HARRIS INSIGHT FUNDS
One Exchange Place, Boston, Massachusetts 02109
Telephone: (800) 982-8782
The Harris Insight Funds Trust (the ``Trust'') is an open-end, diversified
management investment company that currently offers a selection of eleven
investment portfolios. HT Insight Funds, Inc. (the ``Company'') is an open-end,
diversified management investment company that currently offers six in vestment
portfolios. (The eleven portfolios of the Trust and the six portfolios of the
Company are collectively referred to herein as the ``Harris Insight Funds'' or
the ``Funds.'') This Prospectus describes one class of shares (the ``Shares'' or
the ``Institutional Shares'') of each of the eleven investment portfolios
offered by the Trust and one class of shares (the ``Shares'' or the
``Institutional Shares'') of five of the portfolios offered by the Company. The
Funds are as follows:
o Harris Insight Equity Fund (the ``Equity Fund'')
o Harris Insight Equity Income Fund (the ``Equity Income Fund'')
o Harris Insight Growth Fund (the ``Growth Fund'')
o Harris Insight Small-Cap Opportunity Fund (the ``Small-Cap Fund'')
o Harris Insight Index Fund (the ``Index Fund'')
o Harris Insight International Fund (the ``International Fund'')
o Harris Insight Balanced Fund (the ``Balanced Fund'')
o Harris Insight Convertible Securities Fund (the ``Convertible Securities
Fund'')
o Harris Insight Short/Intermediate Bond Fund (the ``Short Intermediate
Fund'')
o Harris Insight Bond Fund (the ``Bond Fund'')
o Harris Insight Intermediate Government Bond Fund (the ``Government Fund'')
o Harris Insight Intermediate Tax-Exempt Bond Fund (the ``Intermediate
Tax-Exempt Fund'')
o Harris Insight Tax-Exempt Bond Fund (the ``Tax-Exempt Fund'')
o Harris Insight Government Money Market Fund (the ``Government Money Fund'')
o Harris Insight Money Market Fund (the ``Money Fund'')
o Harris Insight Tax-Exempt Money Market Fund (the ``Tax-Exempt Money Fund'')
Harris Trust & Savings Bank is the Investment Adviser to the Funds and
Harris Investment Management, Inc., a subsidiary of Harris Bankcorp, Inc., acts
as the Portfolio Management Agent for each of the Funds, except the Tax-Exempt
Money Fund. Shares of each Fund are offered by Funds Distributor, Inc ., the
distributor for the Trust and the Company.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Funds. Please read and retain it for future
reference. A Statement of Additional Information dated February 21, 1996,
containing more detailed information about the Funds has been filed w ith the
Securities and Exchange Commission and (together with any supplements thereto)
is incorporated by reference into this Prospectus. The Statement of Additional
Information may be obtained without charge by writing or calling the Harris
Insight Funds at the address and telephone number printed above.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, HARRIS TRUST & SAVINGS BANK, OR ANY OF ITS AFFILIATES, AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUNDS INV OLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
SHARES OF THE GOVERNMENT MONEY FUND, THE MONEY FUND AND THE TAX-EXEMPT
MONEY FUND (COLLECTIVELY, THE ``MONEY MARKET FUNDS'') ARE NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. ALTHOUGH EACH MONEY MARKET FUND IS ACTIVELY
MANAGED TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE IS NO
ASSURANCE THAT IT WILL BE ABLE TO DO SO.
____________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE ``COMMISSION'') OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTR ARY IS
A CRIMINAL OFFENSE.
February 21, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Expense Table 3
Highlights 6
Financial Highlights 8
Investment Objectives and Policies 9
Equity Fund 9
Equity Income Fund 9
Growth Fund 9
Small-Cap Fund 10
Index Fund 10
International Fund 10
Balanced Fund 11
Convertible Securities Fund 11
Short/Intermediate Fund 12
Bond Fund 13
Government Fund 13
Intermediate Tax-Exempt Fund 14
Tax-Exempt Fund 14
The Money Market Funds 14
Government Money Fund 15
Money Fund 15
Tax-Exempt Money Fund 15
All Funds; All Equity and Fixed Income Funds 16
Investment Strategies 17
Investment Limitations 28
Management 28
Determination of Net Asset Value 32
Purchase of Shares 32
Redemption of Shares 33
Exchange Privilege 34
Dividends and Distributions 35
Federal Income Taxes 35
Account Services 37
Organization and Capital Stock 37
Reports to Shareholders 38
Calculation of Yield and Total Return 38
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement of
Additional Information and/or in the Funds' official sales literature in
connection with the offering of the Funds' shares and, if given or made, su ch
other information or representations must not be relied upon as having been
authorized by the Company, the Trust or the Distributor. This Prospectus does
not constitute an offer in any state in which, or to any person to whom, such
offer may not lawfully be made.
2
<PAGE>
EXPENSE TABLE
Expenses and fees payable by shareholders are summarized in this table and
expressed as a percentage of average net assets.
The following table sets forth certain information concerning shareholder
transaction expenses and projected annual fund operating expenses for
Institutional Shares of the Funds during the current fiscal year.
<TABLE>
<CAPTION>
EQUITY INTER-
EQUITY INCOME GROWTH SMALL-CAP INDEX NATIONAL BALANCED
FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None None None None None None None
ANNUAL FUND OPERATING EXPENSES*:
(as a percentage of average net assets)
Advisory Fees 0.70% 0.70% 0.90% 1.00% 0.25% 1.05% 0.60%
Rule 12b-1 Fees None None None None None None None
Other Expense+ 0.26% 0.23% 0.20% 0.20% 0.20% 0.27% 0.28%
Total Fund Operating Expenses 0.96% 0.93% 1.10% 1.20% 0.45% 1.32% 0.88%
</TABLE>
* Customers of a financial institution, such as Harris Trust & Savings Bank, may
also be charged certain fees and expenses by their institution. These fees may
vary depending on the capacity in which the institution provides fiduciary and
investment services to the particular client (e.g., trust, e state settlement,
advisory and custodian services).
+ With respect to each Fund, other than the Equity Fund, the amount of ``Other
Expenses'' in the table above is based on estimated expenses and projected
assets for the current fiscal year. With respect to the Equity Fund, the
amount of ``Other Expenses'' is based on amounts incurred during the mo st
recent fiscal year.
3
<PAGE>
EXPENSE TABLE (continued)
<TABLE>
<CAPTION>
CONVERTIBLE SHORT/ INTERMEDIATE
SECURITIES INTERMEDIATE BOND GOVERNMENT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None None None None None None
ANNUAL FUND OPERATING EXPENSES*:
(as a percentage of average net assets)
Advisory Fees 0.70% 0.34%+ 0.40%+ 0.30%+ 0.60% 0.60%
Rule 12b-1 Fees None None None None None None
Other Expenses++ 0.22% 0.26% 0.20% 0.20% 0.20% 0.20%
Total Fund Operating Expenses 0.92% 0.60%+ 0.60%+ 0.50%+ 0.80% 0.80%
</TABLE>
* Customers of a financial institution, such as Harris Trust & Savings Bank, may
also be charged certain fees and expenses by their institution. These fees may
vary depending on the capacity in which the institution provides fiduciary and
investment services to the particular client (e.g., trust, e state settlement,
advisory and custodian services).
+ Reflects advisory fees after waivers.
++With respect to each Fund, other than the Short/Intermediate Fund, the amount
of ``Other Expenses'' in the table above is based on estimated expenses and
projected assets for the current fiscal year. With respect to the
Short/Intermediate Fund, the amount of ``Other Expenses'' is based on amou nts
incurred during the most recent fiscal year.
Without waivers, the ratio of total fund operating expenses to average net
assets would be 0.96% with respect to the Short/Intermediate Fund and 0.85%
with respect to the Bond Fund, Government Fund, Intermediate Tax-Exempt Fund
and Tax-Exempt Fund. The investment adviser has voluntarily agreed to waive a
portion of its advisory fees with respect to the Short/Intermediate Fund, the
Bond Fund, the Government Fund, the Intermediate Tax-Exempt Fund and the
Tax-Exempt Fund and will not increase its advisory fee without prior approval
of the Company's Board of Directors and 30 days' prior notice to shareholders.
Without waivers, the advisory fee for the Short/Intermediate Fund would be
0.70% of the Fund's average net assets. Without waivers, the advisory fee for
each of the Bond and Government Funds would be 0.65% of each Fund's average
net assets.
<TABLE>
<CAPTION>
GOVERNMENT MONEY TAX-EXEMPT
MONEY FUND FUND MONEY FUND
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None None None
ANNUAL FUND OPERATING EXPENSES*:
(as a percentage of average net assets after
voluntary fee waivers)
Advisory Fees 0.11% 0.11% 0.11%
Other Expenses 0.20% 0.18% 0.18%
Total Fund Operating Expenses 0.31% 0.29% 0.29%
</TABLE>
* Reflects expenses after waivers of certain fees and other expenses based on
net expenses incurred during the most recent fiscal year. Without any fee and
expense waivers, total operating expenses for the fiscal year ended December
31, 1995 and the period ended December 31, 1994 would have been 0. 32% and
0.31% (annualized) for the Government Money Fund, 0.30% and 0.30% (annualized)
for the Money Fund and 0.29% and 0.30% (annualized) for the Tax-Exempt Money
Fund. Customers of a financial institution, such as Harris Trust, may also be
charged certain fees and expenses by their institution. T hese fees may vary
depending on the capacity in which the institution provides fiduciary and
investment services to the particular client (e.g., trust, estate settlement,
advisory and custodian services).
4
<PAGE>
EXPENSE TABLE (CONTINUED)
EXAMPLE
You would pay the following expenses on a $1,000 investment in Institutional
Shares, assuming (1) a hypothetical 5% gross annual return and (2) redemption at
the end of each time period:
<TABLE>
<CAPTION>
EQUITY INTER-
EQUITY INCOME GROWTH SMALL-CAP INDEX NATIONAL BALANCED
FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
1 year $10 $9 $11 $12 $5 $13 $9
3 years 31 30 35 38 14 42 28
5 years 53 N/A N/A N/A N/A N/A N/A
10 years 118 N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE SHORT/ INTERMEDIATE
SECURITIES INTERMEDIATE BOND GOVERNMENT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
1 year $9 $6 $6 $5 $8 $8
3 years 29 19 19 16 26 26
5 years N/A 33 N/A N/A N/A N/A
10 years N/A 75 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT MONEY TAX-EXEMPT
MONEY FUND FUND MONEY FUND
<S> <C> <C> <C>
1 year $3 $3 $3
3 years 10 9 9
5 years 17 16 16
10 years 39 37 37
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
The purpose of the expense table is to assist the investor in understanding the
various costs and expenses that an investor in a Fund will bear directly or
indirectly. For more information concerning the various costs and expenses, see
``Management.''
5
<PAGE>
HIGHLIGHTS
The following sixteen investment portfolios are described in this Prospectus:
EQUITY FUND -- seeks to provide capital appreciation and current income by
investing primarily in common stocks.
EQUITY INCOME FUND -- seeks to provide current income and, secondarily, capital
appreciation by investing primarily in common stocks and convertible securities.
GROWTH FUND -- seeks to provide capital appreciation and, secondarily, current
income by investing primarily in common stocks and convertible securities of
companies with above-average growth potential.
SMALL-CAP FUND -- seeks to provide long term capital growth by investing
primarily in equity securities of smaller to medium capitalization companies.
INDEX FUND -- seeks to provide the return and risk characteristics of the S&P
500 Index, by investing primarily in securities of companies that comprise that
index.
INTERNATIONAL FUND -- seeks to provide international diversification and capital
appreciation by investing primarily in common stocks of foreign companies.
Current income is a secondary objective.
BALANCED FUND -- seeks to provide current income and capital appreciation by
investing in a balanced portfolio of fixed income and equity securities.
CONVERTIBLE SECURITIES FUND -- seeks to provide capital appreciation and current
income by investing primarily in securities such as bonds, debentures, notes,
preferred stocks or warrants that are convertible into common stocks.
SHORT/INTERMEDIATE FUND -- seeks to provide a high level of total return,
including a competitive level of current income, by investing primarily in
investment grade debt securities with a short/intermediate term average
maturity.
BOND FUND -- seeks to provide a high level of total return, including a
competitive level of current income, by investing primarily in investment grade
debt securities of varying maturities.
GOVERNMENT FUND -- seeks to provide a high level of current income, consistent
with preservation of capital, by investing primarily in Government Securities
(as defined below in ``Investment Strategies'') having an intermediate term
average maturity.
INTERMEDIATE TAX-EXEMPT FUND -- seeks to provide a high level of current income
that is exempt from federal income tax by investing, under normal market
conditions, at least 80% of its assets in municipal obligations with an
intermediate term average maturity.
TAX-EXEMPT FUND -- seeks to provide a high level of current income that is
exempt from federal income tax by investing, under normal market conditions, at
least 80% of its assets in municipal obligations of varying maturities.
GOVERNMENT MONEY FUND -- (money market fund) -- seeks to provide investors with
as high a level of current income as is consistent with its investment policies
and with preservation of capital and liquidity, by investing in short-term
Government Securities and certain repurchase agreements.
MONEY FUND -- (money market fund) -- seeks to provide investors with as high a
level of current income as is consistent with its investment policies and with
preservation of capital and liquidity, by investing in a broad range of
short-term money market instruments.
TAX-EXEMPT MONEY FUND -- (money market fund) -- seeks to provide investors with
as high a level of current income as is consistent with its investment policies
and with preservation of capital and liquidity, by investing primarily in high-
quality, short-term municipal obligations.
6
<PAGE>
WHO MANAGES EACH FUND'S INVESTMENTS?
Harris Trust & Savings Bank (``Harris Trust'' or the ``Investment
Adviser'') is the investment adviser for each Fund. Harris Trust has provided
investment management service to clients for over 100 years. Harris Trust
provides investment services for pension, profit-sharing and personal
portfolios. As of June 30, 1995, assets under management total approximately $23
billion. See page 28.
Harris Investment Management, Inc. (``HIM'' or the ``Portfolio Management
Agent'') provides daily portfolio management services for the Funds, other than
the Tax-Exempt Money Fund. HIM and its predecessors have managed client assets
for over 100 years. HIM has a staff of 96, including 64 profession als,
providing investment expertise to the management of the Harris Insight Funds and
for pension, profit-sharing and institutional portfolios. As of June 30, 1995,
assets under management are estimated to exceed $13 billion. See page 28.
Harris Trust and HIM are subsidiaries of Harris Bankcorp., Inc.
WHAT ADVANTAGES DO THE FUNDS OFFER?
The Funds are designed for individual and institutional investors. A single
investment in shares of the Funds gives the investor benefits customarily
available only to large investors, such as diversification of investment,
greater liquidity and professional management, block purchases of securitie s,
and relief from bookkeeping, safekeeping of securities and other administrative
details.
WHEN ARE DIVIDENDS PAID?
Dividends from each of the Money Market Funds are declared daily and paid
monthly. Dividends from the Short/Intermediate Fund, the Bond Fund, the
Government Fund, the Intermediate Tax-Exempt Fund and the Tax-Exempt Fund are
declared daily and paid monthly. Dividends from the Convertible Securities Fund,
the Equity Fund, the Equity Income Fund, the Growth Fund, the Index Fund and the
Balanced Fund are declared and paid quarterly. Dividends from the Small-Cap Fund
and the International Fund are declared and paid semi-annually. Any net capital
gains will be declared and paid annually. See page 35.
HOW ARE SHARES REDEEMED?
Shares may be redeemed at their next determined net asset value after
receipt of a proper request by the Registered Representative servicing your
account, the Distributor, or through any Service Agent. See page 33.
WHAT RISKS ARE ASSOCIATED WITH THE FUNDS?
Each Fund's performance will change daily based on many factors, including
the quality of the Fund's investments, U.S. and international economic
conditions, general market conditions and international exchange rates. Certain
of the Funds invest in securities of foreign issuers that involve risks n ot
typically associated with U.S. issuers. There is no assurance that any Fund will
achieve its investment objective. See ``Investment Strategies.''
7
<PAGE>
FINANCIAL HIGHLIGHTS
This table shows the total return on one Institutional Share for each
period illustrated.
The following financial highlights are derived from the financial
statements of the Company for the year ended December 31, 1995 audited by Price
Waterhouse LLP, independent accountants. This information should be read in
conjunction with the financial statements and notes thereto which are incorpo
rated by reference in this Prospectus. Institutional Shares of the Money Market
Funds were formerly known as Class C Shares. Institutional Shares of the other
Funds were not previously offered.
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT MONEY FUND MONEY FUND TAX-EXEMPT MONEY FUND
INSTITUTIONAL SHARES INSTITUTIONAL SHARES INSTITUTIONAL SHARES
YEAR YEAR YEAR
ENDED 5/16/94* TO ENDED 1/5/94* TO ENDED 1/5/94* TO
12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment
Operations:
Net Investment Income .056 .028 .057 .039 .035 .025
Total from Investment
Operations .056 .028 .057 .039 .035 .025
Less Distributions:
Net Investment Income (.056) (.028) (.057) (.039) (.035) (.025)
Total Distributions (.056) (.028) (.057) (.039) (.035) (.025)
Net Asset Value, End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return(3) 5.79% 2.82% 5.86% 4.08% 3.60% 2.56%
Ratios/Supplemental Data:
Net Assets, End of Period $(000) 18,367 9,617 98,837 31,990 212,146 237,100
Ratio of Expenses to
Average Net Assets(1) 0.31% 0.29%(2) 0.29% 0.29%(2) 0.29% 0.28%(2)
Ratio of Net Investment
Income to Average Net
Assets 5.62% 4.52%(2) 5.69% 4.79%(2) 3.52% 2.99%(2)
</TABLE>
* Date commenced operations.
(1) Without the voluntary waiver of fees, the expense ratios for the year ended
December 31, 1995 and for the period ended December 31, 1994 would have been
0.32% and 0.31% (annualized) for Government Money Fund, 0.30% and 0.30%
(annualized) for Money Fund and 0.29% and 0.30% (annualized) for Tax-E xempt
Money Fund, respectively.
(2) Annualized.
(3) Total returns for periods of less than one year are not annualized.
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Set forth below are the investment objectives and policies of each of the
Funds. Listed on page 16 following the specific description of each Fund are
those investments that may be made by (i) all of the Funds, or (ii) all of the
equity Funds (i.e., Equity, Equity Income, Growth, Small-Cap, Index,
International and Balanced Funds) and fixed income Funds (i.e., Convertible
Securities, Short/Intermediate, Bond, Government, Intermediate Tax-Exempt and
Tax-Exempt Funds). Each Fund may also invest in securities described in
"Investment Strategies" below and the Statement of Additional Information.
EQUITY FUND
The Equity Fund seeks to provide capital appreciation and current income.
The Equity Fund seeks to provide investors with capital appreciation and
current income. The Fund seeks to attain its investment objective by investing,
under normal market conditions, at least 65% of its total assets in common
stocks of larger capitalization companies (i.e. companies with market
capitalizations in excess of $500 million). The Fund's portfolio is generally
comprised of approximately 50 different issues. Risk is managed by
diversification of investments.
The Fund's investment process considers valuation and improving
fundamentals. The Fund's investments are expected to encompass all major sectors
of the market resulting in a diversified portfolio. The Fund's Portfolio
Management Agent believes that an investment process which combines carefully
monitored risk control with an emphasis on value and fundamental research is
suited for long-term equity investing.
EQUITY INCOME FUND
The Equity Income Fund seeks to provide current income and, secondarily,
capital appreciation.
The Equity Income Fund seeks to provide current income and secondarily,
capital appreciation. The Fund seeks to achieve its investment objective by
investing, under normal market conditions, at least 65% of its total assets in
common stocks and convertible securities that the Fund's Portfolio Management
Agent believes offer good value, an attractive yield and dividend growth
potential.
The Fund is managed with a disciplined investment process which seeks to
maintain a diversified portfolio of high quality equity securities. The Fund
generally emphasizes securities with higher than average dividend yields and/or
stronger than average growth characteristics. The result of this investment
process is a diversified portfolio which the Fund's Portfolio Management Agent
believes provides attractive long-term growth potential while striving to
maintain an attractive current yield.
GROWTH FUND
The Growth Fund seeks to provide capital appreciation and, secondarily,
current income.
The Growth Fund seeks to provide capital appreciation and, secondarily,
current income. The Fund seeks to achieve its investment objective by investing,
under normal market conditions, primarily in common stocks and convertible
securities of companies that the Fund's Portfolio Management Agent believes
offer above-average growth potential. The Fund's investment management
discipline emphasizes growth in sales, earnings and asset values.
9
<PAGE>
SMALL-CAP FUND
The Small-Cap Fund seeks to provide long-term capital appreciation.
The Small-Cap Fund seeks to provide long term capital appreciation. The
Fund seeks to achieve its investment objective by investing, under normal market
conditions, at least 65% of the value of its total assets in equity securities
of smaller to medium capitalization companies (i.e. companies with market
capitalizations between $100 million and $2.5 billion).
The investment management discipline of the Fund searches for companies
offering above-average earnings, sales, and asset value growth.
INDEX FUND
The Index Fund seeks to provide the return and risk characteristics of the
S&P 500 Index.
The Index Fund seeks to provide the return and risk characteristics of the
Standard & Poor's 500 Index (the "S&P 500 Index" or the "Index"), an index which
emphasizes large capitalization companies. As of December 31, 1994, the Index
represented approximately 76% of the market capitalization of publicly owned
stocks in the United States. The Fund seeks to achieve its investment objective
by investing, under normal market conditions, primarily in securities of
companies that comprise the S&P 500 Index.
The Fund is managed through the use of a "quantitative" or "indexing"
investment discipline, which attempts to duplicate the investment composition
and performance of the Index through statistical procedures. As a result, the
Portfolio Management Agent does not employ traditional methods of fund
investment management, such as selecting securities on the basis of economic,
financial and market analysis. The Fund seeks quarterly performance within a .95
correlation to the Index. On at least a monthly basis, the Portfolio Management
Agent compares the correlation of the Fund's performance to that of the Index.
In the event the Fund's performance for the preceding three month period is not
within a .95 correlation to the performance of the Index, the Portfolio
Management Agent may adjust the Fund's holdings in issues included in the Index
to seek a closer performance correlation. The Fund seeks to match closely the
weight of each security in the portfolio approximating its weight in the S&P 500
Index. Although the Fund may not hold all 500 issues included in the Index, it
will generally hold at least 90% of such issues. In addition, the Fund may
maintain positions in S&P 500 Stock Index futures contracts in an effort to
ensure adequate liquidity and to reduce transaction costs.
Standard & Poor's Corporation ("S&P") makes no representation or warranty,
expressed or implied, to the purchasers of the Index Fund or any member of the
public regarding the advisability of investing in either the Index Fund or the
ability of the S&P 500 Index to track general stock market performance. The Fund
is not sponsored, endorsed, sold or promoted by S&P. S&P does not guarantee the
accuracy and/or completeness of its index or any data included therein.
Furthermore, S&P makes no warranty, express or implied, as to the results to be
obtained by the Index Fund, owners of the Fund, any person or any entity from
the use of the index sponsored by S&P or any data included therein. S&P makes no
express or implied warranties and expressly disclaims all such warranties of
merchantability or fitness for a particular purpose for use with respect to its
index or any data included therein.
INTERNATIONAL FUND
The International Fund seeks to provide international diversification and
capital appreciation. Current income is a secondary objective.
The International Fund seeks to provide international diversification and
capital appreciation. Current income is a secondary objective. The Fund seeks to
achieve its investment objective by investing, under normal market conditions,
at least 65% of the value of its total assets in securities of foreign issuers
(i.e., issuers organized outside the United States or whose principal trading
market is outside the United States) and such issuers will be located in at
least three countries other than the United States. The Fund seeks to manage
risk through the diversification of its investments.
10
<PAGE>
The International Fund also may invest in exchange rate-related securities,
securities convertible into or exchangeable for foreign equity securities, and
custodial receipts for U.S. Treasury securities. In addition, the Fund may
engage in the purchase and sale of foreign currency for hedging purposes.
BALANCED FUND
The Balanced Fund seeks to provide current income and capital appreciation
through a balanced portfolio of fixed income and equity securities.
The Balanced Fund seeks to provide current income and capital appreciation
by investing in a balanced portfolio of fixed income and equity securities. The
Fund seeks to achieve its investment objective by utilizing an active asset
allocation approach. Under normal market conditions, equity securities are
expected to comprise between 40% and 65% of the Fund's total assets and fixed
income securities are expected to comprise at least 25% of the Fund's total
assets.
CONVERTIBLE SECURITIES FUND
The Convertible Securities Fund seeks to provide capital appreciation and
current income.
The Convertible Securities Fund seeks to provide capital appreciation and
current income. The Fund intends, under normal market conditions, to invest at
least 65% of the value of its total assets in convertible securities, that is,
securities including bonds, debentures, notes or preferred stock that are
convertible into common stock, or warrants that provide the owner the right to
purchase shares of common stock at a specified price. The Fund may also invest
in equity securities of U.S. corporations. The Fund seeks to diversify among
issuers in a manner that will enable the Fund to minimize the volatility of the
Fund's net asset value in erratic or declining markets.
Under normal market conditions, the Convertible Securities Fund will invest
without limitation in convertible securities of U.S. corporations and in
Eurodollar securities convertible into common stocks of U.S. corporations that
are rated "B" or better by S&P or "B" ("b" in the case of preferred stocks) or
better by Moody's Investors Service, Inc. ("Moody's") at the time of purchase,
or, if not rated, considered by the Portfolio Management Agent to be of
comparable quality, except that investment in securities rated "B\-" by S&P or
Moody's will be limited to 15% of its total assets. Up to 5% of the Convertible
Securities Fund's total assets may be invested in convertible securities that
are rated "CCC" by S&P or "Caa" by Moody's at the time of purchase. Securities
that are rated "BB" or below by S&P or "Ba" or below by Moody's are "high yield
securities", commonly known as junk bonds. By their nature, convertible
securities may be more volatile in price than higher rated debt obligations.
The Convertible Securities Fund may also invest up to 35% of its total
assets in "synthetic convertibles" created by combining separate securities that
possess the two principal characteristics of a true convertible security, i.e.,
fixed income and the right to acquire equity securities. In addition, the
Convertible Securities Fund may invest: up to 15% of its net assets in
convertible securities offered in "private placements" and other illiquid
securities; up to 15% of its total assets in common stocks; and up to 5% of its
net assets in warrants. The Convertible Securities Fund may purchase and sell
index and interest rate futures contracts and covered put and call options on
securities and on indices.
In periods of unusual market conditions, when the Portfolio Management
Agent believes that convertible securities would not best serve the Fund's
objectives, the Convertible Securities Fund may for defensive purposes invest
part or all of its total assets in: (a) Government Securities; (b)
non-convertible debt obligations of domestic corporations, including bonds,
debentures, notes or preferred stock rated "BBB" or better by S&P or "Baa" or
better by Moody's at the time of purchase, which ordinarily are less volatile in
price than convertible securities and serve to increase diversification of risk;
and (c) short-term money market instruments, including U.S. Government,
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bank and commercial obligations with remaining maturities of thirteen months or
less. During such periods, the Convertible Securities Fund will continue to seek
current income but will put less emphasis on capital appreciation.
RISK FACTORS AND OTHER CONSIDERATIONS RELATING TO LOW-RATED AND COMPARABLE
UNRATED SECURITIES. Low-rated and comparable unrated securities (a) will likely
have some quality and protective characteristics that, in the judgment of the
rating organization, are outweighed by large uncertainties or major risk
exposures to adverse conditions and (b) are predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation.
The market values of low-rated and comparable unrated securities are less
sensitive to interest rate changes but more sensitive to economic changes or
individual corporate developments than higher-rated securities; they present a
higher degree of credit risk and their yields will fluctuate over time. During
economic downturns or sustained periods of rising interest rates, the ability of
highly leveraged issuers to service debt obligations may be impaired.
The existence of limited or no established trading markets for low-rated
and comparable unrated securities may result in thin trading of such securities
and diminish the Convertible Securities Fund's ability to dispose of such
securities or to obtain accurate market quotations for valuing such securities
and calculating net asset value. The responsibility of the Trust's Board of
Trustees to value such securities becomes greater and judgment plays a greater
role in valuation because there is less reliable objective data available. In
addition, adverse publicity and investor perceptions may decrease the values and
liquidity of low-rated and comparable unrated securities bonds, especially in a
thinly traded market.
A major economic recession would likely disrupt the market for such
securities, adversely affect their value and the ability of issuers to repay
principal and pay interest, and result in a higher incidence of defaults.
The ratings of Moody's and S&P represent the opinions of those
organizations as to the quality of securities. Such ratings are relative and
subjective, not absolute standards of quality and do not evaluate the market
risk of the securities. Although the Convertible Securities Fund's Portfolio
Management Agent uses these ratings as a criterion for the selection of
securities for the Convertible Securities Fund, it also relies on its
independent analysis to evaluate potential investments for the Convertible
Securities Fund. The Convertible Securities Fund's achievement of its investment
objective may be more dependent on the Portfolio Management Agent's credit
analysis of low-rated and unrated securities than would be the case for a
portfolio of high-rated securities.
SHORT/INTERMEDIATE FUND
The Short/Intermediate Fund seeks to provide a high level of total return,
including a competitive level of current income, by investing primarily in
investment grade debt securities with a short/intermediate term average
maturity.
The Short/Intermediate Fund, formerly known as Harris Insight Managed Fixed
Income Fund, seeks to provide a high level of total return, including a
competitive level of current income, by investing primarily in investment grade
debt securities with a short/intermediate term average maturity. The Fund
intends, under normal market conditions, to invest at least 65% of the value of
its total assets in bonds. For purposes of this 65% limitation, the term "bond"
shall include debt obligations such as bonds and debentures, Government
Securities, debt obligations of domestic and foreign corporations, debt
obligations of foreign governments and their political subdivisions,
asset-backed securities, various mortgage-related securities (including those
issued or collateralized by U.S. Government agencies and inverse floating rate
mortgage-backed securities), other floating/variable rate obligations, municipal
obligations and zero coupon securities. The Fund seeks to achieve its objective
by utilizing a number of
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investment disciplines, including the assessment of yield advantages among
different classes of bonds and among different maturities, the independent
review by the Fund's Portfolio Management Agent of the credit quality of
individual issues, and the analysis by the Fund's Portfolio Management Agent of
economic and market conditions affecting the fixed income markets. The
Short/Intermediate Fund may invest in a broad range of fixed income obligations.
The Fund may invest in fixed and variable rate bonds, debentures, Government
Securities, and Government Stripped Mortgage-Backed Securities. The Fund also
may invest in U.S. Treasury or agency securities placed into irrevocable trusts
and evidenced by a trust receipt.
The Fund's dollar-weighted average portfolio maturity (or average life with
respect to mortgage-related and asset-backed securities), under normal market
conditions, will be between two and five years. The Fund may also hold
short-term U.S. Government Obligations, "high-quality" money market instruments
(i.e., those within the two highest rating categories or, if unrated, determined
by the Portfolio Management Agent to be comparable in quality to instruments so
rated) and cash. Such obligations may include those issued by foreign banks and
foreign branches of U.S. banks. These investments may be in such proportions as,
in the Portfolio Management Agent's opinion, existing circumstances warrant.
BOND FUND
The Bond Fund seeks to provide a high level of total return, including a
competitive level of current income, by investing primarily in investment grade
debt securities of varying maturities.
The Bond Fund seeks to provide a high level of total return, including a
competitive level of current income, by investing primarily in investment grade
debt securities of varying maturities. The Fund seeks to achieve its objective
by utilizing a highly-disciplined, quantitatively-based process to identify
fixed income securities which the Fund's Portfolio Management Agent believes are
undervalued and are positioned to offer the best relative value to enable the
Fund to benefit from anticipated changes in interest rates. Under normal market
conditions, at least 65% of the Bond Fund's total assets will be invested in
bonds. For purposes of this 65% limitation, the term "bond" shall include debt
obligations such as bonds and debentures, Government Securities, debt
obligations of domestic and foreign corporations, debt obligations of foreign
governments and their political subdivisions, asset-backed securities, various
mortgage-related securities (including those issued or collateralized by U.S.
Government agencies and inverse floating rate mortgage-backed securities), other
floating/variable rate obligations, municipal obligations and zero coupon
securities.
GOVERNMENT FUND
The Government Fund seeks to provide a high level of current income,
consistent with preservation of capital.
The Government Fund seeks to provide a high level of current income,
consistent with preservation of capital. The Fund seeks to achieve its
investment objective by investing primarily in Government Securities, including
mortgage-backed securities, having an intermediate term average maturity. Under
normal market conditions, at least 65% of the Fund's total assets will be
invested in Government Securities and in repurchase agreements collateralized by
Government Securities. The average portfolio maturity (or average life with
respect to mortgage-related securities) generally will be between three and ten
years.
In addition, the Fund may also invest in asset-backed securities
collateralized by the U.S. Treasury and certain U.S. Government agencies. It may
also hold foreign debt securities guaranteed by the U.S. Government, its
agencies or instrumentalities (with respect to 10% of its total assets).
Further, the Government Fund may invest in covered put and call options on
securities and on indices.
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INTERMEDIATE TAX-EXEMPT FUND
The Intermediate Tax-Exempt Fund seeks a high level of current income that
is exempt from federal income tax.
The Intermediate Tax-Exempt Fund seeks to provide a high level of current
income that is exempt from federal income tax. As a matter of fundamental
policy, the Fund seeks to achieve its investment objective by investing at least
80% of its assets, under normal market conditions, in a broad range of municipal
bonds and other obligations issued by state and local governments to finance
their operations or special projects. These securities, which are of varying
maturities, make interest payments that are exempt from federal income tax. The
Fund's dollar-weighted average portfolio maturity, under normal market
conditions, will be between three and ten years.
The Fund's selection of individual securities is based on a number of
factors, including anticipated changes in interest rates, the assessment of the
yield advantages of different classes of bonds, and an independent analysis of
credit quality of individual issues by the Fund's Portfolio Management Agent or
the Investment Adviser.
The Intermediate Tax-Exempt Fund may also invest in letters of credit and
U.S. Government Obligations. In addition, the Fund may purchase and sell covered
put and call options on securities and on indices.
TAX-EXEMPT FUND
The Tax-Exempt Fund seeks to provide a high level of current income that is
exempt from federal income tax.
The Tax-Exempt Fund seeks to provide a high level of current income that is
exempt from federal income tax. The Fund seeks to achieve its objective by
anticipating changes in interest rates, analyzing yield differentials for
different types of bonds, and analyzing credit for specific issues and
municipalities. As a matter of fundamental policy, the Fund seeks to achieve its
investment objective by investing at least 80% of its assets, under normal
market conditions, in a broad range of municipal bonds and other obligations
issued by state and local governments to finance their operations or special
projects. These securities make interest payments that are exempt from federal
income tax.
The Tax-Exempt Fund may also invest in letters of credit and U.S.
Government Obligations. Further, the Fund may purchase and sell covered put and
call options on securities and on indices.
THE MONEY MARKET FUNDS
The investment objective of each of the Money Market Funds is to provide
investors with as high a level of current income (which, in the case of the
Tax-Exempt Money Fund, is exempt from federal income taxes) as is consistent
with its investment policies and with preservation of capital and liquidity.
Current income provided by the securities in which the Money Market Funds invest
is not likely to be as high as that provided by securities with longer
maturities or lower quality, which may involve greater risk and price
volatility. Each Money Market Fund will invest in U.S. dollar-denominated
securities with maturities of thirteen months or less. The Money Fund will not
purchase a security (other than Government Securities) unless the security is
rated by at least two nationally recognized rating agencies (such as S&P or
Moody's) within the two highest ratings assigned to short-term debt securities
(or,
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if not rated or rated only by one rating agency, is determined to be of
comparable quality), and not more than 5% of the total assets of the Fund would
be invested in securities bearing the second highest rating. The Tax-Exempt
Money Fund will not purchase a security (other than a Government Security)
unless the security is rated by at least two such rating agencies within the two
highest ratings assigned to short-term debt securities (or, if not rated or
rated by only one rating agency, is determined to be of comparable quality).
Determinations of comparable quality shall be made in accordance with procedures
established by the Company's Board of Directors. Each Money Market Fund will
maintain a dollar-weighted average maturity of 90 days or less in an effort to
maintain a net asset value per share of $1.00. There is no assurance that the
net asset value per share of the Money Market Funds will be maintained at $1.00.
GOVERNMENT MONEY FUND
The Government Money Fund invests in obligations issued or guaranteed by
the U.S Government, its agencies, instrumentalities or sponsored enterprises,
and that have remaining maturities of thirteen months or less.
The Government Money Fund, formerly known as Harris Insight Government
Assets Fund, invests exclusively in Government Securities that have remaining
maturities not exceeding thirteen months and certain repurchase agreements
described below.
The Government Money Fund invests in obligations of U.S. Government
agencies and instrumentalities only when the Portfolio Management Agent is
satisfied that the credit risk with respect to the issuer is minimal.
MONEY FUND
The Money Fund invests in short-term money market instruments, including
U.S. Government, bank and commercial obligations with remaining maturities of
thirteen months or less.
The Money Fund, formerly known as Harris Insight Cash Management Fund,
invests in a broad range of short-term money market instruments that have
remaining maturities not exceeding thirteen months, including Government
Securities and bank and commercial obligations.
The commercial paper purchased by the Money Fund will consist of U.S.
dollar-denominated direct obligations of domestic and foreign corporate issuers,
including bank holding companies.
The Money Fund may also invest in guaranteed investment contracts ("GICs")
issued by U.S. and Canadian insurance companies, and convertible and
non-convertible debt securities of domestic corporations and of foreign
corporations and governments that are denominated, and pay interest, in U.S.
dollars. In addition, the Money Fund may invest in tax-exempt municipal
obligations in which the Tax-Exempt Money Fund may invest, described below, when
the yields on such obligations are higher than the yields on taxable
investments. All securities acquired by the Fund will have remaining maturities
of thirteen months or less and will be subject to the applicable quality
requirements described above.
TAX-EXEMPT MONEY FUND
The Tax-Exempt Money Fund invests in debt instruments issued by or for
states, cities, municipalities and other public authorities and that provide
interest income exempt from federal income tax.
The Tax-Exempt Money Fund, formerly known as Harris Insight Tax-Free Money
Market Fund, invests primarily in high-quality municipal obligations that have
remaining maturities not exceeding thirteen months and meet the applicable
quality requirements described above. Municipal obligations are debt obligations
issued by or on behalf of states, cities, municipalities and other public
authorities. Except for temporary investments in taxable obligations described
below, the Tax-Exempt Money Fund will invest only in municipal obligations that
are exempt from federal income taxes in the opinion of bond counsel. Such
obligations include municipal bonds, municipal notes and municipal commercial
paper.
From time to time, the Tax-Exempt Money Fund may invest 25% or more of its
assets in municipal obligations that are related in such a way that an economic,
business or political development or change affecting one of these obligations
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would also affect the other obligations, for example, municipal obligations the
interest on which is paid from revenues of similar type projects or municipal
obligations whose issuers are located in the same state.
Under ordinary market conditions, the Tax-Exempt Money Fund will maintain
as a fundamental policy at least 80% of the value of its total assets in
obligations that are exempt from federal income tax and not subject to the
alternative minimum tax. The Tax-Exempt Money Fund may, pending the investment
of proceeds of sales of its shares or proceeds from the sale of portfolio
securities, in anticipation of redemptions, or to maintain a "defensive" posture
when, in the opinion of the Investment Adviser, it is advisable to do so because
of market conditions, elect to hold temporarily up to 20% of the current value
of its total assets in cash reserves or invest in taxable securities in which
the Money Fund may invest.
ALL FUNDS; ALL EQUITY AND FIXED INCOME FUNDS
Each Fund may invest in the securities of other investment companies,
when-issued securities and forward commitments, floating/variable rate
obligations (and inverse floating rate obligations with respect to the fixed
income Funds), as well as commercial paper, short-term money market instruments
and cash equivalents, such as certificates of deposit, demand and time deposits
and banker's acceptance notes. In addition, each Fund may enter into repurchase
agreements.
Each equity and fixed income Fund may lend its portfolio securities with
respect to up to one-third of its net assets and may enter into reverse
repurchase agreements.
Each equity and fixed income Fund may invest in securities convertible into
or exchangeable for common stocks or preferred stocks, as well as Government
Securities and debt obligations of domestic corporations rated "Baa" or better
by Moody's, "BBB" or better by S&P or an equivalent rating by another nationally
recognized statistical rating organization at the time of purchase or, if not
rated are considered by the Portfolio Management Agent to be of comparable
quality. (The Convertible Securities Fund may also invest in lower rated
securities, as described above.) Debt obligations rated "BBB" by S&P, "Baa" by
Moody's or the equivalent by such other rating organization may have speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade bonds. In addition, each equity Fund
may invest in securities purchased in an initial public offering. Each equity
Fund also may invest in American Depositary Receipts, European Depositary
Receipts and, with respect to 10% (100% for the International Fund) of total
assets, debt and equity securities of foreign issuers. Further, each equity Fund
may purchase and sell covered put and call options on securities, index and
interest rate futures contracts and options on futures contracts.
__________
Portfolio securities of each Fund are kept under continuing supervision and
changes may be made whenever, in the opinion of the Portfolio Management Agent,
a security no longer seems to meet the objective of the Fund. Portfolio changes
also may be made to increase or decrease investments in anticipation of changes
in security prices in general or to provide funds required for redemptions,
distributions to shareholders or other corporate purposes. Neither the length of
time a security has been held nor the rate of turnover of a Fund's portfolio is
considered a limiting factor on such changes.
__________
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Each Fund may purchase debt obligations that are not rated if, in the
opinion of the Portfolio Management Agent, they are of investment quality at
least comparable to other rated investments that may be purchased by the Fund.
After purchase by a 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 Fund (other than a Money Market Fund) to sell such security unless the
amount of such security exceeds permissible limits. However, the Portfolio
Management Agent will reassess promptly whether the security presents minimal
credit risks and determine whether continuing to hold the security is in the
best interests of the Fund. To the extent that the ratings given by Moody's, S&P
or another nationally recognized statistical rating organization for securities
may change as a result of changes in the rating systems or due to corporate
reorganization of such rating organizations, a Fund will attempt to use
comparable ratings as standards for its investments in accordance with the
investment objectives and policies of the Fund. The ratings of Moody's and S&P
are more fully described in the Appendix to the Statement of Additional
Information. A Money Market Fund may be required to sell a security downgraded
below the minimum required for purchase, absent a specific finding by the
Company's Board of Directors that a sale is not in the best interests of the
Fund.
INVESTMENT STRATEGIES
These bond or debt securities may be collateralized by a pool of assets,
such as automobile loans, home equity loans, equipment leases or other
obligations.
ASSET-BACKED SECURITIES. All of the equity Funds as well as the
Short/Intermediate Fund, the Bond Fund, the Government Fund, the Intermediate
Tax-Exempt Fund, the Tax-Exempt Fund and the Money Fund may purchase
asset-backed securities, which represent a participation in, or are secured by
and payable from, a stream of payments generated by particular assets, most
often a pool of assets similar to one another. With respect to asset-backed
securities purchased by the equity Funds, the Short/Intermediate Fund and the
Bond Fund, assets generating payments will consist of motor vehicle installment
purchase obligations, credit card receivables and home equity loans, equipment
leases, manufactured housing loans and marine loans. The asset-backed securities
purchased by the Intermediate Tax-Exempt Fund, the Tax-Exempt Fund and the
Tax-Exempt Money Fund represent units of beneficial interest in pools of
purchasing contracts, financing leases and sales agreements entered into by
municipalities. The Government Fund may invest in asset-backed trusts
collateralized by the U.S. Treasury or certain other U.S. government agencies
and instrumentalities. In accordance with guidelines established by the Boards
of Trustees and Directors, as the case may be, asset-backed securities may be
considered illiquid securities and, therefore, may be subject to a Fund's 15%
(or, in the case of the Short/Intermediate Fund, the Equity Fund and the Money
Market Funds, 10%) limitation on such investments.
The estimated life of an asset-backed security varies with prepayment
experience with respect to underlying debt instruments. The rate of such
prepayments, and therefore the life of the asset-backed security, will be
primarily a function of current market interest rates, although other economic
and demographic factors may be involved. In periods of falling interest rates,
the rate of prepayments tends to increase. During such periods, the reinvestment
of prepayment proceeds by a Fund will generally be at lower rates than the rates
that were carried by the obligations that have been prepaid. Because of these
and other reasons, an asset-backed security's total return may be difficult to
predict precisely. If a Fund purchases asset-backed securities at a premium,
prepayments may result in some loss of the Fund's principal investment to the
extent of premium paid.
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A BIC is a bank obligation which provides a specified rate of return in
exchange for cash deposits to the issuing bank.
BANK INVESTMENT CONTRACTS. The Short/Intermediate Fund, the Bond Fund and
the Money Fund may invest in bank investment contracts ("BICs") which are debt
obligations issued by banks. BICs require a Fund to make cash contributions to a
deposit account at a bank in exchange for payments at negotiated, floating or
fixed interest rates. A BIC is a general obligation of the issuing bank. BICs
are considered illiquid securities and will be subject to each Fund's 10% (15%
with respect to the Bond Fund) limitation on such investments, unless there is
an active and substantial secondary market for the particular instrument and
market quotations are readily available in accordance with guidelines
established by the Board of Directors or the Board of Trustees, as the case may
be. All purchases of BICs will be subject to the applicable quality requirements
described under "Investment Objectives and Policies."
These obligations include negotiable certificates of deposit, bankers'
acceptances and fixed time deposits.
BANK OBLIGATIONS. Bank obligations include negotiable certificates of
deposit, bankers' acceptances and fixed time deposits. The Money Fund limits its
investments in domestic bank obligations to obligations of U.S. banks (including
foreign branches and thrift institutions) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System, are examined by the Comptroller of the Currency or whose deposits are
insured by the Federal Deposit Insurance Corporation ("U.S. banks"). The Money
Fund limits its investments in foreign bank obligations to U.S.
dollar-denominated obligations of foreign banks (including U.S. branches): (a)
which banks at the time of investment (i) have more than $10 billion, or the
equivalent in other currencies, in total assets and (ii) are among the 100
largest banks in the world, as determined on the basis of assets, and have
branches or agencies in the U.S.; and (b) which obligations, in the opinion of
the Portfolio Management Agent, are of an investment quality comparable to
obligations of U.S. banks that may be purchased by the Money Fund. Each of the
Intermediate Bond Fund and the Money Fund may invest more than 25% of the
current value of its total assets in obligations (including repurchase
agreements) of: (a) U.S. banks; (b) U.S. branches of foreign banks that are
subject to the same regulation as U.S. banks by the U.S. Government or its
agencies or instrumentalities; or (c) foreign branches of U.S. banks if the U.S.
banks would be unconditionally liable in the event the foreign branch failed to
pay on such obligations for any reason. The profitability of the banking
industry is largely dependent upon the availability and cost of funds to finance
lending operations and the quality of underlying bank assets. In addition,
domestic and foreign banks are subject to extensive but different government
regulation which may limit the amount and types of their loans and the interest
rates that may be charged. Obligations of foreign banks involve somewhat
different investment risks from those associated with obligations of U.S.
banks. See ``Foreign Securities.''
Convertible bonds, debentures, and notes are debt obligations offering a
stated interest rate; convertible preferred stocks are senior securities
offering a stated dividend rate.
CONVERTIBLE SECURITIES. All of the equity Funds, the Convertible Securities
Fund and the Bond Fund may invest in convertible securities. Appropriate ratings
and types of convertible securities for each of these Funds are provided in the
description of each Fund starting on page 9. Because convertible securities have
the characteristics of both fixed-income securities and common stock, they
sometimes are called "hybrid" securities. Convertible bonds, debentures and
notes are debt obligations offering a stated interest rate; convertible
preferred stocks are senior securities offering a stated dividend rate.
Convertible securities will at times be priced in the market like other fixed
income securities: that is, their prices will tend to rise when interest rates
decline and will tend to fall when interest rates rise. However, because a
convertible security provides an option to the holder to exchange the security
for either a specified number of the issuer's common shares at a stated price
per share or the cash value of such common shares, the security market price
will tend to fluctuate in relation to the price of the common shares into
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which it is convertible. Thus, convertible securities ordinarily will provide
opportunities both for producing current income and longer term capital
appreciation. Because convertible securities are usually viewed by the issuer as
future common stock, they are generally subordinated to other senior securities
and therefore are rated one category lower than the issuer's non-convertible
debt obligations or preferred stock.
The interest payable on these securities is denominated in U.S. dollars and
is not subject to foreign currency risk and may be paid at rates higher than
most similarly rated securities.
EXCHANGE RATE-RELATED SECURITIES. The International Fund may invest in
securities for which the principal repayment at maturity, while paid in U.S.
dollars, is determined by reference to the exchange rate between the U.S. dollar
and the currency of one or more foreign countries ("Exchange Rate-Related
Securities"). The interest payable on these securities is denominated in U.S.
dollars and is not subject to foreign currency risk and, in most cases, is paid
at rates higher than most other similarly rated securities in recognition of the
foreign currency risk component of Exchange Rate-Related Securities.
Investments in Exchange Rate-Related Securities entail certain risks. There
is the possibility of significant changes in rates of exchange between the U.S.
dollar and any foreign currency to which an Exchange Rate-Related Security is
linked. In addition, there is no assurance that sufficient trading interest to
create a liquid secondary market will exist for a particular Exchange
Rate-Related Security due to conditions in the debt and foreign currency
markets. Illiquidity in the forward foreign exchange market and the high
volatility of the foreign exchange market may, from time to time, combine to
make it difficult to sell an Exchange Rate-Related Security prior to maturity
without incurring a significant price loss.
These obligations bear interest rates that are not fixed but vary with
changes in specified market rates or indices.
FLOATING AND VARIABLE RATE INSTRUMENTS. All of the Funds may purchase
instruments (municipal obligations inals. Certain of these obligations may carry
a demand feature that would permit the holder to tender them back to the issuer
at par value prior to maturity. The Money Market Funds may each invest in a
floating or variable rate obligation even if it carries a stated maturity in
excess of thirteen months upon compliance with certain conditions contained in a
rule of the Commission, in which case such obligation will be treated as having
a maturity not exceeding thirteen months. Each Fund will limit its purchases of
floating and variable rate obligations to those of the same quality as it
otherwise is allowed to purchase.
A floating or variable rate instrument may be subject to the Fund's
percentage limitation on illiquid investments if there is no reliable trading
market for the investment or if the Fund may not demand payment of the principal
amount within seven days.
The Short/Intermediate Fund, the Bond Fund and the Money Fund may invest in
obligations of foreign banks, corporations and governments which are denominated
and pay interest in U.S. dollars.
FOREIGN SECURITIES. The International Fund may invest up to 100% of its
total assets, and each of the remaining equity Funds may invest up to 10% of
total assets in dollar-denominated foreign equity and debt securities. Each
equity Fund may also invest in American Depositary Receipts ("ADRs") and
European Depositary Receipts. ADRs are certificates issued by a U.S. depository
(usually a bank) and represent a specified quantity of shares of an underlying
non-U.S. stock on deposit with a custodian bank as collateral. European
Depository Receipts are typically issued by foreign banks and trust companies
(although they may also be issued by U.S. banks or trust companies) and evidence
ownership of underlying securities issued by either a foreign or a U.S.
corporation.
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The Short/Intermediate Fund and the Bond Fund (each with respect to 20% of
its total assets) as well as the Money Fund may invest in non-convertible (and
convertible in the case of the Bond Fund) debt obligations of foreign banks,
foreign corporations and foreign governments which obligations are denominated
in and pay interest in U.S. dollars. The Convertible Securities Fund may invest
in dollar-denominated Eurodollar securities convertible into the common stock of
domestic corporations. The Government Fund may invest in dollar-denominated
Eurodollar securities that are guaranteed by the U.S. Government or its agencies
or instrumentalities. Investments in foreign securities involve certain
considerations that are not typically associated with investing in domestic
securities. For example, investments in foreign securities typically involve
higher transaction costs than investments in U.S. securities. Foreign
investments may have risks associated with currency exchange rates, political
instability, less complete financial information about the issuers and less
market liquidity than domestic securities. Future political and economic
developments, possible imposition of withholding taxes on income, seizure or
nationalization of foreign holdings, establishment of exchange controls or the
adoption of other governmental restrictions might adversely affect the payment
of principal and interest on foreign obligations. In addition, foreign banks and
foreign branches of domestic banks may be subject to less stringent reserve
requirements and to different accounting, auditing and recordkeeping
requirements than domestic banks.
Forward foreign currency exchange contracts allow the purchase and sale of
a fixed quantity of a foreign currency at a future date.
FORWARD CONTRACTS. All equity Funds may enter into forward foreign currency
exchange contracts for the purchase and sale of a fixed quantity of a foreign
currency at a future date ("Forward Contracts"). These Funds may enter into
Forward Contracts for hedging purposes as well as non-hedging purposes. By
entering into transactions in Forward Contracts, however, a Fund may be required
to forego the benefits of advantageous changes in exchange rates and, in the
case of Forward Contracts entered into for non-hedging purposes, the Fund may
sustain losses which will reduce its gross income. A Fund may also enter into a
Forward Contract on one currency in order to hedge against risk of loss arising
from fluctuations in the value of a second currency (referred to as a "cross
hedge") if, in the judgment of the Portfolio Management Agent, a reasonable
degree of correlation can be expected between movements in the values of the two
currencies. Forward Contracts are traded over-the-counter, and not on organized
commodities or securities exchanges. As a result, such contracts operate in a
manner distinct from exchange-traded instruments, and their use involves certain
risks beyond those associated with transactions in futures contracts or options
traded on exchanges. Each equity Fund has established procedures consistent with
statements of the Securities and Exchange Commission and its staff regarding the
use of Forward Contracts by registered investment companies, which require use
of segregated assets or "cover" in connection with the purchase and sale of such
contracts.
GOVERNMENT SECURITIES. Government Securities consist of obligations issued
or guaranteed by the U.S. Government, its agencies, instrumentalities or
sponsored enterprises.
A GIC is a general obligation of a U.S. or Canadian insurance company.
GUARANTEED INVESTMENT CONTRACTS. The Short/Intermediate Fund, the Bond Fund
and the Money Fund may invest in guaranteed investment contracts ("GICs") issued
by U.S. and Canadian insurance companies. GICs require a Fund to make cash
contributions to a deposit fund of an insurance company's general account. The
insurance company then makes payments to the Fund based on negotiated, floating
or fixed interest rates. A GIC is a general obligation of the issuing insurance
company and not a separate account. The purchase price paid for a GIC becomes
part of the general assets of the insurance company, and the contract is paid
from the insurance company's general assets. Generally, GICs are not assignable
or transferable without the permission of the issuing insurance
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companies, and an active secondary market in GICs does not currently exist. In
accordance with guidelines established by the Trust's Board of Trustees (or the
Company's Board of Directors with respect to the Money Fund), GICs may be
considered illiquid securities and, therefore, subject to the Bond Fund's 15%,
the Short/Intermediate Fund's and the Money Fund's 10% limitation on such
investments. All purchases of GICs by the Fund will be subject to the applicable
quality requirements described under "Investment Objectives and Policies."
Repurchase agreements and time deposits that do not provide for payment to
a Fund within 7 days after notice or which have a term greater than 7 days may
be deemed illiquid securities.
ILLIQUID SECURITIES. Each Fund may invest up to 15% (10% in the case of the
Equity Fund, the Short/Intermediate Fund and the Money Market Funds) of the
value of its net assets in securities that are considered illiquid. Repurchase
agreements and time deposits that do not provide for payment to the Fund within
seven days after notice or which have a term greater than seven days are deemed
illiquid securities for this purpose, unless such securities are variable amount
master demand notes with maturities of nine months or less or unless the
Portfolio Management Agent or Investment Adviser has determined under the
supervision and direction of the Trust's Board of Trustees or the Company's
Board of Directors, as the case may be, that an adequate trading market exists
for such securities or that market quotations are readily available.
Each Fund may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act of 1933 and commercial
paper issued in reliance upon the exemption in Section 4(2) of the Securities
Act of 1933. These securities may be determined to be liquid in accordance with
guidelines established by the Portfolio Management Agent or Investment Adviser
and approved by the Trust's Board of Trustees or the Company's Board of
Directors, as the case may be. The Board of Trustees or Directors will monitor
the Portfolio Management Agent's or Investment Adviser's implementation of these
guidelines on a periodic basis.
These securities may be used as a hedge against anticipated changes in the
value of securities held or in the value of securities a Fund intends to
purchase.
INDEX AND INTEREST RATE FUTURES CONTRACTS; OPTIONS. All equity Funds, the
Convertible Securities Fund, the Bond Fund, the Government Fund, the
Intermediate Tax-Exempt Fund and the Tax-Exempt Fund may attempt to reduce the
risk of investments in securities by hedging a portion of its portfolio through
the use of futures contracts on indices and options on such indices traded on
national securities exchanges. All equity Funds, the Convertible Securities
Fund, the Bond Fund, the Government Fund, the Intermediate Tax-Exempt Fund and
the Tax-Exempt Fund may attempt to reduce the risk of investment in debt
securities by hedging a portion of its portfolio through the use of interest
rate futures and options on such futures contracts. Each such Fund will use
futures contracts and options on such futures contracts only as a hedge against
anticipated changes in the values of securities held in its portfolio or in the
values of securities that it intends to purchase.
All equity Funds, the Convertible Securities Fund, the Bond Fund, the
Government Fund, the Intermediate Tax-Exempt Fund and the Tax-Exempt Fund may
invest in covered put and covered call options and may write covered put and
covered call options on securities in which they may invest directly and that
are traded on registered domestic security exchanges or over-the-counter.
The use of index and interest rate futures contracts and options may expose
a Fund to additional risks and transaction costs. Risks inherent in the use of
such instruments include: (1) the risk that interest rates, securities prices or
currency markets will not move in the direction that the Portfolio Management
Agent anticipates; (2) the existence of an imperfect correlation between the
price of such instruments and movements in the prices of the securities,
interest rates or currencies being hedged; (3) the fact that skills needed to
use these strategies are
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different than those needed to select portfolio securities; (4) the possible
inability to close out certain hedged positions may result in adverse tax
consequences; (5) the possible absence of a liquid secondary market for any
particular instrument and possible exchange-imposed price fluctuation limits,
either of which may make it difficult or impossible to close out a position when
desired; (6) the leverage risk, that is, the risk that adverse price movements
in an instrument can result in a loss substantially greater than a Fund's
initial investment in that instrument (in some cases, the potential loss is
unlimited); and (7) particularly in the case of privately-negotiated
instruments, the risk that the counterparty will fail to perform its
obligations, which could leave a Fund worse off than if it had not entered into
the position.
When a Fund invests in index and interest rate futures contracts and
options, it may be required to segregate cash and other high-grade liquid assets
or certain portfolio securities to `cover' the Fund's position. Assets
segregated or set aside generally may not be disposed of so long as a Fund
maintains the positions requiring segregation or cover. Segregating assets could
diminish a Fund's return due to the opportunity losses of foregoing other
potential investments with the segregated assets.
See "Investment Strategies" in the Statement of Additional Information.
These obligations generally have floating or variable interest rates that
move in the opposite direction of short-term interest rates.
Inverse Floating Rate Obligations. All fixed income Funds may invest in so
called "inverse floating rate obligations" or "residual interest" bonds, or
other related obligations or certificates structured to have similar features.
Such obligations generally have floating or variable interest rates that move in
the opposite direction of short-term interest rates and generally increase or
decrease in value in response to changes in short-term interest rates at a rate
which is a multiple (typically two) of the rate at which fixed-rate, long-term,
tax-exempt securities increase or decrease in response to such changes. As a
result, such obligations have the effect of providing investment leverage and
may be more volatile than long-term, fixed-rate, tax-exempt obligations.
The Bond Fund, the Short/Intermediate Fund and the Government Fund may
invest in mortgage-backed securities (see description of "mortgage-related
securities" below) that have an inverse floating rate.
Subject to certain limitations, the Funds may invest in the securities of
other investment companies.
INVESTMENT COMPANY SECURITIES. In connection with the management of its
daily cash positions, each Fund may invest in securities issued by investment
companies that invest in short-term debt securities (which may include municipal
obligations that are exempt from federal income taxes) and which seek to
maintain a $1.00 net asset value per share. To the extent that the Tax-Exempt
Money Fund invests in such investment companies, it will invest in investment
companies that invest primarily in municipal obligations that are exempt from
federal income taxes. Each Fund, other than the Equity Fund and the
Short/Intermediate Fund, may also invest in securities issued by investment
companies that invest in securities in which such Fund could invest directly.
Securities of investment companies may be acquired by any of the Funds within
the limits prescribed by the Investment Company Act of 1940, as amended (the
"1940 Act"). These limit each such Fund so that: (i) not more than 5% of the
value of its total assets will be invested in the securities of any one
investment company; (ii) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
and (iii) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund or by the Trust or the Company as a whole. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion
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of the other investment company's expenses, including advisory fees. These
expenses would be in addition to the advisory and other expenses that a Fund
bears directly in connection with its own operations.
LETTERS OF CREDIT. Debt obligations, including municipal obligations,
certificates of participation, commercial paper and other short-term
obligations, may be backed by an irrevocable letter of credit of a bank. Only
banks that, in the opinion of the Portfolio Management Agent, are of investment
quality comparable to other permitted investments of a Fund, may be used for
letter of credit-backed investments.
Each of the Funds (except the Money Market Funds) may lend to brokers,
dealers and financial institutions securities from its portfolio representing up
to one-third of the Fund's net assets.
LOANS OF PORTFOLIO SECURITIES. Each of the Funds (except the Money Market
Funds) may lend to brokers, dealers and financial institutions securities from
its portfolio representing up to one third of the Fund's net assets. However,
such loans may be made only if cash or cash equivalent collateral, including
letters of credit, marked-to-market daily and equal to at least 100% of the
current market value of the securities loaned (including accrued interest and
dividends thereon) plus the interest payable to the Fund with respect to the
loan is maintained by the borrower with the Fund in a segregated account. In
determining whether to lend a security to a particular broker, dealer or
financial institution, the Portfolio Management Agent or Investment Sub-Adviser
will consider all relevant facts and circumstances, including the
creditworthiness of the broker, dealer or financial institution. No Fund will
enter into any portfolio security lending arrangement having a duration longer
than one year. Any securities that a Fund may receive as collateral will not
become part of the Fund's portfolio at the time of the loan and, in the event of
a default by the borrower, the Fund will, if permitted by law, dispose of such
collateral except for such part thereof that is a security in which the Fund is
permitted to invest. During the time securities are on loan, the borrower will
pay the Fund any accrued income on those securities, and the Fund may invest the
cash collateral and earn additional income or receive an agreed upon fee from a
borrower that has delivered cash equivalent collateral. Loans of securities by a
Fund will be subject to termination at the Fund's or the borrower's option. Each
Fund may pay reasonable administrative and custodial fees in connection with a
securities loan and may pay a negotiated fee to the borrower or the placing
broker. Borrowers and placing brokers may not be affiliated, directly or
indirectly, with the Trust, the Company, the Investment Adviser, the Investment
Sub-Adviser, the Portfolio Management Agent or the Distributor.
All equity Funds and certain of the fixed income Funds may invest in
mortgage-backed securities, including collateralized mortgage obligations.
MORTGAGE-RELATED SECURITIES. All equity Funds, the Short/Intermediate Fund,
the Bond Fund, and the Government Fund may invest in mortgage-backed securities,
including collateralized mortgage obligations ("CMOs") and Government Stripped
Mortgage-Backed Securities. The Government Fund may purchase such securities
only if they represent interests in an asset-backed trust collateralized by the
Government National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA"), or the Federal Home Loan Mortgage Corporation ("FHLMC").
Government Stripped Mortgage-Backed Securities are mortgage-backed
securities issued or guaranteed by GNMA, FNMA or FHLMC. These securities
represent beneficial ownership interests in either periodic principal
distributions ("principal-only") or interest distributions ("interest-only") on
mortgage-backed certificates issued by GNMA, FNMA or FHLMC, as the case may be.
The certificates underlying the Government Stripped Mortgage-Backed Securities
represent all or part of the beneficial interest in pools of mortgage loans.
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CMOs are types of bonds secured by an underlying pool of mortgages or
mortgage pass-through certificates that are structured to direct payments on
underlying collateral to different series or classes of obligations. To the
extent that CMOs are considered to be investment companies, investment in such
CMOs will be subject to the percentage limitations described under "Investment
Company Securities."
The average life of a mortgage-backed instrument, in particular, is likely
to be substantially less than the original maturity of the mortgage pools
underlying the securities as the result of scheduled principal payments and
mortgage prepayments. The rate of such mortgage prepayments, and hence the life
of the certificates, will be primarily a function of current market rates and
current conditions in the relevant housing markets. In calculating the average
weighted maturity of the fixed income Funds, the maturity of mortgage-backed
instruments will be based on estimates of average life.
Generally, municipal leases are participations in intermediate-
and-short-term obligations issued by municipalities and consisting of leases or
installment purchase contracts for property or equipment.
MUNICIPAL LEASES. The Intermediate Tax-Exempt Fund and the Tax-Exempt Fund
may each invest in municipal leases, which are generally participations in
intermediate- and short-term debt obligations issued by municipalities and
consisting of leases or installment purchase contracts for property or
equipment. Although lease obligations do not constitute general obligations of
the municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. Although "non-appropriation" lease obligations are secured by the
leased property, disposition of the property in the event of foreclosure may
prove difficult. Municipal lease obligations may be considered illiquid
securities and may be subject to each Fund's 15% limitation on such investments.
These securities may be determined to be liquid by the Portfolio Management
Agent in accordance with its procedures and subject to the supervision and
direction by the Board of Trustees of the Trust. See "Investment Strategies --
Municipal Leases" in the Statement of Additional Information.
Municipal Obligations include municipal bonds, notes, and commercial paper.
MUNICIPAL OBLIGATIONS. The Balanced Fund, the Short/Intermediate Fund, the
Bond Fund, the Intermediate Tax-Exempt Fund, the Tax-Exempt Fund and the
Tax-Exempt Money Fund may purchase municipal obligations. As a matter of
fundamental policy, the Intermediate Tax-Exempt Fund and the Tax-Exempt Fund
will invest primarily (i.e., at least 80% of assets under normal circumstances)
in municipal obligations. Municipal bonds generally have a maturity at the time
of issuance of up to 30 years. (The Tax-Exempt Money Fund may invest only in
short-term municipal obligations that have remaining maturities not exceeding
thirteen months.) Municipal notes generally have maturities at the time of
issuance of three years or less. These notes are generally issued in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues. The ability of an issuer to make payments is therefore dependent
on these tax receipts, proceeds from bond sales or other revenues, as the case
may be. Municipal commercial paper is a debt obligation with an effective
maturity or put date of 270 days or less that is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt.
The two principal classifications of municipal obligations are "general
obligation" securities and "revenue" securities. General obligation securities
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue securities are payable only
from the revenues derived from a
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particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or from other specific revenue sources such as the user
of the facility being financed. Revenue securities include private activity
bonds (also known as industrial revenue bonds), which may be purchased only by
the Intermediate Tax-Exempt Fund and the Tax-Exempt Fund and which are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Certain other of the municipal obligations in which the Funds may invest
are:
TANs. The Intermediate Tax-Exempt Fund and the Tax-Exempt Fund may invest
in tax anticipation notes ("TANs"). The possible inability or failure of a
municipal issuer to raise taxes as a result of such events as a decline in its
tax base or a rise in delinquencies could adversely affect the issuer's ability
to meet its obligations on outstanding TANs. Furthermore, some municipal issuers
include various tax proceeds in a general fund that is used to meet obligations
other than those of the outstanding TANs. Use of such a general fund to meet
various obligations could affect the likelihood of making payments on TANs.
BANs. The Intermediate Tax-Exempt Fund and the Tax-Exempt Fund may invest
in bond anticipation notes ("BANs"). The ability of a municipal issuer to meet
its obligations on its BANs is primarily dependent on the issuer's adequate
access to the longer term municipal bond market and the likelihood that the
proceeds of such bond sales will be used to pay the principal of, and interest
on, BANs.
RANs. The Intermediate Tax-Exempt Fund and the Tax-Exempt Fund may invest
in revenue anticipation notes ("RANs"). A decline in the receipt of certain
revenues, such as anticipated revenues from another level of government, could
adversely affect an issuer's ability to meet its obligations on outstanding
RANs. In addition, the possibility that the revenues would, when received, be
used to meet other obligations could adversely affect the ability of the issuer
to pay the principal of, and interest on, RANs.
See "Investment Strategies" in the Statement of Additional Information.
The Funds may purchase securities subject to agreement by the seller to
repurchase them at a specified time and place.
REPURCHASE AGREEMENTS. Each of the Funds may purchase portfolio securities
subject to the seller's agreement to repurchase them at a mutually agreed upon
time and price, which includes an amount representing interest on the purchase
price. Each of the Funds may enter into repurchase agreements only with respect
to obligations that could otherwise be purchased by the Fund. The seller will be
required to maintain in a segregated account for the Fund cash or cash
equivalent collateral equal to at least 100% of the repurchase price (including
accrued interest). Default or bankruptcy of the seller would expose a Fund to
possible loss because of adverse market action, delays in connection with the
disposition of the underlying obligations or expenses of enforcing its rights.
All equity and fixed income Funds may borrow funds for temporary purposes
by selling portfolio securities to financial institutions and agreeing to
repurchase them at a mutually specified date and price.
REVERSE REPURCHASE AGREEMENTS. All equity and fixed income Funds may borrow
funds for temporary purposes by selling portfolio securities to financial
institutions such as banks and broker/dealers and agreeing to repurchase them at
a mutually specified date and price ("reverse repurchase agreements"). Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Fund may decline below the repurchase price. A Fund would pay interest
on amounts obtained pursuant to a reverse repurchase agreement.
A Fund may not enter into a repurchase agreement or reverse repurchase
agreements if, as a result, more than 15% (10% with respect to the Equity Fund,
the Short/Intermediate Fund and the Money Market Funds) of the market value of
the Fund's total net assets would be invested in repurchase agreements or
reverse repurchase agreements with a maturity of more than seven days and in
other
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illiquid securities. The Funds will enter into repurchase agreements and reverse
repurchase agreements only with registered broker/dealers and commercial banks
that meet guidelines established by the Trust's Board of Trustees or the
Company's Board of Directors, as the case may be.
These securities allow the Funds to purchase securities with the right, but
not the obligation, to sell the security at a specific price valid for a
specific period of time.
SECURITIES WITH PUTS. In order to maintain liquidity, all equity Funds, the
Short/Intermediate Fund, the Bond Fund, the Government Fund, the Intermediate
Tax-Exempt Fund, the Tax-Exempt Fund, the Government Money Fund, the Money Fund
and the Tax-Exempt Money Fund may enter into puts with respect to portfolio
securities with banks or broker/dealers that, in the opinion of the Portfolio
Management Agent or, the Investment Adviser with respect to the Tax-Exempt Money
Market Fund or, with respect to the International Fund, the Investment
Sub-Adviser, present minimal credit risks. The ability of these Funds to
exercise a put will depend on the ability of the bank or broker/dealer to pay
for the underlying securities at the time the put is exercised. In the event
that a bank or broker/dealer defaults on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere.
Under a stand-by commitment, a dealer agrees to purchase, at the Fund's
option, specified obligations at a specified price.
STAND-BY COMMITMENTS. The Balanced Fund, the Intermediate Tax-Exempt Fund
and the Tax-Exempt Fund may acquire "stand-by commitments" with respect to
obligations held by it. Under a stand-by commitment, a dealer agrees to
purchase, at the Fund's option, specified obligations at a specified price. The
acquisition of a stand-by commitment may increase the cost, and thereby reduce
the yield, of the obligations to which the commitment relates. These Funds will
acquire stand-by commitments solely to facilitate portfolio liquidity and do not
intend to exercise their rights thereunder for trading purposes. Stand-by
commitments acquired by a Fund will be valued at zero in determining the Fund's
net asset value.
These instruments are issued at a discount from their "face value" and may
exhibit greater price volatility than ordinary debt securities.
STRIPPED SECURITIES. The International Fund and the Money Market Funds may
purchase participations in trusts that hold U.S. Treasury and agency securities
(such as TIGRs and CATs) and also may purchase Treasury receipts and other
stripped securities, which represent beneficial ownership interests in either
future interest payments or the future principal payments on the securities held
by the trust. These instruments are issued at a discount from their "face value"
and may (particularly in the case of stripped mortgage-backed securities)
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
Participations in TIGRs, CATs and other similar trusts are not considered U.S.
Government securities. Stripped securities will normally be considered illiquid
investments and will be acquired subject to the limitations on illiquid
investments unless determined to be liquid under guidelines established by the
Boards of Trustees and Directors.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government Obligations consist of bills,
notes and bonds issued by the U.S. Treasury. They are direct obligations of the
U.S. Government and differ primarily in the length of their maturities.
These obligations are debt securities issued by U.S. Government-sponsored
enterprises and federal agencies.
U.S. GOVERNMENT AGENCY AND INSTRUMENTALITY OBLIGATIONS. Obligations of the
U.S. Government agencies and instrumentalities are debt securities issued by
U.S. Government-sponsored enterprises and federal agencies. Some of these
obligations are supported by: (a) the full faith and credit of the U.S. Treasury
(such as Government National Mortgage Association participation certificates);
(b) the limited authority of the issuer to borrow from the U.S. Treasury (such
as securities of the Federal Home Loan Bank); (c) the authority of the U.S.
Government to purchase certain obligations of the issuer (such as securities of
the Federal National Mortgage Association); or (d) the credit of the issuer
only. In the case of obligations not backed by the full faith and credit of the
U.S., the investor must look principally to the agency issuing or guaranteeing
the obligation for ultimate repayment.
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Variable amount master demand notes differ from ordinary commercial paper
in that they are issued pursuant to a written agreement between the issuer and
the holder.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Short/Intermediate Fund and the
Money Fund may invest in variable amount master demand notes and in convertible
and non-convertible debt securities of domestic corporations and of foreign
corporations and governments that are denominated in and pay interest in U.S.
dollars, consisting of notes, bonds and debentures (i) in the case of the Money
Fund, that have thirteen months or less remaining to maturity and (ii) in the
case of the remaining Funds, that are rated "Baa" or better by Moody's or "BBB"
or better by S&P. Such securities must meet the applicable quality standards
described under "Investment Objectives and Policies." Variable amount master
demand notes differ from ordinary commercial paper in that they are issued
pursuant to a written agreement between the issuer and the holder. Their amounts
may from time to time be increased by the holder (subject to an agreed maximum)
or decreased by the holder or the issuer; they are payable on demand or after an
agreed-upon notice period, e.g., seven days; and the rates of interest vary
pursuant to an agreed-upon formula. Generally, master demand notes are not rated
by a rating agency. However, a Fund may invest in these obligations if, in the
opinion of the Portfolio Management Agent, they are of an investment quality
comparable to rated securities in which the Fund may invest. The Portfolio
Management Agent monitors the creditworthiness of issuers of master demand notes
on a daily basis. Transfer of these notes is usually restricted by the issuer,
and there is no secondary trading market for these notes. A Fund may not invest
in a master demand note with a demand notice period of more than seven days, if,
as a result, more than 15% (10% in the case of the Short/Intermediate Fund and
Money Fund) of the value of the Fund's total net assets would be invested in
these notes, together with other illiquid securities.
Warrants represent rights to purchase securities at a specific price valid
for a specific period of time.
WARRANTS. Each of the Growth Fund, the Equity Fund, the Equity Income Fund,
the Small-Cap Fund, the International Fund, the Balanced Fund and the
Convertible Securities Fund may invest up to 5% of its respective net assets at
the time of purchase, and the Index Fund may invest without such limitation, in
warrants (other than those that have been acquired in units or attached to other
securities) on securities in which it may invest directly. Warrants represent
rights to purchase securities at a specific price valid for a specific period of
time.
When-issued securities (new securities that have not started trading) will
only be purchased by the Funds with the intention of actually acquiring these
instruments.
WHEN-ISSUED SECURITIES. Each of the Funds may purchase securities
(including securities issued pursuant to an initial public offering) on a
when-issued basis, in which case delivery and payment normally take place within
45 days after the date of the commitment to purchase. The Funds will make
commitments to purchase securities on a when-issued basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement date, if deemed advisable. The purchase price and the interest rate
that will be received are fixed at the time of the commitment. When-issued
securities are subject to market fluctuation and no income accrues to the
purchaser prior to issuance. Purchasing a security on a when-issued basis can
involve a risk that the market price at the time of delivery may be lower than
the agreed upon purchase price.
These securities are debt obligations that do not entitle the holder to any
periodic payments of interest prior to maturity and are issued and traded at a
discount.
ZERO COUPON SECURITIES. Each of the Funds except the Convertible Securities
Fund and the Money Market Funds may invest in zero coupon securities. These
securities are debt obligations that do not entitle the holder to any periodic
payments of interest prior to maturity and are issued and traded at a discount.
The values of zero coupon securities are subject to greater fluctuations than
are the values of income securities that distribute income regularly. Zero
coupon securities (which are not issued or guaranteed by the U.S. Government)
may be created by separating the interest and principal component of government
securities or securities issued by private corporate issuers.
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INVESTMENT LIMITATIONS
This section outlines each Fund's policies that only may be changed by a
majority vote of shareholders.
Unless otherwise noted, the foregoing investment objectives and related
policies and activities of each of the Funds are not fundamental and may be
changed by the Trust's Board of Trustees or the Company's Board of Directors, as
the case may be, without the approval of shareholders, provided that, with
respect to the Short/Intermediate, Equity and Money Market Funds, the policy
relating to investment company securities is a fundamental investment policy. If
there is a change in a Fund's investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs.
As matters of fundamental policy, which only may be changed with approval
by the vote of the holders of a majority of the Fund's outstanding voting
securities, as described in the Statement of Additional Information, no Fund
may: (1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of its investments in that industry would exceed 25% of the
current value of its total assets, provided that there is no limitation with
respect to investments (a) in municipal obligations (for the purpose of this
restriction, private activity bonds shall not be deemed municipal obligations if
the payment of principal and interest on such bonds is the ultimate
responsibility of non-governmental users); (b) in obligations of the U.S.
Government, its agencies or instrumentalities; or (c) in the case of the Money
Fund, in certain bank obligations in which the Fund may invest, as set forth in
this Prospectus; (2) invest more than 5% of the current value of its total
assets in the securities of any one issuer, other than obligations of the U.S.
Government, its agencies or instrumentalities, except that up to 25% of the
value of the total assets of a Fund (other than the Money Fund and the
Government Money Fund) may be invested without regard to this limitation; (3)
purchase securities of an issuer if, as a result, with respect to 75% of its
total assets, it would own more than 10% of the voting securities of such
issuer; or (4) borrow from banks, except that a Fund may borrow up to 10% of the
current value of its total assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 10% of
the current value of the Fund's net assets (but investments may not be purchased
while borrowings are in excess of 5%). It is also a fundamental policy that each
Fund may make loans of portfolio securities, and, with respect to the Equity
Fund, the Short/Intermediate Fund and the Money Market Funds, invest up to 10%
of the current value of its net assets in repurchase agreements having
maturities of more than seven days, variable amount master demand notes having
notice periods of more than seven days, fixed time deposits subject to
withdrawal penalties having maturities of more than seven days, and securities
that are not readily marketable. Although not a matter of fundamental policy,
the Funds consider the securities of foreign governments to be a separate
industry for purposes of the 25% asset limitation on investments in the
securities of issuers conducting their principal business activity in the same
industry.
With respect to the second investment limitation set forth above, each of
the Money Fund and the Government Money Fund may invest more than 5% of its
total assets in the securities of a single issuer for a period of up to three
business days after the purchase thereof, so long as it does not make more than
one such investment at any one time.
MANAGEMENT
The Trust and the Company are managed under the direction of their
governing Boards of Trustees and Directors, respectively. Each individual listed
below is a member of both the Trust's Board of Trustees and the Company's Board
of Directors. The principal occupation of each individual is also listed below.
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TRUSTEES AND DIRECTORS
Edgar R. Fiedler Vice President and Economic Counsellor,
The Conference Board.
C. Gary Gerst Chairman of the Board of Directors and
Trustees; Chairman Emeritus, La Salle
Partners, Ltd. (Real Estate Developer
and Manager).
John W. McCarter, Jr. Senior Vice President, Booz Allen &
Hamilton, Inc. (Consulting Firm); Director
of W.W. Grainger, Inc. and A.M. Castle,
Inc.
Ernest M. Roth Consultant; Retired Senior Vice President
and Chief Financial Officer, Commonwealth
Edison Company.
INVESTMENT ADVISER
This section high-lights the experience, services offered, and compensation
of the Funds' Adviser.
The Trust and the Company have each entered into Advisory Contracts with
Harris Trust with respect to each of the Funds. Harris Trust, located at 111
West Monroe Street, Chicago, Illinois, is the successor to the investment
banking firm of N.W. Harris & Co. that was organized in 1882 and was
incorporated in 1907 under the present name of the bank. It is an Illinois
state-chartered bank and a member of the Federal Reserve System. At December 31,
1994, Harris Trust had assets of more than $13 billion and was the largest of 14
banks owned by Harris Bankcorp, Inc. Harris Bankcorp, Inc. is a wholly-owned
subsidiary of Bankmont Financial Corp., which is a wholly-owned subsidiary of
Bank of Montreal, a publicly traded Canadian banking institution.
As of December 31, 1994, Harris Trust managed more than $8 billion in
personal trust assets, and acted as custodian of more than $151 billion in
assets.
With respect to the Tax-Exempt Money Fund, the Advisory Contract provides
that Harris Trust shall make investments for the Fund in accordance with its
best judgment. With respect to the remaining Funds, the Advisory Contracts
provide that Harris Trust is responsible for the supervision and oversight of
the Portfolio Management Agent's performance (as discussed below).
For all its services under the Advisory Contracts with the Funds, Harris
Trust is entitled to receive monthly advisory fees at the following annual
rates:
<TABLE>
<CAPTION>
FUND ANNUAL RATE
<S> <C>
Equity Fund 0.70%
Equity Income Fund 0.70%
Growth Fund 0.90%
Small-Cap Fund 1.00%
Index Fund 0.25%
International Fund 1.05%
Balanced Fund 0.60%
Convertible Securities Fund 0.70%
Short/Intermediate Fund 0.70%
Bond Fund 0.65%
Government Fund 0.65%
Intermediate Tax-Exempt Fund 0.60%
Tax-Exempt Fund 0.60%
Government Money Fund* *0.14% of first $100m of
Money Fund* average daily net assets,
Tax-Exempt Money Fund* plus 0.10% of average daily
net assets over $100m.
</TABLE>
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<PAGE>
For the fiscal year ended December 31, 1995, Harris Trust received fees,
after waivers, at the effective rate of 0.34% of the average daily net assets of
the Short/Intermediate Fund. Harris Trust expects to receive, after waivers,
advisory fees for the current fiscal year at the annual rate of 0.34% of the
average daily net assets of the Short/Intermediate Fund; 0.40% of the average
daily net assets of the Bond Fund; and 0.30% of the average daily net assets of
the Government Fund, respectively.
PORTFOLIO MANAGEMENT AGENT
Harris Trust has entered into Portfolio Management Contracts with Harris
Investment Management, Inc. ("HIM" or the "Portfolio Management Agent") under
which HIM undertakes to furnish investment guidance and policy direction in
connection with the daily portfolio management of all of the Funds except the
Tax-Exempt Money Fund. For the services provided by HIM, Harris Trust will pay
to HIM the advisory fees it receives from the Funds. As of June 30, 1995, HIM
managed an estimated $13.8 billion in assets.
Purchase and sale orders of the securities held by each of the Funds may be
combined with other accounts that HIM manages, and for which it has brokerage
placement authority, in the interest of seeking the most favorable overall net
results. When HIM determines that a particular security should be bought or sold
for any of the Funds and other accounts managed by HIM, HIM undertakes to
allocate those transactions among the participants equitably.
PORTFOLIO MANAGEMENT
The organizational arrangements of the Investment Adviser and the Portfolio
Management Agent require that all investment decisions be made by a committee
and no one person is responsible for making recommendations to that committee.
GLASS-STEAGALL ACT
The Glass-Steagall Act, among other things, generally prohibits federally
chartered or supervised banks from engaging to any extent in the business of
issuing, underwriting, selling or distributing securities, although subsidiaries
of bank holding companies such as Harris Trust and HIM are permitted to purchase
and sell securities upon the order and for the account of their customers.
It is the position of Harris Trust and HIM that they may perform the
services contemplated by the Advisory Contracts, the Portfolio Management
Contracts and this Prospectus without violation of the Glass-Steagall Act or
other applicable federal banking laws or regulations. It is noted, however, that
there are no controlling judicial or administrative interpretations or decisions
and that future judicial or administrative interpretations of, or decisions
relating to, present federal statutes and regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, as well as
future changes in federal statutes or regulations and judicial or administrative
decisions or interpretations thereof, could prevent Harris Trust or HIM from
continuing to perform, in whole or in part, such services. If Harris Trust or
HIM were prohibited from performing any of such services, it is expected that
the Boards of Trustees and Directors of the Trust and the Company, respectively,
would recommend to the Funds' shareholders that they approve new agreements with
another entity or entities qualified to perform such services and selected by
the Boards of Trustees and Directors.
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<PAGE>
To the extent permitted by the Commission, the Funds may pay brokerage
commissions to certain affiliated persons. No such commission payments were made
during the last fiscal year by the Equity Fund, the Intermediate Bond Fund or
the Money Market Funds.
ADMINISTRATORS, CUSTODIAN AND TRANSFER AGENT
These service providers are responsible for maintaining the books and
records of the Funds, handling compliance and regulatory issues, processing buy/
sell orders, customer service and the safekeeping of securities.
First Data Investor Services Group, Inc. (formerly known as The Shareholder
Services Group, Inc.) ("First Data" or the "Administrator") and PFPC Inc.
("PFPC" or the "Administrator and Accounting Services Agent") (collectively, the
"Administrators") serve as the administrators of the Funds. In such capacity,
the Administrators generally assist the Funds in all aspects of their
administration and operation. PFPC also serves as the transfer and dividend
disbursing agent of the Funds (the "Transfer Agent").
PNC Bank, N.A. (the "Custodian") serves as custodian of the assets of the
Funds. PFPC and the Custodian are indirect, wholly-owned subsidiaries of PNC
Bank Corp.
As compensation for their services, the Administrators, the Custodian, and
the Transfer Agent are entitled to receive a combined fee based on the aggregate
average daily net assets of the Funds and the Trust's and the Company's other
investment portfolios, payable monthly at an annual rate of .17% of the first
$300 million of average daily net assets; .15% of the next $300 million; and
.13% of average net assets in excess of $600 million. In addition, a separate
fee is charged by PFPC for certain retail transfer agent services and for
various custody transactional charges.
DISTRIBUTOR
The Distributor underwrites the Funds' shares which are then available for
purchase or redemption.
Funds Distributor, Inc. (the "Distributor") has entered into a Distribution
Agreement with the Trust (and, with respect to the Equity Fund, the Intermediate
Bond Fund and the Money Market Funds, the Company) pursuant to which it has the
responsibility for distributing shares of the Funds. Fees for services rendered
by the Distributor will be paid by the Administrators. The Distributor bears the
cost of printing and mailing prospectuses to potential investors and any
advertising expenses incurred by it in connection with the distribution of
shares.
See "Management" and "Custodian" in the Statement of Additional Information
for additional information regarding the Funds' Investment Adviser, Portfolio
Management Agent, Administrators, Custodian, Transfer Agent and Distributor.
EXPENSES
Except for certain expenses borne by the Distributor, Harris Trust, and
HIM, the Trust and the Company each bears all costs of its operations, including
the compensation of its Trustees or Directors who are not affiliated with Harris
Trust, HIM or the Distributor or any of their affiliates; advisory and
administration fees; payments pursuant to any Service Plan (with respect to only
Class A Shares and in the case of the Money Market Funds, Class A and Class B
Shares); interest charges; taxes; fees and expenses of its independent
accountants, legal counsel, transfer agent and dividend disbursing agent;
expenses of preparing and printing prospectuses (except the expense of printing
and mailing prospectuses used for promotional purposes, unless otherwise payable
pursuant to a Service Plan), shareholders' reports, notices, proxy statements
and reports to regulatory agencies; insurance premiums and certain expenses
relating to insurance coverage; trade association membership dues; brokerage and
other expenses connected with the execution of portfolio securities
transactions; fees and expenses of the Funds' custodian including those for
keeping books and accounts and calculating the net asset value per share of the
Funds; expenses of shareholders' meetings and meetings of Boards of Trustees and
Directors; expenses
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<PAGE>
relating to the issuance, registration and qualification of shares of the Funds;
pricing services; organizational expenses; and any extraordinary expenses.
Expenses attributable to each Fund are charged against the assets of that Fund.
Other general expenses of the Trust and the Company are allocated among the
Funds in an equitable manner as determined by the Boards of Trustees and
Directors.
DETERMINATION OF NET ASSET VALUE
The Net Asset Value (NAV) is the price or value of one share of a Fund.
Net asset value per share for each Fund is determined on each day that the
New York Stock Exchange ("NYSE") and the Federal Reserve Bank of Philadelphia
(the "Fed") are open for trading. For a list of the days on which the net asset
value will not be determined, see "Determination of Net Asset Value" in the
Statement of Additional Information. The net asset value per share of each of
the Funds is determined by dividing the value of the total assets of a Fund less
all of its liabilities by the total number of outstanding shares of that Fund.
The net asset value per share of each of the Funds that are not Money
Market Funds (the "Non-Money Market Funds") is determined at the close of
regular trading on the NYSE on each day the Funds are open for business. The
value of securities of the Non-Money Market Funds (other than bonds and debt
obligations maturing in 60 days or less) is determined based on the last sale
price on the principal exchange on which the securities are traded as of the
close of regular trading on the NYSE (which is currently 4:00 P.M., New York
City time). In the absence of any sale on the valuation date, the securities are
valued at the closing bid price. Securities traded only on over-the-counter
markets are valued at closing over-the-counter bid prices. Bonds are valued at
the mean of the last bid and asked prices. Portfolio securities which are
primarily traded on foreign securities exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except when an occurrence subsequent to the time a value was so established is
likely to have changed such value. In such an event and in those instances where
prices of securities are not readily available, the fair value of those
securities will be determined in good faith by the Board of Trustees or
Directors, as the case may be. Prices used for valuations of securities are
provided by independent pricing services. Debt obligations with remaining
maturities of 60 days or less are valued at amortized cost when the Trust's
Board of Trustees or the Company's Board of Directors, as the case may be, has
determined that amortized cost valuation represents fair value.
The net asset value per share of each of the Money Market Funds is
determined at 12:00 Noon, New York City time. Each of the Funds uses the
amortized cost method to value its portfolio securities and each attempts to
maintain a constant net asset value of $1.00 per share. The amortized cost
method involves valuing a security at its cost and amortizing any discount or
premium over the period until maturity, regardless of the impact of fluctuating
interest rates on the market value of the security.
PURCHASE OF SHARES
Contact your broker, financial institution or service agent for answers to
any questions you may have about purchasing shares.
Institutional shares are sold to fiduciary and discretionary accounts of
institutions, "institutional investors", Directors, Trustees, officers and
employees of the Company, the Trust, the Investment Adviser, the Portfolio
Management Agent, and the Distributor and the Adviser's investment advisory
clients. "Institutional investors" may include financial institutions (such as
banks, savings institutions and credit unions); pension and profit sharing and
employee benefit plans and trusts; insurance companies; investment companies;
investment advisers; and broker/dealers acting for their own accounts or for the
accounts of such institutional investors.
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<PAGE>
The Trust, or the Company as the case may be, reserves the right to reject
any purchase order. All funds will be invested in full and fractional shares.
Checks will be accepted for the purchase of any Fund's shares subject to
collection at full face value in U.S. dollars. Inquiries may be directed to the
Funds at the address and telephone number on the cover of this Prospectus.
Purchase orders for shares of the Fund received in good order by the
Distributor prior to the close of regular trading (4:00 P.M., New York City
time) on the NYSE (on or before 12:00 Noon, New York City time, in the case of
the Money Market Funds) will be executed at the net asset value next determined
on that day. The net asset value of shares of the Money Market Funds is expected
to remain constant at $1.00. Orders placed with the Distributor must be paid for
by check or bank wire on the next business day for Funds other than the Money
Market Funds. Orders for the Money Market Funds placed with the Distributor must
be paid for by check or bank wire on the order date.
There is no sales charge by the Funds for purchases of shares.
No sales charge will be assessed on purchases of shares of the Funds.
Neither the Company nor the Trust imposes any minimum initial or subsequent
investment limitations.
Depending upon the terms of the particular customer account, financial
services institutions, including Harris Trust and HIM, may charge account fees
for automatic investment and other cash management services which they provide,
including, for example, account maintenance fees, compensating balance
requirements, or fees based upon account transactions, assets, or income. This
Prospectus should be read in connection with any information received from
financial institutions.
Each Fund also offers Class A Shares and, in addition, each Money Market
Fund offers another class of shares which are known as Class B Shares but the
terms of which differ from the Institutional Shares offered in this Prospectus.
Different classes of shares of a single portfolio may bear different sales
charges and other expenses which may affect their relative performance.
Investors may call 1-800-982-8782 to obtain more information concerning other
classes of the Funds.
REDEMPTION OF SHARES
Shares may be redeemed at their next determined net asset value after
receipt of a proper request by the Distributor. Shares held by an institution on
behalf of its customers must be redeemed in accordance with instructions and
limitations pertaining to the account at the institution.
There is no charge by the Funds for redemptions, although Institutions may
charge an account-based service fee.
There is no charge for redemption transactions, but an institution may
charge an account-based service fee. Redemption orders received by an
institution before the close of the NYSE with respect to shares of a Fund and
received by the Distributor before the close of business on the same day will be
executed at the Fund's net asset value per share next determined on that day.
Redemption orders received by an institution after the close of the NYSE, or not
received by the Distributor prior to the close of business, will be executed at
the Fund's net asset value next determined on the next business day.
Redemption orders for a Non-Money Market Fund that are received in good
order by 4:00 P.M. New York City time, or 12:00 Noon in the case of the Money
Market Funds, will normally be remitted within five business days but not more
than seven days. In the case of a redemption request made shortly after a recent
purchase, the redemption proceeds will be distributed upon the clearance of the
shareholder's check used to purchase the Fund's shares which may take up to 15
days or more after the
33
<PAGE>
investment. The proceeds may be more or less than cost and, therefore, a
redemption may result in a gain or loss for federal income tax purposes. Payment
of redemption proceeds may be made in readily marketable securities.
REDEMPTION THROUGH INSTITUTIONS
Proceeds of redemptions made through authorized institutions will be
credited to the shareholder's account with the institution. A redeeming
shareholder may request a check from the institution or may elect to retain the
redemption proceeds in such shareholder's account. The institution may benefit
from the use of the redemption proceeds prior to the clearance of a check issued
to a redeeming shareholder for the proceeds or prior to disbursement or
reinvestment of the proceeds on behalf of the shareholder.
REDEMPTION BY EXPEDITED REDEMPTION SERVICE
If shares of the Money Market Funds are held directly by the Transfer Agent
in book credit form and the Expedited Redemption Service has been elected on the
Purchase Application on file with the Transfer Agent, redemption of shares may
be requested by telephone, on any day the Company and the Transfer Agent are
open for business. The Company and its Transfer Agent will attempt to confirm
that telephone instructions are genuine and will use such procedures as are
considered reasonable. In this regard the Company and its Transfer Agent require
personal identification information before accepting telephonic redemption
instructions. The shareholder will bear the risk of loss due to fraud, although
the Company and its agents may have a risk of loss if reasonable procedures are
not used. The Distributor can be reached by calling (800) 982-8782.
Upon request, proceeds of Expedited Redemptions of $1,000 or more will be
wired to the shareholder's bank indicated in the Purchase Application. If an
Expedited Redemption request is received by the Transfer Agent by 12:00 Noon
(New York City time) on a day the Company and the Transfer Agent are open for
business, the redemption proceeds will be transmitted to the shareholder's bank
that same day. A check for the proceeds of less than $1,000 will be mailed to
the shareholder's address of record, except that, in the case of investments in
the Company that have been effected through Institutions, the full amount of the
redemption proceeds will be transmitted by wire.
__________
Due to the high cost of maintaining small accounts, the Trust, or the
Company as the case may be, reserves the right to redeem accounts involuntarily
on behalf of shareholders whose share balances fall below $500 unless this
balance condition results from a decline in the market value of a Fund's assets.
Prior to such a redemption, a shareholder will be notified in writing and
permitted 30 days to make additional investments to raise the account balance to
the specified minimum.
EXCHANGE PRIVILEGE
Once you have held shares for 7 days or more, you can exchange these shares
for other eligible Harris Insight Fund Institutional Shares
Institutional Shares of any of the Funds that have been held for seven days
or more may be exchanged at their respective net asset values for Institutional
Shares of any other Harris Insight Fund in an identically registered account,
provided shares of the Harris Insight Fund to be acquired are registered for
sale in the shareholder's state of residence.
Procedures applicable to redemption of a Fund's shares are also applicable
to exchanging shares. The Trust or the Company, as the case may be, reserves the
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<PAGE>
right to limit the number of times shares may be exchanged between the Harris
Insight Funds, to reject any telephone exchange order or otherwise to modify or
discontinue exchange privileges at any time upon 60 days written notice. A
capital gain or loss for tax purposes may be realized upon an exchange,
depending upon the cost or other basis of shares redeemed.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income of the Short/Intermediate Fund, the
Bond Fund, the Government Fund, the Intermediate Tax-Exempt Fund and the
Tax-Exempt Fund are declared daily and paid monthly. Dividends from the
Convertible Securities Fund, the Equity Fund, the Equity Income Fund, the Growth
Fund, the Index Fund and the Balanced Fund are declared and paid quarterly.
Dividends from the Small-Cap Fund and the International Fund are declared and
paid semi-annually. Dividends from net investment income from each of the Money
Market Funds are declared at the close of each business day to shareholders of
record at 12:00 Noon (New York City time) on the day of declaration and paid
monthly. Shares purchased will begin earning dividends on the day the purchase
order is executed and shares redeemed will earn dividends through the day prior
to redemption, except that, with respect to the Check Redemption Service, shares
redeemed will cease to earn dividends on the day the check is charged to the
Custodian's account at its Federal Reserve Bank. Net investment income for a
Saturday, Sunday or holiday will be declared as a dividend on the previous
business day to shareholders of record at 12:00 Noon (New York City time) on
that day.
Each Fund's net taxable capital gains, if any, will be distributed at least
annually (to the extent required to avoid imposition of the 4% excise tax
described below). Dividends and distributions paid by any of the Funds will be
invested in additional shares of the same Fund at net asset value and credited
to the shareholder's account on the payment date or, at the shareholder's
election, paid in cash. Dividend checks and Statements of Account will be mailed
approximately two business days after the payment date. Each Fund will forward
to the Transfer Agent the monies for dividends to be paid in cash on the payment
date.
Shareholders who redeem all their shares of any of the fixed income and the
money market Funds prior to a dividend payment will receive, in addition to the
redemption proceeds, dividends declared but unpaid. Shareholders who redeem only
a portion of their shares will be entitled to all dividends declared but unpaid
on such shares on the next dividend payment date.
FEDERAL INCOME TAXES
Each Fund will be treated as a separate entity for tax purposes and thus
the provisions of the Internal Revenue Code (the "Code") generally will be
applied to each Fund separately, rather than to the Trust or the Company, as the
case may be, as a whole. As a result, net capital gains, net investment income,
and operating expenses will be determined separately for each Fund. The Trust or
the Company, as the case may be, intends to qualify each Fund as a regulated
investment company under Subchapter M of the Code. As a portfolio of a regulated
investment company, each Fund will not be subject to federal income taxes with
respect to net investment income and net capital gains distributed to its
shareholders, as long as it distributes 90% or more of its net investment income
(including net short-term capital gains) each year.
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<PAGE>
Dividends from net investment income (including net short-term capital
gains), except "exempt-interest dividends" (described below), will be taxable as
ordinary income.
Because more than 50% of the value of the total assets of each of the
Tax-Exempt Fund, the Intermediate Tax-Exempt Fund and the Tax-Exempt Money Fund
at the close of each quarter of its taxable year is expected to consist of
obligations the interest on which is exempt from federal income tax, these Funds
expect to qualify under the Code to pay "exempt-interest dividends." Dividends
distributed by each of these Funds that are attributable to interest from
tax-exempt securities will be designated by the Fund as an "exempt-interest
dividend," and, as such, will generally be exempt from federal income tax.
Because substantially all of the income of each Fund except the equity
Funds will arise from interest, no part of the distributions to shareholders of
these Funds is expected to qualify for the dividends-received deduction allowed
to Corporations under the Code.
Distributions of net long-term capital gains, if any, will be taxable as
long-term capital gains, whether received in cash or reinvested in additional
shares, regardless of how long the shareholder has held the shares, and will not
qualify for the dividends-received deductions.
A taxable gain or loss may also be realized by a holder of shares in a Fund
upon the redemption or transfer of shares depending on the tax basis of the
shares and their price at the time of the transaction.
In the case of the shareholders of each of the Tax-Exempt Fund, the
Intermediate Tax-Exempt Fund or the Tax-Exempt Money Fund, interest on
indebtedness incurred or continued to purchase or carry shares of the Fund will
not be deductible to the extent that the Fund's distributions are exempt from
federal income tax. In addition, the portion of an exempt-interest dividend
allocable to certain tax-exempt obligations will be treated as a preference item
for purposes of the alternative minimum tax imposed on both individuals and
corporations. Persons who may be "substantial users" (or "related persons" of
substantial users) of facilities financed by private activity bonds should
consult their tax advisers before purchasing shares in the Tax-Exempt Fund, the
Intermediate Tax-Exempt Fund or the Tax-Exempt Money Fund.
The exemption of exempt-interest dividends paid by each of the Tax-Exempt
Fund, the Intermediate Tax-Exempt Fund and the Tax-Exempt Money Fund for federal
income tax purposes may not result in similar exemptions under the tax law of
state and local authorities. In general, only interest earned on obligations
issued by the state or locality in which the investor resides will be exempt
from state and local taxes. Shareholders should consult their advisers about the
status of dividends from these Funds in their own states and localities. Each
year the Trust or the Company, as the case may be, will notify shareholders of
the tax status of distributions.
Any loss realized on a sale or exchange of shares of a Fund will be
disallowed to the extent shares are acquired within the 61-day period beginning
30 days before and ending 30 days after the disposition of shares.
The Trust or the Company, as the case may be, will be required to withhold,
subject to certain exemptions, currently at a rate of 31%, a portion of
dividends paid or credited to individual shareholders and of redemption
proceeds, if a correct taxpayer identification number, certified when required,
is not on file with the Trust or the Company, as the case may be, or Transfer
Agent.
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<PAGE>
ACCOUNT SERVICES
Shareholders receive a Statement of Account whenever a share transaction,
dividend or capital gain distribution is effected in the accounts, or at least
annually. Shareholders can write or call the Funds at the address and telephone
number on page one of this Prospectus with any questions relating to their
investment in shares of the Funds.
ORGANIZATION AND CAPITAL STOCK
The Trust is a diversified open-end management investment company which was
organized on December 6, 1995 as a business trust under the laws of The
Commonwealth of Massachusetts. The Trust offers shares of beneficial interest,
$.001 par value, for sale to the public. Currently, the Trust has eleven
portfolios in operation. The Trust's Board has authorized each of the eleven
Funds which are portfolios of the Trust to issue two classes of shares, Class A
and Institutional Shares.
The Company, which was incorporated in Maryland on September 16, 1987, is a
diversified, open-end management investment company. The authorized capital
stock of the Company consists of 10,000,000,000 shares having a par value of
$.001 per share. Currently, the Company has six portfolios in operation. The
Company's Board has authorized the Money Market Funds to issue three classes of
shares, Class A, Class B and Institutional Shares and the remaining Funds (the
"Company's Non-Money Market Funds") to issue two classes of shares, Class A and
Institutional Shares.
In the future, the Board of Trustees of the Trust and the Board of
Directors of the Company may authorize the issuance of shares of additional
investment portfolios and additional classes of shares of any portfolio.
Different classes of shares of a single portfolio may bear different sales
charges and other expenses which may affect their relative performance.
Information regarding other classes of shares may be obtained by calling the
Funds at the telephone number shown on the cover page of this Prospectus or from
any institution which makes available shares of the Funds. All shares of the
Trust and all shares of the Company have equal voting rights and will be voted
in the aggregate, and not by class, except where voting by class is required by
law or where the matter involved affects only one class. A more detailed
statement of the voting rights of shareholders is contained in the Statement of
Additional Information. All shares of the Trust and all shares of the Company,
when issued, will be fully paid and non-assessable.
As of January 31, 1996, the holders of record of 25% or more of the
outstanding shares of the Funds were as follows: ACO/Integra Trust Services held
of record 1,283,579 shares, equal to 27.14% of the outstanding shares of the
Equity Fund and Harris Trust held of record 1,543,359 shares, equal to 32.63% of
the outstanding shares of the Equity Fund; 4,031,259 shares, equal to 81.62% of
the Short/Intermediate Fund; 512,077,635 shares, equal to 95.79% of the
outstanding shares of the Money Market Fund -- Class A Shares; 214,334,587
shares, equal to 99.99% of the Money Market Fund -- Institutional Shares;
255,211,536 shares, equal to 96.40% of the Government Money Market Fund -- Class
A Shares; 31,248,318 shares, equal to 99.99% of the outstanding shares of the
Government Market Fund -- Institutional Shares; 174,081,221 shares, equal to
90.05% of the outstanding shares of the Tax-Exempt Money Market Fund -- Class A
Shares; and 280,623,069 shares, equal to 99.99% of the outstanding shares of the
Tax Exempt Money Market Fund -- Institutional Shares. Harris Trust has indicated
that it holds its shares on behalf of various client accounts and not as
beneficial owner.
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The Trust and the Company may dispense with annual meetings of shareholders
in any year in which Trustees and Directors are not required to be elected by
shareholders. The Board of Trustees of the Trust and the Board of Directors of
the Company, when requested by at least 10% of the Trust's or the Company's
outstanding shares, will call a meeting of shareholders for the purpose of
voting upon the question of removal of a Trustee or Trustees or of a Director or
Directors and will assist in communications with other shareholders as required
by Section 16(c) of the 1940 Act.
There is a possibility that the Trust might become liable for any
misstatement, inaccuracy or incomplete disclosure in this Prospectus concerning
the Company. There is a possibility that the Company might become liable for any
misstatement, inaccuracy or incomplete disclosure in this Prospectus concerning
the Trust.
REPORTS TO SHAREHOLDERS
The fiscal year of both the Trust and the Company ends on December 31. Each
of the Trust and the Company, as the case may be, will send to its shareholders
a semi-annual report showing the investments held by each of the Funds and other
information (including unaudited financial statements) pertaining to the Trust
or the Company, as appropriate. An annual report, containing financial
statements audited by independent accountants, is also sent to shareholders.
CALCULATION OF YIELD AND TOTAL RETURN
The total return of each Fund shows what an investment in Institutional
Shares of the Fund would have earned over a specific period of time.
From time to time each of the Funds may advertise its yield, effective
yield, tax-equivalent yield and "total return" with respect to the Institutional
Shares. "Total return" refers to the amount an investment in Institutional
Shares of a Fund would have earned, including any increase or decrease in net
asset value, over a specified period of time and assumes reinvestment of all
dividends and distributions.
The total return of each Fund shows what an investment in the Fund would
have earned over a specified period of time (such as one, five or ten years or
the period of time since commencement of operations, if shorter) assuming the
payment of the maximum sales loads (if any) when the investment was first made
and reinvestment of all distributions and dividends by the Fund on their
reinvestment dates during the period less all recurring fees.
The yield of each Fund refers to the income generated by an investment in
Institutional Shares of the Fund over a 30-day period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during the 30-day period is assumed
to be earned and reinvested at a constant rate and compounded semi-annually. The
annualized income is then shown as a percentage of the investment.
The effective yield is calculated similarly but, when annualized, the
income earned by an investment in Institutional Shares of the Fund is assumed to
be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. The
"tax-equivalent yield", which will be calculated only for the Intermediate
Tax-Exempt Fund, the Tax-Exempt Fund and the Tax-Exempt Money Fund, refers to
the yield on a taxable investment necessary to produce an after-tax yield equal
to a Fund's tax-free yield, and is calculated by increasing the yield shown for
the Fund to the extent necessary to reflect the payment of specified tax rates.
Thus, the tax-equivalent yield for a Fund will always exceed that Fund's yield.
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From time to time the Money Market Funds advertise "30-day average yield"
and "monthly average yield." Such yields refer to the average daily income
generated by an investment in such Fund over a 30-day or monthly period, as
appropriate (which period will be stated in the advertisement).
A Fund's performance figures for a class of shares represent past
performance, will fluctuate and should not be considered as representative of
future results. The yield of any investment is generally a function of portfolio
quality and maturity, type of instrument and operating expenses.
39
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INVESTMENT ADVISER
Harris Trust & Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
PORTFOLIO MANAGEMENT AGENT
Harris Investment Management, Inc.
190 South LaSalle Street
Chicago, Illinois 60603
ADMINISTRATORS
First Data Investor Services Group, Inc.
53 State Street
Boston, Massachusetts 02109
PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
DISTRIBUTOR
Funds Distributor, Inc.
One Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
PNC Bank, N.A.
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
PFPC Inc.
P.O. Box 8950
Wilmington, Delaware 19885
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
Philadelphia, Pennsylvania
LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
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