As filed electronically with the Securities and Exchange Commission on
June 13, 1997
Securities Act File No. 33-64915
Investment Company Act File No. 811-7447
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 5
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 8
HARRIS INSIGHT FUNDS TRUST
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(Exact Name of Registrant as Specified in Charter)
60 State Street, Suite 1300, Boston, MA 02109
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(Address of Principal Executive Offices including Zip Code)
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Registrant's Telephone Number, including Area Code: (617) 557-0700
Name and Address of Agent for Service: Copies to:
John E. Pelletier, Esq. Cameron S. Avery, Esq.
Harris Insight Funds Trust Bell, Boyd & Lloyd
60 State Street Three First National Plaza
Suite 1300 70 West Madison Street
Boston, MA 02109 Chicago, IL 60602-4207
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It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
___ on __________ pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
X 75 days after filing pursuant to paragraph (a)
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___ on __________ pursuant to paragraph (a) of Rule 485
If appropriate, check the following box:
____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant filed the notice required by Rule 24f-2 for its most
recent fiscal year on February 25, 1997.
CROSS REFERENCE SHEET
Pursuant to Rule 495(b)
under the Securities Act of 1933
(Prospectus offering Class A and Institutional Shares of Harris Insight Emerging
Markets Fund)
Part A
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N-1A Item No. Location
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Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Summary
Item 3. Condensed Financial Information General Information - How Performance is Reported
Item 4. General Description of Registrant Cover Page; Fund Summary; Investment Objectives and
Policies; Additional Investment Information; General
Information - More Information About the Trust
Item 5. Management of the Fund Management
Item 5A. Management: Discussion of Fund Performance Not Applicable
Item 6. Capital Stock and Other Securities Cover Page; Shareholder Services and Policies; How
the Fund Makes Distributions to Shareholders; Tax
Information; General Information - More Information
About the Trust
Item 7. Purchase of Securities Being Offered Management; How to Buy Shares; How to Sell Shares;
Shareholder Services and Policies; General
Information - How Share Value is Determined
Item 8. Redemption or Repurchase How to Buy Shares; How to Sell Shares; Shareholder
Services and Policies
Item 9. Pending Legal Proceedings Not Applicable
</TABLE>
(SAI offering Class A and Institutional Shares of Harris Insight Emerging
Markets Fund)
Part B
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N-1A Item No. Location
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Strategies; Investment Restrictions;
Portfolio Transactions
Item 14. Management of the Fund Management
Item 15. Control Persons and Principal Holders of Management
Securities
Item 16. Investment Advisory and Other Services Management; Service Plans; Custodian; Independent
Accountants
Item 17. Brokerage Allocation and Other Practices Portfolio Transactions
Item 18. Capital Stock and Other Securities Beneficial Interest
Item 19. Purchase, Redemption and Pricing of Determination of Net Asset Value; Financial
Securities Being Offered Statements
Item 20. Tax Status Federal Income Taxes
Item 21. Underwriters Management; Service Plans
Item 22. Calculation of Performance Data Calculation of Yield and Total Return
Item 23. Financial Statements Financial Statements
</TABLE>
CROSS REFERENCE SHEET
Pursuant to Rule 495 (b)
under the Securities Act of 1933
Part A
(All other Prospectuses)
Not Applicable in this Filing
HARRIS INSIGHT(R) FUNDS
HARRIS INSIGHT EMERGING MARKETS FUND
60 State Street, Suite 1300
Boston, Massachusetts 02109
Telephone: (800) 982-8782
This Prospectus offers Class A shares ("Class A Shares") and Institutional
Shares ("Institutional Shares") of Harris Insight Emerging Markets Fund (the
"Fund"). The Fund is an investment portfolio of Harris Insight Funds Trust (the
"Trust"), which is registered as an open-end management investment company (a
mutual fund). The Fund is offered along with the other investment portfolios of
the Trust and HT Insight Funds, Inc. d/b/a Harris Insight Funds. Together, these
funds are known as the Harris Insight Funds.
The Fund invests primarily in securities of issuers located in countries with
emerging capital markets. Investment in these securities involves certain risks
not associated with domestic investing.
Harris Trust and Savings Bank serves as the Fund's investment adviser. Harris
Investment Management, Inc. acts as the Fund's portfolio management agent.
Hansberger Global Investors, Inc. serves as investment sub-adviser to the Fund.
Please read this Prospectus before investing and keep it on file for future
reference. The Prospectus contains the information that a prospective investor
should know before investing, including how the Fund invests and the many
services available to shareholders.
To learn more about the Fund and its investments, you may obtain a copy of the
Harris Insight Funds' most recent financial report and portfolio listing or
Statement of Additional Information dated September 1, 1997 (the "SAI") simply
by calling (800) 982-8782. The SAI has been filed with the Securities and
Exchange Commission (the "SEC") and (as supplemented from time to time) is
incorporated by reference into this Prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI and other information regarding the
Fund.
THE HARRIS INSIGHT FUNDS ARE A FAMILY OF OPEN-END INVESTMENT COMPANIES COMMONLY
KNOWN AS MUTUAL FUNDS. SHARES OF MUTUAL FUNDS ARE NOT INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. SHARES OF THE FUND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, HARRIS TRUST AND SAVINGS BANK OR
ANY OTHER BANK OR BANK AFFILIATE.
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
September 1, 1997
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TABLE OF CONTENTS
Page
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Fund Summary............................................................................
Expense Summary.........................................................................
Investment Objective and Policies.......................................................
Additional Investment Information ......................................................
Additional Investment Policies.................................................
Investment Limitations.........................................................
Risk Considerations............................................................
Management..............................................................................
How to Buy Shares.......................................................................
How to Sell Shares......................................................................
Shareholder Services and Policies.......................................................
How the Fund Makes Distributions to Shareholders; Tax Information.......................
General Information.....................................................................
Banking Law Matters............................................................
How Share Value Is Determined..................................................
How Performance Is Reported....................................................
More Information About the Trust...............................................
Appendix A: Permitted Investments......................................................
</TABLE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the SAI and/or in
the Fund's official sales literature in connection with the offering of the
Fund's shares and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Trust. This Prospectus
does not constitute an offer in any jurisdiction in which, or to any person to
whom, such offer may not lawfully be made.
2
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FUND SUMMARY
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The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
WHO MANAGES THE FUND'S INVESTMENTS?
Harris Trust and Savings Bank ("Harris Trust" or the "Adviser") serves as the
investment adviser for the Fund. Harris Trust and its predecessors have provided
investment management services to clients for over 100 years. In addition to the
services it performs for the Harris Insight Funds, Harris Trust provides
investment management services for pension, profit-sharing and personal
portfolios. As of December 31, 1996, total discretionary trust assets under
management totaled approximately $13.3 billion. Harris Investment Management,
Inc. ("HIM" or the "Portfolio Management Agent") serves as the Fund's portfolio
management agent. As of December 31, 1996, HIM had a staff of 62, including 35
professionals, providing investment expertise to the management of the Harris
Insight Funds and for pension, profit-sharing and institutional portfolios. As
of that date, assets under management were approximately $9.2 billion. Subject
to the general oversight of Harris Trust and HIM, Hansberger Global Investors,
Inc. ("Hansberger") serves as investment sub-adviser to the Fund. Harris Trust
and HIM are subsidiaries of Harris Bankcorp., Inc. See MANAGEMENT.
WHO SHOULD INVEST IN THE FUND?
The Fund should be considered a means of diversifying an investment portfolio
and is not in itself a balanced investment program. The Fund is designed for
long-term investors who can tolerate changes in the value of their investments
in return for the possibility of higher returns and is not intended for
investors whose objective is assured income or preservation of capital. In
making your investment decisions, consider your investment goals, your time
horizon to achieve them, and your tolerance for risk. For more information about
the Fund and its investments, see INVESTMENT OBJECTIVE AND POLICIES.
WHAT ADVANTAGES DOES THE FUND OFFER?
An investment gives the investor benefits customarily available only to large
investors, such as diversification, greater liquidity, professional management,
and relief from bookkeeping, safekeeping of securities and other administrative
details.
WHEN ARE DIVIDENDS PAID?
Dividends from the Fund are declared and paid semi-annually. See HOW THE FUND
MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION.
3
HOW ARE SHARES BOUGHT AND SOLD?
Class A Shares are offered through this Prospectus at a price equal to their net
asset value plus any applicable sales charge. The minimum initial investment in
Class A Shares is $1,000; the minimum subsequent investment is $50.
Institutional Shares are offered primarily to institutional investors without a
sales charge and without the imposition of any minimum initial or subsequent
investment. Shares may be bought or sold by mail, by bank wire or through your
broker-dealer or other financial institution. See HOW TO BUY SHARES and HOW TO
SELL SHARES.
WHAT RISKS ARE ASSOCIATED WITH THE FUND?
There can be no assurance that the Fund will achieve its investment objective.
The net asset value of the Fund will fluctuate based upon changes in the value
of the Fund's portfolio securities and, when shares are sold, an investment may
be worth more or less than the investment's original value. As with any mutual
fund, the fundamental risk is that the value of securities that the Fund holds
may decrease. The Fund's performance and price per share changes daily based on
many factors, including the perceived quality of the Fund's investments,
economic conditions and general market conditions.
Investment in securities of foreign issuers, particularly in countries with
smaller, emerging capital markets, involves certain risks not associated with
domestic investing, including fluctuations in foreign exchange rates, uncertain
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions.
The use of leverage through borrowings, reverse repurchase agreements and other
investment techniques involves additional risks. For information about
particular risks, see ADDITIONAL INVESTMENT INFORMATION - RISK CONSIDERATIONS.
4
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EXPENSE SUMMARY
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The following tables illustrate information concerning shareholder transaction
expenses and annual fund operating expenses for Class A Shares and Institutional
Shares of the Fund. Shareholder transaction expenses are charges you pay when
you buy, sell or hold shares of the Fund. Annual operating expenses are factored
into the Fund's share price and are not charged directly to shareholder
accounts.
SHAREHOLDER TRANSACTION EXPENSES
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CLASS A SHARES INSTITUTIONAL SHARES
<S> <C> <C>
MAXIMUM SALES LOAD IMPOSED ON PURCHASES
(AS A PERCENTAGE OF OFFERING PRICE) 4.50% None
</TABLE>
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets after applicable fee waivers and expense
reimbursements)*
<TABLE>
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CLASS A SHARES INSTITUTIONAL SHARES
<S> <C> <C>
INVESTMENT ADVISORY FEES 1.25% 1.25%
RULE 12B-1 FEES 0.25% None
OTHER EXPENSES 0.50% 0.50%
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TOTAL OPERATING EXPENSES 2.00% 1.75%
</TABLE>
* The amounts for other expenses of the Fund are based on estimated expenses and
projected assets for the current fiscal year.
Customers of a financial institution, such as Harris Trust, also may be
charged certain fees and expenses by the institution. These fees may vary
depending on the capacity in which the institution provides fiduciary and
investment services to the particular client (such as trust, estate
settlement, advisory and custodian services).
EXAMPLE
The table below shows what you would pay if you invested $1,000 over the time
frames indicated. The example assumes you reinvested all dividends and that the
average annual return was 5%.
<TABLE>
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CLASS A SHARES INSTITUTIONAL SHARES
<S> <C> <C>
ONE YEAR $20 $18
THREE YEARS $64 $55
</TABLE>
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 tables is to help you understand the various costs
and expenses that an investor in the Fund will bear directly or indirectly. For
more information concerning these costs and expenses, see MANAGEMENT.
5
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INVESTMENT OBJECTIVE AND POLICIES
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INVESTMENT OBJECTIVE
The Fund seeks to provide capital appreciation. There is no assurance that the
Fund will achieve its investment objective.
INVESTMENT POLICIES
The Fund seeks to achieve its investment objective by investing primarily in a
diversified portfolio of publicly traded equity securities of companies located
in emerging markets that Hansberger believes are undervalued. To a lesser
degree, the Fund also may invest in emerging market equity securities offered in
"private placements." Dividend and interest income from portfolio securities is
largely an incidental consideration.
The Fund's investment approach relies heavily on a fundamental analysis of
securities with a long-term investment perspective. The Fund seeks to maximize
this approach by extending the search for value into many countries around the
world. This global search provides the Fund with more diverse opportunities and
flexibility to shift portfolio investments not only from company to company and
industry to industry, but also from country to country, in search of undervalued
securities.
Under normal circumstances, the Fund invests at least 65% of the value of its
total assets in securities of issuers located in emerging market countries. As
used in this Prospectus, the terms "emerging market country," "emerging
country," or "developing country" apply to any country that, in Hansberger's
opinion, is generally considered to be an emerging or developing country by the
international financial community, which includes the International Bank for
Reconstruction and Development (the "World Bank") and the International Finance
Corporation. There are currently over 130 countries that are emerging or
developing countries under this standard; approximately 40 of these countries
currently have stock markets. These countries generally include every nation in
the world except the United States, Canada, Japan, Australia, New Zealand and
most nations located in Western Europe. Securities of issuers located in
emerging market countries or traded in emerging markets present greater
liquidity risks and other risks than securities of issuers located in developed
countries or traded in more established markets.
By engaging in its own research and by reviewing research obtained through
outside sources, Hansberger seeks to identify appropriate investments for the
Fund. Hansberger may consider a number of factors in evaluating potential
investments including political risks, classic macro-economic variables and
equity market valuations. Hansberger also focuses on the quality of a company's
management, growth prospects, and financial well being. The Fund's investments
generally will reflect a broad cross-section of countries, industries, and
companies in order to minimize risk. In situations where the market for a
particular security is determined by Hansberger to be sufficiently liquid, the
Fund may engage in short sales. For a further
6
description of the Fund's investments and investment techniques, see ADDITIONAL
INVESTMENT INFORMATION, APPENDIX A: PERMITTED INVESTMENTS ("Appendix A") and the
SAI.
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ADDITIONAL INVESTMENT INFORMATION
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ADDITIONAL INVESTMENT POLICIES
Unless otherwise noted, the Fund's investment objective and policies are not
fundamental and may be changed by the Board of Trustees without approval by the
Fund's shareholders. Investment policies that are designated as fundamental may
be changed only with approval of the holders of a majority of the Fund's
outstanding voting securities. A majority of outstanding voting securities means
the lesser of 67% of the shares present or represented at a shareholders meeting
at which the holders of more than 50% of the outstanding shares are present or
represented, or more than 50% of the outstanding shares.
Although the Fund generally invests in common stock, the Fund may also invest in
preferred stocks and certain debt securities of any grade, rated or unrated,
such as convertible bonds and bonds selling at a discount, when Hansberger
believes the potential for appreciation will equal or exceed that available from
investments in common stock. The Fund may also invest in warrants or rights to
subscribe to or purchase such securities, and sponsored or unsponsored American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs"), Global
Depository Receipts ("GDRs") and other depository receipts. The Fund may invest
in the securities of other investment companies, when-issued securities and
forward commitments, floating and variable rate obligations, as well as
commercial paper, short-term money market instruments and cash equivalents, such
as certificates of deposit, demand and time deposits and bankers' acceptance
notes. The Fund may enter into repurchase agreements and reverse repurchase
agreements, lend its portfolio securities, and borrow money for investment
purposes.
The Fund also may invest in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, warrants and futures
contracts and related options. Whenever, in the judgment of Hansberger, market
or economic conditions warrant, the Fund may adopt a temporary defensive
position and may invest without limit in money market securities denominated in
U.S. dollars or in the currency of any foreign country.
Additional information about the Fund's investment policies and restrictions, as
well as certain key risk considerations, is presented below. For a further
description of the Fund's investment policies, including additional fundamental
policies, see Appendix A and the SAI.
PORTFOLIO TRANSACTIONS. Portfolio securities of the Fund are kept under
continuing supervision and changes may be made whenever, in the judgment of
Hansberger, 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 the cash
necessary for redemptions, distributions to shareholders or other Fund
management purposes. Portfolio changes may be made without regard to the length
of time a particular security has been held or the frequency of portfolio
transactions of the Fund (the portfolio turnover rate). The
7
annual portfolio turnover rate for the Fund is not expected to exceed 50%. An
annual portfolio turnover rate of 100% would occur if all of the securities held
by the Fund were replaced once in a period of one year. The realization of
taxable capital gains and, with respect to equity securities, the amount of
brokerage commissions will tend to increase as the level of portfolio activity
increases.
Hansberger seeks "best execution" for all portfolio transactions, but the Fund
may pay higher than the lowest available commission rates when Hansberger
believes it is reasonable to do so in light of the value of the brokerage,
research and other services provided by the broker effecting the transaction.
Purchase and sale orders for portfolio securities on behalf the Fund may be
combined with those of other funds or accounts that Hansberger, HIM or Harris
Trust manages, and for which such entity has brokerage placement authority, in
the interest of seeking the most favorable overall net results. When Hansberger
determines that a particular security should be bought or sold for the Fund and
other funds or accounts it manages, it undertakes to allocate the transactions
among the participants equitably. To the extent permitted by the SEC, the Fund
may pay brokerage commissions to certain affiliated persons.
The Trust, the Adviser, the Portfolio Management Agent, Hansberger and other
service providers to the Fund have adopted codes of ethics which contain
policies on personal securities transactions by "access persons," including
portfolio managers and investment analysts.
TEMPORARY DEFENSIVE POSITION. When business or financial conditions warrant, the
Fund may assume a temporary defensive position by investing in money market
investments. These money market investments include obligations of the U.S.
Government and its agencies and instrumentalities, obligations of foreign
sovereignties, other debt securities, commercial paper including bank
obligations, certificates of deposit (including Eurodollar certificates of
deposit) and repurchase agreements.
For temporary defensive purposes, during periods in which Hansberger believes
changes in economic, financial or political conditions make it advisable, the
Fund may reduce its holdings in equity and other securities and may invest up to
100% of its assets in certain short-term (less than twelve months to maturity)
and medium-term (not greater than five years to maturity) debt securities and in
cash (U.S. dollars, foreign currencies, or multicurrency units). These
short-term and medium-term debt securities consist of (a) obligations of
governments, agencies or instrumentalities of any member state of the
Organization for Economic Cooperation and Development ("OECD"), (b) bank
deposits and bank obligations (including certificates of deposit, time deposits
and bankers' acceptances) of banks organized under the laws of any member state
of the OECD, denominated in any currency; (c) floating rate securities and other
instruments denominated in any currency issued by international development
agencies; (d) finance company and corporate commercial paper and other
short-term corporate debt obligations of corporations organized under the laws
of any member state of the OECD meeting the Fund's credit quality standards; and
(e) repurchase agreements with banks and broker-dealers covering any of the
foregoing securities. The short-term and medium-term debt securities in which
the Fund may invest for temporary defensive purposes will be those that
Hansberger believes to be of high quality, i.e., subject to relatively low risk
of loss of interest or principal
8
(there is currently no rating system for debt securities in most emerging
countries). If rated, these securities will be rated in one of the three highest
rating categories by rating services such as Moody's Investors Service
("Moody's") or Standard & Poor's ("S&P") (i.e., rated at least A).
INVESTMENT LIMITATIONS
The Fund has adopted the investment limitations listed below, which are not
fundamental policies, unless otherwise noted.
DIVERSIFICATION. The Fund is diversified as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). As a matter of
fundamental policy, the Fund may not (i) invest more than 5% of the current
value of its total assets in the securities of any one issuer (other than U.S.
Government Securities), except that up to 25% of the value of the total assets
of the Fund may be invested without regard to this limitation; or (ii) 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.
CONCENTRATION. The Fund is prohibited from concentrating its assets in the
securities of issuers in a single industry. As a matter of fundamental policy,
the Fund may not purchase the securities of issuers conducting their principal
business activity in the same industry if, as an immediate result of the
purchase, the value of its investments in that industry would exceed 25% of the
current value of its total assets. This limitation does not apply to investments
in (i) 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) and (ii) U.S. Government Securities.
BORROWING. As a matter of fundamental policy, the Fund may not borrow from
banks, except that the 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% of total assets).
ILLIQUID SECURITIES. The Fund limits its purchase of illiquid securities.
Illiquid securities are securities that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount at which the Fund
has valued the securities and include, among other things, repurchase agreements
not entitling the holder to payment within seven days and restricted securities
(other than those determined to be liquid pursuant to guidelines established by
the Board of Trustees). See Appendix A.
RISK CONSIDERATIONS
THE FUNDAMENTAL RISK ASSOCIATED WITH THE FUND, LIKE OTHER MUTUAL FUNDS THAT
INVEST IN EQUITY AND FIXED INCOME SECURITIES, IS "MARKET RISK." Market risk is
the risk that the market value of a security that the Fund holds will decrease.
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations may cause a security to be worth
9
less than it was worth at the time of purchase. Market risk may apply to a
single issuer, industry, or sector of the economy or to the market as a whole.
Certain specific risks are described in this section. For more information about
risks associated with certain types of securities, see Appendix A.
RISKS OF EQUITY SECURITIES. Stock values may fluctuate in response to the
activities of an individual company or in response to general market and/or
economic conditions. Historically, common stocks have provided greater long-term
returns and have entailed greater short-term risks than other types of
securities. Smaller or newer issuers are more likely to realize more substantial
growth or suffer more significant losses than larger or more established
issuers. Investments in these companies can be both more volatile and more
speculative.
RISKS OF FIXED INCOME SECURITIES. The value of fixed income (debt) securities
generally varies inversely with prevailing levels of interest rates: the values
of these securities tend to decrease when interest rates are rising, and
increase when interest rates are declining. Changes in interest rates will
generally cause larger changes in the prices of longer-term securities than in
the prices of shorter-term securities. The risk of market losses attributable to
changes in interest rates is known as "interest rate risk."
Debt securities are also subject to "credit risk" relating to the financial
condition of the issuers of the securities. Prices of debt securities may
fluctuate based on changes in the actual or perceived creditworthiness of
issuers. The prices of lower-rated securities often fluctuate more than those of
higher-rated securities.
It is possible that some issuers will not make payments on debt securities held
by the Fund. Investors should be aware that securities offering above-average
yields may involve above-average risks. Securities rated in the lowest
categories of investment grade (that is, BBB by S&P or Baa by Moody's) and
equivalent securities may have speculative characteristics. In adverse economic
or other circumstances, issuers of these securities are more likely to have
difficulty making principal and interest payments than issuers of higher-grade
obligations.
Low-Rated Fixed Income Securities. The debt securities of issuers in emerging
market countries in which the Fund may invest are subject to significant risk
and will not be required to meet any minimum rating standard or equivalent.
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.
10
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 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 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.
An economic recession in a country would likely disrupt the market in that
country 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.
RISKS OF FOREIGN AND EMERGING MARKET SECURITIES. Investments in the securities
of foreign (non-U.S.) issuers, particularly in countries with smaller, emerging
capital markets, may involve risks in addition to those normally associated with
investments in the securities of U.S. issuers.
Political and Economic Risks. In any emerging market country, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could affect investments in
that country. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as economic growth rate, rate
of inflation, capital reinvestment, resources, self-sufficiency and balance of
payments positions. Certain foreign investments may also be subject to foreign
withholding or other governmental taxes that could reduce the return on these
investments.
Certain emerging market countries may restrict investment by foreign entities.
For example, a country may limit the level of foreign investment in certain
issuers, require prior approval of foreign investment by the government, impose
additional tax on foreign investors or limit holdings by foreign investors to
specific classes of securities of an issuer that have less advantageous rights
(with regard to convertibility, for example) than classes available to
domiciliaries of the country.
Substantial limitations may also exist in certain countries with respect to a
foreign investor's ability to repatriate investment income, capital or the
proceeds of sales of securities. The Fund could be adversely affected by delays
in, or refusals to grant, any required governmental approvals for repatriation
of capital. Securities that are subject to material legal restrictions on
repatriation may be considered illiquid securities and, therefore, may be
subject to the Fund's 15% limitation on such investments.
Financial Information and Standards. Often the regulation of, and available
information about, issuers and their securities is less extensive in emerging
market countries than in the United States. Foreign companies may not be subject
to uniform accounting, auditing and financial reporting standards or to
requirements or practices comparable to those applicable to U.S. companies.
11
Regulation and Liquidity of Markets. Government supervision and regulation of
exchanges and brokers in emerging market countries is frequently less extensive
than in the United States. These markets may have different clearance and
settlement procedures. In certain cases, settlements have not kept pace with the
volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could adversely affect or interrupt the
Fund's intended investment program or result in investment losses due to
intervening declines in security values.
Securities markets in emerging market countries are substantially smaller than
U.S. securities markets and have substantially less trading volume, resulting in
diminished liquidity and greater price volatility. Reduced secondary market
liquidity may make it more difficult for the Fund to determine the value of its
portfolio securities or to dispose of particular instruments when necessary.
Brokerage commissions and other transaction costs on foreign securities
exchanges are generally higher as well.
Inflation. Several emerging market countries have experienced substantial, and
in some periods extremely high, rates of inflation in recent years. Inflation
and rapid fluctuations in inflation rates may have very negative effects on the
economies and securities markets of certain emerging market countries. Further,
inflation accounting rules in some emerging market countries require, for
companies that keep accounting records in the local currency, that certain
assets and liabilities be restated on the company's balance sheet in order to
express items in terms of currency of constant purchasing power. Inflation
accounting may indirectly generate losses or profits for certain emerging market
companies.
RISKS OF FOREIGN CURRENCY. Changes in exchange rates between the U.S. dollar and
a foreign currency also will affect the value in U.S. dollars of the securities
denominated in that currency that are held by the Fund. Exchange rates are
influenced generally by the forces of supply and demand in the foreign currency
markets and by numerous other political and economic events occurring outside
the U.S., many of which may be difficult, if not impossible, to predict.
Income from foreign securities will be received and realized in foreign
currencies, while the Fund is required to compute and distribute income in U.S.
dollars. Accordingly, a decline in the value of a particular foreign currency
against the U.S. dollar occurring after the Fund's income has been earned and
computed in U.S. dollars may require the Fund to liquidate portfolio securities
to acquire sufficient U.S. dollars to make a distribution. Similarly, if the
exchange rate declines between the time that the Fund incurs expenses in U.S.
dollars and the time such expenses are paid, the Fund may be required to
liquidate additional foreign securities to purchase the U.S. dollars required to
meet these expenses.
RISKS OF DERIVATIVE SECURITIES. To the extent permitted by its investment
objective and policies, the Fund may invest in securities that are commonly
referred to as "derivatives." Generally, a derivative is a financial instrument
whose value is based on, or "derived" from, a traditional security, asset, or
market index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or
12
performance is linked to other equity securities (such as depository receipts),
currencies, interest rates, indices or other financial indicators.
Some derivatives are in many respects like other securities, although they may
be more volatile or less liquid than their more traditional counterparts.
There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect the Fund from exposure to changing interest rates, securities
prices, or currency exchange rates and for cash management purposes as a
low-cost method of gaining exposure to a particular securities market without
investing directly in those securities.
There are several risks that are associated with derivatives, including
counterparty risk and liquidity risk, which are discussed below. For more
information about the risks associated with certain types of derivatives, see
Appendix A.
BORROWING RISK. Borrowing involves special risk considerations. Interest costs
on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on the borrowed funds (or on the
assets that were retained rather than sold to meet the needs for which funds
were borrowed). Under adverse market conditions, the Fund may have to sell
portfolio securities to meet interest or principal payments at a time when
fundamental investment considerations would not favor such sales. To the extent
the Fund enters into reverse repurchase agreements, the Fund is subject to risks
that are similar to those associated with borrowing.
COUNTERPARTY RISK. A number of transactions in which the Fund may engage are
subject to the risks of default by the other party to the transaction. When the
Fund engages in repurchase, reverse repurchase, derivative, when-issued, forward
commitment, delayed settlement or securities lending transactions, it relies on
the other party to consummate the transaction. Failure of the other party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price believed to be advantageous.
LIQUIDITY RISK. Certain securities may be difficult or impossible to sell at the
time and the price that the Fund would like. The Fund may have to lower the
price, sell other securities instead, or forego an investment opportunity, any
of which could have a negative effect on Fund management or performance.
INFORMATION RISK. Certain key information about a security or market may be
inaccurate or unavailable, which may limit Hansberger's ability to make an
appropriate investment decision with regard to the security or market.
OBJECTIVE RISK. Returns from the particular type of security that the Fund
emphasizes in its investments may trail returns from the overall stock or bond
market. For example, the emerging market equity securities in which the Fund
invests tend to go through periods of relative
13
underperformance and outperformance in comparison to other types of equity
securities. These periods may last for several years or longer.
MANAGEMENT RISK. A strategy used by Hansberger may fail to produce the intended
result, which could have a negative effect on fund performance.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
TRUSTEES
The Trust is managed under the direction of its Boards of Trustees. The Trustees
and their principal occupations are listed below.
<TABLE>
<CAPTION>
<S> <C>
C. Gary Gerst Chairman of the Board of Trustees; Chairman Emeritus,
LaSalle Partners, Ltd. (real estate developer and manager).
Edgar R. Fiedler Senior Fellow and Economic Counsellor, The Conference
Board.
John W. McCarter, Jr. President and Chief Executive Officer, The Field Museum of
Natural History (Chicago); Formerly, Senior Vice President
and Director, Booz-Allen & Hamilton, Inc. (consulting firm).
Ernest M. Roth Consultant; Retired Senior Vice President and Chief
Financial Officer, Commonwealth Edison Company.
</TABLE>
INVESTMENT ADVISER
Harris Trust is the investment adviser for the Fund pursuant to an Advisory
Contract with the Trust. 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, 1996, Harris Trust had total
discretionary trust assets under management of more than $13.3 billion and was
the largest of 25 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, 1996, Harris Trust managed more than $10.6 billion in
discretionary personal trust assets, and managed more than $19.2 billion in
non-discretionary trust assets.
Under the Advisory Contract, Harris Trust is responsible for the supervision and
oversight of the Portfolio Management Agent's performance. The Advisory Contract
provides for an advisory fee payable to Harris Trust at an annual rate of 1.25%
of the average daily net assets of the Fund.
14
PORTFOLIO MANAGEMENT AGENT
Harris Trust has entered into a Portfolio Management Contract with Harris
Investment Management, under which HIM undertakes to furnish investment guidance
and policy direction in connection with the daily portfolio management of the
Fund. The Portfolio Management Contract provides for an advisory fee payable by
Harris Trust to HIM at the same rate as the advisory fee payable by the Fund to
Harris Trust. As of December 31, 1996, HIM had a staff of 62, including 35
professionals, providing investment expertise to the management of the Harris
Insight Funds and for pension, profit-sharing and institutional portfolios. As
of the same date, HIM managed an estimated $9.2 billion in assets.
INVESTMENT SUB-ADVISER
To assist HIM in carrying out its obligations under the Portfolio Management
Contract, HIM has entered into an Investment Sub-advisory Contract with
Hansberger on behalf of the Fund. Hansberger, with principal offices at 515 East
Las Olas Blvd., Suite 1300, Fort Lauderdale, Florida, 33301, conducts a
worldwide portfolio management business that provides a broad range of portfolio
management services to clients in the United States and abroad. As of June 1,
1997, Hansberger managed assets with a value of approximately $630 million.
Pursuant to the Investment Sub-advisory Contract (the "Sub-advisory Contract"),
Hansberger makes investment decisions for the Fund and continuously reviews,
supervises and administers the Fund's investment program. HIM supervises the
performance of Hansberger, including Hansberger's adherence to the Fund's
investment objective and policies. Pursuant to the Sub-advisory Contract, HIM
pays Hansberger a fee for its investment sub-advisory services from the advisory
fees HIM receives from Harris Trust and indirectly from the advisory fees paid
by the Fund to Harris Trust pursuant to the Advisory Contract.
PORTFOLIO MANAGEMENT
The full advisory staff of Hansberger contributes to the investment management
services provided to the Fund. Thomas L. Hansberger, however, is primarily
responsible for the day-to-day investment management of the Fund. Mr. Hansberger
is the Chairman and Chief Executive Officer of Hansberger. Before forming
Hansberger in 1994, Mr. Hansberger had served as Chairman, President and Chief
Executive Officer of Templeton Worldwide, Inc., the parent holding company of
the Templeton group of companies. While at Templeton, Mr. Hansberger served as
director of research and was an officer, director or primary portfolio manager
for several Templeton mutual funds.
ADMINISTRATORS, CUSTODIAN AND TRANSFER AGENT
Harris Trust is the administrator of the Fund (in this capacity, the
"Administrator") and, as such, generally assists the Fund in all aspects of
their administration and operation.
15
The Administrator has a Sub-Administration Agreement with Funds Distributor,
Inc. ("FDI"), whereby FDI performs certain administrative services for the Fund.
The Administrator has Sub-Administration and Accounting Services Agreements with
PFPC Inc. ("PFPC"), whereby PFPC performs certain administrative and accounting
services for the Fund. Under these agreements, the Administrator compensates FDI
and PFPC for providing their services. The Administrator, FDI and PFPC are
referred to collectively as the "Administrators."
Harris Trust (in this capacity, the "Transfer Agent") is also the transfer and
dividend disbursing agent of the Fund. The Transfer Agent has entered into a
Sub-Transfer Agency Services Agreement with PFPC (the "Sub-Transfer Agent")
whereby the Sub-Transfer Agent performs certain transfer agency and dividend
disbursing agency services.
PNC Bank, N.A. (the "Custodian") serves as custodian of the assets of the Fund.
PFPC and the Custodian are indirect, wholly-owned subsidiaries of PNC Bank Corp.
As compensation for their services, the Administrator, the Transfer Agent and
the Custodian are entitled to receive a combined fee based on the aggregate
average daily net assets of the Fund and the other Harris Insight Funds, payable
monthly at an annual rate of 0.17% of the first $300 million of average daily
net assets; 0.15% of the next $300 million; and 0.13% of average daily net
assets in excess of $600 million. In addition, the Fund and the other Harris
Insight Funds pay a separate fee to the Sub-Transfer Agent for certain retail
sub-transfer agent services and reimburse the Custodian for various custody
transactional expenses.
DISTRIBUTOR
Funds Distributor, Inc. (the "Distributor") has entered into a Distribution
Agreement with the Trust pursuant to which it has responsibility for
distributing shares of the Fund. Fees for services rendered by the Distributor
are paid by the Administrator. 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, subject to the
terms of the Service Plan relating to Class A Shares described below, if
implemented pursuant to contractual arrangements between the Trust and the
Distributor and approved by the Board of Trustees.
SERVICE PLAN
Under the Fund's Service Plan relating to Class A Shares, the Fund bears the
costs and expenses connected with advertising and marketing the Fund's shares
and pays the fees of financial institutions (which may include banks),
securities dealers and other industry professionals, such as investment
advisers, accountants and estate planning firms (collectively, "Service Agents")
for servicing activities, as described below, at a rate up to 0.25% per annum of
the average daily net asset value of the Fund's Class A Shares. From their own
resources, Harris Trust and HIM from time to time may voluntarily pay fees to
certain Service Agents. The Administrators and the Distributor may act as
Service Agents and receive fees under a Service Plan.
16
Servicing activities provided by Service Agents to their customers investing in
the Fund may include establishing and maintaining shareholder accounts and
records; processing purchase and redemption transactions; answering customer
inquiries; assisting customers in changing dividend options, account
designations and addresses; sub-accounting; investing customer cash account
balances automatically in Fund shares; providing periodic account balance
statements and integrating these statements with those of other transactions and
balances in the customer's other accounts serviced by the Service Agent;
arranging for bank wires; and performing other services to the extent permitted
by applicable statute, rule or regulation.
EXPENSES
Except for certain expenses borne by the Distributor, Harris Trust, or HIM, the
Trust bears all costs of its operations, including the compensation of its
Trustees 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); interest charges; taxes;
fees and expenses of 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 Fund's custodian
including those for keeping books and accounts; expenses of shareholders'
meetings and meetings of the Board of Trustees; expenses relating to the
issuance, registration and qualification of shares of the Fund; fees of pricing
services; organizational expenses; and any extraordinary expenses. Expenses
directly attributable to the Fund are borne by the Fund. Other general expenses
of the Trust are allocated among the Fund and the other funds of the Trust in an
equitable manner as determined by the Board of Trustees or an administrator.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT. To open an account, complete and sign an application and
mail it along with your check. You also may open your account by wire, as
described below. Please be sure to furnish your taxpayer identification number.
(You must also certify whether you are subject to withholding for failing to
report income to the Internal Revenue Service ("IRS")). Investments received
without a certified taxpayer identification number may be returned.
If you register your account as belonging to multiple owners (e.g., as joint
tenants), you must provide specific authorization on your application in order
for us to accept instructions from a single owner. Otherwise, all owners will
have to agree to any transactions that involve the account.
If you are opening an account through a financial institution or other
intermediary, that organization may have different minimum initial and
subsequent investment requirements.
17
Please contact that organization if you have questions. See BUYING SHARES -
THROUGH FINANCIAL INSTITUTIONS below.
BUYING SHARES. Shares may be purchased by any of the following three methods:
1. BY MAIL. Make your check payable to the Fund. If you are adding to your
existing account, indicate your Fund account number directly on the check and
send to:
Harris Insight Funds
c/o PFPC Inc.
P.O. Box 8952
Wilmington, Delaware 19899-8952
2. BY BANK WIRE. Call the Harris Insight Funds at (800) 625-7073 to set up your
account. Then wire your investment to:
PNC Bank, N.A.
Philadelphia, Pennsylvania
ABA #0310-0005-3
For Credit to: Harris Insight Funds
85-5093-2950
Re: Harris Insight Emerging Markets Fund
[Class A Shares or Institutional Shares]
Account No.:
Account Name:
If you are opening an account, please promptly complete and mail the account
application form to the Fund at the address above under BY MAIL. The Fund
currently does not charge investors for the receipt of wire transfers, although
your bank may charge you for their wiring services.
3. THROUGH FINANCIAL INSTITUTIONS. Shares of the Fund may be purchased through
an authorized broker/dealer, financial institution or service agent with whom
the Distributor has a selling agreement, including Harris Trust or HIM or their
affiliates ("Institutions"), on any day the Fund is open for business. See
GENERAL PURCHASE INFORMATION. Institutions are responsible for the prompt
transmission of buy, exchange or sell orders.
Each Institution may establish its own terms with respect to the requirement of
a minimum initial investment and minimum subsequent investments. Depending upon
the terms of the account, an Institution may charge account fees for automatic
investment and other services it provides, including account maintenance fees,
compensating balance requirements, or fees based upon account transactions,
assets, or income, which would reduce the yield or return on an investment in
the Fund through that Institution. Please read this Prospectus in connection
with any information received from your Institution.
18
GENERAL PURCHASE INFORMATION
The Fund is open for business each day that both of the New York Stock Exchange
(the "Exchange") and the Federal Reserve Bank of Philadelphia are open for
business (i.e., each weekday other than New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day) ("Fund Business
Day"). The Fund normally calculates its net asset value ("NAV") and offering
price at the close of regular trading on the Exchange, which is normally 4:00
p.m., Eastern time. Shares are purchased at the next share price calculated
after your order is received and accepted.
Orders placed directly with the Fund must be paid for by check or bank wire on
the same day. Payment for the shares purchased through an Institution will not
be due until settlement date, normally three business days after the order has
been executed. The Trust reserves the right to reject any purchase order.
Investors purchasing Class A Shares may invest automatically (See SHAREHOLDER
SERVICES AND POLICIES - AUTOMATIC INVESTING).
CLASS A SHARES
SALES CHARGES AND MINIMUM INVESTMENTS
Class A Shares of the Fund are sold with a sales load of up to 4.50% (applied
when your investment is made). There are ways to reduce or eliminate this
charge, however. See REDUCED SALES CHARGES below.
When Class A Shares of the Fund are purchased through an Institution, the
Distributor reallows a portion of the sales charge to the Institution, except as
described below. No sales charge is assessed on the reinvestment of
distributions.
Sales charges for Class A Shares of the Fund are as follows:
<TABLE>
<CAPTION>
Sales Charge Dealer Allowance as
Sales as % of Net % of
Amount of Purchase Charges Amount Invested Offering Price
- ------------------ ------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.25%
$100,000 up to (but less than) $200,000 4.00 4.17 3.75
$200,000 up to (but less than) $400,000 3.50 3.63 3.25
$400,000 up to (but less than) $600,000 2.50 2.56 2.25
$600,000 up to (but less than) $800,000 2.00 2.04 1.75
$800,000 up to (but less than) $1,000,000 1.00 1.01 0.75
$1,000,000 and over 0.00 0.00 0.00
</TABLE>
No sales charge is assessed on Class A Shares that are purchased directly from
the Fund (i.e., not purchased through an Institution). In addition, no sales
charge is assessed on purchases by: (a) any bank, trust company, or other
institution acting on behalf of a fiduciary customer account or
19
any other trust account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Internal Revenue Code of 1986, as amended); (b) any individual with an
investment account or relationship with HIM; (c) directors, trustees or officers
of the Trust or HT Insight Funds, Inc.; (d) any director, current or retired
employee of Harris Bankcorp, Inc. or any of its affiliates or an immediate
family member of such individual (spouses and children under 21); (e) any
broker, dealer or agent who has a sales agreement with the Distributor, and its
employees (and the immediate family members of such individuals); and (f) any
financial institution, financial planner, employee benefit plan consultant or
registered investment adviser acting for the account of a client.
SALES CHARGES AND MINIMUM INVESTMENTS. Class A Shares of the Fund have the
following minimum investments:
To open an account $1,000
To open a retirement account 250
To add to an existing account $ 50
Investing through an Automatic Investment Plan 50
REDUCED SALES CHARGES
YOU MAY BE ENTITLED TO REDUCED SALES CHARGES AS DESCRIBED BELOW. If you qualify
for a reduced sales charge, you must notify the Fund at the time of purchase. If
you invest through an Institution, you should notify the Institution, which in
turn must notify the Fund. Programs that allow for reduced sales charges may be
changed or eliminated at any time.
RIGHT OF ACCUMULATION. The Right of Accumulation allows an investor to combine
the amount invested in Class A Shares of the Fund with the total net asset value
of Class A Shares currently purchased or already owned by that investor in other
non-money market Harris Insight Funds to determine the applicable sales charge.
To obtain such discount, you must provide sufficient information at the time of
purchase to permit verification that your purchase qualifies for the reduced
sales charge, and confirmation of the order is subject to such verification. The
Right of Accumulation may be modified or discontinued at any time by the Fund
with respect to all Class A Shares purchased thereafter.
LETTER OF INTENT. A Letter of Intent allows an investor to purchase Class A
Shares of the Fund and the other non-money market Harris Insight Funds over a
13-month period at reduced sales charges based on the total amount intended to
be purchased plus the total net asset value of Class A Shares already owned.
Each investment made during the period receives the reduced sales charge
applicable to the total amount of the intended investment. If such amount is not
invested within the period, the investor must pay the difference between the
sales charges applicable to the purchases made and the charges previously paid.
To obtain a Letter of Intent form, please call (800)982-8782.
20
INSTITUTIONAL SHARES
Institutional Shares are sold to fiduciary and discretionary accounts of
institutions, "institutional investors," Trustees, officers and employees of the
Trust, HT Insight Funds, Inc., the 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, 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.
Institutional Shares of the Fund are sold at their net asset value without a
sales charge and without the imposition of any minimum initial or subsequent
investment.
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
Shares may be sold (redeemed) at their next determined net asset value after
receipt of a proper request by the Fund directly or through any Institution.
1. BY MAIL. Shareholders may sell shares by writing the Fund at the
following address:
Harris Insight Funds
c/o PFPC Inc.
P.O. Box 8952
Wilmington, Delaware 19899-8952
Certain requests for redemption must be signed by the shareholder with signature
guaranteed. See SHAREHOLDER SERVICES AND POLICIES - SIGNATURE GUARANTEES.
2. BY TELEPHONE. If you have chosen the telephone redemption privilege, you may
request a telephone redemption by calling the Fund at (800) 625-7073 and
providing the your account number, the exact name of your account and your
social security or taxpayer identification number. The Fund then will mail a
check to your account address or, if you have elected the wire redemption
privilege, wire the proceeds on the following business day.
3. BY BANK WIRE. If you have chosen the wire redemption privilege, you may
request the Fund to transmit your proceeds by federal funds wire to a bank
account previously designated by you in writing. See GENERAL REDEMPTION
INFORMATION - WIRE REDEMPTION PRIVILEGE below.
4. THROUGH A FINANCIAL INSTITUTION. If you bought your shares through an
Institution, you may redeem your shares through the Institution. Please contact
the Institution for this service.
GENERAL REDEMPTION INFORMATION
There is no charge for redemptions, but if you bought your shares through an
Institution, the Institution may charge an account-based service fee. A
redemption order received in good order
21
by your Institution or the Fund before the close of the Exchange and before the
close of the Fund Business Day will be executed at the Fund's net asset value
per share next determined on that day. A redemption order received after the
close of the Exchange, or not received by the Fund prior to the close of the
Fund Business Day, will be executed at the Fund's net asset value next
determined on the next Fund Business Day.
Proceeds of a redemption order received in good order will normally be remitted
within five but not more than seven business days, except that if a redemption
request is made shortly after a recent purchase by check, proceeds will be
distributed once the check used to purchase the Fund's shares clears, which may
take up to 15 days or more after the investment. The proceeds may be more or
less than the amount originally invested and, therefore, a redemption may result
in a gain or loss for federal income tax purposes.
The Fund intends to pay redemption proceeds in cash, but reserves the right to
pay in kind by delivery of investment securities equal in value to the
redemption price to the extent permitted by applicable laws and regulations. In
these cases, you might incur brokerage costs in converting the securities to
cash. The right of any shareholder to receive payment of redemption proceeds may
be suspended, or payment may be postponed, in certain circumstances. These
circumstances include any period when the Exchange is closed (other than
weekends or holidays) or trading on the Exchange is restricted, any period when
an emergency exists and any time the SEC permits mutual funds to postpone
payments for the protection of investors.
WIRE REDEMPTION PRIVILEGE. If the wire redemption privilege has been elected on
the shareholder application, redemption of shares may be requested by telephone,
on any day the Fund and the Transfer Agent are open for business, by calling the
Fund at (800) 625-7073.
The minimum amount that may be wired is $1,000. Otherwise, a check is mailed to
the shareholder's address of record. The Fund reserves the right to change this
minimum or to terminate the privilege. Redemption proceeds are transmitted by
wire on the business day after a redemption request is made.
SYSTEMATIC WITHDRAWAL PLAN. You can arrange for periodic, automatic redemptions
from your account. For more information or to sign up for this service, please
call (800) 982-8782.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES AND POLICIES
- --------------------------------------------------------------------------------
EXCHANGING SHARES. SHAREHOLDERS OF CLASS A SHARES OR INSTITUTIONAL SHARES MAY
EXCHANGE THEIR SHARES FOR CLASS A SHARES OR INSTITUTIONAL SHARES, RESPECTIVELY,
OF THE OTHER HARRIS INSIGHT FUNDS OFFERING THOSE SHARES. Shares of the Fund held
for seven days or more may be exchanged for the same class of shares of any
other Harris Insight Fund in an identically registered account, provided that
the shares to be acquired are registered for sale in the your state of
residence. Class A Shares of another fund acquired by exchange pursuant to this
privilege may be re-exchanged for Class A Shares of the Fund at net asset value.
22
Procedures applicable to redemption of the Fund's shares are also applicable to
exchanging shares. If you would like the ability to exchange shares by
telephone, please choose this option when you complete your application. The
Harris Insight Funds reserve the right to limit the number of exchanges between
funds, to reject any telephone exchange order or otherwise to modify or
discontinue the exchange privilege 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.
AUTOMATIC INVESTING. Automatic investing is an easy way to add to your
investment in the Fund and can help you achieve your financial goals as simply
and conveniently as possible. Through the Harris Insight Funds Automatic
Investment Plan you can have as little as $50 a month electronically withdrawn
from your checking account and invested in Class A Shares of the Fund. This
feature can be established when you open your account. For more information or
to receive an application, please call (800) 982-8792.
SIGNATURE GUARANTEES. A signature guarantee assures that a signature is genuine
and protects shareholders from unauthorized account transfers. In addition to
certain signature requirements, a signature guarantee is required in any of the
following circumstances:
* A redemption check is to be made payable to anyone other than the
shareholder(s) of record.
* A redemption check is to be mailed to an address other than the address of
record.
At the Fund's discretion, signature guarantees also may be required for other
redemptions. Banks, savings and loan associations, trust companies, credit
unions, broker-dealers and member firms of a national securities exchange may
guarantee signatures. Call your financial institution to see if it has this
capability.
TELEPHONE TRANSACTIONS. Investors may buy (by bank wire), sell and exchange
shares by telephone. Shareholders engaging in telephone transactions should be
aware that they may be foregoing some of the security associated with written
requests. A shareholder may bear the risk of any losses resulting from an
unauthorized or fraudulent telephone transaction. The Fund will employ
reasonable procedures to confirm that telephonic instructions are genuine. If
the Fund or its service providers fail to employ these measures, they may be
liable for any losses arising from unauthorized or fraudulent instructions. In
addition, the Fund reserves the right to record all telephone conversations.
Please verify the accuracy of telephone instructions immediately upon receipt of
confirmation statements.
During times of drastic economic or market changes, telephone redemption and
exchange privileges may be difficult to implement. In the event that you are
unable to reach the Fund by telephone, requests may be mailed or hand-delivered
to the Fund at [ADDRESS].
REDEMPTION OF SHARES IN SMALLER ACCOUNTS. Because of the high cost of
maintaining small accounts, the Fund reserves the right to redeem all shares in
an account whose value falls below
23
$500 ($250 in the case of a retirement account) unless this is a result of a
decline in the market value of the shares. 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.
SHARE CERTIFICATES. Share certificates are not issued.
STATEMENTS AND REPORTS TO SHAREHOLDERS. You will receive an account statement
after every transaction that affects your share balance, except for
reinvestments of dividend and capital gain distributions, or at least annually,
as well as a quarterly consolidated statement. In addition, each year you will
receive an annual and semi-annual report to shareholders of the Fund. If you
would like copies of these reports, please call (800) 982-8782.
ELIGIBILITY BY STATE. You may only invest in, or exchange into, shares legally
available in your jurisdiction of residence.
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HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS;
TAX INFORMATION
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Dividends of net investment income are declared and paid semi-annually by the
Fund. Any net realized capital gains are declared and paid at least annually.
Dividend and capital gain distributions may be invested in additional shares of
the same Fund at net asset value and credited to your account on the payment
date or paid in cash (no sales charge is assessed on the reinvestment of
dividends or distributions). Distribution checks and account statements will be
mailed approximately two business days after the payment date.
The Fund is treated as a separate entity for tax purposes and thus the
provisions of the Internal Revenue Code (the "Code") generally are applied to
each fund of the Trust separately, rather than to the Trust as a whole. As a
result, net capital gains, net investment income, and operating expenses are
determined separately for the Fund. The Trust intends to qualify the Fund as a
regulated investment company under the Code and to distribute to the
shareholders of the Fund sufficient net investment income and net realized
capital gains of that Fund so that the Fund will not be subject to federal
income taxes.
Dividends (including net short-term capital gains), except "exempt-interest
dividends" (described below), will be taxable to shareholders as ordinary
income.
Distributions of net realized 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 deduction.
A taxable gain or loss also may be realized by a shareholder upon the redemption
or transfer of shares depending on the tax basis of the shares and their value
at the time of the transaction. Any loss realized on a sale or exchange of
shares of the Fund will be disallowed to the extent other
24
shares of that Fund are acquired within the 61-day period beginning 30 days
before and ending 30 days after disposition of the shares.
The Trust will be required to withhold, subject to certain exemptions, a portion
(currently 31%) from dividends paid or credited to individual shareholders and
from redemption proceeds, if a correct taxpayer identification number, certified
when required, is not on file with the Trust or Transfer Agent.
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GENERAL INFORMATION
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BANKING LAW MATTERS
Federal banking laws and regulations generally prohibit federally chartered or
supervised banks from engaging directly 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.
Harris Trust and HIM believe that they may perform the services contemplated by
this Prospectus and their respective agreements with the Trust without violating
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, these services. If this were to
happen, the Fund would seek alternative sources for these services.
HOW SHARE VALUE IS DETERMINED
Net asset value per share is the value of one share of the Fund, which is
determined on each Fund Business Day. Net asset value per share of each class is
determined by dividing the value of the Fund's net assets (i.e., the value of
its securities and other assets less its liabilities) allocable to that class by
the number of shares of that class outstanding.
The net asset value per share of the Fund is determined at the close of regular
trading on the Exchange (currently 4:00 p.m., Eastern time) on each Fund
Business Day. The value of securities held by the Fund (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 time of valuation. 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.
Portfolio securities that are primarily traded on foreign securities exchanges
are generally valued at their closing values on the exchange. Bonds are valued
at the mean of the last bid and asked prices. In the absence of readily
available market quotations (or when, in the view of Hansberger or the Portfolio
Management Agent, available market quotations do not accurately reflect a
security's fair value), securities are valued at their
25
fair value as determined by the Trust's Board of Trustees. Prices used for
valuations of securities are provided by independent pricing services. Debt
obligations with remaining maturities of 60 days or less generally are valued at
amortized cost. 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.
HOW PERFORMANCE IS REPORTED
From time to time, the Fund may advertise its performance. Performance may be
quoted in terms of total return, yield and effective yield. All performance
information is based on historical results and is not intended to indicate
future performance.
Total return refers to the amount an investment in the Fund would have earned,
including any increase or decrease in net asset value, over a specified period
of time and assumes the payment of the maximum sales load and the reinvestment
of all dividends and distributions. The total return of the Fund shows what an
investment in Class A Shares or Institutional Shares of 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 that the
maximum sales load was paid and that all distributions and dividends by the Fund
were reinvested on their reinvestment dates during the period less all recurring
fees. When the Fund compares its total return to that of other mutual funds or
relevant indices, its total return also may be computed without reflecting the
sales load so long as the sales load is stated separately in connection with the
comparison.
The Fund's yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. To calculate standardized
yield, the Fund divides the interest income it earned from its investments for a
30-day period (net of expenses) by the average number of shares entitled to
receive dividends. The result is then expressed as an annualized percentage rate
based on the Fund's share price at the end of the 30-day period (which period
will be stated in the advertisement). The yield of any investment is generally a
function of portfolio quality and maturity, type of instrument and operating
expenses.
The effective yield is calculated similarly but, when annualized, the income
earned by an investment in 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 Fund's advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Inc. and Lipper
Analytical Services, Inc. The comparative material found in the Fund's
advertisements, sales literature or reports to shareholders may contain
performance ratings. That material is not to be considered an indication of
future performance. All performance information for the Fund is calculated on a
class basis. In addition, the Fund may use a benchmark securities index as a
measure of the Fund's performance. The Fund may from time to time advertise a
comparison of its performance against relevant indices.
26
MORE INFORMATION ABOUT THE TRUST
The Trust is an 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 13 portfolios in operation. The
Board has authorized each fund of the Trust to issue two classes of shares,
Class A Shares and Institutional Shares.
In the future, the Board of Trustees 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 (including distribution fees) which may affect
their relative performance. Information regarding other classes of shares may be
obtained by calling the Harris Insight Funds at (800) 982-8782 or from any
institution that makes available shares of the Harris Insight Funds. All shares
of the Trust 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 SAI. All shares of the Trust, when
issued, will be fully paid and non-assessable.
Prior to the public issuance of shares of the Fund, due to its initial
investment, Funds Distributor, Inc. ("FDI") owned all outstanding shares of the
Fund, and, accordingly, may have been deemed to control the Fund. Upon the
investment in the Fund by public shareholders, FDI ceased to be a controlling
person. From time to time, certain shareholders may own a large percentage of
the shares of the Fund. Accordingly, those shareholders may be able to greatly
affect, if not determine, the outcome of a shareholder vote.
The Trust may dispense with annual meetings of shareholders in any year in which
Trustees are not required to be elected by shareholders. It is anticipated
generally that shareholder meetings will be held only when specifically required
by federal or state law. Shareholders have available certain procedures for the
removal of Trustees.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable for the trust's obligations. However,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which both the trust itself was unable
to meet its obligations and inadequate insurance existed. To guard against this
risk, the Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and provides for
indemnification out of Trust property of any shareholder held personally liable
for obligations of the Trust.
27
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APPENDIX A: PERMITTED INVESTMENTS
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ADRS, EDRS AND GDRS. The Fund may purchase sponsored and unsponsored ADRs, GDRs,
EDRs and similar securities ("Depository Receipts"). Depository Receipts are
typically issued by a financial institution ("depository") and evidence
ownership interests in a security or a pool of securities ("underlying
securities") that have been deposited with the depository. In ADRs, the
depository is typically a U.S. financial institution and the underlying
securities are issued by a foreign issuer. In other Depository Receipts, the
depository may be a foreign or a U.S. entity, and the underlying securities may
have a foreign or a U.S. issuer. Depository Receipts will not necessarily be
denominated in the same currency as their underlying securities. Depository
Receipts may be issued pursuant to sponsored or unsponsored programs. In
sponsored programs, an issuer has made arrangements to have its securities
traded in the form of Depository Receipts. In unsponsored programs, the issuer
may not be directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the Depository Receipts. For
purposes of the Fund's investment policies, investments in Depository Receipts
will be deemed to be investments in the underlying securities. Thus, a
Depository Receipt representing ownership of common stock will be treated as
common stock.
BANK OBLIGATIONS. The Fund may invest in obligations of bank obligations,
including negotiable certificates of deposit, bankers' acceptances and time
deposits of U.S. banks (including savings banks and savings associations),
foreign branches of U.S. banks, foreign banks and their non-U.S. branches
(Eurodollars), U.S. branches and agencies of foreign banks (Yankee dollars), and
wholly-owned banking-related subsidiaries of foreign banks.
Certificates of deposit represent an institution's obligation to repay funds
deposited with it that earn a specified interest rate over a given period.
Bankers' acceptances are negotiable obligations of a bank to pay a draft which
has been drawn by a customer and are usually backed by goods in international
trade. Time deposits are non-negotiable deposits with a banking institution that
earn a specified interest rate over a given period. Certificates of deposit and
fixed time deposits, which are payable at the stated maturity date and bear a
fixed rate of interest, generally may be withdrawn on demand but may be subject
to early withdrawal penalties which could reduce the Fund's yield. Deposits
subject to early withdrawal penalties or that mature in more than seven days are
treated as illiquid securities if there is no readily available market for the
securities. The Fund's investments in the obligations of foreign banks and their
branches, agencies or subsidiaries may be obligations of the parent, of the
issuing branch, agency or subsidiary, or both.
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.
28
Obligations of foreign banks involve somewhat different investment risks from
those associated with obligations of U.S. banks.
BRADY BONDS. The Fund may invest a portion of its assets in certain sovereign
debt obligations known as "Brady Bonds." Brady Bonds are issued under the
framework of the Brady Plan, an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external indebtedness. The Brady Plan
contemplates, among other things, the debtor nation's adoption of certain
economic reforms and the exchange of commercial bank debt for newly issued
bonds. In restructuring its external debt under the Brady Plan framework, a
debtor nation negotiates with its existing bank lenders as well as the World
Bank or the International Monetary Fund (the "IMF"). The World Bank or IMF
supports the restructuring by providing funds pursuant to loan agreements or
other arrangements that enable the debtor nation to collateralize the new Brady
Bonds or to replenish reserves used to reduce outstanding bank debt. Under these
loan agreements or other arrangements with the World Bank or IMF, debtor nations
have been required to agree to implement certain domestic monetary and fiscal
reforms. The Brady Plan sets forth only general guiding principles for economic
reform and debt reduction, emphasizing that solutions must be negotiated on a
case-by-case basis between debtor nations and their creditors.
Brady Bonds are recent issues and do not have a long payment history. Agreements
implemented under the Brady Plan are designed to achieve debt and debt-service
reduction through specific options negotiated by a debtor nation with its
creditors. As a result, each country offers different financial packages.
Options have included the exchange of outstanding commercial bank debt for bonds
issued at 100% of face value of such debt, bonds issued at a discount of face
value of such debt, and bonds bearing an interest rate that increases over time
and the advancement of the new money for bonds. The principal of certain Brady
Bonds has been collateralized by U.S. Treasury zero coupon bonds with a maturity
equal to the final maturity of the Brady Bonds. Collateral purchases are
financed by the IMF, World Bank and the debtor nations' reserves. Interest
payments may also be collateralized in part in various ways.
Brady Bonds are often viewed as having three or four valuation components: (i)
the collateralized repayment of principal at final maturity; (ii) the
collateralized interest payments; (iii) the uncollateralized interest payments;
and (iv) any uncollateralized and of principal at maturity (these
uncollateralized amounts constitute the "residual risk"). In light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, investments in Brady Bonds can be viewed as
speculative.
COMMON AND PREFERRED STOCK. The Fund may invest in common and preferred stock.
Common stockholders are the owners of the company issuing the stock and,
accordingly, usually have the right to vote on various corporate governance
matters such as mergers. They are not creditors of the company, but rather, upon
liquidation of the company, are entitled to their pro rata share of the
company's assets after creditors (including fixed income security holders) and,
if applicable, preferred stockholders are paid. Preferred stock is a class of
stock having a preference over common stock as to dividends or upon liquidation.
A preferred stockholder is a shareholder in the company and not a creditor of
the company as is a holder of the company's fixed income
29
securities. Dividends paid to common and preferred stockholders are
distributions of the earnings or other surplus of the company and not interest
payments, which are expenses of the company. Equity securities owned by the Fund
may be traded in the over-the-counter market or on a securities exchange and may
not be traded every day or in the volume typical of securities traded on a major
U.S. national securities exchange. As a result, disposition by the Fund of a
portfolio security to meet redemptions by shareholders or otherwise may require
the Fund to sell the security at less than the reported value of the security,
to sell during periods when disposition is not desirable, or to make many small
sales over a lengthy period of time. The market value of all securities,
including equity securities, is based upon the market's perception of value and
not necessarily the book value of an issuer or other objective measure of a
company's worth.
CONVERTIBLE SECURITIES. The Fund may invest in convertible preferred stock and
bonds, which are fixed income securities that are convertible into common stock
at a specified price or conversion ratio. Because these securities have the
characteristics of both fixed income and equity securities, they sometimes are
called "hybrid" securities. In general, the value of a convertible security is
the higher of its investment value (its value as a fixed income security) and
its conversion value (the value of the underlying shares of common stock if the
security is converted). As a fixed income security, the value of a convertible
security generally increases when interest rates decline and generally decreases
when interest rates rise. The value of convertible securities, however, is also
influenced by the value of the underlying common stock. Thus, convertible
securities ordinarily will provide opportunities for producing both current
income and longer-term capital appreciation. Convertible securities rank senior
to common stock in a corporation's capital structure but are usually subordinate
to any nonconvertible fixed income securities.
EXCHANGE RATE-RELATED SECURITIES. The 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 generally 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.
FLOATING AND VARIABLE RATE SECURITIES. The Fund may purchase securities having a
floating or variable rate of interest. These securities pay interest at rates
that are adjusted periodically according to a specified formula, usually with
reference to a some interest rate index or market interest rate. These
adjustments tend to decrease the security's price sensitivity to changes in
interest rates. 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 Fund will limit its purchases of floating and variable rate
obligations to those of the same quality as it otherwise is
30
allowed to purchase. Similar to fixed rate debt instruments, variable and
floating rate instruments are subject to changes in value based on changes in
market interest rates or changes in the issuer's creditworthiness.
Certain variable rate securities pay interest at a rate that varies inversely to
prevailing short-term interest rates (sometimes referred to as inverse
floaters). For example, upon reset the interest rate payable on a security may
go down when the underlying index has risen. During periods when short-term
interest rates are relatively low as compared to long-term interest rates, the
Fund may attempt to enhance its yield by purchasing inverse floaters. Certain
inverse floaters may have an interest rate reset mechanism that multiplies the
effects of changes in the underlying index. While this form of leverage may
increase the security's yield, it may also increase the volatility of the
security's market value.
A floating or variable rate instrument may be subject to the Fund's percentage
limitation on illiquid securities if there is no reliable trading market for the
instrument or if the Fund may not demand payment of the principal amount within
seven days.
FOREIGN EXCHANGE CONTRACTS AND RELATED FUTURES AND OPTIONS. When investing in
foreign securities the Fund usually effects currency exchange transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange
market. The Fund incurs foreign exchange expenses in converting assets from one
currency to another.
The Fund may enter into forward foreign currency exchange contracts for the
purchase or sale of a fixed quantity of a foreign currency at a future date
("forward contracts"). The Fund may enter into forward contracts to "lock in"
the U.S. dollar price of the securities denominated in a foreign currency or the
U.S. dollar value of interest and dividends to be paid on such securities, or to
hedge against the possibility that the currency of a foreign country in which
the Fund has investments may suffer a decline against the U.S. dollar. By
entering into forward contracts, the 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. The Fund also may 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 Hansberger, 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. The Fund also
may enter into currency futures contracts for these purposes.
Currently, only a limited market, if any, exists for hedging transactions
relating to currencies in many emerging market countries. This may limit the
Fund's ability to effectively hedge its investments in those emerging markets.
31
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge (up to the amount of the
premium received) and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter.
FOREIGN SECURITIES. The Fund may invest in dollar-denominated and
non-dollar-denominated foreign equity and debt securities.
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.
ILLIQUID SECURITIES AND RESTRICTED SECURITIES. The Fund may invest up to 15% of
its net assets in securities that are considered illiquid. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933 ("restricted securities"), securities which are otherwise
not readily marketable, such as over-the-counter options, and repurchase
agreements not entitling the holder to payment of principal in seven days. Under
the supervision of the Board of Trustees, Hansberger and the Portfolio
Management Agent determines and monitors the liquidity of portfolio securities.
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 Hansberger, the Portfolio Management Agent or the Adviser has determined
that an adequate trading market exists for such securities or that market
quotations are readily available.
Limitations on resale may have an adverse effect on the marketability of
portfolio securities and the Fund might also have to register restricted
securities in order to dispose of them, resulting in
32
expense and delay. The Fund might not be able to dispose of restricted or other
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions. There can be no assurance that a liquid
market will exist for any security at any particular time.
The Fund may 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, for which an institutional market has developed. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on the issuer's ability to honor a demand for repayment
of the unregistered security. A security's contractual or legal restrictions on
resale to the general public or to certain institutions may not be indicative of
the liquidity of the security. These securities may be determined to be liquid
in accordance with guidelines established by the Board of Trustees. These
guidelines take into account trading activity in the securities and the
availability of reliable pricing information, among other factors. The Board of
Trustees monitors implementation of these guidelines on a periodic basis.
INDEX FUTURES CONTRACTS; OPTIONS ON INDICES; OPTIONS ON SECURITIES. The Fund may
attempt to reduce the risk of investment 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. The Fund also 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. The 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.
The use of index and interest rate futures contracts and options may expose the
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 manager
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 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
the 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 the Fund worse off than if it had not entered
into the position.
When the Fund invests in futures contracts and options, it may be required to
segregate cash and other appropriate 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 the Fund maintains the
33
positions requiring segregation or cover. Segregating assets could diminish the
Fund's return due to the opportunity losses of foregoing other potential
investments with the segregated assets.
INVESTMENT COMPANY SECURITIES AND INVESTMENT FUNDS. The Fund may invest in
securities issued by investment companies that invest in securities in which the
Fund could invest directly. Securities of investment companies may be acquired
the Fund within the limits prescribed by the 1940 Act. These limits the Fund so
that: (i) not more than 5% of its total assets will be invested in the
securities of any one investment company; (ii) not more than 10% 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 and the other funds of the
Trust as a whole. As a shareholder of another investment company, the Fund would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Fund bears directly in
connection with its own operations.
Some emerging countries have laws and regulations that preclude direct foreign
investment in the securities of companies located there. However, indirect
foreign investment in the securities of companies listed and traded on the stock
exchanges in these countries is permitted by certain emerging countries through
specifically authorized investment funds. The Fund may invest in these
investment funds.
LOANS OF PORTFOLIO SECURITIES. The Fund 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 in a
segregated account. In determining whether to lend a security to a particular
broker, dealer or financial institution, Hansberger and the Portfolio Management
Agent will consider all relevant facts and circumstances, including the
creditworthiness of the broker, dealer or financial institution. The Fund will
not enter into any portfolio security lending arrangement having a duration
longer than one year. Any securities that the 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 the borrower. Loans of securities by the Fund will be subject to
termination at the Fund's or the borrower's option. The 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 Adviser, the Portfolio Management Agent, Hansberger or the Distributor.
34
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. The Fund 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. The Fund 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 the 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.
The Fund 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 the Fund may decline below the repurchase price.
The Fund would pay interest on amounts obtained pursuant to a reverse repurchase
agreement.
The Fund may not enter into a repurchase agreement or reverse repurchase
agreements if, as a result, more than 15% of the Fund's net assets would be
invested in repurchase agreements or reverse repurchase agreements with a
maturity of more than seven days and in other illiquid securities. The Fund will
enter into repurchase agreements and reverse repurchase agreements only with
registered broker/dealers and commercial banks that meet guidelines established
by the Board of Trustees.
SHORT SALES. The Fund may from time to time sell securities short without
limitation, although initially it has no intention to sell securities short. In
a short sale, the Fund sells securities it does not own (but has borrowed) in
anticipation of a decline in the securities' market price. All short sales by
the Fund will be fully collateralized. Short sales involve certain risks and
special considerations; possible losses from short sales may be unlimited,
whereas losses from purchases of securities are limited to the total amount
invested. The Fund may also sell short "against the box," that is, sell a
security that the Fund owns or has the right to acquire, for delivery at a
specified date in the future.
SOVEREIGN DEBT. The Fund may invest in "sovereign debt," which is issued or
guaranteed by emerging market governments (including countries, provinces and
municipalities) or their agencies and instrumentalities. Sovereign debt may
trade at a substantial discount from face value. The Fund may hold and trade
sovereign debt of emerging market countries in appropriate circumstances and to
participate in debt conversion programs. Emerging country sovereign debt
involves a high degree of risk, is generally lower-quality debt, and is
considered speculative in nature. The issuer or governmental authorities that
control sovereign debt repayment ("sovereign debtors") may be unable or
unwilling to repay principal or interest when due in accordance with the terms
of the debt. A sovereign debtor's willingness or ability to repay principal and
interest due in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the
35
sovereign debtor's policy towards the IMF and the political constraints to which
the sovereign debtor may be subject. Sovereign debtors may also be dependent on
expected disbursements from foreign governments, multilateral agencies and
others abroad to reduce principal and interest arrearage on their debt. The
commitment of these third parties to make such disbursements may be conditioned
on the sovereign debtor's implementation of economic reforms or economic
performance and the timely service of the debtor's obligations. The sovereign
debtor's failure to meet these conditions may cause these third parties to
cancel their commitments to provide funds to the sovereign debtor, which may
further impair the debtor's ability or willingness to timely service its debts.
In certain instances, the Fund may invest in sovereign debt that is in default
as to payments of principal or interest. In the event that the Fund holds
non-performing sovereign debt, the Fund may incur additional expenses in
connection with any restructuring of the issuer's obligations or in otherwise
enforcing its rights thereunder.
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. Government Securities.
As used in this Prospectus, the term U.S. Government Securities means
obligations issued or guaranteed by the U.S. Government, its agencies,
instrumentalities or sponsored enterprises. The U.S. Government Securities in
which the Fund may invest include U.S. Treasury securities and obligations
issued or guaranteed by U.S. Government agencies and instrumentalities and
backed by the full faith and credit of the U.S. Government, such as those
guaranteed by the Small Business Administration or issued by the Government
National Mortgage Association. In addition, the U.S. Government Securities in
which the Funds may invest include securities supported primarily or solely by
the creditworthiness of the issuer, such as securities of the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation and the
Tennessee Valley Authority. There is no guarantee that the U.S. Government will
support securities not backed by its full faith and credit. Accordingly,
although these securities have historically involved little risk of loss of
principal if held to maturity, they may involve more risk than securities backed
by the U.S. Government's full faith and credit.
WARRANTS. The Fund may invest in warrants, which are options to purchase an
equity security at a specified price (usually representing a premium over the
applicable market value of the underlying equity security at the time of the
warrant's issuance) and usually during a specified period of time. Unlike
convertible securities and preferred stocks, warrants do not pay a fixed
dividend. Investments in warrants involve certain risks, including the possible
lack of a liquid market for the resale of the warrants, potential price
fluctuations as a result of speculation or other factors and failure of the
price of the underlying security to reach a level at which the warrant can be
prudently exercised (in which case the warrant may expire without being
exercised, resulting in the loss of the Fund's entire investment therein).
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES. The Fund may
purchase securities (including securities issued pursuant to an initial public
offering) on a "when-issued," "delayed delivery" or "forward commitment" basis,
in which case delivery and payment normally take place within 45 days after the
date of the commitment to purchase. The Fund will make a commitment 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 Fund does not earn income on such securities until settlement and
bear the risk of
36
market value fluctuations in between the purchase and settlement dates. New
issues of stocks and bonds, private placements and Government Securities may be
sold in this manner.
ZERO COUPON SECURITIES. The Fund may invest in zero coupon securities. Zero
coupon securities are debt securities that are issued and traded at a discount
and do not entitle the holder to any periodic payments of interest prior to
maturity. Zero coupon securities include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury.
These components are traded independently under the U.S. Treasury's Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program or
as Coupons Under Book Entry Safekeeping ("CUBES").
The Fund may invest in other types of related zero coupon securities commonly
known as "stripped" securities. For instance, a number of banks and brokerage
firms separate the principal and interest portions of U.S. Treasury securities
and sell them separately in the form of receipts or certificates representing
undivided interests in these instruments. These instruments are generally held
by a bank in a custodial or trust account on behalf of the owners of the
securities and are known by various names, including Treasury Receipts ("TRs"),
Treasury Investment Growth Receipts ("TIGRs") and Certificates of Accrual on
Treasury Securities ("CATS"). Stripped securities also may be issued by
corporations and municipalities. Stripped securities will normally be considered
illiquid investments and will be acquired subject to the limitations on illiquid
investments.
Zero coupon securities are sold at original issue discount and pay no interest
to holders prior to maturity, but the Fund holding a zero coupon security must
include a portion of the original issue discount of the security as income.
Because of this, zero coupon securities may be subject to greater fluctuation of
market value than the other debt securities in which the Fund may invest. The
Fund distributes all of its net investment income, and may have to sell
portfolio securities to distribute imputed income, which may occur at a time
when Hansberger would not have chosen to sell such securities and which may
result in a taxable gain or loss.
37
INVESTMENT ADVISER, ADMINISTRATOR,
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
PORTFOLIO MANAGEMENT AGENT
Harris Investment Management, Inc.
190 South LaSalle Street
Chicago, Illinois 60603
INVESTMENT SUB-ADVISER
Hansberger Global Investors, Inc.
515 East Las Olas Blvd., Suite 1300
Fort Lauderdale, Florida 33301
SUB-ADMINISTRATOR AND ACCOUNTING
SERVICES AGENT, SUB-TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
SUB-ADMINISTRATOR AND DISTRIBUTOR
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
CUSTODIAN
PNC Bank, N.A.
Broad & Chestnut Streets
Philadelphia, Pennsylvania 19101
INDEPENDENT ACCOUNTANTS
[ ]
LEGAL COUNSEL
Bell, Boyd & Lloyd
Three First National Plaza
Chicago, Illinois 60602-4207
38
Part B
(All other Statements of Additional Information)
Not Applicable in this Filing
HARRIS INSIGHT(R) FUNDS
HARRIS INSIGHT EMERGING MARKETS FUND
60 State Street, Suite 1300, Boston, Massachusetts 02109
Telephone: (800) 982-8782
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
September 1, 1997
The Harris Insight Emerging Markets Fund (the "Fund") is one of
thirteen portfolios of Harris Insight Funds Trust (the "Trust"), an open-end,
diversified management investment company. The investment objective of the Fund
is described in the Prospectus. See "Investment Objective and Policies."
This Statement of Additional Information is not a prospectus and is
authorized for distribution only when preceded or accompanied by the Fund's
related Prospectus dated September 1, 1997 and any supplement thereto (the
"Prospectus"). This Statement of Additional Information contains additional
information that should be read in conjunction with the Prospectus, additional
copies of which may be obtained without charge from the Trust's distributor,
Funds Distributor, Inc., by writing or calling the Fund at the address or
telephone number given above.
TABLE OF CONTENTS
Page
INVESTMENT STRATEGIES.........................................................2
RATINGS......................................................................17
INVESTMENT RESTRICTIONS......................................................18
MANAGEMENT...................................................................19
SERVICE PLAN.................................................................23
CALCULATION OF YIELD AND TOTAL RETURN........................................24
DETERMINATION OF NET ASSET VALUE.............................................25
PORTFOLIO TRANSACTIONS.......................................................25
FEDERAL INCOME TAXES.........................................................27
BENEFICIAL INTEREST..........................................................29
OTHER........................................................................29
CUSTODIAN....................................................................30
INDEPENDENT ACCOUNTANTS......................................................30
APPENDIX A...................................................................31
INVESTMENT STRATEGIES
ASSET-BACKED SECURITIES. The Fund may purchase asset-backed securities,
which represent direct or indirect participations in, or are secured by and
payable from, assets other than mortgage-backed assets such as motor vehicle
installment sales contracts, installment loan contracts, leases of various types
of real and personal property and receivables from revolving credit (credit
card) agreements. In accordance with guidelines established by the Board of
Trustees, asset-backed securities may be considered illiquid securities and,
therefore, may be subject to the Fund's 15% limitation on such investments.
Asset-backed securities, including adjustable rate asset-backed securities, have
yield characteristics similar to those of mortgage-backed securities and,
accordingly, are subject to many of the same risks, including prepayment risk.
Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution.
Asset-backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-backed
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-backed securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.
CONVERTIBLE SECURITIES. Because they have the characteristics of both
fixed-income securities and common stock, convertible securities 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 relationship
to the price of the common shares into 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. Securities rated "B" or "CCC" (or "Caa") are regarded as having
predominantly speculative characteristics with respect to the issuer's capacity
to pay interest and repay principal, with "B" indicating a lesser degree of
speculation than "CCC" (or "Caa"). While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions. Securities rated "CCC" (or "Caa") have a
currently identifiable vulnerability to default and are dependent upon
2
favorable business, financial, and economic conditions to meet timely payment of
interest and repayment of principal. In the event of adverse business,
financial, or economic conditions, they are not likely to have the capacity to
pay interest and repay principal.
While the market values of low-rated and comparable unrated securities
tend to react less to fluctuations in interest rate levels than the market
values of higher-rated securities, the market values of certain low-rated and
comparable unrated securities also tend to be more sensitive to individual
corporate developments and changes in economic conditions than higher-rated
securities. In addition, low-rated securities and comparable unrated securities
generally present a higher degree of credit risk, and yields on such securities
will fluctuate over time. Issuers of low-rated and comparable unrated securities
are often highly leveraged and may not have more traditional methods of
financing available to them so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by such issuers
is significantly greater because low-rated and comparable unrated securities
generally are unsecured and frequently are subordinated to the prior payment of
senior indebtedness. The Fund may incur additional expenses to the extent that
it is required to seek recovery upon a default in the payment of principal or
interest on its portfolio holdings. The existence of limited markets for
low-rated and comparable unrated securities may diminish the Fund's ability to
obtain accurate market quotations for purposes of valuing such securities and
calculating its net asset value.
Fixed-income securities, including low-rated securities and comparable
unrated securities, frequently have call or buy-back features that permit their
issuers to call or repurchase the securities from their holders, such as the
Fund. If an issuer exercises these rights during periods of declining interest
rates, the Fund may have to replace the security with a lower yielding security,
thus resulting in a decreased return to the Fund.
To the extent that there is no established retail secondary market for
low-rated and comparable unrated securities, there may be little trading of such
securities in which case the responsibility of the Trust's Board of Trustees to
value such securities becomes more difficult and judgment plays a greater role
in valuation because there is less reliable, objective data available. In
addition, the Fund's ability to dispose of the bonds may become more difficult.
Furthermore, adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of high yield bonds,
especially in a thinly traded market.
The market for certain low-rated and comparable unrated securities is
relatively new and has not weathered a major economic recession. The effect that
such a recession might have on such securities is not known. Any such recession,
however, could likely disrupt severely the market for such securities and
adversely affect the value of such securities. Any such economic downturn also
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and could result in a higher incidence of
defaults.
FLOATING AND VARIABLE RATE OBLIGATIONS. Harris Investment Management,
Inc. ("HIM" or the "Portfolio Management Agent") or Hansberger Global Investors,
Inc. ("Hansberger" or the "Sub-adviser") will monitor, on an ongoing basis, the
ability of an issuer of a floating or variable rate demand instrument to pay
principal and interest on demand. The Fund's right to obtain
3
payment at par on a demand instrument could be affected by events occurring
between the date the Fund elects to demand payment and the date payment is due
that may affect the ability of the issuer of the instrument to make payment when
due, except when such demand instrument permits same day settlement. To
facilitate settlement, these same day demand instruments may be held in book
entry form at a bank other than the Fund's custodian subject to a sub-custodian
agreement between the bank and the Fund's custodian.
The floating and variable rate obligations that the Fund may purchase
include certificates of participation in such obligations purchased from banks.
A certificate of participation gives the Fund an undivided interest in the
underlying obligations in the proportion that the Fund's interest bears to the
total principal amount of the obligation. Certain certificates of participation
may carry a demand feature that would permit the holder to tender them back to
the issuer prior to maturity. The income received on certificates of
participation in tax-exempt municipal obligations constitutes interest from
tax-exempt obligations.
FOREIGN INVESTMENT COMPANIES. Some of the countries in which the Fund
may invest may not permit, or may place economic restrictions on, direct
investment by outside investors. Investments in such countries may only be
permitted through foreign government-approved or -authorized investment
vehicles, which may include other investment companies. The Fund may also invest
in other investment companies that invest in foreign securities. Investing
through such vehicles may involve frequent or layered fees or expenses and may
also be subject to limitation under the Investment Company Act of 1940, as
amended (the "1940 Act"). Under the 1940 Act, a Fund may invest up to 10% of its
assets in shares of investment companies and up to 5% of its assets in any one
investment company as long as the investment does not represent more than 3% of
the voting stock of the acquired investment company.
FOREIGN SECURITIES. As discussed in the Prospectus, investing in
foreign securities generally represents a greater degree of risk than investing
in domestic securities, due to possible exchange rate fluctuations, less
publicly available information, more volatile markets, less securities
regulation, less favorable tax provisions, war or expropriation. As a result of
its investments in foreign securities, the Fund may receive interest or dividend
payments, or the proceeds of the sale or redemption of such securities, in the
foreign currencies in which such securities are denominated.
The Fund may purchase securities denominated in the currency of
countries where the interest rate environment as well as the general economic
climate provide an opportunity for declining interest rates and currency
appreciation. If interest rates decline, such non-dollar securities will tend to
appreciate in value. If the currency also appreciates against the dollar, the
total investment in such non-dollar securities would be enhanced further. (For
example, if United Kingdom bonds yield 14% during a year when interest rates
decline causing the bonds to appreciate by 5% and the pound rises 3% versus the
dollar, then the annual total return of such bonds would be 22%. This example is
illustrative only.) Conversely, a rise in interest rates or decline in currency
exchange rates would adversely affect the Fund's return.
Investments in non-dollar securities are evaluated primarily on the
strength of a particular currency against the dollar and on the interest rate
climate of that country. Currency is judged on the basis of fundamental economic
criteria (e.g., relative inflation levels and trends, growth rate
4
forecasts, balance of payments status and economic policies) as well as
technical and political data. In addition to the foregoing, interest rates are
evaluated on the basis of differentials or anomalies that may exist between
different countries.
FOREIGN CURRENCY FORWARD CONTRACTS. The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a fixed quantity
of a foreign currency at a future date ("forward contracts"). Forward contracts
may be entered into by the Fund for hedging purposes as well as for non-hedging
purposes. Forward contracts may also be entered into for "cross hedging" as
noted in the Prospectus. Transactions in forward contracts entered into for
hedging purposes will include forward purchases or sales of foreign currencies
for the purpose of protecting the dollar value of securities denominated in a
foreign currency or protecting the dollar equivalent of interest or dividends to
be paid on such securities. By entering into such transactions, however, the
Fund may be required to forego the benefits of advantageous changes in exchange
rates. The Fund may also enter into transactions in forward contracts for other
than hedging purposes which presents greater profit potential but also involves
increased risk. For example, if the Adviser believes that the value of a
particular foreign currency will increase or decrease relative to the value of
the U.S. dollar, the Fund may purchase or sell such currency, respectively,
through a forward contract. If the expected changes in the value of the currency
occur, the Fund will realize profits which will increase its gross income. Where
exchange rates do not move in the direction or to the extent anticipated,
however, the Fund may sustain losses which will reduce its gross income. Such
transactions, therefore, could be considered speculative.
The Fund has established procedures consistent with statements by the
Securities and Exchange Commission (the "SEC") and its staff regarding the use
of forward contracts by registered investment companies, which require the use
of segregated assets or "cover" in connection with the purchase and sale of such
contracts. In those instances in which the Fund satisfies this requirement
through segregation of assets, it will maintain, in a segregated account, cash
or appropriate liquid securities, which will be marked to market on a daily
basis, in an amount equal to the value of its commitments under forward
contracts.
Currently, only a limited market, if any, exists for hedging
transactions relating to currencies in many emerging market countries or to
securities of issuers domiciled or principally engaged in business in emerging
market countries. This may limit the Fund's ability to effectively hedge its
investments in those emerging markets.
FOREIGN CURRENCY FUTURES. Generally, foreign currency futures provide
for the delivery of a specified amount of a given currency, on the exercise
date, for a set exercise price denominated in U.S. dollars or other currency.
Foreign currency futures contracts would be entered into for the same reason and
under the same circumstances as forward contracts. Hansberger will assess such
factors as cost spreads, liquidity and transaction costs in determining whether
to utilize futures contracts or forward contracts in its foreign currency
transactions and hedging strategy.
Purchasers and sellers of foreign currency futures contracts are
subject to the same risks that apply to the buying and selling of futures
generally. In addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those associated with
options on foreign currencies described below. Further, settlement of a foreign
currency futures
5
contract must occur within the country issuing the underlying currency. Thus,
the Fund must accept or make delivery of the underlying foreign currency in
accordance with any U.S. or foreign restrictions or regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery which
are assessed in the issuing country.
FOREIGN CURRENCY OPTIONS. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward contracts. For example, in order to protect against declines in the
dollar value of portfolio securities which are denominated in a foreign
currency, the Fund may purchase put options on an amount of such foreign
currency equivalent to the current value of the portfolio securities involved.
As a result, the Fund would be able to sell the foreign currency for a fixed
amount of U.S. dollars, thereby securing the dollar value of the portfolio
securities (less the amount of the premiums paid for the options). Conversely,
the Fund may purchase call options on foreign currencies in which securities it
anticipates purchasing are denominated to secure a set U.S. dollar price for
such securities and protect against a decline in the value of the U.S. dollar
against such foreign currency. The Fund may also purchase call and put options
to close out written option positions.
The Fund may also write covered call options on foreign currency to
protect against potential declines in its portfolio securities which are
denominated in foreign currencies. If the U.S. dollar value of the portfolio
securities falls as a result of a decline in the exchange rate between the
foreign currency in which it is denominated and the U.S. dollar, then a loss to
the Fund occasioned by such value decline would be ameliorated by receipt of the
premium on the option sold. At the same time, however, the Fund gives up the
benefit of any rise in value of the relevant portfolio securities above the
exercise price of the option and, in fact, only receives a benefit from the
writing of the option to the extent that the value of the portfolio securities
falls below the price of the premium received. The Fund may also write options
to close out long call option positions. A covered put option on a foreign
currency would be written by the Fund for the same reason it would purchase a
call option, namely, to hedge against an increase in the U.S. dollar value of a
foreign security which the Fund anticipates purchasing. Here, the receipt of the
premium would offset, to the extent of the size of the premium, any increased
cost to the Fund resulting from an increase in the U.S. dollar value of the
foreign security. However, the Fund could not benefit from any decline in the
cost of the foreign security which is greater than the price of the premium
received. The Fund may also write options to close out long put option
positions. The markets in foreign currency options are relatively new and the
Fund's ability to establish and close out positions on such options is subject
to the maintenance of a liquid secondary market.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security,
including foreign securities held in a "hedged" investment portfolio. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
6
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
GOVERNMENT SECURITIES. Government securities consist of obligations
issued or guaranteed by the U.S. Government, its agencies, instrumentalities or
sponsored enterprises ("Government Securities"). Obligations of the United
States Government agencies and instrumentalities are debt securities issued by
United States Government-sponsored enterprises and federal agencies. Some of
these obligations are supported by: (a) the full faith and credit of the United
States Treasury (such as Government National Mortgage Association participation
certificates); (b) the limited authority of the issuer to borrow from the United
States Treasury (such as securities of the Federal Home Loan Bank); (c) the
discretionary authority of the United States Government to purchase certain
obligations (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 United States, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment. In cases where United States Government support of agencies or
instrumentalities is discretionary, no assurance can be given that the United
States Government will provide financial support, since it is not lawfully
obligated to do so.
INDEX FUTURES CONTRACTS AND OPTIONS ON INDEX FUTURES CONTRACTS. The
Fund may attempt to reduce the risk of investment in equity and other 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. The
Fund may hedge a portion of its portfolio by selling index futures contracts to
limit exposure to decline. During a market advance or when the Portfolio
Management Agent or the Sub-adviser anticipates an advance, the Fund may hedge a
portion of its portfolio by purchasing index futures or options on indices. This
affords a hedge against the Fund's not participating in a market advance at a
time when it is not fully invested and serves as a temporary substitute for the
purchase of individual securities that may later by purchased in a more
advantageous manner. The Fund will sell options on indices only to close out
existing hedge positions.
A securities index assigns relative weightings to the securities in the
index, and the index generally fluctuates with changes in the market values of
these securities. A securities index futures contract is an agreement in which
one party agrees to deliver to the other an amount of cash equal to a specific
dollar amount times the difference between the value of a specific securities
index at the close of the last trading day of the contract and the price at
which the agreement is made. Unlike the purchase or sale of an underlying
security, no consideration is paid or received by the Fund upon the purchase or
sale of a securities index futures contract. When the contract is executed, each
party deposits with a broker or in a segregated custodial account a percentage
of the contract amount which may be as low as 5%, called the "initial margin."
During the term of the contract, the amount
7
of this deposit is adjusted based on the current value of the futures contract
by payments of variation margin to or from the broker or segregated account.
The Fund will use index futures contracts only as a hedge against
changes resulting from market conditions in the values of securities held in the
Fund's portfolio or which it intends to purchase and where the transactions are
economically appropriate to the reduction of risks inherent in the ongoing
management of the Fund. The Fund will sell index futures only if the amount
resulting from the multiplication of the then current level of the indices upon
which its futures contracts which would be outstanding, do not exceed one-third
of the value of the Fund's net assets. Also, the Fund may not purchase or sell
index futures if, immediately thereafter, the sum of the premiums paid for
unexpired options on futures contracts and margin deposits on the Fund's
outstanding futures contracts would exceed 5% of the market value of the Fund's
total assets. When the Fund purchases index futures contracts, it will deposit
an amount of cash or appropriate liquid securities equal to the market value of
the futures contracts in a segregated account with its custodian.
There are risks that are associated with the use of futures contracts
for hedging purposes. The price of a futures contract will vary from day to day
and should parallel (but not necessarily equal) the changes in price of the
underlying securities that are included in the index. The difference between
these two price movements is called "basis." There are occasions when basis
becomes distorted. For instance, the increase in value of the hedging
instruments may not completely offset the decline in value of the securities in
the portfolio. Conversely, the loss in the hedged position may be greater than
the capital appreciation that the Fund experiences in its securities positions.
Distortions in basis are more likely to occur when the securities hedged are not
part of the index covered by the futures contract. Further, if market values do
not fluctuate, the Fund will sustain a loss at least equal to the commissions on
the financial futures transactions.
All investors in the futures market are subject to initial margin and
variation margin requirements. Rather than providing additional variation
margin, an investor may close out a futures position. Changes in the initial and
variation margin requirements may influence an investor's decision to close out
the position. The normal relationship between the securities and futures markets
may become distorted if changing margin requirements do not reflect changes in
value of the securities. The margin requirements in the futures market are
substantially lower than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary basis distortion.
In the futures market, it may not always be possible to execute a buy
or sell order at the desired price, or to close out an open position due to
market conditions limits on open positions, and/or daily price fluctuation
limits. Each market establishes a limit on the amount by which the daily market
price of a futures contract may fluctuate. Once the market price of a futures
contract reaches its daily price fluctuation limit, positions in the commodity
can be neither taken nor liquidated unless traders are willing to effect trades
at or within the limit. The holder of a futures contract (including the Fund)
may therefore be locked into its position by an adverse price movement for
several days or more, which may be to its detriment. If the Fund could not close
its open position during this period, it would continue to be required to make
daily cash payments of variation margin. The risk of loss to the Fund is
theoretically unlimited when it writes (sells) a
8
futures contract because it is obligated to settle for the value of the contract
unless it is closed out, regardless of fluctuations in the price of the
underlying index. When the Fund purchases a put option or call option, however,
unless the option is exercised, the maximum risk of loss to the Fund is the
price of the put option or call option purchased.
Options on securities indices are similar to options on securities
except that, rather than the right to take or make delivery of securities at a
specified price, an option on a securities index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the securities index upon which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to the difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the "multiplier"). The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike options
on securities, all settlements are in cash, and gain or loss depends on price
movements in the securities market generally (or in a particular industry or
segment of the market) rather than price movements in individual securities.
Except as described below, the Fund will write call options on indices
only if on such date it holds a portfolio of securities at least equal to the
value of the index times the multiplier times the number of contracts. When the
Fund writes a call option on a broadly based stock market index, it will
segregate or put into escrow with its custodian, or pledge to a broker as
collateral for the option, "qualified securities" with a market value at the
time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts. If the Fund has written an
option on an industry or market segment index, it will segregate, escrow, or
pledge "qualified securities," all of which are stocks of issuers in such
industry or market segment, with a market value at the time the option is
written of not less than 100% of the current index value times the multiplier
times the number of contracts.
The Fund's successful use of index futures contracts and options on
indices depends upon the Portfolio Management Agent's or the Sub-adviser's
ability to predict the direction of the market and is subject to various
additional risks. The correlation between movements in the price of the index
future and the price of the securities being hedged is imperfect and the risk
from imperfect correlation increases as the composition of the Fund's portfolio
diverges from the composition of the relevant index. In addition, if the Fund
purchases futures to hedge against market advances before it can invest in a
security in an advantageous manner and the market declines, the Fund might
create a loss on the futures contract. Particularly in the case of options on
stock indices, the Fund's ability to establish and maintain positions will
depend on market liquidity. In addition, the ability of the Fund to close out an
option depends on a liquid secondary market. The risk of loss to the Fund is
theoretically unlimited when it writes (sells) a futures contract because the
Fund is obligated to settle for the value of the contract unless it is closed
out, regardless of fluctuations in the underlying index. There is no assurance
that liquid secondary markets will exist for any particular option at any
particular time.
Although Fund has no present intention to invest 5% or more of its
assets in index futures and options on indices, the Fund has the authority to
invest up to 25% of its net assets in such securities.
9
See additional risk disclosure above under "Interest Rate Futures
Contracts and Related Options."
INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may
invest in interest rate futures contracts and options on such contracts that are
traded on a domestic exchange or board of trade. Such investments may be made by
the Fund solely for the purpose of hedging against changes in the value of its
portfolio securities due to anticipated changes in interest rates and market
conditions, and not for purposes of speculation. A public market exists for
interest rate futures contracts covering a number of debt securities, including
long-term United States Treasury Bonds, ten-year United States Treasury Notes,
three-month U.S. Treasury Bills and three-month domestic bank certificates of
deposit. Other financial futures contracts may be developed and traded. The
purpose of the acquisition or sale of an interest rate futures contract by the
Fund, as the holder of municipal or other debt securities, is to protect the
Fund from fluctuations in interest rates on securities without actually buying
or selling such securities.
Unlike the purchase or sale of a security, no consideration is paid or
received by the Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the broker an amount of cash or cash
equivalents equal to approximately 10% of the contract amount (this amount is
subject to change by the board of trade on which the contract is traded and
members of such board of trade may charge a higher amount). This amount is known
as initial margin and is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract, assuming that all contractual obligations have been satisfied.
Subsequent payments, known as variation margin, to and from the broker, will be
made on a daily basis as the price of the index fluctuates making the long and
short positions in the futures contract more or less valuable, a process known
as marking-to-market. At any time prior to the expiration of the contract, the
Fund may elect to close the position by taking an opposite position, which will
operate to terminate the Fund's existing position in the futures contract.
The Fund may not purchase or sell futures contracts or purchase options
on futures contracts if, immediately thereafter, more than one-third of its net
assets would be hedged, or the sum of the amount of margin deposits on the
Fund's existing futures contracts and premiums paid for options would exceed 5%
of the value of the Fund's total assets. When the Fund enters into futures
contracts to purchase an index or debt security or purchase call options, an
amount of cash or appropriate liquid securities equal to the notional market
value of the underlying contract will be deposited and maintained in a
segregated account with the Fund's custodian to cover the positions, thereby
insuring that the use of the contract is unleveraged.
Although the Fund will enter into futures contracts only if an active
market exists for such contracts, there can be no assurance that an active
market will exist for the contract at any particular time. Most domestic futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not limit potential
10
losses because the limit may prevent the liquidation of unfavorable positions.
It is possible that futures contract prices could move to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and subjecting some futures traders to
substantial losses. In such event, it will not be possible to close a futures
position and, in the event of adverse price movements, the Fund would be
required to make daily cash payments of variation margin. In such circumstances,
an increase in the value of the portion of the portfolio being hedged, if any,
may partially or completely offset losses on the futures contract. As described
above, however, there is no guarantee the price of municipal bonds or of other
debt securities will, in fact, correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures contract.
If the Fund has hedged against the possibility of an increase in
interest rates adversely affecting the value of municipal bonds or other debt
securities held in its portfolio and rates decrease instead, the Fund will lose
part or all of the benefit of the increased value of the securities it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which reflect
the decline in interest rates. The Fund may have to sell securities at a time
when it may be disadvantageous to do so.
In addition, the ability of the Fund to trade in futures contracts and
options on futures contracts may be materially limited by the requirements of
the Internal Revenue Code of 1986, as amended (the "Code"), applicable to a
regulated investment company. See "Federal Income Taxes" below.
The Fund may purchase put and call options on interest rate futures
contracts which are traded on a domestic exchange or board of trade as a hedge
against changes in interest rates, and may enter into closing transactions with
respect to such options to terminate existing positions. There is no guarantee
such closing transactions can be effected.
Options on futures contracts, as contrasted with the direct investment
in such contracts, give the purchaser the right, in return for the premium paid,
to assume a position in futures contracts at a specified exercise price at any
time prior to the expiration date of the options. Upon exercise of an option,
the delivery of the futures position by the writer of the option to the holder
of the option will be accompanied by delivery of the accumulated balance in the
writer's futures margin account, which represents the amount by which the market
price of the futures contract exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
The potential loss related to the purchase of an option on interest rate futures
contracts is limited to the premium paid for the option (plus transaction
costs). Because the value of the option is fixed at the point of sale, there are
no daily cash payments to reflect changes in the value of the underlying
contract; however, the value of the option does change daily and that change
would be reflected in the net asset value of the Fund.
There are several risks in connection with the use of interest rate
futures contracts and options on such futures contracts as hedging devices.
Successful use of these derivative securities by the Fund is subject to the
Portfolio Management Agent's or the Sub-adviser's ability to predict
11
correctly movements in the direction of interest rates. Such predictions involve
skills and techniques which may be different from those involved in the
management of long-term municipal bond portfolio. There can be no assurance that
there will be a correlation between price movements in interest rate futures, or
related options, on the one hand, and price movements in the municipal bond or
other debt securities which are the subject to the hedge, on the other hand.
Positions in futures contracts and options on futures contracts may be closed
out only on an exchange or board of trade that provides an active market,
therefore, there can be no assurance that a liquid market will exist for the
contract or the option at any particular time. Consequently, the Fund may
realize a loss on a futures contract that is not offset by an increase in the
price of the municipal bonds or other debt securities being hedged or may not be
able to close a futures position in the event of adverse price movements. Any
income earned from transactions in futures contracts and options on futures
contracts will be taxable. Accordingly, it is anticipated that such investments
will be made only in unusual circumstances, such as when the Portfolio
Management Agent or the Sub-adviser anticipates an extreme change in interest
rates or market conditions.
See additional risk disclosure below under "Index Futures Contracts and
Options on Index Futures Contracts."
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 that
assumes the obligation for payment of principal and interest in the event of
default by the issuer. Only banks that, in the opinion of the Portfolio
Management Agent or the Sub-adviser, are of investment quality comparable to
other permitted investments of the Fund, may be used for letter of credit backed
investments.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to brokers, dealers
and financial institutions securities from its portfolio representing up to
one-third of the Fund's net assets 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 the Sub-adviser will
consider all relevant facts and circumstances, including the creditworthiness of
the broker, dealer or financial institution. The Fund will not enter into any
portfolio security lending arrangement having a duration of longer than one
year. Any securities that the 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
the Fund will be subject to termination at the Fund's or the borrower's option.
The 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 Investment Adviser, the Portfolio Management
Agent, the Sub-adviser or the Distributor.
12
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities, including collateralized mortgage obligations ("CMOs") and
Government Stripped Mortgage-Backed Securities. Mortgage-backed securities
represent an interest in a pool of mortgages originated by lenders such as
commercial banks, savings associations and mortgage bankers and brokers.
Mortgage-backed securities may be issued by government-related entities or by
non-governmental entities such as special purpose trusts created by banks,
savings associations, private mortgage insurance companies or mortgage bankers.
U.S. Government-related mortgage-backed securities may be issued or guaranteed
by the U.S. Government or one of its agencies and backed by the full faith and
credit of the U.S. Government, or supported primarily or solely by the
creditworthiness of the issuing U.S. Government agency or other entity.
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. Government Stripped
Mortgage-Backed Securities are mortgage-backed securities issued or guaranteed
by Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), or Federal Home Loan Mortgage Corporation ("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.
Even if the U.S. Government or one of its agencies guarantees principal and
interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market volatility.
When interest rates decline, mortgage-backed securities experience higher rates
of prepayment because the underlying mortgages are refinanced to take advantage
of the lower rates. The prices of mortgage-backed securities may not increase as
much as prices of other debt obligations when interest rates decline, and
mortgage-backed securities may not be an effective means of locking in a
particular interest rate. In addition, any premium paid for a mortgage-backed
security may be lost if the security is prepaid. When interest rates rise,
mortgage-backed securities experience lower rates of prepayment. This has the
effect of lengthening the expected maturity of a mortgage-backed security. As a
result, prices of mortgage-backed securities may decrease more than prices of
other debt obligations when interest rates rise.
PUT AND CALL OPTIONS. The Fund may invest in covered put and covered
call options and write covered put and covered call options on securities in
which they may invest directly and that are traded on registered domestic
securities exchanges. The writer of a call option, who receives a premium, has
the obligation, upon exercise of the option, to deliver the underlying security
against payment of the exercise price during the option period. The writer of a
put, who receives a premium, has the obligation to buy the underlying security,
upon exercise, at the exercise price during the option period.
The Fund may write put and call options on securities only if they are
"covered," and such options must remain "covered" as long as the Fund is
obligated as a writer. A call option is "covered" if the Fund owns the
underlying security or its equivalent covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for
13
additional cash consideration if held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option is also covered if the Fund holds on a share-for-share or equal principal
amount basis a call on the same security as the call written where the exercise
price of the call held is equal to or less than the exercise price of the call
written or greater than the exercise price of the call written if the difference
is maintained by the Fund in cash, Treasury bills or appropriate liquid
securities in a segregated account with its custodian. A put option is "covered"
if the Fund maintains cash or appropriate liquid securities with a value equal
to the exercise price in a segregated account with its custodian, or owns on a
share-for-share or equal principal amount basis a put on the same security as
the put written where the exercise price of the put held is equal to or greater
than the exercise price of the put written.
The principal reason for writing call options is to attempt to realize,
through the receipt of premiums, a greater current return than would be realized
on the underlying securities alone. In return for the premium, the Fund would
give up the opportunity for profit from a price increase in the underlying
security above the exercise price so long as the option remains open, but
retains the risk of loss should the price of the security decline. Upon exercise
of a call option when the market value of the security exceeds the exercise
price, the Fund would receive less total return for its portfolio than it would
have if the call had not been written, but only if the premium received for
writing the option is less than the difference between the exercise price and
the market value. Put options are purchased in an effort to protect the value of
a security owned against an anticipated decline in market value. The Fund may
forego the benefit of appreciation on securities sold or be subject to
depreciation on securities acquired pursuant to call or put options,
respectively, written by the Fund. The Fund may experience a loss if the value
of the securities remains at or below the exercise price, in the case of a call
option, or at or above the exercise price, in the case of a put option.
The Fund may purchase put options in an effort to protect the value of
a security owned against an anticipated decline in market value. Exercise of a
put option will generally be profitable only if the market price of the
underlying security declines sufficiently below the exercise price to offset the
premium paid and the transaction costs. If the market price of the underlying
security increases, the Fund's profit upon the sale of the security will be
reduced by the premium paid for the put option less any amount for which the put
is sold.
The staff of the SEC has taken the position that purchased options not
traded on registered domestic securities exchanges and the assets used as cover
for written options not traded on such exchanges are illiquid securities. The
Trust has agreed that, pending resolution of the issue, the Fund will treat such
options and assets as subject to the Fund's limitation on investment in
securities that are not readily marketable.
Writing of options involves the risk that there will be no market in
which to effect a closing transaction. An exchange-traded option may be closed
out only on an exchange that provides a secondary market for an option of the
same series, and there is no assurance that a liquid secondary market on an
exchange will exist.
14
REPURCHASE AGREEMENTS. The Fund 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. The Fund 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 the 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.
The Fund may not enter into a repurchase agreement if, as a result,
more than 15% of the market value of the Fund's total net assets would be
invested in repurchase agreements with a maturity of more than seven days and in
other illiquid securities. The Fund will enter into repurchase agreements only
with registered broker/dealers and commercial banks that meet guidelines
established by the Board of Trustees.
The Fund may enter into reverse repurchase agreements, which are
detailed in the Prospectus.
SECURITIES WITH PUTS. In order to maintain liquidity, the 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
Sub-adviser present minimal credit risks. The ability of the 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 by having to sell the security elsewhere. A put is not transferable by
the Fund, although the Fund may sell the underlying securities to a third party
at any time. If necessary and advisable, the Fund may pay for certain puts
either separately, in cash or by paying a higher price for portfolio securities
that are acquired subject to such a put (thus reducing the yield to maturity
otherwise available for the same securities). The Fund expects, however, that
puts generally will be available without the payment of any direct or indirect
consideration.
The Fund intends to enter into puts solely to maintain liquidity and do
not intend to exercise their rights thereunder for trading purposes. The puts
will only be for periods substantially less than the life of the underlying
security. The acquisition of a put will not affect the valuation by the Fund of
the underlying security. Where the Fund pays directly or indirectly for a put,
its costs will be reflected as an unrealized loss of the period during which the
put is held by the Fund and will be reflected in realized gain or loss when the
put is exercised or expires. If the value of the underlying security increases,
the potential for unrealized or realized gain is reduced by the cost of the put.
The maturity of a municipal obligation purchased by the Fund will not be
considered shortened by any put to which the obligation is subject.
SHORT SALES. When a Fund sells short, it borrows the securities that it
needs to deliver to the buyer. The Fund must arrange through a broker to borrow
these securities and will become obligated to replace the borrowed securities at
whatever their market price may be at the time of replacement. The Fund may have
to pay a premium to borrow the securities and must pay any dividends or interest
payable on the securities until they are replaced.
15
The Fund's obligation to replace the securities borrowed in connection
with a short sale will be secured. The proceeds the Fund receives from the short
sale will be held on behalf of the broker until the Fund replaces the borrowed
securities, and the Fund will deposit collateral with the broker; this
collateral will consist of cash or liquid, high grade debt obligations. In
addition, the Fund will deposit collateral in a segregated account with the
Fund's custodian; this collateral will consist of cash or liquid, high grade
debt obligations equal to any difference between the market value of (1) the
securities sold at the time they were sold short and (2) any collateral
deposited with the broker in connection with the short sale (not including the
proceeds of the short sale).
The Fund may sell securities short against the box to hedge unrealized
gains on portfolio securities. If a Fund sells securities short against the box,
it may protect unrealized gains, but will lose the opportunity to profit on such
securities if the price rises.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS (DELAYED-DELIVERY).
When-issued purchases and forward commitments (delayed-delivery) are commitments
by the Fund to purchase or sell particular securities with payment and delivery
to occur at a future date (perhaps one or two months later). These transactions
permit the Fund to lock-in a price or yield on a security, regardless of future
changes in interest rates.
When the Fund agrees to purchase securities on a when-issued or forward
commitment basis, PNC Bank, N.A. (the "Custodian") will segregate on the books
of the Fund the liquid assets of the Fund. Normally, the Custodian will set
aside portfolio securities to satisfy a purchase commitment, and in such a case
the Fund may be required subsequently to place additional assets in the separate
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitments. Because the Fund's liquidity and ability to
manage its portfolio might be affected when it sets aside cash or portfolio
securities to cover such purchase commitments, the Investment Adviser expects
that its commitments to purchase when-issued securities and forward commitments
will not exceed 25% of the value of the Fund's total assets absent unusual
market conditions.
The Fund will purchase securities on a when-issued or forward
commitment basis only with the intention of completing the transaction and
actually purchasing the securities. If deemed advisable as a matter of
investment strategy, however, the Fund may dispose of or renegotiate a
commitment after it is entered into, and may sell securities it has committed to
purchase before those securities are delivered to the Fund on the settlement
date. In these cases the Fund may realize a capital gain or loss for federal
income tax purposes.
When the Fund engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result in the Fund's incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or
a forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
the Fund starting on the day the Fund agrees to
16
purchase the securities. The Fund does not earn interest on the securities it
has committed to purchase until they are paid for and delivered on the
settlement date.
ZERO COUPON SECURITIES. A zero coupon security, which may be purchased
by each of the Funds, is a debt obligation that does not entitle the holder to
any periodic payments of interest prior to maturity and therefore is issued and
traded at a discount from its face amount. Zero coupon securities may be created
by separating the interest and principal components of securities issued or
guaranteed by the United States Government or one of its agencies or
instrumentalities or issued by private corporate issuers. These securities may
not be issued or guaranteed by the United States Government. Typically, an
investment brokerage firm or other financial intermediary holding the security
has separated ("stripped") the unmatured interest coupons from the underlying
principal. The holder may then resell the stripped securities. The stripped
coupons are sold separately from the underlying principal, usually at a deep
discount because the buyer receives only the right to receive a fixed payment on
the security upon maturity and does not receive any rights to reinvestment of
periodic interest (cash) payments. Because the rate to be earned on these
reinvestments may be higher or lower than the rate quoted on the interest-paying
obligations at the time of the original purchase, the investor's return on
investments is uncertain even if the securities are held to maturity. This
uncertainty is commonly referred to as reinvestment risk. With zero coupon
securities, however, there are no cash distributions to reinvest, so investors
bear no reinvestment risk if they hold the zero coupon securities to maturity;
holders of zero coupon securities, however, forego the possibility of
reinvesting at a higher yield than the rate paid on the originally issued
security. With both zero coupon securities and interest-paying securities there
is no reinvestment risk on the principal amount of the investment. When held to
maturity, the entire return from such instruments is determined by the
difference between such instrument's purchase price and its value at maturity.
Because interest on zero coupon securities is not paid on a current basis, the
values of securities of this type are subject to greater fluctuations than are
the values of securities that distribute income regularly. In addition, the
Fund's investment in zero coupon securities will result in special tax
consequences. Although zero coupon securities do not make interest payments, for
tax purposes, a portion of the difference between the security's maturity value
and its purchase price is imputed income to the Fund each year. Under the
federal tax laws applicable to investment companies, the Fund will not be
subject to tax on its income if it pays annual dividends to its shareholders
substantially equal to all the income received from, and imputed to, its
investments during the year. Because imputed income must be paid to shareholders
annually, the Fund may need to borrow money or sell securities to meet certain
dividend and redemption obligations. In addition, the sale of securities by the
Fund may increase its expense ratio and decrease its rate of return.
RATINGS
After purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the Fund to sell such security unless the amount of
such securities exceeds permissible limits established in the Prospectus.
However, the Portfolio Management Agent or the Sub-adviser will reassess
promptly whether the security presents minimal credit risks and determine
whether continuing to hold the
17
security is in the best interests of the Fund. To the extent the ratings given
by any nationally recognized statistical rating organization may change as a
result of changes in such organizations or in their rating systems, the Fund
will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectus and in this
Statement of Additional Information.
For additional information on ratings, see Appendix A to this Statement
of Additional Information.
INVESTMENT RESTRICTIONS
The Fund may not:
(1) issue senior securities or borrow money (except that the Fund may
borrow from banks up to 10% of the current value of the Fund's net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of not more than 10% of the current value of the Fund's
total assets, but investments may not be purchased while any aggregate
borrowings in excess of 5% exist);
(2) pledge or mortgage its assets (except that the Fund may pledge its
assets as described in (1) above and (i) to secure letters of credit solely for
the purpose of participating in a captive insurance company sponsored by the
Investment Company Institute to provide fidelity and directors' and officers'
liability insurance or (ii) to a broker for the purpose of collateralizing
investments, such as stock index futures contracts and put options);
(3) make loans, except that the Fund may make loans of portfolio
securities, enter into repurchase agreements and purchase those debt securities
permitted by the Fund's investment policies and restrictions;
(4) invest an amount in excess of 15% of the current value of the
Fund's 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 that are subject to withdrawal penalties and
have maturities of more than seven days, securities that are not readily
marketable and other illiquid securities (including certain GICs and BICs);
(5) purchase or sell real estate (other than securities secured by real
estate or interests therein, securities backed by mortgages or securities issued
by companies that invest in real estate or interests therein), real estate
limited partnerships, commodities or commodity contracts (except with respect to
futures, options and options on futures);
(6) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and margin payments in connection
with transactions in futures, options and options on futures);
18
(7) underwrite securities of other issuers, except to the extent that
the purchase of municipal obligations or other permitted investments directly
from the issuer thereof or from an underwriter for an issuer and the later
disposition of such securities in accordance with the Fund's investment program
may be deemed to be an underwriting;
(8) make investments for the purpose of exercising control or
management; or
(9) purchase securities of other investment companies, except
securities of certain money market funds in accordance with the Fund's
investment objectives and policies and to the extent permissible under the 1940
Act, and except in connection with a merger, consolidation, acquisition,
spin-off or reorganization.
Each of the foregoing investment restrictions is a fundamental policy
of the Fund that may be changed only when permitted by law and approved by the
holders of a majority of the Fund's outstanding voting securities, as described
under "Beneficial Interest."
Whenever any investment restriction states a maximum percentage of the
Fund's assets, it is intended that if the percentage limitation is met at the
time the action is taken, subsequent percentage changes resulting from
fluctuating asset values will not be considered a violation of such
restrictions.
For purposes of these investment restrictions as well as for purposes
of diversification under the 1940 Act, the identification of the issuer of a
municipal obligation depends on the terms and conditions of the obligation. If
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
subdivision and the obligation is backed only by the assets and revenues of the
subdivision, such subdivision would be regarded as the sole issuer. Similarly,
in the case of a "private activity bond," if the bond is backed only by the
assets and revenues of the non-governmental user, the non-governmental user
would be deemed to be the sole issuer. If in either case the creating government
or another entity guarantees an obligation, the guarantee would be considered a
separate security and be treated as an issue of such government or entity.
MANAGEMENT
TRUSTEES AND OFFICERS
The principal occupations of the Trustees and executive officers of the
Trust for the past five years and their ages are listed below. The address of
each, unless otherwise indicated, is 60 State Street, Suite 1300 Boston,
Massachusetts 02109.
C. GARY GERST, Trustee; Chairman of the Board of Trustees - 200 East Randolph
Drive, Floor 43, Chicago, Illinois 60601. Age 58. Chairman Emeritus since 1993
and formerly Co-Chairman, LaSalle Partners Ltd. (real estate developer and
manager). Director, Trustee or Partner, LaSalle
19
Street Fund Inc., LaSalle Street Fund Inc. of Delaware, DEL-LPL Limited
Partnership and DEL-LPAML Limited Partnership.
EDGAR R. FIEDLER, Trustee - 845 Third Avenue, New York, New York 10022. Age 68.
Senior Fellow and Economic Counsellor, The Conference Board; Director or
Trustee, The Stanley Works, Emerging Mexico Fund, The AARP Investment Program
from Scudder, The Scudder Funds, The Scudder Institutional Funds, Scudder
Pathway Series, The Brazil Fund and Zurich American Insurance Company (U.S.
subsidiary of Zurich Insurance). Formerly Assistant Secretary of the Treasury
for Economic Policy (1971-1975).
JOHN W. McCARTER, JR., Trustee - Roosevelt Road at Lakeshore Drive, Chicago,
Illinois 60605. Age 59. President and Chief Executive Officer, The Field Museum
of Natural History since October 1, 1996. Senior Vice President and former
Director of Booz-Allen & Hamilton, Inc. (consulting firm) from April 1987 to
April 1, 1997; Director of W.W. Grainger, Inc. and A.M. Castle, Inc.
ERNEST M. ROTH, Trustee - 205 Abingdon Avenue, Kenilworth, Illinois 60043. Age
70. Consultant since 1992. Formerly, Senior Vice President and Chief Financial
Officer, Commonwealth Edison Company. Director of LaRabida Children's Hospital
and Chairman of LaRabida Children's Foundation.
RICHARD W. INGRAM, President, Treasurer and Chief Financial Officer. Age 41.
Executive Vice President and Director of Client Services and Treasury
Administration of Funds Distributor, Inc. Senior Vice President of Premier
Mutual Fund Services, Inc., an affiliate of Funds Distributor ("Premier
Mutual"), and an officer of certain investment companies advised or administered
by J.P. Morgan, Dreyfus Corporation ("Dreyfus"), Waterhouse Asset Management,
Inc. ("Waterhouse") and RCM Capital Management L.L.C. ("RCM") or their
respective affiliates. From March 1994 to November 1995, Mr. Ingram was Vice
President and Division Manager of First Data Investor Services Group, Inc. From
1989 to 1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director - Mutual Funds of The Boston Company, Inc.
JOHN E. PELLETIER, Vice President and Secretary. Age 33. Senior Vice President,
General Counsel, Secretary and Clerk of Funds Distributor, Inc. and Premier
Mutual, and an officer of certain investment companies advised or administered
by J.P. Morgan, Dreyfus, Waterhouse and RCM or their respective affiliates. From
February 1992 to April 1994, Mr. Pelletier served as Counsel of The Boston
Company Advisors, Inc. From August 1990 to February 1992, Mr. Pelletier was
employed as an associate at Ropes & Gray.
Trustees of the Trust receive from the Trust an annual fee in addition
to a fee for each Board of Trustees meeting, as the case may be, and Board
committee meeting attended and are reimbursed for all out-of-pocket expenses
relating to attendance at meetings.
The following table summarizes the compensation paid by the Trust to
the Trustees of the Trust for the fiscal year ended December 31, 1996:
20
<TABLE>
<CAPTION>
Pension or Retirement Estimated
Aggregate Benefit Accrued as Annual Total Compensation
Compensation from the Part of Fund Expenses Benefits from the Fund
Name of Person, Position Trust upon Complex*
Retirement
- ------------------------------ ----------------------- ----------------------- -------------- -------------------
<S> <C> <C> <C> <C>
C. Gary Gerst, $6,447 None None $34,125
Chairman and Trustee
Edgar R. Fiedler, $5,059(1) None None $28,500
Trustee
John W. McCarter, Jr. $5,059 None None $28,500
Trustee
Ernest M. Roth, $5,059 None None $28,500
Trustee
- -------------------------
</TABLE>
* "Fund Complex" includes the HT Insight Funds, Inc. (the "Company") and
the Trust.
(1) For the period June 1988 through December 31, 1996, the total amount of
compensation (including interest) payable or accrued for Mr. Fiedler
was $188,539 pursuant to the Company's Deferred Compensation Plan for
its independent Directors.
As of ______, 1997, the Trustees and officers owned, in the aggregate,
less than one percent (1%) of the outstanding shares of each class of the Fund.
Investment Adviser, Portfolio Management Agent and Investment
Sub-adviser. Harris Trust is the investment adviser for the Fund pursuant to an
Advisory Contract with the Trust. Harris Trust has entered into a Portfolio
Management Contract with HIM under which HIM is responsible for all Fund
purchase and sale transactions and for providing all such daily portfolio
management services to the Fund. Under the Portfolio Management Contract, Harris
Trust remains responsible for the supervision and oversight of HIM's
performance.
HIM has entered into an Investment Sub-Advisory Agreement (the
"Sub-Advisory Contract") with Hansberger. Under the Sub-advisory Contract,
Hansberger manages the investment of the Fund's assets. In carrying out its
obligations under the Sub-Advisory Contract, Hansberger (i) obtains and
evaluates pertinent economic, statistical, financial and other information
affecting the economic regions and individual national economies generally,
together with information specific to individual companies or industries, the
securities of which are included in the Fund's investment portfolio or may be
under consideration for inclusion therein; and (ii) formulates, recommends, and
executes an ongoing program of investment for the Fund consistent with the
Fund's investment objective, policies, strategy, and restrictions. Under the
Sub-
21
Advisory Contract, HIM remains responsible for the supervision and oversight of
Hansberger's performance.
The Advisory Contract and the Portfolio Management Contract will
continue in effect for a period of two years from February 23, 1996, and
thereafter from year to year provided the continuance is approved annually (i)
by the holders of a majority of the Fund's outstanding voting securities or by
the Board of Trustees and (ii) by a majority of the Trustees of the Trust who
are not parties to the Advisory Contract or the Portfolio Management Contract or
"interested persons" (as defined in the 1940 Act) of any such party. Such
Advisory Contract and Portfolio Management Contract may be terminated on 60
days' written notice by either party and will terminate automatically if
assigned.
The Sub-Advisory Contract will continue in effect from the commencement
of the Fund's operations until February 23, 1999, and thereafter from year to
year provided the continuance is approved annually (i) by the holders of a
majority of the Fund's outstanding voting securities or by the Board of Trustees
and (ii) by a majority of the Trustees of the Trust who are not parties to the
Sub-advisory Contract or "interested persons" (as defined in the 1940 Act) of
any such party. Such Sub-advisory Contract may be terminated on 60 days' written
notice by either party and will terminate automatically if assigned.
For its services under the Advisory Contract with the Fund, Harris
Trust is entitled to receive a monthly advisory fee at the annual rate of 1.25%
of the average daily net assets of the Fund. For its services under the
Portfolio Management Contract, HIM is entitled to receive a monthly advisory fee
payable by Harris Trust to HIM at the same rate as the advisory fee payable by
the Fund to Harris Trust. For its services under the Sub-Advisory Contract, HIM
pays Hansberger a monthly fee at the annual rate of 0.75% of the first $100
million of the Fund's average daily net assets, plus 0.50% of the Fund's average
daily net assets in excess of $100 million.
Harris Trust, HIM or Hansberger provides to the Fund, among other
things, money market security and fixed income research, analysis and
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition and credit conditions. HIM or
Hansberger analyzes key financial ratios that measure the growth, profitability,
and leverage of issuers in order to help maintain a portfolio of above-average
quality. Emphasis placed on a particular type of security will depend on an
interpretation of underlying economic, financial and security trends. The
selection and performance of securities is monitored by a team of analysts
dedicated to evaluating the quality of each portfolio holding.
Administrator. Harris Trust serves as the Fund's administrator
("Administrator") pursuant to Administration Agreement with the Trust and in
that capacity generally assists the Fund in all aspects of its administration
and operation. The Administrator has entered into a Sub-Administration Agreement
with Funds Distributor, Inc. ("Funds Distributor") and Sub-Administration and
Accounting Services Agreements with PFPC Inc. ("PFPC") (the
"Sub-Administrators") on behalf of the Trust. Funds Distributor has agreed to
furnish officers for the Trust; provide corporate secretarial services; prepare
and file various reports with the appropriate regulatory agencies; and prepare
various materials required by the SEC. PFPC has agreed to furnish officers for
the Trust; provide accounting and bookkeeping services for the Fund, including
the
22
computation of the Fund's net asset value, net income and realized capital
gains, if any; and prepare various materials required by any state securities
commission having jurisdiction over the Trust.
Distributor. Funds Distributor, Inc. (the "Distributor") has entered
into a Distribution Agreement with the Trust pursuant to which it has the
responsibility of distributing shares of the Funds.
Other Information Pertaining to Distribution, Administration,
Sub-Administration, Custodian, Transfer Agency and Sub-Transfer Agency
Agreements. Harris Trust serves as the transfer agent and dividend disbursing
agent ("Transfer Agent") of the Fund pursuant to a Transfer Agency Services
Agreement with the Trust. The Transfer Agent has entered into a Sub-Transfer
Agency Services Agreement with PFPC (the "Sub-Transfer Agent") on behalf of the
Trust. PFPC is an affiliate of PNC Bank, N.A., the Custodian for the Trust. PFPC
and PNC Bank, N.A. are not affiliates of Funds Distributor, Harris Trust, HIM or
Hansberger.
SERVICE PLAN
As indicated in the Prospectus, the Fund has adopted a Service Plan
under Section 12(b) of the 1940 Act and Rule 12b-1 promulgated thereunder ("Rule
12b-1"). The Service Plan has been adopted by the Board of Trustees, including a
majority of the Trustees who were not "interested persons" (as defined by the
1940 Act) of the Trust, and who had no direct or indirect financial interest in
the operation of the Service Plan or in any agreement related to the Plan (the
"Qualified Trustees"). The Service Plan will continue in effect from year to
year if such continuance is approved by a majority vote of both the Trustees of
the Trust and the Qualified Trustees. Agreements related to the Service Plan
must also be approved by such vote of the Trustees and the Qualified Trustees.
The Service Plan will terminate automatically if assigned, and may be terminated
at any time, without payment of any penalty, by a vote of a majority of the
outstanding voting securities of the Fund. The Service Plan may not be amended
to increase materially the amounts payable to Service Agents without the
approval of a majority of the outstanding voting securities of the Fund, and no
material amendment to a Service Plan may be made except by a majority of both
the Trustees of the Trust and the Qualified Trustees.
The Service Plan requires that certain service providers furnish to the
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefore) under the Service Plan. Rule 12b-1
also requires that the selection and nomination of the Trustees who are not
"interested persons" of the Trust, be made by such disinterested Trustees.
Service Plan. The Fund bears the costs and expenses connected with
advertising and marketing the Fund's Class A Shares and pays the fees of
financial institutions (which may include banks), securities dealers and other
industry professionals, such as investment advisors, accountants and estate
planning firms (collectively, "Service Agents") for servicing activities, as
described below, at a rate of up to 0.25% per annum of the value of the Fund's
average daily net assets with respect to its Class A Shares.
23
Servicing activities provided by Service Agents to their customers
investing in Class A Shares of the Fund may include, among other things, one or
more of the following: establishing and maintaining shareholder accounts and
records; processing purchase and redemption transactions; answering customer
inquiries regarding the Fund; assisting customers in changing dividend options;
account designations and addresses; performing sub-accounting; investing
customer cash account balances automatically in Fund shares; providing periodic
statements showing a customer's account balance and integrating such statements
with those of other transactions and balances in the customer's other accounts
serviced by the Service Agent; arranging for bank wires; distribution and such
other services as the Fund may request, to the extent the Service Agent is
permitted by applicable statute, rule or regulation.
There is no Service Plan in existence with respect to the Institutional
Shares of the Fund.
CALCULATION OF YIELD AND TOTAL RETURN
The Trust may make available 30-day yield quotations with respect to
Class A Shares and Institutional Shares of the Fund. As required by regulations
of the SEC, the 30-day yield is computed by dividing the Fund's net investment
income per share earned during the period by the net asset value on the last day
of the period. The average daily number of shares outstanding during the period
that are eligible to receive dividends is used in determining the net investment
income per share. Income is computed by totaling the interest earned on all debt
obligations during the period and subtracting from that amount the total of all
recurring expenses incurred during the period. The 30-day yield is then
annualized assuming semi-annual reinvestment and compounding of net investment
income.
The Trust may also make available total return quotations for Class A
and Institutional Shares of the Fund.
The Fund may also calculate an aggregate total return which reflects
the cumulative percentage change in value over the measuring period. The
aggregate total return can be calculated by dividing the amount received upon
redemption by the initial investment and subtracting one from the result.
Current yield and total return for the Fund will fluctuate from time to
time, unlike bank deposits or other investments which pay a fixed yield for a
stated period of time, and do not provide a basis for determining future yields.
Yield (or total return) is a function of portfolio quality, composition,
maturity and market conditions as well as expenses allocated to the Fund.
Performance data of the Fund may be compared to those of other mutual
funds with similar investment objectives and to other relevant indices, such as
those prepared by Salomon Brothers Inc. or Lehman Brothers Inc., or any of their
affiliates or to ratings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
such data is reported in national financial publications such as IBC/Donoghue's
Money Fund Report and Bank Rate Monitor (for money market deposit accounts
offered by the 50 leading
24
banks and thrift institutions in the top five metropolitan statistical areas),
Money Magazine, Forbes, Barron's, The Wall Street Journal and The New York
Times, reports prepared by Lipper Analytical Services and publications of a
local or regional nature. Performance information may be quoted numerically or
may be presented in a table, graph or other illustrations. All performance
information advertised by the Fund is historical in nature and is not intended
to represent or guarantee future results.
In addition, investors should recognize that changes in the net asset
value of shares of the Fund will affect the yield of the Fund for any specified
period, and such changes should be considered together with each such Fund's
yield in ascertaining the Fund's total return to shareholders for the period.
Yield information for the Fund may be useful in reviewing the performance of the
Fund and for providing a basis for comparison with investment alternatives. The
yield of the Fund, however, may not be comparable to other investment
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate yield.
DETERMINATION OF NET ASSET VALUE
As described under "Determination of Net Asset Value" in the
Prospectus, net asset value per share is determined at least as often as each
day that the Federal Reserve Board of Philadelphia and the New York Stock
Exchange are open, i.e., each weekday other than New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day , Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day
(each, a "Holiday").
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by the Trust's Board of Trustees, HIM and Hansberger are responsible
for the Fund's portfolio decisions and the placing of portfolio transactions. In
placing orders, it is the policy of the Trust to obtain the best results taking
into account the dealer's general execution and operational facilities, the type
of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While HIM or Hansberger generally seek
reasonably competitive spreads or commissions, the Fund will not necessarily be
paying the lowest spread or commission available.
Portfolio securities normally will be purchased or sold from or to
dealers serving as market makers for the securities at a net price. The Fund
will also purchase portfolio securities in underwritten offerings and will, on
occasion, purchase securities directly from the issuer. Generally, municipal
obligations and taxable money market securities are traded on a net basis and do
not involve brokerage commissions. The cost of executing the Fund's portfolio
securities transactions will consist primarily of dealer spreads, and
underwriting commissions. Under the 1940 Act, persons affiliated with the Trust
are prohibited from dealing with the Trust as a principal
25
in the purchase and sale of securities unless an exemptive order allowing such
transactions is obtained from the SEC.
HIM or Hansberger may, in circumstances in which two or more dealers
are in a position to offer comparable results for the Fund, give preference to a
dealer that has provided statistical or other research services to such adviser.
By allocating transactions in this manner, HIM and Hansberger are able to
supplement their own research and analysis with the views and information of
other securities firms. Information so received will be in addition to, and not
in lieu of, the services required to be performed under the Advisory, Portfolio
Management and Sub-advisory Contract, and the expenses of such adviser will not
necessarily be reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by dealers through whom
Harris Trust, HIM or Hansberger effect securities transactions for the Fund may
be used by Harris Trust, HIM or Hansberger in servicing its other accounts, and
not all of these services may be used by Harris Trust, HIM or Hansberger in
connection with advising the Fund.
Purchases and sales of securities on a securities exchange are effected
through brokers who charge a negotiated commission for their services. Orders
may be directed to any broker including, to the extent and in the manner
permitted by applicable law, Harris Investors Direct, Inc. ("HID"). In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price that includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. The Fund will not deal with the
Distributor or HID in any transaction in which either one acts as principal
except as may be permitted by the SEC.
In placing orders for portfolio securities of the Fund, HIM or
Hansberger, as the case may be, is required to give primary consideration to
obtaining the most favorable price and efficient execution. This means that HIM
or Hansberger will seek to execute each transaction at a price and commission,
if any, that provide the most favorable total cost or proceeds reasonably
attainable in the circumstances. While HIM or Hansberger will generally seek
reasonably competitive spreads or commissions, the Fund will not necessarily be
paying the lowest spread or commission available. Commission rates are
established pursuant to negotiations with the broker based on the quality and
quantity of execution services provided by the broker in the light of generally
prevailing rates. The allocation of orders among brokers and the commission
rates paid are reviewed periodically by the Board of Trustees.
Subject to the above considerations, HID may act as a main broker for
the Fund. For it to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by it must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time. This standard would allow HID to receive no more than the remuneration
that would be expected to be received by an unaffiliated broker on a
commensurate arm's-length transaction. Furthermore, the Trustees of the Trust,
including a majority who are not "interested" Trustees, have adopted procedures
that are reasonably designed to provide that any commissions, fees or other
remuneration paid to either one
26
are consistent with the foregoing standard. Brokerage transactions with either
one are also subject to such fiduciary standards as may be imposed upon each of
them by applicable law.
FEDERAL INCOME TAXES
The Prospectus describes generally the tax treatment of distributions
by the Fund. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
The Fund is to be treated as a separate entity for federal income tax
purposes and thus the provisions of the Code generally are applied to the Fund
separately, rather than to the Trust as a whole.
Qualification as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"), generally requires, among other
things, that (a) at least 90% of the Fund's annual gross income (without offset
for losses) be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of stocks, securities or
options thereon and certain other income including, but not limited to, gains
from futures contracts; (b) the Fund derives less than 30% of its gross income
from gains (without offset for losses) from the sale or other disposition of
stocks, securities or options thereon and certain futures contracts held for
less than three months; and (c) the Fund diversifies its holdings so that, at
the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, government securities and
other securities, with such other securities limited in respect of any one
issuer to an amount not greater than 5% of each Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities). As a regulated investment company, the Fund will
not be subject to federal income tax on its net investment income and net
capital gains distributed to its shareholders, provided that it distributes to
its shareholders at least 90% of its net investment income (including net
short-term capital gains) earned in each year.
As described in the Prospectus, the Fund may invest in municipal bond
index futures contracts and options on interest rate futures contracts. The Fund
does not anticipate that these investment activities will prevent the Fund from
qualifying as regulated investment companies. As a general rule, these
investment activities will increase or decrease the amount of long-term and
short-term capital gains or losses realized by the Fund and, accordingly, will
affect the amount of capital gains distributed to the Fund's shareholders.
For Federal income tax purposes, gain or loss on the futures contracts
and options described above (collectively referred to as "section 1256
contracts") is taxed pursuant to a special "mark-to-market" system. Under the
mark-to-market system, the Fund may be treated as realizing a greater or lesser
amount of gains or losses than actually realized. As a general rule, gain or
loss on section 1256 contracts is treated as 60% long-term capital gain or loss
and 40% short-term capital gain or loss, and, accordingly, the mark-to-market
system will generally affect the amount of capital gains or losses taxable to
the Fund and the amount of distributions taxable to a shareholder. Moreover, if
27
the Fund invests in both section 1256 contracts and offsetting positions in such
contracts, then the Fund might not be able to receive the benefit of certain
recognized losses for an indeterminate period of time. The Fund expects that its
activities with respect to section 1256 contracts and offsetting positions in
such contracts (a) will not cause it or its shareholders to be treated as
receiving a materially greater amount of capital gains or distributions than
actually realized or received and (b) will permit it to use substantially all of
the losses of the Fund for the fiscal years in which the losses actually occur.
The Fund will generally be subject to an excise tax of 4% of the amount
of any income or capital gains distributed to shareholders on a basis such that
such income or gain is not taxable to shareholders in the calendar year in which
it was earned by the Fund. The Fund intends that it will distribute
substantially all of its net investment income and net capital gains in
accordance with the foregoing requirements, and, thus, expects not to be subject
to the excise tax. Dividends declared by the Fund in October, November or
December payable to shareholders of record on a specified date in such a month
and paid in the following January will be treated as having been paid by the
Fund and received by shareholders on December 31 of the calendar year in which
declared.
Income received by the Fund from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to be invested in
various countries is not known.
Gains or losses on sales of securities by the Fund generally will be
long-term capital gains or losses if the securities have been held by it for
more than one year, except in certain cases where the Fund acquires a put or
writes a call thereon. Other gains or losses on the sale of securities will be
short-term capital gains or losses.
If an option written by the Fund lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund may realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction.
If securities are sold by the Fund pursuant to the exercise of a call
option written by it, the Fund will add the premium received to the sale price
of the securities delivered in determining the amount of gain or loss on the
sale. If securities are purchased by the Fund pursuant to the exercise of a put
option written by it, the Fund will subtract the premium received from its cost
basis in the securities purchased. The requirement that the Fund derive less
than 30% of its gross income from gains from the sale of securities held for
less than three months may limit the Fund's ability to write options.
If, in the opinion of the Trust, ownership of its shares has or may
become concentrated to an extent that could cause the Trust to be deemed a
personal holding company within the meaning of the Code, the Trust may require
the redemption of shares or reject any order for the purchase of shares in an
effort to prevent such concentration.
28
BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, $.001 par
value, and to create one or more classes of these shares. Pursuant thereto, the
Trustees have authorized the issuance of two classes of shares, Class A Shares
and Institutional Shares, for the Fund.
Generally, all shares of the Trust have equal voting rights with other
shares of the Trust 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. As used in the Prospectus and in this Statement of Additional
Information, the term "majority," when referring to the approvals to be obtained
from shareholders in connection with general matters affecting the Fund (e.g.,
election of Trustees and ratification of independent accountants), means the
vote of the lesser of (i) 67% of the Trust's shares represented at a meeting if
the holders of more than 50% of the outstanding shares are present in person or
by proxy, or (ii) more than 50% of the Trust's outstanding shares. The term
"majority," when referring to a request for approval by a particular Fund's
shareholders with respect to matters affecting only that Fund (e.g., changes to
the Fund's fundamental investment policies), means the vote of the lesser of (i)
67% of the shares of the Fund represented at a meeting if the holders of more
than 50% of the outstanding shares of the Fund are present in person or by proxy
or (ii) more than 50% of the outstanding shares of the Fund. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held.
Each share of the Fund represents an equal proportionate interest in
that Fund with each other share of the same Fund and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
that Fund as are declared in the discretion of the Trust's Board of Trustees.
Notwithstanding the foregoing, each class of shares of the Fund bears
exclusively the expense of fees paid to Service Organizations with respect to
that class of shares. In the event of the liquidation or dissolution of the
Fund, shareholders of the Fund being dissolved are entitled to receive the
assets attributable to the Fund that are available for distribution, and a
distribution of any general assets not attributable to the Fund that are
available for distribution in such manner and on such basis as the Trustees in
their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Trust.
OTHER
The Registration Statement, including the Prospectus, the Statement of
Additional Information and the exhibits filed therewith, may be examined at the
office of the SEC in Washington, D.C. Statements contained in the Prospectus or
this Statement of Additional Information as to the contents of any contract or
other document referred to herein or in the Prospectus are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
29
CUSTODIAN
As the Fund's custodian, PNC Bank, N.A., among other things, maintains
a custody account or accounts in the name of the Fund, receives and delivers all
assets for the Fund upon purchase and upon sale or maturity, collects and
receives all income and other payments and distributions on account of the
assets of the Fund, and pays all expenses of the Fund.
INDEPENDENT ACCOUNTANTS
_______________ has been selected as the independent accountants for the Trust.
_________________ address is _______________________.
30
APPENDIX A
Description of Bond Ratings (Including Convertible Bonds)
The following summarizes the highest four ratings used by Standard &
Poor's ("S&P") for corporate and municipal debt:
AAA - Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from AAA issues only in a
small degree
A - Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and repay
principal for debt in this category than for those in higher
rated categories.
To provide more detailed indications of credit quality, the AA, A and
BBB ratings may be modified by the addition of a plus or minus sign to show
relative standing within these major rating categories.
The following summarizes the highest four ratings used by Moody's
Investors Service ("Moody's") for corporate and municipal long-term debt.
Aaa - Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds that are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
31
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds that are rated Baa are considered medium grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category. With regard to municipal
bonds, those bonds in the Aa, A and Baa groups which Moody's believes possess
the strongest investment attributes are designated by the symbols Aa1, A1 or
Baa1, respectively.
The following summarizes the highest four ratings used by Duff & Phelps
Credit Rating Co. ("D&P") for bonds:
AAA - Debt rated AAA is of the highest credit quality. The
risk factors are considered to be negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA - Debt rated AA is of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from
time to time because of economic conditions.
A - Bonds that are rated A have protection factors which are
average but adequate. However risk factors are more variable
and greater in periods of economic stress.
BBB - Bonds that are rated BBB have below average protection
factors but are still considered sufficient for prudent
investment. Considerable variability in risk during economic
cycles.
To provide more detailed indications of credit quality, the AA, A and
BBB ratings may be modified by the addition of a plus or minus sign to show
relative standing within these major categories.
The following summarizes the ratings used by IBCA Limited and IBCA Inc.
("IBCA") for bonds:
Obligations rated AAA by IBCA have the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial, such that
32
adverse changes in business, economic or financial conditions
are unlikely to increase investment risk significantly.
IBCA also assigns a rating to certain international and U.S.
banks. An IBCA bank rating represents IBCA's current
assessment of the strength of the bank and whether such bank
would receive support should it experience difficulties. In
its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In
addition, IBCA assigns banks Long and Short-Term Ratings as
used in the corporate ratings discussed above. Legal Ratings,
which range in gradation from 1 through 5, address the
question of whether the bank would receive support provided by
central banks or shareholders if it experienced difficulties,
and such ratings are considered by IBCA to be a prime factor
in its assessment of credit risk. Individual Ratings, which
range in gradations from A through E, represent IBCA's
assessment of a bank's economic merits and address the
question of how the bank would be viewed if it were entirely
independent and could not rely on support from state
authorities or its owners.
Description of Municipal Notes Ratings
The following summarizes the two highest ratings used by Moody's for
short-term notes and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of
the best quality, enjoying strong protection by established
cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG-2/VMIG-2. Obligations bearing these designations are of
high quality with margins of protection ample although not as
large as in the preceding group.
The following summarizes the two highest ratings by Standard & Poor's
for short-term municipal notes:
SP-1 - Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics are given a "plus" (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest
The three highest rating categories of D&P for short-term debt are Duff
1, Duff 2, and Duff 3. D&P employs three designations, Duff 1+, Duff 1 and Duff
1-, within the highest rating category. Duff 1+ indicates highest certainty of
timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors.
33
Risk factors are very small. Duff 2 indicates good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small. Duff 3 indicates satisfactory liquidity and other
protection factors qualify issue as to investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected.
D&P uses the fixed-income ratings described above under "Description of
Bond Ratings" for tax-exempt notes and other short-term obligations.
Description of Commercial Paper Ratings
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted in A-1+. Capacity for timely payment
on commercial paper rated A-2 is satisfactory but the relative degree of safety
is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The highest rating of D&P for commercial paper is Duff 1. D&P employs
three designations, Duff 1 plus, Duff 1 and Duff 1 minus, within the highest
rating category.
Duff 1 plus indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or ready access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations" Duff 1 indicates very high
certainty of timely payment. Liquidity factors are excellent and supported by
strong fundamental protection factors. Risk factors are considered to be minor.
Duff 1 minus indicates high certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk factors are
very small.
The following summarizes the highest ratings used by Fitch for
short-term obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
F-1 securities possess exceptionally strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated F-1+.
34
Commercial paper rated A-1 by Standard & Poor's indicates that the
degree of safety regarding timely payment is strong. Those issued determined to
possess extremely strong safety characteristics are denoted A-1+.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
Thomson BankWatch, Inc. (TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.
BankWatch Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.
The TBW Short-Term Ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The TBW Short-Term Ratings specifically assess the
likelihood of an untimely payment of principal or interest.
TBW-1 The highest category; indicates a very high degree
of likelihood that principal and interest will be
paid on a timely basis.
TBW-2 The second highest category; while the degree of
safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded
as non-investment grade and therefore speculative.
35
PART C
- ------
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
- -------- ----------------------------------
(a) Financial Statements
Included in Part A of this Registration Statement: Not
applicable.
Included in Part B of this Registration Statement: Not
applicable.
(b) Exhibits
Note: As used herein the term "Registration Statement" refers to the
Registration Statement of Registrant under the Securities Act
of 1933 on Form N-1A, No. 33-64915. All references to a
Post-Effective Amendment ("PEA") or Pre-Effective Amendment
("PreEA") are to Post-Effective Amendments and Pre-Effective
Amendments to the Registration Statement.
(1) (a) Declaration of Trust dated December 6, 1995 (incorporated by
reference to Exhibit No. 1 to the Registration Statement filed
on December 12, 1995).
(b) Amendment to Declaration of Trust dated November 4, 1996
(incorporated by reference to Exhibit No. 1(b) to the PEA No.
3 filed on February 28, 1997).
(c) Amendment to Declaration of Trust dated June 6, 1997 (filed
herewith).
(2) (a) By-Laws (incorporated by reference to Exhibit No. 2 to the
Registration Statement filed on December 12, 1995).
(b) Amendment to By-Laws dated October 31, 1995 (incorporated by
reference to Exhibit No. 2(b) to the PEA No. 3 filed on
February 28, 1997).
(c) Amendment to By-Laws dated January 23, 1996 (incorporated by
reference to Exhibit No. 2(c) to the PEA No. 3 filed on
February 28, 1997).
(d) Amendment to By-Laws dated November 4, 1996 (incorporated by
reference to Exhibit No. 2(d) to the PEA No. 3 filed on
February 28, 1997).
(3) Not applicable.
(4) Not applicable.
(5) (a)(i) Advisory Contract dated February 23, 1996 between
Registrant and Harris Trust and Savings Bank ("Harris Trust"
or the "Adviser") (incorporated by reference to Exhibit No.
5(a)(i) to the PEA No. 3 filed on February 28, 1997).
(a)(ii) Notice to the Adviser dated January 21, 1997 on behalf of
Harris Insight Small-Cap Value Fund (filed herewith).
(a)(iii) Form of Notice to the Adviser dated June 6, 1997 on behalf of
Harris Insight Emerging Markets Fund (filed herewith).
(b)(i) Portfolio Management Contract dated February 23, 1996 between
Harris Trust and Harris
InvestmentManagement, Inc. ("HIM" or the "Portfolio Management
Agent") (incorporated by reference to Exhibit No. 5(b)(i) to
the PEA No. 3 filed on February 28, 1997).
(b)(ii) Notice to the Portfolio Management Agent dated January 21,
1997 on behalf of Harris Insight Small-Cap Value Fund (filed
herewith).
(b)(iii) Form of Notice to the Portfolio Management Agent dated June 6,
1997 on behalf of Harris Insight Emerging Markets Fund (filed
herewith).
(c) Form of Investment Sub-Advisory Contract between HIM and
Hansberger Global Investors, Inc. on behalf of Harris Insight
Emerging Markets Fund (filed herewith).
(6) (a) Distribution Agreement dated February 23, 1996 between the
Registrant and Funds Distributor, Inc. ("FDI") (incorporated
by reference to Exhibit No. 6(a) to the PEA No.
3 filed on February 28, 1997).
(b) Notice to the Distributor dated January 21, 1997 on behalf of
Harris Insight Small-Cap Value Fund (incorporated by reference
to Exhibit No. 6(b) to the PEA No. 3 filed on February 28,
1997).
(c) Form of Notice to the Distributor dated June 6, 1997 on behalf
of Harris Insight Emerging Markets Fund (filed herewith).
(7) Not applicable.
(8) (a) Custodian Agreement dated February 23, 1996 between Registrant
and PNC Bank, N.A. (incorporated by reference to Exhibit No.
8(a) to the PEA No. 3 filed on February 28, 1997).
(b) Notice to the Custodian dated January 21, 1997 on behalf of
Harris Insight Small-Cap Value Fund (incorporated by reference
to Exhibit No. 8(b) to the PEA No. 3 filed on February 28,
1997).
(c) Form of Notice to the Custodian dated June 6, 1997 on behalf
of Harris Insight Emerging Markets Fund (filed herewith).
(9) (a)(i) Transfer Agency Services Agreement dated July 1, 1996 between
Registrant and Harris Trust (incorporated by reference to
Exhibit No. 9(a)(i) to the PEA No. 3 filed on February 28,
1997).
(a)(ii) Notice to the Transfer Agent dated January 21, 1997 on behalf
of Harris Insight Small-Cap Value Fund (filed herewith).
(a)(iii) Form of Notice to the Transfer Agent dated June 6, 1997 on
behalf of Harris Insight Emerging Markets Fund (filed
herewith).
(b)(i) Sub-Transfer Agency Services Agreement dated July 1, 1996
between Harris Trust and PFPC Inc. (incorporated by reference
to Exhibit No. 9(b)(i) to the PEA No. 3 filed on February 28,
1997).
(b)(ii) Notice to the Sub-Transfer Agent dated January 21, 1997 on
behalf of Harris Insight Small-Cap Value Fund (incorporated by
reference to Exhibit No. 9(b)(ii) to the PEA No. 3 filed on
February 28, 1997).
(b)(iii) Form of Notice to the Sub-Transfer Agent dated June 6, 1997 on
behalf of Harris Insight Emerging Markets Fund (filed
herewith).
(c)(i) Administration Agreement dated July 1, 1996 between Registrant
and Harris Trust (incorporated by reference to Exhibit No.
9(c)(i) to the PEA No. 3 filed on February 28, 1997).
(c)(ii) Notice to the Administrator dated January 21, 1997 on behalf
of Harris Insight Small-Cap Value Fund (filed herewith).
(c)(iii) Form of Notice to the Administrator dated June 6, 1997 on
behalf of Harris Insight Emerging Markets Fund (filed
herewith).
(d)(i) Sub-Administration and Accounting Services Agreement dated
July 1, 1996 between Harris Trust and PFPC Inc. (incorporated
by reference to Exhibit No. 9(d)(i) to the PEA No. 3 filed on
February 28, 1997).
(d)(ii) Notice to the Sub-Administrator and Accounting Services Agent
dated January 21, 1997 on behalf of Harris Insight Small-Cap
Value Fund (incorporated by reference to Exhibit No. 9(d)(ii)
to the PEA No. 3 filed on February 28, 1997).
(d)(iii) Form of Notice to the Sub-Administrator and Accounting
Services Agent dated June 6, 1997 on behalf of Harris Insight
Emerging Markets Fund (filed herewith).
(e)(i) Sub-Administration Agreement dated July 1, 1996 between Harris
Trust and FDI (incorporated by reference to Exhibit No.
9(e)(i) to the PEA No. 3 filed on February 28, 1997).
(e)(ii) Notice to the Sub-Administrator dated January 21, 1997 on
behalf of Harris Insight Small-Cap Value Fund (incorporated by
reference to Exhibit No. 9(e)(ii) to the PEA No. 3 filed on
February 28, 1997).
(e)(iii) Form of Notice to the Sub-Administrator dated June 6, 1997 on
behalf of Harris Insight Emerging Markets Fund (filed
herewith).
(10) Not applicable.
(11) Not applicable.
(12) Not applicable.
(13) Form of Purchase Agreement relating to Initial Capital
(incorporated by reference to Exhibit No. 13 to the PEA No. 3
filed on February 28, 1997).
(14) Not applicable.
(15) (a) Service Plan relating to Class A Shares (incorporated by
reference to Exhibit No. 15(a) to the PEA No. 3 filed on
February 28, 1997).
(b) Form of Selling Agreement relating to Class A Shares
(incorporated by reference to Exhibit No. 15(b) to the PEA No.
3 filed on February 28, 1997).
(16) Certain schedules for computation of performance quotations
with respect to Class A
Shares and Institutional Shares (incorporated by reference to
Exhibit No. 16 to the PEA No. 4 filed on May 1, 1997).
(17) Not applicable.
(18) Multi-Class Plan (incorporated by reference to Exhibit No. 18
to the PEA No. 3 filed on February 28, 1997).
Other
Exhibits: Powers of Attorney for C. Gary Gerst, Edgar R. Fielder, John
W. McCarter, Jr. and Ernest M. Roth dated November 4, 1996
(incorporated by reference to the PEA No. 3 filed on February
28, 1997).
Item 25. Persons Controlled by or under Common Control with Registrant.
- -------- --------------------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities.
- -------- --------------------------------
As of June 1, 1997, the number of record holders of each class of securities of
the Registrant was as follows:
<TABLE>
<CAPTION>
Title of Series Number of Record Holders
- --------------- ------------------------
Class A Shares Institutional Shares
-------------- --------------------
<S> <C> <C>
Bond Fund 18 9
Intermediate Tax-Exempt Bond Fund 4 5
Tax-Exempt Bond Fund 6 5
Equity Income Fund 37 5
Growth Fund 83 6
Small-Cap Opportunity Fund 92 14
Index Fund 71 5
International Fund 68 12
Convertible Securities Fund 7 9
Balanced Fund 6 6
Intermediate Government Bond Fund 6 13
Small-Cap Value Fund 3 10
</TABLE>
Item 27. Indemnification.
- -------- ----------------
Under Section 4.3 of the Registrant's Declaration of Trust, any past or
present Trustee or officer of the Registrant (including persons who serve at the
Registrant's request as directors, officers or trustees of another organization
in which the Registrant has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person") shall be indemnified
to the fullest extent permitted by law against all liability and all expenses
reasonably incurred by him or her in connection with any claim, action, suit or
proceeding to which he or she may be a party or otherwise involved by reason of
his or her being or having been a Covered Person. That provision does not
authorize indemnification when it is determined, in the manner specified in the
Declaration of Trust, that such Covered Person has not acted in good faith in
the reasonable belief that his or her actions were in or not opposed to the best
interests of the Registrant. Moreover, that provision does not authorize
indemnification when it is determined, in the manner specified in the
Declaration of Trust, that such covered person would otherwise be liable to the
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties. Expenses may be
paid by the Registrant in advance of the final disposition of any claim, action,
suit or proceeding upon receipt of an undertaking by such Covered Person to
repay such expenses to the Registrant in the event that it is ultimately
determined that indemnification of such expenses is not authorized under the
Declaration of Trust and the Covered Person either provides security for such
undertaking or insures the Registrant against losses from such advances or the
disinterested Trustees or independent legal counsel determines, in the manner
specified in the Declaration of Trust, that there is reason to believe the
Covered Person will be found
to be entitled to indemnification. This description is modified in its entirety
by the provision of Section 4.3 of the Registrant's Declaration of Trust
contained in the Registration Statement filed on December 12, 1995 as Exhibit
No. 1 and incorporated herein by reference.
The Distribution Agreement, the Custodian Agreement, the Transfer
Agency Services Agreement and the Administration Agreement (the "Agreements")
(Exhibit 6(a), Exhibit 8(a), Exhibit 9(a)(i) and Exhibit 9(c)(i), respectively,
to Post-Effective Amendment No. 3 to the Registration Statement and incorporated
herein by reference) provide for indemnification. The general effect of these
provisions is to indemnify entities contracting with the Trust against liability
and expenses in certain circumstances. This description is modified in its
entirety by the provisions of the Agreements as contained in this Registration
Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to Trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a Trustee, officer
or controlling person of the Registrant in connection with the successful
defense of any claim, action, suit or proceeding) is asserted against the
Registrant by such Trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Registrant and its Trustees, officers and employees are insured, under
a policy of insurance maintained by the Registrant, within the limits and
subject to the limitations of the policy, against certain expenses in connection
with the defense of actions, suits or proceedings, and certain liabilities that
might be imposed as a result of such actions, suits or proceedings, to which
they are parties by reason of being or having been such Trustees or officers.
The policy expressly excludes coverage for any Trustee or officer for any claim
arising out of any fraudulent act or omission, any dishonest act or omission or
any criminal act or omission of the Trustee or officer.
Item 28. Business and Other Connections of Investment Adviser.
- -------- -----------------------------------------------------
(a) Harris Trust and Savings Bank ("Harris Bank"), an indirect,
wholly-owned subsidiary of the Bank of Montreal, serves as investment adviser to
the Harris Insight Equity Income Fund, Growth Fund, Small-Cap Opportunity Fund,
Index Fund, International Fund, Balanced Fund, Convertible Securities Fund, Bond
Fund, Intermediate Government Bond Fund, Intermediate Tax-Exempt Bond Fund,
Tax-Exempt Bond Fund, Small-Cap Value Fund and Emerging Markets Fund. Harris
Bank's business is that of an Illinois state-chartered bank with respect to
which it conducts a variety of commercial banking and trust activities.
To the knowledge of the Registrant, none of the directors or executive
officers of Harris Bank except those set forth below, is or has been at any time
during the past two fiscal years engaged in any other business, profession,
vocation or employment of a substantial nature. Set forth below are the names
and principal businesses of the directors and executive officers of Harris Bank
who are or during the past two fiscal years have been engaged in any other
business, profession, vocation or employment of a substantial nature for their
own account or in the capacity of director, officer, employee, partner or
trustee. All directors of Harris Bank also serve as directors of Harris
Bankcorp, Inc., the immediate parent of Harris Bank.
<TABLE>
<CAPTION>
Position(s) with Harris Trust and Principal Business(es) During the
Name Savings Bank Last Two Fiscal Years
- ------------------------------------ ----------------------------------- -------------------------------------
<S> <C> <C>
Alan G. McNally Chairman and Chief Executive Chairman of the Board and Chief
Officer Executive Officer of Harris Trust
and Savings Bank and Harris
Bankcorp, Inc.; formerly, Vice
Chairman of Personal and Commercial
Financial Services of Bank of
Montreal.
F. Anthony Comper Director President and Chief Operating
Officer of the Bank of Montreal.
Susan T. Congalton Director Managing Director of Lupine
Partners; formerly General Counsel
and Chief Financial Officer,
Finance and Law of Carson Pierre
Scott Company.
Roxanne J. Decyk Director Vice President - Corporate
Planning, Amoco Chemical Company;
formerly, Senior Vice President of
Commercial and Industrial Sales,
Amoco Chemical Corporation.
Wilbur H. Gantz Director President and Chief Executive
Officer, PathoGenesis Corporation.
James J. Glasser Director Retired Chairman, President and
Chief Executive Officer of GATX
Corporation.
Dr. Leo M. Henikoff Director President and Chief Executive
Officer of Rush-Presbyterian - St.
Luke's Medical Center.
Dr. Stanley O. Ikenberry Director President of the University of
Illinois.
Edward W. Lyman, Jr. Director Vice Chairman and Senior Executive
Vice President - Corporate and
Institutional Financial Services,
Harris Trust and Savings Bank;
formerly, Department Executive,
Corporate Banking, Harris Trust and
Savings Bank.
Charles H. Shaw Director Chairman of the Shaw Company.
Richard E. Terry Director Chairman and Chief Executive
Officer of Peoples Energy
Corporation.
James O. Webb Director President, James O. Webb and
Associates Inc.
William J. Weisz Director Chairman of the Board of Motorola,
Inc.
</TABLE>
(b) Harris Investment Management, Inc. ("HIM"), an indirect subsidiary
of the Bank of Montreal, serves as the Portfolio Management Agent of the Harris
Insight Equity Income Fund, Growth Fund, Small-Cap Opportunity Fund, Index Fund,
International Fund, Balanced Fund, Convertible Securities Fund, Bond Fund,
Intermediate Government Bond Fund, Intermediate Tax-Exempt Bond Fund, Tax-Exempt
Bond Fund, Small-Cap Value Fund and Emerging Markets Fund pursuant to a
Portfolio Management Agreement with Harris Bank. HIM's business is that of a
Delaware corporation registered as an investment adviser under the Investment
Advisers Act of 1940.
To the knowledge of the Registrant, none of the directors or executive
officers of HIM, except those set forth below, is or has been at anytime during
the past two fiscal years engaged in any other business, profession, vocation or
employment of a substantial nature with respect to publicly traded companies for
their own account or in the capacity of director, officer, employees, partner or
trustee.
<TABLE>
<CAPTION>
Principal Business(es) During the Last Two
Name Position(s) with HIM Fiscal Years
- -------------------------- ------------------------------------- ---------------------------------------------
<S> <C> <C>
Donald G.M. Coxe Director, Chairman of the Board and Chairman of the Board and Chief
Chief Strategist Strategist; Formerly, President and
Chief Investment Officer of Harris
Investment Management, Inc.;
formerly, Chief Strategist of
Nesbitt Thomson, Inc.
Peter P. Capaccio Director Senior Vice President/Director, Mutual
Funds and the Investment Product Group;
formerly, Vice President/Director of Mutual
Funds, U.S. Trust
Terry A. Jackson Director Executive Vice President, Bank of Montreal
Asset Management Services, President of the
Trust Company of the Bank of Montreal and
President of the Bank of Montreal
Investment Management. Vice President of
Nesbitt Thompson, Inc.; formerly, Executive
Vice President, Retail and Institutional
Sales, Bank of Montreal.
William O. Leszinske Director, President, Chief Manager of Equities, Harris Investment
Investment Officer Management, Inc.
Edward W. Lyman, Jr. Director Senior Executive Vice President, Corporate
and Institutional Financial Services,
Harris Trust and Savings Bank. Formerly,
Department Executive of Corporate Banking,
Harris Trust and Savings Bank.
Brian J. Steck Director Director and formerly Chairman of the Board
of Harris Investment Management, Inc.;
Vice- Chairman of Investment Banking of
Bank of Montreal, President of the Bank of
Montreal Investment Management Limited.
Wayne Thomas Director Senior Vice President - Personal Investment
Management, Harris Trust and Savings Bank.
Randall J. Johnson Chief Financial Officer and Senior Partner, Harris Investment
Treasurer Management, Inc.; formerly, Consultant and
Director of Operations, Chicago Partnership
Board, Inc.
Blanche Hurt Secretary Director of Harris Trust
and Savings Bank Trust and
Investment Compliance Office; and
formerly, Corporate Fiduciary
Officer of Harris Trust and Savings
Bank.
</TABLE>
(c) Hansberger Global Investors, Inc. ("Hansberger"), owned and
controlled by Mr. Thomas A. Hansberger, serves as the Investment Sub-Adviser of
the Harris Insight Emerging Markets Fund. Hansberger's business is that of a
Delaware corporation registered as an investment adviser under the Investments
Advisers Act of 1940. As of June 1, 1997, Hansberger managed assets with a value
of approximately $630 million.
<TABLE>
<CAPTION>
Principal Business(es) During the Last Two
Name Position(s) with Hansberger Fiscal Years
- ---------------------------- ------------------------------------ --------------------------------------------
<S> <C> <C>
Thomas L. Hansberger Chairman, President and Chief Chairman, President and Chief Executive
Executive Officer of Hansberger Officer of Hansberger
Salah Al-Maousherji Director of Hansberger Gulf Paper Kuwait and Mashora Consulting
Services (financial consulting firm)
Alberto Cribiore Director of Hansberger Principal of Brera Capital Partners, LLC
(investment banking firm)
Max C. Chapman, Jr. Director of Hansberger Chairman of Nomura Holding America, Inc.
and Director and Managing Director of
Nomura Securities Limited (financial
services companies)
</TABLE>
Item 29. Principal Underwriter.
- -------- ----------------------
(a) In addition to the Harris Insight Funds Trust, Funds Distributor,
Inc. currently acts as distributor for BJB Investment Funds, Burridge Funds, The
Brinson Funds, Fremont Mutual Funds, Inc., HT Insight Funds, Inc. d/b/a Harris
Insight Funds, The JPM Advisor Funds, The JPM Institutional Funds, The JPM
Pierpont Funds, The JPM Series Trust, The JPM Series Trust II, LKCM Fund,
Monetta Fund, Inc., Monetta Trust, The Munder Framlington Funds Trust, The
Munder Funds Trust, The Munder Funds, Inc., The PanAgora Institutional Funds,
RCM Capital Funds, Inc., RCM Equity Funds, Inc., St. Clair Money Market Fund,
Inc., The Skyline Funds, Waterhouse Investors Cash Management Fund, Inc. and
WEBS Index Fund, Inc. Funds Distributor, Inc. is registered with the Securities
and Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. Funds Distributor, Inc. is an indirect
wholly-owned subsidiary of Boston Institutional Group, Inc., a holding company
all of whose outstanding shares are owned by key employees.
(b) The following is a list of the executive officers, directors and
partners of Funds Distributor, Inc.
Director, President and Chief Executive Officer - Marie E. Connolly
Executive Vice President - Richard W. Ingram
Executive Vice President - Donald R. Roberson
Senior Vice President, General Counsel, - John E. Pelletier
Secretary and Clerk
Senior Vice President - Michael S. Petrucelli
Director, Senior Vice President, Treasurer and - Joseph F. Tower, III
Chief Financial Officer
Senior Vice President - Paula R. David
Senior Vice President - Bernard A. Whalen
Director - William J. Nutt
(c) Not applicable.
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained at one or more of the following offices: Harris Insight Funds Trust,
60 State Street, Suite 1300, Boston, Massachusetts 02109; PNC Bank, N.A., 200
Stevens Dr., Suite 440, Lester, PA 19113; PFPC Inc., 103 Bellevue Parkway,
Wilmington, Delaware 19809; or Harris Trust and Savings Bank, 111 West Monroe
Street, Chicago, Illinois 60603.
Item 31. Management Services.
- -------- --------------------
Other than as set forth under the captions "Management" in the
Prospectuses constituting Part A of this Registration Statement and "Management"
in the Statement of Additional Information constituting Part B of this
Registration Statement, the Registrant is not a party to any management-related
service contracts.
Item 32. Undertakings.
- -------- -------------
(a) Not applicable.
(b) Registrant undertakes to file a Post-Effective Amendment relating
to each of the Harris Insight Balanced Fund, the Harris Insight Convertible
Securities Fund, the Harris Insight Intermediate Government Bond Fund, the
Harris Insight Small-Cap Value Fund and the Harris Insight Emerging Markets
Fund, using reasonably current financial statements which need not be certified,
within four to six months from the date each Fund commences investment
operations.
(c) Registrant will furnish each person to whom a Prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Post-Effective Amendment No. 5 to the Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Boston and Commonwealth of Massachusetts on the 12th day of June, 1997.
Harris Insight Funds Trust
By: /s/ Richard W. Ingram
-------------------------------
Richard W. Ingram, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 5 to the Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard W. Ingram President, Treasurer and June 12, 1997
Richard W. Ingram Chief Financial Officer
C. Gary Gerst* Chairman of the June 12, 1997
Board of Trustees;
Trustee
Edgar R. Fiedler* Trustee June 12, 1997
John W. McCarter, Jr.* Trustee June 12, 1997
Ernest M. Roth* Trustee June 12, 1997
</TABLE>
* By: /s/ Christopher J. Kelley
----------------------------
Christopher J. Kelley
Attorney-in-Fact pursuant to powers of attorney dated November 4, 1996.
EXHIBIT INDEX
-------------
Exhibit
- -------
Number Description
- ------ -----------
1(c) Amendment to Declaration of Trust dated June 6, 1997
5(a)(ii) Notice to the Adviser dated January 21, 1997
5(a)(iii) Form of Notice to the Adviser
5(b)(iii) Form of Notice to the Portfolio Management Agent
5(c) Form of Investment Sub-Advisory Contract on behalf of Emerging
Markets Fund
6(c) Form of Notice to the Distributor
8(c) Form of Notice to the Custodian
9(a)(ii) Notice to the Transfer Agent dated January 21, 1997
9(a)(iii) Form of Notice to the Transfer Agent
9(b)(iii) Form of Notice to the Sub-Transfer Agent
9(c)(ii) Notice to the Administrator dated January 21, 1997
9(c)(iii) Form of Notice to the Administrator
9(d)(iii) Form of Notice to the Sub-Administrator and Accounting Services
Agent
9(e)(iii) Form of Notice to the Sub-Administrator
EXHIBIT 1(C)
HARRIS INSIGHT FUNDS TRUST
AMENDMENT DATED JUNE 6, 1997
----------------------------
TO THE DECLARATION OF TRUST
---------------------------
Article V, Section 5.11 of the Declaration of Trust is amended to read:
Section 5.11. Series and Class Designation. The Trustees, in their
discretion, may authorize the division of Shares into two or more Series or
Classes thereof, and the different Series and Class shall be established and
designated, and the variations in the relative rights and preferences as between
the different Series and Classes shall be fixed and determined, by the Trustees;
provided that all Shares shall be identical except that there may be variations
so fixed and determined between different Series or Classes as to investment
objective, policies and restrictions, purchase price, payment obligations,
distribution expenses, right of redemption, special and relative rights as to
dividends and on liquidation, conversion rights, exchange rights an conditions
under which the several Series or Classes shall have separate voting rights, all
of which are subject to the limitations set forth below. All references to
Shares in this Declaration shall be deemed to be Shares of any or all Series or
Classes as the context may require.
Without limiting the authority of the Trustees to establish and
designate any further Series or Classes of Shares, the Trustees hereby establish
and designate thirteen Series, each with two Classes of Shares, Class A Shares
and Institutional Shares: Harris Insight Equity Income Fund, Harris Insight
Growth Fund, Harris Insight Small-Cap Opportunity Fund, Harris Insight Index
Fund, Harris Insight International Fund, Harris Insight Balanced Fund, Harris
Insight Convertible Securities Fund, Harris Insight Bond Fund, Harris Insight
Intermediate Government Bond Fund, Harris Insight Intermediate Tax-Exempt Bond
Fund, Harris Insight Tax-Exempt Bond Fund, Harris Insight Small-Cap Value Fund
and Harris Insight Emerging Markets Fund. The Shares of such Series and any
Shares of any further Series or Classes of Shares that may from time to time be
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Series or Class at the time of
establishing and designating the same) be subject to the following provisions:
(a) The number of authorized Shares and the number of Shares of each
Series or Class thereof that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series or Class into one or more Series or one or more Classes
that may be established and designated from time to time. The Trustees may hold
as treasury shares (of the same or some other Series or Class), reissue for such
consideration and on such terms as they may determine, or cancel any Shares of
any Series or Class reacquired by the Trust at their discretion from time to
time.
(b) All consideration received by the Trust for the issue or sale of
Shares of a particular Series or Class thereof, together with all assets in
which such consideration is invested or reinvested, all income, earnings,
profits and proceeds thereof, including any proceeds derived
form the sale, exchange or liquidation of such assets and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably belong to that Series for all purposes, subject only to the
rights of creditors of such Series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series, the Trustees shall allocate them among any
one or more of the Series established and designated from time to time in such a
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series and Classes for all purposes. No holder of
Shares of any Series shall have any claim on or right to any assets allocated or
belonging to any other Series.
(c) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series or the appropriate
Class or Classes therof and all expenses, costs, charges, and reserves
attributable to that Series or Class or Classes therof, and any general
liabilities, expenses costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or Class shall be
allocated and charged by the Trustees to and among any one or more of the Series
or Classes established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and equitable.
Each allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all Series and
Classes for all purposes. The Trustees shall have full discretion, to the extent
not inconsistent with the 1940 Act, to determine which items are capital; and
each such determination and allocations shall be conclusive and binding upon the
Shareholders. The assets of a particular Series of the Trust shall, under no
circumstances, be charged with liabilities attributable to any other Series or
Class or Classes thereof of the Trust. All persons extending credit to, or
contracting with or having any claim against a particular Series or Class
thereof of the Trust shall look only to the assets of that particular Series for
payment of such credit, contract or claim.
(d) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 7.2 of this Declaration with respect to any Series
or Class which represents the interests in the assets of the Trust immediately
prior to the establishment of two or more Series or Classes. With respect to any
other Series or Class, dividends and distributions on Shares of a particular
Series or Class may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series or Class, from such of the
income and capital gains, accrued or realized, from the assets belonging to that
Series, as the Trustees may determine after providing for actual and accrued
liabilities belonging to that Series or Class. All dividends and distributions
on Shares of a particular Series or Class shall be distributed pro rata to the
Shareholders of that Series or Class in proportion to the number of Shares of
that Series or Class held by such Shareholders at the time of record established
for the payment of such dividends or distribution.
(e) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series or
Class thereof shall be entitled to receive his pro rata share of distributions
of income and capital gains made with respect to such Series or Class thereof.
Upon redemption of his Shares or indemnification for liabilities incurred by
reason of his being or having been a Shareholder of a Series or Class thereof,
such Shareholder shall be paid solely out of the funds and property of such
Series of the Trust. Upon liquidation or termination of a Series or Class
thereof of the Trust, Shareholders of such Series or Class thereof shall be
entitled to receive a pro rata share of the net assets of such Series. A
Shareholder of a particular Series of the Trust shall not be entitled to
participate in a derivative or class action on behalf of any other Series or the
Shareholders of any other Series of the Trust.
(f) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares of any
Series or Class shall have the right to convert or exchange said Shares into
Shares of one or more Series or Classes of Shares in accordance with such
requirements and procedures as may be established by the Trustees.
The establishment and designation of any additional Series or Classes
of Shares shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation and
the relative rights and preferences of such Series or Classes, or as otherwise
provided in such instrument. At any time that there are no Shares outstanding of
any particular Series or Class previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish the
Series or Class and the establishment and designation thereof. Each instrument
referred to in this section shall have the status of an amendment to this
Declaration.
/s/ Richard W. Ingram
---------------------
Richard W. Ingram
President
Date: June 6, 1997
EXHIBIT 5(A)(II)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
January 21, 1997
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
To Whom It May Concern:
Reference is made to the Investment Advisory Agreement between Harris
Insight Funds Trust (the "Trust") and Harris Trust and Savings Bank dated
February 23, 1996 (the "Agreement").
Pursuant to Section 1 entitled "Appointment of Adviser," this writing
is to provide notice of the addition of a new series, Harris Insight Small-Cap
Value Fund ("Small-Cap Value Fund") under the Trust. Small-Cap Value Fund is to
be considered a Fund under the Agreement and shall be subject to the provisions
of the Agreement to the same extent as the Funds named thereunder. The Trust
shall pay, on behalf of Small-Cap Value Fund, the Adviser a fee, computed and
accrued daily and payable on the first business day of each month at an annual
rate of 0.80% of the average daily net assets of Small-Cap Value Fund. Such fee
as is attributable to Small-Cap Value Fund shall be a separate charge to
Small-Cap Value Fund and shall be the several (and not joint or joint and
several) obligation of Small-Cap Value Fund.
The Trust requests that you act as Investment Adviser with respect to
Small-Cap Value Fund while continuing to act as Investment Adviser with respect
to the Funds named in the Agreement.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
/s/ Richard W. Ingram
--------------------------
Richard W. Ingram
President
Accepted: Harris Trust and Savings Bank
/s/ Peter P. Capaccio
----------------------
By: Peter P. Capaccio
EXHIBIT 5(A)(III)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
__________, 1997
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
To Whom It May Concern:
Reference is made to the Investment Advisory Agreement between Harris Insight
Funds Trust (the "Trust") and Harris Trust and Savings Bank dated February 23,
1996 (the "Agreement").
Pursuant to Section 1 entitled "Appointment of Adviser," this writing is to
provide notice of the addition of a new series, Harris Insight Emerging Markets
Fund ("Emerging Markets Fund") under the Trust. Emerging Markets Fund is to be
considered a Fund under the Agreement and shall be subject to the provisions of
the Agreement to the same extent as the Funds named thereunder. The Trust shall
pay, on behalf of Emerging Markets Fund, the Adviser a fee, computed and accrued
daily and payable on the first business day of each month at an annual rate of
1.25% of the average daily net assets of Emerging Markets Fund. Such fee as is
attributable to Emerging Markets Fund shall be a separate charge to Emerging
Markets Fund and shall be the several (and not joint or joint and several)
obligation of Emerging Markets Fund.
The Trust requests that you act as Investment Adviser with respect to Emerging
Markets Fund while continuing to act as Investment Adviser with respect to the
Funds named in the Agreement. With respect to your employment of a Subadviser
pursuant to the Agreement, it is understood that from time to time such
Subadviser may employ or associate with such persons believed by the Subadviser
to be particularly fitted to assist in the execution of its duties as Subadviser
so long as (i) such association or employment in no way diminishes the
Subadviser's obligations regarding such duties, and (ii) the cost of performance
of such duties by another is borne and paid for by the Subadviser.
If the foregoing is in accordance with your understanding, please so indicate by
signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
--------------------------
Richard W. Ingram
President
Accepted: Harris Trust and Savings Bank
By:
EXHIBIT 5(B)(III)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
__________, 1997
Harris Investment Management, Inc.
190 South LaSalle Street
Chicago, Illinois 60603
To Whom It May Concern:
Reference is made to the Portfolio Management Agreement on behalf of
Harris Insight Funds Trust (the "Trust") between Harris Trust and Savings Bank
and Harris Investment Management, Inc. dated February 23, 1996 (the
"Agreement").
Pursuant to Section 1 entitled "Appointment of Subadviser," this
writing is to provide notice of the addition of a new series, Harris Insight
Emerging Markets Fund ("Emerging Markets Fund") under the Trust. Emerging
Markets Fund is to be considered a Fund under the Agreement and shall be subject
to the terms set forth thereunder unless otherwise provided herein. For services
to be rendered and all expenses to be assumed and to be paid by the Adviser, the
Adviser shall pay to the Portfolio Management Agent a fee, computed and accrued
daily and payable on the first business day of each month, at the annual rate
considered separately on a portfolio basis of 1.25% of the average daily net
assets of Emerging Markets Fund.
The Trust requests that you act as Portfolio Management Agent with
respect to Emerging Markets Fund while continuing to act as Portfolio Management
Agent with respect to the Funds named in the Agreement. It is understood that
from time to time you may employ or associate with such persons as you believe
to be particularly fitted to assist in the execution of your duties under the
Agreement so long as (i) such association or employment in no way diminishes
your obligations regarding such duties, and (ii) the cost of performance of such
duties by another is borne and paid for by you.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
---------------------------
Richard W. Ingram
President
Accepted: Harris Investment Management, Inc.
--------------------------------
By:
EXHIBIT 5(C)
INVESTMENT SUB-ADVISORY CONTRACT
FOR
HARRIS INSIGHT EMERGING MARKETS FUND
WITH
HANSBERGER GLOBAL INVESTORS, INC.
Harris Investment Management, Inc. (the "Portfolio Management Agent"),
a Delaware corporation registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and Hansberger Global
Investors, Inc. (the "Subadviser"), a Delaware corporation registered as an
investment adviser under the Advisers Act, agree as follows:
1. APPOINTMENT OF SUBADVISER. Subject to and in accordance with the
Portfolio Management Agreement between Harris Trust and Savings Bank, an
Illinois bank and the investment adviser to the portfolios of Harris Insight
Funds Trust (the "Trust") (the "Adviser"), and the Portfolio Management Agent,
the Portfolio Management Agent appoints the Subadviser to act as manager of the
assets of the Harris Insight Emerging Markets Fund (the "Fund"), a portfolio of
the Trust, said assets, including interest and dividends earned thereon and
capital accretions or other additions thereto (collectively, the "Assets"), to
be invested in accordance with the current Prospectus and Statement of
Additional Information of the Fund, as amended or supplemented from time to
time, and the Subadviser accepts that appointment for the period and on the
terms set forth below.
2. SERVICES OF SUBADVISER.
(a) INVESTMENT MANAGEMENT. Subject to the overall control of the Board
of Trustees of the Trust (the "Board of Trustees"), the Adviser and the
Portfolio Management Agent, the Subadviser shall have supervisory responsibility
for the general management and investment of the Assets of the Fund giving due
consideration to the investment policies and restrictions, portfolio transaction
policies and the other statements concerning the Fund in the Trust's Declaration
of Trust, by-laws and registration statements under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the Securities Act of 1933, as amended
(the "1933 Act"), to the provisions of the 1933 Act and the 1940 Act and rules
and regulations thereunder, and to the provisions of the Internal Revenue Code
applicable to regulated investment companies and other applicable law (the
"Investment Policies and Restrictions"). The Subadviser shall not lend or pledge
any of the Assets without the prior written consent of the Portfolio Management
Agent.
Subject to the overall control of the Board of Trustees, the Adviser
and the Portfolio Management Agent, and unless otherwise instructed, the
Subadviser shall vote proxies solicited by issuers of securities held by the
Fund.
(b) MANAGEMENT SERVICES. In carrying out its obligations to manage and
invest the Assets, the Subadviser shall: (i) obtain and evaluate pertinent
economic, statistical, financial and other information affecting the economic
regions and individual national economies generally, together with information
specific to individual companies or industries, the securities of which are
included in the Fund's investment portfolio or may be under consideration for
inclusion therein; and (ii) formulate, recommend, and execute an ongoing program
of investment for the
Fund consistent with the Fund's investment objective, policies, strategy, and
restrictions as set forth in the Fund's registration statement.
(c) MONITORING SUBADVISER. The Portfolio Management Agent shall monitor
and evaluate the investment performance of the Subadviser; and shall monitor the
investment activities of the Subadviser to ensure compliance with the Investment
Policies and Restrictions.
(d) REPORTS AND INFORMATION. The Subadviser shall furnish to the
Portfolio Management Agent periodic reports on the investment strategy and
performance of the Fund and such additional reports and information as the
Portfolio Management Agent or the Board of Trustees or the officers of the Trust
may reasonably request.
(e) UNDERTAKINGS OF SUBADVISER. The Subadviser further agrees that it
will:
(i) At all times be duly registered as an investment adviser
under the Advisers Act and be duly registered and qualified under other
securities legislation in each jurisdiction where such registration or
qualification is required, whether as portfolio manager, investment counsel or
such other category as may be required;
(ii) Comply with the 1940 Act and with all applicable rules
and regulations of the Securities and Exchange Commission, the provisions of the
Internal Revenue Code relating to regulated investment companies, applicable
banking laws and regulations and policy decisions and procedures adopted by the
Board of Trustees from time to time;
(iii) In the name of the Fund, place or direct the placement
of orders for the execution of portfolio transactions in accordance with the
policies with respect thereto, as set forth in the Fund's then current
Prospectus and Statement of Additional Information, as amended from time to
time, and under the 1933 Act and the 1940 Act. In placing orders or directing
the placement of orders for the execution of portfolio transactions, the
Subadviser shall select brokers and dealers for the execution of the Fund's
transactions. In selecting brokers or dealers to execute such orders, the
Subadviser is expressly authorized to consider the fact that a broker or dealer
has furnished statistical, research or other information or services which
enhance the Subadviser's investment research and portfolio management capability
generally. It is further understood in accordance with Section 28(e) of the
Securities Exchange Act of 1934, as amended, that the Subadviser may negotiate
with and assign to a broker a commission which may exceed the commission which
another broker would have charged for effecting the transaction if the
Subadviser determines in good faith that the amount of commission charged was
reasonable in relation to the value of brokerage and/or research services (as
defined in Section 28(e)) provided by such broker, viewed in terms either of the
Fund's or the Subadviser's overall responsibilities to the Subadviser's
discretionary accounts;
(iv) Maintain books and records with respect to the securities
transactions of the Fund;
(v) Notify the Portfolio Management Agent within five business
days of any change in the Subadviser's directors and senior officers, and of any
anticipated action that would constitute an "assignment" of this Agreement under
the 1940 Act; and
(vi) Treat confidentially and as proprietary information of
the Trust all records and other information relative to the Trust or to prior,
present or potential shareholders, and not use such records or information for
any purpose other than in the performance of its responsibilities and duties
hereunder, except (A) after prior notification to and approval in writing by the
Trust, which approval shall not be unreasonably withheld, (B) when so requested
by the Trust, (C) as required by tax authorities or (D) pursuant to applicable
law, a judicial request, requirement or order, provided that the Subadviser
takes reasonable steps to provide the Trust with prior notice in order to allow
the Trust to contest such request, requirement or order.
(f) BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Subadviser agrees that all records that it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
The Subadviser further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act.
(g) INDEPENDENT CONTRACTOR. The Subadviser shall for all purposes
herein be deemed to be an independent contractor and not an agent of the Trust
or the Portfolio Management Agent and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Trust or the
Portfolio Management Agent in any way.
3. UNDERTAKINGS OF PORTFOLIO MANAGEMENT AGENT. The Portfolio Management
Agent will:
(a) Furnish to the Subadviser promptly a copy of the Trust's
Declaration of Trust and By-Laws, each amendment to the registration statement
of the Trust under the 1940 Act and the 1933 Act, of each Prospectus and
Statement of Additional Information relating to the Fund and any supplement
thereto, all governing documents of the Fund and all Board-adopted procedures of
the Fund;
(b) Inform the principal custodian of the Fund (the "Custodian")
(currently PNC Bank, N.A.) of the appointment of the Subadviser as investment
subadviser in the provision of custodial services to the Fund;
(c) Instruct the Custodian to cooperate with the Subadviser in the
provision of custodial services to the Fund; and
(d) Provide the Subadviser with all information that the Subadviser may
reasonably require insofar as it relates to the custodial arrangements in
connection with this Agreement.
4. EXPENSES BORNE BY SUBADVISER. The Subadviser at its own expense
shall furnish personnel, office space and office facilities and equipment
reasonably required to render its services pursuant to this Agreement.
5. COMPENSATION OF SUBADVISER. For the services to be rendered and the
expenses to be assumed and to be paid by the Portfolio Management Agent under
this Agreement, the Portfolio Management Agent shall pay to the Subadviser a
monthly fee, computed and accrued on each day on which the Fund's net asset
value is determined, and payable in arrears on the first business day of each
month, at the annual rate of 0.75% of the first $100 million of the average net
asset value of the Assets, and 0.50% of such net asset value in excess of $100
million. The fee payable under this Agreement shall be reduced proportionately
during any month in which this Agreement is not in effect for the entire month.
6. NON-EXCLUSIVITY. The Portfolio Management Agent understands that the
Subadviser now acts, will continue to act, or may act in the future, as
investment adviser or investment subadviser to fiduciary and other managed
accounts, including other investment companies and the Portfolio Management
Agent has no objection to the Subadviser so acting, provided that the Subadviser
duly performs all obligations under this Agreement. If the availability of any
particular investment security is limited and that security meets the investment
objective, policies and current strategy of the Fund and also those of one or
more of the Subadviser's other managed accounts, such security will be allocated
among such accounts on an equitable basis, having regard to whether the security
is currently held in any of the relevant investment portfolios, the relevant
size and rate of growth of each of the Fund and the other managed accounts, and
other reasonable factors. The Portfolio Management Agent also understands that
the Subadviser may give advice and take action with respect to any of its other
clients or for its own account which may differ from the timing or nature of
action taken by the Subadviser, with respect to the Fund. Nothing in this
Agreement shall impose upon the Subadviser any obligation to purchase or sell or
to recommend for purchase or sale, with respect to the Fund, any security which
the Subadviser or its shareholder, directors, officers, employees or affiliates
may purchase or sell for its or their own account(s) or for the account of any
other client, provided however, that the Subadviser and its personnel will
comply with the code of ethics applicable to them as approved by the Board of
Trustees of the Trust.
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the right of the Subadviser,
or the right of any of its officers, directors or employees who may also be an
officer, director or employee of the Fund, or person otherwise affiliated with
the Fund (within the meaning of the 1940 Act) to engage in any other business or
to devote time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services of
any kind to any other trust, corporation, firm, individual or association.
7. STANDARD OF CARE. Neither the Subadviser, nor any of its directors,
officers, agents or employees shall be liable or responsible to the Trust or its
shareholders for any error of judgment, or any loss arising out of any
investment, or for any other act or omission in the performance by the
Subadviser of its duties under this Agreement, except for liability resulting
from willful misfeasance, bad faith or gross negligence on its part or from
reckless disregard of its obligations and duties under this Agreement.
8. INSPECTION. The Portfolio Management Agent (or any authorized agent
of the Portfolio Management Agent as advised in writing to the Subadviser) shall
have a right to audit, inspect and photocopy documents (and remove such
photocopies) relating to investment subadvisory and portfolio management
services performed under this Agreement, during normal business hours of the
Subadviser.
9. REPRESENTATIONS OF THE PORTFOLIO MANAGEMENT AGENT AND SUBADVISER.
The Portfolio Management Agent represents that (i) it is authorized to perform
the services herein; (ii) the appointment of the Subadviser has been duly
authorized; and (iii) it will act in conformity with the 1940 Act, and other
applicable laws.
The Subadviser represents that (i) a copy of its Articles of
Incorporation, together with all amendments thereto, is on file in the office of
the Secretary of the State of Delaware; (ii) it will act in conformity with the
1940 Act and other applicable laws; and (iii) is authorized to perform the
services described herein.
10. AUTHORIZED PERSONS.
(a) The Subadviser is authorized to accept instructions and directions
with respect to this Agreement signed by any Director or Senior Director of the
Portfolio Management Agent. The Portfolio Management Agent will notify the
Subadviser of any changes in its officers empowered to act under this Agreement.
Until actual written notice of any such changes is received by the Subadviser,
Subadviser may continue to accept instructions and directions from those
officers previously designated by the Portfolio Management Agent.
(b) The Portfolio Management Agent is authorized to accept instructions
and directions with respect to this Agreement signed by any authorized persons
of the Subadviser as listed in Schedule A of this Agreement. The Subadviser will
notify the Portfolio Management Agent of any changes in its officers empowered
to act under this Agreement.
(c) The Subadviser will advise the Custodian of the names of persons
from whom the Custodian is authorized to accept instructions regarding
investment transactions.
11. USE OF SUBADVISER'S NAME AND MARKS. The Subadviser grants to the
Portfolio Management Agent and the Trust the limited and non-exclusive right to
use, in marketing, promotional and advertising materials of the Portfolio
Management Agent or the Trust, any registered trademarks, logos or other marks
that the Subadviser uses in advertising and publicizing itself and its services
as a portfolio manager or investment counsel. Any such material shall be subject
to the prior written approval by the Subadviser as to form and content prior to
its use by the Portfolio Management Agent or the Trust, which approval shall not
unreasonably be withheld. The Subadviser consents to the disclosure, in
documents relating to
the Fund, of its name as the investment subadviser and portfolio manager of the
Assets of the Fund.
12. AMENDMENT. This Agreement may not be amended without the
affirmative votes (a) of a majority of the Trustees of the Trust, including a
majority of those Trustees who are not "interested persons" of the Trust, the
Investment Adviser, the Portfolio Management Agent or the Subadviser and (b) of
a "majority of the outstanding shares" of such Fund. The terms "interested
person" and "vote of a majority of the outstanding shares" shall be construed in
accordance with their respective definitions in Sections 2(a)(19) and 2(a)(42)
of the 1940 Act and, with respect to the latter term, in accordance with Rule
18f-2 under the 1940 Act.
13. TERMINATION. This Agreement may be terminated, at any time, without
payment of any penalty, by the Board of Trustees, or by a vote of a majority of
the outstanding shares of the Fund, upon at least 60 days' written notice to the
Portfolio Management Agent and the Subadviser. This Agreement may be terminated
by the Portfolio Management Agent and the Subadviser at any time upon at least
60 days' written notice to the Trust. This Agreement shall terminate
automatically in the event of its "assignment" (as defined in Section 2(a)(4) of
the 1940 Act). Unless terminated as hereinbefore provided, this Agreement shall
continue in effect with respect to the Fund from the date hereof until February
23, 1999 and thereafter from year to year only so long as such continuance is
specifically approved at least annually (a) by a majority of those Trustees who
are not interested persons of the Trust, the Investment Adviser, the Portfolio
Management Agent or the Subadviser, voting in person at a meeting called for the
purpose of voting on such approval, and (b) by either the Board of Trustees or
by a vote of a majority of the outstanding shares of the Fund.
14. NOTICE. Any notice, demand, change of address or other
communication to be given in connection with this Agreement shall be given in
writing and shall be given by personal delivery, by registered or certified mail
or by transmittal by facsimile or other electronic medium addressed to the
recipient as follows:
To the Subadviser: Hansberger Global Investors, Inc.
515 East Las Olas Blvd., Suite 1300
Fort Lauderdale, Florida 33301
Attention: General Counsel
Telephone: (954) 522-5150
Fax: (954) 522-3557
To the Portfolio
Management Agent: Harris Investment Management, Inc.
190 South LaSalle Street
Chicago, IL 60606
Telephone: (312) 461-7699
Fax: (312) 461-6268
To the Trust: Harris Insight Funds Trust
60 State Street, Suite 1300
Boston, MA 02109
Telephone: (800) 221-7930
Fax: (617) 557-0701
All notices shall be conclusively deemed to have been given on the day
of actual delivery thereof and, if given by registered or certified mail, on the
fifth business day following the deposit thereof in the mail and, if given by
facsimile or other electronic medium, on the day of transmittal thereof.
15. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the Trust, which shall have all rights against the Subadviser as
would pertain to it if this Agreement were directly between the Trust and the
Subadviser.
16. GOVERNING LAW. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Illinois and the laws of the United
States of America applicable to contracts executed and to be performed therein.
17. REFERENCES AND HEADINGS. In this Agreement and in any such
amendment, references to this Agreement and all expressions such as "herein,"
"hereof," and "under this Agreement" shall be deemed to refer to this Agreement
or this Agreement as amended or affected by any such amendments. Headings are
placed herein for convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or effect of this
Agreement. This Agreement constitutes the entire agreement between the parties
hereto. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
Dated: ________________
HARRIS INVESTMENT MANAGEMENT, INC.
By: _______________________________
Name:
Title:
ATTEST:
______________________, Secretary
HANSBERGER GLOBAL INVESTORS, INC.
By: _______________________________
Name:
Title:
ATTEST:
______________________, Secretary
AGREED AND ACCEPTED:
HARRIS INSIGHT FUNDS TRUST
By: _______________________________
Name:
Title:
ATTEST:
______________________, Secretary
HARRIS TRUST AND SAVINGS BANK
By: _______________________________
Name:
Title:
ATTEST:
______________________, Secretary
SCHEDULE A
SUBADVISER'S AUTHORIZED PERSONS
EXHIBIT 6(C)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
__________, 1997
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, MA 02109
To Whom It May Concern:
Reference is made to the Distribution Agreement between Harris Insight
Funds Trust (the "Trust") and Funds Distributor, Inc. ("FDI") dated February 23,
1996 (the "Distribution Agreement") and the Sub-Administration Agreement on
behalf of the Trust between Harris Trust and Savings Bank and FDI dated July 1,
1996 (the "Sub-Administration Agreement," and collectively, the "Agreements").
This writing is to provide notice of the addition of a new series,
Harris Insight Emerging Markets Fund ("Emerging Markets Fund") under the Trust.
Emerging Markets Fund is to be considered a Fund under the Distribution
Agreement and in Schedule A to the Sub-Administration Agreement and shall be
subject to the terms set forth under the Agreements unless otherwise provided
herein. FDI shall be compensated for services rendered under the Distribution
Agreement as contained therein and for services rendered under the
Sub-Administration Agreement as is consistent with the Fee Letter Agreement
dated July 1, 1996.
The Trust requests that you act as Distributor and Sub-Administrator
with respect to Emerging Markets Fund while continuing to act as Distributor and
Sub-Administrator with respect to the Funds named in the Distribution Agreement
and in Schedule A to the Sub-Administration Agreement.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
---------------------------
Richard W. Ingram
President
Accepted: Funds Distributor, Inc.
--------------------------------
By:
EXHIBIT 8(C)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
__________, 1997
PNC Bank, N.A.
Broad & Chestnut Streets
Philadelphia, Pennsylvania 19103
To Whom It May Concern:
Reference is made to the Custodian Services Agreement between Harris
Insight Funds Trust (the "Trust") and PNC Bank, N.A. ("PNC") dated February 23,
1996 (the "Agreement").
This writing is to provide notice of the addition of a new series,
Harris Insight Emerging Markets Fund ("Emerging Markets Fund") under the Trust.
Emerging Markets Fund is to be considered a Fund pursuant to the Agreement and
shall be subject to the terms set forth thereunder. PNC shall be compensated for
services rendered under the Agreement as is consistent with the Fee Letter
Agreement dated July 1, 1996.
The Trust requests that you act as Custodian with respect to Emerging
Markets Fund while continuing to act as Custodian on behalf of the other Funds
of the Trust.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
------------------------------
Richard W. Ingram
President
Accepted: PNC Bank, N.A.
-------------------------
By:
EXHIBIT 9(A)(II)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
January 21, 1997
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
To Whom It May Concern:
Reference is made to the notice provisions of the following agreements
on behalf of Harris Insight Funds Trust (the "Trust"): the Sub-Administration
and Accounting Services Agreement between Harris Trust and Savings Bank
("Harris") and PFPC Inc. ("PFPC") dated
July 1, 1996; the Sub-Transfer Agency Services Agreement between Harris and PFPC
dated July 1, 1996; the Portfolio Management Agreement between Harris and Harris
Investment Management, Inc. dated February 23, 1996; the Sub-Administration
Agreement between Harris and Funds Distributor Inc. dated July 1, 1996; the
Transfer Agency Agreement between Harris and the Trust dated July 1, 1996; and
the Administration Agreement between Harris and the Trust dated July 1, 1996
(each an "Agreement," and collectively, the "Agreements").
This writing is to provide notice of the addition of a new series,
Harris Insight Small-Cap Value Fund ("Small-Cap Value Fund") under the Trust.
Small-Cap Value Fund is to be considered a Fund under each Agreement or to
Exhibit A, if applicable, and shall be subject to the terms set forth under the
Agreements unless otherwise provided herein. Harris shall be compensated for
services rendered under Agreements as is consistent with the particular
agreement, or the Fee Letter Agreement dated July 1, 1996, whichever applicable.
The Trust requests that you act in the capacity of Administrator and
Transfer Agent with respect to Small-Cap Value Fund while continuing to act as
Administrator and Transfer Agent with respect to the Funds named in the
Agreements or to Exhibits A to the Agreements, if applicable.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
/s/ Richard W. Ingram
---------------------------
Richard W. Ingram
President
Accepted: Harris Trust and Savings Bank
/s/ Peter P. Capaccio
-------------------------
By: Peter P. Capaccio
EXHIBIT 9(A)(III)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
__________, 1997
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
To Whom It May Concern:
Reference is made to the notice provisions of the following agreements
on behalf of Harris Insight Funds Trust (the "Trust"): the Sub-Administration
and Accounting Services Agreement between Harris Trust and Savings Bank
("Harris") and PFPC Inc. ("PFPC") dated July 1, 1996; the Sub-Transfer Agency
Services Agreement between Harris and PFPC dated July 1, 1996; the Portfolio
Management Agreement between Harris and Harris Investment Management, Inc. dated
February 23, 1996; the Sub-Administration Agreement between Harris and Funds
Distributor Inc. dated July 1, 1996; the Transfer Agency Agreement between
Harris and the Trust dated July 1, 1996; and the Administration Agreement
between Harris and the Trust dated July 1, 1996 (each an "Agreement," and
collectively, the "Agreements").
This writing is to provide notice of the addition of a new series,
Harris Insight Emerging Markets Fund ("Emerging Markets Fund") under the Trust.
Emerging Markets Fund is to be considered a Fund under each Agreement or to
Exhibit A, if applicable, and shall be subject to the terms set forth under the
Agreements unless otherwise provided herein. Harris shall be compensated for
services rendered under Agreements as is consistent with the particular
agreement, or the Fee Letter Agreement dated July 1, 1996, whichever applicable.
The Trust requests that you act in the capacity of Administrator and Transfer
Agent with respect to Emerging Markets Fund while continuing to act as
Administrator and Transfer Agent with respect to the Funds named in the
Agreements or to Exhibit A to each Agreement, if applicable.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
-------------------------
Richard W. Ingram
President
Accepted: Harris Trust and Savings Bank
---------------------------------
By:
EXHIBIT 9(B)(III)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
__________, 1997
PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
To Whom It May Concern:
Reference is made to the Sub-Administration and Accounting Services
Agreement on behalf of Harris Insight Funds Trust (the "Trust") between Harris
Trust and Savings Bank and PFPC Inc. ("PFPC") dated July 1, 1996 and to the
Sub-Transfer Agency Services Agreement between Harris Trust and Savings Bank and
PFPC dated July 1, 1996 (each an "Agreement," and collectively the
"Agreements").
This writing is to provide notice of the addition of a new series,
Harris Insight Emerging Markets Fund ("Emerging Markets Fund") under the Trust.
Emerging Markets Fund is to be considered a Fund under Exhibit A of each
Agreement and shall be subject to the terms set forth under the Agreements
unless otherwise provided herein. PFPC shall be compensated for services
rendered under the Agreements as is consistent with the Fee Letter Agreement
dated July 1, 1996.
The Trust requests that you act in the capacity of Sub-Administrator
and Accounting Services Agent and Sub-Transfer Agent with respect to Emerging
Markets Fund while continuing to act as Sub-Administrator and Accounting
Services Agent, and Sub-Transfer Agent with respect to the Funds named in
Exhibit A to each Agreement.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
--------------------------
Richard W. Ingram
President
Accepted: PFPC Inc.
----------------------------
By:
EXHIBIT 9(C)(II)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
January 21, 1997
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
To Whom It May Concern:
Reference is made to the notice provisions of the following agreements
on behalf of Harris Insight Funds Trust (the "Trust"): the Sub-Administration
and Accounting Services Agreement between Harris Trust and Savings Bank
("Harris") and PFPC Inc. ("PFPC") dated July 1, 1996; the Sub-Transfer Agency
Services Agreement between Harris and PFPC dated July 1, 1996; the Portfolio
Management Agreement between Harris and Harris Investment Management, Inc. dated
February 23, 1996; the Sub-Administration Agreement between Harris and Funds
Distributor Inc. dated July 1, 1996; the Transfer Agency Agreement between
Harris and the Trust dated July 1, 1996; and the Administration Agreement
between Harris and the Trust dated July 1, 1996 (each an "Agreement," and
collectively, the "Agreements").
This writing is to provide notice of the addition of a new series,
Harris Insight Small-Cap Value Fund ("Small-Cap Value Fund") under the Trust.
Small-Cap Value Fund is to be considered a Fund under each Agreement or to
Exhibit A, if applicable, and shall be subject to the terms set forth under the
Agreements unless otherwise provided herein. Harris shall be compensated for
services rendered under Agreements as is consistent with the particular
agreement, or the Fee Letter Agreement dated July 1, 1996, whichever applicable.
The Trust requests that you act in the capacity of Administrator and
Transfer Agent with respect to Small-Cap Value Fund while continuing to act as
Administrator and Transfer Agent with respect to the Funds named in the
Agreements or to Exhibits A to the Agreements, if applicable.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
/s/ Richard W. Ingram
---------------------------
Richard W. Ingram
President
Accepted: Harris Trust and Savings Bank
/s/ Peter P. Capaccio
----------------------
By: Peter P. Capaccio
EXHIBIT 9(C)(III)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
__________, 1997
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
To Whom It May Concern:
Reference is made to the notice provisions of the following agreements
on behalf of Harris Insight Funds Trust (the "Trust"): the Sub-Administration
and Accounting Services Agreement between Harris Trust and Savings Bank
("Harris") and PFPC Inc. ("PFPC") dated July 1, 1996; the Sub-Transfer Agency
Services Agreement between Harris and PFPC dated July 1, 1996; the Portfolio
Management Agreement between Harris and Harris Investment Management, Inc. dated
February 23, 1996; the Sub-Administration Agreement between Harris and Funds
Distributor Inc. dated July 1, 1996; the Transfer Agency Agreement between
Harris and the Trust dated July 1, 1996; and the Administration Agreement
between Harris and the Trust dated July 1, 1996 (each an "Agreement," and
collectively, the "Agreements").
This writing is to provide notice of the addition of a new series,
Harris Insight Emerging Markets Fund ("Emerging Markets Fund") under the Trust.
Emerging Markets Fund is to be considered a Fund under each Agreement or to
Exhibit A, if applicable, and shall be subject to the terms set forth under the
Agreements unless otherwise provided herein. Harris shall be compensated for
services rendered under Agreements as is consistent with the particular
agreement, or the Fee Letter Agreement dated July 1, 1996, whichever applicable.
The Trust requests that you act in the capacity of Administrator and Transfer
Agent with respect to Emerging Markets Fund while continuing to act as
Administrator and Transfer Agent with respect to the Funds named in the
Agreements or to Exhibit A to each Agreement, if applicable.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
----------------------------
Richard W. Ingram
President
Accepted: Harris Trust and Savings Bank
----------------------------
By:
EXHIBIT 9(D)(III)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
__________, 1997
PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
To Whom It May Concern:
Reference is made to the Sub-Administration and Accounting Services
Agreement on behalf of Harris Insight Funds Trust (the "Trust") between Harris
Trust and Savings Bank and PFPC Inc. ("PFPC") dated July 1, 1996 and to the
Sub-Transfer Agency Services Agreement between Harris Trust and Savings Bank and
PFPC dated July 1, 1996 (each an "Agreement," and collectively the
"Agreements").
This writing is to provide notice of the addition of a new series,
Harris Insight Emerging Markets Fund ("Emerging Markets Fund") under the Trust.
Emerging Markets Fund is to be considered a Fund under Exhibit A of each
Agreement and shall be subject to the terms set forth under the Agreements
unless otherwise provided herein. PFPC shall be compensated for services
rendered under the Agreements as is consistent with the Fee Letter Agreement
dated July 1, 1996.
The Trust requests that you act in the capacity of Sub-Administrator
and Accounting Services Agent and Sub-Transfer Agent with respect to Emerging
Markets Fund while continuing to act as Sub-Administrator and Accounting
Services Agent, and Sub-Transfer Agent with respect to the Funds named in
Exhibit A to each Agreement.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
----------------------------
Richard W. Ingram
President
Accepted: PFPC Inc.
------------------------
By:
EXHIBIT 9(E)(III)
HARRIS INSIGHT FUNDS TRUST
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
__________, 1997
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, MA 02109
To Whom It May Concern:
Reference is made to the Distribution Agreement between Harris Insight
Funds Trust (the "Trust") and Funds Distributor, Inc. ("FDI") dated February 23,
1996 (the "Distribution Agreement") and the Sub-Administration Agreement on
behalf of the Trust between Harris Trust and Savings Bank and FDI dated July 1,
1996 (the "Sub-Administration Agreement," and collectively, the "Agreements").
This writing is to provide notice of the addition of a new series,
Harris Insight Emerging Markets Fund ("Emerging Markets Fund") under the Trust.
Emerging Markets Fund is to be considered a Fund under the Distribution
Agreement and in Schedule A to the Sub-Administration Agreement and shall be
subject to the terms set forth under the Agreements unless otherwise provided
herein. FDI shall be compensated for services rendered under the Distribution
Agreement as contained therein and for services rendered under the
Sub-Administration Agreement as is consistent with the Fee Letter Agreement
dated July 1, 1996.
The Trust requests that you act as Distributor and Sub-Administrator
with respect to Emerging Markets Fund while continuing to act as Distributor and
Sub-Administrator with respect to the Funds named in the Distribution Agreement
and in Schedule A to the Sub-Administration Agreement.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Sincerely,
Harris Insight Funds Trust
--------------------------
Richard W. Ingram
President
Accepted: Funds Distributor, Inc.
-----------------------------
By:
