Q:  What is the history of the fund?   A : Founded in 1994, Hansberger Global Investors founded is dedicated exclusively to managing global, international and emerging market equity mandates. HGI’s two flagship international equity products are the International Equity Value and International Equity Growth.   From our headquarters in Fort Lauderdale to our offices in Toronto, Moscow, Hong Kong, and Mumbai, we serve a broad range of institutional investors, including corporate, public sector, jointly trusteed, mutual funds, foundations and endowments. The Hansberger International Value Fund, which was launched in 1997, has $100 million in assets under management with a team of fifteen investment professionals. I have been working as portfolio manager of the fund since 2006. Our goal is to consistently provide clients with superior risk-adjusted returns through employing a disciplined, fundamental, bottom-up approach to research and portfolio management.   Q:  What opportunities does the fund provide to investors?   A : What the fund provides to investors is an opportunity to participate in markets outside the U.S., utilizing a value investment philosophy and style. Our fund is a low-risk portfolio where investors get the upside in terms of opportunities outside of the United States, but hopefully with less downside risk and overall volatility.   The other key attribute is that we are very comfortable investing in emerging markets and have a fair amount of exposure to emerging markets.   Q:  What are the tenets of your investment philosophy?   A : The fund’s investment philosophy is to outperform its benchmark with less volatility. We want to buy businesses when they are out of favor and trade at a discounted valuation. Moreover, we want to invest in companies whose fundamental prospects are improving but that improvement is being overlooked or discounted by the market.   Q:  How do you convert your philosophy into an investment strategy?   A : The fund invests primarily in a diversified portfolio of stocks of companies and domiciled outside the United States. It invests more than 80% of assets in issuers located in at least three countries other than the U.S.   The Hansberger International Value Strategy is based upon the belief that value arises from the early recognition of investment opportunities. Research is conducted utilizing a matrix structure to ensure investment decisions incorporate not only the country perspective, but more importantly, global sector perceptions. We typically invest for three to five years and can also invest in developed as well as emerging market companies.   Our valuation methods focus on shares trading at the greatest discount to future earnings, cash flow and/or net asset value. From a valuation perspective, we focus in on three valuation metrics - price-to-normalized earnings, price-to-book and price-to-cash flow.   We are more concerned with the inherent value of stable companies, strong products and sound management than with the movements of share prices and market trends. Consequently, we concentrate on the underlying economic and business fundamentals of each investment. This strategy minimizes portfolio turnover and typically allows us to hold positions for an average of three to five years.   Q:  What is your investment and analysis process?   A : We are looking for companies that are undervalued relative to their global industry peers and the local market context. In doing so, we seek to truly and intricately understand the companies we invest in. As part of this process, we scrutinize current valuations and historic fundamentals, meet with management, and study a company's competitors. Our focus is on adding value to client portfolios through bottom-up stock selection, rather than relying on the precarious fortunes of market timing or currency hedging.   A multi-cultural, multi-national "lens" allows us to distinctively uncover, examine and invest in dynamic opportunities throughout the world.   We uncover ideas through a number of different ways. First, we focus our attention on good businesses that have a historical track record of performance when measured on return on capital, return on equity, and return on assets. We also look at the price-to-earnings multiples and price-to-book value and dividend yield.   Second, we focus our attention on companies where we see improving fundamental prospects. These are companies that are under-earning or have been under-earning but where we see some catalyst for change. This catalyst could be in terms of restructuring of a company’s business or operations or the capital structure of the business. Or else, the company has a new management or change in terms of major investments that they have made that will allow them to be more profitable going forward.   We have a database of about 400 to 500 companies that we continually update and rely for in-depth fundamental research. Generally, the first thing we do is a qualitative assessment of the business.  The qualitative assessment includes an interview with the management where we want to understand their business, flexibility in terms of cost structure, and risks involved in the business.   We talk about the investment plans for the company and the balance sheet. Once we have gone through that, we will transform that into a financial forecast. This is entirely proprietary work and we do not use any outside resources for our financial forecasting.   In this process, we forecast out over a five-year timeframe, the three major financial statements - the income statement, balance sheet, the cash flow statement and really the goal of this process is to gauge the normalized earnings. For every industry we have pre-determined ranges for price-to-normalized earnings that give us an idea of when something is fairly valued, undervalued or overvalued.   We also look at price to book values as well as the enterprise value-to-EBITDA multiple. Based on these multiples, our global industry analyst assigns a buy limit as well as sell limit.   Next, the country analyst will have the opportunity to review all the assumptions and analysis that have gone through the modeling done by the global industry analyst. The country analyst then gives an input from the local market perspective. Once the global industry analyst and the country analyst have agreed that the idea is good, then the company is presented to a proper due diligence and peer review in front of our entire research team.   Every Wednesday morning we have a global research meeting. Before that meeting our research analyst would have provided a two-to-four page write-up on an investment idea that is being presented as well as a standardized template of the financial statement analysis and the forecasted earnings, income statement, balance sheet and cash flow.   In that write-up, there would be a discussion of the investment thesis, assumptions that go into the modeling, valuation and what the valuation case is and there would also be the recommendations for buy as well as sell limits. Once the analyst has presented the idea to the group, we open it up for discussion and at that meeting every one of the analysts has an opportunity to express their opinion. We have a Q&A session where the rest of the investment team challenges the presenting analyst on the investment idea.   While we do not have a formal vote, we will certainly send the investment idea back to the analyst should we have some concerns or issues that need to be more thoroughly explored. However, whenever we are comfortable with the analysis, valuation case, and fundamental outlook of a company, we will approve that idea for our client portfolios.   Q:  How do you select countries?   A : In addition to global industry coverage, several analysts also cover geographic regions or specific countries. For example, we have analysts that cover Japan, Europe, China, etc. That said our country exposure is a residual of our bottom up investment process. We will have exposure to all major regions of the world.   Q:  How do you execute your portfolio construction?   A : We construct our portfolios with the help of a bottom-up research process. Shares meeting our value discipline will determine the country and industry diversification of our portfolios. That said, we will make no attempt to time the market. For us, cash is a residual of the investment process; and we typically keep it at less than 5% of the assets. We are currently about 75% invested in the developed markets of the world and about 25% in the emerging market countries.   Bottom-up fundamental research drives the regional and sector diversification too. Generally, no single holding accounts for more than 2% of the portfolio at cost and the fund typically hold 75 to 85 issues in 20 to 30 countries.   We believe that stock selection drives performance while providing adequate diversification, so we invest in regions including Japan, Europe and the rest of the world that cover emerging markets, as well as the resource markets of Australia and Canada. Then, we will also consider smaller developed Asian market like Hong Kong and Singapore. Our allocations to major regions generally range between plus or minus 30% of index weight.   Sector considerations play a significant role in the portfolio’s diversification with allocations to economic sectors generally ranging between 0.5 – 2X the index weight.   The benchmark of the fund is the Morgan Stanley Capital International All Country World Index Ex-U.S.   Q:  Would you discuss some themes or sectors?   A : We focus most of our attention on individual companies and consider one company at a time.   Companies in emerging markets have received higher allocation in our portfolio in the context of our international portfolios because we believe they offer better values. Essentially, we have found companies in emerging markets that trade at a discount on a price-to-earnings, cash flow, and an asset basis, and most importantly, trade at a discount relative to their developed market peers.   In terms of the fundamentals, they have been superior to the developed markets. We believe the risk in emerging markets is misunderstood, which creates value and opportunity. The premise is that these are better value companies with better longer term fundamental prospects, and so, ultimately, it dips down to the companies, not the macro work.   Q:  What are the sources of risk and how do you contain risks?   A : First of all, we believe our primary risk is company specific, so we pay a lot of attention to the price we pay and the research we conduct on the company as we manage that through our fundamental process. The other way to mitigate that risk is by buying companies when they are out of favor and that mitigates downside risk.   In terms of currency risk, we believe that the diversification benefit of investing in emerging markets includes investing in different currencies so we do not do any currency hedging.   We try to mitigate the relative currency exposure through our diversification guidelines. In fact, what we are trying to do is to limit the amount that currency can detract or help in a relative basis to performance. The same thing holds true for sectors too. We will not be completely out of any particular sector at any given point in time based on our current diversification guidelines.   We also look at risk factors on a country basis. Instead of hedging currencies we would rather focus on how that currency will impact the businesses that we invest in.