As filed electronically with the Securities and Exchange Commission
on May 1, 2000
Securities Act File No. 33-64915
Investment Company Act File No. 811-7447
================================================================================
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. 14
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17
HARRIS INSIGHT FUNDS TRUST
--------------------------
(Exact Name of Registrant as Specified in Charter)
3200 Horizon Drive, King of Prussia, PA 19406
-----------------------------------------------
(Address of Principal Executive Offices including Zip Code)
Registrant's Telephone Number, including Area Code: 610.239.4590
Name and Address of Agent for Service:
Gary M. Gardner, Esq.
Harris Insight Funds Trust
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Copies to:
Cameron S. Avery, Esq. and G. Nicholas Bullat, Esq.
Bell, Boyd & Lloyd Harris Trust & Savings Bank
Three First National Plaza 111 West Monroe Street
70 West Madison Street 21st Floor East
Chicago, IL 60602-4207 Chicago, IL 60603
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
------
60 days after filing pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on May 1, 2000 pursuant to paragraph (b)
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on ___________ pursuant to paragraph (a)(1)
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on _____________ pursuant to paragraph (a)(2) of rule 485
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If appropriate, check the following box:
This post-effective amendment designates a new effective
------ date for a previously filed post-effective amendment.
<PAGE>
HARRIS
INSIGHT(R) FUNDS
A Shares
May 1, 2000 PROSPECTUS
HARRIS INSIGHT EQUITY FUNDS
Balanced Fund
Equity Income Fund
Equity Fund
Growth Fund
Small-Cap Value Fund
Small-Cap Opportunity Fund
International Fund
Emerging Markets Fund
HARRIS INSIGHT FIXED INCOME FUNDS
Convertible Securities Fund
Tax-Exempt Bond Fund
Bond Fund
Intermediate Tax-Exempt Bond Fund
Short/Intermediate Bond Fund
Intermediate Government Bond Fund
AS WITH ANY MUTUAL FUND, THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS ADEQUATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO]
HARRIS
INSIGHT(R) FUNDS
<PAGE>
TABLE OF CONTENTS
INTRODUCTION TO EQUITY FUNDS PAGE 2
HARRIS INSIGHT EQUITY FUNDS
Balanced Fund 4
Equity Income Fund 6
Equity Fund 8
Growth Fund 10
Small-Cap Value Fund 12
Small-Cap Opportunity Fund 14
International Fund 16
Emerging Markets Fund 18
Risk Considerations 20
Fees and Expenses 24
INTRODUCTION TO FIXED INCOME FUNDS 26
HARRIS INSIGHT FIXED INCOME FUNDS
Convertible Securities Fund 28
Tax-Exempt Bond Fund 30
Bond Fund 32
Intermediate Tax-Exempt Bond Fund 34
Short/Intermediate Bond Fund 36
Intermediate Government Bond Fund 38
Risk Considerations 40
Fees and Expenses 42
INVESTMENT ADVISER 44
PORTFOLIO MANAGERS 47
PRICING OF FUND SHARES 50
SHAREHOLDER SERVICES 51
DIVIDENDS AND TAX CONSIDERATIONS 60
DISTRIBUTION ARRANGEMENTS 61
MASTER FUND/FEEDER FUND STRUCTURE 62
FINANCIAL HIGHLIGHTS 64
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT EQUITY FUNDS
The Harris Insight Equity Funds invest in stocks, which represent partial
ownership in a company. These Funds generally pursue capital appreciation: that
is, an increase in the Fund's share value. In some cases, the Harris Insight
Equity Funds also seek dividend income.
Equity funds' share prices will fluctuate with changes in the market and
economy as well as with the fortunes of the companies issuing the underlying
stocks. For this reason, equity fund share prices can sometimes be more volatile
than the share prices of other types of funds, exhibiting sharp increases or
decreases over relatively short periods of time.
WHY INVEST IN EQUITY FUNDS?
Equity funds offer investors the potential for greater returns than fixed income
funds and are considered an attractive choice for outpacing inflation over the
long term. Equity funds are more appropriate for investors who can tolerate a
higher degree of risk in exchange for an opportunity to pursue attractive
long-term investment rewards.
2
<PAGE>
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Shares of the Harris Insight Equity Funds are not bank deposits and are not
insured or guaranteed by the FDIC or any other government agency. The value
of your investment in a Fund will fluctuate, which means that you may lose
money.
Each Fund's primary investment practices and strategies are discussed in
this prospectus. Other practices, and their related risks, are described in
the Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be changed
by the Board of Trustees without approval by the Fund's shareholders.
Each Fund's principal risks are provided in an alphabetical listing within
the Fund description that follows. These risks are discussed in detail
under "Risk Considerations" on page 20.
- --------------------------------------------------------------------------------
3
<PAGE>
HARRIS INSIGHT EQUITY FUNDS
BALANCED FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide current income and capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests in a portfolio of equity and fixed income securities. Under
normal market conditions, equity securities will comprise between 40% and 65% of
the Fund's assets, and fixed income securities will comprise at least 25% of the
Fund's assets.
The portfolio manager continually reviews and adjusts the blend of the
securities in an effort to enhance returns based on current market conditions,
interest rate projections and other economic factors.
The Fund seeks to provide an overall return comprising between 40% and 65% of
the return of the STANDARD & POOR'S 500 STOCK INDEX and between 35% and 60% of
the return of the LEHMAN BROTHERS AGGREGATE BOND INDEX.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, Page 20.)
o Allocation risk
o Interest rate risk
o Market risk
TERMS TO KNOW
STANDARD & POOR'S
500 STOCK INDEX (S&P 500(R))
An unmanaged index consisting of 500 widely held U.S. common stocks. The stocks
in the index are chosen based on industry representation, liquidity and
stability. The index is designed to reflect the returns of many different
sectors of the U.S. economy.
LEHMAN BROTHERS
AGGREGATE BOND INDEX
An index measuring the total return of approximately 6,500 U.S. bonds.
4
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1998 1999
8.29% -1.52%
Best Quarter: Q4 1998 8.21%
- -------------------------------------
Worst Quarter: Q3 1998 -6.35%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Inception
Year (4/16/97)
- --------------------------------------
Balanced Fund -1.52% 10.08%
S&P 500
Stock Index 21.04% 29.63%
Lehman Brothers
Aggregate
Bond Index -0.82% 6.58%
* A Shares of the Fund commenced operations on February 10, 1999. Because the
Fund's A Shares have been outstanding for less than a full year, performance
shown reflects performance of the Fund's N Shares, which had lower expenses,
and does not reflect the effect that A Shares' expenses would have had on
performance.
5
<PAGE>
EQUITY INCOME FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide current income and, secondarily, capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in common stocks that can
be found in the S&P 500 or other attractive issues. These stocks are of larger
capitalization companies (i.e., companies with MARKET CAPITALIZATION in excess
of $1 billion).
The portfolio manager's approach should produce returns that are similar to
those of the S&P 500 and its corresponding sectors, yet with a higher level of
income.
The portfolio manager utilizes a disciplined investment process designed to
maintain a diversified portfolio of the equity securities of higher quality
companies.
The portfolio manager seeks securities with:
o Higher-than-average dividend yields
o Stronger-than-average growth characteristics
WHAT IS THE FUND'S PRINCIPAL RISK?
(See Risk Considerations, Page 20.)
o Market risk
o Market segment risk
TERMS TO KNOW
MARKET CAPITALIZATION
The total market value of a company's outstanding shares of common stock,
calculated by multiplying the number of shares outstanding by the current market
price of the shares.
6
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1994 1995 1996 1997 1998 1999
- -0.66% 36.50% 17.62% 31.53% 22.66% 9.68%
Best Quarter: Q4 1998 19.62%
- -------------------------------------
Worst Quarter: Q3 1998 -11.12%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 Inception
Year Years (1/1/94)
- -------------------------------------
Equity Income
Fund 9.68% 23.22% 18.87%
S&P 500
Stock Index 21.04% 28.56% 23.54%
* A Shares of the Fund commenced operations on February 10, 1999. Because the
Fund's A Shares have been outstanding for less than a full year, performance
shown reflects performance of the Fund's N Shares, which had lower expenses,
and does not reflect the effect that A Shares' expenses would have had on
performance.
The Fund is the successor to a collective or common investment fund managed by
Harris Trust and Savings Bank (Harris Trust) with investment objectives and
policies that were, in all material respects, equivalent to those of the Fund.
The performance of the Fund includes the performance of the predecessor fund
for periods before it became a mutual fund. The predecessor fund's performance
was adjusted to reflect the Fund's estimate of its expense ratio for the first
year of operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
7
<PAGE>
EQUITY FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation and current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in common stocks. These
stocks are of larger capitalization companies (i.e., companies with MARKET
CAPITALIZATION in excess of $1 billion).
The portfolio manager selects stocks that represent sectors found within the S&P
500 in an effort to:
o Provide greater returns, over the long-term, than the securities comprising
the S&P 500
o Maintain a risk level approximating that of the
S&P 500
The Fund's portfolio consists of approximately 50 to 75 stocks, diversified
among major sectors of the market.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, Page 20.)
o Market risk
o Market segment risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 6.
8
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -7.87% 27.29% 8.19% 18.23% -2.05% 36.26% 24.15% 35.45% 13.42% -1.74%
Best Quarter: Q4 1998 18.66%
- -------------------------------------
Worst Quarter: Q3 1998 -14.52%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 10
Year Years Years
- -------------------------------------
Equity
Fund -1.74% 20.62% 14.14%
S&P 500
Stock Index 21.04% 28.56% 18.20%
* A Shares of the Fund commenced operations on February 12, 1999. Because the
Fund's A Shares have been outstanding for less than a full year, performance
shown reflects performance of the Fund's N Shares, which had lower expenses,
and does not reflect the effect that A Shares' expenses would have had on
performance.
9
<PAGE>
GROWTH FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in common stocks. These
stocks are of larger capitalization companies (i.e., companies with MARKET
CAPITALIZATION in excess of $1 billion).
The portfolio manager selects securities that are considered to be undervalued
and to represent growth opportunities. The Fund's investment management
discipline emphasizes growth in sales, earnings and asset values.
WHAT ARE THE FUND'S
PRINCIPAL RISKS?
(See Risk Considerations, Page 20.)
o Market risk
o Market segment risk
o Volatility risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 6.
10
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1993 1994 1995 1996 1997 1998 1999
5.96% -0.30% 36.16% 28.60% 32.54% 24.68% 16.22%
Best Quarter: Q4 1998 22.65%
- -------------------------------------
Worst Quarter: Q3 1998 -11.95%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
Inception
1 Year 5 Years (4/1/92)
- --------------------------------------
Growth Fund 16.22% 27.45% 19.16%
S&P 500
Stock Index 21.04% 28.56% 20.88%
* A Shares of the Fund commenced operations on February 5, 1999. Because the
Fund's A Shares have been outstanding for less than a full year, performance
shown reflects performance of the Fund's N Shares, which had lower expenses,
and does not reflect the effect that A Shares' expenses would have had on
performance.
The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
11
<PAGE>
SMALL-CAP VALUE FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in the securities of
smaller capitalization companies (i.e., companies that fall in the lowest 15% of
publicly traded companies listed in the U.S. determined by market
capitalization). These securities tend to be represented in the Russell 2000
Index, an index of companies with a median MARKET CAPITALIZATION of $428
million, that is a popular measure of the stock price performance of small
companies.
Using a "value" approach, the portfolio manager buys those securities considered
to be conservatively valued relative to the securities of comparable companies.
The portfolio manager pays particular attention to a company's current and
forecasted earnings levels.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, Page 20.)
o Market risk
o Small company risk
o Volatility risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 6.
12
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -16.52 41.39% 15.95% 14.68% -3.44% 26.78% 14.50% 29.09% -4.15% 0.22%
Best Quarter: Q1 1991 20.93%
- -------------------------------------
Worst Quarter: Q3 1990 -23.80%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 10
Year Years Years
- -------------------------------------
Small-Cap
Value Fund 0.22% 12.53% 10.59%
Russell 2000
Small Stock
Index 21.26% 16.69% 13.40%
Russell
2000 Value
Index** -1.49% 13.14% 12.45%
* A Shares of the Fund commenced operations on August 18, 1999. Because the
Fund's A Shares have been outstanding for less than a full year, performance
shown reflects performance of the Fund's N Shares, which had lower expenses,
and does not reflect the effect that A Shares' expenses would have had on
performance.
The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
** The Fund's primary benchmark is now the Russell 2000 Value Index - a
small-cap value index comprised of stocks in the Russell 2000 Small Stock
Index that have a lower price-to-book ratio and/or forecasted earnings
growth. This index better reflects the investment objectives of the Fund.
13
<PAGE>
SMALL-CAP OPPORTUNITY FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in the securities of
smaller capitalization companies (i.e., companies that fall in the lowest 15% of
publicly traded companies listed in the U.S. determined by MARKET
CAPITALIZATION). These securities tend to be represented in the Russell 2000
Index, an index of companies with a median market capitalization of $428
million, that is a popular measure of the stock price performance of small
companies.
The Fund invests in the securities of companies that the portfolio manager
believes have superior growth potential. In selecting securities, the portfolio
manager pays particular attention to companies offering potentially
above-average earnings, sales and asset value growth. The portfolio manager buys
those securities considered to be attractively valued relative to the securities
of comparable companies.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, Page 20.)
o Market risk
o Small company risk
o Volatility risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 6.
14
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -11.79 47.29% 18.71% 14.85% -3.96% 25.99% 18.53% 25.14% 0.99% 39.75
Best Quarter: Q4 1999 28.14%
- -------------------------------------
Worst Quarter: Q3 1990 -23.83%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
- -------------------------------------
Small-Cap
Opportunity
Fund 39.75% 21.41% 16.20%
Russell 2000
Small Stock
Index 21.26% 16.69% 13.40%
* A Shares of the Fund commenced operations on March 5, 1999. Because the Fund's
A Shares have been outstanding for less than a full year, performance shown
reflects performance of the Fund's N Shares, which had lower expenses, and
does not reflect the effect that A Shares' expenses would have had on
performance.
The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
15
<PAGE>
INTERNATIONAL FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation. Current income is a secondary
objective
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in non-U.S. equity
securities. The Fund invests in at least three foreign countries to reduce risk.
The Fund invests in securities that the portfolio manager believes are
undervalued. When selecting securities, the portfolio manager pays particular
attention to the quality of a company's management, its growth prospects and
financial soundness.
The Fund may engage in foreign currency hedging transactions in an attempt to
minimize the effects of currency fluctuations on the Fund.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, Page 20.)
o Currency rate risk
o Foreign securities risk
o Geographic concentration risk
o Market risk
o Volatility risk
16
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -22.40% 11.77% -4.60% 24.36% 4.11% 3.87% 4.89% -5.21% -4.84% 26.81%
Best Quarter: Q2 1999 14.50%
- -------------------------------------
Worst Quarter: Q3 1990 -19.83%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
- -------------------------------------
International
Fund 26.81% 4.50% 2.93%
MSCI EAFE
Index 25.27% 11.13% 5.32%
* A Shares of the Fund commenced operations on March 5, 1999. Because the Fund's
A Shares have been outstanding for less than a full year, performance shown
reflects performance of the Fund's N Shares, which had lower expenses, and
does not reflect the effect that A Shares' expenses would have had on
performance.
The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
17
<PAGE>
EMERGING MARKETS FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in equity securities of
issuers located in emerging market countries. The portfolio manager selects
securities it considers to be undervalued.
The Fund's investments reflect a broad cross-section of countries, industries
and companies.
When selecting securities, the portfolio manager pays particular attention to
the quality of a company's management, its growth prospects and financial
soundness.
The portfolio manager also evaluates such criteria as:
o Political climate of a country
o Interest rate and currency considerations
o Equity market valuations
The Fund may invest in certain debt securities when the portfolio manager
believes their potential for appreciation equals or exceeds that available from
investments in common stock.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, Page 20.)
o Currency rate risk
o Foreign securities risk
o Geographic concentration risk
o Market risk
o Volatility risk
TERMS TO KNOW
EMERGING MARKET COUNTRY
The World Bank and other international agencies define a developing country on
the basis of such factors as trade initiatives, per capita income and level of
industrialization. There are over 130 countries that are emerging or developing
under this standard and approximately 40 of these countries have stock markets.
Emerging market countries generally include every nation in the world except the
U.S., Canada, Japan, Australia, New Zealand and most nations located in Western
Europe.
18
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1998 1999
- -31.50% 64.06%
Best Quarter: Q4 1999 32.38%
- -------------------------------------
Worst Quarter: Q2 1998 -27.18%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
Inception
1 Year (10/21/97)
- ---------------------------------------
Emerging Markets
Fund 64.06% -1.85%
MSCI Emerging
Markets Index 63.70% 8.41%
* A Shares of the Fund commenced operations on August 12, 1999. Because the
Fund's A Shares have been outstanding for less than a full year, performance
shown reflects performance of the Fund's N Shares, which had lower expenses,
and does not reflect the effect that A Shares' expenses would have had on
performance.
19
<PAGE>
RISK CONSIDERATIONS - EQUITY FUNDS
<TABLE>
<CAPTION>
The risks of investing in the various Funds are illustrated in the chart below.
A Fund's principal risks are designated by the ^ symbol.
- ---------------------------------------------------------------------------------------------------
FUND Equity Small-Cap Small-Cap Emerging
RISKS Balanced Income Equity Growth Value Opportunity International Markets
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allocation ^
- ---------------------------------------------------------------------------------------------------
Counterparty o o o o o o o o
- ---------------------------------------------------------------------------------------------------
Credit o o o
- ---------------------------------------------------------------------------------------------------
Currency
rate o ^ ^
- ---------------------------------------------------------------------------------------------------
Foreign
securities o o o o o o ^ ^
- ---------------------------------------------------------------------------------------------------
Geographic
concentration ^ ^
- ---------------------------------------------------------------------------------------------------
Interest rate ^ o o
- ---------------------------------------------------------------------------------------------------
Leverage o o o o o o o o
- ---------------------------------------------------------------------------------------------------
Market ^ ^ ^ ^ ^ ^ ^ ^
- ---------------------------------------------------------------------------------------------------
Market
segment ^ ^ ^ o o
- ---------------------------------------------------------------------------------------------------
Prepayment o o o
- ---------------------------------------------------------------------------------------------------
Small company ^ ^ o o
- ---------------------------------------------------------------------------------------------------
Volatility o ^ ^ ^ ^ ^
- ---------------------------------------------------------------------------------------------------
</TABLE>
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
ALLOCATION RISK
The risk that the percentages of the fund's assets invested in equities and
fixed income securities, respectively, will not be optimum for market conditions
at a given time.
20
<PAGE>
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
CURRENCY RATE RISK
The risk that fluctuations in the exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Although a fund may
engage in foreign currency hedge transactions to help reduce this risk, those
transactions may not be effective or appropriate in particular situations nor,
of course, will they protect against declines in security values.
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S.; more volatile markets; less securities regulation; less
favorable tax provisions; war or expropriation.
GEOGRAPHIC CONCENTRATION RISK
The risk that, if a fund concentrates its investments in a single country or
region, its portfolio will be more susceptible to factors adversely affecting
issuers located in that country or region than would a more geographically
diverse portfolio of securities.
INTEREST RATE RISK
The risk that changing interest rates may adversely affect the value of an
investment. With fixed-rate securities, an increase in prevailing interest rates
typically causes the value of those securities to fall, while a decline in
prevailing interest rates generally produces an increase in the market value of
the securities. Changes in interest rates will affect the value of longer-term
fixed income securities more than shorter-term securities and lower quality
securities more than higher quality securities.
LEVERAGE RISK
The risk that downward price changes in a security may result in a loss greater
than a fund's investment in the security. This risk exists through the use of
certain securities or techniques (e.g., derivative securities or purchases on
margin) that tend to magnify changes in an index or market.
21
<PAGE>
MARKET RISK
The risk that the market value of a fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or it may affect the market as a whole.
MARKET SEGMENT RISK
The risk that investments concentrated in one portion of the market (e.g., large
capitalization stocks or short-term government bonds) will underperform the
overall market.
PREPAYMENT RISK
The risk that issuers will prepay fixed rate obligations when interest rates
fall, forcing a fund to re-invest in obligations with lower interest rates than
the original obligations.
SMALL COMPANY RISK
The risk that investments in smaller companies may be more volatile than
investments in larger companies, as smaller companies generally experience
higher growth and failure rates. The trading volume of small-company securities
is normally lower than that of larger companies. Changes in the demand for the
securities of smaller companies generally have a disproportionate effect on
their market price, tending to make prices rise more in response to buying
demand and fall more in response to selling pressure.
VOLATILITY RISK
The risk that performance will be affected by unanticipated events (e.g.,
significant earnings shortfalls or gains, war, or political events) that cause
major price changes in individual securities or market sectors.
22
<PAGE>
Yhis page intentionally left blank.
23
<PAGE>
FEES AND EXPENSES - EQUITY FUNDS
The tables below describe the fees and expenses that you will pay if you buy and
hold shares of the Harris Insight Equity Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES* 5.50%
MAXIMUM DEFERRED SALES CHARGE (LOAD)* 1.00%
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
REDEMPTION FEE None
EXCHANGE FEE None
- --------------------------------------------------------------------------------
* Sales charge waivers and reduced sales charge plans are available for A
Shares. If A Shares purchased without an initial sales charge (purchases of
$1,000,000 or more) are redeemed within two years after purchase, a contingent
deferred sales charge of up to 1.00% will be applied to the redemption.
See Shareholder Services - How To Buy Shares.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Equity Small-Cap Small-Cap Emerging
Balanced Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Advisory Fees1 0.60% 0.70% 0.70% 0.90% 0.80% 1.00% 1.05% 1.25%
Rule 12b-1 Fees2 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
Other Expenses1 0.45 0.29 0.21 0.24 0.24 0.21 0.30 0.51
- ----------------------------------------------------------------------------------------------------
Total Operating
Expenses1, 2 1.30% 1.24% 1.16% 1.39% 1.29% 1.46% 1.60% 2.01%
- -----------------------------------------------------------------------------------------------------
</TABLE>
1 Expenses are based on amounts incurred by the Funds during their most recent
fiscal year but do not reflect waivers of advisory fees by Harris Trust and
sub-administration fees by PFPC Inc. After these waivers, actual Fund advisory
fees, Other Expenses and Total Operating Expenses for the fiscal year ended
December 31, 1999 were:
<TABLE>
<CAPTION>
Equity Small-Cap Small-Cap Emerging
Balanced Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Advisory Fees 0.45% 0.65% 0.70% 0.87% 0.75% 0.99% 1.05% 1.23%
Rule 12b-1 Fees2 0.33 0.31 0.33 0.32 0.25 0.29 0.30 0.25
Other Expenses 0.43 0.28 0.20 0.23 0.24 0.21 0.30 0.47
Total Operating
Expenses2 1.21% 1.24% 1.23% 1.42% 1.24% 1.49% 1.65% 1.95%
- ----------------------------------------------------------------------------------------------------
</TABLE>
2 Commencing October 1, 1999, Harris Trust has reduced Rule 12b-1 Fees for the
Equity Funds to 0.25% of average net assets. If those fee reductions had been
in effect for the entire fiscal year ended December 31, 1999, the Total
Operating Expenses for each of the Equity Funds (expressed as a percentage of
average net assets) for that fiscal year end would have been as follows:
Balanced Fund 1.13%; Equity Income Fund 1.18%; Equity Fund 1.15%; Growth Fund
1.35%; Small-Cap Value Fund 1.24%; Small-Cap Opportunity Fund 1.45%;
International Fund 1.60%; and Emerging Markets Fund 1.95%.
24
<PAGE>
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Equity Funds to the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in a Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Equity Small-Cap Small-Cap Emerging
Balanced Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One Year $675 $669 $662 $684 $674 $690 $704 $743
- ----------------------------------------------------------------------------------------------------
Three Years 939 922 898 966 936 986 1,027 1,146
- ----------------------------------------------------------------------------------------------------
Five Years 1,224 1,194 1,153 1,269 1,219 1,304 1,373 1,573
- ----------------------------------------------------------------------------------------------------
Ten Years 2,032 1,967 1,881 2,127 2,021 2,200 2,346 2,759
- ----------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT FIXED INCOME FUNDS
The Harris Insight Fixed Income Funds invest primarily in bonds,
which are debt instruments that normally -
o Pay a set amount of interest on a regular basis
o Repay the face amount, or principal, at a stated future date
o Are issued by domestic and foreign corporations, federal and state
governments, and their agencies
WHY INVEST IN FIXED INCOME FUNDS?
Fixed income funds can play a key role in an investor's portfolio by offering:
o A reasonable level of current income
o A measure of price stability relative to equity fund investments
o In the case of tax-exempt funds, income that is generally free from federal
income tax
HOW DO FIXED INCOME FUNDS PROVIDE A STEADY STREAM OF INCOME?
Fixed income funds earn income on the underlying securities and pay this out to
the shareholders on a regular (e.g., monthly) basis.
WHAT CAUSES BOND VALUES TO CHANGE?
Investors should be aware that bonds will fluctuate in value for any of three
main reasons:
o A change in interest rates
o A change in economic conditions
o A change in the financial condition of the issuer
HOW DOES THE PRICE OF A BOND MOVE WITH INTEREST RATES?
When interest rates rise, bond prices fall - and vice versa. Changing interest
rates have a greater effect on bonds with longer maturities than on those with
shorter maturities. As a result, when prevailing interest rates rise, the prices
of long-term bonds decrease, to a greater degree than the prices of short-term
bonds. The reverse is true when interest rates fall.
HOW ARE BONDS GRADED?
Bond quality, or grade, refers to the creditworthiness (the ability to repay
debt) of the issuing organization. Higher ratings indicate better quality.
Independent rating services, such as Moody's Investors Service or Standard &
Poor's, publish and disseminate bond quality ratings on a regular basis.
26
<PAGE>
- --------------------------------------------------------------------------------
Shares of the Harris Insight Fixed Income Funds are not bank deposits and
are not insured or guaranteed by the FDIC or any other government agency.
The value of your investment in a Fund will fluctuate, which means that you
may lose money.
Each Fund's primary investment practices and strategies are discussed in
this prospectus. Other practices, and their related risks, are described in
the Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be changed
by the Board of Trustees without approval by the Fund's shareholders.
Each Fund's principal risks are provided in an alphabetical listing within
the Fund description that follows. These risks are discussed in detail
under "Risk Considerations" on page 40.
- --------------------------------------------------------------------------------
27
<PAGE>
HARRIS INSIGHT FIXED INCOME FUNDS
CONVERTIBLE SECURITIES FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide capital appreciation and current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in CONVERTIBLE SECURITIES
(bonds, preferred stock and other instruments that are convertible into common
stock).
The Fund also may invest up to 35% of its assets in SYNTHETIC CONVERTIBLES and
15% of its assets in common stocks. When, in the portfolio manager's opinion,
convertible securities do not serve the Fund's objective, the Fund may invest
part or all of its assets in U.S. GOVERNMENT SECURITIES, corporate debt
obligations and short-term money market instruments. The portfolio manager will
continue to seek current income during such periods, but will put less emphasis
on capital appreciation.
The portfolio manager invests primarily in convertible securities rated "B" or
better by Standard & Poor's Corporation and Moody's Investors Service, Inc. (or,
if not rated, securities considered by the portfolio manager to be of comparable
quality). The Fund may also invest up to:
o 15% of its assets in securities rated "B-"
o 5% of its assets in convertible securities rated "CCC" by Standard & Poor's
or "Caa" by Moody's. (Securities rated "BB" or below by Standard & Poor's or
"Ba" or below by Moody's are "high yield" securities, commonly known as "junk
bonds." These securities are considered speculative and are subject to
increased risk.)
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 40.)
o Credit risk
o Interest rate risk
o Market risk
TERMS TO KNOW
CONVERTIBLE SECURITIES
Bonds, debentures, notes, preferred stock or other securities that are
convertible into common stock. Convertible securities have some unique return
characteristics relative to market fluctuations:
o When equity markets go up, they tend to rise in price
o When interest rates rise, they tend to decline relatively less in price than
long-term bonds
SYNTHETIC CONVERTIBLES
Issues that function like a convertible security by combining separate
securities into one investment package offering fixed income and the right to
acquire stock.
U.S. GOVERNMENT SECURITIES
Obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
28
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -20.62% 26.90% 17.31% 13.52% -3.36% 18.93% 20.77% 18.32% -2.04% 31.75%
Best Quarter: Q4 1999 25.13%
- -------------------------------------
Worst Quarter: Q3 1990 -17.71%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
- -------------------------------------
Convertible
Securities
Fund 31.75% 17.01% 11.02%
First Boston
Convertible
Index 42.29% 18.47% 14.06%
* A Shares of the Fund commenced operations on January 13, 2000. Performance
prior to January 13, 2000 reflects performance of the Fund's N Shares, which
had lower expenses, and does not reflect the effect that A Shares' expenses
would have had on performance.
The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
29
<PAGE>
TAX-EXEMPT BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of current income that is exempt from
federal income tax.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in MUNICIPAL SECURITIES
with varying maturities. These securities are generally exempt from federal
income tax and not subject to the ALTERNATIVE MINIMUM TAX.
The portfolio manager employs:
o Interest rate risk management techniques to temper the potential negative
impact of interest rate increases on the Fund's share price
o In-depth credit analysis to help ensure that the municipalities issuing the
bonds are likely to repay their debt
The Fund also may invest in U.S. GOVERNMENT SECURITIES and securities with
various forms of credit enhancement (such as bank letters of credit). The Fund
may buy and sell options and interest rate futures contracts to hedge against
declines in the value of portfolio securities.
In pursuit of higher income, the portfolio manager normally favors longer-term
bonds that typically mature in ten years or more. In exchange for this higher
potential income, investors may experience higher share-price volatility than
would occur through investments with shorter maturities.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 40.)
o Credit risk
o Interest rate risk
o Municipal market risk
o Prepayment risk
TERMS TO KNOW
ALTERNATIVE MINIMUM TAX (AMT)
A federal tax designed to ensure that individuals, trusts, estates and companies
are limited in their deductions, exemptions, and tax credits when calculating
federal income tax liability.
MUNICIPAL SECURITIES
Bonds and other obligations issued by state and local governments to finance
operations or projects. These securities make interest payments that are exempt
from federal income tax.
U.S. GOVERNMENT SECURITIES
See page 28.
30
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
5.34% 11.34% 8.09% 12.67% -7.53% 14.16% 3.43% 8.28% 4.62% -3.31
Best Quarter: Q1 1995 5.92%
- -------------------------------------
Worst Quarter: Q1 1994 -5.15%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
- -------------------------------------
Tax-Exempt
Bond Fund -3.31% 5.28% 5.50%
Lehman
Brothers
Municipal
Bond Index -2.06% 6.91% 6.88%
* A Shares of the Fund had not commenced operations as of the date of this
prospectus. Performance reflects performance of the Fund's N Shares, which had
lower expenses, and does not reflect the effect that A Shares' expenses would
have had on performance.
The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
31
<PAGE>
BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of total return, including a competitive
level of current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in bonds and similar fixed
income securities.
The Fund may invest in the following:
o Bonds and debentures
o U.S. GOVERNMENT SECURITIES
o Debt obligations of foreign governments
o MORTGAGE-BACKED SECURITIES
o MUNICIPAL SECURITIES
o ZERO-COUPON SECURITIES
o Other floating/variable rate obligations
o Options and interest-rate futures contracts
The Fund normally maintains a DOLLAR-WEIGHTED AVERAGE MATURITY
(or average life with respect to mortgage-backed and asset-backed securities) of
between five and ten years. Accordingly, the Fund's holdings may experience more
share-price volatility than bonds with shorter maturities, making the Fund a
more suitable investment for long-term investors.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 40.)
o Credit risk
o Interest rate risk
o Prepayment risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 28.
MORTGAGE-BACKED SECURITIES
Debt issues, based on a pool of underlying mortgages, that make interest and
principal payments to investors.
MUNICIPAL SECURITIES
See page 30.
ZERO-COUPON SECURITIES
Securities that do not pay a stated interest rate but are sold at a deep
discount to their value at maturity. The difference between a security's
discounted price and its full value at maturity represents the payment of
interest.
DOLLAR-WEIGHTED AVERAGE MATURITY
An average of all of the maturities of a fund's securities holdings, weighted
according to each security's dollar value relative to the rest of the holdings.
32
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1997 1998 1999
9.14% 6.86% -1.16%
Best Quarter: Q3 1997 3.61%
- -------------------------------------
Worst Quarter: Q2 1999 -1.13%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Inception
Year (4/22/96)
- -------------------------------------
Bond Fund -1.16% 5.36%
Lehman Brothers
Aggregate
Bond Index -0.82% 6.30%
* A Shares of the Fund commenced operations on February 18, 1999. Because the
Fund's A Shares have been outstanding for less than a full year, performance
shown reflects performance of the Fund's N Shares, which had lower expenses,
and does not reflect the effect that A Shares' expenses would have had on
performance.
33
<PAGE>
INTERMEDIATE TAX-EXEMPT BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of current income that is exempt from
federal income tax.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in a broad range of
MUNICIPAL SECURITIES. These securities are generally exempt from federal income
tax and not subject to the ALTERNATIVE MINIMUM TAX.
Under normal market conditions, the Fund's investments will have a
DOLLAR-WEIGHTED AVERAGE MATURITY in a range of three to ten years. Such
intermediate-term securities share these basic characteristics:
o They offer a higher income stream and somewhat higher share price volatility
than shorter-term municipal bond funds
o They tend to deliver less income with greater share price stability than
longer-term bond funds
The Fund also may invest in U.S. GOVERNMENT SECURITIES and securities with
various forms of credit enhancement (such as bank letters of credit). The Fund
may buy and sell options and interest rate futures contracts to hedge against
declines in value of portfolio securities.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 40.)
o Credit risk
o Interest rate risk
o Municipal market risk
o Prepayment risk
TERMS TO KNOW
MUNICIPAL SECURITIES
See page 30.
ALTERNATIVE MINIMUM TAX (AMT)
See page 30.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 32.
U.S. GOVERNMENT SECURITIES
See page 28.
34
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
6.08% 10.75% 6.50% 8.28% -3.33% 11.40% 2.80% 6.14% 4.67% -0.68%
Best Quarter: Q1 1995 4.51%
- -------------------------------------
Worst Quarter: Q1 1994 -2.89%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
- --------------------------------------
Intermediate
Tax-Exempt
Bond Fund -0.68% 4.79% 5.17%
Lehman
Brothers
Quality
Intermediate
Municipal
Bond Index 0.29% 6.24% N/A **
Lehman
Brothers
3-15 Year Blend
Municipal
Index *** -0.47% 6.67% N/A **
* A Shares of the Fund had not commenced operations as of the date of this
prospectus. Performance reflects performance of the Fund's N Shares, which
had lower expenses, and does not reflect the effect that A Shares' expenses
would have had on performance.
The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
** The inception date of the index is July 1, 1993.
*** The Fund's primary benchmark is now the Lehman Brothers 3-15 Year Blend
Municipal Index - an index comprised of 40,278 investment-grade or better
municipal bonds, from issues larger than $50 million dated since 1991 and
having maturities between 2 and 17 years. This index better reflects the
investment objectives and policies of the Fund.
35
<PAGE>
SHORT/INTERMEDIATE BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of total return, including a competitive
level of current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets primarily in bonds with a
short/intermediate-term average maturity.
The portfolio manager favors bonds with two to five years remaining to maturity
in order to achieve relative price stability and an attractive stream of income.
Such short/intermediate-term bonds tend to offer a buffer against rising
interest rates, although they will appreciate less when interest rates fall.
The Fund normally maintains a DOLLAR-WEIGHTED AVERAGE MATURITY (or average life
with respect to mortgage-backed and asset-backed securities) of between two and
five years. The Fund may invest in:
o Bonds and debentures
o U.S. GOVERNMENT SECURITIES
o U.S. dollar-denominated debt obligations of foreign issuers
o MORTGAGE-BACKED SECURITIES
o ASSET BACKED SECURITIES
o MUNICIPAL SECURITIES
o ZERO-COUPON SECURITIES
o Other floating/variable rate obligations
o Options and interest-rate futures contracts
If a defensive position is warranted, the Fund may hold short-term U.S.
government securities (such as Treasury bills), high-quality money market
instruments and cash.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 40.)
o Credit risk
o Interest rate risk
o Prepayment risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 28.
MORTGAGE-BACKED SECURITIES
See page 32.
ASSET-BACKED SECURITIES
Securities collateralized by credit card loans or other accounts receivable.
MUNICIPAL SECURITIES
See page 30.
ZERO-COUPON SECURITIES
See page 32.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 32.
36
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1992 1993 1994 1995 1996 1997 1998 1999
5.28% 9.91% -1.29% 13.88% 3.51% 6.89% 6.75% 0.56%
Best Quarter: Q3 1992 4.62%
- -------------------------------------
Worst Quarter: Q4 1992 -2.13%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 Inception
Year Years (4/1/91)
- --------------------------------------
Short/
Intermediate
Bond Fund 0.56% 6.23% 6.35%
Lehman
Brothers
Intermediate
Government/
Corporate
Bond Index 0.39% 7.10% 7.67%
* A Shares of the Fund commenced operations on July 22, 1999. Because the Fund's
A Shares have been outstanding for less than a full year, performance shown
reflects performance of the Fund's N Shares, which had lower expenses, and
does not reflect the effect that A Shares' expenses would have had on
performance.
37
<PAGE>
INTERMEDIATE GOVERNMENT BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of current income, consistent with
preservation of capital.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in:
o U.S. GOVERNMENT SECURITIES
o MORTGAGE-BACKED SECURITIES, issued by U.S. government agencies
o REPURCHASE AGREEMENTS collateralized by U.S. government securities
The DOLLAR-WEIGHTED AVERAGE MATURITY (or average life with respect to
mortgage-backed and asset-backed securities) generally will be in the
intermediate range of between three and ten years.
The portfolio manager may invest up to 20% of the fund's assets in:
o ASSET-BACKED SECURITIES
o ZERO-COUPON SECURITIES
o Corporate bonds
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 40.)
o Credit risk
o Interest rate risk
o Prepayment risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 28.
MORTGAGE-BACKED SECURITIES
See page 32.
REPURCHASE AGREEMENTS
A binding agreement enabling a bank or broker to borrow money, using securities
as collateral, with a promise to buy back the securities at a specified price,
usually within 90 days.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 32.
ASSET-BACKED SECURITIES
See page 36.
ZERO-COUPON SECURITIES
See page 32.
38
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
8.92% 13.30% 6.49% 8.10% -1.93% 13.09% 3.86% 7.56% 7.18% -1.05%
Best Quarter: Q3 1991 4.57%
- -------------------------------------
Worst Quarter: Q1 1994 -2.21%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
- -------------------------------------
Intermediate
Government
Bond Fund -1.05% 6.03% 6.44%
Lehman Brothers
Intermediate
Government
Bond Index 0.49% 6.93% 7.10%
* A Shares of the Fund commenced operations on February 12, 1999. Because the
Fund's A Shares have been outstanding for less than a full year, performance
shown reflects performance of the Fund's N Shares, which had lower expenses,
and does not reflect the effect that A Shares' expenses would have had on
performance.
The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
39
<PAGE>
RISK CONSIDERATIONS - FIXED INCOME FUNDS
<TABLE>
<CAPTION>
The risks of investing in the various Funds are illustrated in the chart below.
A Fund's principal risks are designated by the ^ symbol.
- ----------------------------------------------------------------------------------------------------
FUNDS Intermediate Short/ Intermediate
Convertible Tax-Exempt Tax-Exempt Intermediate Government
RISKS Securities Bond Bond Bond Bond Bond
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Counterparty o o o o o o
- ----------------------------------------------------------------------------------------------------
Credit ^ ^ ^ ^ ^ ^
- ----------------------------------------------------------------------------------------------------
Foreign securities o o o o
- ----------------------------------------------------------------------------------------------------
Interest rate ^ ^ ^ ^ ^ ^
- ----------------------------------------------------------------------------------------------------
Leverage o o o o o o
- ----------------------------------------------------------------------------------------------------
Market ^ o o o o o
- ----------------------------------------------------------------------------------------------------
Municipal market ^ o ^
- ----------------------------------------------------------------------------------------------------
Prepayment ^ ^ ^ ^ ^
- ----------------------------------------------------------------------------------------------------
</TABLE>
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
40
<PAGE>
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S.; more volatile markets; less securities regulation; less
favorable tax provisions; war or expropriation.
INTEREST RATE RISK
The risk that changing interest rates may adversely affect the value of an
investment. With fixed-rate securities, an increase in prevailing interest rates
typically causes the value of those securities to fall, while a decline in
prevailing interest rates generally produces an increase in the market value of
the securities. Changes in interest rates will affect the value of longer-term
fixed income securities more than shorter-term securities and lower quality
securities more than higher quality securities.
LEVERAGE RISK
The risk that downward price changes in a security may result in a loss greater
than a fund's investment in the security. This risk exists through the use of
certain securities or techniques (e.g., derivative securities or purchases on
margin) that tend to magnify changes in an index or market.
MARKET RISK
The risk that the market value of a fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or it may affect the market as a whole.
MUNICIPAL MARKET RISK
The risk that certain factors may negatively affect the value of municipal
securities, and, as a result, the share price of a fund that invests in them.
These factors include political or legislative changes, uncertainties related to
the tax status of the securities or the rights of investors in the securities. A
fund may invest in municipal obligations that are related in such a way (e.g.,
multiple apparently unrelated issues that depend on the financial rating or
support of a single government unit) that an economic, business or political
development or change that affects one of these obligations would also affect
the others.
PREPAYMENT RISK
The risk that issuers will prepay fixed-rate obligations when interest rates
fall, forcing a fund to re-invest in obligations with lower interest rates than
the original obligations.
41
<PAGE>
FEES AND EXPENSES - FIXED INCOME FUNDS
The tables below describe the fees and expenses that you will pay if you buy and
hold shares of the Harris Insight Fixed Income Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES* 4.50%
MAXIMUM DEFERRED SALES CHARGE (LOAD)* 1.00%
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
REDEMPTION FEE None
EXCHANGE FEE None
- --------------------------------------------------------------------------------
* Sales charge waivers and reduced sales charge plans are available for A
Shares. If A Shares purchased without an initial sales charge (purchases of
$1,000,000 or more) are redeemed within two years after purchase, a contingent
deferred sales charge of up to 1.00% will be applied to the redemption. See
Shareholder Services - How To Buy Shares.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
- ---------------------------------------------------------------------------------------------------------
Convertible Intermediate Short/ Intermediate
Securities Tax-Exempt Bond Tax-Exempt Intermediate Government
Fund Bond Fund Fund Bond Fund Bond Fund Bond Fund
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees1 0.70% 0.60%2 0.65% 0.60%2 0.70% 0.65%
Rule 12b-1 Fees 0.25 0.25 0.25 0.25 0.25 0.25
Other Expenses1 0.31 0.23 0.25 0.22 0.22 0.28
- ---------------------------------------------------------------------------------------------------------
Total Operating Expenses1 1.26% 1.08% 1.15% 1.07% 1.17% 1.18%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
1 Expenses are based on amounts incurred by the Funds during their most recent
fiscal year but do not reflect waivers of advisory fees by Harris Trust and
sub-administration fees by PFPC Inc. After these waivers, actual Fund advisory
fees, Other Expenses and Total Operating Expenses for the fiscal year ended
December 31, 1999 were:
<TABLE>
<CAPTION>
Convertible Intermediate Short/ Intermediate
Securities Tax-Exempt Bond Tax-Exempt Intermediate Government
Fund Bond Fund Fund Bond Fund Bond Fund Bond Fund
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.61% 0.47%2 0.37% 0.47%2 0.39% 0.24%
Other Expenses 0.31 0.23 0.23 0.22 0.21 0.26
Total Operating Expenses 1.17% 0.95% 0.85% 0.94% 0.85% 0.75%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
2 Commencing October 18, 1999, Harris Trust has waived its entire advisory fee
for the Tax-Exempt Bond Fund and the Intermediate Tax-Exempt Bond Fund. These
fee waivers can be reduced or terminated at any time at the option of Harris
Trust. If those fee waivers had been in effect for the entire fiscal year
ended December 31, 1999, the total operating expenses for each of the
Tax-Exempt Bond Fund and the Intermediate Tax-Exempt Bond Fund (expressed as
a percentage of average net assets) for that year would have been 0.48%
and 0.47% respectively.
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
42
<PAGE>
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Fixed Income Funds to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in a Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Convertible Intermediate Short/ Intermediate
Securities Tax-Exempt Bond Tax-Exempt Intermediate Government
Fund Bond Fund Fund Bond Fund Bond Fund Bond Fund
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year $573 $555 $562 $455 $465 $466
- ----------------------------------------------------------------------------------------
Three Years 832 778 799 678 709 712
- ----------------------------------------------------------------------------------------
Five Years 1,110 1,019 1,054 919 971 976
- ----------------------------------------------------------------------------------------
Ten Years 1,904 1,708 1,785 1,610 1,721 1,732
- ----------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
INVESTMENT ADVISER
Harris Trust and Savings Bank (Harris Trust), an Illinois state-chartered bank
and a member of the Federal Reserve System, is the investment adviser for each
of the Harris Insight Funds. Harris Trust is the successor to the investment
banking firm of N.W. Harris & Co., which was organized in 1882 and incorporated
in 1907. At December 31, 1999, Harris Trust had total discretionary assets under
management of approximately $26.4 billion and was the largest bank 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,
1999, Harris Trust managed more than $13.8 billion in discretionary personal
trust assets, and administered more than $17.9 billion in non-discretionary
trust assets.
Harris Trust oversees the PORTFOLIO MANAGEMENT AGENT and the INVESTMENT
SUB-ADVISER.
The Funds have received an exemptive order from the SEC that permits Harris
Trust, subject to certain conditions, to select new portfolio management
agents/sub-advisers or replace existing portfolio management agents/sub-advisers
without first obtaining shareholder approval for the change. In addition, Harris
Trust may authorize a portfolio management agent/sub-adviser to enter into a
sub-portfolio management agreement with one or more sub-subadvisers on behalf of
any Fund managed by that portfolio management agent/sub-adviser. The Board of
Trustees, including a majority of the "independent" Trustees, must approve each
new portfolio management, sub-portfolio management or sub-sub-portfolio
management agreement. This allows Harris Trust to employ new portfolio
management agents/sub-advisers for new or existing Funds, change the terms of
particular agreements with sub-advisers or change portfolio management
agents/sub-advisers when it determines that a change is beneficial to
shareholders, and to avoid the delay and expense of calling and holding
shareholder meetings to approve each change. In accordance with the exemptive
order, Harris Trust and the Funds will provide investors with information about
each new portfolio management agent/sub-adviser (or sub-subadviser) and its
portfolio management (or sub-portfolio management) agreement within 90 days of
the hiring of a new portfolio management agent/sub-adviser or sub-subadviser.
Harris Trust is responsible for selecting, monitoring, evaluating and allocating
assets to the portfolio management agents/sub-advisers and oversees their
compliance with each Fund's investment objective, policies and restrictions.
The SAI contains more information about the Funds' advisory and portfolio
management agreements, including a fuller discussion of the Funds' SEC exemptive
order.
44
<PAGE>
ADVISORY FEES
The following chart shows the investment advisory fees paid, before fee waivers,
by each Fund during its last fiscal year.
MANAGEMENT FEES PAID
(expressed as a percentage of average net assets)
Balanced Fund.....................0.60%
Equity Income Fund................0.70
Equity Fund.......................0.70
Growth Fund.......................0.90
Small-Cap Value Fund..............0.80
Small-Cap Opportunity Fund .......1.00
International Fund................1.05
Emerging Markets Fund.............1.25
Convertible Securities Fund.......0.70
Tax-Exempt Bond Fund..............0.60
Bond Fund.........................0.65
Intermediate Tax-Exempt
Bond Fund.........................0.60
Short/Intermediate Bond Fund......0.70
Intermediate Government
Bond Fund.........................0.65
Harris Trust may waive any portion of its investment advisory fees or reimburse
Fund expenses from time to time. These arrangements are voluntary and may be
terminated at any time.
PORTFOLIO MANAGEMENT AGENT
As the portfolio management agent, Harris Investment Management, Inc. (HIM)
manages the investments of all of the Funds. In the case of the International
Fund and the Emerging Markets Fund, HIM has appointed Hansberger Global
Investors, Inc. as the investment sub-adviser. HIM is a wholly-owned subsidiary
of Harris Bankcorp, Inc. For the services provided by HIM, Harris Trust pays HIM
the advisory fees Harris Trust receives from the Funds. As of December 31, 1999,
HIM managed approximately $14.1 billion in assets.
INVESTMENT SUB-ADVISER
Hansberger Global Investors, Inc. (Hansberger) serves as investment sub-adviser
to, and makes all investment decisions for, the International Fund and the
Emerging Markets Fund. Hansberger, founded in 1994, is a wholly-owned subsidiary
of Hansberger Group, Inc. and provides a broad range of portfolio management
services to clients in the U.S. and abroad. As of December 31, 1999, Hansberger
managed approximately $2.9 billion in assets. Hansberger is paid for its
investment sub-advisory services from the advisory fees HIM receives from Harris
Trust.
Many persons on the staffs of the investment adviser, portfolio management agent
and investment sub-adviser contribute to the investment management services
provided to the Funds. The individuals named in the following section, however,
are primarily
45
<PAGE>
responsible for the day-to-day investment management of the Funds.
INVESTMENT ADVISER
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 60690
INVESTMENT SUB-ADVISER
Hansberger Global Investors, Inc.
515 East Las Olas Blvd., Suite 1300
Fort Lauderdale, Florida 33301
46
<PAGE>
PORTFOLIO MANAGERS
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT EQUITY FUNDS
BALANCED FUND
C. THOMAS JOHNSON, CFA, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Johnson joined Harris Trust in 1969. He has served as Portfolio Manager of
the Fund since it commenced operations in 1997 and has 30 years of experience in
portfolio management.
EQUITY INCOME FUND
DANIEL L. SIDO, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1994, Mr. Sido served as Portfolio Manager for a trust
company, managing equity and fixed income portfolios. He has served as Portfolio
Manager of the Fund since it commenced operations in 1996 and has over 16 years
of investment management experience.
EQUITY FUND
DONALD G. M. COXE, CHAIRMAN AND CHIEF STRATEGIST (HIM)
Mr. Coxe joined HIM in 1993. He has served as Portfolio Manager of the Fund
since 1996 and has nearly 32 years of institutional investment management
experience.
GROWTH FUND
T. ANDREW JANES, PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Janes joined HIM in 1999. He has served as Portfolio Manager of the Fund
since then and has 14 years of portfolio management, investment research and
trust administration experience.
SMALL-CAP VALUE FUND
JON K. TESSEO, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Tesseo joined HIM in 1999. He has served as Portfolio Manager of the Fund
since then and has 9 years of portfolio management and investment research
experience.
SMALL-CAP OPPORTUNITY FUND
PAUL KLEINAITIS, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Kleinaitis joined HIM in 1999. He has served as Portfolio Manager of the
Fund since then and has 13 years of portfolio management and investment research
experience.
47
<PAGE>
INTERNATIONAL FUND
EMERGING MARKETS FUND
THOMAS L. HANSBERGER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER (HANSBERGER)
Before forming Hansberger in 1994, Mr. Hansberger was Chairman, President and
Chief Executive Officer of Templeton Worldwide, Inc. While at Templeton, he
served as director of research and was an officer, director or primary portfolio
manager for several Templeton mutual funds. He leads the International Fund's
portfolio team, which includes:
John Hock, Senior Vice President, Research
Charles Gulden, Senior Vice President, Research
He also leads the Emerging Markets Fund's portfolio team, which includes:
Francisco Alzuru, Managing Director, Portfolio Manager and Research Analyst
Ajit Dayan, Managing Director of Indian Research
Aureole L.W. Foong, Director of Global Emerging Markets Research
Robert Mazuelos, Research Analyst
Vladimir Tyurenkov, Managing Director of Eastern Europe and Russian Research,
Portfolio Manager and Research Analyst
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT FIXED INCOME FUNDS
CONVERTIBLE SECURITIES FUND
JON D. THANOS, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Thanos joined HIM in 1996. He has served as Portfolio Manager of the Fund
since 1999 and has 8 years of portfolio management and trading experience.
TAX-EXEMPT BOND FUND
INTERMEDIATE TAX-EXEMPT BOND FUND
GEORGE W. SELBY, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1998, Mr. Selby served as Executive Director of
Municipal Bond Sales for a brokerage firm. He has 17 years of municipal bond
sales experience and was appointed Portfolio Manager of:
o Tax-Exempt Bond Fund in 1998
o Intermediate Tax-Exempt Bond Fund in 1998
48
<PAGE>
BOND FUND
SHORT/INTERMEDIATE BOND FUND
INTERMEDIATE GOVERNMENT BOND FUND
LAURA ALTER, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1994, Ms. Alter served as Portfolio Manager for a major
mutual fund investment management firm. She has 15 years of experience in the
fixed-income investment area and was appointed Portfolio Manager of:
o Bond Fund when it commenced operations in 1996
o Short/Intermediate Bond Fund in 1994
MAUREEN SVAGERA, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1994, Ms. Svagera was Principal/Vice President at an
investment management firm where she focused on the mortgage and asset-backed
securities markets. She has 17 years of experience in the fixed-income market
and was appointed Portfolio Manager of:
o Bond Fund when it commenced operations in 1996
o Short/Intermediate Bond Fund in 1996
o Intermediate Government Bond Fund when it commenced operations in 1997
49
<PAGE>
PRICING OF FUND SHARES
SHARES OF THE FUNDS ARE BOUGHT AND SOLD AT NET ASSET VALUE PLUS ANY APPLICABLE
SALES CHARGE
Each Fund calculates its net asset value per share (NAV) on each day on which
both the New York Stock Exchange (NYSE) and the Federal Reserve Bank of
Philadelphia are open for business.
HOW THE FUNDS CALCULATE NAV
The NAV of a class of shares of a Fund is determined by dividing the value of
the securities and other assets, less liabilities, allocated to the class by the
number of outstanding shares of the class.
The NAV is calculated as of the close of regular trading on the NYSE (normally
4:00 p.m., Eastern time) and is generally based on the last sale prices of all
securities held by the Fund and the number of shares outstanding. A Fund's
securities are valued based on market value or, where market quotations are not
readily available, are based on fair value as determined in good faith by or
under the direction of the Fund's board of trustees. Foreign securities are
valued on the basis of quotations from the primary markets in which they are
traded, and are translated from the local currency into U.S. dollars using
current exchange rates. If the value of a foreign security has been materially
affected by events occurring after the close of a foreign market, it may be
valued by another method that the board believes reflects fair value. Foreign
securities may trade in their local markets on weekends or other days when a
Fund does not price its shares. Therefore, the NAV of Funds holding foreign
securities may change on days when shareholders will not be able to buy or sell
their Fund shares.
50
<PAGE>
SHAREHOLDER SERVICES
HOW TO BUY SHARES
OPENING A NEW ACCOUNT IS EASY
There are three convenient ways to invest in the Harris Insight Funds.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
THROUGH FINANCIAL
BY MAIL BY BANK WIRE INSTITUTION/PROFESSIONAL
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Complete and sign an Call the Funds at Contact your financial
application for A Shares. 800.625.7073, during institution or professional for
business hours, to initiate more information.
Make your check payable your purchase.
to the Harris Insight Funds. Important note: Each
Please be sure to furnish institution or professional
If you are adding to your your taxpayer may have its own procedures
existing account, indicate identification number. and requirements for buying
your Fund account shares and may charge fees.
number directly on Then wire your
the check. investment to:
PNC Bank, N.A.
Mail your application Philadelphia, PA
and check to: ABA #0310-0005-3
Harris Insight Funds For Credit To:
c/o PFPC Inc. Harris Insight Funds
P.O. Box 8952 85-5093-2950
Wilmington, DE 19899-8952 Re: [Name of Fund]--
A Shares
Account No.:
Account Name:
Taxpayer ID No.:
If you are opening a new
account, please complete
and mail the account
application form to the Funds
at the address given
under "By Mail."
The Funds currently do not
charge investors for the
receipt of wire transfers,
although your bank may
charge you for their
wiring services.
- ------------------------------------------------------------------------------------------
</TABLE>
Orders placed directly with the Funds must be paid for by check or bank wire
before the order will be executed. The Funds do not accept third-party checks.
Payment for shares purchased through a financial institution will not be due
until settlement date, normally three business days after the order has been
executed.
51
<PAGE>
Shares are purchased at the NAV next calculated plus any applicable sales charge
after your investment is received. In some cases, a contingent deferred sales
charge is imposed on redemptions made within two years of purchase. The Funds
reserve the right to reject any purchase order.
Please indicate whether you would like the ability to buy, redeem or exchange
shares by telephone or wire when you complete your application.
SALES CHARGES
A Shares of the Funds are generally sold with a sales charge of up to 5.50%
(applied when your investment is made).
When you purchase A Shares of the Funds 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 A Shares of the Funds are as follows:
<TABLE>
<CAPTION>
EQUITY FUNDS
SALES CHARGE AS A % OF DEALER ALLOWANCE AS
AMOUNT OF PURCHASE SALES CHARGES NET AMOUNT INVESTED % OF OFFERING PRICE*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
$50,000 to $99,999 4.50 4.71 4.00
$100,000 to $249,999 3.50 3.63 3.25
$250,000 to $499,999 2.50 2.56 2.25
$500,000 to $999,999 2.00 2.04 1.75
$1,000,000 and over 0.00 0.00 1.00++
- -----------------------------------------------------------------------------------
<CAPTION>
CONVERTIBLE SECURITIES FUND, TAX-EXEMPT BOND FUND AND BOND FUND
SALES CHARGE AS A % OF DEALER ALLOWANCE AS
AMOUNT OF PURCHASE SALES CHARGES NET AMOUNT INVESTED % OF OFFERING PRICE*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.25%
$50,000 TO $99,999 4.25 4.43 4.00
$100,000 TO $249,999 3.50 3.63 3.25
$250,000 TO $499,999 2.50 2.56 2.25
$500,000 TO $999,999 2.00 2.04 1.75
$1,000,000 and over 0.00 0.00 1.00++
- -----------------------------------------------------------------------------------
52
<PAGE>
<CAPTION>
INTERMEDIATE TAX-EXEMPT BOND FUND, SHORT/INTERMEDIATE BOND FUND
AND INTERMEDIATE GOVERNMENT BOND FUND
SALES CHARGE AS A % OF DEALER ALLOWANCE AS
AMOUNT OF PURCHASE SALES CHARGES NET AMOUNT INVESTED % OF OFFERING PRICE*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.50% 3.63% 3.25%
$50,000 to $99,999 3.25 3.36 3.00
$100,000 to $249,999 2.50 2.56 2.25
$250,000 to $499,999 2.00 2.04 1.75
$500,000 to $999,999 1.50 1.52 1.25
$1,000,000 and over 0.00 0.00 1.00++
- -----------------------------------------------------------------------------------
</TABLE>
++The dealer allowance for these purchases is 1.00% on purchases of $1 million
to $2 million, 0.80% on the next $1 million, 0.50% on the next $47 million,
and 0.25% on purchases in excess of $50 million.
* Dealers receive the following allowances for aggregate purchases in any
twelve-month period by a qualified employee benefit plan, including
employer-sponsored 401(k), 403(b), or other qualified retirement plans,
provided that the plan sponsor demonstrates at the time of the initial
purchase of shares that there are at least 75 eligible employees or that the
plan has assets of at least $500,000: 1.00% on purchases up to $2 million,
0.80% on the next $1 million, 0.50% on the next $47 million, and 0.25% on
purchases in excess of $50 million. The twelve-month period commences on the
plan's initial purchase date and is reset on each anniversary thereof.
No sales charge is assessed on purchases of $1 million or more, nor on purchases
by:
o Any bank, trust company, or other institution acting on behalf of a fiduciary
customer account or any other trust account (including plans under Section
401 of the Internal Revenue Code)
o Registered representatives and employees of broker-dealers having
selling-group agreements with the distributor for the Funds relating to the
Funds, and any trust, pension, profit-sharing, or other benefit plan
sponsored by such a broker-dealer for its representatives and employees
o Any individual with an investment account or advisory relationship with HIM
o Trustees of the Funds.
REDUCED SALES CHARGES
You may be eligible to buy A Shares with a reduced sales charge in three ways,
but these purchases may be subject to a contingent deferred sales charge,
described below -
o RIGHT OF ACCUMULATION Allows you to include your existing investments in A
Shares of the Funds as part of your current investment for purposes of
calculating sales charges.
o LETTER OF INTENT Allows you to count all investments in A Shares of the Funds
over the next thirteen months as if you were making them all at once for
purposes of calculating sales charges.
o FAMILY PURCHASES Allows purchases by family members over a thirteen-month
period to be combined as if they were made at the same time for purposes of
calculating sales charges. ("Family" includes any person considered to be a
part of an extended family, including but not limited to parents,
grandparents, children, grandchildren, god-parents, in-laws, aunts, uncles,
brothers, sisters, nephews, nieces, and cousins, including step- and adopted
relatives.)
53
<PAGE>
To qualify for a reduced sales charge, you must notify and provide sufficient
information to the Funds at the time of purchase. If you invest through an
institution, you should notify the institution which, in turn, must notify the
Funds. Programs that allow for reduced sales charges may be changed or
eliminated at any time.
CONTINGENT DEFERRED SALES CHARGE
A Shares of a Fund that are redeemed within two years after purchase will be
subject to a contingent deferred sales charge (CDSC) when no initial sales
charge was assessed on their purchases because they were purchased:
o in a transaction involving at least $1,000,000, or
o pursuant to the right of accumulation, a letter of intent, or a family
purchase.
The amount of the CDSC and the period for which it applies are as follows:
CDSC AS A % OF DOLLAR AMOUNT
PERIOD SHARES HELD SUBJECT TO CHARGE
Less than one year 1.00%
One to two years 0.50
The CDSC, which will be used to recover commissions paid to institutions, will
be assessed on an amount equal to the lesser of the cost of the shares being
redeemed and the net asset value of the shares at the time of redemption.
No CDSC will be imposed on
o increases in net asset value above the initial purchase price
o redemptions of shares acquired through the reinvestment of dividends and
distributions
o involuntary redemptions by a Fund of shareholder accounts with low account
balances.
Redemptions of shares will be effected in the manner that results in the
imposition of the lowest CDSC. Redemptions will be made -
o First, from A Shares held for more than two years
o Second, from A Shares acquired through the reinvestment of dividends and
distributions
o Third, from A Shares held between one and two years
o Fourth, from A Shares held for less than one year.
The imposition of a CDSC on shares purchased through an exchange from A Shares
of another Fund is based upon the original purchase date and price of the other
Fund's shares.
The CDSC will be waived by the Funds for redemptions -
o pursuant to a systematic withdrawal plan
o that are shown to have resulted from the death or disability of the
accountholder
54
<PAGE>
o by qualified retirement plans upon plan termination or dissolution
o from IRAs, if made pursuant to death or disability of the accountholder, or
for minimum distributions required after attaining age 70 1/2.
AUTOMATIC INVESTMENT PLAN: A CONVENIENT OPTION
Through automatic investing, you can invest equal amounts of money on a regular
basis.
At the time you open your account or any time afterward, you can elect Harris
Insight Funds' Automatic Investment Plan by so indicating on the Harris Insight
Funds New Account Application. The Plan lets you invest as little as $50 a month
in the Fund of your choice through electronic withdrawals from your checking or
savings account. (If your checking or savings account does not have sufficient
assets to permit the Automatic Investment in any month, your participation in
the Plan will cease and a new application will be needed to reinstate your
Plan.)
CHOOSE YOUR INVESTMENT AMOUNT
The Harris Insight Funds offer a flexible range of minimum investment amounts to
initiate or add to your investment program.
MINIMUM
PER FUND
To open a regular account..............................................$1,000
To open a retirement account.............................................$250
To open an account using the Automatic Investment Plan....................$50
To add to an existing account.............................................$50
MORE ABOUT BUYING SHARES
MULTIPLE OWNERS
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 authorize any transactions in the account.
TAXPAYER IDENTIFICATION
You must certify whether you are subject to withholding for failing to report
income to the Internal Revenue Service. Investments received without a certified
taxpayer identification number may be returned.
55
<PAGE>
- --------------------------------------------------------------------------------
HOURS OF OPERATION
The Funds are open for business each day the New York Stock Exchange (NYSE)
and the Federal Reserve Bank of Philadelphia are open for business. The Funds
are closed for business on:
- --------------------------------------------------------------------------------
New Year's Day Memorial Day Veterans' Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
Presidents' Day Labor Day Christmas Day
Good Friday Columbus Day
- --------------------------------------------------------------------------------
You may call 800.982.8782 to speak with a Fund representative Monday through
Friday from 8:00 a.m. to 5:00 p.m., Central time.
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
ACCESSING YOUR MONEY IS EASY
You may sell or redeem some or all of your shares when the Funds are open for
business by doing one of the following.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
BY MAIL AND BY TELEPHONE BY TELEPHONE AND THROUGH FINANCIAL
CHECK AND CHECK BANK WIRE INSTITUTION/PROFESSIONAL
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
You may sell shares by If you have chosen If you have chosen Contact your financial
writing the Funds at: the telephone the wire redemption institution or
Harris Insight Funds redemption privilege, privilege, you may professional for more
c/o PFPC Inc. you may call call 800.625.7073, information.
P.O. Box 8952 800.625.7073, during during business
Wilmington, DE business hours, to sell hours, to sell your Important note: Each
19899-8952. your shares. shares and have your institution or
proceeds wired to a professional may have
A check for your A check for your pre-designated bank its own procedures
proceeds will be proceeds will be account. and requirements
mailed to you. mailed to you. for selling shares
and may charge fees.
- -------------------------------------------------------------------------------------------------
</TABLE>
A redemption request should be accompanied by your account number, the exact
name(s) on your account and your social security or taxpayer identification
number. Some redemption requests require a signature guarantee. (See page 57 for
more information.)
The Funds reserve the right to pay redemptions "in kind" - payment in portfolio
securities rather than cash if the amount you are redeeming is large enough to
affect a Fund's operations (limited to amounts more than $250,000 or
representing more than 1% of the Fund's assets). In these cases, you might incur
brokerage costs in converting the securities to cash.
56
<PAGE>
MORE ABOUT REDEMPTIONS
WHEN ORDERS ARE PROCESSED
Your shares will be sold at the NAV next calculated after your order is accepted
by the Funds' transfer agent in good order. Your order will be processed and a
check for the proceeds will be mailed to you promptly. Payment by wire will
generally be sent the following business day.
Please note that proceeds for redemption requests made shortly after a recent
purchase by check will be distributed only after the check clears, which may
take up to 15 days.
Under unusual circumstances, the Funds may suspend redemptions, if allowed by
the Securities and Exchange Commission, or postpone payment.
MINIMUM AMOUNT REQUIRED FOR WIRE SALES
The minimum amount of redemption proceeds that may be wired is $1,000.
Otherwise, a check for redemption proceeds is mailed to your address of record.
The Funds reserve the right to change this minimum or to terminate the
privilege.
SYSTEMATIC WITHDRAWAL PLAN (NOT AVAILABLE FOR IRAS OR OTHER RETIREMENT ACCOUNTS)
You may enroll in the Systematic Withdrawal Plan (SWP) by so indicating on the
Harris Insight Funds New Account Application. Using the SWP, you may redeem a
specific dollar amount (not less than $100) from your Harris Insight Funds
account each month, quarter, six months or year.
To enroll in the SWP, you must meet the following conditions:
o you must have elected to reinvest your Fund dividends,
o your shares of the Fund from which you want shares redeemed must have a value
of at least $10,000 at the time of each withdrawal, and
o your shares must not be subject to the Contingent Deferred Sales Load that
applies to certain purchases of A Shares.
Plan redemptions are normally processed on the 25th day of the applicable month
(or on the next Business Day if the normal processing day is not a Business Day)
and are paid promptly thereafter. You should know that, if your SWP withdrawals
are greater than the amount of dividends from your Fund, the withdrawals reduce
the principal invested. (If your Fund account does not have a sufficient balance
to permit a Systematic Withdrawal, your participation in the SWP will cease and
a new application will be needed to reinstate your Plan.)
SIGNATURE GUARANTEES
The Funds require signature guarantees on certain redemption requests to protect
you and the Funds from unauthorized account transfers. A signature guarantee is
required when a redemption check is -
57
<PAGE>
o To be payable to anyone other than the shareholder(s) of record
o To be mailed to an address other than the address of record
o To be wired to a bank other than one previously authorized.
Signature guarantees may be obtained from a domestic bank or trust company,
broker, dealer, clearing agency or savings association that participates in a
medallion program recognized by the Securities Transfer Association.
REDEMPTION OF SHARES IN SMALLER ACCOUNTS
Each Fund reserves the right to close a shareholder's account and mail the
proceeds to the shareholder if the value of the account is reduced below $500
($250 in the case of a retirement account), unless the reduction is due to
market activity. However, the shareholder will first be notified in writing and
permitted 30 days to increase the balance.
ADDITIONAL SHAREHOLDER SERVICES AND INFORMATION
EXCHANGING SHARES
You may exchange your A Shares of a Fund for A Shares of any other Harris
Insight Fund or for N Shares of any Harris Insight Money Market Fund without a
sales charge, provided that:
o Your A Shares have been held for at least seven days,
o Your account registration stays the same, and
o The shares you wish to buy are registered for sale in your home state.
Any N Shares of a Harris Insight Money Market Fund that you obtain by an
exchange of A Shares of another Fund may in turn be exchanged for and invested
in A Shares of any Fund without a sales charge. A sales charge will apply to
exchanges of N Shares from a Harris Insight Money Market Fund if those Shares
(a) were not purchased through a previous exchange from A Shares of a Fund or
(b) are attributable to dividends and interest earned on Harris Insight Money
Market Funds N Shares.
The Harris Insight Money Market Funds N Shares are offered by a separate
prospectus.
Each Fund reserves the right to terminate temporarily or permanently the
exchange privilege of any investor who makes more than four exchanges out of a
Fund in a calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted together
for purposes of the four-exchange limit. The exchange limit may be modified for
accounts in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials for further
information.
Each Fund reserves the right to refuse an exchange by any person or group if, in
Harris Trust's judgment, the Fund to be purchased might be unable to invest the
58
<PAGE>
money effectively in accordance with its investment objective and policies or
might otherwise be adversely affected. Also, each Fund reserves the right to
modify or discontinue the exchange privilege for any reason, upon 60 days'
written notice.
The procedures that apply to redeeming shares also apply to exchanging shares.
DIRECTED DIVIDEND PLAN (DDP)
You may direct your dividends and/or distributions from one Harris Insight Fund
to be invested automatically in another Harris Insight Fund without any fee or
sales charge, provided that both Funds are in the same share class (except for
directing dividends between A Shares and N Shares of the Money Market Funds and
Index Fund) and have identical ownership registration. To use the DDP, you must
maintain a balance of at least $1,000 in the Fund account from which dividends
are paid at the time each DDP payment is made. (If your Fund account does not
have a sufficient balance to permit a Directed Dividend payment, your
participation in the DDP will cease and a new application will be needed to
reinstate your Plan.)
TELEPHONE TRANSACTIONS
You may give up some level of security by choosing to buy or sell shares by
telephone rather than by mail. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine. If the Funds or their service
providers follow these procedures, they will not be liable for any losses
arising from unauthorized or fraudulent instructions and you may be responsible
for unauthorized requests.
Please verify the accuracy of instructions immediately upon receipt of
confirmation statements. You may bear the risk of loss from an unauthorized
telephone transaction.
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 Funds by telephone, requests may be mailed or hand-delivered
to the Funds c/o PFPC Inc., 103 Bellevue Parkway, Wilmington, DE 19809.
REGULAR REPORTS
Your investment will be easy to track. During the year, you will receive:
o An annual account statement
o A quarterly consolidated statement
o A confirmation statement, each time you buy, sell or exchange shares
o Annual and semi-annual reports to shareholders for each Fund in which you
invest.
For more information on any of Harris Insight Funds' shareholder services,
please call 800.982.8782.
59
<PAGE>
DIVIDENDS AND TAX CONSIDERATIONS
Dividends of net investment income, if any, are declared and paid at least
annually by each Fund. Following is the schedule of payments:
- -----------------------------------------------------------
FUND DECLARED AND PAID
- -----------------------------------------------------------
Balanced Fund Quarterly
- -----------------------------------------------------------
Equity Income Fund Quarterly
- -----------------------------------------------------------
Equity Fund Quarterly
- -----------------------------------------------------------
Growth Fund Annually
- -----------------------------------------------------------
Small-Cap Value Fund Annually
- -----------------------------------------------------------
Small-Cap Opportunity Fund Annually
- -----------------------------------------------------------
International Fund Annually
- -----------------------------------------------------------
Emerging Markets Fund Annually
- -----------------------------------------------------------
Convertible Securities Fund Quarterly
- -----------------------------------------------------------
Tax-Exempt Bond Fund Daily/Monthly
- -----------------------------------------------------------
Bond Fund Daily/Monthly
- -----------------------------------------------------------
Intermediate Tax-Exempt Bond Fund Daily/Monthly
- -----------------------------------------------------------
Short/Intermediate Bond Fund Daily/Monthly
- -----------------------------------------------------------
Intermediate Government Bond Fund Daily/Monthly
- -----------------------------------------------------------
Any capital gains are declared and paid at least annually.
All distributions may be invested in additional shares of the same Fund at NAV
and credited to your account on the ex-date, paid in cash on the payment date,
or invested in another Fund on the ex-date pursuant to the DDP. Distribution
checks and account statements will be mailed approximately two business days
after the payment date.
TAX CONSIDERATIONS
Following is a brief discussion of the general tax treatment of various
distributions from the Funds. It is not an exhaustive discussion, and your
particular tax status may be different. We encourage you to consult with your
own tax adviser about federal, state and local tax considerations.
The tax status of any distribution is the same regardless of how long you have
held shares of the Fund and whether you reinvest it in additional shares or take
it in cash:
60
<PAGE>
o All dividends paid, including net short-term capital gains (except
"EXEMPT-INTEREST DIVIDENDS") are taxable to you as ordinary income.
o Distributions of net long-term capital gains, if any, are taxable to you as
long-term capital gains regardless of how long you have held the shares.
o You may realize a taxable gain or loss when you sell shares or exchange
shares between Funds, depending on your tax basis in the shares and the value
of those shares at the time of the transaction.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. If a Fund pays
nonrefundable taxes to foreign governments during the year, the taxes will
reduce the Fund's dividends but will still be included in your taxable income.
However, you may be able to claim an offsetting credit or deduction on your tax
return for your share of foreign taxes paid by a Fund.
TERMS TO KNOW
EXEMPT-INTEREST DIVIDENDS
Dividends paid by tax-exempt funds that are exempt from federal income tax.
Exempt-interest dividends are not necessarily exempt from state and local income
taxes.
DISTRIBUTION ARRANGEMENTS
SERVICE PLAN
Under a service plan adopted under Rule 12b-1, each of the Funds bears the costs
and expenses connected with advertising and marketing A Shares and may pay the
fees of financial institutions, securities dealers and other industry
professionals (which may include Harris Trust and its affiliates) for
shareholder support services at a rate of up to 0.25% of the average daily net
asset value of each Fund's A Shares. Because these expenses are paid out of the
Fund's assets on an on-going basis, over time these expenses will increase the
cost of your investment and may cost you more than paying other types of sales
charges.
MULTIPLE CLASSES
Each Fund offers three classes of shares: N Shares, A Shares and Institutional
shares. The shares of each class are offered by a separate prospectus.
61
<PAGE>
MASTER FUND/FEEDER FUND STRUCTURE
The Board of Trustees has the authority to convert any Fund to a "feeder" fund
in a Master Fund/Feeder Fund Structure in which the Fund, instead of investing
in portfolio securities directly, would seek to achieve its investment objective
by investing all of its investable assets in a separate "master" fund having the
same investment objectives and substantially similar investment restrictions.
Other funds with similar objectives and restrictions could also invest in the
same Master Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs.
The SAI contains more information about the Funds, the Master Fund/Feeder Fund
Structure and the types of securities in which the Funds may invest.
62
<PAGE>
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63
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand a Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund A Share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in A Shares of each Fund, assuming
reinvestment of all dividends and distributions. This information has been
derived from the financial statements audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the Funds' financial
statements, is included in the Funds' annual report, which is available upon
request.
These financial highlights should be read with the financial statements.
<TABLE>
<CAPTION>
EQUITY
BALANCED INCOME EQUITY
FUND FUND FUND
02/10/99(3) 02/10/99(3) 02/12/99(3)
TO 12/31/99 TO 12/31/99 TO 12/31/99
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $14.14 $19.26 $16.97
----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.340 0.098 (0.002)
Net Realized and Unrealized Gain/(Loss) on Investments (0.305) 1.744 (0.275)
------ ----- ------
Total from Investment Operations 0.035 1.842 (0.277)
----- ----- ------
LESS DISTRIBUTIONS:
Net Investment Income (0.394) (0.124) (0.003)
Net Realized Gains (1.401) (0.578) (2.060)
------ ------ ------
Total Distributions (1.795) (0.702) (2.063)
------ ------ ------
Net Asset Value, End of Period $12.38 $20.40 $14.63
===== ===== =====
TOTAL RETURN 0.50%(2)(4) 9.66%(2)(4) (1.50)%(2)(4)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 84 437 161
Ratio of Expenses to Average Net Assets 1.21%(1) 1.24%(1) 1.23%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.38%(1) 1.30%(1) 1.24%(1)
Ratio of Net Investment Income to Average Net Assets 2.51%(1) 0.55%(1) (0.04%)(1)
Portfolio Turnover Rate 67.77% 18.57% 65.13%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
(4) Sales load is not reflected in total return.
64
<PAGE>
<CAPTION>
SMALL-CAP SMALL-CAP
GROWTH VALUE OPPORTUNITY
FUND FUND FUND
02/05/99(3) 08/18/99(3) 03/05/99(3)
TO 12/31/99 TO 12/31/99 TO 12/31/99
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $27.00 $29.09 $16.67
------ ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (0.073) 0.008 (0.092)
Net Realized and Unrealized Gain/(Loss) on Investments 3.420 1.368 8.177
------ ------ ------
Total from Investment Operations 3.347 1.376 8.085
------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income -- (0.051) --
Net Realized Gains (1.387) (0.135) (0.765)
------ ------ ------
Total Distributions (1.387) (0.186) (0.765)
------ ------ ------
Net Asset Value, End of Period $28.96 $30.28 $23.99
===== ===== =====
TOTAL RETURN 12.65%(2)(4) 4.77%(2)(4) 48.98%(2)(4)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 710 12 28
Ratio of Expenses to Average Net Assets 1.42%(1) 1.24%(1) 1.49%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.46%(1) 1.29%(1) 1.50%(1)
Ratio of Net Investment Income to Average Net Assets (0.48%)(1) 0.12%(1) (0.79%)(1)
Portfolio Turnover Rate 35.11% 70.84% 59.99%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
(4) Sales load is not reflected in total return.
65
<PAGE>
<CAPTION>
SHORT/ INTERMEDIATE
EMERGING INTERMEDIATE GOVERNMENT
INTERNATIONAL MARKETS BOND BOND BOND
FUND FUND FUND FUND FUND
03/05/99(3) 08/12/99(3) 02/18/99(3) 07/22/99(3) 02/12/99(3)
TO 12/31/99 TO 12/31/99 TO 12/31/99 TO 12/31/99 TO 12/31/99
Net Asset Value, Beginning of Period $11.90 $7.47 $10.11 $10.02 $16.44
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (0.009) (0.024) 0.503 0.258 0.761
Net Realized and Unrealized Gain/(Loss) on Investments 4.022 2.150 (0.612) (0.250) (0.880)
----- ----- ----- ----- -----
Total from Investment Operations 4.013 2.126 (0.109) 0.008 (0.119)
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Net Investment Income (0.023) (0.016) (0.503) (0.258) (0.761)
Net Realized Gains -- -- (0.008) -- --
----- ----- ----- ----- -----
Total Distributions (0.023) (0.016) (0.511) (0.258) (0.761)
----- ----- ----- ----- -----
Net Asset Value, End of Period $15.89 $9.58 $9.49 $9.77 $15.56
===== ===== ===== ===== =====
TOTAL RETURN 33.73%(2)(4) 28.48%(2)(4) (1.09)%(2)(4) 0.09%(2)(4) (0.72)%(2)(4)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 5 5 26 140 232
Ratio of Expenses to Average Net Assets 1.65%(1) 1.95%(1) 0.85%(1) 0.85%(1) 0.75%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.65%(1) 2.01%(1) 1.15%(1) 1.17%(1) 1.18%(1)
Ratio of Net Investment Income to Average Net Assets (0.56%)(1) (0.42%)(1) 5.95%(1) 5.68%(1) 5.47%(1)
Portfolio Turnover Rate 48.49% 53.69% 92.79% 72.86% 76.50%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
(4) Sales load is not reflected in total return.
66 67
</TABLE>
<PAGE>
FOR MORE INFORMATION
More information on the Harris Insight Funds is available free upon request:
SHAREHOLDER REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected a Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about each Fund and its policies. The SAI is on
file with the Securities and Exchange Commission (Commission) and is
incorporated by reference into (i.e., is legally considered part of) this
prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 800.982.8782
BY MAIL
Harris Insight Funds
3200 Horizon Drive
King of Prussia, PA 19406
ON THE INTERNET
Text-only versions of the prospectus and other documents pertaining to the Funds
can be viewed online or downloaded from:
HARRIS INSIGHT FUNDS
http://www.harrisinsight.com
Information about the Funds (including the SAI) can be reviewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 202.942.8090. Reports and other information about the Funds are available on
the EDGAR Database on the Commission's Internet site at http://www.sec.gov.
Copies of information about the Funds may be obtained, after paying a
duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing to the Commission's Public Reference Section,
Washington, D.C. 20549-0102
The Funds are series of Harris Insight Funds Trust,
whose investment company registration number is 811-7447.
HIF 1000 5/00
<PAGE>
HARRIS
INSIGHT(R) FUNDS
N Shares
MAY 1, 2000 PROSPECTUS
HARRIS INSIGHT EQUITY FUNDS
Balanced Fund
Index Fund
Equity Income Fund
Equity Fund
Growth Fund
Small-Cap Value Fund
Small-Cap Opportunity Fund
International Fund
Emerging Markets Fund
HARRIS INSIGHT FIXED INCOME FUNDS
Convertible Securities Fund
Tax-Exempt Bond Fund
Bond Fund
Intermediate Tax-Exempt Bond Fund
Short/Intermediate Bond Fund
Intermediate Government Bond Fund
HARRIS INSIGHT MONEY MARKET FUNDS
Tax-Exempt Money Market Fund
Money Market Fund
Government Money Market Fund
AS WITH ANY MUTUAL FUND, THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER THIS
PROSPECTUS IS ADEQUATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]
HARRIS
INSIGHT(R) FUNDS
<PAGE>
TABLE OF CONTENTS
INTRODUCTION TO EQUITY FUNDS PAGE 2
Harris Insight Equity Funds
Balanced Fund 4
Index Fund 6
Equity Income Fund 8
Equity Fund 10
Growth Fund 12
Small-Cap Value Fund 14
Small-Cap Opportunity Fund 16
International Fund 18
Emerging Markets Fund 20
Risk Considerations 22
Fees and Expenses 26
INTRODUCTION TO FIXED INCOME FUNDS 28
Harris Insight Fixed Income Funds
Convertible Securities Fund 30
Tax-Exempt Bond Fund 32
Bond Fund 34
Intermediate Tax-Exempt Bond Fund 36
Short/Intermediate Bond Fund 38
Intermediate Government Bond Fund 40
Risk Considerations 42
Fees and Expenses 44
INTRODUCTION TO MONEY MARKET FUNDS 46
Harris Insight Money Market Funds
Tax-Exempt Money Market Fund 48
Money Market Fund 50
Government Money Market Fund 52
Risk Considerations 54
Fees and Expenses 56
INVESTMENT ADVISER 58
PORTFOLIO MANAGERS 61
PRICING OF FUND SHARES 64
SHAREHOLDER SERVICES 65
DIVIDENDS AND TAX CONSIDERATIONS 72
DISTRIBUTION ARRANGEMENTS 74
MASTER FUND/FEEDER FUND STRUCTURE 74
FINANCIAL HIGHLIGHTS 76
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT EQUITY FUNDS
The Harris Insight Equity Funds invest in stocks, which represent partial
ownership in a company. These Funds generally pursue capital appreciation: that
is, an increase in the Fund's share value. In some cases, the Harris Insight
Equity Funds also seek dividend income.
Equity funds' share prices will fluctuate with changes in the market and
economy as well as with the fortunes of the companies issuing the underlying
stocks. For this reason, equity fund share prices can sometimes be more volatile
than the share prices of other types of funds, exhibiting sharp increases or
decreases over relatively short periods of time.
WHY INVEST IN EQUITY FUNDS?
Equity funds offer investors the potential for greater returns than fixed income
funds and are considered an attractive choice for outpacing inflation over the
long term. Equity funds are more appropriate for investors who can tolerate a
higher degree of risk in exchange for an opportunity to pursue attractive
long-term investment rewards.
2
<PAGE>
................................................................................
Shares of the Harris Insight Equity Funds are not bank deposits and are not
insured or guaranteed by the FDIC or any other government agency. The value of
your investment in a Fund will fluctuate, which means that you may lose money.
Each Fund's primary investment practices and strategies are discussed in this
prospectus. Other practices, and their related risks, are described in the
Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be changed by
the Board of Trustees without approval by the Fund's shareholders.
Each Fund's principal risks are provided in an alphabetical listing within the
Fund description that follows. These risks are discussed in detail under "Risk
Considerations" on page 22.
................................................................................
3
<PAGE>
HARRIS INSIGHT EQUITY FUNDS
BALANCED FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide current income and capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests in a portfolio of equity and fixed income securities. Under
normal market conditions, equity securities will comprise between 40% and 65% of
the Fund's assets, and fixed income securities will comprise at least 25% of the
Fund's assets.
The portfolio manager continually reviews and adjusts the blend of the
securities in an effort to enhance returns based on current market conditions,
interest rate projections and other economic factors.
The Fund seeks to provide an overall return comprising between 40% and 65% of
the return of the STANDARD & POOR'S 500 STOCK INDEX and between 35% and 60% of
the return of the LEHMAN BROTHERS AGGREGATE BOND INDEX.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Allocation risk
o Interest rate risk
o Market risk
TERMS TO KNOW
STANDARD & POOR'S
500 STOCK INDEX (S&P 500(R))
An unmanaged index consisting of 500 widely held U.S. common stocks. The stocks
in the index are chosen based on industry representation, liquidity and
stability. The index is designed to reflect the returns of many different
sectors of the U.S. economy.
LEHMAN BROTHERS
AGGREGATE BOND INDEX
An index measuring the total return of approximately 6,500 U.S. bonds.
4
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1998 1999
8.29% -1.52%
Best Quarter: Q4 1998 8.21%
Worst Quarter: Q3 1998 -6.35%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Inception
Year (4/16/97)
Balanced Fund -1.52% 10.08%
S&P 500 Stock
Index 21.04% 29.63%
Lehman Brothers
Aggregate Bond
Index -0.82% 6.58%
5
<PAGE>
INDEX FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide the return and risk characteristics of the S&P 500.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally holds at least 90% of the 500 securities in the S&P 500 and
attempts to match its holdings of each issue with that security's proportional
representation in the S&P 500.
The portfolio manager employs a "passively" managed - or index - investment
approach that attempts to replicate the performance of the index without
necessarily investing in all of its stocks. This approach is unlike traditional
methods of active investment management whereby securities are selected on the
basis of economic, financial and market analysis. The Fund seeks a quarterly
performance within one percentage point of the performance of the S&P 500. On a
regular basis, the portfolio manager compares the Fund's performance to that of
the S&P 500. The portfolio manager may adjust the Fund's holdings if the Fund's
performance does not adequately track the performance of the S&P 500.
Apart from its equity investments, the Fund may use S&P 500 STOCK INDEX FUTURES
CONTRACTS to reduce transactional costs and simulate full investment in the S&P
500 while retaining a cash balance for portfolio management purposes.
WHAT IS THE FUND'S PRINCIPAL RISK?
(See Risk Considerations, page 22.)
o Market risk
TERMS TO KNOW
S&P 500 STOCK INDEX FUTURES CONTRACTS
Agreements whereby one party agrees to accept, and the other party agrees to
deliver, a dollar amount based on the value of the S&P 500 on a specified future
date. Purchasers of index futures contracts may participate in the performance
of the securities included in the index without committing the full amount of
capital required to purchase all of the individual securities.
6
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1993 1994 1995 1996 1997 1998 1999
9.23% 0.53% 36.62% 22.47% 32.51% 27.88% 20.14%
Best Quarter: Q4 1998 21.17%
Worst Quarter: Q3 1998 -10.03%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 Inception
Year Years (4/1/92)
Index Fund 20.14% 27.78% 19.70%
S&P 500
Stock Index 21.04% 28.56% 20.88%
* The Fund is the successor to a collective or common investment fund managed
by Harris Trust and Savings Bank (Harris Trust) with investment objectives
and policies that were, in all material respects, equivalent to those of
the Fund. The performance of the Fund includes the performance of the
predecessor fund for periods before it became a mutual fund. The
predecessor fund's performance was adjusted to reflect the Fund's estimate
of its expense ratio for the first year of operation as a mutual fund,
including any applicable sales load. The predecessor fund was not
registered under the Investment Company Act of 1940 nor was it subject to
certain investment limitations, diversification requirements, and other
restrictions imposed by the Act and the Internal Revenue Code, which, if
applicable, may have adversely affected the performance results.
7
<PAGE>
EQUITY INCOME FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide current income and, secondarily, capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in common stocks that can
be found in the S&P 500 or other attractive issues. These stocks are of larger
capitalization companies (i.e., companies with MARKET CAPITALIZATION in excess
of $1 billion).
The portfolio manager's approach should produce returns that are similar to
those of the S&P 500 and its corresponding sectors, yet with a higher level of
income. The portfolio manager utilizes a disciplined investment process designed
to maintain a diversified portfolio of the equity securities of higher quality
companies.
The portfolio manager seeks securities with:
o Higher-than-average dividend yields
o Stronger-than-average growth characteristics
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Market risk
o Market segment risk
TERMS TO KNOW
MARKET CAPITALIZATION
The total market value of a company's outstanding shares of common stock,
calculated by multiplying the number of shares outstanding by the current market
price of the shares.
8
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1994 1995 1996 1997 1998 1999
- -0.66% 36.50% 17.62% 31.53% 22.66% 9.68%
Best Quarter: Q4 1998 19.62%
Worst Quarter: Q3 1998 -11.12%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 Inception
Year Years (1/1/94)
Equity
Income Fund 9.68% 23.22% 18.87%
S&P 500
Stock Index 21.04% 28.56% 23.54%
* The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
9
<PAGE>
EQUITY FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation and current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in common stocks. These
stocks are of larger capitalization companies (i.e., companies with MARKET
CAPITALIZATION in excess of $1 billion).
The portfolio manager selects stocks that represent sectors found within the S&P
500 in an effort to:
o Provide greater returns, over the long-term, than the securities comprising
the S&P 500
o Maintain a risk level approximating that of the S&P 500
The Fund's portfolio consists of approximately 50 to 75 stocks, diversified
among major sectors of the market.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Market risk
o Market segment risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 8.
10
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -7.87% 27.29% 8.19% 18.23% -2.05% 36.26% 24.15% 35.45% 13.42% -1.74%
</TABLE>
Best Quarter: Q4 1998 18.66%
Worst Quarter: Q3 1998 -14.52%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Year 5 Years 10 Years
Equity Fund -1.74% 20.62% 14.14%
S&P 500
Stock Index 21.04% 28.56% 18.20%
11
<PAGE>
GROWTH FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in common stocks. These
stocks are of larger capitalization companies (i.e., companies with MARKET
CAPITALIZATION in excess of $1 billion).
The portfolio manager selects securities that are considered to be undervalued
and to represent growth opportunities. The Fund's investment management
discipline emphasizes growth in sales, earnings and asset values.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Market risk
o Market segment risk
o Volatility risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 8.
12
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1993 1994 1995 1996 1997 1998 1999
5.96% -0.30% 36.16% 28.60% 32.54% 24.68% 16.22%
Best Quarter: Q4 1998 22.65%
Worst Quarter: Q3 1998 -11.95%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 Inception
Year Years (4/1/92)
Growth Fund 16.22% 27.45% 19.16%
S&P 500
Stock Index 21.04% 28.56% 20.88%
* The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of
1940 nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
13
<PAGE>
SMALL-CAP VALUE FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in the securities of
smaller capitalization companies (i.e., companies that fall in the lowest 15% of
publicly traded companies listed in the U.S. determined by MARKET
CAPITALIZATION). These securities tend to be represented in the Russell 2000
Index, an index of companies with a median market capitalization of $428
million, that is a popular measure of the stock price performance of small
companies.
Using a "value" approach, the portfolio manager buys those securities considered
to be conservatively valued relative to the securities of comparable companies.
The portfolio manager pays particular attention to a company's current and
forecasted earnings levels.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Market risk
o Small company risk
o Volatility risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 8.
14
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -16.52% 41.39% 15.95% 14.68% -3.44% 26.78% 14.50% 29.09% -4.15% 0.22%
</TABLE>
Best Quarter: Q1 1991 20.93%
Worst Quarter: Q3 1990 -23.80%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Small-Cap
Value Fund 0.22% 12.53% 10.59%
Russell 2000
Small Stock
Index 21.26% 16.69% 13.40%
Russell 2000
Value
Index ** -1.49% 13.14% 12.45%
* The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of
1940 nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
** The Fund's primary benchmark is now the Russell 2000 Value Index - a
small-cap value index comprised of stocks in the Russell 2000 Small Stock
Index that have a lower price-to-book ratio and/or forecasted earnings
growth. This index better reflects the investment objectives and policies
of the Fund.
15
<PAGE>
SMALL-CAP OPPORTUNITY FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in the securities of
smaller capitalization companies (i.e., companies that fall in the lowest 15% of
publicly traded companies listed in the U.S. determined by MARKET
CAPITALIZATION). These securities tend to be represented in the Russell 2000
Index, an index of companies with a median market capitalization of $428
million, that is a popular measure of the stock price performance of small
companies.
The Fund invests in the securities of companies that the portfolio manager
believes have superior growth potential. In selecting securities, the portfolio
manager pays particular attention to companies offering potentially
above-average earnings, sales and asset value growth. The portfolio manager buys
those securities considered to be attractively valued relative to the securities
of comparable companies.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Market risk
o Small company risk
o Volatility risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 8.
16
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -11.79% 47.29% 18.71% 14.85% -3.96% 25.99% 18.53% 25.14% 0.99% 39.75%
</TABLE>
Best Quarter: Q4 1999 28.14%
Worst Quarter: Q3 1990 -23.83%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Small-Cap
Opportunity
Fund 39.75% 21.41% 16.20%
Russell 2000
Small Stock
Index 21.26% 16.69% 13.40%
* The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of
1940 nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
17
<PAGE>
INTERNATIONAL FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation. Current income is a secondary
objective.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in non-U.S. equity
securities. The Fund invests in at least three foreign countries to reduce risk.
The Fund invests in securities that the portfolio manager believes are
undervalued. When selecting securities, the portfolio manager pays particular
attention to the quality of a company's management, its growth prospects and
financial soundness.
The Fund may engage in foreign currency hedging transactions in an attempt to
minimize the effects of currency fluctuations on the Fund.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Currency rate risk
o Foreign securities risk
o Geographic concentration risk
o Market risk
o Volatility risk
18
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -22.40% 11.77% -4.60% 24.36% 4.11% 3.87% 4.89% -5.21% -4.84% 26.81%
</TABLE>
Best Quarter: Q2 1999 14.50%
Worst Quarter: Q3 1990 -19.83%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
International
Fund 26.81% 4.50% 2.93%
MSCI EAFE
Index 25.27% 11.13% 5.32%
* The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of
1940 nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
19
<PAGE>
EMERGING MARKETS FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in equity securities of
issuers located in EMERGING MARKET COUNTRIES. The portfolio manager selects
securities it considers to be undervalued.
The Fund's investments reflect a broad cross-section of countries, industries
and companies.
When selecting securities, the portfolio manager pays particular attention to
the quality of a company's management, its growth prospects and financial
soundness.
The portfolio manager also evaluates such criteria as:
o Political climate of a country
o Interest rate and currency considerations
o Equity market valuations
The Fund may invest in certain debt securities when the portfolio manager
believes their potential for appreciation equals or exceeds that available from
investments in common stock.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Currency rate risk
o Foreign securities risk
o Geographic concentration risk
o Market risk
o Volatility risk
TERMS TO KNOW
EMERGING MARKET COUNTRY
The World Bank and other international agencies define a developing country on
the basis of such factors as trade initiatives, per capita income and level of
industrialization. There are over 130 countries that are emerging or developing
under this standard and approximately 40 of these countries have stock markets.
Emerging market countries generally include every nation in the world except the
U.S., Canada, Japan, Australia, New Zealand and most nations located in Western
Europe.
20
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1998 1999
- -31.50% 64.06%
Best Quarter: Q4 1999 32.38%
Worst Quarter: Q2 1998 -27.18%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year (10/21/97)
Emerging Markets
Fund 64.06% -1.85%
MSCI Emerging
Markets Index 63.70% 8.41%
21
<PAGE>
RISK CONSIDERATIONS - EQUITY FUNDS
The risks of investing in the various Funds are illustrated in the chart below.
A Fund's principal risks are designated by the ^ symbol.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUNDS Equity Small-Cap Small-Cap Emerging
RISKS Balanced Index Income Equity Growth Value Opportunity International Markets
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Allocation ^
- -------------------------------------------------------------------------------------------------------------------
Counterparty o o o o o o o o o
- -------------------------------------------------------------------------------------------------------------------
Credit o o o
- -------------------------------------------------------------------------------------------------------------------
Currency rate o ^ ^
- -------------------------------------------------------------------------------------------------------------------
Foreign
securities o o o o o o ^ ^
- -------------------------------------------------------------------------------------------------------------------
Geographic
concentration ^ ^
- -------------------------------------------------------------------------------------------------------------------
Interest rate ^ o o o
- -------------------------------------------------------------------------------------------------------------------
Leverage o o o o o o o o o
- -------------------------------------------------------------------------------------------------------------------
Market ^ ^ ^ ^ ^ ^ ^ ^ ^
- -------------------------------------------------------------------------------------------------------------------
Market
segment o ^ ^ ^ o o
- -------------------------------------------------------------------------------------------------------------------
Prepayment o o o
- -------------------------------------------------------------------------------------------------------------------
Small company ^ ^ o o
- -------------------------------------------------------------------------------------------------------------------
Volatility o ^ ^ ^ ^ ^
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
ALLOCATION RISK
The risk that the percentages of the fund's assets invested in equities and
fixed income securities, respectively, will not be optimum for market conditions
at a given time.
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
22
<PAGE>
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
CURRENCY RATE RISK
The risk that fluctuations in the exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Although a fund may
engage in foreign currency hedge transactions to help reduce this risk, those
transactions may not be effective or appropriate in particular situations nor,
of course, will they protect against declines in security values.
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S.; more volatile markets; less securities regulation; less
favorable tax provisions; war or expropriation.
GEOGRAPHIC CONCENTRATION RISK
The risk that, if a fund concentrates its investments in a single country or
region, its portfolio will be more susceptible to factors adversely affecting
issuers located in that country or region than would a more geographically
diverse portfolio of securities.
INTEREST RATE RISK
The risk that changing interest rates may adversely affect the value of an
investment. With fixed-rate securities, an increase in prevailing interest rates
typically causes the value of those securities to fall, while a decline in
prevailing interest rates generally produces an increase in the market value of
the securities. Changes in interest rates will affect the value of longer-term
fixed income securities more than shorter-term securities and lower quality
securities more than higher quality securities.
LEVERAGE RISK
The risk that downward price changes in a security may result in a loss greater
than a fund's investment in the security. This risk exists through the use of
certain securities or techniques (e.g., derivative securities or purchases on
margin) that tend to magnify changes in an index or market.
23
<PAGE>
MARKET RISK
The risk that the market value of a fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or it may affect the market as a whole.
MARKET SEGMENT RISK
The risk that investments concentrated in one portion of the market (e.g., large
capitalization stocks or short-term government bonds) will underperform the
overall market.
PREPAYMENT RISK
The risk that issuers will prepay fixed rate obligations when interest rates
fall, forcing a fund to re-invest in obligations with lower interest rates than
the original obligations.
SMALL COMPANY RISK
The risk that investments in smaller companies may be more volatile than
investments in larger companies, as smaller companies generally experience
higher growth and failure rates. The trading volume of small-company securities
is normally lower than that of larger companies. Changes in the demand for the
securities of smaller companies generally have a disproportionate effect on
their market price, tending to make prices rise more in response to buying
demand and fall more in response to selling pressure.
VOLATILITY RISK
The risk that performance will be affected by unanticipated events (e.g.,
significant earnings shortfalls or gains, war, or political events) that cause
major price changes in individual securities or market sectors.
24
<PAGE>
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25
<PAGE>
FEES AND EXPENSES - EQUITY FUNDS
The tables below describe the fees and expenses that you will pay if you buy
and hold shares of the Harris Insight Equity Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
REDEMPTION FEE None
EXCHANGE FEE None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Equity Small-Cap Small-Cap Emerging
Balanced Index Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Advisory Fees1 0.60% 0.25% 0.70% 0.70% 0.90% 0.80% 1.00% 1.05% 1.25%
Shareholder
Servicing Fees 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
Other Expenses1 0.45 0.21 0.29 0.21 0.24 0.24 0.21 0.30 0.51
- -------------------------------------------------------------------------------------------------------------------
Total Operating
Expenses1 1.30% 0.71% 1.24% 1.16% 1.39% 1.29% 1.46% 1.60% 2.01%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Expenses are based on amounts incurred by the Funds during their most
recent fiscal year but do not reflect waivers of advisory fees by Harris
Trust and sub-administration fees by PFPC Inc. After these waivers, actual
Fund advisory fees, Other Expenses and Total Operating Expenses for the
fiscal year ended December 31, 1999 were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Equity Small-Cap Small-Cap Emerging
Balanced Index Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Advisory Fees 0.45% 0.24% 0.65% 0.70% 0.87% 0.75% 0.99% 1.05% 1.23%
Other Expenses 0.43 0.21 0.28 0.20 0.23 0.24 0.21 0.30 0.47
Total Operating
Expenses 1.13% 0.70% 1.18% 1.15% 1.35% 1.24% 1.45% 1.60% 1.95%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
26
<PAGE>
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Equity Funds to the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in a Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Equity Small-Cap Small-Cap Emerging
Balanced Index Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One Year $132 $73 $126 $118 $142 $131 $149 $163 $204
- -------------------------------------------------------------------------------------------------------------------
Three Years 412 227 393 368 440 409 462 505 630
- -------------------------------------------------------------------------------------------------------------------
Five Years 713 395 681 638 761 708 797 871 1,083
- -------------------------------------------------------------------------------------------------------------------
Ten Years 1,568 883 1,500 1,409 1,669 1,556 1,746 1,900 2,338
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT FIXED INCOME FUNDS
The Harris Insight Fixed Income Funds invest primarily in bonds, which are debt
instruments that normally -
o Pay a set amount of interest on a regular basis
o Repay the face amount, or principal, at a stated future date
o Are issued by domestic and foreign corporations,
federal and state governments, and their agencies
WHY INVEST IN FIXED INCOME FUNDS?
Fixed income funds can play a key role in an investor's portfolio by offering:
o A reasonable level of current income
o A measure of price stability relative to equity fund investments
o In the case of tax-exempt funds, income that is generally free from federal
income tax
HOW DO FIXED INCOME FUNDS PROVIDE A STEADY STREAM OF INCOME?
Fixed income funds earn income on the underlying securities and pay this out to
the shareholders on a regular (e.g., monthly) basis.
WHAT CAUSES BOND VALUES TO CHANGE?
Investors should be aware that bonds will fluctuate in value for any of three
main reasons:
o A change in interest rates
o A change in economic conditions
o A change in the financial condition of the issuer
HOW DOES THE PRICE OF A BOND MOVE WITH INTEREST RATES?
When interest rates rise, bond prices fall - and vice versa. Changing interest
rates have a greater effect on bonds with longer maturities than on those with
shorter maturities. As a result, when prevailing interest rates rise, the prices
of long-term bonds decrease, to a greater degree than the prices of short-term
bonds. The reverse is true when interest rates fall.
HOW ARE BONDS GRADED?
Bond quality, or grade, refers to the creditworthiness (the ability to repay
debt) of the issuing organization. Higher ratings indicate better quality.
Independent rating services, such as Moody's Investors Service or Standard &
Poor's, publish and disseminate bond quality ratings on a regular basis.
28
<PAGE>
................................................................................
Shares of the Harris Insight Fixed Income Funds are not bank deposits and are
not insured or guaranteed by the FDIC or any other government agency. The value
of your investment in a Fund will fluctuate, which means that you may lose
money.
Each Fund's primary investment practices and strategies are discussed in this
prospectus. Other practices, and their related risks, are described in the
Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be changed by
the Board of Trustees without approval by the Fund's shareholders.
Each Fund's principal risks are provided in an alphabetical listing within the
Fund description that follows. These risks are discussed in detail under "Risk
Considerations" on page 42.
................................................................................
29
<PAGE>
HARRIS INSIGHT FIXED INCOME FUNDS
CONVERTIBLE SECURITIES FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide capital appreciation and current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in CONVERTIBLE SECURITIES
(bonds, preferred stock and other instruments that are convertible into common
stock).
The Fund also may invest up to 35% of its assets in SYNTHETIC CONVERTIBLES and
15% of its assets in common stocks. When, in the portfolio manager's opinion,
convertible securities do not serve the Fund's objective, the Fund may invest
part or all of its assets in U.S. GOVERNMENT SECURITIES, corporate debt
obligations and short-term money market instruments. The portfolio manager will
continue to seek current income during such periods, but will put less emphasis
on capital appreciation.
The portfolio manager invests primarily in convertible securities rated "B" or
better by Standard & Poor's Corporation and Moody's Investors Service, Inc. (or,
if not rated, securities considered by the portfolio manager to be of comparable
quality). The Fund may also invest up to:
o 15% of its assets in securities rated "B-"
o 5% of its assets in convertible securities rated "CCC" by Standard & Poor's
or "Caa" by Moody's. (Securities rated "BB" or below by Standard & Poor's
or "Ba" or below by Moody's are "high yield" securities, commonly known as
"junk bonds." These securities are considered speculative and are subject
to increased risk.)
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 42.)
o Credit risk
o Interest rate risk
o Market risk
TERMS TO KNOW
CONVERTIBLE SECURITIES
Bonds, debentures, notes, preferred stock or other securities that are
convertible into common stock. Convertible securities have some unique return
characteristics relative to market fluctuations:
o When equity markets go up, they tend to rise in price
o When interest rates rise, they tend to decline relatively less in price
than long-term bonds
SYNTHETIC CONVERTIBLES
Issues that function like a convertible security by combining separate
securities into one investment package offering fixed income and the right to
acquire stock.
U.S. GOVERNMENT SECURITIES
Obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
30
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -20.62% 26.90% 17.31% 13.52% -3.36% 18.93% 20.77% 18.32% -2.04% 31.75%
</TABLE>
Best Quarter: Q4 1999 25.13%
Worst Quarter: Q3 1990 -17.71%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Convertible
Securities
Fund 31.75% 17.01% 11.02%
First Boston
Convertible
Index 42.29% 18.47% 14.06%
* The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of
1940 nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
31
<PAGE>
TAX-EXEMPT BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of current income that is exempt from
federal income tax.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in MUNICIPAL SECURITIES
with varying maturities. These securities are generally exempt from federal
income tax and not subject to the ALTERNATIVE MINIMUM TAX.
The portfolio manager employs:
o Interest rate risk management techniques to temper the potential negative
impact of interest rate increases on the Fund's share price
o In-depth credit analysis to help ensure that the municipalities issuing the
bonds are likely to repay their debt
The Fund also may invest in U.S. GOVERNMENT SECURITIES and securities with
various forms of credit enhancement (such as bank letters of credit). The Fund
may buy and sell options and interest rate futures contracts to hedge against
declines in the value of portfolio securities.
In pursuit of higher income, the portfolio manager normally favors longer-term
bonds that typically mature in ten years or more. In exchange for this higher
potential income, investors may experience higher share-price volatility than
would occur through investments with shorter maturities.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 42.)
o Credit risk
o Interest rate risk
o Municipal market risk
o Prepayment risk
TERMS TO KNOW
ALTERNATIVE MINIMUM TAX (AMT)
A federal tax designed to ensure that individuals, trusts, estates and companies
are limited in their deductions, exemptions, and tax credits when calculating
federal income tax liability.
MUNICIPAL SECURITIES
Bonds and other obligations issued by state and local governments to finance
operations or projects. These securities make interest payments that are exempt
from federal income tax.
U.S. GOVERNMENT SECURITIES
See page 30.
32
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.34% 11.34% 8.09% 12.67% -7.53% 14.16% 3.43% 8.28% 4.62% -3.31%
</TABLE>
Best Quarter: Q1 1995 5.92%
Worst Quarter: Q1 1994 -5.15%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Tax-Exempt
Bond Fund -3.31% 5.28% 5.50%
Lehman
Brothers
Municipal
Bond Index -2.06% 6.91% 6.88%
* The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of
1940 nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
33
<PAGE>
BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of total return, including a competitive
level of current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in bonds and similar fixed
income securities.
The Fund may invest in the following:
o Bonds and debentures
o U.S. GOVERNMENT SECURITIES
o Debt obligations of foreign governments
o MORTGAGE-BACKED SECURITIES
o MUNICIPAL SECURITIES
o ZERO-COUPON SECURITIES
o Other floating/variable rate obligations
o Options and interest-rate futures contracts
The Fund normally maintains a DOLLAR-WEIGHTED AVERAGE MATURITY (or average life
with respect to mortgage-backed and asset-backed securities) of between five and
ten years. Accordingly, the Fund's holdings may experience more share-price
volatility than bonds with shorter maturities, making the Fund a more suitable
investment for long-term investors.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 42.)
o Credit risk
o Interest rate risk
o Prepayment risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 30.
MORTGAGE-BACKED SECURITIES
Debt issues, based on a pool of underlying mortgages, that make interest and
principal payments to investors.
MUNICIPAL SECURITIES
See page 32.
ZERO-COUPON SECURITIES
Securities that do not pay a stated interest rate but are sold at a deep
discount to their value at maturity. The difference between a security's
discounted price and its full value at maturity represents the payment of
interest.
DOLLAR-WEIGHTED AVERAGE MATURITY
An average of all of the maturities of a fund's securities holdings, weighted
according to each security's dollar value relative to the rest of the holdings.
34
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1997 1998 1999
9.14% 6.86% -1.16%
Best Quarter: Q3 1997 3.61%
Worst Quarter: Q2 1999 -1.13%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Inception
Year (4/22/96)
Bond Fund -1.16% 5.36%
Lehman Brothers
Aggregate
Bond Index -0.82% 6.30%
35
<PAGE>
INTERMEDIATE TAX-EXEMPT BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of current income that is exempt from
federal income tax.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in a broad range of
MUNICIPAL SECURITIES. These securities are generally exempt from federal income
tax and not subject to the ALTERNATIVE MINIMUM TAX.
Under normal market conditions, the Fund's investments will have a
DOLLAR-WEIGHTED AVERAGE MATURITY in a range of three to ten years. Such
intermediate-term securities share these basic characteristics:
o They offer a higher income stream and somewhat higher share price
volatility than shorter-term municipal bond funds
o They tend to deliver less income with greater share price stability than
longer-term bond funds
The Fund also may invest in U.S. GOVERNMENT SECURITIES and securities with
various forms of credit enhancement (such as bank letters of credit). The Fund
may buy and sell options and interest rate futures contracts to hedge against
declines in value of portfolio securities.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 42.)
o Credit risk
o Interest rate risk
o Municipal market risk
o Prepayment risk
TERMS TO KNOW
MUNICIPAL SECURITIES
See page 32.
ALTERNATIVE MINIMUM TAX (AMT)
See page 32.
DOLLAR-WEIGHTED AVERAGE MATURITY See
page 34.
U.S. GOVERNMENT SECURITIES
See page 30.
36
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.08% 10.75% 6.50% 8.28% -3.33% 11.40% 2.80% 6.14% 4.67% -0.68%
</TABLE>
Best Quarter: Q1 1995 4.51%
Worst Quarter: Q1 1994 -2.89%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Intermediate
Tax-Exempt
Bond Fund -0.68% 4.79% 5.17%
Lehman
Brothers
Quality
Intermediate
Municipal
Bond Index 0.29% 6.24% N/A **
Lehman
Brothers
3-15 Year Blend
Municipal
Index *** -0.47% 6.67% N/A **
* The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of
1940 nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
** The inception date of the index was July 1, 1993.
*** The Fund's primary benchmark is now the Lehman Brothers 3-15 Year Blend
Municipal Index - an index comprised of 40,278 investment-grade or better
municipal bonds, from issues larger than $50 million dated since 1991 and
having maturities between 2 and 17 years. This index better reflects the
investment objectives and policies of the Fund.
37
<PAGE>
SHORT/INTERMEDIATE BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of total return, including a competitive
level of current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets primarily in bonds with a
short/intermediate-term average maturity.
The portfolio manager favors bonds with two to five years remaining to maturity
in order to achieve relative price stability and an attractive stream of income.
Such short/intermediate-term bonds tend to offer a buffer against rising
interest rates, although they will appreciate less when interest rates fall.
The Fund normally maintains a DOLLAR-WEIGHTED AVERAGE MATURITY (or average life
with respect to mortgage-backed and asset-backed securities) of between two and
five years. The Fund may invest in:
o Bonds and debentures
o U.S. GOVERNMENT SECURITIES
o U.S. dollar-denominated debt obligations of foreign issuers
o MORTGAGE-BACKED SECURITIES
o ASSET-BACKED SECURITIES
o MUNICIPAL SECURITIES
o ZERO-COUPON SECURITIES
o Other floating/variable rate obligations
o Options and interest-rate futures contracts
If a defensive position is warranted, the Fund may hold short-term U.S.
government securities (such as Treasury bills), high-quality money market
instruments and cash.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 42.)
o Credit risk
o Interest rate risk
o Prepayment risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 30.
MORTGAGE-BACKED SECURITIES
See page 34.
ASSET-BACKED SECURITIES
Securities collateralized by credit card loans or other accounts receivable.
MUNICIPAL SECURITIES
See page 32.
ZERO-COUPON SECURITIES
See page 34.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 34.
38
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1992 1993 1994 1995 1996 1997 1998 1999
5.28% 9.91% -1.29% 13.88% 3.51% 6.89% 6.75% 0.56%
Best Quarter: Q3 1992 4.62%
Worst Quarter: Q4 1992 -2.13%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 5 Inception
Year Years (4/1/91)
Short/
Intermediate
Bond Fund 0.56% 6.23% 6.35%
Lehman
Brothers
Intermediate
Government/
Corporate
Bond Index 0.39% 7.10% 7.67%
39
<PAGE>
INTERMEDIATE GOVERNMENT BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of current income, consistent with
preservation of capital.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in:
o U.S. GOVERNMENT SECURITIES
o MORTGAGE-BACKED SECURITIES,
issued by U.S. government agencies
o REPURCHASE AGREEMENTS
collateralized by U.S. government securities
The DOLLAR-WEIGHTED AVERAGE MATURITY (or average life with respect to
mortgage-backed and asset-backed securities) generally will be in the
intermediate range of between three and ten years.
The portfolio manager may invest up to 20% of the fund's assets in:
o ASSET-BACKED SECURITIES
o ZERO-COUPON SECURITIES
o Corporate bonds
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 42.)
o Credit risk
o Interest rate risk
o Prepayment risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 30.
MORTGAGE-BACKED SECURITIES
See page 34.
REPURCHASE AGREEMENTS
A binding agreement enabling a bank or broker to borrow money, using securities
as collateral, with a promise to buy back the securities at a specified price,
usually within 90 days.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 34.
ASSET-BACKED SECURITIES
See page 38.
ZERO-COUPON SECURITIES
See page 34.
40
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.92% 13.30% 6.49% 8.10% -1.93% 13.09% 3.86% 7.56% 7.18% -1.05%
</TABLE>
Best Quarter: Q3 1991 4.57%
Worst Quarter: Q1 1994 -2.21%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Intermediate
Government
Bond Fund -1.05% 6.03% 6.44%
Lehman
Brothers
Intermediate
Government
Bond Index 0.49% 6.93% 7.10%
* The Fund is the successor to a collective or common investment fund managed
by Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of
1940 nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
41
<PAGE>
RISK CONSIDERATIONS - FIXED INCOME FUNDS
The risks of investing in the various Funds are illustrated in the chart below.
A Fund's principal risks are designated by the ^ symbol.
<TABLE>
<CAPTION>
FUNDS Intermediate Short/ Intermediate
Convertible Tax-Exempt Tax-Exempt Intermediate Government
RISKS Securities Bond Bond Bond Bond Bond
<S> <C> <C> <C> <C> <C> <C>
Counterparty o o o o o o
- -------------------------------------------------------------------------------------------------------------------
Credit ^ ^ ^ ^ ^ ^
- -------------------------------------------------------------------------------------------------------------------
Foreign securities o o o o
- -------------------------------------------------------------------------------------------------------------------
Interest rate ^ ^ ^ ^ ^ ^
- -------------------------------------------------------------------------------------------------------------------
Leverage o o o o o o
- -------------------------------------------------------------------------------------------------------------------
Market ^ o o o o o
- -------------------------------------------------------------------------------------------------------------------
Municipal market ^ o ^
- -------------------------------------------------------------------------------------------------------------------
Prepayment ^ ^ ^ ^ ^
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
42
<PAGE>
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S.; more volatile markets; less securities regulation; less
favorable tax provisions; war or expropriation.
INTEREST RATE RISK
The risk that changing interest rates may adversely affect the value of an
investment. With fixed-rate securities, an increase in prevailing interest rates
typically causes the value of those securities to fall, while a decline in
prevailing interest rates generally produces an increase in the market value of
the securities. Changes in interest rates will affect the value of longer-term
fixed income securities more than shorter-term securities and lower quality
securities more than higher quality securities.
LEVERAGE RISK
The risk that downward price changes in a security may result in a loss greater
than a fund's investment in the security. This risk exists through the use of
certain securities or techniques (e.g., derivative securities or purchases on
margin) that tend to magnify changes in an index or market.
MARKET RISK
The risk that the market value of a fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or it may affect the market as a whole.
MUNICIPAL MARKET RISK
The risk that certain factors may negatively affect the value of municipal
securities, and, as a result, the share price of a fund that invests in them.
These factors include political or legislative changes, uncertainties related to
the tax status of the securities or the rights of investors in the securities. A
fund may invest in municipal obligations that are related in such a way (e.g.,
multiple apparently unrelated issues that depend on the financial rating or
support of a single government unit) that an economic, business or political
development or change that affects one of these obligations would also affect
the others.
PREPAYMENT RISK
The risk that issuers will prepay fixed-rate obligations when interest rates
fall, forcing a fund to re-invest in obligations with lower interest rates than
the original obligations.
43
<PAGE>
FEES AND EXPENSES - FIXED INCOME FUNDS
The tables below describe the fees and expenses that you will pay if you buy
and hold shares of the Harris Insight Fixed Income Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
REDEMPTION FEE None
EXCHANGE FEE None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Convertible Intermediate Short/ Intermediate
Securities Tax-Exempt Bond Tax-Exempt Intermediate Government
Fund Bond Fund Fund Bond Fund Bond Fund Bond Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT ADVISORY FEES1 0.70% 0.60%2 0.65% 0.60%2 0.70% 0.65%
Shareholder Servicing Fees 0.25 0.25 0.25 0.25 0.25 0.25
Other Expenses1 0.31 0.23 0.25 0.22 0.22 0.28
- -------------------------------------------------------------------------------------------------------------------
Total Operating Expenses1 1.26% 1.08% 1.15% 1.07% 1.17% 1.18%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Expenses are based on amounts incurred by the Funds during their most
recent fiscal year but do not reflect waivers of advisory fees by Harris
Trust and sub-administration fees by PFPC Inc. After these waivers, actual
Fund advisory fees, Other Expenses and Total Operating Expenses for the
fiscal year ended December 31, 1999 were:
<TABLE>
<CAPTION>
Convertible Intermediate Short/ Intermediate
Securities Tax-Exempt Bond Tax-Exempt Intermediate Government
Fund Bond Fund Fund Bond Fund Bond Fund Bond Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.61% 0.47%2 0.37% 0.47%2 0.39% 0.24%
Other Expenses 0.31 0.23 0.23 0.22 0.21 0.26
Total Operating Expenses 1.17% 0.95% 0.85% 0.94% 0.85% 0.75%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
2 Commencing October 18, 1999, Harris Trust has waived its entire advisory
fee for the Tax-Exempt Bond Fund and the Intermediate Tax-Exempt Bond Fund.
These fee waivers can be reduced or terminated at any time at the option of
Harris Trust. If those fee waivers had been in effect for the entire fiscal
year ended December 31, 1999, the Total Operating Expenses for each of the
Tax-Exempt Bond Fund and the Intermediate Tax-Exempt Bond Fund (expressed
as a percentage of average net assets) for that year would have been 0.48%
and 0.47% respectively.
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
44
<PAGE>
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Fixed Income Funds to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in a Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Convertible Intermediate Short/ Intermediate
Securities Tax-Exempt Bond Tax-Exempt Intermediate Government
Fund Bond Fund Fund Bond Fund Bond Fund Bond Fund
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year $128 $110 $117 $109 $119 $120
- --------------------------------------------------------------------------------------------
Three Years 400 343 365 340 372 375
- --------------------------------------------------------------------------------------------
Five Years 692 595 633 590 644 649
- --------------------------------------------------------------------------------------------
Ten Years 1,523 1,317 1,398 1,306 1,420 1,432
- --------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT MONEY MARKET FUNDS
The Harris Insight Money Market Funds offer investors the opportunity to derive
income from a portfolio of money market instruments with a stable net asset
value. They invest in short-term securities issued by banks, other U.S.
corporations, the U.S. government, state or local governments, and other
entities. These money market instruments may include certificates of deposit,
bankers' acceptances, variable rate demand notes, fixed-term obligations,
COMMERCIAL PAPER, ASSET-BACKED SECURITIES and REPURCHASE AGREEMENTS.
WHY INVEST IN MONEY MARKET FUNDS?
These funds are especially well-suited for conservative investors who seek -
o Current income
o Stability of principal (they are managed in an attempt to maintain a share
price of $1.00)
o Checkwriting privileges permitting access to your money at any time
WHAT ARE THE FUNDS' INVESTMENT PARAMETERS?
Money market funds must conform to a number of regulations, including rules that
require each fund to -
o Limit the DOLLAR-WEIGHTED AVERAGE MATURITY of their investments to 90 days
or less
o Buy only high-quality, short-term money market instruments
o Buy securities with remaining maturities no longer than 397 days
TERMS TO KNOW
COMMERCIAL PAPER
Short-term securities that are issued by corporations and other borrowers to
finance their current obligations and are typically unsecured. Issues of
commercial paper normally have maturities of less than nine months and have
fixed rates of return.
ASSET-BACKED SECURITIES
See page 38.
REPURCHASE AGREEMENTS
See page 40.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 34.
46
<PAGE>
................................................................................
Shares of the Harris Insight Money Market Funds are not bank deposits and are
not guaranteed or insured by any bank, government entity, or the FDIC. Although
each of the Harris Insight Money Market Funds seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
a Fund.
Each Fund's primary investment practices and strategies are discussed in this
prospectus. Other practices, and their related risks, are described in the
Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be changed by
the Board of Trustees without approval by the Fund's shareholders.
Each Fund's principal risks are provided in an alphabetical listing within the
Fund description that follows. These risks are discussed in detail under "Risk
Considerations" on page 54.
................................................................................
47
<PAGE>
HARRIS INSIGHT MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income that is exempt from
federal income taxes as is consistent with its investment policies and with
preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in high-quality, short-term
money market instruments that are generally exempt from federal income tax and
are not subject to the ALTERNATIVE MINIMUM TAX.
The Fund will invest primarily in high-quality MUNICIPAL SECURITIES that are
generally exempt from federal income taxes and will purchase only U.S.
dollar-denominated securities.
In addition, the Fund will purchase only securities (other than U.S. GOVERNMENT
SECURITIES) that have been rated within the two highest rating categories by at
least two nationally recognized rating agencies (or, if not rated, are
considered by the portfolio manager to be of comparable quality).
Depending on market conditions, the Fund may temporarily hold up to 20% of the
current value of its assets in securities whose interest income is subject to
taxation.
Current income generally will be lower than the income provided by funds that
invest in securities with taxable income or securities with longer maturities or
lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 54.)
o Credit risk
o Municipal market risk
o Principal stability risk
TERMS TO KNOW
ALTERNATIVE MINIMUM TAX (AMT)
See page 32.
MUNICIPAL SECURITIES
See page 32.
U.S. GOVERNMENT SECURITIES
See page 30.
48
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.51% 4.16% 2.54% 1.99% 2.30% 3.31% 2.94% 3.17% 3.02% 2.75%
</TABLE>
Best Quarter: Q4 1990 1.39%
Worst Quarter: Q1 1994 0.43%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Year 5 Years 10 Years
Tax-Exempt
Money
Market
Fund 2.75% 3.04% 3.16%
As of December 31, 1999, the seven-day yield for the Fund was 3.83%. As of the
same date, the effective tax-equivalent seven-day yield for the Fund was 5.43%.
For current yield information, please call 800.982.8782.
49
<PAGE>
MONEY MARKET FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income as is consistent
with its investment policies and with preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests only in high-quality, short-term money market instruments that,
in the opinion of the investment adviser, present minimal credit risks. The Fund
invests in a broad range of short-term money market instruments, including U.S.
GOVERNMENT SECURITIES, as well as bank and commercial obligations. COMMERCIAL
PAPER purchased by the Fund will consist of U.S. dollar-denominated direct
obligations of domestic and foreign corporate issuers, including bank holding
companies.
The Fund will purchase only U.S. dollar-denominated securities. In addition, the
Fund will purchase only securities (other than U.S. government securities) that
have been rated within the two highest rating categories by at least two
nationally recognized rating agencies (or, if not rated, are considered by the
portfolio manager to be of comparable quality). No more than 5% of the Fund's
assets will be invested in securities in the second highest rating category.
Current income generally will be lower than the income provided by funds that
invest in securities with longer maturities or lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 54.)
o Credit risk
o Foreign securities risk
o Principal stability risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 30.
COMMERCIAL PAPER
See page 46.
50
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7.94% 5.87% 3.41% 2.69% 3.79% 5.58% 5.11% 5.35% 5.25% 4.92%
</TABLE>
Best Quarter: Q2 1990 1.95%
Worst Quarter: Q2 1993 0.65%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Year 5 Years 10 Years
Money
Market
Fund 4.92% 5.24% 4.98%
As of December 31, 1999, the seven-day yield for the Fund was 5.52%. For current
yield information, please call 800.982.8782.
51
<PAGE>
GOVERNMENT MONEY MARKET FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income from government
obligations as is consistent with preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests exclusively in short-term securities issued by the U.S.
government, its agencies or instrumentalities, and REPURCHASE AGREEMENTS backed
by those securities, all of which are deemed to be of minimal credit risk by the
investment adviser.
Current income generally will be lower than the income provided by funds that
invest in securities with longer maturities or lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 54.)
o Credit risk
o Principal stability risk
TERMS TO KNOW
REPURCHASE AGREEMENTS
See page 40.
52
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7.78% 5.67% 3.42% 2.62% 3.72% 5.51% 5.00% 5.17% 5.08% 4.67%
</TABLE>
Best Quarter: Q3 1990 1.91%
Worst Quarter: Q4 1993 0.64%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 YEAR 5 YEARS 10 YEARS
Government
Money
Market
Fund 4.67% 5.09% 4.86%
As of December 31, 1999, the seven-day yield for the Fund was 4.93%. For current
yield information, please call 800.982.8782.
53
<PAGE>
RISK CONSIDERATIONS - MONEY MARKET FUNDS
The risks of investing in the various Funds are illustrated in the chart below.
A Fund's principal risks are designated by the ^ symbol.
- --------------------------------------------------------------------------------
FUNDS Tax-Exempt Government
RISKS Money Market Money Market Money Market
- --------------------------------------------------------------------------------
Counterparty o o o
- --------------------------------------------------------------------------------
Credit ^ ^ ^
- --------------------------------------------------------------------------------
Foreign securities ^
- --------------------------------------------------------------------------------
Municipal market ^
- --------------------------------------------------------------------------------
Principal stability ^ ^ ^
- --------------------------------------------------------------------------------
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S.; more volatile markets; less securities regulation; less
favorable tax provisions; war or expropriation.
54
<PAGE>
MUNICIPAL MARKET RISK
The risk that certain factors may negatively affect the value of municipal
securities, and, as a result, the share price of a fund that invests in them.
These factors include political or legislative changes, uncertainties related to
the tax status of the securities or the rights of investors in the securities. A
fund may invest in municipal obligations that are related in such a way (e.g.
multiple apparently unrelated issues that depend on the financial rating or
support of a single government unit) that an economic, business or political
development or change that affects one of these obligations would also affect
the others.
PRINCIPAL STABILITY RISK
The risk that a money market fund may not be able to maintain a stable net asset
value of $1.00 per share.
55
<PAGE>
FEES AND EXPENSES - MONEY MARKET FUNDS
The tables below describe the fees and expenses that you will pay if you buy
and hold shares of the Harris Insight Money Market Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
REDEMPTION FEE None
EXCHANGE FEE None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
- --------------------------------------------------------------------------------
Tax-Exempt Money Government Money
Money Market Fund Market Fund Market Fund
- --------------------------------------------------------------------------------
Investment Advisory Fee 0.11% 0.10% 0.11%
Rule 12b-1 Fees1 0.10 0.10 0.10
Shareholder Servicing Fees 0.25 0.25 0.25
Other Expenses1 0.12 0.14 0.13
- --------------------------------------------------------------------------------
Total Operating Expenses1 0.58% 0.59% 0.59%
- --------------------------------------------------------------------------------
1 Expenses are based on amounts incurred by the Funds during their most
recent fiscal year but do not reflect reduced Rule 12b-1 Fees or expense
reductions (expense reimbursements and fee waivers) by Harris Trust. After
these reductions, actual Fund Rule 12b-1 Fees, Other Expenses and Total
Operating Expenses for the fiscal year ended December 31, 1999 were:
Tax-Exempt Money Government Money
Money Market Fund Market Fund Market Fund
- --------------------------------------------------------------------------------
Rule 12b-1 Fees 0.07% 0.10% 0.10%
Other Expenses 0.12 0.09 0.09
Total Operating Expenses 0.55% 0.54% 0.55%
- --------------------------------------------------------------------------------
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
56
<PAGE>
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Money Market Funds to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in a Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
- --------------------------------------------------------------------------------
TAX-EXEMPT MONEY GOVERNMENT MONEY
MONEY MARKET FUND MARKET FUND MARKET FUND
- --------------------------------------------------------------------------------
One Year $59 $60 $60
- --------------------------------------------------------------------------------
Three Years 186 189 189
- --------------------------------------------------------------------------------
Five Years 324 329 329
- --------------------------------------------------------------------------------
Ten Years 726 738 738
- --------------------------------------------------------------------------------
57
<PAGE>
INVESTMENT ADVISER
Harris Trust and Savings Bank (Harris Trust), an Illinois state-chartered bank
and a member of the Federal Reserve System, is the investment adviser for each
of the Harris Insight Funds. Harris Trust is the successor to the investment
banking firm of N.W. Harris & Co., which was organized in 1882 and incorporated
in 1907. At December 31, 1999, Harris Trust had total discretionary assets under
management of approximately $26.4 billion and was the largest bank 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,
1999, Harris Trust managed more than $13.8 billion in discretionary personal
trust assets, and administered more than $17.9 billion in non-discretionary
trust assets.
Harris Trust oversees the PORTFOLIO MANAGEMENT AGENT and the INVESTMENT
SUB-ADVISER.
The Funds have received an exemptive order from the SEC that permits Harris
Trust, subject to certain conditions, to select new portfolio management
agents/sub-advisers or replace existing portfolio management agents/sub-advisers
without first obtaining shareholder approval for the change. In addition, Harris
Trust may authorize a portfolio management agent/sub-adviser to enter into a
sub-portfolio management agreement with one or more sub-subadvisers on behalf of
any Fund managed by that portfolio management agent/sub-adviser. The Board of
Trustees, including a majority of the "independent" Trustees, must approve each
new portfolio management, sub-portfolio management or sub-sub-portfolio
management agreement. This allows Harris Trust to employ new portfolio
management agents/sub-advisers for new or existing Funds, change the terms of
particular agreements with sub-advisers or change portfolio management
agents/sub-advisers when it determines that a change is beneficial to
shareholders, and to avoid the delay and expense of calling and holding
shareholder meetings to approve each change. In accordance with the exemptive
order, Harris Trust and the Funds will provide investors with infor-mation about
each new portfolio management agent/sub-adviser (or sub-subadviser) and its
portfolio management (or sub-portfolio management) agreement within 90 days of
the hiring of a new portfolio management agent/sub-adviser or sub-subadviser.
Harris Trust is responsible for selecting, monitoring, evaluating and allocating
assets to the portfolio management agents/sub-advisers and oversees their
compliance with each Fund's investment objective, policies and restrictions.
The SAI contains more information about the Funds' advisory and portfolio
management agreements, including a fuller discussion of the Funds' SEC exemptive
order.
ADVISORY FEES
The following chart shows the investment advisory fees paid, before fee waivers,
by each Fund during its last fiscal year.
58
<PAGE>
MANAGEMENT FEES PAID
(expressed as a percentage of average net assets)
Balanced Fund.................... 0.60%
Index Fund....................... 0.25
Equity Income Fund................0.70
Equity Fund...................... 0.70
Growth Fund.......................0.90
Small-Cap Value Fund..............0.80
Small-Cap Opportunity Fund........1.00
International Fund................1.05
Emerging Markets Fund.............1.25
Convertible Securities Fund.......0.70
Tax-Exempt Bond Fund .............0.60
Bond Fund.........................0.65
Intermediate Tax-Exempt
Bond Fund.........................0.60
Short/Intermediate Bond Fund......0.70
Intermediate Government
Bond Fund.........................0.65
Government Money Market Fund, Money Market Fund and Tax-Exempt Money Market
Fund: 0.14% of each Fund's first $100 million of net assets plus 0.10% of the
Fund's remaining net assets.
Harris Trust may waive any portion of its investment advisory fees or reimburse
Fund expenses from time to time. These arrangements are voluntary and may be
terminated at any time.
PORTFOLIO MANAGEMENT AGENT
As the portfolio management agent, Harris Investment Management, Inc. (HIM)
manages the investments of all of the Funds. In the case of the International
Fund and the Emerging Markets Fund, HIM has appointed Hansberger Global
Investors, Inc. as the investment sub-adviser. HIM is a wholly-owned subsidiary
of Harris Bankcorp, Inc. For the services provided by HIM to the Funds for which
it serves as portfolio management agent, Harris Trust pays HIM the advisory fees
Harris Trust receives from those Funds. As of December 31, 1999, HIM managed
approximately $14.1 billion in assets.
INVESTMENT SUB-ADVISER
Hansberger Global Investors, Inc. (Hansberger) serves as investment sub-adviser
to, and makes all investment decisions for, the International Fund and the
Emerging Markets Fund. Hansberger, founded in 1994, is a wholly-owned subsidiary
of Hansberger Group, Inc. and provides a broad range of portfolio management
services to clients in the U.S. and abroad. As of December 31, 1999, Hansberger
managed approximately $2.9 billion in assets. Hansberger is paid for its
investment sub-advisory services from the advisory fees HIM receives from Harris
Trust.
Many persons on the staffs of the investment adviser, portfolio management agent
and investment sub-adviser contribute to the investment management services
provided to the Funds. The
59
<PAGE>
individuals named in the following section, however, are primarily responsible
for the day-to-day investment management of the Funds.
INVESTMENT ADVISER
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 60690
INVESTMENT SUB-ADVISER
Hansberger Global Investors, Inc.
515 East Las Olas Blvd., Suite 1300
Fort Lauderdale, Florida 33301
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<PAGE>
PORTFOLIO MANAGERS
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT EQUITY FUNDS
BALANCED FUND
C. THOMAS JOHNSON, CFA, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Johnson joined Harris Trust in 1969. He has served as Portfolio Manager of
the Fund since it commenced operations in 1997 and has 30 years of experience in
portfolio management.
EQUITY INCOME FUND
DANIEL L. SIDO, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1994, Mr. Sido served as Portfolio Manager for a trust
company, managing equity and fixed income portfolios. He has served as Portfolio
Manager of the Fund since it commenced operations in 1996 and has over 16 years
of investment management experience.
EQUITY FUND
DONALD G. M. COXE, CHAIRMAN AND CHIEF STRATEGIST (HIM)
Mr. Coxe joined HIM in 1993. He has served as Portfolio Manager of the Fund
since 1996 and has nearly 32 years of institutional investment management
experience.
GROWTH FUND
T. ANDREW JANES, PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Janes joined HIM in 1999. He has served as Portfolio Manager of the Fund
since then and has 14 years of portfolio management, investment research and
trust administration experience.
INDEX FUND
SMALL-CAP VALUE FUND
JON D. THANOS, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Thanos joined HIM in 1996. He has 8 years of portfolio management and
trading experience and was appointed Portfolio Manager of:
o Index Fund in 1999
JON K. TESSEO, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Tesseo joined HIM in 1999. He has 9 years of portfolio management and
investment research experience and was appointed Portfolio Manager of:
o Index Fund in 2000
o Small-Cap Value Fund in 1999
SMALL-CAP OPPORTUNITY FUND
PAUL KLEINAITIS, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Kleinaitis joined HIM in 1999. He has served as Portfolio Manager of the
Fund since then and has 13 years of portfolio management and investment research
experience.
61
<PAGE>
INTERNATIONAL FUND
EMERGING MARKETS FUND
THOMAS L. HANSBERGER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER (HANSBERGER)
Before forming Hansberger in 1994, Mr. Hansberger was Chairman, President and
Chief Executive Officer of Templeton Worldwide, Inc. While at Templeton, he
served as director of research and was an officer, director or primary portfolio
manager for several Templeton mutual funds. He leads the International Fund's
portfolio team, which includes:
John Hock, Senior Vice President, Research
Charles Gulden, Senior Vice President, Research
He also leads the Emerging Markets Fund's portfolio team, which includes:
Francisco Alzuru, Managing Director, Portfolio Manager and Research Analyst
Ajit Dayan, Managing Director of Indian Research
Aureole L.W. Foong, Director of Global Emerging Markets Research
Robert Mazuelos, Research Analyst
Vladimir Tyurenkov, Managing Director of Eastern Europe and Russian Research,
Portfolio Manager and Research Analyst
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT FIXED INCOME FUNDS
CONVERTIBLE SECURITIES FUND
JON D. THANOS, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Thanos joined HIM in 1996. He has served as Portfolio Manager of the Fund
since 1999 and has 8 years of portfolio management and trading experience.
TAX-EXEMPT BOND FUND
INTERMEDIATE TAX-EXEMPT BOND FUND
GEORGE W. SELBY, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1998, Mr. Selby served as Executive Director of
Municipal Bond Sales for a brokerage firm. He has 17 years of municipal bond
sales experience and was appointed Portfolio Manager of:
o Tax-Exempt Bond Fund in 1998
o Intermediate Tax-Exempt Bond Fund in 1998
62
<PAGE>
BOND FUND
SHORT/INTERMEDIATE BOND FUND
INTERMEDIATE GOVERNMENT BOND FUND
LAURA ALTER, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1994, Ms. Alter served as Portfolio Manager for a major
mutual fund investment management firm. She has 15 years of experience in the
fixed-income investment area and was appointed Portfolio Manager of:
o Bond Fund when it commenced operations in 1996
o Short/Intermediate Bond Fund in 1994
MAUREEN SVAGERA, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1994, Ms. Svagera was Principal/Vice President at an
investment management firm where she focused on the mortgage and asset-backed
securities markets. She has 17 years of experience in the fixed-income market
and was appointed Portfolio Manager of:
o Bond Fund when it commenced operations in 1996
o Short/Intermediate Bond Fund in 1996
o Intermediate Government Bond Fund when it commenced operations in 1997
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND
KIMBERLY J. KEYWELL, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1995, Ms. Keywell served as an Associate Portfolio
Manager for the trust department of a large banking institution. She has 8 years
of investment management experience and was appointed Portfolio Manager of the
Fund in 1998.
GOVERNMENT MONEY MARKET FUND
MONEY MARKET FUND
RANDALL T. ROYTHER, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Royther joined Harris Trust in 1990. He has 11 years of investment
management experience and was appointed Portfolio Manager of:
o Government Money Market Fund in 1995
o Money Market Fund in 1995
63
<PAGE>
PRICING OF FUND SHARES
SHARES OF THE FUNDS ARE BOUGHT AND SOLD AT NET ASSET VALUE
Each Fund calculates its net asset value per share (NAV) on each day on which
both the New York Stock Exchange (NYSE) and the Federal Reserve Bank of
Philadelphia are open for business.
HOW THE FUNDS CALCULATE NAV
The NAV of a class of shares of a Fund is determined by dividing the value of
the securities and other assets, less liabilities, allocated to the class by the
number of outstanding shares of the class.
NON-MONEY MARKET FUNDS
The NAV is calculated as of the close of regular trading on the NYSE (normally
4:00 p.m., Eastern time) and is generally based on the last sale prices of all
securities held by the Fund and the number of shares outstanding. A Fund's
securities are valued based on market value or, where market quotations are not
readily available, are based on fair value as determined in good faith by or
under the direction of the Fund's board of trustees.
Foreign securities are valued on the basis of quotations from the primary
markets in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If the value of a foreign
security has been materially affected by events occurring after the close of a
foreign market, it may be valued by another method that the board believes
reflects fair value. Foreign securities may trade in their local markets on
weekends or other days when a Fund does not price its shares. Therefore, the NAV
of Funds holding foreign securities may change on days when shareholders will
not be able to buy or sell their Fund shares.
MONEY MARKET FUNDS
The NAV for the Tax-Exempt Money Market Fund is calculated as of 12:00 Noon,
Eastern time. The NAVs for each of the Money Market Fund and the Government
Money Market Fund is calculated as of 2:30 p.m., Eastern time. In its attempt to
maintain a stable NAV of $1.00 per share, securities held by each Money Market
Fund are valued at amortized cost, which is approximately equal to market value.
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<PAGE>
SHAREHOLDER SERVICES
HOW TO BUY SHARES
OPENING A NEW ACCOUNT IS EASY
There are three convenient ways to invest in the Harris Insight Funds.
<TABLE>
<CAPTION>
THROUGH FINANCIAL
BY MAIL BY BANK WIRE INSTITUTION/PROFESSIONAL
<S> <C> <C>
Complete and sign an Call the Funds at Contact your financial
application for N Shares. 800.625.7073, during institution or professional
business hours, to for more information.
Make your check payable initiate your purchase.
to the Harris Insight Funds. Important note: Each
Please be sure to furnish institution or professional
If you are adding to your your taxpayer identification may have its own
existing account, indicate number. procedures and
your Fund account requirements for buying
number directly on Then wire your shares and may charge
the check. investment to: fees
PNC Bank, N.A.
Mail your application Philadelphia, PA
and check to: ABA #0310-0005-3
Harris Insight Funds For Credit To:
c/o PFPC Inc. Harris Insight Funds
P.O. Box 8952 85-5093-2950
Wilmington, DE 19899-8952 Re: [Name of Fund]--
N Shares
Account No.:
Account Name:
Taxpayer ID No.:
If you are opening a new
account, please complete
and mail the account
application form to the Funds
at the address given under
"By Mail."
The Funds currently do not
charge investors for
the receipt of wire
transfers, although your
bank may charge you for
their wiring services.
</TABLE>
Orders placed directly with the Funds must be paid for by check or bank wire
before the order will be executed. The Funds do not accept third-party checks.
Payment for shares purchased through a financial institution will not be due
until settlement date, normally three business days after the order has been
executed.
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<PAGE>
Shares are purchased at the NAV next calculated after your investment is
received. The Funds reserve the right to reject any purchase order.
Please indicate whether you would like the ability to buy, redeem or exchange
shares by telephone or wire when you complete your application.
AUTOMATIC INVESTMENT PLAN: A CONVENIENT OPTION
Through automatic investing, you can invest equal amounts of money on a regular
basis.
At the time you open your account or any time afterward, you can elect Harris
Insight Funds' Automatic Investment Plan by so indicating on the Harris Insight
Funds New Account Application. The Plan lets you invest as little as $50 a month
in the Fund of your choice through electronic withdrawals from your checking or
savings account. (If your checking or savings account does not have sufficient
assets to permit the Automatic Investment in any month, your participation in
the Plan will cease and a new application will be needed to reinstate your
Plan.)
CHOOSE YOUR INVESTMENT AMOUNT
The Harris Insight Funds offer a flexible range of minimum investment amounts to
initiate or add to your investment program.
MINIMUM
PER FUND
To open a regular account.................................................$1,000
To open a retirement account................................................$250
To open an account using the Automatic Investment Plan.......................$50
To add to an existing account................................................$50
MORE ABOUT BUYING SHARES
MULTIPLE OWNERS
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 authorize any transactions in the account.
TAXPAYER IDENTIFICATION
You must certify whether you are subject to withholding for failing to report
income to the Internal Revenue Service. Investments received without a certified
taxpayer identification number may be returned.
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<PAGE>
HOURS OF OPERATION
The Funds are open for business each day the New York Stock Exchange (NYSE)
and the Federal Reserve Bank of Philadelphia are open for business. The Funds
are closed for business on:
New Year's Day Memorial Day Veterans' Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
Presidents' Day Labor Day Christmas Day
Good Friday Columbus Day
You may call 800.982.8782 to speak with a Fund representative Monday through
Friday from 8:00 a.m. to 5:00 p.m., Central time.
HOW TO SELL SHARES
ACCESSING YOUR MONEY IS EASY
You may sell or redeem some or all of your shares by doing one of the following.
<TABLE>
<CAPTION>
BY MAIL AND BY TELEPHONE BY TELEPHONE AND THROUGH FINANCIAL
CHECK AND CHECK BANK WIRE INSTITUTION/PROFESSIONAL
<S> <C> <C> <C>
You may sell shares If you have chosen If you have chosen Contact your financial
by writing the Funds the telephone the wire redemption institution or
at: redemption privilege, privilege, you may professional for more
Harris Insight Funds you may call call 800.625.7073, information.
c/o PFPC Inc. 800.625.7073, during during business
P.O. Box 8952 business hours, to hours, to sell your Important note: Each
Wilmington, DE sell your shares. shares and have institution or
19899-8952. your proceeds wired professional may have
A check for your to a pre-designated its own procedures
A check for your proceeds will be bank account. and requirements
proceeds will be mailed to you. for selling shares
mailed to you. and may charge fees.
</TABLE>
A redemption request should be accompanied by your account number, the exact
name(s) on your account and your social security or taxpayer identification
number. Some redemption requests require a signature guarantee. (See page 69 for
more information.)
The Funds reserve the right to pay redemptions "in kind" - payment in portfolio
securities rather than cash - if the amount you are redeeming is large enough to
affect a Fund's operations (limited to amounts more than $250,000 or
representing more than 1% of the Fund's assets). In these cases, you might incur
brokerage costs in converting the securities to cash.
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<PAGE>
MORE ABOUT REDEMPTIONS
WHEN ORDERS ARE PROCESSED
Your shares will be sold at the NAV next calculated after your order is accepted
by the Funds' transfer agent in good order. Your order will be processed and a
check for the proceeds will be mailed to you promptly. Payment by wire will
generally be sent the following business day.
Please note that proceeds for redemption requests made shortly after a recent
purchase by check will be distributed only after the check clears, which may
take up to 15 days.
Under unusual circumstances, the Funds may suspend redemptions, if allowed by
the Securities and Exchange Commission, or postpone payment.
MINIMUM AMOUNT REQUIRED FOR WIRE SALES
The minimum amount of redemption proceeds that may be wired is $1,000.
Otherwise, a check for redemption proceeds is mailed to your address of record.
The Funds reserve the right to change this minimum or to terminate the
privilege.
SYSTEMATIC WITHDRAWAL PLAN (NOT AVAILABLE FOR IRAS OR OTHER RETIREMENT ACCOUNTS)
You may enroll in the Systematic Withdrawal Plan (SWP) by so indicating on the
Harris Insight Funds New Account Application. Using the SWP, you may redeem a
specific dollar amount (not less than $100) from your Harris Insight Funds
account each month, quarter, six months or year.
To enroll in the SWP, you must meet the following conditions:
o you must have elected to reinvest your Fund dividends, and
o your shares of the Fund from which you want shares redeemed must have a
value of at least $10,000 at the time of each withdrawal.
Plan redemptions are normally processed on the 25th day of the applicable month
(or on the next Business Day if the normal processing day is not a Business Day)
and are paid promptly thereafter. You should know that, if your SWP withdrawals
are greater than the amount of dividends from your Fund, the withdrawals reduce
the principal invested. (If your Fund account does not have a sufficient balance
to permit a Systematic Withdrawal, your participation in the SWP will cease and
a new application will be needed to reinstate your Plan.)
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<PAGE>
SIGNATURE GUARANTEES
The Funds require signature guarantees on certain redemption requests to protect
you and the Funds from unauthorized account transfers. A signature guarantee is
required when a redemption check is -
o To be payable to anyone other than the shareholder(s) of record
o To be mailed to an address other than the address of record
o To be wired to a bank other than one previously authorized.
Signature guarantees may be obtained from a domestic bank or trust company,
broker, dealer, clearing agency or savings association that participates in a
medallion program recognized by the Securities Transfer Association.
CHECKWRITING (FOR MONEY MARKET FUNDS)
Checkwriting is available for each of the Harris Insight Money Market Funds. If
you are an investor in one of these Funds and have completed the checkwriting
portion of your application and signature card, you may redeem shares by writing
a check against your account. When a check is presented to the Transfer Agent
for payment, the Fund's Custodian will cause the Fund to redeem a sufficient
number of shares in your account to cover the amount of the check.
You will continue to earn income on your shares until a check is presented to
the Transfer Agent for payment. The minimum check amount is $500.
If you are opening a new account and wish to establish the checkwriting option,
you must complete the account application and signature card. If you already
have an account, you may contact the Harris Insight Funds at 800.625.7073 for
the necessary checkwriting application. Upon receipt of this form, checks will
be forwarded to you.
This privilege is not available for IRAs, SEP-IRAs, 401(k), 403(b), Keogh or
other retirement accounts.
The checkwriting privilege is subject to the customary rules and regulations
governing checkwriting:
o FOR JOINT TENANT ACCOUNTS, each shareholder must sign each check, unless
the shareholders have authorized fewer signatures and such election is on
file with the Funds' Transfer Agent.
o A SUFFICIENT NUMBER OF SHARES IS REQUIRED to cover the amount of the check.
If you do not own enough shares to cover a check when presented, the check
will be returned to the payee marked "insufficient funds".
o A CHECK MAY BE RETURNED if it is for less than $500 or if the check would
require the redemption of shares purchased by check or electronic funds
transfer within the ten previous business days.
69
<PAGE>
The Funds and the Custodian reserve the right to terminate or modify the
checkwriting privilege or to impose a service fee in connection with the
privilege.
Charges may be imposed for returned checks, stop-payment orders, copies of
cancelled checks and other special services.
REDEMPTION OF SHARES IN SMALLER ACCOUNTS
Each Fund reserves the right to close a shareholder's account and mail the
proceeds to the shareholder if the value of the account is reduced below $500
($250 in the case of a retirement account), unless the reduction is due to
market activity. However, the shareholder will first be notified in writing and
permitted 30 days to increase the balance.
ADDITIONAL SHAREHOLDER SERVICES AND INFORMATION
EXCHANGING SHARES
You may exchange your N Shares of any Money Market Fund for N Shares of any
other Harris Insight Fund without a sales charge, provided that:
o Your N Shares have been held for at least seven days,
o Your account registration stays the same, and
o The shares you wish to buy are registered for sale in your home state.
If you purchased N Shares of a Harris Insight Money Market Fund by an exchange
of A Shares of another Fund, those N Shares (but not other N Shares, including
shares acquired by reinvestment of dividends on the exchanged A Shares) may be
exchanged for and invested in A Shares of any Fund without a sales charge. Any
other N Shares of a Fund may be exchanged for and invested in A Shares of any
other Fund subject to the then-applicable sales charge.
The Harris Insight Funds A Shares are offered by a separate prospectus.
Each Fund reserves the right to terminate temporarily or permanently the
exchange privilege of any investor who makes more than four exchanges out of a
Fund in a calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted together
for purposes of the four-exchange limit. The exchange limit may be modified for
accounts in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials for further
information.
Each Fund reserves the right to refuse an exchange by any person or group if, in
Harris Trust's judgment, the Fund to be purchased might be unable to invest the
money effectively in accordance with its investment objective and policies or
might otherwise be adversely affected. Also, each Fund reserves the right to
modify or discontinue the exchange privilege for any reason, upon 60 days'
written notice.
The procedures that apply to redeeming shares also apply to exchanging shares.
70
<PAGE>
DIRECTED DIVIDEND PLAN (DDP)
You may direct your dividends and/or distributions from one Harris Insight Fund
to be invested automatically in another Harris Insight Fund without any fee or
sales charge, provided that both Funds are in the same share class and have
identical ownership registration. To use the DDP, you must maintain a balance of
at least $1,000 in the Fund account from which dividends are paid at the time
each DDP payment is made. (If your Fund account does not have a sufficient
balance to permit a Directed Dividend payment, your participation in the DDP
will cease and a new application will be needed to reinstate your Plan.)
TELEPHONE TRANSACTIONS
You may give up some level of security by choosing to buy or sell shares by
telephone rather than by mail. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine. If the Funds or their service
providers follow these procedures, they will not be liable for any losses
arising from unauthorized or fraudulent instructions and you may be responsible
for unauthorized requests.
Please verify the accuracy of instructions immediately upon receipt of
confirmation statements. You may bear the risk of loss from an unauthorized
telephone transaction.
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 Funds by telephone, requests may be mailed or hand-delivered
to the Funds c/o PFPC Inc., 103 Bellevue Parkway, Wilmington, DE 19809.
REGULAR REPORTS
Your investment will be easy to track. During the year, you will receive:
o An annual account statement
o A quarterly consolidated statement
o A confirmation statement, each time you buy, sell or exchange shares
o An annual and semi-annual report to shareholders for each Fund in which you
invest.
For more information on any of Harris Insight Funds' shareholder services,
please call 800.982.8782
71
<PAGE>
DIVIDENDS AND TAX CONSIDERATIONS
Dividends of net investment income, if any, are declared and paid at least
annually by each Fund. Following is the schedule of payments:
FUND DECLARED AND PAID
- --------------------------------------------------------------------------------
Balanced Fund Quarterly
- --------------------------------------------------------------------------------
Index Fund Quarterly
- --------------------------------------------------------------------------------
Equity Income Fund Quarterly
- --------------------------------------------------------------------------------
Equity Fund Quarterly
- --------------------------------------------------------------------------------
Growth Fund Annually
- --------------------------------------------------------------------------------
Small-Cap Value Fund Annually
- --------------------------------------------------------------------------------
Small-Cap Opportunity Fund Annually
- --------------------------------------------------------------------------------
International Fund Annually
- --------------------------------------------------------------------------------
Emerging Markets Fund Annually
- --------------------------------------------------------------------------------
Convertible Securities Fund Quarterly
- --------------------------------------------------------------------------------
Tax-Exempt Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Intermediate Tax-Exempt Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Short/Intermediate Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Intermediate Government Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Tax-Exempt Money Market Fund Daily/Monthly
- --------------------------------------------------------------------------------
Money Market Fund Daily/Monthly
- --------------------------------------------------------------------------------
Government Money Market Fund Daily/Monthly
- --------------------------------------------------------------------------------
Any capital gains are declared and paid at least annually.
All distributions may be invested in additional shares of the same Fund at NAV
and credited to your account on the ex-date, paid in cash on the payment date,
or invested in another Fund on the ex-date pursuant to the DDP. Distribution
checks and account statements will be mailed approximately two business days
after the payment date.
TAX CONSIDERATIONS
Following is a brief discussion of the general tax treatment of various
distributions from the Funds. It is not an exhaustive discussion, and your
particular tax status
72
<PAGE>
may be different. We encourage you to consult with your own tax adviser about
federal, state and local tax considerations.
The tax status of any distribution is the same regardless of how long you have
held shares of the Fund and whether you reinvest it in additional shares or take
it in cash:
o All dividends paid, including net short-term capital gains (except
"EXEMPT-INTEREST DIVIDENDS") are taxable to you as ordinary income.
o Distributions of net long-term capital gains, if any, are taxable to you as
long-term capital gains regardless of how long you have held the shares.
o You may realize a taxable gain or loss when you sell shares or exchange
shares between Funds, depending on your tax basis in the shares and the
value of those shares at the time of the transaction.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. If a Fund pays
nonrefundable taxes to foreign governments during the year, the taxes will
reduce the Fund's dividends but will still be included in your taxable income.
However, you may be able to claim an offsetting credit or deduction on your tax
return for your share of foreign taxes paid by a Fund.
TERMS TO KNOW
EXEMPT-INTEREST DIVIDENDS
Dividends paid by tax-exempt funds that are exempt from federal income tax.
Exempt-interest dividends are not necessarily exempt from state and local income
taxes.
73
<PAGE>
DISTRIBUTION ARRANGEMENTS
SERVICE PLANS
Each Fund may pay fees, at a rate of up to 0.25% of the average daily net asset
value of the Fund's N Shares, to financial institutions, securities dealers and
other industry professionals (which may include Harris Trust and its affiliates)
for shareholder support services that they provide. Each Money Market Fund may
also pay for expenses incurred for advertising and marketing N Shares of the
Fund at a rate of up to 0.10% of average daily net asset value of the Fund
pursuant to a plan adopted by the Fund under Rule 12b-1. Because those expenses
are paid out of the Fund's assets on an on-going basis, over time those expenses
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
MULTIPLE CLASSES
Each of the Index Fund, Tax-Exempt Money Market Fund, Money Market Fund and
Government Money Market Fund offers two classes of shares: N Shares and
Institutional Shares. Each other Fund offers three classes of shares: N Shares,
A Shares and Institutional Shares. The shares of each class are offered by a
separate prospectus.
MASTER FUND/FEEDER FUND STRUCTURE
The Board of Trustees has the authority to convert any Fund to a "feeder" fund
in a Master Fund/Feeder Fund Structure in which the Fund, instead of investing
in portfolio securities directly, would seek to achieve its investment objective
by investing all of its investable assets in a separate "master" fund having the
same investment objectives and substantially similar investment restrictions.
Other funds with similar objectives and restrictions could also invest in the
same Master Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs.
The SAI contains more information about the Funds, the Master Fund/Feeder Fund
Structure and the types of securities in which the Funds may invest.
74
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75
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand a Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund N Share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in N Shares of each Fund,
assuming reinvestment of all dividends and distributions. This information has
been derived from the financial statements audited by PricewaterhouseCoopers
LLP, independent accountants, whose report, along with the Funds' financial
statements, is included in the Funds' annual report, which is available
upon request.
These financial highlights should be read with the financial statements.
<TABLE>
<CAPTION>
BALANCED
FUND
04/16/97(3)
12/31/99 12/31/98 TO 12/31/97
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $14.44 $14.93 $12.56
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.386 0.440 0.301
Net Realized and Unrealized Gain/(Loss) on Investments (0.641) 0.759 2.411
------ ------ ------
Total from Investment Operations (0.255) 1.199 2.712
------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.404) (0.448) (0.342)
Net Realized Gains (1.401) (1.241) --
------ ------ ------
Total Distributions (1.805) (1.689) (0.342)
------ ------ ------
Net Asset Value, End of Period $12.38 $14.44 $14.93
====== ====== ======
TOTAL RETURN (1.52)% 8.29% 21.72%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 2,311 2,328 700
Ratio of Expenses to Average Net Assets 1.13% 1.13% 1.13%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.30% 1.23% 1.17%(1)
Ratio of Net Investment Income to Average Net Assets 2.59% 2.91% 3.20%(1)
Portfolio Turnover Rate 67.77% 70.93% 108.29%(1)
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
76
<PAGE>
<CAPTION>
INDEX
FUND
04/19/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $28.35 $23.51 $18.48 $16.35
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.249 0.236 0.247 0.188
Net Realized and Unrealized Gain/(Loss) on Investments 5.413 6.244 5.725 2.511
------ ------ ------ ------
Total from Investment Operations 5.662 6.480 5.972 2.699
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.240) (0.232) (0.233) (0.225)
Net Realized Gains (0.562) (1.408) (0.709) (0.344)
------ ------ ------ ------
Total Distributions (0.802) (1.640) (0.942) (0.569)
------ ------ ------ ------
Net Asset Value, End of Period $33.21 $28.35 $23.51 $18.48
====== ====== ====== ======
TOTAL RETURN 20.14% 27.88% 32.51% 16.56%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 24,056 13,727 6,942 150
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.71% 0.71% 0.72% 0.74%(1)
Ratio of Net Investment Income to Average Net Assets 0.79% 0.91% 1.14% 1.60%(1)
Portfolio Turnover Rate 2.17% 5.59% 7.10% 4.71%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
77
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY INCOME
FUND
04/18/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $19.26 $16.31 $13.72 $13.02
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.105 0.171 0.237 0.179
Net Realized and Unrealized Gain/(Loss) on Investments 1.741 3.490 4.037 1.732
------ ------ ------ ------
Total from Investment Operations 1.846 3.661 4.274 1.911
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.128) (0.167) (0.220) (0.213)
Net Realized Gains (0.578) (0.544) (1.464) (0.998)
------ ------ ------ ------
Total Distributions (0.706) (0.711) (1.684) (1.209)
------ ------ ------ ------
Net Asset Value, End of Period $20.40 $19.26 $16.31 $13.72
====== ====== ====== ======
TOTAL RETURN 9.68% 22.66% 31.53% 14.67%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 5,117 3,728 1,241 298
Ratio of Expenses to Average Net Assets 1.18% 1.18% 1.18% 1.18%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.24% 1.21% 1.21% 1.19%(1)
Ratio of Net Investment Income to Average Net Assets 0.61% 1.01% 1.44% 2.11%(1)
Portfolio Turnover Rate 18.57% 21.60% 29.87% 52.77%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
78
<PAGE>
<CAPTION>
EQUITY
FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.02 $17.59 $15.53 $13.99 $11.28
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.005 0.066 0.174 0.451 0.229
Net Realized and Unrealized Gain/(Loss) on Investments (0.323) 2.213 5.190 2.926 3.827
------ ------ ------ ------ ------
Total from Investment Operations (0.318) 2.279 5.364 3.377 4.056
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.012) (0.063) (0.175) (0.173) (0.232)
Net Realized Gains (2.060) (2.786) (3.129) (1.664) (1.114)
------ ------ ------ ------ ------
Total Distributions (2.072) (2.849) (3.304) (1.837) (1.346)
------ ------ ------ ------ ------
Net Asset Value, End of Period $14.63 $17.02 $17.59 $15.53 $13.99
====== ====== ====== ====== ======
TOTAL RETURN (1.74)% 13.42% 35.45% 24.15% 36.26%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 19,685 29,050 17,859 7,792 61,256
Ratio of Expenses to Average Net Assets 1.15% 1.14% 1.13% 0.94% 0.96%
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.16% 1.14% 1.13% 0.94% 0.97%
Ratio of Net Investment Income to Average Net Assets 0.04% 0.39% 1.08% 1.47% 1.75%
Portfolio Turnover Rate 65.13% 76.92% 81.48% 75.20% 75.93%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
79
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GROWTH
FUND
04/19/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $26.18 $22.67 $18.69 $16.49
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (0.119) (0.030) 0.004 0.030
Net Realized and Unrealized Gain/(Loss) on Investments 4.296 5.546 6.026 3.273
------ ------ ------ ------
Total from Investment Operations 4.177 5.516 6.030 3.303
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income -- -- (0.004) (0.038)
Net Realized Gains (1.387) (2.006) (2.046) (1.065)
------ ------ ------ ------
Total Distributions (1.387) (2.006) (2.050) (1.103)
------ ------ ------ ------
Net Asset Value, End of Period $28.97 $26.18 $22.67 $18.69
====== ====== ====== ======
TOTAL RETURN 16.22% 24.68% 32.54% 19.95%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 7,800 7,661 2,766 397
Ratio of Expenses to Average Net Assets 1.35% 1.35% 1.35% 1.35%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.39% 1.36% 1.36% 1.39%(1)
Ratio of Net Investment Income to Average Net Assets (0.41)% (0.20)% (0.03)% 0.17%(1)
Portfolio Turnover Rate 35.11% 34.96% 37.02% 35.36%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
80
<PAGE>
<CAPTION>
SMALL-CAP
VALUE FUND
07/10/97(3)
12/31/99 12/31/98 TO 12/31/97
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $30.69 $33.02 $32.31
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.031 0.093 0.028
Net Realized and Unrealized Gain/(Loss) on Investments 0.029 (1.342) 3.462
------ ------ ------
Total from Investment Operations 0.060 (1.249) 3.490
------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.053) (0.070) (0.036)
Net Realized Gains (0.417) (1.011) (2.744)
------ ------ ------
Total Distributions (0.470) (1.081) (2.780)
------ ------ ------
Net Asset Value, End of Period $30.28 $30.69 $33.02
====== ====== ======
TOTAL RETURN 0.22% (4.15)% 10.95%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 743 641 292
Ratio of Expenses to Average Net Assets 1.24% 1.24% 1.24%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.29% 1.30% 1.31%(1)
Ratio of Net Investment Income to Average Net Assets 0.12% 0.31% 0.38%(1)
Portfolio Turnover Rate 70.84% 76.44% 91.66%(1)
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMALL-CAP
OPPORTUNITY FUND
04/19/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.77 $17.66 $15.51 $14.25
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (0.057) (0.060) (0.003) 0.032
Net Realized and Unrealized Gain/(Loss) on Investments 7.042 0.241 3.823 1.996
------ ------ ------ ------
Total from Investment Operations 6.985 0.181 3.820 2.208
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income -- -- -- (0.050)
Net Realized Gains (0.765) (0.071) (1.670) (0.718)
------ ------ ------ ------
Total Distributions (0.765) (0.071) (1.670) (0.768)
------ ------ ------ ------
Net Asset Value, End of Period $23.99 $17.77 $17.66 15.51
====== ====== ====== ======
TOTAL RETURN 39.75% 0.99% 25.14% 14.29%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 6,397 5,032 2,485 443
Ratio of Expenses to Average Net Assets 1.45% 1.45% 1.45% 1.45%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.46% 1.46% 1.46% 1.47%(1)
Ratio of Net Investment Income to Average Net Assets (0.75)% (0.53)% (0.22)% 0.10%(1)
Portfolio Turnover Rate 59.99% 51.49% 39.63% 46.13%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
82
<PAGE>
<CAPTION>
INTERNATIONAL
FUND
03/13/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.55 $13.33 $15.46 $14.69
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.101 0.140 0.078 0.091
Net Realized and Unrealized Gain/(Loss) on Investments 3.262 (0.787) (0.876) 0.860
------ ------ ------ ------
Total from Investment Operations 3.363 (0.647) (0.798) 0.951
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.023) (0.133) (0.069) (0.113)
Net Realized Gains -- -- (1.263) (0.068)
------ ------ ------ ------
Total Distributions (0.023) (0.133) (1.332) (0.181)
------ ------ ------ ------
Net Asset Value, End of Period $15.89 $12.55 $13.33 $15.46
====== ====== ====== ======
TOTAL RETURN 26.81% (4.84)% (5.21)% 6.48%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 2,531 1,657 1,265 597
Ratio of Expenses to Average Net Assets 1.60% 1.58% 1.65% 1.61%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.60% 1.58% 1.67% 1.63%(1)
Ratio of Net Investment Income to Average Net Assets 0.61% 1.39% 0.57% 0.35%(1)
Portfolio Turnover Rate 48.49% 45.82% 93.33% 6.72%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
83
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMERGING MARKETS CONVERTIBLE
FUND SECURITIES FUND
10/21/97(3) 03/26/97(3)
12/31/99 12/31/98 TO 12/31/97 12/31/99 12/31/98 TO 12/31/97
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $5.85 $8.54 $10.00 $24.14 $28.52 $29.30
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (0.027) 0.008 0.002 0.902 1.106 0.690
Net Realized and Unrealized
Gain/(Loss) on Investments 3.773 (2.698) (1.462) 6.559 (1.691) 3.122
------ ------ ------ ------ ------ ------
Total from Investment Operations 3.746 (2.690) (1.460) 7.461 (0.585) 3.812
------ ------ ------ ------ ------ ------
Less Distributions:
Net Investment Income (0.016) -- -- (0.922) (1.073) (0.825)
Net Realized Gains -- -- -- (0.139) (2.722) (3.767)
------ ------ ------ ------ ------ ------
Total Distributions (0.016) -- -- (1.061) (3.795) (4.592)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $9.58 $5.85 $8.54 $30.54 $24.14 $28.52
====== ====== ====== ====== ====== ======
TOTAL RETURN 64.06% (31.50)% (14.60)%(2) 31.75% (2.04)% 13.39%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 322 62 96 375 409 85
Ratio of Expenses to Average Net Assets 1.95% 2.00% 2.00%(1) 1.17% 1.17% 1.17%(1)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 2.01% 2.33% 2.34%(1) 1.26% 1.26% 1.21%(1)
Ratio of Net Investment Income to Average
Net Assets (0.42)% 0.81% 0.18%(1) 3.48% 3.80% 3.51%(1)
Portfolio Turnover Rate 53.69% 34.55% --% 20.14% 48.73% 93.24%(1)
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
84
<PAGE>
<CAPTION>
TAX-EXEMPT
BOND FUND
10/02/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.39 $10.52 $10.25 $10.33
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.424 0.418 0.435 0.105
Net Realized and Unrealized
Gain/(Loss) on Investments (0.760) 0.059 0.391 0.136
------ ------ ------ ------
Total from Investment Operations (0.336) 0.477 0.826 0.241
------ ------ ------ ------
Less Distributions:
Net Investment Income (0.424) (0.418) (0.435) (0.105)
Net Realized Gains -- (0.189) (0.121) (0.216)
------ ------ ------ ------
Total Distributions (0.424) (0.607) (0.556) (0.321)
------ ------ ------ ------
Net Asset Value, End of Period $9.63 $10.39 $10.52 $10.25
====== ====== ====== ======
TOTAL RETURN (3.31)% 4.62% 8.28% 2.34%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 1,109 909 644 38
Ratio of Expenses to Average Net Assets 0.95% 1.04% 1.05% 1.05%(1)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.08% 1.05% 1.05% 1.06%(1)
Ratio of Net Investment Income to Average
Net Assets 4.19% 3.97% 4.22% 4.35%(1)
Portfolio Turnover Rate 225.82% 87.61% 61.52% 61.60%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
BOND
FUND
04/22/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.20 $10.20 $10.07 $9.99
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.586 0.579 0.603 0.402
Net Realized and Unrealized Gain/(Loss) on Investments (0.702) 0.103 0.284 0.113
------ ------ ------ ------
Total from Investment Operations (0.116) 0.682 0.887 0.515
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.586) (0.579) (0.603) (0.402)
Net Realized Gains (0.008) (0.103) (0.154) (0.033)
------ ------ ------ ------
Total Distributions (0.594) (0.682) (0.757) (0.435)
------ ------ ------ ------
Net Asset Value, End of Period $9.49 $10.20 $10.20 $10.07
====== ====== ====== ======
TOTAL RETURN (1.16)% 6.86% 9.14% 5.27%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 4,455 2,566 936 130
Ratio of Expenses to Average Net Assets 0.85% 0.85% 0.85% 0.85%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.15% 1.13% 1.14% 1.23%(1)
Ratio of Net Investment Income to Average Net Assets 5.95% 5.64% 6.00% 5.87%(1)
Portfolio Turnover Rate 92.79% 64.93% 138.30% 116.02%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
86
<PAGE>
<CAPTION>
INTERMEDIATE TAX-EXEMPT
BOND FUND
03/13/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.70 $10.75 $10.58 $10.55
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.396 0.390 0.327 0.084
Net Realized and Unrealized Gain/(Loss) on Investments (0.467) 0.103 0.220 0.066
------ ------ ------ ------
Total from Investment Operations (0.071) 0.493 0.547 0.150
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.396) (0.390) (0.327) (0.084)
Net Realized Gains (0.013) (0.153) (0.050) (0.036)
------ ------ ------ ------
Total Distributions (0.409) (0.543) (0.377) (0.120)
------ ------ ------ ------
Net Asset Value, End of Period $10.22 $10.70 $10.75 $10.58
====== ====== ====== ======
TOTAL RETURN (0.68)%(2) 4.67% 6.14% 1.44%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 2,743 900 644 --
Ratio of Expenses to Average Net Assets 0.94% 1.05% 1.04% 1.04%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.07% 1.05% 1.04% 1.07%(1)
Ratio of Net Investment Income to Average Net Assets 3.78% 3.62% 3.91% 4.33%(1)
Portfolio Turnover Rate 191.27% 90.92% 48.72% 57.23%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
87
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHORT/INTERMEDIATE
BOND FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.30 $10.21 $10.14 $10.38 $9.66
------ ------ ------ ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.570 0.577 0.608 0.594 0.588
Net Realized and Unrealized Gain/(Loss) on Investments (0.515) 0.096 0.070 (0.247) 0.720
------ ------ ------ ------ -----
Total from Investment Operations 0.055 0.673 0.678 0.347 1.308
------ ------ ------ ------ -----
LESS DISTRIBUTIONS:
Net Investment Income (0.570) (0.577) (0.608) (0.587) (0.588)
Net Realized Gains (0.015) (0.006) -- -- --
------ ------ ------ ------ -----
Total Distributions (0.585) (0.583) (0.608) (0.587) (0.588)
------ ------ ------ ------ -----
Net Asset Value, End of Period $9.77 $10.30 $10.21 $10.14 $10.38
====== ====== ====== ====== ======
TOTAL RETURN 0.56% 6.75% 6.89% 3.51% 13.88%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 7,525 4,658 5,922 4,432 51,814
Ratio of Expenses to Average Net Assets 0.85% 0.85% 0.85% 0.62% 0.60%
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.17% 1.15% 1.14% 0.92% 0.96%
Ratio of Net Investment Income to Average Net Assets 5.68% 5.60% 5.99% 5.59% 5.91%
Portfolio Turnover Rate 72.86% 66.06% 98.08% 186.02% 194.94%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
88
<PAGE>
<CAPTION>
INTERMEDIATE
GOVT. BOND FUND
04/16/97(3)
12/31/99 12/31/98 TO 12/31/97
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $16.61 $16.54 $16.06
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.876 0.925 0.702
Net Realized and Unrealized Gain/(Loss) on Investments (1.050) 0.231 0.521
------ ------ ------
Total from Investment Operations (0.174) 1.156 1.223
------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.876) (0.925) (0.702)
Net Realized Gains -- (0.161) (0.041)
------ ------ ------
Total Distributions (0.876) (1.806) (0.743)
------ ------ ------
Net Asset Value, End of Period $15.56 $16.61 $16.54
====== ====== ======
TOTAL RETURN (1.05)% 7.18% 7.76%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 4,870 2,126 716
Ratio of Expenses to Average Net Assets 0.75% 0.75% 0.75%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.18% 1.16% 1.16%(1)
Ratio of Net Investment Income to Average Net Assets 5.47% 5.57% 6.06%(1)
Portfolio Turnover Rate 76.50% 99.63% 84.89%(1)
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operations.
89
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-EXEMPT
MONEY MARKET FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.027 0.030 0.031 0.029 0.033
Net Realized and Unrealized
Gain/(Loss) on Investments -- -- -- -- --
------ ------ ------ ------ ------
Total from Investment Operations 0.027 0.030 0.031 0.029 0.033
------ ------ ------ ------ ------
Less Distributions:
Net Investment Income (0.027) (0.030) (0.031) (0.029) (0.033)
Capital Contribution -- -- -- -- --
------ ------ ------ ------ ------
Total Distributions (0.027) (0.030) (0.031) (0.029) (0.033)
------ ------ ------ ------ ------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
TOTAL RETURN 2.75% 3.02% 3.17% 2.94% 3.31%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 240,132 204,114 223,071 178,849 170,570
Ratio of Expenses to Average Net Assets 0.55% 0.55% 0.54% 0.53% 0.56%
Ratio of Expenses to Average Net
Assets (Excluding Waivers) 0.58% 0.58% 0.61% 0.64% 0.65%
Ratio of Net Investment Income to
Average Net Assets 2.71% 2.99% 3.13% 2.89% 3.25%
90
<PAGE>
<CAPTION>
MONEY MARKET
FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.048 0.051 0.052 0.050 0.054
Net Realized and Unrealized
Gain/(Loss) on Investments -- -- (0.001) -- --
------ ------ ------ ------ ------
Total from Investment Operations 0.048 0.051 0.051 0.050 0.054
------ ------ ------ ------ ------
Less Distributions:
Net Investment Income (0.048) (0.051) (0.052) (0.050) (0.054)
Capital Contribution -- -- 0.001 -- --
------ ------ ------ ------ ------
Total Distributions (0.048) (0.051) (0.051) (0.050) (0.054)
------ ------ ------ ------ ------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
TOTAL RETURN 4.92% 5.25% 5.35% 5.11% 5.58%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 1,053,228 877,527 677,804 461,213 423,588
Ratio of Expenses to Average Net Assets 0.54% 0.53% 0.51% 0.52% 0.56%
Ratio of Expenses to Average Net
Assets (Excluding Waivers) 0.59% 0.59% 0.61% 0.63% 0.65%
Ratio of Net Investment Income to
Average Net Assets 4.85% 5.12% 5.23% 5.00% 5.42%
91
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT
MONEY MARKET FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.046 0.050 0.050 0.049 0.054
Net Realized and Unrealized Gain/(Loss) on Investments -- -- -- -- --
------ ------ ------ ------ ------
Total from Investment Operations 0.046 0.050 0.050 0.049 0.054
------ ------ ------ ------ ------
Less Distributions:
Net Investment Income (0.046) (0.050) (0.050) (0.049) (0.054)
Capital Contribution -- -- -- -- --
------ ------ ------ ------ ------
Total Distributions (0.046) (0.050) (0.050) (0.049) (0.054)
------ ------ ------ ------ ------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
TOTAL RETURN 4.67% 5.08% 5.17% 5.00% 5.51%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 289,651 248,595 247,594 206,073 264,426
Ratio of Expenses to Average Net Assets 0.55% 0.54% 0.53% 0.54% 0.57%
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.59% 0.59% 0.63% 0.67% 0.67%
Ratio of Net Investment Income to Average Net Assets 4.58% 4.96% 5.05% 4.89% 5.36%
92 93
</TABLE>
<PAGE>
FOR MORE INFORMATION
More information on the Harris Insight Funds is available free upon request:
SHAREHOLDER REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected a Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about each Fund and its policies. The SAI is on
file with the Securities and Exchange Commission (Commission) and is
incorporated by reference into (i.e., is legally considered part of) this
prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 800.982.8782
BY MAIL
Harris Insight Funds
3200 Horizon Drive
King of Prussia, PA 19406
ON THE INTERNET
Text-only versions of the prospectus and other documents pertaining to the Funds
can be viewed online or downloaded from:
HARRIS INSIGHT FUNDS
http://www.harrisinsight.com
Information about the Funds (including the SAI) can be reviewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 202.942.8090. Reports and other information about the Funds are available on
the EDGAR Database on the Commission's Internet site at http://www.sec.gov.
Copies of information about the Funds may be obtained, after paying a
duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing to the Commission's Public Reference Section,
Washington, D.C. 20549-0102.
The Funds are series of Harris Insight Funds Trust, whose investment company
registration number is 811-7447.
HIF 1000 5/00
<PAGE>
HARRIS
INSIGHT(R) FUNDS
INSTITUTIONAL SHARES
MAY 1, 2000 PROSPECTUS
HARRIS INSIGHT EQUITY FUNDS
Balanced Fund
Index Fund
Equity Income Fund
Equity Fund
Growth Fund
Small-Cap Value Fund
Small-Cap Opportunity Fund
International Fund
Emerging Markets Fund
HARRIS INSIGHT FIXED INCOME FUNDS
Convertible Securities Fund
Tax-Exempt Bond Fund
Bond Fund
Intermediate Tax-Exempt Bond Fund
Short/Intermediate Bond Fund
Intermediate Government Bond Fund
HARRIS INSIGHT MONEY MARKET FUNDS
Tax-Exempt Money Market Fund
Money Market Fund
Government Money Market Fund
AS WITH ANY MUTUAL FUND, THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER THIS
PROSPECTUS IS ADEQUATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]
HARRIS
INSIGHT(R) FUNDS
<PAGE>
TABLE OF CONTENTS
INTRODUCTION TO EQUITY FUNDS PAGE 2
HARRIS INSIGHT EQUITY FUNDS
Balanced Fund 3
Index Fund 4
Equity Income Fund 5
Equity Fund 6
Growth Fund 7
Small-Cap Value Fund 8
Small-Cap Opportunity Fund 9
International Fund 10
Emerging Markets Fund 11
Risk Considerations 12
Fees and Expenses 14
INTRODUCTION TO FIXED INCOME FUNDS 15
HARRIS INSIGHT FIXED INCOME FUNDS
Convertible Securities Fund 16
Tax-Exempt Bond Fund 17
Bond Fund 18
Intermediate Tax-Exempt Bond Fund 19
Short/Intermediate Bond Fund 20
Intermediate Government Bond Fund 21
Risk Considerations 22
Fees And Expenses 24
INTRODUCTION TO MONEY MARKET FUNDS 25
HARRIS INSIGHT MONEY MARKET FUNDS
Tax-Exempt Money Market Fund 26
Money Market Fund 27
Government Money Market Fund 28
Risk Considerations 29
Fees And Expenses 30
INVESTMENT ADVISER 31
PORTFOLIO MANAGERS 32
PRICING OF FUND SHARES 34
SHAREHOLDER SERVICES 35
DIVIDENDS AND TAX CONSIDERATIONS 38
DISTRIBUTION ARRANGEMENTS 39
MASTER FUND/FEEDER FUND STRUCTURE 39
FINANCIAL HIGHLIGHTS 40
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT EQUITY FUNDS
The Harris Insight Equity Funds invest in stocks, which represent partial
ownership in a company. These Funds generally pursue capital appreciation:
that is, an increase in the Fund's share value. In some cases, the Harris
Insight Equity Funds also seek dividend income.
Equity funds' share prices will fluctuate with changes in the market and
economy as well as with the fortunes of the companies issuing the
underlying stocks. For this reason, equity fund share prices can sometimes
be more volatile than the share prices of other types of funds, exhibiting
sharp increases or decreases over relatively short periods of time.
WHY INVEST IN EQUITY FUNDS?
Equity funds offer investors the potential for greater returns than fixed income
funds and are considered an attractive choice for outpacing inflation over the
long term. Equity funds are more appropriate for investors who can tolerate a
higher degree of risk in exchange for an opportunity to pursue attractive
long-term investment rewards.
- --------------------------------------------------------------------------------
Shares of the Harris Insight Equity Funds are not bank deposits and are not
insured or guaranteed by the FDIC or any other government agency. The value
of your investment in a Fund will fluctuate, which means that you may lose
money.
Each Fund's primary investment practices and strategies are discussed
in this prospectus. Other practices, and their related risks, are described
in the Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be changed
by the Board of Trustees without approval by the Fund's shareholders.
Each Fund's principal risks are provided in an alphabetical listing within
the Fund description that follows. These risks are discussed in detail under
"Risk Considerations" on page 12.
- --------------------------------------------------------------------------------
2
<PAGE>
HARRIS INSIGHT EQUITY FUNDS
BALANCED FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide current income and capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests in a portfolio of equity and fixed income securities. Under
normal market conditions, equity securities will comprise between 40% and 65% of
the Fund's assets, and fixed income securities will comprise at least 25% of the
Fund's assets.
The portfolio manager continually reviews and adjusts the blend of the
securities in an effort to enhance returns based on current market conditions,
interest rate projections and other economic factors.
The Fund seeks to provide an overall return comprising between 40% and 65% of
the return of the STANDARD & POOR'S 500 STOCK INDEX and between 35% and 60% of
the return of the LEHMAN BROTHERS AGGREGATE BOND INDEX.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 12.)
o Allocation risk
o Interest rate risk
o Market risk
TERMS TO KNOW
STANDARD & POOR'S 500 STOCK INDEX (S&P 500(R))
An unmanaged index consisting of 500 widely held U.S. common stocks. The stocks
in the index are chosen based on industry representation, liquidity and
stability. The index is designed to reflect the returns of many different
sectors of the U.S. economy.
LEHMAN BROTHERS AGGREGATE BOND INDEX
An index measuring the total return of approximately 6,500 U.S. bonds.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1998 1999
8.61% -1.30%
Best Quarter: Q4 1998 5.99%
- ------------------------------------------------------------
Worst Quarter: Q3 1998 -6.30%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Inception
Year (3/24/97)
- ------------------------------------------------------------
Balanced Fund -1.30% 9.57%
S&P 500 Stock Index 21.04% 28.90%
Lehman Brothers
Aggregate Bond Index -0.82% 6.43%
3
<PAGE>
INDEX FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide the return and risk characteristics of the S&P 500.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally holds at least 90% of the 500 securities in the S&P 500 and
attempts to match its holdings of each issue with that security's proportional
representation in the S&P 500.
The portfolio manager employs a "passively" managed - or index - investment
approach that attempts to replicate the performance of the index without
necessarily investing in all of its stocks. This approach is unlike traditional
methods of active investment management whereby securities are selected on the
basis of economic, financial and market analysis. The Fund seeks a quarterly
performance within one percentage point of the performance of the S&P 500. On a
regular basis, the portfolio manager compares the Fund's performance to that of
the S&P 500. The portfolio manager may adjust the Fund's holdings if the Fund's
performance does not adequately track the performance of the S&P 500.
Apart from its equity investments, the Fund may use S&P 500 STOCK INDEX FUTURES
CONTRACTS to reduce transaction costs and simulate full investment in the S&P
500 while retaining a cash balance for portfolio management purposes.
WHAT IS THE FUND'S PRINCIPAL RISK?
(See Risk Considerations, page 12.)
o Market risk
TERMS TO KNOW
S&P 500 STOCK INDEX FUTURES CONTRACTS
Agreements whereby one party agrees to accept, and the other party agrees to
deliver, a dollar amount based on the value of the S&P 500 on a specified future
date. Purchasers of index futures contracts may participate in the performance
of the securities included in the index without committing the full amount of
capital required to purchase all of the individual securities.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1993 1994 1995 1996 1997 1998 1999
9.50% 0.78% 39.96% 22.71% 32.78% 28.22% 20.40%
Best Quarter: Q4 1998 21.23%
- ------------------------------------------------------------
Worst Quarter: Q3 1998 -10.01%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 Inception
Year Years (4/1/92)
- ------------------------------------------------------------
Index Fund 20.40% 28.07% 19.98%
S&P 500 Stock Index 21.04% 28.56% 20.88%
* The Fund is the successor to a collective or common investment fund managed by
Harris Trust and Savings Bank (Harris Trust) with investment objectives and
policies that were, in all material respects, equivalent to those of the Fund.
The performance of the Fund includes the performance of the predecessor fund
for periods before it became a mutual fund. The predecessor fund's performance
was adjusted to reflect the Fund's estimate of its expense ratio for the first
year of operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
4
<PAGE>
EQUITY INCOME FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide current income and, secondarily, capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in common stocks that can
be found in the S&P 500 or other attractive issues. These stocks are of larger
capitalization companies (i.e., companies with MARKET CAPITALIZATION in excess
of $1 billion).
The portfolio manager's approach should produce returns that are similar to
those of the S&P 500 and its corresponding sectors, yet with a higher level of
income.
The portfolio manager utilizes a disciplined investment process designed to
maintain a diversified portfolio of the equity securities of higher quality
companies.
The portfolio manager seeks securities with:
o Higher-than-average dividend yields
o Stronger-than-average growth characteristics
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 12.)
o Market risk
o Market segment risk
TERMS TO KNOW
MARKET CAPITALIZATION
The total market value of a company's outstanding shares of common stock,
calculated by multiplying the number of shares outstanding by the current market
price of the shares.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1994 1995 1996 1997 1998 1999
-0.43% 36.84% 17.95% 31.90% 22.97% 9.87%
Best Quarter: Q4 1998 19.75%
- ------------------------------------------------------------
Worst Quarter: Q3 1998 -11.06%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 Inception
Year Years (1/1/94)
- -------------------------------------------------------------
Equity Income Fund 9.87% 23.53% 19.16%
S&P 500 Stock Index 21.04% 28.56% 23.54%
* The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
5
<PAGE>
EQUITY FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation and current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in common stocks. These
stocks are of larger capitalization companies (i.e., companies with MARKET
CAPITALIZATION in excess of $1 billion).
The portfolio manager selects stocks that represent sectors found within the S&P
500 in an effort to:
o Provide greater returns, over the long-term, than the securities comprising
the S&P 500
o Maintain a risk level approximating that of the S&P 500
The Fund's portfolio consists of approximately 50 to 75 stocks, diversified
among major sectors of the market.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 12.)
o Market risk
o Market segment risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 5.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1997 1998 1999
35.89% 13.80% -1.57%
Best Quarter: Q4 1998 18.81%
- ------------------------------------------------------------
Worst Quarter: Q3 1998 -14.46%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Inception
Year (2/26/96)
- -------------------------------------------------------------
Equity Fund -1.57% 15.27%
S&P 500 Stock Index 21.04% 26.10%
6
<PAGE>
GROWTH FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in common stocks. These
stocks are of larger capitalization companies (i.e., companies with MARKET
CAPITALIZATION in excess of $1 billion).
The portfolio manager selects securities that are considered to be undervalued
and to represent growth opportunities. The Fund's investment management
discipline emphasizes growth in sales, earnings and asset values.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 12.)
o Market risk
o Market segment risk
o Volatility risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 5.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1993 1994 1995 1996 1997 1998 1999
6.21% -0.05% 36.43% 28.92% 32.81% 25.03% 16.56%
Best Quarter: Q4 1998 22.71%
- ------------------------------------------------------------
Worst Quarter: Q3 1998 -11.92%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 Inception
Year Years (4/1/92)
- -----------------------------------------------------------
Growth Fund 16.56% 27.76% 19.45%
S&P 500 Stock Index 21.04% 28.56% 20.88%
* The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
7
<PAGE>
SMALL-CAP VALUE FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in the securities of
smaller capitalization companies (i.e., companies that fall in the lowest 15% of
publicly traded companies listed in the U.S. determined by MARKET
CAPITALIZATION). These securities tend to be represented in the Russell 2000
Index, an index of companies with a median market capitalization of $428
million, that is a popular measure of the stock price performance of small
companies.
Using a "value" approach, the portfolio manager buys those securities considered
to be conservatively valued relative to the securities of comparable companies.
The portfolio manager pays particular attention to a company's current and
forecasted earnings levels.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 12.)
o Market risk
o Small company risk
o Volatility risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 5.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-16.26 41.64% 16.30% 14.96% -3.21% 27.15% 15.05% 29.58% -3.93% 0.49%
</TABLE>
Best Quarter: Q1 1991 20.97%
- ------------------------------------------------------------
Worst Quarter: Q3 1990 -23.72%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 10
Year Years Years
- -----------------------------------------------------------
Small-Cap Value Fund 0.49% 12.85% 10.88%
Russell 2000 Small
Stock Index 21.26% 16.69% 13.40%
Russell 2000 Value Index ** -1.49% 13.14% 12.45%
* The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
**The Fund's primary benchmark is now the Russell 2000 Value Index - a small-cap
value index comprised of stocks in the Russell 2000 Small Stock Index that
have a lower price-to-book ratio and/or lower forecasted earnings growth. This
index better reflects the investment objectives and policies of the Fund.
8
<PAGE>
SMALL-CAP OPPORTUNITY FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in the securities of
smaller capitalization companies (i.e., companies that fall in the lowest 15% of
publicly traded companies listed in the U.S. determined by MARKET
CAPITALIZATION). These securities tend to be represented in the Russell 2000
Index, an index of companies with a median market capitalization of $428
million, that is a popular measure of the stock price performance of small
companies.
The Fund invests in the securities of companies that the portfolio manager
believes have superior growth potential. In selecting securities, the portfolio
manager pays particular attention to companies offering potentially
above-average earnings, sales and asset value growth. The portfolio manager buys
those securities considered to be attractively valued relative to the securities
of comparable companies.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 12.)
o Market risk
o Small company risk
o Volatility risk
TERMS TO KNOW
MARKET CAPITALIZATION
See page 5.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-11.57% 47.65% 19.00% 15.19% -3.71% 26.30% 18.80% 25.47% 1.16% 40.14%
</TABLE>
Best Quarter: Q4 1999 28.21%
- ------------------------------------------------------------
Worst Quarter: Q3 1990 -23.79%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 10
Year Years Years
- -----------------------------------------------------------
Small-Cap Opportunity Fund 40.14% 21.69% 16.48%
Russell 2000 Small
Stock Index 21.26% 16.69% 13.40%
* The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
9
<PAGE>
INTERNATIONAL FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation. Current income is a secondary
objective.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in non-U.S. equity
securities. The Fund invests in at least three foreign countries to reduce risk.
The Fund invests in securities that the portfolio manager believes are
undervalued. When selecting securities, the portfolio manager pays particular
attention to the quality of a company's management, its growth prospects and
financial soundness.
The Fund may engage in foreign currency hedging transactions in an attempt to
minimize the effects of currency fluctuations on the Fund.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 12.)
o Currency rate risk
o Foreign securities risk
o Geographic concentration risk
o Market risk
o Volatility risk
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-22.16% 11.95% -4.39% 24.61% 4.29% 4.18% 5.11% -4.87% -4.64% 27.33%
</TABLE>
Best Quarter: Q2 1999 14.62%
- ------------------------------------------------------------
Worst Quarter: Q3 1990 -19.75%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 10
Year Years Years
- -----------------------------------------------------------
International Fund 27.33% 4.81% 3.20%
MSCI EAFE Index 25.27% 11.13% 5.32%
* The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
10
<PAGE>
EMERGING MARKETS FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in equity securities of
issuers located in EMERGING MARKET COUNTRIES. The portfolio manager selects
securities it considers be undervalued.
The Fund's investments reflect a broad cross-section of countries, industries
and companies.
When selecting securities, the portfolio manager pays particular attention to
the quality of a company's management, its growth prospects and financial
soundness.
The portfolio manager also evaluates such criteria as:
o Political climate of a country
o Interest rate and currency considerations
o Equity market valuations
The Fund may invest in certain debt securities when the portfolio manager
believes their potential for appreciation equals or exceeds that available from
investments in common stock.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 12.)
o Currency rate risk
o Foreign securities risk
o Geographic concentration risk
o Market risk
o Volatility risk
TERMS TO KNOW
EMERGING MARKET COUNTRY
The World Bank and other international agencies define a developing country on
the basis of such factors as trade initiatives, per capita income and level of
industrialization. There are over 130 countries that are emerging or developing
under this standard and approximately 40 of these countries have stock markets.
Emerging market countries generally include every nation in the world except the
U.S., Canada, Japan, Australia, New Zealand and most nations located in Western
Europe.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1998 1999
- -31.16% 64.53%
Best Quarter: Q4 1999 32.66%
- ------------------------------------------------------------
Worst Quarter: Q2 1998 -27.09%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Inception
Year (10/21/97)
- ------------------------------------------------------------
Emerging Markets Fund 64.53% -1.45%
MSCI Emerging
Markets Index 63.70% 8.41%
11
<PAGE>
RISK CONSIDERATIONS - EQUITY FUNDS
<TABLE>
The risks of investing in the various Funds are illustrated in the chart below.
A Fund's principal risks are designated by the ^ symbol.
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
FUNDS Equity Small-Cap Small-Cap Emerging
RISKS Balanced Index Income Equity Growth Value Opportunity International Markets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Allocation ^
- --------------------------------------------------------------------------------------------------------------------------------
Counterparty o o o o o o o o o
- --------------------------------------------------------------------------------------------------------------------------------
Credit o o o
- --------------------------------------------------------------------------------------------------------------------------------
Currency rate o ^ ^
- --------------------------------------------------------------------------------------------------------------------------------
Foreign securities o o o o o o ^ ^
- --------------------------------------------------------------------------------------------------------------------------------
Geographic
concentration ^ ^
- --------------------------------------------------------------------------------------------------------------------------------
Interest rate ^ o o o
- --------------------------------------------------------------------------------------------------------------------------------
Leverage o o o o o o o o o
- --------------------------------------------------------------------------------------------------------------------------------
Market ^ ^ ^ ^ ^ ^ ^ ^ ^
- --------------------------------------------------------------------------------------------------------------------------------
Market segment o ^ ^ ^ o o
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment o o o
- --------------------------------------------------------------------------------------------------------------------------------
Small company ^ ^ o o
- --------------------------------------------------------------------------------------------------------------------------------
Volatility o ^ ^ ^ ^ ^
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
ALLOCATION RISK
The risk that the percentages of the fund's assets invested in equities and
fixed income securities, respectively, will not be optimum for market conditions
at a given time.
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
CURRENCY RATE RISK
The risk that fluctuations in the exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Although a fund may
engage in foreign currency hedge transactions to help reduce this risk, those
transactions may not be effective or appropriate in particular situations nor,
of course, will they protect against declines in security values.
12
<PAGE>
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S.; more volatile markets; less securities regulation; less
favorable tax provisions; war or expropriation.
GEOGRAPHIC CONCENTRATION RISK
The risk that, if a fund concentrates its investments in a single country or
region, its portfolio will be more susceptible to factors adversely affecting
issuers located in that country or region than would a more geographically
diverse portfolio of securities.
INTEREST RATE RISK
The risk that changing interest rates may adversely affect the value of an
investment. With fixed-rate securities, an increase in prevailing interest rates
typically causes the value of those securities to fall, while a decline in
prevailing interest rates generally produces an increase in the market value of
the securities. Changes in interest rates will affect the value of longer-term
fixed income securities more than shorter-term securities and lower quality
securities more than higher quality securities.
LEVERAGE RISK
The risk that downward price changes in a security may result in a loss greater
than a fund's investment in the security. This risk exists through the use of
certain securities or techniques (e.g., derivative securities or purchases on
margin) that tend to magnify changes in an index or market.
MARKET RISK
The risk that the market value of a fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or it may affect the market as a whole.
MARKET SEGMENT RISK
The risk that investments concentrated in one portion of the market (e.g., large
capitalization stocks or short-term government bonds) will underperform the
overall market.
PREPAYMENT RISK
The risk that issuers will prepay fixed rate obligations when interest rates
fall, forcing a fund to re-invest in obligations with lower interest rates than
the original obligations.
SMALL COMPANY RISK
The risk that investments in smaller companies may be more volatile than
investments in larger companies, as smaller companies generally experience
higher growth and failure rates. The trading volume of small-company securities
is normally lower than that of larger companies. Changes in the demand for the
securities of smaller companies generally have a disproportionate effect on
their market price, tending to make prices rise more in response to buying
demand and fall more in response to selling pressure.
VOLATILITY RISK
The risk that performance will be affected by unanticipated events (e.g.,
significant earnings shortfalls or gains, war, or political events) that cause
major price changes in individual securities or market sectors.
13
<PAGE>
FEES AND EXPENSES - EQUITY FUNDS
The tables below describe the fees and expenses that you will pay if you buy
and hold shares of the Harris Insight Equity Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
REDEMPTION FEE None
EXCHANGE FEE None
- --------------------------------------------------------------------------------
<TABLE>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Small-Cap Small-Cap Emerging
Balanced Index Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Advisory Fees1 0.60% 0.25% 0.70% 0.70% 0.90% 0.80% 1.00% 1.05% 1.25%
Other Expenses1 0.45 0.21 0.29 0.21 0.24 0.24 0.21 0.30 0.51
- ----------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses1 1.05% 0.46% 0.99% 0.91% 1.14% 1.04% 1.21% 1.35% 1.76%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
1 Expenses are based on amounts incurred by the Funds during their most recent
fiscal year but do not reflect waivers of advisory fees by Harris Trust and
sub-administration fees by PFPC Inc. After these waivers, actual Fund advisory
fees, Other Expenses and Total Operating Expenses for the fiscal year ended
December 31, 1999 were:
<CAPTION>
Equity Small-Cap Small-Cap Emerging
Balanced Index Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.45% 0.24% 0.65% 0.70% 0.87% 0.75% 0.99% 1.05% 1.23%
Other Expenses 0.43 0.21 0.28 0.20 0.23 0.24 0.21 0.30 0.47
Total Operating Expenses 0.88% 0.45% 0.93% 0.90% 1.10% 0.99% 1.20% 1.35% 1.70%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
<TABLE>
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Equity Funds to the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in a Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<CAPTION>
Equity Small-Cap Small-Cap Emerging
Balanced Index Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One Year $107 $47 $101 $93 $116 $106 $123 $137 $179
- -----------------------------------------------------------------------------------------------------------------------------------
Three Years 334 148 315 290 362 331 384 428 554
- -----------------------------------------------------------------------------------------------------------------------------------
Five Years 579 258 547 504 628 574 665 739 954
- -----------------------------------------------------------------------------------------------------------------------------------
Ten Years 1,283 579 1,213 1,120 1,386 1,271 1,466 1,624 2,073
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT FIXED INCOME FUNDS
The Harris Insight Fixed Income Funds invest primarily in bonds, which are
debt instruments that normally --
o Pay a set amount of interest on a regular basis
o Repay the face amount, or principal, at a stated future date
o Are issued by domestic and foreign corporations, federal and state
governments, and their agencies
WHY INVEST IN FIXED INCOME FUNDS?
Fixed income funds can play a key role in an investor's portfolio by offering:
o A reasonable level of current income
o A measure of price stability relative to equity fund investments
o In the case of tax-exempt funds, income that is generally free from federal
income tax
HOW DO FIXED INCOME FUNDS PROVIDE A STEADY STREAM OF INCOME?
Fixed income funds earn income on the underlying securities and pay this out to
the shareholders on a regular (e.g., monthly) basis.
WHAT CAUSES BOND VALUES TO CHANGE?
Investors should be aware that bonds will fluctuate in value for any of three
main reasons:
o A change in interest rates
o A change in economic conditions
o A change in the financial condition of the issuer
HOW DOES THE PRICE OF A BOND MOVE WITH INTEREST RATES?
When interest rates rise, bond prices fall - and vice versa. Changing interest
rates have a greater effect on bonds with longer maturities than on those with
shorter maturities. As a result, when prevailing interest rates rise, the prices
of long-term bonds decrease, to a greater degree than the prices of short-term
bonds. The reverse is true when interest rates fall.
HOW ARE BONDS GRADED?
Bond quality, or grade, refers to the creditworthiness (the ability to repay
debt) of the issuing organization. Higher ratings indicate better quality.
Independent rating services, such as Moody's Investors Service or Standard &
Poor's, publish and disseminate bond quality ratings on a regular basis.
- --------------------------------------------------------------------------------
Shares of the Harris Insight Fixed Income Funds are not bank deposits and are
not insured or guaranteed by the FDIC or any other government agency. The
value of your investment in a Fund will fluctuate, which means that you may
lose money.
Each Fund's primary investment practices and strategies are discussed in
this prospectus. Other practices, and their related risks, are described in
the Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be changed
by the Board of Trustees without approval by the Fund's shareholders.
Each Fund's principal risks are provided in an alphabetical listing within
the Fund description that follows. These risks are discussed in detail under
"Risk Considerations" on page 22.
- --------------------------------------------------------------------------------
15
<PAGE>
HARRIS INSIGHT FIXED INCOME FUNDS
CONVERTIBLE SECURITIES FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide capital appreciation and current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in CONVERTIBLE SECURITIES
(bonds, preferred stock and other instruments that are convertible into common
stock).
The Fund also may invest up to 35% of its assets in SYNTHETIC CONVERTIBLES and
15% of its assets in common stocks. When, in the portfolio manager's opinion,
convertible securities do not serve the Fund's objective, the Fund may invest
part or all of its assets in U.S. GOVERNMENT SECURITIES, corporate debt
obligations and short-term money market instruments. The portfolio manager will
continue to seek current income during such periods, but will put less emphasis
on capital appreciation.
The portfolio manager invests primarily in convertible securities rated "B" or
better by Standard & Poor's Corporation and Moody's Investors Service, Inc. (or,
if not rated, securities considered by the portfolio manager to be of comparable
quality). The Fund may also invest up to:
o 15% of its assets in securities rated "B-"
o 5% of its assets in convertible securities rated "CCC" by Standard & Poor's
or "Caa" by Moody's. (Securities rated "BB" or below by Standard & Poor's
or "Ba" or below by Moody's are "high yield" securities, commonly known as
"junk bonds." These securities are considered speculative and are subject
to increased risk.)
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Credit risk
o Interest rate risk
o Market risk
TERMS TO KNOW
CONVERTIBLE SECURITIES
Bonds, debentures, notes, preferred stock or other securities that are
convertible into common stock. Convertible securities have some unique return
characteristics relative to market fluctuations:
o When equity markets go up, they tend to rise in price
o When interest rates rise, they tend to decline relatively less in price
than long-term bonds
SYNTHETIC CONVERTIBLES
Issues that function like a convertible security by combining separate
securities into one investment package offering fixed income and the right to
acquire stock.
U.S. GOVERNMENT SECURITIES
Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -20.39% 27.14 17.61% 13.84% -3.09% 19.18% 21.05% 18.68% -1.80% 32.07%
</TABLE>
Best Quarter: Q4 1999 25.25%
- ------------------------------------------------------------
Worst Quarter: Q3 1990 -17.64%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 10
Year Years Years
- ------------------------------------------------------------
Convertible Securities Fund 32.07% 17.30% 11.30%
First Boston Convertible Index 42.29% 18.47% 14.06%
* The Fund is the successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
16
<PAGE>
TAX-EXEMPT BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of current income that is exempt from
federal income tax.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in MUNICIPAL SECURITIES
with varying maturities. These securities are generally exempt from federal
income tax and not subject to the ALTERNATIVE MINIMUM TAX.
The portfolio manager employs:
o Interest rate risk management techniques to temper the potential negative
impact of interest rate increases on the Fund's share price
o In-depth credit analysis to help ensure that the municipalities issuing the
bonds are likely to repay their debt
The Fund also may invest in U.S. GOVERNMENT SECURITIES and securities with
various forms of credit enhancement (such as bank letters of credit). The Fund
may buy and sell options and interest rate futures contracts to hedge against
declines in the value of portfolio securities.
In pursuit of higher income, the portfolio manager normally favors longer-term
bonds that typically mature in ten years or more. In exchange for this higher
potential income, investors may experience higher share-price volatility than
would occur through investments with shorter maturities.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Credit risk
o Interest rate risk
o Municipal market risk
o Prepayment risk
TERMS TO KNOW
ALTERNATIVE MINIMUM TAX (AMT)
A federal tax designed to ensure that individuals, trusts, estates and companies
are limited in their deductions, exemptions, and tax credits when calculating
federal income tax liability.
MUNICIPAL SECURITIES
Bonds and other obligations issued by state and local governments to finance
operations or projects. These securities make interest payments that are exempt
from federal income tax.
U.S. GOVERNMENT SECURITIES
See page 16.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.60% 11.61% 8.37% 12.95% -7.30% 14.45% 3.76% 8.55% 4.88% -3.07%
</TABLE>
Best Quarter: Q2 1995 5.98%
- ------------------------------------------------------------
Worst Quarter: Q1 1994 -5.09%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 10
Year Years Years
- ------------------------------------------------------------
Tax-Exempt Bond Fund -3.07% 5.55% 5.77%
Lehman Brothers
Municipal Bond Index -2.06% 6.91% 6.88%
* The Fund is a successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
17
<PAGE>
BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of total return, including a competitive
level of current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in bonds and similar fixed
income securities. The Fund may invest in the following:
o Bonds and debentures
o U.S. GOVERNMENT SECURITIES
o Debt obligations of foreign governments
o MORTGAGE-BACKED SECURITIES
o MUNICIPAL SECURITIES
o ZERO-COUPON SECURITIES
o Other floating/variable rate obligations
o Options and interest-rate futures contracts
The Fund normally maintains a DOLLAR-WEIGHTED AVERAGE MATURITY (or average life
with respect to mortgage-backed and asset-backed securities) of between five and
ten years. Accordingly, the Fund's holdings may experience more share-price
volatility than bonds with shorter maturities, making the Fund a more suitable
investment for long-term investors.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Credit risk
o Interest rate risk
o Prepayment risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 16.
MORTGAGE-BACKED SECURITIES
Debt issues, based on a pool of underlying mortgages, that make interest and
principal payments to investors.
MUNICIPAL SECURITIES
See page 17.
ZERO-COUPON SECURITIES
Securities that do not pay a stated interest rate but are sold at a deep
discount to their value at maturity. The difference between a security's
discounted price and its full value at maturity represents the payment of
interest.
DOLLAR-WEIGHTED AVERAGE MATURITY
An average of all of the maturities of a fund's securities holdings, weighted
according to each security's dollar value relative to the rest of the holdings.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1997 1998 1999
9.41% 7.12% -0.91%
Best Quarter: Q3 1997 3.67%
- ------------------------------------------------------------
Worst Quarter: Q2 1999 -1.07%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Inception
Year (4/16/96)
- ------------------------------------------------------------
Bond Fund -0.91% 5.60%
Lehman Brothers
Aggregate Bond Index -0.82% 6.29%
18
<PAGE>
INTERMEDIATE TAX-EXEMPT BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of current income that is exempt from
federal income tax.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in a broad range of
MUNICIPAL SECURITIES. These securities are generally exempt from federal income
tax and not subject to the ALTERNATIVE MINIMUM TAX.
Under normal market conditions, the Fund's investments will have a
DOLLAR-WEIGHTED AVERAGE MATURITY in a range of three to ten years. Such
intermediate-term securities share these basic characteristics:
o They offer a higher income stream and somewhat higher share price
volatility than shorter-term municipal bond funds
o They tend to deliver less income with greater share price stability than
longer-term bond funds
The Fund also may invest in U.S. GOVERNMENT SECURITIES and securities with
various forms of credit enhancement (such as bank letters of credit). The Fund
may buy and sell options and interest rate futures contracts to hedge against
declines in value of portfolio securities.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Credit risk
o Interest rate risk
o Municipal market risk
o Prepayment risk
TERMS TO KNOW
MUNICIPAL SECURITIES
See page 17.
ALTERNATIVE MINIMUM TAX (AMT)
See page 17.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 18.
U.S. GOVERNMENT SECURITIES
See page 16.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.35% 11.02% 6.77% 8.55% -3.08% 11.68% 3.06% 6.41% 4.94% -0.43%
</TABLE>
Best Quarter: Q1 1995 4.57%
- ------------------------------------------------------------
Worst Quarter: Q1 1994 -2.83%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 10
Year Years Years
- -----------------------------------------------------------
Intermediate Tax-Exempt -0.43% 5.05% 5.43%
Bond Fund
Lehman Brothers
Quality Intermediate
Municipal Bond Index 0.29% 6.24% N/A **
Lehman Brothers
3-15 Year Blend
Municipal Bond Index *** -0.47% 6.67% N/A **
* The Fund is a successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
** The inception date of the index was July 1, 1993.
*** The Fund's primary benchmark will now be the Lehman Brothers 3-15 Year Blend
Municipal Index - an index comprised of 40,278 investment-grade or better
municipal bonds, from issues larger than $50 million dated since 1991 and
having maturities between 2 and 17 years. This index better reflects the
investment objectives and policies of the Fund.
19
<PAGE>
SHORT/INTERMEDIATE BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of total return, including a competitive
level of current income.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in bonds with a
short/intermediate-term average maturity.
The portfolio manager favors bonds with two to five years remaining to maturity
in order to achieve relative price stability and an attractive stream of income.
Such short/intermediate-term bonds tend to offer a buffer against rising
interest rates, although they will appreciate less when interest rates fall.
The Fund normally maintains a DOLLAR-WEIGHTED AVERAGE MATURITY (or average life
with respect to mortgage-backed and asset-backed securities) of between two and
five years. The Fund may invest in:
o Bonds and debentures
o U.S. GOVERNMENT SECURITIES
o U.S. dollar-denominated debt obligations of foreign issuers
o MORTGAGE-BACKED SECURITIES
o ASSET-BACKED SECURITIES
o MUNICIPAL SECURITIES
o ZERO-COUPON SECURITIES
o Other floating/variable rate obligations
o Options and interest-rate futures contracts
If a defensive position is warranted, the Fund may hold short-term U.S.
government securities (such as Treasury bills), high-quality money market
instruments and cash.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Credit risk
o Interest rate risk
o Prepayment risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 16.
MORTGAGE-BACKED SECURITIES
See page 18.
ASSET-BACKED SECURITIES
Securities collateralized by credit card loans or other accounts receivable.
MUNICIPAL SECURITIES
See page 17.
ZERO-COUPON SECURITIES
See page 18.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 18.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1997 1998 1999
7.15% 7.01% 0.81%
Best Quarter: Q3 1998 3.33%
- ------------------------------------------------------------
Worst Quarter: Q2 1999 -0.73%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Inception
Year (2/26/96)
- ------------------------------------------------------------
Short/Intermediate
Bond Fund 0.81% 4.79%
Lehman Brothers
Intermediate Government/
Corporate Bond Index 0.39% 5.42%
20
<PAGE>
INTERMEDIATE GOVERNMENT BOND FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide a high level of current income, consistent with
preservation of capital.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 65% of its assets in:
o U.S. GOVERNMENT SECURITIES
o MORTGAGE-BACKED SECURITIES, issued by U.S. government agencies
o REPURCHASE AGREEMENTS collateralized by U.S. government securities
The DOLLAR-WEIGHTED AVERAGE MATURITY (or average life with respect to
mortgage-backed and asset-backed securities) generally will be in the
intermediate range of between three and ten years.
The portfolio manager may invest up to 20% of the Fund's assets in:
o ASSET-BACKED SECURITIES
o ZERO-COUPON SECURITIES
o Corporate bonds
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
o Credit risk
o Interest rate risk
o Prepayment risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 16.
MORTGAGE-BACKED SECURITIES
See page 18.
REPURCHASE AGREEMENTS
A binding agreement enabling a bank or broker to borrow money, using securities
as collateral, with a promise to buy back the securities at a specified price,
usually within 90 days.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 18.
ASSET-BACKED SECURITIES
See page 20.
ZERO-COUPON SECURITIES
See page 18.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. The
table compares the Fund's performance over time to that of a broad measure of
market performance. When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of how it will perform
in the future.
BAR CHART:
<TABLE>
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.29% 13.50% 6.82% 8.26% -1.65% 13.46% 4.06% 7.82% 7.45% -0.80%
</TABLE>
Best Quarter: Q3 1991 4.64%
- ------------------------------------------------------------
Worst Quarter: Q1 1994 -2.09%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 5 10
Year Years Years
- -----------------------------------------------------------
Intermediate Government
Bond Fund -0.80% 6.30% 6.71%
Lehman Brothers Intermediate
Government Bond Index 0.49% 6.93% 7.10%
* The Fund is a successor to a collective or common investment fund managed by
Harris Trust with investment objectives and policies that were, in all
material respects, equivalent to those of the Fund. The performance of the
Fund includes the performance of the predecessor fund for periods before it
became a mutual fund. The predecessor fund's performance was adjusted to
reflect the Fund's estimate of its expense ratio for the first year of
operation as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor was it subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the
performance results.
21
<PAGE>
<TABLE>
RISK CONSIDERATIONS - FIXED INCOME FUNDS
The risks of investing in the various Funds are illustrated in the chart below.
A Fund's principal risks are designated by the ^ symbol.
<CAPTION>
FUNDS Intermediate Short/ Intermediate
Convertible Tax-Exempt Tax-Exempt Intermediate Government
RISKS Securities Bond Bond Bond Bond Bond
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Counterparty o o o o o o
- ----------------------------------------------------------------------------------------------------------
Credit ^ ^ ^ ^ ^ ^
- ----------------------------------------------------------------------------------------------------------
Foreign securities o o o o
- ----------------------------------------------------------------------------------------------------------
Interest rate ^ ^ ^ ^ ^ ^
- ----------------------------------------------------------------------------------------------------------
Leverage o o o o o o
- ----------------------------------------------------------------------------------------------------------
Market ^ o o o o o
- ----------------------------------------------------------------------------------------------------------
Municipal market ^ o ^
- ----------------------------------------------------------------------------------------------------------
Prepayment ^ ^ ^ ^ ^
- ----------------------------------------------------------------------------------------------------------
</TABLE>
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S.; more volatile markets; less securities regulation; less
favorable tax provisions; war or expropriation.
INTEREST RATE RISK
The risk that changing interest rates may adversely affect the value of an
investment. With fixed-rate securities, an increase in prevailing interest rates
typically causes the value of those securities to fall, while a decline in
prevailing interest rates generally produces an increase in the market value of
the securities. Changes in interest rates will affect the value of longer-term
fixed income securities more than shorter-term securities and lower quality
securities more than higher quality securities.
22
<PAGE>
LEVERAGE RISK
The risk that downward price changes in a security may result in a loss greater
than a fund's investment in the security. This risk exists through the use of
certain securities or techniques (e.g., derivative securities or purchases on
margin) that tend to magnify changes in an index or market.
MARKET RISK
The risk that the market value of a fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or it may affect the market as a whole.
MUNICIPAL MARKET RISK
The risk that certain factors may negatively affect the value of municipal
securities, and, as a result, the share price of a fund that invests in them.
These factors include political or legislative changes, uncertainties related to
the tax status of the securities or the rights of investors in the securities. A
fund may invest in municipal obligations that are related in such a way (e.g.,
multiple apparently unrelated issues that depend on the financial rating or
support of a single government unit) that an economic, business or political
development or change that affects one of these obligations would also affect
the others.
PREPAYMENT RISK
The risk that issuers will prepay fixed-rate obligations when interest rates
fall, forcing a fund to re-invest in obligations with lower interest rates than
the original obligations.
23
<PAGE>
FEES AND EXPENSES - FIXED INCOME FUNDS
The tables below describe the fees and expenses that you will pay if you buy
and hold shares of the Harris Insight Fixed Income Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
REDEMPTION FEE None
EXCHANGE FEE None
- --------------------------------------------------------------------------------
<TABLE>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Convertible Tax-Exempt Intermediate Short/ Intermediate
Securities Bond Bond Tax-Exempt Intermediate Government
Fund Fund Fund Bond Fund Bond Fund Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees1 0.70% 0.60%2 0.65% 0.60%2 0.70% 0.65%
Other Expenses1 0.31 0.23 0.25 0.22 0.22 0.28
- ---------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses1 1.01% 0.83% 0.90% 0.82% 0.92% 0.93%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
1 Expenses are based on amounts incurred by the Funds during their most recent
fiscal year but do not reflect waivers of advisory fees by Harris Trust and
sub-administration fees by PFPC Inc. After these waivers, actual Fund advisory
fees, Other Expenses and Total Operating Expenses for the fiscal year ended
December 31, 1999 were:
<CAPTION>
Convertible Tax-Exempt Intermediate Short/ Intermediate
Securities Bond Bond Tax-Exempt Intermediate Government
Fund Fund Fund Bond Fund Bond Fund Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.61% 0.47%2 0.37% 0.47%2 0.39% 0.24%
Other Expenses 0.31 0.23 0.23 0.22 0.21 0.26
Total Operating Expenses 0.92% 0.70% 0.60% 0.69% 0.60% 0.50%
- ---------------------------------------------------------------------------------------------------------------------------------
2 Commencing October 18, 1999, Harris Trust has waived its entire advisory fee
for the Tax-Exempt Bond Fund and the Intermediate Tax-Exempt Bond Fund. Those
waivers can be reduced or terminated at any time at the option of Harris
Trust. If those fee waivers had been in effect for the entire fiscal year
ended December 31, 1999, the Total Operating Expenses for each of the
Tax-Exempt Bond Fund and the Intermediate Tax-Exempt Bond Fund (expressed as
percentage of average net assets) for that year would have been 0.23% and
0.22% respectively.
</TABLE>
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Fixed Income Funds to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in a Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
Convertible Tax-Exempt Intermediate Short/ Intermediate
Securities Bond Bond Tax-Exempt Intermediate Government
Fund Fund Fund Bond Fund Bond Fund Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year $103 $85 $92 $84 $94 $95
- ---------------------------------------------------------------------------------------------------------------------------------
Three Years 322 265 287 262 293 296
- ---------------------------------------------------------------------------------------------------------------------------------
Five Years 558 460 498 455 509 515
- ---------------------------------------------------------------------------------------------------------------------------------
Ten Years 1,236 1,025 1,108 1,014 1,131 1,143
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT MONEY MARKET FUNDS
The Harris Insight Money Market Funds offer investors the opportunity to derive
income from a portfolio of money market instruments with a stable net asset
value. They invest in short-term securities issued by banks, other U.S.
corporations, the U.S. government, state or local governments, and other
entities. These money market instruments may include certificates of deposit,
bankers' acceptances, variable rate demand notes, fixed-term obligations,
COMMERCIAL PAPER, ASSET-BACKED SECURITIES and REPURCHASE AGREEMENTS.
WHY INVEST IN MONEY MARKET FUNDS?
These funds are especially well-suited for conservative investors who seek -
o Current income
o Stability of principal (they are managed in an attempt to maintain a share
price of $1.00)
WHAT ARE THE FUNDS' INVESTMENT PARAMETERS?
Money market funds must conform to a number of regulations, including rules that
require each fund to -
o Limit the DOLLAR-WEIGHTED AVERAGE MATURITY of their investments to 90 days
or less
o Buy only high-quality, short-term money market instruments
o Buy securities with remaining maturities no longer than 397 days
TERMS TO KNOW
COMMERCIAL PAPER
Short-term securities that are issued by corporations and other borrowers to
finance their current obligations and are typically unsecured. Issues of
commercial paper normally have maturities of less than nine months and have
fixed rates of return.
ASSET-BACKED SECURITIES
See page 20.
REPURCHASE AGREEMENTS
See page 21.
DOLLAR-WEIGHTED AVERAGE MATURITY
See page 18.
- --------------------------------------------------------------------------------
Shares of the Harris Insight Money Market Funds are not bank deposits and are
not guaranteed or insured by any bank, government entity, or the FDIC.
Although each of the Harris Insight Money Market Funds seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in a Fund.
Each Fund's primary investment practices and strategies are discussed in this
prospectus. Other practices, and their related risks, are described in the
Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be changed
by the Board of Trustees without approval by the Fund's shareholders.
Each Fund's principal risks are provided in an alphabetical listing within
the Fund description that follows. These risks are discussed in detail under
"Risk Considerations" on page 29.
- --------------------------------------------------------------------------------
25
<PAGE>
HARRIS INSIGHT MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income that is exempt from
federal income taxes as is consistent with its investment policies and with
preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in high-quality, short-term
money market instruments that are generally exempt from federal income tax and
are not subject to the ALTERNATIVE MINIMUM TAX.
The Fund will invest primarily in high-quality MUNICIPAL SECURITIES that are
generally exempt from federal income taxes and will purchase only U.S.
dollar-denominated securities.
In addition, the Fund will purchase only securities (other than U.S. GOVERNMENT
SECURITIES) that have been rated within the two highest rating categories by at
least two nationally recognized rating agencies (or, if not rated, are
considered by the portfolio manager to be of comparable quality).
Depending on market conditions, the Fund may temporarily hold up to 20% of the
current value of its assets in securities whose interest income is subject to
taxation.
Current income generally will be lower than the income provided by funds that
invest in securities with taxable income or securities with longer maturities or
lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 29.)
o Credit risk
o Municipal market risk
o Principal stability risk
TERMS TO KNOW
ALTERNATIVE MINIMUM TAX (AMT)
See page 17.
MUNICIPAL SECURITIES
See page 17.
U.S. GOVERNMENT SECURITIES
See page 16.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1995 1996 1997 1998 1999
3.60% 3.19% 3.47% 3.35% 3.07%
Best Quarter: Q2 1995 0.95%
- ------------------------------------------------------------
Worst Quarter: Q1 1999 0.68%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 5 Inception
Year Years (1/5/94)
- ------------------------------------------------------------
Tax-Exempt
Money Market Fund 3.07% 3.33% 3.20%
As of December 31, 1999, the seven-day yield for the fund was 4.14%. As of the
same date, the effective tax-equivalent seven-day yield for the Fund was 5.88%.
For current yield information, please call 800.982.8782.
26
<PAGE>
MONEY MARKET FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income as is consistent
with its investment policies and with preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests only in high-quality, short-term money market instruments that,
in the opinion of the investment adviser, present minimal credit risks. The Fund
invests in a broad range of short-term money market instruments, including U.S.
GOVERNMENT SECURITIES, as well as bank and commercial obligations. COMMERCIAL
PAPER purchased by the Fund will consist of U.S. dollar-denominated direct
obligations of domestic and foreign corporate issuers, including bank holding
companies.
The Fund will purchase only U.S. dollar-denominated securities. In addition, the
Fund will purchase only securities (other than U.S. government securities) that
have been rated within the two highest rating categories by at least two
nationally recognized rating agencies (or, if not rated, are considered by the
portfolio manager to be of comparable quality). No more than 5% of the Fund's
assets will be invested in securities in the second highest rating category.
Current income generally will be lower than the income provided by funds that
invest in securities with longer maturities or lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 29.)
o Credit risk
o Foreign securities risk
o Principal stability risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 16.
COMMERCIAL PAPER
See page 25.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1995 1996 1997 1998 1999
5.86% 5.38% 5.66% 5.61% 5.29%
Best Quarter: Q2 1995 1.46%
- ------------------------------------------------------------
Worst Quarter: Q2 1999 1.23%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 5 Inception
Year Years (1/5/94)
- ------------------------------------------------------------
Money Market Fund 5.29% 5.56% 5.31%
As of December 31, 1999, the seven-day yield for the Fund was 5.87%. For current
yield information, please call 800.982.8782.
27
<PAGE>
GOVERNMENT MONEY MARKET FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income from government
obligations as is consistent with preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests exclusively in short-term securities issued by the U.S.
government, its agencies or instrumentalities, and REPURCHASE AGREEMENTS backed
by those securities, all of which are deemed to be of minimal credit risk by the
investment adviser.
Current income generally will be lower than the income provided by funds that
invest in securities with longer maturities or lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 29.)
o Credit risk
o Principal stability risk
TERMS TO KNOW
REPURCHASE AGREEMENTS
See page 21.
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1995 1996 1997 1998 1999
5.79% 5.24% 5.48% 5.43% 5.04%
Best Quarter: Q2 1995 1.45%
- ------------------------------------------------------------
Worst Quarter: Q2 1999 1.18%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 5 Inception
Year Years (5/16/94)
- -------------------------------------------------------------
Government Money
Market Fund 5.04% 5.39% 5.29%
As of December 31, 1999, the seven-day yield for the Fund was 5.28%. For current
yield information, please call 800.982.8782.
28
<PAGE>
RISK CONSIDERATIONS - MONEY MARKET FUNDS
The risks of investing in the various Funds are illustrated in the chart below.
FUNDS Tax-Exempt Government
Money Money Money
RISKS Market Market Market
- --------------------------------------------------------------------------------
Counterparty o o o
- --------------------------------------------------------------------------------
Credit ^ ^ ^
- --------------------------------------------------------------------------------
Foreign securities ^
- --------------------------------------------------------------------------------
Municipal market ^
- --------------------------------------------------------------------------------
Principal stability ^ ^ ^
- --------------------------------------------------------------------------------
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S.; more volatile markets; less securities regulation; less
favorable tax provisions; war or expropriation.
MUNICIPAL MARKET RISK
The risk that certain factors may negatively affect the value of municipal
securities, and, as a result, the share price of a fund that invests in them.
These factors include political or legislative changes, uncertainties related to
the tax status of the securities or the rights of investors in the securities. A
fund may invest in municipal obligations that are related in such a way (e.g.,
multiple apparently unrelated issues that depend on the financial rating or
support of a single government unit) that an economic, business or political
development or change that affects one of these obligations would also affect
the others.
PRINCIPAL STABILITY RISK
The risk that a money market fund may not be able to maintain a stable net asset
value of $1.00 per share.
29
<PAGE>
FEES AND EXPENSES - MONEY MARKET FUNDS
The tables below describe the fees and expenses that you will pay if you buy
and hold shares of the Harris Insight Money Market Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
REDEMPTION FEE None
EXCHANGE FEE None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
- --------------------------------------------------------------------------------
Tax-Exempt Money Government
Money Market Market Money Market
Fund Fund Fund
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.11% 0.10% 0.11%
Other Expenses1 0.12 0.14 0.13
- --------------------------------------------------------------------------------
Total Operating Expenses1 0.23% 0.24% 0.24%
- --------------------------------------------------------------------------------
1 Expenses are based on amounts incurred by the Funds during their most recent
fiscal year but do not reflect expense reductions (expense reimbursements and
fee waivers) by Harris Trust. After these reductions, actual Other Expenses
and Total Operating Expenses of the Funds for the fiscal year ended December
31, 1999 were:
Tax-Exempt Money Government
Money Market Market Money Market
Fund Fund Fund
- --------------------------------------------------------------------------------
Other Expenses 0.12% 0.09% 0.09%
Total Operating Expenses 0.23% 0.19% 0.20%
- --------------------------------------------------------------------------------
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Money Market Funds to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in a Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
- --------------------------------------------------------------------------------
Tax-Exempt Money Government
Money Market Market Money Market
Fund Fund Fund
- --------------------------------------------------------------------------------
One Year $24 $25 $25
- --------------------------------------------------------------------------------
Three Years 74 77 77
- --------------------------------------------------------------------------------
Five Years 130 135 135
- --------------------------------------------------------------------------------
Ten Years 293 306 306
- --------------------------------------------------------------------------------
30
<PAGE>
INVESTMENT ADVISER
Harris Trust and Savings Bank (Harris Trust), an Illinois state-chartered bank
and a member of the Federal Reserve System, is the investment adviser for each
of the Harris Insight Funds. Harris Trust is the successor to the investment
banking firm of N.W. Harris & Co, which was organized in 1882 and incorporated
in 1907. At December 31, 1999, Harris Trust had total discretionary assets under
management of approximately $26.4 billion and was the largest bank 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,
1999, Harris Trust managed more than $13.8 billion in discretionary personal
trust assets, and administered more than $17.9 billion in non-discretionary
trust assets.
Harris Trust oversees the PORTFOLIO MANAGEMENT AGENT and the INVESTMENT
SUB-ADVISER.
The Funds have received an exemptive order from the SEC that permits Harris
Trust, subject to certain conditions, to select new portfolio management
agents/sub-advisers or replace existing portfolio management agents/sub-advisers
without first obtaining shareholder approval for the change. In addition, Harris
Trust may authorize a portfolio management agent/sub-adviser to enter into a
sub-portfolio management agreement with one or more sub-subadvisers on behalf of
any Fund managed by that portfolio management agent/sub-adviser. The Board of
Trustees, including a majority of the "independent" Trustees, must approve each
new portfolio management, sub-portfolio management or sub-sub-portfolio
management agreement. This allows Harris Trust to employ new portfolio
management agents/sub-advisers for new or existing Funds, change the terms of
particular agreements with sub-advisers or change portfolio management
agents/sub-advisers when it determines that a change is beneficial to
shareholders, and to avoid the delay and expense of calling and holding
shareholder meetings to approve each change. In accordance with the exemptive
order, Harris Trust and the Funds will provide investors with information about
each new portfolio management agent/sub-adviser (or sub-subadviser) and its
portfolio management (or sub-portfolio management) agreement within 90 days of
the hiring of a new portfolio management agent/sub-adviser or sub-subadviser.
Harris Trust is responsible for selecting, monitoring, evaluating and allocating
assets to the portfolio management agents/sub-advisers and oversees their
compliance with each Fund's investment objective, policies and restrictions.
The SAI contains more information about the Funds' advisory and portfolio
management agreements, including a fuller discussion of the Funds' SEC exemptive
order.
ADVISORY FEES
The following chart shows the investment advisory fees paid, before fee waivers,
by each Fund during its last fiscal year.
MANAGEMENT FEES PAID
(expressed as a percentage of average net assets)
Balanced Fund.............................................0.60%
Index Fund................................................0.25
Equity Income Fund........................................0.70
Equity Fund...............................................0.70
Growth Fund...............................................0.90
Small-Cap Value Fund......................................0.80
Small-Cap Opportunity Fund................................1.00
International Fund........................................1.05
Emerging Markets Fund.....................................1.25
Convertible Securities Fund...............................0.70
Tax-Exempt Bond Fund......................................0.60
Bond Fund.................................................0.65
Intermediate Tax-Exempt Bond Fund.........................0.60
Short/Intermediate Bond Fund..............................0.70
Intermediate Government Bond Fund.........................0.65
Government Money Market Fund, Money Market Fund and Tax-Exempt Money Market
Fund: 0.14% of each Fund's first $100 million of net assets plus 0.10% of the
Fund's remaining net assets.
Harris Trust may waive any portion of its investment advisory fees or reimburse
Fund expenses from time to time. These arrangements are voluntary and may be
terminated at any time.
PORTFOLIO MANAGEMENT AGENT
As the portfolio management agent, Harris Investment Management, Inc. (HIM)
manages the investments of all of the Funds. In the case of the International
Fund and the Emerging Markets Fund, HIM has appointed Hansberger Global
Investors, Inc. as the investment sub-adviser. HIM is a wholly-owned subsidiary
of Harris Bankcorp, Inc. For the services provided by HIM to the Funds for which
it serves as portfolio management agent, Harris Trust pays HIM the advisory fees
Harris Trust receives from those Funds. As of December 31, 1999, HIM managed
approximately $14.1 billion in assets.
31
<PAGE>
INVESTMENT SUB-ADVISER
Hansberger Global Investors, Inc. (Hansberger) serves as investment sub-adviser
to, and makes all investment decisions for, the International Fund and the
Emerging Markets Fund. Hansberger, founded in 1994, is a wholly-owned subsidiary
of Hansberger Group, Inc. and provides a broad range of portfolio management
services to clients in the U.S. and abroad. As of December 31, 1999, Hansberger
managed approximately $2.9 billion in assets. Hansberger is paid for its
investment sub-advisory services from the advisory fees HIM receives from Harris
Trust.
Many persons on the staffs of the investment adviser, portfolio management agent
and investment sub-adviser contribute to the investment management services
provided to the Funds. The individuals named in the following section, however,
are primarily responsible for the day-to-day investment management of the Funds.
INVESTMENT ADVISER
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 60690
INVESTMENT SUB-ADVISER
Hansberger Global Investors, Inc.
515 East Las Olas Blvd., Suite 1300
Fort Lauderdale, Florida 33301
PORTFOLIO MANAGERS
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT EQUITY FUNDS
BALANCED FUND
C. THOMAS JOHNSON, CFA, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Johnson joined Harris Trust in 1969. He has served as Portfolio Manager of
the Fund since it commenced operations in 1997 and has 30 years of experience in
portfolio management.
EQUITY INCOME FUND
DANIEL L. SIDO, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1994, Mr. Sido served as Portfolio Manager for a trust
company, managing equity and fixed income portfolios. He has served as Portfolio
Manager of the Fund since it commenced operations in 1996 and has over 16 years
of investment management experience.
EQUITY FUND
DONALD G. M. COXE, CHAIRMAN AND CHIEF STRATEGIST (HIM)
Mr. Coxe joined HIM in 1993. He has served as Portfolio Manager of the Fund
since 1996 and has nearly 32 years of institutional investment management
experience.
GROWTH FUND
T. ANDREW JANES, PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Janes joined HIM in 1999. He has served as Portfolio Manager of the Fund
since then and has 14 years of portfolio management, investment research and
trust administration experience.
INDEX FUND
SMALL-CAP VALUE FUND
JON D. THANOS, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Thanos joined HIM in 1996. He has 8 years of portfolio management and
trading experience and was appointed Portfolio Manager of:
o Index Fund in 1999
JON K. TESSEO, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Tesseo joined HIM in 1999. He has 9 years of portfolio management and
investment research experience and was appointed Portfolio Manager of:
o Index Fund in 2000
o Small-Cap Value Fund in 1999
32
<PAGE>
SMALL-CAP OPPORTUNITY FUND
PAUL KLEINAITIS, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Kleinaitis joined HIM in 1999. He has served as portfolio manager of the
Fund since then and has 13 years of portfolio management and investment research
experience.
INTERNATIONAL FUND
EMERGING MARKETS FUND
THOMAS L. HANSBERGER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER (HANSBERGER)
Before forming Hansberger in 1994, Mr. Hansberger was Chairman, President and
Chief Executive Officer of Templeton Worldwide, Inc. While at Templeton, he
served as director of research and was an officer, director or primary portfolio
manager for several Templeton mutual funds. He leads the International Fund's
portfolio team, which includes:
John Hock, Senior Vice President, Research
Charles Gulden, Senior Vice President, Research
He also leads the Emerging Markets Fund's portfolio team, which includes:
Francisco Alzuru, Managing Director, Portfolio Manager and Research Analyst
Ajit Dayan, Managing Director of Indian Research
Aureole L.W. Foong, Director of Global Emerging Markets Research
Robert Mazuelos, Research Analyst
Vladimir Tyurenkov, Managing Director of Eastern Europe and Russian
Research, Portfolio Manager and Research Analyst
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT FIXED INCOME FUNDS
CONVERTIBLE SECURITIES FUND
JON D. THANOS, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Mr. Thanos joined HIM in 1996. He has served as Portfolio Manager of the Fund
since 1999 and has 8 years of portfolio management and trading experience.
TAX-EXEMPT BOND FUND
INTERMEDIATE TAX-EXEMPT BOND FUND
GEORGE W. SELBY, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1998, Mr. Selby served as Executive Director of
Municipal Bond Sales for a brokerage firm. He has 17 years of municipal bond
sales experience and was appointed Portfolio Manager of:
o Tax-Exempt Bond Fund in 1998
o Intermediate Tax-Exempt Bond Fund in 1998
BOND FUND
SHORT/INTERMEDIATE BOND FUND
INTERMEDIATE GOVERNMENT BOND FUND
LAURA ALTER, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1994, Ms. Alter served as Portfolio Manager for a major
mutual fund investment management firm. She has 15 years of experience in the
fixed-income investment area and was appointed Portfolio Manager of:
o Bond Fund when it commenced operations in 1996
o Short/Intermediate Bond Fund in 1994
MAUREEN SVAGERA, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1994, Ms. Svagera was Principal/Vice President at an
investment management firm where she focused on the mortgage and asset-backed
securities markets. She has 17 years of experience in the fixed-income market
and was appointed Portfolio Manager of:
o Bond Fund when it commenced operations in 1996
o Short/Intermediate Bond Fund in 1996
o Intermediate Government Bond Fund when it commenced operations in 1997
33
<PAGE>
PORTFOLIO MANAGERS OF THE
HARRIS MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND
KIMBERLY J. KEYWELL, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1995, Ms. Keywell served as an Associate Portfolio
Manager for the trust department of a large banking institution. She has 8 years
of investment management experience and was appointed Portfolio Manager of the
Fund in 1998.
GOVERNMENT MONEY MARKET FUND
MONEY MARKET FUND
RANDALL T. ROYTHER, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Royther joined Harris Trust in 1990. He has 11 years of investment
management experience and was appointed Portfolio Manager of:
o Government Money Market Fund in 1995
o Money Market Fund in 1995
PRICING OF FUND SHARES
SHARES OF THE FUNDS ARE BOUGHT AND SOLD AT NET ASSET VALUE
Each Fund calculates its net asset value per share (NAV) on each day on which
both the New York Stock Exchange (NYSE) and the Federal Reserve Bank of
Philadelphia are open for business.
HOW THE FUNDS CALCULATE NAV
The NAV of a class of shares of a Fund is determined by dividing the value of
the securities and other assets, less liabilities, allocated to the class by the
number of outstanding shares of the class.
NON-MONEY MARKET FUNDS
The NAV is calculated as of the close of regular trading on the NYSE (normally
4:00 p.m., Eastern time) and is generally based on the last sale prices of all
securities held by the Fund and the number of shares outstanding. A Fund's
securities are valued based on market value or, where market quotations are not
readily available, are based on fair value as determined in good faith by or
under the direction of the Fund's board of trustees.
Foreign securities are valued on the basis of quotations from the primary
markets in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If the value of a foreign
security has been materially affected by events occurring after the close of a
foreign market, it may be valued by another method that the board believes
reflects fair value. Foreign securities may trade in their local markets on
weekends or other days when a Fund does not price its shares. Therefore, the NAV
of Funds holding foreign securities may change on days when shareholders will
not be able to buy or sell their Fund shares.
MONEY MARKET FUNDS
The NAV for the Tax-Exempt Money Market Fund is calculated as of 12:00 Noon,
Eastern time. The NAVs for each of the Money Market Fund and the Government
Money Market Fund is calculated as of 2:30 p.m., Eastern time. In its attempt to
maintain a stable NAV of $1.00 per share, securities held by each Money Market
Fund are valued at amortized cost, which is approximately equal to market value.
34
<PAGE>
SHAREHOLDER SERVICES
HOW TO BUY SHARES
Institutional shares are sold to the following investors:
o Fiduciary and discretionary accounts of institutions
o Financial institutions, such as banks, savings institutions and credit
unions
o Pension and profit sharing and employee benefit plans and trusts
o Insurance companies
o Investment companies
o Investment advisers
o Broker/dealers investing for their own accounts or for the accounts of
other institutional investors
Institutional shares may also be sold to directors, trustees, officers and
employees of the Funds, the investment adviser, the portfolio management agent,
the distributor and the investment adviser's other investment advisory clients.
OPENING A NEW ACCOUNT IS EASY
There are three convenient ways to invest in the Harris Insight Funds.
BY MAIL
Complete and sign an application for Institutional shares.
Make your check payable to the Harris Insight Funds.
If you are adding to your existing account, indicate your Fund account number
directly on the check.
Mail your application and check to:
Harris Insight Funds
c/o PFPC Inc.
P.O. Box 8952
Wilmington, DE 19899-8952
BY BANK WIRE
Call the Funds at 800.625.7073, during business hours, to initiate your
purchase.
Please be sure to furnish your taxpayer identification number.
Then wire your investment to:
PNC Bank, N.A.
Philadelphia, PA
ABA #0310-0005-3
For Credit To:
Harris Insight Funds
85-5093-2950
Re: [Name of Fund]--
Institutional shares
Account No.:
Account Name:
Taxpayer ID No.:
If you are opening a new account, please complete and mail the account
application form to the Funds at the address given under "By Mail."
The Funds currently do not charge investors for the receipt of wire transfers,
although your bank may charge you for their wiring services.
THROUGH FINANCIAL
INSTITUTION/PROFESSIONAL
Contact your financial institution or professional for more information.
Important note: Each institution or professional may have its own procedures and
requirements for buying shares and may charge fees.
The Harris Insight Funds do not require a minimum investment to initiate or add
to your investment program.
Orders placed directly with the Funds must be paid for by check or bank wire
before the order will be executed. The Funds do not accepts third-party checks.
Payment for shares purchased through a financial institution will not be due
until settlement date, normally three business days after the order has been
executed.
Shares are purchased at the NAV next calculated after your investment is
received. The Funds reserve the right to reject any purchase order.
Please indicate whether you would like the ability to buy, redeem or exchange
shares by telephone or wire when you complete your application.
35
<PAGE>
MORE ABOUT BUYING SHARES
TAXPAYER IDENTIFICATION
You must certify whether you are subject to withholding for failing to report
income to the Internal Revenue Service. Investments received without a certified
taxpayer identification number may be returned.
- --------------------------------------------------------------------------------
HOURS OF OPERATION
The Funds are open for business each day the New York Stock Exchange (NYSE) and
the Federal Reserve Bank of Philadelphia are open for business. The Funds are
closed for business on:
- --------------------------------------------------------------------------------
New Year's Day Memorial Day Veterans' Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
Presidents' Day Labor Day Christmas Day
Good Friday Columbus Day
- --------------------------------------------------------------------------------
You may call 800.982.8782 to speak with a Fund representative Monday through
Friday from 8:00 a.m. to 5:00 p.m., Central time.
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
ACCESSING YOUR MONEY IS EASY
You may sell or redeem some or all of your shares when the Funds are open for
business by doing one of the following.
- --------------------------------------------------------------------------------
BY MAIL
AND CHECK
You may sell shares by writing the Funds at:
Harris Insight Funds
c/o PFPC Inc.
P.O. Box 8952
Wilmington, DE 19899-8952.
A check for your proceeds will be mailed to you.
BY TELEPHONE
AND CHECK
If you have chosen the telephone redemption privilege, you may call
800.625.7073, during business hours, to sell your shares.
A check for your proceeds will be mailed to you.
BY TELEPHONE AND
BANK WIRE
If you have chosen the wire redemption privilege, you may call 800.625.7073,
during business hours, to sell your shares and have your proceeds wired to a
pre-designated bank account.
THROUGH FINANCIAL
INSTITUTION/PROFESSIONAL
Contact your financial institution or professional for more information.
Important note: Each institution or professional may have its own procedures and
requirements for selling shares and may charge fees.
- --------------------------------------------------------------------------------
A redemption request should be accompanied by your account number, the exact
name(s) on your account and your social security or taxpayer identification
number. Some redemption requests require a signature guarantee. (See page 37 for
more information.)
The Funds reserve the right to pay redemptions "in kind" - payment in portfolio
securities rather than cash - if the amount you are redeeming is large enough to
affect a Fund's operations (limited to amounts more than $250,000 or
representing more than 1% of the Fund's assets). In these cases, you might incur
brokerage costs in converting the securities to cash.
MORE ABOUT REDEMPTIONS
WHEN ORDERS ARE PROCESSED
Your shares will be sold at the NAV next calculated after your order is accepted
by the Funds' transfer agent in good order. Your order will be processed and a
check for the proceeds will be mailed to you promptly. Payment by wire will
generally be sent the following business day.
Please note that proceeds for redemption requests made shortly after a recent
purchase by check will be distributed only after the check clears, which may
take up to 15 days.
Under unusual circumstances, the Funds may suspend redemptions, if allowed by
the Securities and Exchange Commission, or postpone payment.
MINIMUM AMOUNT REQUIRED FOR WIRE SALES
The minimum amount of redemption proceeds that may be wired is $1,000.
Otherwise, a check for redemption proceeds is mailed to your address of record.
The Funds reserve the right to change this minimum or to terminate
the privilege.
36
<PAGE>
SIGNATURE GUARANTEES
The Funds use signature guarantees on certain redemption requests to protect you
and the Funds from unauthorized account transfers. A signature guarantee is
required when a redemption check is --
o Payable to anyone other than the shareholder(s) of record
o To be mailed to an address other than the address of record
o To be wired to a bank other than one previously authorized.
Signature guarantees may be obtained from a domestic bank or trust company,
broker, dealer, clearing agency or savings association that participates in a
medallion program recognized by the Securities Transfer Association.
REDEMPTION OF SHARES IN SMALLER ACCOUNTS
Each Fund reserves the right to close a shareholder's account and mail the
proceeds to the shareholder if the value of the account is reduced below $500
($250 in the case of a retirement account), unless the reduction is due to
market activity. However, the shareholder will first be notified in writing and
permitted 30 days to increase the balance.
ADDITIONAL SHAREHOLDER SERVICES AND INFORMATION
EXCHANGING SHARES
You can exchange your Institutional shares of a Fund for Institutional shares of
any other Harris Insight Fund, provided that:
o Shares have been held for at least seven days,
o Account registration stays the same, and
o The shares you wish to buy are registered for sale in your home state.
Under certain circumstances, the Funds may:
o Limit the number of exchanges between Funds
o Reject a telephone exchange order
o Modify or discontinue the exchange privilege upon 60 days' written notice
The procedures that apply to redeeming shares also apply to exchanging shares.
TELEPHONE TRANSACTIONS
You may give up some level of security by choosing to buy or sell shares by
telephone rather than by mail. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine. If the Funds or their service
providers follow these procedures, they will not be liable for any losses
arising from unauthorized or fraudulent instructions and you may be responsible
for unauthorized requests.
Please verify the accuracy of instructions immediately upon receipt of
confirmation statements. You may bear the risk of loss from an unauthorized
telephone transaction.
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 Funds by telephone, requests may be mailed or hand-delivered
to the Funds c/o PFPC Inc., 103 Bellevue Parkway, Wilmington, DE 19809.
REGULAR REPORTS
Your investment will be easy to track. During the year, you will receive:
o An annual account statement
o A quarterly consolidated statement
o A confirmation statement, each time you buy, sell or exchange shares
o Annual and semi-annual reports to shareholders for each Fund in which you
invest.
For more information on any of Harris Insight Funds' shareholder services,
please call 800.982.8782.
37
<PAGE>
DIVIDENDS AND TAX CONSIDERATIONS
Dividends of net investment income, if any, are declared and paid at least
annually by each Fund. Following is the schedule of payments:
FUND DECLARED AND PAID
- --------------------------------------------------------------------------------
Balanced Fund Quarterly
- --------------------------------------------------------------------------------
Index Fund Quarterly
- --------------------------------------------------------------------------------
Equity Income Fund Quarterly
- --------------------------------------------------------------------------------
Equity Fund Quarterly
- --------------------------------------------------------------------------------
Growth Fund Annually
- --------------------------------------------------------------------------------
Small-Cap Value Fund Annually
- --------------------------------------------------------------------------------
Small-Cap Opportunity Fund Annually
- --------------------------------------------------------------------------------
International Fund Annually
- --------------------------------------------------------------------------------
Emerging Markets Fund Annually
- --------------------------------------------------------------------------------
Convertible Securities Fund Quarterly
- --------------------------------------------------------------------------------
Tax-Exempt Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Intermediate Tax-Exempt Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Short/Intermediate Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Intermediate Government Bond Fund Daily/Monthly
- --------------------------------------------------------------------------------
Tax-Exempt Money Market Fund Daily/Monthly
- --------------------------------------------------------------------------------
Money Market Fund Daily/Monthly
- --------------------------------------------------------------------------------
Government Money Market Fund Daily/Monthly
- --------------------------------------------------------------------------------
Any capital gains are declared and paid at least annually.
All distributions may be invested in additional shares of the same Fund at NAV
and credited to your account on the ex-date, paid in cash on the payment date,
or invested in another Fund on the ex-date pursuant to the DDP. Distribution
checks and account statements will be mailed approximately two business days
after the payment date.
TAX CONSIDERATIONS
Following is a brief discussion of the general tax treatment of various
distributions from the Funds. It is not an exhaustive discussion, and your
particular tax status may be different. We encourage you to consult with your
own tax adviser about federal, state and local tax considerations.
The tax status of any distribution is the same regardless of how long you have
held shares of the Fund and whether you reinvest in additional shares or take it
in cash:
o All dividends paid, including net short-term capital gains (except
"exempt-interest dividends") are taxable to you as ordinary income.
o Distributions of net long-term capital gains, if any, are taxable to you as
long-term capital gains regardless of how long you have held the shares.
o You may realize a taxable gain or loss when you sell shares or exchange
shares between Funds, depending on your tax basis in the shares and the
value of those shares at the time of the transaction.
38
<PAGE>
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. If a Fund pays
nonrefundable taxes to foreign governments during the year, the taxes will
reduce the Fund's dividends but will still be included in your taxable income.
However, you may be able to claim an offsetting credit or deduction on your tax
return for your share of foreign taxes paid by a Fund.
TERMS TO KNOW
EXEMPT-INTEREST DIVIDENDS
Dividends paid by tax-exempt funds that are exempt from federal income tax.
Exempt-interest dividends are not necessarily exempt from state and local income
taxes.
DISTRIBUTION ARRANGEMENTS
MULTIPLE CLASSES
Each of the Index Fund, Tax-Exempt Money Market Fund, Money Market Fund and
Government Money Market Fund offers two classes of shares: N Shares and
Institutional Shares. Each other Fund offers three classes of shares: N Shares,
A Shares and Institutional Shares. The shares of each class are offered by a
separate prospectus.
MASTER FUND/FEEDER FUND STRUCTURE
The Board of Trustees has the authority to convert any Fund to a "feeder" fund
in a Master Fund/Feeder Fund Structure in which the Fund, instead of investing
in portfolio securities directly, would seek to achieve its investment objective
by investing all of its investable assets in a separate "master" fund having the
same investment objectives and substantially similar investment restrictions.
Other funds with similar objectives and restrictions could also invest in the
same Master Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs.
The SAI contains more information about the Funds, the Master Fund/Feeder Fund
Structure and the types of securities in which the Funds may invest.
39
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand a Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund Institutional share. The total returns in the table represent the rate
that an investor would have earned (or lost) on an investment in Institutional
shares of each Fund, assuming reinvestment of all dividends and distributions.
This information has been derived from the financial statements audited by
PricewaterhouseCoopers LLP, independent accountants, whose report, along with
the Funds' financial statements, is included in the Funds' annual report, which
is available upon request.
<TABLE>
These financial highlights should be read with the financial statements.
<CAPTION>
BALANCED INDEX
FUND FUND
03/24/97(3) 02/26/96(3)
12/31/99 12/31/98 TO 12/31/97 12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $14.44 $14.93 $12.74 $28.35 $23.51 $18.48 $16.72
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.444 0.492 0.377 0.307 0.304 0.278 0.268
Net Realized and Unrealized Gain/(Loss)
on Investments (0.668) 0.753 2.185 5.420 6.247 5.742 2.104
------ ------ ------ ------ ------ ------ ------
Total from Investment Operations (0.224) 1.245 2.562 5.727 6.551 6.020 2.372
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.435) (0.494) (0.372) (0.305) (0.303) (0.281) (0.268)
Net Realized Gains (1.401) (1.241) -- (0.562) (1.408) (0.709) (0.344)
------ ------ ------ ------ ------ ------ ------
Total Distributions (1.836) (1.735) (0.372) (0.867) (1.711) (0.999) (0.612)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period 12.38 $14.44 $14.93 $33.21 $28.35 $23.51 $18.48
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (1.30)% 8.61% 20.24%(2) 20.40% 28.22% 32.78% 14.26%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 21,871 56,027 69,415 549,696 362,568 292,196 143,954
Ratio of Expenses to Average Net Assets 0.88% 0.88% 0.88%(1) 0.45% 0.45% 0.45% 0.45%(1)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.05% 0.98% 0.92%(1) 0.46% 0.46% 0.47% 0.49%(1)
Ratio of Net Investment Income to Average Net Assets 2.84% 3.16% 3.45%(1) 1.04% 1.16% 1.39% 1.85%(1)
Portfolio Turnover Rate 67.77% 70.93% 108.29%(1) 2.17% 5.59% 7.10% 4.71%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
EQUITY INCOME
FUND
02/26/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $19.27 $16.32 $13.73 $13.34
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.168 0.218 0.272 0.270
Net Realized and Unrealized Gain/(Loss) on Investments 1.713 3.492 4.050 1.387
------ ------ ------ ------
Total from Investment Operations 1.881 3.710 4.322 1.657
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.173) (0.216) (0.268) (0.269)
Net Realized Gains (0.578) (0.544) (1.464) (0.998)
------ ------ ------ ------
Total Distributions (0.751) (0.760) (1.732) (1.267)
------ ------ ------ ------
Net Asset Value, End of Period $20.40 $19.27 $16.32 $13.73
====== ====== ====== ======
TOTAL RETURN 9.87% 22.97% 31.90% 12.46%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 79,458 62,204 40,424 31,760
Ratio of Expenses to Average Net Assets 0.93% 0.93% 0.93% 0.93%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.99% 0.96% 0.96% 0.97%(1)
Ratio of Net Investment Income to Average Net Assets 0.86% 1.26% 1.69% 2.36%(1)
Portfolio Turnover Rate 18.57% 21.60% 29.87% 52.77%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
EQUITY GROWTH
FUND FUND
02/26/96(3) 02/26/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96 12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.03 $17.59 $15.53 $15.30 $26.25 $22.67 $18.69 $17.01
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.049 0.116 0.234 0.189 (0.042) 0.012 0.048 0.062
Net Realized and Unrealized Gain/(Loss)
on Investments (0.339) 2.224 5.190 1.898 4.319 5.583 6.026 2.746
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations (0.290) 2.340 5.424 2.087 4.277 5.595 6.074 2.808
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.050) (0.114) (0.235) (0.193) -- (0.009) (0.048) (0.063)
Net Realized Gains (2.060) (2.786) (3.129) (1.664) (1.387) (2.006) (2.046) (1.065)
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (2.110) (2.900) (3.364) (1.857) (1.387) (2.015) (2.094) (1.128)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $14.63 $17.03 $17.59 $15.53 $29.14 $26.25 $22.67 $18.69
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (1.57)% 13.80% 35.89% 13.66%(2) 16.56% 25.03% 32.81% 16.43%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 579,754 841,119 845,829 568,400 182,283 144,759 109,140 76,516
Ratio of Expenses to Average Net Assets 0.90% 0.89% 0.88% 0.90%(1) 1.10% 1.10% 1.10% 1.10%(1)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 0.91% 0.89% 0.88% 0.90%(1) 1.14% 1.11% 1.11% 1.14%(1)
Ratio of Net Investment Income to Average
Net Assets 0.29% 0.64% 1.33% 1.43%(1) (0.16%) 0.05% 0.22% 0.42%(1)
Portfolio Turnover Rate 65.13% 76.92% 81.48% 75.20% 35.11% 34.96% 37.02% 35.36%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
SMALL-CAP VALUE
FUND
03/24/97(3)
12/31/99 12/31/98 TO 12/31/97
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $30.69 $33.02 $28.29
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.124 0.132 0.146
Net Realized and Unrealized Gain/(Loss) on Investments 0.015 (1.312) 7.467
------ ------ ------
Total from Investment Operations 0.139 (1.180) 7.613
------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.122) (0.139) (0.139)
Net Realized Gains (0.417) (1.011) (2.744)
------ ------ ------
Total Distributions (0.539) (1.150) (2.883)
------ ------ ------
Net Asset Value, End of Period $30.29 $30.69 $33.02
====== ====== ======
TOTAL RETURN 0.49% (3.93)% 27.11%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 115,544 143,525 99,816
Ratio of Expenses to Average Net Assets 0.99% 0.99% 0.99%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.04% 1.05% 1.06%(1)
Ratio of Net Investment Income to Average Net Assets 0.37% 0.56% 0.63%(1)
Portfolio Turnover Rate 70.84% 76.44% 91.66%(1)
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
SMALL-CAP OPPORTUNITY
FUND
02/26/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.85 $17.71 $15.52 $14.24
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (0.039) (0.047) 0.007 0.057
Net Realized and Unrealized Gain/(Loss) on Investments 7.124 0.258 3.865 1.998
------ ------ ------ ------
Total from Investment Operations 7.085 0.211 3.872 2.055
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income -- -- (0.012) (0.057)
Net Realized Gains (0.765) (0.071) (1.670) (0.718)
------ ------ ------ ------
Total Distributions (0.765) (0.071) (1.682) (0.775)
------ ------ ------ ------
Net Asset Value, End of Period $24.17 $17.85 $17.71 $15.52
====== ====== ====== ======
TOTAL RETURN 40.14% 1.16% 25.47% 14.49%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 432,071 296,719 274,353 150,306
Ratio of Expenses to Average Net Assets 1.20% 1.20% 1.20% 1.20%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.21% 1.21% 1.21% 1.22%(1)
Ratio of Net Investment Income to Average Net Assets (0.50)% (0.28)% 0.03% 0.46%(1)
Portfolio Turnover Rate 59.99% 51.49% 39.63% 46.13%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING MARKETS
FUND FUND
02/26/96(3) 10/21/97(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96 12/31/99 12/31/98 TO 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.55 $13.33 $15.46 $15.04 $ 5.87 $ 8.55 $10.00
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.117 0.166 0.116 0.128 (0.004) 0.023 0.006
Net Realized and Unrealized Gain/(Loss)
on Investments 3.309 (0.787) (0.858) 0.485 3.790 (2.688) (1.456)
------ ------ ------ ------ ------ ------ ------
Total from Investment Operations 3.426 (0.621) (0.742) 0.613 3.786 (2.665) (1.450)
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.086) (0.159) (0.125) (0.125) (0.016) (0.015) --
Net Realized Gains -- -- (1.263) (0.068) -- -- --
------ ------ ------ ------ ------ ------ ------
Total Distributions (0.086) (0.159) (1.388) (0.193) (0.016) (0.015) --
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $15.89 $12.55 $13.33 $15.46 $ 9.64 $ 5.87 $ 8.55
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 27.33% (4.64)% (4.87)% 4.08%(2) 64.53% (31.16)% (14.50)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 272,886 194,447 172,158 109,747 38,155 19,072 18,023
Ratio of Expenses to Average Net Assets 1.35% 1.33% 1.40% 1.36%(1) 1.70% 1.75% 1.75%(1)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.35% 1.33% 1.42% 1.38%(1) 1.76% 2.08% 2.09%(1)
Ratio of Net Investment Income to Average
Net Assets 0.86% 1.64% 0.82% 0.99%(1) (0.17)% 1.06% 0.43%(1)
Portfolio Turnover Rate 48.49% 45.82% 93.33% 6.72% 53.69% 34.55% --%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE SECURITIES TAX-EXEMPT BOND
FUND FUND
03/24/97(3) 02/26/96(3)
12/31/99 12/31/98 TO 12/31/97 12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $24.14 $28.52 $29.15 $10.39 $10.52 $10.25 $10.56
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.983 1.130 0.914 0.449 0.444 0.461 0.402
Net Realized and Unrealized Gain/(Loss)
on Investments 6.544 (1.647) 3.120 (0.760) 0.059 0.391 (0.094)
------ ------ ------ ------ ------ ------ ------
Total from Investment Operations 7.527 (0.517) 4.034 (0.311) (0.503) 0.852 0.308
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.978) (1.141) (0.897) (0.449) (0.444) (0.461) (0.402)
Net Realized Gains (0.139) (2.722) (3.767) -- (0.189) (0.121) (0.216)
------ ------ ------ ------ ------ ------ ------
Total Distributions (1.117) (3.863) (4.664) (0.449) (0.633) (0.582) (0.618)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $30.55 $24.14 $28.52 $ 9.63 $10.39 $10.52 $10.25
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 32.07% (1.80)% 14.24%(2) (3.07)% 4.88% 8.55% 3.04%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 52,100 49,396 59,384 126,027 169,060 179,871 165,388
Ratio of Expenses to Average Net Assets 0.92% 0.92% 0.92%(1) 0.70% 0.79% 0.80% 0.80%(1)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.01% 1.01% 0.96%(1) 0.83% 0.80% 0.80% 0.81%(1)
Ratio of Net Investment Income to Average
Net Assets 3.73% 4.05% 3.76%(1) 4.44% 4.22% 4.47% 4.60%(1)
Portfolio Turnover Rate 20.14% 48.73% 93.24%(1) 225.82% 87.61% 61.52% 61.60%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
BOND FUND
04/16/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.20 $10.20 $10.07 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.611 0.604 0.628 0.425
Net Realized and Unrealized Gain/(Loss) on Investments (0.702) 0.103 0.284 0.103
------ ------ ------ ------
Total from Investment Operations (0.091) 0.707 0.912 0.528
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.611) (0.604) (0.628) (0.425)
Net Realized Gains (0.008) (0.103) (0.154) (0.033)
------ ------ ------ ------
Total Distributions (0.619) (0.707) (0.782) (0.458)
------ ------ ------ ------
Net Asset Value, End of Period $ 9.49 $10.20 $10.20 $10.07
====== ====== ====== ======
TOTAL RETURN (0.91)% 7.12% 9.41% 5.40%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 157,587 183,831 140,447 43,142
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.60%(1)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.90% 0.88% 0.89% 0.98%(1)
Ratio of Net Investment Income to Average Net Assets 6.20% 5.89% 6.25% 6.03%(1)
Portfolio Turnover Rate 92.79% 64.93% 138.30% 116.02%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TAX-EXEMPT
BOND FUND
02/26/96(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.70 $10.75 $10.58 $10.74
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.423 0.417 0.442 0.381
Net Realized and Unrealized Gain/(Loss)
on Investments (0.467) 0.103 0.220 (0.124)
------ ------ ------ ------
Total from Investment Operations (0.044) 0.520 0.662 0.257
------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.423) (0.417) (0.442) (0.381)
Net Realized Gains (0.013) (0.153) (0.050) (0.036)
------ ------ ------ ------
Total Distributions (0.436) (0.570) (0.492) (0.417)
------ ------ ------ ------
Net Asset Value, End of Period $10.22 $10.70 $10.75 $10.58
====== ====== ====== ======
TOTAL RETURN (0.43)% 4.94% 6.41% 2.49%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 177,813 226,087 193,009 208,690
Ratio of Expenses to Average Net Assets 0.69% 0.80% 0.79% 0.79%(1)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 0.82% 0.80% 0.79% 0.82%(1)
Ratio of Net Investment Income to Average
Net Assets 4.03% 3.87% 4.16% 4.28%(1)
Portfolio Turnover Rate 191.27% 90.92% 48.72% 57.23%
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
SHORT/INTERMEDIATE INTERMEDIATE GOVERNMENT
BOND FUND BOND FUND
02/26/96(3) 03/24/97(3)
12/31/99 12/31/98 12/31/97 TO 12/31/96 12/31/99 12/31/98 TO 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.30 $10.21 $10.14 $10.30 $16.61 $16.54 $16.12
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.595 0.603 0.633 0.517 0.916 0.967 0.793
Net Realized and Unrealized Gain/(Loss)
on Investments (0.515) 0.096 0.070 (0.160) (1.050) 0.231 0.461
------ ------ ------ ------ ------ ------ ------
Total from Investment Operations 0.080 0.699 0.703 0.357 (0.134) 1.198 1.254
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.595) (0.603) (0.633) (0.517) (0.916) (0.967) (0.793)
Net Realized Gains (0.015) (0.006) -- -- -- (0.161) (0.041)
------ ------ ------ ------ ------ ------ ------
Total Distributions (0.610) (0.609) (0.633) (0.517) (0.916) (1.128) (0.834)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $ 9.77 $10.30 $10.21 $10.14 $15.56 $16.61 $16.54
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 0.81% 7.01% 7.15% 3.61%(2) (0.80)% 7.45% 7.96%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 297,977 337,015 288,886 255,573 94,360 103,162 99,359
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.60%(1) 0.50% 0.50% 0.50%(1)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 0.92% 0.90% 0.89% 0.90%(1) 0.93% 0.91% 0.91%(1)
Ratio of Net Investment Income to Average
Net Assets 5.93% 5.85% 6.24% 6.06%(1) 5.72% 5.82% 6.31%(1)
Portfolio Turnover Rate 72.86% 66.06% 98.08% 186.02% 76.50% 99.63% 84.89%(1)
(1) Annualized.
(2) Total returns for periods of less than one year are not annualized.
(3) Date commenced operation.
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY
MARKET FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.030 0.033 0.034 0.031 0.035
Net Realized and Unrealized Gain/(Loss) on Investments -- -- -- -- --
------ ------ ------ ------ ------
Total from Investment Operations 0.030 0.033 0.034 0.031 0.035
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.030) (0.033) (0.034) (0.031) (0.035)
Capital Contribution -- -- -- -- --
------ ------ ------ ------ ------
Total Distributions (0.030) (0.033) (0.034) (0.031) (0.035)
------ ------ ------ ------ ------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
TOTAL RETURN 3.07% 3.35% 3.47% 3.19% 3.60%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 515,987 606,754 497,986 388,404 212,146
Ratio of Expenses to Average Net Assets 0.23% 0.23% 0.25% 0.29% 0.29%
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.23% 0.23% 0.26% 0.29% 0.29%
Ratio of Net Investment Income to Average Net Assets 3.01% 3.30% 3.41% 3.14% 3.52%
50
<PAGE>
<CAPTION>
MONEY MARKET
FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.052 0.055 0.055 0.052 0.057
Net Realized and Unrealized Gain/(Loss) on Investments -- -- (0.001) -- --
------ ------ ------ ------ ------
Total from Investment Operations 0.052 0.055 0.054 0.052 0.057
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.052) (0.055) (0.055) (0.052) (0.057)
Capital Contribution -- -- 0.001 -- --
------ ------ ------ ------ ------
Total Distributions (0.052) (0.055) (0.054) (0.052) (0.057)
------ ------ ------ ------ ------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
TOTAL RETURN 5.29% 5.61% 5.66% 5.38% 5.86%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 2,084,723 1,391,856 1,028,091 369,417 98,837
Ratio of Expenses to Average Net Assets 0.19% 0.19% 0.21% 0.27% 0.29%
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.24% 0.24% 0.26% 0.28% 0.30%
Ratio of Net Investment Income to Average Net Assets 5.20% 5.46% 5.54% 5.23% 5.69%
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT MONEY
MARKET FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.049 0.053 0.053 0.051 0.056
Net Realized and Unrealized Gain/(Loss) on Investments -- -- -- -- --
------ ------ ------ ------ ------
Total from Investment Operations 0.049 0.053 0.053 0.051 0.056
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net Investment Income (0.049) (0.053) (0.053) (0.051) (0.056)
Capital Contribution -- -- -- -- --
------ ------ ------ ------ ------
Total Distributions (0.049) (0.053) (0.053) (0.051) (0.056)
------ ------ ------ ------ ------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
TOTAL RETURN 5.04% 5.43% 5.48% 5.24% 5.79%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 210,521 162,285 63,970 37,169 18,367
Ratio of Expenses to Average Net Assets 0.20% 0.19% 0.23% 0.31% 0.31%
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.24% 0.24% 0.28% 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets 4.93% 5.27% 5.36% 5.12% 5.62%
52 53
</TABLE>
<PAGE>
FOR MORE INFORMATION
More information on the Harris Insight Funds is available free upon request:
SHAREHOLDER REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected a Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about each Fund and its policies. The SAI is on
file with the Securities and Exchange Commission (Commission) and is
incorporated by reference into (i.e., is legally considered part of) this
prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 800.982.8782
BY MAIL
Harris Insight Funds
3200 Horizon Drive
King of Prussia, PA 19406
ON THE INTERNET
Text-only versions of the prospectus and other documents pertaining to the Funds
can be viewed online or downloaded from:
HARRIS INSIGHT FUNDS
http://www.harrisinsight.com
Information about the Funds (including the SAI) can be reviewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 202.942.8090. Reports and other information about the Funds are available on
the EDGAR Database on the Commission's Internet site at http://www.sec.gov.
Copies of information about the Funds may be obtained, after paying a
duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing to the Commission's Public Reference Section,
Washington, D.C. 20549-0102.
The Funds are series of Harris Insight Funds Trust, whose investment company
registration number is 811-7447.
HIF 1100 5/00
<PAGE>
HARRIS
INSIGHT(R) FUNDS
N SHARES
MAY 1, 2000 PROSPECTUS
HARRIS INSIGHT MONEY MARKET FUNDS
Tax-Exempt Money Market Fund
Money Market Fund
Government Money Market Fund
AS WITH ANY MUTUAL FUND, THE SECURITIES
AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS
IS ADEQUATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
[LOGO]
HARRIS
INSIGHT(R) FUNDS
<PAGE>
TABLE OF CONTENTS
INTRODUCTION TO MONEY MARKET FUNDS PAGE 2
HARRIS INSIGHT MONEY MARKET FUNDS
Tax-Exempt Money Market Fund 4
Money Market Fund 6
Government Money Market Fund 8
Risk Considerations 10
Fees and Expenses 12
INVESTMENT ADVISER 14
PORTFOLIO MANAGERS 15
PRICING OF FUND SHARES 15
SHAREHOLDER SERVICES 16
DIVIDENDS AND TAX CONSIDERATIONS 22
DISTRIBUTION ARRANGEMENTS 23
MASTER FUND/FEEDER FUND STRUCTURE 23
FINANCIAL HIGHLIGHTS 24
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT MONEY MARKET FUNDS
The Harris Insight Money Market Funds offer investors the opportunity to
derive income from a portfolio of money market instruments with a stable net
asset value. They invest in short-term securities issued by banks, other U.S.
corporations, the U.S. government, state or local governments, and other
entities. These money market instruments may include certificates of deposit,
bankers' acceptances, variable rate demand notes, fixed-term obligations,
COMMERCIAL PAPER, ASSET-BACKED SECURITIES and REPURCHASE AGREEMENTS.
WHY INVEST IN MONEY MARKET FUNDS?
These funds are especially well-suited for conservative investors who seek -
o Current income
o Stability of principal (they are managed in an attempt to maintain a share
price of $1.00)
o Checkwriting privileges permitting access to your money at any
time
WHAT ARE THE FUNDS' INVESTMENT PARAMETERS?
Money market funds must conform to a number of regulations, including rules
that require each fund to -
o Limit the DOLLAR-WEIGHTED AVERAGE MATURITY of their investments to 90 days or
less
o Buy only high-quality, short-term money market instruments
o Buy securities with remaining maturities no longer than 397 days
TERMS TO KNOW
COMMERCIAL PAPER
Short-term securities that are issued by corporations and other borrowers to
finance their current obligations and are typically unsecured. Issues of
commercial paper normally have maturities of less than nine months and have
fixed rates of return.
ASSET-BACKED SECURITIES
Securities collateralized by credit card loans or other accounts receivable.
REPURCHASE AGREEMENTS
A binding agreement enabling a bank or broker to borrow money, using
securities as collateral, with a promise to buy back the securities at a
specified price, usually within 90 days.
DOLLAR-WEIGHTED AVERAGE MATURITY
An average of all of the maturities of a fund's securities holdings, weighted
according to each security's dollar value relative to the rest of the
holdings.
2
<PAGE>
- -------------------------------------------------------------------------------
Shares of the Harris Insight Money Market Funds are not bank deposits and
are not guaranteed or insured by any bank, government entity, or the FDIC.
Although each of the Harris Insight Money Market Funds seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose
money by investing in a Fund.
Each Fund's primary investment practices and strategies are discussed in
this prospectus. Other practices, and their related risks, are described
in the Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be
changed by the Board of Trustees without approval by the Fund's
shareholders.
Each Fund's principal risks are provided in an alphabetical listing within
the Fund description that follows. These risks are discussed in detail
under "Risk Considerations" on page 10.
- -------------------------------------------------------------------------------
3
<PAGE>
HARRIS INSIGHT MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income that is exempt from
federal income taxes as is consistent with its investment policies and with
preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in high-quality, short-term
money market instruments that are generally exempt from federal income tax and
are not subject to the ALTERNATIVE MINIMUM TAX.
The Fund will invest primarily in high-quality MUNICIPAL SECURITIES that are
generally exempt from federal income taxes and will purchase only U.S.
dollar-denominated securities.
In addition, the Fund will purchase only securities (other than U.S. GOVERNMENT
SECURITIES) that have been rated within the two highest rating categories by at
least two nationally recognized rating agencies (or, if not rated, are
considered by the portfolio manager to be of comparable quality).
Depending on market conditions, the Fund may temporarily hold up to 20% of the
current value of its assets in securities whose interest income is subject to
taxation.
Current income generally will be lower than the income provided by funds that
invest in securities with taxable income or securities with longer maturities or
lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 10.)
o Credit risk
o Municipal market risk
o Principal stability risk
TERMS TO KNOW
ALTERNATIVE MINIMUM TAX (AMT)
A federal tax designed to ensure that individuals, trusts, estates and companies
are limited in their deductions, exemptions, and tax credits when calculating
federal income tax liability.
MUNICIPAL SECURITIES
Bonds and other obligations issued by state and local governments to finance
operations or projects. These securities make interest payments that are exempt
from federal income tax.
U.S. GOVERNMENT SECURITIES
Obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
4
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
5.51% 4.16% 2.54% 1.99% 2.30% 3.31% 2.94% 3.17% 3.02% 2.75%
Best Quarter: Q4 1990 1.39%
- -----------------------------------------------
Worst Quarter: Q1 1994 0.43%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99) 1 Year 5 Years 10 Years
- ------------------------------------------------
Tax-Exempt Money
Market Fund 2.75% 3.04% 3.16%
As of December 31, 1999, the seven-day yield for the Fund was 3.83%. As of the
same date, the effective tax-equivalent seven-day yield for the Fund was
5.43%. For current yield information, please call 800.982.8782.
5
<PAGE>
MONEY MARKET FUND
- -------------------------------------------------------------------------------
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income as is consistent
with its investment policies and with preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests only in high-quality, short-term money market instruments that,
in the opinion of the investment adviser, present minimal credit risks. The Fund
invests in a broad range of short-term money market instruments, including U.S.
GOVERNMENT SECURITIES, as well as bank and commercial obligations. COMMERCIAL
PAPER purchased by the Fund will consist of U.S. dollar-denominated direct
obligations of domestic and foreign corporate issuers, including bank holding
companies.
The Fund will purchase only U.S. dollar-denominated securities. In addition, the
Fund will purchase only securities (other than U.S. government securities) that
have been rated within the two highest rating categories by at least two
nationally recognized rating agencies (or, if not rated, are considered by the
portfolio manager to be of comparable quality). No more than 5% of the Fund's
assets will be invested in securities in the second highest rating category.
Current income generally will be lower than the income provided by funds that
invest in securities with longer maturities or lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 10.)
o Credit risk
o Foreign securities risk
o Principal stability risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 4.
COMMERCIAL PAPER
See page 2.
6
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
7.94% 5.87% 3.41% 2.69% 3.79% 5.58% 5.11% 5.35% 5.25% 4.92%
Best Quarter: Q2 1990 1.95%
- -----------------------------------------------
Worst Quarter: Q2 1993 0.65%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99) 1 Year 5 Years 10 Years
- -----------------------------------------------
Money Market Fund 4.92% 5.24% 4.98%
As of December 31, 1999, the seven-day yield for the Fund was 5.52%.
For current yield information, please call 800.982.8782.
7
<PAGE>
GOVERNMENT MONEY MARKET FUND
- -------------------------------------------------------------------------------
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income from government
obligations as is consistent with preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests exclusively in short-term securities issued by the U.S.
government, its agencies or instrumentalities, and REPURCHASE AGREEMENTS backed
by those securities, all of which are deemed to be of minimal credit risk by the
investment adviser.
Current income generally will be lower than the income provided by funds that
invest in securities with longer maturities or lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 10.)
o Credit risk
o Principal stability risk
TERMS TO KNOW
REPURCHASE AGREEMENTS
See page 2.
8
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
7.78% 5.67% 3.42% 2.62% 3.72% 5.51% 5.00% 5.17% 5.08% 4.67%
Best Quarter: Q3 1990 1.91%
- -----------------------------------------------
Worst Quarter: Q4 1993 0.64%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99) 1 Year 5 Years 10 Years
- -----------------------------------------------
Government
Money Market Fund 4.67% 5.09% 4.86%
As of December 31, 1999, the seven-day yield for the Fund was 4.93%.
For current yield information, please call 800.982.8782.
9
<PAGE>
RISK CONSIDERATIONS
The risks of investing in the various Funds are illustrated in the chart below.
A Fund's principal risks are designated by the ^ symbol.
- -------------------------------------------------------------------------------
FUNDS Tax-Exempt Government
RISKS Money Market Money Market Money Market
- -------------------------------------------------------------------------------
Counterparty o o o
- -------------------------------------------------------------------------------
Credit ^ ^ ^
- -------------------------------------------------------------------------------
Foreign securities ^
- -------------------------------------------------------------------------------
Municipal market ^
- --------------------------------------------------------------------------------
Principal stability ^ ^ ^
- --------------------------------------------------------------------------------
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S.; more volatile markets; less securities regulation; less
favorable tax provisions; war or expropriation.
10
<PAGE>
MUNICIPAL MARKET RISK
The risk that certain factors may negatively affect the value of municipal
securities, and, as a result, the share price of a fund that invests in them.
These factors include political or legislative changes, uncertainties related to
the tax status of the securities or the rights of investors in the securities. A
fund may invest in municipal obligations that are related in such a way (e.g.
multiple apparently unrelated issues that depend on the financial rating or
support of a single government unit) that an economic, business or political
development or change that affects one of these obligations would also affect
the others.
PRINCIPAL STABILITY RISK
The risk that a money market fund may not be able to maintain a stable net asset
value of $1.00 per share.
11
<PAGE>
FEES AND EXPENSES - MONEY MARKET FUNDS
The tables below describe the fees and expenses
that you will pay if you buy and hold shares
of the Harris Insight Money Market Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- -------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
REDEMPTION FEE None
EXCHANGE FEE None
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
- --------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Government Money
Money Market Fund Market Fund Market Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.11% 0.10% 0.11%
Rule 12b-1 Fees1 0.10 0.10 0.10
Shareholder Servicing Fees 0.25 0.25 0.25
Other Expenses1 0.12 0.14 0.13
- --------------------------------------------------------------------------------------------------------------
Total Operating Expenses1 0.58% 0.59% 0.59%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
1 Expenses are based on amounts incurred by the Funds during their most recent
fiscal year but do not reflect reduced Rule 12b-1 Fees or expense reductions
(expense reimbursements and fee waivers) by Harris Trust. After these
reductions, actual Fund Rule 12b-1 Fees, Other Expenses and Total Operating
Expenses for the fiscal year ended December 31, 1999 were:
<TABLE>
<CAPTION>
Tax-Exempt Money Government Money
Money Market Fund Market Fund Market Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rule 12b-1 Fees 0.07% 0.10% 0.10%
Other Expenses 0.12 0.09 0.09
Total Operating Expenses 0.55% 0.54% 0.55%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
12
<PAGE>
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Money Market Funds to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in a Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Government Money
Money Market Fund Market Fund Market Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Year $59 $60 $60
- ---------------------------------------------------------------------------------------------------------------------------
Three Years 186 189 189
- ---------------------------------------------------------------------------------------------------------------------------
Five Years 324 329 329
- ---------------------------------------------------------------------------------------------------------------------------
Ten Years 726 738 738
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
INVESTMENT ADVISER
Harris Trust and Savings Bank (Harris Trust), an Illinois state-chartered bank
and a member of the Federal Reserve System, is the investment adviser for each
of the Harris Insight Funds. Harris Trust is the successor to the investment
banking firm of N.W. Harris & Co., which was organized in 1882 and incorporated
in 1907. At December 31, 1999, Harris Trust had total discretionary assets under
management of approximately $26.4 billion and was the largest bank 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,
1999, Harris Trust managed more than $13.8 billion in discretionary personal
trust assets, and administered more than $17.9 billion in non-discretionary
trust assets.
Harris Trust oversees the PORTFOLIO MANAGEMENT AGENT.
The Funds have received an exemptive order from the SEC that permits Harris
Trust, subject to certain conditions, to select new portfolio management
agents/sub-advisers or replace existing portfolio management agents/sub-advisers
without first obtaining shareholder approval for the change. In addition, Harris
Trust may authorize a portfolio management agent/sub-adviser to enter into a
sub-portfolio management agreement with one or more sub-subadvisers on behalf of
any Fund managed by that portfolio management agent/sub-adviser. The Board of
Trustees, including a majority of the "independent" Trustees, must approve each
new portfolio management, sub-portfolio management or sub-sub-portfolio
management agreement. This allows Harris Trust to employ new portfolio
management agents/sub-advisers for new or existing Funds, change the terms of
particular agreements with sub-advisers or change portfolio management
agents/sub-advisers when it determines that a change is beneficial to
shareholders, and to avoid the delay and expense of calling and holding
shareholder meetings to approve each change. In accordance with the exemptive
order, Harris Trust and the Funds will provide investors with information about
each new portfolio management agent/sub-adviser (or sub-subadviser) and its
portfolio management (or sub-portfolio management) agreement within 90 days of
the hiring of a new portfolio management agent/sub-adviser or sub-subadviser.
Harris Trust is responsible for selecting, monitoring, evaluating and allocating
assets to the portfolio management agents/sub-advisers and oversees their
compliance with each Fund's investment objective, policies and restrictions. The
SAI contains more information about the Funds' advisory and portfolio management
agreements, including a fuller discussion of the Funds' SEC exemptive order.
ADVISORY FEES
The investment advisory fees payable to Harris Trust for each Fund are based
upon the average daily net assets of each Fund at the annual rate of 0.14% of
each Fund's first $100 million of net assets plus 0.10% of the Fund's remaining
net assets.
Harris Trust may waive any portion of its investment advisory fees or reimburse
Fund expenses from time to time. These arrangements are voluntary and may be
terminated at any time.
PORTFOLIO MANAGEMENT AGENT
As the portfolio management agent, Harris Investment Management, Inc. (HIM)
manages the investments of all of the Funds. HIM is a wholly-owned subsidiary of
Harris Bankcorp, Inc. For the services provided by HIM to the Funds for which it
serves as portfolio management agent, Harris Trust pays HIM the advisory fees
Harris Trust receives from those Funds. As of December 31, 1999, HIM managed
approximately $14.1 billion in assets.
Many persons on the staffs of the investment adviser and portfolio management
agent contribute to the investment management services provided to the Funds.
The individuals named in the following section, however, are primarily
responsible for the day-to-day investment management of the Funds.
INVESTMENT ADVISER
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 60690
14
<PAGE>
PORTFOLIO MANAGERS
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
KIMBERLY J. KEYWELL, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1995, Ms. Keywell served as an Associate Portfolio
Manager for the trust department of a large banking institution. She has 8 years
of investment management experience and was appointed Portfolio Manager of the
Fund in 1998.
GOVERNMENT MONEY MARKET FUND
MONEY MARKET FUND
RANDALL T. ROYTHER, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Royther joined Harris Trust in 1990. He has 11 years of investment
management experience and was appointed Portfolio Manager of:
o Government Money Market Fund in 1995
o Money Market Fund in 1995
PRICING OF FUND SHARES
SHARES OF THE FUNDS ARE BOUGHT AND SOLD AT NET ASSET VALUE
Each Fund calculates its net asset value per share (NAV) on each day on which
both the New York Stock Exchange (NYSE) and the Federal Reserve Bank of
Philadelphia are open for business.
HOW THE FUNDS CALCULATE NAV
The NAV of a class of shares of a Fund is determined by dividing the value of
the securities and other assets, less liabilities, allocated to the class by the
number of outstanding shares of the class.
The NAV for the Tax-Exempt Money Market Fund is calculated as of 12:00 Noon,
Eastern time. The NAVs for each of the Money Market Fund and the Government
Money Market Fund is calculated as of 2:30 p.m., Eastern time. In its attempt to
maintain a stable NAV of $1.00 per share, securities held by each Money Market
Fund are valued at amortized cost, which is approximately equal to market value.
15
<PAGE>
SHAREHOLDER SERVICES
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
OPENING A NEW ACCOUNT IS EASY
<TABLE>
<CAPTION>
There are three convenient ways to invest in the Harris Insight Funds.
- -------------------------------------------------------------------------------------------------------------
THROUGH FINANCIAL
BY MAIL BY BANK WIRE INSTITUTION/PROFESSIONAL
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Complete and sign an application Call the Funds at Contact your financial
for N shares. 800.625.7073, during business institution or professional for
hours, to initiate your purchase. more information.
Make your check payable to
the Harris Insight Funds. Please be sure to furnish your Important note:
taxpayer identification number. Each institution or professional
If you are adding to your may have its own procedures
existing account, indicate Then wire your investment to: and requirements for buying
your Fund account number PNC Bank, N.A. shares and may charge fees.
directly on the check. Philadelphia, PA
ABA #0310-0005-3
Mail your application For Credit To:
and check to: Harris Insight Funds
Harris Insight Funds 85-5093-2950
c/o PFPC Inc. Re: [Name of Fund]--N shares
P.O. Box 8952 Account No.:
Wilmington, DE 19899-8952 Account Name:
Taxpayer ID No.:
If you are opening a new account, please
complete and mail the account application
form to the Funds at the address given
under "By Mail."
The Funds currently do not charge investors
for the receipt of wire transfers, although
your bank may charge you for their wiring
services.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
Orders placed directly with the Funds must be paid for by check or bank wire
before the order will be executed. The Funds do not accept third-party checks.
Payment for shares purchased through a financial institution will not be due
until settlement date, normally three business days after the order has been
executed.
Shares are purchased at the NAV next calculated after your investment is
received. The Funds reserve the right to reject any purchase order.
Please indicate whether you would like the ability to buy, redeem or exchange
shares by telephone or wire when you complete your application.
AUTOMATIC INVESTMENT PLAN: A CONVENIENT OPTION
Through automatic investing, you can invest equal amounts of money on a regular
basis.
At the time you open your account or any time afterward, you can elect Harris
Insight Funds' Automatic Investment Plan by so indicating on the Harris Insight
Funds New Account Application. The Plan lets you invest as little as $50 a month
in the Fund of your choice through electronic withdrawals from your checking or
savings account. (If your checking or savings account does not have sufficient
assets to permit the Automatic Investment in any month, your participation in
the Plan will cease and a new application will be needed to reinstate your
Plan.)
CHOOSE YOUR INVESTMENT AMOUNT
The Harris Insight Funds offer a flexible range of minimum investment amounts to
initiate or add to your investment program.
MINIMUM PER FUND
To open a regular account................................................$1,000
To open a retirement account...............................................$250
To open an account using the Automatic Investment Plan......................$50
To add to an existing account...............................................$50
MORE ABOUT BUYING SHARES
MULTIPLE OWNERS
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 authorize any transactions in the account.
TAXPAYER IDENTIFICATION
You must certify whether you are subject to withholding for failing to report
income to the Internal Revenue Service. Investments received without a certified
taxpayer identification number may be returned.
17
<PAGE>
- --------------------------------------------------------------------------------
HOURS OF OPERATION
The Funds are open for business each day the New York Stock Exchange (NYSE) and
the Federal Reserve Bank of Philadelphia are open for business. The Funds are
closed for business on:
- --------------------------------------------------------------------------------
New Year's Day Memorial Day Veterans' Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
Presidents' Day Labor Day Christmas Day
Good Friday Columbus Day
- --------------------------------------------------------------------------------
You may call 800.982.8782 to speak with a Fund representative Monday through
Friday from 8:00 a.m. to 5:00 p.m., Central time.
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
ACCESSING YOUR MONEY IS EASY
<TABLE>
<CAPTION>
You may sell or redeem some or all of your shares by doing one of the following.
- -------------------------------------------------------------------------------------------------------------
BY MAIL AND BY TELEPHONE BY TELEPHONE AND THROUGH FINANCIAL
CHECK AND CHECK BANK WIRE INSTITUTION/PROFESSIONAL
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
You may sell shares by If you have chosen the If you have chosen the Contact your financial
writing the Funds at: telephone redemption wire redemption institution or professional
Harris Insight Funds privilege, you may call privilege, you may call for more information.
c/o PFPC Inc. 800.625.7073, during 800.625.7073, during
P.O. Box 8952 business hours, to business hours, to sell Important note: Each
Wilmington, DE 19899-8952 sell your shares. shares and have your institution or professional
proceeds wired to a may have its own
A check for your proceeds A check for your pre-designated bank procedures and
will be mailed to you. proceeds will be account. requirements for selling
mailed to you. shares and may
charge fees.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
A redemption request should be accompanied by your account number, the exact
name(s) on your account and your social security or taxpayer identification
number. Some redemption requests require a signature guarantee. (See page 19 for
more information.)
The Funds reserve the right to pay redemptions "in kind" - payment in portfolio
securities rather than cash - if the amount you are redeeming is large enough to
affect a Fund's operations (limited to amounts more than $250,000 or
representing more than 1% of the Fund's assets). In these cases, you might incur
brokerage costs in converting the securities to cash.
18
<PAGE>
MORE ABOUT REDEMPTIONS
WHEN ORDERS ARE PROCESSED
Your shares will be sold at the NAV next calculated after your order is accepted
by the Funds' transfer agent in good order. Your order will be processed and a
check for the proceeds will be mailed to you promptly. Payment by wire will
generally be sent the following business day.
Please note that proceeds for redemption requests made shortly after a recent
purchase by check will be distributed only after the check clears, which may
take up to 15 days.
Under unusual circumstances, the Funds may suspend redemptions, if allowed by
the Securities and Exchange Commission, or postpone payment.
MINIMUM AMOUNT REQUIRED FOR WIRE SALES
The minimum amount of redemption proceeds that may be wired is $1,000.
Otherwise, a check for redemption proceeds is mailed to your address of record.
The Funds reserve the right to change this minimum or to terminate the
privilege.
SYSTEMATIC WITHDRAWAL PLAN (NOT AVAILABLE FOR IRAS OR OTHER RETIREMENT ACCOUNTS)
You may enroll in the Systematic Withdrawal Plan (SWP) by so indicating on the
Harris Insight Funds New Account Application. Using the SWP, you may redeem a
specific dollar amount (not less than $100) from your Harris Insight Funds
account each month, quarter, six months or year.
To enroll in the SWP, you must meet the following conditions:
o you must have elected to reinvest your Fund dividends, and
o your shares of the Fund from which you want shares redeemed must have a value
of at least $10,000 at the time of each withdrawal.
Plan redemptions are normally processed on the 25th day of the applicable month
(or on the next Business Day if the normal processing day is not a Business Day)
and are paid promptly thereafter. You should know that, if your SWP withdrawals
are greater than the amount of dividends from your Fund, the withdrawals reduce
the principal invested. (If your Fund account does not have a sufficient balance
to permit a Systematic Withdrawal, your participation in the SWP will cease and
a new application will be needed to reinstate your Plan.)
SIGNATURE GUARANTEES
The Funds require signature guarantees on certain redemption requests to protect
you and the Funds from unauthorized account transfers. A signature guarantee is
required when a redemption check is -
o To be payable to anyone other than the shareholder(s) of record
o To be mailed to an address other than the address of recor
o To be wired to a bank other than one previously authorized.
Signature guarantees may be obtained from a domestic bank or trust company,
broker, dealer, clearing agency or savings association that participates in a
medallion program recognized by the Securities Transfer Association.
CHECKWRITING
Checkwriting is available for each of the Harris Insight Money Market Funds. If
you are an investor in one of
19
<PAGE>
these Funds and have completed the checkwriting portion of your application and
signature card, you may redeem shares by writing a check against your account.
When a check is presented to the Transfer Agent for payment, the Fund's
Custodian will cause the Fund to redeem a sufficient number of shares in your
account to cover the amount of the check.
You will continue to earn income on your shares until a check is presented to
the Transfer Agent for payment. The minimum check amount is $500.
If you are opening a new account and wish to establish the checkwriting option,
you must complete the account application and signature card. If you already
have an account, you may contact the Harris Insight Funds at 800.625.7073 for
the necessary checkwriting application. Upon receipt of this form, checks will
be forwarded to you.
This privilege is not available for IRAs, SEP-IRAs, 401(k), 403(b), Keogh
or other retirement accounts.
The checkwriting privilege is subject to the customary rules and regulations
governing checkwriting:
o FOR JOINT TENANT ACCOUNTS, each shareholder must sign each check, unless the
shareholders have authorized fewer signatures and such election is on file
with the Funds' Transfer Agent.
o A SUFFICIENT NUMBER OF SHARES IS REQUIRED to cover the amount of the check.
If you do not own enough shares to cover a check when presented, the check
will be returned to the payee marked "insufficient funds".
o A CHECK MAY BE RETURNED if it is for less than $500 or if the check would
require the redemption of shares purchased by check or electronic funds
transfer within the ten previous business days.
The Funds and the Custodian reserve the right to terminate or modify the
checkwriting privilege or to impose a service fee in connection with the
privilege.
Charges may be imposed for returned checks, stop-payment orders, copies of
cancelled checks and other special services.
REDEMPTION OF SHARES IN SMALLER ACCOUNTS
Each Fund reserves the right to close a shareholder's account and mail the
proceeds to the shareholder if the value of the account is reduced below $500
($250 in the case of a retirement account), unless the reduction is due to
market activity. However, the shareholder will first be notified in writing and
permitted 30 days to increase the balance.
ADDITIONAL SHAREHOLDER SERVICES AND INFORMATION
EXCHANGING SHARES
You may exchange your N Shares of any Money Market Fund for N Shares of any
other Harris Insight Fund without a sales charge, provided that:
o Your N Shares have been held for at least seven days,
o Your account registration stays the same, and
o The shares you wish to buy are registered for sale in your home state.
If you purchased N Shares of a Harris Insight Money Market Fund by an exchange
of A Shares of another Fund, those N Shares (but not other N Shares, including
shares acquired by reinvestment of dividends on the exchanged A Shares) may be
exchanged for and invested in A Shares of any Fund without a sales charge. Any
other N Shares of a Fund may be exchanged for and invested in A Shares of any
other Fund subject to the then-applicable sales charge.
20
<PAGE>
The Harris Insight Funds A Shares are offered by a separate prospectus.
Each Fund reserves the right to terminate temporarily or permanently the
exchange privilege of any investor who makes more than four exchanges out of a
Fund in a calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted together
for purposes of the four-exchange limit. The exchange limit may be modified for
accounts in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials for further
information.
Each Fund reserves the right to refuse an exchange by any person or group if, in
Harris Trust's judgment, the Fund to be purchased might be unable to invest the
money effectively in accordance with its investment objective and policies or
might otherwise be adversely affected. Also, each Fund reserves the right to
modify or discontinue the exchange privilege for any reason, upon 60 days'
written notice.
The procedures that apply to redeeming shares also apply to exchanging shares.
DIRECTED DIVIDEND PLAN (DDP)
You may direct your dividends and/or distributions from one Harris Insight Fund
to be invested automatically in another Harris Insight Fund without any fee or
sales charge, provided that both Funds are in the same share class and have
identical ownership registration. To use the DDP, you must maintain a balance of
at least $1,000 in the Fund account from which dividends are paid at the time
each DDP payment is made. (If your Fund account does not have a sufficient
balance to permit a Directed Dividend payment, your participation in the DDP
will cease and a new application will be needed to reinstate your Plan.)
TELEPHONE TRANSACTIONS
You may give up some level of security by choosing to buy or sell shares by
telephone rather than by mail. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine. If the Funds or their service
providers follow these procedures, they will not be liable for any losses
arising from unauthorized or fraudulent instructions and you may be responsible
for unauthorized requests.
Please verify the accuracy of instructions immediately upon receipt of
confirmation statements. You may bear the risk of loss from an unauthorized
telephone transaction.
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 Funds by telephone, requests may be mailed or hand-delivered
to the Funds c/o PFPC Inc., 103 Bellevue Parkway, Wilmington, DE 19809.
REGULAR REPORTS
Your investment will be easy to track. During the year, you will receive:
o An annual account statement
o A quarterly consolidated statement
o A confirmation statement, each time you buy, sell or exchange shares
o Annual and semi-annual reports to shareholders for each Fund in which you
invest.
For more information on any of Harris Insight Funds' shareholder services,
please call 800.982.8782
21
<PAGE>
DIVIDENDS AND TAX CONSIDERATIONS
Dividends of net investment income, if any, are declared daily and paid monthly
by each Fund. Any capital gains are declared and paid at least annually.
All distributions may be invested in additional shares of the same Fund at NAV
and credited to your account on the ex-date, paid in cash on the payment date,
or invested in another Fund on the ex-date pursuant to the DDP. Distribution
checks and account statements will be mailed approximately two business days
after the payment date.
TAX CONSIDERATIONS
Following is a brief discussion of the general tax treatment of various
distributions from the Funds. It is not an exhaustive discussion, and your
particular tax status may be different. We encourage you to consult with your
own tax adviser about federal, state and local tax considerations.
The tax status of any distribution is the same regardless of how long you have
held shares of the Fund and whether you reinvest it in additional shares or take
it in cash:
o All dividends paid, including net short-term capital gains (except
"EXEMPT-INTEREST DIVIDENDS") are taxable to you as ordinary income.
o Distributions of net long-term capital gains, if any, are taxable to you as
long-term capital gains regardless of how long you have held the shares.
o You may realize a taxable gain or loss when you sell shares or exchange
shares between Funds, depending on your tax basis in the shares and the value
of those shares at the time of the transaction.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. If a Fund pays
nonrefundable taxes to foreign governments during the year, the taxes will
reduce the Fund's dividends but will still be included in your taxable income.
However, you may be able to claim an offsetting credit or deduction on your tax
return for your share of foreign taxes paid by a Fund.
TERMS TO KNOW
EXEMPT-INTEREST DIVIDENDS
Dividends paid by tax-exempt funds that are exempt from federal income tax.
Exempt-interest dividends are not necessarily exempt from state and local income
taxes.
22
<PAGE>
DISTRIBUTION ARRANGEMENTS
SERVICE PLANS
Each Fund may pay fees, at a rate of up to 0.25% of the average daily net asset
value of the Fund's N Shares, to financial institutions, securities dealers and
other industry professionals (which may include Harris Trust and its affiliates)
for shareholder support services that they provide. Each Money Market Fund may
also pay for expenses incurred for advertising and marketing N Shares of the
Fund at a rate of up to 0.10% of average daily net asset value of the Fund
pursuant to a plan adopted by the Fund under Rule 12b-1. Because those expenses
are paid out of the Fund's assets on an on-going basis, over time those expenses
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
MULTIPLE CLASSES
Each of the Tax-Exempt Money Market Fund, Money Market Fund, Government Money
Market Fund and Index Fund offers two classes of shares: N Shares and
Institutional Shares. Each other Fund offers three classes of shares: N Shares,
A Shares and Institutional Shares. The shares of each class are offered by a
separate prospectus.
MASTER FUND/FEEDER FUND STRUCTURE
The Board of Trustees has the authority to convert any Fund to a "feeder" fund
in a Master Fund/Feeder Fund Structure in which the Fund, instead of investing
in portfolio securities directly, would seek to achieve its investment objective
by investing all of its investable assets in a separate "master" fund having the
same investment objectives and substantially similar investment restrictions.
Other funds with similar objectives and restrictions could also invest in the
same Master Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs.
The SAI contains more information about the Funds, the Master Fund/Feeder Fund
Structure and the types of securities in which the Funds may invest.
23
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand a Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund N Share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in N Shares of each Fund, assuming
reinvestment of all dividends and distributions. This information has been
derived from the financial statements audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the Funds' financial
statements, is included in the Funds' annual report, which is available upon
request.
These financial highlights should be read with the financial statements.
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY
MARKET FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.027 0.030 0.031 0.029 0.033
Net Realized and Unrealized
Gain/(Loss) on Investments -- -- -- -- --
----- ----- ----- ----- -----
Total from Investment Operations 0.027 0.030 0.031 0.029 0.033
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Net Investment Income (0.027) (0.030) (0.031) (0.029) (0.033)
Capital Contribution -- -- -- -- --
----- ----- ----- ----- -----
Total Distributions (0.027) (0.030) (0.031) (0.029) (0.033)
----- ----- ----- ----- -----
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN 2.75% 3.02% 3.17% 2.94% 3.31%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 240,132 204,114 223,071 178,849 170,570
Ratio of Expenses to Average 0.55% 0.55% 0.54% 0.53% 0.56%
Ratio of Expenses to Average Net
Assets (Excluding Waivers) 0.58% 0.58% 0.61% 0.64% 0.65%
Ratio of Net Investment Income to
Average Net Assets 2.71% 2.99% 3.13% 2.89% 3.25%
24
<PAGE>
<CAPTION>
MONEY MARKET
FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.048 0.051 0.052 0.050 0.054
Net Realized and Unrealized
Gain/(Loss) on Investments -- -- (0.001) -- --
----- ----- ----- ----- -----
Total from Investment Operations 0.048 0.051 0.051 0.050 0.054
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Net Investment Income (0.048) (0.051) (0.052) (0.050) (0.054)
Capital Contribution -- -- 0.001 -- --
----- ----- ----- ----- -----
Total Distributions (0.048) (0.051) (0.051) (0.050) (0.054)
----- ----- ----- ----- -----
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN 4.92% 5.25% 5.35% 5.11% 5.58%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 1,053,228 877,527 677,804 461,213 423,588
Ratio of Expenses to Average 0.54% 0.53% 0.51% 0.52% 0.56%
Ratio of Expenses to Average Net
Assets (Excluding Waivers) 0.59% 0.59% 0.61% 0.63% 0.65%
Ratio of Net Investment Income to
Average Net Assets 4.85% 5.12% 5.23% 5.00% 5.42%
<CAPTION>
GOVERNMENT MONEY
MARKET FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.046 0.050 0.050 0.049 0.054
Net Realized and Unrealized
Gain/(Loss) on Investments -- -- -- -- --
----- ----- ----- ----- -----
Total from Investment Operations 0.046 0.050 0.050 0.049 0.0547
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Net Investment Income (0.046) (0.050) (0.050) (0.049) (0.054)
Capital Contribution -- -- -- -- --
----- ----- ----- ----- -----
Total Distributions (0.046) (0.050) (0.050) (0.049) (0.054)
----- ----- ----- ----- -----
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN 4.67% 5.08% 5.17% 5.00% 5.51%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 289,651 248,595 247,594 206,073 264,426
Ratio of Expenses to Average 0.55% 0.54% 0.53% 0.54% 0.57%
Ratio of Expenses to Average Net
Assets (Excluding Waivers) 0.59% 0.59% 0.63% 0.67% 0.67%
Ratio of Net Investment Income to
Average Net Assets 4.58% 4.96% 5.05% 4.89% 5.36%
</TABLE>
25
<PAGE>
FOR MORE INFORMATION
More information on the Harris Insight Funds is available free upon request:
SHAREHOLDER REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected a Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about each Fund and its policies. The SAI is on
file with the Securities and Exchange Commission (Commission) and is
incorporated by reference into (i.e., is legally considered part of) this
prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 800.982.8782
BY MAIL
Harris Insight Funds
3200 Horizon Drive
King of Prussia, PA 19406
ON THE INTERNET
Text-only versions of the prospectus and other documents pertaining to the Funds
can be viewed online or downloaded from:
HARRIS INSIGHT FUNDS
http://www.harrisinsight.com
Information about the Funds (including the SAI) can be reviewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 202.942.8090. Reports and other information about the Funds are available on
the EDGAR Database on the Commission's Internet site at http://www.sec.gov.
Copies of information about the Funds may be obtained, after paying a
duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing to the Commission's Public Reference Section,
Washington, D.C. 20549-0102.
The Funds are series of Harris Insight Funds Trust, whose investment company
registration number is 811-7447.
HIF 1025 5/00
<PAGE>
HARRIS
INSIGHT(R) FUNDS
Institutional Shares
MAY 1, 2000 PROSPECTUS
HARRIS INSIGHT MONEY MARKET FUNDS
Tax-Exempt Money Market Fund
Money Market Fund
Government Money Market Fund
AS WITH ANY MUTUAL FUND, THE SECURITIES AND EXCHANGE COMMISSION (SEC)
HAS NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER THIS
PROSPECTUS IS ADEQUATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]
HARRIS
INSIGHT(R) FUNDS
<PAGE>
TABLE OF CONTENTS
INTRODUCTION TO MONEY MARKET FUNDS PAGE 2
HARRIS INSIGHT MONEY MARKET FUNDS
Tax-Exempt Money Market Fund 4
Money Market Fund 6
Government Money Market Fund 8
Risk Considerations 10
Fees and Expenses 12
INVESTMENT ADVISER 14
PORTFOLIO MANAGERS 16
PRICING OF FUND SHARES 17
SHAREHOLDER SERVICES 18
DIVIDENDS AND TAX CONSIDERATIONS 24
DISTRIBUTION ARRANGEMENTS 25
MASTER FUND/FEEDER FUND STRUCTURE 25
FINANCIAL HIGHLIGHTS 26
<PAGE>
INTRODUCTION TO THE HARRIS INSIGHT MONEY MARKET FUNDS
The Harris Insight Money Market Funds offer investors the opportunity
to derive income from a portfolio of money market instruments with a stable net
asset value. They invest in short-term securities issued by banks, other U.S.
corporations, the U.S. government, state or local governments, and other
entities. These money market instruments may include certificates of deposit,
bankers' acceptances, variable rate demand notes, fixed-term obligations,
COMMERCIAL PAPER, ASSET-BACKED SECURITIES and REPURCHASE AGREEMENTS.
WHY INVEST IN MONEY MARKET FUNDS?
These funds are especially well-suited for conservative investors who seek -
o Current income
o Stability of principal (they are managed in an attempt to maintain a share
price of $1.00)
WHAT ARE THE FUNDS' INVESTMENT PARAMETERS?
Money market funds must conform to a number of regulations, including rules that
require each fund to -
o Limit the DOLLAR-WEIGHTED AVERAGE MATURITY of their investments to 90 days or
less
o Buy only high-quality, short-term money market instruments
o Buy securities with remaining maturities no longer than 397 days
TERMS TO KNOW
COMMERCIAL PAPER
Short-term securities that are issued by corporations and other borrowers to
finance their current obligations and are typically unsecured. Issues of
commercial paper normally have maturities of less than nine months and have
fixed rates of return.
ASSET-BACKED SECURITIES
Securities collateralized by credit card loans or other accounts receivable.
REPURCHASE AGREEMENTS
A binding agreement enabling a bank or broker to borrow money, using securities
as collateral, with a promise to buy back the securities at a specified price,
usually within 90 days.
DOLLAR WEIGHTED AVERAGE MATURITY
An average of all of the maturities of a fund's securities holdings, weighted
according to each security's dollar value relative to the rest of the holdings.
2
<PAGE>
- --------------------------------------------------------------------------------
Shares of the Harris Insight Money Market Funds are not bank deposits and
are not guaranteed or insured by any bank, government entity, or the FDIC.
Although each of the Harris Insight Money Market Funds seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose
money by investing in a Fund.
Each Fund's primary investment practices and strategies are discussed in
this prospectus. Other practices, and their related risks, are described
in the Statement of Additional Information.
The investment objective of each Fund is not fundamental and may be
changed by the Board of Trustees without approval by the Fund's
shareholders.
Each Fund's principal risks are provided in an alphabetical listing within
the Fund description that follows. These risks are discussed in detail
under "Risk Considerations" on page 10.
- --------------------------------------------------------------------------------
3
<PAGE>
HARRIS INSIGHT MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income that is exempt from
federal income taxes as is consistent with its investment policies and with
preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in high-quality, short-term
money market instruments that are generally exempt from federal income tax and
are not subject to the ALTERNATIVE MINIMUM TAX.
The Fund will invest primarily in high-quality MUNICIPAL SECURITIES that are
generally exempt from federal income taxes and will purchase only U.S.
dollar-denominated securities.
In addition, the Fund will purchase only securities (other than U.S. GOVERNMENT
securities) that have been rated within the two highest rating categories by at
least two nationally recognized rating agencies (or, if not rated, are
considered by the portfolio manager to be of comparable quality).
Depending on market conditions, the Fund may temporarily hold up to 20% of the
current value of its assets in securities whose interest income is subject to
taxation.
Current income generally will be lower than the income provided by funds that
invest in securities with taxable income or securities with longer maturities or
lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 10.)
o Credit risk
o Municipal market risk
o Principal stability risk
TERMS TO KNOW
ALTERNATIVE MINIMUM TAX (AMT)
A federal tax designed to ensure that individuals, trusts, estates and companies
are limited in their deductions, exemptions, and tax credits when calculating
federal income tax liability.
MUNICIPAL SECURITIES
Bonds and other obligations issued by state and local governments to finance
operations or projects. These securities make interest payments that are exempt
from federal income tax.
U.S. GOVERNMENT SECURITIES
Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
4
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1995 1996 1997 1998 1999
3.60% 3.19% 3.47% 3.35% 3.07%
Best Quarter: Q2 1995 0.95%
- --------------------------------------
Worst Quarter: Q1 1999 0.68%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 5 Inception
Year Years (1/5/94)
- -------------------------------------
Tax-Exempt
Money Market
Fund 3.07% 3.33% 3.20%
As of December 31, 1999, the seven-day yield for the Fund was 4.14%. As of the
same date, the effective tax-equivalent seven-day yield for the Fund was 5.88%.
For current yield information, please call 800.982.8782.
5
<PAGE>
MONEY MARKET FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income as is consistent
with its investment policies and with preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests only in high-quality, short-term money market instruments that,
in the opinion of the investment adviser, present minimal credit risks. The Fund
invests in a broad range of short-term money market instruments, including U.S.
GOVERNMENT SECURITIES, as well as bank and commercial obligations. COMMERCIAL
PAPER purchased by the Fund will consist of U.S. dollar-denominated direct
obligations of domestic and foreign corporate issuers, including bank holding
companies.
The Fund will purchase only U.S. dollar-denominated securities. In addition, the
Fund will purchase only securities (other than U.S. government securities) that
have been rated within the two highest rating categories by at least two
nationally recognized rating agencies (or, if not rated, are considered by the
portfolio manager to be of comparable quality). No more than 5% of the Fund's
assets will be invested in securities in the second highest rating category.
Current income generally will be lower than the income provided by funds that
invest in securities with longer maturities or lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 10.)
o Credit risk
o Foreign securities risk
o Principal stability risk
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES
See page 4.
COMMERCIAL PAPER
See page 3.
6
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future..
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1995 1996 1997 1998 1999
5.86% 5.38% 5.66% 5.61% 5.29%
Best Quarter: Q2 1995 1.46%
- -------------------------------------
Worst Quarter: Q2 1999 1.23%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 5 Inception
Year Years (1/5/94)
- -------------------------------------
Money
Market
Fund 5.29% 5.56% 5.31%
As of December 31, 1999, the seven-day yield for the Fund was 5.87%. For current
yield information, please call 800.982.8782.
7
<PAGE>
GOVERNMENT MONEY MARKET FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide as high a level of current income from government
obligations as is consistent with preservation of capital and liquidity.
WHAT IS THE FUND'S INVESTMENT APPROACH?
The Fund invests exclusively in short-term securities issued by the U.S.
government, its agencies or instrumentalities, and REPURCHASE AGREEMENTS backed
by those securities, all of which are deemed to be of minimal credit risk by the
investment adviser.
Current income generally will be lower than the income provided by funds that
invest in securities with longer maturities or lower quality.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 10.)
o Credit risk
o Principal stability risk
TERMS TO KNOW
REPURCHASE AGREEMENTS
See page 3.
8
<PAGE>
HOW HAS THE FUND PERFORMED?
The chart and table give an indication of the Fund's risks and performance. The
chart shows you how the Fund's performance has varied from year to year. When
you consider this information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the future.
BAR CHART:
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1995 1996 1997 1998 1999
5.79% 5.24% 5.48% 5.43% 5.04%
Best Quarter: Q2 1995 1.45%
- -------------------------------------
Worst Quarter: Q2 1999 1.18%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 5 Inception
Year Years (5/16/94)
- --------------------------------------
Government
Money Market
Fund 5.04% 5.39% 5.29%
As of December 31, 1999, the seven-day yield for the Fund was 5.28%. For current
yield information, please call 800.982.8782.
9
<PAGE>
RISK CONSIDERATIONS - MONEY MARKET FUNDS
The risks of investing in the various Funds are illustrated in the chart below.
A Fund's principal risks are designated by the ^ symbol.
- --------------------------------------------------------------------------------
FUNDS Tax-Exempt Government
RISKS Money Market Money Market Money Market
- --------------------------------------------------------------------------------
Counterparty o o o
- --------------------------------------------------------------------------------
Credit ^ ^ ^
- --------------------------------------------------------------------------------
Foreign securities ^
- --------------------------------------------------------------------------------
Municipal market ^
- --------------------------------------------------------------------------------
Principal stability ^ ^ ^
- --------------------------------------------------------------------------------
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
o The investment objective
o The Fund's ability to achieve its objective
o The markets in which the Fund invests
o The investments the Fund makes in those markets
o Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and prevent a Fund from achieving its objectives.
COUNTERPARTY RISK
The risk that a fund incurs when it engages in repurchase, reverse repurchase,
derivative, when-issued, forward-commitment, delayed-settlement and
securities-lending transactions with another party, relies on the other party to
consummate the transaction and is subject to the risk of default by the other
party. Failure of the other party to consummate the transaction may result in
the fund's incurring a loss or missing an opportunity to obtain a price believed
to be advantageous.
CREDIT RISK
The risk that the issuer of a security or the counterparty to a contract will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
FOREIGN SECURITIES RISK
The risk that the prices of foreign securities may be more volatile than those
of their domestic counterparts owing in part to possible political or economic
instability; limits on repatriation of capital; exchange controls or exchange
rate fluctuations; less publicly available information as a result of
accounting, auditing, and financial
10
<PAGE>
reporting standards different from those used in the U.S.; more volatile
markets; less securities regulation; less favorable tax provisions; war or
expropriation.
MUNICIPAL MARKET RISK
The risk that certain factors may negatively affect the value of municipal
securities, and, as a result, the share price of a fund that invests in them.
These factors include political or legislative changes, uncertainties related to
the tax status of the securities or the rights of investors in the securities. A
fund may invest in municipal obligations that are related in such a way (e.g.,
multiple apparently unrelated issues that depend on the financial rating or
support of a single government unit) that an economic, business or political
development or change that affects one of these obligations would also affect
the others.
PRINCIPAL STABILITY RISK
The risk that a money market fund may not be able to maintain a stable net asset
value of $1.00 per share.
11
<PAGE>
FEES AND EXPENSES - MONEY MARKET FUNDS
The tables below describe the fees and expenses that you will pay if you buy and
hold shares of the Harris Insight Equity Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
- --------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
- --------------------------------------------------------------------------------
REDEMPTION FEE None
- --------------------------------------------------------------------------------
EXCHANGE FEE None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
- --------------------------------------------------------------------------------
Tax-Exempt Money Government
Money Market Market Money Market
Fund Fund Fund
- --------------------------------------------------------------------------------
Investment
Advisory Fees 0.11% 0.10% 0.11%
Other Expenses1 0.12 0.14 0.13
- --------------------------------------------------------------------------------
Total Operating
Expenses1, 2 0.23% 0.24% 0.24%
- --------------------------------------------------------------------------------
1 Expenses are based on amounts incurred by the Funds during their most recent
fiscal year but do not reflect expense reductions (expense reimbursements and
fee waivers) by Harris Trust. After these reductions, actual Other Expenses
and Total Operating Expenses of the Funds for the fiscal year ended December
31, 1999 were:
Tax-Exempt Money Government
Money Market Market Money Market
Fund Fund Fund
------------------------------------------------------------------------------
Other Expenses 0.12% 0.09% 0.09%
Total Operating Expenses 0.23% 0.19% 0.20%
------------------------------------------------------------------------------
Customers of a financial institution such as Harris Trust may also be charged
certain fees or 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.
12
<PAGE>
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Harris
Insight Money Market Funds to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in a Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
- --------------------------------------------------------------------------------
Tax-Exempt Money Government
Money Market Market Money Market
Fund Fund Fund
- --------------------------------------------------------------------------------
One Year $24 $25 $25
- --------------------------------------------------------------------------------
Three Years 74 77 77
- --------------------------------------------------------------------------------
Five Years 130 135 135
- --------------------------------------------------------------------------------
Ten Years 293 306 306
- --------------------------------------------------------------------------------
13
<PAGE>
INVESTMENT ADVISER
Harris Trust and Savings Bank (Harris Trust), an Illinois state-chartered bank
and a member of the Federal Reserve System, is the investment adviser for each
of the Harris Insight Funds. Harris Trust is the successor to the investment
banking firm of N.W. Harris & Co., which was organized in 1882 and incorporated
in 1907. At December 31, 1999, Harris Trust had total discretionary assets under
management of approximately $26.4 billion and was the largest bank 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,
1999, Harris Trust managed more than $13.8 billion in discretionary personal
trust assets, and administered more than $17.9 billion in non-discretionary
trust assets.
Harris Trust oversees the PORTFOLIO MANAGEMENT AGENT.
The Funds have received an exemptive order from the SEC that permits Harris
Trust, subject to certain conditions, to select new portfolio management
agents/sub-advisers or replace existing portfolio management agents/sub-advisers
without first obtaining shareholder approval for the change. In addition, Harris
Trust may authorize a portfolio management agent/sub-adviser to enter into a
sub-portfolio management agreement with one or more sub-subadvisers on behalf of
any Fund managed by that portfolio management agent/sub-adviser. The Board of
Trustees, including a majority of the "independent" Trustees, must approve each
new portfolio management, sub-portfolio management or sub-sub-portfolio
management agreement. This allows Harris Trust to employ new portfolio
management agents/sub-advisers for new or existing Funds, change the terms of
particular agreements with sub-advisers or change portfolio management
agents/sub-advisers when it determines that a change is beneficial to
shareholders, and to avoid the delay and expense of calling and holding
shareholder meetings to approve each change. In accordance with the exemptive
order, Harris Trust and the Funds will provide investors with information about
each new portfolio management agent/sub-adviser (or sub-subadviser) and its
portfolio management (or sub-portfolio management) agreement within 90 days of
the hiring of a new portfolio management agent/sub-adviser or sub-subadviser.
Harris Trust is responsible for selecting, monitoring, evaluating and allocating
assets to the portfolio management agents/sub-advisers and oversees their
compliance with each Fund's investment objective, policies and restrictions.
The SAI contains more information about the Funds' advisory and portfolio
management agreements, including a fuller discussion of the Funds' SEC exemptive
order.
14
<PAGE>
ADVISORY FEES
The investment advisory fees payable to Harris Trust for each Fund are based
upon the average daily net assets of each Fund at the annual rate of 0.14% of
each Fund's first $100 million of net assets plus 0.10% of the Fund's remaining
net assets.
Harris Trust may waive any portion of its investment advisory fees or reimburse
Fund expenses from time to time. These arrangements are voluntary and may be
terminated at any time.
PORTFOLIO MANAGEMENT AGENT
As the portfolio management agent, Harris Investment Management, Inc. (HIM)
manages the investments of all of the Funds. HIM is a wholly-owned subsidiary of
Harris Bankcorp, Inc. For the services provided by HIM to the Funds for which it
serves as portfolio management agent, Harris Trust pays HIM the advisory fees
Harris Trust receives from those Funds. As of December 31, 1999, HIM managed
approximately $14.1 billion in assets.
Many persons on the staffs of the investment adviser and portfolio management
agent contribute to the investment management services provided to the Funds.
The individuals named in the following section, however, are primarily
responsible for the day-to-day investment management of the Funds.
INVESTMENT ADVISER
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 60690
15
<PAGE>
PORTFOLIO MANAGERS
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND
KIMBERLY J. KEYWELL, PRINCIPAL AND PORTFOLIO MANAGER (HIM)
Prior to joining HIM in 1995, Ms. Keywell served as an Associate Portfolio
Manager for the trust department of a large banking institution. She has 8 years
of investment management experience and was appointed Portfolio Manager of the
Fund in 1998.
GOVERNMENT MONEY MARKET FUND
MONEY MARKET FUND
RANDALL T. ROYTHER, SENIOR PARTNER AND PORTFOLIO MANAGER (HIM)
Mr. Royther joined Harris Trust in 1990. He has 11 years of investment
management experience and was appointed Portfolio Manager of:
o Government Money Market Fund in 1995
o Money Market Fund in 1995
16
<PAGE>
PRICING OF FUND SHARES
SHARES OF THE FUNDS ARE BOUGHT AND SOLD AT NET ASSET VALUE
Each Fund calculates its net asset value per share (NAV) on each day on which
both the New York Stock Exchange (NYSE) and the Federal Reserve Bank of
Philadelphia are open for business.
HOW THE FUNDS CALCULATE NAV
The NAV of a class of shares of a Fund is determined by dividing the value of
the securities and other assets, less liabilities, allocated to the class by the
number of outstanding shares of the class.
The NAV for the Tax-Exempt Money Market Fund is calculated as of 12:00 Noon,
Eastern time. The NAVs for each of the Money Market Fund and the Government
Money Market Fund is calculated as of 2:30 p.m., Eastern time. In its attempt to
maintain a stable NAV of $1.00 per share, securities held by each Money Market
Fund are valued at amortized cost, which is approximately equal to market value.
17
<PAGE>
SHAREHOLDER SERVICES
HOW TO BUY SHARES
Institutional shares are sold to the following investors:
o Fiduciary and discretionary accounts of institutions
o Financial institutions, such as banks, savings institutions and credit unions
o Pension and profit sharing and employee benefit plans and trusts
o Insurance companies
o Investment companies
o Investment advisers
o Broker/dealers investing for their own accounts or for the accounts of other
institutional investors
Institutional shares may also be sold to directors, trustees, officers and
employees of the Funds, the investment adviser, the portfolio management agent,
the distributor and the investment adviser's other investment advisory clients.
18
<PAGE>
OPENING A NEW ACCOUNT IS EASY
There are three convenient ways to invest in the Harris Insight Funds.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
THROUGH FINANCIAL
BY MAIL BY BANK WIRE INSTITUTION/PROFESSIONAL
- ------------------------------------------------------------------------------------
<S> <C> <C>
Complete and sign an Call the Funds at Contact your financial
application for 800.625.7073, during institution or professional for
Institutional Shares. business hours, to initiate more information.
your purchase.
Make your check payable Important note: Each
to the Harris Insight Funds. Please be sure to furnish institution or professional
your taxpayer may have its own procedures
If you are adding to your identification number. and requirements for buying
existing account, indicate shares and may charge fees.
your Fund account Then wire your
number directly on investment to:
the check. PNC Bank, N.A.
Philadelphia, PA
Mail your application ABA #0310-0005-3
and check to: For Credit To:
Harris Insight Funds Harris Insight Funds
c/o PFPC Inc. 85-5093-2950
P.O. Box 8952 Re: [Name of Fund]--
Wilmington, DE 19899-8952 Institutional Shares
Account No.:
Account Name:
Taxpayer ID No.:
If you are opening a new
account, please complete
and mail the account
application form to the
Funds at the address given
under "By Mail."
The Funds currently do
not charge investors for
the receipt of wire
transfers, although your
bank may charge you for
their wiring services.
- -----------------------------------------------------------------------------------
</TABLE>
The Harris Insight Funds do not require a minimum investment to initiate or add
to your investment program.
Orders placed directly with the Funds must be paid for by check or bank wire
before the order will be executed. The Funds do not accepts third-party checks.
Payment for shares purchased through a financial institution will not be due
until settlement date, normally three business days after the order has been
executed.
19
<PAGE>
Shares are purchased at the NAV next calculated after your investment is
received. The Funds reserve the right to reject any purchase order.
Please indicate whether you would like the ability to buy, redeem or exchange
shares by telephone or wire when you complete your application.
MORE ABOUT BUYING SHARES
TAXPAYER IDENTIFICATION
You must certify whether you are subject to withholding for failing to report
income to the Internal Revenue Service. Investments received without a certified
taxpayer identification number may be returned.
- --------------------------------------------------------------------------------
HOURS OF OPERATION
The Funds are open for business each day the New York Stock Exchange (NYSE)
and the Federal Reserve Bank of Philadelphia are open for business. The Funds
are closed for business on:
- --------------------------------------------------------------------------------
New Year's Day Memorial Day Veterans' Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
Presidents' Day Labor Day Christmas Day
Good Friday Columbus Day
- --------------------------------------------------------------------------------
You may call 800.982.8782 to speak with a Fund representative Monday through
Friday from 8:00 a.m. to 5:00 p.m., Central time.
- --------------------------------------------------------------------------------
20
<PAGE>
HOW TO SELL SHARES
ACCESSING YOUR MONEY IS EASY
You may sell or redeem some or all of your shares when the Funds are open for
business by doing one of the following.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
BY MAIL AND BY TELEPHONE BY TELEPHONE AND THROUGH FINANCIAL
CHECK AND CHECK BANK WIRE INSTITUTION/PROFESSIONAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
You may sell shares by If you have chosen If you have chosen Contact your financial
writing the Funds at: the telephone the wire redemption institution or
Harris Insight Funds redemption privilege, privilege, you may professional for more
c/o PFPC Inc. you may call call 800.625.7073, information.
P.O. Box 8952 800.625.7073, during during business
Wilmington, DE business hours, to sell hours, to sell your Important note: Each
19899-8952. your shares. shares and have your institution of
proceeds wired to a professional may have
A check for your A check for your pre-designated bank its own procedures
proceeds will be proceeds will be account. and requirements
mailed to you. mailed to you. for selling shares
and may charge fees.
- ------------------------------------------------------------------------------------------------------
</TABLE>
A redemption request should be accompanied by your account number, the exact
name(s) on your account and your social security or taxpayer identification
number. Some redemption requests require a signature guarantee. (See page 22 for
more information.)
The Funds reserve the right to pay redemptions "in kind" - payment in portfolio
securities rather than cash - if the amount you are redeeming is large enough to
affect a Fund's operations (limited to amounts more than $250,000 or
representing more than 1% of the Fund's assets). In these cases, you might incur
brokerage costs in converting the securities to cash.
MORE ABOUT REDEMPTIONS
WHEN ORDERS ARE PROCESSED
Your shares will be sold at the NAV next calculated after your order is accepted
by the Funds' transfer agent in good order. Your order will be processed and a
check for the proceeds will be mailed to you promptly. Payment by wire will
generally be sent the following business day.
Please note that proceeds for redemption requests made shortly after a recent
purchase by check will be distributed only after the check clears, which may
take up to 15 days.
Under unusual circumstances, the Funds may suspend redemptions, if allowed by
the Securities and Exchange Commission, or postpone payment.
21
<PAGE>
MINIMUM AMOUNT REQUIRED FOR WIRE SALES
The minimum amount of redemption proceeds that may be wired is $1,000.
Otherwise, a check for redemption proceeds is mailed to your address of record.
The Funds reserve the right to change this minimum or to terminate the
privilege.
SIGNATURE GUARANTEES
The Funds use signature guarantees on certain redemption requests to protect you
and the Funds from unauthorized account transfers. A signature guarantee is
required when a redemption check is --
o Payable to anyone other than the shareholder(s) of record
o To be mailed to an address other than the address of record
o To be wired to a bank other than one previously authorized.
Signature guarantees may be obtained from a domestic bank or trust company,
broker, dealer, clearing agency or savings association that participates in a
medallion program recognized by the Securities Transfer Association.
REDEMPTION OF SHARES IN SMALLER ACCOUNTS
Each Fund reserves the right to close a shareholder's account and mail the
proceeds to the shareholder if the value of the account is reduced below $500
($250 in the case of a retirement account), unless the reduction is due to
market activity. However, the shareholder will first be notified in writing and
permitted 30 days to increase the balance.
ADDITIONAL SHAREHOLDER SERVICES AND INFORMATION
EXCHANGING SHARES
You can exchange your Institutional shares of a Fund for Institutional shares of
any other Harris Insight Fund, provided that:
o Shares have been held for at least seven days,
o Account registration stays the same, and
o The shares you wish to buy are registered for sale in your home state.
Under certain circumstances, the Funds may:
o Limit the number of exchanges between Funds
o Reject a telephone exchange order
o Modify or discontinue the exchange privilege upon 60 days' written notice
The procedures that apply to redeeming shares also apply to exchanging shares.
22
<PAGE>
TELEPHONE TRANSACTIONS
You may give up some level of security by choosing to buy or sell shares by
telephone rather than by mail. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine. If the Funds or their service
providers follow these procedures, they will not be liable for any losses
arising from unauthorized or fraudulent instructions and you may be responsible
for unauthorized requests.
Please verify the accuracy of instructions immediately upon receipt of
confirmation statements. You may bear the risk of loss from an unauthorized
telephone transaction.
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 Funds by telephone, requests may be mailed or hand-delivered
to the Funds c/o PFPC Inc., 103 Bellevue Parkway, Wilmington, DE 19809.
REGULAR REPORTS
Your investment will be easy to track. During the year, you will receive:
o An annual account statement
o A quarterly consolidated statement
o A confirmation statement, each time you buy, sell or exchange shares
o Annual and semi-annual reports to shareholders for each Fund in which you
invest.
For more information on any of Harris Insight Funds' shareholder services,
please call 800.982.8782
23
<PAGE>
DIVIDENDS AND TAX CONSIDERATIONS
Dividends of net investment income, if any, are declared daily and paid monthly
by each Fund. Any capital gains are declared and paid at least annually.
All distributions may be invested in additional shares of the same Fund at NAV
and credited to your account on the ex-date, paid in cash on the payment date,
or invested in another Fund on the ex-date pursuant to the DDP. Distribution
checks and account statements will be mailed approximately two business days
after the payment date.
TAX CONSIDERATIONS
Following is a brief discussion of the general tax treatment of various
distributions from the Funds. It is not an exhaustive discussion, and your
particular tax status may be different. We encourage you to consult with your
own tax adviser about federal, state and local tax considerations.
The tax status of any distribution is the same regardless of how long you have
held shares of the Fund and whether you reinvest in additional shares or take it
in cash:
o All dividends paid, including net short-term capital gains (except
"EXEMPT-INTEREST DIVIDENDS") are taxable to you as ordinary income.
o Distributions of net long-term capital gains, if any, are taxable to you as
long-term capital gains regardless of how long you have held the shares.
o You may realize a taxable gain or loss when you sell shares or exchange
shares between Funds, depending on your tax basis in the shares and the value
of those shares at the time of the transaction.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. If a Fund pays
nonrefundable taxes to foreign governments during the year, the taxes will
reduce the Fund's dividends but will still be included in your taxable income.
However, you may be able to claim an offsetting credit or deduction on your tax
return for your share of foreign taxes paid by a Fund.
TERMS TO KNOW
EXEMPT-INTEREST DIVIDENDS
Dividends paid by tax-exempt funds that are exempt from federal income tax.
Exempt-interest dividends are not necessarily exempt from state and local income
taxes.
24
<PAGE>
DISTRIBUTION ARRANGEMENTS
MULTIPLE CLASSES
Each of the Tax-Exempt Money Market Fund, Money Market Fund, Government Money
Market Fund and Index Fund offers two classes of shares: N Shares and
Institutional Shares. Each other Fund offers three classes of shares: N Shares,
A Shares and Institutional Shares. The shares of each class are offered by a
separate prospectus.
MASTER FUND/FEEDER FUND STRUCTURE
The Board of Trustees has the authority to convert any Fund to a "feeder" fund
in a Master Fund/Feeder Fund Structure in which the Fund, instead of investing
in portfolio securities directly, would seek to achieve its investment objective
by investing all of its investable assets in a separate "master" fund having the
same investment objectives and substantially similar investment restrictions.
Other funds with similar objectives and restrictions could also invest in the
same Master Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs.
The SAI contains more information about the Funds, the Master Fund/Feeder Fund
Structure and the types of securities in which the Funds may invest.
25
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand a Fund's
financial performance for the past 5 years (or, if shorter, the period of
the Fund's operations). Certain information reflects financial results for a
single Fund Institutional share. The total returns in the table represent
the rate that an investor would have earned (or lost) on an investment in
Institutional shares of each Fund, assuming reinvestment of all dividends
and distributions. This information has been derived from the financial
statements audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Funds' financial
statements, is included in the Funds' annual report, which is
available upon request.
These financial highlights should be read with the financial statements.
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY
MARKET FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.030 0.033 0.034 0.031 0.035
Net Realized and Unrealized
Gain/(Loss) on Investments -- -- -- -- --
----- ----- ----- ----- -----
Total from Investment Operations 0.030 0.033 0.034 0.031 0.035
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Net Investment Income (0.030) (0.033) (0.034) (0.031) (0.035)
Capital Contribution -- -- -- -- --
----- ----- ----- ----- -----
Total Distributions (0.030) (0.033) (0.034) (0.031) (0.035)
----- ----- ----- ----- ----
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN 3.07% 3.35% 3.47% 3.19% 3.60%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 515,987 606,754 497,986 388,404 212,146
Ratio of Expenses to Average
Net Assets 0.23% 0.23% 0.25% 0.29% 0.29%
Ratio of Expenses to Average Net
Assets (Excluding Waivers) 0.23% 0.23% 0.26% 0.29% 0.29%
Ratio of Net Investment Income to
Average Net Assets 3.01% 3.30% 3.41% 3.14% 3.52%
26
<PAGE>
<CAPTION>
MONEY MARKET
FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.052 0.055 0.055 0.052 0.057
Net Realized and Unrealized
Gain/(Loss) on Investments -- -- (0.001) -- --
----- ----- ----- ----- -----
Total from Investment Operations 0.052 0.055 0.054 0.052 0.057
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Net Investment Income (0.052) (0.055) (0.055) (0.052) (0.057)
Capital Contribution -- -- 0.001 -- --
----- ----- ----- ----- -----
Total Distributions (0.052) (0.055) (0.054) (0.052) (0.057)
----- ----- ----- ----- -----
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN 5.29% 5.61% 5.66% 5.38% 5.86%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 2,084,723 1,391,856 1,028,091 369,417 98,837
Ratio of Expenses to Average
Net Assets 0.19% 0.19% 0.21% 0.27% 0.29%
Ratio of Expenses to Average Net
Assets (Excluding Waivers) 0.24% 0.24% 0.26% 0.28% 0.30%
Ratio of Net Investment Income to
Average Net Assets 5.20% 5.46% 5.54% 5.23% 5.69%
27
<PAGE>
<CAPTION>
GOVERNMENT MONEY
MARKET FUND
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.049 0.053 0.053 0.051 0.056
Net Realized and Unrealized
Gain/(Loss) on Investments -- -- -- -- --
----- ----- ----- ----- -----
Total from Investment Operations 0.049 0.053 0.053 0.051 0.056
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Net Investment Income (0.049) (0.053) (0.053) (0.051) (0.056)
Capital Contribution -- -- -- -- --
----- ----- ----- ----- -----
Total Distributions (0.049) (0.053) (0.053) (0.051) (0.056)
----- ----- ----- ----- -----
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN 5.04% 5.43% 5.48% 5.24% 5.79%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($000) 210,521 162,285 63,970 37,169 18,367
Ratio of Expenses to Average
Net Assets 0.20% 0.19% 0.23% 0.31% 0.31%
Ratio of Expenses to Average Net
Assets (Excluding Waivers) 0.24% 0.24% 0.28% 0.32% 0.32%
Ratio of Net Investment Income to
Average Net Assets 4.93% 5.27% 5.36% 5.12% 5.62%
</TABLE>
28
<PAGE>
FOR MORE INFORMATION
More information on the Harris Insight Funds is available free upon request:
SHAREHOLDER REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected a Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about each Fund and its policies. The SAI is on
file with the Securities and Exchange Commission (Commission) and is
incorporated by reference into (i.e., is legally considered part of) this
prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 800.982.8782
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Harris Insight Funds
3200 Horizon Drive
King of Prussia, PA 19406
ON THE INTERNET
Text-only versions of the prospectus and other documents pertaining to the Funds
can be viewed online or downloaded from:
HARRIS INSIGHT FUNDS
http://www.harrisinsight.com
Information about the Funds (including the SAI) can be reviewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 202.942.8090. Reports and other information about the Funds are available on
the EDGAR Database on the Commission's Internet site at http://www.sec.gov.
Copies of information about the Funds may be obtained, after paying a
duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing to the Commission's Public Reference Section,
Washington, D.C. 20549-0102
The Funds are series of Harris Insight Funds Trust,
whose investment company registration number is 811-7447.
HIF 1275 5/00
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HARRIS INSIGHT(R) FUNDS
3200 Horizon Drive
King of Prussia, Pennsylvania 19406
Telephone: (800) 982-8782
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
This Statement of Additional Information (the "SAI") is not a
prospectus. It should be read in conjunction with the corresponding prospectuses
dated May 1, 2000 and any supplement thereto (the "Prospectuses") for the series
of Harris Insight Funds Trust (the "Trust") listed below (each a "Fund" and
collectively the "Funds").
The Funds are as follows:
Equity Funds
o Harris Insight Emerging Markets Fund
o Harris Insight International Fund
o Harris Insight Small-Cap Opportunity Fund
o Harris Insight Small-Cap Value Fund
o Harris Insight Growth Fund
o Harris Insight Equity Fund
o Harris Insight Equity Income Fund
o Harris Insight Index Fund
o Harris Insight Balanced Fund
Fixed Income Funds
o Harris Insight Convertible Securities Fund
o Harris Insight Tax-Exempt Bond Fund
o Harris Insight Bond Fund
o Harris Insight Intermediate Tax-Exempt Bond Fund
o Harris Insight Short/Intermediate Bond Fund
o Harris Insight Intermediate Government Bond Fund
Money Market Funds
o Harris Insight Tax-Exempt Money Market Fund
o Harris Insight Money Market Fund
o Harris Insight Government Money Market Fund
Each Fund's financial statements and financial highlights for the
fiscal period ended December 31, 1999, including the independent auditors'
report thereon, are included in the Funds' Annual Report and are incorporated
herein by reference.
To obtain a free copy of the Prospectuses or Annual Report, please
write or call the Funds at the address or telephone number given above.
Capitalized terms not defined herein are defined in the Prospectuses.
HIF 1150 5/00
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TABLE OF CONTENTS
PAGE
General Information About the Trust.........................................3
Investment Strategies.......................................................3
Ratings....................................................................29
Investment Restrictions....................................................29
Master Fund/Feeder Fund Structure..........................................31
Trustees and Executive Officers............................................33
Control Persons and Principal Holders of Securities........................35
Investment Management, Distribution and Other Services.....................41
Service Plans..............................................................49
Calculation of Yield and Total Return......................................52
Additional Purchase and Redemption Information.............................56
Determination of Net Asset Value...........................................58
Portfolio Transactions ....................................................59
Tax Information............................................................62
Shares of Beneficial Interest..............................................65
Other......................................................................66
Independent Accountant's and Reports to Shareholders.......................66
Appendix A.................................................................67
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GENERAL INFORMATION ABOUT THE TRUST
The Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company. The
Trust was organized as a Massachusetts business trust on December 6, 1995.
Because the Trust offers multiple investment portfolios (the "Funds"), it is
known as a "series" company. The Trust currently has eighteen Funds, with
various investment objectives and policies. Each Fund, except for the Index Fund
and the Money Market Funds, offers three classes of shares, A Shares, N Shares
and Institutional Shares. The Index Fund and each of the Money Market Funds
offer two classes of shares, N Shares and Institutional Shares. (Prior to
February 18, 1999, A Shares were named "Advisor" Shares and N Shares were named
"Class A" Shares.) The investment objectives of the Funds are described in the
Prospectuses. Harris Trust and Savings Bank ("Harris Trust" or the "Investment
Adviser") is the adviser to the Funds, Harris Investment Management, Inc.
("HIM", the "Sub-Adviser", or the "Portfolio Management Agent") is the portfolio
manager for each of the Funds, and Hansberger Global Investors, Inc.
("Hansberger" or the "Investment Sub-Subadviser") is the sub-subadviser to the
International Fund and the Emerging Markets Fund. See "Investment Management,
Distribution and Other Services" below.
INVESTMENT STRATEGIES
ASSET-BACKED SECURITIES. The Funds, except for the Convertible
Securities 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 installment loan contracts, leases of
various types of real and personal property, motor vehicle installment sales
contracts 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 a Fund's 15% (10% with respect to the Money Market Funds) 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.
BANK OBLIGATIONS. A Fund may invest in bank obligations, include
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. The Money Market Fund limits its
investments in domestic bank obligations to obligations of U.S. banks (including
foreign branches and thrift institutions) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System, are examined by Comptroller of the Currency or whose deposits are
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insured by the Federal Deposit Insurance Corporation ("U.S. banks"). The Money
Market Fund limits its investments in foreign bank obligations to U.S.
dollar-denominated obligations of foreign banks (including U.S. branches): (a)
which banks at the time of investment (i) have more than $10 billion, or the
equivalent in other currencies, in total assets and (ii) are among the 100
largest banks in the world, as determined on the basis of assets, and have
branches or agencies in the U.S.; and (b) which obligations, in the opinion of
HIM, are of an investment quality comparable to obligations of U.S. banks that
may be purchased by the Money Market Fund. Each of the Short/Intermediate Bond
Fund and the Money Market Fund may invest more than 25% of the current value of
its total assets in obligations (including repurchase agreements) of: (a) U.S.
banks; (b) U.S. branches of foreign banks that are subject to the same
regulation as U.S. banks by the U.S. Government or its agencies or
instrumentalities; or (c) foreign branches of U.S. banks if the U.S. banks would
be unconditionally liable in the event the foreign branch failed to pay on such
obligations for any reason.
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. A 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. Obligations of
foreign banks involve somewhat different investment risks from those associated
with obligations of U.S. banks.
BORROWING. A Fund may borrow up to 10% of the current value of its net
assets for temporary purposes only in order to meet redemptions, which borrowing
may be secured by the pledge of up to 10% of the current value of the Fund's net
assets. Investments may not be purchased while any aggregate borrowings in
excess of 5% exist.
COMMON AND PREFERRED STOCK. The Equity Funds and the Convertible
Securities 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, in the event of liquidation of the
company, would be entitled to their pro rata shares 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 securities. Dividends paid to common
and preferred stockholders are distributions of the earnings or other surplus of
the company and not
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interest payments, which are expenses of the company. Equity securities owned by
a 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 a 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.
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. The Small-Cap
Opportunity Fund and the Small-Cap Value Fund have heightened exposure to these
risks due to their policy of investing in smaller companies.
CONVERTIBLE SECURITIES. The Equity Funds and the Fixed Income Funds 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 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 for producing both
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.
See additional information on ratings and debt obligations below under
"Debt Securities" and in Appendix A of this SAI.
DEBT SECURITIES. Debt, or fixed income, securities (which include
corporate bonds, debentures, notes, Government securities, municipal
obligations, state- or state agency-issued obligations, obligations of foreign
issuers, asset- or mortgage-backed securities, and other obligations) are used
by issuers to borrow money and thus are debt obligations of the issuer. Holders
of debt securities are creditors of the issuer, normally ranking ahead of
holders of both common and preferred stock as to dividends or upon liquidation.
The issuer usually pays a fixed, variable, or floating rate of interest and must
repay the amount borrowed at the security's maturity. Some debt securities, such
as zero-coupon securities (discussed below), do not pay interest but are sold at
a deep discount from their face value.
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Yields on debt securities depend on a variety of factors, including the
general conditions of the money, bond, and note markets, the size of a
particular offering, the maturity date of the obligation, and the rating of the
issue. Debt securities with longer maturities tend to produce higher yields and
are generally subject to greater price fluctuations in response to changes in
market conditions than obligations with shorter maturities. An increase in
interest rates generally will reduce the market value of portfolio debt
securities, while a decline in interest rates generally will increase the value
of the same securities. The achievement of a Fixed Income Fund's investment
objective depends in part on the continuing ability of the issuers of the debt
securities in which a Fund invests to meet their obligations for the payment of
principal and interest when due. Obligations of issuers of debt securities are
subject to the provisions of bankruptcy, insolvency, and other laws that affect
the rights and remedies of creditors. There is also the possibility that, as a
result of litigation or other conditions, the ability of an issuer to pay, when
due, the principal of and interest on its debt securities may be materially
affected.
The rating or quality of a debt security refers to the issuer's
creditworthiness, i.e., its ability to pay principal and interest when due.
Higher ratings indicate better credit quality, as rated by independent rating
organizations such as Moody's Investors Service, Standard & Poor's, or Fitch,
which publish their ratings on a regular basis. Appendix A provides a
description of the various ratings provided for bonds (including convertible
bonds), municipal bonds, and commercial paper.
High Yield Debt Securities. Securities rated "BB", "B", or "CCC" by
Standard & Poor's ( "Ba" or lower by Moody's) 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". Such securities are frequently referred to as "high
yield" securities or "junk bonds". 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" ("Caa" by Moody's)
have a currently identifiable vulnerability to default and are dependent upon
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. A 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.
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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 a 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, a 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 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. Each 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 an interest rate index or market interest
rate. These adjustments tend to decrease the sensitivity of the security's
market value to changes in interest rates. The Sub-Adviser or Sub-Subadviser
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. A
Fund's right to obtain 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 Funds' custodian subject to a
sub-custodian agreement between the bank and the Funds' custodian.
The floating and variable rate obligations that the Funds may purchase
include certificates of participation in such obligations purchased from banks.
A certificate of participation gives a 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 Money Market Funds may invest in certificates
of participation even if the underlying obligations carry stated maturities in
excess of thirteen months upon compliance with certain conditions contained in a
rule of the Securities and Exchange Commission (the "Commission"). The income
received on certificates of participation in tax-exempt municipal obligations
constitutes interest from tax-exempt obligations.
Each Fund will limit its purchases of floating and variable rate
obligations to those of the same quality as it otherwise is allowed to purchase.
Similar to fixed rate debt instruments, variable
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and floating rate instruments are subject to changes in value based on changes
in prevailing 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, a 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 CURRENCY AND FOREIGN CURRENCY FORWARD CONTRACTS, FUTURES AND
OPTIONS. When investing in foreign securities, a 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 expenses in converting assets
from one currency to another.
Forward Contracts. Each of the Equity Funds and the Fixed Income Funds,
except for the Tax-Exempt Bond Fund and the Intermediate Tax-Exempt Bond Fund,
may enter into foreign currency forward 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, either
to "lock-in" the U.S. dollar purchase 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 a Fund has investments may suffer a decline against the
U.S. dollar, as well as for non-hedging purposes. A Fund may also enter into a
forward contract on one currency in order to hedge against risk of loss arising
from fluctuations in the value of a second currency ("cross hedging"), if in the
judgment of the Investment Adviser, Sub-Adviser or Sub-Subadviser, a reasonable
degree of correlation can be expected between movements in the values of the two
currencies. By entering into such transactions, however, the Fund may be
required to forego the benefits of advantageous changes in exchange rates.
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 an exchange.
Each of the Emerging Markets Fund and the International Fund may also
enter into transactions in forward contracts for other than hedging purposes
that present greater profit potential but also involve increased risk. For
example, if the Investment Adviser, Sub-Adviser or Sub-Subadviser believes that
the value of a particular foreign currency will increase or decrease relative to
the value of the U.S. dollar, the Funds may purchase or sell such currency,
respectively, through a forward contract. If the expected changes in the value
of the currency occur, the Funds will realize profits which will increase their
gross income. Where exchange rates do not move in the direction or to the extent
anticipated, however, the Funds may sustain losses which will reduce their gross
income. Such transactions, therefore, could be considered speculative.
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The Funds have established procedures consistent with statements by the
Commission 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 Funds satisfy this requirement through segregation of assets, they
will segregate appropriate liquid securities, which will be marked to market on
a daily basis, in an amount equal to the value of their commitments under
forward contracts.
Only a limited market, if any, currently 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, in which the Emerging Markets Fund or the International Fund
may invest. This may limit a 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. The Investment Adviser,
Sub-Adviser or Sub-Subadviser 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 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 Emerging Markets Fund and the
International 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.
A 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
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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. A 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. A 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.
As in the case of other kinds of options, the use of foreign currency
options constitutes only a partial hedge and a 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, the Fund may forfeit the
entire amount of the premium plus related transaction costs.
Options on foreign currencies written or purchased by a Fund may be
traded on U.S. or foreign exchanges or over-the-counter. 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.
FOREIGN INVESTMENT COMPANIES. Some of the countries in which the
Emerging Markets Fund or International Fund may invest, may not permit, or may
place economic restrictions on, direct investment by outside investors.
Investments in such countries may be permitted only through foreign
government-approved or -authorized investment vehicles, which may include other
investment companies. These Funds may also invest in other investment companies
that invest in
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foreign securities. Investing through such vehicles may involve frequent or
layered fees or expenses and may also be subject to limitation under 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 Fund does not own more than 3% of the voting stock of any one
investment company.
FOREIGN SECURITIES. Investing in foreign securities generally
represents a greater degree of risk than investing in domestic securities, due
to possible exchange controls or exchange rate fluctuations, limits on
repatriation of capital, less publicly available information as a result of
accounting, auditing, and financial reporting standards different from those
used in the U.S., more volatile markets, less securities regulation, less
favorable tax provisions, political or economic instability, war or
expropriation. As a result of its investments in foreign securities, a 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 Emerging Markets Fund and the International Fund may purchase
sponsored and unsponsored American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and similar
securities ("Depositary Receipts"). Each of the Equity Funds also may invest in
ADRs and EDRs. Depositary Receipts are typically issued by a financial
institution ("depository") and evidence ownership interests in a security or a
pool of securities ("underlying securities") that have been deposited with the
depository. For ADRs, the depository is typically a U.S. financial institution
and the underlying securities are issued by a foreign issuer. For other
Depositary Receipts, the depository may be a foreign or a U.S. entity, and the
underlying securities may have a foreign or a U.S. issuer. Depositary Receipts
will not necessarily be denominated in the same currency as their underlying
securities. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. For purposes of a Fund's investment policies,
investments in Depositary Receipts will be deemed to be investments in the
underlying securities. Thus, a Depositary Receipt representing ownership of
common stock will be treated as common stock.
Each of the Emerging Markets Fund and International 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
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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.
Agreements implemented under the Brady Plan are designed to achieve
debt and debt-service reduction through specific options negotiated by a debtor
nation with its creditors. As a result, each country offers different financial
packages. Options have included the exchange of outstanding commercial bank debt
for bonds issued at 100% of face value of such debt, bonds issued at a discount
of face value of such debt, and bonds bearing an interest rate that increases
over time and the advancement of the new money for bonds. The principal of
certain Brady Bonds has been collateralized by U.S. Treasury zero coupon bonds
with a maturity equal to the final maturity of the Brady Bonds. Collateral
purchases are financed by the IMF, World Bank and the debtor nations' reserves.
Interest payments may also be collateralized in part in various ways.
Brady Bonds are often viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final maturity;
(ii) the collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, investments in Brady Bonds can be viewed as
speculative.
Each of the other Equity Funds, except for the Balanced Fund, may
invest up to 10% of its total assets in dollar-denominated foreign equity and
debt securities. The Balanced Fund, the Short/Intermediate Bond Fund and the
Bond Fund (each with respect to 20% of its total assets) may invest in
non-convertible and convertible debt of foreign banks, foreign corporations and
foreign governments which obligations are denominated in and pay interest in
U.S. dollars. The Money Market Fund may invest in non-convertible debt of
foreign banks, foreign corporations and foreign governments which obligations
are denominated in and pay interest in U.S. dollars. The Convertible Securities
Fund may invest only in dollar-denominated Eurodollar securities that are
convertible into the common stock of domestic corporations. The Intermediate
Government Bond Fund may invest in dollar-denominated Eurodollar securities that
are guaranteed by the U.S. Government or its agencies or instrumentalities.
On January 1, 1999, the European Monetary Union introduced a new single
currency, the Euro, which replaced the national currencies of participating
member nations. The adoption of the Euro does not reduce the currency risk
presented by the fluctuations in value of the U.S. dollar relative to other
currencies and, in fact, currency risk may be magnified. Also, increased market
volatility may result.
FUNDING AGREEMENTS. Funding agreements are insurance contracts between
an investor and the issuing insurance company. For the issuer, they represent
senior obligations under an insurance product. For the investor, and from a
regulatory perspective, these agreements are treated as securities. These
agreements, like other insurance products, are backed by claims on the general
assets of the issuing entity and rank on the same priority level as other policy
holder claims. Funding agreements typically are issued with a one-year final
maturity and a variable interest rate, which may adjust weekly, monthly, or
quarterly. Some agreements carry a seven-day put feature.
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A funding agreement without this feature is considered illiquid. These
agreements are regulated by the state insurance board of the state where they
are executed.
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 U.S.
Government agencies and instrumentalities are debt securities issued by U. S.
Government-sponsored enterprises and federal agencies. Some of these obligations
are supported by: (a) the full faith and credit of the U.S. Treasury (such as
Government National Mortgage Association participation certificates); (b) the
limited authority of the issuer to borrow from the U.S. Treasury (such as
securities of the Federal Home Loan Bank); (c) the discretionary authority of
the U.S. 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 U.S. Government support of
agencies or instrumentalities is discretionary, no assurance can be given that
the U.S. Government will provide financial support, since it is not legally
obligated to do so.
GUARANTEED INVESTMENT CONTRACTS. Each of the Short/Intermediate Bond
Fund, the Bond Fund and the Money Market Fund may invest in guaranteed
investment contracts ("GICs") issued by U.S. and Canadian insurance companies. A
GIC requires the investor to make cash contributions to a deposit fund of an
insurance company's general account. The insurance company then makes payments
to the investor based on negotiated, floating or fixed interest rates. A GIC is
a general obligation of the issuing insurance company and not a separate
account. The purchase price paid for a GIC becomes part of the general assets of
the insurance company, and the contract is paid from the insurance company's
general assets. Generally, a GIC is not assignable or transferable without the
permission of the issuing insurance company, and an active secondary market in
GICs does not currently exist.
ILLIQUID SECURITIES AND RESTRICTED SECURITIES. Each Fund may invest up
to 15% (10% with respect to the Money Market Funds) 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 that 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
Trust's Board of Trustees, the Investment Adviser, Sub-Adviser and
Sub-Subadviser determine and monitor 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 the Investment Adviser has determined that an adequate
trading market exists for such securities or that market quotations are readily
available.
The Funds 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
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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 Trust's
Board of Trustees. Those 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 those guidelines on a
periodic basis.
INDEX FUTURES CONTRACTS AND OPTIONS ON INDEX FUTURES CONTRACTS. Each
Equity Fund and Fixed Income Fund may attempt to reduce the risk of investment
in equity and other securities by hedging a portion of each portfolio through
the use of futures contracts on indices and options on such indices traded on
national securities exchanges. Each of these Funds may hedge a portion of its
portfolio by selling index futures contracts to limit exposure to decline.
During a market advance or when the Sub-Adviser or the Sub-Subadviser
anticipates an advance, a 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 be purchased in a more advantageous manner. The Index
Fund may maintain Standard & Poor's 500 Index futures contracts to simulate full
investment in that index while retaining a cash position for fund management
purposes, to facilitate trading or to reduce transaction costs. A 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
those 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 a 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 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.
Municipal bond index futures contracts, which are based on an index of
40 tax-exempt, municipal bonds with an original issue size of at least $50
million and a rating of A or higher by Standard & Poor's ("S&P") or A or higher
by Moody's Investors Service ("Moody's"), began trading in mid-1985. No physical
delivery of the underlying municipal bonds in the index is made. The Fixed
Income Funds may utilize any such contracts and associated put and call options
for which there is an active trading market.
Except for the Index Fund, a 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. A 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, a 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
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Fund's outstanding futures contracts would exceed 5% of the market value of
the Fund's total assets. When a Fund purchases index futures contracts, it will
segregate appropriate liquid securities equal to the market value of the futures
contracts.
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 a 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, a 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 a 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 a 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 a Fund is theoretically
unlimited when it writes (sells) a 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 a 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
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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.
A Fund's successful use of index futures contracts and options on
indices depends upon the Sub-Adviser's or Sub-Subadviser'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 a Fund's portfolio diverges from the composition
of the relevant index. In addition, if a 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, a Fund's ability to
establish and maintain positions will depend on market liquidity. In addition,
the ability of a Fund to close out an option depends on a liquid secondary
market. The risk of loss to a Fund is theoretically unlimited when it writes
(sells) a futures contract because a 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 no Fund has a present intention to invest 5% or more of its
assets in index futures and options on indices, a Fund has the authority to
invest up to 25% of its net assets in such securities.
See additional risk disclosure below under "Interest Rate Futures
Contracts and Related Options."
INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. All Equity Funds
and Fixed Income Funds 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 a 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 U. S. Treasury Bonds, ten-year U.S.
Treasury Notes, three-month U.S. Treasury Bills, Eurobonds, 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 a 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 a Fund upon the purchase or sale of a futures contract. Initially, a
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
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the expiration of the contract, a 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.
A 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 a 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 segregated to cover the positions,
thereby insuring that the use of the contract is unleveraged.
Although a 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
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, a 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 a Fund has hedged against the possibility of an increase in interest
rates that would adversely affect 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 a 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. A Fund may have to sell securities at a time when
it may be disadvantageous to do so.
In addition, the ability of a 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 "Tax Information" below.
A 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.
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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 a 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 a Fund is subject to the
Sub-Adviser's or Sub-Subadviser's ability to predict correctly the direction of
movements in interest rates. Such predictions involve skills and techniques
which may be different from those involved in the management of a long-term 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 debt securities which are the subject of 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, a
Fund may realize a loss on a futures contract that is not offset by an increase
in the price of the 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 Sub-Adviser or Sub-Subadviser
anticipates an extreme change in interest rates or market conditions.
See additional risk disclosure above under "Index Futures Contracts and
Options on Index Futures Contracts."
INVESTMENT COMPANY SECURITIES AND INVESTMENT FUNDS. In connection with
the management of its daily cash positions, each Fund may invest in securities
issued by investment companies that invest in short-term debt securities (which
may include municipal obligations that are exempt from Federal income taxes) and
that seek to maintain a $1.00 net asset value per share.
Each non-Money Market Fund also may invest in securities issued by
investment companies that invest in securities in which the Fund could invest
directly, within the limits prescribed by the 1940 Act. These limit each such
Fund so that, except as provided below in the section "Master Fund/Feeder Fund
Structure", (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. As a shareholder of another
investment company, a Fund would bear, along with other shareholders, its pro
rata portion of the other investment company's expenses, including advisory
fees. Those
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expenses would be in addition to the advisory and other expenses that the Fund
bears directly in connection with its own operations.
Some emerging market 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 those countries is permitted by certain emerging
countries through specifically authorized investment funds. Each of the Emerging
Markets Fund and the International Fund may invest in these investment funds.
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 Sub-Adviser or
Sub-Subadviser, are of investment quality comparable to other permitted
investments of a Fund may be used for Letter of Credit-backed investments.
MORTGAGE-RELATED SECURITIES. All Equity Funds, the Short/Intermediate
Bond Fund, the Bond Fund and the Intermediate Government Bond Fund may invest in
mortgage-backed securities, including collateralized mortgage obligations
("CMOs") and Government Stripped Mortgage-Backed Securities. The Intermediate
Government Bond Fund may purchase such securities if they represent interests in
an asset-backed trust collateralized by the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA"), or the
Federal Home Loan Mortgage Corporation ("FHLMC"), and may invest up to 20% of
its assets in non-government, mortgage-backed securities.
CMOs are types of bonds secured by an underlying pool of mortgages or
mortgage pass-through certificates that are structured to direct payments on the
underlying collateral to different series or classes of the obligations. To the
extent that CMOs are considered to be investment companies, investments in such
CMOs will be subject to the percentage limitations described under "Investment
Company Securities" in this SAI.
Government Stripped Mortgage-Backed Securities are mortgage-backed
securities issued or guaranteed by GNMA, FNMA, or FHLMC. These securities
represent beneficial ownership interests in either periodic principal
distributions ("principal-only") or interest distributions ("interest-only") on
mortgage-backed certificates issued by GNMA, FNMA or FHLMC, as the case may be.
The certificates underlying the Government Stripped Mortgage-Backed Securities
represent all or part of the beneficial interest in pools of mortgage loans.
Mortgage-backed securities generally provide a monthly payment
consisting of interest and principal payments. Additional payments may be made
out of unscheduled repayments of principal resulting from the sale of the
underlying residential property, refinancing or foreclosure, net of fees or
costs that may be incurred. Prepayments of principal on mortgage-related
securities may tend to increase due to refinancing of mortgages as interest
rates decline. Prompt payment of principal and interest on GNMA mortgage
pass-through certificates is backed by the full faith and credit of the United
States. FNMA-guaranteed mortgage pass-through certificates and FHLMC
participation certificates are solely the obligations of those entities but are
supported by the discretionary authority of the U.S. Government to purchase the
agencies' obligations.
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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.
Investments in interest-only Government Stripped Mortgage-Backed
Securities will be made in order to enhance yield or to benefit from anticipated
appreciation in value of the securities at times when the Sub-Adviser or
Sub-Subadviser believes that interest rates will remain stable or increase. In
periods of rising interest rates, the value of interest-only Government Stripped
Mortgage-Backed Securities may be expected to increase because of the diminished
expectation that the underlying mortgages will be prepaid. In this situation the
expected increase in the value of interest-only Government Stripped
Mortgage-Backed Securities may offset all or a portion of any decline in value
of the portfolio securities of the Fund. Investing in Government Stripped
Mortgage-Backed Securities involves the risks normally associated with investing
in mortgage-backed securities issued by government or government-related
entities. In addition, the yields on interest-only and principal-only Government
Stripped Mortgage-Backed Securities are extremely sensitive to the prepayment
experience on the mortgage loans underlying the certificates collateralizing the
securities. If a decline in the level of prevailing interest rates results in a
rate of principal prepayments higher than anticipated, distributions of
principal will be accelerated, thereby reducing the yield to maturity on
interest-only Government Stripped Mortgage-Backed Securities and increasing the
yield to maturity on principal-only Government Stripped Mortgage-Backed
Securities. Conversely, if an increase in the level of prevailing interest rates
results in a rate of principal prepayments lower than anticipated, distributions
of principal will be deferred, thereby increasing the yield to maturity on
interest-only Government Stripped Mortgage-Backed Securities and decreasing the
yield to maturity on principal-only Government Stripped Mortgage-Backed
Securities. Sufficiently high prepayment rates could result in a Fund's not
fully recovering its initial investment in an interest-only Government Stripped
Mortgage-Backed Security. Government Stripped Mortgage-Backed Securities are
currently traded in an over-the-counter market maintained by several large
investment banking firms. There can be no assurance that a Fund will be able to
effect a trade of a Government Stripped Mortgage-Backed Security at a time when
it wishes to do so.
MUNICIPAL LEASES. Each of the Intermediate Tax-Exempt Bond Fund and the
Tax-Exempt Bond Fund may acquire participations in lease obligations or
installment purchase contract obligations (hereinafter collectively called
"lease obligations") of municipal authorities or entities. Although lease
obligations do not constitute general obligations of the municipality for which
the municipality's taxing power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to budget for, appropriate, and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on a yearly basis. In addition to the
"non-
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appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated with
more conventional bonds. In the case of a "non-appropriation" lease, a Fund's
ability to recover under the lease in the event of non-appropriation or default
will be limited solely to the repossession of the leased property in the event
foreclosure might prove difficult.
In evaluating the credit quality of a municipal lease obligation and
determining whether such lease obligation will be considered "liquid," the
Sub-Adviser will consider: (1) whether the lease can be canceled; (2) what
assurance there is that the assets represented by the lease can be sold; (3) the
strength of the lessee's general credit (e.g., its debt, administrative,
economic, and financial characteristics); (4) the likelihood that the
municipality will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of non-appropriation"); and, (5)
the legal recourse in the event of failure to appropriate.
MUNICIPAL OBLIGATIONS. The Balanced Fund, the Short/Intermediate Bond
Fund, the Bond Fund, the Intermediate Tax-Exempt Bond Fund, the Tax-Exempt Bond
Fund and the Tax-Exempt Money Market Fund may invest in tax-exempt obligations
to the extent consistent with each Fund's investment objective and policies.
Notes sold as interim financing in anticipation of collection of taxes, a bond
sale or receipt of other revenues are usually general obligations of the issuer.
TAX ANTICIPATION NOTES (TANS). An uncertainty in a municipal issuer's
capacity to raise taxes as a result of such events as a decline in its
tax base or a rise in delinquencies could adversely affect the issuer's
ability to meet its obligations on outstanding TANs. Furthermore, some
municipal issuers commingle various tax proceeds in a general fund that
is used to meet obligations other than those of the outstanding TANs.
Use of such a general fund to meet various other obligations could
affect the likelihood of making payments on TANs.
BOND ANTICIPATION NOTES (BANS). The ability of a municipal issuer to
meet its obligations on its BANs is primarily dependent on the issuer's
adequate access to the longer-term municipal bond market and the
likelihood that the proceeds of such bond sales will be used to pay the
principal of, and interest on, BANs.
REVENUE ANTICIPATION NOTES (RANS). A decline in the receipt of certain
revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its
obligations on outstanding RANs. In addition, the possibility that the
revenues would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal of, and interest
on, RANs.
The Short/Intermediate Bond Fund, the Balanced Fund, the Bond Fund, the
Intermediate Tax-Exempt Bond Fund and the Tax-Exempt Bond Fund may also invest
in: (1) municipal bonds that are rated at the date of purchase "Baa" or better
by Moody's or "BBB" or better by S&P; (2) municipal notes having maturities at
the time of issuance of 15 years or less that are rated at the date of purchase
"MIG 1" or "MIG 2" (or "VMIG 1" or "VMIG 2" in the case of an issue having a
variable rate with a demand feature) by Moody's or "SP-1+," "SP-1," or "SP-2" by
S&P; and (3) municipal commercial paper with a stated maturity of one year or
less that is rated at the date of purchase "P-2" or better by Moody's or "A-2"
or better by S&P.
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PUT AND CALL OPTIONS. All Equity Funds and Fixed Income Funds 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.
These Funds each 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 a 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 additional cash consideration if such cash is segregated) upon
conversion or exchange of other securities held in its portfolio. A call option
is also covered if a 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 appropriate liquid
assets representing the difference are segregated by the Fund. A put option is
"covered" if a Fund maintains appropriate liquid securities with a value equal
to the exercise price, 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, a 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, a 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. A 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. A
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.
Each 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, a 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 Commission 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,
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each of the Funds will treat such options and assets as subject to such 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.
REAL ESTATE INVESTMENT TRUSTS (REITS). The Emerging Markets Fund and
the International Fund may invest in REITs. REITs are pooled investment vehicles
that invest primarily in income producing real estate or real estate related
loans or interests. Investing in REITs involves certain unique risks in addition
to those risks associated with investing in the real estate industry in general.
REITs may be affected by changes in the value of the underlying property owned
by the REITs or the quality of loans held by the REIT. REITs are dependent upon
management skills, are not diversified, and are subject to the risks of
financing projects.
REITs are also subject to interest rate risks. When interest rates
decline, the value of a REIT's investment in fixed rate obligations can be
expected to rise. Conversely, when interest rates rise, the value of a REIT's
investment in fixed rate obligations can be expected to decline.
Investing in REITs involves risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than securities of larger companies.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements
by which the Fund purchases 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. A repurchase
agreement must be collateralized by obligations that could otherwise be
purchased by the Fund (except with respect to maturity), and these must be
maintained by the seller in a segregated account for the Fund cash or cash
equivalents equal to at least 102% of the repurchase price (including accrued
interest). Default or bankruptcy of the seller would expose a Fund to possible
loss because of adverse market action, delays in connection with the disposition
of the underlying obligations or expenses of enforcing its rights.
A Fund may not enter into a repurchase agreement if, as a result, more
than 15% (10% with respect to a Money Market Fund) 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. A Fund will
enter into repurchase agreements only with registered broker/dealers and
commercial banks that meet guidelines established by the Board of Trustees.
REVERSE REPURCHASE AGREEMENTS. Each of the Equity Funds and the Fixed
Income Funds may borrow funds for temporary purposes by entering into an
agreement to sell portfolio securities to a financial institution such as a bank
or broker-dealer and to repurchase them at a mutually specified date and price
("reverse repurchase agreement"). A reverse repurchase agreement involves 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 the amount obtained
pursuant to the reverse repurchase agreement.
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A Fund may not enter into a reverse repurchase agreement if, as a
result, more than 15% (10% with respect to a Money Market Fund) of the Fund's
net assets would be invested in reverse repurchase agreements with a maturity of
more than seven days and in other illiquid securities. The Funds will enter into
reverse repurchase agreements only with registered broker-dealers and commercial
banks that meet guidelines established by the Trust's Board of Trustees.
RULE 2A-7 MATTERS. Each of the Money Market Funds must comply with the
requirements of Rule 2a-7 under the 1940 Act ("Rule 2a-7"). Under the applicable
quality requirements of Rule 2a-7, the Funds may purchase only U.S.
dollar-denominated instruments that are determined to present minimal credit
risks and that are at the time of acquisition "eligible securities" as defined
in Rule 2a-7. Generally, eligible securities are divided into "first tier" and
"second tier" securities. First tier securities are generally those in the
highest rating category (e.g., A-1 by S&P) or unrated securities deemed to be
comparable in quality, government securities and securities issued by other
money market funds. Second tier securities are generally those in the second
highest rating category (e.g., A-2 by S&P) or unrated securities deemed to be
comparable in quality. See Appendix A for more information.
The Money Market Fund may not invest more than 5% of its total assets
in second tier securities nor more than the greater of 1% of its total assets or
$1 million in the second tier securities of a single issuer. The Tax-Exempt
Money Market Fund may not invest more than 5% of its total assets in second tier
"conduit securities" (as defined in Rule 2a-7), nor more than 1% of its total
assets or $1 million (whichever is greater) in second tier conduit securities
issued by a single issuer. Generally, conduit securities are securities issued
to finance non-governmental private projects, such as retirement homes, private
hospitals, local housing projects, and industrial development projects, with
respect to which the ultimate obligor is not a government entity.
Each Money Market Fund will maintain a dollar-weighted average maturity
of 90 days or less and will limit its investments to securities that have
remaining maturities of 397 calendar days or less or other features that shorten
maturities in a manner consistent with the requirements of Rule 2a-7, such as
interest rate reset and demand features.
SECURITIES LENDING. Each Fund, except the Money Market Funds, may lend
to brokers, dealers and financial institutions securities from its portfolio
representing up to one-third of the Fund's total 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 Sub-Adviser or Sub-Subadviser will
consider all relevant facts and circumstances, including the creditworthiness of
the broker, dealer or financial institution. No Fund will enter into any
portfolio security lending arrangement having a duration of longer than one
year. Any securities that a Fund may receive as collateral will not become part
of the Fund's portfolio at the time of the loan and, in the event of a default
by the borrower, the Fund will, if permitted by law, dispose of such collateral
except for such part thereof that is a security in which the Fund is permitted
to invest. During the time securities are on loan, the borrower will pay the
Fund any accrued income on those securities, and the Fund may invest the cash
collateral and earn additional income or receive an agreed upon fee from a
borrower that has delivered cash equivalent collateral. Loans of securities by a
Fund will be
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subject to termination at the Fund's or the borrower's option. Each Fund may pay
reasonable administrative and custodial fees in connection with a securities
loan and may pay a negotiated fee to the borrower or the placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with the Trust, the Investment Adviser, the Sub-Adviser, the Sub-Subadviser or
the Distributor.
SECURITIES WITH PUTS. A put is not transferable by a Fund, although a
Fund may sell the underlying securities to a third party at any time. If
necessary and advisable, any 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 Funds expect, however, that puts generally will be
available without the payment of any direct or indirect consideration.
All Funds, except for the Convertible Securities Fund, intend to enter
into puts solely to maintain liquidity and do not intend to exercise their
rights thereunder for trading purposes. The puts will be only for periods
substantially less than the life of the underlying security. The acquisition of
a put will not affect the valuation by a Fund of the underlying security. The
actual put will be valued at zero in determining net asset value in the case of
the Money Market Funds. Where a 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 a Fund will not be considered
shortened by any put to which the obligation is subject.
SHORT SALES. With respect to the Emerging Markets Fund and the
International Fund, when a Fund sells short, it borrows the securities that it
needs to deliver to the buyer. A 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. A 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.
A Fund's obligation to replace the securities borrowed in connection
with a short sale will be secured. The proceeds a 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, a 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 Emerging Markets Fund and the International 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.
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SOVEREIGN DEBT. The Emerging Markets Fund and the International 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 Funds may hold and trade sovereign debt of
emerging-market countries in appropriate circumstances to participate in debt
conversion programs. Emerging-market country sovereign debt involves a high
degree of risk, is generally lower-quality debt, and is considered speculative
in nature. The issuer or governmental authorities that control sovereign-debt
repayment ("sovereign debtors") may be unable or unwilling to repay principal or
interest when due in accordance with the terms of the debt. A sovereign debtor's
willingness or ability to repay principal and interest due in a timely manner
may be affected by, among other factors, its cash-flow situation, the extent of
its foreign reserves, the availability of sufficient foreign exchange on the
date a payment is due, the relative size of the debt service burden to the
economy as a whole, the sovereign debtor's policy towards the 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 Funds may
invest in sovereign debt that is in default as to payments of principal or
interest. In the event that the Funds hold non-performing sovereign debt, the
Funds may incur additional expenses in connection with any restructuring of the
issuer's obligations or in otherwise enforcing their rights thereunder.
The Fixed Income Funds may invest in "sovereign debt" that is U.S.
dollar-denominated and investment-grade.
STAND-BY COMMITMENTS. Each of the Balanced Fund, the Tax-Exempt Bond
Fund and the Intermediate Tax-Exempt Bond Fund may purchase municipal securities
together with the right to resell them to the seller or a third party at an
agreed-upon price or yield within specified periods prior to their maturity
dates. Such a right to resell is commonly known as a stand-by commitment, and
the aggregate price which a Fund pays for securities with a stand-by commitment
may increase the cost, and thereby reduce the yield, of the security. The
primary purpose of this practice is to permit a Fund to be as fully invested as
practicable in municipal securities while preserving the necessary flexibility
and liquidity to meet unanticipated redemptions. The Balanced Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes. Stand-by
commitments acquired by a Fund are valued at zero in determining the Fund's net
asset value. Stand-by commitments involve certain expenses and risks, including
the inability of the issuer of the commitment to pay for the securities at the
time the commitment is exercised, non-marketability of the commitment, and
differences between the maturity of the underlying security and the maturity of
the commitment.
TEMPORARY INVESTMENTS. When business or financial conditions warrant,
each of the non-Money Market Funds 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 sovereigns, other debt securities, commercial
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paper including bank obligations, certificates of deposit (including Eurodollar
certificates of deposit) and repurchase agreements.
For temporary defensive purposes, during periods in which the
Investment Adviser believes changes in economic, financial or political
conditions make it advisable, the Funds may reduce their holdings in equity and
other securities and may invest up to 100% of their 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). In the case of the International Fund and
the Emerging Markets Fund, 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
the Investment Adviser believes to be of high quality, i.e., subject to
relatively low risk of loss of interest or principal (there is currently no
rating system for debt securities in most emerging countries). If rated, these
securities will be rated in one of the three highest rating categories by rating
services such as Moody's or S&P (i.e., rated at least A).
WARRANTS. The Equity Funds and the Convertible Securities 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 PURCHASES AND FORWARD COMMITMENTS (DELAYED-DELIVERY).
When-issued purchases and forward commitments (delayed-delivery) are commitments
by a 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 a Fund agrees to purchase securities on a when-issued or forward
commitment basis, the Trust's 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 a 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
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Adviser expects that its commitments to purchase when-issued securities and
forward commitments will not exceed 25% of the value of a Fund's total assets
absent unusual market conditions.
A 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, a 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 a 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
a Fund starting on the day the Fund agrees to purchase the securities. A 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. Each 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 may be created by separating the
interest and principal components of securities issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities or issued by private
corporate issuers. These securities may not be issued or guaranteed by the U.S.
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, a 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 a Fund
each year. Under the Federal tax laws applicable to investment companies, a Fund
will not be subject to tax on its income if it pays annual dividends to its
shareholders substantially
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equal to all the income received from, and imputed to, its investments during
the year. Because imputed income must be paid to shareholders annually, a Fund
may need to borrow money or sell securities to meet certain dividend and
redemption obligations. In addition, the sale of securities by a Fund may
increase its expense ratio and decrease its rate of return.
RATINGS
After purchase by a Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the Fund for such type of security to sell the
security unless the amount of the security exceeds the Fund's permissible limit.
However, the Sub-Adviser or the Sub-Subadviser will reassess promptly whether
the security presents minimal credit risks and determine whether continuing to
hold the security is in the best interests of the Fund. A Money Market Fund may
be required to sell a security downgraded below the minimum required for
purchase, absent a specific finding by the Trust's Board of Trustees that a sale
is not 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 the organization or in its rating system, the Fund will attempt to
use comparable ratings as standards for investments in accordance with the
investment policies contained in the Prospectuses and in this SAI.
For additional information on ratings, see Appendix A to this SAI.
INVESTMENT RESTRICTIONS
(1) No diversified Fund may, with respect to 75% of its assets, invest
more than 5% of its assets (valued at the time of investment) in securities of
any one issuer, except for securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities or repurchase agreements
for such securities, and except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies.
(2) No Fund may, with respect to 75% of its assets, acquire securities
of any one issuer that at the time of investment represent more than 10% of the
voting securities of the issuer, except that all or substantially all of the
assets of the Fund may be invested in another registered investment company
having the same investment objective and substantially similar investment
policies.
(3) No Fund may invest more than 25% of its assets (valued at the time
of investment) in securities of companies in any one industry, except that (a)
this restriction does not apply to investments in (i) securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities,
(ii) municipal obligations (for purposes 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 (iii) in the case of the Money Market Fund, bank obligations that
are otherwise permitted as investments, and (b) all or substantially all of the
assets of the Fund may be invested in another registered investment company
having the same investment objective and substantially similar investment
policies.
(4) No Fund may borrow money except to the extent permitted by
applicable law, regulation or order.
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<PAGE>
(5) No Fund may issue any senior security except to the extent
permitted by applicable law, regulation or order.
(6) No Fund may underwrite the distribution of securities of other
issuers; however, (a) the Fund may acquire "restricted" securities that, in the
event of a resale, might be required to be registered under the Securities Act
of 1933 on the ground that the Fund could be regarded as an underwriter as
defined by that act with respect to such resale and (b) all or substantially all
of the assets of the Fund may be invested in another registered investment
company having the same investment objective and substantially similar
investment policies.
(7) No Fund may make loans, but this restriction shall not prevent the
Fund from (a) investing in debt obligations, (b) investing in money market
instruments or repurchase agreements, (c) participating in an interfund lending
program among Funds having a common investment adviser or distributor to the
extent permitted by applicable law or (d) lending its portfolio securities. The
Fund will not lend securities having a value in excess of 33-1/3% of its assets,
including collateral received for loaned securities (valued at the time of any
loan).
(8) No Fund may purchase or sell real estate or interests in real
estate, although it may invest in securities secured by interests in real estate
and securities of enterprises that invest in real estate or interests in real
estate, and may acquire and dispose of real estate or interests in real estate
acquired through the exercise of rights as a holder of debt obligations secured
by real estate or interests therein.
(9) No Fund may purchase or sell commodities or commodity contracts,
except that it may enter into (a) futures, options, and options on futures, (b)
forward contracts, and (c) other financial transactions not requiring the
delivery of physical commodities.
(10) No Fund may invest in the securities of other investment companies
except to the extent permitted by applicable law, regulation or order or rule of
the SEC.
(11) No Fund may purchase securities on margin (except for use of
short-term credits as are necessary for the clearance of transactions) or
participate in a joint or on a joint or several basis in any trading account in
securities.
(12) No Fund may invest more than 15% (10% in the case of a Money
Market Fund) of its net assets (valued at the time of investment) in illiquid
securities, including repurchase agreements maturing in more than seven days.
(13) No Fund may make short sales of securities unless (a) the Fund
owns at least an equal amount of such securities, or owns securities that are
convertible or exchangeable, without payment of further consideration, into at
least an equal amount of such securities or (b) the securities sold are "when
issued" or "when distributed" securities that the Fund expects to receive in a
recapitalization, reorganization or other exchange for securities that it
contemporaneously owns or has the right to obtain and provided that transactions
in options, futures and options on futures are not treated as short sales.
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<PAGE>
(14) As a matter of fundamental policy, none of the foregoing
investment policies or restrictions of the Fund shall prohibit the Fund from
investing all or substantially all of its assets in the shares of another
registered open-end investment company having the same investment objective and
substantially similar policies and restrictions.
The investment restrictions numbered 3 - 10 and number 14 are
fundamental policies of each of the Funds that may be changed only when
permitted by law and approved by the holders of a majority of such Fund's
outstanding voting securities, as described under "Beneficial Interest".
Investment restriction number 14 permits the Funds to adopt a Master Fund/Feeder
Fund structure, as described in the next section.
Whenever any investment restriction states a maximum percentage of a
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, except that at no time may the value of the illiquid securities
held by a Money Market Fund exceed 10% of the Fund's total assets.
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.
MASTER FUND/FEEDER FUND STRUCTURE
The Shareholders and the Board of Trustees have approved a proposal
that permits each Fund to invest substantially all of its investable assets in
another open-end management investment company having the same investment
objective and substantially similar policies and restrictions (a "Master
Fund/Feeder Fund Structure"). Prior to any such actual investment, however, the
Board of Trustees would be required to approve the transaction and shareholders
would be notified.
Although the Board of Trustees has not determined that any of the Funds
should convert to a Master Fund/Feeder Fund Structure at this time, the Board of
Trustees believes it could be in the best interests of some or all of the Funds
at some future date and could vote at some time in the future to convert the
Fund into a "Feeder Fund" under which all of the assets of the Fund would be
invested in a Master Fund. The Feeder Fund would transfer its assets to a Master
Fund in exchange for shares of beneficial interest in the Master Fund having the
same net asset value as the value of the assets transferred. (The ownership
interests of the Fund's shareholders would not be altered by this change.)
Any Master Fund in which a Feeder Fund would invest would be registered
as an open-end management investment company under the 1940 Act and would be
required to have the same investment objective and substantially similar
policies and restrictions as the Feeder Fund.
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<PAGE>
Accordingly, by investing in a Master Fund, the Feeder Fund would continue to
pursue its then current investment objective and policies in substantially the
same manner, except that it would pursue that objective through its investment
in the Master Fund rather than through direct investments in the types of
securities dictated by its investment objectives and policies. The Master Fund,
whose shares could be offered to other feeder funds or other investors in
addition to the Feeder Fund, would invest in the same type of securities in
which the Fund would have directly invested, providing substantially the same
investment results to the Feeder Fund's shareholders. However, the expense
ratios, the yields, and the total returns of other investors in the Master Fund
may be different from those of the Feeder Fund due to differences in Feeder Fund
expenses.
By investing substantially all of its assets in a Master Fund, a Feeder
Fund could expect to be in a position to realize directly or indirectly certain
economies of scale, in that a larger investment portfolio resulting from
multiple Feeder Funds is expected to achieve a lower ratio of operating expenses
to net assets. A Master Fund may be offered to an undetermined number of other
Feeder Funds. However, there can be no assurance that any such additional
investments in a Master Fund by other Feeder Funds will take place.
If a Fund invests substantially all of its assets in a Master Fund, the
Fund would no longer require portfolio management services. For this reason, if
the Board of Trustees were to convert a Fund into a Feeder Fund, the existing
investment advisory agreement between the Trust and the Adviser relating to that
Fund would be terminated, although the Feeder Fund would continue to have an
administration agreement with the Adviser or another party for the provision of
certain administrative services on terms approved by the non-interested Trustees
of the Trust.
A Feeder Fund may withdraw its investment in a Master Fund at any time
if the Board of Trustees determines that it is in the best interests of the
shareholders of the Feeder Fund to do so or if the investment policies or
restrictions of the Master Fund were changed so that they were inconsistent with
the policies and restriction of the Feeder Fund. Upon any such withdrawal, the
Board of Trustees of the Trust would consider what action might be taken,
including the investment of all of the assets of the Feeder Fund in another
pooled investment entity having substantially the same investment objective as
the Feeder Fund or the retaining of an investment adviser to directly invest the
Feeder Fund's assets in accordance with its investment objective and policies.
Whenever a Feeder Fund is asked to vote on a proposal by the Master
Fund, the Feeder Fund will hold a meeting of its shareholders if required by
applicable law or its policies, and cast its vote with respect to the Master
Fund in the same proportion as its shareholders vote on the proposal.
Once its assets are invested in a Master Fund, a Feeder Fund will value
its holdings (i.e., shares issued by the Master Fund) at their fair value, which
will be based on the daily net asset value of the Master Fund. The net income of
the Feeder Fund will be determined at the same time and on the same days as the
net income of the Master Fund is determined, which would be the same time and
days that the Feeder Fund uses for this purpose.
Investments in a Master Fund would have no preemptive or conversion
rights and would be fully paid and non-assessable, except as set forth below.
Similar to the Trust, a Master Fund would not be required to hold annual
meetings of its shareholders, but the Master Fund would be required to hold
special meetings of shareholders when, in the judgment of its trustees, it is
necessary or desirable to submit matters for a shareholder vote. Other
shareholders in a Master Fund have rights
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<PAGE>
similar to those of Feeder Fund shareholders; under certain circumstances (e.g.,
upon application and submission of certain specified documents to the Board of
Trustees by a specified number of investors), they have the right to communicate
with other shareholders in connection with requesting a meeting of shareholders
for the purpose of removing one or more of the Master Fund's trustees.
Shareholders also have the right to remove one or more trustees, without a
meeting, by a declaration in writing by a specified number of shareholders. Upon
liquidation of a Master Fund, investors would be entitled to share pro rata in
the net assets of the Master Fund available for distribution to shareholders.
Each Master Fund shareholder would be entitled to a vote in proportion
to the share of its investment in the Master Fund. Investments in a Master Fund
would not be transferable, but a shareholder (such as a Feeder Fund) could
redeem all or any portion of its investment at any time at net asset value.
Tax Considerations. The implementation of a Master Fund/Feeder Fund
structure is not expected to have any adverse tax effects on the Funds or their
shareholders. As a condition of and prior to implementation of conversion of a
Fund to a Master Fund/Feeder Fund Structure, the Trust would either obtain a
private letter ruling from the Internal Revenue Service or receive an opinion of
counsel that no gain or loss for Federal income tax purposes would be recognized
by the Feeder Fund, the Master Fund, or the shareholders of the Feeder Fund in
connection with the transfer of the Feeder Fund's assets to the Master Fund in
exchange for shares of beneficial interest in the Master Fund.
A Feeder Fund would continue to qualify and elect to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). To so qualify, a Feeder Fund must meet certain
income, distribution, and diversification requirements. It is expected that any
Feeder Fund's investment in a Master Fund will satisfy these requirements.
Provided that each Feeder Fund meets these requirements and distributes all of
its net investment income and realized capital gains to its shareholders in
accordance with the timing requirements imposed by the Code, the Feeder Fund
would not pay any Federal income or excise taxes. Any Master Fund would qualify
and elect to be treated as a "partnership" under the Code and, therefore, would
also not expect to be required to pay any Federal income or excise taxes. Income
dividends and any capital gain distributions by a Master Fund to a Feeder Fund
will be distributed by the Feeder Fund to its shareholders, and such payments
will be subject to Federal and applicable state income taxes on that Feeder
Fund's shareholders.
TRUSTEES AND EXECUTIVE OFFICERS
Responsibility for overall management of the Trust and the Funds rests
with the Board of Trustees in accordance with Massachusetts law. The principal
occupations of the Trustees and executive officers of the Trust for the past
five years and their ages at May 1, 2000 are listed below. The address of each
Trustee or executive officer, unless otherwise indicated, is Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428-2961.
C. GARY GERST, Trustee; Chairman of the Board of Trustees - 200 East Randolph
Drive, Floor 43, Chicago, Illinois 60601. Age 61. Chairman Emeritus, Jones Lang
LaSalle, formerly named LaSalle Partners Ltd. (real estate investment manager
and consulting firm). Director, Nonlinear
33
<PAGE>
Dynamics, Inc. (applications software producer) and Florida Office Property
Company, Inc. (real estate investment fund).
EDGAR R. FIEDLER, Trustee - 50023 Brogden, Chapel Hill, NC 27514. Age 71. Senior
Fellow and Economic Counselor, The Conference Board. Director or Trustee, The
Stanley Works (tool manufacturer), AARP Income Trust, Scudder Institutional
Funds, Scudder Pathway Series, Farmer's Investment Trust, Brazil Fund and PEG
Capital Management (investment companies).
VALERIE B. JARRETT, Trustee - 350 West Hubbard Street, Chicago, Illinois 60610.
Age 43. Executive Vice President, The Habitat Company (residential property
developer) and Chairman and Chief Executive Officer, Chicago Transit Authority.
Director, USG Corporation (building materials manufacturer).
JOHN W. McCARTER, JR., Trustee - Roosevelt Road at Lakeshore Drive, Chicago,
Illinois 60605. Age 62. President and Chief Executive Officer, The Field Museum
of Natural History since 1996. Senior Vice President and Director, Booz-Allen &
Hamilton, Inc. (consulting firm) prior thereto. Director, W.W. Grainger, Inc.
(industrial distributor), A.M. Castle, Inc. (metals distributor), Pittway
Corporation (alarm manufacturer) and LaSalle Partners U.S. Real Estate Fund
(investment company).
PAULA WOLFF, Trustee - 30 West Monroe Street, 18th Floor, Chicago, Illinois
60603. Age 55. Senior Executive, Chicago Metropolis 2020 (civic organization)
since 2000. President, Governors State University prior thereto. Trustee,
University of Chicago; Chair, University of Chicago Hospitals; and Director,
Ariel Capital Management, Inc. (investment manager).
PHILIP H. RINNANDER, President. Age 55. President and Chief Executive Officer
since 1999 , Provident Distributors, Inc. (mutual fund distributor), and
Managing Director and Chief Financial Officer prior thereto.
JASON A. GREIM, Vice President. Age 24. Vice President since 1999, Provident
Distributors, Inc., and Director of Mutual Funds Operations (1998-1999).
Student, Drexel University prior thereto.
GARY M. GARDNER, Secretary. Age 49. Senior Vice President, PFPC Inc. (mutual
fund administrator) and officer of certain investment companies distributed by
Provident Distributors, Inc.
THOMAS J. RYAN, Treasurer and Chief Financial Officer. Age 58. Vice President
and Director of Accounting, PFPC Inc. and officer of certain investment
companies.
Trustees of the Trust receive from the Trust a retainer in addition to
a fee for each Board of Trustees meeting and Board committee meeting attended.
The Trust has not adopted any form of retirement plan covering Trustees or
officers.
The following table summarizes the compensation for the year ended
December 31, 1999 paid by the Trust to the Trustees of the Trust and by HT
Insight Funds, Inc. (the "Company"), a
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<PAGE>
separate investment company that was merged into the Trust pursuant to the vote
of the shareholders of each entity on November 29, 1999, to the Directors of the
Company :
<TABLE>
<CAPTION>
Aggregate Aggregate Total Compensation Average
Compensation Compensation from from the Fund Compensation per
Name of Person, Position from the Trust the Company Complex* Fund
- ------------------------------ ----------------- ---------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
C. Gary Gerst, $13,275 $30,975 $44,250 $2,458
Chairman, Director and
Trustee
Edgar R. Fiedler, $9,825 $22,925(1) $32,750 $1,819
Director and Trustee
John W. McCarter, Jr. $9,750 $22,750 $32,500 $1,806
Director and Trustee
Ernest M. Roth, $10,875 $25,375 $36,250 $2,014
Director and Trustee
Paula Wolff, $11,100 $25,900 $37,000 $2,506
Director and Trustee
</TABLE>
* "Fund Complex" includes the Company and the Trust.
(1) For the period June 1988 through December 31, 1999, the total amount of
compensation (including interest) payable or accrued for Mr. Fiedler
was $217,689 pursuant to the Company's Deferred Compensation Plan for
its independent Directors.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 2000, the principal holders of the A Shares, N Shares
and Institutional Shares of each Fund of the Trust were as follows:
The principal holders of A Shares of the Emerging Markets Fund were
Donaldson Lufkin Jenrette Securities Corp., PO Box 2052, Jersey City, NJ 07303;
National Financial Services Corp., PO Box 3908, Church Street Station, New York,
NY 10008, on behalf of Susan M. Schultz, 3855 Shoal Drive, Hanover Park, IL
60103; and National Financial Services Corp., PO Box 3908, Church Street
Station, New York, NY 10008, on behalf of Sara Curiel, 5416 W. 30th Place,
Cicero, IL 60804, which held of record 2,714 shares (75.6%); 570 shares (15.9%);
and 304 shares (8.5%), respectively, of the outstanding A Shares of the Fund.
The principal holders of N Shares of the Emerging Markets Fund were National
Financial Services Corp., PO Box 3908, Church Street Station, New York, NY
10008, on behalf of Harris Trust and Savings Bank Custodian For David B. Beatty
IRA, 201 Golf Terrace, Wilmette, IL 60091; Harris Trust and Savings Bank, 111 W.
Monroe Street, Chicago, IL 60603; W. O. and C. O. Leszinske, 180 E. Pearson,
Chicago, IL 60611; and National Financial Services Corp., PO Box 3908, Church
Street Station, New York, NY 10008, on behalf of John and Janet Hughes Revocable
Trust, 7712 E. Oakwood Circle, Tucson, AZ 85750, which held of record 5,294
shares (13.7%); 4,878 shares (12.6%); 2,404 shares (6.2%); and 2,335 shares
(6.0%), respectively, of the outstanding N Shares of the Fund. The principal
holder of Institutional Shares of the Emerging Markets Fund was Harris Trust and
Savings Bank, 111 W. Monroe Street, Chicago, IL 60603, which held of record
4,827,753 shares (98.8%) of the outstanding Institutional Shares of the Fund.
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<PAGE>
The principal holders of A Shares of the International Fund were
National Financial Services Corp., PO Box 3908, Church Street Station, New York,
NY 10008, on behalf of Susan M. Schultz IRA, 3855 Shoal Drive, Hanover Park, IL
60103; Julie V. Grinnell Custodian For Alec Temple Grinnell, 11882 SW 58th
Street, Webster, FL 33597; and National Financial Services Corp., PO Box 3908,
Church Street Station, New York, NY 10008, on behalf of Thomas R. Byrnes IRA,
1512 S. 61st Avenue, Cicero, IL 60804, which held of record 299 shares (74.7%);
61 shares (15.2%) and 40 shares (9.9%), respectively, of the outstanding A
Shares of the Fund. The principal holders of N Shares of the International Fund
were Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603;
LaSalle National Bank, 120 S. LaSalle Street, Chicago, IL 60603, Custodian For
Barbara H. Nielsen, PO Box 1443, Chicago, IL 60690; LaSalle National Bank, 120
S. LaSalle Street, Chicago, IL 60603, Custodian For Philip R. Nielsen, PO Box
1443, Chicago, IL 60690; Karen Toole Verbica Trust, PO Box 7933, San Jose, CA
95150; and LaSalle National Bank, 120 S. LaSalle Street, Chicago, IL 60603, on
behalf of Arthur C. Nielsen, Jr., PO Box 1443, Chicago, IL 60690, which held of
record 16,901 shares (10.8%); 10,036 shares (6.4%); 10,036 shares (6.4%); 8,170
shares (5.2%) and 8,139 shares (5.2%), respectively, of the outstanding N Shares
of the Fund. The principal holder of Institutional Shares of the International
Fund was Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603,
which held of record 17,519,909 shares (99.1%) of the outstanding Institutional
Shares of the Fund.
The principal holders of A Shares of the Small-Cap Opportunity Fund
were Donaldson Lufkin Jenrette Securities Corp., PO Box 2052, Jersey City, NJ
07303; Parker Hunter Inc., 600 Grant Street, Pittsburgh, PA 15219, on behalf of
James D. Emery IRA, 708 Jackson Avenue, West Brownsville, PA 15417; and Lynn and
Jeffrey Goldapske, N9618 Otte Court, Appleton, WI 54915, which held of record
1,112 shares (42.0%); 950 shares (35.9%); and 236 shares (8.9%) of the
outstanding A Shares of the Fund. The principal holders of N Shares of the
Small-Cap Opportunity Fund were Harris Trust and Savings Bank, 111 W. Monroe
Street, Chicago, IL 60603; and Bank of America NT & SA, 600 Montgomery Street,
San Francisco, CA 94104, on behalf of Laverne N. Gaynor Grandchildren's Trust,
PO Box 513577, Los Angeles, CA 90051, which held of record 157,179 shares
(41.3%) and 26,138 shares (6.9%), respectively, of the outstanding N Shares of
the Fund. The principal holder of Institutional Shares of the Small-Cap
Opportunity Fund was Harris Trust and Savings Bank, 111 W. Monroe Street,
Chicago, IL 60603, which held of record 18,767,162 shares (98.9%) of the
outstanding Institutional Shares of the Fund.
The principal holders of A Shares of the Small-Cap Value Fund were
Vivian Sanchez and Esther Sanchez, 9609 Allande NE, Albuquerque, NM 87109; Lynn
and Jeffrey Goldapske, N9618 Otte Court, Appleton, WI 54915; and Gary R. Miles,
11530 E. Lake Road, North East, PA 16428, which held of record 291 shares
(54.0%); 182 shares (33.7%); and 66 shares (12.3%), respectively, of the
outstanding A Shares of the Fund. The principal holders of N Shares of the
Small-Cap Value Fund were Harris Trust and Savings Bank, 111 W. Monroe Street,
Chicago, IL 60603; Charles Schwab & Co., Inc., Benefit of Customers, 101
Montgomery Street, San Francisco, CA 94110; and Anne S. Lyman Profit Sharing
Plan, 1510 Tower Road, Winnetka, IL 60093, which held of record 7,697 shares
(39.1%); 1,541 shares (7.8%); and 1,183 shares (6.0%), respectively, of the
outstanding N Shares of the Fund. The principal holder of Institutional Shares
of the Small-Cap Value Fund was Harris Trust and Savings Bank, 111 W. Monroe
Street, Chicago, IL 60603, which held of record 3,253,716 shares (96.3%) of the
outstanding Institutional Shares of the Fund.
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<PAGE>
The principal holders of A Shares of the Growth Fund were Carlee Family
Limited Partnership, 848 Collier Court, Marco Island, FL 33937; and National
Financial Services Corp., PO Box 3908, Church Street Station, New York, NY
10008, on behalf of Linda Bordignon Trust, 12375 W. Winding Creek Loop, Huntley,
IL 60142, which held of record 2,092 shares (7.5%) and 1,668 shares (6.0%),
respectively, of the outstanding A Shares of the Fund. The principal holders of
N Shares of the Growth Fund were Harris Trust and Savings Bank, 111 W. Monroe
Street, Chicago, IL 60603; and GSB & Co., 800 Waukegan Road, Glenview, IL 60025,
which held of record 31,879 shares (12.7%) and 13,592 shares (5.4%),
respectively, of the outstanding N Shares of the Fund. The principal holder of
Institutional Shares of the Growth Fund was Harris Trust and Savings Bank, 111
W. Monroe Street, Chicago, IL 60603, which held of record 6,404,951 shares
(99.6%) of the outstanding Institutional Shares of the Fund.
The principal holders of A Shares of the Equity Fund were Eleanor Garon
Revocable Living Trust, 4100 N. Marine Drive, Chicago, IL 60613; Julia Berger
Revocable Living Trust, 11349 S. Roberts Road, Palos Hills, IL 60465; National
Financial Service Corp., PO Box 3908, Church Street Station, New York, NY 10008,
on behalf of Carol J. Turner, 125 E. San Miguel, Phoenix, AZ 85012; Parker
Hunter Inc., 600 Grant Street, Pittsburgh, PA 15219, on behalf of Marietta
Imaging Inc Pension Plan FBO Steven Boker, Marietta, OH 45750; National
Financial Service Corp., PO Box 3908, Church Street Station, New York, NY 10008,
on behalf of James Mueller, 6 W. Blackberry Court, Streamwood, IL 60107; and
Lori Schral IRA, 234 Iroquis Avenue, Pittsburgh, PA 15237, which held of record
2,095 shares (17.0%); 1,430 shares (11.6%); 1,173 shares (9.5%); 1,156 shares
(9.4%); 1,027 shares (8.3%); and 985 shares (8.0%), respectively, of the
outstanding A Shares of the Fund. The principal holders of N Shares of the
Equity Fund were Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago,
IL 60603; and National Financial Services Corp., PO Box 3908, Church Street
Station, New York, NY 10008, on behalf of Harris Trust and Savings Bank
Custodian For Glynn M. Rossa, 3500 Corben Court, Madison, WI 53704, which held
of record 153,652 shares (12.7%) and 97,056 shares (8.0%), respectively, of the
outstanding N Shares of the Fund. The principal holder of Institutional Shares
of the Equity Fund was Harris Trust and Savings Bank, 111 W. Monroe Street,
Chicago, IL 60603, which held of record 32,254,683 shares (95.5%) of the
outstanding Institutional Shares of the Fund.
The principal holders of A Shares of the Equity Income Fund were
Eleanor Garon Revocable Living Trust, 4100 N. Marine Drive, Chicago, IL 60613;
and National Financial Services Corp., PO Box 3908, Church Street Station, New
York, NY 10008, on behalf of Hiroshi and Chiyo Ito, 1441 W. Carmen Avenue,
Chicago, IL 60640, which held of record 8,079 shares (31.4%) and 2,382 shares
(9.2%), respectively, of the outstanding A Shares of the Fund. The principal
holder of N Shares of the Equity Income Fund was Harris Trust and Savings Bank,
111 W. Monroe Street, Chicago, IL 60603, which held of record 141,562 shares
(47.5%) of the outstanding N Shares of the Fund. The principal holder of
Institutional Shares of the Equity Income Fund was Harris Trust and Savings
Bank, 111 W. Monroe Street, Chicago, IL 60603, which held of record 3,557,051
shares (99.6%) of the outstanding Institutional Shares of the Fund.
The principal holder of N Shares of the Index Fund was Harris Trust and
Savings Bank, 111 W. Monroe Street, Chicago, IL 60603, which held of record
183,876 shares (23.3%) of the outstanding N Shares of the Fund. The principal
holders of the Institutional Shares of the Index Fund were Harris Trust and
Savings Bank, 111 W. Monroe Street, Chicago, IL 60603; and The University of
Chicago Hospitals, 5841 S. Maryland Avenue, Chicago, IL 60637, which held of
37
<PAGE>
record 14,872,532 shares (87.5%) and 2,089,310 shares (12.3%), respectively, of
the outstanding Institutional Shares of the Fund.
The principal holders of A Shares of the Balanced Fund were National
Financial Services Corp., PO Box 3908, Church Street Station, New York, NY
10008, on behalf of James Mueller IRA, 6 W. Blackberry Court, Streamwood, IL
60107; National Financial Services Corp., PO Box 3908, Church Street Station,
New York, NY 10008, on behalf of Carmello Saverino IRA, 855 Hermitage Drive,
Addison, IL 60101; National Financial Services Corp., PO Box 3908, Church Street
Station, New York, NY 10008, on behalf of Michael D. and Holly J. Robinson, 641
Redwood Drive, Aurora, IL 60506; National Financial Services Corp., PO Box 3908,
Church Street Station, New York, NY 10008, on behalf of Madeline M. Saverino
IRA, 855 Hermitage Drive, Addison, IL 60101; and National Financial Services
Corp., PO Box 3908, Church Street Station, New York, NY 10008, on behalf of
Dorothy M. Attermeyer IRA, 740 Woodside Avenue, Hinsdale, IL 60521, which held
of record 2,470 shares (35.7%); 1,467 shares (21.2%); 949 shares (13.7%); 870
shares (12.6%); and 575 shares (8.3%), respectively, of the outstanding A Shares
of the Fund. The principal holders of the N Shares of the Balanced Fund were
Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603; David P.
Sanes Money Purchase Plan, 9451 N. Lockwood Avenue, Skokie, IL 60077; and Kathy
Richland Photography Profit Sharing Plan, 839 Wrightwood, Chicago, IL 60614,
which held of record 36,315 shares (22.7%); 30,187 shares (18.9%); and 9,949
shares (6.2%), respectively, of the outstanding N Shares of the Fund. The
principal holder of Institutional Shares of the Balanced Fund was Harris Trust
and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603, which held of record
1,135,477 shares (99.9%) of the outstanding Institutional Shares of the Fund.
The principal holders of A Shares of the Convertible Securities Fund
were National Financial Services Corp., PO Box 3908, Church Street Station, New
York, NY 10008, on behalf of Sara Curiel, 5416 W. 30th Place, Cicero, IL 60804;
National Financial Services Corp., PO Box 3908, Church Street Station, New York,
NY 10008, on behalf of Rafael Montanez, 2425 S. Whipple, Chicago, IL 60623; and
National Financial Services Corp., PO Box 3908, Church Street Station, New York,
NY 10008, on behalf of Baldemar and Elvia Casimiro, 2248 W. 19th Street,
Chicago, IL 60608, which held of record 474 shares (66.8%); 150 shares (21.2%);
and 85 shares (12.0%), respectively, of the outstanding A Shares of the Fund.
The principal holders of N Shares of the Convertible Securities Fund were
National Financial Services Corp., PO Box 3908, Church Street Station, New York,
NY 10008, on behalf of Ronald J. Sengstock, 3901 E. Pinnacle Peak Road, Phoenix,
AZ 85050; National Financial Services Corp., PO Box 3908, Church Street Station,
New York, NY 10008, on behalf of Barbara E. Glore, 1555 N. Astor, Chicago, IL
60610; Banc of America Securities LLC, 600 Montgomery Street, San Francisco, CA
94111; National Financial Services Corp., PO Box 3908, Church Street Station,
New York, NY 10008, on behalf of Harris Trust and Savings Bank Custodian For
George O Podd IRA, 500 Crown Colony Court, Des Moines, IA 50315; and John W.
McCarter Jr. Trust, 575 Thornwood Lane, Northfield, IL 60093, which held of
record 1,872 shares (16.9%); 1,109 shares (10.0%); 1,029 shares (9.3%); 996
shares (9.0%) and 874 shares (7.9%), respectively, of the outstanding N Shares
of the Fund. The principal holders of Institutional Shares of the Convertible
Securities Fund were Harris Trust and Savings Bank, 111 W. Monroe Street,
Chicago, IL 60603; and Pipe Fitters Retirement Fund Local 597, 3800 Citibank
Center, Tampa, FL 33607, which held of record 1,548,436 shares (88.7%) and
190,193 shares (10.9%), respectively, of the outstanding Institutional Shares of
the Fund.
38
<PAGE>
The principal holders of N Shares of the Tax-Exempt Bond Fund were
Capital Network Services, One Bush Street, San Francisco, CA 94104; William D.
Markle, 1527 W. Morse Avenue, Chicago, IL 60626; National Financial Services
Corp., PO Box 3908, Church Street Station, New York, NY 10008, on behalf of Mark
J. and Kathleen Vandlik, 144 S. Sleight, Naperville, IL 60540; Benjamin F.
Kable, 14323 Burgess Road, La Pine, OR 97739; Margaret R. Eilers Revocable Inter
Vivos Trust, 7419 Somerset, Clayton, MO 63105; Michael R. Chandler, 4500 W.
Mustang, Beverly Hills, FL 34465; John M. Reeder, PO Box 226, Greensboro, VT
05841; and Jean R. Smith Revocable Trust, 225 Laurel Avenue, Wilmette, IL 60091,
which held of record 87,873 shares (24.1%); 5,328 shares (6.1%); 5,263 shares
(6.0%); 5,055 shares (5.8%); 4,955 shares (5.6%); 4,861 shares (5.5%); 4,572
shares (5.2%); and 4,572 shares (5.2%), respectively, of the outstanding N
Shares of the Fund. The principal holder of Institutional Shares of the
Tax-Exempt Bond Fund was Harris Trust and Savings Bank, 111 W. Monroe Street,
Chicago, IL 60603, which held of record 10,840,865 shares (99.8%) of the
outstanding Institutional Shares of the Fund.
The principal holders of A Shares of the Bond Fund were National
Financial Services Corp., PO Box 3908, Church Street Station, New York, NY
10008, on behalf of Carol J. Turner IRA, 125 E. San Miguel, Phoenix, AZ 85012;
National Financial Services Corp., PO Box 3908, Church Street Station, New York,
NY 10008, on behalf of Judith A. Jensen IRA Rollover, 1747 N. Washtenaw,
Chicago, IL 60647; Adam Bottorff and Susan U. Goldsworthy, 6580 Ridgefield
Circle, West Bloomfield, MI 48322; and National Financial Services Corp., PO Box
3908, Church Street Station, New York, NY 10008, on behalf of Dolores R.
Hathaway IRA, 108 N. Reuter Avenue, Arlington Heights, IL 60004, which held of
record 1,790 shares (62.6%); 508 shares (17.8%); 356 shares (12.4%); and 204
shares (7.1%), respectively, of the outstanding shares of A Shares of the Fund.
The principal holder of the N Shares of the Bond Fund was Harris Trust and
Savings Bank, 111 W. Monroe Street, Chicago, IL 60603, which held of record
241,630 shares (61.5%) of the outstanding shares of the N Shares of the Fund.
The principal holder of Institutional Shares of the Bond Fund was Harris Trust
and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603, which held of record
14,658,535 shares (96.5%) of the outstanding Institutional Shares of the Fund.
The principal holders of N Shares of the Intermediate Tax-Exempt Bond
Fund were Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL
60603; National Financial Services Corp., PO Box 3908, Church Street Station,
New York, NY 10008, on behalf of Carole Ann Bauer Revocable Living Trust, 2060
W. Frost Road, Schaumburg, IL 60195; Mary B. Dekker Trust A, 235 Sixth Avenue
South, Clinton, IA 52732; and National Financial Services Corp., PO Box 3908,
Church Street Station, New York, NY 10008, on behalf of Cecily Mistarz, 2672 N.
Orchard, Chicago, IL 60614, which held of record 28,260 shares (43.1%); 9,772
shares (14.9%); 4,428 shares (6.7%); and 3,557 shares (5.4%), respectively, of
the outstanding N Shares of the Fund. The principal holder of the Institutional
Shares of the Intermediate Tax-Exempt Bond Fund was Harris Trust and Savings
Bank, 111 W. Monroe Street, Chicago, IL 60603, which held of record 18,218,239
shares (99.9%) of the outstanding Institutional Shares of the Fund.
The principal holder of A Shares of the Short/Intermediate Bond Fund
was Parker Hunter Inc., 600 Grant Street, Pittsburgh, PA 15219, on behalf of
Alfred G. Tackla IRA, 8653 Bradford Lane, Brecksville, OH 44141, which held of
record 14,513 shares (99.9%) of the outstanding A Shares of the Fund. The
principal holders of N Shares of the Short/Intermediate Bond Fund were Harris
Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603; and James
Stewart Miller Revocable Living Trust, 2335 Geysers Road, Geyserville, CA 95441,
which held of record 72,043 shares (17.3%) and 25,062 shares (6.0%),
respectively, of the outstanding N Shares of the
39
<PAGE>
Fund. The principal holder of Institutional Shares of the Short/Intermediate
Bond Fund was Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL
60603, which held of record 30,861,636 shares (98.3%) of the outstanding
Institutional Shares of the Fund.
The principal holders of A Shares of the Intermediate Government Bond
Fund were National Financial Services Corp., PO Box 3908, Church Street Station,
New York, NY 10008, on behalf of Frank Shelby Bennett Trust, PO Box 642,
Tombstone, AZ 85638; National Financial Services Corp., PO Box 3908, Church
Street Station, New York, NY 10008, on behalf of Laura J. Florito, 1195
Buttercup Lane, Bartlett, IL 60103; Susan Goldsworthy Custodian For Andrew
Goldsworthy, 6580 Ridgefield Circle, West Bloomfield, MI 48322; and National
Financial Services Corp., PO Box 3908, Church Street Station, New York, NY
10008, on behalf of Joyce C. Podraza IRA, 1919 Wildwood Circle, Glendale
Heights, IL 60139, which held of record 2,212 shares (77.9%); 221 shares (7.8%);
185 shares (6.5%); and 153 shares (5.4%), respectively, of the outstanding A
Shares of the Fund. The principal holder of N Shares of the Intermediate
Government Bond Fund was Harris Trust and Savings Bank, 111 W. Monroe Street,
Chicago, IL 60603, which held of record 175,557 shares (54.8%) of the
outstanding N Shares of the Fund. The principal holders of Institutional Shares
of the Intermediate Government Bond Fund were Harris Trust and Savings Bank, 111
W. Monroe Street, Chicago, IL 60603; and Hospital for Joint Diseases Orthopediac
Institute Salaries Employee Pension and Profit Sharing, 301 E. 17th Street, New
York, NY 10006, which held of record 5,057,035 shares (92.7%) and 373,902 shares
(6.9%), respectively, of the outstanding Institutional Shares of the Fund.
The principal holder of N Shares of the Tax-Exempt Money Market Fund
was Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603,
which held of record 215,239,057 shares (84.9%) of the outstanding N Shares of
the Fund. The principal holder of Institutional Shares of the Tax-Exempt Money
Market Fund was Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL
60603, which held of record 613,843,763 shares (99.9%) of the outstanding
Institutional Shares of the Fund.
The principal holder of the N Shares of the Money Market Fund was
Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603, which
held of record 1,042,846,716 shares (91.8%) of the outstanding N Shares of the
Fund. The principal holder of Institutional Shares of the Money Market Fund was
Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603, which
held of record 1,730,410,565 shares (82.2%) of the outstanding Institutional
Shares of the Fund.
The principal holder of N Shares of the Government Money Market Fund
was Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL 60603,
which held of record 293,418,919 shares (95.2%) of the outstanding N Shares of
the Fund. The principal holder of Institutional Shares of the Government Money
Market Fund was Harris Trust and Savings Bank, 111 W. Monroe Street, Chicago, IL
60603, which held of record 185,514,414 shares (97.5%) of the outstanding
Institutional Shares of the Fund.
The shares described above as held by Harris Trust and Savings Bank are
being held on behalf of various accounts and not as beneficial owners. To the
extent that any shareholder is the beneficial owner of more than 25% of the
outstanding shares of any Fund, such shareholder may be deemed to be a "control
person" of that Fund for purposes of the 1940 Act.
40
<PAGE>
As of March 31, 2000, Trustees and officers of the Trust as a group
beneficially owned less than 1% of the outstanding shares of any Fund.
INVESTMENT MANAGEMENT, DISTRIBUTION AND OTHER SERVICES
INVESTMENT MANAGEMENT. Each of the Funds is advised by Harris Trust
and Savings Bank ("Harris Trust" or the "Investment Adviser"). Harris Trust 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. Harris Trust is a wholly-owned subsidiary of Harris Bankcorp, Inc, which
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.
Harris Trust, subject to review and approval by the Board of Trustees,
sets each Fund's investment objective and overall investment strategies and, as
more fully described below, provides general management services to each Fund,
including overall supervisory responsibility for the management and investment
of each Fund's portfolio. Harris Trust also has overall responsibility, subject
to the ongoing supervision of the Trust's Board of Trustees, for administering
all operations of the Trust and for providing or arranging for the provision of
the overall business management and administrative services necessary for the
Trust's operations.
In accordance with the terms of its Advisory Contract with the Trust,
Harris Trust seeks to achieve each Fund's investment objective by evaluating,
selecting, and recommending to the Board of Trustees subadvisers ("Subadvisers")
with whom Harris Trust enters into Subadvisory Agreements and to whom Harris
Trust delegates its responsibility for providing day-do-day investment advice
to, making investment decisions for, and managing the assets of each Fund.
The 1940 Act generally provides that an investment adviser or
sub-adviser to a mutual fund may act as such only pursuant to a written contract
that has been approved by a vote of the fund's shareholders and by a vote of a
majority of the trustees of the fund who are not parties to such contract or
agreement or interested persons of any party to such contract or agreement.
However, Harris Trust and the Trust have received an exemptive order from the
Securities Exchange Commission ("SEC Order") that permits, and the Trust's
shareholders and Board of Trustees have approved, operation of the Trust in a
manner that allows Harris Trust, subject to approval by the Trust's Board of
Trustees but without obtaining further shareholder approval, to enter into,
materially amend, or terminate any Subadvisory Agreement on behalf of any one or
more of the Funds (as well as of any future Fund of the Trust). Under this
adviser/sub-adviser management structure, a Subadviser to a Fund acts in a
capacity similar to that of a portfolio manager in a more traditional mutual
fund advisory structure that does not involve a Subadviser. Specifically, a
Subadviser, like a portfolio manager in a more traditional structure, manages a
Fund's assets under the oversight and supervision of the Adviser. Changing a
Fund's Sub-Adviser is, therefore, analogous to replacing the portfolio manager
of a single-manager managed fund, which does not require shareholder approval
under the 1940 Act. Any Subadvisory Agreement remains subject to approval by a
majority of the Trustees of the Trust who are not parties to or interested
persons of any party to the agreement. Furthermore, the Trust still requires
shareholder approval to amend its Advisory Contract with Harris Trust (including
any amendment to raise the management fee rate payable under such agreement) or
to enter into a new Advisory Contract with Harris Trust or any other investment
adviser.
41
<PAGE>
Harris Trust may, pursuant to the SEC Order, also authorize a
Subadviser (subject to the further approval of the Board of Trustees) to enter
into a sub-portfolio management contract with one or more sub-subadvisers (each,
a "Sub-subadviser") on behalf of any Fund managed by that Subadviser.
Notwithstanding its delegation of portfolio management duties to Subadvisers and
authorization of further delegation by one or more Subadvisers to
Sub-subadvisers, Harris Trust retains ultimate responsibility for the
supervision and oversight of each Subadviser's and Sub-subadviser's performance
under a Subadvisory Agreement or sub-portfolio management contract,
respectively. In fulfilling that responsibility Harris Trust (i) when
appropriate, recommends to the Board of Trustees the allocation and reallocation
of a Fund's assets among multiple Subadvisers; (ii) monitors and evaluates the
performance of Subadvisers; (iii) ensures that Subadvisers comply with each
Fund's investment objectives, policies, and restrictions; and (iv) recommends
the hiring, termination, and replacement of Subadvisers.
Any Subadviser selected to manage the assets of a Fund is or will be
registered under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"). Within 90 days of the hiring of any new sub-adviser or the implementation
of any proposed material change in a Subadvisory Agreement, the Trust will
furnish shareholders the information about the new Sub-adviser and Subadvisory
Agreement that would have been included in a proxy statement relating to
shareholder approval of such agreement. Harris Trust will not, however, enter
into a Subadvisory Agreement on behalf of a Fund with any Subadviser that is an
affiliated person, as defined by the 1940 Act, of Harris Trust or the Trust,
other than by reason of serving as Subadviser to one or more of the Funds
("Affiliated Subadviser"), unless that agreement, including the compensation to
be paid thereunder, has been approved by the shareholders of the applicable
Fund. When a Subadviser change is proposed for a Fund with an Affiliated
Subadviser, the Board, including a majority of the Independent Trustees, will
make a separate finding, reflected in the Board's minutes, that the change of
Subadviser is in the best interests of the Fund and its shareholders and that
the change does not involve a conflict of interest from which Harris Trust or
the Affiliated Subadviser derives an inappropriate advantage.
With respect to each of the Funds, Harris Trust has entered into a
Portfolio Management Contract with Harris Investment Management, Inc. ("HIM")
under which HIM, as Sub-Adviser, is responsible for all Fund purchase and sale
transactions and for providing all such daily portfolio management services to
such Funds. Under the Portfolio Management Contracts, Harris Trust remains
responsible for the supervision and oversight of HIM's performance. HIM, an
investment adviser registered under the Advisers Act, is a wholly-owned
subsidiary of Harris Bankcorp, Inc.
Pursuant to the SEC Order described above, HIM (and any other
Subadviser retained by Harris Trust) may, subject to approval by Harris Trust
and the Trust's Board of Trustees, enter into, materially amend or terminate a
sub-portfolio management contract with one or more Sub-Subadvisers without
obtaining shareholder approval. Harris Trust and HIM (or any other Subadviser
retained by Harris Trust) retain ultimate responsibility for the supervision and
oversight of each Sub-subadviser's performance under a Subadvisory Agreement or
sub-portfolio management contract, respectively.
HIM has entered into a sub-portfolio management contract with
Hansberger Global Investors, Inc. ("Hansberger"). Hansberger, a wholly-owned
subsidiary of Hansberger Group, Inc., is an investment adviser registered under
the Advisers Act and provides a broad range of portfolio
42
<PAGE>
management services to clients in the U.S. and abroad. Hansberger Group, Inc. is
majority-controlled by Thomas L. Hansberger, who founded the firm in 1994. Under
the sub-portfolio management contract, Hansberger manages the investment of
assets of the Emerging Markets Fund and the International Fund. In carrying out
its obligations, 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
those Funds' investment portfolio or may be under consideration for inclusion
therein; and (ii) formulates, recommends, and executes an ongoing program of
investment for those Funds consistent with those Funds' investment objectives,
policies, strategy, and restrictions. HIM remains responsible for the
supervision and oversight of Hansberger's performance.
Harris Trust, HIM or Hansberger provides to the Funds, among other
things, money market, equity and fixed income security research, analysis and
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition and credit conditions. HIM and
Hansberger analyze 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.
The Advisory Contract with respect to each Fund will continue in effect
from year to year, provided that such continuation is specifically approved
annually (i) by the holders of a majority of the "outstanding voting securities"
of the Fund (as defined in the 1940 Act) or by the Board of Trustees, as the
case may be, and (ii) by a majority of the Trustees of the Trust who are not
parties to the Advisory Contracts or "interested persons" (as defined in the
1940 Act) of any such party.
The Portfolio Management Contract with respect to each Fund will
continue in effect from year to year, provided that such continuation is
specifically approved as described in the immediately preceding paragraph.
Harris Trust from time to time may offer programs under which it may
make payments from its own resources to certain non-profit organizations based
on shares of the Funds held by members of the organizations and in an amount up
to 0.10% of the value of those shares. Those payments are expenses of Harris
Trust and are not Fund expenses, and thus will not affect Fund performance.
Harris Trust from time to time may make payments from its own resources
to certain service organizations and financial intermediaries for their services
in connection with investments in the Funds made by their clients or customers.
Those payments are expenses of Harris Trust and are not Fund expenses, and thus
will not affect Fund performance.
Portfolio Management. The skilled portfolio management teams behind the
Harris Insight Funds believe that consistent investment performance requires
discipline, focus, knowledge, and excellent informational resources. The money
management philosophy that HIM employs focuses on two key points:
o Active portfolio management is a key component of superior performance.
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<PAGE>
o A systematic investment process may increase both consistency and levels of
relative performance.
Experience and creativity, combined with technological support, are
most likely to result in successful investment decisions. HIM offers investors
that powerful combination for managing their money. More importantly, instead of
relying on individual stars to manage its mutual funds, HIM has established a
strong professional team of seasoned portfolio managers and analysts. Together,
they take a quantitatively-driven approach to investing, focusing on their
investors' needs, concerns and investment goals.
HIM is a leader in the application of analytic techniques used in the
selection of portfolios. HIM's equity investment process focuses on maintaining
a well-diversified portfolio of stocks whose prices are determined to be
attractively ranked based upon their future potential.
After identifying the appropriate type of universe for each Fund -
whether the stocks are issued by large, established companies, or by smaller
firms - HIM gathers fundamental, quality and liquidity data. A multi-factor
model then ranks and/or scores the stocks. Stocks which fail to meet HIM's
hurdles are removed from further consideration.
Attractive stocks are periodically identified and added to the
portfolio, while those that have become unattractive are systematically
replaced. Fund portfolio managers, in conjunction with experienced research
analysts, play a role throughout the process.
HIM actively manages taxable and tax-exempt fixed income securities
using a highly disciplined, quantitatively-based investment process. This
enables HIM to create portfolios of fixed income securities that it believes are
undervalued based upon their future potential. HIM seeks securities in specific
industries or areas of the country that, it believes, offer the best value and
stand to benefit from anticipated changes in interest rates.
Using quantitative models that attempt to ensure competitive results in
both rising and falling markets, bond portfolio managers select securities
within different industries while managing interest rate risk. These
quantitative models have the ability to measure changes in the economy, changes
in the prices of various goods and services, and changes in interest rates.
Potential purchases are finally reviewed with regard to their suitability to,
credit assessment of and impact on the overall portfolio.
The following table shows the dollar amount of fees payable to the
Investment Adviser for its services with respect to each Fund, the amount of fee
that was waived by the Investment Adviser, if any, and the actual fee received
by the Investment Adviser. This data is for the past three fiscal years or
shorter period if the Fund has been in operation for a shorter period.
<TABLE>
<CAPTION>
Gross Advisory Fee Advisory Fee Voluntarily Net Advisory Fee
($) Waived ($) ($)
-------------------------------- ------------------------------ --------------------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- ----------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Government Money
Market Fund 343,287 432,078 542,580 -- -- -- 343,287 432,078 542,580
Money Market Fund 1,285,919 1,926,556 2,668,708 -- -- -- 1,285,919 1,926,556 2,668,708
Tax-Exempt Money
Market Fund 676,850 897,439 819,216 -- -- -- 676,850 897,439 819,216
44
<PAGE>
<CAPTION>
Gross Advisory Fee Advisory Fee Voluntarily Net Advisory Fee
($) Waived ($) ($)
-------------------------------- ------------------------------ --------------------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- ----------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Fund 617,981 1,107,053 1,194,357 277,603 470,364 522,321 340,378 636,689 672,036
Convertible
Securities Fund 325,654 364,871 335,222 20,552 48,872 41,036 305,102 315,999 294,186
Intermediate
Government Bond Fund 453,478 682,626 669,469 283,923 430,386 427,300 169,555 252,240 242,169
Intermediate
Tax-Exempt Bond Fund 1,195,229 1,193,836 1,236,094 2,062 1,920 249,836 1,193,167 1,191,916 986,258
Short/Intermediate
Bond Fund 1,950,205 2,309,905 2,297,876 812,087 985,902 1,020,456 1,138,118 1,324,003 1,277,420
Tax-Exempt Bond Fund 1,034,844 1,058,237 953,658 564 7,788 199,578 1,034,280 1,050,449 754,080
Balanced Fund 297,432 382,132 287,180 18,183 65,775 73,333 279,249 316,357 213,847
Emerging Markets Fund 37,994 238,897 334,341 10,336 62,722 5,145 27,658 176,175 329,196
Equity Fund 5,497,774 6,213,809 5,312,875 -- -- -- 5,497,774 6,213,809 5,312,875
Equity Income Fund 265,358 360,398 518,808 10,661 16,960 35,232 254,697 343,438 483,576
Growth Fund 875,635 1,191,917 1,530,500 13,517 15,256 51,635 862,118 1,176,661 1,478,865
Index Fund 581,658 818,579 1,166,714 40,100 23,765 24,950 541,558 794,814 1,141,764
International Fund 1,796,685 1,932,241 2,440,532 32,097 -- -- 1,764,588 1,932,241 2,440,532
Small-Cap Opportunity
Fund 2,218,918 2,858,643 3,288,396 17,029 24,863 24,702 2,201,889 2,833,780 3,263,694
Small-Cap Value Fund 447,182 887,045 1,029,786 38,615 69,402 60,276 408,567 817,643 969,510
- ----------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
</TABLE>
The Trust, Harris Trust, HIM, Hansberger, and the Distributor have each
adopted codes of ethics under Rule 17j-1 under the 1940 Act. These codes of
ethics permit persons subject to the respective code, subject to conditions set
forth therein, to invest in securities, including certain securities that may be
purchased or held by a Fund or Funds. Each code of ethics has been filed with
and is available from the Commission at the address, telephone number, and
Internet site given on the back cover of the Trust's prospectus.
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN. Harris Trust serves as the
Funds' administrator ("Administrator") pursuant to Administration Agreements
with the Trust and in that capacity generally assists the Funds in all aspects
of their administration and operation. The Administrator has entered into a
Sub-Administration and Accounting Services Agreements with PFPC Inc. ("PFPC" or
the "Sub-Administrator") on behalf of the Trust. PFPC has agreed to furnish
officers for the Trust; provide corporate secretarial services; prepare and file
various reports with the appropriate regulatory agencies; assist in preparing
various materials required by the Commission; provide accounting and bookkeeping
services for the Funds, including the computation of each 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.
Harris Trust serves as the transfer agent and dividend disbursing agent
("Transfer Agent") of the Funds pursuant to Transfer Agency Services Agreements
with the Trust. The Transfer Agent
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<PAGE>
has entered into Sub-Transfer Agency Services Agreements with PFPC (the
"Sub-Transfer Agent") on behalf of the Trust whereby the Sub-Transfer Agent
performs certain transfer agency and dividend disbursing agency services.
PFPC Trust Company ("PFPC Trust" or the "Custodian") serves as
custodian of the assets of the Funds and, among other things, maintains a
custody account or accounts in the name of each Fund, receives and delivers all
assets for each Fund upon purchase and upon sale or maturity, collects and
receives all income and other payments and distributions on account of the
assets of each Fund, and pays all expenses of each Fund. The Custodian has
entered into Sub-Custodian Services Agreements with PNC Bank, N.A. ("PNC" or the
"Sub-Custodian") on behalf of the Trust whereby the Sub-Custodian performs
certain sub-custodian services. PFPC, PFPC Trust and PNC 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 Funds of the Trust, 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 $600 million. In addition, the Funds pay a separate fee to the Sub-Transfer
Agent for certain retail sub-transfer agent services and reimburse the Custodian
for various custody transactional expenses.
The following table shows the dollar amount of fees payable to the
Administrator for its services with respect to each Fund, the amount of fee that
was waived by the Administrator, if any, and the actual fee received by the
Administrator. The data is for the past three fiscal years or shorter period if
the Fund has been in operation for a shorter period.
<TABLE>
<CAPTION>
Administration Fee ($) Reduction by Administrator($) Net Administration Fee ($)
-------------------------------- ------------------------------ --------------------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- ---------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Government Money
Market Fund 264,347 332,164 436,115 114,341 179,879 243,499 150,006 152,285 192,616
Money Market Fund 1,058,621 1,627,203 2,283,155 476,735 865,316 1,267,814 581,886 761,887 1,015,341
Tax-Exempt Money
Market Fund 554,506 739,379 667,524 -- -- -- 554,506 739,379 677,524
Bond Fund 129,517 245,966 292,757 -- -- 15,537 129,517 245,966 277,220
Convertible
Securities Fund 63,999 75,640 72,356 -- -- -- 63,999 75,640 72,356
Intermediate
Government Bond Fund
96,088 152,049 171,256 -- -- 15,697 96,088 152,049 155,559
Intermediate
Tax-Exempt Bond Fund 273,834 287,718 311,340 -- -- -- 273,834 287,718 311,340
Short/Intermediate
Bond Fund 385,023 477,736 503,868 -- -- 7,936 385,023 477,736 495,932
Tax-Exempt Bond Fund 238,688 255,614 240,107 -- -- -- 238,688 255,614 240,107
Balanced Fund 68,073 92,442 87,918 -- -- 15,965 68,073 92,442 71,953
Emerging Markets Fund 4,309 28,633 48,270 -- -- 6,678 4,309 28,633 41,592
Equity Fund 1,078,273 1,288,430 1,159,792 -- -- 15,697 1,078,273 1,288,430 1,144,095
46
<PAGE>
<CAPTION>
Administration Fee ($) Reduction by Administrator($) Net Administration Fee ($)
-------------------------------- ------------------------------ --------------------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- ---------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income Fund 52,398 74,396 126,972 -- -- 15,965 52,398 74,396 111,007
Growth Fund 134,450 191,807 270,868 -- -- 16,125 134,450 191,807 254,743
Index Fund 318,288 474,653 698,724 -- -- -- 318,288 474,653 698,724
International Fund 248,075 280,560 379,956 -- -- 14,662 248,075 280,560 365,294
Small-Cap
Opportunity Fund 304,109 414,180 507,905 -- -- 14,662 304,109 414,180 493,243
Small-Cap Value Fund 77,285 160,268 199,620 -- -- 5,250 77,285 160,268 194,370
- ---------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
</TABLE>
DISTRIBUTOR. Effective May 1, 1999, Provident Distributors, 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. Prior to
that date, the distributor for the Funds was Funds Distributor, Inc. (FDI). 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 Plans described
below, if implemented pursuant to contractual arrangements between the Trust and
the Distributor and approved by the Board of Trustees of the Trust. The
Distributor has agreed to furnish officers for the Trust, as required.
A Shares of the Funds are sold with a maximum front-end sales charge of
5.50%. Effective December 1, 1997, the front-end sales charge assessed on N
Shares of the Equity Funds and the Fixed Income Funds was eliminated. N Shares
of these Funds were previously sold with a maximum front-end sales charge of
4.50%. A Shares of the Funds may be subject to a contingent deferred sales
charge of up to 1.00%, which is described in the Prospectuses and under
"Additional Purchase and Redemption Information" in this SAI.
Sales charges for A Shares of the Funds are described in the
Prospectuses and under "Additional Purchase and Redemption Information" in this
SAI.
The following table shows the dollar amount of sales charges payable to
the Distributor with respect to sales of A Shares of each Fund and the amount of
sales charges retained by the Distributor and not reallowed to other persons.
The data is for the past three fiscal years or shorter period if the Fund has
been in operation for a shorter period. There were no sales charges payable to
the Distributor with respect to the Funds not mentioned below.
<TABLE>
<CAPTION>
Aggregate Underwriting Amount Retained by the
Commissions ($) Distributor. ($)(1) Amount Reallowed ($)
----------------------------- --------------------------- -----------------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- --------------------------------- --------- --------- --------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Fund N/A N/A 1,435 N/A N/A 115 N/A N/A 1,320
Convertible Securities Fund N/A N/A N/A N/A N/A N/A N/A N/A N/A
Intermediate Government Bond
Fund N/A N/A 6,477 N/A N/A 624 N/A N/A 5,853
Short/Intermediate Bond Fund
N/A N/A 3,621 N/A N/A 403 N/A N/A 3,218
47
<PAGE>
<CAPTION>
Aggregate Underwriting Amount Retained by the
Commissions ($) Distributor. ($)(1) Amount Reallowed ($)
----------------------------- --------------------------- -----------------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- --------------------------------- --------- --------- --------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced Fund N/A N/A 4,045 N/A N/A 386 N/A N/A 3,659
Emerging Markets Fund N/A N/A 250 N/A N/A 24 N/A N/A 226
Equity Fund N/A N/A 9,199 N/A N/A 847 N/A N/A 8,352
Equity Income Fund N/A N/A 20,963 N/A N/A 1,870 N/A N/A 19,093
Growth Fund N/A N/A 38,050 N/A N/A 3,563 N/A N/A 34,487
International Fund N/A N/A 276 N/A N/A 25 N/A N/A 251
Small-Cap Opportunity Fund N/A N/A 1,351 N/A N/A 141 N/A N/A 1,210
Small-Cap Value Fund N/A N/A 55 N/A N/A 5 N/A N/A 50
- --------------------------------- --------- --------- --------- --------- -------- -------- --------- --------- ---------
</TABLE>
(1) The Distributor also retained any amount that would otherwise have
been retained by FDI for the period January 1, 1999 to May 1, 1999.
The following table shows the dollar amount of sales charges payable to
the Distributor with respect to sales of N Shares of each Fund and the amount of
sales charges retained by the Distributor and not reallowed to other persons.
The data is for the past three fiscal years or shorter period if the Fund has
been in operation for a shorter period. There were no sales charges payable to
the Distributor with respect to the Funds not mentioned below.
<TABLE>
<CAPTION>
Aggregate Underwriting Amount Retained by the
Commissions ($) Distributor. ($)(1) Amount Reallowed ($)
----------------------------- --------------------------- -----------------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- --------------------------------- --------- --------- --------- -------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short/Intermediate Bond Fund 1,473 N/A N/A 81 N/A N/A 1,392 N/A N/A
Equity Fund 7,153 N/A N/A 392 N/A N/A 6,761 N/A N/A
Equity Income Fund 85 N/A N/A 5 N/A N/A 80 N/A N/A
Growth Fund 1,908 N/A N/A 108 N/A N/A 1,800 N/A N/A
Small-Cap Opportunity Fund 2,380 N/A N/A 134 N/A N/A 2,246 N/A N/A
Index Fund 728 N/A N/A 40 N/A N/A 688 N/A N/A
International Fund 2,712 N/A N/A 147 N/A N/A 2,565 N/A N/A
- --------------------------------- --------- --------- --------- -------- --------- -------- --------- --------- ---------
</TABLE>
(1) Prior to May 1, 1999, the Distributor was FDI.
OTHER 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
48
<PAGE>
administration fees; payments pursuant to any Service Plan (with respect only to
A Shares and N 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 Funds' 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 Funds; fees of pricing services;
organizational expenses; and any extraordinary expenses. Expenses attributable
to each Fund are borne by that Fund. Other general expenses of the Trust are
allocated among the Funds in an equitable manner as determined by the Board of
Trustees.
SERVICE PLANS
A SHARES. The Funds, except for the Index Fund and the Money Market
Funds, have adopted a Service Plan for A Shares under Section 12(b) of the 1940
Act and Rule 12b-1 promulgated thereunder ("Rule 12b-1") that provides for
distribution/service fees of up to 0.25% (on an annualized basis) of the average
daily net assets attributable to A Shares.
The Funds bear the costs and expenses connected with advertising and
marketing the Funds' A Shares and may pay the fees of each institution ("Service
Organization") which purchases A Shares on behalf of its customers ("Customers")
for servicing activities, as described below, at a rate of up to 0.25% per annum
of the value of a Fund's average daily net asset values of its A Shares.
Servicing activities provided by Service Organizations to their
Customers investing in A Shares of the Fund may include, among other things, one
or more of the following: (i) establishing and maintaining shareholder accounts
and records; (ii) processing purchase and redemption transactions; (iii)
answering Customer inquiries; (iv) assisting Customers in changing dividend
options, account designations and addresses; (v) performing sub-accounting; (vi)
investing Customer cash account balances automatically in Fund shares; (vii)
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; (viii) arranging for
bank wires; (ix) distribution and such other services as the Fund may request,
to the extent the Service Organization is permitted by applicable statute, rule
or regulation.
N SHARES. The Funds have adopted a complex-wide Service Plan for N
Shares of the Funds that provides for service fees of up to 0.25% per annum of
the average daily net asset values of the N Shares. This Service Plan does not
authorize payments under the Plan to be made for distribution purposes and was
not adopted under Rule 12b-1. Additionally, the Money Market Funds have adopted
a Service Plan relating to N Shares pursuant to Rule 12b-1. That Service Plan
provides for distribution fees of up to 0.10% per annum of the average daily net
asset values of the Money Market Funds' N Shares.
ALL FUNDS. Each Fund has entered into an agreement with each
Service Organization that purchases N Shares on behalf of its Customers. In the
case of N Shares, the
49
<PAGE>
Service Organization is required to provide shareholder support services to its
Customers who beneficially own such Shares in consideration of the payment of up
to 0.25% (on an annualized basis) of the average daily net asset value of that
Fund's N Shares held by the Service Organization for the benefit of Customers.
Support services will include: (i) aggregating and processing purchase and
redemption requests from Customers and placing net purchase and redemption
orders with the Fund's Distributor; (ii) processing dividend payments from the
Fund on behalf of Customers; (iii) providing information periodically to
Customers showing their positions in the Fund's shares; (iv) arranging for bank
wires; (v) responding to Customer inquiries relating to the services performed
by the Service Organization and handling correspondence; (vi) forwarding
shareholder communications from the Fund (such as proxies, shareholder reports,
annual and semi-annual financial statements, and dividend, distribution and tax
notices) to Customers; (vii) acting as shareholder of record and nominee; (viii)
arranging for the reinvestment of dividend payments; and (ix) other similar
account administrative services.
In addition, a Service Organization, at its option, may also provide to
its holders of N Shares (a) a service that invests the assets of their other
accounts with the Service Organization in the Fund's shares (sweep program); (b)
sub-accounting with respect to shares owned beneficially or the information
necessary for sub-accounting; and (c) checkwriting services.
MONEY MARKET FUNDS. Under the Service Plan that relates only
to the Money Market Funds, each Money Market Fund may make additional payments
to Service Organizations for shareholder services described above and also may
(i) bear the costs and expenses in connection with advertising and marketing the
Fund's N Shares and (ii) make payments to Service Organizations for assistance
in connection with the distribution of shares to Customers, including the
forwarding to Customers of Prospectuses, sales literature and advertising
materials provided by the Distributor of shares, at a rate of up to 0.10% per
annum of the average daily net asset values of the N Shares.
INSTITUTIONAL SHARES. There is no Service Plan in existence with
respect to the Institutional Shares of the Funds.
GENERAL. Each 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"). Each 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 Plans must also be approved by such vote of the Trustees and the
Qualified Trustees. The Service Plans 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 proper Fund. No Service
Plan may be amended to increase materially the amounts payable to Service
Organizations without the approval of a majority of the outstanding voting
securities of the proper 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.
Each 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
50
<PAGE>
therefor) under such 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.
From their own resources, Harris Trust and HIM from time to time may
pay fees to certain Service Organizations. Additionally, Harris Trust and the
Distributor may act as Service Organizations and receive fees under a Service
Plan. The following table shows Service Organization fees paid to Harris Trust
with respect to A Shares and N Shares of each Fund for the period ended December
31, 1999.
<TABLE>
<CAPTION>
Shareholder Shareholder Rule 12b-1 Fees
Servicing Plan Servicing Plan Rule 12b-1 Fees Waived
Fees Paid($) Fees Waived($) ($) ($)
- ------------------------------------------- -------------------- ------------------ ---------------- -------------------
<S> <C> <C> <C> <C>
Government Money Market Fund 706,776 -- 282,710 --
Money Market Fund 2,359,645 -- 943,858 --
Tax-Exempt Money Market Fund 565,358 -- 151,051 79,145
Bond Fund 8,646 -- 43 --
Convertible Securities Fund 964 -- -- --
Intermediate Government Bond Fund 10,062 -- 345 --
Intermediate Tax-Exempt Bond Fund 6,210 -- -- --
Short/Intermediate Bond Fund 17,408 -- 154 --
Tax-Exempt Bond Fund 3,108 -- -- --
Balanced Fund 6,284 -- 187 --
Emerging Markets Fund 404 -- 4 --
Equity Fund 61,972 -- 253 --
Equity Income Fund 11,989 -- 600 --
Growth Fund 19,109 -- 1,129 --
Index Fund 48,245 -- -- --
International Fund 5,917 -- 7 --
Small-Cap Opportunity Fund 12,038 -- 39 --
Small-Cap Value Fund 1,580 -- 8 --
- ------------------------------------------- -------------------- ------------------ ---------------- -------------------
</TABLE>
51
<PAGE>
CALCULATION OF YIELD AND TOTAL RETURN
The Trust makes available various yield quotations with respect to
shares of each class of shares of the Money Market Funds. Each of these amounts
was calculated based on the 7-day period ended December 31, 1999, by calculating
the net change in value, exclusive of capital changes, of a hypothetical account
having a balance of one share at the beginning of the period, dividing the net
change in value by the value of the account at the beginning of the base period
to obtain the base period return, and multiplying the base period return by
365/7, with the resulting yield figure carried to the nearest hundredth of one
percent. The net change in value of an account consists of the value of
additional shares purchased with dividends from the original share plus
dividends declared on both the original share and any such additional shares
(not including realized gains or losses and unrealized appreciation or
depreciation) less applicable expenses. Effective yield quotations for N Shares
and Institutional Shares of each of the Money Market Funds are also made
available. These amounts are calculated in a similar fashion to yield, except
that the base period return is compounded by adding 1, raising the sum to a
power equal to 365 divided by 7, and subtracting 1 from the result, according to
the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) 365/7] -1
Current yield for all of the Money Market Funds will fluctuate from
time to time, unlike bank deposits or other investments that pay a fixed yield
for a stated period of time, and does not provide a basis for determining future
yields.
The yields of the N Shares and Institutional Shares of each of the
following Money Market Funds for the 7-day period ended December 31, 1999 are
listed below.
<TABLE>
<CAPTION>
Current Yield Effective Yield
------------- ---------------
N Institutional N Institutional
----- ------------- ----- -------------
<S> <C> <C> <C> <C>
Government Money Market Fund 4.93% 5.28% 5.05% 5.42%
Money Market Fund 5.52 5.87 5.67 6.04
Tax-Exempt Money Market Fund 3.83 4.14 3.91 4.23
</TABLE>
N Shares of the Money Market Funds bear the expenses of fees paid to
Service Organizations. As a result, at any given time, the net yield of N Shares
could be up to 0.35% lower than the net yield of Institutional Shares of the
Money Market Funds.
From time to time each of the Money Market Funds may advertise its
"30-day average yield" and its "monthly average yield." Such yields refer to the
average daily income generated by an investment in such Fund over a 30-day
period, as appropriate, (which period will be stated in the advertisement).
The yields of N Shares and Institutional Shares of each of the
following Money Market Funds for the 30-day period ended December 31, 1999 are:
<TABLE>
<CAPTION>
30-day Yield
------------
N Institutional
------ -------------
<S> <C> <C>
Government Money Market Fund 4.98% 5.33%
Money Market Fund 5.42 5.77
Tax-Exempt Money Market Fund 3.18 3.49
</TABLE>
52
<PAGE>
A standardized "tax-equivalent yield" may be quoted for the Tax-Exempt
Money Market Fund, the Tax-Exempt Bond Fund and the Intermediate Tax-Exempt Bond
Fund, which is computed by: (a) dividing the portion of the Fund's yield (as
calculated above) that is exempt from Federal income tax by one minus a stated
Federal income rate; and (b) adding the figure resulting from (a) above to that
portion, if any, of the yield that is not exempt from federal income tax. For
the 7-day period ended December 31, 1999, the effective tax equivalent yield of
the N Shares and Institutional Shares of the Tax-Exempt Money Market Fund was
5.43% and 5.88%, respectively. For the 30-day period ended December 31, 1999,
the 30-day tax equivalent yield for the N Shares and Institutional Shares of the
Tax-Exempt Bond Fund and the N Shares and Institutional Shares of the
Intermediate Tax-Exempt Bond Fund were 7.10% and 7.44%, and 6.79% and 7.14%,
respectively, based on a stated tax rate of 28%. No A Shares of the Tax-Exempt
Bond Fund and the Intermediate Tax-Exempt Bond Fund had been issued as of
December 31, 1999.
The Trust makes available 30-day yield quotations with respect to A
Shares, N Shares and Institutional Shares of the Non-Money Market Funds. As
required by regulations of the Commission, the 30-day yield is computed by
dividing a 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 following table shows 30-day yields for the period ended December
31, 1999, for A Shares, N Shares and Institutional Shares of the Non-Money
Market Funds.
<TABLE>
<CAPTION>
30-day Yield
------------
A N Institutional
----- ----- -------------
<S> <C> <C> <C>
Bond Fund 6.13% 6.43% 6.68%
Convertible Securities Fund -- 1.27 1.52
Intermediate Government Bond Fund 5.81 6.03 6.28
Intermediate Tax-Exempt Bond Fund -- 4.89 5.14
Short/Intermediate Bond Fund 6.02 6.24 6.49
Tax-Exempt Bond Fund -- 5.11 5.36
Balanced Fund 2.93 3.10 3.35
Equity Fund 0.06 0.06 0.31
Equity Income Fund 0.78 0.82 1.07
Growth Fund (0.42) (0.44) (0.19)
Index Fund -- 0.77 1.02
Small-Cap Opportunity Fund (0.86) (0.90) (0.65)
Small-Cap Value Fund (0.01) (0.12) 0.13
</TABLE>
The Trust also makes available total return quotations for A Shares, N
Shares and Institutional Shares of each of the Non-Money Market Funds.
The following table shows average annual total return for the one year,
five year, ten year and since inception periods (or shorter period if the Fund
has been in operation for a shorter period) ended December 31, 1999 for A
Shares, N Shares and Institutional Shares of the Non-Money Market Funds. The
actual date of the commencement of each Fund's operations, or the commencement
of the offering of each Class' Shares, is listed in the Funds' financial
statements.
53
<PAGE>
<TABLE>
<CAPTION>
1 Year 5 Year 10 Year Inception to 12/31/99
---------------------- --------------------- ---------------------- -------------------------------
N Institutional N Institutional N Institutional A N Institutional
- ---------------------------- -------- ------------- ------- ------------- ------- -------------- -------- -------- -------------
(%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Fund (1.16) (0.91) -- -- -- -- (6.37) 5.36 5.60
Convertible Securities Fund 31.75 32.07 17.01 17.30 11.02 11.30 -- 12.07 12.35
Intermediate Government
Bond Fund (1.05) (0.80) 6.03 6.30 6.44 6.71 (4.74) 7.64 7.91
Intermediate Tax-Exempt
Bond Fund (0.68) (0.43) 4.79 5.05 5.17 5.43 -- 5.16 5.42
Short/Intermediate Bond
Fund 0.56 0.81 6.23 -- -- -- (7.38) 6.35 4.79
Tax-Exempt Bond Fund (3.31) (3.07) 5.28 5.55 5.50 5.77 -- 6.99 7.26
Balanced Fund (1.52) (1.30) -- -- -- -- (5.59) 10.08 9.57
Emerging Markets Fund 64.06 64.53 -- -- -- -- 64.36 (1.85) (1.45)
Equity Fund (1.74) (1.57) 20.62 -- 14.14 -- (7.78) 14.92 15.27
Equity Income Fund 9.68 9.87 23.22 23.53 -- -- 4.07 18.87 19.16
Growth Fund 16.22 16.56 27.45 27.76 -- -- 7.15 19.16 19.45
Index Fund 20.14 20.40 27.78 28.07 -- -- -- 19.70 19.98
International Fund 26.81 27.33 4.50 4.81 2.93 3.20 32.61 4.96 5.23
Small-Cap Opportunity Fund 39.75 40.14 21.41 21.69 16.20 16.48 50.99 15.94 16.23
Small-Cap Value Fund 0.22 0.49 12.53 12.85 10.59 10.88 (2.60) 12.77 13.06
- ---------------------------- -------- ------------- ------- ------------- ------- -------------- -------- -------- -------------
</TABLE>
Each of these amounts is computed by assuming a hypothetical initial
investment of $10,000. It is assumed that all of the dividends and distributions
by each Fund over the specified period of time were reinvested. It was then
assumed that at the end of the specified period, the entire amount was redeemed.
The average annual total return was then calculated by calculating the annual
rate required for the initial investment to grow to the amount that would have
been received upon redemption.
The Funds 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. The
following table shows aggregate total return for the one year, five year, ten
year and since inception (if less than ten years) periods ended December 31,
1999 for A Shares, N Shares and Institutional Shares of the Non-Money Market
Funds.
<TABLE>
<CAPTION>
1 Year 5 Year 10 Year Inception to 12/31/99
---------------------- --------------------- ---------------------- -----------------------------
N Institutional N Institutional N Institutional A N Institutional
- ---------------------------- -------- ------------- ------- ------------- ------- ------------- ------ ------ -------------
(%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Fund (1.16) (0.91) -- -- -- -- (5.57) 21.34 22.41
Convertible Securities Fund 31.75 32.07 119.33 122.04 184.34 191.60 -- 453.28 474.29
Intermediate Government
Bond Fund (1.05) (0.80) 33.99 35.70 86.66 91.44 (4.22) 202.02 213.34
54
<PAGE>
<CAPTION>
1 Year 5 Year 10 Year Inception to 12/31/99
---------------------- --------------------- ---------------------- -----------------------------
N Institutional N Institutional N Institutional A N Institutional
- ---------------------------- -------- ------------- ------- ------------- ------- ------------- ------ ------ -------------
(%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Intermediate Tax-Exempt
Bond Fund (0.68) (0.43) 26.37 27.95 65.51 69.70 -- 102.37 109.48
Short/Intermediate Bond
Fund 0.56 0.81 35.26 -- -- -- (3.39) 71.53 19.78
Tax-Exempt Fund (3.31) (3.07) 29.32 31.03 70.81 75.23 -- 175.49 186.15
Balanced Fund (1.52) (1.30) -- -- -- -- (5.01) 29.80 28.89
Emerging Markets Fund 64.06 64.53 -- -- -- -- 21.49 (4.02) (3.17)
Equity Fund (1.74) (1.57) 155.35 -- 275.19 -- (6.93) 419.83 73.02
Equity Income Fund 9.68 9.87 184.09 187.64 -- -- 3.63 182.21 186.41
Growth Fund 16.22 16.56 236.28 240.42 -- -- 6.46 286.97 294.24
Index Fund 20.14 20.40 240.63 244.51 -- -- -- 300.63 307.95
International Fund 26.81 27.33 24.62 26.50 33.49 36.97 26.40 87.07 93.34
Small-Cap Opportunity Fund 39.75 40.14 163.76 166.89 348.71 359.92 40.79 815.75 850.19
Small-Cap Value Fund 0.22 0.49 80.47 83.00 173.51 180.87 (0.99) 507.31 531.18
- ---------------------------- -------- ------------- ------- ------------- ------- ------------- ------ ------ -------------
</TABLE>
Current yield and total return for the Non-Money Market Funds 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 Funds.
Performance data of the Funds may be compared with those of other
mutual funds with similar investment objectives and with 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 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 Funds 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 Non-Money Market Funds will affect the yield of such
Funds 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 all of the Funds may be
useful in reviewing the performance of a Fund and for providing a basis for
comparison with investment alternatives. The yield of a Fund may not be
comparable to other investment alternatives, however, because of differences in
the foregoing variables and differences in the methods used to value portfolio
securities, compute expenses, and calculate yield.
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<PAGE>
Performance of Common and Collective Trust Funds. The Convertible
Securities Fund, Intermediate Government Bond Fund, Small-Cap Value Fund,
Tax-Exempt Bond Fund, Intermediate Tax-Exempt Bond Fund, Index Fund, Small-Cap
Opportunity Fund, Equity Income Fund, Growth Fund and International Fund
commenced operations upon the investment of a substantial amount of assets
invested from collective and common trust funds operated by Harris Trust. If a
Fund's predecessor fund was operated with investment policies substantially
similar to those of the Fund, the Fund may include in quotations of its
performance the performance history of the predecessor fund in accordance with
interpretations of the Commission and as appropriate. Because collective and
common trust funds usually have an effective expense ratio of zero, in order not
to overstate performance, a predecessor fund's performance included in any
quotation of the Fund's performance will be calculated as if the predecessor
fund had operated with an expense ratio equal to the Fund's estimated expense
ratio for its first year of operations.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each Fund has authorized one or more brokers to accept purchase and
redemption orders on its behalf. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order, which will be priced at the Fund's net asset value next calculated after
it is so accepted.
Redemption proceeds normally are paid in cash. However, the Trust has
filed formal elections with the Commission pursuant to which a Fund may effect a
redemption in kind in portfolio securities only if a shareholder is redeeming
more than $250,000 or 1% of the Fund's total net assets, whichever is less,
during any 90-day period. If payment for shares redeemed is made wholly or
partially in portfolio securities, brokerage costs may be incurred by the
shareholder in converting the securities to cash.
An investor in A Shares of a Fund may be entitled to reduced sales
charges. To qualify for a reduced sales charge, an investor must notify and
provide sufficient information to the Funds at the time of purchase. If an
investor invests through an institution, the investor should notify the
institution, which in turn must notify the Funds. Programs that allow for
reduced sales charges, such as the Right of Accumulation, a Letter of Intent, or
Family Purchases (each of which is explained below), may be changed or
eliminated at any time.
The Right of Accumulation allows an investor to combine the amount
invested in A Shares of a Fund with the total net asset value of A Shares
currently purchased or already owned by that investor of all Funds to determine
the applicable sales charge. To obtain such discount, the purchaser must provide
sufficient information at the time of purchase to permit verification that the
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 Funds with respect to all A Shares purchased
thereafter.
A Letter of Intent allows an investor to purchase A Shares of the 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 A Shares already
owned. Each investment made during the period receives the
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<PAGE>
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.
Family Purchases allow family members to purchase A Shares of the Funds
over a thirteen-month period at reduced sales charges based on the combined
purchases of a family as if they were purchased at the same time for purposes of
calculating sales charges. ("Family" includes any person considered to be a part
of an extended family, including but not limited to parents, grandparents,
children, grandchildren, god-parents, in-laws, aunts, uncles, brothers, sisters,
nephews, nieces, and cousins, including step- and adopted relatives.)
In order to recover commissions paid to institutions, A Shares of a
Fund on which no initial sales charge was assessed due to a purchase amount of
$1,000,000 or more in a single transaction or pursuant to the Right of
Accumulation, a Letter of Intent, or Family Purchases that are redeemed within
one year of the purchase date will be subject to contingent deferred sales
charges equal to 1.00% of the dollar amount subject to the charge. Redemptions
made within one to two years of the purchase will be subject to contingent
deferred sales charges equal to 0.50% of the dollar amount subject to the
charge. The charge will be assessed on an amount equal to the lesser of the cost
of the shares being redeemed and their net asset value at the time of
redemption. Accordingly, no sales charge will be imposed on increases in net
asset value above the initial purchase price. In addition, no charge will be
assessed on redemptions of shares acquired through the reinvestment of dividends
and distributions or involuntary redemptions by a Fund of shareholder accounts
with low account balances.
Redemptions of shares will be effected in the manner that results in
the imposition of the lowest deferred sales charge. Redemptions with respect to
a shareholder's investment in a Fund will automatically be made first from any A
Shares in a Fund held for more than two years, second from A Shares of the Fund
acquired pursuant to reinvestment of dividends and distributions, third from A
Shares held within one and two years, and fourth from A Shares of the Fund held
for less than one year.
The contingent deferred sales charge on shares purchased through an
exchange from A Shares of another Fund is based upon the original purchase date
and price of the other Fund's shares. For a shareholder with a Letter of Intent
who does not purchase $1,000,000 of A Shares under the letter, no contingent
deferred sales charge is imposed, but a sales load adjustment will be imposed on
the account of such shareholder at the expiration of the period set forth in the
Letter of Intent. A Letter of Intent may provide for a contingent deferred sales
charge in some cases.
The contingent deferred sales charge will be waived by the Funds for
redemptions (a) pursuant to a systematic withdrawal plan, (b) that are shown to
have resulted from the death or disability of the accountholder, (c) by
qualified retirement plans upon plan termination or dissolution, (d) directed by
participants in qualified retirement plans, or (e) from IRAs, if made pursuant
to death or disability of the accountholder, or for minimum distributions
required after attaining age 70-1/2.
For an additional administrative fee, paid separately by the
shareholder and not as an expense of the Funds, a shareholder may participate in
the College In-Sight(R) Program. Through the Program, a participating private
college or university reduces the undergraduate tuition for a
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student, designated by the shareholder, in an amount based on the shareholder's
account balance during the time the shareholder participates in the Program.
Participation in the Program may begin any time before a designated student
graduates from high school. However, no tuition reduction rewards can be earned
after June 30th of the student's high school graduation year. Program details
and an application are available from the Funds at the address or telephone
number given above.
Participants in the Employees' Savings and Profit Sharing Plan of Bank
of Montreal/Harris ("Harris Plan"), through their Harris Plan account balances
invested in the Funds, may also act as a College In-Sight Program sponsor for
students affiliated with the Carole Robertson Center for Learning, a nonprofit
organization offering child, youth, and family development programs to members
of Chicago's inner-city communities. Harris Plan participants may obtain more
information and an application by calling the telephone number given above.
DETERMINATION OF NET ASSET VALUE
The 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").
The value of securities held by the Non-Money Market Funds (other than
debt obligations maturing in 60 days or less) is determined based on the last
sale price on the principal exchange (including for these purposes the National
Association of Securities Dealers' Automatic Quotation System) 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 generally are valued at
closing over-the-counter bid prices. Portfolio securities that are primarily
traded on foreign securities exchanges generally are 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 the Investment Adviser, available market quotations do not accurately
reflect a security's fair value), securities are valued at their 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,
as discussed below.
Each of the Money Market Funds uses the amortized cost method to
determine the value of its portfolio securities pursuant to Rule 2a-7. 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. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
that a Fund would receive if the security were sold. During these periods the
yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund that uses a method of valuation based upon market prices.
Thus, during periods of declining interest rates, if the use of the amortized
cost method resulted in a lower value of a Fund's portfolio on a particular day,
a prospective investor in that Fund would be able to obtain a somewhat higher
yield than would result from investments in a fund using solely market values,
and existing Fund shareholders would receive correspondingly less income. The
converse would apply during periods of rising interest rates.
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Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, each of the Money Market Funds must maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase
securities having remaining maturities (as defined in Rule 2a-7) of 397 days or
less and invest only in securities determined by the Board of Trustees to meet
the quality and minimal credit risk requirements of Rule 2a-7. The maturity of
an instrument is generally deemed to be the period remaining until the date when
the principal amount thereof is due or the date on which the instrument is to be
redeemed. Rule 2a-7 provides, however, that the maturity of an instrument may be
deemed shorter in the case of certain instruments, including certain variable
and floating rate instruments subject to demand features. Pursuant to Rule 2a-7,
the Board is required to establish procedures designed to stabilize at $1.00, to
the extent reasonably possible, the price per share of each of the Money Market
Funds as computed for the purpose of sales and redemptions. Such procedures
include review of the portfolio holdings of each of the Money Market Funds by
the Board of Trustees, at such intervals as it may deem appropriate, to
determine whether a Fund's net asset value calculated by using available market
quotations deviates from $1.00 per share based on amortized cost. The extent of
any deviation will be examined by the Board of Trustees. If such deviation
exceeds 1/2 of 1%, the Board will promptly consider what action, if any, will be
initiated. In the event the Board determines that a deviation exists that may
result in material dilution or other unfair results to investors or existing
shareholders, the Board will take such corrective action as it regards as
necessary and appropriate, including the sale of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity, withholding dividends or establishing a net asset value per share by
using available market quotations.
PORTFOLIO TRANSACTIONS
Portfolio securities of each Fund are kept under continuing supervision
and changes may be made whenever, in the judgment of the Investment Adviser,
Sub-Adviser, or Sub-Subadviser, a security no longer is deemed 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 a Fund (the portfolio turnover rate). 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. 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 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 (with respect to each Fund) or
Hansberger (with respect to the International and Emerging Markets Funds) is
responsible for each 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 seeks reasonably competitive spreads or commissions, the Funds will
not necessarily be paying the lowest spread or commission available.
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Purchase and sale orders for securities on behalf any Fund may be
combined with those of other accounts that HIM or Hansberger manages, and for
which it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When HIM or Hansberger determines that a
particular security should be bought or sold for any of the Funds and other
accounts it manages, it allocates the transactions among the participants
equitably. To the extent permitted by the Commission, the Funds may pay
brokerage commissions to certain affiliated persons. During the last fiscal
year, no Fund paid commissions to such persons.
Purchases and sales of securities for the Fixed Income Funds and the
Money Market Funds will usually be principal transactions. Portfolio securities
normally will be purchased or sold from or to dealers serving as market makers
for the securities at a net price. Each of the Funds 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 a Fund's portfolio securities
transactions will consist primarily of dealer spreads, and underwriting
commissions. Under the 1940 Act, any person affiliated with the Trust is
prohibited from dealing with the Trust as a principal in the purchase and sale
of securities unless an exemptive order allowing such transactions is obtained
from the Commission.
HIM or Hansberger may, in circumstances in which two or more dealers
are in a position to offer comparable results for a 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/or 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 Portfolio Management
and Sub-Advisory Contracts, 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
HIM or Hansberger effect securities transactions for a Fund may be used by HIM
or Hansberger in servicing its other accounts, and not all of these services may
be used by HIM or Hansberger in connection with advising the Funds.
The following table shows total brokerage commissions and the total
dollar amount of transactions on which commissions were paid. This information
is for the past three fiscal years (or shorter if the Fund has been in operation
for a shorter period).
<TABLE>
<CAPTION>
Total Brokerage Commissions ($) Total Dollar Amount of Transactions ($)
-------------------------------------- ----------------------------------------------------
1997 1998 1999 1997 1998 1999
- ---------------------------- ------------ ------------ ------------ ----------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Convertible Securities Fund 15,915 17,957 15,939 12,667,478 13,220,179 9,378,646
Balanced Fund 51,841 77,519 62,259 36,694,360 52,768,682 46,502,593
Emerging Markets Fund 66,505 86,280 94,699 11,195,946 16,890,323 20,824,746
Equity Fund 1,490,680 1,855,467 1,468,542 1,226,623,062 1,400,503,290 1,165,494,999
Equity Income Fund 20,970 28,649 44,330 20,785,343 30,249,587 39,105,004
Growth Fund 80,371 129,319 152,356 64,254,236 96,800,368 122,195,327
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<CAPTION>
Total Brokerage Commissions ($) Total Dollar Amount of Transactions ($)
-------------------------------------- ----------------------------------------------------
1997 1998 1999 1997 1998 1999
- ---------------------------- ------------ ------------ ------------ ----------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Index Fund 43,400 20,464 43,820 116,419,664 28,635,056 93,551,597
International Fund 358,558 614,604 642,480 289,865,829 173,826,470 217,927,230
Small-Cap Opportunity Fund 269,136 437,246 491,119 156,483,678 232,858,016 344,183,300
Small-Cap Value Fund 240,854 405,440 379,079 129,913,628 195,946,616 173,382,519
- ---------------------------- ------------ ------------ ------------ ----------------- ---------------- -----------------
</TABLE>
With respect to transactions directed to brokers because of research
services provided, the following table shows total brokerage commissions and the
total dollar amount of transactions on which commissions were paid for the
fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Total Brokerage Commissions Total Dollar Amount of Transactions on which
(Research-related) ($) Commissions were paid (Research-related) ($)
- ---------------------------------- ---------------------------------- ------------------------------------------------
<S> <C> <C>
Balanced Fund 8,689 6,181,008
Emerging Markets Fund 11,022 3,561,821
Equity Fund 308,104 220,147,243
Equity Income Fund 12,783 9,061,170
Growth Fund 9,971 6,083,193
International Fund 50,132 23,160,623
Small-Cap Opportunity Fund 4,194 2,421,460
Small-Cap Value Fund 1,314 260,062
- ---------------------------------- ---------------------------------- ------------------------------------------------
</TABLE>
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 InvestorLine, Inc. ("HIL"). 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 Funds will not deal with the
Distributor or HIL in any transaction in which either one acts as principal
except as may be permitted by the Commission.
In placing orders for portfolio securities of the Funds, HIM or
Hansberger 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 Funds 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
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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, HIL may act as a main broker for
the Funds. For it to effect any portfolio transactions for the Funds, 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 HIL 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 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.
TAX INFORMATION
Each Fund is treated as a separate entity for Federal income tax
purposes and thus the provisions of the Code generally are applied to each Fund
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 each
Fund.
The Trust intends to qualify each Fund as a regulated investment
company under the Code and to distribute to the shareholders of each 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. Qualification as a
regulated investment company under 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 and (b) 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, each 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 and, in the case of the Tax-Exempt Money
Market Fund, the Intermediate Tax-Exempt Bond Fund and the Tax-Exempt Bond Fund,
that it distributes to its shareholders at least 90% of its net tax-exempt
income (including net short-term capital gains). In addition, the Tax-Exempt
Money Market Fund, the Intermediate Tax-Exempt Bond Fund and the Tax-Exempt Bond
Fund intend that at least 50% of the value of its total assets at the close of
each quarter of its taxable year will consist of obligations the interest on
which is exempt from Federal income tax, so that such Funds will qualify under
the Code to pay "exempt-interest dividends" (described below).
Dividends (including net short-term capital gains), except
exempt-interest dividends, will be taxable to shareholders as ordinary income.
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Distributions of net long-term capital gains, if any, will be taxable
as long-term capital gains, whether received in cash or reinvested in additional
shares, regardless of how long the shareholder has held the shares, and will not
qualify for the dividends-received deductions.
A taxable gain or loss 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 a Fund will be disallowed to the extent other shares of
that Fund are acquired within the 61-day period beginning 30 days before and
ending 30 days after disposition of the shares.
Dividends paid by each of the Tax-Exempt Bond Fund, the Intermediate
Tax-Exempt Bond Fund and the Tax-Exempt Money Market Fund (the "Tax-Exempt
Funds") out of tax-exempt interest income earned by the Fund ("exempt-interest
dividends") generally will not be subject to Federal income tax in the hands of
the Fund's shareholders. However, persons who are substantial users or related
persons thereof of facilities financed by private activity bonds held by a Fund
may be subject to Federal income tax on their pro rata share of the interest
income from such bonds and should consult their tax advisers before purchasing
shares of such Fund.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of a Fund generally is not deductible for Federal income tax purposes.
Under the IRS rules for determining when borrowed funds are used for purchasing
or carrying particular assets, shares of a Fund may be considered to have been
purchased or carried with borrowed funds even though those funds are not
directly linked to the shares. Substantially all of the dividends paid by each
Tax-Exempt Fund are anticipated to be exempt from Federal income taxes.
Shareholders of the Tax-Exempt Funds may be exempt from state and local
taxes on distributions of tax-exempt interest income derived from obligations of
the state and/or municipalities of the state in which they reside but may be
subject to tax on income derived from the municipal securities of other
jurisdictions. Shareholders are advised to consult with their tax advisers
concerning the application of state and local taxes to investments in the Fund
which may differ from the Federal income tax consequences described above.
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.
Certain of the Funds may invest in municipal bond index futures
contracts and options on interest rate futures contracts. The Funds do not
anticipate that these investment activities will prevent the Funds 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 a 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, a Fund may be treated as realizing a greater or
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<PAGE>
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 a Fund and the amount of distributions taxable to a
shareholder. Moreover, if a 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. Each 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.
Each Fund (except the Tax-Exempt Funds to the extent of this tax-exempt
interest) 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. Each 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 a 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 a 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 a Fund's assets to be invested in
various countries is not known.
Gains or losses on sales of securities by a 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.
In the case of the Equity Funds and the Fixed Income Funds, if an
option written by a 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.
In the case of the Equity Funds and the Fixed Income Funds, if
securities are sold by the Fund pursuant to the exercise of a call option
written by it, such 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.
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.
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<PAGE>
SHARES OF 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 three classes of shares, A Shares, N
Shares and Institutional Shares, for each Fund of the Trust, except for the
Harris Insight Index Fund and the Money Market Funds. The Index Fund and the
Money Market Funds have two classes of shares, N Shares and Institutional
Shares.
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 Prospectuses 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 Funds (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 the approvals to be obtained from shareholders in
connection with matters affecting a single Fund or any other single Fund (e.g.,
annual approval of advisory contracts), 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 of a Fund
are entitled to that number of votes that is equal to the number of whole shares
and fractional shares held multiplied by the net asset value of one share of
that Fund in United States dollars determined at the close of business on the
record date (for example, a share having a net asset value of $10.50 would be
entitled to 10.5 votes).
Each share of a 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 each 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
Trust (or a Fund), shareholders of each Fund (or the Fund being dissolved) are
entitled to receive the assets attributable to that Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular 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.
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.
65
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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.
OTHER
The Registration Statement, including the Prospectuses, this SAI and
the exhibits filed therewith, may be examined at the office of the Commission in
Washington, D.C. Statements contained in the Prospectuses or this SAI as to the
contents of any contract or other document referred to herein or in the
Prospectuses 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.
INDEPENDENT ACCOUNTANT'S AND REPORTS TO SHAREHOLDERS
PricewaterhouseCoopers LLP, 30 South 17th Street, Philadelphia,
Pennsylvania 19103 are the independent accountants for the Trust and audit and
report on the Trust's annual financial statements, review certain regulatory
reports , and perform other professional accounting, auditing, tax and advisory
services when engaged to do so by the Trust. Shareholders will receive annual
audited financial statements and semi-annual unaudited financial statements. The
Funds' December 31, 1999 financial statements and the report thereon of
PricewaterhouseCoopers LLP from the Funds' December 31, 1999 Annual Report (as
filed with the Commission on March 1, 2000 pursuant to Section 30(b) of the 1940
Act and Rule 30b2-1 thereunder (Accession Number 0000935069-99-000038)) are
incorporated herein by reference.
66
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS (INCLUDING CONVERTIBLE BONDS)
The following summarizes ratings used by Standard & Poor's ("S&P") for
corporate and municipal debt:
AAA - An obligation rated AAA has the highest rating assigned
by S&P. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.
AA - An obligation rated AA differs from the highest rated
obligations only in small degree. The obligor's capacity to
meet its financial commitment on the obligation is very
strong.
A - An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB - An obligation rated BBB exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
of the obligor to meet its financial commitment on the
obligation.
BB - An obligation rated BB is less vulnerable to nonpayment
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions that could lead to the obligor's
inadequate capacity to meet its financial commitment on the
obligation.
B - An obligation rated B is more vulnerable to nonpayment
than obligations rated BB, but the obligor currently has the
capacity to meet its financial commitment on the obligation.
Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet
its financial commitment on the obligation.
CCC - An obligation rated CCC is currently vulnerable to
nonpayment, and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its
financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its
financial commitment on the obligation.
CC - An obligation rated CC is currently highly vulnerable to
nonpayment.
C - Any subordinated debt or preferred stock obligation rated
C is currently highly vulnerable to nonpayment. The C rating
may be used to cover a situation where a bankruptcy petition
has been filed or similar action taken, but payments on this
67
<PAGE>
obligation are being continued. A C rating also will be
assigned to a preferred stock issue in arrears on dividends or
sinking fund payments, but that is currently paying.
To provide more detailed indications of credit quality, the ratings
from AA to CCC may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
The following summarizes 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 edged." 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 that make the long-term risk appear
somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - 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.
Ba - Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and, thereby, not well safeguarded during both
good and bad times over the future.
B - Bonds that are rated B generally lack characteristics of
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal and interest.
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<PAGE>
Ca - Bonds that are rated Ca represent obligations that are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C - Bonds that are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through Caa. 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.
The following summarizes ratings used by Duff & Phelps Credit Rating
Co. ("D&P") for bonds:
AAA - Bonds that are rated AAA are of the highest credit
quality. The risk factors are negligible, being only slightly
more than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are 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. There is considerable variability in risk during
economic cycles.
BB - Bonds that are rated BB are below investment grade but
deemed likely to meet obligations when due. Present or
prospective financial protection factors fluctuate according
to industry conditions. Overall quality may move up or down
frequently within this category.
B - Bonds that are rated B are below investment grade and
possess risk that obligations will not be met when due.
Financial protection factors will fluctuate widely according
to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC - Bonds that are rated CCC are well below investment grade
securities. Considerable uncertainty exists as to timely
payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with
unfavorable company developments
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<PAGE>
To provide more detailed indications of credit quality, the ratings AA
through B 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 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 ratings used by Moody's for short-term
notes and variable rate demand obligations:
MIG 1/VMIG 1. This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG 2/VMIG 2. This designation denotes high quality. Margins
of protection are ample although not as large as in the
preceding group.
MIG 3/VMIG 3. This designation denotes favorable quality. All
security elements are accounted for but the undeniable
strength of the preceding grades is lacking. Liquidity and
cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4. This designation denotes adequate quality.
Protection commonly regarded as required of an investment
security is present and although not distinctly or
predominantly speculative, there is specific risk.
The following summarizes the ratings by Standard & Poor's for
short-term municipal notes:
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SP-1 - Strong capacity to pay principal and interest. An issue
determined to possess overwhelming safety characteristics is
given a "plus" (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest,
with some vulnerability to adverse financial and economic
changes over the term of the notes.
SP-3 - Speculative 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. 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. Issues carrying the A-3 designation
have an adequate capacity for timely payment. They are, however, more vulnerable
to the adverse effects of changes in circumstances than obligations carrying the
higher designations. Issues rated B are regarded as having only speculative
capacity for payment.
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 debt
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have strong ability for repayment of short-term debt 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. Issuers rated Prime-3 (or supporting institutions) have
an acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternative liquidity is maintained.
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<PAGE>
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 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 minus indicates high certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. 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 issues as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected. Duff 4 indicates
speculative investment characteristics. Liquidity is not sufficient to insure
against disruption in debt service. Operating factors and market access may not
be subject to a high degree of variation.
The following summarizes the ratings used by Fitch for short-term
obligations:
F-1 - Highest credit quality. Indicates the best capacity for
timely payment of financial commitments; may have an added "+"
to denote any exceptionally strong credit feature.
F-2 - Good credit quality. A satisfactory capacity for timely
payment of financial commitments, but the margin of safety is
not as great as in the case of the higher ratings.
F-3 - Fair credit quality. The capacity for timely payment of
financial commitments is adequate; however, near-term adverse
changes could result in a reduction to non-investment grade.
F-4 - Speculative. Minimal capacity for the payment of
financial commitments, plus vulnerability to near-term adverse
changes in financial and economic conditions
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.
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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.
TBW ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, TBW 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.
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PART C
OTHER INFORMATION
Item 23. Exhibits.
- ------- --------
(a) (1) Declaration of Trust dated December 6, 1995 (incorporated
by reference to Registration Statement filed on
December 12, 1995).
(2) Amendment to Declaration of Trust dated November 4, 1996
(incorporated by reference to Post-Effective Amendment
("PEA") No. 3 filed on February 28, 1997).
(3) Amendment to Declaration of Trust dated June 6, 1997
(incorporated by reference to PEA No. 5 filed on June 13,
1997).
(4) Amendment to Declaration of Trust dated November 2, 1998
(incorporated by reference to PEA No. 9 filed on November 9,
1998).
(5) Amendment to Declaration of Trust dated February 18, 1999
(incorporated by reference to PEA No. 10 filed on March 2,
1999).
(6) Amendment to Declaration of Trust dated 1 May 2000
(filed herewith).
(b) (1) By-Laws (incorporated by reference to Registration Statement
filed on December 12, 1995).
(2) Amendment to By-Laws dated October 31, 1995 (incorporated
by reference to PEA No. 3 filed on February 28, 1997).
(3) Amendment to By-Laws dated January 23, 1996 (incorporated
by reference to PEA No. 3 filed on February 28, 1997).
(4) Amendment to By-Laws dated November 4, 1996 (incorporated
by reference to PEA No. 3 filed on February 28, 1997).
(c) Not applicable.
(d) (1) Advisory Contract dated April 28, 2000 between Registrant
and Harris Trust and Savings Bank ("Harris Trust" or the
"Adviser") (filed herewith).
(2) Portfolio Management Contract dated April 28, 2000 between
Harris Trust and Harris Investment Management, Inc. ("HIM"
or the "Portfolio Management Agent") (filed herewith).
(3) Investment Sub-Advisory Contract dated August 6, 1997
between HIM and Hansberger Global Investors, Inc. on behalf
of Harris Insight International Fund (incorporated by
reference to PEA No. 6 filed on September 15, 1997).
(4) Investment Sub-Advisory Contract dated October 1, 1997
between HIM and Hansberger Global Investors, Inc. on behalf
of Harris Insight Emerging Markets Fund (incorporated by
reference to PEA No. 7 filed on February 27, 1998).
(e) (1) Distribution Agreement dated April 28, 2000 between the
Registrant and Provident Distributors, Inc. ("PDI")
(filed herewith).
<PAGE>
(f) Not applicable.
(g) (1) Custodian Agreement dated February 23, 1996 between
Registrant and PNC Bank, N.A. (incorporated by reference to
PEA No. 3 filed on February 28, 1997).
(2) Notice to the Custodian dated January 21, 1997 on behalf of
Harris Insight Small-Cap Value Fund (incorporated by
reference to PEA No. 3 filed on February 28, 1997).
(3) Notice to the Custodian dated June 6, 1997 on behalf of
Harris Insight Emerging Markets Fund (incorporated by
reference to PEA No. 6 filed on September 15, 1997).
(4) Consent to Assignment of Custodian Agreement dated February
18, 1999 between Registrant and PNC Bank, N.A. (incorporated
by reference to PEA No. 11 filed on May 3, 1999).
(5) Sub-Custodian Services Agreement dated February 18, 1999 by
and between PFPC Trust Company, PNC Bank, N.A. and
Registrant (incorporated by reference to PEA No. 11 filed on
May 3, 1999).
(6) Foreign Custody Manager Delegation Agreement dated February
18, 1999 by and between PFPC Trust Company, PNC Bank, N.A.
and Registrant (incorporated by reference to PEA No. 11
filed on May 3, 1999).
(7) Notice to the Custodian dated April 28, 2000 on behalf of
Harris Insight Equity Fund, Harris Insight Short/Intermediate
Bond Fund, Harris Insight Money Market Fund, Harris Insight
Tax-Exempt Money Market Fund, and Harris Insight Government
Money Market Fund (filed herewith).
(8) Notice to the Sub-Custodian dated April 28, 2000 on behalf of
Harris Insight Equity Fund, Harris Insight Short/Intermediate
Bond Fund, Harris Insight Money Market Fund, Harris Insight
Tax-Exempt Money Market Fund, and Harris Insight Government
Money Market Fund (filed herewith).
(h) (1) Transfer Agency Services Agreement dated July 1, 1996 between
Registrant and Harris Trust (incorporated by reference to
PEA No. 3 filed on February 28, 1997).
(2) Notice to the Transfer Agent dated January 21, 1997 on behalf
of Harris Insight Small-Cap Value Fund (incorporated by
reference to PEA No. 5 filed on June 13, 1997).
(3) Notice to the Transfer Agent dated June 6, 1997 on behalf of
Harris Insight Emerging Markets Fund (incorporated by
reference to PEA No. 7 filed on February 27, 1998).
(3)(a) Notice to the Transfer Agent dated April 28, 2000 on behalf
of Harris Insight Equity Fund, Harris Insight
Short/Intermediate Bond Fund, Harris Insight Money Market
Fund, Harris Insight Tax-Exempt Money Market Fund, and Harris
Insight Government Money Market Fund (filed herewith).
(4) Sub-Transfer Agency Services Agreement dated July 1, 1996
between Harris Trust and PFPC Inc. (incorporated by reference
to PEA No. 3 filed on February 28, 1997).
(5) Notice to the Sub-Transfer Agent dated January 21, 1997 on
behalf of Harris Insight Small-Cap Value Fund (incorporated
by reference to PEA No. 3 filed on February 28, 1997).
(5)(a) Notice to the Sub-Transfer Agent dated April 28, 2000 on
behalf of Harris Insight Equity Fund, Harris Insight
Short/Intermediate Bond Fund, Harris Insight Money Market
Fund,
<PAGE>
Harris Insight Tax-Exempt Money Market Fund, and Harris
Insight Government Money Market Fund (filed herewith).
(6) Notice to the Sub-Transfer Agent dated June 6, 1997 on behalf
of Harris Insight Emerging Markets Fund (incorporated by
reference to PEA No. 6 filed on September 15, 1997).
(7) Administration Agreement dated July 1, 1996 between
Registrant and Harris Trust (incorporated by reference to
PEA No. 3 filed on February 28, 1997).
(8) Notice to the Administrator dated January 21, 1997 on behalf
of Harris Insight Small-Cap Value Fund (incorporated by
reference to PEA No. 5 filed on June 13, 1997).
(9) Notice to the Administrator dated June 6, 1997 on behalf of
Harris Insight Emerging Markets Fund (incorporated by
reference to PEA No. 6 filed on September 15, 1997).
(9)(a) Notice to the Administrator dated April 28, 2000 on behalf of
Harris Insight Equity Fund, Harris Insight Short/Intermediate
Bond Fund, Harris Insight Money Market Fund, Harris Insight
Tax-Exempt Money Market Fund, and Harris Insight Government
Money Market Fund (filed herewith).
(10) Sub-Administration and Accounting Services Agreement dated
July 1, 1996 between Harris Trust and PFPC Inc. (incorporated
by reference to PEA No. 3 filed on February 28, 1997).
(10)(a) Amendment dated 1 May 1999 of Sub-Administration and
Accounting Services Agreement dated July 1, 1996 between
Harris Trust and PFPC, Inc. (incorporated by reference to
PEA No. 12 filed on May 7, 1999).
(11) 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 PEA No. 3 filed on
February 28, 1997).
(12) Notice to the Sub-Administrator and Accounting Services Agent
dated June 6, 1997 on behalf of Harris Insight Emerging
Markets Fund (incorporated by reference to PEA No. 6 filed on
September 15, 1997).
(12)(a) Notice to the Sub-Administrator and Accounting Services Agent
dated April 28, 2000 on behalf of Harris Insight Equity Fund,
Harris Insight Short/Intermediate Bond Fund, Harris Insight
Money Market Fund, Harris Insight Tax-Exempt Money Market
Fund, and Harris Insight Government Money Market Fund (filed
herewith).
(13) Form of Shareholder Servicing Agreement (incorporated by
reference to PEA No. 7 filed on February 27, 1998).
(14) Form of Shareholder Servicing Agreement relating to Advisor
Shares (incorporated by reference to PEA No. 9 filed on
November 9, 1998).
(i) Not applicable.
(j) (1) Consent of PricewaterhouseCoopers LLP dated April 26, 2000.
(k) Not applicable.
(l) (1) Form of Purchase Agreement relating to Initial Capital
(incorporated by reference to PEA No. 3 filed on February
28, 1997).
<PAGE>
(2) Subscription Agreement dated January 14, 1999 between
Registrant and FDI Distribution Services, Inc. relating to
Advisor Shares (incorporated by reference to PEA No. 10 filed
on March 2, 1999).
(m) (1) Service Plan dated April 28, 2000 relating to N Shares
(filed herewith).
(2) Service Plan dated April 28, 2000 relating to A Shares
(filed herewith).
(3) Form of Selling Agreement (incorporated by reference to PEA
No. 13 filed on February 16, 2000).
(n) Not applicable.
(o) (1) Multi-Class Plan (incorporated by reference to PEA No. 3
filed on February 28, 1997).
(2) Multi-Class Plan dated November 2, 1998 (incorporated by
reference to PEA No. 9 filed on November 9, 1998).
(3) Multi-Class Plan dated February 18, 1999 (incorporated by
reference to PEA No. 10 filed on March 2, 1999).
(p) (1) Code of Ethics of Harris Insight Funds Trust (incorporated
by reference to PEA No. 13 filed on February 16, 2000).
(2) Statement of Principles and Code of Ethics of Harris Trust
and Savings Bank and Harris Investment Management, Inc.
(incorporated by reference to PEA No. 13 filed on February
16, 2000).
(3) Code of Ethics of Provident Distributors, Inc. (incorporated
by reference to PEA No. 13 filed on February 16, 2000).
(4) Code of Ethics of Hansberger Global Investors, Inc. (filed
herewith).
Other Exhibits: Powers of Attorney for C. Gary Gerst, Edgar R. Fielder, John
W. McCarter, Jr. and Paula Wolff dated February 24, 2000
(filed herewith).
Power of Attorney for Valerie B. Jarrett dated February 1,
2000 (incorporated by reference to PEA No. 13 filed on
February 16, 2000).
Power of Attorney for Philip H. Rinnander dated February 1,
2000 (incorporated by reference to PEA No. 13 filed on
February 16, 2000).
Power of Attorney for Thomas J. Ryan dated February 7, 2000
(incorporated by reference to PEA No. 13 filed on February
16, 2000).
Item 24. Persons Controlled by or under Common Control with Registrant.
- ------- -------------------------------------------------------------
Not applicable.
Item 25. 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
<PAGE>
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")
contained in various post-effective amendments 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 26. 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 Fund, Harris Insight Short/Intermediate Bond Fund,
Harris Insight Money Market Fund, Harris Insight Tax-Exempt Money Market Fund,
Harris Insight Government Money Market Fund, 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
<PAGE>
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 Bankmont
Financial Corp., Harris Bankmont, Inc. and 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 of the Board, President, Chairman of the Board, President,
and Chief Executive Officer and Chief Executive Officer, Harris
Trust and Savings Bank. Chairman
of the Board and Chief Executive
Officer, Harris Bankcorp, Inc.
Pastora San Juan Cafferty Director Professor, University of Chicago
School of Social Service
Administration
Martin R. Castro Director Partner, Baker & McKenzie
Haven E. Cockerham Director Senior Vice President, Human
Resources, R. R. Donnelley & Sons
Company
F. Anthony Comper Director Chairman and Chief Executive
Officer, Bank of Montreal
Susan T. Congalton Director Managing Director, Lupine L.L.C.
Wilbur H. Gantz Director Chairman of the Board and Chief
Executive Officer, PathoGenesis
Corporation
James J. Glasser Director Chairman Emeritus, GATX Corporation
Dr. Leo M. Henikoff Director President and Chief Executive
Officer, Rush-Presbyterian - St.
Luke's Medical Center
Richard M. Jaffee Director Chairman, Oil-Dri Corporation of
America
Edward W. Lyman, Jr. Director Vice Chair of the Board, Harris
Trust and Savings Bank and Harris
Bankcorp, Inc.
<PAGE>
<CAPTION>
<S> <C> <C>
Charles H. Shaw Director Chairman, The Shaw Company
Richard E. Terry Director Chairman and Chief Executive
Officer, Peoples Energy Corporation
James O. Webb Director President, James O. Webb and
Associates, Inc.
</TABLE>
(b) Harris Investment Management, Inc. ("HIM"), an indirect
wholly-owned subsidiary of the Bank of Montreal, serves as the Portfolio
Management Agent of the Harris Insight Equity Fund, Harris Insight
Short/Intermediate Bond Fund, Harris Insight Money Market Fund, Harris Insight
Tax-Exempt Money Market Fund, Harris Insight Government Money Market Fund,
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
Name Position(s) with HIM Last Two Fiscal Years
- --------------------------- ------------------------------------- -------------------------------------------------
<S> <C> <C>
Donald G.M. Coxe Director, Chairman of the Board and Chairman of the Board and Chief Strategist,
Chief Strategist Harris Investment Management, Inc.; Chairman of
the Board, Jones Heward Investments, Inc.
Peter P. Capaccio Director Senior Vice President/Director, Mutual Funds
and the Investment Product Group, Harris Trust
and Savings Bank
William A. Downe Director Vice Chair, Private Client Group, Bank of
Montreal, and Deputy Chair, Nesbitt Burns,
Inc. Formerly, Executive Vice President, North
American Corporate Banking, Bank of Montreal
William O. Leszinske Director, President, Chief President and Chief Investment Officer, Harris
Investment Officer Investment Management, Inc.
Edward W. Lyman, Jr. Director Vice Chair of the Board, Harris Trust and
Savings Bank and Harris Bankcorp, Inc.
Gilles G. Ouellette Director President and Chief Operating Officer, Private
Client Group, Bank of Montreal, and Deputy
Chair, Nesbitt Burns, Inc. Formerly, Vice
Chair and Head of the Private Client Division,
Nesbitt Burns, Inc.
Brian J. Steck Director Retired; formerly Vice-Chairman of Investment
and Corporate Banking, Bank of Montreal;
<PAGE>
<CAPTION>
<S> <C> <C>
Chairman and Chief Executive Officer, Nesbitt
Burns, Inc.
Wayne W. Thomas Director Senior Vice President - Personal Investment
Management, Harris Trust and Savings Bank
William E. Thonn Director Executive Vice President - The Private Bank,
Harris Trust and Savings Bank
Randall J. Johnson Chief Financial Officer and Senior Partner, Harris Investment Management,
Treasurer Inc.
Blanche O. Hurt Secretary Vice President and Senior Counsel, Harris Trust
and Savings Bank
Andrea J. Torok Assistant Secretary Principal, Harris Investment Management, Inc.
</TABLE>
(c) Hansberger Global Investors, Inc. ("Hansberger") serves as the
Investment Sub-Adviser of the Harris Insight International Fund and the Harris
Insight Emerging Markets Fund. Hansberger is a wholly owned subsidiary of
Hansberger Group, Inc. ("Group Inc.). Group Inc. is currently majority
controlled by Mr. Thomas L. Hansberger. Hansberger, a Delaware corporation, is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended. As of December 31, 1999, Hansberger managed assets with a value of
approximately $2.9 billion.
<TABLE>
<CAPTION>
Principal Business(es) During the Last Two
Name Position(s) with Hansberger Fiscal Years
- ------------------------------ ------------------------------------- --------------------------------------------
<S> <C> <C>
Thomas L. Hansberger Chairman, President, Chief Chairman, President and Chief Executive
Executive Officer, Chief Investment Officer of Hansberger
Officer and Treasurer
J. Christopher Jackson Director, Senior Vice President And Director, Senior Vice President and
General Counsel General Counsel of Hansberger
Kimberley A. Scott Director, Senior Vice President, Director, Senior Vice President, Chief
Chief Administrative Officer, Chief Administrative Officer and Chief
Compliance Officer and Secretary Compliance Officer of Hansberger
Lauretta A. Reeves Director of Research Director of Research of Hansberger
Thomas A. Christensen Chief Financial Officer Chief Financial Officer of Hansberger
</TABLE>
Item 27. Principal Underwriter
(a) Provident Distributors, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies as of 2/1/2000:
International Dollar Reserve Fund I, Ltd.
Provident Institutional Funds Trust
Pacific Innovations Trust
Columbia Common Stock Fund, Inc.
Columbia Growth Fund, Inc.
Columbia International Stock Fund, Inc.
Columbia Special Fund, Inc.
Columbia Small Cap Fund, Inc.
<PAGE>
Columbia Real Estate Equity Fund, Inc.
Columbia Balanced Fund, Inc.
Columbia Daily Income Company
Columbia U.S. Government Securities Fund, Inc.
Columbia Fixed Income Securities Fund, Inc.
Columbia Municipal Bond Fund, Inc.
Columbia High Yield Fund, Inc.
Columbia National Municipal Bond Fund, Inc.
GAMNA Series Funds, Inc.
WT Investment Trust
Kalmar Pooled Investment Trust
The RBB Fund, Inc.
Robertson Stephens Investment Trust HT Insight Funds, Inc.
Harris Insight Funds Trust Hilliard-Lyons Government Fund, Inc
Hilliard-Lyons Growth Fund, Inc. Hilliard-Lyons Research Trust
Senbanc Fund Warburg Pincus Trust ABN AMRO Funds Alleghany
Funds BT Insurance Funds Trust First Choice Funds Trust
Forward Funds, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
IBJ Funds Trust
Light Index Funds, Inc.
LKCM Funds
Matthews International Funds
McM Funds
Metropolitan West Funds
New Covenant Funds, Inc.
Panorama Trust
Smith Breeden Series Funds
Smith Breeden Trust
Stratton Growth Fund, Inc.
Stratton Monthly Dividend REIT Shares, Inc.
The Stratton Funds, Inc.
The Galaxy Fund
The Galaxy VIP Fund
Galaxy Fund II
The Govett Funds, Inc.
Trainer, Wortham First Mutual Funds
Undiscovered Managers Funds
Wilshire Target Funds, Inc.
Weiss, Peck & Greer Funds Trust
Weiss, Peck & Greer International Fund
WPG Growth and Income Fund
WPG Growth Fund
WPG Tudor Fund
<PAGE>
RWB/WPG U.S. Large Stock Fund
Tomorrow Funds Retirement Trust
The BlackRock Funds, Inc. (Distributed by BlackRock
Distributors, Inc. a wholly owned subsidiary of Provident
Distributors, Inc.)
Northern Funds Trust and Northern Institutional Funds Trust
(Distributed by Northern Funds Distributors, LLC. a
wholly owned subsidiary of Provident Distributors, Inc.)
The Offit Investment Fund, Inc. (Distributed by Offit Funds
Distributor, Inc. a wholly owned subsidiary of Provident
Distributors, Inc.)
The Offit Variable Insurance Fund, Inc. (Distributed by
Offit Funds Distributor, Inc. a wholly owned subsidiary of
Provident Distributors, Inc.)
Provident Distributors, Inc. is registered with the Securities and
Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. Provident Distributors, Inc. is
located at 3200 Horizon Drive, King of Prussia, PA 19406.
(b) The following is a list of the executive officers, directors and
partners of Provident Distributors, Inc.:
President and Treasurer Philip H. Rinnander
Secretary and Sole Director Jane Haegele
Vice President Jason A. Greim
Vice President Barbara A. Rice
Vice President Jennifer K. Rinnander
Vice President and Compliance Officer Lisa M. Buono
(c) Not applicable.
Item 28. 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,
3200 Horizon Drive, King of Prussia, PA 19406; PNC Bank, N.A., Broad and
Chestnut Streets, Philadelphia, Pennsylvania 19107; PFPC Inc., 103 Bellevue
Parkway, Wilmington, Delaware 19809; or Harris Trust and Savings Bank, 111 West
Monroe Street, Chicago, Illinois 60603.
Item 29. 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 30. Undertakings.
- ------- ------------
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of the requirements for effectiveness of this Post-Effective
Amendment No. 14 to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 14
to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Chicago and State of Illinois on the 28
day of April, 2000.
Harris Insight Funds Trust
/s/ Philip H. Rinnander
--------------------------
By: PHILIP H. RINNANDER, PRESIDENT*
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 14 to the Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated:
Signature Title Date
- ------------------------- ------------------------ ---------------
Philip H. Rinnander* President 28 April 2000
Thomas J. Ryan* Treasurer and Chief 28 April 2000
Financial Officer
C. Gary Gerst* Chairman of the 28 April 2000
Board of Trustees;
Trustee
Edgar R. Fiedler* Trustee 28 April 2000
John W. McCarter, Jr.* Trustee 28 April 2000
Paula Wolff* Trustee 28 April 2000
Valerie B. Jarrett* Trustee 28 April 2000
* By: /s/ G. Nicholas Bullat
----------------------
G. Nicholas Bullat
Attorney-in-Fact pursuant to powers of attorney dated 1 February 2000,
7 February 2000, and 24 February 2000.
<PAGE>
Index of Exhibits Filed with this Amendment
Exhibit
Number Exhibit
- ------- -------
(a)(6) Amendment to Declaration of Trust dated May 1, 2000
(d)(1) Advisory Contract dated April 28, 2000 between Registrant
and Harris Trust and Savings Bank ("Harris Trust" or the
"Adviser").
(d)(2) Portfolio Management Contract dated April 28, 2000 between
Harris Trust and Harris Investment Management, Inc. ("HIM"
or the "Portfolio Management Agent") .
(e)(1) Distribution Agreement dated April 28, 2000 between the
Registrant and Provident Distributors, Inc. ("PDI").
(g)(7) Notice to the Custodian dated April 28, 2000 on behalf of
Harris Insight Equity Fund, Harris Insight Short/Intermediate
Bond Fund, Harris Insight Money Market Fund, Harris Insight
Tax-Exempt Money Market Fund, and Harris Insight Government
Money Market Fund.
(g)(8) Notice to the Sub-Custodian dated April 28, 2000 on behalf of
Harris Insight Equity Fund, Harris Insight Short/Intermediate
Bond Fund, Harris Insight Money Market Fund, Harris Insight
Tax-Exempt Money Market Fund, and Harris Insight Government
Money Market Fund.
(h)(3)(a) Notice to the Transfer Agent dated April 28, 2000 on behalf
of Harris Insight Equity Fund, Harris Insight
Short/Intermediate Bond Fund, Harris Insight Money Market
Fund, Harris Insight Tax-Exempt Money Market Fund, and Harris
Insight Government Money Market Fund.
(h)(5)(a) Notice to the Sub-Transfer Agent dated April 28, 2000 on
behalf of Harris Insight Equity Fund, Harris Insight
Short/Intermediate Bond Fund, Harris Insight Money Market
Fund, Harris Insight Tax-Exempt Money Market Fund, and Harris
Insight Government Money Market Fund.
(h)(9)(a) Notice to the Administrator dated April 28, 2000 on behalf of
Harris Insight Equity Fund, Harris Insight Short/Intermediate
Bond Fund, Harris Insight Money Market Fund, Harris Insight
Tax-Exempt Money Market Fund, and Harris Insight Government
Money Market Fund.
(h)(12)(a) Notice to the Sub-Administrator and Accounting Services Agent
dated April 28, 2000 on behalf of Harris Insight Equity Fund,
Harris Insight Short/Intermediate Bond Fund, Harris Insight
Money Market Fund, Harris Insight Tax-Exempt Money Market
Fund, and Harris Insight Government Money Market Fund.
(j)(1) Consent of PricewaterhouseCoopers LLP dated April 26, 2000.
(m)(1) Service Plan dated April 28, 2000 relating to N Shares.
(m)(2) Service Plan dated April 28, 2000 relating to A Shares.
(p)(4) Code of Ethics of Hansberger Global Investors, Inc.
Other: Powers of Attorney for C. Gary Gerst, Edgar R. Fielder,
John W. McCarter, Jr., and Paula Wolff dated February 24,
2000.
HARRIS INSIGHT FUNDS TRUST
AMENDMENT DATED MAY 1, 2000
TO THE DECLARATION OF TRUST
Article V, Section 5.9 of the Trust's Declaration of Trust is amended
to read as follows (additions are underscored):
Section 5.9 Voting Powers. The Shareholders shall have power to
vote only (i) for the election of Trustees as provided in Section 2.12;
(ii) with respect to any investment advisory contract entered into
pursuant to Section 3.2; (iii) with respect to termination of the Trust
or a Series thereof as provided in Section 8.2; (iv) with respect to
any amendment of this Declaration to the extent and as provided in
Section 8.3; (v) with respect to any merger, consolidation or sale of
assets as provided in Section 8.4; (vi) with respect to incorporation
of the Trust to the extent and as provided in Section 8.5; (vii) to the
same extent as the stockholders of a Massachusetts business corporation
as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action
on behalf of the Trust or a Series thereof or the Shareholders of
either; (viii) with respect to any plan adopted pursuant to Rule 12b-1
(or any successor rule) under the 1940 Act, and related matters; and
(ix) with respect to such additional matters relating to the Trust as
may be required by this Declaration, the By-Laws or any registration of
the Trust as an investment company under the 1940 Act with the
Commission (or any successor agency) or as the Trustees may consider
necessary or desirable. Each whole Share (or fractional Share)
outstanding on the record date established in accordance with the
By-Laws shall be entitled to a number of votes on any matter on which
it is entitled to vote equal to the net asset value of the Share (or
fractional Share) in United States dollars determined at the close of
business on the record date (for example, a Share having a net asset
value of $10.50 would be entitled to 10.5 votes). On any matter
submitted to Shareholders all shares shall be voted in the aggregate
and not by individual Series except (1) when required by the 1940 Act
or any rule thereunder Shares shall be voted by individual Series or
Class and (2) when the Trustees shall have determined that the matter
affects only the interests of one or more Series or Classes thereof,
then only the Shareholders of such Series or Classes thereof shall be
entitled to vote thereon. The Trustees may, in conjunction with the
establishment of any Series or any Classes of Shares, establish
conditions under which the several Series or Classes of Shares shall
have separate voting rights or no voting rights. There shall be no
cumulative voting in the election of Trustees. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration or the By-Laws to be taken by
Shareholders.
<PAGE>
The By-Laws may include further provisions for Shareholders' votes and
meetings and related matters.
Article V, Section 5.11 of the Trust's Declaration of Trust is amended
to read as follows (additions are underscored and deletions are struck-through):
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 Classes 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 and conditions under which the several Series or
Classes shall have separate voting rights, all of which are subject to
the limitations set for the 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 fourteen Series, each with three Classes
of Shares, N Shares, A Shares and Institutional Shares: Harris Insight
Equity Fund, Harris Insight Equity Income Fund, Harris Insight Growth
Fund, Harris Insight Small-Cap Opportunity Fund, Harris Insight
International Fund, Harris Insight Emerging Markets Fund, Harris
Insight Balanced Fund, Harris Insight Convertible Securities Fund,
Harris Insight Bond Fund, Harris Insight Short/Intermediate Bond Fund,
Harris Insight Intermediate Government Bond Fund, Harris Insight
Intermediate Tax-Exempt Bond Fund, Harris Insight Tax-Exempt Bond Fund
and Harris Insight Small-Cap Value Fund. The following four Series
shall have two classes of Shares, N Shares and Institutional Shares:
The Harris Insight Index Fund, Harris Insight Tax-Exempt Money Market
Fund, Harris Insight Money Market Fund and Harris Insight Government
Money Market 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
2
<PAGE>
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 from 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 of 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 thereof and all expenses, costs,
charges, and reserves attributable to that Series or Class or Classes
thereof, 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
3
<PAGE>
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 interest 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 of 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
4
<PAGE>
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 be 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/ Philip H. Rinnander
-----------------------
Philip H. Rinnander
President
Date: May 1, 2000
INVESTMENT ADVISORY CONTRACT
Harris Insight Funds (the "Trust"), a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end diversified management investment company, and Harris
Trust and Savings Bank, an Illinois bank (the "Adviser"), agree as follows:
1. APPOINTMENT OF ADVISER. The Trust appoints the Adviser to furnish
investment advisory and other services to the Trust for each of its series
listed on Exhibit A hereto (the "Funds"), and the Adviser accepts that
appointment, for the period and on the terms set forth below. In the event that
the Trust establishes one or more portfolios other than the Funds named above
with respect to which it desires to retain the Adviser to act as investment
adviser hereunder, it shall notify the Adviser in writing. If the Adviser is
willing to render such services under this Agreement, it shall so notify the
Trust in writing, whereupon Exhibit A shall be amended to include such portfolio
as a Fund hereunder, and such portfolio shall be subject to the provisions of
this Agreement to the same extent as the Funds named above except to the extent
that said provisions (including those relating to the compensation payable by
the Fund to the Adviser) are modified with respect to such Fund in writing by
the Trust and the Adviser at the time.
2. SERVICES OF ADVISER.
(a) INVESTMENT MANAGEMENT. Subject to the overall supervision and
control of the Board of Trustees of the Trust (the "Board of Trustees"), the
Adviser shall have supervisory responsibility for the general management and
investment of the Funds' assets, giving due consideration to the investment
policies and restrictions, portfolio transaction policies and the other
statements concerning the respective Funds in the Trust's Declaration of Trust,
by-laws and registration statements under 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, to the provisions of the Internal
Revenue Code applicable to the Funds as regulated investment companies and to
other applicable law (the "Investment Policies and Restrictions"). It is
understood that the Adviser may enter into portfolio management contracts (each,
a "Subadvisory Contract") with one or more portfolio managers (each, a
"Subadviser"). Any Subadviser, with the approval of the Adviser and of the Board
of Trustees, may enter into sub-portfolio management contracts (each, a
"Sub-subadvisory Contract") on behalf of any or all Funds with one or more other
portfolio managers (each, a "Sub-subadviser"). Each Subadviser or Sub-subadviser
or any successor to any of them shall have the responsibilities and duties set
forth in Section 3 below and in its respective Subadvisory Contract or
Sub-subadvisory Contract. As long as a Subadvisory Contract is in effect with
respect to all or a portion of the assets of any Fund, the services provided by
the Adviser with respect to those assets will be limited to the supervision and
oversight of the performance of any Subadviser or Sub-subadviser under the
Subadvisory Contract and any related Sub-subadvisory Contract.
<PAGE>
(b) MONITORING SUBADVISER. The Adviser shall monitor and evaluate
the investment performance of the Subadviser and of any Sub-subadviser, and
shall monitor the investment activities of the Subadviser and of any Sub-
subadviser to ensure compliance with the Investment Policies and Restrictions.
(c) REPORTS AND INFORMATION. The Adviser shall furnish to the Board of
Trustees periodic reports on the investment strategy and performance of the
Funds and such additional reports and information as the Board of Trustees or
the officers of the Trust may reasonably request.
(d) CUSTOMERS OF FINANCIAL INSTITUTIONS. It is understood that the
Adviser may, but shall not be obligated to, provide, either directly or through
agents, administrative and other services with respect to shareholders who are
customers of the Adviser or its affiliates, including establishing shareholder
accounts, assisting the Trust's transfer agent with respect to recording
purchase and redemption transactions, advising shareholders about the status of
their accounts, current yield and dividends declared and such related services
as the shareholders or the Funds may request. It is further understood that the
Adviser may, but shall not be obligated to, make payments from its own resources
to other financial institutions that provide similar services to shareholders of
the Funds that are customers of such institutions. Notwithstanding the
foregoing, the Adviser shall not provide any distribution services to the Trust
that the Adviser is legally precluded from providing under the Glass-Steagall
Act or other applicable law.
(e) UNDERTAKINGS OF ADVISER. The Adviser further agrees that it will:
(i) 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;
(ii) Select broker-dealers in accordance with guidelines established by
the Board of Trustees from time to time and in accordance with applicable law
(consistent with this obligation, when the execution and price offered by two or
more brokers or dealers are comparable, the Adviser may, in its discretion,
purchase and sell portfolio securities to and from brokers and dealers who
provide the Adviser with research advice and other services);
(iii) Maintain books and records with respect to the securities
transactions of the Funds; and
(iv) 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 will 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 a judicial
request, requirement or order, provided
2
<PAGE>
that the Adviser 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 Adviser 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 Adviser
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 Adviser shall for all purposes herein
be deemed to be an independent contractor and not an agent of the Trust and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Trust in any way.
3. SERVICES OF SUBADVISERS AND SUB-SUBADVISERS. Subject to the overall
supervision and control of the Board of Trustees and the Adviser, any Subadviser
or Sub-subadviser shall manage the investment and reinvestment of the assets of
any Fund for which it has responsibility in accordance with the terms of its
Subadvisory or Sub-subadvisory Contract, giving due consideration to the
Investment Policies and Restrictions applicable to the Fund. The Adviser shall
not be responsible or liable for the investment merits of any decision by a
Subadviser or Sub-subadviser to purchase, hold, or sell a particular security
for the portfolio of a Fund.
4. EXPENSES BORNE BY TRUST. Except as otherwise provided in this
Agreement or any other contract to which the Trust is a party, the Trust shall
pay all expenses incidental to its organization, operations and business
including, without limitation: all charges of depositories, custodians,
sub-custodians and other agencies for the safekeeping and servicing of its cash,
securities and other property, and of its transfer, shareholder recordkeeping,
dividend disbursing and redemption agents, if any; all charges for equipment or
services used for obtaining price quotations; all charges for accounting
services provided to the Trust by the custodian, the Adviser or any other
provider of accounting services; all expenses of portfolio pricing, net asset
value computation and reporting portfolio information to the Adviser or
Subadviser; all charges for services of administration; all charges of
independent auditors and legal counsel; all compensation of the Trustees other
than those affiliated with any entity providing advisory or administrative
services to the Trust, and all expenses incurred in connection with their
services to the Trust; all expenses of preparing, printing and distributing
notices, proxy solicitation material and reports to shareholders of the Funds;
all expenses of meetings of shareholders; all expenses of preparation and
printing of annual or more frequent revisions of the Funds' prospectus(es) and
of supplying each then existing shareholder or beneficial owner of shares of the
Funds with a copy of such revised prospectus(es); all expenses related to
preparing and transmitting certificates representing shares of the Funds, if
any; all expenses of bond and insurance coverage required by law or deemed
advisable by the Board of Trustees; all costs of borrowing money; all taxes and
corporate fees payable to Federal, state or other governmental agencies,
domestic or foreign; all stamp or other transfer taxes; all expenses of
registering and maintaining the registration of the Trust under the 1940 Act and
of shares of the Funds under the 1933 Act, of qualifying and maintaining
qualification of the Trust and of shares of the Funds for sale under
3
<PAGE>
securities laws of various states or other jurisdictions and of registration and
qualification of the Trust under all other laws applicable to the Trust or its
business activities; all payments pursuant to a plan adopted on behalf of the
Funds pursuant to Rule 12b-1 under the 1940 Act; all fees, dues and other
expenses incurred by the Trust in connection with membership of the Trust in any
trade association or other investment company organization; and extraordinary
expenses. In addition the Funds shall pay all broker's commissions and other
charges relating to the purchase and sale of portfolio securities or other
assets of the Funds.
5. ALLOCATION OF EXPENSES BORNE BY TRUST. Any expenses borne by the
Trust that are attributable solely to the organization, operation or business of
the Funds shall be paid solely out of assets of the Funds. Any expense borne by
the Trust that is not solely attributable to the Funds, nor solely to any other
portfolio of the Trust, shall be apportioned in such manner as the Trust or an
administrator for the Trust determines is fair and appropriate, or as otherwise
specified by the Board of Trustees.
6. EXPENSES BORNE BY ADVISER. The Adviser at its own expense shall
furnish personnel, office space and office facilities and equipment required to
render its services pursuant to this Agreement and shall be responsible for
payment of the fees of the Subadviser pursuant to the Subadvisory Contract (but
the Adviser shall not be responsible for any expenses such Subadviser may incur
in connection with their performance of services for the Trust).
7. COMPENSATION OF ADVISER. For the services to be rendered and the
expenses to be assumed and to be paid by the Adviser under this Agreement, the
Trust shall pay to the Adviser a fee, computed and accrued daily and payable on
the first business day of each month, at the annual rates set forth on Exhibit A
hereto for each Fund considered separately on a portfolio-by-portfolio basis.
8. NON-EXCLUSIVITY. The services of the Adviser to the Trust under
this Agreement are not to be deemed exclusive and the Adviser shall be free to
render similar services to others so long as its services under this Agreement
are not impaired by such other activities.
9. STANDARD OF CARE. Neither the Adviser, nor any Subadviser, nor any
of their respective 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 Adviser or a Subadviser of its duties under this Agreement or
a Subadvisory Contract, respectively, except for liability resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser or
Subadviser, respectively, or from reckless disregard by the Adviser or the
Subadviser of its obligations and duties under this Agreement or the Subadvisory
Contract, respectively.
10. AMENDMENT. This Agreement may not be amended with respect to a
particular Fund without the affirmative votes (a) of a majority of the Directors
of the Trustees, including a majority of those Trustees who are not "interested
persons" of the Trust or the Adviser 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
4
<PAGE>
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.
11. TERMINATION. This Agreement may be terminated as to any Fund, 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 Adviser. This Agreement may be terminated by the Adviser
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 a particular Fund for a
period of two years from the date hereof 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 or of the
Adviser, 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 such Fund.
12. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. The names "Harris
Insight Funds Trust" and "Trustees of Harris Insight Funds Trust" refer
respectively to the Trust created and the Trustees as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated December 6, 1995 which is hereby referred to and a copy of which is
on file at the office of the Secretary of State of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"Harris Insight Funds Trust" entered into in the name or on behalf thereof by
any of the Trustees, officers, representatives or agents are not made
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders, officers, representatives or agents of the Trust
personally, but bind only the Trust Property, and all persons dealing with any
class of shares of the Trust must look solely to the Trust Property belonging to
such class for the enforcement of any claims against the Trust.
13. 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 Adviser: Harris Trust and Savings Bank
111 W. Monroe Street, 6W
Chicago, IL 60603
Telephone: 312.461.4088 Fax: 312.293.4291
To the Trust: Harris Insight Funds Trust
Four Falls Corporate Center, 6th Floor
--
West Conshohocken, PA 19428
Telephone: 610.260.6533 Fax: 610.260.6535
5
<PAGE>
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.
14. 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.
15. 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 may be executed in any number of counterparts, each of
which shall be deemed an original.
Dated: April 28, 2000
HARRIS INSIGHT FUNDS TRUST
ATTEST: By /s/ Philip H. Rinnander
---------------------------
Name: Philip H. Rinnander
----------------------
/s/ Gary M. Gardner , Secretary Title:President
- ------------------------------- ---------------------
HARRIS TRUST AND SAVINGS BANK
ATTEST: By /s/ Peter P. Capaccio
-------------------------
Name: Peter P. Capaccio
----------------------
/s/ Thomas R. Sizer , Secretary Title: President
- -------------------------------- ----------------------
6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
Harris Insight Funds Trust
Investment Adviser Compensation
FUND (SERIES) FEE1
------------- ---
<S> <C>
Equity Fund 0.70
Equity Income Fund 0.70
Growth Fund 0.90
Index Fund 0.25
Small-Cap Opportunity Fund 1.00
Small-Cap Value Fund 0.80
International Fund 1.05
Emerging Markets Fund 1.25
Balanced Fund 0.60
Convertible Securities Fund 0.70
Bond Fund 0.65
Short-Intermediate Bond Fund 0.70
Intermediate Government Bond Fund 0.65
Tax-Exempt Bond Fund 0.60
Intermediate Tax-Exempt Bond Fund 0.60
Money Market Fund 1st $100 million: 0.14
> $100 million: 0.10
Tax-Exempt Money Market Fund 1st $100 million: 0.14
> $100 million: 0.10
Government Money Market Fund 1st $100 million: 0.14
> $100 million: 0.10
</TABLE>
1 Calculated as a percentage of average daily net assets for each portfolio.
7
PORTFOLIO MANAGEMENT CONTRACT
Harris Trust and Savings Bank (the "Adviser"), an Illinois bank and
Harris Investment Management, Inc., (the "Subadviser") a Delaware corporation
registered under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), agree as follows:
1. APPOINTMENT OF SUBADVISER. The Adviser appoints the Subadviser to
furnish investment advisory and other services to the Harris Insight Funds Trust
(the "Trust") for its series listed on Exhibit A hereto (the "Funds") 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") and the Adviser, the
Subadviser shall have supervisory responsibility for the general management and
investment of the assets of the Funds giving due consideration to the investment
policies and restrictions, portfolio transaction policies and the other
statements concerning the respective Funds 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, to the provisions of the Internal Revenue Code
applicable to the Funds as regulated investment companies and to other
applicable law (the "Investment Policies and Restrictions"). It is understood
that the Subadviser, with the approval of the Adviser and the Board of Trustees,
may enter into sub-portfolio management contracts (each, a "Sub-subadvisory
Contract") on behalf of any or all Funds with one or more other portfolio
mangers (each, a "Sub-subadviser"). Each Sub-subadviser or any successor to a
Sub-subadviser shall have the responsibilities and duties set forth in Section 3
below and in its respective Sub-subadvisory Contract. As long as a
Sub-subadvisory Contract is in effect with respect to all or a portion of the
assets of any Fund, the services provided by the Subadviser with respect to
those assets will be limited to the supervision and oversight of the
Sub-subadviser's performance under the Sub-subadvisory Contract.
(b) MONITORING SUB-SUBADVISER. The Subadviser shall monitor and
evaluate the investment performance of any Sub-subadviser and shall monitor the
investment activities of any Sub-subadviser to ensure compliance with the
Investment Policies and Restrictions.
(c) REPORTS AND INFORMATION. The Subadviser shall furnish to the
Adviser periodic reports on the investment strategy and performance of the Funds
and such additional reports and information as the Adviser or the Board of
Trustees or the officers of the Trust may reasonably request.
(d) UNDERTAKINGS OF SUBADVISER. The Subadviser further agrees that
it will:
(i) At all times be duly registered as an investment adviser
under the Investment
<PAGE>
Advisers Act of 1940 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) Select broker-dealers in accordance with guidelines
established by the Board of Trustees from time to time and in accordance with
applicable law (consistent with this obligation, when the execution and price
offered by two or more brokers or dealers are comparable, the Subadviser may, in
its discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide the Subadviser with research advice and other services);
(iv) Maintain books and records with respect to the
securities transactions of the Funds;
(v) 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 will 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 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.
(e) 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.
(f) INDEPENDENT CONTRACTOR. The Subadviser shall for all purposes
herein be deemed to be an independent contractor and not an agent of the Trust
and shall, unless otherwise expressly provided or authorized, have no authority
to act for or represent the Trust in any way.
3. SERVICES OF SUB-SUBADVISER. Subject to the overall supervision and
control of the Board of Trustees, the Adviser, and the Subadviser, any
Sub-subadviser shall manage the investment and reinvestment of the assets of any
Fund for which it has responsibility in accordance with the terms of its
Sub-subadvisory Contract, giving due consideration to the Investment Policies
and Restrictions applicable to the Fund. Neither the Adviser nor the Subadviser
shall be responsible or liable for the investment merits of any decision by a
Sub-subadviser to purchase, hold, or sell a particular security for the
portfolio of a Fund.
2
<PAGE>
4. UNDERTAKINGS OF ADVISER. The Adviser will:
(a) Furnish to the Subadviser promptly a copy of each amendment to the
registration statement of the Trust under the 1940 Act and the 1933 Act and of
each prospectus and statement of additional information relating to the Fund and
any supplement thereto;
(b) Inform the principal custodian of the Funds (the "Custodian")
(currently PFPC Trust Company) of the appointment of the Subadviser as
investment subadviser and portfolio manager of the Funds;
(c) Instruct the Custodian to cooperate with the Subadviser in the
provision of custodial services to the Funds; 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.
5. EXPENSES BORNE BY SUBADVISER. The Subadviser at its own
expense shall furnish personnel, office space and office facilities and
equipment required to render its services pursuant to this Agreement.
6. COMPENSATION OF SUBADVISER. For the services to be rendered and the
expenses to be assumed and to be paid by the Adviser under this Agreement, the
Adviser shall pay to the Subadviser a fee, computed and accrued daily and
payable on the first business day of each month, at the annual rates set forth
on Exhibit A hereto for each Fund considered separately on a
portfolio-by-portfolio basis.
7. NON-EXCLUSIVITY. The services of the Subadviser to the Trust
under this Agreement are not to be deemed exclusive and the Subadviser
shall be free to render similar services to others so long as its services
under this Agreement are not impaired by such other activities.
8. 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.
9. INSPECTION. The Adviser (or any authorized agent of the Adviser 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.
10. AUTHORIZED PERSONS.
3
<PAGE>
(a) The Subadviser is authorized to accept instructions and directions
with respect to this Agreement signed by any one of ______________ of the
Adviser. The Adviser will notify the Subadviser of any changes in its officers
empowered to act under this Agreement.
(b) The Adviser is authorized to accept instructions and directions
with respect to this Agreement signed by any Senior Partner or Partner of the
Subadviser. The Subadviser will notify the Adviser 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
Adviser and the Trust the right to use, in marketing, promotional and
advertising materials of the Adviser 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 approval by the Subadviser as to form and
content prior to its use by the Adviser or the Trust. The Subadviser consents to
the disclosure, in documents relating to the Funds, of its name as the
investment sub-adviser and portfolio manager of the assets of the Funds.
12. AMENDMENT. This Agreement may not be amended with respect to a
particular Fund without the affirmative votes (a) of a majority of the Directors
of the Trustees, including a majority of those Trustees who are not "interested
persons" of the Trust, the Adviser 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 as to any Fund, 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 Adviser. This Agreement may be terminated by the Adviser
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 a particular Fund for a
period of two years from the date hereof 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
Adviser 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 such 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
4
<PAGE>
delivery, by registered or certified mail or by transmittal by facsimile or
other electronic medium addressed to the recipient as follows:
To the Subadviser: Harris Investment Management, Inc.
190 S. LaSalle Street, 4th Floor
Chicago, IL 60603
Telephone: 312.461.7699 Fax: 312.461.6268
To the Adviser: Harris Trust and Savings Bank
111 W. Monroe Street, 6W
Chicago, IL 60603
Telephone: 312.461.4088 Fax: 312.293.4291
To the Trust: Harris Insight Funds Trust
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428
Telephone: 610.260.6533 Fax: 610.260.6535
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 may be executed in any number of counterparts, each of
which shall be deemed an original.
5
<PAGE>
Dated: April 28, 2000
HARRIS TRUST AND SAVINGS BANK
ATTEST: By /s/ Peter P. Capaccio
--------------------------
Name: Peter P. Capaccio
--------------------------
/s/ Thomas R. Sizer , Secretary Title: Senior Vice President
- ------------------------------- --------------------------
HARRIS INVESTMENT MANAGEMENT,
INC.
ATTEST: By /s/ William O. Leszinske
-------------------------
Name: William O. Leszinske
-------------------------
/s/ Blanche O. Hurt , Secretary Title: President
- -------------------------------- -------------------------
6
<PAGE>
EXHIBIT A
Harris Insight Funds Trust
Portfolio Manager Compensation
FUND (SERIES) FEE1
------------- ---
Equity Fund 0.70
Equity Income Fund 0.70
Growth Fund 0.90
Index Fund 0.25
Small-Cap Opportunity Fund 1.00
Small-Cap Value Fund 0.80
International Fund 1.05
Emerging Markets Fund 1.25
Balanced Fund 0.60
Convertible Securities Fund 0.70
Bond Fund 0.65
Short-Intermediate Bond Fund 0.70
Intermediate Government Bond Fund 0.65
Tax-Exempt Bond Fund 0.60
Intermediate Tax-Exempt Bond Fund 0.60
Money Market Fund 1st $100 million: 0.14
> $100 million: 0.10
Tax-Exempt Money Market Fund 1st $100 million: 0.14
> $100 million: 0.10
Government Money Market Fund 1st $100 million: 0.14
> $100 million: 0.10
1 Calculated as a percentage of average daily net assets for each portfolio.
7
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of the 28th day of April, 2000
by and between Harris Insight(R) Funds Trust, a Massachusetts Business Trust
(the "Trust"), and PROVIDENT DISTRIBUTORS, INC., a Delaware corporation
("Provident" or "Distributor").
WHEREAS, the Trust is an open-end management investment company and is
so registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Trust desires to retain Provident as Distributor for the
Trust's separate portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (individually, a
"Fund" and collectively, the "Funds") in order to provide for the sale and
distribution of shares of the Funds (the "Shares"), and Provident is willing to
render such services;
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein and intending to be legally bound hereby, the parties hereto
agree as follows:
I. DELIVERY OF DOCUMENTS
The Trust has delivered to Provident copies of each of the following
documents and will deliver to it all future amendments and supplements thereto,
if any:
(a) The Trust's most recent Prospectus(es) and Statement(s) of
Additional Information and all amendments and supplements
thereto (collectively, the "Prospectuses").
II. DISTRIBUTION
1. Appointment of Distributor. The Trust hereby appoints Provident as
Distributor of the Funds' Shares and Provident hereby accepts such appointment
and agrees to render the services and duties set forth in this Section II. In
the event that the Trust establishes one or more portfolios other than the Funds
with respect to which it desires to retain Provident to act as distributor
hereunder, the Trust shall notify Provident in writing. If Provident is willing
to render such services, it shall notify the Trust whereupon such portfolio
shall become one of the "Funds" hereunder and such portfolios shall be added to
Exhibit A and acknowledged in writing by the parties hereto.
2. Services and Duties.
(a) The Trust agrees to sell through Provident, as agent, from time to
time during the term of this Agreement, Shares upon the terms and at the current
offering price as described in the applicable Prospectus. Provident will act
only in its own behalf as principal in making agreements with selected dealers
or others for the sale and
<PAGE>
redemption of Shares, and shall sell Shares only at the offering price thereof
as set forth in the applicable Prospectus. Prior to making any payments from its
own resources to financial institutions, securities dealers or other industry
professionals for shareholder services, administration or distribution
assistance for a Fund, Provident will enter into written agreements in a form
satisfactory to the Trust's Board of Trustees. Provident shall devote
appropriate efforts to effect sales of Shares of each of the Funds, but shall
not be obligated to sell any certain number of Shares.
(b) In all matters relating to the sale and redemption of Shares,
Provident will act in conformity with the Trust's Declaration of Trust, By-Laws
and applicable Prospectuses and with the instructions and directions of the
Board of Trustees of the Trust and will conform to and comply with the
requirements of the 1933 Act, the 1940 Act, the regulations of the National
Association of Securities Dealers, Inc. and all other applicable Federal or
state laws and regulations.
(c) All Shares of the Funds and future funds covered by this Agreement
offered for sale by Provident shall be offered for sale to the public at a price
per share (the "offering price") equal to (i) their net asset value (determined
in the manner set forth in the applicable Prospectuses), plus (ii) any sales
charge applicable to a class of Shares which shall be the percentage of the
offering price of such Shares as set forth in the applicable Prospectuses. The
offering price, if not an exact multiple of one cent, shall be adjusted to the
nearest cent. Concessions paid by Provident to broker-dealers and other persons
shall be set forth in either the selling agreements between Provident and such
broker-dealers and persons or, if such concessions are described in the
applicable Prospectuses, shall be as so set forth. No broker-dealer or other
person who enters into a selling or distribution and servicing agreement with
Provident shall be authorized to act as agent for the Trust in connection with
the offering or sale of Shares to the public or otherwise.
(d) If any Shares sold by Provident under the terms of this Agreement
are redeemed or repurchased by the Trust or by Provident as agent or are
tendered for redemption within seven business days after the date of
confirmation of the original purchase of said Shares, Provident shall forfeit
the amount above the net asset value received by it with respect to such Shares,
provided that the portion, if any, of such amount re-allowed by Provident to
broker-dealers or other persons shall be repayable to the Trust only to the
extent recovered by Provident from the broker-dealer or other persons concerned.
Provident shall include in the form of agreement with such broker-dealers and
other persons a corresponding provision for the forfeiture by them of their
concession with respect to Shares sold by them or their principals and redeemed
or repurchased by the Trust or by Provident as agent (or tendered for
redemption) within seven business days after the date of confirmation of such
initial purchases.
<PAGE>
3. Service Plan Reports.
So long as the Trust has one or more service plans in effect for one or
more classes of shares (the "Service Plans"), the Distributor shall provide the
Trust's Board of Trustees at least quarterly, a written report of the amounts
expended by the Distributor pursuant to the Service Plans and the purpose for
which such expenditures were made.
4. Sales and Redemptions.
(a) The Trust shall pay all costs and expenses in connection with the
registration of the Shares under the 1933 Act, and all expenses in connection
with maintaining facilities for the issue and transfer of the Shares and for
supplying information, prices and other data to be furnished by the Trust
hereunder, and all expenses in connection with preparing, printing and
distributing the Prospectuses except as set forth in subsection 2(c) of Section
II hereof.
(b) The Trust shall execute all documents, furnish all information and
otherwise take all actions which may be reasonably necessary in the discretion
of the Trust's officers in connection with the qualification of the Shares for
sale in such states as Provident may designate to the Trust and the Trust may
approve, and the Trust shall pay all filing fees which may be incurred in
connection with such qualification. Provident shall pay all other expenses
incurred by Provident in connection with the sale of the Shares, except as
otherwise specifically provided in this Agreement.
(c) The Trust shall have the right to suspend the sale of Shares at any
time in response to conditions in the securities markets or otherwise, and to
suspend the redemption of Shares of any Fund at any time permitted by the 1940
Act or the rules of the SEC ("Rules").
(d) The Trust reserves the right to reject any order for Shares, but
will not do so arbitrarily or without reasonable cause.
III. CONFIDENTIALITY
Provident will treat confidentially and as proprietary information of
the Trust all records and other information relative to the Trust, to the
Trust's prior or current shareholders and to those persons or entities who
respond to Provident's inquiries concerning investment in the Trust, and, except
as provided below, will not use such records and information for any purpose
other than the performance of its responsibilities and duties hereunder. Any
other use by Provident of the information and records referred to above may be
made only after prior notification to and approval in writing by the Trust. Such
approval shall not be unreasonably withheld and may not be withheld where: (i)
Provident may be exposed to civil or criminal contempt proceedings for failure
to divulge such information; (ii) Provident is requested to divulge such
information by duly constituted authorities; or (iii) Provident is so requested
by the Trust.
<PAGE>
IV. INDEMNIFICATION
1. Trust Representation. The Trust represents and warrants to Provident
that at all times the Registration Statement and Prospectuses will in all
material respects conform to the applicable requirements of the 1933 Act and the
Rules thereunder and will not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation or warranty in this
subsection shall apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Trust by or on behalf of
and with respect to Provident expressly for use in the Registration Statement or
Prospectuses.
2. Provident Representation. Provident represents and warrants to the
Trust that it is duly organized as a Delaware corporation and is and at all
times will remain registered as a broker/dealer under the Securities Exchange
act of 1934 and a member in good standing with the National Association of
Securities Dealers and is otherwise duly authorized and licensed to carry out
its services as contemplated herein.
3. Trust Indemnification. The Trust, on behalf of each Fund, will
indemnify, defend and hold harmless Provident, its several officers and Trustees
and any person who controls Provident within the meaning of Section 15 of the
1933 Act, from and against any losses, claims, damages or liabilities, joint or
several, to which any of them may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectuses or in any application or other document
executed by the Trust, or arise out of, or are based upon, information furnished
on behalf of a Fund, filed in any state in order to qualify the Shares under the
securities or blue sky laws thereof ("Blue Sky Application"), or arise out of,
or are based upon, the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse Provident, its several officers and Trustees,
and any person who controls Provident within the meaning of Section 15 of the
1933 Act, for any legal or other expenses reasonably incurred by any of them in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Trust shall not be liable in any case to the
extent that such loss, claim, damage or liability arises out of, or is based
upon, any untrue statement, alleged untrue statement, or omission or alleged
omission made in the Registration Statement, the Prospectuses, any Blue Sky
Application or any application or other document executed by or on behalf of the
Trust in reliance upon and in conformity with written information furnished to
the Trust by or on behalf of and with respect to Provident specifically for
inclusion therein.
The Trust shall not indemnify any person pursuant to this subsection 3
unless the court or other body before which the proceeding was brought has
rendered a final
<PAGE>
decision on the merits that such person was not liable by reason of his willful
misfeasance, bad faith or gross negligence in the performance of his duties, or
his reckless disregard of his obligations and duties, under this Agreement
("disabling conduct") or, in the absence of such a decision, a reasonable
determination (based upon a review of the facts) that such person was not liable
by reason of disabling conduct has been made by the vote of a majority of a
quorum of Trustees of the Trust who are neither "interested persons" of the
Trust (as defined in the 1940 Act) nor parties to the proceeding, or by an
independent legal counsel in a written opinion.
The Company shall advance attorneys' fees and other expenses incurred
by any person in defending any claim, demand, action or suit which is the
subject of a claim for indemnification pursuant to this subsection 3, so long
as: (i) such person shall undertake to repay all such advances unless it is
ultimately determined that he is entitled to indemnification hereunder; and (ii)
such person shall provide security for such undertaking, or the Company shall be
insured against losses arising by reason of any lawful advances, or a majority
of a quorum of the disinterested, non-party directors of the Company (or an
independent legal counsel in a written opinion) shall determine based on a
review of readily available facts (as opposed to a full trial-type inquiry) that
there is reason to believe that such person ultimately will be found entitled to
indemnification hereunder.
4. Provident Indemnification. Provident will indemnify, defend and hold
harmless the Trust, the Trust's several officers and Trustees and any person who
controls the Trust within the meaning of Section 15 of the 1933 Act, from and
against any losses, claims, damages or liabilities, joint or several, to which
any of them may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon any breach of its representations,
warranties and agreements herein, or which arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectuses, any Blue Sky Application or any
application or other documents executed by or on behalf of the Trust or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Trust by or on behalf of and with
respect to Provident specifically for inclusion therein, and will reimburse the
Trust, the Trust's several officers and Trustees, and any person who controls
the Trust within the meaning of Section 15 of the 1933 Act, for any legal or
other expenses reasonably incurred by any of them in investigating, defending or
preparing to defend any such action, proceeding or claim, as such expenses are
incurred.
5. General Indemnity Provision. No indemnifying party shall be liable
under its indemnity agreement contained in subsection 3 or 4 hereof with respect
to any claim made against such indemnifying party unless the indemnified party
shall have notified the indemnifying party in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the indemnified party (or after the
indemnified party shall have received notice of such
<PAGE>
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve it from any liability which it may otherwise
have to the indemnified party. The indemnifying party will be entitled to
participate at its own expense in the defense or, if it so elects to assume the
defense of any suit brought to enforce any such liability, and if the
indemnifying party elects to assume the defense, such defense shall be conducted
by counsel chosen by it and reasonably satisfactory to the indemnified party. In
the event the indemnifying party elects to assume the defense of any such suit
and retain such counsel, the indemnified party shall bear the fees and expenses
of any additional counsel retained by the indemnified party, provided that the
indemnified party shall have the right to employ one separate counsel to
represent it in such suit if in the reasonable judgment of the indemnified party
it is advisable because of an actual or potential conflict of interest between
it and the indemnifying party in the conduct of the defense of such action, in
which event the fees and expenses of such separate counsel will be borne by the
indemnifying party.
6. Limitation of Liability. The names "Harris Insight Fund Trust" and
Trustees of "Harris Insight Fund Trust" refer respectively to the Trust created
and the Trustees as trustees but not individually or personally, acting from
time to time under a Declaration of Trust dated December 6, 1995 which is hereby
referred to and a copy of which is on file at the office of the Secretary of
State of the Commonwealth of Massachusetts and at the principal office of the
Trust. The obligations of "Harris Insight Fund Trust Funds" entered into in the
name or on behalf thereof by any of the Trustees, officers, representatives or
agents are not made individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders, officers, representatives or agents of
the Trust personally, but bind only the Trust property, and all persons dealing
with any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
V. DURATION AND TERMINATION
This Agreement shall become effective as of the date first above
written, and, unless sooner terminated as provided herein, shall continue until
April 24, 2001. Thereafter, if not terminated, this Agreement shall continue
automatically for successive terms of one year, provided that such continuance
is specifically approved at least annually by a vote of the majority of those
members of the Board of Trustees of the Trust who are not parties to this
Agreement or "interested persons" of the Trust and have no direct or indirect
financial interest in the operation of each Fund's Service Plan or in this
Agreement, or in any agreement relating to the Plan, by vote cast in person at a
meeting called for the purpose of voting on such approval; provided, however,
that this Agreement may be terminated by the Trust at any time, without the
payment of any penalty, by vote of a majority of the entire Board of Trustees of
the Trust or by a vote of a "majority of the outstanding voting securities" of
the Trust on 60 days' written notice to Provident, or by Provident at any time,
without the payment of any penalty, on 60 days' written notice to the Trust.
This Agreement will automatically and immediately terminate in the event of its
"assignment". (As used in this Agreement, the terms
<PAGE>
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meanings as such terms have in the 1940 Act.)
VI. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated except by an instrument in writing signed by the party against which
an enforcement of the change, waiver, discharge or termination is sought.
VII. NOTICES
Notices of any kind to be given to the Trust hereunder by Provident
shall be in writing and shall be duly given if mailed or delivered to the Trust
at 3200 Horizon Drive, King of Prussia, PA 19406, or at such other address or to
such individual as shall be so specified by the Trust to Provident. Notices of
any kind to be given to Provident hereunder by the Trust shall be in writing and
shall be duly given if mailed or delivered to Provident at 3200 Horizon Drive,
King of Prussia, PA 19406 or at such other address or to such individual as
shall be so specified by Provident to the Trust.
VIII. MISCELLANEOUS
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision if this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section V hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by Delaware law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation of the SEC thereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
HARRIS INSIGHT FUNDS TRUST
By: /s/ Philip H. Rinnander
-------------------------
Attest: /s/ Jason A. Greim
-------------------
PROVIDENT DISTRIBUTORS, INC.
By: /s/ Philip H. Rinnander
-------------------------
Attest: /s/ Jason A. Greim
-------------------
<PAGE>
EXHIBIT A
This Exhibit A, dated as of April 28, 2000, is Exhibit A to the
Distribution Agreement dated April 28, 2000 between Harris Insight Funds Trust
and Provident Distributors, Inc.
HARRIS INSIGHT FUNDS
Harris Insight Government Money Market Fund
Harris Insight Money Market Fund
Harris Insight Tax-Exempt Money Market Fund
Harris Insight Short/Intermediate Bond 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 Convertible Securities Fund
Harris Insight Equity Fund
Harris Insight Equity Income Fund
Harris Insight Growth Fund
Harris Insight Small-Cap Opportunity Fund
Harris Insight Small-Cap Value Fund
Harris Insight Index Fund
Harris Insight Balanced Fund
Harris Insight International Fund
Harris Insight Emerging Markets Fund
HARRIS INSIGHT FUNDS TRUST
3200 Horizon Drive
King of Prussia, PA 19406
April 28, 2000
PFPC Trust Company
8800 Tinnicum Boulevard, 2nd Floor
Philadelphia, Pennsylvania 19153
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 Administration
Agreement between Harris Trust and Savings Bank ("Harris") and the Trust dated
July 1, 1996; the Sub-Administration and Accounting Services Agreement between
Harris and PFPC Inc. ("PFPC") dated July 1, 1996; the Transfer Agency Agreement
between Harris and the Trust dated July 1, 1996; the Sub-Transfer Agency
services Agreement between Harris and PFPC dated July 1, 1996; the Custodian
Agreement between the Trust and PNC Bank, N.A. ("PNC"), dated February 23, 1996;
and the Sub-Custodian Services Agreement among PFPC Trust Company ("PFPC-TC"),
PNC Bank, N.A. and the Trust dated February 18, 1999; (each an "Agreement," and
collectively, the "Agreements").
This writing is to provide notice of the addition of five series under
the Trust: Harris Insight Equity Fund, Harris Insight Short/Intermediate Bond
Fund, Harris Insight Money Market Fund, Harris Insight Tax-Exempt Money Market
Fund, and Harris Insight Government Money Market Fund (each a "New Portfolio"
and together, the "New Portfolios"). Each New Portfolio is to be considered a
Fund under each Agreement or to Exhibit A to the Agreements, if applicable, and
shall be subject to the terms set forth under the Agreements unless otherwise
provided herein. PFPC-TC shall be compensated for services rendered under each
applicable Agreement as is consistent with the particular Agreement or the Fee
Letter Agreement dated May 1, 1999, whichever is applicable.
The Trust requests that you act in the capacity of Custodian with
respect to the New Portfolios while continuing to act as Custodian 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/ Philip H. Rinnander
--------------------------
Philip H. Rinnander
President
PFPC TRUST COMPANY
Accepted:/s/ Joseph Gramlich
-------------------
Joseph Gramlich
Senior Vice President
cc: PNC Bank, N.A.
<PAGE>
EXHIBIT A
This Exhibit A, dated as of April 28, 2000, is Exhibit A to the
Custodian Agreement dated February 23, 1996 between Harris Insight Funds Trust
and PNC Bank, N.A.
HARRIS INSIGHT FUNDS
Harris Insight Government Money Market Fund
Harris Insight Money Market Fund
Harris Insight Tax-Exempt Money Market Fund
Harris Insight Short/Intermediate Bond 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 Convertible Securities Fund
Harris Insight Equity Fund
Harris Insight Equity Income Fund
Harris Insight Growth Fund
Harris Insight Small-Cap Opportunity Fund
Harris Insight Small-Cap Value Fund
Harris Insight Index Fund
Harris Insight Balanced Fund
Harris Insight International Fund
Harris Insight Emerging Markets Fund
HARRIS INSIGHT FUNDS TRUST
By: /s/ Philip H. Rinnander
-----------------------
Philip H. Rinnander
Title: President
PFPC TRUST COMPANY
By: /s/ Joseph Gramlich
----------------------
Joseph Gramlich
Title: Senior Vice President
HARRIS INSIGHT FUNDS TRUST
3200 Horizon Drive
King of Prussia, PA 19406
April 28, 2000
PNC Bank, N.A.
8800 Tinnicum Boulevard, 2nd Floor
Philadelphia, Pennsylvania 19113
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 Administration
Agreement between Harris Trust and Savings Bank ("Harris") and the Trust dated
July 1, 1996; the Sub-Administration and Accounting Services Agreement between
Harris and PFPC Inc. ("PFPC") dated July 1, 1996; the Transfer Agency Agreement
between Harris and the Trust dated July 1, 1996; the Sub-Transfer Agency
services Agreement between Harris and PFPC dated July 1, 1996; the Custodian
Agreement between the Trust and PNC Bank, N.A. ("PNC"), dated February 23, 1996;
and the Sub-Custodian Services Agreement among PFPC Trust Company ("PFPC-TC"),
PNC Bank, N.A. and the Trust dated February 18, 1999; (each an "Agreement," and
collectively, the "Agreements").
This writing is to provide notice of the addition of five series under
the Trust: Harris Insight Equity Fund, Harris Insight Short/Intermediate Bond
Fund, Harris Insight Money Market Fund, Harris Insight Tax-Exempt Money Market
Fund, and Harris Insight Government Money Market Fund (each a "New Portfolio"
and together, the "New Portfolios"). Each New Portfolio is to be considered a
Fund under each Agreement or to Exhibit A to the Agreements, if applicable, and
shall be subject to the terms set forth under the Agreements unless otherwise
provided herein. PNC shall be compensated for services rendered under each
applicable Agreement as is consistent with the particular Agreement or the Fee
Letter Agreement dated May 1, 1999, whichever is applicable.
The Trust requests that you act in the capacity of Sub-Custodian with
respect to the New Portfolios while continuing to act as Sub-Custodian 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/ Philip H. Rinnander
-----------------------
Philip H. Rinnander
President
PNC BANK, N.A.
Accepted: /s/Brian Burns
---------------------
Brian Burns
Senior Vice President
cc: PFPC Trust Company
<PAGE>
EXHIBIT A
This Exhibit A, dated as of April 28, 2000, is Exhibit A to the
Sub-Custodian and Services Agreement dated February 18, 1999 among Harris
Insight Funds Trust, PNC Bank, N.A., and PFPC Trust Company.
HARRIS INSIGHT FUNDS
Harris Insight Government Money Market Fund
Harris Insight Money Market Fund
Harris Insight Tax-Exempt Money Market Fund
Harris Insight Short/Intermediate Bond 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 Convertible Securities Fund
Harris Insight Equity Fund
Harris Insight Equity Income Fund
Harris Insight Growth Fund
Harris Insight Small-Cap Opportunity Fund
Harris Insight Small-Cap Value Fund
Harris Insight Index Fund
Harris Insight Balanced Fund
Harris Insight International Fund
Harris Insight Emerging Markets Fund
HARRIS INSIGHT FUNDS TRUST
By: /s/ Philip H. Rinnander
-----------------------
Philip H. Rinnander
Title: President
PNC BANK, N.A. PFPC TRUST COMPANY
By: /s/ Brian Burns By: /s/ Joseph Gramlich
------------------- ---------------------
Brian Burns Joseph Gramlich
Senior Vice President Senior Vice President
HARRIS INSIGHT FUNDS TRUST
3200 Horizon Drive
King of Prussia, PA 19406
April 28, 2000
Harris Trust and Savings Bank
111 West Monroe Street / 6W
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 Administration
Agreement between Harris Trust and Savings Bank ("Harris") and the Trust dated
July 1, 1996; the Sub-Administration and Accounting Services Agreement between
Harris and PFPC Inc. ("PFPC") dated July 1, 1996; the Transfer Agency Agreement
between Harris and the Trust dated July 1, 1996; the Sub-Transfer Agency
services Agreement between Harris and PFPC dated July 1, 1996; the Custodian
Agreement between the Trust and PNC Bank, N.A., dated February 23, 1996; and the
Sub-Custodian Services Agreement among PFPC Trust Company, PNC Bank, N.A. and
the Trust dated February 18, 1999; (each an "Agreement," and collectively, the
"Agreements").
This writing is to provide notice of the addition of five series under
the Trust: Harris Insight Equity Fund, Harris Insight Short/Intermediate Bond
Fund, Harris Insight Money Market Fund, Harris Insight Tax-Exempt Money Market
Fund, and Harris Insight Government Money Market Fund (each a "New Portfolio"
and together, the "New Portfolios"). Each New Portfolio is to be considered a
Fund under each Agreement or to Exhibit A to the Agreements, 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 each
applicable Agreement as is consistent with the particular Agreement or the Fee
Letter Agreement dated May 1, 1999, whichever is applicable.
The Trust requests that you act in the capacity of Transfer Agent with
respect to the New Portfolios while continuing to act as 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/ Philip H. Rinnander
-----------------------
Philip H. Rinnander
President
HARRIS TRUST AND SAVINGS BANK
Accepted: /s/ Peter P. Capaccio
---------------------
Peter P. Capaccio
Senior Vice President
<PAGE>
EXHIBIT A
This Exhibit A, dated as of April 28, 2000, is Exhibit A to the
Transfer Agency Services Agreement dated July 1, 1996 between Harris Insight
Funds Trust and Harris Trust and Savings Bank.
HARRIS INSIGHT FUNDS
Harris Insight Government Money Market Fund
Harris Insight Money Market Fund
Harris Insight Tax-Exempt Money Market Fund
Harris Insight Short/Intermediate Bond 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 Convertible Securities Fund
Harris Insight Equity Fund
Harris Insight Equity Income Fund
Harris Insight Growth Fund
Harris Insight Small-Cap Opportunity Fund
Harris Insight Small-Cap Value Fund
Harris Insight Index Fund
Harris Insight Balanced Fund
Harris Insight International Fund
Harris Insight Emerging Markets Fund
HARRIS INSIGHT FUNDS TRUST
/s/ Philip H. Rinnander
-----------------------
Philip H. Rinnander
President
HARRIS TRUST AND SAVINGS BANK
/s/ Peter P. Capaccio
---------------------
Peter P. Capaccio
Senior Vice President
HARRIS INSIGHT FUNDS TRUST
3200 Horizon Drive
King of Prussia, PA 19406
April 28, 2000
PFPC, Inc.
400 Bellevue Parkway
Wilmington, DE 19809
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 Administration
Agreement between Harris Trust and Savings Bank ("Harris") and the Trust dated
July 1, 1996; the Sub-Administration and Accounting Services Agreement between
Harris and PFPC Inc. ("PFPC") dated July 1, 1996; the Transfer Agency Agreement
between Harris and the Trust dated July 1, 1996; the Sub-Transfer Agency
services Agreement between Harris and PFPC dated July 1, 1996; the Custodian
Agreement between the Trust and PNC Bank, N.A., dated February 23, 1996; and the
Sub-Custodian Services Agreement among PFPC Trust Company, PNC Bank, N.A. and
the Trust dated February 18, 1999; (each an "Agreement," and collectively, the
"Agreements").
This writing is to provide notice of the addition of five series under
the Trust: Harris Insight Equity Fund, Harris Insight Short/Intermediate Bond
Fund, Harris Insight Money Market Fund, Harris Insight Tax-Exempt Money Market
Fund, and Harris Insight Government Money Market Fund (each a "New Portfolio"
and together, the "New Portfolios"). Each New Portfolio is to be considered a
Fund under each Agreement or to Exhibit A to the Agreements, if applicable, and
shall be subject to the terms set forth under the Agreements unless otherwise
provided herein. PFPC shall be compensated for services rendered under each
applicable Agreement as is consistent with the particular Agreement or the Fee
Letter Agreement dated May 1, 1999, whichever is applicable.
The Trust requests that you act in the capacity of Sub-Transfer Agent
with respect to the New Portfolios while continuing to act as Sub-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/ Philip H. Rinnander
-----------------------
Philip H. Rinnander
President
PFPC, INC.
Accepted: /s/ Thomas J. Ryan
--------------------
Thomas J. Ryan
Vice President, Director
cc: Harris Trust and Savings Bank
<PAGE>
EXHIBIT A
This Exhibit A, dated as of April 28, 2000, is Exhibit A to the
Sub-Transfer Agency Services Agreement dated July 1, 1996 between Harris Trust
and Savings Bank and PFPC Inc.
HARRIS INSIGHT FUNDS
Harris Insight Government Money Market Fund
Harris Insight Money Market Fund
Harris Insight Tax-Exempt Money Market Fund
Harris Insight Short/Intermediate Bond 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 Convertible Securities Fund
Harris Insight Equity Fund
Harris Insight Equity Income Fund
Harris Insight Growth Fund
Harris Insight Small-Cap Opportunity Fund
Harris Insight Small-Cap Value Fund
Harris Insight Index Fund
Harris Insight Balanced Fund
Harris Insight International Fund
Harris Insight Emerging Markets Fund
HARRIS TRUST AND SAVINGS BANK
By: /s/ Peter P. Capaccio
-------------------------
Peter P. Capaccio
Title: Senior Vice President
PFPC INC.
By: /s/ Thomas J. Ryan
----------------------
Thomas J. Ryan
Title: Vice President, Director
HARRIS INSIGHT FUNDS TRUST
3200 Horizon Drive
King of Prussia, PA 19406
April 28, 2000
Harris Trust and Savings Bank
111 West Monroe Street / 6W
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 Administration
Agreement between Harris Trust and Savings Bank ("Harris") and the Trust dated
July 1, 1996; the Sub-Administration and Accounting Services Agreement between
Harris and PFPC Inc. ("PFPC") dated July 1, 1996; the Transfer Agency Agreement
between Harris and the Trust dated July 1, 1996; the Sub-Transfer Agency
services Agreement between Harris and PFPC dated July 1, 1996; the Custodian
Agreement between the Trust and PNC Bank, N.A., dated February 23, 1996; and the
Sub-Custodian Services Agreement among PFPC Trust Company, PNC Bank, N.A. and
the Trust dated February 18, 1999; (each an "Agreement," and collectively, the
"Agreements").
This writing is to provide notice of the addition of five series under
the Trust: Harris Insight Equity Fund, Harris Insight Short/Intermediate Bond
Fund, Harris Insight Money Market Fund, Harris Insight Tax-Exempt Money Market
Fund, and Harris Insight Government Money Market Fund (each a "New Portfolio"
and together, the "New Portfolios"). Each New Portfolio is to be considered a
Fund under each Agreement or to Exhibit A to the Agreements, 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 each
applicable Agreement as is consistent with the particular Agreement or the Fee
Letter Agreement dated May 1, 1999, whichever is applicable.
The Trust requests that you act in the capacity of Administrator with
respect to the New Portfolios while continuing to act as Administrator 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/ Philip H. Rinnander
--------------------------
Philip H. Rinnander
President
HARRIS TRUST AND SAVINGS BANK
Accepted: /s/ Peter P. Capaccio
---------------------
Peter P. Capaccio
Senior Vice President
<PAGE>
EXHIBIT A
This Exhibit A, dated as of April 28, 2000, is Exhibit A to the
Administration Agreement dated July 1, 1996 between Harris Insight Funds Trust
and Harris Trust and Savings Bank.
HARRIS INSIGHT FUNDS
Harris Insight Government Money Market Fund
Harris Insight Money Market Fund
Harris Insight Tax-Exempt Money Market Fund
Harris Insight Short/Intermediate Bond 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 Convertible Securities Fund
Harris Insight Equity Fund
Harris Insight Equity Income Fund
Harris Insight Growth Fund
Harris Insight Small-Cap Opportunity Fund
Harris Insight Small-Cap Value Fund
Harris Insight Index Fund
Harris Insight Balanced Fund
Harris Insight International Fund
Harris Insight Emerging Markets Fund
HARRIS INSIGHT FUNDS TRUST
By: /s/ Philip H. Rinnander
---------------------------
Philip H. Rinnander
Title: President
HARRIS TRUST AND SAVINGS BANK
By: /s/ Peter P. Capaccio
-------------------------
Peter P. Capaccio
Title: Senior Vice President
HARRIS INSIGHT FUNDS TRUST
3200 Horizon Drive
King of Prussia, PA 19406
April 28, 2000
PFPC, Inc.
400 Bellevue Parkway
Wilmington, DE 19809
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 Administration
Agreement between Harris Trust and Savings Bank ("Harris") and the Trust dated
July 1, 1996; the Sub-Administration and Accounting Services Agreement between
Harris and PFPC Inc. ("PFPC") dated July 1, 1996; the Transfer Agency Agreement
between Harris and the Trust dated July 1, 1996; the Sub-Transfer Agency
services Agreement between Harris and PFPC dated July 1, 1996; the Custodian
Agreement between the Trust and PNC Bank, N.A., dated February 23, 1996; and the
Sub-Custodian Services Agreement among PFPC Trust Company, PNC Bank, N.A. and
the Trust dated February 18, 1999; (each an "Agreement," and collectively, the
"Agreements").
This writing is to provide notice of the addition of five series under
the Trust: Harris Insight Equity Fund, Harris Insight Short/Intermediate Bond
Fund, Harris Insight Money Market Fund, Harris Insight Tax-Exempt Money Market
Fund, and Harris Insight Government Money Market Fund (each a "New Portfolio"
and together, the "New Portfolios"). Each New Portfolio is to be considered a
Fund under each Agreement or to Exhibit A to the Agreements, if applicable, and
shall be subject to the terms set forth under the Agreements unless otherwise
provided herein. PFPC shall be compensated for services rendered under each
applicable Agreement as is consistent with the particular Agreement or the Fee
Letter Agreement dated May 1, 1999, whichever is applicable.
The Trust requests that you act in the capacity of Sub-Administrator
and Accounting Services Agent with respect to the New Portfolios while
continuing to act as Sub-Administrator and Accounting Services 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/ Philip H. Rinnander
--------------------------
Philip H. Rinnander
President
PFPC, INC.
Accepted: /s/ Thomas J. Ryan
-------------------
Thomas J. Ryan
Vice President, Director
cc: Harris Trust and Savings Bank
<PAGE>
EXHIBIT A
This Exhibit A, dated as of April 28, 2000, is Exhibit A to the
Sub-Administration and Accounting Services Agreement dated July 1, 1996, as
amended May 1, 1999 between Harris Trust and Savings Bank and PFPC Inc.
HARRIS INSIGHT FUNDS
Harris Insight Government Money Market Fund
Harris Insight Money Market Fund
Harris Insight Tax-Exempt Money Market Fund
Harris Insight Short/Intermediate Bond 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 Convertible Securities Fund
Harris Insight Equity Fund
Harris Insight Equity Income Fund
Harris Insight Growth Fund
Harris Insight Small-Cap Opportunity Fund
Harris Insight Small-Cap Value Fund
Harris Insight Index Fund
Harris Insight Balanced Fund
Harris Insight International Fund
Harris Insight Emerging Markets Fund
HARRIS TRUST AND SAVINGS BANK
By: /s/ Peter P. Capaccio
--------------------------
Peter P. Capaccio
Title: Senior Vice President
PFPC INC.
By: /s/ Thomas J. Ryan
----------------------
Thomas J. Ryan
Title: Vice President, Director
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby censent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 14 to the Registration Statement on Form N-1A (No. 33-64915)
of Harris Insight Funds Trust of our report dated February 4, 2000, relating to
the financial statements and financial highlights appearing in the December 31,
1999 Annual Report to Shareholders, which is incorporated by reference in such
Statement of Additional Information. We also consent to the references to us
under the heading "Financial Highlights" in such Prospectuses and under the
heading "Independent Accountants and Reports to Shareholders" in such Statement
of Additional Information.
/s/PricewaterhouseCooper LLP
PricewaterhouseCooper LLP
Philadelphia, Pennsylvania
April 26, 2000
HARRIS INSIGHT FUNDS TRUST
SERVICE PLAN
N SHARES--MONEY MARKET FUNDS
[adopted pursuant to Rule 12b-1]
This Service Plan (the "Service Plan") is adopted by Harris Insight
Funds Trust, a Massachusetts business trust (the "Company"), on behalf of the N
Shares class of the Harris Insight Money Market Fund, Harris Insight Government
Money Market Fund and Harris Insight Tax-Exempt Money Market Fund (each, a
"Fund" and collectively, the "Funds"), each of which is a portfolio of the
Company, pursuant to Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), subject to the following terms and
conditions:
SECTION 1. COMPENSATION.
Any officer of the Company is authorized to execute and deliver, in the
name and on behalf of the Company and of each Fund's N Shares class, written
agreements in substantially the form attached hereto or in any other form duly
approved by the Board of Trustees of the Company ("Servicing Agreements") with
financial institutions such as banks, securities dealers or other industry
professionals, such as investment advisers, accountants, and estate planning
firms ("Service Organizations"). Such Servicing Agreements shall require the
Service Organizations to provide services on behalf of the applicable Fund as
set forth therein to their customers who beneficially own N Shares in
consideration of fees, computed daily and paid monthly in the manner set forth
in the Servicing Agreements, at an annual rate of 0.10% of the average daily net
asset value of N Shares held by a Service Organization on behalf of its
customers. Such Servicing Agreements shall also require a Service Organization
to agree that it would waive such portion of any payments made to it pursuant to
the relevant Servicing Agreement to the extent necessary to assure that
payments, if any, required to be accrued by any class of Fund shares on any day
do not exceed the income to be accrued to such class on that day. All expenses
incurred by the Company in connection with a Servicing Agreement and the
implementation of this Service Plan with respect to a particular class of shares
of a Fund shall be borne entirely by the holders of that class of shares of that
Fund.
SECTION 2. PAYMENTS BY THE FUNDS' DISTRIBUTOR, INVESTMENT
ADVISER AND/OR PORTFOLIO MANAGEMENT AGENT.
Pursuant to the Service Plan, the Funds' distributor, investment
adviser and/or portfolio management agent may provide payments (i) to Service
Organizations for providing the various services described in Servicing
Agreements and (ii) for sales, marketing and distribution services and expenses,
including the distribution of sales literature and advertising provided by the
distributor of Fund shares. Payments made by the Funds' distributor, investment
adviser and/or portfolio management agent,
<PAGE>
respectively, shall be made from their own resources without reimbursement
by the Funds.
SECTION 3. APPROVAL BY SHAREHOLDERS.
The Service Plan will not take effect with respect to a Fund, and no
fee will be payable in accordance with Section 1 of the Service Plan, until the
Service Plan has been approved by a vote of at least a majority of the
outstanding voting securities of the Fund.
SECTION 4. APPROVAL BY TRUSTEES.
Neither the Service Plan nor any related agreements will take effect
with respect to a Fund until approved by a majority vote of both (a) the full
Board of Trustees of the Company and (b) those Trustees who are not interested
persons of the Company and who have no direct or indirect financial interest in
the operation of the Service Plan or in any agreements related to it (the
"Independent Trustees"), cast in person at a meeting called for the purpose of
voting on the Service Plan and the related agreements.
SECTION 5. CONTINUANCE OF THE SERVICE PLAN.
The Service Plan will continue in effect from year to year with respect
to a Fund, so long as its continuance is specifically approved annually by vote
of the Company's Board of Trustees in the manner described in Section 4 above.
SECTION 6. TERMINATION.
The Service Plan may be terminated with respect to a Fund at any time,
without penalty, by vote of a majority of the Independent Trustees or by a vote
of a majority of the outstanding voting securities of the Fund.
SECTION 7. AMENDMENTS.
The Service Plan may not be amended with respect to a Fund to increase
materially the amount of the fees described in Section 1 above, unless the
amendment is approved by a vote of a majority of the outstanding voting
securities of the Fund, and all material amendments to the Service Plan must
also be approved by the Company's Board of Trustees in the manner described in
Section 4 above.
SECTION 8. SELECTION OF CERTAIN TRUSTEES.
While the Service Plan is in effect, the selection and nomination of
the Company's Trustees who are not interested persons of the Company will be
committed to the discretion of the Trustees then in office who are not
interested persons of the Company.
2
<PAGE>
SECTION 9. WRITTEN REPORTS.
In each year during which the Service Plan remains in effect with
respect to a Fund, the Company's administrator or co-administrator will prepare
and furnish to the Company's Board of Trustees, and the Board will review, at
least quarterly, written reports, complying with the requirements of the Rule,
that set out the amounts expended under the Service Plan relating to the Fund
and the purposes for which those expenditures were made.
SECTION 10. PRESERVATION OF MATERIALS.
The Company will preserve copies of the Service Plan, any agreement
relating to the Service Plan and any report made pursuant to Section 9 above,
for a period of not less than six years (the first two years in an easily
accessible place) from the date of the Service Plan, agreement or report.
SECTION 11. MEANINGS OF CERTAIN TERMS.
As used in the Service Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed to have the same
meaning that those terms have under the 1940 Act and the rules and regulations
under the 1940 Act, subject to any exemption that may be granted to the Company
under the 1940 Act by the Securities and Exchange Commission.
Dated: 28 April 2000
3
<PAGE>
HARRIS INSIGHT(R) FUNDS
SHAREHOLDER SERVICING AGREEMENT
[pursuant to Rule 12b-1]
AGREEMENT, dated as of _____________, by and between
_____________________ and _____________________, as A shareholder servicing
agent hereunder (the "Agent"), relating to transactions in shares of beneficial
interest of the N Shares class (the "Shares") of any of the money market
portfolios (Harris Insight Money Market Fund, Harris Insight Government Money
Market Fund and Harris Insight Tax-Exempt Money Market Fund (each, a "Fund",
and, collectively, the "Funds") offered by Harris Insight Funds Trust (the
"Company").
_____________________ and the Agent hereby agree as follows:
1. Appointment. The Agent hereby agrees to perform certain services for
its customers (the "Customers") as hereinafter set forth. The Agent's
appointment hereunder is non-exclusive, and the parties recognize and agree
that, from time to time, _____________________ may enter into other shareholder
servicing agreements, in writing, with other institutions.
2. Services to be Performed. The Agent, as agent for its Customers,
shall be responsible for performing shareholder administrative support services,
which will include one or more of the following: (i) establishing and
maintaining shareholder accounts and records; (ii) processing purchase and
redemption transactions; (iii) 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
Agent; (iv) arranging for bank wires; (v) responding to Customer inquiries
relating to the Fund; (vi) performing subaccounting with respect to Fund shares
beneficially owned by the customer; (vii) investing customer cash account
balances automatically in Fund shares; (viii) assisting Customers in changing
dividend options, account designations and addresses; and (ix) distribution and
such other services if requested by the _____________________ to the extent the
Agent is permitted by applicable statute, rule or regulation.
The Agent shall provide all personnel and facilities necessary in order
for it to perform the functions described in this Section 2 with respect to its
Customers.
3. Fees
3.1 Fees from [_____________________]. In consideration for the
services described in Section 2 hereof and the incurring of expenses in
connection therewith, the Agent shall receive a fee from _____________________,
computed daily and payable monthly, at an annual rate of 0.10% of 1% of the
average daily net asset value of Shares of each Fund held of record by the Agent
from time to time on behalf of Customers. For
<PAGE>
purposes of determining the fees payable to the Agent hereunder, the value of
the Fund's net assets shall be computed in the manner specified in the Company s
then-current prospectus and statement of additional information (the
"Prospectus") for computation of the net asset value of _____________________
Shares.
3.2 Fees from Customers. It is agreed that the Agent may impose certain
conditions on Customers, in addition to or different from those imposed by the
Company, such as requiring a minimum initial investment or imposing limitations
on the amounts of transactions. It is also understood that the Agent may
directly credit or charge fees to Customers in connection with an investment in
the Funds. The Agent shall credit or bill Customers directly for such credits or
fees. In the event the Agent charges Customers such fees, it shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Company
pursuant to Section 3.1 of this Agreement. It is understood, however, that in no
event shall the Agent have recourse or access as Agent or otherwise to the
account of any shareholder of the Company except to the extent expressly
authorized by law or by such shareholder, or to any assets of the Company, for
payment of any direct fees referred to in this Section 3.2.
4. Approval of Materials to be Circulated. Advance copies or proofs of
all materials that are to be generally circulated or disseminated by the Agent
to Customers or prospective Customers that identify or describe the Company
shall be provided to the Company at least 10 days prior to such circulation or
dissemination (unless the Company consents in writing to a shorter period), and
such materials shall not be circulated or disseminated or further circulated or
disseminated at any time after the Company shall have given written notice to
the Agent of any objection thereto.
The Agent is not authorized to make any representations concerning
_____________________ or the Company except those contained in the current
Prospectus for the Funds, or in such supplemental literature or advertising as
may be authorized by _____________________ in writing.
Nothing in this Section 4 shall be construed to make
_____________________ or the Company liable for the use of any information about
the Company which is disseminated by the Agent.
5. Compliance with Laws. The Agent shall comply with all
applicable federal and state laws and regulations in the performance of its
duties under this Agreement, including securities laws.
6. Limitations of Shareholder, Officer and Trustee Liability. The Agent
hereby agrees that obligations assumed by _____________________ pursuant to this
Agreement shall be limited in all cases to _____________________ and its assets
and that the Agent shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Company. It is further agreed that the
Agent shall not seek
2
<PAGE>
satisfaction of any such obligations from the Board of Trustees, any individual
Trustee or any officer of the Company.
7. Notices. All notices or other communications hereunder to either
party shall be in writing or by confirming telegram, cable, telex or facsimile
sending device. Notices shall be addressed: (a) if to
[name and address],
Attention: [ ];
and (b) if to the Agent,
[name and address],
Attention: [ ].
8. Further Assurance. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
9. Termination. This Agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Qualified Trustees or by
vote of a majority of the outstanding voting securities of the Company, on not
more than 60 days' written notice to any other party to this Agreement. This
Agreement shall terminate automatically in the event of its assignment, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"). As
used in this Agreement, "Qualified Trustees" means the Trustees of the Company
who are not "interested persons," as that term is defined in the 1940 Act, of
the Company and have no direct or indirect financial interest in the operation
of the Service Plans, adopted in accordance with Rule 12b-1 under the 1940 Act,
or in any agreements related to the Service Plan.
10. Changes; Amendments. This Agreement may be changed or amended only
by written instrument signed by both parties.
11. Reports. The Agent will provide _____________________ or its
designees such information as _____________________ or its designees may
reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein), and
will otherwise cooperate with the Company and its designees (including, without
limitation, any auditors designated by the Company), in connection with the
preparation of reports to the Company's Board of Trustees concerning this
Agreement and the monies paid or payable under this Agreement, as well as any
other reports or filings that may be required by law.
12. Independent Contractor/Liabilities. For purposes of this Agreement,
the Agent will be deemed to be an independent contractor, and will have no
authority to act as agent for _____________________ or the Company in any matter
or in any respect. By the Agent's written acceptance of this Agreement, the
Agent agrees to and does
3
<PAGE>
release, indemnify and hold harmless _____________________ and the Company from
and against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by the Agent or its officers,
employees or agents regarding its responsibilities hereunder or the purchase,
redemption, transfer or registration of Shares by or on behalf of Customers.
13. Governing Law. This Agreement shall be governed by the lawsof the
Commonwealth of Massachusetts.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
----------------------
By:
Title:
----------------------
By:
Title:
<PAGE>
HARRIS INSIGHT FUNDS TRUST
SERVICE PLAN--N SHARES
[not pursuant to Rule 12b-1]
This Service Plan (the "Service Plan") is adopted by Harris Insight
Funds Trust, a Massachusetts business trust (the "Company"), on behalf of the N
Shares class of the Harris Insight Money Market Fund, Harris Insight Government
Money Market Fund, Harris Insight Tax-Exempt Money Market Fund, Harris Insight
Equity Fund, Harris Insight Short/Intermediate Bond Fund, Harris Insight
Convertible Fund, 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 Tax-Exempt Intermediate Bond
Fund, Harris Insight Tax-Exempt Bond Fund, Harris Insight Small-Cap Value Fund
and Harris Insight Emerging Markets Fund (each, a "Fund" and collectively, the
"Funds"), each of which is a portfolio of the Company subject to the following
terms and conditions:
SECTION 1. COMPENSATION.
Any officer of the Company is authorized to execute and deliver, in the
name and on behalf of the Company and of each Fund's N Shares class, written
agreements in substantially the form attached hereto or in any other form duly
approved by the Board Members of the Company ("Servicing Agreements") with
financial institutions such as banks, securities dealers or other industry
professionals, such as investment advisers, accountants, and estate planning
firms ("Service Organizations"). Such Servicing Agreements shall require the
Service Organizations to provide services on behalf of the applicable Fund as
set forth therein to their customers who beneficially own N Shares in
consideration of fees, computed daily and paid monthly in the manner set forth
in the Servicing Agreements, at an annual rate of 0.25% of the average daily net
asset value of N Shares held by a Service Organization on behalf of its
customers. Such Servicing Agreements shall also require a Service Organization
to agree that it would waive such portion of any payments made to it pursuant to
the relevant Servicing Agreement to the extent necessary to assure that
payments, if any, required to be accrued by any class of Fund shares on any day
do not exceed the income to be accrued to such class on that day. All expenses
incurred by the Company in connection with a Servicing Agreement and the
implementation of this Service Plan with respect to a particular class of shares
of a Fund shall be borne entirely by the holders of that class of shares of that
Fund.
<PAGE>
SECTION 2. PAYMENTS BY THE FUNDS' DISTRIBUTOR, INVESTMENT ADVISER
AND/OR PORTFOLIO MANAGEMENT AGENT.
Pursuant to the Service Plan, the Funds' distributor, investment
adviser and/or portfolio management agent may provide payments to Service
Organizations for providing the various services described in Servicing
Agreements. Payments made by the Funds' distributor, investment adviser and/or
portfolio management agent, respectively, shall be made from their own resources
without reimbursement by the Funds.
SECTION 3. APPROVAL BY BOARD MEMBERS.
Neither the Service Plan nor any related agreements will take effect
with respect to a Fund until approved by a majority vote of both (a) the full
Board Members of the Company and (b) those Board Members who are not interested
persons of the Company and who have no direct or indirect financial interest in
the operation of the Service Plan or in any agreements related to it (the
"Independent Board Members"), cast in person at a meeting called for the purpose
of voting on the Service Plan and the related agreements.
SECTION 4. CONTINUANCE OF THE SERVICE PLAN.
The Service Plan will continue in effect from year to year with respect
to a Fund, so long as its continuance is specifically approved annually by vote
of the Company's Board Members in the manner described in Section 4 above.
SECTION 5. TERMINATION.
The Service Plan may be terminated with respect to a Fund at any time,
without penalty, by vote of a majority of the Independent Board Members or by a
vote of a majority of the outstanding voting securities of the Fund.
SECTION 6. AMENDMENTS.
The Service Plan may not be amended with respect to a Fund to increase
materially the amount of the fees described in Section 1 above, unless the
amendment is approved by a vote of a majority of the outstanding voting
securities of the Fund, and all material amendments to the Service Plan must
also be approved by the Company's Board Members in the manner described in
Section 4 above.
SECTION 7. SELECTION OF CERTAIN BOARD MEMBERS.
While the Service Plan is in effect, the selection and nomination of
the Company's Board Members who are not interested persons of the Company will
be committed to the discretion of the Board Members then in office who are not
interested persons of the Company.
2
<PAGE>
SECTION 8. WRITTEN REPORTS.
In each year during which the Service Plan remains in effect with
respect to a Fund, the Company's administrator or co-administrator will prepare
and furnish to the Company's Board Members, and the Board will review, at least
quarterly, written reports that set out the amounts expended under the Service
Plan relating to the Fund and the purposes for which those expenditures were
made.
SECTION 9. PRESERVATION OF MATERIALS.
The Company will preserve copies of the Service Plan, any agreement
relating to the Service Plan and any report made pursuant to Section 9 above,
for a period of not less than six years (the first two years in an easily
accessible place) from the date of the Service Plan, agreement or report.
SECTION 10. MEANINGS OF CERTAIN TERMS.
As used in the Service Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed to have the same
meaning that those terms have under the Investment Company Act of 1940, as
amended (the "1940 Act") and the rules and regulations under the 1940 Act,
subject to any exemption that may be granted to the Company under the 1940 Act
by the Securities and Exchange Commission.
Dated: 28 April 2000
<PAGE>
HARRIS INSIGHT(R) FUNDS
SHAREHOLDER SERVICING AGREEMENT
[not pursuant to Rule 12b-1]
AGREEMENT, dated as of _____________, by and between
_____________________ and _____________________, as A shareholder servicing
agent hereunder (the "Agent"), relating to transactions in shares of beneficial
interest of the N Shares class (the "Shares") of any of the investment
portfolios (the "Funds") offered by Harris Insight Funds Trust (the "Company").
_____________________ and the Agent hereby agree as follows:
1. Appointment. The Agent hereby agrees to perform certain services for
its customers (the "Customers") as hereinafter set forth. The Agent's
appointment hereunder is non-exclusive, and the parties recognize and agree
that, from time to time, _____________________ may enter into other shareholder
servicing agreements, in writing, with other institutions.
2. Services to be Performed. The Agent, as agent for its Customers,
shall be responsible for performing shareholder administrative support services,
which will include one or more of the following: (i) establishing and
maintaining shareholder accounts and records; (ii) processing purchase and
redemption transactions; (iii) 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
Agent; (iv) arranging for bank wires; (v) responding to Customer inquiries
relating to the Fund; (vi) performing subaccounting with respect to Fund shares
beneficially owned by the customer; (vii) investing customer cash account
balances automatically in Fund shares; (viii) assisting Customers in changing
dividend options, account designations and addresses; and (ix) such other
services if requested by the _____________________ to the extent the Agent is
permitted by applicable statute, rule or regulation.
The Agent shall provide all personnel and facilities necessary in order
for it to perform the functions described in this Section 2 with respect to its
Customers.
3. Fees
3.1 Fees from [_____________________]. In consideration for the
services described in Section 2 hereof and the incurring of expenses in
connection therewith, the Agent shall receive a fee from _____________________,
computed daily and payable monthly, at an annual rate of .25% of 1% of the
average daily net asset value of Shares of each Fund held of record by the Agent
from time to time on behalf of Customers. For purposes of determining the fees
payable to the Agent hereunder, the value of the Fund's
<PAGE>
net assets shall be computed in the manner specified in the Company s
then-current prospectus and statement of additional information (the
"Prospectus") for computation of the net asset value of _____________________
Shares.
3.2 Fees from Customers. It is agreed that the Agent may impose certain
conditions on Customers, in addition to or different from those imposed by the
Company, such as requiring a minimum initial investment or imposing limitations
on the amounts of transactions. It is also understood that the Agent may
directly credit or charge fees to Customers in connection with an investment in
the Funds. The Agent shall credit or bill Customers directly for such credits or
fees. In the event the Agent charges Customers such fees, it shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Company
pursuant to Section 3.1 of this Agreement. It is understood, however, that in no
event shall the Agent have recourse or access as Agent or otherwise to the
account of any shareholder of the Company except to the extent expressly
authorized by law or by such shareholder, or to any assets of the Company, for
payment of any direct fees referred to in this Section 3.2.
4. Approval of Materials to be Circulated. Advance copies or proofs of
all materials that are to be generally circulated or disseminated by the Agent
to Customers or prospective Customers that identify or describe the Company
shall be provided to the Company at least 10 days prior to such circulation or
dissemination (unless the Company consents in writing to a shorter period), and
such materials shall not be circulated or disseminated or further circulated or
disseminated at any time after the Company shall have given written notice to
the Agent of any objection thereto.
The Agent is not authorized to make any representations concerning
_____________________ or the Company except those contained in the current
Prospectus for the Funds, or in such supplemental literature or advertising as
may be authorized by _____________________ in writing.
Nothing in this Section 4 shall be construed to make
_____________________ or the Company liable for the use of any information about
the Company which is disseminated by the Agent.
5. Compliance with Laws. The Agent shall comply with all applicable
federal and state laws and regulations in the performance of its duties under
this Agreement, including securities laws.
6. Limitations of Shareholder, Officer and Board Member Liability. The
Agent hereby agrees that obligations assumed by _____________________ pursuant
to this Agreement shall be limited in all cases to _____________________ and its
assets and that the Agent shall not seek satisfaction of any such obligation
from the shareholders or any shareholder of the Company. It is further agreed
that the Agent shall not seek
2
<PAGE>
satisfaction of any such obligations from the Board Members, any individual
Board Member or any officer of the Company.
7. Notices. All notices or other communications hereunder to either
party shall be in writing or by confirming telegram, cable, telex or facsimile
sending device. Notices shall be addressed: (a) if to
[name and address],
Attention: [ ];
and (b) if to the Agent,
[name and address],
Attention: [ ].
8. Further Assurance. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
9. Termination. This Agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Qualified Board Members or
by vote of a majority of the outstanding voting securities of the Company, on
not more than 60 days' written notice to any other party to this Agreement. This
Agreement shall terminate automatically in the event of its assignment, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"). As
used in this Agreement, "Qualified Board Members" means the Board Members of the
Company who are not "interested persons," as that term is defined in the 1940
Act, of the Company and have no direct or indirect financial interest in the
operation of the Service Plans, or in any agreements related to the Service
Plan.
10. Changes; Amendments. This Agreement may be changed or amended only
by written instrument signed by both parties.
11. Reports. The Agent will provide _____________________ or its
designees such information as _____________________ or its designees may
reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein), and
will otherwise cooperate with the Company and its designees (including, without
limitation, any auditors designated by the Company), in connection with the
preparation of reports to the Company's Board Members concerning this Agreement
and the monies paid or payable under this Agreement, as well as any other
reports or filings that may be required by law.
12. Independent Contractor/Liabilities. For purposes of this Agreement,
the Agent will be deemed to be an independent contractor, and will have no
authority to act as agent for _____________________ or the Company in any matter
or in any respect. By the Agent's written acceptance of this Agreement, the
Agent agrees to and does
3
<PAGE>
release, indemnify and hold harmless _____________________ and the Company from
and against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by the Agent or its officers,
employees or agents regarding its responsibilities hereunder or the purchase,
redemption, transfer or registration of Shares by or on behalf of Customers.
13. Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
------------------
By:
Title:
------------------
By:
Title:
4
HARRIS INSIGHT FUNDS TRUST
SERVICE PLAN - A SHARES
[adopted pursuant to Rule 12b-1]
This Service Plan (the "Service Plan") is adopted by Harris Insight
Funds Trust, a Massachusetts business trust, (the "Company"), on behalf of the A
Shares class of the Harris Insight Equity Fund, Harris Insight
Short/Intermediate Bond Fund, Harris Insight Equity Income Fund, Harris Insight
Growth Fund, Harris Insight Small-Cap Opportunity Fund, Harris Insight
International Fund, Harris Insight Emerging Markets Fund, Harris Insight
Balanced Fund, Harris Insight Convertible Securities Fund, Harris Insight Bond
Fund, Harris Insight Intermediate Government Bond Fund, Harris Insight
Tax-Exempt Intermediate Bond Fund, Harris Insight Tax-Exempt Bond Fund, and
Harris Insight Small-Cap Value Fund (each, a "Fund" and collectively, the
"Funds"), each of which is a portfolio of the Company, pursuant to Rule 12b-1
(the "Rule") under the Investment Company Act of 1940, as amended (the "1940
Act"), subject to the following terms and conditions:
SECTION 1. COMPENSATION.
Any officer of the Company is authorized to execute and deliver, in the
name and on behalf of the Company and of each Fund's A Shares class, written
agreements in substantially the form attached hereto or in any other form duly
approved by the Board Members of the Company ("Servicing Agreements") with
financial institutions such as banks, securities dealers or other industry
professionals, such as investment advisers, accountants, and estate planning
firms ("Service Organizations"). Such Servicing Agreements shall require the
Service Organizations to provide services on behalf of the applicable Fund as
set forth therein to their customers who beneficially own A Shares in
consideration of fees, computed daily and paid quarterly in the manner set forth
in the Servicing Agreements, at an annual rate of up to 0.25% of the average
daily net asset value of A Shares held by a Service Organization on behalf of
its customers. All expenses incurred by the Company in connection with a
Servicing Agreement and the implementation of this Service Plan with respect to
a particular class of shares of a Fund shall be borne entirely by the holders of
that class of shares of that Fund.
SECTION 2. PAYMENTS BY THE FUNDS' DISTRIBUTOR, INVESTMENT ADVISER
AND/OR PORTFOLIO MANAGEMENT AGENT.
Pursuant to the Service Plan, the Funds' distributor, investment
adviser and/or portfolio management agent may provide payments (i) to Service
Organizations for providing the various services described in Servicing
Agreements and (ii) for sales, marketing and distribution services and expenses,
including the distribution of sales literature and advertising provided by the
distributor of Fund shares. Payments made by the Funds' distributor, investment
adviser and/or portfolio management agent,
1
<PAGE>
respectively, shall be made from their own resources without reimbursement by
the Funds.
SECTION 3. APPROVAL BY SHAREHOLDERS.
The Service Plan will not take effect with respect to a Fund, and no
fee will be payable in accordance with Section 1 of the Service Plan, until the
Service Plan has been approved by a vote of at least a majority of the
outstanding voting securities of the Fund except as provided in the Rule.
SECTION 4. APPROVAL BY DIRECTORS.
Neither the Service Plan nor any related agreements will take effect
with respect to a Fund until approved by a majority vote of both (a) the full
Board Members of the Company and (b) those Board Members who are not interested
persons of the Company and who have no direct or indirect financial interest in
the operation of the Service Plan or in any agreements related to it (the
"Independent Board Members"), cast in person at a meeting called for the purpose
of voting on the Service Plan and the related agreements.
SECTION 5. CONTINUANCE OF THE SERVICE PLAN.
The Service Plan will continue in effect from year to year with respect
to a Fund, so long as its continuance is specifically approved annually by vote
of the Company's Board Members in the manner described in Section 4 above.
SECTION 6. TERMINATION.
The Service Plan may be terminated with respect to a Fund at any time,
without penalty, by vote of a majority of the Independent Board Members or by a
vote of a majority of the outstanding voting securities of the Fund.
SECTION 7. AMENDMENTS.
The Service Plan may not be amended with respect to a Fund to increase
materially the amount of the fees described in Section 1 above, unless the
amendment is approved by a vote of a majority of the outstanding voting
securities of the Fund, and all material amendments to the Service Plan must
also be approved by the Company's Board Members in the manner described in
Section 4 above.
SECTION 8. SELECTION OF CERTAIN BOARD MEMBERS.
While the Service Plan is in effect, the selection and nomination of
the Company's Board Members who are not interested persons of the Company will
be committed to the discretion of the Board Members then in office who are not
interested persons of the Company.
2
<PAGE>
SECTION 9. WRITTEN REPORTS.
In each year during which the Service Plan remains in effect with
respect to a Fund, the Company's administrator or co-administrator will prepare
and furnish to the Company's Board Members, and the Board will review, at least
quarterly, written reports, complying with the requirements of the Rule, that
set out the amounts expended under the Service Plan relating to the Fund and the
purposes for which those expenditures were made.
SECTION 10. PRESERVATION OF MATERIALS.
The Company will preserve copies of the Service Plan, any agreement
relating to the Service Plan and any report made pursuant to Section 9 above,
for a period of not less than six years (the first two years in an easily
accessible place) from the date of the Service Plan, agreement or report.
SECTION 11. MEANINGS OF CERTAIN TERMS.
As used in the Service Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed to have the same
meaning that those terms have under the 1940 Act and the rules and regulations
under the 1940 Act, subject to any exemption that may be granted to the Company
under the 1940 Act by the Securities and Exchange Commission.
Dated: 28 April 2000
3
<PAGE>
HARRIS INSIGHT(R) FUNDS
SHAREHOLDER SERVICING AGREEMENT
A SHARES
[pursuant to Rule 12b-1]
AGREEMENT, dated as of _____________, by and between
_____________________ and _____________________, as A shareholder servicing
agent hereunder (the "Agent"), relating to transactions in shares of beneficial
interest of the A Shares class (the "Shares") of any of the investment
portfolios (the "Funds") offered by Harris Insight Funds Trust (the "Company").
_____________________ and the Agent hereby agree as follows:
1. Appointment. The Agent hereby agrees to perform certain services for
its customers (the "Customers") as hereinafter set forth. The Agent's
appointment hereunder is non-exclusive, and the parties recognize and agree
that, from time to time, _____________________ may enter into other shareholder
servicing agreements, in writing, with other institutions.
2. Services to be Performed. The Agent, as agent for its Customers,
shall be responsible for performing shareholder administrative support services,
which will include one or more of the following: (i) establishing and
maintaining shareholder accounts and records; (ii) processing purchase and
redemption transactions; (iii) 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
Agent; (iv) arranging for bank wires; (v) responding to Customer inquiries
relating to the Fund; (vi) performing subaccounting with respect to Fund shares
beneficially owned by the customer; (vii) investing customer cash account
balances automatically in Fund shares; (viii) assisting Customers in changing
dividend options, account designations and addresses; and (ix) distribution and
such other services if requested by the _____________________ to the extent the
Agent is permitted by applicable statute, rule or regulation.
The Agent shall provide all personnel and facilities necessary in order
for it to perform the functions described in this Section 2 with respect to its
Customers.
3. Fees
3.1 Fees from [_____________________]. In consideration for the
services described in Section 2 hereof and the incurring of expenses in
connection therewith, the Agent shall receive a fee from _____________________,
computed daily and payable monthly, at an annual rate of [.35%] of 1% of the
average daily net asset value of Shares of each Fund held of record by the Agent
from time to time on behalf of Customers. For
4
<PAGE>
purposes of determining the fees payable to the Agent hereunder, the value of
the Fund's net assets shall be computed in the manner specified in the Company s
then-current prospectus and statement of additional information (the
"Prospectus") for computation of the net asset value of _____________________
Shares.
3.2 Fees from Customers. It is agreed that the Agent may impose certain
conditions on Customers, in addition to or different from those imposed by the
Company, such as requiring a minimum initial investment or imposing limitations
on the amounts of transactions. It is also understood that the Agent may
directly credit or charge fees to Customers in connection with an investment in
the Funds. The Agent shall credit or bill Customers directly for such credits or
fees. In the event the Agent charges Customers such fees, it shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Company
pursuant to Section 3.1 of this Agreement. It is understood, however, that in no
event shall the Agent have recourse or access as Agent or otherwise to the
account of any shareholder of the Company except to the extent expressly
authorized by law or by such shareholder, or to any assets of the Company, for
payment of any direct fees referred to in this Section 3.2.
4. Approval of Materials to be Circulated. Advance copies or proofs of
all materials that are to be generally circulated or disseminated by the Agent
to Customers or prospective Customers that identify or describe the Company
shall be provided to the Company at least 10 days prior to such circulation or
dissemination (unless the Company consents in writing to a shorter period), and
such materials shall not be circulated or disseminated or further circulated or
disseminated at any time after the Company shall have given written notice to
the Agent of any objection thereto.
The Agent is not authorized to make any representations concerning
_____________________ or the Company except those contained in the current
Prospectus for the Funds, or in such supplemental literature or advertising as
may be authorized by _____________________ in writing.
Nothing in this Section 4 shall be construed to make _________________
or the Company liable for the use of any information about the Company which
is disseminated by the Agent.
5. Compliance with Laws. The Agent shall comply with all applicable
federal and state laws and regulations in the performance of its duties under
this Agreement, including securities laws.
6. Limitations of Shareholder, Officer and Board Member Liability. The
Agent hereby agrees that obligations assumed by _____________________ pursuant
to this Agreement shall be limited in all cases to _____________________ and its
assets and that the Agent shall not seek satisfaction of any such obligation
from the shareholders or any shareholder of the Company. It is further agreed
that the Agent shall not seek
5
<PAGE>
satisfaction of any such obligations from the Board Members, any individual
Board Member or any officer of the Company.
7. Notices. All notices or other communications hereunder to either
party shall be in writing or by confirming telegram, cable, telex or facsimile
sending device. Notices shall be addressed: (a) if to
[name and address],
Attention: [ ];
and (b) if to the Agent,
[name and address],
Attention: [ ].
8. Further Assurance. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the
purposes hereof.
9. Termination. This Agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Qualified Board Members or
by vote of a majority of the outstanding voting securities of the Company, on
not more than 60 days' written notice to any other party to this Agreement. This
Agreement shall terminate automatically in the event of its assignment, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"). As
used in this Agreement, "Qualified Board Members" means the Board Members of the
Company who are not "interested persons," as that term is defined in the 1940
Act, of the Company and have no direct or indirect financial interest in the
operation of the Service Plan, adopted in accordance with Rule 12b-1 under the
1940 Act, or in any agreements related to the Service Plan.
10. Changes; Amendments. This Agreement may be changed or amended only
by written instrument signed by both parties.
11. Reports. The Agent will provide _____________________ or its
designees such information as _____________________ or its designees may
reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein), and
will otherwise cooperate with the Company and its designees (including, without
limitation, any auditors designated by the Company), in connection with the
preparation of reports to the Company's Board Members concerning this Agreement
and the monies paid or payable under this Agreement, as well as any other
reports or filings that may be required by law.
12. Independent Contractor/Liabilities. For purposes of this Agreement,
the Agent will be deemed to be an independent contractor, and will have no
authority to act as agent for _____________________ or the Company in any matter
or in any respect. By the Agent's written acceptance of this Agreement, the
Agent agrees to and does
6
<PAGE>
release, indemnify and hold harmless _____________________ and the Company from
and against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by the Agent or its officers,
employees or agents regarding its responsibilities hereunder or the purchase,
redemption, transfer or registration of Shares by or on behalf of Customers.
13. Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
--------------------
By:
Title:
--------------------
By:
Title:
7
HANSBERGER GLOBAL INVESTORS, INC.
AMENDED CODE OF ETHICS
The success of Hansberger Global Investors, Inc. ("HGII") depends on public
confidence in our integrity and professionalism. To reinforce that confidence,
employees must always avoid activities, interests and relationships that might
interfere with making decisions in the best interest of the client and the firm.
The following are some of the areas in which conflicts of interest may arise.
L. DEFINITIONS
A. "Access Person" means any director of the Company or Employee
who, in connection with regular functions or duties, makes,
participates in, or has the ability to obtain information
regarding the purchase or sale of a security by a Company
client, or whose functions relate to the making of any
recommendations with respect to such purchases or sales. In
the event that any individual or company should be in a
control relationship to a client or the Company, the term
"Access Person" would include such an individual or company to
the same extent as an Employee of the client or the Company.
B. "Adviser's Act" means the U.S. Investment Advisers Act of
1940, as amended.
C "Employee" means any officer or employee of the Company, but
does not mean any Outside Director.
D. "Employee Account" means all accounts in the name of or for
the benefit of an Employee, his or her spouse, dependent
children or any person living with an Employee or to whom an
Employee contributes economic support, as well as any other
account with respect to which an Employee exercises investment
discretion or provides investment advice.
E. "Company" means HGII and its subsidiaries.
F. "Compliance Department" means the Company's compliance
department located in Fort Lauderdale, Florida.
G. "Director of Compliance" means Kimberley A. Scott.
H. "1940 Act" means the U.S. Investment Company Act of 1940, as
amended.
I. "Investment Personnel" means portfolio managers, security
analysts, traders and other Employee who provide information
and advice to a portfolio manager or who assist in the
execution of a portfolio manager's decision.
J. "Legal Department" means the Company's legal department
located in Fort Lauderdale, Florida.
K. "Outside Director" means a director of the Company who is not
an "interested person" of the Company within the meaning of
Section 2(a)(19)(B) of the 1940 Act.
L. "Portfolio Manager" means any person who exercises investment
discretion on behalf of the Company or any Company client.
M. "Security" refers not only to the instruments set forth in
Section 2(a)(36) of the 1940 Act, or the instruments set forth
in Section 202(a)(18) of the Adviser's Act, but to any
instrument into which such instrument may be converted, any
warrant of any issuer that has issued the instrument, and any
option, such as a put, call, straddle or spread (whether or
not such option is "covered") relating to an instrument. In
addition, security means any future or option Commodity
transaction. It does not include (a) any instrument
representing a direct obligation of the United States
Government, (b) any instrument issued by an open-end
investment company, or (c) any instrument issued by an unit
investment trust.
1
<PAGE>
II. STANDARDS OF CONDUCT FOR PERSONAL SECURITIES TRANSACTIONS
The following rules are intended to provide guidance to Employees with
respect to personal securities transactions.
A. EMPLOYEES
The following prohibitions are applicable to Employees.
1. Employees are prohibited from the following
activities unless they have obtained prior written
approval from the Director of Compliance or the Legal
Department:
a. Employees may not join an investment club
or enter into an investment partnership;
b. Employees may not purchase for their own
account a security in a private placement;
c. Employees may not purchase shares in
closed-end investment companies distributed
by the Company; and
d. Employees may not serve on the boards of
directors of either publicly traded or
privately held companies nor may they serve
as members of any creditor committees.
2. Employees shall not open or maintain a brokerage
account for their own account or for any Beneficial
Account unless the Employee directs the broker to
provide duplicate confirmations and account
statements to the Compliance Department.
3. For the purpose of purchasing Company sponsored
mutual funds at net asset value, Employees may have
joint accounts only with spouses, their children
under age 21, parents, step-parents, parents-in-law,
brothers, sisters, grandchildren or grandparents and
a trustee or custodian of any qualified pension or
profit sharing plan or IRA established for the
benefit of such persons.
4. Employees shall not purchase securities during an
initial public offering.
5. No Employee shall execute a Securities transaction on
a day during which a client advised by the Company
has a pending "buy" or "sell" order in such Security.
6. No Employee shall purchase or sell any Security for
their account or for any Beneficial Account unless
the proposed purchase or sale has been reported to
and pre-cleared by the Director of Compliance or in
his or her absence the Legal Department.
a. This pre-clearance requirement shall not apply
to:
1) Securities issued by the U.S. Government or
by any open-end investment company;
2) Money market instruments;
3) The acquisition of securities through
automatic dividend reinvestment plans;
4) The exercise of pro rata rights; and
5) Purchases or sales through any profit sharing,
pension or other benefit plan of the Company.
2
<PAGE>
b. All proposed personal securities
transactions shall be documented either on a
Personal Security Trade Authorization Form
(a copy of which is attached as Exhibit A)
or on an electronic form provided on the
Employee's personal computer and forwarded
to the Director of Compliance.
c. Subject to the further provisions set forth
herein, the Director of Compliance or in his
or her absence, the General Counsel, as the
case may be, shall pre-clear the purchase or
sale of a Security if the transaction does
not violate the Company's Code of Ethics.
Such determination shall be by:
1) Reviewing the portfolios managed by the
Company; and
2) Determining if the security is currently
on the Company's then current research
database or is then currently
under consideration for adding to the
Company's database pending review by the
Company's research committee.
d. In the event the proposed trade does not
appear to violate the Company's Code of
Ethics, or any other Code of Ethics
applicable to HGI and its employees, the
Director of Compliance, or in his or her
absence, the General Counsel, will authorize
the Employee to execute the trade.
1) The Director of Compliance shall execute
the Trade Authorization Form.
2) The Director of Compliance shall
communicate authorization of the
trade to the Employee.
3) The time at which the trade authorization
is communicated to the Employee shall be
documented on the Authorization Form.
e. The trade authorization is effective for the
remainder of the trading day unless otherwise
indicated by the Director of Compliance.
f. The Director of Compliance shall maintain the
originally executed Authorization Form. A copy
of the executed Authorization Form will be
available to the Employee upon request.
7. All Employees and Outside Directors shall report all
security transactions to the Compliance Department
within ten (10) calendar days after the end of each
calendar quarter. The report shall contain the date
of the transaction; the title, number of shares, and
nature of the transaction; the price at which the
transaction was effected; and the name of the broker,
dealer or bank which or through whom the transaction
was effected. Reports shall be made on forms sent to
the Employees and Outside Directors every quarter.
8. Employees shall not profit from the purchase and
sale, or sale and purchase, of the same or equivalent
Securities within 60 calendar days. Any profits
realized on such trades shall be disgorged to a
charitable organization.
9. All Employees shall disclose all personal and
beneficial Securities holdings upon the commencement
of employment and thereafter on an annual basis to
the Compliance Department.
10. Employees may not speak in or to the media, on or
off the record, regarding any security without the
prior authorization of the Chief Compliance Officer
or the General Counsel.
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11. Access Persons shall not purchase or sell a Security
(or a related Security) within seven (7) calendar
days before or after any advisory client, over which
the Company exercises investment discretion, trades
in such Security. Any profits realized on a trade in
such a Security, within the prescribed period, shall
be disgorged.
B. Notwithstanding the foregoing, the Chief Compliance Officer
may approve an Employee's purchase or sale of a Security that
would otherwise violate the provisions set forth above if he
or she determines after appropriate inquiry that the
transaction is consistent with the fiduciary duty owed to the
Company's clients and is not potentially harmful to a client
because: (a) it does not conflict with any Security being
considered for purchase or sale by any current advisory client
and (b) the decision to purchase or sell the Security is not
the result of information obtained in the course of an
Employee's relationship with an advisory client or an adviser.
III. INSIDER TRADING
The following rules are intended to apply to all Employees and Director with
respect to insider trading.
A. IDENTIFYING INSIDE INFORMATION
Before trading for yourself or others, including investment
companies or private accounts managed by the Company in the
securities of a company about which you may have potential
inside information, ask yourself the following questions:
Is the information material? Is this information that an
investor would consider important in making his or her
investment decisions? Is this information that would
substantially affect the market price of the securities if
generally disclosed?
Is the information non-public? To whom has this information
been provided? Has the information been effectively
communicated to the marketplace? (For example, published in
Reuters, The Wall Street Journal or other publications of
general circulation?)
If, after consideration of the above, you believe that the information may be
material and non-public, you should take the following steps:
1. Report the matter immediately to the Compliance Officer.
2. Do not purchase or sell the securities on behalf of
yourself or others, including investment companies or
private accounts managed by the Company.
3. Do not communicate the information inside or outside the
Company, other than to the Compliance Officer.
4. After the Compliance Officer has reviewed the issue, you
will be instructed either to continue the prohibitions
against trading and communication noted in 2. and 3.
above, or you will be allowed to trade and communicate the
information.
B. RESTRICTING ACCESS TO MATERIAL NON-PUBLIC INFORMATION
Information in your possession that is identified as material and non-public may
not be communicated to anyone, including persons within the Company, except as
provided in subparagraph 1 above. In addition, care should be taken so that such
information is secure. For example, files containing material non-public
information should be sealed; access to computer files containing material
non-public information should be restricted.
To implement the proper restriction of access to material non-public
information, various Company employees and/or departments are responsible for
the following:
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1. General Access Control Procedures
The Company has established a process by which access to sensitive company files
that may contain non-public information is carefully limited. Since most of the
Company's files, which have insider-trading implications are stored in
computers, personal identification numbers, passwords and/or code access numbers
are distributed to specified individuals only. This activity is monitored on an
ongoing basis. In addition, access to certain areas of the Company likely to
contain sensitive information, are restricted by access codes.
Employees are made aware of their duties with respect to information being
stored in non-accessible file cabinets. Employees are reminded that they should
log off of their computers once having completed a task so as to limit
information availability; places within the Company where any non-public
information would be accessible are limited; specific fax machines are used to
relay sensitive, potentially non-public information; access to all areas of the
Company are limited through one main reception area so that outsiders are
immediately identified and escorted to their proper destinations; and draft
memoranda that may contain insider information are destroyed immediately after
their use.
2. Personnel Department Procedures
Prior to an individual's formal offer of employment, the Personnel Department
provides the individual with the Company's Policies and Procedures with respect
to insider trading and clarifies that the Company views that the person's
willingness to adhere to these policies and procedures to be a condition
precedent to accepting employment with the Company.
The Compliance Officer assists the Personnel Department by responding to insider
policy questions from prospective employees so that it is clear what they can or
cannot do with respect to insider trading as an employee of the Company.
New hires are provided with an acknowledgment form to execute before formally
commencing employment in which the individual represents that he or she has
received the Company's Procedures on Insider Trading, has read and understood
them, and that continued employment with the Company is dependent upon
compliance with those procedures.
Annually, the Personnel Department elicits a written statement from all Company
employees that they have not violated any of the Company's Insider Trading
Policies and Procedures.
C. SUPERVISORY PROCEDURES FOR EFFECTUATING COMPLIANCE
The roles of the Compliance Department and the Legal Department are critical to
the implementation and maintenance of HGII's Policies and Procedures against
Insider Trading. Supervisory procedures can be divided into three categories -
Prevention of Insider Trading, Detection of Insider Trading and Control of
Inside Information.
1. Prevention of Insider Trading
To prevent insider trading, the Compliance and/or Legal Departments:
a. provide, on a regular basis, an educational program
to familiarize officers, directors and employees
with, and meet on a selective basis with newly
hired personnel to inform them of the Company's
Policies and Procedures;
b. answer questions regarding the Company's Policies
and Procedures;
c. resolve issues of whether information received
by an officer, director or employee of the Company
is material and non-public;
d. review on a regular basis and update as necessary
the Company's Policies and Procedures;
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2. Detection of Insider Trading
To detect insider trading, the Compliance Department is responsible for:
a. reviewing the trading activity reports filed by
each officer, director and employee, with
particular emphasis on employees that have access
to non-public information and sample testing of
all employees;
b. reviewing the trading activity of investment
companies and private accounts managed by the
Company;
c. reviewing the trading activity of the Company's own
account;
d. coordinating the review of such reports with other
appropriate officers, directors or employees of
the Company; and
e. periodically generating reports for management on
those tests.
3. Control of Inside Information
When it has been determined that an officer, director or employee of the Company
has material non-public information, measures will be implemented to prevent
dissemination of such information. For example:
a. All employees of the Company will be notified that
they are prohibited from disclosing to other persons
("tippees") inside information about the issuer in
question and from trading in the securities in
question in "personal securities transactions" or for
the accounts of clients (notwithstanding the
inclusion of such securities on any "recommended to
buy" or "recommended to sell" lists compiled by the
Company), until further notice.
b. Following receipt of notice prohibiting certain
trades and until receipt of further notice, every
employee with material non-public information shall
file with the Compliance Officer, a weekly written
report of all personal securities transactions as
defined in the Company's Code of Ethics, during the
prior week. (This report is in addition to the
standard Form filed with the Compliance Officer.)
c. The Compliance Department will review such reports
weekly as well as the Company's records of trades for
client's accounts in order to determine if these
procedures or the Company's Code of Ethics have been
violated.
d. The Compliance Department will maintain and regularly
update a list of every employee who has indicated or
about whom it has been indicated that he or she has
come into contact with material non-public
information so that it can emphasize these particular
Insiders in its monitoring program.
e. The Compliance Department will place any
written materials containing the inside
information in a confidential file.
4. Special Reports to Management
Promptly upon learning of a violation of the Company's Compliance Procedures for
Insider Trading, the Compliance Department should determine whether a written
report to senior management, the Company Executive Committee, and/or the
appropriate Board of Directors is warranted taking into consideration the nature
of the violation in light of all relevant facts and circumstances.
5. Annual Reports to Management
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On an annual basis, the Compliance Department should prepare a written report to
the Management of the Company setting forth a summary of existing procedures to
detect and prevent insider trading and recommendations for improvement, if any,
and a description of HGII's continuing educational program regarding Insider
Trading, including the dates and attendees of such programs since the last
report to management.
POWER OF ATTORNEY
The undersigned hereby constitute and appoint G. Nicholas Bullat, Blanche O.
Hurt, Peter P. Capaccio, Merrill J. Sklenar, and Timothy R. Kane, and each of
them, with full power to act, their true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, for them and in their name,
place, and stead, in any and all capacities (until revoked in writing) to sign
any or all amendments to the Registration Statement on Form N-1A of Harris
Insight Funds Trust, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commissions, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing,
and ratifying and confirming all that said attorneys-in-fact and agents, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Dated: 24 February 2000.
/s/ C. Gary Gerst /s/ Paula Wolff
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C. Gary Gerst Paula Wolff
/s/ Edgar R. Fiedler /s/ John W. McCarter, Jr.
- --------------------------- ---------------------------
Edgar R. Fiedler John W. McCarter, Jr.
