Czech Koruna
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
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>
Hansberger Institutional Series
Portfolio of Investments as of March 31, 1997 (Unaudited)
Emerging Markets Fund
<TABLE>
<CAPTION>
Value
Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <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>
<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>
<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>
<TABLE>
<S> <C> <C> <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> <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
==========================
ADR - American Depositary Receipt.
GDR - Global Depository Receipt.
(a) Aggregate cost for federal income tax purposes was $12,239,995; and net unrealized appreciation consisted of:
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>
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. 3
<PAGE>
Hansberger Institutional Series
Statements of Operations
Three Months Ended March 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging
International 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. 4
<PAGE>
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. 5
<PAGE>
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. 5
<PAGE>
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. 6
<PAGE>
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% 65.26%**
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. 6
<PAGE>
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>
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>
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>
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>
Purchases Sales
Portfolio --------- -----
- ---------
<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.
