-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FxqSWRVk9T1OkRJpTnJ7ncLC2lI9rKHbn0zS51rCnOv1x26FizEkWulNYN6zPtXP HVwiV3Vo/9Jg+8lT0HNlWA== 0001018170-96-000003.txt : 19960820 0001018170-96-000003.hdr.sgml : 19960820 ACCESSION NUMBER: 0001018170-96-000003 CONFORMED SUBMISSION TYPE: N-1A EL PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19960801 DATE AS OF CHANGE: 19960819 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDING LOEVNER FUNDS INC CENTRAL INDEX KEY: 0001018170 STANDARD INDUSTRIAL CLASSIFICATION: FILING VALUES: FORM TYPE: N-1A EL SEC ACT: 1933 Act SEC FILE NUMBER: 333-09341 FILM NUMBER: 96602241 BUSINESS ADDRESS: STREET 1: 600 FIFTH AVE 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 8007624848 MAIL ADDRESS: STREET 1: 600 FIFTH AVE 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 FORMER COMPANY: FORMER CONFORMED NAME: HLM FUNDS INC/ FA DATE OF NAME CHANGE: 19960705 N-1A EL 1 As filed with the Securities and Exchange Commission on ________, 1996. File Nos. 33-______,811-_____ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________ FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X Pre-Effective Amendment No. Post-Effective Amendment No. REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X Amendment No. ___ HARDING, LOEVNER FUNDS, INC. - - - ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) 600 FIFTH AVENUE, 26th FLOOR NEW YORK, NEW YORK 10020 - - - ----------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number: 800-762-4848 WILLIAM E. VASTARDIS, Senior Vice President AMT Capital Services, Inc. 600 Fifth Avenue, 26th Floor New York, New York 10020 - - - ------------------------------------------------------------------------------ (Name and address of agent for service) With a copy to: ALLAN S. MOSTOFF, Esq. Dechert Price & Rhoads 1500 K Street, N.W. Washington, D.C. 20005 Approximate Date of Proposed Public Offering: As soon as practicable after this Registration Statement becomes effective. It is proposed that this filing will become effective: immediately upon filing pursuant to Rule 485(b) on ___ pursuant to Rule 485(b) 60 days after filing pursuant to Rule 485(a) 75 days after filing pursuant to Rule 485(a) on _____ pursuant to Rule 485(a) The registrant hereby amends this Registration Statement under the Securities Act of 1933 on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with the provision of Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine. Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant hereby elects to register an indefinite number of shares of Capital Stock, $.001 par value per share, of all series of the Registrant, now existing or hereafter created. The amount of the registration fee required by Rule 24f-2 is $500. HARDING, LOEVNER FUNDS, INC. Registration Statement on Form N-1A CROSS REFERENCE SHEET Pursuant to Rule 495(a) Under the Securities Act of 1933 Form N-1A Item No. Location Part A. Prospectus Caption Item 1. Cover Page Cover Page Item 2. Synopsis The Fund's Expenses Item 3. Condensed Financial Information Not Applicable Item 4. General Description of Registrant Description of the Fund; Investment Policies; Investment Restrictions; Risks Associated with the Fund's Investment Policies and Investment Techniques Item 5. Management of the Fund Management of the Fund Item 5A.Management's Discussion Not Applicable of Fund Performance Item 6. Capital Stock and Other Shareholder Information; Tax Considerations; Dividends Item 7. Purchase of Securities Purchase and Redemption of Offered Shares; Offered Dividends; Determination of Net Asset Value; Distribution of Fund Shares Item 8. Redemption or Repurchase Purchase and Redemption of Shares Item 9. Pending Legal Proceedings Not Applicable N-1A Item No. Statement of Additional Information Caption Part B Item 10. Cover Page Cover Page Item 11. Table of Contents Table of Contents Item 12. General Information and History Organization of the Fund Item 13. Investment Objectives and Policies Supplemental Descriptions of Investments; Supplemental Investment Techniques; Supplemental Discussion of Risks Associated With the Fund's Investment Policies and Investment Techniques; Investment Restrictions Item 14. Management of the Fund Management of the Fund Item 15. Control Persons and Principal Not Applicable Holders of Securities Item 16. Investment Advisory and Other Services Management of the Fund Item 17. Brokerage Allocation Portfolio Transactions Item 18. Capital Stock and Other Securities Shareholder Information; Tax Considerations; Organization of the Fund Item 19. Purchase, Redemption and Pricing of Securities Being Offered Net Asset Value Item 20. Tax Status Tax Considerations Item 21. Underwriters Distribution of Fund Shares Item 22. Calculation of Performance Data Calculation of Performance Data Item 23. Financial Statements Not Applicable Part C Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement HARDING, LOEVNER FUNDS, INC. Prospectus - _______, 1996 Harding, Loevner Funds, Inc. (the "Fund") is a no-load, open-end management investment company (a "mutual fund") that currently has four separate diversified portfolios (each a "Portfolio"), each of which has distinct investment objectives and policies. There is no sales charge for purchase of shares. Shares of each Portfolio may be purchased through AMT Capital Services, Inc. ("AMT Capital"), the Fund's exclusive distributor. The minimum initial investment in any Portfolio is $100,000. Additional investments or redemptions may be of any amount. The Portfolios and their investment objectives are: International Equity Portfolio - to seek long-term capital appreciation through investments in equity securities of companies based outside the United States. Global Equity Portfolio - to seek long-term capital appreciation through investments in equity securities of companies based both in and outside the United States. Emerging Markets Portfolio - to seek long-term capital appreciation through investments in equity securities of companies based in developing markets outside the United States. Multi-Asset Global Portfolio - to seek long-term capital appreciation and a growing stream of current income through investments in equity and debt securities of companies based both inside and outside the United States. No assurance can be given that a Portfolio's investment objectives will be attained This Prospectus sets forth concisely the information that a prospective investor should know before investing. It should be read and retained for future reference. A Statement of Additional Information dated ________, 1996, containing additional information about the Fund (the "Statement of Additional Information"), has been filed with the Securities and Exchange Commission (the "Commission") and is incorporated by reference into this Prospectus. It is available without charge and can be obtained by calling or writing AMT Capital at the telephone numbers or address listed on the cover of this Prospectus. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS Prospectus Highlights............................................. Fund Expenses..................................................... The Fund.......................................................... Investment Policies............................................... Descriptions of Investments....................................... Risks Associated with the Fund's Investment Policies and Investment Techniques.................... Investment Restrictions........................................... Brokerage Practices............................................... Yields and Total Return........................................... Distribution of Fund Shares....................................... Determination of Net Asset Value.................................. Purchase and Redemption of Shares................................. Dividends......................................................... Management of the Fund............................................ Tax Considerations................................................ Shareholder Information........................................... Other Parties..................................................... Shareholder Inquiries............................................. PROSPECTUS HIGHLIGHTS Harding, Loevner Funds, Inc. is a no-load, open-end management investment company that currently has four separate diversified Portfolios, each of which has distinct investment objectives and policies. There is no assurance that a Portfolio will achieve its investment objective. See "Investment Objectives" below. Investment Objectives Name of Portfolio Investment Objective - - - ----------------------------------------------------------------------------- International Equity Portfolio To seek long-term capital appreciation through investments in equity securities of companies based outside the United States. Global Equity Portfolio To seek long-term capital appreciation through investments in equity securities of companies based both in and outside the United States. Emerging Markets Portfolio To seek long-term capital appreciation through investments in equity securities of companies based in developing markets outside the United States. Multi-Asset Global Portfolio To seek long-term capital appreciation and a growing stream of current income through investments in equity and debt securities of companies based both inside and outside the United States. Investment Adviser Harding, Loevner Management, L.P. ("HLM"), which manages approximately $1 billion in assets for private investors and institutions, serves as investment adviser to the Fund. HLM provides the Fund with business and asset management services, including investment research and advice and determining which portfolio securities shall be purchased or sold on behalf of the Fund. Administrator and Distributor AMT Capital serves as Administrator to the Fund, supervising the general day- to-day business activities and operations of the Fund other than investment advisory activities. AMT Capital also serves as the exclusive distributor of shares of the Fund's Portfolios. For more information, refer to "Management of the Fund." How to Invest Shares of each Portfolio may be purchased without any sales charges at their net asset value next determined after receipt of the order by submitting an Account Application to AMT Capital and wiring federal funds to AMT Capital's "Fund Purchase Account" at Investors Bank & Trust Company (the "Transfer Agent"). The Portfolios are not available for sale in all states. For information about the Fund's availability, contact an account representative at AMT Capital. The minimum initial investment per Portfolio is $100,000. There is no minimum amount for subsequent investments. There are no sales commissions (loads) or 12b-1 fees. For more information, refer to "Purchase and Redemption of Shares." How to Redeem Shares Shares of each Portfolio may be redeemed, without charge, at their next determined net asset value after receipt by either the Transfer Agent or AMT Capital of the redemption request. For more information, refer to "Purchase and Redemption of Shares." Risks Prospective investors should consider certain risks associated with an investment in any Portfolio. There is no assurance that a Portfolio will achieve its investment objective. The Fund invests in securities of companies based outside of the United States. Investments in foreign securities involve risks not associated with investments in securities issued by United States entities. For more information, refer to "Investment Policies", "Descriptions of Investments", and "Risks Associated with the Fund's Investment Policies and Investment Techniques". FUND EXPENSES The following table illustrates the expenses and fees that a shareholder of the Fund can expect to incur. The purpose of this table is to assist the investor in understanding the various expenses that an investor in the Fund will bear directly or indirectly. Shareholder Transaction Expenses - - - --------------------------------- Sales Load Imposed on Purchases None Sales Load Imposed on Reinvested Dividends None Deferred Sales Load None Redemption Fees None Exchange Fees None Annual Fund Operating Expenses (after expense reimbursements, shown as a percentage of average net assets) Other Expenses ------------------------------------------- Total Other Other Expenses Expenses Total (after (after Operating Adminis- expense expense Expenses Advisory 12b-1 tration reimbur- reimbur- Fees Fees Fees sment) sment) ________ _____ ________ _________ ________ _________ International Equity Portfolio 0.75% None 0.15% 0.10% (a) 0.25%(a) 1.00% (a) Global Equity Portfolio 1.00% None 0.15% 0.10% (a) 0.25% (a) 1.25% (a) Emerging Markets Portfolio 1.25% None 0.15% 0.35% (a) 0.50% (a) 1.75% (a) Multi-Asset Global Portfolio 1.00% None 0.15% 0.10% (a) 0.25% (a) 1.25% (a) (a) HLM has voluntarily agreed to cap the total operating expenses at 1.00%, 1.25%, 1.75% and 1.25% (on an annualized basis) of the average daily net assets of the International Equity Portfolio, Global Equity Portfolio, Emerging Markets Portfolio and Multi-Asset Global Portfolio, respectively. Without such cap, the total operating expenses (on an annualized basis) for International Equity Portfolio, Global Equity Portfolio, Emerging Market Portfolio and Multi-Asset Global Portfolio are estimated to be 1.10%, 1.50%, 2.00% and ____%, respectively, (of their average daily net assets. which 0.20%, 0.35%, 0.60% and ____% is "other expenses").. The following table illustrates the expenses that an investor would pay on each $1,000 increment of its investment over various time periods, assuming a 5% annual return. As noted in the table above, the Fund charges no redemption fees of any kind. Expenses Per $1,000 Investment (including expense waivers and reimbursements) 1 Year 3 Years ------ ------- International Equity Portfolio $10 $32 Global Equity Portfolio $13 $40 Emerging Markets Portfolio $18 $57 Multi-Asset Global Portfolio $13 $40 These examples should not be considered a representation of future expenses or performance. Actual operating expenses and annual returns may be greater or less than those shown. At the discretion of and until further notice from HLM, expenses of the International Equity, Global Equity, Emerging Markets and Multi-Asset Global Portfolios will not exceed 1.00%, 1.25%, 1.75% and 1.25%, respectively, of each such Portfolio's average daily net assets for any fiscal year. Certain portions of the transaction expenses (i.e., brokerage commissions) are not included in the expenses subject to the cap described above. See "Investment Policies - Portfolio Turnover". THE FUND Harding, Loevner Funds, Inc. is a no-load, open-end management investment company that currently has four separate diversified portfolios, each of which has distinct investment objectives and policies. There is no assurance that a Portfolio will achieve its investment objective. The investment objective and policies of each Portfolio are described below. Except as otherwise indicated, the investment policies may be changed at any time by the Fund's Board of Directors to the extent that such changes are consistent with the investment objective of the applicable Portfolio. However, each Portfolio's investment objective is fundamental and may not be changed without a majority vote of the Portfolio's outstanding shares, which is defined as the lesser of (a) 67% of the shares of the applicable Portfolio present or represented if the holders of more than 50% of the shares are present or represented at the shareholders' meeting, or (b) more than 50% of the shares of the applicable Portfolio (hereinafter, "majority vote"). The investment objective of each of the Portfolios is: Name of Portfolio Investment Objective - - - ------------------------------------------------------------------------------ International Equity Portfolio To seek long-term capital appreciation through investments in equity securities of companies based outside the United States. Global Equity Portfolio To seek long-term capital appreciation through investments in equity securities of companies based both in and outside the United States. Emerging Markets Portfolio To seek long-term capital appreciation through investments in equity securities of companies based in developing markets outside the United States. Multi-Asset Global Portfolio To seek long-term capital appreciation and a growing stream of current income through investments in equity and debt securities of companies based both inside and outside the United States. INVESTMENT POLICIES International Equity Portfolio The International Equity Portfolio invests at least 65% of its total assets in common stocks, securities convertible into such common stocks [including American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs")], closed-end investment companies, and rights and warrants issued by companies that are based outside the United States. The Portfolio may invest in forward foreign currency exchange contracts, equity derivative securities such as options on common stocks and options, futures and options on futures on foreign common stock indices. The Portfolio may also invest in securities of U.S. companies which derive, or are expected to derive, a significant portion of their revenues from their foreign operations, although under normal circumstances not more than 15% of the Portfolio's assets will be invested in securities of U.S. companies. The Portfolio may also invest up to 35% of its assets in the types of short-term securities and in other debt securities described under the caption "Descriptions of Investments" below. The Portfolio may invest up to 20% of its assets in convertible securities and debt securities which are rated below investment-grade, that is, rated below Baa by Moody's Investors Service, Inc. ("Moody's") or below BBB by Standard & Poors ("Standard & Poors", or "S&P") ["junk bonds"] and in unrated securities judged to be of equivalent quality as determined by HLM. The Portfolio will invest broadly in the available universe of common stocks of companies domiciled in one country in each of at least three of the following groups: (1) Europe, including Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom; (2) the Pacific Rim, including Australia, Hong Kong, Japan, Malaysia, New Zealand, and Singapore; (3) Canada; and (4) countries with "emerging markets" as defined by Morgan Stanley Capital International ("MSCI"). At least 65% of these securities will be denominated in one of at least three currencies other than the U.S. dollar. HLM's international equity investment approach is "bottom up". The approach seeks to identify companies with excellent long-term business prospects, and then to select from among them those whose stocks appear to offer attractive absolute returns. HLM's investment criteria include both growth and value considerations. HLM seeks companies that it believes have strong balance sheets, sustainable internal growth, superior financial returns and defensible business franchises. Typically, HLM will only invest in companies that it has analyzed for a number of years. Country allocation and sector weightings reflect the results of stock selection, which itself is strongly influenced by HLM's cyclical and secular outlook for various industries, sectors, and national economies. Explicit country or sector allocation decisions are taken only when necessary to ensure that portfolios are well-diversified. HLM hedges foreign currency exposure infrequently, on those occasions when it has a strong view on the prospects for a particular currency. Currency hedging is done through the use of forward contracts or options. Portfolio Turnover. Portfolio turnover will depend on factors such as volatility in the markets that the Portfolio invests in, or the variability of cash flows into and out of the Portfolio. Portfolio turnover is expected to be low, generally below 50%, due to the emphasis on stock selection. Global Equity Portfolio The Global Equity Portfolio invests at least 65% of its total assets in common stocks, securities convertible into such common stocks (including ADRs and EDRs), closed-end investment companies, and rights and warrants issued by companies that are based both in and outside the United States. The Portfolio may invest in forward foreign currency exchange contracts, equity derivative securities such as options on common stocks and options, futures and options on futures on foreign common stock indices. The Portfolio may also invest up to 35% of its assets in the types of short-term securities and in other debt securities described under the caption "Descriptions of Investments" below. The Portfolio may invest up to 20% of its assets in convertible securities and debt securities which are rated below investment-grade. The Portfolio will invest broadly in the available universe of common stocks of companies domiciled in one of at least three countries including the United States and countries listed above in International Equity Portfolio's investment policies. HLM's "bottom up" approach is also utilized for this Portfolio. HLM hedges foreign currency exposure infrequently, on those occasions when it has a strong view on the prospects for a particular currency. Currency hedging is done through the use of forward contracts or options. Portfolio Turnover. Portfolio turnover will depend on factors such as volatility in the markets that the Portfolio invests in, or the variability of cash flows into and out of the Portfolio. Portfolio turnover is expected to be low, generally below 50%, due to the emphasis on stock selection. Emerging Markets Portfolio The Emerging Markets Portfolio invests at least 65% of its total assets in common stocks, securities convertible into such common stocks (including ADRs and EDRs), closed-end investment companies, and rights and warrants issued by companies that are based in developing markets outside the United States. The Portfolio may invest in forward foreign currency exchange contracts, equity derivative securities such as options on common stocks and options, futures and options on futures on foreign common stock indices. The Portfolio may also invest in securities of U.S. companies which derive, or are expected to derive, a significant portion of their revenues from their foreign operations, although under normal circumstances not more than 15% of the Portfolio's assets will be invested in securities of U.S. companies. The Portfolio may also invest up to 35% of its assets in the types of short-term securities and in other debt securities described under the caption "Descriptions of Investments" below. The Portfolio may invest up to 20% of its assets in convertible securities and debt securities which are rated below investment-grade. The Portfolio will invest broadly in the available universe of common stocks of companies domiciled in one of at least three countries listed below under the caption "Description of Investments - Emerging Markets Securities". HLM's "bottom up" approach is also utilized for this Portfolio. HLM hedges foreign currency exposure infrequently, on those occasions when it has a strong view on the prospects for a particular currency. Currency hedging is done through the use of forward contracts or options. Portfolio Turnover. Portfolio turnover will depend on factors such as volatility in the markets that the Portfolio invests in, or the variability of cash flows into and out of the Portfolio. Portfolio turnover is expected to be below 100% due to the emphasis on stock selection. Multi-Asset Global Portfolio The Multi-Asset Global Portfolio invests assets in common stocks, securities convertible into such common stocks (including ADRs and EDRs), closed-end investment companies, debt securities and rights and warrants issued by companies that are based both in and outside the United States. The Portfolio may invest in forward foreign currency exchange contracts, equity and debt derivative securities such as options, futures and options on futures. The Portfolio may also invest its assets in the types of short-term securities described under the caption "Descriptions of Investments" below. The Portfolio will invest broadly in the available universe of equity and debt securities of companies domiciled in at least three countries including the United States. HLM's "bottom up" approach is utilized for the selection of equity and fixed income investments for this Portfolio. While the Portfolio will generally emphasize equity investments, the allocation of the Portfolio among equity, fixed income and cash equivalent investments may range widely, and will vary over time according to HLM's current assessment of the relative risk and potential return of alternative investments. From time to time, HLM may hedge a portion of the foreign currency exposure of the Portfolio. Currency hedging is done through the use of forward contracts or options. Portfolio Turnover. Portfolio turnover will depend on factors such as volatility in the markets that the Portfolio invests in, or the variability of cash flows into and out of the Portfolio. Portfolio turnover is expected to be low, generally below 50%, due to the emphasis on security selection. DESCRIPTION OF INVESTMENTS The following briefly describes some of the different types of securities in which each Portfolio, unless otherwise specified, may invest and investment techniques in which each Portfolio may engage, subject to each Portfolio's investment objective and policies. For a more extensive description of certain of these assets and the risks associated with them, see the Statement of Additional Information. Equity Securities. The Portfolios will invest in various types of equity securities, including common stocks, preferred stocks, convertible securities, ADRs, EDRs, rights and warrants. The stocks that the Portfolios will invest in may be either growth-oriented or value-oriented. Growth-oriented stocks are the stocks of companies that are believed to have internal strengths, such as good financial resources, a satisfactory rate of return on capital, a favorable industry position, and superior management. Value-oriented stocks have lower price multiples (either price/earnings or price/book) than other stocks in their industry and can sometimes also display weaker fundamentals such as growth of earnings and dividends. Rights and warrants are instruments which give the holder the right to purchase the issuer's securities at a stated price during a stated term. Foreign Securities. The Portfolios will invest in foreign securities. Foreign securities include equity, foreign-fixed income, or derivative securities denominated in currencies other than the U.S. dollar, including any single currency or multi-currency units, plus sponsored and unsponsored ADRs and EDRs. ADRs typically are issued by a U.S. bank or trust company and evidence ownership of underlying securities issued by a foreign corporation. EDRs, which are sometimes referred to as Continental Depositary Receipts, are receipts issued in Europe, typically by foreign banks and trust companies, that evidence ownership of either foreign or domestic underlying securities. Unsponsored ADRs and EDRs differ from sponsored ADRs and EDRs in that the establishment of unsponsored ADRs and EDRs is not approved by the issuer of the underlying securities. Risks associated with investing in foreign securities are described under the caption "Risks Associated with the Fund's Investment Policies and Investment Techniques -Foreign Investments" below. Emerging Markets Securities. For purposes of its investment policies, the Fund defines an emerging market as any country, the economy and market of which is generally considered to be emerging or developing by MSCI or, in the absence of an MSCI classification, by the World Bank. Under this definition, the Fund considers emerging markets to include all markets except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Emerging Markets Debt Instruments. The Emerging Markets Portfolio and the Multi-Asset Global Portfolio may invest in zero coupon securities and convertible debt or other debt securities acquired at a discount. A portion of the Portfolio's sovereign debt securities may be acquired at a discount. The Portfolio will only purchase such securities to the extent consistent with the Portfolio's investment objectives. Foreign Governments and International and Supranational Agency Securities. The Portfolios may purchase, for temporary purposes, debt obligations issued or guaranteed by foreign governments or their subdivisions, agencies and instrumentalities, and debt obligations issued or guaranteed by international agencies and supranational entities. Convertible Securities. The Portfolios may invest in convertible preferred and debt securities which are securities that may be converted into or exchanged for, at either a stated price or stated rate, underlying shares of common stock. Convertible securities have general characteristics similar to both fixed-income and equity securities. Although to a lesser extent than with fixed-income securities generally, the market value of convertible fixed income securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. In addition, because of the conversion feature, the market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stocks and therefore also will react to variations in the general market for equity securities. A unique feature of convertible securities is that as the market price of the underlying common stock declines, convertible securities tend to trade increasingly on a yield basis, and so may not experience market value declines to the same extent as the underlying common stock. When the market price of the underlying common stock increases, the prices of the convertible securities tend to rise as a reflection of the value of the underlying common stock. While no securities investments are without risk, investments in convertible securities generally entail less risk than investments in common stock of the same issuer. Foreign Currency Transactions. The Portfolios hedge foreign currency exposure infrequently, on those occasions when HLM has a strong view on the prospects for a particular currency. Each Portfolio will conduct its currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market, or through entering into forward contracts to purchase or sell currency. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. The use of forward currency contracts does not eliminate fluctuations in the underlying prices of the securities, but it does establish a rate of exchange that can be achieved in the future. In addition, although forward currency contracts limit the risk of loss due to a decline in the value of the hedged currency, at the same time, they also limit any potential gain that might result should the value of the currency increase. Each Portfolio will segregate cash, U.S. Government securities or other high-grade liquid debt obligations with the custodian in an amount at all times equal to or exceeding their commitment with respect to contracts that are not part of a designated hedge. Warrants. The Portfolios may invest up to 10% of the value of their net assets (valued at the lower of cost or market) in warrants for equity securities, which are securities permitting, but not obligating, their holder to subscribe for other equity securities. Warrants do not carry with them the right to dividends or voting rights with respect to the securities that they entitle their holder to purchase, and they do not represent any rights in the assets of the issuer. As a result, an investment in warrants may be considered more speculative than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to its expiration date. U.S. Treasury and other U.S. Government and Government Agency Securities. Each Portfolio may purchase securities issued by or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities and supported by the full faith and credit of the United States ("U.S. Government Securities"). Each Portfolio may also purchase securities issued by a U.S. Government-sponsored enterprise or federal agency that is supported either by its ability to borrow from the U.S. Treasury (e.g., Student Loan Marketing Association) or by its own credit standing (e.g., Federal National Mortgage Association). Such securities do not constitute direct obligations of the United States but are issued, in general, under the authority of an Act of Congress. Bank Obligations. Each Portfolio may invest in obligations of domestic and foreign banks, including time deposits, certificates of deposit, bankers' acceptances, letters of credit, bank notes, deposit notes, Eurodollar or Yankeedollar time deposits, Eurodollar or Yankeedollar certificates of deposit, variable rate notes, loan participations, variable amount master demand notes and custodial receipts. Domestic bank obligations are defined as instruments: issued by U.S. (domestic) banks; U.S. branches of foreign banks, if such branches are subject to the same regulation as U.S. banks; and foreign branches of U.S. banks, if HLM determines that the investment risk associated with investing in instruments issued by such branches is the same as that of investing in instruments issued by the U.S. parent bank, in that the U.S. parent bank would be unconditionally liable in the event that the foreign branch failed to pay on its instruments. Other than the allowable 20% of a Portfolio's assets invested in below-investment grade convertible and other debt securities, all investments in bank obligations will be rated at least "B" by Thomson Bankwatch or similarly rated by IBCA Ltd., or of comparable quality as determined by HLM. Corporate Debt Instruments. Each Portfolio may purchase commercial paper, short-term notes and other obligations of U.S. and foreign corporate issuers meeting the Portfolio's credit quality standards (including variable rate notes). Other than the allowable 20% of a Portfolio's assets invested in below-investment grade convertible and other debt securities, all investments in corporate debt instruments will be rated at least "BBB" or "A-1" (in the case of commercial paper) by S&P, "Baa" or "P-1" (in the case of commercial paper) by Moody's, or of comparable quality as determined by HLM. Repurchase Agreements. Each Portfolio may enter into repurchase agreements under which a bank or securities firm (that is a dealer in U.S. Government Securities reporting to the Federal Reserve Bank of New York) agrees, upon entering into the contract, to sell U.S. Government Securities to a Portfolio and repurchase such securities from the Portfolio at a mutually agreed-upon price and date. Repurchase agreements will generally be restricted to those that mature within seven days. Securities subject to repurchase agreements will be held by the Company's custodian, sub-custodian or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are considered to be loans by the Portfolio under the Investment Company Act of 1940, as amended, (the "1940 Act"). The Portfolios will engage in such transactions with parties selected on the basis of such party's creditworthiness and will enter into repurchase agreements only with financial institutions which are deemed by HLM to be in good financial standing and which have been approved by the Board of Directors. Reverse Repurchase Agreements. Each Portfolio may enter into reverse repurchase agreements under which a primary or reporting dealer in U.S. Government Securities purchases U.S. Government Securities from a Portfolio and the Portfolio agrees to repurchase the securities at an agreed-upon price and date. Commission rules require either that securities sold by a Portfolio under a reverse repurchase agreement be segregated pending repurchase or that the proceeds be segregated on that Portfolio's books and records pending repurchase. The Fund will maintain for each Portfolio a segregated custodial account containing cash, U.S. Government Securities or other appropriate high- grade debt securities having an aggregate value at least equal to the amount of such commitments to repurchase, including accrued interest, and will subsequently monitor the account to ensure such equivalent value is maintained until payment is made. Reverse repurchase agreements will generally be restricted to those that mature within seven days. The Portfolios will engage in such transactions with parties selected on the basis of such party's creditworthiness. When-Issued Securities. The Portfolios may purchase securities on a firm commitment basis, including when-issued securities. Securities purchased on a firm commitment basis are purchased for delivery beyond the normal settlement date at a stated price and yield. Such securities are recorded as an asset and are subject to changes in value based upon changes in the general level of interest rates. The Portfolios will only make commitments to purchase securities on a firm commitment basis with the intention of actually acquiring the securities but may sell them before the settlement date if it is deemed advisable. When a Portfolio purchases securities on a when-issued or forward commitment basis, the Portfolio's custodian will maintain in a segregated account cash and liquid high-grade debt securities having a value (determined daily) at least equal to the amount of the Portfolio's purchase commitments. In the case of a forward commitment to sell portfolio securities, the custodian will hold the portfolio securities themselves in a segregated account while the commitment is outstanding. These procedures are designed to ensure that the Portfolio will maintain sufficient assets at all times to cover its obligations under when- issued purchases and forward commitments. Derivatives. The Portfolios are authorized to use various hedging and investment strategies described below to hedge broad or specific market movements, or to seek to increase the Portfolios' income or gains. The Portfolios may purchase and sell (or write) exchange-listed and over-the-counter put and call options on securities, financial futures contracts, equity indices and other financial instruments and enter into financial futures contracts (collectively, these transactions are referred to in this Prospectus as "Derivatives"). Derivatives may be used to attempt to protect against possible changes in the market value of securities held or to be purchased by a Portfolio resulting from securities market to protect the Portfolio's unrealized gains in the value of its securities, to facilitate the sale of those securities for investment purposes, to establish a position in the derivatives markets as a temporary substitute for purchasing or selling particular securities or to seek to enhance the Portfolio's income or gain. The Portfolios may use any or all types of Derivatives at any time; no particular strategy will dictate the use of one type of transaction rather than another, as use of any Derivatives will be a function of numerous variables, including market conditions. The ability of a Portfolio to utilize Derivatives successfully will depend on, in addition to the factors described above, HLM's ability to predict pertinent market movements, which cannot be assured. These skills are different from those needed to select the Portfolio's securities. The Portfolios are not "commodity pools" (i.e., pooled investment vehicles which trade in commodity futures contracts and options thereon and the operator of which is registered with the Commodity Futures Trading Commission (the "CFTC")) and Derivatives involving futures contracts and options on futures contracts will be purchased, sold or entered into only for bona fide hedging purposes, provided that a Portfolio may enter into such transactions for purposes other than bona fide hedging if, immediately thereafter, the sum of the amount of its initial margin and premiums on open contracts and options would not exceed 5% of the liquidation value of the Portfolio's portfolio, provided, further, that, in the case of an option that is in-the-money, the in-the-money amount may be excluded in calculating the 5% limitation. The use of certain Derivatives will require that the Portfolio segregate cash, liquid high grade debt obligations or other assets to the extent the Portfolio's obligations are not otherwise "covered" through ownership of the underlying security or financial instrument. Futures Contracts. The Portfolios may use stock index futures contracts ("futures contracts") as a hedge against the effects of changes in the market value of the stocks comprising the relevant index. In managing its cash flows, a Portfolio may also use futures contracts as a substitute for holding the designated securities underlying the futures contract. A futures contract is an agreement to purchase or sell a specified amount of designated securities for a set price at a specified future time. At the time the Portfolio enters into a futures transaction, it is required to make a performance deposit ("initial margin") of cash or liquid securities in a segregated account in the name of the futures broker. Subsequent payments of "variation margin" are then made on a daily basis, depending on the value of the futures position which is continually marked to market. The Portfolios will segregate cash, U.S. Government securities or other high grade debt obligations in an amount sufficient to meet its obligations under these transactions. If the Portfolio enters into a short position in a futures contract as a hedge against anticipated adverse market movements and the market then rises, the increase in the value of the hedged securities will be offset in whole or in part, by a loss on the futures contract. If instead the Portfolio purchases a futures contract as a substitute for investing in the designated underlying securities, the Portfolio will experience gains or losses that correspond generally to gains or losses in the underlying securities. The latter type of futures contract transactions permits the Portfolio to experience the results of being fully invested in a particular asset class, while maintaining the liquidity needed to manage cash flows into or out of the Portfolio (e.g., purchases and redemptions of Portfolio shares). Under normal market conditions, futures contracts positions may be closed out on a daily basis. Stock Index Options. The Portfolios may purchase or sell options on stock indices on U.S. and foreign exchanges or in the over-the-counter markets. An option on a stock index permits the purchaser of the option, in return for the premium paid, the right to receive from the seller cash equal to the difference between the closing price of the index and the exercise price of the option. The Portfolios will segregate cash, U.S. Government securities or other high grade debt obligations in an amount sufficient to meet its obligations under these transactions. Options on Futures Contracts. The Portfolios may purchase or sell options on futures contracts as an alternative to buying or selling futures contracts. Options on futures contracts are similar to options on the security underlying the futures contracts except that options on stock index futures contracts give the purchaser the right to assume a position at a specified price in a stock index futures contract at any time during the life of the option. The Portfolios will segregate cash, U.S. Government securities or other high grade debt obligations in an amount sufficient to meet its obligations under these transactions. A detailed discussion of Derivatives, including applicable requirements of the CFTC, and special risks associated with such strategies, appears in the Statement of Additional Information. Securities Lending. Although, the Fund has no current plans to do so, each Portfolio may lend securities to banks, broker-dealers or other institutional investors pursuant to agreements requiring that the loans be continuously secured by any combination of cash, securities of the U.S. government and its agencies or other high quality liquid investments, that at all times equal at least 102% of the market value of the loaned securities. Such loans will not be made if, as a result, the aggregate amount of all outstanding securities loans for any Portfolio exceeds 33 1/3% of its total assets. A Portfolio continues to receive interest on the securities loaned and simultaneously earns either interest on the investment of the cash collateral or fee income if the loan is otherwise collateralized. However, a Portfolio normally pays lending fees and related expenses from the interest earned on invested collateral. Should the borrower of the securities fail financially, there is a risk of delay in recovery of the securities or loss of rights in the collateral. However, loans are made only to borrowers which are approved by the Board of Directors and are deemed by HLM to be of good financial standing. A Portfolio may invest cash collateral it receives in connection with a loan of securities in securities of the U.S. Government and its agencies and other high quality short-term debt instruments. For purposes of complying with each Portfolio's investment policies and restrictions, collateral received in connection with securities loans will not be deemed an asset of a Portfolio unless otherwise required by law. See the Statement of Additional Information for further information regarding loan transactions. RISKS ASSOCIATED WITH THE FUND'S INVESTMENT POLICIES AND INVESTMENT TECHNIQUES A more detailed discussion of the risks associated with the investment policies and investment techniques of the Portfolios appears in the Statement of Additional Information. Foreign Investments. Securities issued by foreign governments, foreign corporations, international agencies and obligations of foreign banks involve risks not associated with securities issued by U.S. entities. With respect to certain foreign countries, there is the possibility of expropriation of assets, confiscatory taxation and political or social instability or diplomatic developments that could affect investment in those countries. There may be less publicly available information about a foreign financial instrument than about a United States instrument and foreign entities may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those of United States entities. A Portfolio could encounter difficulties in obtaining or enforcing a judgment against the issuer in certain foreign countries. In addition, certain foreign investments may be subject to foreign withholding or other taxes, although the Portfolio will seek to minimize such withholding taxes whenever practical. Investors may be able to deduct such taxes in computing their taxable income or to use such amounts as credits against their United States income taxes if more than 50% of the Portfolio's total assets at the close of any taxable year consist of stock or securities of foreign corporations. Ownership of unsponsored ADRs may not entitle the Portfolio to financial or other reports from the issuer to which it would be entitled as the owner of sponsored ADRs. See "Tax Considerations". Emerging Markets Securities. The risks of investing in foreign securities may be intensified in the case of investments in issuers domiciled or doing substantial business in emerging markets or countries with limited or developing capital markets. Security prices in emerging markets can be significantly more volatile than in the more developed nations of the world, reflecting the greater uncertainties of investing in less established markets and economies. In particular, countries with emerging markets may have relatively unstable governments, present the risk of sudden adverse government action and even nationalization of businesses, restrictions on foreign ownership, or prohibitions of repatriation of assets, and may have less protection of property rights than more developed countries. The economies of countries with emerging markets may be predominantly based on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of substantial holdings difficult or impossible at times. Transaction settlement and dividend collection procedures may be less reliable in emerging markets than in developed markets. Securities of issuers located in countries with emerging markets may have limited marketability and may be subject to more abrupt or erratic price movements. High Yield/High Risk Securities. Each Portfolio may invest up to 20% of its assets in convertible securities and debt securities rated lower than Baa by Moody's or BBB by S&P, or of equivalent quality as determined by HLM (commonly referred to as "junk bonds"). The lower the ratings of such debt securities, the greater their risks render them like equity securities. Each Portfolio will invest no more than 10% of its assets in securities rated B or lower by Moody's or S&P, or of equivalent quality, but may invest in securities rated C by Moody's or D by S&P, or the equivalent, which may be in default with respect to payment of principal or interest. Derivatives and Hedging. The Portfolios may engage in hedging and other strategic transactions and certain other investment practices which may entail certain risks. Derivatives involve special risks, including possible default by the other party to the transaction, illiquidity and, to the extent HLM's view as to certain market movements is incorrect, the risk that the use of Derivatives could result in greater losses than if they had not been used. Use of put and call options could result in losses to a Portfolio, force the purchase or sale of portfolio securities at inopportune times or for prices higher or lower than current market values or cause the Portfolio to hold a security it might otherwise sell. The use of options and futures transactions entails certain special risks. In particular, the variable degree of correlation between price movements of futures contracts and price movements in the related portfolio position of a Portfolio could create the possibility that losses on the Derivative will be greater than gains in the value of the Portfolio's position. The loss from investing in futures transactions which are unhedged or uncovered, is potentially unlimited. In addition, futures and options markets could be illiquid in some circumstances and certain over-the-counter options could have no markets. A Portfolio might not be able to close out certain positions without incurring substantial losses. To the extent a Portfolio utilizes futures and options transactions for hedging, such transactions should tend to minimize the risk of loss due to a decline in the value of the hedged position and, at the same time, limit any potential gain to the Portfolio that might result form an increase in value of the position. Finally, the daily variation margin requirements for futures contracts create a greater ongoing potential financial risk than would purchases of options, in which case the exposure is limited to the cost of the initial premium and transaction costs. Losses resulting from the use of Derivatives will reduce the Portfolio's net asset value, and possibly income, and the losses may be greater than if Derivatives had not been used. Additional information regarding the risks and special considerations associated with Derivatives appears in the Statement of Additional Information. Illiquid and Restricted Securities. Each Portfolio will not invest more than 15% of the value of its net assets in illiquid securities. Illiquid securities are securities which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which a Portfolio has valued the investments, and include securities with legal or contractual restrictions on resale, time deposits, repurchase agreements having maturities longer than seven days and securities that do not have readily available market quotations. In addition, a Portfolio may invest in securities that are sold in private placement transactions between their issuers and their purchasers and that are neither listed on an exchange nor traded over-the counter. These factors may have an adverse effect on the Portfolio's ability to dispose of particular securities and may limit a Portfolio's ability to obtain accurate market quotations for purposes of valuing securities and calculating net asset value and to sell securities at fair value. If any privately placed securities held by a Portfolio are required to be registered under the securities laws of one or more jurisdictions before being resold, the Portfolio may be required to bear the expenses of registration. A Portfolio may also purchase securities that are not registered under the Securities Act of 1933, as amended (the "1933 Act"), but which can be sold to qualified institutional buyers in accordance with Rule 144A under that Act ("Rule 144A securities"). Rule 144A securities generally must be sold to other qualified institutional buyers. A Portfolio may also invest in commercial obligations issued in reliance on the so-called "private placement" exemption from registration afforded by Section 4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition under the federal securities laws, and generally is sold to institutional investors such as the Portfolio who agree that they are purchasing the paper for investment and not with a view to public distribution. Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper normally is resold to other institutional investors like the Portfolio through or with the assistance of the issuer or investment dealers who make a market in the Section 4(2) paper, thus providing liquidity. If a particular investment in Rule 144A securities, Section 4(2) paper or private placement securities is not determined to be liquid, that investment will be included within the 15% limitation on investment in illiquid securities. Not all Rule 144A securities can be deemed liquid; HLM will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. Repurchase and Reverse Repurchase Agreements. In the event the other party to a repurchase agreement or a reverse repurchase agreement becomes subject to a bankruptcy or other insolvency proceeding or such party fails to satisfy its obligations thereunder, a Portfolio could (i) experience delays in recovering cash or the securities sold (and during such delay the value of the underlying securities may change in a manner adverse to the Portfolio) or (ii) lose all or part of the income, proceeds or rights in the securities to which the Portfolio would otherwise be entitled. Reverse repurchase agreements involve the risk that the market value of the portfolio securities sold by a Portfolio may decline below the price of the securities the Portfolio is obligated to repurchase. INVESTMENT RESTRICTIONS The following investment restrictions apply to each Portfolio and may be changed with respect to a particular Portfolio only by the majority vote of that Portfolio's outstanding shares. Accordingly, no Portfolio may: (a) invest more than 5% of its total assets in securities of any one issuer, other than securities issued by the U.S. Government, its agencies and instrumentalities, or purchase more than 10% of the voting securities of any one issuer, with respect to 75% of a Portfolio's total assets; (b) invest more than 25% of its total assets in the securities of companies primarily engaged in any one industry other than the U.S. Government, its agencies or instrumentalities. Finance companies as a group are not considered a single industry for purposes of this policy; (c) borrow money, except through reverse repurchase agreements or from a bank for temporary or emergency purposes in an amount not exceeding one third of the value of its total assets nor will the Portfolios borrow for leveraging purposes. In addition, although not a fundamental policy, the Portfolios will repay any money borrowed before any additional portfolio securities are purchased. See the Statement of Additional Information for a further description regarding reverse repurchase agreements; (d) invest more than 10% of the value of its total assets in warrants in accordance with Texas Rule 123.2(8); (e) purchase or sell real estate (other than marketable securities representing interests in, or backed by, real estate and securities of companies that deal in real estate or mortgages) or real estate limited partnerships, or purchase or sell physical commodities or contracts relating to physical commodities; or (f) purchase or retain the securities of any open-end investment companies. The above percentage limits are based upon current asset values at the time of the applicable transaction; accordingly, a subsequent change in asset values will not affect a transaction which was in compliance with the investment restrictions at the time such transaction was effected. See the Statement of Additional Information for other investment limitations. BROKERAGE PRACTICES HLM will place its own orders to execute the securities transactions which are designed to implement the applicable investment objective and policies of the Portfolios. HLM will use its reasonable efforts to execute all purchases and sales with brokers, dealers and banks on a best available price and most favorable execution basis. The full range and quality of services offered by the executing broker or dealer is considered when making these determinations. Neither HLM nor any of its officers, affiliates, or employees will act as principal or receive any compensation from the Portfolios in connection with the purchase or sale of investments for the Portfolios. YIELDS AND TOTAL RETURN The Portfolios' yield for any 30-day (or one month) period is computed by dividing the net investment income per share earned during such period by the maximum public offering price per share on the last day of the period, and then annualizing such 30-day (or one month) yield in accordance with a formula prescribed by the Commission which provides for compounding on a semiannual basis. The Portfolios may from time to time advertise their total return. Any total return quotations advertised will reflect the average annual compounded rate of return during the designated time period based on a hypothetical initial investment and the redeemable value of that investment at the end of the period. The Portfolios will at times compare their performance to applicable published indices, and may also disclose their performance as ranked by certain analytical services. See the Statement of Additional Information for more information about the calculation of yields and total returns. Performance figures are based upon historical earnings and are not intended to indicate future performance. DISTRIBUTION OF FUND SHARES Shares of the Fund are distributed by AMT Capital pursuant to a Distribution Agreement (the "Distribution Agreement") dated as of __________ between the Fund and AMT Capital. No fees are payable by the Fund pursuant to the Distribution Agreement. Under a sales incentive fee agreement dated ________ between AMT Capital Advisers, an affiliate of AMT Capital and HLM, HLM has agreed to pay AMT Capital Advisers a monthly sales incentive fee at an annual rate of 0.25% of the average daily value of shares of the Fund purchased as a result of the efforts of AMT Capital Advisers or its affiliates. DETERMINATION OF NET ASSET VALUE The "net asset value" per share of each Portfolio is calculated as of the close of business on days when the New York Stock Exchange is open for business, (hereinafter, "Business Day"). Each Portfolio determines its net asset value per share by subtracting that Portfolio's liabilities (including accrued expenses and dividends payable) from the total value of the Portfolio's investments and other assets and dividing the result by the total outstanding shares of the Portfolio. For purposes of calculating each Portfolio's net asset value, securities are valued as follows: (1) all portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at their last sale price, or if there are no trades, at the latest bid price; (2) deposits and repurchase agreements are valued at their cost plus accrued interest unless HLM determines in good faith, under procedures established by and under the general supervision of the Fund's Board of Directors, that such value does not approximate the fair value of such assets; (3) U.S. securities listed or traded on an exchange are valued at their last sale price on that exchange, or if there are no trades, at the mean between the latest bid and asked prices; (4) Non-U.S. securities listed or traded on an exchange are valued at their last sale price on that exchange, or if there are no trades, at the last closing price on that exchange, (5) securities which are traded both in the OTC market and on a stock exchange will be valued according to the broadest and most representative market; (6) short-term obligations with maturities of 60 days or less are valued at amortized cost, which constitutes fair value as determined by the Fund's Board of Directors. Amortized cost involves valuing an instrument at its original cost to the Portfolio and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument; and (7) the value of other assets for which market quotations are not readily available will be determined in good faith by HLM at fair value under procedures established by and under the general supervision of the Fund's Board of Directors. Quotations of foreign securities denominated in a foreign currency are converted to a U.S. dollar-equivalent at exchange rates obtained from an automated pricing service at the bid price except for the Royal Currencies (United Kingdom, Ireland, European Currency Unit, Australia and New Zealand), which are valued at the ask price. PURCHASE AND REDEMPTION OF SHARES Purchases There is no sales charge imposed by the Fund. The minimum initial investment in any Portfolio of the Fund is $100,000; additional purchases or redemptions may be of any amount. With respect to purchases of Fund shares through brokers: 1) a broker may charge transaction fees, 2) duplicate mailings of Fund material to shareholders who reside at the same address may be eliminated, and 3) the minimum initial investment through a broker is less than a direct purchase with the Fund. The offering of shares of the Fund is continuous and purchases of shares of the Fund may be made on any Business Day. The Fund offers shares at a public offering price equal to the net asset value next determined after receipt of a purchase order. Purchases of shares must be made by wire transfer of Federal funds. Share purchase orders are effective on the date when AMT Capital receives a completed Account Application Form (and other required documents) and Federal funds become available to the Fund in the Fund's account with the Transfer Agent as set forth below. The shareholder's bank may impose a charge to execute the wire transfer. The wiring instructions are: Investors Bank & Trust Company, Boston, MA ABA#: 011-001-438 Account Name: AMT Capital Services, Inc. - Fund Purchase Account Account #: 933333333 Reference: Harding, Loevner Funds, Inc. - (designate Portfolio) In order to purchase shares on a particular Business Day, a purchaser must call AMT Capital at (800) 762-4848 or (212) 332-5211 prior to the close of business (normally 4:00 p.m. Eastern time) to inform the Fund of the incoming wire transfer and must clearly indicate which Portfolio is to be purchased. If Federal funds are received by the Fund that same day, the order will be effective on that day. If the Fund receives notification after the above- mentioned cut-off times, or if Federal funds are not received by the Transfer Agent, such purchase order shall be executed as of the date that Federal funds are received. Redemptions The Fund will redeem all full and fractional shares of the Fund upon request of shareholders. The redemption price is the net asset value per share next determined after receipt by the Transfer Agent of proper notice of redemption as described below. If such notice is received by the Transfer Agent by the close of business (normally 4:00 p.m. Eastern time) on any Business Day, the redemption will be effective on the date of receipt. Payment will ordinarily be made by wire on the next Business Day but within no more than seven business days from the date of receipt. If the notice is received on a day that is not a Business Day or after the above-mentioned cut-off times, the redemption notice will be deemed received as of the next Business Day. There is no charge imposed by the Fund to redeem shares of the Fund; however, a shareholder's bank may impose its own wire transfer fee for receipt of the wire. Redemptions may be executed in any amount requested by the shareholder up to the amount such shareholder has invested in the Fund. To redeem shares, a shareholder or any authorized agent (so designated on the Account Application Form) must provide the Transfer Agent with the dollar or share amount to be redeemed, the account to which the redemption proceeds should be wired (which account shall have been previously designated by the shareholder on its Account Application Form), the name of the shareholder and the shareholder's account number. Shares redeemed receive dividends up to and including the day preceding the day the redemption proceeds are wired. A shareholder may change its authorized agent or the account designated to receive redemption proceeds at any time by writing to the Transfer Agent with an appropriate signature guarantee. Further documentation may be required when deemed appropriate by the Transfer Agent. A shareholder may request redemption by calling the Transfer Agent at (800) 247-0473. Telephone redemption is made available to shareholders of the Fund on the Account Application Form. The Fund or the Transfer Agent employ reasonable procedures designed to confirm that instructions communicated by telephone are genuine. If either the Fund or the Transfer Agent does not employ such procedures, it may be liable for losses due to unauthorized or fraudulent instructions. The Fund or the Transfer Agent may require personal identification codes and will only wire funds through pre-existing bank account instructions. No bank instruction changes will be accepted via telephone. Exchange Privilege Shares of each Portfolio may be exchanged for shares of another Portfolio based on the respective net asset values of the shares involved in the exchange, assuming that shareholders wishing to exchange shares reside in states where these mutual funds are qualified for sale. The Fund's Portfolio minimum amounts of $100,000 would still apply. An exchange order is treated the same as a redemption followed by a purchase. Investors who wish to make exchange requests should telephone AMT Capital or the Transfer Agent. DIVIDENDS Each Portfolio will declare and pay a dividend from its net investment income on an annual basis. Each Portfolio will distribute its realized net short-term capital gains (i.e. with respect to assets held one year or less) and net long- term capital gains (i.e. with respect to assets held more than one year) at least annually by automatically reinvesting (unless a shareholder has elected to receive cash) such short-term or long-term capital gains in additional shares of the Portfolio at the net asset value on the ex-date of the distribution.. MANAGEMENT OF THE FUND Board of Directors The Board of Directors of the Fund are responsible for the overall management and supervision of the Fund. The Fund's Directors are: Director Profile - - - ------------------------------------------------------------------------------ Insert Directors Additional information about the Directors and the Fund's executive officers may be found in the Statement of Additional Information under the heading "Management of the Fund - Board of Directors". Investment Adviser Subject to the direction and authority of the Fund's Board of Directors, HLM provides investment advisory services to each Portfolio pursuant to the Investment Advisory Agreement dated _______, 1996. Under the Investment Advisory Agreement, HLM is responsible for providing investment research and advice, determining which portfolio securities shall be purchased or sold by each Portfolio of the Fund, purchasing and selling securities on behalf of the Portfolios and determining how voting and other rights with respect to the portfolio securities of the Portfolios are exercised in accordance with each Portfolio's investment objective, policies, and restrictions. HLM also provides office space, equipment, and personnel necessary to manage the Fund. HLM, established in 1989, is a registered investment adviser that specializes in global investment management for private investors and institutions. HLM currently has approximately $1 billion in assets under management. HLM is located at 50 Division Street, Suite 401, Somerville, NJ 08876. HLM manages assets for several other registered investment companies. HLM bears the expense of providing the above services to the Fund. For its services, each of the International Equity Portfolio, Global Equity Portfolio, Emerging Markets Portfolio and Multi-Asset Global Portfolio pay HLM a monthly fee at an annual rate of 0.75%, 1.00%, 1.25% and 1.00%, respectively, of its average daily net assets. The advisory fee paid by each Portfolio is higher than that charged by most funds which invest primarily in U.S. securities, but not necessarily higher than the fees charged to funds with investment objectives similar to those of the Portfolios. Portfolio Managers Daniel D. Harding (responsible for global portfolio management), co-founder of HLM and a director of its general partner, is the firm's chief investment officer, with overall responsibility for investment policy. Dan served for twelve years as a senior investment manager with Rockefeller & Co., investment adviser to the Rockefeller family and related institutions. As manager of the family's flagship equity, fixed income and balanced fund portfolios, he set investment strategy and provided investment counseling to family members, trusts and private businesses. In this capacity he also spearheaded the diversification of the firm's investments into overseas markets. Dan began his career as a trust investment officer at American National Bank & Trust in Morristown, NJ. He is an honors graduate in history and international relations from Colgate University, a Chartered Financial Analyst, and a Chartered Investment Counselor. Dan is a trustee and treasurer of the Peck School. David R. Loevner, co-founder, is the chief executive officer of HLM and a director of the firm's general partner. He serves on the investment committee, and is responsible for operations, administration, compliance, and client service. His prior experience includes nine years with Rockefeller and Co., where he managed equity portfolios, counseled family members, and developed new financial planning and asset allocation tools. David also managed a number of professional service units with the Rockefeller family office, including the Rockefeller Insurance Company, which he established in 1985. In 1987, David established Rockefeller's first Asian office, in Hong Kong, from which he directed a region-wide investment program comprising small company and venture investments. Before Rockefeller, David worked for the World Bank, as country economist for Brazil. He graduated summa cum laude from Princeton University and, as a Sachs Scholar, received graduate degrees in statistics and in economics from Oxford University. David is a director of the Princeton University Investment Company and an advisory trustee of Outward Bound USA. Simon Hallett (responsible for international portfolio management), senior portfolio manager and a director of the firm's general partner, serves as the chair of the investment committee. Simon has managed global portfolios for individuals and institutions since 1979, when he joined the investment management department of London-based Buckmaster and Moore. In 1981 he moved to Hong Kong, where he began to concentrate on Asian markets, and in 1984 joined Jardine Fleming Investment Management, one of Asia's largest and most respected investment management companies. Simon's ultimate position at Jardine Fleming was director in charge of a team of six portfolio managers investing in the markets of South East and North Asia for a diverse clientele comprising European pension plans, governments, and private clients, Rockefeller & Co. among them. He joined HLM in 1991. A British subject, Simon is an honors graduate of Oxford University in Politics, Philosophy and Economics. Alexander T. Walsh, portfolio manager, is a member of the investment committee and a principal of the firm. From 1979 through 1982, he worked in money market trading and operations for J. Henry Schroder Bank & Trust Co., New York. Alec joined Merrill Lynch, New York in 1982 as an account executive. In 1987 he moved to Paine Webber, where he built an institutional equity clientele comprising Fortune 100 accounts and investment advisers. Promoted to 1st Vice President in 1992, he remained with the firm until joining HLM in 1994. Alec is a 1978 graduate of McGill University with a BA in North American Studies. G. "Rusty" Johnson III, research analyst, is a member of the investment committee and a principal of the firm. He began his career in Hong Kong in 1986, developing computer-based arbitrage programs for Chin Tung Futures, subsequently a subsidiary of Standard Chartered Bank. The following year he joined Jardine Fleming Research to concentrate on Asian equities. After three years in Hong Kong and two years in Bangkok, Rusty moved to Jardine Fleming's parent company, Robert Fleming, in New York as an institutional broker of Asian equities. He spent a further year in institutional equity sales in New York with Peregrine Securities before joining HLM in 1994. Rusty is a magna cum laude graduate in economics of Washington and Lee University, where his program included studies at Fu Jen University, Taiwan, and the Chinese University of Hong Kong. Rusty is a Chartered Financial Analyst. Ferrill D. Roll, portfolio manager, has fifteen years' experience across a wide range of international markets. Prior to joining Harding, Loevner in 1996, he was general partner of Cesar Montemayor Capital, L.P., a global investment partnership investing in fixed income, currency, and equity markets, since 1992. For six years before that, he worked in international equity sales, first at First Boston (1985-1989) and later at Baring Securities (1989-1992), working primarily on European markets. During 1990, he acted as head of Baring's German equity research, in Frankfurt. Prior to joining First Boston, Ferrill worked for five years at JP Morgan, where he advised corporate clients on foreign exchange markets and set up the currency options trading department. He graduated from Stanford University in 1980 with a degree in economics. Administrator Pursuant to an Administration Agreement between the Fund and AMT Capital Services, Inc., dated as of _________, 1996 AMT Capital provides for administrative services to, and assists in managing and supervising all aspects of, the general day-to-day business activities and operations of the Fund other than investment advisory activities, including custodial, transfer agency, dividend disbursing, accounting, auditing, compliance and related services. The Fund pays AMT Capital a monthly fee at an annual rate of 0.15% on the first $500 million of the average daily net assets of the Fund, 0.10% on the next $500 million of the average daily net assets of the Fund, and 0.05% on the average daily net assets over $1 billion. Each Portfolio pays a proportionate share of the fee based on its relative net assets. Founded in early 1992, AMT Capital Services, a Delaware corporation, is a registered broker-dealer whose senior managers are former officers of Morgan Stanley and the Vanguard Group, where they were responsible for the administration and distribution of The Pierpont Funds, a $5 billion fund complex now owned by J.P. Morgan, and the private label administration group of Vanguard, which administered nearly $10 billion in assets for 45 portfolios, respectively. Direct Expenses Those fees and expenses paid directly by the Fund may include the fees of independent auditors, transfer agent and dividend disbursing agent, and custodian; the expense of obtaining quotations for calculating the value of each Portfolio's net assets; taxes, if any, and the preparation of each Portfolio's tax returns; brokerage fees and commissions; interest; costs of Board of Director and shareholder meetings; the expense of printing and mailing prospectuses and reports to existing shareholders; fees for filing reports with regulatory bodies and the maintenance of the Fund's existence; legal fees; fees to federal and state authorities for the registration of shares; fees and expenses of members of the Board of Directors who are not directors, officers, employees or stockholders of HLM or its affiliates; insurance and fidelity bond premiums; and any extraordinary expenses of a nonrecurring nature. TAX CONSIDERATIONS The following discussion is for general information only. An investor should consult with his or her own tax adviser as to the tax consequences of an investment in a Portfolio, including the status of distributions from each Portfolio under applicable state or local law. Federal Income Taxes Each Portfolio intends to qualify for and to elect to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended. To qualify, a Portfolio must meet certain income, distribution and diversification requirements. In any year in which a Portfolio qualifies as a RIC and distributes all of its taxable income and substantially all of its net tax-exempt interest income on a timely basis, the Portfolio will not pay U.S. federal income or excise tax. If in any year a Portfolio should fail to qualify as a regulated investment company, the Portfolio would be subject to federal income tax in the same manner as an ordinary corporation, and distributions to shareholders would be taxable to such holders as ordinary income to the extent of the earnings and profits of the Portfolio. Distributions in excess of earnings and profits will be treated as a tax- free return of capital, to the extent of a holder's basis in its shares, and any excess, as a long- or short-term capital gain. Each Portfolio intends to distribute all of its taxable income and net tax- exempt interest income by automatically reinvesting such amount in additional shares of the Portfolio and distributing those shares to its shareholders, unless a shareholder elects, on the Account Application Form, to receive cash payments for such distributions. Shareholders receiving distributions from the Fund in the form of additional shares will be treated for federal income tax purposes as receiving a distribution in an amount equal to the fair market value of the additional shares on the date of such a distribution. Dividends paid by a Portfolio from its investment company taxable income (including interest and net short-term capital gains) will be taxable to a U.S. shareholder as ordinary income, whether received in cash or in additional Fund shares. Distributions of net capital gains (the excess of net long-term capital gains over net short-term capital losses) are generally taxable to shareholders as long-term capital gain, regardless of how long they have held their Portfolio shares. If a portion of a Portfolio's income consists of dividends paid by U.S. corporations, a portion of the dividends paid by the Portfolio may be eligible for the corporate dividends-received deduction. A distribution will be treated as paid on December 31 of the current calendar year if it is declared by a Portfolio in October, November or December with a record date in any such month and paid by the Portfolio during January of the following calendar year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received. Each Portfolio will inform shareholders of the amount and tax status of all amounts treated as distributed to them not later than 60 days after the close of each calendar year. Any gain or loss realized by a shareholder upon the sale or other disposal of shares of a Portfolio, or upon receipt of a distribution in a complete liquidation of the Portfolio, generally will be a capital gain or loss which will be long-term or short-term, generally depending upon the shareholder's holding period for the shares. A loss realized on a sale or exchange of shares may be disallowed if other shares are acquired within a 61-day period beginning 30 days before the ending 30 days after the date that the shares are disposed of. Each Portfolio may be required to withhold U.S. federal income tax at the rate of 31% of all taxable distributions payable to shareholders who fail to provide the Portfolio with their correct taxpayer identification number or to make required certifications, or who have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's U.S. federal income tax liability. Income received by a Portfolio from sources within foreign countries may be subject to withholding and other taxes imposed by such countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. In certain circumstances, a Portfolio may be eligible and may elect to "pass through" to the Portfolio's shareholders the amount of foreign income and similar taxes paid by the Portfolio. Each shareholder will be notified within 60 days after the close of a Portfolio's taxable year whether the foreign taxes paid by the Portfolio will "pass through" for the year. Further information relating to tax consequences is contained in the Statement of Additional Information. Ordinary income dividends paid by the Fund to shareholders who are non- resident aliens or foreign entities will be subject to a 30% withholding tax unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty law or the income is "effectively connected" with a U.S. trade or business. Generally, subject to certain exceptions, capital gain dividends paid to non-resident shareholders or foreign entities will not be subject to U.S. tax. Non-resident shareholders are urged to consult their own tax advisers concerning the applicability of the U.S. withholding tax. The foregoing discussion is only a brief summary of the important federal tax considerations generally affecting the Fund and its shareholders. As noted above, IRAs receive special tax treatment. No attempt is made to present a detailed explanation of the federal, state or local income tax treatment of the Fund or its shareholders, and this discussion is not intended as a substitute for careful tax planning. Accordingly, potential investors in the Fund should consult their tax advisers with specific reference to their own tax situation. State and Local Taxes A Portfolio may be subject to state, local or foreign taxation in any jurisdiction in which the Portfolio may be deemed to be doing business. Portfolio distributions may be subject to state and local taxes. Distributions of a Portfolio which are derived from interest on obligations of the U.S. Government and certain of its agencies, authorities and instrumentalities may be exempt from state and local taxes in certain states. Shareholders should consult their own tax advisers regarding the particular tax consequences of an investment in a Portfolio. SHAREHOLDER INFORMATION Description of the Fund The Fund was established under Maryland law by the filing of its Articles of Incorporation on ________,1996. The Fund's Articles of Incorporation permit the Directors to authorize the creation of additional Portfolios, each of which may issue separate classes of shares. Currently, the Fund has four separate Portfolios. Voting Rights Each share of common stock of a Portfolio or class is entitled to one vote for each dollar of net asset value and a proportionate fraction of a vote for each fraction of a dollar of net asset value. Generally, shares of each Portfolio and class vote together on any matter submitted to shareholders, except when otherwise required by the 1940 Act or when a matter affects the interests of each Portfolio or class in a different way, in which case the shareholders of each Portfolio or class vote separately. If the Directors determine that a matter does not affect the interests of a Portfolio or class, then the shareholders of that Portfolio or class will not be entitled to vote on that matter. Approval of the investment advisory agreements are matters to be determined separately by each Portfolio (but not by each class of a Portfolio). The election of the Fund's Board of Directors and the approval of the Fund's independent auditors are voted upon by shareholders on a Fund-wide basis. As a Maryland corporation, the Fund is not required to hold annual shareholder meetings. Shareholder approval will be sought only for certain changes in the Fund's or a Portfolio's operation and for the election of Directors under certain circumstances. Directors may be removed by shareholders at a special meeting. A special meeting of the Fund shall be called by the Directors upon written request of shareholders owning at least 10% of the Fund's outstanding shares. Shareholders will be assisted in communicating with other shareholders in connection with removing a Director as if Section 16(c) of the 1940 Act were applicable. OTHER PARTIES Custodian and Accounting Agent Investors Bank & Trust Company, P.O. Box 1537, Boston, Massachusetts 02205- 1537, is Custodian for the securities and cash of the Fund and Accounting Agent for the Fund. Transfer and Dividend Disbursing Agent Investors Bank & Trust Company, P.O. Box 1537, Boston, Massachusetts 02205- 1537, is Transfer Agent for the shares of the Fund, and Dividend Disbursing Agent for the Fund. Legal Counsel Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C. 20005-1208, are legal counsel for the Fund. Independent Auditors Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019 are the independent auditors for the Fund. SHAREHOLDER INQUIRIES Inquiries concerning the Fund may be made by writing to AMT Capital Services, Inc., 600 Fifth Avenue New York, New York 10020 or by calling AMT Capital at (800) 762-4848 [or (212) 332-5211, if within New York City]. STATEMENT OF ADDITIONAL INFORMATION Harding, Loevner Funds, Inc. Distributed By: AMT Capital Services, Inc. 600 Fifth Avenue 26th Floor New York, NY 10020 (212) 332-5211 (800) 762-4848 Harding, Loevner Funds, Inc. (the "Fund") is a no-load, open-end management investment company consisting of four diversified portfolios: International Equity Portfolio, Global Equity Portfolio, Emerging Markets Portfolio and Multi-Asset Global Portfolio (each a "Portfolio"). There is no sales charge for purchase of shares. Each Portfolio is managed by Harding, Loevner Management, L.P. ("HLM"). Shares of each Portfolio may be purchased through AMT Capital Services, Inc. ("AMT Capital"). This Statement of Additional Information is not a prospectus and should be read in conjunction with the prospectus of the Fund, dated _________, 1996 (the "Prospectus"), which has been filed with the Securities and Exchange Commission (the "Commission") and can be obtained, without charge, by calling or writing AMT Capital at the telephone number or address stated above. This Statement of Additional Information incorporates by reference the Prospectus. __________, 1996 TABLE OF CONTENTS Page ------ Organization of the Fund............................................ Management of the Fund.............................................. Board of Directors and Officers................................. Investment Adviser.............................................. Administrator................................................... Distribution of Fund Shares......................................... Supplemental Descriptions of Investments............................ Supplemental Investment Techniques.................................. Supplemental Discussion of Risks Associated With the Fund's Investment Policies and Investment Techniques................ Investment Restrictions............................................. Portfolio Transactions.............................................. Net Asset Value..................................................... Tax Considerations.................................................. Shareholder Information............................................. Calculation of Performance Data..................................... Ratings Descriptions................................................ ORGANIZATION OF THE FUND The authorized capital stock of the Fund consists of 2,500,000,000 shares with $.001 par value, allocated as follows: (i) 500,000,000 shares to the International Equity Portfolio; (ii) 500,000,000 shares to the Global Equity Portfolio; (iii) 500,000,000 shares to the Emerging Markets Portfolio; (iv) 500,000,000 shares to the Multi-Asset Global Portfolio and (v) 500,000,000 shares not yet allocated to any Portfolio. Holders of shares of a Portfolio have one vote for each dollar, and a proportionate fraction of a vote for each fraction of a dollar, of net asset value held by a shareholder. All shares issued and outstanding are fully paid and non-assessable, transferable, and redeemable at net asset value at the option of the shareholder. Shares have no preemptive or conversion rights. The shares of the Fund have non-cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of Directors can elect 100% of the Directors if they choose to do so, and, in such event, the holders of the remaining less than 50% of the shares voting for the election of Directors will not be able to elect any person or persons to the Board of Directors. MANAGEMENT OF THE FUND BOARD OF DIRECTORS AND OFFICERS The Fund is managed by its Board of Directors. The individuals listed below are the officers and directors of the Fund. An asterisk (*) has been placed next to the name of each director who is an "interested person" of the Fund, as such term is defined in the Investment Company Act of 1940, as amended (the "1940 Act"), by virtue of his or her affiliation with the Fund or HLM. [Insert Directors and other Officers] Carla E. Dearing, 600 Fifth Avenue, New York, NY 10020, Assistant Treasurer of the Fund. Ms. Dearing is President, Principal, and Director of AMT Capital Services. Ms. Dearing is also Managing Director and Principal of AMT Capital Advisers, Inc. Ms. Dearing was a former Vice President of Morgan Stanley & Co., where she worked from June 1984 to August 1986 and from November 1988 to January 1992. Ms. Dearing's responsibilities included new product and market development for Morgan Stanley Capital International ("MSCI"), while serving as an Associate in MSCI's London office, and assisting with the launch of several Pierpont Funds, while serving as a member of Morgan Stanley's Financial Planning and Analysis staff in New York. William E. Vastardis, 600 Fifth Avenue, New York, NY 10020, Secretary and Treasurer of the Fund. Mr. Vastardis is a Senior Vice President of AMT Capital Services and has been with the firm since July 1992. Prior to April 1992, Mr. Vastardis served as Vice President and head of the Vanguard Group Inc.'s private label administration unit for seven years, after six years in Vanguard's fund accounting operations. No employee of HLM or AMT Capital receives any compensation from the Fund for acting as an officer or director of the Fund. The Fund pays each director who is not a director, officer or employee of HLM and AMT Capital or any of their affiliates, a fee of $_____ for each meeting attended, and each of the Directors receives an annual retainer of $____ which is paid in quarterly installments at the end of each quarter. By virtue of the responsibilities assumed by HLM and AMT Capital and their affiliates under their respective agreements with the Fund, the Fund itself requires no employees in addition to its officers. INVESTMENT ADVISER HLM provides investment advisory services to the Fund. The terms of the investment advisory agreements (the "Advisory Agreements") between the Fund, on behalf of each Portfolio, and HLM obligate HLM to provide investment advisory and portfolio management services to the Portfolios. HLM is a registered investment adviser organized in 1989. HLM provides investment advisory services to private investors and institutions. The Advisory Agreements will remain in effect for two years following their date of execution and thereafter will automatically continue for successive annual periods, so long as such continuance is specifically approved at least annually by (a) the Board of Directors or (b) the vote of a "majority" (as defined in the 1940 Act) of a Portfolio's outstanding shares voting as a single class; provided, that in either event the continuance is also approved by at least a majority of the Board of Directors who are not "interested persons" (as defined in the 1940 Act) of the Fund by vote cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreements are terminable without penalty on not less than 60 days' notice by the Board of Directors or by a vote of the holders of a majority of the relevant Portfolio's outstanding shares voting as a single class, or upon not less than 60 days' notice by HLM. Each of the Advisory Agreements will terminate automatically in the event of its "assignment" (as defined in the 1940 Act). HLM pays all of its own expenses arising from the performance of its obligations under the Advisory Agreements. Under its Advisory Agreements, HLM also pays all executive salaries and expenses of the Directors and Officers of the Fund who are employees of HLM or its affiliates and office rent of the Fund. Subject to the expense reimbursement provisions described in the Prospectus under "Fund Expenses", other expenses incurred in the operation of the Fund are borne by the Fund, including, without limitation, investment advisory fees, brokerage commissions, interest, fees and expenses of independent attorneys, auditors, custodians, accounting agents, transfer agents, taxes, cost of stock certificates and any other expenses (including clerical expenses) of issue, sale, repurchase or redemption of shares, expenses of registering and qualifying shares of the Fund under federal and state laws and regulations, expenses of printing and distributing reports, notices and proxy materials to existing shareholders, expenses of printing and filing reports and other documents filed with governmental agencies, expenses of annual and special shareholders' meetings, expense of printing and distributing prospectuses, fees and expenses of Directors of the Fund who are not employees of HLM or its affiliates, membership dues in the Investment Company Institute, insurance premiums and extraordinary expenses such as litigation expenses. Fund expenses directly attributable to a Portfolio are charged to that Portfolio; other expenses are allocated proportionately among all the Portfolios in relation to the net assets of each Portfolio. As compensation (subject to expense caps as described under "Fund Expenses" in the Prospectus) for the services rendered by HLM under the Advisory Agreements, each Portfolio pays HLM a monthly advisory fee calculated by applying the following annual percentage rates to such Portfolio's average daily net assets for the month: Rate ------ International Equity ........................... 0.75% Global Equity .................................. 1.00% Emerging Markets ............................... 1.25% Multi-Asset Global ............................. 1.00% ADMINISTRATOR Pursuant to its terms, the administration agreement (the "Administration Agreement") between the Fund and AMT Capital, as Administrator, obligates the Administrator to manage and supervise all aspects of the general day-to-day business activities and operations of the Fund other than investment advisory activities, including custodial, transfer agency, dividend disbursing, accounting, auditing, compliance and related services. The Administration Agreement will remain in effect for five years following the date of execution and thereafter will automatically continue for successive annual periods. DISTRIBUTION OF FUND SHARES Shares of the Fund are distributed by AMT Capital pursuant to a Distribution Agreement (the "Distribution Agreement") between the Fund and AMT Capital. The Fund and AMT Capital have agreed to indemnify one another against certain liabilities. The Distribution Agreement will remain in effect for two years following the date of execution and thereafter will continue for successive annual periods only if its continuance is approved annually by a majority of the Board of Directors who are not parties to such agreements or "interested persons" of any such party and either by votes of a majority of the Directors or a majority of the outstanding voting securities of the Fund. SUPPLEMENTAL DESCRIPTIONS OF INVESTMENTS The different types of securities in which the Portfolios may invest, subject to their respective investment objective, policies and restrictions, are described in the Prospectus under "Descriptions of Investments". Additional information concerning the characteristics of certain of the Portfolios' investments are set forth below. U.S. Treasury and U.S. Government Agency Securities. U.S. Government Securities include instruments issued by the U.S. Treasury, including bills, notes and bonds. These instruments are direct obligations of the U.S. Government and, as such, are backed by the full faith and credit of the United States. They differ primarily in their interest rates, the lengths of their maturities and the dates of their issuances. In addition, U.S. Government Securities include securities issued by instrumentalities of the U.S. Government, such as the Government National Mortgage Association ("GNMA"), which are also backed by the full faith and credit of the United States. U.S. Government Agency Securities include instruments issued by instrumentalities established or sponsored by the U.S. Government, such as the Student Loan Marketing Association ("SLMA"), the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). While these securities are issued, in general, under the authority of an Act of Congress, the U.S. Government is not obligated to provide financial support to the issuing instrumentalities. Bank Obligations. The Fund limits its investments in U.S. bank obligations to obligations of U.S. banks that in HLM's opinion meet sufficient creditworthiness criteria. The Fund limits its investments in foreign bank obligations to obligations of foreign banks (including U.S. branches of foreign banks) that, in the opinion of HLM, are of an investment quality comparable to obligations of U.S. banks in which each Portfolio may invest. Other than the allowable 20% of a Portfolio's assets invested in below-investment grade convertible and other debt securities, all investments in bank obligations will be rated at least "B" by Thomson Bankwatch or similarly rated by IBCA Ltd., or of comparable quality as determined by HLM. Corporate Debt Instruments. Corporate debt securities of domestic and foreign issuers include such instruments as corporate bonds, debentures, notes, commercial paper, medium-term notes, variable rate notes and other similar corporate debt instruments. Other than the allowable 20% of a Portfolio's assets invested in below-investment grade convertible and other debt securities, all investments in corporate debt instruments will be rated at least "BBB" or "A-1" (in the case of commercial paper) by Standard & Poors' ("S&P"), "Baa" or "P-1" (in the case of commercial paper) by Moody's Investors Service, Inc. ("Moody's"), or of comparable quality as determined by HLM. Brady Bonds. Each Portfolio, subject to limitations, may invest in "Brady Bonds", which are debt securities issued or guaranteed by foreign governments in exchange for existing external commercial bank indebtedness under a plan announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989. To date, over $154 billion (face amount) of Brady Bonds have been issued by the governments of thirteen countries, the largest proportion having been issued by Argentina, Brazil, Mexico and Venezuela. Brady Bonds have been issued only recently, and accordingly, they do not have a long payment history. Brady Bonds may be collateralized or uncollateralized, are issued in various currencies (primarily the U.S. dollar) and are actively traded in the over-the- counter secondary market. Each Portfolio may invest in either collateralized or uncollateralized Brady Bonds. U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate par bonds or floating rate discount bonds, are collateralized in full as to principal by U.S. Treasury zero coupon bonds having the same maturity as the bonds. Interest payments on such bonds generally are collateralized by cash or securities in an amount that, in the case of fixed rate bonds, is equal to at least one year of rolling interest payments or, in the case of floating rate bonds, initially is equal to at least one year's rolling interest payments based on the applicable interest rate at the time and is adjusted at regular intervals thereafter. Brady Bonds which have been issued to date are rated BB or B by S&P or Ba or B by Moody's or, in cases in which a rating by S&P or Moody's has not been assigned, are generally considered by the Adviser to be of comparable quality. Repurchase Agreements. When participating in repurchase agreements, a Portfolio buys securities from a vendor (e.g., a bank or securities firm) with the agreement that the vendor will repurchase the securities at the same price plus interest at a later date. Repurchase agreements may be characterized as loans secured by the underlying securities. Such transactions afford an opportunity for the Portfolio to earn a return on available cash at minimal market risk, although the Portfolio may be subject to various delays and risks of loss if the vendor becomes subject to a proceeding under the U.S. Bankruptcy Code or is otherwise unable to meet its obligation to repurchase. The securities underlying a repurchase agreement will be marked to market every business day so that the value of such securities is at least equal to the value of the repurchase price thereof, including the accrued interest thereon. Reverse Repurchase Agreements. When participating in reverse repurchase agreements, a Portfolio sells U.S. Government securities and simultaneously agrees to repurchase them at an agreed upon price and date. The difference between the amount the Portfolio receives for the securities and the amount it pays on repurchase is deemed to be a payment of interest. The Fund will maintain for each Portfolio a segregated custodial account containing cash, U.S. Government securities or other appropriate high-grade debt securities having an aggregate value at least equal to the amount of such commitments to repurchase, including accrued interest, until payment is made. Reverse repurchase agreements create leverage, a speculative factor, and will be considered as borrowings for the purposes of limitations on borrowings. SUPPLEMENTAL INVESTMENT TECHNIQUES Borrowing. Each Portfolio may borrow money temporarily from banks when (i) it is advantageous to do so in order to meet redemption requests, (ii) a Portfolio fails to receive transmitted funds from a shareholder on a timely basis, (iii) the custodian of the Fund fails to complete delivery of securities sold or (iv) a Portfolio needs cash to facilitate the settlement of trades made by the Portfolio. In addition, each Portfolio may, in effect, lend securities by engaging in reverse repurchase agreements and may, in effect, borrow money by doing so. Securities may be borrowed by engaging in repurchase agreements. See "Investment Restrictions" and "Supplemental Descriptions of Investments". Securities Lending. Although, the Fund has no current plans to do so, each Portfolio is authorized to lend securities from its investment portfolios, with a value not exceeding 33 1/3% of its total assets, to banks, brokers and other financial institutions if it receives collateral in cash, U.S. Government Securities or other high grade liquid investments which will be maintained at all times in an amount equal to at least 102% of the current market value of the loaned securities. The loans will be terminable at any time by the Fund and the relevant Portfolio will then receive the loaned securities within five days. During the period of such a loan, the Portfolio receives the income on the loaned securities and a loan fee and may thereby increase its total return. Foreign Currency Hedging. The Portfolios may enter into forward foreign currency contracts (a "forward contract") and may purchase and write (on a covered basis) exchange-traded or over-the-counter ("OTC") options on currencies, foreign currency futures contracts, and options on foreign currency futures contracts primarily to protect against a decrease in the U.S. dollar equivalent value of its foreign currency portfolio securities or the payments thereon that may result from an adverse change in foreign currency exchange rates. The Portfolios may at times hedge all or some portion of their currency exchange risk. Conditions in the securities, futures, options, and foreign currency markets will determine whether and under what circumstances a Portfolio will employ any of the techniques or strategies described below and in the section of the Prospectus entitled "Descriptions of Investments". A Portfolio's ability to pursue certain of these strategies may be limited by applicable regulations of the Commodity Futures Trading Commission ("CFTC") and the federal tax requirements applicable to regulated investment companies (see "Tax Considerations"). Forward Contracts. Sale of currency for dollars under such a contract establishes a price for the currency in dollars. Such a sale insulates returns from securities denominated in that currency from exchange rate fluctuations to the extent of the contract while the contract is in effect. A sale contract will be advantageous if the currency falls in value against the dollar and disadvantageous if it increases in value against the dollar. A purchase contract will be advantageous if the currency increases in value against the dollar and disadvantageous if it falls in value against the dollar. The Portfolios may use forward contracts to insulate existing security positions against exchange rate movement ("position hedges") or to insulate proposed transactions against such movement ("transaction hedges"). For example, to establish a position hedge, a forward contract on a foreign currency might be sold to protect against the decline in the value of that currency against the dollar. To establish a transaction hedge, a foreign currency might be purchased on a forward basis to protect against an anticipated increase in the value of that currency against the dollar. Futures Contracts. The Portfolios may enter into contracts for the purchase or sale for future delivery (a "futures contract") of contracts based on financial indices including any index of common stocks. The Portfolios may also enter into futures contracts based on foreign currencies. U.S. futures contracts have been designed by exchanges which have been designated as "contracts markets" by the CFTC, and must be executed through a futures commission merchant, or brokerage firm, that is a member of the relevant contract market. Futures contracts trade on a number of exchange markets and, through their clearing corporations, the exchanges guarantee performance of the contracts as between the clearing members of the exchange. The Portfolios may also enter into futures contracts that are based on securities that would be eligible investments for the Portfolios. The Portfolios may enter into contracts that are denominated in currencies other than the U.S. dollar. Although futures contracts by their terms call for the actual delivery or acquisition of securities or currency, in most cases the contractual obligation is fulfilled before the date of the contract without having to make or take delivery of the securities or currency. The offsetting of a contractual obligation is accomplished by buying (or selling, as the case may be) on a commodities exchange an identical futures contract calling for delivery in the same month. Such a transaction, which is effected through a member of an exchange, cancels the obligation to make or take delivery of the securities or currency. Since all transactions in the futures market are made, offset, or fulfilled through a clearinghouse associated with the exchange on which the contracts are traded, a Portfolio will incur brokerage fees when it purchases or sells futures contracts. At the time a futures contract is purchased or sold, a Portfolio must allocate cash or securities as a deposit payment ("initial margin"). It is expected that the initial margin on U.S. exchanges may range from approximately 3% to approximately 15% of the value of the securities or commodities underlying the contract. Under certain circumstances, however, such as periods of high volatility, the Portfolio may be required by an exchange to increase the level of its initial margin payment. Additionally, initial margin requirements may be increased generally in the future by regulatory action. An outstanding futures contract is valued daily and the payment in cash of ("variation margin") generally will be required, a process known as "marking to the market". Each day the Portfolio will be required to provide (or will be entitled to receive) variation margin in an amount equal to any decline (in the case of a long futures position) or increase (in the case of a short futures position) in the contract's value from the preceding day. Options on Foreign Currencies. The Portfolios may purchase and sell (or write) put and call options on foreign currencies to protect against a decline in the U.S. dollar-equivalent value of their portfolio securities or payments due thereon or a rise in the U.S. dollar-equivalent cost of securities that they intend to purchase. A foreign currency put option grants the holder the right, but not the obligation, at a future date to sell a specified amount of a foreign currency to its counterparty at a predetermined price. Conversely, a foreign currency call option grants the holder the right, but not the obligation, to purchase at a future date a specified amount of a foreign currency at a predetermined price. Options on Futures Contracts. The purchase of a call option on a futures contract is similar in some respects to the purchase of a call option on an individual security or currency. Depending on the pricing of the option compared to either the price of the futures contract upon which it is based or the price of the underlying securities or currency, it may or may not be less risky than ownership of the futures contract or the underlying securities or currency. As with the purchase of futures contracts, when a Portfolio is not fully invested it may purchase a call option on a futures contract to hedge against a market advance due to declining interest rates or a change in foreign exchange rates. The writing of a call option on a futures contract constitutes a partial hedge against declining prices of the security or foreign currency which is deliverable upon exercise of the futures contract. If the futures price at expiration of the option is below the exercise price, the Portfolio will retain the full amount of the option premium which provides a partial hedge against any decline that may have occurred in the Portfolio's portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against increasing prices of the security or foreign currency which is deliverable upon exercise of the futures contract. If the futures price at expiration of the option is higher than the exercise price, the Portfolio will retain the full amount of the option premium which provides a partial hedge against any increase in the price of securities which the Portfolio intends to purchase. If a put or call option the Portfolio has written is exercised, the Portfolio will incur a loss that will be reduced by the amount of the premium it receives. Depending on the degree of correlation between changes in the value of its portfolio securities and changes in the value of its futures positions, the Portfolio's losses from existing options on futures may to some extent be reduced or increased by changes in the value of portfolio securities. The purchase of a put option on a futures contract is similar in some respects to the purchase of protective put options on portfolio securities. Restrictions on the Use of Futures Contracts and Options on Futures Contracts. Regulations of the CFTC applicable to the Portfolios require that all of the Portfolios' futures and options on futures transactions constitute bona fide hedging transactions, except that a transaction may not constitute a bona fide hedging transaction entered into for other purposes if, immediately thereafter, the sum of the amount of initial margin deposits on a Portfolio's existing futures positions and premiums paid for related options would not exceed 5% of the value of the Portfolio's total assets. Illiquid Securities. Although each of the Portfolios may invest up to 15% of the value of its net assets in illiquid assets, it is not expected that any Portfolio will invest a significant portion of its assets in illiquid securities. All repurchase agreements and time deposits maturing in more than seven days are treated as illiquid assets. SUPPLEMENTAL DISCUSSION OF RISKS ASSOCIATED WITH THE FUND'S INVESTMENT POLICIES AND INVESTMENT TECHNIQUES Additional information concerning risks associated with certain of the Portfolios' investments is set forth below. Creditworthiness. In general, certain obligations which the Portfolios may invest in are subject to credit risks such as the loss of credit ratings or possible default. After purchase by a Portfolio of the Fund, a security may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require a sale of such security by the Portfolio. However, HLM will consider such event in its determination of whether a Portfolio should hold the security. To the extent that the ratings given by S&P or Moody's may change as a result of changes in such organizations or their rating systems, the Fund will attempt to use comparable ratings as standards for investments in accordance with the investment policies contained in the Prospectus and in this Statement of Additional Information. Foreign Bank Obligations. Obligations of foreign banks involve somewhat different investment risks than those affecting obligations of United States banks, including the possibilities that their liquidity could be impaired because of future political and economic developments, that their obligations may be less marketable than comparable obligations of United States banks, that a foreign jurisdiction might impose withholding taxes on interest income payable on those obligations, that foreign deposits may be seized or nationalized, that foreign governmental restrictions such as exchange controls may be adopted that might adversely affect the payment of principal and interest on those obligations and that the selection of those obligations may be more difficult because there may be less publicly available information concerning foreign banks or the accounting, auditing and financial reporting standards, practices and requirements applicable to foreign banks may differ from those applicable to United States banks. Foreign banks are not generally subject to examination by any United States government agency or instrumentality. Also, investments in commercial banks located in several foreign countries are subject to additional risks due to the combination in such banks of commercial banking and diversified securities activities. High Yield/High Risk Debt Securities. Each Portfolio may invest up to 20% of its assets in convertible securities and debt securities which are rated below investment-grade - that is, rated below Baa by Moody's or BBB by S&P and in unrated securities judged to be of equivalent quality by HLM. Below investment grade securities carry a high degree of risk (including the possibility of default or bankruptcy of the issuers of such securities), generally involve greater volatility of price and risk of principal and income, and may be less liquid, than securities in the higher rating categories and are considered speculative. The lower the ratings of such debt securities, the greater their risks render them like equity securities. See "Ratings Descriptions" in this Statement of Additional Information for a more complete description of the ratings assigned by ratings organizations and their respective characteristics. Economic downturns have disrupted in the past, and could disrupt in the future, the high yield market and impaired the ability of issuers to repay principal and interest. Also, an increase in interest rates would have a greater adverse impact on the value of such obligations than on comparable higher quality debt securities. During an economic downturn or period of rising interest rates, highly leveraged issues may experience financial stress which would adversely affect their ability to service their principal and interest payment obligations. Prices and yields of high yield securities will fluctuate over time and, during periods of economic uncertainty, volatility of high yield securities may adversely affect a Portfolio's net asset value. In addition, investments in high yield zero coupon or pay-in-kind bonds, rather than income- bearing high yield securities, may be more speculative and may be subject to greater fluctuations in value due to changes in interest rates. The trading market for high yield securities may be thin to the extent that there is no established retail secondary market or because of a decline in the value of such securities. A thin trading market may limit the ability of a Portfolio to accurately value high yield securities in its portfolio and to dispose of those securities. Adverse publicity and investor perceptions may decrease the values and liquidity of high yield securities. These securities may also involve special registration responsibilities, liabilities and costs. Credit quality in the high yield securities market can change suddenly and unexpectedly, and even recently issued credit ratings may not fully reflect the actual risks posed by a particular high-yield security. For these reasons, it is the policy of HLM not to rely exclusively on ratings issued by established credit rating agencies, but to supplement such ratings with its own independent and on-going review of credit quality. The achievement of a Portfolio's investment objective by investment in such securities may be more dependent on HLM's credit analysis than is the case for higher quality bonds. Should the rating of a portfolio security be downgraded, HLM will determine whether it is in the best interest of the Portfolio to retain or dispose of such security. Prices for below investment-grade securities may be affected by legislative and regulatory developments. Foreign Securities. Foreign financial markets, while growing in volume, have, for the most part, substantially less volume than United States markets, and securities of many foreign companies are less liquid and their prices more volatile than securities of comparable domestic companies. The foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Delivery of securities may not occur at the same time as payment in some foreign markets. Delays in settlement could result in temporary periods when a portion of the assets of a Portfolio is uninvested and no return is earned thereon. The inability of a Portfolio to make intended security purchases due to settlement problems could cause the Portfolio to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result either in losses to a Portfolio due to subsequent declines in value of the portfolio security or, if the Portfolio has entered into a contract to sell the security, could result in possible liability to the purchaser. As foreign companies are not generally subject to uniform accounting, auditing and financial reporting standards and practices comparable to those applicable to domestic companies, there may be less publicly available information about certain foreign companies than about domestic companies. There is generally less government supervision and regulation of exchanges, financial institutions and issuers in foreign countries than there is in the United States. A foreign government may impose exchange control regulations which may have an impact on currency exchange rates, and there is the possibility of expropriation or confiscatory taxation, political or social instability, or diplomatic developments which could affect U.S. investments in those countries. Although HLM will use reasonable efforts to obtain the best available price and the most favorable execution with respect to all transactions, HLM will consider the full range and quality of services offered by the executing broker or dealer when making these determinations. Fixed commissions on many foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Certain foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion of foreign withholding taxes will reduce the income received by the Portfolios on these investments. However, these foreign withholding taxes are not expected to have a significant impact on the Portfolios, since each Portfolio's investment objective is to seek long-term capital appreciation and any income should be considered incidental. Foreign Currency Hedging. The success of currency hedging will depend on the ability of HLM to predict exchange rate fluctuations. Predicting such fluctuations is extremely difficult and thus the successful execution of a hedging strategy is highly uncertain. An incorrect prediction will cause poorer Portfolio performance than would otherwise be the case. Forward contracts that protect against anticipated losses have the corresponding effect of canceling possible gains if the currency movement prediction is incorrect. Precise matching of forward contract amounts and the value of portfolio securities is generally not possible because the market value of the protected securities will fluctuate while forward contracts are in effect. Adjustment transactions are theoretically possible but time consuming and expensive, so contract positions are likely to be approximate hedges, not perfect. The cost to a Portfolio of engaging in foreign currency forward contracts will vary with factors such as the foreign currency involved, the length of the contract period, and the market conditions then prevailing, including general market expectations as to the direction of the movement of various foreign currencies against the U.S. dollar. Furthermore, HLM may not be able to purchase forward contracts with respect to all of the foreign currencies in which a Portfolio's securities may be denominated. In those circumstances the correlation between the movements in the exchange rates of the subject currency and the currency in which the portfolio security is denominated may not be precise. Moreover, if the forward contract is entered into in an over-the- counter transaction, as will usually be the case, the Portfolio generally will be exposed to the credit risk of its counterparty. If the Portfolio enters into such contracts on a foreign exchange, the contract will be subject to the rules of that foreign exchange. Foreign exchanges may impose significant restrictions on the purchase, sale, or trading of such contracts, including the imposition of limits on price moves. Such limits may significantly affect the ability to trade such a contract or otherwise to close out the position and could create potentially significant discrepancies between the cash and market value of the position in the forward contract. Finally, the cost of purchasing forward contracts in a particular currency will reflect, in part, the rate of return available on instruments denominated in that currency. The cost of purchasing forward contracts to hedge portfolio securities that are denominated in currencies that in general yield high rates of return may thus tend to reduce that rate of return toward the rate of return that would be earned on assets denominated in U.S. dollars. Futures Contracts. Futures contracts entail special risks. Among other things, the ordinary spreads between values in the cash and futures markets, due to differences in the character of these markets, are subject to distortions relating to: (1) investors' obligations to meet additional variation margin requirements; (2) decisions to make or take delivery, rather than entering into offsetting transactions; and (3) the difference between margin requirements in the securities markets and margin deposit requirements in the futures market. The possibility of such distortion means that a correct forecast of general market or foreign exchange rate trends may still not result in a successful transaction. Although the Fund believes that the use of such contracts and options thereon will benefit the Portfolios, if predictions about the general direction of securities market movements or foreign exchange rates is incorrect, a Portfolio's overall performance would be poorer than if it had not entered into any such contracts or purchased or written options thereon. A Portfolio's ability to establish and close out positions in futures contracts and options on futures contracts will be subject to the development and maintenance of a liquid market. Although the Portfolio generally will purchase or sell only those futures contracts and options thereon for which there appears to be a liquid market, there is no assurance that a liquid market on an exchange will exist for any particular futures contract or option thereon at any particular time. Where it is not possible to effect a closing transaction in a contract to do so at a satisfactory price, the Portfolio would have to make or take delivery under the futures contract or, in the case of a purchased option, exercise the option. In the case of a futures contract that the Portfolio has sold and is unable to close out, the Portfolio would be required to maintain margin deposits on the futures contract and to make variation margin payments until the contract is closed. Under certain circumstances, exchanges may establish daily limits in the amount that the price of a futures contract or related option contract may vary either up or down from the previous day's settlement price. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. Futures or options contract prices could move to the daily limit for several consecutive trading days with little or no trading and thereby prevent prompt liquidation of positions and subject some traders to substantial losses. Buyers and sellers of foreign currency futures contracts are subject to the same risks that apply to the use of futures generally. In addition, there are risks associated with foreign currency futures contracts and their use as hedging devices similar to those associated with forward contracts on foreign currencies. Further, settlement of a foreign currency futures contract must occur within the country issuing the underlying currency. Thus, a Portfolio must accept or make delivery of the underlying foreign currency in accordance with any U.S. or foreign restrictions or regulations regarding the maintenance of foreign banking arrangements by U.S. residents and may be required to pay any fees, taxes or charges associated with such delivery that are assessed in the country of the underlying currency. Options on Foreign Currency. As in the case of other types of options, the benefit to a Portfolio deriving from the purchase of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, the Portfolio could sustain losses on transactions in foreign currency options that would require them to forego a portion or all of the benefits of advantageous changes in such rates. A Portfolio may write options on foreign currencies for hedging purposes. For example, where the Portfolio anticipates a decline in the dollar value of foreign currency denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised, and the decrease in value of portfolio securities will be offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar costs of securities to be acquired, a Portfolio could write a put option on the relevant currency which, if rates move in the manner projected, will expire unexercised and allow the Portfolio to hedge such increased costs up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this movement does not occur, the option may be exercised and the Portfolio would be required to purchase or sell the underlying currency at a loss which may not be fully offset by the amount of the premium. Through the writing of options on foreign currencies, the Portfolio also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements in exchange rates. Options on Futures Contracts. The amount of risk a Portfolio assumes when it purchases an option on a futures contract is the premium paid for the option plus related transaction costs. In addition to the correlation risks discussed above, the purchase of an option also entails the risk that changes in the value of the underlying futures contract will not be fully reflected in the value of the option purchased. Options on foreign currency futures contracts may involve certain additional risks. Trading options on foreign currency futures contracts is relatively new. The ability to establish and close out positions in such options is subject to the maintenance of a liquid secondary market. To mitigate this problem, a Portfolio will not purchase or write options on foreign currency futures contracts unless and until, in HLM's opinion, the market for such options has developed sufficiently that the risks in connection with such options are not greater than the risks in connection with transactions in the underlying foreign currency futures contracts. Compared to the purchase or sale of foreign currency futures contracts, the purchase of call or put options thereon involves less potential risk to the Portfolio because the maximum amount at risk is the premium paid for the option (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a foreign currency futures contract would result in a loss, such as when there is no movement in the price of the underlying currency or futures contract, when use of the underlying futures contract would not result in a loss. Lower-Rated Debt Securities ("Junk Bonds"). The market value of lower-rated debt securities tend to reflect individual corporate developments to a greater extent than do higher-rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-rated debt securities also tend to be more sensitive to general economic conditions than are higher-rated debt securities. INVESTMENT RESTRICTIONS The Fund has adopted the investment restrictions listed below relating to the investment of each Portfolio's assets and its activities. These are fundamental policies that may not be changed without the approval of the holders of a majority of the outstanding voting securities of a Portfolio (which for this purpose and under the 1940 Act means the lesser of (i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares). None of the Portfolios may: (1) invest more than 5% of its total assets (taken at market value) in securities of any one issuer, other than securities issued by the U.S. Government, its agencies and instrumentalities, or purchase more than 10% of the voting securities of any issuer, with respect to 75% of a Portfolio's total assets; (2) invest more than 25% of its total assets in the securities of companies primarily engaged in any one industry other than the U.S. Government, its agencies and instrumentalities. Finance companies as a group are not considered a single industry for purposes of this policy; (3) borrow money, except through reverse repurchase agreements or from a bank for temporary or emergency purposes in an amount not exceeding one third of the value of its total assets nor will it borrow for leveraging purposes; (4) issue senior securities (other than as specified in clause (3)); (5) make loans, except (a) through the purchase of all or a portion of an issue of debt securities in accordance with its investment objective, policies and limitations, or (b) by engaging in repurchase agreements with respect to portfolio securities, or (c) by lending securities to other parties, provided that no securities loan may be made, if, as a result, more than 33 1/3% of the value of its total assets would be lent to other parties; (6) underwrite securities of other issuers; (7) invest in companies for the purpose of exercising control or management; (8) purchase or sell real estate (other than marketable securities representing interests in, or backed by, real estate or securities of companies which deal in real estate or mortgages); (9) purchase or sell physical commodities or related commodity contracts; (10) invest directly in interests in oil, gas or other mineral exploration or development programs or mineral leases; (11) invest more than 10% of its total assets in warrants; or (12) purchase or retain the securities of any open-end investment companies. Whenever an investment policy or limitation states a maximum percentage of a Portfolio's assets that may be invested in any security or other asset or sets forth a policy regarding quality standards, such standard or percentage limitation shall be determined immediately after and as a result of the Portfolio's acquisition of such security or other asset. Accordingly, any later increase or decrease in a percentage resulting from a change in values, net assets or other circumstances will not be considered when determining whether that investment complies with the Portfolio's investment policies and limitations. Each Portfolio's investment objectives and other investment policies not designated as fundamental in this Statement of Additional Information are non- fundamental and may be changed at any time by action of the Board of Directors. Although a non-fundamental policy, each Portfolio may not purchase securities on margin or make short sales, unless, by virtue of its ownership of other securities, it has the right to obtain securities equivalent in kind and amount to the securities sold and, if the right is conditional, the sale is made upon the same conditions, except that the Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities. PORTFOLIO TRANSACTIONS The Advisory Agreements authorize HLM to select the brokers or dealers that will execute the purchases and sales of investment securities for each of the Fund's Portfolios and HLM to use reasonable efforts to obtain the best available price and the most favorable execution with respect to all transactions for the Portfolios. HLM will consider the full range and quality of services offered by the executing broker or dealer when making these determinations. Some securities considered for investment by the Fund's Portfolios may also be appropriate for other clients advised by HLM. If the purchase or sale of securities consistent with the investment policies of a Portfolio and one or more of these other clients advised by HLM is considered at or about the same time, transactions in such securities will be allocated among the Portfolio and clients in a manner deemed fair and reasonable by HLM, as the case may be. Although there is no specified formula for allocating such transactions, the various allocation methods used by HLM, and the results of such allocations, are subject to periodic review by the Board of Directors. Brokers are selected on a basis of their overall assistance in terms of execution capabilities and research services, provided that their commission schedules are competitive with other firms providing similar services. No trades will be executed with HLM, its affiliates, officers or employees acting as principal or agent for others, although such entities and persons may be trading contemporaneously in the same or similar securities. NET ASSET VALUE As used in the Prospectus, "Business Day" refers to those days when the New York Stock Exchange is open for business, which is Monday through Friday except for holidays. As of the date of this Statement of Additional Information, such holidays are: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. TAX CONSIDERATIONS The following summary of tax consequences, which does not purport to be complete, is based on U.S. federal tax laws and regulations in effect on the date of this Statement of Additional Information, which are subject to change by legislative or administrative action. Qualification as a Regulated Investment Company. Each Portfolio intends to qualify for and to elect to be treated as, a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"). To qualify as a RIC, a Portfolio must, among other things, (a) derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of securities or foreign currencies, or other income derived from its business of investing in securities (the "Qualifying Income Requirement"); (b) derive less than 30% of its gross income each taxable year from sales or other dispositions of certain assets (namely, (i) securities; (ii) options, futures and forward contracts [other than those on foreign currencies]; and (iii) foreign currencies [including options, futures and forward contracts on such currencies] not directly related to the Portfolio's principal business of investing in stocks or securities [or options and futures with respect to stocks or securities]) held less than three months (the "30% Limitation"); (c) diversify its holdings so that, at the end of each quarter of the Portfolio's taxable year, (i) at least 50% of the market value of the Portfolio's assets is represented by cash and cash items (including receivables), U.S. Government securities, securities of other RICs and other securities, with such other securities of any one issuer limited to an amount not greater than 5% of the value of the Portfolio's total assets and not greater than 10% of the outstanding voting securities of such issuer and (ii) not more than 25% of the value of the Portfolio's total assets is invested in the securities of any one issuer (other than U.S. Government securities or the securities of other RICs); and (d) distribute at least 90% of its investment company taxable income (which includes, among other items, interest and net short-term capital gains in excess of net long-term capital losses) and its net tax-exempt interest income each taxable year. If for any taxable year a Portfolio does not qualify as a RIC, all of its taxable income will be taxed to the Portfolio at corporate rates. For each taxable year that the Portfolio qualifies as a RIC, it will not be subject to federal income tax on that part of its investment company taxable income and net capital gains (the excess of net long-term capital gain over net short-term capital loss) that it distributes to its shareholders. In addition, to avoid a nondeductible 4% federal excise tax, the Portfolio must distribute during each calendar year an amount at least equal to the sum of 98% of its ordinary income (not taking into account any capital gains or losses) determined on a calendar year basis, 98% of its capital gains in excess of capital losses determined in general on an October 31 year-end basis, and any undistributed amounts from previous years. The 30% Limitation may require that a Portfolio defer closing out certain positions beyond the time when it otherwise would be advantageous to do so, in order not to be disqualified as a RIC. Each Portfolio will monitor its compliance with all of the rules set forth in the preceding paragraph. Distributions. Each Portfolio's automatic reinvestment of its taxable investment income, net short-term capital gains and net long-term capital gains in additional shares of the Portfolio and distribution of such shares to shareholders will be taxable to the Portfolio's shareholders. In general, such shareholders will be treated as if such income and gains had been distributed to them by the Portfolio and then reinvested by them in shares of the Portfolio, even though no cash distributions have been made to shareholders. The automatic reinvestment of taxable investment income and net realized short- term capital gains of the Portfolio will be taxable to the Portfolio's shareholders as ordinary income. Each Portfolio's automatic reinvestment of any net long-term capital gains designated by the Portfolio as capital gain dividends will be taxable to the shareholders as long-term capital gain, regardless of how long they have held their Portfolio shares. If a portion of a Portfolio's income consists of dividends paid by U.S. corporations, a portion of the dividends paid by the Portfolio may be eligible for the corporate dividend-received deduction. A distribution will be treated as paid on December 31 of the current calendar year if it is declared by a Portfolio in October, November or December with a record date in such a month and paid by the Portfolio during January of the following calendar year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than in the calendar year in which the distributions are received. Each Portfolio will inform shareholders of the amount and tax status of all amounts treated as distributed to them not later than 60 days after the close of each calendar year. Sale of Shares. Upon the sale or other disposition of shares of a Portfolio, or upon receipt of a distribution in complete liquidation of a Portfolio, a shareholder generally will realize a capital gain or loss which will be long- term or short-term, generally depending upon the shareholder's holding period for the shares. Any loss realized on the sale or exchange will be disallowed to the extent the shares disposed of are replaced (including shares acquired pursuant to a dividend reinvestment plan) within a period of 61 days beginning 30 days before and ending 30 days after disposition of the shares. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Any loss realized by the shareholder on a disposition of Portfolio shares held by the shareholder for six months or less will be treated as a long-term capital loss to the extent of any distributions of net capital gains deemed received by the shareholder with respect to such shares. Under the Code, a shareholder may not deduct that portion of interest on indebtedness incurred or continued to purchase or carry shares of an investment company paying exempt-interest dividends which bears the same ratio to the total of such interest as the exempt-interest dividends bear to the total dividends (excluding net capital gain dividends) received by the shareholder. In addition, under rules issued by the Internal Revenue Service for determining when borrowed funds are considered to be used to purchase or carry particular assets, the purchase of such shares may be considered to have been made with borrowed funds even though the borrowed funds are not directly traceable to such purchase. Zero Coupon Securities. Investments by a Portfolio in zero coupon securities (other than tax-exempt zero coupon securities) will result in income to the Portfolio equal to a portion of the excess of the face value of the securities over their issue price (the "original issue discount") each year that the securities are held, even though the Portfolio receives no cash interest payments. This income is included in determining the amount of income which the Portfolio must distribute to maintain its status as a RIC and to avoid the payment of federal income tax and the 4% excise tax. Similarly, investments in tax-exempt zero coupon securities will result in a Portfolio accruing tax- exempt income each year that the securities are held, even though the Portfolio receives no cash payments of tax-exempt interest. This tax-exempt income is included in determining the amount of net tax-exempt interest income which a Portfolio must distribute to maintain its status as a regulated investment company. Backup Withholding. A Portfolio may be required to withhold U.S. federal income tax at the rate of 31% of all amounts deemed to be distributed as a result of the automatic reinvestment by the Portfolio of its income and gains in additional shares of the Portfolio and, all redemption payments made to shareholders who fail to provide the Portfolio with their correct taxpayer identification number or to make required certifications, or who have been notified by the Internal Revenue Service that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld will be credited against a shareholder's U.S. federal income tax liability. Corporate shareholders and certain other shareholders are exempt from such backup withholding. Tax Treatment of Hedging Transactions. The taxation of equity options and over-the-counter options on debt securities is governed by the Code section 1234. Pursuant to Code section 1234, the premium received by a Portfolio for selling a put or call option is not included in income at the time of receipt. If the option expires, the premium is short-term capital gain to the Portfolio. If the Portfolio enters into a closing transaction, the difference between the amount paid to close out its position and the premium received is short-term capital gain or loss. If a call option written by the Portfolio is exercised, thereby requiring the Portfolio to sell the underlying security, the premium will increase the amount realized upon the sale of such security and any resulting gain or loss will be a capital gain or loss, and will be long- term or short-term depending upon the holding period of the security. With respect to a put or call option that is purchased by a Portfolio, if the option is sold, any resulting gain or loss will be a capital gain or loss, and will be long-term or short-term, depending upon the holding period of the option. If the option expires, the resulting loss is a capital loss and is long-term or short-term, depending upon the holding period of the option. If the option is exercised, the cost of the option, in the case of a call option, is added to the basis of the purchased security and, in the case of a put option, reduces the amount realized on the underlying security in determining gain or loss. Certain options, futures, and forward contracts in which a Portfolio may invest are "section 1256 contracts." Gains and losses on section 1256 contracts are generally treated as 60% long-term and 40% short-term capital gains or losses ("60/40 treatment"), regardless of the Portfolio's actual holding period for the contract. Also, a section 1256 contract held by the Portfolio at the end of each taxable year (and generally, for the purposes of the 4% excise tax, on October 31 of each year) must be treated as if the contract had been sold at its fair market value on that day ("mark to market treatment"), and any deemed gain or loss on the contract is subject to 60/40 treatment. Foreign currency gain or loss (discussed below) arising from section 1256 contracts may, however, be treated as ordinary income or loss. The hedging transactions undertaken by a Portfolio may result in "straddles" for federal income tax purposes. The straddle rules may affect the character of gains or losses realized by the Portfolio. In addition, losses realized by the Portfolio on positions that are part of a straddle may be deferred under the straddle rules rather than being taken into account in calculating the taxable income for the taxable year in which such losses are realized. Further, the Portfolio may be required to capitalize, rather than deduct currently, any interest expense on indebtedness incurred or continued to purchase or carry any positions that are part of a straddle. Because only a few regulations implementing the straddle rules have been implemented, the tax consequences to the Portfolio of engaging in hedging transactions are not entirely clear. Hedging transactions may increase the amount of short-term capital gain realized by a Portfolio which is taxed as ordinary income when distributed to members. The Portfolio may make one or more of the elections available under the Code that are applicable to straddles. If the Portfolio makes any of the elections, the amount, character, and timing of the recognition of gains or losses from the affected straddle positions will be determined under rules that vary according to the election(s) made. The rules applicable under certain of the elections may accelerate the recognition of gains or losses from the affected straddle positions. Because the straddle rules may affect the amount, character, and timing of gains or losses from the positions that are part of a straddle, the amount of Portfolio income that is distributed to members and that is taxed to them as ordinary income or long-term capital gain may be increased or decreased as compared to a fund that did not engage in such hedging transactions. Tax Treatment of Foreign Currency-Related Transactions. Gains or losses attributable to fluctuations in exchange rates that occur between the time a Portfolio accrues receivables or liabilities denominated in a foreign currency and the time the Portfolio actually collects such receivables, or pays such liabilities, generally are treated as ordinary income or ordinary loss. Similarly, on disposition of certain options, futures, and forward contracts and on disposition of debt securities denominated in a foreign currency, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition of the security or contract and the date of disposition also are treated as ordinary gain or loss. These gains or losses, referred to under the Code as "section 988" gains or losses, may increase or decrease the amount of the Portfolio's investment company taxable income to be distributed to members as ordinary income. Tax Treatment of Passive Foreign Investment Companies. If a Portfolio invests in stock of certain foreign investment companies, the Portfolio may be subject to U.S. federal income taxation on a portion of any "excess distribution" with respect to, or gain from the disposition of, such stock. The tax would be determined by allocating on a pro rata basis such distribution or gain to each day of the Portfolio's holding period for the stock. The distribution or gain so allocated to any taxable year of the Portfolio, other than the taxable year of the excess distribution or disposition, would be taxed to the Portfolio at the highest ordinary income rate in effect for such year, and the tax would be further increased by an interest charge to reflect the value of the tax deferral deemed to have resulted from the ownership of the foreign company's stock. Any amount of distribution or gain allocated to the taxable year of the distribution or disposition would be included in the Portfolio's investment company taxable income and, accordingly, would not be taxable to the Portfolio to the extent distributed by the Portfolio as a dividend to its shareholders. A Portfolio may be able to make an election, in lieu of being taxable in the manner described above, to include annually in income its pro rata share of the ordinary earnings and net capital gain of any foreign investment company in which it invests, regardless of whether it actually received any distributions from the foreign company. These amounts would be included in the Portfolio's investment company taxable income and net capital gain which, to the extent distributed by the Portfolio as ordinary or capital gain dividends, as the case may be, would not be taxable to the Portfolio. In order to make this election, the Portfolio would be required to obtain certain annual information from the foreign investment companies in which it invests, which in many cases may be difficult to obtain. Other elections may become available to the Portfolio that would provide alternative tax treatment for investments in foreign investment companies. Foreign Shareholders. U.S. taxation of a shareholder who, as to the United States, is a non-resident alien individual, a foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder") depends on whether the income from the Portfolio is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from a Portfolio is not "effectively connected" with a U.S. trade or business carried on by the foreign shareholder, deemed distributions by the Portfolio of investment company taxable income will be subject to a U.S. tax of 30% (or lower treaty rate), which tax is generally withheld from such distributions. Deemed distributions of capital gain dividends and any gain realized upon redemption, sale or exchange of shares will not be subject to U.S. tax at the rate of 30% (or lower treaty rate) unless the foreign shareholder is a nonresident alien individual who is physically present in the U.S. for more than 182 days during the taxable year and meets certain other requirements. However, this 30% tax on capital gains of non-resident alien individuals who are physically present in the United States for more than the 182-day period only applies in exceptional cases because any individual present in the United States for more than 182 days during the taxable year is generally treated as a resident for U.S. federal income tax purposes. In that case, he or she would be subject to U.S. federal income tax on his or her worldwide income at the graduated rates applicable to U.S. citizens, rather than the 30% U.S. tax. In the case of a foreign shareholder who is a non- resident alien individual, the Portfolio may be required to withhold U.S. federal income tax at a rate of 31% of deemed distributions of net capital gains and redemption payments unless the foreign shareholder certifies his or her non-U.S. status under penalties of perjury or otherwise establishes an exemption. See "Backup Withholding" above. If the income from a Portfolio is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then deemed distributions of investment company taxable income and capital gain dividends and any gain realized upon the redemption, sale or exchange of shares of the Portfolio will be subject to U.S. federal income tax at the graduated rates applicable to U.S. citizens or domestic corporations. Foreign corporate shareholders may also be subject to the branch profits tax at a 30% rate. The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are advised to consult their own advisers with respect to the particular tax consequences to them of an investment in a Portfolio. Foreign Withholding Taxes. Income received by a Portfolio from sources within foreign countries may be subject to withholding and other taxes imposed by such countries. If more than 50% of the value of the Portfolio's total assets at the close of its taxable year consists of securities of foreign corporations, the Portfolio will be eligible and may elect to "pass through" to the Portfolio's shareholders the amount of foreign taxes paid by the Portfolio. Pursuant to this election, a shareholder will be required to include in gross income (in addition to dividends actually received) its pro rata share of the foreign taxes paid by the Portfolio, and may be entitled either to deduct its pro rata share of the foreign taxes in computing its taxable income or to use the amount as a foreign tax credit against its U.S. federal income tax liability, subject to limitations. Each shareholder will be notified within 60 days after the close of the Portfolio's taxable year whether the foreign taxes paid by the Portfolio will "pass through" for that year. If a Portfolio is not eligible to make the election to "pass through" to its shareholders its foreign taxes, the foreign taxes it pays will reduce its investment company taxable income and distributions by the Portfolio will be treated as U.S. source income. Generally, a credit for foreign taxes is subject to the limitation that it may not exceed the shareholder's U.S. tax attributable to its foreign source taxable income. For this purpose, if the pass-through election is made, the source of the Portfolio's income flows through to its shareholders. With respect to the Portfolios, gains from the sale of securities will be treated as derived from U.S. sources and certain currency fluctuation gains, including fluctuation gains from foreign currency denominated debt securities, receivables and payables, will be treated as ordinary income derived from U.S. sources. The limitation on the foreign tax credit is applied separately to foreign source passive income (as defined for purposes of the foreign tax credit), including the foreign source passive income passed through by the Portfolios. Shareholders who are not liable for federal income taxes will not be affected by any such "pass through" of foreign tax credits. Other Taxes A Portfolio may be subject to state, local or foreign taxes in any jurisdiction in which the Portfolio may be deemed to be doing business. In addition, shareholders of a Portfolio may be subject to state, local or foreign taxes on distributions from the Portfolio. In many states, Portfolio distributions which are derived from interest on certain U.S. Government obligations may be exempt from taxation. Shareholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in a Portfolio. SHAREHOLDER INFORMATION Certificates representing shares of a particular Portfolio will not be issued to shareholders. Investors Bank & Trust Company, the Fund's Transfer Agent, will maintain an account for each shareholder upon which the registration and transfer of shares are recorded, and any transfers shall be reflected by bookkeeping entry, without physical delivery. Detailed confirmations of each purchase or redemption are sent to each shareholder. Monthly statements of account are sent which include shares purchased as a result of a reinvestment of Portfolio distributions. The Transfer Agent will require that a shareholder provide requests in writing, accompanied by a valid signature guarantee form, when changing certain information in an account (i.e., wiring instructions, telephone privileges, etc.). Fund management reserves the right to waive the minimum initial investment in any Portfolio. The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase order with respect to shares of a Portfolio by making payment in whole or in part in readily marketable securities chosen by the Fund and valued as they are for purposes of computing the Portfolio's net asset value (redemption-in-kind). If payment is made in securities, a shareholder may incur transaction expenses in converting theses securities to cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of which the Fund is obligated to redeem shares with respect to any one shareholder during any 90- day period, solely in cash up to the lesser of $250,000 or 1% of the net asset value of a Portfolio at the beginning of the period. CALCULATION OF PERFORMANCE DATA The Portfolios may, from time to time, include the 30-day yield in advertisements or reports to shareholders or prospective investors. Quotations of yield for will be based on all investment income per share during a particular 30-day (or one month) period (including dividends and interest), less expenses accrued during the period ("net investment income"), and are computed by dividing net investment income by the maximum offering price per share on the last day of the period, according to the following formula which is prescribed by the Commission: YIELD = 2 x { [ ((a - b) / (c x d)) + 1]^6 - 1 } Where: a = dividends and interest earned during the period; b = expenses accrued for the period (net of reimbursements); c = the average daily number of shares of a Portfolio outstanding during the period that were entitled to receive dividends; and d = the maximum offering price per share on the last day of the period. Each of the Portfolios may, from time to time, include "total return" in advertisements or reports to shareholders or prospective investors. Quotations of average annual total return will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in a Portfolio of the Fund over periods of 1, 5 and 10 years (up to the life of the Portfolio), calculated pursuant to the following formula which is prescribed by the Commission: P(1 + T)^n = ERV Where: P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years, and ERV = the ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period. All total return figures assume that all dividends are reinvested when paid. RATINGS DESCRIPTIONS Standard & Poors Corporation AAA. Bonds rated AAA are highest grade debt obligations. This rating indicates an extremely strong capacity to pay principal and interest. AA. Bonds rated AA also qualify as high-quality obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from AAA issues only in small degree. A. Bonds rated A have a strong capacity to pay principal and interest, although they are more susceptible to the adverse effects of changes in circumstances and economic conditions. BBB. Bonds rated BBB are regarded as having adequate capacity to pay interest or principal. Although these bonds normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and principal. BB and Lower. Bonds rated BB, B, CCC, CC, C and D are regarded, on balance, as predominately speculative with respect to the issuer's capacity to pay interest and principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and D the highest degree of speculation. While such bonds may have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. The ratings AA to D may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. A-1. Standard & Poors Commercial Paper ratings are current assessments of the likelihood of timely payments of debts having original maturity of no more than 365 days. The A-1 designation indicates the degree of safety regarding timely payment is very strong. A-2. Capacity for timely payment on issues with this designation is strong. However, the relative degree of safety is not as high as for issues designated A-1. Moody's Investors Service, Inc. Aaa. Bonds are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa. Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuations of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than the Aaa securities. A. Bonds which are rated A possess many favorable investment attributes and may be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa. Baa rated bonds are considered medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba. Bonds which are rated Ba are judged to have speculative elements because their future cannot be considered as well assured. Uncertainty of position characterizes bonds in this class, because the protection of interest and principal payments may be very moderate and not well safeguarded. B and Lower. Bonds which are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the security over any long period of time may be small. Bonds which are rated Caa are of poor standing. Such securities may be in default of there may be present elements of danger with respect to principal or interest. Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's applies the numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through C in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. Moody's ratings for state and municipal and other short-term obligations will be designated Moody's Investment Grade ("MIG"). This distinction is in recognition of the differences between short-term credit risk and long-term risk. Factors affecting the liquidity of the borrower are uppermost in importance in short-term borrowing, while various factors of the first importance in long-term borrowing risk are of lesser importance in the short run. MIG-1. Notes bearing this designation are of the best quality enjoying strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing, or both. MIG-2. Notes bearing this designation are of favorable quality, with all security elements accounted for, but lacking the undeniable strength of the previous grade. Market access for refinancing, in particular, is likely to be less well established. P-1. Moody's Commercial Paper ratings are opinions of the ability of issuers to repay punctually promissory obligations not having an original maturity in excess of nine months. The designation "Prime-1" or "P-1" indicates the highest quality repayment capacity of the rated issue. P-2. Issuers have a strong capacity for repayment of short-term promissory obligations. Thompson Bankwatch, Inc. A. Company possess an exceptionally strong balance sheet and earnings record, translating into an excellent reputation and unquestioned access to its natural money markets. If weakness or vulnerability exists in any aspect of the company's business, it is entirely mitigated by the strengths of the organization. A/B. Company is financially very solid with a favorable track record and no readily apparent weakness. Its overall risk profile, while low, is not quite as favorable as companies in the highest rating category. IBCA Limited A1. Short-term obligations rated A1 are supported by a very strong capacity for timely repayment. A plus sign is added to those issues determined to possess the highest capacity for timely payment. Fitch Investors Service, Inc. F-1. The rating F-1 is the highest rating assigned by Fitch. Among the factors considered by Fitch in assigning this rating are: (1) the issuer's liquidity; (2) its standing in the industry; (3) the size of its debt; (4) its ability to service its debt; (5) its profitability; (6) its return on equity; (7) its alternative sources of financing; and (8) its ability to access the capital markets. Analysis of the relative strength or weakness of these factors and others determines whether an issuer's commercial paper is rated F-1. Part C. OTHER INFORMATION Item 24. Financial Statements and Exhibits (a) Financial Statements and Schedules: Statement of Assets and Liabilities dated ______________, 1996* Independent Auditors' Report dated ______________-----__, 1996* (b) Exhibits: Exhibit Number Description - - - -------------- ----------- 1(a) Registrant's Articles of Incorporation 2 By-Laws 3 None 4(a) Specimen Stock Certificates for Shares of Registrant* 5(a) Advisory Agreement between Registrant and Harding, Loevner, Management, L.P.* 6(a) Distribution Agreement between Registrant and AMT Capital Services, Inc.* 7 None 8 Custodian Agreement between Registrant and Investors Bank & Trust Company* 9(a) Administration Agreement between Registrant and AMT Capital Services, Inc.* 9(b) Form of Transfer Agency Agreement between Registrant and Investors Bank & Trust Company* 10 Opinion and Consent of Dechert Price & Rhoads* 11 Consent of Ernst & Young* 12 None 13(a) Form of Share Purchase Agreement between Registrant and Harding, Loevner Management, L.P.* 14 None * To be filed by Amendment. Item 25. Persons Controlled by or Under Common Control with Registrant Not Applicable. Item 26. Number of Holders of Securities Title of Class Number of Record Holders Global Equity Portfolio None International Equity Portfolio None Emerging Markets Portfolio None Multi-Asset Global Portfolio None Item 27. Indemnification The Registrant shall indemnify directors, officers, employees and agents of the Registrant against judgments, fines, settlements and expenses to the fullest extent allowed, and in the manner provided, by applicable federal and Maryland law, including Section 17(h) and (i) of the Investment Company Act of 1940. In this regard, the Registrant undertakes to abide by the provisions of Investment Company Act Releases No. 11330 and 7221 until amended or superseded by subsequent interpretation of legislative or judicial action. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 28. Business and Other Connections of Investment Adviser Harding, Loevner Management, L.P. (the "Investment Adviser") is a limited partnership organized under the laws of the State of New Jersey and it is an investment adviser registered under the Investment Advisers Act of 1940 (the "Advisers Act"). The list required by this Item 28 of officers and directors of the Investment Adviser, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by such officers and directors during the past two years, is incorporated by reference to Schedules A and D of Form ADV filed by the Investment Adviser pursuant to the Advisers Act (SEC File No. 801-36845). Item 29. Principal Underwriter (a) In addition to Registrant, AMT Capital Services, Inc. ("AMT Capital") currently acts as principal underwriter to FFTW Funds, Inc., TIFF Investment Program, Inc., Holland Series Fund, Inc. and AMT Capital Fund, Inc. AMT Capital is registered with the Securities and Exchange Commission as a broker/dealer and is a member of the National Association of Securities Dealers, Inc. (b) For each director or officer of AMT Capital Services, Inc.: Name and Principal Business Address Positions and Offices Positions and Offices with Underwriter with Registrant - - - ------------------------------------------------------------------------------- Alan M. Trager Director, Chairman and None 600 Fifth Avenue Treasurer 26th Floor New York, NY 10020 Carla E. Dearing Director, President Assistant Treasurer 600 Fifth Avenue 26th Floor New York, NY 10020 Ruth L. Lansner Secretary None Gilbert, Segall & Young 430 Park Avenue 11th Floor New York, NY 10022 William E. Vastardis Senior Vice President Secretary Treasurer 600 Fifth Avenue 26th Floor New York, NY 10020 (c) Not Applicable. Item 30. Location of Accounts and Records All accounts, book and other documents required to be maintained by Section 31(a) of an Investment Company Act of 1940 and the Rules (17 CFR 270.32a-l to 3la-3) promulgated thereunder will be maintained by the following: Accounting and Custodial Records - Investors Bank & Trust Company, P.O. Box 1537, Boston, Massachusetts 02205-1537. Dividend Disbursing Agent and Transfer Agent - Investors Bank & Trust Company, P.O. Box 1537, Boston, Massachusetts 02205-1537. Balance of Accounts and Records: AMT Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New York 10020, and Harding, Loevner Management, L.P., 50 Division Street, Suite 401, Somerville, N.J. 08876. Item 31. Management Services Not Applicable. Item 32. Undertakings (a) Not Applicable (b) Registrant hereby undertakes to file a post-effective amendment, containing financial statements as of a reasonably current date which need not be certified, within four to six months from the date of commencement of investment operations of the Fund (c) The Registrant undertakes to call a meeting of shareholders for the purpose of voting upon the question of removal of one or more of the Registrant's directors when requested in writing to do so by the holders of at least 10% of Registrant's outstanding shares, and in connection with such meeting, to assist in communications with other shareholders in this regard, as provided under Section 16(c) of the 1940 Act. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York on the 31st day of July, 1996. HARDING, LOEVNER FUNDS, INC. By: /s/ David R. Loevner David R. Loevner, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement had been signed below by the following persons in the capacities indicated on the 31st day of July 1996. Signature Title /s/ David R. Loevner Director and President (Principal Executive, Financial and Accounting Officer) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________ EXHIBITS TO FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940 ________________________________ HARDING, LOEVNER FUNDS, INC. HARDING, LOEVNER FUNDS, INC. EXHIBIT INDEX Exhibit No. Description of Exhibit (1a) Registrant's Articles of Incorporation 2 By-Laws EX-99.B1 2 ARTICLES OF INCORPORATION HARDING, LOEVNER FUNDS, INC. FIRST: Formation. The undersigned, Eric P. Nachimovsky - whose post office address is 600 Fifth Avenue, 26th Floor New York, NY 10020, being at least twenty-one years of age, do under and by virtue of the Maryland General Corporation Law, authorizing the formation of corporations, associate myself as incorporator with the intention of forming a corporation (hereinafter called the "Corporation"). SECOND: Name. The name of the Corporation is Harding, Loevner Funds, Inc. THIRD: Purpose. The purpose for which the Corporation is formed is to act as an open-end management investment company under the Investment Company Act of 1940, as amended, as then in effect and the rules and regulations from time to time promulgated and effective thereunder (referred to herein collectively as the "Act") and to exercise and enjoy all of the powers, rights and privileges granted to, or conferred upon, corporations by the Maryland General Corporation Law now or hereafter in force. FOURTH: Address and Resident Agent. The post office address of the principal office of the Corporation in the State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, MD 21202. The name and address of the resident agent of the Corporation in the State of Maryland is The Corporation Trust Incorporated, a corporation of this State, 32 South Street, Baltimore, MD 21202. FIFTH: Capital Stock. (a) The total number of shares of capital stock of all classes that the Corporation shall have authority to issue is Two Billion Five Hundred Million (2,500,000,000) all of which capital stock shall have a par value of one cent ($.01) per share to be known and designated as Common Stock, such shares of Common Stock having an aggregate par value of $25,000,000.00. The Board of Directors shall be authorized to increase or decrease the aggregate number of authorized shares of Common Stock from time to time in accordance with the provisions of the Maryland General Corporation Law. (b) Subject to the provisions of these Articles of Incorporation, the Board of Directors shall have the power to issue shares of Common Stock of the Corporation from time to time, at prices not less than the par value thereof, for such consideration as may be fixed from time to time pursuant to the direction of the Board of Directors. All stock shall be issued on a fully paid and non-assessable basis. (c) Pursuant to Section 2-105 of the Maryland General Corporation Law, the Board of Directors of the Corporation shall have the power to designate one or more classes of shares of Common Stock, to fix the number of shares in any such class and to classify or reclassify any unissued shares with respect to such class. Any such class (subject to any applicable rule, regulation or order of the Securities and Exchange Commission or other applicable law or regulation) shall have such preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of redemption and other characteristics as the Board may determine in the absence of contrary determination set forth herein. The aforesaid power shall include the power to create, by classifying or reclassifying unissued shares in the aforesaid manner, one or more classes in addition to those initially designated as named below. Subject to such aforesaid power, the Board of Directors has initially designated four classes of shares of Common Stock of the corporation. The name of such classes and the number of shares of Common Stock initially classified and allocated to these classes are as follows: Number of Shares of Common Stock Name of Class Initially Classified and Allocated International Equity Portfolio 500,000,000 Global Equity Portfolio 500,000,000 Emerging Markets Portfolio 500,000,000 Multi-Asset Global Portfolio 500,000,000 Unallocated Shares 500,000,000 (d) At any time when there are no shares outstanding or subscribed for a particular class previously established and designated herein by the Board of Directors, the class may be liquidated in accordance with applicable law or by similar means. Each share of a class shall have equal rights with each other share of that class with respect to the assets of the Corporation pertaining to that class. The dividends payable to the holders of any class (subject to any applicable rule, regulation or order of the Securities and Exchange Commission or any other applicable law or regulation) shall be determined by the Board and need not be individually declared, but may be declared and paid in accordance with a formula adopted by the Board. Except as otherwise provided herein, all references in these Articles of Incorporation to Common Stock or to a class of stock shall apply without discrimination to the shares of each class of stock. (e) The holder of each share of Common Stock of the Corporation shall be entitled to one vote for each dollar, and a proportionate fraction of a vote for each fraction of a dollar, of net asset value on the record date or the date the stock transfer books of the Corporation are closed, as the case may be, of each share of Common Stock of the Corporation, standing in his or her name on the books of the Corporation on such date. On any matter submitted to a vote of stockholders, all shares of the Corporation then issued and outstanding and entitled to vote, irrespective of the class, shall be voted in the aggregate and not by class except (1) when otherwise expressly provided by the Maryland General Corporation Law, or when required by the Act, shares shall be voted by individual class; and (2) when the matter does not affect any interest of a particular class, then only stockholders of such other class or classes whose interests may be affected shall be entitled to vote hereon. Holders of shares of stock of the Corporation shall not be entitled to cumulative voting in the election of Directors or on any other matter. (f) Each class of stock of the Corporation shall have the following powers, preference and participating, voting, or other special rights, and the qualifications, restrictions, and limitations thereof shall be as follows: 1. All consideration received by the Corporation for the issue or sale of stock of each class, together with all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to the class of shares of stock with respect to which such assets, payments or funds were received by the Corporation for all purposes, subject only to the rights of creditors, and shall be so recorded upon the books of account of the Corporation. Such assets, income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof and any assets derived from any reinvestment of such proceeds, in whatever form the same may be, are herein referred to as "assets belonging to" such class. 2. The Board of Directors may from time to time declare and pay dividends or distributions, in stock or in cash, on any or all classes of stock; provided, such dividends or distributions on shares of any class of stock shall be paid only out of earnings, surplus, or other lawfully available assets belonging to such class. Subject to the foregoing proviso, the amount of any dividends or distributions and the payment thereof shall be wholly in the discretion of the Board of Directors. 3. The Board of Directors shall have the power in its discretion to distribute in any fiscal year as dividends, including dividends designated in whole or in part as capital gain distributions, amounts sufficient, in the opinion of the Board of Directors, to enable the Corporation to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, or any successor or comparable statute thereof, and regulations promulgated thereunder (collectively, the "IRC"), and to avoid liability for the Corporation for Federal income tax in respect of that year and to make other appropriate adjustments in connection therewith. The Board of Directors shall have the power, in its discretion, to make such elections as to the tax status of the Corporation or any class of the Corporation as may be permitted or required by the IRC, without the vote of stockholders of the Corporation or any class. 4. In the event of the liquidation or dissolution of the Corporation, stockholders of each class shall be entitled to receive, as a class, out of the assets of the Corporation available for distribution to stockholders, but other than general assets, the assets belonging to such class, and the assets so distributable to the stockholders of any class shall be distributed among such stockholders in proportion to the number of shares of such class held by them and recorded on the books of the Corporation. In the event that there are any general assets not belonging to any particular class of stock and available for distribution, such distribution shall be made to the holders of stock of all classes in proportion to the net asset value of the respective class determined as hereinafter provided and distributed to the holders of capital stock of each class in proportion to the number of shares of that class held by the respective holders. 5. The assets belonging to any class of stock shall be charged with the liabilities in respect to such class, and shall also be charged with its share of the general liabilities of the Corporation. General liabilities shall be charged to classes in proportion to the net asset value of the respective class determined as hereinafter provided. The determination of the Board of Directors shall be conclusive as to the amount of liabilities, including accrued expenses and reserves, as to the allocation of the same as to a given class, and as to whether the same or general assets of the Corporation are allocable to one or more classes. (g) The Board of Directors may provide for a holder of any class of stock of the Corporation, who surrenders his certificate in good form for transfer to the Corporation or, if the shares in question are not represented by certificates, who delivers to the Corporation a written request in good order signed by the shareholder, to convert the shares in question on such bases as the Board may provide, into shares of stock of any other class of the Corporation. (h) No holder of any class of Common Stock of the Corporation or of any other class of stock or securities which may hereafter be created shall be entitled as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of capital stock of any class, or of rights or options to purchase any capital stock, or of securities convertible into, or carrying rights or options to purchase, capital stock of any class, whether now or hereafter authorized or whether issued for money, for consideration other than money or by way of a dividend or otherwise, and all such rights are hereby waived by each holder of Common Stock and of any other class of stock or securities which may hereafter be created. SIXTH: Board of Directors. (a) Number and Election. The number of directors of the Corporation, so long as there is no Common Stock outstanding, or, if there is Common Stock outstanding, but there are less than three stockholders, shall be one. Except as provided in the preceding sentence, the number of directors of the Corporation shall initially be one (1) provided, however, that the number of directors may be increased or decreased in accordance with the By-Laws so long as the number is never less than three (3). Except as provided in the By-Laws, the election of directors may be conducted in any way approved at the meeting (whether stockholders or directors) at which the election is held, provided that such election shall be by ballot whenever requested by any person entitled to vote. The name of the director who shall act until the first annual meeting or until his successor is duly elected and qualified is: David R. Loevner (b) Removal of Directors. Subject to the limits of the Act and unless otherwise provided by the By-Laws, a director may be removed with or without cause, by the affirmative vote of a majority of (a) the Board of Directors, (b) a committee of the Board of Directors appointed for such purpose, or (c) the stockholders by vote of a majority of the outstanding shares of the Corporation. (c) Responsibility and Liability. To the fullest extent permitted by Maryland General Corporation Law, as it may be amended from time to time, subject to the limitations imposed by the Act, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders for damages. This limitation on liability applies to events occurring at the time a person serves as a director or officer of the Corporation, whether or not such person is a director or officer at the time of any proceeding in which liability is asserted. No amendment of the charter of the Corporation or repeal of any of its provisions shall limit or eliminate any of the benefits provided to directors and officers under this Article SIXTH in respect of any act or omission that occurred prior to such amendment or repeal. (d) Reliance on Books and Reports. Each director or officer or member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be entitled to rely on any information, opinion, report, or statement, including any financial statement or other financial data, prepared or presented by (i) an officer or employee of the Corporation whom they reasonably believe to be reliable and competent in the matters presented; (ii) a lawyer, public accountant, or other person, as to a matter which they believe to be within the person's professional or expert competence; and (iii) a committee of the Board on which they do not serve, as to a matter within its designated authority, if they reasonably believe the committee to merit confidence (e) Indemnification. The Corporation, including its successors and assigns, shall indemnify its directors and officers to the fullest extent allowed, and in the manner provided, by Maryland General Corporation Law as it may be amended from time to time and the Act, including the advancing of reasonable expenses incurred in connection therewith. Such indemnification shall be in addition to any other right or claim to which any director or officer may otherwise been entitled. The Corporation may indemnify any other persons permitted but not required to be indemnified by Maryland General Corporation Law and the Act as they may be amended from time to time, if and to the extent indemnification is authorized and determined to be appropriate in each case in accordance with applicable law by the Board of Directors, the stockholders, or special legal counsel appointed by the Board of Directors. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or who, while a director, officer, employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, against any liability asserted against and incurred by such person in any such capacity or arising out of such person's position, whether or not the Corporation would have had the power to indemnify such liability, but shall not be required to purchase or maintain insurance on behalf of any such person. No amendment of the Articles of Incorporation of the Corporation or repeal of any of its provisions shall limit or eliminate any of the benefits provided under this Article SIXTH in respect of any act or omission that occurred prior to such amendment or repeal. The rights provided to any person by this Article shall be enforceable against the Corporation by such person who shall be presumed to have relied upon such rights in serving or continuing to serve in the capacities indicated herein. No amendment of these Articles of Incorporation shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. Nothing in these Articles of Incorporation shall be deemed to (i) require a waiver of compliance with any provision of the Securities Act of 1933, as amended, or the Act, or of any valid rule, regulation or order of the Securities and Exchange Commission under those Acts or (ii) protect any director or officer of the Corporation against any liability to the Corporation or its stockholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of his or her duties or by reason of his or her reckless disregard of his or her obligations and duties hereunder. (f) Severability. Each section or portion thereof of this Article SIXTH shall be deemed severable from the remainder, and the invalidity of any such section or portion shall not affect the validity of the remainder of this Article SIXTH. SEVENTH: Management of the Affairs of the Corporation. The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation: (a) The Board shall have power to fix an initial offering price for the shares of any class which shall yield to the Corporation not less than the par value thereof, at which price the shares of the Common Stock of the Corporation shall be offered for sale, and to determine from time to time thereafter the offering price which shall yield to the Corporation not less than the par value thereof from sales of the shares of its Common Stock. The net asset value of the property and assets of any class of the Corporation shall be determined at such times as the Board of Directors may direct, by deducting from the total appraised value of all of the property and assets of the Corporation which constitute the assets belonging to the class, determined in the manner hereinafter provided, all debts, obligations and liabilities of the Corporation (including, but without limitation of the generality of any of the foregoing, any or all debts, obligations, liabilities or claims of any and every kind and nature, whether fixed, accrued, or unmatured, and any reserves or charges, determined in accordance with generally accepted accounting principles, for any or all thereof, whether for taxes, including estimated taxes or unrealized book profits, expenses, contingencies or otherwise) allocable to such class. In determining the total appraised value of all the property and assets of the Corporation or belonging to any class thereof: 1. Securities owned shall be valued at market value or, in the absence of readily available market quotations, at fair value as determined in good faith by or as directed by the Board of Directors in accordance with applicable statutes and regulations. 2. Dividends declared but not yet received, or rights, in respect of securities which are quoted ex-dividend or ex-rights, shall be included in the value of such securities as determined by or pursuant to the direction of the Board of Directors on the day the particular securities are first quoted ex-dividend or ex-rights, and on each succeeding day until the said dividends or rights are received and become part of the assets of the Corporation. 3. The value of any other assets of the Corporation (and any of the assets mentioned in paragraphs (1) or (2), in the discretion of the Board of Directors in the event of national financial emergency, as hereinafter defined) shall be determined in such manner as may be approved from time to time by or pursuant to the discretion of the Board of Directors. The net asset value of each share of any class of the Common Stock of the Corporation shall be determined by dividing the net asset value of the property and assets of the relevant class of the Corporation, as defined above, by the total number of shares of its Common Stock then issued and outstanding for such class, including any shares of such class sold by the Corporation up to and including the date as of which such net asset value is to be determined, whether or not certificates therefor have actually been issued. In case the net asset value of each share of any such class so determined shall include a fraction of one cent, such net asset value of each share of that class shall be adjusted to the nearer full cent. For the purpose of these Articles of Incorporation, a "national financial emergency" is defined as the whole or any part of any period (i) during which the New York Stock Exchange is closed other than customary weekend and holiday closing, (ii) during which trading on the New York Stock Exchange is restricted, (iii) during which an emergency exists as a result of which disposal by the Corporation of securities owned by such class is not reasonably practicable or it is not reasonably practicable for the Corporation fairly to determine the value for the net assets of such class, or (iv) during any other period when the Securities and Exchange Commission (or any succeeding governmental authority) may for the protection of security holders of the Corporation by order permit suspension of the right of redemption or postponement of the date of payment on redemption; provided that applicable rules and regulations of the Securities and Exchange Commission (or any succeeding governmental authority) shall govern as to whether the conditions prescribed in (ii), (iii), or (iv) exist. Notwithstanding any other provisions of this Article, the Board of Directors may suspend the right of stockholders of any or all classes of shares to require the Corporation to redeem shares held by them for such periods and to the extent permitted by, or in accordance with, the Act. The Board of Directors may, in the absence of a ruling by a responsible regulatory official, terminate such suspension at such time as the Board of Directors, in its discretion, shall deem reasonable, such determination to be conclusive. (b) To the extent permitted by law, except in the case of a national financial emergency or as otherwise permitted or required in this Article SEVENTH, the Corporation shall redeem shares of its Common Stock from its stockholders upon request of the holder thereof received by the Corporation or its designated agent during business hours of any business day, provided that such request must be accompanied by surrender of outstanding certificate or certificates for such shares in form for transfer and must be in writing or, subject to limitations established by the Board of Directors, received by telephone and insofar as it may relate to shares for which no certificate has been issued, together with such proof of the authenticity of signatures as may reasonably be required with respect to such certificated shares (or, on such request in the event on certificate is outstanding) by, or pursuant to the direction of the Board of Directors of the Corporation, and accompanied by proper stock transfer stamps. Shares redeemed upon written request shall be redeemed by the Corporation at the net asset value of such shares determined in the manner provided in Paragraph (1) of this Article SEVENTH as of the close of business on the business day during which such request was received in good order by the Corporation. Payments of shares of its Common Stock so redeemed by the Corporation shall be made only from assets of the applicable class lawfully available therefor and out of such assets. Payment shall be in cash, except payment for such shares may, at the option of the Board of Directors, or such officer or officers as they may duly authorize for the purpose in their complete discretion, be made from the assets of that class in kind or partially in cash and partially in kind. In case of any payment in kind the Board of Directors, or its delegate, shall have absolute discretion as to what security or securities constituting assets belonging to such class shall be distributed in kind and the amount if the same; and the securities shall be valued for purpose of distribution at the value at which they were appraised in computing the current net asset value of the class of the Corporation's shares, provided that any stockholder who cannot legally acquire securities so distributed in kind by reason of the prohibitions of the Act shall receive cash. Payments for shares of its Common Stock so redeemed by the Corporation shall be made by the Corporation as provided above within seven days after the date which the request for redemption of such shares has been received in good order by the Corporation or its designated agent; provided, however, that if payment shall be made by delivery of assets of the Corporation, as provided above, any securities to be delivered as part of such payment shall be delivered as promptly as any necessary transfers of such securities on the books of the several issuers whose securities are to be delivered may be made, but not necessarily within such seven day period. The right of any holder of shares of the Common Stock of the Corporation to receive dividends thereon and all other rights of such stockholder with respect to the shares so redeemed by the Corporation shall cease and determine from and after the time as of which the purchase price of such shares shall be fixed, as provided above, except the right of such stockholder to receive payment for such shares as provided for herein. (c) The Board of Directors, may from time to time, without the vote or consent of stockholders, establish uniform standards with respect to the minimum net asset value of a stockholder account or minimum investment which may be made by a stockholder. The Board of Directors may authorize the closing of those stockholder accounts not meeting the specified minimum standards of net asset value by redeeming all of the shares in such accounts, provided there is mailed to each affected stockholder account, at least sixty (60) days prior to the planned redemption date, a notice setting forth the minimum account size requirement and the date on which the account will be closed if the minimum size requirement is not met prior to said closing date. EIGHTH: Determination Binding. Any determination made in good faith, so far as accounting matters are involved, in accordance with accepted accounting practice by or pursuant to the authority or the direction of the Board of Directors, as to the amount of assets, obligations or liabilities of the Corporation from dividends and interest for any period or amounts at any time legally available for the payment of dividends, as to the amount of any reserves or charges set up and the propriety thereof, as to the time of or purpose for creating reserves or as to the use, alteration or cancellation of any reserves or charges (whether or not any obligation or liability for which such reserves or charges shall have been created, shall have been paid or discharged or shall be then or thereafter required to be paid or discharged), as to the price of any security owned by the Corporation or as to any other matters relating to the issuance, sale, redemption or other acquisition or disposition of securities or shares of capital stock of the Corporation, and any reasonable determination made in good faith by the Board of Directors shall be final and conclusive, and shall be binding upon the Corporation and all holders of its capital stock, past, present, and future, and shares of the capital stock of the Corporation are issued and sold on the condition and understanding, evidenced by the purchase of shares of capital stock or acceptance of share certificates, that any and all such determinations shall be binding as aforesaid. No provision of these Articles of Incorporation shall be effective to require a waiver of compliance with any provision of the Act or the Securities Act of 1933, or of any valid rule, regulation or order of the Securities and Exchange Commission thereunder. NINTH: Contracts and Agreements. The Corporation is expressly empowered as follows: (a) The Corporation may enter into a written contract or contracts with any person or organization, including any firm, corporation, trust or association in which any officer, other employee, director or stockholder of the Corporation may be interested, providing for a delegation of the management of all of the Corporation's securities portfolios and also for the delegation of the performance of administrative corporate functions subject always to the direction of the Board of Directors. The compensation payable by the Corporation under such contracts shall be such as is deemed fair and equitable to both parties and by the Board of Directors. Each such contract shall in all respects be consistent with and subject to the requirements of the Act as then in effect and regulation of the Securities and Exchange Commission (or any succeeding governmental authority) promulgated thereunder. (b) The Corporation may appoint one or more distributors or agents or both for the sale of the shares of the Corporation, may directly or indirectly compensate such person or persons for the sale of such shares and may enter into such contract or contracts with such person or persons as the Board of Directors of the Corporation in its discretion may deem reasonable and proper. (c) The Corporation may employ such custodian or custodians for the safekeeping of the property of the Corporation and its shares, such dividend disbursing agent or agents, and such transfer agent or agents and registrar or registrars for its shares, and may make and perform such contracts for the aforesaid purposes as in the opinion of the Board of Directors of the Corporation may be reasonable, necessary, or proper for the conduct of the affairs of the Corporation, and may pay the fees and disbursements of such custodians, dividend disbursing agents, transfer agents, and registrars out of the income and/or any other property of the Corporation. Notwithstanding any other provision of these Articles of Incorporation or the By-Laws of the Corporation, the Board of Directors may cause any or all of the property of the Corporation to be transferred to or to be acquired and held in the name of the Corporation or nominee or nominees of such custodian satisfactory to the Board of Directors. (d) All contracts entered into pursuant to subsections (a), (b), and (c), of this Article NINTH shall in all respect be consistent with and subject to the requirements of the Act as then in effect and regulations of the Securities and Exchange Commission promulgated thereunder. (e) The same person, partnership (general or limited), association, trust or corporation may be employed in any multiple capacity under subsection (a), (b) and (c) of this Article NINTH and may receive compensation from the Corporation in as many capacities as such person, partnership (general or limited), association, trust or corporation shall serve the Corporation. The same person may be financially interested in or otherwise affiliated (as defined in the Act) with persons who are parties to any or all of the contracts entered into by the Corporation pursuant to this Article NINTH. Any contract entered into pursuant to this Article NINTH may be made with any person even though an officer, other employee, director or stockholder of the Corporation may be such other person or may have an interest in such other person. No contract entered into by the Corporation with any other party pursuant to this Article NINTH shall be invalidated or rendered voidable because any officer, other employee, director or stockholder of the Corporation may be such other person or may have an interest in such other person. No contract entered into by the Corporation with any other party pursuant to this Article NINTH shall be invalidated or rendered voidable because any officer, other employee, director or stockholder of the Corporation is such other party or has an interest in such other party. No person having an interest in such other party shall be liable merely by reason of such interest for any loss or expense to the Corporation under or by reason of said contract or accountable for any profit realized directly therefrom, provided that all provisions of applicable laws were complied with when the Corporation entered into the contract. TENTH: Other Powers. In furtherance, and not in limitation, of the powers conferred by the laws of the State of Maryland, the Board of Directors is expressly authorized: (a) To make, alter or repeal the By-Laws of the Corporation, except where such power is reserved by the By-Laws to the stockholders, and except as otherwise required by the Act. (b) From time to time to determine whether and to what extent and at what times and places and under what conditions and regulations the books and accounts of the Corporation or any of them other than the stock ledger, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by law or authorized by resolution of the Board of Directors or of the stockholders. (c) Without the assent or vote of the stockholders, to authorize and issue obligations of the Corporation, secured and unsecured, as the Board of Directors may determine, and to authorize and cause to be executed mortgages and liens upon the property of the Corporation, real or personal but only to the extent permitted by the fundamental policies of the Corporation recited in its registration statement filed pursuant to the Act. (d) In addition to the powers and authorities granted herein and by statute expressly conferred upon it, the Board of Directors is authorized to exercise all such powers and do all acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of Maryland General Corporation Law, of these Articles of Incorporation, and of the By-Laws of the Corporation. (e) To authorize from time to time the payment of compensation and expenses to the Directors for services to the Corporation, including fees for attendance at meetings of the Board of Directors and committees thereof. (f) Subject to the requirements of applicable law, to establish, in its absolute discretion, the basis or method, timing and frequency for determining the value of assets belonging to each class or series and for determining the net asset value of each share of each class or series for purposes of sales, redemptions, repurchases or otherwise. Without limiting the foregoing, the Board of Directors may determine that the net asset value per share of any class or series should be maintained at a designated constant value and may adopt procedures, not inconsistent with applicable law, to accomplish that result. Such procedures may include a requirement, in the event of a net loss with respect to the particular class or series from time to time, for automatic pro rata capital contributions from each stockholder of that class or series in amounts sufficient to maintain the designated constant share value. (g) To make such elections, in its discretion, as to the tax status of the Corporation or any class of the Corporation's capital stock as may be permitted or required by the IRC. ELEVENTH: Location of Books and Records. The books of the Corporation may be kept (subject to any provisions contained in applicable statutes) outside the State of Maryland at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. Election of directors need not be by ballot unless the By-Laws of the Corporation shall so provide. TWELFTH: Reservation of Right to Amend. The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. THIRTEENTH: Shareholder Voting. (a) Quorum. The presence in person or by proxy of the holders of Common Stock of the Corporation entitled to cast one- third of the votes entitled to be cast thereat, without regard to class, shall constitute a quorum at any meeting of the stockholders, except with respect to any matter which, under applicable statutes or regulatory requirements, requires approval by a separate vote of one or more classes of stock, in which case the presence in person or by proxy of the holders of Common Stock entitled to cast one-third of the votes of each class required to vote as a class on the matter shall constitute a quorum. If at any meeting of the stockholders there shall be less than a quorum present, the stockholders present at such meeting may, without further notice, adjourn the same from time to time until a quorum shall be present. (b) Shareholder Majority. Notwithstanding any provision of Maryland General Corporation Law requiring more than a majority vote of the Common Stock, or any class thereof, in connection with any corporation action (including, but not limited to, the amendment of these Articles of Incorporation), unless otherwise provided in these Articles of Incorporation the Corporation may take or authorize such action upon the favorable vote of the holders of Common Stock entitled to cast a majority of the votes thereon. FOURTEENTH: Duration. The duration of the Corporation shall be perpetual. FIFTEENTH: No Liability. The stockholders of the Corporation shall not be liable for, and their private property shall not be subject to, claim levy or other encumbrance on account of the debts or liabilities of the Corporation, to any extent whatsoever. SIXTEENTH: Owner of Record. The Corporation shall be entitled to treat the person in whose name any share of the capital stock of the Corporation is registered as the owner thereof for purposes of dividends and other distributions in the course of business or in the course of recapitalization, sale of the property and assets of the Corporation, or otherwise, and for the purpose of votes, approvals and consents by stockholders and for the purpose of notices to stockholders, and for all other purposes whatsoever; and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share, on the part of any other person, whether or not the Corporation shall have notice thereof, save as expressly required by law. I acknowledge these Articles of Incorporation to be my act and further acknowledge that, to the best of my knowledge the matters and facts set forth therein are true in all material respects under the penalties of perjury, this __ day of July, 1996. _______________________________ Eric P. Nachimovsky EX-99.B2 3 BY-LAWS OF HARDING, LOEVNER FUNDS, INC. ARTICLE I Fiscal Year and Offices Section 1 FISCAL YEAR. Unless otherwise provided by resolution of the Board of Directors the fiscal year of the Corporation shall begin on the first day of January and end on the last day of December. Section 2 REGISTERED OFFICE. The registered office of the Corporation in Maryland shall be located at c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, MD 21202 and the name and address of its Resident Agent is The Corporation Trust Incorporated, 32 South Street, Baltimore, MD 21202. Section 3 OTHER OFFICES. The Corporation shall also have a place of business in New York and the Corporation shall have the power to open additional offices for the conduct of its business, either within or outside the States of New York and Maryland as such places as the Board of Directors may from time to time designate. ARTICLE II Meetings of Stockholders Section 1 PLACE OF MEETINGS. All meetings of the stockholders of the Corporation (the "Stockholders") shall be held at the office of the Corporation in the City of New York or at such other place within the United States as may from time to time be designated by the Board and stated in the notice of such meeting. Section 2 ANNUAL MEETINGS. The First Annual Meeting of Stockholders shall be held at such time and on such date during the first six months of the first fiscal year of the Corporation as may be fixed by the Board of Directors by resolution. At the Annual Meeting, the Stockholders shall elect a Board of Directors and transact any other business which may properly be brought before the meeting. Thereafter, annual meetings of Stockholders will not be held in any years in which the election of directors is not required to be acted upon under the Investment Company Act of 1940 (the "Act"). Section 3 SPECIAL MEETINGS. Special Meetings of the Stockholders may be called at any time by the Chairman of the Board or the President, or by a majority of the Board of Directors, and shall be called by the Chairman of the Board, President or Secretary upon written request of the holders of shares entitled to cast not less than ten percent of all the votes entitled to be cast at such meeting provided that (a) such request shall state the purposes of such meeting and the matters proposed to be acted on, and (b) the Stockholders requesting such meeting shall have paid to the Corporation the reasonably estimated cost of preparing and mailing the notice thereof, which the Secretary shall determine and specify to such Stockholders. Unless requested by Stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting, no Special Meeting needs be called to consider any matter which is substantially the same as a matter voted on at any meeting of the Stockholders held during the preceding twelve months. Section 4 NOTICE. Not less than ten nor more than ninety days before the date of every Annual or Special Stockholders' Meeting, the Secretary shall cause to be personally delivered, left at his (her) residence or usual place of business, or mailed to each Stockholder entitled to vote at such meeting at his (her) address (as it appears on the records of the Corporation at the time of mailing) written notice stating the time and place of the meeting and, in the case of a Special Meeting of Stockholders shall be limited to the purposes stated in the notice. Notice of any Stockholders' meeting need not be given to any Stockholder who shall sign a written waiver of such notice whether before or after the time of such meeting, provided that such waiver of notice shall be filed with the record of such meeting or to any Stockholder who shall attend such meeting in person or by proxy. Notice of adjournment of a Stockholders' meeting to another time or place need not be given, if such time and place are announced at the meeting. Irregularities in the notice or in the giving thereof as well as the accidental omission to give notice of any meeting to, or the non-receipt of any such notice by, any of the Stockholders shall not invalidate any action taken by or at any such meeting. Section 5 RECORD DATE FOR MEETINGS. The Board of Directors may fix in advance a date not more than ninety days, nor less than ten days, prior to the date of any Annual or Special Meeting of the Stockholders as a record date for the determination of the Stockholders entitled to receive notice of, and to vote at any meeting and any adjournment thereof; and in such case such Stockholders and only such Stockholders as shall be Stockholders of record on the date so fixed shall be entitled to receive notice of and to vote at such meeting and any adjournment thereof as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 6 VOTING. Each Stockholder shall have one vote for each dollar, and a proportionate fraction of a vote for each fraction of a dollar, of the net asset value per share of each share of Common Stock of the Corporation held by such stockholder on the record date set pursuant to Section 5 on each matter submitted to a vote at a meeting of Stockholders. Such vote may be made in person or by proxy. If no record date has been fixed for the determination of stockholders, the record date for the determination of Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business (i) on the day on which notice of the meeting is mailed or (ii) on the day 30 days before the meeting, whichever is the closer date to the meeting. At all meetings of the Stockholders, a quorum being present, all matters shall be decided by a majority of the votes cast in person or by proxy, unless the question is one which by express provision of the laws of the State of Maryland, the Act, as from time to time amended, or the Articles of Incorporation, a different vote is required, in which case such express provision shall control the decision of such question. At all meetings of Stockholders, unless the voting is conducted by inspectors, all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the Chairman of the meeting. Section 7 VOTING - PROXIES. The right to vote by proxy shall exist only if the instrument authorizing such proxy to act shall have been executed in writing by the Stockholder himself (herself) or by his (her) attorney thereunto duly authorized in writing. No proxy shall be voted on after eleven months from its date unless it provides for a longer period. Each proxy shall be in writing subscribed by the Stockholder or his (her) duly authorized attorney and shall be dated, but need not be sealed, witnessed or acknowledged. Proxies shall be delivered to the Secretary of the Corporation or person acting as Secretary of the meeting before being voted. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of such proxy the Corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a Stockholder shall be deemed valid unless challenged at or prior to its exercise. Section 8 CONDUCT AT STOCKHOLDERS MEETINGS. The Chairman of the Stockholders' meeting shall be the President of the Corporation, or if he (she) is not present, a director or officer of the Corporation to be elected at the meeting. The Chairman of a Stockholders' meeting shall preside over such meeting. The Secretary of the Corporation, if present, shall act as a Secretary of such meeting, or if he (she) is not present, an Assistant Secretary shall so act; if neither the Secretary nor any Assistant Secretary is present, then the presiding officer at the meeting shall act as the Secretary of such meeting. Section 9 INSPECTORS. At any election of directors, the Board of Directors prior thereto may, or, if they have not so acted, the Chairman of the meeting may appoint one or more inspectors of election who shall first subscribe an oath of affirmation to execute faithfully the duties of inspectors at such election with strict impartiality and according to the best of their ability, and shall after the election make a certificate of the result of the vote taken. No candidate for the office of director shall be appointed such inspector. Section 10 STOCK LEDGER AND LIST OF STOCKHOLDERS. It shall be the duty of the Secretary or Assistant Secretary of the Corporation to cause an original or duplicate stock ledger to be maintained at the office of the Corporation's transfer agent. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. Any one or more persons, each of whom has been a Stockholder of record of the Corporation for more than six months next preceding such request, who owns or own in the aggregate 5% or more of the outstanding Common Stock of any class of the Corporation, may submit a written request to any officer of the Corporation or its resident agent in Maryland for a list of the Stockholders of the Corporation. Within 20 days after such a request, there shall be prepared and filed at the Corporation's principal office a list containing the names and address of all Stockholders of the Corporation and the number of shares of each class held by each Stockholder, certified as correct under oath by an officer of the Corporation, by its stock transfer agent, or by its registrar. Section 11 ACTION WITHOUT MEETING. Any action to be taken by Stockholders may be taken without a meeting if all Stockholders entitled to vote on the matter consent to the action in writing and if all Stockholders entitled to notice of the meeting but not entitled to vote at it waive any right to dissent in writing and the written consents and waivers are filed with the records of the meetings of Stockholders. Such consent shall be treated for all purposes as a vote at a meeting. ARTICLE III Directors Section 1 GENERAL POWERS. The business of the Corporation shall be under the direction of its Board of Directors, which may exercise all powers of the Corporation, except such as are by statute, or the Articles of Incorporation, or by these By- Laws conferred upon or reserved to the Stockholders. All acts done by any meeting of the Board of Directors or by any person acting as a director, so long as his (her) successor shall not have been duly elected or appointed, shall, notwithstanding that it be afterwards discovered that there was some defect in the election of the directors or of such person acting as aforesaid or that they or any of them were disqualified, be as valid as if the directors or such other person, as the case may be, had been duly elected and were or was qualified to be directors or a director of the Corporation. Section 2 NUMBER AND TERM OF OFFICE. The number of directors which shall constitute the whole Board shall be determined from time to time by the Board of Directors, but shall not be fewer than three, nor more than fifteen. Each director elected shall hold office until his successor is elected and qualified. Directors need not be Stockholders. Section 3 INCREASE OR DECREASE IN NUMBER OF DIRECTORS. The directors, by the vote of a majority of all the directors then in office, may increase the number of directors and may elect directors to fill the vacancies created by such increase in the number of directors. The Board of Directors, by the vote of a majority of all the directors then in office, may likewise decrease the number of directors to a number not less than three (3), provided that the tenure of office of a director may not be changed by any such decrease. Any director elected to fill a vacancy created by an increase in the number of directors shall hold office until his (her) successor is elected and qualifies. Section 4 ELECTION. Initially the directors shall be those persons named as such in the Articles of Incorporation. Each director shall hold office for a tenure to be set by resolution of the Board of Directors and until his (her) successor has been duly elected and qualifies, until his (her) death, or until he (she) has resigned or has been removed pursuant to the applicable provisions of these By- Laws. To the extent that election of the members of the Board of Directors is required by the Act and except as herein provided, the members of the Board of Directors shall be elected by the vote of the holders of record of a majority of the shares of stock present in person or by proxy and entitled to vote at the applicable meeting of Stockholders. In the case of any vacancy or vacancies in the office of director through death, resignation or otherwise, other than an increase in the number of directors, a majority of the remaining directors, although a majority is less than a quorum, by an affirmative vote, or the sole remaining director, may elect a successor or successors, as the case may be, to hold office until the next meeting of Stockholders and until his (her) successor is chosen and qualifies. In the case of a vacancy which results from an increase in the number of directors, a majority of the entire Board of Directors may fill such a vacancy. Section 5 REMOVAL OF DIRECTORS. At any Stockholders Meeting, provided a quorum is present, any director may be removed (either with or without cause) by the vote of the holders of a majority of the shares present or represented at the meeting, and at the same meeting a duly qualified person may be elected in his (her) stead by a majority of the votes validly cast. Section 6 PLACE OF MEETING. Meetings of the Board of Directors, regular or special, may be held at any place in or out of the States of Maryland or New York as the Board may from time to time determine. Section 7 QUORUM. One-third of the entire Board of Directors then in office shall constitute a quorum for the transaction of business, provided that a quorum for the transaction of business shall be no less than one-third of the total number of directors fixed pursuant to Section 2 and in no case shall be less than two directors. If at any meeting of directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum shall have been obtained. The act of the majority of the directors present at any meeting at which there is a quorum shall be the act of the directors, except as otherwise specifically provided by law, by the Corporation's Articles of Incorporation or by these By-Laws. Section 8 REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of Directors provided that notice of any change in the time or place of such meeting shall be sent promptly to each director not present at the meeting at which such change was made in the manner provided for notice of special meetings. Members of the Board of Directors or any committee designated thereby may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at a meeting. Section 9 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President on one day's oral, telegraphic or written notice to each director; Special Meetings shall be called by the Chairman of the Board, President or Secretary in like manner and on like notice on the written request of two directors. Section 10 INFORMAL ACTIONS. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if a written consent to such action is signed in one or more counterparts by all members of the Board or of such committee, as the case may be and such written consent is filed within the minutes of proceedings of the Board or committee. Section 11 COMMITTEES. The Board of Directors, by the affirmative vote of a majority of the directors then in office, may establish committees which shall in each case consist of such number of directors (but not less than two) and shall have and may exercise such powers, subject to any limitations in law or in the Corporation's Articles of Incorporation, as the directors may determine in the resolution appointing them. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the directors shall otherwise provide. The directors shall have power at any time to change the members and powers of any such committee, to fill vacancies and to discharge any such committee. Section 12 ACTION OF COMMITTEES. In the absence of an appropriate resolution of the Board of Directors each committee may adopt such rules and regulations governing its proceedings, quorum and manner of acting as it shall deem proper and desirable, provided that the quorum shall not be less than two directors. The committees shall keep minutes of their proceedings and shall report the same to the Board of Directors at the meeting next succeeding, and any action by the committee shall be subject to revisions and alteration by the Board of Directors, provided that no rights of these persons shall be affected by any such revision or alteration. In the absence of any member of such committee the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a member of the Board of Directors to act in the place of such absent member. Section 13 PRESUMPTION OF ASSENT. A director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he (she) announces his (her) dissent at the meeting and his (her) dissent is entered in the minutes of the meeting, or he (she) files his (her) written dissent to the action before the meeting adjourns with the person acting as the Secretary of the meeting, or he (she) forwards his (her) written dissent within 24 hours after the meeting is adjourned to the Secretary of the Corporation. The right to dissent does not apply to a director who voted in favor of the action or who failed to make his (her) dissent known at the meeting. A director may abstain from voting on any matter coming before the meeting by stating that he (she) is so abstaining at the time the vote is taken and by causing his (her) abstention to be recorded or stated in writing in the same manner as provided above for a dissent. Section 14 COMPENSATION. Any director who is not an employee of Harding, Loevner Management, L.P., AMT Capital Services, Inc., or any other entity providing services to the Corporation, may be compensated for his (her) services as director or as a member of a committee of directors, or as Chairman of the Board or chairman of a committee by fixed periodic payments or by fees for attendance at meetings or by both. All officers and directors of the Corporation may be reimbursed for transportation and other expenses, all in such manner and amounts as the Board of Directors may from time to time determine. ARTICLE IV Notices Section 1 FORM. Notices to Stockholders shall be in writing and delivered personally or mailed to the Stockholders at their addresses appearing on the books of the Corporation. Notices to directors shall be oral or by telephone or telegram or in writing delivered personally or mailed to the directors at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors need not state the purpose of a Regular or Special Meeting. Section 2 WAIVER. Whenever any notice of the time, place or purpose of any meeting of Stockholders, directors or a committee is required to be given under the provisions of Maryland General Corporation Law or under the provisions of Articles of Incorporation or the By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice and filed with the records of the meeting, whether before or after the holding thereof, or actual attendance at the meeting of Stockholders in person or by proxy, or at the meeting of directors of committee in person, shall be deemed equivalent to the giving of such notice to such persons. ARTICLE V Officers Section 1 EXECUTIVE OFFICERS. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President who shall be a director, a Vice President, a Secretary and a Treasurer. The Board of Directors, at its discretion, may also appoint a director as Chairman of the Board who shall perform and execute such executive and administrative duties and powers as the Board of Directors shall from time to time prescribe. The same person may hold two or more offices, except that no person shall be both President and Vice President and no officer shall execute, acknowledge or verify any instrument in more than one capacity, if such instrument is require by law, the Articles of Incorporation or these By-Laws to be executed, acknowledged or verified by two or more officers. Section 2 ELECTION. The Board of Directors shall choose a President, a Secretary and a Treasurer at its first meeting and thereafter at the next meeting following a Stockholders' Meeting at which directors were elected. Section 3 OTHER OFFICERS. The Board of Directors from time to time may appoint such other officers and agents as its shall deem advisable, who shall hold their offices for such terms and shall exercise powers and perform such duties as shall be determined from time to time by the Board. The Board of Directors from time to time may delegate to one or more officers or agents the power to appoint any such subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties. Section 4 COMPENSATION. The salaries and other compensation of all officers and agents of the Corporation shall be fixed by the Board of Directors, except that the Board of Directors may delegate to any person or group of persons the power to fix the salary or their compensation of any subordinate officers or agents appointed pursuant to Section 3 of this Article V. Section 5 TENURE. The officers of the corporation shall serve for one year and until their successors are chosen and qualify. Any officer or agent may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board of Directors. In addition, any officer or agent appointed pursuant to Section 3 may be removed, either with or without cause, by any officer upon whom such power of removal shall have been conferred by the Board of Directors. Any officer may resign his (her) office at any time by delivering a written resignation to the Board of Directors, the President, the Secretary, or any Assistant Secretary, and, unless otherwise specified therein, such resignation shall take effect upon delivery. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors, unless pursuant to Section 3 the power of appointment has been conferred by the Board of Directors on any other officer. Section 6 PRESIDENT. The President shall be the Chief Executive Officer of the Corporation; and unless the Chairman has been so designated, he (she) shall preside at all meetings of the Stockholders and directors, and shall see that all orders and resolutions of the Board are carried into effect. The President, unless the Chairman has been so designated, shall also be the chief administrative officer of the Corporation and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 7 CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall be chosen, shall preside at all meetings of the Board of Directors and Stockholders, and shall perform and execute such executive duties and administrative powers as the Board of Directors shall from time to time prescribe. Section 8 VICE PRESIDENT. The Vice President shall see that all orders and resolutions of the Board are carried into effect. The Vice President shall also have primary supervisory responsibility for the Fund's marketing and distribution efforts as the Board of Directors shall from time to time prescribe. Section 9 SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the Stockholders and record all the proceedings thereof and shall perform like duties for any committee when required. He (she) shall give or cause to begin, notice of meetings of the Stockholders and of the Board of Directors, shall have charge of the records of the Corporation, including the stock books, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision he (she) shall be. He (she) shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, shall affix and attest the same to any instrument requiring it. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his (her) signature. Section 10 ASSISTANT SECRETARY. The Assistant Secretaries in order of their seniority, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors shall prescribe. Section 11 TREASURER. The Treasurer, unless another officer has been so designated, shall be the principal financial and accounting officer of the Corporation. Except as otherwise provided by the Board of Directors, he (she) shall have general supervision of the funds and property of the Corporation and of the performance by the custodian of its duties with respect thereto. He (she) shall render to the Board of Directors, whenever directed by the Board, an account of the financial condition of the Corporation and of all his (her) transactions as Treasurer; and as soon as possible after the close of each financial year he (she) shall make and submit to the Board of Directors a like report for such financial year. He (she) shall cause to be prepared annually a full and correct statement of the affairs of the Corporation, including a balance sheet and a financial statement of operations for the preceding fiscal year, which shall be submitted to the Annual Meeting of Stockholders and filed within twenty days thereafter at the principal office of the Corporation in the State of New York. He (she) shall perform all the acts incidental to the office of Treasurer, subject to the control of the Board of Directors. Section 12 ASSISTANT TREASURER. The Assistant Treasurers, in the order of the seniority, shall in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors may from time to time prescribe. Section 13 SURETY BOND. The Board of Directors may require any officer or agent of the Corporation to execute a bond (including, without limitation, any bond required by the Investment Company Act of 1940, as amended, and the rules and regulations of the Securities and Exchange Commission ) to the Corporation in such sum and with such surety or sureties as the Board of Directors may determine, conditioned upon the faithful performance of his (her) duties of the Corporation, including responsibility for negligence and for the accounting of any Corporation's property, funds or securities that may come into his (her) hands. ARTICLE VI Stock Section 1 CERTIFICATES. To the extent permitted by Maryland General Corporation Law and if approved by resolution of the Board of Directors, Stockholders shall not be entitled to a certificate or certificates. Any certificates issued shall be in the form approved by the Board of Directors which shall certify the class and the number of shares owned by him (her) in the Corporation. Each certificate shall be signed by the President and counter-signed by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. Section 2 SIGNATURE. Where a certificate is signed (1) by a transfer agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf of the Corporation and a registrar, the signature of any such President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be a facsimile. In case any officer who has signed any certificate ceases to be an officer of the Corporation before the certificate is issued, the certificate may nevertheless be issued by the Corporation with the same effect as if the officer had not ceased to be such officer as of the date of its issue. Section 3 TRANSFER OF SHARES. Shares of Common Stock of the Corporation shall be transferable on the register of the Corporation by the holder thereof in person or by his (her) agent duly authorized in writing, upon delivery to the directors or the Transfer Agent of a duly executed instrument of transfer, together with such evidence of the genuineness of each such execution and authorization of such other matters as the Corporation or its agents may reasonably require. Section 4 RECORDING AND TRANSFER WITHOUT CERTIFICATES. Notwithstanding the foregoing provisions of this Article VI, the Corporation shall have full power to participate in any program approved by the Board of Directors providing for the recording and transfer of ownership of shares of the Corporation's stock by electronic or other means without the issuance of certificates. Section 5 LOST CERTIFICATES. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been stolen, lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to have been stolen, lost or destroyed, or upon other satisfactory evidence of such theft, loss or destruction. When authorizing such issuance of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such stolen, lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and to give a bond with sufficient surety to the Corporation to indemnify it against any loss or claim that may be made by reason of the issuance of a new certificate. Section 6 TRANSFER OF COMMON STOCK. Transfer of shares of the stock of the Corporation shall be made on the books of the Corporation by the holder or record thereof (in person or by his (her) attorney thereunto duly authorized by a power of attorney duly executed in writing and filed with the Secretary of the Corporation) (i) if a certificate or certificates have been issued, upon the surrender of the certificate or certificates, properly endorsed or accompanied by proper instruments of transfer, representing such shares, or (ii) as otherwise prescribed by the Board of Directors. Every certificate exchanged, surrendered for redemption or otherwise returned to the Corporation shall be marked "Canceled" with the date of cancellation. Section 7 REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such shares or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the Maryland General Corporation Law. Section 8 TRANSFER AGENT AND REGISTRAR. The Board of Directors may, from time to time, appoint or remove transfer agents and or registrars of transfers of shares of stock of the Corporation, and it may appoint the same person as both transfer agent and registrar. Upon any such appointment being made all certificates representing shares of stock thereafter issued shall be countersigned by one of such transfer agents or by one of such registrars of transfers or by both and shall not be valid unless so countersigned. If the same person shall be both transfer agent and registrar, only one countersignature by such person shall be required. Section 9 STOCK LEDGER. The Corporation shall maintain, or cause to maintain, an original stock ledger containing the names and address of all Stockholders and the number and class of shares held by each Stockholder. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. Section 10 RECORD DATES. The Board of Directors may fix, in advance, a date as the record date for the purpose of determining those Stockholders who shall be entitled to notice of, or to vote at, any meeting of Stockholders, or for the purpose of determining those Stockholders or the allotment of any rights, or for the purpose of making any other proper determination with respect to Stockholders. Such date, in any case, shall be not more than 90 days to the date on which the particular action, requiring such determination of Stockholders, is to be taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period, not to exceed in any case 20 days. ARTICLE VII General Provisions Section 1 RIGHTS IN SECURITIES. The Board of Directors, on behalf of the Corporation, shall have the authority to exercise all of the rights of the Corporation as owner of any securities which might be exercised by any individual owning such securities in his (her) own right; including, but not limited to, the rights to vote by proxy for any and all purposes, to consent to the reorganization, merger or consolidation of any issuer or to consent to the sale, lease or mortgage of all or substantially all of the property and assets of any issuer; and to exchange any of the shares of stock of any issuer for the shares of stock issued therefore upon any such reorganization, merger, consolidation, sale, lease or mortgage. The Board of Directors shall have the right to authorize any officer of the Corporation adviser to execute proxies and the right to delegate the authority granted by this Section 1 to any officer of the Corporation. Section 2 CUSTODIANSHIP. (a) The Corporation shall place and at all times maintain in the custody of a custodian (including any sub-custodian for the custodian) all funds, securities and similar investment owned by the Corporation. Subject to the approval of the Board of Directors the custodian may enter into arrangements with securities depositories, as long as such arrangements comply with the provisions of the Investment Company Act of 1940 and the rules and regulations promulgated thereunder. (b) Upon termination of a custodian agreement or inability of the custodian to continue to serve, the Board of Directors shall promptly appoint a successor custodian. But in the event that no successor custodian can be found who has the required qualifications and is willing to serve, the Board of Directors shall call as promptly as possible a Special Meeting of the Stockholders to determine whether the Corporation shall function without a custodian or shall be liquidated. If so directed by vote of the holders of a majority of the outstanding shares of stock of the Corporation, the custodian shall deliver and pay over all property of the Corporation held by it as specified in such vote. (c) The following provisions shall apply to the employment of a custodian and to any contract entered into with the custodian so employed: The Board of Directors shall cause to be delivered to the custodian all securities owned by the Corporation or to which it may become entitled, and shall order the same to be delivered by the custodian only in completion of a sale, exchange, transfer, pledge, or other disposition thereof, all as the Board of Directors may generally or from time to time require or approve or to a successor custodian; and the Board of Directors shall cause all funds owned by the Corporation or to which it may become entitled to be paid to the custodian, and shall order the same disbursed only for investment against delivery of the securities acquired, or in payment of expenses, including management compensation, and liabilities of the Corporation, including distributions to shareholders or proper payments to borrowers of securities representing partial return of collateral, or to a successor custodian. Section 3 REPORTS. Not less often than semi-annually, the Corporation shall transmit to the Stockholders a report of the operations of the Corporation based at least annually upon an audit by independent public accounts, which report shall clearly set forth, in addition to the information customarily furnished in a balance sheet and profit and loss statement, a statement of all amounts paid to security dealers, legal counsel, transfer agent, disbursing agent, registrar or custodian or trustee, where such payments are made to a firm, corporation, bank or trust company, having a partner, officer or director who is also an officer or director of the Corporation. A copy, or copies, of all reports submitted to the Stockholders of the Corporations shall also be sent, as required, to the regulatory agencies of the United States and of the states in which the securities of the Corporation are registered and sold. Section 4 SEAL. The corporate seal shall have inscribed thereon the name of the Corporation, the year or its organization and the words "Corporate Seal, Maryland". The seal may be used by causing or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 5 EXECUTION OF INSTRUMENTS. All deeds, documents, transfers, contracts, agreements and other instruments requiring execution by the corporation shall be signed by the Chairman or the President or by the Treasurer or Secretary or an Assistant Treasurer or an Assistant Secretary, or as the Board of Directors may otherwise, from time to time, authorize. Any such authorization may be general or confined to specific instance. Except as otherwise authorized by the Board of Directors, all requisitions or orders for the assignment of securities standing in the name of the custodian or its nominee, or for the execution of powers to transfer the same, shall be signed in the name of the Corporation by the Chairman or the President or by the Secretary, Treasurer or an Assistant Treasurer. Section 6 ACCOUNTANT. The Corporation shall employ an independent public accountant or a firm of independent public accountants as its Accountants to examine the accounts of the Corporation and to sign and certify financial statements filed by the Corporation. The employment of the Accountant shall be conditioned upon the right of the Corporation to terminate the employment forthwith without any penalty by vote of a majority of the outstanding voting securities at any Stockholders' meeting called for that purpose. The Accountant's certificates and reports should be addressed both to the Board of Directors and to the Stockholders. ARTICLE VIII Indemnification To the extent allowed and permitted under Maryland General Corporation Law, a representative of the Corporation shall be indemnified by the Corporation with respect to each proceeding against such representative for all expenses (including attorneys' fees and disbursements), judgments, fines and amounts paid in settlement actually and reasonably incurred by such representative in connection with such proceeding, provided that such representative acted in good faith and in a manner he (she) reasonably believed to be in or not opposed to the best interest of the Corporation and, with respect to any criminal proceeding, had not reasonable cause to believe his (her) conduct was unlawful; except that no indemnification shall be made in respect of any claim, issue or matter as to which such representative has been adjudged to be liable by reason of willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of his (her) duty to the Corporation ("disabling conduct"), unless and only to the extent that the court in which the proceeding was brought, or a court of equity in the county in which the Corporation has its principal office, determines upon application that, despite the adjudication of liability but in view of all circumstances of the case, such corporate representative is fairly and reasonably entitled to indemnity for the expenses which the court considers proper. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption had the person did not act in good faith and in a manner which he (she) reasonably believed to be in or not opposed to the best interest of the Corporation and, with respect to any criminal proceeding, had reasonable cause to believe that his (her) conduct was unlawful. To the extent that the representative of the Corporation has been successful on the merits or otherwise in defense of any proceeding referred to in the preceding paragraph, or in defense of any claim, issue or matter therein, it shall be presumed that the representative did not engage in disabling conduct, whereupon the Corporation shall indemnify him (her) against all expenses (including attorneys' fees and disbursements) actually and reasonably incurred by him (her) in connection therewith. In the absence of a final decision by a court or other body before which the proceeding was brought that the representative was not liable by reason of disabling conduct, indemnification may still be granted provided that a reasonable determination, based upon review of the facts, that the representative was not liable by reason of disabling conduct, by (i) the vote of a majority of a quorum of directors who are neither "interested persons" (as defined in Section 2(a) (19) of the Act) of the Corporation, nor parties to the proceeding; or (ii) an independent legal counsel in a written opinion. Expenses (including attorneys' fees and disbursements) incurred in defending a proceeding may be paid by the Corporation in advance of the final disposition thereof if the Corporation receives a written affirmation by the representative of the Corporation of such representative's good faith belief that the standard of conduct necessary for indemnification has been met; and an undertaking by or on behalf of the representative of the Corporation to repay the advance if it is ultimately determined that he (she) is not entitled to be indemnified by the Corporation as authorized in this Article, and (x) the representative shall provide a security for his (her) undertaking; or (y) the Corporation shall be insured against losses arising by reason of any lawful advances; or (z) a majority of a quorum of the disinterested, non-party directors of the Corporation, or an independent legal counsel, in a written opinion, shall determine, based on a review of readily available facts, that there is reason to believe that the representative ultimately will be found entitled to indemnification. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a representative of the Corporation or other person may be entitled under any agreement, vote of Stockholders or disinterested directors or otherwise, both as to action in his (her) official capacity and as to action in another capacity while holding the office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and inure to the benefit of his (her) heirs and personal representatives. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a trustee, director, officer, employee or agent of another trust, corporation, partnership, joint venture or other enterprise against any liability asserted against him (her) and incurred by him (her) in any such capacity or arising out of his (her) status as such, regardless of whether the Corporation would have the power to indemnify him (her) against the liability under the provisions of this Article. Nothing contained in this Article shall be construed to indemnify any representative of the Corporation against any liability to the Corporation or to its security holders to which he (she) would otherwise be subject by reason of misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his (her) office. As used in this Article "representative of the Corporation" means an individual: (1) who is a present or former director, officer, agent or employee of the Corporation or who serves or has served another corporation, trust, partnership, joint venture or other enterprise in one of such capacities at the request of the Corporation, and (2) who by reason of his (her) position is, has been or is threatened to be made a party to a proceeding; and "proceeding" includes any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative. ARTICLE IX Amendments The By-Laws of the Corporation may be altered, amended or repealed either by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote in respect thereof and represented in person or by proxy at any annual or special meeting of the stockholders, or by the Board of Directors at any regular or special meeting of the Board of Directors; provided, that the Board of Directors may not amend or repeal this Article IX and that the vote of Stockholders required for alteration, amendment or repeal of any of such provisions shall be subject to all applicable requirements of federal or state laws or of the Articles of Incorporation. -----END PRIVACY-ENHANCED MESSAGE-----