As filed electronically with the Securities and Exchange Commission
on February 16, 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. 13
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 16
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HARRIS INSIGHT FUNDS TRUST
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(Exact Name of Registrant as Specified in Charter)
Four Falls Corporate Center, 6th Floor, West Conshohocken, PA 19428-2961
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(Address of Principal Executive Offices including Zip Code)
Registrant's Telephone Number, including Area Code: 610.260.6533
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<TABLE>
<CAPTION>
Name and Address of Agent for Service: Copies to:
<S> <C> <C>
Gary M. Gardner, Esq. Cameron S. Avery, Esq. and G. Nicholas Bullat, Esq.
Harris Insight Funds Trust Bell, Boyd & Lloyd Harris Trust & Savings Bank
PFPC Inc. Three First National Plaza 111 West Monroe Street
400 Bellevue Parkway 70 West Madison Street 21st Floor East
Wilmington, DE 19809 Chicago, IL 60602-4207 Chicago, IL 60603
</TABLE>
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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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 __________ pursuant to paragraph (b)
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on __________ pursuant to paragraph (a)(1)
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X on May 1, 2000 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.
1
<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 46
PRICING OF FUND SHARES 49
SHAREHOLDER SERVICES 50
DIVIDENDS AND TAX CONSIDERATIONS 57
DISTRIBUTION ARRANGEMENTS 59
MASTER FUND/FEEDER FUND STRUCTURE 60
FINANCIAL HIGHLIGHTS 60
2
<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.
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT EQUITY FUNDS?
The portfolio manager considers a combination of factors when selecting
portfolio securities:
o Measurable elements, such as the value of assets and the cost of capital
o Economic, financial and market indicators
o A company's financial condition, management and position in its industry
Based on this analysis, the portfolio manager endeavors to identify stocks of
companies that may demonstrate:
o Above-average earnings, sales and asset value growth
o Greater potential value than is perceived by others in the marketplace
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
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)
1999 1998
- -1.52% 8.29%
Best Quarter: Q4 1998 5.92%
Worst Quarter: Q3 1998 -6.35%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
Inception
1 Year (4/16/97)
Balanced Fund -1.52% 10.08%
S&P 500 Stock Index ____% ____%
Lehman Brothers
Aggregate Bond Index ____% ____%
*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.
TERMS TO KNOW
4
<PAGE>
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.
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 CAPITALIZATIONS 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 20.)
o Market risk
o Market segment 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.
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1999 1998 1997 1996 1995 1994
9.68% 22.66% 31.53% 17.62% 36.50%-0.66%
Best Quarter: Q4 1998 19.62%
Worst Quarter: Q3 1998 -11.12%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
Inception
1 Year 5 Years (1/1/94)
5
<PAGE>
Equity Income
Fund 9.68% 23.22% 18.87%
S&P 500
Stock Index ____% ____% ____%
*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 for 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 operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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.
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.
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
CAPITALIZATIONS 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
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)
6
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -1.74% 13.42% 35.45% 24.15% 36.26% -2.05% 18.23% 8.19% 27.29% -7.87%
</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 ____% ____% ____%
*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.
TERMS TO KNOW
MARKET CAPITALIZATION, SEE PAGE 7
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
CAPITALIZATIONS 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
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)
7
<PAGE>
1999 1998 1997 1996 1995 1994 1993
16.22% 24.68% 32.54% 28.60% 36.16% -0.30% 5.96%
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 ____% ____% ____%
*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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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.
TERMS TO KNOW
MARKET CAPITALIZATION, SEE PAGE 7
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
CAPITALIZATIONS). 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
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.
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.22% -4.15% 29.09% 14.50% 26.78% -3.44% 14.68% 15.95% 41.39% -16.52%
</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 ____% ____% ____%
Russell 2000
Value Index** ____% ____% ____%
*A Shares of the Fund commenced operations on September 9, 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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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 will now be 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.
TERMS TO KNOW
MARKET CAPITALIZATION, SEE PAGE 7
SMALL-CAP OPPORTUNITY FUND
WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks to provide capital appreciation.
WHAT IS THE FUND'S INVESTMENT APPROACH?
9
<PAGE>
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
CAPITALIZATIONS). 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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
39.75 0.99% 25.14% 18.53% 25.99% -3.96% 14.85% 18.71% 47.29% -11.79%
</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 ____% ____% ____%
*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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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.
TERMS TO KNOW
10
<PAGE>
MARKET CAPITALIZATION, SEE PAGE 7
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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
26.81% -4.84% -5.21% 4.89% 3.87% 4.11% 24.36% -4.60% 11.77% -22.40%
</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 ____% ____% ____%
11
<PAGE>
*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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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.
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 the 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
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)
1999 1998
64.06% -31.50%
12
<PAGE>
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 ____% ____%
*A Shares of the Fund commenced operations on August 13, 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.
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.
RISK CONSIDERATIONS - EQUITY FUNDS
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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
13
<PAGE>
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 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 may produce 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 smaller 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.
14
<PAGE>
The risks of investing in the various Funds are illustrated in the chart below.
<TABLE>
<CAPTION>
Equity Small-Cap Small-Cap Emerging
Balanced Income Equity Growth Value Opportunity International Markets
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RISKS
Allocation o
Counterparty o o o o o o o o
Credit o o o
Currency rate o o o
Foreign securities o o o o o o o o
Geographic
concentration o o
Interest rate o o o
Leverage o o o o o o o o
Market o o o o o o o o
Market segment o o o o o o
Prepayment o o o
Small company o o o o
Volatility o o o o o
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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 Fees(1) 0.60% 0.70% 0.70% 0.90% 0.80% 1.00% 1.05% 1.25%
- -------------------------------------------------------------------------------------------------------------------------------
Rule 12b-1 Fees(2) 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
- -------------------------------------------------------------------------------------------------------------------------------
15
<PAGE>
Other Expenses 0.38 0.26 0.19 0.21 0.25 0.21 0.28 0.83
- -------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses(1) 1.23% 1.21% 1.14% 1.36% 1.30% 1.46% 1.58% 2.33%
- -------------------------------------------------------------------------------------------------------------------------------
(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.
After these waivers, actual Fund advisory fees and total operating expenses
for the fiscal year ended December 31, 1999 were:
Equity Small-Cap Small-Cap Emerging
Balanced Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
Investment
Advisory Fees 0.50% 0.67% 0.70% 0.89% 0.74% 0.99% 1.05% 0.92%
- -------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1.13% 1.18% 1.14% 1.35% 1.14% 1.45% 1.58% 2.00%
- -------------------------------------------------------------------------------------------------------------------------------
</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. Those fee reductions can be
changed or terminated at any time at the option of Harris Trust. If those
fee reductions had been in effect for the 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 ____%; Equity Income Fund ____%; Equity Fund ____%;
Growth Fund ____%; Small-Cap Value Fund ____%; Small-Cap Opportunity Fund
____%; International Fund ____%; and Emerging Markets Fund ____%.
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 $ 678 $ 676 $ 669 $ 690 $ 685 $ 700 $ 711 $ 783
- -----------------------------------------------------------------------------------------------------------------
Three Years 948 942 922 986 969 1,016 1,050 1,266
- -----------------------------------------------------------------------------------------------------------------
Five Years 1,239 1,229 1,194 1,304 1,274 1,353 1,412 1,774
- -----------------------------------------------------------------------------------------------------------------
Ten Years 2,063 2,042 1,967 2,200 2,137 2,304 2,428 3,164
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
16
<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.
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT FIXED INCOME FUNDS?
The portfolio manager actively manages fixed income investments in pursuit of
attractive investment opportunities. The portfolio manager applies three key
tools in selecting securities:
o Analysis of economic and market conditions affecting the fixed income markets,
including forecasting the direction of interest rates
o Assessment of the yield advantages of different classes of bonds or sectors
of the bond market
o Assessment of the value offered, relative to other investment opportunities,
including an independent review of each issue's credit quality
Based on this analysis, the portfolio manager endeavors to identify bonds that
appear:
o Undervalued relative to the market's expectations
o Positioned to benefit from anticipated changes in interest rates
17
<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.
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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31.75% -2.04% 18.32% 20.77% 18.93% -3.36% 13.52% 17.31% 26.90% -20.62%
</TABLE>
Best Quarter: Q4 1999 25.13%
18
<PAGE>
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 ____% ____% ____%
*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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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.
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.
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.
19
<PAGE>
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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -3.31% 4.62% 8.28% 3.43% 14.16% -7.53% 12.67% 8.09% 11.34% 5.34%
</TABLE>
Best Quarter: Q- 199_ ____%
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 ____% ____% ____%
*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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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.
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 29
20
<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
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)
1999 1998 1997
- -1.16% 6.86% 9.14%
Best Quarter: Q3 1997 3.61%
Worst Quarter: Q1 1997 -0.93%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
21
<PAGE>
Inception
1 Year (4/22/96)
Bond Fund -1.16% 5.36%
Lehman Brothers
Aggregate Bond Index ____% ____%
*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.
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 29
MORTGAGE-BACKED SECURITIES
Debt issues, based on a pool of underlying mortgages, that make interest and
principal payments to investors.
MUNICIPAL SECURITIES, SEE PAGE 31
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 its discounted price
and the full value of the security 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.
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
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
22
<PAGE>
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -0.68% 4.67% 6.14% 2.80% 11.40% -3.33% 8.28% 6.50% 10.75% 6.08%
</TABLE>
Best Quarter: Q_ 199_ ____%
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 ____% ____% N/A **
Lehman
Brothers
3-15 Year
Blend
Municipal
Index*** ____% ____% ____%
*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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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 Lehman Brothers Quality Intermediate Municipal Bond
Index is 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, with maturities between 2 and 17 years, from issues larger than
$50 million dated since 1991. This index better reflects the investment
objectives and policies of the Fund.
TERMS TO KNOW
MUNICIPAL SECURITIES, SEE PAGE 31
ALTERNATIVE MINIMUM TAX, SEE PAGE 31
DOLLAR WEIGHTED AVERAGE MATURITY, SEE PAGE 33
U.S. GOVERNMENT SECURITIES, SEE PAGE 29
SHORT/INTERMEDIATE BOND FUND
23
<PAGE>
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 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
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)
1999 1998 1997 1996 1995 1994 1993 1992
0.56% 6.75% 6.89% 3.51% 13.88% -1.29% 9.91% 5.28%
Best Quarter: Q3 1992 4.62%
Worst Quarter: Q4 1992 -2.13%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
Inception
1 Year 5 Years (4/1/91)
24
<PAGE>
Short/
Intermediate
Bond Fund 0.56% 6.23% 6.35%
Lehman
Brothers
Intermediate
Government
Corporate
Bond Index ____% ____% ____%
* 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.
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 29
MORTGAGE-BACKED SECURITIES, SEE PAGE 33
MUNICIPAL SECURITIES, SEE PAGE 31
ZERO COUPON SECURITIES, SEE PAGE 33
DOLLAR WEIGHTED AVERAGE MATURITY, SEE PAGE 33
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
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
25
<PAGE>
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -1.05% 7.18% 7.56% 3.86% 13.09% -1.93% 8.10% 6.49% 13.30% 8.92%
</TABLE>
Best Quarter: Q_ 199_ ____%
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 ____% ____% ____%
*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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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.
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 29
MORTGAGE-BACKED SECURITIES, SEE PAGE 33
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 33
ASSET-BACKED SECURITIES
Securities collateralized by credit card loans or other accounts receivable.
ZERO COUPON SECURITIES, SEE PAGE 33
RISK CONSIDERATIONS - FIXED INCOME FUNDS
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
26
<PAGE>
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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 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 may produce 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., derivitive 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 other obligations.
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.
<TABLE>
<CAPTION>
Short/ Intermediate
Convertible Tax-Exempt Intermediate Intermediate Government
Securities Bond Bond Tax-Exempt Bond Bond
RISKS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Counterparty o o o o o o
Credit o o o o o o
27
<PAGE>
Foreign securities o o o o
Interest rate o o o o o o
Leverage o o o o o o
Market o o o o o o
Municipal market o o o
Prepayment o o o o o
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Convertible Tax-Exempt Intermediate Short/Intermediate Intermediate
Securities Bond Bond Tax-Exempt Bond Government
Fund Fund Fund Bond Fund Fund Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees(1) 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 Expenses 0.31 0.20 0.23 0.20 0.20 0.26
Total Operating Expenses(1) 1.26% 1.05% 1.13% 1.05% 1.15% 1.16%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Expenses are based on amounts incurred by the Funds during their most recent
fiscal year but do not reflect waivers of advisory fee by Harris Trust. After
these waivers, actual Fund advisory fees and total operating expenses for the
fiscal year ended December 31, 1999 were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Convertible Tax-Exempt Intermediate Short/Intermediate Intermediate
Securities Bond Bond Tax-Exempt Bond Government
Fund Fund Fund Bond Fund Fund Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.61% 0.59(2) 0.37% 0.60%(2) 0.40% 0.24%
Total Operating Expenses 1.17% 1.04% 0.85% 1.05% 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. 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 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 end would have been 0.45%.
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.
28
<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 Tax-Exempt Intermediate Short/Intermediate Intermediate
Securities Bond Bond Tax-Exempt Bond Government
Fund Fund Fund Bond Fund Fund Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year $ 573 $ 552 $ 560 $ 453 $ 463 $ 464
Three Years 832 769 793 672 703 706
Five Years 1,110 1,003 1,044 909 961 966
Ten Years 1,904 1,675 1,763 1,588 1,699 1,710
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<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 $____ billion and was the largest of 28 banks owned
by Harris Bankcorp, Inc. Harris Bankcorp, Inc. is a wholly-owned subsidiary of
Bankmont Financial Corp., which is a wholly-owned subsidiary of Bank of
Montreal, a publicly-traded Canadian banking institution. As of December 31,
1999, Harris Trust managed more than $____ billion in discretionary personal
trust assets, and administered more than $____ 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 sub-portfolio management or sub-sub-portfolio management agreement. This
allows Harris 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%
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
30
<PAGE>
As the portfolio management agent, Harris Investment Management, Inc. (HIM)
manages the investments of all of the Funds and, 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 following persons, 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
31
<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.
INTERNATIONAL FUND
JAMES E. CHANEY, CHIEF INVESTMENT OFFICER (HANSBERGER)
Prior to joining Hansberger in 1996, Mr. Chaney was Executive Vice President of
Templeton Worldwide Inc. and a senior member of its Portfolio
Management/Strategy Committee. While at Templeton, he managed numerous accounts,
including the Foreign Equity Series of Templeton Institutional Funds Inc. He
leads the International Fund's portfolio team, which includes:
John Carl Fenley, CFA, Research Analyst, Global Equities
Victoria Gretzky, Research Analyst
John Hock, Research Analyst
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 Emerging Markets Fund's
portfolio team, which includes:
32
<PAGE>
Francisco Alzuru, Managing Director, Portfolio Manager and Research Analyst
Ajit Dayal, Managing Director of India
Aureole L.W. Foong, Director of Global Emerging Markets Research
Robert Mazuelos, Research Analyst
Vladimir Tyurenkov, Managing Director of Eastern Europe and Russia, Portfolio
Manager and Research Analyst
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT FIXED INCOME FUNDS
INTERMEDIATE GOVERNMENT BOND FUND
SHORT/INTERMEDIATE BOND FUND
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 Short/Intermediate Bond Fund in 1994
o Bond Fund when it commenced operations in 1996
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 Intermediate Government Bond Fund when it commenced operations in 1997
o Short/Intermediate Bond Fund in 1996
o Bond Fund when it commenced operations in 1996
INTERMEDIATE TAX-EXEMPT BOND FUND
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 Intermediate Tax-Exempt Bond Fund in 1998
o Tax-Exempt Bond Fund in 1998
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.
33
<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.
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.
34
<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>
- ------------------------------------------- ----------------------------------------- -----------------------------------------
BY MAIL BY BANK WIRE THROUGH FINANCIAL
INSTITUTIONS/PROFESSIONALS
- ------------------------------------------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
Complete and sign an application for A Call the Funds at 800.625.7073, during Contact your financial institution or
Shares. business hours, to initiate your professional for more information.
purchase.
Important note: Each institution or
Make your check payable to the Harris Please be sure to furnish your taxpayer professional may have its own
Insight Funds. identification number. procedures and requirements for buying
shares and may charge fees.
If you are adding to your existing Then wire your investment to:
account, indicate your Fund account PNC Bank, N.A.
number directly on the check. Philadelphia, PA
ABA# 0310-0005-3 For credit to:
Harris Insight Funds
Mail your application and check to: 85-5093-2950
Harris Insight Funds Re: [Name of Fund] - A Shares
c/o PFPC, Inc. Account No.:
P.O. Box 8952 Account Name:
Wilmington, DE 19899-8952 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 the 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 next share price 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.
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:
35
<PAGE>
EQUITY FUNDS
<TABLE>
<CAPTION>
SALES CHARGE AS A % OF DEALER ALLOWANCE AS
AMOUNT OF PURCHASE SALES CHARGES NET AMOUNT INVESTED % OF OFFERING PRICE*
- -----------------------------------------------------------------------------------------
<S> <C> <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++
- -----------------------------------------------------------------------------------------
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++
- -----------------------------------------------------------------------------------------
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 plan,
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 CDSC, 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.
36
<PAGE>
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.)
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:
CONTINGENT DEFERRED SALES CHARGE AS A %
PERIOD SHARES HELD OF DOLLAR AMOUNT 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 deferred sales charge. 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 within one and two years
o Fourth, from A shares held for less than one year
The 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
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.
37
<PAGE>
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.)
For more information on any of Harris Insight Funds' shareholder services,
please call 800.982.8782.
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.
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.
PLEASE INDICATE WHETHER YOU WOULD LIKE THE ABILITY TO BUY, REDEEM OR EXCHANGE
SHARES BY TELEPHONE OR WIRE WHEN YOU COMPLETE YOUR APPLICATION.
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.
38
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
BY TELEPHONE THROUGH FINANCIAL
BY MAIL AND CHECK BY TELEPHONE AND CHECK AND BANK WIRE INSTITUTION/PROFESSIONAL
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C>
You may sell shares by writing
the Funds at: If you have chosen the If you have chosen the wire Contact your financial
Harris Insight Funds telephone redemption redemption privilege, you institution or professional
c/o PFPC Inc. privilege, you may call may call 800.625.7073, for more information.
P.O. Box 8952 800.625.7073, during during business hours, to
Wilmington, DE 19899-8952 business hours, to sell your sell your shares and have Important note: Each
shares. your proceeds wired to a institution of professional
A check for your proceeds will pre-designated bank account. may have its own procedures
be mailed to you. A check for your proceeds and requirements for selling
will be 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 __ 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 once 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 -
39
<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 is a participant in
a medallion program recognized by the Securities Transfer Association.
For more information on any of Harris Insight Funds' shareholder services,
please call 800.982.8782.
REDEMPTION OF SHARES IN SMALLER ACCOUNTS
Each Fund reserves the right to close a shareholder's account if the value of
the account is reduced below $500 ($250 in the case of a retirement account) and
mail the proceeds to the shareholder, unless the reduction is due to market
activity. However, the shareholder would 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
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
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 reinvested 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,
40
<PAGE>
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
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 net
asset value and credited to your account on the payment date, or paid in cash.
Distribution checks and account statements will be mailed approximately two
business days after the payment date.
TAX CONSIDERATIONS
41
<PAGE>
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
been in 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.
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.
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.
42
<PAGE>
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.
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.
(Insert Tables)
43
<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)
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 (is legally considered part of) this prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 800.982.8782
BY MAIL
Harris Insight Funds
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428-2961
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 Statement of Additional Information)
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 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.
44
<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.
1
<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 60
PRICING OF FUND SHARES 64
SHAREHOLDER SERVICES 66
DIVIDENDS AND TAX CONSIDERATIONS 73
DISTRIBUTION ARRANGEMENTS 75
MASTER FUND/FEEDER FUND STRUCTURE 76
FINANCIAL HIGHLIGHTS 77
2
<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.
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT EQUITY FUNDS?
The portfolio manager considers a combination of factors when selecting
portfolio securities:
o Measurable elements, such as the value of assets and the cost of capital
o Economic, financial and market indicators
o A company's financial condition, management and position in its industry
Based on this analysis, the portfolio manager endeavors to identify stocks of
companies that may demonstrate:
o Above-average earnings, sales and asset value growth
o Greater potential value than is perceived by others in the marketplace
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
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)
1999 1998
- -1.52% 8.29%
Best Quarter: Q4 1998 5.92%
Worst Quarter: Q3 1998 -6.35%
Average Annual Total Return
(as of 12/31/99)
Inception
1 Year (4/16/97)
Balanced Fund -1.52% 10.08%
S&P 500 Stock Index ____% ____%
Lehman Brothers
Aggregate Bond Index ____% ____%
TERMS TO KNOW
Standard & Poor's 500 Stock Index (S&P 500(R))
4
<PAGE>
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.
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
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)
1999 1998 1997 1996 1995 1994 1993
20.14% 27.88% 32.51% 22.47% 36.62% 0.53% 9.23%
Best Quarter: Q4 1998 19.57%
Worst Quarter: Q3 1998 -10.03%
Average Annual Total Return*
(as of 12/31/99)
Inception
1 Year 5 Years (4/1/92)
Index Fund 20.14% 27.78% 19.70%
S&P 500
Stock Index ____% ____% ____%
5
<PAGE>
* 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 for 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 operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940 nor
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.
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.
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 CAPITALIZATIONS 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
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)
1999 1998 1997 1996 1995 1994
9.68% 22.66% 31.53% 17.62% 36.50% -0.66%
Best Quarter: Q4 1998 19.62%
6
<PAGE>
Worst Quarter: Q3 1998 -11.12%
Average Annual Total Return*
(as of 12/31/99)
Inception
1 Year 5 Years (1/1/94)
Equity
Income Fund 9.68% 23.22% 18.87%
S&P 500
Stock Index ____% ____% ____%
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
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.
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
CAPITALIZATIONS 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
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.
7
<PAGE>
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -1.74% 13.42% 35.45% 24.15% 36.26% -2.05% 18.23% 8.19% 27.29% -7.87%
</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 ____% ____% ____%
TERMS TO KNOW
Market capitalization, see page 9.
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
CAPITALIZATIONS 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
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)
8
<PAGE>
1999 1998 1997 1996 1995 1994 1993
16.22% 24.68% 32.54% 28.60% 36.16% -0.30% 5.96%
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 ____% ____% ____%
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
Terms To Know
MARKET CAPITALIZATION, SEE PAGE 9.
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
CAPITALIZATIONS). 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
HOW HAS THE FUND PERFORMED?
9
<PAGE>
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.22% -4.15% 29.09% 14.50% 26.78% -3.44% 14.68% 15.95% 41.39% -16.52%
</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 ____% ____% ____%
Russell 2000
Value Index ** ____% ____% ____%
* 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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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 will now be 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.
TERMS TO KNOW
MARKET CAPITALIZATION, SEE PAGE 9.
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
CAPITALIZATIONS). These securities tend to be represented
10
<PAGE>
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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
39.75% 0.99% 25.14% 18.53% 25.99% -3.96% 14.85% 18.71% 47.29% -11.79%
</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 StockIndex ____% ____% ____%
* 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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
TERMS TO KNOW
MARKET CAPITALIZATION, SEE PAGE 9.
11
<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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
26.81% -4.84% -5.21% 4.89% 3.87% 4.11% 24.36% -4.60% 11.77% -22.40%
</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 ____% ____% ____%
* 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 for the Fund includes
the performance of the predecessor fund for periods before it
12
<PAGE>
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 operations as a
mutual fund, including any applicable sales load. The predecessor fund was not
registered under the Investment Company Act of 1940 nor 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.
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 the 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
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)
1999 1998
13
<PAGE>
64.06% -31.50%
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 ____% ____%
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.
RISK CONSIDERATIONS - EQUITY FUNDS
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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
14
<PAGE>
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 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 may produce 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 smaller 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.
The risks of investing in the various Funds are illustrated in the chart below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Small-Cap Small-Cap Emerging
Balanced Index Income Equity Growth Value Opportunity International Markets
- -----------------------------------------------------------------------------------------------------------------
RISKS
Allocation o
Counterparty o o o o o o o o o
Credit o o o
Currency
rate o o o
15
<PAGE>
Foreign
Securities o o o o o o o o
Geographic
concentration o o
Interest rate o o
Leverage o o o o o o o o o
Market o o o o o o o o o
Market
segment o o o o o o
Prepayment o o o
Small company o o o o
- -----------------------------------------------------------------------------------------------------------------
Volatility o o o o o o o o o
</TABLE>
16
<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 Expenses 0.38 0.21 0.26 0.19 0.21 0.25 0.21 0.28 0.83
Total Operating
Expenses(1) 1.23% 0.71% 1.21% 1.14% 1.36% 1.30% 1.46% 1.58% 2.33%
- ----------------------------------------------------------------------------------------------------------------------
</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. After
these waivers, actual Fund advisory fees 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 0.50% 0.24% 0.67% 0.70% 0.89% 0.74% 0.99% 1.05% 0.92%
- ----------------------------------------------------------------------------------------------------------------------
Total Operating
Expenses 1.13% 0.70% 1.18% 1.14% 1.35% 1.24% 1.45% 1.58% 2.00%
- ----------------------------------------------------------------------------------------------------------------------
</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 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 $ 125 $ 73 $ 123 $ 116 $ 138 $ 132 $ 149 $ 161 $ 236
Three Years 390 227 384 362 431 412 462 499 727
Five Years 676 395 665 628 745 713 797 860 1,245
Ten Years 1,489 883 1,466 1,386 1,635 1,568 1,746 1,878 2,666
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<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.
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT FIXED INCOME FUNDS?
The portfolio manager actively manages fixed income investments in pursuit of
attractive investment opportunities. The portfolio manager applies three key
tools in selecting securities:
o Analysis of economic and market conditions affecting the fixed income
markets, including forecasting the direction of interest rates
o Assessment of the yield advantages of different classes of bonds or sectors
of the bond market
o Assessment of the value offered, relative to other investment
opportunities, including an independent review of each issue's credit
quality
Based on this analysis, the portfolio manager endeavors to identify bonds that
appear:
o Undervalued relative to the market's expectations
o Positioned to benefit from anticipated changes in interest rates
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.
18
<PAGE>
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.
19
<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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31.75% -2.04% 18.32% 20.77% 18.93% -3.36% 13.52% 17.31% 26.90% -20.62%
</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
20
<PAGE>
Convertible
Securities
Fund 31.75% 17.01% 11.02%
First Boston
Convertible
Index ____% ____% ____%
* 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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
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.
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.)
21
<PAGE>
o Credit risk
o Interest rate risk
o Municipal market risk
o Prepayment 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.
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -3.31% 4.62% 8.28% 3.43% 14.16% -7.53% 12.67% 8.09% 11.34% 5.34%
</TABLE>
Best Quarter: Q_ 199_ ____%
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 ____% ____% ____%
* 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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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.
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 31.
22
<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
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)
1999 1998 1997
- -1.16% 6.86% 9.14%
Best Quarter: Q3 1997 3.61%
Worst Quarter: Q2 1999 -1.13%
23
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year (4/22/96)
Bond Fund -1.16% 5.36%
Lehman Brothers
Aggregate Bond Index ____% ____%
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 31.
MORTGAGE-BACKED SECURITIES
Debt issues, based on a pool of underlying mortgages, that make interest and
principal payments to investors.
MUNICIPAL SECURITIES, SEE PAGE 33.
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 its discounted price
and the full value of the security 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.
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
24
<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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -0.68% 4.67% 6.14% 2.80% 11.40% -3.33% 8.28% 6.50% 10.75% 6.08%
</TABLE>
Best Quarter: Q_ 199_ ____%
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 ____% ____% N/A **
Lehman
Brothers
3-15 Year Blend
Municipal
Index*** ____% ____% ____%
*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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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 Lehman Brothers Quality Intermediate Municipal Bond
Index is 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, with maturities between 2 and 17 years, from issues larger
than $50 million dated since 1991. This index better reflects the investment
objectives and policies of the Fund.
TERMS TO KNOW
MUNICIPAL SECURITIES, SEE PAGE 33.
ALTERNATIVE MINIMUM TAX, SEE PAGE 33.
DOLLAR WEIGHTED AVERAGE MATURITY, SEE PAGE 35.
U.S. GOVERNMENT SECURITIES, SEE PAGE 31.
25
<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 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
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)
1999 1998 1997 1996 1995 1994 1993 1992
0.56% 6.75% 6.89% 3.51% 13.88% -1.29% 9.91% 5.28%
Best Quarter: Q3 1992 4.62%
Worst Quarter: Q4 1992 -2.13%
26
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year 5 Years (4/1/91)
Short/
Intermediate
Bond Fund 0.56% 6.23% 6.35%
Lehman
Brothers
Intermediate
Government
Corporate
Bond Index ____% ____% ____%
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 31.
MORTGAGE-BACKED SECURITIES, SEE PAGE 35.
MUNICIPAL SECURITIES, SEE PAGE 33.
ZERO COUPON SECURITIES, SEE PAGE 35.
DOLLAR WEIGHTED AVERAGE MATURITY, SEE PAGE 35.
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
27
<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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -1.05% 7.18% 7.56% 3.86% 13.09% -1.93% 8.10% 6.49% 13.30% 8.92%
</TABLE>
Best Quarter: Q_ 199_ ____%
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 ____% ____% ____%
*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 for 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
operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940
nor 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.
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 31.
MORTGAGE-BACKED SECURITIES, SEE PAGE 35.
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 35.
ASSET-BACKED SECURITIES
Securities collateralized by credit card loans or other accounts receivable
ZERO COUPON SECURITIES, SEE PAGE 35.
28
<PAGE>
RISK CONSIDERATIONS - FIXED INCOME FUNDS
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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 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 may produce 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., derivitive 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 other obligations.
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.
29
<PAGE>
<TABLE>
<CAPTION>
Short/ Intermediate
Convertible Tax-Exempt Intermediate Intermediate Government
Securities Bond Bond Tax-Exempt Bond Bond
RISKS
<S> <C> <C> <C> <C> <C> <C>
Counterparty o o o o o o
Credit o o o o o o
Foreign
Securities o o o o
Interest rate o o o o o o
Leverage o o o o o o
Market o o o o o o
Municipal market o o o
Prepayment o o o o o
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<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 Fees(1) 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 Expenses 0.31 0.20 0.23 0.20 0.20 0.26
Total Operating Expenses(1) 1.26% 1.05% 1.13% 1.05% 1.15% 1.16%
- -----------------------------------------------------------------------------------------------------------------------------
</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. After
these waivers, actual Fund advisory fees 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% 0.59%(2) 0.37% 0.60%(2) 0.40% 0.24%
- -----------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1.17% 1.04% 0.85% 1.05% 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. 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 a percentage of
average net assets) for that year end would have been ____%.
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 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 $ 552 $ 560 $ 453 $ 463 $ 464
Three Years 832 769 793 672 703 706
Five Years 1,110 1,003 1,044 909 961 966
Ten Years 1,904 1,675 1,763 1,588 1,699 1,710
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<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
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT MONEY MARKET FUNDS?
Two key tools are applied when selecting short-term securities for the money
market funds:
o Independent review of each issue's credit quality
o Analysis of economic and market conditions
The portfolio manager endeavors to identify money market instruments that appear
to-
o Have minimal credit risk
o Be positioned to benefit from anticipated changes in interest rates
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 41.
REPURCHASE AGREEMENTS, SEE PAGE 41.
DOLLAR WEIGHTED AVERAGE MATURITY, SEE PAGE 35.
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.
32
<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
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.
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2.75% 3.02% 3.17% 2.94% 3.31% 2.30% 1.99% 2.54% 4.16% 5.51%
</TABLE>
Best Quarter: Q_ 199_ ____%
Worst Quarter: Q2 1993 0.63%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
1 Year 5 Years 10 Years
33
<PAGE>
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 3.91%.
For current yield information, please call 800.982.8782.
TERMS TO KNOW
ALTERNATIVE MINIMUM TAX (AMT), SEE PAGE 33.
MUNICIPAL SECURITIES, SEE PAGE 33.
U.S. GOVERNMENT SECURITIES, SEE PAGE 31.
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
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.
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.92% 5.25% 5.35% 5.11% 5.58% 3.79% 2.69% 3.41% 5.87% 7.94%
</TABLE>
Best Quarter: Q_ 199_ ____%
34
<PAGE>
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.
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 49.
COMMERCIAL PAPER, SEE PAGE 47.
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
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.
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.67% 5.08% 5.17% 5.00% 5.51% 3.72% 2.62% 3.42% 5.67% 7.78%
</TABLE>
Best Quarter: Q_ 199_ ____%
Worst Quarter: Q2 1993 0.63%
35
<PAGE>
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.
36
<PAGE>
RISK CONSIDERATIONS - MONEY MARKET FUNDS
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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 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 other obligations.
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.
37
<PAGE>
The risks of investing in the various Funds are illustrated in the chart below.
- --------------------------------------------------------------------------------
Tax-Exempt Government
Money Market Money Market Money Market
- --------------------------------------------------------------------------------
RISKS
Counterparty o o o
Credit o o o
Foreign Securities o
Municipal market o
Principal stability o o o
- --------------------------------------------------------------------------------
38
<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 0.10% 0.10% 0.11%
Rule 12b-1 Fees(1) 0.10 0.10 0.10
Shareholder Servicing Fees 0.25 0.25 0.25
Other Expenses(1) 0.13 0.14 0.13
Total Operating Expenses(1) 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 Rule 12b-1 fees and total operating and other expenses of
the Funds 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% 0.09% 0.10%
Other Expenses 0.13 0.09 0.08
Total Operating Expenses 0.55% 0.53% 0.54%
- --------------------------------------------------------------------------------
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
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
- --------------------------------------------------------------------------------
39
<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 $____ billion and was the largest of 28 banks owned
by Harris Bankcorp, Inc. Harris Bankcorp, Inc. is a wholly-owned subsidiary of
Bankmont Financial Corp., which is a wholly-owned subsidiary of Bank of
Montreal, a publicly-traded Canadian banking institution. As of December 31,
1999, Harris Trust managed more than $____ billion in discretionary personal
trust assets, and administered more than $____ 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 sub-portfolio management or sub-sub-portfolio management agreement. This
allows Harris 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
40
<PAGE>
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 and, 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 following persons, 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
41
<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.
INDEX 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.
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.
INTERNATIONAL FUND
JAMES E. CHANEY, CHIEF INVESTMENT OFFICER (HANSBERGER)
Prior to joining Hansberger in 1996, Mr. Chaney was Executive Vice President of
Templeton Worldwide Inc. and a senior member of its Portfolio
Management/Strategy Committee. While at Templeton, he managed numerous accounts,
including the Foreign Equity Series of Templeton Institutional Funds Inc. He
leads the International Fund's portfolio team, which includes:
John Carl Fenley, CFA, Research Analyst, Global Equities
Victoria Gretzky, Research Analyst
John Hock, Research Analyst
EMERGING MARKETS FUND
THOMAS L. HANSBERGER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER (HANSBERGER)
42
<PAGE>
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 Emerging Markets Fund's
portfolio team, which includes:
Francisco Alzuru, Managing Director, Portfolio Manager and Research Analyst
Ajit Dayan, Managing Director of India
Aureole L.W. Foong, Director of Global Emerging Markets Research
Robert Mazuelos, Research Analyst
Vladimir Tyurenkov, Managing Director of Eastern Europe and Russia,
Portfolio Manager and Research Analyst
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT FIXED INCOME FUNDS
INTERMEDIATE GOVERNMENT BOND FUND
SHORT/INTERMEDIATE BOND FUND
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 Short/Intermediate Bond Fund in 1994
o Bond Fund when it commenced operations in 1996
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 Intermediate Government Bond Fund when it commenced operations in 1997
o Short/Intermediate Bond Fund when it commenced operations in 1996
INTERMEDIATE TAX-EXEMPT BOND FUND
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 Intermediate Tax-Exempt Bond Fund in 1998
o Tax-Exempt Bond Fund in 1998
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.
43
<PAGE>
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT MONEY MARKET FUNDS
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
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.
44
<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.
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 NAV 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.
45
<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>
<S> <C> <C>
- -------------------------------------- ----------------------------------- ---------------------------------
BY MAIL BY BANK WIRE THROUGH FINANCIAL
INSTITUTION/PROFESSIONAL
- -------------------------------------- ----------------------------------- ---------------------------------
Complete and sign an application for Call the Funds at 800.625.7073 to Contact your financial
Institutional shares. initiate your purchase. institution or professional for
more information.
Make your check payable to the Please be sure to furnish your Important note: Each
Harris Insight Funds. taxpayer identification number. institution or professional may
have its own procedures and
requirements for buying shares
and may charge fees.
If you are adding to your existing Then wire your investment to:
account, indicate your Fund account PNC Bank, N.A.
number directly on the check. 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.:
Mail your application and check to: If you are opening a new account, please
Harris Insight Funds complete and mail the account application
c/o PFPC Inc. form to the Funds at the address given
P.O. Box 8952 under "By Mail."
Wilmington, DE 19899-8952
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 the 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 next share price calculated after your investment is
received. The Funds reserve the right to reject any purchase order.
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
46
<PAGE>
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.
For more information on any of Harris Insight Funds' shareholder services,
please call 800.982.8782.
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.
Please indicate whether you would like the ability to buy, redeem or exchange
shares by telephone or wire when you complete your application.
47
<PAGE>
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>
<S> <C> <C> <C>
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
BY TELEPHONE THROUGH FINANCIAL
BY MAIL AND CHECK BY TELEPHONE AND CHECK AND BANK WIRE INSTITUTION/PROFESSIONAL
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
You may sell shares by writing If you have chosen the If you have chosen the wire Contact your financial
the Funds at: telephone redemption redemption privilege, you may institution or professional
Harris Insight Funds privilege, you may call call 800.625.7073, during for more information.
c/o PFPC, Inc. 800.625.7073, during business hours, to sell your
P.O. Box 8952 business hours, to sell your shares and have your proceeds
Wilmington, DE 19899-8952 shares. wired to a pre-designated
bank account.
A check for your proceeds will A check for your proceeds Important note: Each
be mailed to you. will be mailed to you. institution of professional
may have its own procedures
and requirements 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 __ 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 once 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.)
48
<PAGE>
For more information on any of Harris Insight Funds' shareholder services,
please call 800.982.8782
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 is a participant 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 previous ten 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 if the value of
the account is below $500 ($250 in the case of a retirement account) and mail
the proceeds to the shareholder, unless the reduction is due to market activity.
However, the shareholder would 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
49
<PAGE>
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 those 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 judgement, 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 reinvested 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
50
<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 net
asset value and credited to your account on the ex-date, or paid in cash on the
payment date. 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
been in 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.
51
<PAGE>
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 PLANS (N SHARES ONLY)
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 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 assets 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 offer 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.
52
<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 each 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.
(Insert Tables)
53
<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)
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 (is legally considered part of) this prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 800.982.8782
BY MAIL
Harris Insight Funds
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428-2961
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 Statement of Additional Information)
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 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.
54
<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.
1
<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 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
INTRODUCTION TO MONEY MARKET FUNDS 44
HARRIS INSIGHT MONEY MARKET FUNDS
Tax-Exempt Money Market Fund 46
Money Market Fund 48
Government Money Market Fund 50
Risk Considerations 52
Fees And Expenses 54
INVESTMENT ADVISER 56
PORTFOLIO MANAGERS 58
PRICING OF FUND SHARES 62
SHAREHOLDER SERVICES 63
DIVIDENDS AND TAX CONSIDERATIONS 68
MASTER FUND/FEEDER FUND STRUCTURE 69
FINANCIAL HIGHLIGHTS 70
2
<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.
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT EQUITY FUNDS?
The portfolio manager considers a combination of factors when selecting
portfolio securities:
O Measurable elements, such as the value of assets and the cost of capital
O Economic, financial and market indicators
O A company's financial condition, management and position in its industry
Based on this analysis, the portfolio manager endeavors to identify stocks of
companies that may demonstrate:
O Above-average earnings, sales and asset value growth
O Greater potential value than is perceived by others in the marketplace
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
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)
1999 1998
- -1.30% 8.61%
Best Quarter: Q4 1998 5.99%
Worst Quarter: Q3 1998 -6.30%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year (3/24/97)
Balanced Fund -1.30% 9.57%
S&P 500 Stock Index ____% ____%
4
<PAGE>
Lehman Brothers
Aggregate Bond Index ____% ____%
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.
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 22.)
O Market 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.
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1999 1998 1997 1996 1995 1994 1993
20.40% 28.22% 32.78% 22.71% 39.96% 0.78% 9.50%
5
<PAGE>
Best Quarter: Q4 1998 21.23%
Worst Quarter: Q3 1998 -10.01%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
Inception
1 Year 5 Years (4/1/92)
Index Fund 20.40% 28.07% 19.98%
S&P 500
Stock Index _____% ____% ____%
*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 for 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 operations as a mutual fund, including any applicable sales load. The
predecessor fund was not registered under the Investment Company Act of 1940 nor
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.
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. Because no delivery of the underlying securities is made, purchasers of
index futures contracts may participate in the performance of the securities
included in the index without the required commitment of capital to purchase the
securities.
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 capitalizations 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
6
<PAGE>
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 22.)
O Market risk
O Market segment 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.
YEAR-BY-YEAR TOTAL RETURN*
(as of 12/31 each year)
1999 1998 1997 1996 1995 1994
9.87% 22.97% 31.90% 17.95% 36.84% -0.43%
Best Quarter: Q4 1998 19.75%
Worst Quarter: Q3 1998 -11.06%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
Inception
1 Year 5 Years (1/1/94)
Equity Income Fund 9.87% 23.53% 19.16%
S&P 500 Stock Index ____% ____% ____%
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
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.
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
CAPITALIZATIONS 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
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)
1999 1998 1997
- -1.57% 13.80% 35.89%
Best Quarter: Q4 1998 18.81%
Worst Quarter: Q3 1998 -14.46%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year (2/26/96)
Equity Fund -1.57% 15.27%
S&P 500 Stock Index ____% ____%
8
<PAGE>
TERMS TO KNOW
MARKET CAPITALIZATION, SEE PAGE 9.
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
CAPITALIZATIONS 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
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)
1999 1998 1997 1996 1995 1994 1993
16.56% 25.03% 32.81% 28.92% 36.43% -0.05% 6.21%
Best Quarter: Q4 1998 22.71%
Worst Quarter: Q3 1998 -11.92%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
Inception
1 Year 5 Years (4/1/92)
Growth Fund 16.56% 27.76% 19.45%
S&P 500 Stock Index ____% ____% ____%
9
<PAGE>
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
TERMS TO KNOW
MARKET CAPITALIZATION, SEE PAGE 9.
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
CAPITALIZATIONS). 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
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)
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
0.49% -3.93% 29.58% 15.05% 27.15% -3.21% 14.96% 16.30% 41.64% -16.26%
</TABLE>
Best Quarter: Q1 1991 20.97%
Worst Quarter: Q3 1990 -23.72%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Small-Cap Value Fund 0.49% 12.85% 10.88%
Russell 2000 Small
Stock Index ____% ____% ____%
Russell 2000
Value Index ** ____% ____% ____%
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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 will now be 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.
TERMS TO KNOW
MARKET CAPITALIZATION, SEE PAGE 9.
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 CAPITALIZATIONS). 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,
11
<PAGE>
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
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)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
40.14% 1.16% 25.47% 18.80% 26.30% -3.71% 15.19% 19.00% 47.65% -11.57%
</TABLE>
Best Quarter: Q4 1999 28.21%
Worst Quarter: Q3 1990 -23.79%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Small-Cap Opportunity
Fund 40.14% 21.69% 16.48%
Russell 2000
Small Stock Index ____% ____% ____%
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
TERMS TO KNOW
12
<PAGE>
MARKET CAPITALIZATION, SEE PAGE 9.
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
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)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
27.33% -4.64% -4.87% 5.11% 4.18% 4.29% 24.61% -4.39% 11.95% -22.16%
</TABLE>
Best Quarter: Q2 1999 14.62%
Worst Quarter: Q3 1990 -19.75%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
13
<PAGE>
1 Year 5 Years 10 Years
International Fund 27.33% 4.81% 3.20%
MSCI EAFE Index ____% ____% ____%
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
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 the 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
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.
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1999 1998
64.53% -31.16%
Best Quarter: Q4 1999 32.66%
Worst Quarter: Q2 1998 -27.09%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year (10/21/97)
Emerging Markets Fund 64.53% -1.45%
MSCI Emerging
Markets Index ____% ____%
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.
RISK CONSIDERATIONS - EQUITY FUNDS
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
15
<PAGE>
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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 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 may produce 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., derivitive 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
16
<PAGE>
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 smaller 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.
The risks of investing in the various Funds are illustrated in the chart below.
<TABLE>
<CAPTION>
Equity Small-Cap Small-Cap Emerging
Balanced Index Income Equity Growth Value Opportunity International Markets
RISKS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Allocation O
Counterparty O O O O O O O O O
Credit O O O
Currency rate O O O
Foreign securities O O O O O O O O
Geographic
concentration O O
Interest rate O O O
Leverage O O O O O O O O O
Market O O O O O O O O O
Market segment O O O O O O
Prepayment O O O
Small company O O O O
Volatility O O O O O O O O O
</TABLE>
FEES AND EXPENSES - EQUITY FUNDS
17
<PAGE>
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>
Balanced Equity Small-Cap Small-Cap Emerging
Markets Index Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Investment
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees(1) 0.60% 0.25% 0.70% 0.70% 0.90% 0.80% 1.00% 1.05% 1.25%
Other Expenses 0.38 0.21 0.26 0.19 0.21 0.25 0.21 0.28 0.83
- ------------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses(1) 0.98% 0.46% 0.96% 0.89% 1.11% 1.05% 1.21% 1.33% 2.08%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1Expenses 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. After
these waivers, actual Fund advisory fees and total operating expenses for the
fiscal year ended December 31, 1999 were:
<TABLE>
<CAPTION>
Balanced Equity Small-Cap Small-Cap Emerging
Markets Index Income Equity Growth Value Opportunity International Markets
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Investment
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees 0.50% 0.24% 0.67% 0.70% 0.89% 0.74% 0.99% 1.05% 0.92%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.88% 0.45% 0.93% 0.89% 1.10% 0.99% 1.20% 1.33% 1.75%
- ------------------------------------------------------------------------------------------------------------------------------------
</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
18
<PAGE>
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>
Balanced Equity Small-Cap Small-Cap Emerging
Markets 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 $100 $47 $98 $91 $113 $107 $123 $135 $211
- ------------------------------------------------------------------------------------------------------------------------------------
Three Years 312 148 306 284 353 334 384 421 652
- ------------------------------------------------------------------------------------------------------------------------------------
Five Years 542 258 531 493 612 579 665 729 1,119
Ten Years 1,201 579 1,178 1,096 1,352 1,283 1,466 1,601 2,410
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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?
19
<PAGE>
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.
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT FIXED INCOME FUNDS?
The portfolio manager actively manages fixed income investments in pursuit of
attractive investment opportunities. The portfolio manager applies three key
tools in selecting securities:
O Analysis of economic and market conditions affecting the fixed income
markets, including forecasting the direction of interest rates
O Assessment of the yield advantages of different classes of bonds or sectors
of the bond market
O Assessment of the value offered, relative to other investment
opportunities, including an independent review of each issue's credit
quality
Based on this analysis, the portfolio manager endeavors to identify bonds that
appear:
O Undervalued relative to the market's expectations
O Positioned to benefit from anticipated changes in interest rates
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.
20
<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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
32.07% -1.80% 18.68% 21.05% 19.18% -3.09% 13.84% 17.61% 27.14% -20.39%
</TABLE>
Best Quarter: Q4 1999 25.25%
21
<PAGE>
Worst Quarter: Q3 1990 -17.64%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Convertible Securities Fund 32.07% 17.30% 11.30%
First Boston
Convertible Index ____% ____% ____%
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
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.
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
22
<PAGE>
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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -3.07% 4.88% 8.55% 3.76% 14.45% -7.30% 12.95% 8.37% 11.61% 5.60%
</TABLE>
Best Quarter: Q_ 199_ ____%
Worst Quarter: Q1 1994 -5.09%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Tax-Exempt Bond Fund -3.07% 5.55% 5.77%
Lehman Brothers
Municipal Bond Index ____% ____% ____%
23
<PAGE>
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
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 29.
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.
O 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
24
<PAGE>
O Prepayment 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.
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1999 1998 1997
- -0.91% 7.12% 9.41%
Best Quarter: Q3 1997 3.67%
Worst Quarter: Q2 1999 -1.07%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year (4/16/96)
Bond Fund -0.91% 5.60%
Lehman Brothers
Aggregate Bond Index ____% ____%
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 29.
MORTGAGE-BACKED SECURITIES
Debt issues, based on a pool of underlying mortgages, that make interest and
principal payments to investors.
MUNICIPAL SECURITIES, SEE PAGE 31.
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 its discounted price
and the full value of the security 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.
25
<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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -0.43% 4.94% 6.41% 3.06% 11.68% -3.08% 8.55% 6.77% 11.02% 6.35%
</TABLE>
Best Quarter: Q_ 199_ ____%
Worst Quarter: Q1 1994 -2.83%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
26
<PAGE>
Intermediate Tax-Exempt -0.43% 5.05% 5.43%
Bond Fund
Lehman Brothers
Quality Intermediate
Municipal Bond Index ____% ____% N/A **
Lehman Brothers
3-15 Year Blend
Municipal Bond Index *** ____% ____% ____%
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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 Lehman Brothers Quality Intermediate Municipal Bond
Index is 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, with maturities between 2 and 17 years, from issues larger than
$50 million dated since 1991. This index better reflects the investment
objectives and policies of the Fund.
TERMS TO KNOW
MUNICIPAL SECURITIES, SEE PAGE 31.
ALTERNATIVE MINIMUM TAX, SEE PAGE 31.
DOLLAR WEIGHTED AVERAGE MATURITY, SEE PAGE 33.
U.S. GOVERNMENT SECURITIES, SEE PAGE 29.
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 MUNICIPAL SECURITIES
27
<PAGE>
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
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)
1999 1998 1997
0.81% 7.01% 7.15%
Best Quarter: Q3 1998 3.33%
Worst Quarter: Q2 1999 -0.73%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year (2/26/96)
Short/Intermediate
Bond Fund 0.81% 4.79%
Lehman Brothers
Intermediate Government
Corporate Bond Index ____% ____%
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 29.
MORTGAGE-BACKED SECURITIES, SEE PAGE 33.
28
<PAGE>
MUNICIPAL SECURITIES, SEE PAGE 31.
ZERO COUPON SECURITIES, SEE PAGE 33.
DOLLAR WEIGHTED AVERAGE MATURITY, SEE PAGE 33.
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
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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
29
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -0.80% 17.45% 7.82% 4.06% 13.46% -1.65% 8.26% 6.82% 13.50% 9.29%
</TABLE>
Best Quarter: Q_ 199_ ____%
Worst Quarter: Q1 1994 -2.09%
AVERAGE ANNUAL TOTAL RETURN*
(as of 12/31/99)
1 Year 5 Years 10 Years
Intermediate Government
Bond Fund -0.80% 6.30% 6.71%
Lehman Brothers
Intermediate Government
Bond Index ____% ____% ____%
*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 for 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 operations as a mutual fund,
including any applicable sales load. The predecessor fund was not registered
under the Investment Company Act of 1940 nor 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.
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 29.
MORTGAGE-BACKED SECURITIES, SEE PAGE 33.
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 33.
ASSET-BACKED SECURITIES
Securities collateralized by credit card loans or other accounts receivable.
ZERO COUPON SECURITIES, SEE PAGE 33.
RISK CONSIDERATIONS - FIXED INCOME FUNDS
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
30
<PAGE>
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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 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 may produce 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., derivitive 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 other obligations.
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.
31
<PAGE>
The risks of investing in the various Funds are illustrated in the chart below.
<TABLE>
<CAPTION>
Intermediate Short/ Intermediate
Convertible Tax-Exempt Tax-Exempt Intermediate Government
Securities Bond Bond Bond Bond Bond
RISKS
<S> <C> <C> <C> <C> <C> <C>
Counterparty o o o o o o
Credit o o o o o o
Foreign securities o o o o
Interest rate o o o o o o
Leverage o o o o o o
Market o o o o o o
Municipal market o o o
Prepayment o o o o o
</TABLE>
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)
- --------------------------------------------------------------------------------
32
<PAGE>
<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>
Investment Advisory Fees(1) 0.70% 0.60% 2 0.65% 0.60% 2 0.70% 0.65%
Other Expenses 0.31 0.20 0.23 0.20 0.20 0.26
- -----------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses(1) 1.01% 0.80% 0.88% 0.80% 0.90% 0.91%
- -----------------------------------------------------------------------------------------------------------------------------
</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. After
these waivers, actual Fund advisory fees and total operating expenses for the
fiscal year ended December 31, 1999 were:
<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>
Investment Advisory Fees 0.61% 0.59% 2 0.37% 0.60% 2 0.40% 0.24%
- -----------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.92% 0.79% 0.60% 0.80% 0.60% 0.50%
- -----------------------------------------------------------------------------------------------------------------------------
</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. 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 end would have been ____%.
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 Bond Intermediate Short/ Intermediate
Securities Bond Fund Tax-Exempt Intermediate Government
Fund Fund Bond Fund Bond Fund Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year $ 103 $ 82 $ 90 $ 82 $ 92 $ 93
Three Years 322 255 281 255 287 290
- ---------------------------------------------------------------------------------------------------------------------------
Five Years 558 444 488 444 498 504
- ---------------------------------------------------------------------------------------------------------------------------
Ten Years 1,236 990 1,084 990 1,108 1,120
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<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
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT MONEY MARKET FUNDS?
Two key tools are applied when selecting short-term securities for the money
market funds:
O Independent review of each issue's credit quality
O Analysis of economic and market conditions
The portfolio manager endeavors to identify money market instruments that appear
to -
O Have minimal credit risk
O Be positioned to benefit from anticipated changes in interest rates
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 39.
REPURCHASE AGREEMENTS, SEE PAGE 39.
DOLLAR WEIGHTED AVERAGE MATURITY, SEE PAGE 33.
34
<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 Funds' 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 52.
35
<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 52.)
O Credit risk
O Municipal market risk
O Principal stability 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. 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)
1999 1998 1997 1996 1995
3.07% 3.35% 3.47% 3.19% 3.60%
Best Quarter: Q2 1995 0.95%
Worst Quarter: Q1 1999 0.68%
36
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year 5 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 4.23%.
For current yield information, please call 800.982.8782.
TERMS TO KNOW
ALTERNATIVE MINIMUM TAX (AMT), SEE PAGE 31.
MUNICIPAL SECURITIES, SEE PAGE 31.
U.S. GOVERNMENT SECURITIES, SEE PAGE 29.
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 52.)
O Credit risk
O Foreign securities risk
O Principal stability risk
37
<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.
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1999 1998 1997 1996 1995
5.29% 5.61% 5.66% 5.38% 5.86%
Best Quarter: Q2 1995 1.46%
Worst Quarter: Q2 1999 1.23%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year 5 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.
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 29.
COMMERCIAL PAPER, SEE PAGE 45.
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?
38
<PAGE>
(See Risk Considerations, page 52.)
O Credit risk
O Principal stability 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. 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)
1999 1998 1997 1996 1995
5.04% 5.43% 5.48% 5.24% 5.79%
Best Quarter: Q2 1995 1.44%
Worst Quarter: Q2 1999 1.18%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year 5 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.
39
<PAGE>
RISK CONSIDERATIONS - MONEY MARKET FUNDS
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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 price of foreign securities may be more volatile than 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 other obligations.
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.
The risks of investing in the various Funds are illustrated in the chart below.
40
<PAGE>
Tax-Exempt Government
Money Money Money
Market Market Market
RISKS
Counterparty o o o
Credit o o o
Foreign securities o
Municipal market o
Principal stability o o o
41
<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)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-Exempt Money Government
Money Market Market Money Market
Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.10% 0.10% 0.11%
Other Expenses1 0.13 0.14 0.13
Total Operating Expenses(1) 0.23% 0.24% 0.24%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 total operating and
other expenses of the Funds for the fiscal year ended December 31, 1999 were:
<TABLE>
<CAPTION>
Tax-Exempt Money Government
Money Market Market Money Market
Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Other Expenses 0.13% 0.09% 0.08%
Total Operating Expenses 0.23% 0.19% 0.19%
- -------------------------------------------------------------------------------------------------------------------------------
</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 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:
- --------------------------------------------------------------------------------
42
<PAGE>
<TABLE>
<CAPTION>
Tax-Exempt Money Government
Money Market Market Money Market
Fund Fund Fund
<S> <C> <C> <C>
One Year $ 24 $ 25 $ 25
Three Years 74 77 77
Five Years 130 135 135
Ten Years 293 306 306
- ---------------------------------------------------------------------------------------------------------------------------------
</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 $____ billion and was the largest of 28 banks owned
by Harris Bankcorp, Inc. Harris Bankcorp, Inc. is a wholly-owned subsidiary of
Bankmont Financial Corp., which is a wholly-owned subsidiary of Bank of
Montreal, a publicly-traded Canadian banking institution. As of December 31,
1999, Harris Trust managed more than $____ billion in discretionary personal
trust assets, and administered more than $____ 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 sub-portfolio management or sub-sub-portfolio management agreement. This
allows Harris 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
44
<PAGE>
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 and, 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 following persons, 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
45
<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.
INDEX 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.
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.
INTERNATIONAL FUND
JAMES E. CHANEY, CHIEF INVESTMENT OFFICER (HANSBERGER)
46
<PAGE>
Prior to joining Hansberger in 1996, Mr. Chaney was Executive Vice President of
Templeton Worldwide Inc. and a senior member of its Portfolio
Management/Strategy Committee. While at Templeton, he managed numerous accounts,
including the Foreign Equity Series of Templeton Institutional Funds Inc. He
leads the International Fund's portfolio team, which includes:
John Carl Fenley, CFA, Research Analyst, Global Equities
Victoria Gretzky, Research Analyst
John Hock, Research Analyst
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 Emerging Markets Fund's
portfolio team, which includes:
Francisco Alzuru, Managing Director, Portfolio Manager and Research Analyst
Ajit Dayan, Managing Director of India
Aureole L.W. Foong, Director of Global Emerging Markets Research
Robert Mazuelos, Research Analyst
Vladimir Tyurenkov, Managing Director of Eastern Europe and Russia,
Portfolio Manager and Research Analyst
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT FIXED INCOME FUNDS
INTERMEDIATE GOVERNMENT BOND FUND
SHORT/INTERMEDIATE BOND FUND
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 Short/Intermediate Bond Fund in 1994
O Bond Fund when it commenced operations in 1996
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 Intermediate Government Bond Fund when it commenced operations in 1997
O Short/Intermediate Bond Fund in 1996
O Bond Fund when it commenced operations in 1996
INTERMEDIATE TAX-EXEMPT BOND FUND
47
<PAGE>
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 Intermediate Tax-Exempt Bond Fund in 1998
O Tax-Exempt Bond Fund in 1998
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.
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT MONEY MARKET FUNDS
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
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.
48
<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.
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 NAV 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.
49
<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.
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------- ----------------------------------- ---------------------------------
BY MAIL BY BANK WIRE THROUGH FINANCIAL
INSTITUTION/PROFESSIONAL
- -------------------------------------- ----------------------------------- ---------------------------------
Complete and sign an application for Call the Funds at 800.625.7073 to Contact your financial
Institutional shares. initiate your purchase. institution or professional for
more information.
Make your check payable to the Please be sure to furnish your Important note: Each
Harris Insight Funds. taxpayer identification number. institution or professional may
have its own procedures and
requirements for buying shares
and may charge fees.
If you are adding to your existing Then wire your investment to:
account, indicate your Fund account PNC Bank, N.A.
number directly on the check. 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.:
Mail your application and check to: If you are opening a new account, please
Harris Insight Funds complete and mail the account application
c/o PFPC Inc. form to the Funds at the address given
P.O. Box 8952 under OBy Mail.O
Wilmington, DE 19899-8952
The Funds currently do not charge
investors for the receipt of wire
transfers, although your bank may
50
<PAGE>
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 the 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 next share price calculated after your investment is
received. The Funds reserve the right to reject any purchase order.
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:
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
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.
PLEASE INDICATE WHETHER YOU WOULD LIKE THE ABILITY TO BUY, REDEEM OR EXCHANGE
SHARES BY TELEPHONE OR WIRE WHEN YOU COMPLETE YOUR APPLICATION.
51
<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>
<S> <C> <C> <C>
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
BY MAIL AND CHECK BY TELEPHONE AND CHECK BY TELEPHONE AND THROUGH FINANCIAL
BANK WIRE INSTITUTIONS/PROFESSIONALS
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
You may sell shares by writing If you have chosen the If you have chosen the wire Contact your financial
the Funds at: telephone redemption redemption privilege, you may institution or professional
privilege, you may call call 800.625.7073, during for more information.
Harris Insight Funds 800.625.7073, during business hours, to sell
c/o PFPC Inc. business hours, to sell shares and have your proceeds
P.O. Box 8952 shares. wired to a pre-designated
Wilmington, DE 19899-8952. bank account.
A check for your proceeds will A check for your proceeds Important note: Each
be mailed to you. will be mailed to you. institution or professional
may have its own procedures
and requirements 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 66 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 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 once 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
52
<PAGE>
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 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 is a participant 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 if the value of
the account is reduced below $500 ($250 in the case of a retirement account) and
mail the proceeds to the shareholder, unless the reduction is due to market
activity. However, the shareholder would 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 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
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.
53
<PAGE>
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.
54
<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 net
asset value and credited to your account on the ex-date, or paid in cash on the
payment date. 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
been in the Fund and whether you reinvest in additional shares or take it in
cash.
55
<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 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.
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.
MULTIPLE CLASSES
Each of the Index Fund, Tax-Exempt Money Market Fund, Money Market Fund and
Government Money Market Fund offer 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.
56
<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.
(insert tables)
57
<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)
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 (is legally considered part of) this prospectus.
To obtain information:
BY TELEPHONE
Call 800.982.8782
BY MAIL
Harris Insight Funds
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428-2961
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 Statement of Additional Information)
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 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.
58
<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.
1
<PAGE>
TABLE OF CONTENTS
INTRODUCTION TO MONEY MARKET FUNDSPAGE 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 16
SHAREHOLDER SERVICES 17
DIVIDENDS AND TAX CONSIDERATIONS 22
DISTRIBUTION ARRANGEMENTS 23
MASTER FUND/FEEDER FUND STRUCTURE 24
FINANCIAL HIGHLIGHTS 25
2
<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
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT MONEY MARKET FUNDS?
Two key tools are applied when selecting short-term securities for the money
market funds:
o Independent review of each issue's credit quality
o Analysis of economic and market conditions
The portfolio manager endeavors to identify money market instruments that appear
to-
o Have minimal credit risk
o Be positioned to benefit from anticipated changes in interest rates
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.
3
<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.
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
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.
YEAR-BY-YEAR TOTAL RETURN
4
<PAGE>
(as of 12/31 each year)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2.75% 3.02% 3.17% 2.94% 3.31% 2.30% 1.99% 2.54% 4.16% 5.51%
</TABLE>
Best Quarter: Q_ 199_ ____%
Worst Quarter: Q2 1993 0.63%
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 3.91%.
For current yield information, please call 800.982.8782.
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.
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.
5
<PAGE>
WHAT ARE THE FUND'S PRINCIPAL RISKS?
(See Risk Considerations, page 10.)
o Credit risk
o Foreign securities risk
o Principal stability 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. 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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.92% 5.25% 5.35% 5.11% 5.58% 3.79% 2.69% 3.41% 5.87% 7.94%
</TABLE>
Best Quarter: Q_ 199_ ____%
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.
TERMS TO KNOW
U.S. GOVERNMENT SECURITIES, SEE PAGE 5.
COMMERCIAL PAPER, SEE PAGE 3.
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.)
6
<PAGE>
o Credit risk
o Principal stability 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. 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)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.67% 5.08% 5.17% 5.00% 5.51% 3.72% 2.62% 3.42% 5.67% 7.78%
</TABLE>
Best Quarter: Q_ 199_ ____%
Worst Quarter: Q2 1993 0.63%
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.
7
<PAGE>
RISK CONSIDERATIONS - MONEY MARKET FUNDS
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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 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 other obligations.
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.
The risks of investing in the various Funds are illustrated in the chart below.
- --------------------------------------------------------------------------------
Tax-Exempt Government
Money Market Money Market Money Market
- --------------------------------------------------------------------------------
RISKS
Counterparty o o o
Credit o o o
Foreign Securities o
Municipal market o
Principal stability o o o
- --------------------------------------------------------------------------------
8
<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 0.10% 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 0.13 0.14 0.13
Total Operating Expenses(1) 0.58% 0.59% 0.59%
- --------------------------------------------------------------------------------
1Expenses 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 Rule 12b-1 fees and total operating and other expenses of
the Funds 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% 0.09% 0.10%
Other Expenses 0.13 0.09 0.08
Total Operating Expenses 0.55% 0.53% 0.54%
- --------------------------------------------------------------------------------
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
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
- --------------------------------------------------------------------------------
9
<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 $____ billion and was the largest of 28 banks owned
by Harris Bankcorp, Inc. Harris Bankcorp, Inc. is a wholly-owned subsidiary of
Bankmont Financial Corp., which is a wholly-owned subsidiary of Bank of
Montreal, a publicly-traded Canadian banking institution. As of December 31,
1999, Harris Trust managed more than $____ billion in discretionary personal
trust assets, and administered more than $____ 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 sub-portfolio management or sub-sub-portfolio management agreement. This
allows Harris 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 following persons, 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
10
<PAGE>
PORTFOLIO MANAGERS
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT MONEY MARKET FUNDS
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
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.
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.
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 NAV 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.
11
<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>
<S> <C> <C>
- -------------------------------------- ----------------------------------- ---------------------------------
BY MAIL BY BANK WIRE THROUGH FINANCIAL
INSTITUTION/PROFESSIONAL
- -------------------------------------- ----------------------------------- ---------------------------------
Complete and sign an application for Call the Funds at 800.625.7073 to Contact your financial
Institutional shares. initiate your purchase. institution or professional for
more information.
Make your check payable to the Please be sure to furnish your Important note: Each
Harris Insight Funds. taxpayer identification number. institution or professional may
have its own procedures and
requirements for buying shares
and may charge fees.
If you are adding to your existing Then wire your investment to:
account, indicate your Fund account PNC Bank, N.A.
number directly on the check. 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.:
Mail your application and check to: If you are opening a new account, please
Harris Insight Funds complete and mail the account application
c/o PFPC Inc. form to the Funds at the address given
P.O. Box 8952 under "By Mail."
Wilmington, DE 19899-8952
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 the 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 next share price calculated after your investment is
received. The Funds reserve the right to reject any purchase order.
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
12
<PAGE>
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.
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.
Please indicate whether you would like the ability to buy, redeem or exchange
shares by telephone or wire when you complete your application.
13
<PAGE>
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>
<S> <C> <C> <C>
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
BY TELEPHONE THROUGH FINANCIAL
BY MAIL AND CHECK BY TELEPHONE AND CHECK AND BANK WIRE INSTITUTIONS/PROFESSIONALS
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
You may sell shares by writing If you have chosen the If you have chosen the wire Contact your financial
the Funds at: telephone redemption redemption privilege, you may institution or professional
Harris Insight Funds privilege, you may call call 800.625.7073, during for more information.
c/o PFPC Inc. 800.625.7073, during business hours, to sell your
P.O. Box 8952 business hours, to sell your shares and have your proceeds
Wilmington, DE 19899-8952 shares. wired to a pre-designated
bank account.
A check for your proceeds will A check for your proceeds Important note: Each
be mailed to you. will be mailed to you. institution or professional
may have its own procedures
and requirements 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 __ 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 once 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.)
14
<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 is a participant 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 previous ten 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 if the value of
the account is below $500 ($250 in the case of a retirement account) and mail
the proceeds to the shareholder, unless the reduction is due to market activity.
However, the shareholder would 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
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 those 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.
15
<PAGE>
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 judgement, 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 reinvested 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.
16
<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 net asset value and credited to your account on the ex-date, or paid in cash
on the payment date. 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
been in 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 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.
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 PLANS (N SHARES ONLY)
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 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 assets 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 and Government Money
Market Fund offer two classes of shares, N Shares and Institutional Shares. The
shares of each class are offered by a separate prospectus.
17
<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.
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 each 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.
(Insert Tables)
18
<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)
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 (is legally considered part of) this prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 800.982.8782
BY MAIL
Harris Insight Funds
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428-2961
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 Statement of Additional Information)
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 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.
19
<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.
1
<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 16
SHAREHOLDER SERVICES 17
DIVIDENDS AND TAX CONSIDERATIONS 23
MASTER FUND/FEEDER FUND STRUCTURE 24
FINANCIAL HIGHLIGHTS 25
2
<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
HOW ARE SECURITIES SELECTED FOR THE HARRIS INSIGHT MONEY MARKET FUNDS?
Two key tools are applied when selecting short-term securities for the money
market funds:
o Independent review of each issue's credit quality
o Analysis of economic and market conditions
The portfolio manager endeavors to identify money market instruments that appear
to -
o Have minimal credit risk
o Be positioned to benefit from anticipated changes in interest rates
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.
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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 Funds' 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.
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
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.
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YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1999 1998 1997 1996 1995
3.07% 3.35% 3.47% 3.19% 3.60%
Best Quarter: Q2 1995 0.95%
Worst Quarter: Q1 1999 0.68%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year 5 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 4.23%.
For current yield information, please call 800.982.8782.
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.
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.
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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
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.
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1999 1998 1997 1996 1995
5.29% 5.61% 5.66% 5.38% 5.86%
Best Quarter: Q2 1995 1.46%
Worst Quarter: Q2 1999 1.23%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year 5 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.
TERMS TO KNOW
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U.S. GOVERNMENT SECURITIES, SEE PAGE 5.
COMMERCIAL PAPER, SEE PAGE 3.
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
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.
YEAR-BY-YEAR TOTAL RETURN
(as of 12/31 each year)
1999 1998 1997 1996 1995
5.04% 5.43% 5.48% 5.24% 5.79%
Best Quarter: Q2 1995 1.44%
Worst Quarter: Q2 1999 1.18%
AVERAGE ANNUAL TOTAL RETURN
(as of 12/31/99)
Inception
1 Year 5 Years (5/16/94)
Government Money
Market Fund 5.04% 5.39% 5.29%
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As of December 31, 1999, the seven-day yield for the Fund was 5.28%. For current
yield information, please call 800.982.8782.
RISK CONSIDERATIONS - MONEY MARKET FUNDS
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 when a fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it 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 price of foreign securities may be more volatile than 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 other obligations.
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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.
The risks of investing in the various Funds are illustrated in the chart below.
Tax-Exempt Government
Money Money Money
Market Market Market
RISKS
Counterparty o o o
Credit o o o
Foreign securities o
Municipal market o
Principal stability o o o
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
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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 0.10% 0.10% 0.11%
Other Expenses(1) 0.13 0.14 0.13
- --------------------------------------------------------------------------------
Total Operating Expenses(1) 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 total operating
and other 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 0.13% 0.09% 0.08%
- --------------------------------------------------------------------------------
Total Operating Expenses 0.23% 0.19% 0.19%
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
- --------------------------------------------------------------------------------
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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 $____ billion and was the largest of 28 banks owned
by Harris Bankcorp, Inc. Harris Bankcorp, Inc. is a wholly-owned subsidiary of
Bankmont Financial Corp., which is a wholly-owned subsidiary of Bank of
Montreal, a publicly-traded Canadian banking institution. As of December 31,
1999, Harris Trust managed more than $____ billion in discretionary personal
trust assets, and administered more than $____ 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 sub-portfolio management or sub-sub-portfolio management agreement. This
allows Harris 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 and, 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 ADVISER
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
PORTFOLIO MANAGEMENT AGENT
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Harris Investment Management, Inc.
190 South LaSalle Street
Chicago, Illinois 60690
PORTFOLIO MANAGERS
PORTFOLIO MANAGERS OF THE
HARRIS INSIGHT MONEY MARKET FUNDS
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
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.
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.
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.
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MONEY MARKET FUNDS
The NAV for the Tax-Exempt Money Market Fund is calculated as of 12:00 Noon,
Eastern time. The NAV 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.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------- ----------------------------------- ---------------------------------
BY MAIL BY BANK WIRE THROUGH FINANCIAL
INSTITUTION/PROFESSIONAL
- -------------------------------------- ----------------------------------- ---------------------------------
Complete and sign an application for Call the Funds at 800.625.7073 to Contact your financial
Institutional shares. initiate your purchase. institution or professional for
more information.
Make your check payable to the Please be sure to furnish your Important note: Each
Harris Insight Funds. taxpayer identification number. institution or professional may
have its own procedures and
requirements for buying shares
and may charge fees.
If you are adding to your existing Then wire your investment to:
account, indicate your Fund account PNC Bank, N.A.
number directly on the check. Philadelphia, PA
ABA #0310-0005-3
For Credit To:
Harris Insight Funds
85-5093-2950
Re: [Name of Fund]--
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Institutional shares
Account No.:
Account Name:
Taxpayer ID No.:
Mail your application and check to: If you are opening a new account, please
Harris Insight Funds complete and mail the account application
c/o PFPC Inc. form to the Funds at the address given
P.O. Box 8952 under "By Mail."
Wilmington, DE 19899-8952
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 accept third party checks.
Payment for the 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 next share price calculated after your investment is
received. The Funds reserve the right to reject any purchase order.
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.
PLEASE INDICATE WHETHER YOU WOULD LIKE THE ABILITY TO BUY, REDEEM OR EXCHANGE
SHARES BY TELEPHONE OR WIRE WHEN YOU COMPLETE YOUR APPLICATION.
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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>
<S> <C> <C> <C>
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
BY TELEPHONE THROUGH FINANCIAL
BY MAIL AND CHECK BY TELEPHONE AND CHECK AND BANK WIRE INSTITUTIONS/PROFESSIONALS
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
You may sell shares by writing If you have chosen the If you have chosen the wire Contact your financial
the Funds at: telephone redemption redemption privilege, you may institution or professional
Harris Insight Funds privilege, you may call call 800.625.7073, during for more information.
c/o PFPC Inc. 800.625.7073, during business hours, to sell your
P.O. Box 8952 business hours, to sell your shares and have your proceeds
Wilmington, DE 19899-8952 shares. wired to a pre-designated
bank account.
A check for your proceeds will A check for your proceeds Important note: Each
be mailed to you. will be mailed to you. institution or professional
may have its own procedures
and requirements 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 21 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 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 once 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
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<PAGE>
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 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 is a participant 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 if the value of
the account is reduced below $500 ($250 in the case of a retirement account) and
mail the proceeds to the shareholder, unless the reduction is due to market
activity. However, the shareholder would 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 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
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:
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<PAGE>
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
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 net asset value and credited to your account on the ex-date, or paid in cash
on the payment date. 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
been in 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 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.
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.
MULTIPLE CLASSES
Each of the Tax-Exempt Money Market Fund, Money Market Fund and Government Money
Market Fund offer two classes of shares, N Shares and Institutional Shares. The
shares of each class are offered by a separate prospectus.
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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.
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.
(insert tables)
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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)
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 (is legally considered part of) this prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 800.982.8782
BY MAIL
Harris Insight Funds
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428-2961
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 Statement of Additional Information)
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 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.
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HARRIS INSIGHT(R) FUNDS
Four Falls Corporate Center, 6th Floor
West Conshohocken, Pennsylvania 19428-2961
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 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......................................................................28
Investment Restrictions......................................................28
Master Fund/Feeder Fund Structure............................................30
Trustees and Executive Officers..............................................33
Control Persons and Principal Holders of Securities..........................34
Investment Management, Distribution and Other Services.......................35
Service Plans................................................................43
Calculation of Yield and Total Return........................................46
Additional Purchase and Redemption Information...............................50
Determination of Net Asset Value.............................................52
Portfolio Transactions ......................................................53
Tax Information..............................................................56
Shares of Beneficial Interest................................................58
Other........................................................................60
Independent Auditors and Reports to Shareholders.............................60
Appendix A...................................................................61
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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. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.
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
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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 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
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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 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 both for producing
current income and longer-term capital appreciation. Because convertible
securities are usually viewed by the issuer as future common stock, they are
generally subordinated to other senior securities and therefore are rated one
category lower than the issuer's non-convertible debt obligations or preferred
stock. Securities rated "B" or "CCC" (or "Caa") are regarded as having
predominantly speculative characteristics with respect to the issuer's capacity
to pay interest and repay principal, with "B" indicating a lesser degree of
speculation than "CCC" (or "Caa"). While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions. Securities rated "CCC" (or "Caa") have a
currently identifiable vulnerability to default and are dependent upon 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.
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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.
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,
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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 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, OPTIONS AND
FUTURES. 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
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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.
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.
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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 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.
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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 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
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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 or other arrangements with the World Bank or
IMF, debtor nations have been required to agree to implement certain domestic
monetary and fiscal reforms. The Brady Plan sets forth only general guiding
principles for economic reform and debt reduction, emphasizing that solutions
must be negotiated on a case-by-case basis between debtor nations and their
creditors.
Brady Bonds are recent issues and do not have a long payment history.
Agreements implemented under the Brady Plan are designed to achieve debt and
debt-service reduction through specific options negotiated by a debtor nation
with its creditors. As a result, each country offers different financial
packages. Options have included the exchange of outstanding commercial bank debt
for bonds issued at 100% of face value of such debt, bonds issued at a discount
of face value of such debt, and bonds bearing an interest rate that increases
over time and the advancement of the new money for bonds. The principal of
certain Brady Bonds has been collateralized by U.S. Treasury zero coupon bonds
with a maturity equal to the final maturity of the Brady Bonds. Collateral
purchases are financed by the IMF, World Bank and the debtor nations' reserves.
Interest payments may also be collateralized in part in various ways.
Brady Bonds are often viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final maturity;
(ii) the collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized 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 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
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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 (the "EMU") 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. A funding agreement
without this feature is considered illiquid. These agreements are regulated by
the state insurance board in 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 lawfully
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
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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
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. All
Equity Funds and Fixed Income Funds may attempt to reduce the risk of investment
in equity and other securities by hedging a portion of its portfolio through the
use of futures contracts on indices and options on such indices traded on
national securities exchanges. 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
these securities. A securities index futures contract is an agreement in which
one party agrees to deliver to the other an amount of cash equal to a specific
dollar amount times the difference between the value of a specific securities
index at the close of the last trading day of the contract and the price at
which the agreement is made. Unlike the purchase or sale of an underlying
security, no consideration is paid or received by 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
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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 Fund 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 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
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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 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-
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term U. S. Treasury Bonds, ten-year U.S. Treasury Notes, three-month U.S.
Treasury Bills and three-month domestic bank certificates of deposit. Other
financial futures contracts may be developed and traded. The purpose of the
acquisition or sale of an interest rate futures contract by 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 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 adversely affecting the value of municipal bonds or other debt securities
held in its portfolio and rates
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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.
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 movements in the
direction of interest rates. Such predictions involve skills and techniques
which may be different from those involved in the management of long-term
municipal bond portfolio. There can be no assurance that there will be a
correlation between price movements in interest rate futures, or related
options, on the one hand, and price movements in the municipal bond or other
debt securities which are the subject to the hedge, on the other hand. Positions
in futures contracts and options on futures contracts may be closed out only on
an exchange or board of trade that provides an active market, therefore, there
can be no assurance that a liquid market will exist for the contract or the
option at any particular time. Consequently, a Fund may realize a loss on a
futures contract that is not offset by an increase in the price of the municipal
bonds or other debt securities being hedged or may not be able to close a
futures position in the event of adverse price movements. Any income earned from
transactions in futures contracts and options on futures contracts will be
taxable. Accordingly, it is anticipated that such investments will be made only
in unusual circumstances, such as when the Sub-Adviser or Sub-Subadviser
anticipates an extreme change in interest rates or market conditions.
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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 expenses would be in addition to the advisory and other expenses
that the Fund bears directly in connection with its own operations.
Some emerging countries have laws and regulations that preclude direct
foreign investment in the securities of companies located there. However,
indirect foreign investment in the securities of companies listed and traded on
the stock exchanges in 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
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.
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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 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.
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
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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-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 mix various tax proceeds into a
general fund that is used to meet obligations other than those of the
outstanding TANs. Use of such a general fund to meet various
obligations could affect the likelihood of making payments on TANs.
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
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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.
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
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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, 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. 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 be maintained by the
seller in a segregated account for the Fund cash or cash equivalents equal to at
least 102% of the repurchase
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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.
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.
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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 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 only be 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.
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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.
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 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
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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 sovereignties, other debt securities, commercial paper
including bank obligations, certificates of deposit (including Eurodollar
certificates of deposit) and repurchase agreements.
For temporary defensive purposes, during periods in which the
Investment Adviser believes changes in economic, financial or political
conditions make it advisable, these 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).
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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 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
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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 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.
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<PAGE>
(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.
(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.
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<PAGE>
(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.
(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.
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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. 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.
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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 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 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.
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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 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 - Governors Highway and Stuenkel Road, University Park,
Illinois 60466. Age 55. President, Governors State University. 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.
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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 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 Compensation from from the Fund per Fund
Name of Person, Position from the Trust the Company Complex*
- ------------------------------ ----------------- ---------------------- ---------------------- ------------------------
<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:
(insert data)
The shareholders described above have indicated that they each hold
their shares 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.
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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.
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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
36
<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 security and fixed income research, analysis and
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition and credit conditions. HIM 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,
credit assessment and the impact to 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
- ----------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
Government Money
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
38
<PAGE>
- ----------------------- -------------------------------- ------------------------------ --------------------------------
Gross Advisory Fee Advisory Fee Voluntarily Net Advisory Fee
($) Waived ($) ($)
---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- ----------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
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 1,191,916 986,285
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")
(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
39
<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
- ---------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
Government Money
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
Equity Income Fund 52,398 74,396 126,972 -- -- 15,965 52,398 74,396 111,007
40
<PAGE>
- ---------------------- -------------------------------- ------------------------------ --------------------------------
Administration Fee ($) Reduction by Administrator Net Administration Fee ($)
($)
---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- ---------------------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ----------
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 86,931 N/A N/A 8,075 N/A N/A 78,856
Short/Intermediate Bond
Fund N/A N/A 3,621 N/A N/A 403 N/A N/A 3,218
Balanced Fund N/A N/A 4,045 N/A N/A 386 N/A N/A 3,659
41
<PAGE>
- --------------------------------- ----------------------------- --------------------------- -----------------------------
Aggregate Underwriting Amount Retained by the
Commissions ($) Distributor. ($) (1) Amount Reallowed ($)
----------------------------- --------------------------- -----------------------------
--------- --------- --------- --------- -------- -------- --------- --------- ---------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- --------------------------------- --------- --------- --------- --------- -------- -------- --------- --------- ---------
Emerging Markets Fund N/A N/A 250 N/A N/A 24 N/A N/A 226
Equity Fund N/A N/A 9,199 N/A N/A 847 N/A N/A 8,352
Equity Income Fund N/A N/A 20,963 N/A N/A 1,870 N/A N/A 19,093
Growth Fund N/A N/A 38,050 N/A N/A 3,563 N/A N/A 34,487
International Fund N/A N/A 276 N/A N/A 25 N/A N/A 251
Small-Cap Opportunity Fund N/A N/A 1,351 N/A N/A 141 N/A N/A 1,210
Small-Cap Value Fund N/A N/A 55 N/A N/A 5 N/A N/A 50
- --------------------------------- --------- --------- --------- --------- -------- -------- --------- --------- ---------
</TABLE>
(1) The Distributor also retained any amount that would otherwise have
been retained by FDI for the period preceding May 1, 1999.
The following table shows the dollar amount of sales charges payable to
the Distributor with respect to sales of N Shares of each Fund and the amount of
sales charges retained by the Distributor and not reallowed to other persons.
The data is for the past three fiscal years or shorter period if the Fund has
been in operation for a shorter period. There were no sales charges payable to
the Distributor with respect to the Funds not mentioned below.
<TABLE>
<CAPTION>
- --------------------------------- ----------------------------- --------------------------- -----------------------------
Aggregate Underwriting Amount Retained by the
Commissions ($) Distributor. ($) (1) Amount Reallowed ($)
----------------------------- --------------------------- -----------------------------
--------- --------- --------- -------- --------- -------- --------- --------- ---------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- --------------------------------- --------- --------- --------- -------- --------- -------- --------- --------- ---------
Short/Intermediate Bond
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 Funds Distributor, Inc.
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 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,
42
<PAGE>
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 Boards 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, Tax-Exempt Money Market
Fund, Money Market Fund and Government Money Market Fund, 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 which purchases N Shares on behalf of its Customers. In the
case of N Shares, the Service Organization is required to provide shareholder
support services to its Customers who
43
<PAGE>
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 therefore) 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.
44
<PAGE>
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>
45
<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:
30-day Yield
N Institutional
Government Money Market Fund 4.98% 5.33%
Money Market Fund 5.42 5.77
Tax-Exempt Money Market Fund 3.18 3.49
46
<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.
47
<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
Intermediate Tax-Exempt
Bond Fund (0.68) (0.43) 26.37 27.95 65.51 69.70 -- 102.37 109.48
48
<PAGE>
- ---------------------------- -------------------- -------------------- ------------------- -----------------------------
1 Year 5 Year 10 Year Inception to 12/31/99
-------------------- -------------------- ------------------- -----------------------------
-------- ----------- ------- ------------ ------- ----------- -------- --------
N Institutional N Institutional N Institutional A N Institutional
- ---------------------------- -------- ----------- ------- ------------ ------- ----------- -------- -------- -----------
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 to those of other mutual
funds with similar investment objectives and to other relevant indices, such as
those prepared by Salomon Brothers Inc. or Lehman Brothers Inc., or any of their
affiliates or to ratings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
such data is reported in national financial publications such as IBC/Donoghue's
Money Fund Report and Bank Rate Monitor (for money market deposit accounts
offered by the 50 leading 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 the Fund and for providing a basis for
comparison with investment alternatives. The yield of a Fund, however, may not
be comparable to other investment alternatives because of differences in the
foregoing variables and differences in the methods used to value portfolio
securities, compute expenses and calculate yield.
49
<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, 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 reduced sales charge
applicable to the total amount of the intended investment. If such amount is
50
<PAGE>
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 student,
designated by the shareholder, in an amount based on the shareholder's account
balance
51
<PAGE>
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.
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.
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
52
<PAGE>
instrument is to be redeemed. Rule 2a-7, however, provides 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, 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 at $1.00. 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 seems to meet the objective
of the Fund. Portfolio changes also may be made to increase or decrease
investments in anticipation of changes in security prices in general or to
provide the cash necessary for redemptions, distributions to shareholders or
other Fund management purposes. Portfolio changes may be made without regard to
the length of time a particular security has been held or the frequency of
portfolio transactions of 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.
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.
53
<PAGE>
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 ($)
-------------------------------------- ----------------------------------------------------
------------ ------------ ------------ ----------------- ---------------- -----------------
1997 1998 1999 1997 1998 1999
- ---------------------------- ------------ ------------ ------------ ----------------- ---------------- -----------------
Convertible Securities
<S> <C> <C> <C> <C> <C> <C>
Fund 15,915 17,957 15,939 12,667,478 13,220,179 9,378,646
Balanced Fund 51,841 77,519 62,259 36,694,360 52,768,682 46,502,593
Emerging Markets
Fund 66,505 86,280 94,699 11,195,946 16,890,323 20,824,746
Equity Fund 1,490,680 1,855,467 1,468,542 1,226,623,062 1,400,503,290 1,165,494,999
Equity Income Fund 20,970 28,649 44,330 20,785,343 30,249,587 39,105,004
Growth Fund 80,371 129,319 152,356 64,254,236 96,800,368 122,195,327
Index Fund 43,400 20,464 43,820 116,419,664 28,635,056 93,551,597
International Fund 358,558 614,604 642,480 289,865,829 173,826,470 217,927,230
Small-Cap Opportunity
Fund 269,136 437,246 491,119 156,483,678 232,858,016 344,183,300
Small-Cap Value Fund 240,854 405,440 379,079 129,913,628 195,946,616 173,382,519
- ---------------------------- ------------ ------------ ------------ ----------------- ---------------- -----------------
</TABLE>
54
<PAGE>
With respect to transactions directed to brokers because of research
services provided, the following table shows total brokerage commissions and the
total dollar amount of transactions on which commissions were paid for the
fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
- ---------------------------------- ---------------------------------- ------------------------------------------------
Total Brokerage Commissions Total Dollar Amount of Transactions on which
(Research-related) ($) 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 Investors Direct, Inc. ("HID"). In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price that includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. The Funds will not deal with the
Distributor or HID in any transaction in which either one acts as principal
except as may be permitted by the 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
services provided by the broker in the light of generally prevailing rates. The
allocation of orders among brokers and the commission rates paid are reviewed
periodically by the Board of Trustees.
Subject to the above considerations, HID may act as a main broker for
the 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 HID to receive no more than the remuneration
that would be expected to be received by an unaffiliated broker on a
commensurate arm's-length transaction. Furthermore, the Trustees of
55
<PAGE>
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.
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.
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<PAGE>
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 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)
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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.
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.
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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.
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.
59
<PAGE>
OTHER
The Registration Statement, including the Prospectuses, the 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 AUDITORS AND REPORTS TO SHAREHOLDERS
PricewaterhouseCoopers LLP, 30 South 17th Street, Philadelphia,
Pennsylvania 19103 are the independent auditors for the Trust and audit and
report on the Trust's annual financial statements, review certain regulatory
reports and the Trust's Federal income tax returns, 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.
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APPENDIX A
DESCRIPTION OF BOND RATINGS (INCLUDING CONVERTIBLE BONDS)
The following summarizes the highest four ratings used by Standard &
Poor's ("S&P") for corporate and municipal debt:
AAA - Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than for those in higher rated categories.
To provide more detailed indications of credit quality, the AA, A and
BBB ratings may be modified by the addition of a plus or minus sign to show
relative standing within these major rating categories.
The following summarizes the highest four ratings used by Moody's
Investors Service ("Moody's") for corporate and municipal long-term debt.
Aaa - Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered upper medium grade
obligations. Factors giving security to principal
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and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds that are rated Baa are considered medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category. With regard to municipal
bonds, those bonds in the Aa, A and Baa groups which Moody's believes possess
the strongest investment attributes are designated by the symbols Aa1, A1 or
Baa1, respectively.
The following summarizes the highest four ratings used by Duff & Phelps
Credit Rating Co. ("D&P") for bonds:
AAA - Debt rated AAA is of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Debt rated AA is of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds that are rated A have protection factors which are
average but adequate. However risk factors are more variable and
greater in periods of economic stress.
BBB - Bonds that are rated BBB have below average protection
factors but are still considered sufficient for prudent
investment. Considerable variability in risk during economic
cycles.
To provide more detailed indications of credit quality, the AA, A and
BBB ratings may be modified by the addition of a plus or minus sign to show
relative standing within these major categories.
The following summarizes the ratings used by IBCA Limited and IBCA Inc.
("IBCA") for bonds:
Obligations rated AAA by IBCA have the lowest expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial, such that 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
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such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual
rating system comprised of Legal Ratings and Individual Ratings.
In addition, IBCA assigns banks Long and Short-Term Ratings as
used in the corporate ratings discussed above. Legal Ratings,
which range in gradation from 1 through 5, address the question
of whether the bank would receive support provided by central
banks or shareholders if it experienced difficulties, and such
ratings are considered by IBCA to be a prime factor in its
assessment of credit risk. Individual Ratings, which range in
gradations from A through E, represent IBCA's assessment of a
bank's economic merits and address the question of how the bank
would be viewed if it were entirely independent and could not
rely on support from state authorities or its owners.
DESCRIPTION OF MUNICIPAL NOTES RATINGS
The following summarizes the two highest ratings used by Moody's for
short-term notes and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of the
best quality, enjoying strong protection by established cash
flows, superior liquidity support or demonstrated broad-based
access to the market for refinancing.
MIG-2/VMIG-2. Obligations bearing these designations are of high
quality with margins of protection ample although not as large as
in the preceding group.
The following summarizes the two highest ratings by Standard & Poor's
for short-term municipal notes:
SP-1 - Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics are given a "plus" (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt are Duff
1, Duff 2, and Duff 3. D&P employs three designations, Duff 1+, Duff 1 and Duff
1-, within the highest rating category. Duff 1+ indicates highest certainty of
timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. 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.
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D&P uses the fixed-income ratings described above under "Description of
Bond Ratings" for tax-exempt notes and other short-term obligations.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted in A-1+. Capacity for timely payment
on commercial paper rated A-2 is satisfactory but the relative degree of safety
is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The highest rating of D&P for commercial paper is Duff 1. D&P employs
three designations, Duff 1 plus, Duff 1 and Duff 1 minus, within the highest
rating category.
Duff 1 plus indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or ready access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by strong fundamental protection factors. Risk factors are considered to be
minor. Duff 1 minus indicates high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
The following summarizes the highest ratings used by Fitch for
short-term obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
F-1 securities possess exceptionally strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated F-1+.
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.
BankWatch Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.
The TBW Short-Term Ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The TBW Short-Term Ratings specifically assess the
likelihood of an untimely payment of principal or interest.
TBW-1 The highest category; indicates a very high degree
of likelihood that principal and interest will be
paid on a timely basis.
TBW-2 The second highest category; while the degree of
safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded
as non-investment grade and therefore speculative.
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PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits.
<S> <C> <C>
(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).
(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 __, 2000 between Registrant and Harris Trust and Savings
Bank ("Harris Trust" or the "Adviser") (filed herewith).
(2) Portfolio Management Contract dated April __, 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 July 29, 1999 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).
(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).
(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).
(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).
(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).
<PAGE>
(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).
(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) Not applicable.
(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).
(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 __, 2000 relating to N Shares (filed herewith).
(2) Service Plan dated April __, 2000 relating to A Shares (filed herewith).
(3) Form of Selling Agreement (filed herewith).
(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 (filed herewith)
(2) Statement of Principles and Code of Ethics of Harris Trust and Savings Bank and Harris
Investment Management, Inc. (filed herewith)
(3) Code of Ethics of Provident Distributors, Inc. (filed herewith)
<PAGE>
Other Powers of Attorney for C. Gary Gerst, Edgar R. Fielder, John W. McCarter, Jr. and Paula
Exhibits: Wolff dated April 30, 1999 (incorporated by reference to PEA No. 11 filed on May 3,
1999).
Power of Attorney for Valerie B. Jarrett dated February 1, 2000 (filed herewith).
Power of Attorney for Philip H. Rinnander dated February 1, 2000 (filed herewith).
Power of Attorney for Thomas J. Ryan dated February 7, 2000 (filed herewith).
</TABLE>
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 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
<PAGE>
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 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
<PAGE>
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.
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 Last Two
Name Position(s) with HIM Fiscal Years
- --------------------------- ------------------------------------- ---------------------------------------------
<S> <C> <C>
Donald G.M. Coxe Director, Chairman of the Board Chairman of the Board and Chief Strategist,
and 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 O. Leszinske Director, President, Chief President and Chief Investment Officer,
Investment Officer Harris Investment Management, Inc.
<PAGE>
Edward W. Lyman, Jr. Director Vice Chair of the Board, Harris Trust and
Savings Bank and Harris Bankcorp, Inc.
Brian J. Steck Director Retired; formerly Vice-Chairman of
Investment and Corporate Banking, Bank of
Montreal; 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
Treasurer Management, 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 and Chief Chairman, President and Chief Executive
Executive Officer Officer of Hansberger
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 Administrative Officer and Chief Administrative Officer and Chief
Chief Compliance Officer Compliance Officer of Hansberger
James E. Chaney Chief Investment Officer Chief Investment 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
- -------- ---------------------
<PAGE>
(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.
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
<PAGE>
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
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 Four Falls Corporate Center, Suite 600, West Conshohocken,
Pennsylvania 19428-2961.
(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, Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428-2961; 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.
<PAGE>
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 has duly
caused this Post-Effective Amendment No. 13 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 16th day of February, 2000.
Harris Insight Funds Trust
By: Philip H. Rinnander, President*
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 13 to the Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated:
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------- ------------------------- ----
<S> <C> <C>
Philip H. Rinnander* President 16th February 2000
Thomas J. Ryan* Treasurer and Chief 16th February 2000
Financial Officer
C. Gary Gerst* Chairman of the 16th February 2000
Board of Trustees;
Trustee
Edgar R. Fiedler* Trustee 16th February 2000
John W. McCarter, Jr.* Trustee 16th February 2000
Paula Wolff* Trustee 16th February 2000
Valerie B. Jarrett* Trustee 16th February 2000
</TABLE>
* By: /s/ G. Nicholas Bullat
----------------------
G. Nicholas Bullat
Attorney-in-Fact pursuant to powers of attorney dated 30 April 1999, 1
February 2000, and 7 February 2000.
<PAGE>
Index of Exhibits Filed with this Amendment
Exhibit Exhibit
Number -------
(d)(1) Advisory Contract dated April __, 2000 between Registrant and
Harris Trust and Savings Bank
(d)(2) Portfolio Management Contract dated April __, 2000 between
Harris Trust and Harris Investment Management, Inc.
(e)(1) Distribution Agreement dated July 29, 1999 between the
Registrant and Provident Distributors, Inc.
(m)(1) Service Plan dated April __, 2000 relating to N Shares
(m)(2) Service Plan dated April __, 2000 relating to A Shares
(m)(3) Form of Selling Agreement
(p)(1) Code of Ethics of Harris Insight Funds Trust
(p)(2) Statement of Principles and Code of Ethics of Harris Trust and
Savings Bank and Harris Investment Management, Inc.
(p)(3) Code of Ethics of Provident Distributors, Inc.
Other: Power of Attorney for Valerie B. Jarrett dated February 1, 2000
Power of Attorney for Philip H. Rinnander dated February 1, 2000
Power of Attorney for Thomas J. Ryan dated February 7, 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 ___, 2000
HARRIS INSIGHT FUNDS TRUST
ATTEST: By _______________________
Name:
______________________, Secretary Title:
HARRIS TRUST AND SAVINGS BANK
ATTEST: By _______________________
Name:
______________________, Secretary Title:
6
<PAGE>
EXHIBIT A
HARRIS INSIGHT FUNDS TRUST
INVESTMENT ADVISER COMPENSATION
<TABLE>
<CAPTION>
------------------------------------------------------- --------------------------------------------------
FUND (SERIES) FEE 1
------------- ---
------------------------------------------------------- --------------------------------------------------
<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.
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
managers (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 __, 2000
HARRIS TRUST AND SAVINGS BANK
ATTEST: By ___________________________
Name:
______________________, Secretary Title:
HARRIS INVESTMENT MANAGEMENT, INC.
ATTEST: By ___________________________
Name:
______________________, Secretary Title:
6
<PAGE>
EXHIBIT A
---------
HARRIS INSIGHT FUNDS TRUST
PORTFOLIO MANAGER COMPENSATION
<TABLE>
<CAPTION>
------------------------------------------------------- --------------------------------------------------
FUND (SERIES) FEE 1
------------- ---
------------------------------------------------------- --------------------------------------------------
<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
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of this 29th day of July, 1999
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 - Harris Insight Emerging Markets Fund, Harris
Insight International Fund, Harris Insight Small-Cap Opportunity Fund, Harris
Insight Small-Cap Value Fund, Harris Insight Growth Fund, Harris Insight Equity
Income Fund, Harris Insight Index Fund, Harris Insight Balanced Fund, Harris
Insight Convertible Securities Fund, Harris Insight Tax-Exempt Bond Fund, Harris
Insight Bond Fund, Harris Insight Intermediate Tax-Exempt Bond Fund, and Harris
Insight Intermediate Government Bond Fund (individually, a "Fund" and
collectively, the "Funds") 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 listed on
an addendum acknowledged in writing by the parties hereto.
<PAGE>
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 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.
2
<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.
3
<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 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
4
<PAGE>
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 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,
5
<PAGE>
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 30, 2000. 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 "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 Four Falls Corporate Center, 6th
6
<PAGE>
Floor, West Conshohocken, PA 19428, 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 Four Falls Corporate
Center, 6th Floor, West Conshohocken, PA 19428 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.
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/ Gary M. Gardner
--------------------
Attest: /s/ David C. Lebisky
--------------------
PROVIDENT DISTRIBUTORS, INC.
By: /s/ Philip H. Rinnander
-----------------------
Attest: /s/ Jason A. Greim
------------------
7
6
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: April ___, 1999
3
<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.
4
<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.
5
<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: April ___, 1999
6
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: April ___, 1999
3
Dear Sirs:
As the principal underwriter of shares of certain registered
investment companies presently or hereafter managed, advised or administered by
Harris Trust and Savings Bank or its affiliates, shares of which companies are
distributed by us at their respective net asset values plus sales charges as
applicable, pursuant to our Distribution Agreements with such companies (the
"Funds"), we invite you to participate as a non-exclusive principal in the
distribution of shares of any and all of the Funds upon the following terms and
conditions:
1. You are to offer and sell such shares only at the public offering prices
which shall be currently in effect, in accordance with the terms of the
then current prospectuses and statements of additional information of the
Funds subject in each case to the delivery prior to or at the time of
such sales of the then current prospectus. You agree to act only as
principal in such transactions and nothing in this Agreement shall
constitute either of us the agent of the other or shall constitute you or
the Fund the agent of the other. In all transactions in these shares
between you and us, we are acting as agent for the Fund and not as
principal. All orders are subject to acceptance by us and become
effective only upon confirmation by us. We reserve the right in our sole
discretion to reject any order. The minimum dollar purchase of shares of
the Funds shall be the applicable minimum amounts described in the then
current prospectuses and statements of additional information and no
order for less than such amounts will be accepted.
2. On each purchase of shares by you from us, the total sales charges and
discount to selected dealer, if any, shall be as stated in each Fund's
then current prospectus.
Such sales charges and discount to selected dealers are subject to
reductions under a variety of circumstances as described in each Fund's
then current prospectus and statement of additional information. To
obtain these reductions, we must be notified when the sale takes place
which would qualify for the reduced charge.
There is no sales charge or discount to selected dealers on the
reinvestment of any dividends or distributions.
3. All purchases of shares of a Fund made under any cumulative purchase
privilege as set forth in a Fund's then current effective prospectus
shall be considered an individual transaction for the purpose of
determining the concession from the public offering price to which you
are entitled as set forth in paragraph 2 hereof.
4. As a member of the selling group, you agree to purchase shares of the
Funds only through us or from your customers. Purchases through us shall
be made only for your own investment purposes or for the purpose of
covering purchase orders already received from your customers, and we
agree that we will not place orders for the purchase of shares from a
Fund except to cover purchase orders already received by us. Purchases
from your customers shall be at a price not less than the net asset value
quoted by each such Fund at the time of such purchase. Nothing herein
contained shall prevent you from selling any
1
<PAGE>
shares of a Fund for the account of a record holder to us or to such Fund
at the net asset value quoted by us and charging your customer a fair
commission for handling the transaction.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
6. You agree to sell shares of the Funds only (a) to your customers at the
public offering prices then in effect or (b) to us as agent for the Funds
or to each such Fund itself at the redemption price, as described in each
Fund's then current effective prospectus.
7. Settlement shall be made promptly, but in no case later than the time
customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of
which draft you agree to pay on presentation to you. If payment is not so
received or made, the right is reserved forthwith to cancel the sale or
at our option to resell the shares to the applicable Fund, at the then
prevailing net asset value in which latter case you agree to be
responsible for any loss resulting to such Fund or to us from your
failure to make payment as aforesaid.
8. If any shares sold to you under the terms of this Agreement are
repurchased by a Fund or by us as agent, or for the account of that Fund
or are tendered to that Fund for purchase at liquidating value under the
terms of the Articles of Incorporation or Declaration of Trust or other
document governing such Fund within seven (7) business days after the
date of confirmation to you of your original purchase order therefor, you
agree to pay forthwith to us the full amount of the concession allowed to
you on the original sale and we agree to pay such amount to the Fund when
received by us. We shall notify you of such repurchase within ten (10)
days of the effective date of such repurchase.
9. All sales will be subject to receipt of shares by us from the Funds. We
reserve the right in our discretion without notice to you to suspend
sales or withdraw the offering of shares entirely, or to modify or cancel
this Agreement.
10. From time to time during the term of this Agreement we may make payments
to you pursuant to one or more of the distribution and/or service plans
adopted by certain of the Funds pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Act") in consideration of your
furnishing distribution and/or shareholder services hereunder with
respect to each such Fund. We have no obligation to make any such
payments and you waive any such payments until we receive monies therefor
from the Fund. Any such payments made pursuant to this Section 10 shall
be subject to the following terms and conditions:
(a) Any such payments shall be in such amounts as we may from time to
time advise you in writing but in any event not in excess of the amounts
permitted by the plan in effect with respect to each particular Fund and
will be based on the dollar amount of Fund shares which are owned of
record by your firm as nominee for your customers or which are owned
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by those customers of your firm whose records, as maintained by the Funds
or their agents, designate your firm as the customer's dealer of record.
Any such payments shall be in addition to the selling concession, if any,
allowed to you pursuant to this Agreement. No such fee will be paid to
you with respect to shares purchased by you and redeemed by the funds or
by us as agent within seven business days after the dates of confirmation
of such purchase.
(b) The provisions of this Section 10 relate to the plan adopted by a
particular Fund pursuant to Rule 12b-1. In accordance with Rule 12b-1,
any person authorized to direct the disposition of monies paid or payable
by a Fund pursuant to this Section 10 shall provide the Fund's Board, and
the Board shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were
made.
(c) The provisions of this Section 10 applicable to each Fund shall
remain in effect for not more than a year and thereafter for successive
annual periods only so long as such continuance is specifically approved
at least annually in conformity with Rule 12b-1 and the Act. The
provisions of this Section 10 shall automatically terminate with respect
to a particular Plan, in the event such Plan terminates or is not
continued or in the event this Agreement terminates or ceases to remain
in effect. In addition, the provisions of this Section 10 may be
terminated at any time, without penalty, by either party with respect to
any particular Plan or not more than 60 days' nor less than 30 days'
written notice delivered or mailed by registered mail, postage prepaid,
to the other party.
11. No person is authorized to make any representations concerning the Funds
or shares of the Funds except those contained in each Fund's then current
effective prospectus or statement of additional information and any such
information as may be released by a Fund as information supplemental to
such prospectus or statement of additional information. In purchasing
shares through us you shall rely solely on the representations contained
in each Fund's then current effective prospectus or statement of
additional information and supplemental information above-mentioned.
12. Additional copies of each such prospectus or statement of additional
information and any printed information issued as supplemental to each
such prospectus or statement of additional information will be supplied
by us to members of the selling group in reasonable quantities upon
request.
13. We, our affiliates and the Funds shall not be liable for any loss,
expense, damages, costs or other claim arising out of any redemption or
exchange pursuant to telephone instructions from any person or our
refusal to execute such instructions for any reason.
14. All communications to us shall be sent to us at Provident Distributors,
Inc., Four Falls Corporate Center, 6th Floor, West Conshohocken, PA
19428, Attention: Phil Rinnander. Any notice to you shall be duly given
if mailed or telegraphed to you at your address as registered from time
to time with the National Association of Securities Dealers, Inc.
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15. This Agreement may be terminated upon written notice by either party at
any time, and shall automatically terminate upon its attempted assignment
by you, whether by operation of law or otherwise.
16. By accepting this Agreement, you represent that you are registered as a
broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a dealer in the states or other jurisdictions where you transact
business, and are a member in good standing of the National Association
of Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in
full force and effect throughout the term of this Agreement. You further
agree to comply with all applicable Federal laws, the laws of the states
or other jurisdictions concerned, and the rules and regulations
promulgated thereunder and with the Constitution, By-Laws and Code of
Conduct of the National Association of Securities Dealers, Inc., and that
you will not offer or sell shares of the Funds in any state or
jurisdiction where they may not lawfully be offered and/or sold.
If you are offering and selling shares of the Funds in jurisdictions
outside the several states, territories, and possessions of the United States
and are not otherwise required to be registered, qualified, or a member of the
National Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in which
such offer and/or sale is made, to comply with the full disclosure requirements
of the Securities Act of 1933 and the regulations promulgated thereunder, to
conduct your business in accordance with the spirit of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. You agree to
indemnify and hold the Funds, their investment advisor, and us harmless from
loss or damage resulting from any failure on your part to comply with applicable
laws. We agree to indemnify you, your officers, directors, employees, and
agents, against any loss or damage, including reasonable attorneys' fees, for
any material misstatement or omission in the prospectus, statement of additional
information, approved sales literature, or approved advertisement for the Funds.
17. You agree to maintain records of all sales of shares made through you and
to furnish us with copies of each record on request.
18. This Agreement and all amendments to this Agreement shall take effect
with respect to and on the date of any orders placed by you after the
date set forth below or, as applicable, after the date of the notice of
amendment sent to you by the undersigned.
19. This Agreement shall be construed in accordance with the laws of the
State of Delaware and shall be binding upon both parties hereto when
signed and accepted by you in the space provided below.
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FOR PROVIDENT DISTRIBUTORS, INC.:
_____________________________________________________ _______________
By: Date
________________________________________________________________________________
FOR:
________________________________________________________________________________
Address of Principal Office
________________________________________________________________________________
City State Zip Code
BY: ITS:
__________________________________ ________________________ _________________
Authorized Signature Title Date
__________________________________
Print Name
5
HT INSIGHT FUNDS, INC.
HARRIS INSIGHT FUNDS TRUST
CODE OF ETHICS
GENERAL PRINCIPLES
This Code of Ethics ("Code") establishes rules of conduct for "Covered
Persons" (as defined herein) of HT Insight Funds, Inc. d/b/a Harris
Insight Funds and Harris Insight Funds Trust (each of which is referred
to as the "Company", and each portfolio of which entities is referred
to as a "Fund") and is designed to govern the personal securities
activities of Covered Persons. In general, in connection with personal
securities transactions, Covered Persons should (1) always place the
interests of the Company's shareholders first; (2) ensure that their
personal securities transactions are conducted consistent with this
Code and in such a manner as to avoid any actual or potential conflict
of interest or any abuse of their positions of trust and
responsibility; and (3) not take inappropriate advantage of their
positions.
I. DEFINITIONS. FOR PURPOSES OF THIS CODE:
A. "Beneficial Ownership" has the meaning set forth in
Attachment A.
B. "Non-interested Board Member" means a director or trustee (as
the case may be) of the Company who is not an "interested
person" (as defined in the Investment Company Act of 1940, as
amended) of the Company; and a "Covered Director" and "Covered
Officer" means each director, trustee or officer of the
Company who is a Covered Person.
C. "Covered Person" means a trustee, director, officer, employee
or "Advisory Person" (as defined in Rule 17j-1 (the "Rule")
under the Investment Company Act of 1940 (the "1940 Act")) of
the Company, [other than a director, officer, general partner
or Advisory Person of an investment adviser for a principal
underwriter of the Company].
D. "Covered Security" means any stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest
or participation in any profit-sharing agreement,
collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a
security, fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, or privilege
on any security (including a certificate of deposit) or on any
group or index of securities (including any interest therein
or based on the value thereof),
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or any put, call, straddle, option, or privilege entered into
on a national securities exchange relating to foreign
currency, or, in general, any interest or instrument commonly
known as a "security," or any certificate of interest or
participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe to
or purchase, any of the foregoing. "Covered Security" shall
not, however, include any of the following instruments,
transactions in which are not subject to the pre-clearance,
blackout, or reporting provisions of this Code:
1. direct obligations of the Government of the United States;
2. bankers' acceptances, bank certificates of deposit,
commercial paper and high-quality sort-term debt
instruments, including repurchase agreements; and
3. shares of registered open-end investment companies,
including shares of the Company.
E. "Designated Clearance Officer" means a member of the
Compliance Department of Harris Bank designated by the Chief
Compliance Officer of Harris Bank.
F. "Security Held or to be Acquired" by a Fund means-
1. Any Covered Security which, within the most recent 15
days-
(a) Is or has been held by the Fund; or
(b) Is being or has been considered by the Fund or its
investment adviser for purchase by the Fund; and
2. Any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered Security
described in paragraph (I)(D).
G. "Service Provider" means the Company's investment adviser,
portfolio manager, any sub-adviser, and principal
underwriter...
II. Unlawful Actions. It is unlawful for any affiliated person of any
Fund, or any affiliated person of an investment adviser or principal
underwriter for
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any Fund, in connection with the purchase or sale, directly or
indirectly, by the person of a Security Held or to be Acquired by the
Fund:
A. To employ any device, scheme or artifice to defraud the Fund;
B. To make any untrue statement of a material fact to the Fund or
omit to state a material fact necessary in order to make the
statements made to the Fund, in light of the circumstances
under which they are made, not misleading;
C. To engage in any act, practice or course of business that
operates or would operate as a fraud or deceit on the Fund; or
D. To engage in any manipulative practice with respect to the
Fund.
III. RESTRICTIONS ON ACTIVITIES
A. BLACKOUT PERIODS
Except as provided in Paragraph (VI)(B), below, no Covered
Person shall purchase or sell, directly or indirectly, any
security in which he or she has, or by reason of such
transaction acquires, any direct or indirect Beneficial
Ownership (a) on a day during which the Company has a pending
"buy" or "sell" order in that same security until that order
is executed or withdrawn or (b) when the Designated Clearance
Officer has been advised by the Company's investment adviser,
portfolio management agent or investment sub-adviser that the
same security is being considered for purchase or sale for any
Fund.
B. INTERESTED TRANSACTIONS
No Covered Person shall recommend any securities transactions
to the Company without having disclosed his or her interest,
if any, in such securities or the issuer thereof, including
without limitation:
1. any direct or indirect Beneficial Ownership of any
securities of such issuer;
2. any contemplated transaction by such person in such
securities;
3. any position with such issuer or its affiliates; and
4. any present or proposed business relationship
between such issuer or its affiliates and such person
or any party in which such person has a significant
interest.
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C. INITIAL PUBLIC OFFERINGS AND PRIVATE PLACEMENTS
No "Investment Person" (as defined in the Rule) who is a
Covered Person shall directly or indirectly acquire Beneficial
Ownership of any securities in an initial public offering or
private placement unless that Investment Person has submitted
for review by and obtained the prior approval of a Designated
Clearance Officer who has been provided by such Investment
Person with full details of the proposed transaction
(including written certification that the investment
opportunity did not arise by virtue of the Investment Person's
activities on behalf of the Company) and has concluded after
consultation with other investment advisory personnel of the
Company, that the Funds have no foreseeable interest in
purchasing such securities.
D. SHORT-TERM TRADING PROFITS
No Advisory Person of the Company who is a Covered Person
shall profit within a 60 calendar day period from the purchase
and sale, or sale and purchase, of the same (or equivalent)
securities of which such Advisory Person has Beneficial
Ownership. Any pre-tax profit so realized shall, unless the
Company's Board Members approve otherwise, be paid over to the
United Way of Greater Chicago.
D. GIFTS
No Advisory Person of the Company who is a Covered Person
shall receive any gift or other things of more than de minimis
value from any person or entity that does or seeks to do
business with or on behalf of the Company. Gifts of more than
de minimis value must be either returned to the donor or paid
for by the recipient. This prohibition does not apply to an
occasional meal, ticket to a theater, entertainment, or
sporting event that is an incidental part of a meeting that
has a clear business purpose.
E. SERVICE AS A DIRECTOR
No Advisory Person of the Company who is a Covered Person
shall serve on the board of directors of any publicly traded
company without prior written authorization from a committee
comprised of the Designated Clearance Officer, the President
and a Vice President of the Company's investment adviser or
Senior Partner of the Company's portfolio management agent
(the "Compliance Committee") based upon a determination that
such board service would be consistent with the interests of
the Company and its shareholders.
In instances in which such service is authorized, the Advisory
Person shall not participate in making investment decisions
for the Company relating to
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the securities of the company on whose board he or she sits
through the implementation of appropriate "Chinese Wall"
procedures established by the Compliance Committee of the
investment adviser.
IV. EXEMPT TRANSACTIONS
The prohibitions described in paragraphs (A) and (D) of Section III
shall not apply to:
A. Purchases or sales effected in any account over which the
Covered Person has no direct or indirect influence or control;
B. Purchases or sales in an investment advisory account of a
Non-interested Board Member (either alone or with others) over
which the investment adviser for the account exercises
investment discretion if such Board Member did not have
knowledge of the transaction until after the transaction had
been executed.
C. Securities which the Company is not permitted to sell or
purchase under the investment objectives and policies set
forth in the Company's then current prospectus(es) or
registration statement;
D. Purchases or sales over which neither the Covered Person nor
the Company have control;
E. Purchases that are part of an automatic dividend reinvestment
plan;
F. Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from the issuer, and
sales of such rights so acquired;
G. Cumulative purchases or sales within a seven-day period of up
to 200 shares of securities issued by any company with a
market capitalization in excess of $1 billion. ; or
H. Subject to the advance approval by a Designated Clearance
Officer purchases or sales which are permissible in the
opinion of the Designated Clearance Officer because such
purchases or sales would be unlikely to affect a highly
institutional market, or because such purchases or sales are
clearly not related economically to the securities held,
purchased or sold by the Company.
V. COMPLIANCE PROCEDURES
A. Execution of personal securities transactions
Each Covered Person (other than a Covered Director or Covered
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Officer) shall (1) conduct all transactions in securities in
which he or she, directly or indirectly, has Beneficial
ownership through brokerage accounts that have been identified
to a Designated Clearance Officer, (2) cause duplicate copies
of confirmations of all transactions required to be reported
hereunder and copies of periodic statements for all securities
accounts to be sent to a Designated Clearance Officer, and (3)
identify to a Designated Clearance Officer any account in
which such Covered Person has a beneficial interest.
B. PRE-CLEARANCE
1. Except as provided in Paragraphs (V)(E) and (VI)(B),
below, a Covered Person may directly or indirectly,
acquire or dispose of Beneficial Ownership of a
security, other than shares of the Company, only if
(a) such purchase or sale has been approved in
advance by a Designated Clearance Officer, (b) the
approved transaction is completed on the same day
approval is received and (c) a Designated Clearance
Officer has not rescinded such approval prior to
execution of the transaction.
2. A written authorization for a security transaction
will be provided by a Designated Clearance Officer to
the person receiving authorization and to memorialize
the oral authorization that was granted.
3. Pre-clearance approval under paragraph (1) above will
expire at the close of business on the trading day
after the date on which oral authorization is
received, and the Covered Person is required to renew
clearance for the transaction if the trade is not
completed before the authority expires.
C. TRANSACTION REPORTS
1. Except as provided in Paragraph (V)(E), below, each
Covered Person who acquires or disposes of any direct
or indirect Beneficial Ownership of a Covered
Security shall submit to a Designated Clearance
Officer no later than 10 days after the end of the
calendar quarter in which the transaction was
effected a report containing the following
information:
a. The name of the reporting person;
b. The date of the transaction, the title, the
interest rate and maturity date (if
applicable), the number of shares, and the
principal amount of each Covered Security
involved;
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c. The nature of the transaction (i.e.,
purchase, sale or any other acquisition or
disposition);
d. The price of the Covered Security at which
the transaction was effected;
e. The name of the broker, dealer or bank with
or through whom the transaction was
effected; and
f. The date that the report is submitted by the
Covered Person.
2. Except as provided in Paragraph (V)(E), below, each
Covered Person, no later than 10 days after the end
of any calendar quarter in which the Covered Person
established or acquired Beneficial ownership of a
securities account shall submit to a Designated
Clearance Officer a report containing the following
information:
a. The name of the reporting person;
b. The name of the broker, dealer or bank with
whom the Covered Person established the
account;
c. The date the account was established; and
d. The date that the report is submitted by the
Covered Person.
3. A Designated Clearance Officer shall review reports
received and as appropriate compare the reports with
the written pre-clearance authorization provided. If
any Designated Clearance Officer is also a Covered
Person, that Designated Clearance Officer's trades
are to be reviewed by another Designated Clearance
Officer.
4. Any report submitted to comply with the requirements
of this Section V may contain a statement that the
report shall not be construed as an admission by the
person making such report that such person has any
direct or indirect Beneficial Ownership in the
securities to which the report relates.
D. DISCLOSURE OF PERSONAL HOLDINGS
Except as provided in Paragraph (V)(E), below, each Covered
Person shall submit to a Designated Clearance Officer the
following--
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1. Initial Holdings Report: Upon commencement of
employment,(1) but in no case later than 10 days
after a person becomes a Covered Person under this
Code, each Covered Person shall be required to
disclose his or her current personal securities
holdings in a report containing the following
information:
a. The name of the Covered Person;
b. The title, number of shares and principal amount
of each Covered Security in which the Covered
Person had any direct or indirect Beneficial
Ownership when the person became a Covered
Person;
c. The information specified in Paragraph (V)(C)
(2); and
d. The date that the report is submitted by the
Covered Person.
2. Annual Holdings Reports: Each Covered Person shall
deliver to a Designated Clearance Officer no later
than February 1 of each year an annual report(2) of
holdings, current as of a date no more than 30 days
before the annual report is submitted and providing
the following information:
a. The name of the Covered Person;
b. The title, number of shares and principal amount
of each Covered Security in which the Covered
Person had any direct or indirect Beneficial
Ownership;
c. The name of any broker, dealer, or bank with
whom the Covered Person maintains an account
in which any securities are held for the direct
or indirect benefit of the Covered Person; and
d. The date that the report is submitted by the
Covered Person.
E. EXCEPTIONS FROM REPORTING REQUIREMENTS
- --------
(1) Pursuant to revised Rule 17j-1, the initial report for any Covered
Person newly employed after 1 March 2000 is due within 10 days of
notice to the Covered Person of his/her status as such. Covered Persons
employed prior to or as of 1 March 2000 need not file initial reports.
(2) The first such annual report pursuant to revised Rule 17j-1 is due no
later than 30 January 2001.
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1. NON-INTERESTED BOARD MEMBERS: Any person who is a
Covered Person with respect to the Company solely by
virtue of being a Non-interested Board Member shall
be required to comply with Paragraphs (V)(B), (V)(C),
and (V)(D), above, with respect to a transaction only
if such person, at the time of that transaction,
knew, or in the ordinary course of fulfilling his or
her official duties as a Board Member of the Company
should have known, that during the 15-day period
immediately preceding the date of the transaction by
such person, the security such person purchased or
sold is or was purchased or sold by the Company or
was being considered for purchase or sale by the
Company, or investment adviser, or if applicable,
portfolio management agent or investment sub-adviser.
2. No report shall be required of a Covered Person
pursuant to Paragraphs (V)(C) and (V)(D) with respect
to transactions effected for, and Covered Securities
held in, any account over which the Covered Person
has no direct or indirect influence or control.
3. No report shall be required of a Covered Person
pursuant to Paragraph (V)(C) if such report would
duplicate (a) information recorded pursuant to Rules
204-2(a)(12) or 204-2(a)(13) under the Investment
Advisers Act of 1940, as amended, or (b) information
contained in broker trade confirmations or account
statements received by the Company, Harris Bank, or
HIM with respect to the Covered Person in the time
period required by Paragraph (V)(C)(2), provided that
all of the information required by that Paragraph is
contained in the broker trade confirmations or
account statements, or in the records of the Company,
Harris Bank, or HIM.
F. CERTIFICATION OF COMPLIANCE
Each Covered Person is required to certify annually that he or
she has read and understood the Company's Code and recognizes
that he or she is subject to such Code. Further, each Covered
Person is required to certify annually that he or she has
complied with all the requirements of the Code and that he or
she has disclosed or reported all personal securities
transactions required to be disclosed or reported pursuant to
the requirements of the Code. A form of certification is
attached to this Code as Attachment B.
G. REPORTS TO BOARD MEMBERS
1. At each quarterly meeting, the Company's Board
Members shall review a report regarding:
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a. Any transaction that evidences a possible
violation of this Code, including untimely
filings of any reports required by this
Code;
b. Any securities transaction that occurred
during the prior quarter that may have been
inconsistent with the provisions of the
codes of ethics adopted by a Service
Provider; and
c. Any significant remedial action taken in
response to such violations described in
paragraph 3 above.
2. In addition to the foregoing quarterly reports, at
least annually the Company's Board Members shall
review written reports of the Company and each
Service Provider that:
a. Describe any issues arising under that
entity's code of ethics or procedures since
the last report to the Board Members,
including, but not limited to, information
about material violations of the code or
procedures and sanctions imposed in response
to such material violations; and;
b. Certify that the Company or the Service
Provider has adopted procedures reasonably
necessary to prevent Access Persons (as
defined in the Rule) from violating the
Code.
H. REVIEW BY THE BOARD MEMBERS
Within six months after a Service Provider adopts any material
change to its code of ethics, the Company's Board Members
shall review such amended code and determine whether to
approve it.
I. Identification of Covered Persons. The Company shall identify
all Covered Persons and inform them of their reporting
obligation hereunder.
J. Review Procedures. The Company shall institute and
periodically review procedures (1) reasonably necessary to
prevent violations of this Code and (2) pursuant to which
appropriate management or compliance personnel review all
reports required by this Code.
VI. COVERED DIRECTORS AND COVERED OFFICERS
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A. The Company recognizes that a Covered Director or a Covered
Officer does not have on-going, day-to-day involvement with
the investment operations of the Company. In addition, it has
been the practice of the Company not to give information about
securities purchased or sold by the Company or considered for
purchase or sale by the Company to Covered Directors or
Covered Officers in materials circulated until at least 15
days after such securities are purchased or sold by the
Company or are considered for purchase or sale by the Company.
Accordingly, the Company believes that less stringent controls
are appropriate for Covered Directors or Covered Officers.
B. The blackout period imposed by Paragraph (III)(A)and the
securities pre-clearance requirement contained in Paragraph
(V)(B), above shall apply to a Covered Director or Covered
Officer only if he or she knew or, in the ordinary course of
fulfilling his or her official duties as a director or
officer, should have known, that during the fifteen day period
immediately before or after such person's transaction in a
security or at the time of the transaction that the security
purchased or sold by him or her was also purchased or sold by
the Company or considered for purchase or sale by the Company.
VII. SANCTIONS
Upon discovering that a Covered Person has not complied with the
requirements of this Code, the Designated Clearance Officer shall
submit findings to the Company's Board. The Compliance Committee may
impose on that Covered Person whatever sanctions the Compliance
Committee deems appropriate, including, among other things, the
unwinding of the transaction and the disgorgement of profits, letter of
censure, suspension or termination of employment or removal from
office. Any significant sanction imposed shall be reported to the Board
Members in accordance with Paragraph (V)(G)(1)(c) above.
VIII. ADVISER AND PRINCIPAL UNDERWRITER CODES
The Company's investment adviser, portfolio management agent,
investment sub-adviser and principal underwriter shall adopt, maintain
and enforce separate codes of ethics with respect to their personnel in
compliance with Rule 17j-1 and Rule 204-2(a)(12) of the Investment
Advisers Act of 1940 or Section 15(f) of the Securities Exchange Act of
1934, as applicable, and shall forward to the Company's administrator
and the Company's Counsel copies of such codes and all future
amendments and modifications thereto.
IX. RECORDKEEPING
There shall be preserved with the Company's records in accordance with
Rule 17j-1:
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A. This Code and any prior code in effect during the past five
years, maintained in an easily accessible place;
B. A record (maintained in an easily accessible place for at
least five years after the end of the fiscal year in which
the violation occurs) of any violation of this Code, and of
any action taken as a result of the violation;
C. A copy (maintained for at least five years after the end of
the fiscal year in which the report is made or the information
is provided, the first two years in an easily accessible
place) of each report made by a Covered Person as required by
this Code, including any information provided pursuant to
Paragraph (V)(E)(3)(b) in lieu of the quarterly reports
otherwise required by this Code;
D. A record (maintained in an easily accessible place) of all
persons, currently or within the past five years, who are or
were required to make reports under Paragraphs (V)(C) and
(V)(D) of this Code, or who are or were responsible for
reviewing these reports;
E. A copy (maintained for at least five years after the end of
the fiscal year in which it is made, the first two years in an
easily accessible place) of each report required by Paragraph
(V)(G) of this Code;
F. A record (maintained by the Company for at least five years
after the end of the fiscal year in which the approval is
granted) of any decision, and the reasons supporting the
decision, to approve the acquisition by investment personnel
of securities under Paragraph III.C of this Code; and
G. Any written report prepared by Harris Bank or HIM concerning
the subject matter of this Code, maintained for at least five
years after the end of the fiscal year in which it is made.
X. CONFIDENTIALITY
All information obtained from any Covered Person hereunder shall be
kept in strict confidence, except that reports of securities
transactions hereunder may be made available to the Securities and
Exchange Commission or any other regulatory or self-regulatory
organization, and may otherwise be disclosed to the extent required by
law or regulation.
XI. OTHER LAWS, RULE AND STATEMENTS OF POLICY
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Nothing contained in this Code shall be interpreted as relieving any
Covered Person from acting in accordance with the provision of any
applicable law, rule, or regulation or any other statement of policy or
procedures governing the conduct of such person adopted by the Company.
XII. FURTHER INFORMATION
If any person has any questions with regard to the applicability of the
provisions of this Code generally or with regard to any securities
transaction or transactions such person should consult a Designated
Clearance Officer.
Dated: 24 February 2000
13
<PAGE>
Attachment A
The term "beneficial ownership" as used in the attached Code of Ethics
(the "Code") is to be interpreted by reference to Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934 (the "Rule"), except that the determination of
direct or indirect beneficial ownership for purposes of the Code must be made
with respect to all securities that a Covered Person has or acquires. Under the
Rule, a person is generally deemed to have beneficial ownership of securities if
the person, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or indirect
pecuniary interest in the securities.
The term "pecuniary interest" in particular securities is generally
defined in the Rule to mean the opportunity, directly or indirectly, to profit
or share in any profit derived from a transaction in the securities. A person is
refutably deemed to have an "indirect pecuniary interest" within the meaning of
the Rule in any securities held by members of the person's immediate family
sharing the same household, the term "immediate family" including any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
sister-in-law, as well as adoptive relationships. Under the Rule, an indirect
pecuniary interest also includes, among other things: a general partner's
proportionate interest in the portfolio securities held by a general or limited
partnership; a performance-related fee, other than an asset-based fee, received
by any broker, dealer, bank, insurance company, investment company, investment
adviser, investment manager, trustee or person or entity performing a similar
function; a person's right to dividends that is separated or separable from the
underlying securities; a person's interest in securities held by certain trusts;
and a person's right to acquire equity securities through the exercise or
conversion of any derivative security, whether or not presently exercisable, the
term "derivative security being generally defined as any option, warrant,
convertible security, stock appreciation right, or similar right with an
exercise or conversion privilege at a price related to an equity security, or
similar securities with, or value derived from, the value of an equity security.
For purposes of the Rule, a person who is a shareholder of a corporation or
similar entity is not deemed to have a pecuniary interest in portfolio
securities held by the corporation or entity, so long as the shareholder is not
a controlling shareholder of the corporation or the entity and does not have or
share investment control over the corporation's or the entity portfolio.
14
<PAGE>
Attachment B
HT Insight Funds, Inc. d/b/a Harris Insight Funds
Harris Insight Funds Trust
Annual Certification
Pursuant to the requirements of the Code of Ethics of the HT Insight
Funds, Inc. d/b/a Harris Insight Funds and Harris Insight Funds Trust
(collectively referred to as the "Company"), the undersigned hereby certifies as
follows:
1. I have read the Company's Code of Ethics.
2. I understand the Code of Ethics and acknowledge that I am
subject to it.
3. Since the date of the last Annual Certification (if any) given
pursuant to the Code of Ethics, I have reported all personal
securities transactions required to be reported under the
requirements of the Amended Code of Ethics.
Date: ______________________________
Signature
______________________________
Print Name
15
HARRIS TRUST AND SAVINGS BANK
HARRIS INVESTMENT MANAGEMENT, INC.
STATEMENT OF PRINCIPLES AND
CODE OF ETHICS FOR
INVESTMENT ADVISORY AND
MUTUAL FUND MANAGEMENT PERSONNEL
STATEMENT OF PRINCIPLES
Introduction
This Statement of Principles and Code of Ethics ("Code") establishes
rules of conduct for "Covered Persons" and "Investment Personnel" (as
defined in Sections I.A and I.B, below) employed by Harris Trust and
Savings Bank ("Bank") and Harris Investment Management, Inc. ("HIM"
and, together with the Bank, "Harris"), respectively the investment
adviser to and portfolio management agent for HT Insight Funds, Inc.
d/b/a/ Harris Insight Funds and Harris Insight Funds Trust (together,
the "Funds", each portfolio of which is a "Fund"), and is designed to
govern the personal securities activities of Covered Persons. In
general, in connection with personal securities transactions, Covered
Persons should (1) always place the interests of the Funds and their
shareholders first; (2) ensure that all personal securities
transactions are conducted in a manner consistent with this Code and in
such manner as to avoid any actual or potential conflict of interest or
any abuse of a Covered Person's position of trust and responsibility;
and (3) not take inappropriate advantage of their positions.
Harris Policies
Confidential Information
In the course of their employment with Harris, employees, in their
capacities as investment personnel, administrators, and/or officers,
will learn confidential information concerning Harris, the Funds, and
various other matters. "Confidential information" means, until such
information has been publicly disseminated (through the media or public
records, by sale to clients, or through any other means of external
communication) all information not publicly available and includes, but
is not limited to, the composition of individual fund and client
portfolios; fund and client financial information; corporate financial
activity; client lists; securities candidate and working lists;
investment models, methods, processes, and formulae; and certain
records, procedures, systems, pending research recommendations,
software and other proprietary information.
<PAGE>
It is crucial that all personnel realize that the proper treatment of
confidential information is a key aspect of preserving the integrity of
Harris' advisory function. Accordingly, and in addition to any other
restrictions and requirements imposed by Harris, Covered Persons shall
not (i) disclose, directly or indirectly, any confidential information
to anyone other than personnel and authorized professional advisors
such as our attorneys and accountants who need such information in
order to discharge their professional duties, or (ii) use, directly or
indirectly, any confidential information for their personal benefit.
Furthermore, given the importance of confidentiality to Harris'
business, each Covered Person should refrain from discussing Harris'
business, investments, and client relationships and any matters
relating to investments for or by the Funds unless such Covered Person
is absolutely certain that the matter is not covered by any
confidentiality requirements. All Covered Persons should understand
that any breach of the above confidentiality requirements contained in
these policies and procedures will result in disciplinary action
against the employee and may constitute a violation of federal laws.
Inside Information
Insider trading is prohibited by the federal securities laws, including
the Securities Exchange Act of 1934 (the "1934 Act") and the Insider
Trading and Securities Fraud Enforcement Act of 1988 ("ITSFEA"), which
is specifically applicable to investment advisers and broker/dealers
and is otherwise applicable to any entity with access to inside
information relating to public companies. Such organizations have an
affirmative statutory obligation to establish and enforce written
policies and procedures that are reasonably designated to prevent the
misuse of inside information. Substantial criminal and civil penalties
can be imposed for failing to meet these new standards.1
1. Definition of Insider Trading
While there is no single precise definition of insider
trading, the term is generally understood to mean the purchase
or sale of securities while in possession of material,
non-public information (i.e., information not available to the
general public that would be important to an investor in
making a decision to buy or sell a security). Insider trading
also includes making such information available ("tipping") to
others who may trade based on that information; the laws
governing insider trading by an em-
- --------
1 Criminal penalties for insider trading violations by individuals are
a maximum of 10 years in prison and/or a $1,000,000 fine for each violation.
Criminal penalties for violations by non-natural persons are a maximum of
$2,500,000 for each violation. Control persons may be liable for treble civil
damages if the control person knew of a violation or recklessly failed to
enforce insider trading policies or procedures which permitted a violation to
occur.
2
<PAGE>
ployee who has such information cover trades made not only
for the employee's own account but for the account(s) of any
family member of the employee (including spouse, minor
children, and adults living in the same household), accounts
under the control of the employee or any family member, and
accounts including trusts in which the employee or any
family member has any beneficial interest (as further
defined in Attachment B). Obviously, these descriptions do
not catalogue the many different types of information that
can be construed as material and nonpublic. Rather than
attempting to make such determinations on their own,
employees who receive nonpublic, important information
should immediately seek the advice of a Designated
Supervisory Person (as defined in Section V.B.1 below).
2. Harris Policy
It is Harris' policy to comply fully with all federal and
state laws and regulations, and that policy applies to all
employees and directors of Harris. Consistent with these
historic policies and practices, Harris intends to monitor the
activities of all of its employees to prevent the misuse of
inside information. IN FURTHERANCE OF THAT AIM, HARRIS HAS
IMPLEMENTED AND WILL STRICTLY ENFORCE THE FOLLOWING POLICIES
AND PROCEDURES DESIGNED BOTH TO MEET OBLIGATIONS UNDER THE
1934 ACT AND UNDER ITSFEA, AND TO REINFORCE HISTORIC POLICIES
REGARDING THE USE OF CONFIDENTIAL OR INSIDE INFORMATION. In
order to comply fully with the requirements of the applicable
securities laws, it is imperative that each employee carefully
read, understand, and act in conformity with the policies and
procedures outlined below. Employees should also be familiar
and comply with the provisions of the HARRIS BANK CODE OF
ETHICS, the HARRIS BANK TRUST, CUSTODY AND INVESTMENT
MANAGEMENT DIRECTIVES MANUAL, and the STANDARDS OF
PROFESSIONAL CONDUCT OF THE ASSOCIATION FOR INVESTMENT
MANAGEMENT AND RESEARCH.
CODE OF ETHICS
I. Applicability
A. For purposes of this Code, "Covered Person" shall include:
1. "Access Persons" of the Funds or of Harris Bank,
which means any director, officer, or Advisory Person
of Harris Bank who, with respect to any Fund or to
any accounts of clients of The Private Bank/PCFS
("PB/PCFS") or HIM, makes any recommendation, par-
3
<PAGE>
ticipates in the determination of which
recommendation will be made, or whose principal
function or duties relate to the determination of
which recommendation will be made, or who, in
connection with his or her duties, obtains any
information concerning recommendations on Covered
Securities being made to any Fund or to any accounts
of clients of PB/PCFS or HIM.
2. "Access Persons" of HIM, which means any director,
officer, or Advisory Person of HIM.
3. As used in the preceding paragraphs, the term
"Advisory Person" means-- (a) any employee of the
Funds, Harris Bank, or HIM, respectively, (or of any
company in a control relationship to the Funds,
Harris Bank, or HIM) who, in connection with his or
her regular functions or duties, makes any
recommendation, participates in, or obtains
information regarding the purchase or sale of Covered
Securities by a Fund or by any accounts of clients of
PB/PCFS or HIM, or whose functions relate to the
making of any recommendations with respect to the
purchases or sales, including (i) the person or
persons with the direct responsibility and authority
to make investment decisions affecting any portfolio
of the Funds or accounts managed within PB/PCFS or
HIM (together, "Portfolio Managers"), (ii) analysts,
(iii) traders, and (iv) support staff working
directly with Portfolio Managers and analysts, and
employees who work on Funds-related or PB/PCFS or
HIM investment-related accounting matters; and
(b) Any natural person in a control relationship to
the Funds, Harris Bank, or HIM who obtains
information concerning recommendations made to the
Funds or to any accounts of clients of PB/PCFS or
HIM with regard to the purchase or sale of Covered
Securities by the Funds or by any accounts of
clients of PB/PCFS or HIM.
A list of all Covered Persons as of the date of
adoption of this Code is attached as Attachment A.
B. For purposes of this Code, "Investment Personnel" shall mean--
1. any employee of the Funds, Harris Bank, or HIM,
respectively, (or of any company in a control
relationship to the Funds, Harris Bank, or HIM) who,
in connection with his or her regular functions or
duties, makes or participates in making
recommendations regarding the purchase or sale of
securities by a Fund or by any accounts of cli-
4
<PAGE>
ents of PB/PCFS or HIM, including (a) the person or
persons with the direct responsibility and authority
to make investment decisions affecting any portfolio
of the Funds or accounts managed within PB/PCFS or
HIM (together, "Portfolio Managers"), (b) analysts,
(c) traders, and (d) support staff working directly
with Portfolio Managers and analysts, and employees
who work on Funds-related or PB/PCFS or HIM
investment-related accounting matters; and
2. Any natural person who controls the Funds, Harris
Bank, or HIM and who obtains information concerning
recommendations made to the Funds or to any accounts
of clients of PB/PCFS or HIM regarding the purchase
or sale of securities by the Funds or by any accounts
of clients of PB/PCFS or HIM.
C. For purposes of this Code, "Covered Security" means any
stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided
interest in oil, gas, or other mineral rights, any put, call,
straddle, option, or privilege on any security (including a
certificate of deposit) or on any group or index of securities
(including any interest therein or based on the value thereof),
or any put, call, straddle, option, or privilege entered into
on a national securities exchange relating to foreign
currency, or, in general, any interest or instrument
commonly known as a "security," or any certificate of interest
or participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe
to or purchase, any of the foregoing. "Covered Securities"
shall not, however, include the following instruments,
transactions in which are not subject to the pre-clearance,
blackout, or reporting provisions of this Code:
1. direct obligations of the Government of the United
States;
2. bankers' acceptances;
3. bank certificates of deposit;
4. high-quality sort-term debt instruments, including
repurchase agreements;
5. commercial paper;
6. shares of registered open-end investment companies,
including shares of the Funds;
5
<PAGE>
7. options on a securities index; and
8. exchange-traded synthetic index securities, e.g.,
SPDRs, WEBs, etc.
D. For purposes of this Code, a "Security Held or to be Acquired"
by a Fund means-
1. Any Covered Security which, within the most recent
15 days,
(a) Is or has been held by the Fund; or
(b) Is being or has been considered by the Fund or
its investment adviser for purchase by the Fund;
and
2. Any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered
Security described in paragraph (D)(1).
E. For purposes of this Code, the "purchase or sale of a Covered
Security" includes, among other things, the writing of an
option to purchase or sell as Covered Security.
F. For purposes of this Code, a "Covered Person" does not include
any person who is subject to the securities transaction
pre-clearance requirements and securities transaction
reporting requirements of the codes of ethics adopted by (a)
the Board of Directors and Board of Trustees of the Funds, (b)
any Fund's investment sub-adviser other than HIM, or (c) the
Funds' principal underwriter in compliance with Rule 17j-1 of
the 1940 Act ("Rule 17j-1") and Rule 204-2(a)(12) of the
Investment Advisers Act of 1940 or Section 15(f) of the 1934
Act, as applicable.
G. For purposes of this Code, a person who normally assists in
the preparation of public reports or who receives public
reports but who receives no information about current
recommendations or trading or who obtains knowledge of current
recommendations or trading activity once or infrequently or
inadvertently shall not be deemed to be a Covered Person.
II. Unlawful Actions
It is unlawful for any affiliated person of any Fund, or any affiliated
person of an investment adviser for any Fund, in connection with the
purchase or sale, directly or indirectly, by the person of a Security
Held or to be Acquired by the Fund:
A. To employ any device, scheme or artifice to defraud the Fund;
6
<PAGE>
B. To make any untrue statement of a material fact to the Fund
or omit to state a material fact necessary in order to make
the statements made to the Fund, in light of the circumstances
under which they are made, not misleading;
C. To engage in any act, practice or course of business that
operates or would operate as a fraud or deceit on the Fund; or
D. To engage in any manipulative practice with respect to the
Fund.
III. Restrictions on Activities
A. Blackout Periods
1. No Covered Person shall purchase or sell, directly or
indirectly, any security in which he or she has, or
by reason of such transaction acquires, any direct or
indirect beneficial ownership (as defined in
Attachment B to this Code) (a) on a day during which
a Fund has a pending "buy" or "sell" order in that
same security until that order is executed or
withdrawn or (b) when a Designated Supervisory Person
(as defined in Section V.B.1, below) has been advised
by the Funds' investment adviser, portfolio
management agent or investment sub-adviser that the
same security is being actively considered for
purchase or sale for any Fund. A purchase or sale of
a security is being "actively considered" when a
recommendation to purchase or sell has been made for
a Fund and is pending.
2. No Portfolio Manager, with regard to any security
under consideration for a Fund managed by him or her,
or analyst, with regard to any security followed by
him or her, who knows or who has reason to know such
security is under consideration for purchase or sale
in a Fund or specific client account, shall purchase
or sell, directly or indirectly, any security in
which he or she has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership
as defined in Attachment B to this Code within seven
calendar days before or after a Fund trades in that
security.
3. No analyst, with regard to any security he or she
follows, shall without the approval of of the
Designated Supervisory Person, purchase or sell any
security within seven calendar days before or after
the analyst issues or updates any research notes,
current comments, ratings changes, update reports,
etc., concerning that security.
7
<PAGE>
B. Interested Transactions
No Covered Person shall recommend any securities transactions
by the Funds without having disclosed his or her interest, if
any, in such securities or the issuer thereof, including
without limitation:
1. Any direct or indirect beneficial ownership (as
defined in Attachment B to this Code) of any
securities of such issuer;
2. Any contemplated transaction by such person in such
securities;
3. Any position with such issuer or its affiliates; and
4. Any present or proposed business relationship between
such issuer or its affiliates and such person or any
party in which such person has a significant
interest.
C. Initial Public Offerings
A Covered Person may acquire securities in an initial public
offering for his or her personal account, provided that (1)
such transaction otherwise complies with all other provisions
of this Code, the NASD Free-Riding and Withholding
Interpretation, and other applicable laws and regulations; (2)
neither (a) any Fund nor (b) any PB/PCFS client account for
which the Covered Person has any responsibility is authorized
to invest in initial public offerings; and (3) the Covered
Person has submitted for review by and obtained the prior
approval of a Designated Supervisory Person who has been
provided by such Covered Person with full details of the
proposed transaction (including written certification that the
investment opportunity did not arise by virtue of the Covered
Person's activities on behalf of the Funds or any PB/PCFS
client account) and has concluded after consultation with
other Harris investment advisory personnel that the Funds or
PB/PCFS client accounts have no foreseeable interest in
purchasing such securities.
D. Private Placements
No Covered Person shall acquire, directly or indirectly,
beneficial ownership of any securities in a private placement
without the review and prior approval of a Designated
Supervisory Person who has been provided by such Covered
Person with full details of the proposed transaction
(including written certification that the investment
opportunity did not arise by virtue of the Covered Person's
activities on behalf of the Funds) and has concluded after
consultation with other Harris investment advisory
8
<PAGE>
personnel that the Funds have no foreseeable interest in
purchasing such securities.
E. Short-Term Trading Profits
No Covered Person shall profit within a sixty- (60-) day
calendar period from the purchase and sale, or sale and
purchase, of the same (or equivalent) securities of which such
Covered Person has beneficial ownership if such securities are
on any Harris-approved Working List2 or are being actively
considered for addition to or deletion from any Working List.
A security is being "actively considered" when a
recommendation to add the security to or delete it from any
Working List has been made and is pending decision. Any profit
so realized shall, unless the Funds' Board(s) approves
otherwise, be paid over to the Funds or to a charitable
organization of the Covered Person's choosing. Notwithstanding
the foregoing and provided that at least two Designated
Supervisory Persons approve any exception granted pursuant to
this paragraph, a Covered Person may be permitted to retain
profits that result from a purchase or sale that occurs as a
consequence of circumstances not foreseen at the time of the
initial sale or purchase transaction, e.g., a "sale" pursuant
to a tender offer for securities purchased without knowledge
of the impending tender offer within 60 days of the required
tender date. The provisions of this Section shall not apply to
transactions effected to close out a pre-existing hedge
position within 60 days of the date on which such position was
established.
F. Gifts
No Covered Person shall receive any gift or other things of
more than de minimis value from any person or entity that does
or seeks to do business with or on behalf of the Funds. Gifts
of more than de minimis value must be either returned to the
donor or paid for by the recipient. This prohibition does not
apply to an occasional meal or ticket to a theater,
entertainment, or sporting event that is an incidental part of
a meeting that has a clear business purpose.
G. Service as a Director
No Covered Person, other than an individual who is a Covered
Person solely because such individual is a member of the board
of directors of HIM, shall serve on the board of directors of
any publicly traded company
- --------
2 Working Lists are lists of securities that have been approved for
purchase or retention by Harris Bank, a business unit thereof, or clients of
Harris Investment Management, Inc.
9
<PAGE>
without prior written authorization from a committee comprised
of all Designated Supervisory Persons, an Executive Vice
President or a Senior Vice President of the Bank, and a senior
manager of the Funds' portfolio management agent (the
"Compliance Committee") based upon a determination that such
board service would be consistent with the interests of the
Funds and their shareholders.
In instances in which such service is authorized, the Covered
Person shall not participate in making investment decisions
relating to the securities of the company on whose board he or
she sits through the implementation of appropriate "Chinese
Wall" procedures established by the Compliance Committee.
IV. Exempt Transactions
The prohibitions described in paragraphs (A) and (E) of Section III shall not
apply to:
A. Purchases or sales effected in any account over which the
Covered Person has no direct or indirect influence or control;
B. Securities which the Funds are not permitted to purchase or
sell under the investment objectives and policies set forth in
the Funds' then current prospectuses, under the Securities Act
of 1933, or the Funds' registration statement on Form N-1A.
C. Purchases or sales over which neither the Covered Person nor
the Funds have control;
D. Purchases that are part of an automatic dividend reinvestment
plan;
E. Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from the issuer, and
sales of such rights so acquired;
F. Cumulative purchases or sales within a seven-day period of up
to 200 shares of securities issued by any company with a
market capitalization in excess of $1 billion; or
G. Subject to the advance approval by a Designated Supervisory
Person, purchases or sales which are permissible in the
opinion of a Designated Supervisory Person because such
purchases or sales would be unlikely to affect a highly
institutional market, or because such purchases or sales are
clearly not related economically to the securities held,
purchased or sold by the Funds.
10
<PAGE>
V. Compliance Procedures
A. Execution of personal securities transactions.
All personal securities transactions of Covered Persons must
be conducted through brokerage accounts that have been
identified to a Designated Supervisory Person, and any account
in which any Covered Person has a beneficial interest shall be
so identified. Each such brokerage account must be set up to
deliver duplicate copies of all confirmations and statements
to a Designated Supervisory Person. No exceptions will be made
to this policy.
B. Pre-clearance
1. A Covered Person may, directly or indirectly, acquire
or dispose of beneficial ownership of a security,
other than shares of the Funds, only if (a) such
purchase or sale has been approved in advance by the
Compliance Officer of HIM or another of the
supervisory persons designated by Harris (each a
"Designated Supervisory Person"), (b) the approved
transaction is completed within two business days of
the day approval is received, and (c) a Designated
Supervisory Person has not rescinded such approval
prior to execution of the transaction. If any
Designated Supervisory Person is also a Covered
Person, that individual shall obtain pre-clearance
approval from another Designated Supervisory Person
in conformity with the preceding sentence and shall
otherwise comply with all the provisions of this
Code.
2. A written authorization for a security transaction
will be provided by a Designated Supervisory Person
to the person receiving authorization, to memorialize
any oral authorization that may have been granted.
3. Pre-clearance approval under paragraph (1) above will
expire at the close of business on the trading day
after the date on which oral authorization is
received, and the Covered Person is required to renew
clearance for the transaction if the trade is not
completed before the authority expires.
4. If a securities transaction has received
pre-clearance approval under paragraph (1) above but
has not been executed prior to the expiration of that
approval as provided by paragraph (3) above, the
Covered Person who requested pre-clearance shall
report the non-
11
<PAGE>
execution to the Designated Supervisory Person who
granted the approval no later than the close of
business on the trading day after the approval
expired.
C. Transaction Reports
1. Every Covered Person must report certain information
about each transaction by which the Covered Person
acquires any direct or indirect beneficial ownership
(as defined in Attachment A to this Code) of a
Covered Security, subject to the exceptions set forth
in Section V.E, below.
2. A Covered Person must submit to a Designated
Supervisory Person a transaction report pursuant to
this Section V.C.2 no later than 10 days after the
end of any calendar quarter in which occurred any
transaction with respect to a Covered Security in
which the Covered Person had any direct or indirect
beneficial ownership interest. The report must
contain the following information:
a. The name of the reporting person;
b. The date of the transaction, the title, the
interest rate and maturity date (if
applicable), the number of shares, and the
principal amount of each Covered Security
involved;
c. The nature of the transaction (i.e.,
purchase, sale, gift, or any other
acquisition or disposition);
d. The price of the Covered Security at which
the transaction was effected;
e. The name of the broker, dealer or bank with
or through whom the transaction was
effected; and
f. The date that the report is submitted by the
Covered Person.
3. A Covered Person must submit to a Designated
Supervisory Person a securities account report
pursuant to this Section V.C.3 no later than 10 days
after the end of any calendar quarter with respect to
any account established during that quarter by the
Covered Person in which account securities were held
for the direct or indirect benefit of the Covered
Person. Each year, concurrently with the annual
report of holdings required to be submitted by 1
February, each Covered Person must submit to a
Designated Supervisory
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Person a summary report listing all accounts in
which, during the preceding year, securities were
held for the direct or indirect benefit of the
Covered Person. These quarterly and annual reports
must contain the following information:
a. The name of the reporting person;
b. The name of the broker, dealer or bank with
whom the Covered Person established the
account;
c. The date the account was established; and
d. The date that the report is submitted by the
Covered Person.
4. The Designated Supervisory Person shall monitor the
trading patterns of Covered Persons, review reports
received, and as appropriate compare the reports with
the written pre-clearance authorization provided and
with records of transactions for the Funds and other
clients of PB/PCFS and HIM.
5. Any report submitted to comply with the requirements
of this Section V may contain a statement that the
report shall not be construed as an admission by the
person making such report that such person has any
direct or indirect beneficial ownership (as defined
in Attachment B to this Code) in the securities to
which the report relates.
D. Disclosure of Personal Holdings
1. Initial Holdings Reports: Upon commencement of
employment,3 but in no case later than 10 days after
a person becomes a Covered Person under this Code,
each Covered Person shall be required to disclose his
or her current personal securities holdings in a
report containing the following information:
a. The name of the Covered Person;
b. The title, number of shares and principal amount
of each Covered Security in which the Covered
Person had any direct or indirect beneficial
ownership when the person became an Covered
Person;
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3 Pursuant to revised Rule 17j-1, the initial report for any Covered Person
newly employed after 1 March 2000 is due within 10 days of notice to the Covered
Person of his/her status as such. Covered Persons employed prior to or as of 1
March 2000 need not file initial reports.
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<PAGE>
c. The name of any broker, dealer, or bank with
whom the Covered Person maintained an account in
which any securities were held for the direct or
indirect benefit of the Covered Person as of the
date the person became an Covered Person; and
d. The date that the report is submitted by the
Covered Person.
2. Annual Holdings Reports: Each Covered Person shall
deliver to a Designated Supervisory Person no later
than February 1(4) of each year an annual report of
holdings, current as of a date no more than 30 days
before the annual report is submitted and providing
the following information:
a. The name of the Covered Person;
b. The title, number of shares and principal amount
of each Covered Security in which the Covered
Person had any direct or indirect beneficial
ownership;
c. The name of any broker, dealer, or bank with
whom the Covered Person maintains an account
in which any securities are held for the direct
or indirect benefit of the Covered Person; and
d. The date that the report is submitted by the
Covered Person.
E. Exceptions from Reporting Requirements.
1. No report shall be required of a Covered Person
pursuant to Sections V.C and V.D with respect to
transactions effected for, and Covered Securities
held in, any account over which the Covered Person
has no direct or indirect influence or control.
2. No report shall be required of a Covered Person
pursuant to Section V.C if such report would
duplicate (a) information recorded pursuant to Rules
204-2(a)(12) or 204-2(a)(13) under the Investment
Advisers Act of 1940, as amended, or (b) information
contained in broker trade confirmations or account
statements received by the Funds or Harris with
respect to the Covered Person in the time period
required by Section V.C.2, provided that all of the
information required by that Section is contained in
the broker trade confirma-
- ----------
(4) The first such annual report pursuant to revised Rule17,-1 is due no
later than 30 January 2001.
14
<PAGE>
tions or account statements, or in the records of the
Funds or Harris. Notwithstanding the preceding
sentence, each Covered Person shall, in response
to the quarterly transactions list provided to the
Covered Person by the Designated Supervisory Persons,
confirm the accuracy of and, to the extent required
to conform with the reports otherwise required by
Section V.C, supplement said transactions list within
the period stated in the transactions list.
F. Certification of Compliance
Each Covered Person is required to certify annually that he or
she has read and understood this Code and recognizes that he
or she is subject to such Code. Further, each Covered Person
is required to certify annually that he or she has complied
with all the requirements of the Code and that he or she has
disclosed or reported all personal securities transactions
required to be disclosed or reported pursuant to the
requirements of the Code. A form of certification is attached
to this Code as Attachment C.
G. Reports to Board
At least annually the investment adviser of the Funds shall
provide a written report at a regular meeting of the Funds'
Board of Directors and Board of Trustees that:
1. Describes any issues arising under this Code or the
procedures adopted by Harris since the last report to
the Board of Directors and Board of Trustees,
including, but not limited to, information about
material violations of the code or procedures and
sanctions imposed in response to such material
violations; and;
2. Certifies that Harris has adopted procedures
reasonably necessary to prevent Access Persons from
violating the code.
H. Review by the Board
At least annually and, in any case, within six months of
adopting any material change to this Code, Harris, as
investment adviser to and portfolio management agent for the
Funds, shall report to the Board of Directors and the Board of
Trustees of the Funds and submit for approval:
1. All existing procedures concerning Covered Persons'
personal trading activities and any procedural
changes made during the past year; and
15
<PAGE>
2. Any recommended or previously adopted changes to this
Code or the related procedures.
I. Identification of Covered Persons. The Funds and Harris
shall identify all Covered Persons who are required to make
these reports and inform those Covered Persons of their
reporting obligation hereunder.
J. Review Procedures. The Funds and Harris shall institute and
periodically review procedures (1) reasonably necessary to
prevent violations of this Code and (2) pursuant to which
appropriate management or compliance personnel review all
reports required by this Code.
VI. Sanctions
Upon discovering that a Covered Person has not complied with the
requirements of this Code, a Designated Supervisory Person shall submit
findings to the Compliance Committee. The Compliance Committee may
impose on that Covered Person whatever sanctions the Compliance
Committee deems appropriate, including, among other things, the
unwinding of the transaction and the disgorgement of profits, letter of
censure, suspension or termination of employment or removal from
office. Any significant sanction imposed shall be reported to the Board
of Directors and the Board of Trustees in accordance with Section V.G.3
above.
VII. Recordkeeping
There shall be preserved with the Funds' records in accordance with
Rule 17j-1:
A. This Code and any prior code in effect during the five years
preceding the date of this Code, maintained in an easily
accessible place;
B. A record (maintained in an easily accessible place for at
least five years after the end of the fiscal year in which the
violation occurs) of any violation of this Code, and of any
action taken as a result of the violation;
C. A copy (maintained for at least five years after the end of
the fiscal year in which the report is made or the information
is provided, the first two years in an easily accessible
place) of each report made by a Covered Person as required by
this Code, including any information provided pursuant to
Section V.E.2(b) in lieu of the quarterly reports otherwise
required by this Code;
D. A record (maintained in an easily accessible place) of all
persons, currently or within the past five years, who are or
were required to make reports
16
<PAGE>
under Sections V.C and V.D of this Code, or who are or were
responsible for reviewing these reports;
E. A copy (maintained for at least five years after the end of
the fiscal year in which it is made, the first two years in an
easily accessible place) of each report required by Section
V.G of this Code;
F. A record (maintained by the Funds or Harris, as the case may
be, for at least five years after the end of the fiscal year
in which the approval is granted) of any decision, and the
reasons supporting the decision, to approve the acquisition by
investment personnel of securities under Sections III.C and
III.D of this Code; and
G. Any written report prepared by Harris Bank or HIM concerning
the subject matter of this Code.
VIII. Confidentiality
All information obtained from any Covered Person hereunder shall be
kept in strict confidence, except that reports of securities
transactions hereunder may be made available to the Securities and
Exchange Commission or any other regulatory or self-regulatory
organization, to the Funds, and may otherwise be disclosed to the
extent required by law or regulation.
IX. Other Laws, Rule and Statements of Policy
Nothing contained in this Code shall be interpreted as relieving any
Covered Person from acting in accordance with the provision of any
applicable law, rule, or regulation or any other statement of policy or
procedure governing the conduct of such person adopted by Harris or the
Funds.
X. Further Information
If any person has any questions with regard to the applicability of the
provisions of this Code generally or with regard to any securities
transaction or transactions such person should consult a Designated
Supervisory Person.
17
<PAGE>
Attachment A-1
HT Insight Funds, Inc. d/b/a Harris Insight Funds
Harris Insight Funds Trust
Covered Persons employed by
Harris Trust and Savings Bank,
Investment Adviser to the Funds
18
<PAGE>
Attachment A-2
HT Insight Funds, Inc. d/b/a Harris Insight Funds
Harris Insight Funds Trust
Covered Persons employed by
Harris Investment Management, Inc.,
Portfolio Management Agent for the Funds
19
<PAGE>
Attachment B
The term "beneficial ownership" as used in the attached Code of Ethics
(the "Code") is to be interpreted by reference to Rule 16a-1(a)(2) under the
1934 Act (the "Rule"), except that the determination of direct or indirect
beneficial ownership for purposes of the Code must be made with respect to all
securities that a Covered Person has or acquires. Under the Rule, a person is
generally deemed to have beneficial ownership of securities if the person,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares a direct or indirect pecuniary interest
in the securities.
The term "pecuniary interest" in particular securities is generally
defined in the Rule to mean the opportunity, directly or indirectly, to profit
or share in any profit derived from a transaction in the securities. A person is
refutably deemed to have an "indirect pecuniary interest" within the meaning of
the Rule in any securities held by members of the person's immediate family
sharing the same household, the term "immediate family" including any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, brother-in-law, sister-in-law, as well
as adoptive relationships. Under the Rule, an indirect pecuniary interest also
includes, among other things: a general partner's proportionate interest in the
portfolio securities held by a general or limited partnership; a
performance-related fee, other than an asset-based fee, received by any broker,
dealer, bank, insurance company, investment company, investment adviser,
investment manager, trustee, person or entity performing a similar function; a
person's right to dividends that is separated or separable from the underlying
securities; a person's interest in securities held by certain trusts, including
specifically a beneficiary's interest in a trust, transactions for which are
under the beneficiary's direction or control, whether sole or shared; and a
person's right to acquire equity securities through the exercise or conversion
of any derivative security, whether or not presently exercisable, the term
"derivative security" being generally defined as any option, warrant,
convertible security, stock appreciation right, or similar right with an
exercise or conversion privilege at a price related to an equity security, or
similar securities with, or value derived from the value of any equity security.
For purposes of the Rule, a person who is a shareholder of a corporation or
similar entity is not deemed to have a pecuniary interest in portfolio
securities held by the corporation or entity, so long as the shareholder is not
a controlling shareholder of the corporation or the entity and does not have or
share investment control over the corporation's or the entity portfolio.
20
<PAGE>
Attachment C
HARRIS TRUST AND SAVINGS BANK
HARRIS INVESTMENT MANAGEMENT, INC.
STATEMENT OF PRINCIPLES AND
CODE OF ETHICS FOR
INVESTMENT ADVISORY AND
MUTUAL FUND MANAGEMENT PERSONNEL
ANNUAL CERTIFICATION
Pursuant to the requirements of the Code of Ethics for Investment
Advisory and Mutual Fund Management Personnel of Harris Trust and Savings Bank
and Harris Investment Management, Inc., the undersigned hereby certifies as
follows:
1. I have read the Code of Ethics.
2. I understand the Code of Ethics and acknowledge that I am
subject to it.
3 Since the date of the last Annual Certification (if any) given
pursuant to the Code of Ethics, I have reported all personal
securities transactions required to be reported under the
requirements of the Code of Ethics.
Date: ____________________________
Signature
____________________________
Print Name
21
(updated January 21, 2000)
CODE OF ETHICS
Provident Distributors, Inc.
BlackRock Distributors, Inc.
Offit Funds Distributor, Inc.
Northern Funds Distributor, LLC.
(collectively, "Distributors")
This Code of Ethics (the "Code") establishes rules of conduct
for persons who are associated with the Distributors referred to above. The Code
governs their personal investments and other investment-related activities.
The basic rule is very simple: put the client's interests
first. Officers, directors and employees owe a fiduciary duty to, among others,
the shareholders of each of the funds for which the Distributors serve as
principal underwriters ("the Funds") to conduct their personal securities
transactions in a manner which does not interfere with fund portfolio
transactions or otherwise take unfair advantage of their relationships with the
Funds. Further, all personal Securities transactions must be conducted in such a
manner as to avoid any actual or potential conflict of interest or any abuse of
an individual's position of trust and responsibility. Persons covered by the
Code must adhere to these general principles as well as comply with the Code's
specific provisions.
This Code is intended to assist persons associated with the
Distributors in fulfilling their obligations under the law. The first part lays
out who the Code applies to, the second part deals with personal investment
activities, the third part deals with other sensitive business practices, and
subsequent parts deal with reporting and administrative procedures.
The Code is very important to the Distributors and persons
associated with the Distributors. Violations may not only cause the Distributors
embarrassment, loss of business, legal restrictions, fines and other punishments
but for persons governed by this Code, demotion, suspension, firing, ejection
from the securities business and very large fines.
I. APPLICABILITY
(A) The Code applies to each of the following:
1. The Distributors referred to at the top of page one
of the Code.
2. Any officer, director, employee, or associated person
of any of the Distributors who, in the ordinary
course of business, makes, participates in or obtains
information regarding the purchase or sale of Covered
Securities (as defined herein) by the Funds for which
the Distributors as a principal underwriter or whose
function or duties in the ordinary course of business
relate to the making of any recommendation to a Fund
regarding the purchase or sale of covered securities.
This includes the formulation and making of
investment recommendations and decisions, the
purchase and sale of securities for the Funds and the
utilization of information about investment
recommendations, decisions and trades.
<PAGE>
3. Any other officer, director, employee, or associated
person of any of the Distributors not described in
(A)2 above.
(B) DEFINITIONS
1. ACCESS PERSONS. The persons described in items (A)2
above.
2. ACCESS PERSON ACCOUNT. Includes all advisory,
brokerage, bank, trust or other accounts or forms of
direct or indirect beneficial ownership in which one
or more Access Person and/or one or more members of
an Access Person's immediate family have an economic
interest. Immediate family includes an Access
Person's spouse and minor children living with the
Access Person. Investment partnerships and similar
indirect means of ownership are also included.
3. AFFILIATES OF THE FUNDS. The Distributors.
4. COMPLIANCE OFFICER. The compliance officer of the
Distributors.
5. COVERED PERSONS. The Distributors, the Access Persons
and the persons described in item (A)3 above.
6. REGISTERED INVESTMENT ADVISER EMPLOYER. A registered
investment adviser that employs a Covered Person
under this code.
7. COVERED SECURITY. Means a security as defined in
section 2(a)(36) of the Investment Company Act of
1940, as amended. Generally, this definition
encompasses any financial instrument treated as a
security for investment purposes and any related
instrument such as futures, forward or swap contract
entered into with respect to one or more securities,
a basket of or an index of securities or components
of securities. However, the term Covered Security
does not include direct obligations of the Government
of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper and high
quality short-term debt instruments, including
repurchase agreements or shares of registered
open-end investment companies. Furthermore, the term
Covered Security does not include: (i) securities
purchased or sold in any account over which the
Access Person has no direct or indirect influence or
control; (ii) securities purchased or sold in a
transaction which is non-volitional on the part of
either the Access Person or the Fund;
(iii) securities acquired as a part of an automatic
dividend reinvestment plan; and (iv) securities
acquired upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its
securities to the extent such rights were acquired
from such issuer, and sales of such rights so
acquired.
2
<PAGE>
8. SECURITY HELD OR TO BE ACQUIRED BY A FUND. Any
Covered Security, which, within the most recent 15
days:
(a) is or has been held by a Fund;
(b) is being or has been considered by the Fund or
its investment adviser for purchase by the fund
and
Any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered
Security.
9. LIMITED OFFERING. Means an offering that is exempt
from registration under the Securities Act of 1933
pursuant to Section 4(2) or Section 4(6) or pursuant
to Rule 504, Rule 505, or Rule 506 under the
Securities Act of 1933.
10. INITIAL PUBLIC OFFERING. Means an offering of
securities registered under the Securities Act of
1933, the issuer of which, immediately before the
registration, was not subject to the reporting
requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934.
11. PURCHASE OR SALE OF A COVERED SECURITY includes,
among other things, the writing of an options to
purchase or sell a Covered Security.
II. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES
(A) FRAUDULENT OR DECEPTIVE PRACTICES
No Covered Person shall, in connection with the purchase or
sale, directly or indirectly, by such person of a Covered
Security Held or to be Acquired by the Funds:
(1) employ any device, scheme or artifice to
defraud the Funds;
(2) make to the Funds any untrue statement of a
material fact or omit to state to the Funds
a material fact necessary in order to make
the statement made, in light of the
circumstances under which they are made, not
misleading;
(3) engage in any act, practice or course of
business which would operate as a fraud or
deceit upon the Funds;
(4) engage in any manipulative practice with
respect to the Funds;
(5) trade while in possession of material
non-public information for personal or other
investment accounts, or disclosing such
information to others in or outside the
Distributors who have no need for this
information.
3
<PAGE>
It is a violation of federal securities laws to buy or sell
securities while in possession of material non-public
information and illegal to communicate such information to a
third party who buys or sells.
(B) BASIC RESTRICTION ON INVESTING ACTIVITIES
If a purchase or sale order is pending or under active
consideration for any Fund, neither the same Covered Security
nor any related Covered Security (such as an option, warrant
or convertible security) may be bought or sold for any Access
Person Account.
(C) INITIAL PUBLIC OFFERINGS
No Security may be acquired in an Initial Public Offering for
any Covered Person.
(D) PRE-CLEARANCE OF PERSONAL SECURITIES
TRANSACTIONS
The Distributors will obtain copies of the Codes of Ethics of
Registered Investment Adviser employers to determine whether
they are designed to adequately protect fund shareholders. The
Distributors will rely on the Registered Investment Advisers
to enforce their Codes of Ethics, particularly as the Codes
relate to the pre-clearance of personal securities
transactions.
No Security may be bought or sold for an Access Person Account
unless the Access Person complies with the Code of Ethics
adopted by his Registered Investment Adviser employer.
Covered persons not associated with an investment adviser are
not required to pre-clear transactions.
(E) LIMITED OFFERING
No Limited Offering may be purchased for an Access Person
Account unless the Access Person complies with the Code of
Ethics adopted by his Registered Investment Adviser employer.
An Access Person who is not subject to a Code of Ethics of a
Registered Investment Adviser must preclear private placement
transactions with the Distributors.
III. OTHER INVESTMENT-RELATED RESTRICTIONS
(A) GIFTS
No Person shall accept any gift or other item of more than
$100 in value from any person or entity that does business
with or on behalf of any Fund or is seeking to do business
with or on behalf of any fund.
4
<PAGE>
(B) SERVICE AS A DIRECTOR
No Access Person shall commence service on the Board of
Directors of a publicly traded company or any company in which
any Fund has an interest without prior authorization from his
Registered Investment Adviser employer.
IV. REPORT AND ADDITIONAL COMPLIANCE PROCEDURES
(A) The Compliance Officer shall notify each Covered Person who
may be required to make reports pursuant to this Code that
such person is subject to the reporting requirements and shall
deliver a copy of this Code to each such person.
(B) Every Covered Person must submit a report (a form of which is
appended as Exhibit A) containing the information set forth in
paragraph (C) below with respect to transactions in any
Security in which such Covered Person has or by reason of such
transactions acquires, any direct or indirect beneficial
ownership (as defined in Exhibit B) in the Covered Security.
These reports will be reviewed by the Compliance Director.
A Covered Person will be deemed to have complied with the
requirements of this Article IV insofar as the Compliance
Officer receives in a timely fashion duplicate monthly or
quarterly brokerage statements on which all transactions
required to be reported hereunder are described.
(C) A Covered Person must submit the report required by this
Article to the Compliance Officer no later than 10 days after
the end of the calendar quarter in which the transaction to
which the report relates was effected. A report must contain
the following information:
1. The date of the transaction, the title, the interest
rate and maturity date (if applicable) and number of
shares and the principal amount of each Security
involved;
2. The nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
3. The price of the Covered Security at which the
transaction was effected; and
4. The name of the broker, dealer or bank with or
through whom the transaction was effected.
5. The date that the report is submitted by the Covered
Person.
(D) Any report submitted to comply with the requirements of this
Article IV may contain a statement that the report shall not
be construed as an admission by the person making such report
that he has any direct or indirect benefit ownership in the
Security to which the report relates.
5
<PAGE>
(E) Within 10 days of commencement of employment and/or
registration with any of the Distributors, or within 10 days
of subsequently becoming an Access Person each Access Person
shall be required to disclose all current personal Covered
Securities holdings contained in any Access Person Account in
which such Access Person has an interest. These holding
reports will be reviewed by the Compliance Officer. A holdings
report (a form of which is appended as exhibit C must contain
the following information:
1. The title, number of shares and principal amount of
each Covered Security in which the Access Person had
any direct or indirect beneficial ownership when the
person became an Access Person.
2. The date that the report is submitted by the Access
Person.
(F) Annually each Access Person must submit a report listing all
securities beneficially owned by the Access Person that will
be current as of a date not more that 30 days before the
report is submitted. These holding reports will be reviewed by
the Compliance Officer. A holding report (the form of which is
appended as Exhibit C) must contain the following information:
1. The title, number of shares and principal amount of
each Covered Security in which the Access Person had
any direct or indirect beneficial ownership when the
person became an Access Person.
2. The name of any broker, dealer or bank with whom the
Access Person maintains an account in which any
securities are held for the direct or indirect
benefit of the Access Person.
3. The date that the report is submitted by the Access
Person.
(G) Annually each Covered Person must certify on a report (the
form of which is appended as Exhibit (D) that he has read and
understood the Code and recognizes that he is subject to such
Code. In addition, annually each Covered Person must certify
that he has disclosed or reported all personal Securities
transactions required to be disclosed or reported under the
Code and that he is not subject to any regulatory disability.
(H) At least annually (or quarterly in the case of Items 3 and 4
below), the Distributors shall report to the Boards of
Directors of the Funds:
1. All existing procedures concerning Covered Persons'
personal trading activities and reporting
requirements and any procedural changes made during
the past year;
2. Any recommended changes to the Distributors' Codes of
Ethics or procedures;
6
<PAGE>
3. A summary of any material violations of this Code
which occurred during the past quarter and the nature
of any remedial action taken; and
4. Any exceptions to any provisions of this Code of
Ethics as determined under Article VI below.
V. SANCTIONS
Upon discovering that a Covered Person has not complied with the
requirements of this Code, the Compliance Officer in consultation with
the officers of the relevant Distributor may impose whatever sanctions
within its power they deem appropriate, including, among other things,
suspension or termination of employment and/or registration. Material
violations of requirements of this Code by Covered Persons and any
sanctions imposed in connection therewith shall be reported not less
frequently than quarterly to the Board of Directors of any relevant
Fund.
VI. EXCEPTIONS
The Compliance Officer in consultation with the officers of the
relevant Distributors reserves the right to decide, on a case-by-case
basis, exceptions to any provisions under this Code. Any exceptions
made hereunder will be maintained in writing by the Compliance Officer
and presented to the Board of Directors of any relevant Fund at its
next scheduled meeting.
VII. PRESERVATION OF DOCUMENTS
This Code, a copy of each report by a Covered Person, a record of any
violation of this Code and of any action taken as a result of the
violation, any written report made hereunder by the Compliance Officer
or Distributors and lists of all persons required to make reports or
review reports shall be preserved with the records of the relevant
Distributor for a five year period in an easily accessible place.
VIII. OTHER LAWS, RULES AND STATEMENTS OF POLICY
Nothing contained in this Code shall be interpreted as relieving any
Covered Person from acting in accordance with the provision of any
applicable law, rule or regulation or any other statement of policy or
procedure governing the conduct of such person adopted by the
Distributors.
7
<PAGE>
Exhibit A
EXAMPLE ONLY
PROVIDENT DISTRIBUTORS, INC.
OFFIT FUNDS DISTRIBUTOR, INC.
BLACKROCK DISTRIBUTORS, INC.
NORTHERN FUNDS DISTRIBUTOR, LLC
Securities Transactions Report For the Calendar Quarter Ended: ________
To the Compliance Officer:
During the quarter referred to above, the following transactions were
effected in Covered Securities of which I had, or by reason of such transaction
acquired, direct or indirect beneficial ownership, and which are required to be
reported pursuant to the Code of Ethics adopted by the Firm.
<TABLE>
<CAPTION>
- ----------------- --------------------- ------------- --------------------- --------------------- ---------- ----------------------
SECURITY DATE OF TRANSACTION No. of DOLLAR AMOUNT OF NATURE OF PRICE BROKER/DEALER OR BANK
SHARES or TRANSACTION TRANSACTION THROUGH WHOM EFFECTED
Principal (Purchase, Sale,
Amount Other)
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
During the quarter referred to above, I established the following
account in which securities were held during the quarter for my direct or
indirect benefit:
1. The name of the broker, dealer or bank with whom you established
the account____________________________________
2. The date the account was established___________________
This report (i) excludes transactions with respect to which I had no
direct or indirect influence or control, (ii) excludes other transactions not
required to be reported, and (iii) is not an admission that I have or had any
direct or indirect beneficial ownership in the securities listed above.
Except as noted on the reverse side of this report, I hereby certify
that I have no knowledge of the existence of any personal conflict of interest
relationship which may involve the Firm's clients, such as the existence of any
economic relationship between my transactions and securities held or to be
acquired by the Firm for any of its clients.
NOTE: Do NOT report transactions in direct obligations of the U. S.
Government, bankers' acceptances, bank certificates of deposit, commercial paper
and high quality short-term debt instruments including repurchase agreements and
open-end mutual funds.
[ ] No transactions to report.
Date:____________________ Signature:______________________________________
8
<PAGE>
Exhibit B
BENEFICIAL OWNERSHIP
For purposes of the attached Code of Ethics, "beneficial
ownership" shall be interpreted in the same manner as it would be in determining
whether a person is subject to the provisions of Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, except the
determination of direct or indirect beneficial ownership shall apply to all
securities that a Covered Person has or acquires. The term "beneficial
ownership" of securities would include not only ownership of securities held by
a Covered Person for his own benefit, whether in bearer form or registered in
his name or otherwise, but also ownership of securities held for his benefit by
others (regardless of whether or how they are registered) such as custodians,
brokers, executors, administrators, or trustees (including trusts in which he
has only a remainder interest), and securities held for his account by pledges,
securities owned by a partnership in which he is a member if he may exercise a
controlling influence over the purchase, sale of voting of such securities, and
securities owned by any corporation or similar entry in which he owns securities
if the shareholder is a controlling shareholder of the entity and has or shares
investment control over the entity's portfolio.
Ordinarily, this term would not include securities held by
executors or administrators in estates in which a Covered Person is a legatee or
beneficiary unless there is a specified legacy to such person of such securities
or such person is the sole legatee or beneficiary and there are other assets in
the estate sufficient to pay debts ranking ahead of such legacy, or the
securities are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by a Covered Person where such person enjoys "financial
benefits substantially equivalent to ownership." The Securities and Exchange
Commission has said that although the final determination of beneficial
ownership is a question to be determined in the light of the facts of the
particular case, generally a person is regarded as the beneficial owner of
securities held in the name of his or her spouse and their minor children.
Absent special circumstances such relationship ordinarily results in such person
obtaining financial benefits substantially equivalent to ownership, e.g.,
application of the income derived from such securities to maintain a common
home, or to meet expenses that such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
A Covered Person also may be regarded as the beneficial owner
of securities held in the name of another person, if by reason of any contract,
understanding, relationship, or other agreement, he obtains therefrom financial
benefits substantially equivalent to those of ownership.
A Covered Person also is regarded as the beneficial owner of
securities held in the name of a spouse, minor children or other person, even
though he does not obtain therefrom the aforementioned benefits of ownership, if
he can vest or revest title in himself at once or at some future time.
9
<PAGE>
Exhibit C
EXAMPLE ONLY
PROVIDENT DISTRIBUTORS, INC.
OFFIT FUNDS DISTRIBUTOR, INC.
BLACKROCK DISTRIBUTORS, INC.
NORTHERN FUNDS DISTRIBUTOR, LLC
HOLDINGS REPORT
For the Year/Period Ended _________________
(month/day/year)
Check Here if this is an Initial Holdings Report
To the Compliance Officer:
As of the calendar year/period referred to above, I have a direct or
indirect beneficial ownership interest in the securities listed below which are
required to be reported pursuant to the Code of Ethics of the Fund:
Security Name Number of Shares Principal Amount
The name of any broker, dealer or bank with whom I maintain an account
in which my securities are held for my direct or indirect benefit are as
follows:
This report excludes securities with respect to which I had no direct
or indirect influence or control and excludes other transactions not required to
be reported.
Date:_________________ Signature:___________________
Print Name:_________________
<PAGE>
ANNUAL CERTIFICATION OF CODE OF ETHICS
A. I (a Covered Person) hereby certify that I have read and
understood the Code of Ethics, and recognize that I am subject
to its provisions. In addition, I hereby certify that I have
complied with the requirements of the Code of Ethics and that
I have disclosed or reported all personal Securities
transactions required to be disclosed or reported under the
Code of Ethics;
B. Within the last ten years there have been no complaints or
disciplinary actions filled against me by any regulated
securities or commodities exchange, any self-regulatory
securities or commodities organization, any attorney general,
or any governmental office or agency regulating insurance
securities, commodities or financial transactions in the
United States, in any state of the United States, or in any
other country;
C. I have not within the last ten years been convicted of or
acknowledged commission of any felony or misdemeanor arising
out of my conduct as an employee, salesperson, officer,
director, insurance agent, broker, dealer, underwriter,
investment manager or investment advisor; and
D. I have not been denied permission or otherwise enjoined by
order, judgment or decree of any court of competent
jurisdiction, regulated securities or commodities exchange,
self-regulatory securities or commodities organization or
other federal or state regulatory authority from acting as an
investment advisor, securities or commodities broker or
dealer, commodity pool operator or trading advisor or as an
affiliated person or employee of any investment company, bank,
insurance company or commodity broker, dealer, pool operator
or trading advisor, or from engaging in or continuing any
conduct or practice in connection with any such activity or
the purchase or sale of any security.
Print Name: __________________
Signature: __________________
Date: __________________
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints 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: 1 February 2000.
/s/ Valerie B. Jarrett
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Valarie B. Jarrett
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints 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, his true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, for him and in his 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 of HT Insight Funds, Inc., 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: 1 February 2000.
Attest: /s/ Philip H. Rinnander
-----------------------
Philip H. Rinnander
/s/ Jason A. Greim
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<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints 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, his true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, for him and in his 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 of HT Insight Funds, Inc., 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: 7 February 2000.
/s/ Thomas J. Ryan
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Thomas J. Ryan
