HANSBERGER INSTITUTIONAL SERIES, N-30D, 1998-03-12

HANSBERGER INSTITUTIONAL SERIES
N-30D, 1998-03-12

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<PAGE>

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[LOGO OF HANSBERGER APPEARS HERE] HANSBERGER
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INSTITUTIONAL
SERIES
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ANNUAL REPORT
December 31, 1997

International Fund

Emerging Markets Fund

<PAGE>

LETTER TO SHAREHOLDERS

February 15, 1998

Dear Fellow Shareholder:

In 1997 we witnessed several significant events, some of which will have a
lasting effect on global financial markets. In the Far East, the transition of
power in Hong Kong finally occurred mid-year without any unanticipated
surprises. This change, however, has unfortunately resulted in perceived
uncertainty about Hong Kong's future. Hong Kong's economy and financial
markets have subsequently suffered despite favorable long-term prospects. In
Europe, next year's economic union euphorically influenced many Western
European financial markets. Western European countries continued to implement
changes in monetary and fiscal policy in anticipation of this union.
Deregulation of industries has also resulted in noticeable secular changes
including company specific rationalization efforts and the acceleration of
other corporate restructuring activities including mergers and acquisitions. A
political shift in power occurred in the United Kingdom, as the Labor party
took control of government after many years and for the first time ever, the
Bank of England was given the authority to determine monetary policy
independent of the Treasury's wishes. The Sterling appreciated and the British
financial markets were mixed.

Domestic events in Latin America were relatively uneventful. This stability
was generally well received by most local financial markets. The prolonged
bull market in North America was also a recognized positive factor. Eastern
Europe and Africa were relatively uneventful as well. The results of financial
markets in these regions, however, were mixed and were oftentimes very
dependent upon monetary and fiscal policies implemented by local governments.
Underperforming financial markets, for example, were generally affected by
austerity programs implemented to improve prospects for the future.

The most significant event affecting global financial markets was regional
economic turmoil within Asia, which continued to escalate throughout the year
despite efforts of local governments to control this unavoidable chain of
events. This economic debacle peaked during the fourth quarter with rapid
devaluation of many Asian currencies and free-falling financial markets. The
Thai, Indonesian, Malaysian and Korean markets, for example, all lost more
than two-thirds of their value in US Dollar terms. The severity of the
situation also had global implications. Most global financial markets were
negatively affected in the final months of 1997. This sudden downturn
generally erased most gains that had been accumulated by US investors with
international investment mandates.

The Asian crisis also indirectly affected Japan, which has been a
disappointing market for many years. The Japanese government has not
implemented necessary changes to revitalize its economy and financial markets
have continued to predictably disappoint investors. The Asian crisis itself is
probably due in part to Japan's actions in earlier years and the government's
inability to correct a closed and protected economy. The state of the banking
system and a weak Japanese currency vis-a-vis non-Asian currencies have
exacerbated the problem along with the evolution of a democratic government
that remains in transition. Inaction was expected in 1997 and inaction
occurred.

Despite already high valuations, the US stock market, continued to rise to
lofty levels. US investors generally fared better in the US markets rather
than abroad because of Asian turmoil and a generally stronger dollar. The US
Dollar was particularly strong vis-a-vis the Canadian Dollar, which is testing
historic lows.

Looking forward to 1998, it remains difficult to assess developments in
global financial markets, given increased uncertainty due to the Asian crisis
and investor fears regarding the possibility of a global economic slowdown and
possible deflation. We remain undaunted despite these uncertainties and the
difficult year that was experienced by international investors in 1997. Our
view, as always, is to maintain a longer-term perspective and view current
market volatility in global markets as a period of opportunity provided long-
term prospects remain favorable for investments that are being considered for
the Funds.

Our investment ideas are a residual of our fundamental investment process
which draws from the resources of two dozen analysts who collectively have
responsibilities for seeking investment opportunities in 26 global industries
and 62 stock markets. Their best ideas, which are reviewed by the entire team,
are placed on our selective Value List, which is the universe that we use to
construct portfolios. The "Value" List is essentially a summary of where we
are finding value today in anticipation of future returns for our investors.
<PAGE>

Overall, global market valuations range significantly from overvalued to
very undervalued. This disparity has continued to widen for the past several
years and we believe the differences today have not been seen in many years.
It remains difficult for us to find value in the United States for funds with
global mandates. Our North American weighting in our global portfolios has
been historically low and we do not see an opportunity in the near term to
identify more US ideas without a market correction. Therefore, it remains much
easier for us at this point in time to find investment ideas outside of North
America.

In the international arena, we continue to find opportunities in the
emerging markets. However, we remain cognizant that an undervalued opportunity
may become more undervalued in the near-term, particularly during periods when
the "madness of crowds" reacts without rationality. Despite fears of "doom and
gloom" in the Far East, we continue to focus on shares that have strong
underlying fundamentals but have depressed prices because of "guilt by
association." We believe there are always good shares to find in difficult and
volatile markets. Looking forward, many of these shares offer significant
potential for appreciation for patient investors. In Latin America, the
abundance of ideas has subsided with many of these markets having been good
performers over the past several years. Eastern Europe, however, continues to
be a source of new ideas, particularly in troubled and overlooked markets
including the Czech and Slovakian markets which are now showing initial signs
of improvement. The Russian Republic also offers opportunity, provided that
all ideas are "risk adjusted" and thoroughly analyzed. We continue to expand
our efforts in Africa where we believe prospects in South Africa may also be
interesting.

In developed markets, we have historically favored shares in Western
European markets, but our opportunities are becoming more limited as these
markets have continued to move ahead, especially larger capitalization issues.
Analysts' recommendations are now primarily limited to only a few of these
markets, including the United Kingdom and Italy. Elsewhere, our exposure to
the Japanese market remains low, but it is growing, as it becomes more
apparent that change must occur and probably will occur over the next several
years. These changes include a cleanup of the banking system, corporate tax
reform, on-going deregulation of industries; announcements of share repurchase
programs and options program, and LBO, MBO and M&A activity. Company managers
are also becoming more aware of the importance of proper balance sheet
management and how to add value for shareholders.

There are also no significant trends in our global industry exposure.
Financial services, however, are always an important component of our work and
the focus has shifted from markets that have been good performers to those
that are currently overlooked. Our current research findings also indicate
that earnings growth is now slowing in many industries. It is for this reason
that many of our recommendations are focused on investment opportunities,
which have more predictable earnings with limited risk. The continuous trend
of consolidation and cost-cutting is also a significant theme and to a certain
extent we are investing in cyclical issues which believe have overly
discounted earnings disappointments attributed to falling industry cycles.

We anticipate that the US Dollar will remain stable or devalue vis-a-vis
currencies in Western Europe and Japan over the next several years.
Additionally, many Asian currencies may now be marginally undervalued given
excessive pessimism. These expectations are factored into our analysis of
investments on a case by case basis. We have not typically engaged in currency
hedging of portfolios.

Overall, we are satisfied with the quality of our ideas and remain confident
that our long-term perspective and patience will be rewarded. The
international investing environment and results for the Funds in their first
year have been difficult. However, we are very enthusiastic about future
prospects and the current positioning of the Funds, which are now fully
invested and well, diversified. Our primary mission is to work as diligently
and as effectively as we can to add value for our investors. Thank you for
your continued support.

For the Hansberger Institutional Series
James E. Chaney
Chief Investment Officer
Hansberger Global Investors, Inc.
<PAGE>

PORTFOLIO MANAGEMENT REVIEW

INTERNATIONAL FUND

MARKETS

1997 started off as a good year for most financial markets. As the year
progressed and the troubles in Asia became more apparent, global financial
markets pursued very divergent paths. The MSCI US Index (in US$) appreciated
34.1% while the MSCI Japan Index (in US$) slumped 23.5%. Among the emerging
markets, the MSCI Turkey Index (in US$) appreciated 118.1% while the MSCI
Thailand Index (in US$) lost 76.8%! During this period, most markets with
strong relative performance in recent years continued to outperform.
Meanwhile, markets with poor relative performance in recent years continued to
underperform. We believe that this development has also resulted in
significant dispersions in valuations, with some markets being overvalued and
some markets being very undervalued.

In addition to the Asian crisis which negatively affected local returns for
many global stock markets, a stronger US dollar also had a negative
translation effect for US domiciled international funds. It is estimated that
the impact of US dollar strength for most international funds domiciled in the
US that were unhedged, including your fund, was significant and generally
resulted in translation losses of at least 10% for the year.

FUND PERFORMANCE

The fund's annual total return for the year ended December 31, 1997, was -
1.46% versus the MSCI EAFE annual return of 2.06%. This result is primarily
attributed to several factors, one of which we believe properly positions the
fund for future opportunities. More specifically, the fund remains invested in
emerging markets stocks with meaningful exposure to the Far East and Eastern
Europe where we think the future potential to add value for our investors
could be significant despite disappointments in 1997 and uncertainty in 1998.
The emerging markets exposure will remain limited and should not typically
exceed 20-25% of total Fund assets to suit diversification and risk
considerations. Alternatively, your fund was prudently overweighted in Europe
and underweighted in Japan.

The fund's current policy to remain unhedged was also a drag on performance
as was the fund's policy to remain as fully invested as possible. It was a
unique year where many overseas investments in US dollar terms underperformed
US T-Bills. Nevertheless, we believe that these policies are correct and
consistent with our long-term focus. However, there will be periods such as
last year when these policies will not add value in the near-term.

During this period of volatile market performance, your fund benefited from
being well diversified among 40 markets. Your Fund's low turnover is also a
positive factor and is indicative of our investment style.

INVESTMENT OUTLOOK

Although 1997 was a difficult year for your fund, we remain very confident
and optimistic about its future potential. We remain committed to the emerging
markets, particularly the Far East and Eastern Europe. We also envision that
the Fund's weighting in developed Asian markets including Singapore and Japan
will rise as we continue to find opportunities. Alternatively, if Western
European markets continue to appreciate, it is also probable that the fund's
weighting will fall as holdings are divested and fewer ideas are recommended
by our analysts.

Overall, we remain unduanted by the current turmoil in the Far East and view
market uncertainty with enthusiasm. We believe that attractive investment
opportunities are often found during periods of despondency. These
opportunities oftentimes require patience before rewards come to fruition. We
will, as always, maintain our fundamental value-oriented approach to investing
and will continue our diligent efforts to add value for your fund.

For the International Fund Team
James E. Chaney
Chief Investment Officer
Hansberger Global Investors, Inc.

1
<PAGE>

Change in value of a $10,000 Investment
in Hansberger International Fund vs. MSCI EAFE Index
1/1/97 - 12/31/97

[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>

Date Hansberger International Fund MSCI EAFE Index
- ---- ----------------------------- ---------------
<S> <C> <C>
12/30/96 10,000 10,000
01/31/97 10,178 9,652
02/28/97 10,366 9,813
03/31/97 10,247 9,851
04/30/97 10,326 9,905
05/31/97 10,642 10,562
06/30/97 11,087 11,136
07/31/97 11,413 11,319
08/31/97 10,694 10,476
09/30/97 11,354 11,065
10/31/97 10,375 10,217
11/30/97 9,881 10,115
12/31/97 9,854 10,206
</TABLE>

This graph compares the Fund's performance with the MCSI Europe Australia Far
East ("EAFE") Index, a broad-based unmanaged index that represents the general
performance of international equity markets. Total returns for the Fund and
the index include reinvestment of all dividends and capital gains. The index
does not include commissions or fees that an investor purchasing the
securities in the index would pay. Past performance is no guarantee of future
results, and the investment return and principal value of an investment in the
Fund will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Although the investment characteristics
of the index are similar to those of the Fund, the securities owned by the
Fund and those composing the index are likely to be different, and any
securities that the Fund and the index have in common are likely to have
different weightings in the respective portfolios. Investors cannot invest
directly in the index.

2
<PAGE>

PORTFOLIO MANAGEMENT REVIEW

EMERGING MARKETS FUND

PORTFOLIO REVIEW

We are pleased to present the annual report of the Hansberger Institutional
Series Emerging Markets Fund. At year-end, your portfolio was invested in 30
countries around the world.

A detailed schedule of securities held in the portfolio is listed later in
this report (see Portfolio of Investments beginning on page 11). We believe
that this portfolio which includes holdings in many world class companies,
operating in dynamic emerging economies, is structured to fully participate in
the continuing growth of the global economic community.

GLOBAL EMERGING MARKET REVIEW

Emerging equity markets generated mixed performance in 1997. While the
United States and other developed markets continued their good performance of
recent years, emerging markets around the world continued to show excess
volatility, as they were rattled by the events that developed in Asia during
the second half of the year. All countries in Asia and Eastern Europe posted
negative performance in 1997, with the exception of Russia and Hungary, which
were two of the best three performers in the emerging markets. Despite the
significant loss of value experienced in the second half of the year, Latin
America was able to buck the trend and finish the year on a positive note.

The fourth quarter of 1997 observed the start of some of the worst economic
downturns in recent memory for many Asian economies. Although the problems in
each country are varied and disparate, the spark that started the crisis in
each country was a sudden loss in confidence in the value of local currencies.
More fundamentally, the countries woes tended to be based on an over-reliance
on cheap foreign capital--foreign debt for Indonesia and Korea, foreign equity
for Malaysia, and both for Thailand. In Indonesia and Korea, plummeting
exchange rates reeked havoc with balance sheets over-weighted with US dollar
denominated debt--making some companies instantly insolvent. In Malaysia, the
falling local currency and erratic responses by national leaders caused equity
markets to collapse. As the country was relying on ever-rising equity markets
to finance huge and grandiose investment projects, falling markets mandated a
sudden and painful re-ordering of economic priorities.

Eastern Europe started the year on solid ground but was hit hard in the
second half; not only by the Asian crisis but also by natural disasters that
affected several of the countries in the region. Poland and the Czech Republic
were affected by a major flood in July-August 1997. This caused massive
disruption in manufacturing areas and forced the shut down of many facilities
for about a month; others are still under reconstruction. Real GDP growth of
countries fell to a range between 3% and 6% due to this damage (down from an
expected 5% to 7% prior to the flooding).

Currencies and political events were also important factors in 1997. At the
same time that some of the Asian currencies came under attack, the Czech
Koruna was targeted and had to be devalued twice in May for 10% and another 6%
in July. Polish elections and their effect on the reshuffling of political
power affected this market. Most Eastern European countries continued on an
active privatization policy, which allowed more industrial companies to be
floated in the market. In addition, stock markets in the region continue to
improve their regulatory efforts and increase transparency. As a result,
Russia and Slovakia were included in MSCI Emerging Markets Free Index in
November 1997. Russia had its first year of positive economic growth of 0.4%
in six years.

Latin American markets posted fair results in 1997, although they did not
escape the effects of the Asian crisis. After a very good first half supported
by strong economic growth in Argentina and Mexico and privatization
expectations in Brazil, exogenous factors caused the larger markets to drop
significantly from their pre-summer highs. Argentina and Brazil were hit first
on fears of devaluations, given their resilient current accounts deficits and
perceived strong currencies. The other countries were also targeted later on
as profit taking spread throughout the region.

Because of these disruptions in the market place, a careful, systematic
investor is able to find great bargains among undervalued securities. Some
fine companies, many outstanding by any international measure, are now trading

3
<PAGE>

at very inexpensive prices, especially when viewed in US dollar terms.
Further, in response to this currency crisis, many governments are enacting
legislation that will structurally change their economies, increasing their
long-run competitiveness. For example, in Asia, Malaysia has recently
announced many draconian measures to ensure that its economy does not slide
further, while Korea is under the supervision of the IMF and its program of
tight controls. In Latin America, Brazil is stepping up its efforts on the
fiscal side, and in Eastern Europe, the Czech Republic is establishing clear
market supervision and privatizing banks. These changes, if maintained and
backed up by further liberalization and reform, have the potential to usher in
a new age of prosperity for many of these economies. In times of deep and
significant change like the present, an investor must be especially vigilant
and careful when selecting companies to hold. But, for those with the
experience and patience to ensure a thorough understanding of companies and
industries, this turmoil presents an extremely rare investment opportunity.

To capitalize on this opportunity, analysts from our various offices
proceeded to visit the companies we hold and prospective ideas in Thailand,
Malaysia, India, Indonesia, Korea, Brazil, Chile, Poland, Russia and other
Eastern Bloc countries during the second half of the year. As a result of
these visits, we eliminated some stocks from our portfolios which became over-
leveraged or insufficiently competitive due to the changes in exchange rates.
On the other hand, we found companies that will thrive as governments and
companies restructure. Shares of some fine companies were trading at less than
two times prospective earnings per share, and we added them to our portfolios.

INVESTMENT OUTLOOK

The negative reaction by all stock markets to the problems that arose in
Asia underscores the globalization of the world's economies. Not knowing
immediately the impact the projected drop in demand from Asia public and
private consumers would have in companies in developed nations, investors
dumped stocks regardless of their address during the final quarter of the
year. We have spent a great deal of time over the last months sifting through
some of the more extreme views on the future of the world's economies to focus
on which stocks will benefit during this time of instability.

During this period, we have been able to increase our weighting in cyclical
stocks. Quite correctly, the markets have assumed that exports coming out of
Asia will increase and global prices decrease for many chemicals, forest
products and metals. The stock prices of many companies producing these goods
have dropped accordingly. We are selectively buying those, which have a
competitive advantage due to location, productivity or cheap access to raw
materials and that will benefit relative to their competitors in this
environment. In addition, we are looking at exporters that record their sales
in US dollars but record costs in local currencies and that we believe will
have a dominant role in their industries globally. We added to defensive
stocks such as healthcare companies and utilities, the demand for whose
products will only decrease slightly but whose stock prices are severely
discounted from where they were at the beginning of the year. And finally we
bought consolidators, companies with strong domestic franchises, sufficient
cash flow to buy their competitors for pennies on the dollar that will be even
stronger than before as these countries rebound.

Throughout this rather wild investment environment in 1997, we have remained
true to our investment discipline. We bought stocks in countries and
industries abandoned by other investors and in markets others fear to enter.
Contrary to other investment organizations, we have not and will not try to
time individual markets or the market place in general. To this end, and to
remain consistent with our client's objectives, our portfolios remain fully
invested. We have continued to develop our worldwide research organization in
an effort to take advantage of opportunities, regardless of their geographic
location and we look eagerly towards 1998. We truly believe our investment
philosophy executed by our experienced and diverse research team will enable
us to generate superior performance in these very unsettling times. We
appreciate your confidence in Hansberger Global Investors and look forward to
serving you in the New Year.

For the Emerging Markets Fund Team
Thomas L. Hansberger, CFA
Chairman
Hansberger Global Investors, Inc.

4
<PAGE>

Change in value of a $10,000 Investment
in Hansberger Emerging Markets Fund vs. MSCI Emerging Markets Free Index
1/1/97 - 12/31/97

[LINE GRAPH APPEARS HERE]

Hansberger Emerging MSCI Emerging Markets
Date Markets Fund Free Index
- -------- ------------ ----------
12/30/96 10,000 10,000
1/31/97 10,375 10,682
2/28/97 10,623 11,140
3/31/97 10,356 10,847
4/30/97 10,375 10,866
5/31/97 10,603 11,177
6/30/97 11,215 11,775
7/31/97 11,947 11,951
8/31/97 11,334 10,430
9/30/97 11,483 10,719
10/31/97 9,753 8,960
11/30/97 8,647 8,633
12/31/97 8,469 8,841

This graph compares the Fund's performance with the MCSI Emerging Markets Free
Index, a broad-based unmanaged index that represents the general performance
of equity markets in developing markets. Total returns for the Fund and the
index include reinvestment of all dividends and capitalizations. The index
does not include commissions or fees that an investor purchasing the
securities in the index would pay. Past performance is no guarantee of future
results, and the investment return and principal value of an investment in the
Fund will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Although the investment characteristics
of the index are similar to those of the Fund, the securities owned by the
Fund and those composing the index are likely to be different, and any
securities that the Fund and the index have in common are likely to have
different weightings in the respective portfolios. Investors cannot invest
directly in the index.

5
<PAGE>

INTERNATIONAL FUND

Portfolio of Investments
December 31, 1997

<CAPTION>
Common Stocks--91.2%
ARGENTINA - 1.2%
125,000 Mirgor S.A. ADR(a,c).................................. $ 437,500
40,000 Mirgor S.A. ADR(a).................................... 140,000
33,000 Telefonica de Argentina S.A. ADR...................... 1,229,250
39,000 Transportadora de Gas del Sur, S.A. ADR............... 436,313
------------
2,243,063
------------
AUSTRALIA - 2.6%
146,491 Broken Hill Proprietary Co. .......................... 1,359,897
1,106,979 Burns, Philip & Company Ltd. ......................... 173,074
105,000 Coles Myer Ltd. ...................................... 504,124
440,000 Gio Australia Holdings Ltd. .......................... 1,124,478
122,077 National Australia Bank Ltd. ......................... 1,704,262
------------
4,865,835
------------
AUSTRIA - 0.4%
12,000 Boehler-Uddeholm AG................................... 703,479
------------
BRAZIL - 1.3%
26,500 Aracruz Celulose S.A. ADR............................. 380,938
24,000 Elevadores Atlas S.A. ................................ 290,310
627,000 Rhodia-Ster S.A. GDR(a,c)............................. 705,375
72,000 Rhodia-Ster S.A. GDR(a)............................... 81,000
8,000 Telebras ADR.......................................... 931,500
------------
2,389,123
------------
CANADA - 1.7%
124,000 Moore Corp. Ltd. ..................................... 1,875,500
140,000 Noranda Forest, Inc. ................................. 759,033
129,400 Primex Forest Products Ltd. .......................... 552,198
------------
3,186,731
------------
CHILE - 0.5%
48,000 Empresa Nacional Electricidad S.A. ADR................ 849,000
------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>

CHINA - 0.7%
2,846,000 Harbin Power Equipment Co., Ltd., Class H............. $ 345,237
1,500,000 Jinwei Textile Machinery Co., Ltd., Class H........... 147,116
117,000 Shandong Huaneng Power Co., Ltd. ADR.................. 804,375
------------
1,296,728
------------
COLOMBIA - 0.4%
34,000 Banco Ganadero S.A. ADR............................... 816,000
------------
CZECH REPUBLIC - 2.4%
84,000 Komercni Banka A.S. GDR (a,c)......................... 1,008,000
50,000 Komercni Banka A.S. ADR............................... 600,000
10,000 SPT Telekom A.S.(a)................................... 1,069,210
53,900 Skoda Plzen A.S.(a)................................... 953,238
72,887 Zivnobanka-Investicni Fond............................ 848,821
------------
4,479,269
------------
DENMARK - 2.2%
29,000 Tele Danmark A/S, Class B............................. 1,798,771
30,500 Unidanmark A/S, Class A (Registered).................. 2,239,014
------------
4,037,785
------------
FINLAND - 1.3%
98,000 Kemira Oy............................................. 925,894
148,500 Merita Ltd., Class A.................................. 811,840
98,000 Metsa-Serla Oy,
Class B.............................................. 764,087
------------
2,501,821
------------
FRANCE - 5.3%
25,500 AXA-UAP............................................... 1,973,142
15,002 Bail Investissement................................... 1,991,625
45,512 Banque Nationale de Paris............................. 2,419,089
18,500 Elf Aquitaine S.A. ................................... 2,151,699
27,000 SCOR S.A. ............................................ 1,291,119
------------
9,826,674
------------
GERMANY - 3.0%
57,000 Bilfinger & Berger Bau AG............................. 1,799,717
</TABLE>

6
<PAGE>

INTERNATIONAL FUND (CONTINUED)

Portfolio of Investments
December 31, 1997

<CAPTION>
Common Stocks (continued)
GERMANY (CONTINUED)
17,000 Gildemeister AG(a).................................. $ 916,645
20,000 Tarkett AG.......................................... 450,263
4,300 Viag AG............................................. 2,354,429
------------
5,521,054
------------
HONG KONG - 5.9%
3,000,000 Cafe De Coral Holdings Ltd. ........................ 654,278
179,000 Cheung Kong Holdings Ltd. .......................... 1,172,313
1,900,000 Giordano International Ltd. ........................ 655,891
425,000 Guoco Group Ltd. ................................... 1,039,328
295,000 Hutchison Whampoa Ltd. ............................. 1,850,174
298,876 Jardine Matheson Holdings Ltd. ..................... 1,524,267
347,351 Jardine Strategic Holdings Ltd. .................... 917,008
5,624,000 Pacific Ports Co., Ltd.(a).......................... 1,030,595
1,820,000 Swire Pacific Ltd., Class B......................... 1,843,722
920,000 Tai Cheung Holdings Ltd. ........................... 365,079
------------
11,052,655
------------
INDIA - 0.8%
510,000 Crompton Greaves GDR(c)............................. 816,000
189,000 India Cements Ltd. GDR(c)........................... 250,425
40,000 India Cements Ltd. GDR.............................. 53,000
145,000 Indian Aluminum Company Ltd. GDR(c)................. 290,000
------------
1,409,425
------------
INDONESIA - 0.8%
1,595,000 PT Indah Kiat Pulp & Paper Corp. ................... 282,750
120,000 PT Indah Kiat Pulp & Paper Corp., Warrants expiring
7/11/02(a)......................................... 4,691
620,000 PT Indosat ......................................... 1,149,818
------------
1,437,259
------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>

ISRAEL - 0.5%
40,000 Koor Industries Ltd. ADR.............................. $ 877,500
------------
ITALY - 3.4%
840,000 Ansaldo Transporti S.p.A.(a).......................... 1,172,866
600,000 Banca Commerciale Italiana............................ 2,085,924
90,000 Burgo (Cartiere) S.p.A. .............................. 538,016
240,000 Edison S.p.A. ........................................ 1,451,668
261,625 Telecom Italia S.p.A(a)............................... 1,153,575
------------
6,402,049
------------
JAPAN - 5.3%
35,000 Aoyama Trading Co., Ltd. ............................. 625,024
207,000 Ataka Construction & Engineering...................... 652,056
47,000 Chudenko Corp. ....................................... 1,026,633
235,000 Daito Trust Construction Co. ......................... 1,435,486
183,000 Daiwa Securities Co., Ltd. ........................... 631,155
360,000 Dowa Fire & Marine Insurance Co. ..................... 1,073,309
229,000 Kyudenko Co., Ltd. ................................... 1,156,628
648,000 Marubeni Corp. ....................................... 1,137,321
305,000 Nippon Fire & Marine Insurance Co. ................... 1,143,093
46,000 Yamanouchi Pharmaceutical Co., Ltd. .................. 987,162
------------
9,867,867
------------
MALAYSIA - 0.9%
600,000 Malakoff Bhd.......................................... 1,249,518
550,000 Road Builder (M) Holdings Bhd......................... 353,516
450,000 Tractors Malaysia Holdings Bhd........................ 148,091
------------
1,751,125
------------
MEXICO - 2.3%
150,000 Elamex S.A. de C.V.(a)................................ 1,125,000
1,745,000 Grupo Herdez S.A., Series B........................... 1,472,208
30,500 Nacional Financiera................................... 1,696,563
------------
4,293,771
------------
</TABLE>

7
<PAGE>

INTERNATIONAL FUND (CONTINUED)

Portfolio of Investments
December 31, 1997

The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>
Common Stocks (continued)
NETHERLANDS - 2.6%
42,856 Ahrend N.V. .......................................... $ 1,346,350
61,000 European Vinyls Corp. International N.V. ............. 1,353,784
20,500 Eriks Holdings N.V. .................................. 1,339,605
30,290 Koninklijke Pakhoed N.V. ............................. 873,901
------------
4,913,640
------------
NEW ZEALAND - 1.7%
580,000 Air New Zealand Ltd., Class B......................... 1,161,879
2,820,000 Brierley Investments Ltd. ............................ 2,014,040
------------
3,175,919
------------
NORWAY - 2.8%
107,000 Fokus Banken ASA...................................... 992,377
38,000 Kvaerner ASA.......................................... 1,934,523
56,000 Sparebanken NOR....................................... 1,994,097
26,570 Unitor ASA............................................ 323,770
------------
5,244,767
------------
PAKISTAN - 0.4%
5,700 Pakistan Telecom Ltd. GDR............................. 422,261
5,200 Pakistan Telecom Ltd. GDR(c).......................... 392,913
------------
815,174
------------
PERU - 0.4%
85,000 Banco Wiese ADR....................................... 425,000
28,000 Southern Peru Copper Corp. ........................... 374,500
------------
799,500
------------
PHILIPPINES - 0.4%
185,000 Philippine National Bank(a)........................... 406,543
2,350,000 Pilipino Telephone Corp.(a)........................... 261,111
------------
667,654
------------
POLAND - 0.7%
65,000 Bank Rozwoju Eksportu S.A. ........................... 1,346,099
------------
PORTUGAL - 1.8%
97,500 Banco Totta & Acores S.A., Class B.................... 1,914,507
37,500 Electricidade de Portugal, S.A. ADR(a)................ 1,453,125
------------
3,367,632
------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>

RUSSIA - 3.4%
11,925,600 Aviastar(a)........................................... $ 289,195
19,000 Chelyabinsk Metal(a).................................. 380,000
11,500 Lukoil Oil Co. ADR.................................... 1,055,988
2,237,300 Novorossiysk Sea Shipping(a).......................... 671,190
19,000 Oskolcement(a,b)...................................... 1,083,000
320,000 Rostelekom(a)......................................... 1,136,000
59,000 Surgutneftegaz ADR.................................... 605,045
3,700,000 Unified Energy Systems(a)............................. 1,110,000
------------
6,330,418
------------
SINGAPORE - 0.9%
370,000 City Developments Ltd. ............................... 1,716,325
------------
SLOVAKIA - 1.7%
25,500 Nafta Gbely A.S. ..................................... 967,153
44,000 Slovakofarma A.S. GDR(a,c)............................ 367,400
95,000 VSZ A.S. ............................................. 1,843,710
------------
3,178,263
------------
SLOVENIA - 0.8%
72,000 SKB Banka GDR(c)...................................... 1,278,000
15,000 SKB Banka GDR......................................... 266,250
------------
1,544,250
------------
SOUTH AFRICA - 1.5%
555,000 Murray & Roberts Holdings Ltd. ....................... 838,231
57,000 Sappi Ltd. ........................................... 286,962
49,000 Southvaal Holdings Ltd. .............................. 755,163
20,000 Standard Bank Investment Ltd. ........................ 879,482
------------
2,759,838
------------
SOUTH KOREA - 2.0%
449,997 Cho Hung Bank Co. Ltd. ............................... 918,578
27,000 Hyundai Motor Co. Ltd. ............................... 297,876
215,000 Korea Fund, Inc.(a)................................... 1,424,375
99,000 Korean Investment Fund, Inc.(a)....................... 365,063
17,000 Pohang Iron & Steel Co. (b)........................... 481,070
25,000 Shinsegae Department Store Co. ....................... 184,366
------------
3,671,328
------------
</TABLE>

8
<PAGE>

INTERNATIONAL FUND (CONTINUED)

Portfolio of Investments
December 31, 1997

The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>
Common Stocks (continued)
SPAIN - 5.8%
27,000 Banco Pastor S.A. .................................... $ 2,277,322
60,000 Cortfefiel S.A. ...................................... 1,205,120
25,000 Gas Y Electridad, S.A. ............................... 1,805,054
165,000 Iberdrola S.A. ....................................... 2,171,480
44,000 Repsol S.A. .......................................... 1,877,256
54,000 Telefonica de Espana S.A. ............................ 1,541,844
------------
10,878,076
------------
SWEDEN - 2.0%
211,000 ABB AB, B Shares...................................... 2,484,729
73,000 Getinge Industrier AB, Class B........................ 1,158,453
------------
3,643,182
------------
SWITZERLAND - 2.6%
1,050 Baloise Holdings (Registered)(a)...................... 1,943,273
775 Julius Baer Holding AG, Class B....................... 1,438,035
920 Novartis AG, (Registered)............................. 1,492,913
------------
4,874,221
------------
THAILAND - 2.0%
481,100 Bankok Bank Public Co. Ltd. 12/31/98 SEC.............. 1,199,003
335,000 Land & House Public Co. Ltd. (Foreign)................ 66,792
444,500 Pharta Thanakit Public Company Ltd. (Foreign)......... 246,944
100,000 Siam Cement Public Company Ltd. (Foreign)............. 789,200
211 Thai International Fund GDR(a)........................ 1,503,375
------------
3,805,314
------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>

UNITED KINGDOM - 14.8%
3,028,000 Albert Fisher Group plc............................... $ 1,791,333
847,080 BICC plc.............................................. 2,422,098
244,000 British Telecommunications plc........................ 1,918,624
633,000 BTR plc............................................... 1,913,989
1,137,237 Coats Viyella plc..................................... 1,700,631
761,043 Hillsdown Holdings plc................................ 1,850,925
570,000 House of Fraser plc................................... 1,882,734
124,581 Hyder plc............................................. 1,981,733
288,639 J Sainsbury plc....................................... 2,414,298
131,878 National Westminster Bank plc......................... 2,193,163
150,000 Powergen plc.......................................... 1,952,246
116,000 Reckit & Colman plc................................... 1,820,453
600,000 Rolls-Royce plc....................................... 2,317,059
479,000 Waste Management International plc(a)................. 1,385,371
------------
27,544,657
------------
TOTAL -- COMMON STOCKS
(Cost $191,391,535).................................. 170,084,470
------------
<CAPTION>
Preferred Stocks - 1.5%
<C> <S> <C>
AUSTRIA - 1.0%
13,000 Bank Austria AG....................................... 617,504
29,316 Bank Austria AG (New)(a).............................. 1,322,893
------------
1,940,397
------------
NETHERLANDS - 0.5%
18,000 Ballast Nedam N.V..................................... 932,113
------------
TOTAL -- PREFERRED STOCKS
(Cost $2,447,430).................................... 2,872,510
------------
</TABLE>

9
<PAGE>

INTERNATIONAL FUND (CONTINUED)

Portfolio of Investments
December 31, 1997

The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
Face
Amount Maturity Discount Value
(000) Date Rate (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>
Government Obligations - 6.7%
U.S. TREASURY BILLS - 6.7%
$ 845 1/02/98, 4.92%........................................ $ 845,000
2,063 1/08/98, 4.97%........................................ 2,061,004
202 1/15/98, 4.92%........................................ 201,614
7,150 1/22/98, 4.97%........................................ 7,129,252
423 2/12/98, 5.15%........................................ 420,572
133 2/19/98, 5.09%........................................ 132,078
1,530 3/19/98, 5.28%........................................ 1,513,398
141 3/26/98, 5.16%........................................ 139,339
------------
TOTAL -- GOVERNMENT OBLIGATIONS
(Cost $12,441,450)..................................... 12,442,257
------------
TOTAL INVESTMENTS --99.4%
(Cost $206,280,415).................................... 185,399,237
Other Assets and Liabilities (Net) -- 0.6% ............. 1,159,618
------------
NET ASSETS -- 100%...................................... $186,558,855
============
</TABLE>
(a) Non-income producing securities.
(b) Fair valued securities - See Note A-1. Total market value of fair valued
securities owned at December 31, 1997 was $1,564,070 or .8% of net assets.
(c) 144A Security - Certain conditions for public sale may exist.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
SEC Share Entitlement Certificate.
SECTOR DIVERSIFICATION

<TABLE>
<CAPTION>
% of
Net Market
Assets Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Capital Goods.............................................. 10.3 $ 19,143,790
Consumer Goods............................................. 7.3 13,638,156
Diversified Operations..................................... 10.1 18,813,995
Energy..................................................... 11.1 20,672,134
Finance.................................................... 28.7 53,573,548
Gold Mines................................................. 0.4 755,163
Materials.................................................. 7.5 14,084,001
Services................................................... 17.3 32,276,193
Government Obligations..................................... 6.7 12,442,257
----- ------------
Total Investments........................................ 99.4 $185,399,237
Other Assets and Liabilities (Net)......................... 0.6 1,159,618
----- ------------
Net Assets............................................... 100.0 $186,558,855
===== ============
</TABLE>

10
<PAGE>

EMERGING MARKETS FUND

Portfolio of Investments
December 31, 1997

The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- ------------------------------------------------------------------------------
<C> <S> <C>
Common Stocks - 96.2%
ARGENTINA - 4.7%
35,099 Banco Rio De La Plata ADR(a)......................... $ 491,386
38,000 Mirgor S.A. ADR(a,c)................................. 133,000
40,000 Mirgor S.A. ADR(a)................................... 140,000
9,000 Telecom Argentina S.A. ADR........................... 321,750
6,000 Telefonica de Argentina S.A. ADR..................... 223,500
37,000 Transportadora de Gas del Sur S.A. ADR............... 413,938
-----------
1,723,574
-----------
BRAZIL - 7.9%
29,500 Aracruz Celulose S.A. ADR............................ 424,063
2,402,000 Brasmotor S.A. PN.................................... 236,746
15,000 Companhia Vale do Rio Doce ADR....................... 301,742
750,000 Dixie Toga S.A. Preferred(a)......................... 383,047
22,000 Elevadores Atlas S.A. ............................... 266,117
800,000 Inds Klabin Papel E Celulose......................... 365,575
9,000 Petrobras S.A. ADR................................... 210,479
137,000 Rhodia-Ster S.A. GDR(a,c)............................ 154,125
40,000 Rhodia-Ster S.A. GDR................................. 45,000
2,000 Telebras ADR......................................... 232,875
40,000 Usiminas ADR(a,c).................................... 220,000
9,000 Usiminas ADR......................................... 49,500
-----------
2,889,269
-----------
CHILE - 1.0%
21,000 Empresa Nacional Electricidad S.A. ADR............... 371,438
-----------
CHINA - 1.9%
1,264,000 Harbin Power Equipment Co., Ltd., Class H............ 153,331
1,190,000 Jingwei Textile Machinery Co., Ltd., Class H......... 116,712
528,000 Northeast Electrical Transmission & Transformation
Machinery Manufacturing Co., Ltd., Class H.......... 59,961
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>

CHINA (CONTINUED)
24,000 Shandong Huaneng Power Co., Ltd. ADR................... $ 165,000
300,000 Shanghai Haixing Shipping Co., Class H(a).............. 76,654
734,000 Shanghai Petrochemical Co., Ltd., Class H.............. 114,613
-----------
686,271
-----------
COLOMBIA - 1.4%
7,500 Banco Ganadero S.A. ADR................................ 180,000
25,000 Banco Industrial Colombiano SP ADR..................... 350,000
-----------
530,000
-----------
CROATIA - 1.4%
3,000 Pliva GDR.............................................. 49,725
28,500 Pliva GDR(c)........................................... 473,359
-----------
523,084
-----------
CZECH REPUBLIC - 6.1%
7,000 CKD Praha Holding A.S.(a).............................. 232,625
6,000 Ceske Energeticke Zavody A.S.(a)....................... 196,792
5,000 Deza Valasske Mezirici A.S. ........................... 346,772
24,500 Komercni Banka A.S. ADR................................ 294,000
23,000 Komercni Banka A.S. GDR(c)............................. 276,000
4,500 Metrostav A.S.(a)...................................... 273,082
1,900 SPT Telecom A.S.(a).................................... 203,150
22,500 Skoda Plzen A.S. ...................................... 397,919
-----------
2,220,340
-----------
ECUADOR - 1.1%
1,200 La Cemento Nacional GDR(c)............................. 249,600
700 La Cemento Nacional GDR................................ 145,600
-----------
395,200
-----------
GREECE - 1.2%
20,600 Hellenic Telecommunication Organization S.A. .......... 422,066
-----------
</TABLE>

11
<PAGE>

EMERGING MARKETS FUND (CONTINUED)

Portfolio of Investments
December 31, 1997

The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>
Common Stocks (continued)
HONG KONG - 6.3%
1,070,000 Cafe De Coral Holdings Ltd. ........................... $ 233,359
231,000 Cathay Pacific Airways................................. 187,805
33,000 Cheung Kong Holdings Ltd. ............................. 216,125
340,468 Dairy Farm International Holdings Ltd. ................ 367,705
496,000 Giordano International Ltd. ........................... 171,222
71,000 Guoco Group Ltd. ...................................... 173,629
95,000 Hopewell Holdings Ltd. ................................ 23,661
42,000 Hutchison Whampoa Ltd. ................................ 263,415
35,038 Jardine Matheson Holdings Ltd. ........................ 178,694
81,000 Jardine Strategic Holdings Ltd. ....................... 213,840
192,000 Pacific Ports Company Ltd.(a).......................... 35,184
1,079,000 Techtronic Industries Co. ............................. 250,639
-----------
2,315,278
-----------
HUNGARY - 3.4%
6,000 BorsodChem Rt. ........................................ 216,518
8,300 EGIS Rt. .............................................. 520,899
2,200 Graboplast Rt. ........................................ 116,496
15,000 Matav Rt. ADR(a)....................................... 390,000
-----------
1,243,913
-----------
INDIA - 5.4%
20,000 BSES Ltd. GDR(c)....................................... 350,000
190,000 Crompton Greaves GDR(c)................................ 304,000
41,600 India Cements Ltd. GDR(c).............................. 55,120
85,000 India Cements Ltd. GDR................................. 112,625
120,000 Indian Aluminum Co. Ltd. GDR(c)........................ 240,000
5,000 Larsen & Toubro Ltd. GDR............................... 55,500
28,500 Larsen & Toubro Ltd. GDR(c)............................ 316,350
25,000 Reliance Industries GDR(c)............................. 211,048
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- ------------------------------------------------------------------------------
<C> <S> <C>

INDIA (CONTINUED)
19,600 Tata Engineering and Locomotive Co.(c)............... $ 163,366
80,000 Videocon International Ltd.(c)....................... 60,000
137,000 Videocon International Ltd. GDR...................... 102,750
-----------
1,970,759
-----------
INDONESIA - 2.9%
2,000,000 PT Ciputra Development .............................. 90,909
673,000 PT Indah Kiat Pulp & Paper Corp...................... 119,305
27,200 PT Indah Kiat Pulp & Paper Corp., Warrants expiring
7/11/02(a).......................................... 1,063
330,000 PT Indorama Synthetics (a)........................... 147,000
10,600 PT Indosat ADR....................................... 204,713
710,500 PT Kalbe Farma....................................... 125,952
573,900 PT Pabrik Kertas Tjiwi Kimia......................... 140,865
32,000 PT Pabrik Kertas Tjiwi Kimia, Warrants expiring
7/15/02(a).......................................... 1,862
5,290,000 PT Semen Cibinong (Foreign)(b)....................... 240,455
-----------
1,072,124
-----------
MALAYSIA - 4.4%
100,000 Malakoff Bhd......................................... 208,253
100,000 Malayan Banking Bhd.................................. 290,525
130,000 O.Y.L. Industries Bhd................................ 304,152
530,000 Road Builder (M) Hldgs Bhd........................... 340,661
100,000 Telekom Malaysia Bhd................................. 295,668
535,000 Tractors Malaysia Holdings Bhd....................... 176,064
-----------
1,615,323
-----------
MEXICO - 4.0%
85,000 Altos Hornos de Mexico S.A.(a)....................... 196,154
25,700 Cemex S.A. de C.V.(a)................................ 116,702
24,000 Elamex S.A. de C.V.(a)............................... 180,000
</TABLE>

12
<PAGE>

EMERGING MARKETS FUND (CONTINUED)

Portfolio of Investments
December 31, 1997

Common Stocks (continued)
MEXICO (CONTINUED)
250,000 Grupo Herdez S.A., Series B.......................... $ 210,918
3,500 Telefonos de Mexico S.A., Class L, ADR............... 196,219
95,000 Transportacion Martima Mexicana S.A. de C.V., Class
A, ADR(a)........................................... 581,875
-----------
1,481,868
-----------
PAKISTAN - 0.5%
2,500 Pakistan Telecom Ltd. GDR(a,c)....................... 188,900
-----------
PERU - 1.7%
69,000 Banco Wiese ADR...................................... 345,000
21,900 Southern Peru Copper Corp. .......................... 292,913
-----------
637,913
-----------
PHILIPPINES - 3.5%
48,000 Metropolitan Bank & Trust Co. ....................... 322,963
6,570,000 MRC Allied Industries, Inc.(a)....................... 162,222
185,200 Philippine National Bank(a).......................... 406,983
586,700 Pilipino Telephone Corp.(a).......................... 65,189
1,116,000 Primetown Property Group, Inc.(a).................... 151,556
5,875,000 Republic Glass Holdings Corp......................... 165,370
-----------
1,274,283
-----------
POLAND - 4.6%
16,000 Agros Holdings S.A., Class C(a)...................... 331,348
18,500 Bank Rozwoju Eksportu S.A. .......................... 383,121
130,000 Mostostal-Export S.A. ............................... 328,226
44,000 Polifarb Wroclaw S.A.(a)............................. 208,454
25,000 Stomil Olsztyn S.A. ................................. 191,489
16,397 Zaclady Metali Lekkich Kety(a)....................... 251,188
-----------
1,693,826
-----------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>

PORTUGAL - 1.4%
17,000 Banco Totta & Acores S.A., Class B..................... $ 333,811
4,600 Electricidade de Portugal, S.A. ADR(a)................. 178,250
-----------
512,061
-----------
ROMANIA - 0.8%
27,000 Romcim Bucharest(a).................................... 305,706
-----------
RUSSIA - 9.5%
3,685,000 Aviastar(a)............................................ 89,361
415,000 Bashkirenergo(a)....................................... 224,100
13,000 Chelyabinsk Metal(a)................................... 260,000
32,000 Dalmore Product........................................ 112,000
200,000 Irkutskenergo.......................................... 39,400
1 Irkutskenergo RDC (Registered)(a)(c)................... 39,000
5,000 Izhorskie Zavody(a).................................... 400,000
2,400 Lukoil Holding Co. ADR................................. 220,380
5,000 Magnitogorsky Ferrous(a)............................... 117,500
2,000 Mosenergo ADR(a,c)..................................... 74,774
1,000,000 Novorossiysk Sea Shipping(a)........................... 300,000
30,000 Nizhnovsvyazinform(a).................................. 97,500
30,000 Norilsk Nickel(a)...................................... 190,500
2,000 Oskolcement(a,b)....................................... 114,000
24,000 Pervouralsky Novotrubny Factory(a)..................... 69,000
35,000 Primorsk Sea Shipping.................................. 129,500
60,000 Rostelekom(a).......................................... 213,000
3,800 Samarasvyazinform Preferred(a)......................... 199,500
32,500 Surgutneftegaz ADR..................................... 333,287
3,950 Verkhnyaya Salda Metal(a).............................. 266,724
-----------
3,489,526
-----------
SINGAPORE - 1.2%
20,000 City Developments Ltd. ................................ 92,774
250,000 Osprey Maritime Ltd. .................................. 200,714
119,000 Wing Tai Holdings Ltd. ................................ 139,417
-----------
432,905
-----------
</TABLE>

13
<PAGE>

EMERGING MARKETS FUND (CONTINUED)

Portfolio of Investments
December 31, 1997

The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- --------------------------------------------------------------------------------
<C> <S> <C>
Common Stocks (continued)
SLOVAKIA - 5.5%
24,280 Drotovna A.S.(a)....................................... $ 344,027
9,500 Nafta Gbely A.S. ...................................... 360,312
5,000 Plastika Nitra A.S. ................................... 68,985
39,000 Slovakofarma GDR(c).................................... 325,650
8,395 Slovenske Energeticke Stroja(a)........................ 66,083
14,700 Slovnaft A.S. ......................................... 391,749
23,800 VSZ A.S. .............................................. 461,898
-----------
2,018,704
-----------
SLOVENIA - 1.0%
20,500 SKB Banka GDR(c)....................................... 363,875
-----------
SOUTH AFRICA - 3.3%
285,000 Murray & Roberts Holdings Ltd. ........................ 430,443
10,000 Standard Bank Investment............................... 439,741
71,000 Sappi Ltd. ............................................ 357,444
-----------
1,227,628
-----------
SOUTH KOREA - 2.9%
70,000 Cho Hung Bank Co., Ltd. ............................... 142,891
28,000 Cho Hung Bank Co., Ltd. GDR(a)......................... 42,000
13,750 Hyundai Motor Co., Ltd. ............................... 151,696
31,000 Lg Cable & Machinery, Ltd.(a).......................... 97,847
5,940 Pohang Iron & Steel Co., Ltd. (b)...................... 168,091
3,400 Samsung Electronics GDR................................ 77,027
3,428 Samsung Electronics GDR(a,c)........................... 47,974
42,000 Sk Telecom Co., Ltd. ADR............................... 273,000
18,000 Ssangyong Oil Refining Co., Ltd. ...................... 76,142
-----------
1,076,668
-----------
THAILAND - 1.8%
98,300 Bankok Bank Public Co. Ltd. 12/31/98 SEC............... 244,984
123,947 Land & House Public Co., Ltd. (Foreign)................ 24,712
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note A1)
- -------------------------------------------------------------------------------
<C> <S> <C>

THAILAND (CONTINUED)
156,600 Pharta Thanakit Public Company Ltd. (Foreign)......... $ 87,000
11,000 Siam Cement Public Company Ltd. (Foreign)............. 86,812
125,000 Thai Farmer's Bank Public Co., Ltd. 12/31/98 SEC...... 227,155
-----------
670,663
-----------
TURKEY - 3.6%
4,500,000 Cimsa Cimento Sanayi Ve Ticaret A.S. ................. 244,270
4,250,000 Kartonsan Karton Sanayi Ve Ticaret A.S. .............. 261,460
550,000 Netas Telekomunik A.S.(a)............................. 199,034
4,640,000 Tat Konserve Sanayii A.S. ............................ 219,407
10,000,000 Yapi Ve Kredi Bankasi A.S. ........................... 381,182
-----------
1,305,353
-----------
VENEZUELA - 1.8%
50,000 Mavesa, S.A. ADR...................................... 318,750
84,000 Siderurgica Venezolana Sivensa ADR.................... 351,464
-----------
670,214
-----------
TOTAL -- COMMON STOCKS
(Cost $44,784,537)................................... 35,328,732
===========
</TABLE>

14
<PAGE>

EMERGING MARKETS FUND (CONTINUED)

Portfolio of Investments
December 31, 1997

The accompanying notes are an integral part of the financial statements.

<TABLE>
<CAPTION>
Face
Amount Maturity Discount Value
(000) Date Rate (Note A1)
- --------------------------------------------------------------------------------
<C> <C> <S> <C>
Government Obligations - 6.7%
U.S. TREASURY BILLS - 6.7%
$300 1/08/98, 4.98%.......................................... $ 299,710
192 1/22/98, 4.96%.......................................... 191,444
8 1/29/98, 5.06%.......................................... 7,968
84 2/05/98, 4.20%.......................................... 83,466
182 2/12/98, 5.11%.......................................... 180,956
232 2/19/98, 5.14%.......................................... 230,441
526 2/26/98, 5.04%.......................................... 521,869
579 3/12/98, 5.06%.......................................... 573,362
60 3/19/98, 5.08%.......................................... 59,349
323 3/26/98, 5.24%.......................................... 319,195
-----------
TOTAL -- U.S. GOVERNMENT OBLIGATIONS
(Cost $2,467,727)....................................... 2,467,760
-----------
TOTAL INVESTMENTS -- 102.9%
(Cost $47,252,264)...................................... 37,796,492
Other Assets and Liabilities (Net) -- (2.9%)............. (1,076,281)
-----------
NET ASSETS -- 100%....................................... $36,720,211
===========
</TABLE>
(a) Non-income producing securities.
(b) Fair valued securities - See Note A-1. Total market value of fair valued
securities owned at December 31, 1997 was $522,546 or 1.4% of net assets.
(c) 144A Security - Certain conditions for public sale may exist.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
RDC Russian Depositary Certificate - The Russian Depositary Certificates
represent fractional undivided interests in Sub-Trusts of the Russian
Depositary Trust, a unit established under the laws of the Cayman Islands.
Each Sub-Trust has a specific number of shares of stock of a designated
company organized under the laws of the Russian Federation. The
accompanying portfolio designates the shares of stock in each Sub-Trust
whose values are based upon the closing prices of the underlying shares in
such Sub-Trust.
SEC Share Entitlement Certificate.

SECTOR DIVERSIFICATION

<TABLE>
<CAPTION>
% of
Net Market
Assets Value
------ -----------
<S> <C> <C>
Capital Equipment.......................................... 12.3 $ 4,516,094
Consumer Goods............................................. 9.2 3,354,168
Diversified Operations..................................... 3.8 1,411,644
Energy..................................................... 8.9 3,253,755
Finance.................................................... 17.3 6,364,577
Materials.................................................. 26.2 9,616,902
Services................................................... 15.7 5,752,125
Technology................................................. 1.7 638,575
Treasury Obligations....................................... 6.7 2,467,760
Utilities.................................................. 1.1 420,892
----- -----------
Total Investments........................................ 102.9 $37,796,492
Other Assets and Liabilities (Net)......................... (2.9) (1,076,281)
----- -----------
Net Assets............................................... 100.0 $36,720,211
===== ===========
</TABLE>

15
<PAGE>

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 1997

<TABLE>
<CAPTION>
Emerging
International Markets
Fund Fund
------------- -----------
<S> <C> <C>
ASSETS:
Investments, at Cost--see accompanying
portfolios....................................... $206,280,415 $47,252,264
============ ===========
Investments, at Value (Note A1)................... $185,399,237 $37,796,492
Dividends Receivable.............................. 268,929 37,027
Receivable for Fund Shares Sold................... 1,010,000 298,980
Receivable for Investments Sold................... 2,146,622 2,859,259
Receivable from Investment Adviser (Note B)....... -- 12,834
Deferred Organization Costs (Note A5)............. 40,294 40,319
Other Assets...................................... 7,596 4,108
------------ -----------
Total Assets..................................... 188,872,678 41,049,019
------------ -----------
LIABILITIES:
Payable for Investments Purchased................. 919,251 2,404,503
Payable for Fund Shares Redeemed.................. -- 517,821
Net Unrealized Loss on Foreign Currency Contracts
(Note A3)........................................ -- 3,810
Overdraft Payable................................. 1,033,022 1,270,459
Management Fees Payable........................... 48,609 --
Administration Fees Payable....................... 20,354 5,176
Custodian Fees Payable............................ 209,197 91,045
Professional Fees Payable......................... 15,499 15,499
Accrued Expenses and Other Liabilities............ 67,891 20,495
------------ -----------
Total Liabilities................................ 2,313,823 4,328,808
------------ -----------
NET ASSETS........................................ $186,558,855 $36,720,211
============ ===========
NET ASSETS CONSIST OF:
Paid-in Capital................................... $206,594,633 $46,655,866
Undistributed (Distributions in Excess of) Net
Investment Income................................ (15,225) 4,734
Accumulated Net Realized Gain (Loss).............. 870,636 (483,990)
Unrealized Depreciation of Investments and Foreign
Currency Translations............................ (20,891,189) (9,456,399)
------------ -----------
NET ASSETS........................................ $186,558,855 $36,720,211
============ ===========
Shares of Beneficial Interest Outstanding
(unlimited authorization, no par value).......... 19,050,977 4,319,784
============ ===========
NET ASSET VALUE PER SHARE......................... $ 9.79 $ 8.50
============ ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

16
<PAGE>

STATEMENTS OF OPERATIONS

Year Ended December 31, 1997

<TABLE>
<CAPTION>
Emerging
International Markets
Fund Fund
------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends......................................... $ 2,436,285 $ 389,051
Interest.......................................... 700,138 188,071
Less: Foreign Taxes Withheld...................... (274,606) (23,627)
------------ -----------
Total Income..................................... 2,861,817 553,495
------------ -----------
EXPENSES:
Investment Advisory Fees (Note B):
Basic Fees....................................... 756,296 211,273
Less: Fees Waived................................ (232,426) (113,120)
------------ -----------
Investment Advisory Fees--Net..................... 523,870 98,153
Administration Fees............................... 139,285 41,437
Custodian Fees.................................... 244,971 113,567
Professional Fees................................. 31,574 31,574
Registration and Filing Fees...................... 97,461 33,261
Shareholder Reports............................... 8,625 8,625
Trustees' Fees and Expenses (Note E).............. 6,312 6,312
Amortization of Organization Costs (Note A5)...... 9,839 9,814
Miscellaneous Expenses............................ 6,559 4,627
------------ -----------
Total Expenses................................... 1,068,496 347,370
------------ -----------
Expenses Reimbursed by Investment Adviser (Note
B)............................................... (59,242) (30,659)
------------ -----------
Net Expenses...................................... 1,009,254 316,711
------------ -----------
NET INVESTMENT INCOME............................. 1,852,563 236,784
------------ -----------
NET REALIZED GAIN (LOSS):
Security Transactions............................. 2,722,096 (410,898)
Foreign Currency Transactions..................... (350,740) 76,166
------------ -----------
Net Realized Gain (Loss)......................... 2,371,356 (334,732)
------------ -----------
NET UNREALIZED DEPRECIATION ON:
Investments....................................... (20,881,178) (9,455,772)
Foreign Currency Translations..................... (10,011) (627)
------------ -----------
Net Unrealized Depreciation...................... (20,891,189) (9,456,399)
------------ -----------
NET REALIZED AND UNREALIZED LOSS.................. (18,519,833) (9,791,131)
------------ -----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... $(16,667,270) $(9,554,347)
============ ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

17
<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
International Fund Emerging Markets Fund
------------------------------------ ------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, 1997 December 31, 1996* December 31, 1997 December 31, 1996*
----------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net Investment Income... $ 1,852,563 $ 412 $ 236,784 $ 412
Net Realized Gain
(Loss)................. 2,371,356 -- (334,732) --
Net Unrealized Deprecia-
tion................... (20,891,189) -- (9,456,399) --
------------ ---------- ----------- ----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations........ (16,667,270) 412 (9,554,347) 412
------------ ---------- ----------- ----------
DISTRIBUTIONS:
Net Investment Income... (1,512,675) -- (319,047) --
In Excess of Net Invest-
ment Income............ (15,225) -- -- --
Capital Gains........... (1,851,460) -- (73,128) --
------------ ---------- ----------- ----------
Total Distributions.... (3,379,360) -- (392,175) --
------------ ---------- ----------- ----------
CAPITAL SHARE TRANSAC-
TIONS (NOTE G):
Proceeds from Shares
Sold................... 198,341,640 4,244,847 42,364,916 5,181,548
Net Asset Value of
Shares Reinvested...... 3,160,738 -- 217,646 --
Cost of Shares Re-
deemed................. (6,001) -- (1,455,689) --
Transaction Fees........ 813,273 -- 307,324 --
------------ ---------- ----------- ----------
Increase in Net Assets
from Capital Share
Transactions........... 202,309,650 4,244,847 41,434,197 5,181,548
------------ ---------- ----------- ----------
Net Increase in Net As-
sets................... 182,263,020 4,245,259 31,487,675 5,181,960
NET ASSETS:
Beginning of Period.... 4,295,835 50,576 5,232,536 50,576
------------ ---------- ----------- ----------
End of Period.......... $186,558,855 $4,295,835 $36,720,211 $5,232,536
============ ========== =========== ==========
Undistributed
(Distributions in
Excess of) Net
Investment Income
Included in End of
Period Net Assets...... $ (15,225) $ 1,013 $ 4,734 $ 1,013
============ ========== =========== ==========
</TABLE>
- --------------------------
* The Fund commenced operations on December 30, 1996.

The accompanying notes are an integral part of the financial statements.

18
<PAGE>

FINANCIAL HIGHLIGHTS

For a Share Outstanding Throughout Each Period

<TABLE>
<CAPTION>
International Fund Emerging Markets Fund
------------------------------------- -------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, 1997 December 31, 1996*+ December 31, 1997 December 31, 1996*+
----------------- ------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 10.12 $ 10.12 $ 10.12 $ 10.12
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income... 0.10 -- 0.05 --
Net Realized and
Unrealized Loss ....... (0.25) -- (1.58) --
-------- ------- ------- -------
Total from Investment
Operations............ (0.15) -- (1.53) --
-------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net Investment Income... (0.08) -- (0.07) --
In Excess of Net Invest-
ment Income............ -- ++ -- -- --
Capital Gains........... (0.10) -- (0.02) --
-------- ------- ------- -------
Total Distributions.... (0.18) -- (0.09) --
-------- ------- ------- -------
Net Asset Value, End of
Period................. $ 9.79 $ 10.12 $ 8.50 $ 10.12
======== ======= ======= =======
TOTAL RETURN............ (1.46)% 0.00 % (15.11)% 0.00 %
RATIOS AND SUPPLEMENTAL
DATA:
Net Assets, End of Pe-
riod (in Thousands).... $186,559 $ 4,296 $36,720 $ 5,233
RATIO OF EXPENSES TO AV-
ERAGE NET ASSETS(1).... 1.00 % 1.00 %** 1.50 % 1.50 %**
Ratio of Net Investment
Income to Average Net
Assets(1).............. 1.84 % 3.50 %** 1.12 % 2.87 %**
Portfolio Turnover
Rate................... 14 % 0 % 15 % 0 %
Average Commission Rate
Per Share.............. $ 0.0078 $0.0000 $0.0034 $0.0000
As a Percentage of
Trade Amount.......... 0.36 % -- 0.62 % --

- --------------------------
(1) Effect of voluntary expense limitation
during the period:
Ratio of Expenses to
Average Net Assets... 1.29 % 77.13 %** 2.18 % 65.28 %**
Ratio of Net
Investment Income
(Loss) to Average Net
Assets............... 1.55 % (72.63)%** 0.44 % (60.91)%**
</TABLE>

* The 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.
++ Amount represents less than $0.01 per share.

The accompanying notes are an integral part of the financial statements.

19
<PAGE>

NOTES TO FINANCIAL STATEMENTS

December 31, 1997

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 December 31, 1997, the Trust was
comprised of two separate active, diversified portfolios (individually re-
ferred to as a "Fund," collectively as the "Funds"). The International Fund
and the Emerging Markets Fund, each a Fund of the Trust, commenced 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 pol-
icy 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 compa-
nies. Such policies are consistently followed by the Trust in the preparation
of the financial statements. Generally accepted accounting principles may re-
quire management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could dif-
fer from those estimates.

1. SECURITY VALUATION: Equity securities listed on a U.S. exchange are val-
ued at the latest quoted sales price on the valuation date. Securities
listed on a foreign exchange are valued at their closing price. Unlisted se-
curities 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 secu-
rities 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 re-
stricted securities and unlisted foreign securities, are valued at fair
value as determined in good faith by the Board of Trustees, although the ac-
tual calculations may be done by others.

The Funds' investments in emerging markets or developing markets may subject
the Funds to a greater degree of risk than in a developed market. Risks as-
sociated with these developing markets, attributable to political, social or
economic factors, may affect the price of the Funds' investments and income
generated by these investments, as well as the Funds' ability to repatriate
such amounts.

2. FOREIGN CURRENCY TRANSLATION: The accounting records of the Funds are
maintained in U.S. dollars. Investment securities and other assets and lia-
bilities denominated in a foreign currency are translated into U.S. dollars
at the foreign currency exchange rates applicable on that day. Purchases and
sales of securities, income receipts and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates of
the transactions. Net realized gains and losses on foreign currency transac-
tions represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, currency gains and
losses realized between the trade and settlement dates on securities trans-
actions and the difference between the amount of net investment income ac-
crued and the U.S. dollar amount actually received. The effect of changes in
foreign currency exchange rates on investments in securities are not segre-
gated in the Statement of Operations from the effects of changes in market
prices of those securities, but are included with the net realized and
unrealized gain or loss on investment in securities.

3. FORWARD CURRENCY EXCHANGE CONTRACTS: The Funds may enter into forward
currency exchange contracts in connection with planned purchases or sales of
securities or to hedge the value of some or all of a Fund's portfolio secu-
rities. A forward currency contract is an agreement between two parties to
purchase and sell a currency at a set price on a future date. The market
value of a forward currency contract fluctuates with changes in currency ex-
change rates applicable on that day. Forward currency contracts are marked-
to-

20
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

market daily using the forward foreign currency exchange rates applicable on
that day or at such other rates as deemed appropriate. The change in value
is recorded by the Funds as an unrealized gain or loss. When a forward cur-
rency contract is extinguished, either by delivering the currency or by en-
tering into another forward currency contract, the Fund records a realized
gain or loss equal to the difference between the value of the contract at
the time it was opened and the value of the contract at settlement date. The
Funds could be exposed to risk if the counterparties are unable to meet the
terms of the contracts or if the value of the currency changes unfavorably
relative to the U.S. dollar.

4. 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.

5. ORGANIZATIONAL COSTS: The organizational costs of the Funds are being am-
ortized on a straight-line basis over a period of five years beginning with
each Fund's commencement of operations. Hansberger Global Investors, Inc.
has agreed that in the event any of its initial shares in a Fund are re-
deemed, 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.

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 for-
eign securities where the ex-dividend date may have passed are recorded as
soon as the Fund is informed of the ex-dividend date in the exercise of rea-
sonable 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 at-
tributed to a particular Fund. Expenses that cannot be directly attributed
are apportioned among the Funds based upon relative net assets. Distribu-
tions to shareholders are recorded on the ex-date. Income and capital gain
distributions are determined in accordance with U.S. federal income tax reg-
ulations, 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 distribu-
tions will result in reclassifications to paid-in capital, undistributed net
investment income (loss) and accumulated net realized gain (loss) on invest-
ments and foreign currency transactions. Undistributed net investment income
(loss) and accumulated net realized gain (loss) may include temporary book
and tax differences which should reverse in a subsequent period.

For the year ended December 31, 1997, the Funds reclassified the following
amounts:

<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME (LOSS) GAIN (LOSS) CAPITAL
-------------- ------------ -------
<S> <C> <C> <C>
International Fund....................... $(340,901) $350,740 $(9,839)
Emerging Markets Fund.................... 85,984 (76,130) (9,854)
</TABLE>

Distributions in excess of tax basis earnings and profits will be reported
in the Fund's financial statements as a return of capital. Furthermore, dif-
ferences in the recognition or classification of income between the finan-
cial statements and tax earnings and profits which result in temporary over-
distributions for financial statement purposes are classified as distribu-
tions in excess of net investment income or in excess of accumulated net re-
alized gains.

Permanent book and tax basis differences, if any, are not included in ending
undistributed net investment income for the purpose of calculating net in-
vestment 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
agree-

21
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

ment at a monthly fee calculated at the annual rate of 0.75% and 1.00% of aver-
age daily net assets of the International Fund and the Emerging Markets Fund,
respectively. The Adviser has voluntarily agreed to reduce advisory fees pay-
able 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 discon-
tinue 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 ad-
ministrative, 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 em-
ployees of CGFSC are officers of the Fund.

D. CUSTODIAN: The Chase Manhattan Bank serves as the Trust's custodian in ac-
cordance with a custodian agreement. Custodian fees are computed and payable
monthly based on assets held, investment purchases and sales activity, an ac-
count maintenance fee, plus reimbursement for certain out-of-pocket expenses.

E. TRUSTEE FEES: The Trust pays each Trustee, who is not also an officer or af-
filiated person, an annual fee plus travel and other expenses incurred in at-
tending board meetings. Trustees who are also officers or affiliated persons
receive no remuneration for their service as Trustees.

Expenses for the year ended December 31, 1997 include legal fees paid to Mor-
gan, Lewis & Bockius LLP. A partner of that firm is a Trustee to the Trust.

F. PURCHASES AND SALES: For the year ended December 31, 1997, purchases and
sales of investment securities other than long-term U.S. Government securities
and short-term investments were as follows:

<TABLE>
<CAPTION>
Fund Purchases Sales
- ---- ------------ -----------
<S> <C> <C>
International Fund..................................... $203,212,617 $12,084,361
Emerging Markets Fund.................................. 47,808,338 2,611,254
</TABLE>

There were no purchases or sales of long-term U.S. Government securities during
the year ended December 31, 1997.

G. CAPITAL SHARE TRANSACTIONS: Transactions in fund shares for the periods in-
dicated below were as follows:

<TABLE>
<CAPTION>
International Fund Emerging Markets Fund
------------------- ----------------------
Year Period Year Period
Ended Ended Ended Ended
12/31/97 12/31/96 12/31/97 12/31/96
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Shares sold........................ 18,303,555 424,451 3,945,128 517,011
Shares issued on reinvestment of
distributions..................... 323,501 -- 25,943 --
Shares repurchased................. 530 -- 168,298 --
---------- ------- ----------- ---------
Increase (decrease)................ 18,626,526 424,451 3,802,773 517,011
Fund shares:
Beginning of period................ 424,451 -- 517,011 --
---------- ------- ----------- ---------
End of period...................... 19,050,977 424,451 4,319,784 517,011
</TABLE>

Effective April 15, 1997, new shareholders are charged a transaction fee in
connection with each purchase and redemption of shares of each fund. The trans-
action fee is 0.50% for the International Fund and 1.00% for the Emerging Mar-
kets Fund. The transaction fee is not a sales charge and is retained by the
Funds. The fee does not apply to and is not charged in connection with ex-
changes from one Fund to another, certain insignificant transactions, including
the reinvestment of dividends or capital gain distributions, or transactions
involving shareholders who previously purchased shares that were not subject to
the transaction fee.

H. OTHER: At December 31, 1997, cost, unrealized appreciation, unrealized (de-
preciation), and net unrealized appreciation (depreciation) for U.S. Federal
income tax purposes of the investments of the Portfolio were as follows:

<TABLE>
<CAPTION>
Net
Unrealized
Unrealized Unrealized Appreciation
Fund Cost Appreciation (Depreciation) (Depreciation)
---- ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
International Fund...... $206,280,415 $12,857,677 $(33,738,855) $(20,881,178)
Emerging Markets Fund... 47,252,264 2,094,097 (11,549,869) (9,455,772)
</TABLE>

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.

22
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Trustees of Hansberger Institutional Series:

We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of Hansberger Institutional Series, a
Massachusetts Business Trust (comprising, respectively, the International Fund
and the Emerging Markets Fund) as of December 31, 1997, and the related
statements of operations, the statements of changes in net assets and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the Hansberger Institutional
Series as of December 31, 1997, the results of their operations, the changes
in their net assets and the financial highlights for the periods presented in
conformity with generally accepted accounting principles.

Arthur Andersen LLP

Boston, Massachusetts
February 6, 1998

- -------------------------------------------------------------------------------

FEDERAL INCOME TAX INFORMATION (UNAUDITED):

For the year ended December 31, 1997, the Funds expect to pass through to
shareholders foreign tax credits of approximately $275,000 and $21,000 for the
International Fund and Emerging Markets Fund, respectively. In addition, for
the year ended December 31, 1997, gross income derived from sources within
foreign countries amounted to $2,441,000 and $391,000 for the International
Fund and Emerging Markets Fund, respectively.