<PAGE>
LOGO
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Hansberger
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Institutional
Series
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PROSPECTUS
International Fund
Emerging Markets Fund
Foreign Small Cap Fund
All Countries Fund(SM)
<PAGE>
HANSBERGER INSTITUTIONAL SERIES
PROSPECTUS
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- ----------------- ----
<S> <C>
Introduction............................................................... 2
Fee Summary................................................................ 3
Investment Objectives and Policies......................................... 6
Risk Factors............................................................... 14
Investment Limitations..................................................... 16
Purchase and Redemption of Shares.......................................... 17
Shareholder Services....................................................... 21
Management of the Fund..................................................... 23
Valuation of Shares........................................................ 25
Performance Information.................................................... 26
Dividends and Capital Gains Distributions.................................. 26
Taxes...................................................................... 27
Portfolio Transactions..................................................... 28
General Information........................................................ 28
</TABLE>
<PAGE>
LOGO
HANSBERGER INSTITUTIONAL SERIES
515 EAST LAS OLAS BOULEVARD
SUITE 1300
FORT LAUDERDALE, FLORIDA
TELEPHONE NO. 954-522-5150
Hansberger Institutional Series (the "Trust"), a diversified management
investment company, is designed to provide institutional investors with multi-
national investment opportunities professionally managed by Hansberger Global
Investors, Inc. (the "Adviser"). The Trust currently consists of four separate
investment series (the "Funds") offering a range of investment choices. The
Funds and their investment objectives are:
International Fund. Seeks to achieve long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments outside the United States including developing countries.
Emerging Markets Fund. Seeks to achieve long-term capital growth through a
policy of investing primarily in publicly traded equity securities of
companies located in emerging markets.
Foreign Small Cap Fund. Seeks to achieve long-term capital growth through a
policy of investing primarily in equity securities of issuers with relatively
small market capitalizations located outside the United States.
All Countries Fund(SM.) Seeks to achieve long-term capital growth through a
policy of investing primarily in securities of companies located in any
country, including the United States.
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in a Fund, nor
can there be any assurance that a Fund's investment objective will be
attained. Each Fund may invest without limit in developing countries, borrow
money for investment purposes, invest in a variety of derivative instruments,
and may invest up to 15% of its net assets in illiquid securities, each of
which may involve greater risk and/or increased Fund expenses. In addition,
investments in foreign securities involve certain risks which are not normally
involved in investment in U.S. securities. See "RISK FACTORS." Investors
should carefully consider these risks before investing.
This Prospectus sets forth concisely information about the Funds that you
should know before investing. You should read it carefully and retain it for
future reference. Additional information about the Funds appears in a
Statement of Additional Information ("SAI"), also dated May 1, 1998, and has
been filed with the Securities and Exchange Commission (the "SEC"). The SAI is
incorporated in this Prospectus by reference. The SAI is available upon
request and without charge by writing or calling the Trust at the address or
telephone number provided above.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
TRUST'S SHARES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
The date of this Prospectus is May 1, 1998.
<PAGE>
INTRODUCTION
This Prospectus describes the International Fund, Emerging Markets Fund,
Foreign Small Cap Fund and All Countries FundSM (the "Funds"), four
diversified series of shares offered by the Hansberger Institutional Series
(the "Trust"), an open-end management investment company. Each Fund's
investment objective is long-term capital growth, but follows different
investment policies, and invests primarily in certain securities consistent
with those policies in attempting to meet its objective. See "INVESTMENT
OBJECTIVES AND POLICIES."
INVESTMENT ADVISER
Hansberger Global Investors, Inc. (the "Adviser") serves as investment
adviser to the Funds. See "MANAGEMENT OF THE FUND--Investment Adviser."
INVESTMENT RISKS
There can be no assurance that any Fund will achieve its investment
objectives. In addition, special risks may be presented by the particular
investment policies of each Fund. For example, each Fund has the right to
purchase securities in any foreign country, developed or developing. Investors
should consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations, which are
in addition to the usual risks inherent in domestic investments. Each of the
Funds' investment strategies involves specific risks described in this
Prospectus under "INVESTMENT OBJECTIVES AND POLICIES" and "RISK FACTORS," and
under "INVESTMENT POLICIES AND TECHNIQUES" and "'ADDITIONAL RISK FACTORS" in
the SAI.
HOW TO INVEST
You may purchase shares at the Offering Price by check or by wire directly
from the Trust. The Offering Price is the net asset value per share next
determined after the Fund's transfer agent receives your order. See "FEE
SUMMARY." Your minimum initial investment in the Trust is normally $1,000,000,
and each subsequent investment must be at least $100,000. At its discretion,
the Adviser may waive minimum investment requirements for certain investors,
clients and employees. No minimum applies to automatic reinvestment of
dividends and capital gains distributions. You may be charged a fee if you
effect transactions through a broker or agent. See "PURCHASE AND REDEMPTION OF
SHARES." CURRENTLY, SHARES OF FOREIGN SMALL CAP FUND AND ALL COUNTRIES FUND SM
ARE NOT BEING OFFERED OR SOLD.
HOW TO REDEEM SHARES
You may redeem your shares of a Fund at any time at the net asset value per
share next determined after the Trust receives your redemption request in
"good order." Each Fund's net asset value per share fluctuates, so a share's
redemption price may be more or less than its purchase price. If you reduce
your total investment in a Fund to less than the minimum required initial
investment amount, your investment may be subject to redemption. See "PURCHASE
AND REDEMPTION OF SHARES."
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund expects to pay dividends and distribute capital gains at least
annually. Unless you provide written notice to the Fund to the contrary,
dividends and distributions will be automatically reinvested. See "DIVIDENDS
AND CAPITAL GAINS DISTRIBUTIONS."
2
<PAGE>
FEE SUMMARY
The following table and example are intended to assist you in understanding
the expenses and fees that a shareholder of a Fund will incur:
<TABLE>
<CAPTION>
EMERGING FOREIGN ALL
INTERNATIONAL MARKETS SMALL CAP COUNTRIES
FUND FUND FUND+ FUNDSM+
------------- -------- --------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES*
Maximum Sales Load Imposed on
Purchases......................... None None None None
Maximum Deferred Sales Load........ None None None None
Maximum Deferred Sales Load Imposed
on Reinvested Dividends........... None None None None
Exchange Fees...................... None None None None
Redemption Fees.................... 0.50% 1.00% 1.00% 0.50%
==== ==== ==== ====
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management Fees (after voluntary
waivers)**........................ 0.52% 0.46% 0.90% 0.75%
12b-1 Fees......................... None None None None
Other Expenses (after voluntary
reimbursements)***................ 0.48% 1.04% 0.35% 0.25%
---- ---- ---- ----
Total Fund Operating Expenses
(after voluntary waivers and
reimbursements)****............... 1.00% 1.50% 1.25% 1.00%
==== ==== ==== ====
</TABLE>
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* Shareholders will be charged a transaction fee, which is payable directly
to the Fund, in connection with each purchase and redemption of shares of
the Fund. The transaction fee is intended to allocate transaction costs
associated with purchases and redemptions of shares of the Fund to
investors actually making such purchases and redemptions rather than to the
Fund's other shareholders. The transaction fee represents the Adviser's
estimate of such transaction costs, which include the costs of acquiring
and disposing of the Fund's portfolio securities. The transaction fee is
1.00% for the Emerging Markets and Foreign Small Cap Funds and 0.50% for
the International and All Countries Funds. THE TRANSACTION FEE IS NOT A
SALES CHARGE OR LOAD, AND IS RETAINED BY THE FUND. The fee does not apply
to, and is not charged in connection with exchanges 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.
** Reflects voluntary waivers of fees by the Adviser. In the absence of such
voluntary waivers, management fees for the International Fund and the
Emerging Markets Fund were 0.75% and 1.00%, respectively, for the fiscal
year ended December 31, 1997.
*** Reflects voluntary reimbursements of fees and other expenses by the
Adviser. In the absence of such voluntary reimbursements, Other Expenses
for the International Fund and the Emerging Markets Fund were 0.54% and
1.18%, respectively, for the fiscal year ended December 31, 1997. Other
Expenses for the Foreign Small Cap Fund and the All Countries FundSM,
absent such voluntary waivers and reimbursements, are estimated to be
0.40% and 0.45%, respectively, for the fiscal year ending December 31,
1998.
**** Reflects voluntary waivers and reimbursements of fees by the Adviser. In
the absence of such voluntary waivers or reimbursements, Total Fund
Operating Expenses for the International Fund and the Emerging Markets
Fund would have been 1.29% and 2.18%, respectively, for the fiscal year
ended December 31, 1997. Other Expenses for the Foreign Small Cap Fund
and the All Countries FundSM, absent such voluntary waivers and
reimbursements, are estimated to be 1.30% and 1.20%, respectively, for
the fiscal year ending December 31, 1998.
+ As of May 1, 1998, the Foreign Small Cap Fund and All Countries FundSM had
not yet commenced operations.
3
<PAGE>
EXAMPLE
The following example demonstrates the expenses you would pay on a $1,000
investment assuming 5% annual return and (1) redemption at the end of each
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
International Fund........................ $20 $42 $ 66 $135
Emerging Markets Fund..................... $36 $68 $104 $203
Foreign Small Cap Fund.................... $33 $61
All Countries FundSM...................... $20 $42
</TABLE>
or (2) no redemption at the end of each period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
International Fund........................ $15 $37 $60 $127
Emerging Markets Fund..................... $25 $57 $92 $189
Foreign Small Cap Fund.................... $23 $50
All Countries FundSM...................... $15 $37
</TABLE>
THE EXAMPLE IS BASED UPON TOTAL OPERATING EXPENSES, EXCEPT WITH RESPECT TO
THE FOREIGN SMALL CAP AND ALL COUNTRIES FUNDS FOR WHICH IT IS BASED ON
ESTIMATED EXPENSES. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. THE ASSUMPTION OF A 5% ANNUAL RETURN IS REQUIRED BY THE SEC AND IS NOT
A PREDICTION OF A FUND'S FUTURE PERFORMANCE. THE EXAMPLE ASSUMES THE DEDUCTION
OF TRANSACTION FEES AT THE TIME OF PURCHASE AND REDEMPTION. INVESTMENTS IN THE
FUNDS PRIOR TO APRIL 15, 1997, ARE NOT SUBJECT TO THE TRANSACTION FEES.
The Adviser may direct a Fund's securities transactions to brokers who may
agree to assume (or to arrange for third parties to assume) certain expenses
of the Fund.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following information is included in the Trust's Annual Report and has
been audited by Arthur Andersen LLP, the Trust's independent accountants.
Their report on the financial statements and financial highlights is included
in the Annual Report, and is incorporated by reference into the SAI. As of
December 31, 1997, the Foreign Small Cap Fund and All Countries FundSM had not
yet commenced operations. The Trust's 1997 Annual Report to Shareholders is
available upon request and without charge by calling 1-800-414-6927.
For a Share Outstanding Throughout Each Period.
<TABLE>
<CAPTION>
INTERNATIONAL FUND EMERGING MARKETS FUND
-------------------------- -------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996*+ 1997 1996*+
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.12 $ 10.12 $ 10.12 $ 10.12
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income... 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
Investment 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
Period (in Thousands).. $186,559 $ 4,296 $36,720 $ 5,233
RATIO OF EXPENSES TO
AVERAGE 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.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective and the investment restrictions set forth
under "INVESTMENT RESTRICTIONS" in the SAI are fundamental and may not be
changed without Shareholder approval. All other investment policies and
practices described in this Prospectus are not fundamental, and may be changed
by the Board of Trustees without Shareholder approval.
INTERNATIONAL FUND
The Fund's investment objective is long-term capital growth. The Fund seeks
to achieve its objective by investing in stocks and debt obligations of
companies and governments outside the United States which the Adviser believes
are undervalued. Income will be an incidental consideration.
The Adviser's portfolio investment decisions rely heavily on a fundamental
analysis of securities with a long-term investment perspective. The Adviser
seeks to increase the scope and effectiveness of this fundamental investment
approach by extending the search for value into many countries around the
world. This global search provides the Adviser with more diverse opportunities
and flexibility to shift portfolio investments not only from company to
company and industry to industry, but also country to country, in search of
undervalued securities. Under normal market conditions, the Fund will invest
more than 80% of its assets in issuers located in at least three countries
other than the United States. This 80% does not include the cash position of
the Fund.
EMERGING MARKETS FUND
The Fund's investment objective is long-term capital growth. The Fund seeks
to achieve this goal by investing primarily in a diversified portfolio of
publicly traded equity securities of companies located in emerging markets
that the Adviser believes are undervalued. The Fund may also, to a lesser
degree, invest in private placement emerging market equity securities.
Dividend and interest income from portfolio securities is largely an
incidental consideration.
The Adviser's portfolio investment decisions rely heavily on a fundamental
analysis of securities with a long-term investment perspective. The Adviser
seeks to increase the scope and effectiveness of this fundamental investment
approach by extending the search for value into many countries around the
world. This global search provides the Adviser with more diverse opportunities
and flexibility to shift portfolio investments not only from company to
company and industry to industry, but also country to country, in search of
undervalued securities.
Under normal circumstances, the Fund will invest at least 70% of the the
value of its total assets in securities of issuers located in emerging market
countries. As used in this Prospectus, the terms "emerging market country,"
"emerging country," or "developing country" apply to any country that, in the
Adviser's opinion, is generally considered to be an emerging or developing
country in the international financial community, which includes the
International Bank for Reconstruction and Development (the "World Bank") and
the International Finance Corporation. There are currently over 130 countries
that are emerging or developing countries under this standard; approximately
40 of these countries currently have stock markets. These countries generally
include every nation in the world except the United States, Canada, Japan,
Australia, New Zealand and most nations located in Western Europe. Securities
of issuers located in emerging market countries or traded in emerging markets
present greater liquidity risks and other risks than securities of issuers
located in developed countries and traded in more established markets.
By engaging in its own research and by reviewing research obtained through
outside sources, the Adviser seeks to identify appropriate investments for the
Fund. The Adviser considers a number of factors in evaluating potential
investments including political risks, classic macro-economic variables
6
<PAGE>
and equity market valuations. The Adviser also focuses on the quality of a
company's management, the company's growth prospects, and the financial
wellbeing of the company. The Fund's investments generally will reflect a
broad cross-section of countries, industries, and companies in order to
minimize risk. In situations where the market for a particular security is
determined by the Adviser to be sufficiently liquid, the Fund may engage in
short sales. These investment techniques are described below under "Investment
Techniques" and "RISK FACTORS," and under the heading "INVESTMENT POLICIES AND
TECHNIQUES" in the SAI.
FOREIGN SMALL CAP FUND
The Fund's investment objective is to provide long-term capital growth. It
seeks to achieve its objective by investing primarily in equity securities of
issuers with relatively small market capitalizations (share price times number
of equity securities outstanding) located outside the United States which the
Adviser believes are undervalued. Income will be an incidental consideration.
The Adviser's portfolio investment decisions rely heavily on a fundamental
analysis of securities with a long-term investment perspective. The Adviser
seeks to increase the scope and effectiveness of this fundamental investment
approach by extending the search for value into many countries around the
world. This global search provides the Adviser with more diverse opportunities
and flexibility to shift portfolio investments not only from company to
company and industry to industry, but also country to country, in search of
undervalued securities. Under normal market conditions, the Fund will invest
at least 70% of the value of its total assets in (1) companies located in
developing countries with individual market capitalizations of less than $750
million USD (at the time of purchase) and (2) companies located in developed
countries, other than the United States, with individual market
capitalizations of less than $1.5 billion USD (at the time of purchase).
ALL COUNTRIES FUND(SM)
The Fund's investment objective is long-term capital growth. The Fund seeks
to achieve its objective by investing in stocks and debt obligations of
companies and governments in any country which the Adviser believes are
undervalued. Income will be an incidental consideration.
The Adviser's portfolio investment decisions rely heavily on a fundamental
analysis of securities with a long-term investment perspective. The Adviser
seeks to increase the scope and effectiveness of this fundamental investment
approach by extending the search for value into many countries around the
world. This global search provides the Adviser with more diverse opportunities
and flexibility to shift portfolio investments not only from company to
company and industry to industry, but also country to country, in search of
undervalued securities. Under normal market conditions, the Fund will invest
its assets in at least three countries, which may include the United States.
INVESTMENT POLICIES COMMON TO EACH FUND
Although each Fund generally invests in common stock, a Fund may also invest
in preferred stocks and certain debt securities, rated or unrated, such as
convertible bonds and bonds selling at a discount, when the Adviser believes
the potential for appreciation will equal or exceed that available from
investments in common stock. Each Fund may also invest in warrants or rights
to subscribe to or purchase such securities, and sponsored or unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs") and other depositary receipts
(collectively, "Depositary Receipts"). Each Fund may invest in securities of
companies or investment trusts that invest in, or securities backed by,
mortgages, real estate or interests in real estate, including, but not limited
to, real estate investment trusts ("REITs"). Each Fund may also lend its
portfolio securities and borrow money for investment purposes (i.e.,
"leverage" its portfolio). In addition, each Fund may invest in closed-end
investment companies holding foreign securities, and
7
<PAGE>
enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. When deemed appropriate by the Adviser, the Fund may
invest cash balances in repurchase agreements and other money market
investments to maintain liquidity in an amount sufficient to meet expenses or
for day-to-day operating purposes. These investment techniques are described
below under "Investment Techniques" and "Risk Factors," and under the heading
"INVESTMENT POLICIES AND TECHNIQUES" in the SAI. Whenever, in the judgment of
the Adviser, market or economic conditions warrant, each Fund may adopt a
temporary defensive position and may invest without limit in money market
securities denominated in U.S. dollars or in the currency of any foreign
country. See "Investment Techniques--Temporary Investments."
INVESTMENT TECHNIQUES
Unless specified to the contrary, each Fund may engage in the investment
techniques and make the types of investments described and discussed in this
section.
Depositary Receipts. Each Fund may purchase sponsored and unsponsored
Depositary Receipts that are or become available, including ADRs, GDRs, EDRs
and other Depositary Receipts. Depositary Receipts are typically issued by a
financial institution ("depository") and evidence ownership interests in a
security or a pool of securities ("underlying securities") that have been
deposited with the depository. In ADRs, the depository is typically a U.S.
financial institution and the underlying securities are issued by a foreign
issuer. In other Depositary Receipts, the depository may be a foreign or a
U.S. entity, and the underlying securities may have a foreign or a U.S.
issuer. Depositary Receipts will not necessarily be denominated in the same
currency as their underlying securities. Depositary Receipts may be issued
pursuant to sponsored or unsponsored programs. In sponsored programs, an
issuer has made arrangements to have its securities traded in the form of
Depositary Receipts. In unsponsored programs, the issuer may not be directly
involved in the creation of the program. Although regulatory requirements with
respect to sponsored and unsponsored programs are generally similar, in some
cases it may be easier to obtain financial information from an issuer that has
participated in the creation of a sponsored program. Accordingly, there may be
less information available regarding issuers of securities underlying
unsponsored programs and there may not be a correlation between such
information and the market value of the Depositary Receipts. For purposes of a
Fund's investment policies, investments in Depositary Receipts will be deemed
to be investments in the underlying securities. Thus, a Depositary Receipt
representing ownership of common stock will be treated as common stock.
Sovereign Debt. Each Fund may invest in Sovereign Debt, which may trade at a
substantial discount from face value. The Fund may hold and trade Sovereign
Debt of emerging market countries in appropriate circumstances and to
participate in debt conversion programs. Emerging country Sovereign Debt
involves a high degree of risk, is generally lower-quality debt, and is
considered speculative in nature. The issuer or governmental authorities that
control Sovereign Debt repayment ("sovereign debtors") may be unable or
unwilling to repay principal or interest when due in accordance with the terms
of the debt. A sovereign debtor's willingness or ability to repay principal
and interest due in a timely manner may be affected by, among other factors,
its cash flow situation, the extent of its foreign reserves, the availability
of sufficient foreign exchange on the date a payment is due, the relative size
of the debt service burden to the economy as a whole, the sovereign debtor's
policy towards the International Monetary Fund (the "IMF") and the political
constraints to which the sovereign debtor may be subject. Sovereign debtors
may also be dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearage on their debt. The commitment of these third parties to make such
disbursements may be conditioned on the sovereign debtor's implementation of
economic reforms or economic performance and the timely service of the
debtor's obligations. The sovereign debtor's failure to meet these conditions
may cause these third parties to cancel their commitments to provide funds
8
<PAGE>
to the sovereign debtor, which may further impair the debtor's ability or
willingness to timely service its debts. In certain instances, a Fund may
invest in Sovereign Debt that is in default as to payments of principal or
interest. A Fund holding non-performing Sovereign Debt may incur additional
expenses in connection with any restructuring of the issuer's obligations or
in otherwise enforcing its rights thereunder.
Brady Bonds. Each Fund may invest in Brady Bonds as part of its investment
in Sovereign Debt of countries that have restructured or are in the process of
restructuring their Sovereign Debt pursuant to the Brady Plan.
Brady Bonds are issued under the framework of the Brady Plan, an initiative
announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a
mechanism for debtor nations to restructure their outstanding external
indebtedness. The Brady Plan contemplates, among other things, the debtor
nation's adoption of certain economic reforms and the exchange of commercial
bank debt for newly issued bonds. In restructuring its external debt under the
Brady Plan framework, a debtor nation negotiates with its existing bank
lenders as well as the World Bank or IMF. The World Bank or IMF supports the
restructuring by providing funds pursuant to loan agreements or other
arrangements that enable the debtor nation to collateralize the new Brady
Bonds or to replenish reserves used to reduce outstanding bank debt. Under
these loan agreements or other arrangements with the World Bank or IMF, debtor
nations have been required to agree to implement certain domestic monetary and
fiscal reforms. The Brady Plan sets forth only general guiding principles for
economic reform and debt reduction, emphasizing that solutions must be
negotiated on a case-by-case basis between debtor nations and their creditors.
Brady Bonds are recent issues and do not have a long payment history.
Agreements implemented under the Brady Plan are designed to achieve debt and
debt-service reduction through specific options negotiated by a debtor nation
with its creditors. As a result, each country offers different financial
packages. Options have included the exchange of outstanding commercial bank
debt for bonds issued at 100% of face value of such debt, bonds issued at a
discount of face value of such debt, and bonds bearing an interest rate that
increases over time and the advancement of the new money for bonds. The
principal of certain Brady Bonds has been collateralized by U.S. Treasury zero
coupon bonds with a maturity equal to the final maturity of the Brady Bonds.
Collateral purchases are financed by the IMF, World Bank and the debtor
nations' reserves. Interest payments may also be collateralized in part in
various ways.
Brady Bonds are often viewed as having three or four valuation components:
(i) the collateralized repayment of principal at final maturity; (ii) the
collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In light of
the residual risk of Brady Bonds and, among other factors, the history of
defaults with respect to commercial bank loans by public and private entities
of countries issuing Brady Bonds, investments in Brady Bonds can be viewed as
speculative.
Investment Funds. Some emerging countries have laws and regulations that
preclude direct foreign investment in the securities of companies located
there. However, indirect foreign investment in the securities of companies
listed and traded on the stock exchanges in these countries is permitted by
certain emerging countries through specifically authorized investment funds.
Each Fund may invest in these investment funds, as well as other closed-end
investment companies (collectively, "Investment Funds"), subject to the
provisions of the Investment Company Act of 1940, as amended, and rules
thereunder (the "1940 Act") and other applicable laws as discussed below under
"INVESTMENT LIMITATIONS." If a Fund invests in investment funds, shareholders
will bear not only their proportionate share of the Fund's expenses (including
operating expenses and the fees of the Adviser), but also, indirectly, the
similar expenses of the underlying investment funds.
9
<PAGE>
Repurchase Agreements. Each Fund may enter into repurchase agreements with
brokers, dealers or banks ("counterparties") that the Adviser has determined
meet the credit guidelines established by the Board of Trustees. Repurchase
agreements will be fully collateralized, and may be viewed for purposes of the
1940 Act as a loan of money by the Fund to the counterparty. The Fund may
incur a loss if the counterparty defaults and the collateral value declines,
or if bankruptcy proceedings are commenced regarding the counterparty and the
Fund's realization upon the collateral is delayed or limited. Each Fund's
aggregate investment in certain illiquid repurchase agreements and other
investments is limited as set forth under "INVESTMENT LIMITATIONS."
Securities Lending. Each Fund is authorized to lend up to 33 1/3% of the
total market value of its portfolio securities to brokers, dealers, domestic
and foreign banks or other financial institutions for the purpose of
increasing its net investment income; however, currently, no Fund intends to
engage in such lending. Any such loan must be fully secured; however, there
may be risks of delay in recovery of the securities or even loss of rights in
the collateral should the borrower of the securities fail financially. For
more detailed information about securities lending, see "INVESTMENT POLICIES
AND TECHNIQUES" in the SAI.
Temporary Investments. Each Fund may make money market investments pending
other investment or settlement for liquidity, or in adverse market conditions.
These money market investments include obligations of the U.S. Government and
its agencies and instrumentalities, obligations of foreign sovereignties,
other debt securities, commercial paper including bank obligations,
certificates of deposit (including Eurodollar certificates of deposit) and
repurchase agreements.
For temporary defensive purposes, during periods in which the Adviser
believes changes in economic, financial or political conditions make it
advisable, each Fund may reduce its holdings in equity and other securities
and may invest up to 100% of its assets in certain short-term (less than
twelve months to maturity) and medium-term (not greater than five years to
maturity) debt securities and in cash (U.S. dollars, foreign currencies, or
multicurrency units). These short-term and medium-term debt securities consist
of (a) obligations of governments, agencies or instrumentalities of any member
state of the Organization for Economic Cooperation and Development ("OECD"),
(b) bank deposits and bank obligations (including certificates of deposit,
time deposits and bankers' acceptances) of banks organized under the laws of
any member state of the OECD, denominated in any currency; (c) floating rate
securities and other instruments denominated in any currency issued by
international development agencies; (d) finance company and corporate
commercial paper and other short-term corporate debt obligations of
corporations organized under the laws of any member state of the OECD meeting
the Fund's credit quality standards; and (e) repurchase agreements with banks
and broker-dealers covering any of the foregoing securities. The short-term
and medium-term debt securities in which a Fund may invest for temporary
defensive purposes will be those that the Adviser believes to be of high
quality, i.e., subject to relatively low risk of loss of interest or principal
(there is currently no rating system for debt securities in most emerging
countries). If rated, these securities will be rated in one of the three
highest rating categories by rating services such as Moody's Investors
Service, Inc. or Standard & Poor's Corporation (i.e., rated at least A).
"When-Issued" Securities. Each Fund may purchase securities on a when-issued
or delayed delivery basis. The price of debt obligations purchased on a when-
issued basis is fixed at the time the Fund commits to purchase, but delivery
and payment for the securities ("settlement") takes place at a later date. The
price of these securities may be expressed in yield terms; the Funds will
enter into these transactions in order to lock in the yield (price) available
at the time of commitment.
Between purchase and settlement, the Fund assumes the ownership risk of the
when-issued securities, including the risk of fluctuations in the securities'
market value due to, among other factors, a change in the general level of
interest rates. However, no interest accrues to the Fund during this period.
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<PAGE>
Forward Foreign Currency Exchange Contracts and Options on Foreign
Currencies. Each Fund may enter into forward foreign currency exchange
contracts ("forward contracts"), providing for the purchase of or sale of an
amount of a specified currency at a future date. Each Fund may use forward
contracts to protect against a foreign currency's decline against the U.S.
dollar between the trade date and settlement date for a securities
transaction, or to lock in the U.S. dollar value of dividends declared on
securities it holds, or generally to protect the U.S. dollar value of the
securities it holds against exchange rate fluctuations. Each Fund may also use
forward contracts to protect against fluctuating exchange rates and exchange
control regulations. Forward contracts may limit a Fund's losses due to
exchange rate fluctuation, but they will also limit any gains that the Fund
might otherwise have realized. Each Fund may also enter into foreign currency
futures contracts ("currency futures").
Except where segregated accounts are not required by the 1940 Act, when a
Fund enters into a forward contract or currency future, the Custodian will
place cash, U.S. government securities, or other liquid securities into a
segregated account of the Fund in an amount equal to the value of the Fund's
total assets committed to consummation of forward contracts and currency
futures. If the value of these segregated securities declines, additional cash
or securities will be placed in the account on a daily basis so that the
account value is at least equal to the Fund's commitments to such contracts.
See "INVESTMENT POLICIES AND TECHNIQUES--Forward Currency Contracts" in the
SAI.
Each Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign currency denominated portfolio securities
and against increases in the U.S. dollar cost of such securities to be
acquired. As in the case of other kinds of options, however, the writing of an
option on a foreign currency constitutes only a partial hedge, up to the
amount of the premium received, and the Fund could be required to purchase or
sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event
of rate movements adverse to the Fund's position, it may forfeit the entire
amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by the Funds are traded on U.S. and
foreign exchanges or over the counter.
Non-Publicly Traded Securities. Each Fund may invest in securities that are
neither listed on a stock exchange nor traded over the counter, including
privately placed securities. These securities may present a higher degree of
business and financial risk, which can result in substantial losses. In the
absence of a public trading market for these securities, they may be less
liquid than publicly traded securities. Although these securities may be
resold in privately negotiated transactions, the prices realized from these
sales could be less than those originally paid by the Fund or less than what
the Fund may consider the fair value of such securities. Further, companies
whose securities are not publicly traded may not be subject to disclosure and
other investor protection requirements that might apply if their securities
were publicly traded. If such securities are required to be registered under
the securities laws of one or more jurisdictions before being resold, the Fund
may be required to bear the costs of registration. As a general matter, each
Fund may not invest more than 15% of its net assets in illiquid securities,
including securities for which there is no readily available secondary market,
nor more than 10% of its total assets in securities that are restricted from
sale to the public without registration ("Restricted Securities") under the
Securities Act of 1933, as amended (the "1933 Act"). Subject to these limits,
however, a Fund may invest up to 25% of its total assets in Restricted
Securities that can be offered and sold to qualified institutional buyers
under Rule 144A under the 1933 Act ("Rule 144A Securities"). The Board of
Trustees has adopted guidelines and delegated to the Adviser, subject to the
Board's supervision, the daily function of determining and monitoring the
liquidity of Rule 144A Securities. Rule 144A Securities may become illiquid if
qualified institutional buyers are not interested in acquiring them.
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<PAGE>
Borrowing and Other Forms of Leverage. Each Fund may borrow money from U.S.-
regulated banks. The 1940 Act and each Fund's fundamental investment policies
restrict such borrowing to 33 1/3% of the Fund's total assets (including the
amount borrowed) less all liabilities and indebtedness other than the
borrowing. Borrowing creates leverage, which is a speculative characteristic;
leverage from borrowing will magnify declines as well as increases in a Fund's
net asset value per share and net yield. A Fund will borrow only on a secured
basis, and only when the Adviser believes that borrowing will benefit the Fund
after taking into account considerations such as the costs of borrowing and
the likely investment returns on securities purchased with borrowed monies.
Options Transactions. Each Fund may seek to hedge all or a portion of its
investments through options on other securities in which it may invest.
Options in which a Fund may transact will be traded on a recognized securities
or futures exchange or over the counter. Options markets in emerging countries
are currently limited and the nature of the strategies adopted by the Adviser
and the extent to which those strategies are used will depend on the
development of such markets.
Each Fund may write (i.e., sell) covered call options. A call gives the
purchaser the right to buy the security underlying the option from the Fund at
the stated exercise price, on or before a specified date (the "termination
date") that is usually not more than nine months from the date the option is
issued. A "covered" call means that so long as the Fund is obligated as the
writer of the option, it will own (i) the securities underlying the option, or
(ii) securities convertible or exchangeable (without the payment of any
consideration) into the securities underlying the option.
Each Fund may also write (i.e., sell) covered put options. The writer of a
put incurs an obligation to buy the security underlying the option from the
put's purchaser at the exercise price at any time on or before the termination
date, at the purchaser's election (certain options a Fund writes will be
exercisable by the purchaser only on a specific date). Generally, a put is
"covered" if the Fund maintains cash, U.S. government securities or other
liquid securities equal to the exercise price of the option or if the Fund
holds a put on the same underlying security with a similar or higher exercise
price.
Each Fund may also purchase put or call options on individual securities or
baskets of securities. When a Fund purchases a call, it acquires the right to
buy the underlying security at the exercise price on or before the termination
date, and when a Fund purchases a put, it acquires the right to sell the
underlying security at the exercise price on or before the termination date.
The primary risks associated with the use of options on securities are (i)
imperfect correlation between the change in market value of the securities the
Fund holds and the prices of options relating to the securities purchased or
sold by the Fund; and (ii) possible lack of a liquid secondary market for an
option. Options not traded on an exchange (OTC options) are often considered
illiquid and may be difficult to value. The Adviser believes that each Fund
will minimize its risk of being unable to close out an options contract by
transacting in options only if there appears to be a liquid secondary market
for those options.
Futures Contracts. Each Fund may buy and sell financial futures contracts,
stock and bond index futures contracts, foreign currency futures contracts and
options on any of the foregoing for hedging purposes only. A financial futures
contract is an agreement between two parties to buy or sell a specified debt
security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the
difference between the value of the index at the beginning and at the end of
the contract period. A futures contract on a foreign currency is an agreement
to buy or sell a specified amount of a currency for a set price on a future
date.
When a Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security,
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<PAGE>
index or currency fluctuates, either party to the contract is required to make
additional margin payments, known as "variation margin," to cover any
additional obligation it may have under the contract. In addition, when the
Fund enters into a futures contract, it will segregate assets or "cover" its
position in accordance with the 1940 Act. See "INVESTMENT POLICIES AND
TECHNIQUES Derivative Instruments--Futures Contracts" in the SAI. With respect
to positions in futures and related options that do not constitute "bona fide
hedging" positions as defined in regulations of the Commodity Futures Trading
Commission, the Fund will not enter into a futures contract or related option
contract if, immediately thereafter, the aggregate initial margin deposits
relating to such positions plus premiums paid by it for open futures option
positions, less the amount by which any such options are "in-the-money," would
exceed 5% of the Fund's total assets. The value of the underlying securities
on which futures contracts will be written at any one time will not exceed 25%
of the total assets of the Fund.
The primary risks associated with the use of futures and options on futures
are (i) imperfect correlation between the change in market value of the
securities held by the Fund and the prices of related futures and options on
futures purchased or sold by the Fund, and (ii) possible lack of a liquid
secondary market for a futures contract (or related option) and the resulting
inability to close a futures position, which could have an adverse impact on
the Fund's ability to hedge. The risk of loss in trading on futures contracts
and related options in some strategies can be substantial, due both to the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing. Gains and losses on futures and related options depend on the
Adviser's ability to predict correctly the direction of stock prices, interest
rates, and other economic factors. In the opinion of the Trustees, the risk
that the Fund will be unable to close out a futures position or related
options contract will be minimized by only entering into futures contracts or
related options transactions for which there appears to be a liquid secondary
market. For more detailed information about futures transactions see
"INVESTMENT POLICIES AND TECHNIQUES" in the SAI.
Short Sales. Each Fund may from time to time sell securities short without
limitation, although initially there is no intention to sell securities short.
In a short sale, a Fund sells securities it does not own (but has borrowed) in
anticipation of a decline in the securities' market price. All short sales by
a Fund will be fully collateralized. Short sales involve certain risks and
special considerations; possible losses from short sales may be unlimited,
whereas losses from purchases of securities are limited to the total amount
invested. Each Fund may also sell short "against the box," that is, sell a
security that the Fund owns or has the right to acquire, for delivery at a
specified date in the future.
REITS. REITs are trusts that invest primarily in commercial real estate or
real estate-related loans. The value of interests in REITs may be affected by
the value of the underlying property owned or the quality of the loans held by
the trust.
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<PAGE>
RISK FACTORS
FOREIGN INVESTMENT
Investment in securities of foreign issuers and in foreign branches of
domestic banks, involves some risks different from, or in addition to, those
affecting investments in securities of U.S. issuers:
Information Publicly available information about foreign
issuers and economies may be limited. Foreign
issuers are not generally subject to uniform
accounting, auditing and financial and other
reporting standards and requirements comparable
to those applicable to U.S. companies.
Statistical information about the economy in an
emerging market country may be unavailable, or
if available may be unreliable or not directly
comparable to information regarding the economy
of the U.S. or other more developed countries.
Regulation There may be less government supervision and
regulation of foreign securities exchanges,
brokers and listed companies than in the U.S.
Liquidity and Concentration Many foreign securities markets have
substantially less volume than U.S. national
securities exchanges. Available investments in
emerging countries may be highly concentrated
in a small number of issuers, or the issuers
may be unseasoned and/or have significantly
smaller market capitalization than in the U.S.
or more developed countries. Consequently,
securities of foreign issuers may be less
liquid and more volatile than those of
comparable domestic issuers.
Brokerage Brokerage commissions and other transaction
costs on foreign securities exchanges are
generally higher than in the U.S.
Taxes Dividends and interest paid by foreign issuers
may be subject to withholding and other foreign
taxes, which may decrease the net return on
foreign investments as compared to dividends
and interest paid to the Fund by U.S.
companies. It is expected that the Funds'
shareholders will be able to claim a credit for
U.S. tax purposes for any such foreign taxes,
although there can be no assurance that they
will be able to do so. See "TAXES."
Political/Economy Political and economic developments may present
risks. A foreign jurisdiction might impose or
change withholding taxes on income payable in
connection with foreign securities. There are
risks of seizure, nationalization or
expropriation of a foreign issuer or foreign
deposits, and adoption of foreign governmental
restrictions such as exchange controls. Many
emerging or developing countries have less
stable political and economic environments than
some more developed countries, and may face
external stresses (including war) as well as
internal ones (including hyperinflation,
currency depreciation, limited resource self-
sufficiency, and balance of
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<PAGE>
payments issues and associated social unrest).
It may be more difficult to obtain a judgment
in a court outside the U.S.
Currency Exchange Securities of foreign issuers are frequently
denominated in foreign currencies, and a Fund
may temporarily hold uninvested reserves in
bank deposits in foreign currencies. The
exchange rates between the U.S. dollar and the
currencies of emerging markets countries may be
volatile, and changes in currency rates and
exchange control regulations may affect
(favorably or unfavorably) the value of a
Fund's assets in U.S. dollars. A Fund may incur
costs in converting between currencies.
Repatriation Restrictions Foreign governments may delay or restrict
repatriation of a Fund's investment income or
other assets. If, for any reason, a Fund were
unable, through borrowing or otherwise, to
distribute an amount equal to substantially all
of its investment company taxable income (as
defined for U.S. tax purposes) within required
time periods, the Fund would cease to qualify
for the favorable tax treatment afforded
regulated investment companies under the U.S.
Internal Revenue Code of 1986, as amended (the
"Code").
INVESTING IN SMALLER CAPITALIZATION STOCKS
The Adviser believes that the issuers of smaller capitalization stocks often
have sales and earnings growth rates which exceed those of larger companies,
and that such growth rates may in turn be reflected in more rapid share price
appreciation. However, investing in smaller capitalization stocks can involve
greater risk than is customarily associated with investing in stocks of
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources,
may be dependent for management on one or a few key persons, and can be more
susceptible to losses. Also, their securities may be thinly traded (and
therefore have to be sold at a discount from current prices or sold in small
lots over an extended period of time), may be followed by fewer investment
research analysts and may be subject to wider price swings and thus may create
a greater chance of loss than securities of larger capitalization companies.
Transaction costs in stocks of smaller capitalization companies may be higher
than those of larger capitalization companies.
INVESTING IN LOWER RATED DEBT SECURITIES
Each Fund may invest in lower rated or unrated debt securities. Debt
considered below investment grade may be referred to as "junk bonds" or "high
risk" securities. The emerging country debt securities in which the Fund may
invest are subject to significant risk and will not be required to meet any
minimum rating standard or equivalent. Debt securities are subject to the risk
of the issuer's inability to meet principal and interest payments (credit
risk) and may also be subject to price volatility due to such factors as
interest rate sensitivity, market perception of the issuer's creditworthiness
and general market liquidity (market risk). Lower rated or unrated securities
are more likely to react to developments affecting market and credit risk than
are more highly rated securities, which react primarily to movements in
general levels of interest rates. The market values of debt securities tend to
vary inversely with interest rate levels. Yields and market values of lower
rated and unrated debt will fluctuate over time, reflecting not only changing
interest rates but also the market's perception of credit quality and the
outlook for economic growth. When economic conditions appear to be
deteriorating, medium to lower rated securities may decline in value due to
heightened concern over credit quality,
15
<PAGE>
regardless of prevailing interest rates. The Adviser will consider credit risk
and market risk in making debt security investment decisions for each Fund.
Investors should carefully consider the relative risks of investing in a Fund
that purchases lower rated and unrated debt securities, and should understand
that such securities are not generally meant for short-term investing.
The U.S. market for lower rated and unrated corporate debt is relatively new
and its recent growth paralleled a long period of economic expansion and an
increase in merger, acquisition and leveraged buyout activity. In addition,
trading markets for debt securities of issuers located in emerging countries
may be limited. Adverse economic developments may disrupt the market for U.S.
corporate lower rated and unrated debt securities and for emerging country
debt securities. Such disruptions may severely affect the ability of issuers,
especially highly leveraged issuers, to service their debt obligations or to
repay their obligations upon maturity. In addition, the secondary market for
lower rated and unrated debt securities, which is concentrated in relatively
few market makers, may not be as liquid as the secondary market for more
highly rated securities. As a result, the Adviser could find it more difficult
to sell these securities or may be able to sell the securities only at prices
lower than if such securities were widely traded. Prices realized upon the
sale of such lower rated or unrated securities, under these circumstances, may
be less than the prices used in calculating a Fund's net asset value.
OTHER INVESTMENT RISK FACTORS
Each of the Funds' investment strategies involves specific risks. Further
information about these specific risks can be found in this Prospectus under
"INVESTMENT OBJECTIVES AND POLICIES--Investment Techniques" and under
"INVESTMENT POLICIES AND TECHNIQUES" and "ADDITIONAL RISK FACTORS" in the SAI.
INVESTMENT LIMITATIONS
Each Fund has adopted certain fundamental investment policies and
restrictions. A Fund may not change its investment objective or any
fundamental policy or restriction without approval of the holders of a
majority of the Fund's outstanding shares. Each Fund has also instituted non-
fundamental operating policies. Although the Board of Trustees may change
operating policies without shareholder approval, the Trust will promptly
notify shareholders of any material change in non-fundamental operating
policies. See "INVESTMENT RESTRICTIONS" in the SAI.
Each Fund is a diversified company under the 1940 Act and is therefore
subject to the following limitations:
. as to 75% of its total assets, the Fund may not invest more than 5% of
its total assets in the securities of any one issuer, except obligations
of or securities guaranteed by the U.S. Government and its agencies and
instrumentalities, and
. the Fund may not own more than 10% of the outstanding voting securities
of any one issuer.
Each Fund also intends to comply with the diversification requirements imposed
by the Code, for qualification as a regulated investment company. See "TAXES."
Under each Fund's non-fundamental restrictions, a Fund may not (i) invest
more than 15% of the market value of its net assets in investments for which
market quotations are not readily available or that are otherwise illiquid;
(ii) mortgage, pledge or hypothecate any assets except in connection with any
such borrowing in amounts up to 33 1/3% of the value of the Fund's net assets
at the time of borrowing; or (iii) invest more than 5% of its net assets in
warrants (exclusive of amounts acquired in units or attached to securities).
Each Fund may invest no more than 15% of its total assets in securities issued
by any one company or government, exclusive of U.S. Government securities.
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<PAGE>
Each Fund will not invest 25% or more of the total value of its assets in a
particular industry. For purposes of this investment restriction, a foreign
government (but not the United States government) is deemed to be an
"industry," and therefore investments in the obligations of any one foreign
government may not equal or exceed 25% of a Fund's assets.
Each Fund's investment techniques are described herein under "Investment
Techniques" and "RISK FACTORS," and under the heading "INVESTMENT POLICIES AND
TECHNIQUES" in the SAI. Each Fund invests for long-term growth of capital and
does not intend to place emphasis upon short-term trading profits.
Accordingly, each Fund normally expects to have an annual portfolio turnover
rate of less than 50%.
PURCHASE AND REDEMPTION OF SHARES
You may purchase and redeem shares of each Fund on any day when the New York
Stock Exchange ("NYSE") is open for business (a "business day") so long as the
Custodian is also open for business that day. The purchase price of shares is
a Fund's net asset value per share next determined after receipt of your
purchase order, plus any applicable transaction fee; the amount of any
transaction fee is deducted from the total amount of your investment, and the
remaining amount of your investment is invested in the Fund. The redemption
price of shares is a Fund's net asset value per share next determined after
receipt of your redemption request in "good order," less any applicable
transaction fee. Each Fund's net asset value per share is determined on each
business day at the close of regular trading of the NYSE (currently 4:00 p.m.,
Eastern Time). Purchase orders and redemption requests received prior to this
time on any business day will be executed at the price computed on that day;
orders and requests received after the regular close of the NYSE will be
executed at the price computed on the next business day. The Trust reserves
the right to refuse any order for purchase of shares.
HOW TO PURCHASE SHARES
How to Open an Account. To open an account, you must complete an Account
Registration Form and send it to the Trust, and either send in your check or
arrange for a wire transfer. Your initial investment must be for at least
$1,000,000 unless you have received a waiver from the Adviser. For purposes of
meeting the required minimum investments, the Trust will aggregate all
accounts under common ownership or control, including accounts of spouses and
minor children. There is no minimum for employer sponsored 401(k) plans that
have more than 100 employee participants.
By Check Make your check (or other negotiable bank draft
or money order) payable to: "Hansberger
Institutional Series," and mail it with your
completed and signed Account Registration Form
to:
Hansberger Institutional Series
c/o Chase Global Funds Services
Company
P.O. Box 2973
73 Tremont Street
Boston, MA 02208
Checks must be drawn on U.S. banks.
By Wire Have your bank send a Federal funds wire or a
bank wire to the Trust, and mail your completed
and signed Account Registration Form to:
Hansberger Institutional Series
c/o Chase Global Funds Services
Company
P.O. Box 2973
73 Tremont Street
Boston, MA 02208
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<PAGE>
The Trust will accept your purchase order
before receiving your Account Registration Form
only if you have provided certain information
with your wire.
You must follow these steps to purchase shares
by wire: First, telephone the Trust at 1-800-
414-6927 to receive a wire control number. To
be issued your account number, you will need to
provide a written application with your name,
address, telephone number, Social Security or
Tax Identification ("I.D.") Number, the amount
being wired, and the name of the bank sending
the wire. Second, instruct your bank to wire
the specified amount to the following account
(be sure to have your bank include your account
number and the Fund's name):
The Chase Manhattan Bank
ABA Number 021000021
DDA Number 910 2 777076
Attn: Hansberger Institutional Series
Ref: (Fund name, account number,
account name, wire control
number).
Federal funds wires cannot be made on any
federal holiday restricting wire transfers,
even if the NYSE is open on that day. Liability
of the Fund or its agents for fraudulent or
unauthorized wire instructions may be limited.
See "SHAREHOLDER SERVICES--Telephone
Transaction Privilege."
Your bank may charge a service fee for sending
a Federal funds wire or bank wire.
Letter of Intent. You may make an initial investment of less than $1 million
if you execute a letter of intent ("Letter") which expresses your intention to
invest at least $1 million in the Funds within 13 months. The minimum initial
investment under a Letter is $100,000. If you do not invest at least $1
million in shares of the Funds or other funds advised by the Adviser within
the 13-month period from execution of the Letter, the shares actually
purchased may be involuntarily redeemed and the proceeds sent to you at your
address of record. Any redemptions you make during the 13-month period will be
subtracted from the amount of shares purchased for purposes of determining
whether the terms of the Letter have been completed.
How to Add to Your Investment. You may purchase additional shares for your
account at any time by mailing a check or by wiring funds to the Fund
according to the procedures above. If wiring funds, please call 1-800-414-6927
to receive a wire control number. Your check, a cover letter, or your wire
instructions must specify the name of the Fund, the name on your account and
your account number, and you must call the Fund before wiring funds. Your
check or wire must be for at least $100,000.
OTHER PURCHASE INFORMATION
Payment for shares of a Fund must be in United States dollars, unless you
have received the Fund's prior written approval to make payment in other
currencies or by tendering securities.
No share certificates will be issued. All shares purchased for your account
will be confirmed to you and credited to your account on the Fund's books
maintained by the Transfer Agent.
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<PAGE>
To ensure that checks are collected, you may not redeem shares purchased by
check until payment for the purchase has been received; receipt may take up to
eight business days after purchase. If your purchase is cancelled due to
nonpayment or because your check does not clear, you will be responsible for
any loss incurred by the Trust or its agents, and you may be restricted from
making future investments in the Trust. If you are already a shareholder, the
Trust may redeem shares from your account(s) as reimbursement for any such
loss.
If an investment in the Funds is made through a broker that has executed a
dealer agreement with the Trust, the Adviser or one of its affiliates may make
a payment out of its own resources to such dealer in an amount not to exceed
0.25% of the amount invested. Dealers may contact the Adviser for additional
information.
Investors may also purchase shares of a Fund through banks, brokers, agents
and registered broker-dealers who may or may not have a dealer agreement with
the Funds. Those banks, brokers, agents and broker-dealers, who make purchases
for their customers, may charge a fee for such services.
The Trust reserves the right to reject any purchase order for shares if the
Trust or its agents determine that accepting such order would not be in the
best interest of a Fund or its existing shareholders.
HOW TO REDEEM SHARES
You may withdraw all or any portion of the amount in your account by
redeeming your shares at any time. Redemption proceeds may be more or less
than the purchase price of your shares depending on, among other factors, the
market value of the investment securities held by the Fund at the time you
redeem. Please note that purchases made by check cannot be redeemed until
payment has been collected, which may take up to eight business days after
purchase. You may redeem shares of the Funds by mail or telephone.
By Mail Send your redemption request to:
Hansberger Institutional Series
c/o Chase Global Funds Services
Company
P.O. Box 2973
73 Tremont Street
Boston, MA 02208
"Good order" means that your redemption request
includes the following documentation:
. A letter of instruction or a stock
assignment specifying the number of shares
or dollar amount to be redeemed, signed by
all registered owners of the shares in the
exact names in which they are registered.
. Any required signature guarantees (see
"Further Redemption Information" below).
. Other supporting legal documents, if
required, in the case of estates, trusts,
guardianships, custodianships, corporations,
pension and profit sharing plans and other
organizations.
If you are uncertain of requirements for
redemption of your shares, consult with a
representative of the Trust.
19
<PAGE>
By Telephone
If you have telephone transaction privileges,
you can request a redemption of your shares by
calling the Fund prior to 4:00 P.M. Eastern
Time, to receive that day's closing net asset
value; redemption proceeds will be mailed to
you or wired to your bank. When placing a
redemption order by telephone, you should have
ready the name and address on your account and
the account number from which you want to
redeem shares, and your Social Security or Tax
I.D. number; additional personal identification
information may also be required. If you
experience difficulty placing a redemption
order by telephone, you may send your request
by regular or express mail and it will be
effective at the net asset value next
determined after it is received in good order.
The Fund's and the Transfer Agent's liability
for fraudulent or unauthorized telephone
redemption requests may be limited. See
"SHAREHOLDER SERVICES--Telephone Transaction
Privilege."
To change a bank or bank account designated to
receive your redemption proceeds by wire, you
must send a written request to the Fund at the
address above. Each shareholder must sign any
request to change the bank or bank account, and
each signature must be guaranteed.
FURTHER REDEMPTION INFORMATION
Normally the Funds make payment for all shares redeemed within one business
day after receiving the request in good order; payment may be delayed, but not
for more than seven days, except in the case of redemptions of shares
purchased by check, as discussed above. A Fund may suspend redemptions or
postpone the effective date of redemptions at times when the NYSE is closed,
or under any emergency circumstances as determined by the SEC.
Each Fund may, although it does not intend to do so under normal
circumstances, pay redemption proceeds in whole or in part by a distribution
in kind of securities held in its portfolio, in conformity with applicable SEC
rules.
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to redeem all of your shares if your redemptions cause your
account value to drop below the minimum required investment. The Trust will
not redeem an account whose value has dropped solely because of market
reductions in net asset value. If at any time your account value does not
equal or exceed the required minimum, you may be notified of this fact. You
will be allowed at least 60 days to add to your investment before any
involuntary redemption is processed.
To protect your account, the Trust and its agents from fraud, signature
guarantees are required for certain redemptions to verify the identity of the
person who has authorized a redemption from your account. A signature
guarantee is not required for redemptions of $50,000 or less, requested by and
payable to all shareholders of record.
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than the
registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other than
the registered address; or
. share transfer requests.
20
<PAGE>
Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program. Eligible
guarantor institutions include banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations. Notaries public are not acceptable
guarantors.
Please contact the Trust for further information. See "ADDITIONAL
SHAREHOLDER INFORMATION" in the SAI.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
You may exchange your shares of a Fund for shares of any other available
Fund without charge once every six months. Call the Trust to find out what
Funds are available. An exchange is treated as a redemption followed by a
purchase, and is subject to all requirements that apply to redemptions and
purchases. An exchange request will normally be effective at the net asset
value next determined after it is received in "good order." An exchange will
be considered a taxable event for shareholders subject to tax. Before you make
an exchange, you should read the prospectus disclosure relating to the new
Fund(s) in which you seek to invest. Shares of the new Fund(s) must be
registered for sale in your state of residence for the exchange privilege to
be available.
You may exchange shares by mail and, if you have telephone transaction
privileges, by telephone. See "Telephone Transaction Privilege."
By Mail Send your exchange request to:
Hansberger Institutional Series
c/o Chase Global Funds Services
Company
P.O. Box 2973
73 Tremont Street
Boston, MA 02208
Your exchange request must be in "good order"
(see "How To Redeem Shares--By Mail" above),
and must also include the name of the new
Fund(s) into which you wish to exchange your
shares.
By Telephone If you have telephone transaction privileges,
you may exchange shares by calling the Trust at
1-800-414-6927. You should have ready the
account name and address and the account number
of the Fund account from which you intend to
exchange shares, the name of the Fund into
which you intend to exchange shares, and your
Social Security or Tax I.D. number; additional
personal identification information may also be
required. If you experience difficulty placing
an exchange order by telephone, you may send
your request by regular or express mail and it
will be effective at the net asset value next
determined after it is received in good order.
The Trust's and the Transfer Agent's liability
for fraudulent or unauthorized telephone
transactions may be limited. See "Telephone
Transaction Privilege."
In order to prevent abuse of the exchange privilege to the disadvantage of
other shareholders, the Trust reserves the right to terminate the exchange
privilege of any shareholder at the Trust's sole discretion.
21
<PAGE>
PURCHASES OR EXCHANGES BY TIMING ACCOUNTS
Market timing or allocation services ("Timing Accounts") generally include
accounts administered so as to redeem or purchase shares based upon certain
predetermined market indicators. The Trust reserves the right to temporarily
or permanently terminate the exchange privilege or reject any specific
purchase order for any Timing Account or any person whose transactions seem to
follow a timing pattern. In addition, the Trust reserves the right to refuse
the purchase side of a redemption and purchase request by any Timing Account,
person, or group if, in the Adviser's judgement, a Fund would be unable to
invest effectively in accordance with its investment objectives and policies,
or would otherwise potentially be adversely affected. A Shareholder's
exchanges into a Fund may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the Fund's
assets. In particular, a pattern of exchanges, purchases and redemptions that
coincides with a "market timing" strategy may be disruptive to a Fund and
therefore may be refused.
TELEPHONE TRANSACTION PRIVILEGE
When you open your account, you may elect to have telephone transaction
privileges by completing the "Telephone Transaction" section of the Account
Registration Form. You may have telephone access to certain information
regarding your account, such as your current share value, even if you do not
want the ability to make transactions by telephone.
During periods of drastic economic or market changes, telephone redemption
and exchange options may be difficult to implement, and you may need to send
your requests by mail.
The Funds and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring you to provide certain personal identification
information when you open your account and prior to effecting each transaction
requested by telephone. In addition, all telephone transaction requests will
be recorded and you may be required to provide additional written instructions
by facsimile. Neither the Funds nor the Transfer Agent will be responsible for
any loss, liability, cost or expense for following instructions received by
telephone that either of them reasonably believes to be genuine. The Fund or
the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions in the event reasonable procedures are not followed.
TRANSFER OF REGISTRATION
You may transfer registration of any of your shares in a Fund to another
person by writing to the Transfer Agent at Hansberger Institutional Series,
c/o Chase Global Fund Services Company, 73 Tremont Street, Boston, MA 02108-
3913. Your written request must be in "good order" before any transfer can be
effective. For a description of "good order," see "How to Redeem Shares--By
Mail" above.
22
<PAGE>
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Board of Trustees decides upon matters of general policy and reviews the
actions of each Fund's Adviser and Administrator. The officers of the Trust
conduct and supervise its daily business operations. See "TRUSTEES AND
OFFICERS OF THE TRUST" in the SAI.
INVESTMENT ADVISER
Hansberger Global Investors is the Investment Adviser to the Trust. The
Adviser, with principal offices at 515 East Las Olas Blvd., Suite 1300, Fort
Lauderdale, Florida, 33301, conducts a worldwide portfolio management business
that provides a broad range of portfolio management services to customers in
the United States and abroad. See "INVESTMENT ADVISER" in the SAI.
The Adviser provides each Fund with investment advice and portfolio
management services pursuant to an Investment Advisory Agreement (the
"Advisory Agreement"), and, subject to the supervision of the Board of
Trustees, makes each Fund's day-to-day investment decisions, arranges for the
execution of portfolio transactions and generally manages each Fund's
investments. Under the terms of its Advisory Agreement, each Fund pays the
Adviser a monthly advisory fee, accrued daily based on the Fund's average
daily net assets, at the annual rates set forth in the table below. Because
each Fund invests internationally, these advisory fees are higher than those
of most investment companies, but the Adviser believes the fees are comparable
to those of investment companies with similar objectives and policies.
<TABLE>
<CAPTION>
FUND ADVISORY FEE
---- ------------
<S> <C>
International Fund........................................... 0.75%
Emerging Markets Fund........................................ 1.00%
Foreign Small Cap Fund....................................... 0.90%
All Countries FundSM......................................... 0.75%
</TABLE>
PORTFOLIO MANAGEMENT TEAMS
FUNDS PORTFOLIO MANAGERS
----- ------------------
Emerging THOMAS L. HANSBERGER is the Chairman and Chief Executive
Markets All Officer of the Adviser and the Trust. Mr. Hansberger is
Countries primarily responsible for the day-to-day management of the
Emerging Markets and All Countries Funds. Before forming the
Adviser, Mr. Hansberger had served as Chairman, President
and Chief Executive Officer of Templeton Worldwide, Inc.
("Templeton"), the parent holding company of the Templeton
group of companies. While at Templeton, Mr. Hansberger
served as director of research and was an officer, director
or primary portfolio manager for several Templeton Mutual
Funds.
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<PAGE>
FUNDS PORTFOLIO MANAGERS
----- ------------------
International JAMES E. CHANEY joined the Adviser in 1996 as Chief
Investment Officer and is primarily responsible for the day-
to-day management of the International Fund. Prior to
joining the Adviser, he was Executive Vice President for
Templeton Worldwide and a senior member of its Portfolio
Management/ Strategy Committee. While at Templeton, Mr.
Chaney managed numerous accounts, including the $2.5 billion
Templeton Institutional Funds Inc. Foreign Equity Series.
The Templeton Institutional Funds Inc. Foreign Equity Series
reported an average annual total return of 16.89% for the
one-year period ended June 30, 1996, and 13.59% for the
period of Mr. Chaney's tenure as portfolio manager, October
1, 1993 to June 30, 1996./1/ This is relevant because the
Templeton Institutional Funds Inc. Foreign Equity Series was
the only comparable account managed by Mr. Chaney while at
Templeton with substantially similar investment objectives,
policies and strategies as the International Fund. Of
course, past performance is not necessarily indicative of
future performance.
Foreign Small LAURETTA (RETZ) REEVES joined the Adviser in 1996 as a
Cap Managing Director, portfolio manager and research analyst.
She also serves as Director of Research for the Adviser. Ms.
Reeves is primarily responsible for the day-to-day
management of the Foreign Small Cap Fund. Prior to joining
the Adviser she was Senior Vice President of Templeton in
the research and portfolio management group with primary
responsibility for numerous industries and countries,
including global chemicals and European banks.
Emerging FRANCISCO ALZURU joined the Adviser in 1994 as a Managing
Markets All Director, portfolio manager and research analyst,
Countries specializing in Latin America. Prior to joining the Adviser,
he worked at Vestcorp Partners as their Latin American
analyst.
Emerging Markets AJIT DAYAL joined the Adviser in 1998 as Managing Director
All Countries of India. Prior to joining the Adviser he was a Director of
all Jardine Fleming companies in India, with direct
responsibility for research and investment management.
International JOHN FENLEY joined the Adviser in 1997 as a research
analyst, responsible for research coverage of global
equities. Prior to joining the Adviser, he was the portfolio
manager for the Institutional Investment Department of Sun
Trust Bank, and before that served as a portfolio manager
and equity analyst for Fifth Third Bank.
Emerging Markets AUREOLE FOONG joined the Adviser in 1997 as Director of
Asian Research. Prior to joining the Adviser, he was a
Director of Peregrine Asset Management where he was
responsible for several mutual fund and private accounts
investing in regional Asian markets.
International VICTORIA GRETZKY joined the Adviser in 1995 as a research
analyst. Prior to joining the Adviser, she was a research
analyst for Optimum Consulting, a Russian based firm which
specialized in restructuring Russian Companies during
privatization.
________
1 Morningstar Principia(TM) for Mutual Funds, July 1996. Performance data was
calculated using the SEC standardized method of calculating average annual
total return. See "PERFORMANCE INFORMATION" in the SAI.
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<PAGE>
FUNDS PORTFOLIO MANAGERS
----- ------------------
Foreign Small Cap CHARLES F. GULDEN joined the Adviser in 1996 as a Managing
Director, portfolio manager and research analyst. Prior to
joining the Adviser, he was Vice President and Director of
Templeton in the research and portfolio management group
with primary research responsibility for global health care
services and agricultural chemical sectors.
International JOHN HOCK joined the Adviser in 1996 as a research analyst.
Prior to joining the Adviser, he was a vice president and
senior analyst in the global securities research and
economics group at Merrill Lynch.
Foreign Small Cap RON HOLT joined the Adviser in 1997 as a research analyst.
Prior to joining the Adviser, he was a Vice President in the
Corporate and Institutional Client Group at Merrill Lynch.
Emerging ROBERT MAZUELOS joined the Adviser in 1995 as a research
Markets All analyst. Prior to joining the Adviser, he was a performance
Countries analyst at Templeton Investment Counsel, Inc. where he was
responsible for return analysis on separate accounts and
mutual funds.
Emerging VLADIMIR TYURENKOV joined the Adviser in 1995 as Managing
Markets Director of Eastern Europe and Russia, portfolio manager and
Foreign Small research analyst. Prior to joining the Adviser, he spent
Cap several years working for the Russian Government and worked
extensively on the Pepperdine University Russian Conversion
and Privatization Program.
ADMINISTRATOR AND TRANSFER AGENT
Chase Global Funds Services Company, a subsidiary of The Chase Manhattan
Bank, 73 Tremont Street, Boston MA 02108-3913, (the "Administrator" or
"Transfer Agent") provides administrative services to the Fund pursuant to an
Administration Agreement (the "Administration Agreement"). Services provided
under the Administration Agreement are subject to supervision by officers of
the Trust and the Board of Trustees, and include day-to-day administration of
matters related to the existence of the Trust, maintenance of its records,
preparation of reports, supervision of the Trust's arrangements with its
custodian, and assistance in preparing the Trust's registration statements
under federal and state laws. Also under the Administration Agreement, the
Administrator (through its agents) provides dividend disbursing and transfer
agent services to the Trust. For additional information regarding the
Administration Agreement, see "TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT"
in the SAI. For its services under the Administration Agreement, the Trust
pays the Administrator a monthly fee in proportion to the Funds' combined
average daily net assets at the following annual rate: 0.12% of the first $500
million in average daily net assets, 0.08% for the next $500 million, and
0.06% for average net assets over $1 billion.
EXPENSES
Each Fund is responsible for payment of certain other fees and expenses
(including legal fees, accountant's fees, custodial fees and printing and
mailing costs) specified in the Advisory and Administration Agreements. Each
Fund will also bear a portion of its operating costs, including amortized
organizational costs.
VALUATION OF SHARES
The net asset value per share of a Fund is determined by dividing the total
market value of the Fund's investments and other assets, less any liabilities,
by the total number of the Fund's outstanding shares. Net asset value per
share is determined as of the regular close of the NYSE on each day that
25
<PAGE>
the NYSE is open for business. Price information on listed securities is taken
from the exchange where the security is primarily traded. Securities listed on
a U.S. securities exchange for which market quotations are available are
valued at the last quoted sale price on the day the valuation is made.
Securities listed on a foreign exchange are valued at their closing price.
Unlisted securities and listed securities not traded on the valuation date for
which market quotations are not readily available are valued at a price within
a range not exceeding the current asked price nor less than the current bid
price. The current bid and asked prices are determined based on the average
bid and asked prices quoted on such valuation date by reputable brokers.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Net asset value includes interest on fixed income securities, which is
accrued daily. In addition, bonds and other fixed income securities may be
valued on the basis of prices provided by a pricing service when such prices
are believed to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last
sale prices but take into account institutional size trading in similar groups
of securities and any developments related to the specific securities.
Securities not priced in this manner are valued at the most recently quoted
bid price, or, when securities exchange valuations are used, at the latest
quoted sale price on the day of valuation. If there is no such reported sale,
the latest quoted bid price will be used. Securities purchased with remaining
maturities of 60 days or less are valued at amortized cost, if it approximates
market value. In the event that amortized cost does not approximate market
value, market prices as determined above will be used.
The value of other assets and securities for which no quotations are readily
available (including restricted and unlisted foreign securities) and those
securities for which it is inappropriate to determine the prices in accordance
with the above-stated procedures are determined in good faith using methods
determined by the Board of Trustees. For purposes of calculating net asset
value per share, all assets and liabilities initially expressed in foreign
currencies will be translated into U.S. dollars at the mean of the bid price
and asked price for such currencies against the U.S. dollar last quoted by any
major bank.
PERFORMANCE INFORMATION
Each Fund may advertise its "total return," which shows what an investment
in the Fund would have earned over a specified period of time (such as one,
five or ten years) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period. Total return does
not take into account any federal or state income taxes that may be payable on
dividends and distributions or on redemption. The Funds may also include
comparative performance information in advertising or marketing a Fund's
shares, including data from Lipper Analytical Services, Inc., other industry
publications, business periodicals, rating services and market indices. See
"PERFORMANCE INFORMATION" in the SAI.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All income dividends and capital gains distributions will automatically be
reinvested in additional shares at net asset value unless the shareholder has
elected to receive income dividends and capital gains distributions in cash. A
shareholder may make this election by providing written notice to the Fund or
by checking off the appropriate box in the Distribution Option Section on the
Account Registration Form.
Each Fund expects to distribute substantially all of its net investment
income in the form of dividends at least annually. Net capital gains, if any,
will be distributed annually.
Undistributed net investment income is included in a Fund's net assets for
the purpose of calculating net asset value per share. Therefore, on the "ex-
dividend" date, the net asset value per
26
<PAGE>
share excludes the dividend (i.e., is reduced by the per share amount of the
dividend). Dividends paid shortly after the purchase of shares by an investor,
although in effect a return of capital, are taxable to shareholders subject to
income tax.
TAXES
The following summary of United States federal income tax consequences is
based on current tax laws and regulations, which may be changed by
legislative, judicial, or administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of a Fund or its shareholders.
Accordingly, shareholders are urged to consult their tax advisers regarding
specific questions as to federal, state and local income taxes.
Each Fund is treated as a separate entity for federal income tax purposes.
Each Fund intends to qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Code so that each Fund will be
relieved of federal income tax on that part of its net investment income and
net capital gain (the excess of net long-term capital gain over net short-term
capital loss) that is distributed to shareholders.
Each Fund distributes substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to shareholders.
Dividends from a Fund's net investment income are taxable to shareholders as
ordinary income, whether received in cash or in additional shares. Such
dividends paid by a Fund will generally qualify for the 70% dividends-received
deduction for corporate shareholders only to the extent of the aggregate
qualifying dividend income received by the Fund from U.S. corporations. Each
Fund will report annually to its shareholders the amount of dividend income
qualifying for such treatment.
Distributions of net capital gain are taxable to shareholders as long-term
capital gain, regardless of how long shareholders have held their shares. Each
Fund sends reports annually to its shareholders of the federal income tax
status of all distributions made during the preceding year.
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary income and capital gain net income (the excess of short-term
and long-term capital gains over short-term and long-term capital losses),
including any available capital loss carryforwards, prior to the end of each
calendar year to avoid liability for federal excise tax.
Dividends and other distributions declared by a Fund in October, November or
December of any year and payable to shareholders of record on a date in such
month will be deemed to have been paid by the Fund and received by the
shareholders on the last day of that year if the distributions are paid by the
Fund at any time during the following January.
The sale or redemption of shares may result in taxable gain or loss to the
redeeming shareholder, depending upon whether the fair market value of the
redemption proceeds exceeds or is less than the Shareholder's adjusted basis
in the redeemed shares. If capital gain distributions have been made in
respect of shares that are sold at a loss after being held for six months or
less, then the loss is treated as a long-term capital loss to the extent of
the capital gain distributions.
Shareholders are urged to consult with their tax advisers concerning the
application of state and local income taxes to investments in a Fund, which
may differ from the federal income tax consequences described above.
Investment income received by a Fund from sources within foreign countries
may be subject to foreign income taxes withheld at the source. Information on
taxation of a Fund by certain foreign countries is set out in the SAI. To the
extent that a Fund is liable for foreign income taxes so withheld,
27
<PAGE>
the Fund intends to operate so as to meet the requirements of the Code to pass
through to the shareholders credit for foreign income taxes paid. Although
each Fund intends to meet Code requirements to pass through credit for such
taxes, there can be no assurance that each Fund will be able to do so.
A Fund may be required to withhold Federal income tax at the rate of 31% of
all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholders' Federal income tax liability.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HERETO FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISERS
ABOUT THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE FUNDS.
PORTFOLIO TRANSACTIONS
Each Fund's Advisory Agreement authorizes the Adviser to select the brokers
or dealers that will execute the purchases and sales of investment securities
for the Fund and directs the Adviser to use its best efforts to obtain the
best available price and most favorable execution on all transactions for the
Fund. Each Fund has authorized the Adviser to pay higher commissions in
recognition of brokerage services which, in the opinion of the Adviser, are
necessary for the achievement of better execution, provided the Adviser
believes this to be in the best interest of the Fund.
Since shares of the Funds are not marketed through intermediary brokers or
dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of shares which may be made through such firms.
However, the Adviser may place portfolio orders with qualified broker-dealers
who recommend the Funds or who act as agents in the purchase of shares of the
Funds for their clients.
In purchasing and selling securities for a Fund, it is the Fund's policy to
seek to obtain quality execution at the most favorable prices, through
responsible broker-dealers. In selecting broker-dealers to execute the
securities transactions for a Fund, consideration will be given to such
factors as the price of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing broker-dealers,
and the brokerage and research services which they provide to the Fund. Some
securities considered for investment by the Fund may also be appropriate for
other clients served by the Adviser. If purchase or sale of securities
consistent with the investment policies of the Fund and one or more of these
other clients served by the Adviser is considered at or about the same time,
transactions in such securities will be allocated among the Fund and such
other clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations,
are subject to periodic review by the Board of Trustees.
GENERAL INFORMATION
ORGANIZATION OF THE TRUST AND THE FUNDS; DESCRIPTION OF SHARES
The Trust was organized as a Massachusetts business trust under a
Declaration of Trust dated July 25, 1996. The Declaration of Trust permits the
Trust to issue an indefinite number of units of beneficial interest
("shares"), with or without par value.
28
<PAGE>
The Trust may issue shares in any number of "series"; each series of the
Trust is a separate portfolio and functions as a separate mutual fund,
although the Funds would share a common board of trustees, and may share an
adviser, administrator, transfer agent, or custodian. All consideration
received by the Trust for shares of any series, and all assets of that series,
belong only to that series and are subject to that series' liabilities. The
Funds are currently the only series of the Trust. Each Fund currently offers
only one class of shares. The Trustees may, however, create and issue
additional series of shares and may create and issue shares of additional
classes of one or more series.
Except as described below, the shares of each Fund, when issued, will be
fully paid, non-assessable, fully transferable and redeemable at the option of
the holder. The shares have no preference as to conversion, exchange,
dividends, retirement or other features and have no preemptive rights. Each
share entitles the shareholder of record to one vote. All shareholders of a
Fund may vote as a single class on each matter presented to shareholders for
action except with respect to any matter that affects one or more series or
class solely or in a manner different from others, in which case the shares of
the affected series or class are entitled to vote separately. The shares of
the Trust have non-cumulative rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so. Persons or organizations owning 25% or
more of the outstanding shares of a Fund may be presumed to "control" (as
defined in the 1940 Act) the Fund.
The Trust is not required to hold annual shareholder meetings; shareholder
meetings will be held from time to time for the election of Trustees under
certain circumstances, or to seek approval for changes to the operations of
the Trust or a Fund. A Trustee may be removed from office by the remaining
Trustees, or by the shareholders at a special meeting called on the written
request of shareholders owning at least 10% of the Trust's outstanding shares.
REPORTS AND STATEMENTS TO SHAREHOLDERS
Each Fund's fiscal year ends on December 31st of each year. Each Fund will
send annual, semi-annual, and quarterly reports to its shareholders; the
financial statements appearing in annual reports are audited by the Trust's
independent accountants.
CUSTODIAN
The Chase Manhattan Bank serves as each Fund's custodian. For more
information on the custodian, see "CUSTODIAN" in the SAI.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, One International Place, Boston, Massachusetts 02110,
serves as independent accountants for the Trust and audits its annual
financial statements.
29
<PAGE>
[LOGO] HANSBERGER INSTITUTIONAL SERIES
515 E. Las Olas Blvd.
Fort Lauderdale, FL 33301
Tel.: 954-522-5150
Fax.: 954-522-3557
- --------------------------------------------------------------------------------
Internet e-mail:[email protected]
