HARRIS INSIGHT MONEY MARKET FUNDS
HARRIS INSIGHT FUNDS
One Exchange Place, Boston, Massachusetts 02109
Telephone: (800) 982-8782
HT Insight Funds, Inc. (the ``Company'') currently offers shares
representing interests in six mutual funds. This Prospectus describes one class
of shares (``Class A Shares'' or ``Shares'') of each of the Company's three
Money Market Funds (the ``Funds''):
o Harris Insight Government Money Market Fund (the ``Government Money Fund'')
o Harris Insight Money Market Fund (the ``Money Fund'')
o Harris Insight Tax-Exempt Money Market Fund (the ``Tax-Exempt Money Fund'')
Harris Trust & Savings Bank is the Investment Adviser to the Funds and
Harris Investment Management, Inc., a subsidiary of Harris Bankcorp, Inc., acts
as Portfolio Management Agent for two of the Funds. Shares of each Fund are
offered by Funds Distributor, Inc., the Company's distributor.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Funds. Please read and retain it for future
reference. A Statement of Additional Information dated February 21, 1996,
containing more detailed information about the Funds has been filed w ith the
Securities and Exchange Commission and (together with any supplements thereto)
is incorporated by reference into this Prospectus. The Statement of Additional
Information and the most recent financial statements may be obtained without
charge by writing or calling the Company at the address and telephone number
printed above. Separate Prospectuses for the other investment portfolios offered
by the Company may be obtained without charge by writing or calling the Company
at the address and telephone number printed above.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY HARRIS TRUST & SAVINGS BANK, OR ANY OF ITS AFFILIATES, AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUNDS INVO LVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
SHARES OF THE MONEY MARKET FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. ALTHOUGH EACH MONEY MARKET FUND IS ACTIVELY MANAGED TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE IS NO ASSURANCE THAT IT WILL
BE ABLE TO DO SO.
__________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE ``COMMISSION'') OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTR ARY IS A
CRIMINAL OFFENSE.
February 21, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Expense Table 3
Highlights 4
Financial Highlights 5
Investment Objectives and Policies 8
Government Money Fund 8
Money Fund 8
Tax-Exempt Money Fund 9
Investment Strategies 10
Investment Limitations 14
Management 15
Determination of Net Asset Value 18
Purchase of Shares 19
Redemption of Shares 20
Service Plan 21
Dividends and Distributions 21
Federal Income Taxes 22
Account Services 23
Organization and Capital Stock 23
Reports to Shareholders 24
Calculation of Yield 24
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement of
Additional Information and/or in the Funds' official sales literature in
connection with the offering of the Funds' shares and, if given or made, such
other information or representations must not be relied upon as having been
authorized by the Company or the Distributor. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
2
<PAGE>
EXPENSE TABLE
Expenses and fees payable by Class A shareholders are summarized in this
table and expressed as a percentage of average net assets.
The following table illustrates the expenses and fees expected to be
incurred by an investment in Class A Shares of each of the Funds. Class A Shares
of each Fund represent equal, pro rata interests in that Fund. Class A Shares
bear expenses payable (at the rate of up to 0.35% per annum) to organiz ations
for the services they provide to the beneficial owners of Class A Shares. See
``Service Plan''.
<TABLE>
<CAPTION>
GOVERNMENT TAX-EXEMPT
MONEY FUND MONEY FUND MONEY FUND
CLASS A CLASS A CLASS A
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets
after voluntary fee waivers)
Advisory Fees 0.11% 0.11% 0.11%
Rule 12b-1 Fees (after waivers) 0.26% 0.27% 0.27%
Other Expenses 0.20% 0.18% 0.18%
Total Fund Operating Expenses 0.57% 0.56% 0.56%
</TABLE>
Without waivers, Rule 12b-1 Fees for Class A shares of each Fund would have been
0.35% of a Fund's average net assets. Without waivers, total operating expenses
for the fiscal years ended December 31, 1995 and 1994 (i) for the Government
Money Fund would have been 0.67% and 0.66%, (ii) for the Mone y Fund would have
been 0.65% and 0.65%, and (iii) for the Tax-Exempt Money Fund would have been
0.65% and 0.65%. Customers of a financial institution, such as Harris Trust &
Savings Bank, may be charged certain fees and expenses by their institution.
These fees may vary depending on the capacity in which the institution provides
fiduciary and investment services to the particular client (e.g., trust, estate
settlement, advisory and custodian services).
With respect to each Fund, the amount of ``Other Expenses'' in the table above
is based on amounts incurred during the most recent fiscal year.
<TABLE>
<CAPTION>
GOVERNMENT TAX-EXEMPT
EXAMPLE MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment in Class A
Shares, assuming (1) a hypothetical
5% gross annual return and (2)
redemption at the end of each time
period:
1 year $ 6 $ 6 $ 6
3 years 18 18 18
5 years 32 31 31
10 years 71 70 70
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
The purpose of the expense table is to assist the investor in understanding the
various costs and expenses that an investor in a Fund will bear directly or
indirectly. For more information concerning the various costs and expenses, see
``Management.''
3
<PAGE>
HIGHLIGHTS
The following three investment portfolios are described in this Prospectus:
GOVERNMENT MONEY FUND -- a money market fund that invests in short-term
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities and certain repurchase agreements.
MONEY FUND -- a money market fund that invests in a broad range of short-term
money market instruments.
TAX-EXEMPT MONEY FUND -- a money market fund that invests primarily in
high-quality, short-term municipal obligations.
The investment objective of each Fund is to provide investors with as high a
level of current income (exempt from federal income tax, in the case of the
Tax-Exempt Money Fund) as is consistent with its investment policies and with
preservation of capital and liquidity.
WHO MANAGES EACH FUND'S INVESTMENTS?
Harris Trust & Savings Bank (``Harris Trust'' or the ``Investment
Adviser'') is the investment adviser for each Fund. Harris Trust has provided
investment management services to clients for over 100 years. Harris Trust
provides investment services for pension, profit-sharing and personal portfolios
. As of June 30, 1995, assets under management total approximately $23 billion.
See page 16.
Harris Investment Management, Inc. (``HIM'' or the ``Portfolio Management
Agent'') provides daily portfolio management services for the Government Money
Fund and the Money Fund. HIM and its predecessors have managed client assets for
over 100 years. HIM has a staff of 96, including 64 professionals , providing
investment expertise to the management of Harris Insight Funds and for pension,
profit-sharing and institutional portfolios. As of June 30, 1995, assets under
management are estimated to exceed $13 billion. See page 17.
Harris Trust and HIM are subsidiaries of Harris Bankcorp, Inc.
WHAT ADVANTAGES DO THE FUNDS OFFER?
The Funds are designed for individual and institutional investors. A single
investment in shares of the Harris Insight Funds gives the investor benefits
customarily available only to large investors, such as diversification of
investment, greater liquidity and professional management, block purchas es of
securities, relief from bookkeeping, safekeeping of securities and other
administrative details.
WHEN ARE DIVIDENDS PAID?
Dividends from each of the Funds are declared daily and paid monthly. See
page 22.
HOW ARE SHARES REDEEMED?
Shares may be redeemed at their next determined net asset value after
receipt of a proper request by the Registered Representative servicing your
account, the Distributor, or through any Service Agent. See page 20.
WHAT RISKS ARE ASSOCIATED WITH EACH FUND?
Each Fund's performance may change daily based on many factors, including
the quality of the Fund's investments, economic conditions and general market
conditions. There is no assurance that any Fund will achieve its investment
objective. See ``Investment Strategies.''
4
<PAGE>
FINANCIAL HIGHLIGHTS
This table shows the total return on one Class A share for each period
illustrated.
The following financial highlights, insofar as it relates to each of the
five years in the period ended December 31, 1995, are derived from the financial
statements of the Company for the year ended December 31, 1995 audited by Price
Waterhouse LLP, independent accountants. This information should be read in
conjunction with the financial statements and notes thereto which are
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
GOVERNMENT MONEY MARKET FUND**
YEAR YEAR YEAR YEAR YEAR YEAR YEAR 02/11/88*
ENDED ENDED ENDED ENDED ENDED ENDED ENDED TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment
Operations:
Net Investment Income .054 .037 .026 .033 .055 .075 .084 .061
Total from Invest-
ment Operations .054 .037 .026 .033 .055 .075 .084 .061
Less Distributions:
Net Investment Income (.054) (.037) (.026) (.033) (.055) (.075) (.084) (.061)
Total distributions (.054) (.037) (.026) (.033) (.055) (.075) (.084) (.061)
Net Asset Value
End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 5.51% 3.72% 2.62% 3.42% 5.67% 7.78% 8.80% 6.27%(3)
Ratios/Supplemental
Data:
Net Assets, End of
Period $(000) 264,426 229,619 263,909 140,134 632,663 87,098 35,751 43,870
Ratios of Expenses
to Average Net
Assets(1) 0.57% 0.60% 0.61% 0.66% 0.71% 0.52% 0.40% 0.54%(2)
Ratios of Net
Investment Income
to Average Net
Assets 5.36% 3.62% 2.57% 3.34% 5.45% 7.49% 8.45% 7.24%(2)
</TABLE>
* Date commenced operations.
** Formerly the Government Assets Fund.
(1) Without the voluntary waiver of fees, the expense ratios for the Government
Money Fund for the years ended December 31, 1995, 1994, 1993, 1992, 1991,
1990 and 1989 and the period ended December 31, 1988, would have been 0.67%,
0.66%, 0.70%, 0.70%, 0.78%, 0.83%, 0.88% and 0.99% (annualized).
(2) Annualized.
(3) Total returns for periods of less than one year are not annualized.
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MONEY MARKET FUND**
YEAR YEAR YEAR YEAR YEAR YEAR YEAR 02/10/88*
ENDED ENDED ENDED ENDED ENDED ENDED ENDED TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment
Operations:
Net Investment Income .054 .037 .027 .034 .057 .077 .086 .064
Total from Invest-
ment Operations .054 .037 .027 .034 .057 .077 .086 .064
Less Distributions
Net Investment Income (.054) (.037) (.027) (.034) (.057) (.077) (.086) (.064)
Total distributions (.054) (.037) (.027) (.034) (.057) (.077) (.086) (.064)
Net Asset Value,
End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 5.58% 3.79% 2.69% 3.41% 5.87% 7.94% 9.01% 6.59%(3)
Ratios/Supplemental
Data:
Net Assets, End
of Period $(000) 423,588 530,366 348,984 383,280 263,419 153,934 172,439 112,144
Ratios of Expenses
to Average Net
Assets(1) 0.56% 0.55% 0.57% 0.60% 0.71% 0.67% 0.58% 0.46%(2)
Ratios of Net
Investment Income
to Average Net
Assets 5.42% 3.79% 2.66% 3.34% 5.69% 7.66% 8.60% 7.15%(2)
</TABLE>
* Date commenced operations.
** Formerly the Cash Management Fund.
(1) Without the voluntary waiver of fees, the expense ratios for the Money
Market Fund for the years ended December 31, 1995, 1994, 1993, 1992, 1991,
1990 and 1989 and the period ended December 31, 1988, would have been 0.65%,
0.65%, 0.72%, 0.73%, 0.74%, 0.78%, 0.85% and 0.87% (annualized).
(2) Annualized.
(3) Total returns for periods of less than one year are not annualized.
6
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY MARKET FUND**
YEAR YEAR YEAR YEAR YEAR YEAR YEAR 02/09/88*
ENDED ENDED ENDED ENDED ENDED ENDED ENDED TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment
Operations:
Net Investment Income .033 .023 .020 .025 .041 .053 .058 .043
Total from Invest-
ment Operations .033 .023 .020 .025 .041 .053 .058 .043
Less Distributions:
Net Investment Income (.033) (.023) (.020) (.025) (.041) (.053) (.058) (.043)
Total distributions (.033) (.023) (.020) (.025) (.041) (.053) (.058) (.043)
Net Asset Value,
End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 3.31% 2.30% 1.99% 2.54% 4.16% 5.51% 5.91% 4.39%(3)
Ratios/Supplemental
Data:
Net Assets, End of
Period $(000) 170,570 123,501 168,440 152,821 157,693 136,117 112,674 103,192
Ratios of Expenses
to Average Net
Assets(1) 0.56% 0.54% 0.54% 0.62% 0.49% 0.47% 0.43% 0.51%(2)
Ratios of Net
Investment Income
to Average Net
Assets 3.25% 2.20% 1.97% 2.50% 4.08% 5.38% 5.76% 4.81%(2)
</TABLE>
* Date commenced operations.
** Formerly the Tax-Free Money Market Fund.
(1) Without the voluntary waiver of fees, the expense ratios for the Tax-Exempt
Money Fund for the years ended December 31, 1995, 1994, 1993, 1992, 1991,
1990 and 1989 and the period ended December 31, 1988, would have been 0.65%,
0.65%, 0.71%, 0.73%, 0.75%, 0.78%, 0.82% and 0.85% (annualized).
(2) Annualized.
(3) Total returns for periods of less than one year are not annualized.
7
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
This section describes some of the securities that the Funds may purchase
and certain investment techniques which the Funds may use to pursue their
investment objectives.
The investment objective of each Fund is to provide investors with as high
a level of current income (which, in the case of the Tax-Exempt Money Fund, is
exempt from federal income taxes) as is consistent with its investment policies
and with preservation of capital and liquidity. Current income pr ovided by the
securities in which the Funds invest is not likely to be as high as that
provided by securities with longer maturities or lower quality, which may
involve greater risk and price volatility. Each Fund will invest in U.S.
dollar-denominated securities with maturities of thirteen months or less. The
Money Fund will not purchase a security (other than a Government Security)
unless the security is rated by at least two nationally recognized rating
agencies (such as Standard & Poor's Corporation (``S&P'') or Moody's Investors
Service, Inc. (``Moody's'')) within the two highest rating s assigned to
short-term debt securities (or, if not rated or rated only by one rating agency,
is determined to be of comparable quality), and not more than 5% of the total
assets of the Fund would be invested in securities bearing the second highest
rating. The Tax-Exempt Money Fund will not purch ase a security (other than a
Government Security) unless the security is rated by at least two such rating
agencies within the two highest ratings assigned to short-term debt securities
(or, if not rated or rated by only one rating agency, is determined to be of
comparable quality). Determinations of comparable quality shall be made in
accordance with procedures established by the Board of Directors. Each Fund will
maintain a dollar-weighted average maturity of 90 days or less in an effort to
maintain a net asset value per share of $1.00. There is no assurance that the
net asset value per sh are of the Funds will be maintained at $1.00.
GOVERNMENT MONEY FUND
The Government Money Fund invests in obligations issued or guaranteed by
the U.S Government or its agencies or instrumentalities that have remaining
maturities of thirteen months or less.
The Government Money Fund, formerly known as Harris Insight Government
Assets Fund, invests exclusively in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities (``Government Securities'') that
have remaining maturities not exceeding thirteen months and in certain
repurchase agreements described below. The Government Money Fund invests in
obligations of U.S. Government agencies and instrumentalities only when the
Portfolio Management Agent is satisfied that the credit risk with respect to the
issuer is minimal.
A further description of these obligations is included under ``Investment
Strategies.''
MONEY FUND
The Money Fund invests in short-term money market instruments, including
U.S. Government, bank and commercial obligations with remaining maturities of
thirteen months or less.
The Money Fund, formerly known as Harris Insight Cash Management Fund,
invests in a broad range of short-term money market instruments that have
remaining maturities not exceeding thirteen months, including Government
Securities and bank and commercial obligations.
Bank obligations include negotiable certificates of deposit, bankers'
acceptances and fixed time deposits. The Money Fund limits its investments in
domestic bank obligations to obligations of U.S. banks (including foreign
branches and thrift institutions) that have more than $1 billion in total assets
at the time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency, or whose deposits are insured by
the Federal Deposit Insurance Corporation (``U.S. banks''). The Money Fund
limits its investments in foreign bank obligations to U.S. dollar-denominated
obligations of foreign banks (including U.S. branches): (a) which banks at the
time of investment (i) have more
8
<PAGE>
than $10 billion, or the equivalent in other currencies, in total assets and
(ii) are among the 100 largest banks in the world, as determined on the basis of
assets, and have branches or agencies in the U.S.; and (b) which obligations, in
the opinion of the Portfolio Management Agent, are of an investment quality
comparable to obligations of U.S. banks that may be purchased by the Money Fund.
The Money Fund may invest more than 25% of the current value of its total assets
in obligations (including repurchase agreements) of: (a) U.S. banks; (b) U.S.
branches of foreign banks that are subject to the same regulation as U.S. banks
by the U.S. Government agencies or (c) foreign branches of U.S. banks if the
U.S. banks would be unconditionally liable in the event the foreign branch
failed to pay on such obligations for any reason.
The profitability of the banking industry is largely dependent upon the
availability and cost of funds to finance lending operations and the quality of
underlying bank assets. In addition, domestic and foreign banks are subject to
extensive but different government regulation which may limit the amount and
types of their loans and the interest rates that may be charged. Obligations of
foreign banks involve somewhat different investment risks from those affecting
obligations of U.S. banks. See ``Investment Strategies -- Foreign Securities.''
The commercial paper purchased by the Money Fund will consist of U.S.
dollar-denominated direct obligations of domestic and foreign corporate issuers,
including bank holding companies.
The Money Fund may also invest in bank investment contracts (``BICs''),
asset-backed securities, guaranteed investment contracts (``GICs'') issued by
U.S. and Canadian insurance companies, convertible and non-convertible debt
securities of domestic corporations and of foreign corporations and governments
that are denominated, and pay interest, in U.S. dollars, and variable amount
master demand notes.
In addition, the Money Fund may invest in tax-exempt municipal obligations
in which the Tax-Exempt Money Fund may invest, described below, when the yields
on such obligations are higher than the yields on taxable investments. The Money
Fund may also invest in certain other obligations as describedin ``Investment
Strategies'' below and in the Statement of Additional Information.
All securities acquired by the Fund will have remaining maturities of
thirteen months or less and will be subject to the applicable quality
requirements described above.
TAX-EXEMPT MONEY FUND
The Tax-Exempt Money Fund invests in debt instruments issued by or for
states, cities, municipalities and other public authorities that provide
interest income exempt from federal income tax.
The Tax-Exempt Money Fund, formerly known as Harris Insight Tax-Free Money
Market Fund, invests primarily in high-quality municipal obligations that have
remaining maturities not exceeding thirteen months and meet the applicable
quality requirements described above. Municipal obligations are debt obligations
issued by or on behalf of states, cities, municipalities and other public
authorities. Except for temporary investments in taxable obligations described
below, the Tax-Exempt Money Fund will invest only in municipal obligations that
are exempt from federal income taxes in the opinion of bond counsel. Such
obligations include municipal bonds, municipal notes and municipal commercial
paper.
From time to time, the Tax-Exempt Money Fund may invest 25% or more of its
assets in municipal obligations that are related in such a way that an economic,
business or political development or change affecting one of these obligations
would also affect the other obligations, for example, municipal obligations the
interest on which is paid from revenues of similar type projects or municipal
obligations whose issuers are located in the same state.
9
<PAGE>
Under ordinary market conditions, the Tax-Exempt Money Fund will maintain
as a fundamental policy at least 80% of the value of its total assets in
obligations that are exempt from federal income tax and not subject to the
alternative minimum tax. The Tax-Exempt Money Fund may, pending the investment
of proceeds of sales of its shares or proceeds from the sale of portfolio
securities, in anticipation of redemptions, or to maintain a ``defensive''
posture when, in the opinion of the Investment Adviser, it is advisable to do so
because of market conditions, elect to hold temporarily up to 20% of the current
value of its total assets in cash reserves or invest in taxable securities in
which the Money Fund may invest.
________________________
Each Fund may purchase debt obligations that are not rated if, in the
opinion of the Portfolio Management Agent, or the Investment Adviser with
respect to the Tax-Exempt Money Fund, they are of investment quality comparable
to other rated investments that may be purchased by the Fund. After purchase by
a Fund, a security may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Fund. A Fund may be required to sell a
security downgraded below the minimum required for purchase, absent a specific
finding by the Board of Directors that a sale is not in the best interests of
the Fund. The ratings of Moody's and S&P are more fully described in the
Appendix to the Statement of Additional Information.
INVESTMENT STRATEGIES
These bond or debt securities may be collateralized by a pool of assets,
such as automobile loans, home equity loans, equipment leases or other
obligations.
ASSET-BACKED SECURITIES. The Money Fund may purchase asset-backed
securities, which represent a participation in, or are secured by and payable
from, a stream of payments generated by particular assets, most often a pool of
assets similar to one another. Assets generating such payments will consist of
motor vehicle installment purchase obligations, credit card receivables and home
equity loans, equipment leases, manufactured housing loans and marine loans. In
accordance with guidelines established by the Board of Directors, asset-backed
securities may be considered illiquid securities and, therefore, subject to the
Fund's 10% limitation on such investments.
The estimated life of an asset-backed security varies with prepayment
experience with respect to underlying debt instruments. The rate of such
prepayments, and therefore the life of the asset-backed security, will be
primarily a function of current market interest rates, although other economic
and demographic factors may be involved. In periods of falling interest rates,
the rate of prepayments tends to increase. During such periods, the reinvestment
of prepayment proceeds by a Fund will generally be at lower rates than the rates
that were carried by the obligations that have been prepaid. Because of these
and other reasons, an asset-backed security's total return may be difficult to
predict precisely. If a Fund purchases asset-backed securities at a premium,
prepayments may result in some loss of the Fund's principal investment to the
extent of premium paid.
A BIC is a bank obligation which provides a specified rate of return in
exchange for cash deposits to the issuing bank.
BANK INVESTMENT CONTRACTS. The Money Fund may invest in bank investment
contracts (``BICs'') which are debt obligations issued by banks. BICs require
the Fund to make cash contributions to a deposit account at a bank in exchange
for payments at negotiated, floating or fixed interest rates. A BIC is a general
obligation of the issuing bank. BICs are considered illiquid securities and will
be subject to each Fund's 10% limitation on such investments, unless there is an
active and substantial secondary market for the particular instrument and market
quotatians are readily available in accordance with guidelines established by
the Board of Directors. All purchases of BICs will be subject to the applicable
quality requirements described under ``Investment Objectives and Policies.''
10
<PAGE>
These obligations bear interest rates that are not fixed but vary with
changes in specified market rates or indices.
FLOATING AND VARIABLE RATE INSTRUMENTS. The Funds may purchase instruments
having a floating or variable rate of interest.obligations bear interest at
rates that are not fixed, but vary with changes in specified market rates or
indices, such as the prime rate, or at specified intervals. Cer in of these
obligations may carry a demand feature that would permit the holder to tender
them back to the issuer at par value prior to maturity. The Funds may each
invest in a floating or variable rate obligation even if it carries a stated
maturity in excess of thirteen months upon compliance with certain conditions
contained in a rule of the Commission, in which case such obligation will be
treated as having a maturity not exceeding thirteen months. Each Fund will limit
its purchases of floating and variable rate obligations to those of the same
quality as it otherwise is allowed to purchase.
A floating or variable rate instrument may be subject to the Fund's
percentage limitation on illiquid investments if there is no reliable trading
market for the investment or if the Fund may not demand payment of the principal
amount within seven days.
The Money Fund may invest in obligations of foreign banks, corporations and
governments which are denominated and pay interest in U.S. dollars.
FOREIGN SECURITIES. The Money Fund may invest in non-convertible debt
obligations of foreign banks, foreign corporations and foreign governments which
obligations are denominated in and pay interest in U.S. dollars. Investment in
foreign securities involve certain considerations that are not typically
associated with investing in domestic securities. Investments in foreign
securities typically involve higher transaction costs than investments in U.S.
securities. Foreign investments may have risks associated with currency exchange
rates, political liability, less complete financial information about the
issuers and less market liquidity. Future political and economic developments,
possible imposition of withholding taxes on income, seizure or nationalization
of foreign holdings, establishment of exchange controls or the adoption of other
governmental restrictions might adversely affect the payment of principal and
interest on foreign obligations. In addition, foreign banks and foreign branches
of domestic banks may be subject to less stringent reserve requirements than and
to different accounting, auditing and recordkeeping requirements from domestic
banks.
A GIC is a general obligation of a U.S. or Canadian insurance company.
GUARANTEED INVESTMENT CONTRACTS. The Money Fund may invest in guaranteed
investment contracts (``GICs'') issued by U.S. and Canadian insurance companies.
GICs require the Fund to make cash contributions to a deposit fund of an
insurance company's general account. The insurance company then makes payments
to the Fund based on negotiated, floating or fixed interest rates. A GIC is a
general obligation of the issuing insurance company and not a separate account.
The purchase price paid for a GIC becomes part of the general assets of the
insurance company, and the contract is paid from the insurance company's general
assets. Generally, GICs are not assignable or transferable without the
permission of the issuing insurance companies, and an active secondary market in
GICs does not currently exist. In accordance with guidelines established by the
Company's Board of Directors, GICs may be considered illiquid securities and,
therefore, subject to the Fund's 10% limitation on such investments. All
purchases of GICs by the Fund will be subject to the applicable quality
requirements described under ``Investment Objectives and Policies.''
Repurchase agreements and time deposits that do not provide for payment to
a Fund within 7 days after notice or which have a term greater than 7 days may
be deemed illiquid securities.
ILLIQUID SECURITIES. A Fund will not invest more than 10% of the value of
its net assets in securities that are considered illiquid. Repurchase agreements
and time deposits that do not provide for payment to the Fund within seven days
after notice or which have a term greater than seven days are deemed illiquid
securities for this purpose (unless such securities are variable amount master
demand notes with maturities of nine months or less or unless the Portfolio
Management Agent or Investment Adviser has determined under the supervision and
direction of the Company's Board of Directors that an adequate trading market
exists for such securities or that market quotations are readily available).
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Each Fund may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act of 1933 and commercial
paper issued in reliance upon the exemption in Section 4(2) of the Securities
Act of 1933. These securities may be determined to be liquid in accordance with
guidelines established by the Portfolio Management Agent or Investment Adviser
and approved by the Company's Board of Directors. The Board of Directors will
monitor the Portfolio Management Agent's or Investment Adviser's implementation
of these guidelines on a periodic basis.
Subject to certain limitations, the Funds may invest in the securities of
other investment companies.
INVESTMENT COMPANY SECURITIES. In connection with the management of its
daily cash positions, each Fund may invest in securities issued by investment
companies that invest in short-term, debt securities and which seek to maintain
a $1.00 net asset value per share. To the extent that the Tax-ExemptFund invests
in such investment companies, it will invest in investment companies that invest
primarily in municipal obligations that are exempt from federal income taxes.
Securities of investment companies will be acquired by a Fund within the limits
prescribed by the Investment Company Act of 1940, as amended (the ``1940 Act'').
These limit each Fund so that: (i) not more than 5% of the value of its total
assets will be invested in the securities of any one investment company; (ii)
not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group; and (iii) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund or by the Company as a whole. 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. These expenses would be in addition to the advisory and other expenses
that a Fund bears directly in connection with its own operations.
Municipal Obligations include municipal bonds, notes, and commercial paper.
MUNICIPAL OBLIGATIONS. The Tax-Exempt Money Fund may invest in short- term
tax-exempt obligations issued by or on behalf of states, territories and
possessions of the U.S., the District of Columbia, and their respective
authorities, agencies, instrumentalities and political subdivisions that have
remaining maturities not exceeding thirteen months. Such Municipal Obligations
include municipal bonds, municipal notes and municipal commercial paper.
Municipal bonds generally have a maturity at the time of issuance of up to 30
years. Municipal notes generally have maturities at the time of issuance of
three years or less. These notes are generally issued in anticipation of the
receipt of tax funds, the proceeds of bond placements or other revenues. The
ability of an issuer to make payments is therefore dependent on these tax
receipts, proceeds from bond sales or other revenues, as the case may be.
Municipal commercial paper is a debt obligation with an effective maturity or
put date of 270 days or less that is issued to finance seasonal working capital
needs or as short-term financing in anticipation of longer-term debt.
OTHER SHORT-TERM CORPORATE OBLIGATIONS INCLUDING VARIABLE AMOUNT MASTER
DEMAND NOTES. The Money Fund may invest in convertible and non-convertible debt
securities of domestic corporations and of foreign corporations and governments
that are denominated in and pay interest in U.S. dollars, consisting of notes,
bonds and debentures that have thirteen months or less remaining to maturity and
meet the applicable quality standards described under ``Investment Objectives
and Policies,'' and in variable amount master demand notes. Variable amount
master demand notes differ from ordinary commercial paper in that they are
issued pursuant to a written agreement between the issuer and the holder. Their
amounts may from time to time be increased by the holder (subject to an agreed
maximum) or decreased by the holder or the issuer; they are payable on demand or
after an
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agreed-upon notice period, e.g., seven days; and the rates of interest vary
pursuant to an agreed-upon formula. Generally, master demand notes are not rated
by a rating agency. However, the Fund may invest in these obligations if, in the
opinion of the Portfolio Management Agent, they are of an investment quality
comparable to rated securities in which the Fund may invest. The Portfolio
Management Agent monitors the creditworthiness of issuers of master demand notes
on a daily basis. Transfer of these notes is usually restricted by the issuer,
and there is no secondary trading market for these notes. The Fund may not
invest in a master demand note with a demand notice period of more than seven
days, if, as a result, more than 10% of the value of the Fund's total net assets
would be invested in these notes, together with other illiquid securities.
The Funds may purchase securities subject to agreement by the seller to
repurchase them at a specified time and place.
REPURCHASE AGREEMENTS. Each Fund may purchase portfolio securities subject
to the seller's agreement to repurchase them at a mutually agreed upon time and
price, which includes an amount representing interest on the purchase price.
Each Fund may enter into repurchase agreements only with respect to obligations
that could otherwise be purchased by the Fund. The seller will be required to
maintain in a segregated account for the Fund cash or cash equivalent collateral
equal to at least 100% of the repurchase price (including accrued interest).
Default or bankruptcy of the seller would expose 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
10% of the market value of that Fund's total net assets would be invested in
repurchase agreements with a maturity of more than seven days and in other
illiquid securities. The Funds will enter into repurchase agreements only with
registered broker/dealers and commercial banks that meet guidelines established
by the Company's Board of Directors.
These securities allow the Funds to purchase securities with the right, but
not the obligation, to sell the security at a specific price valid for a
specific period of time.
SECURITIES WITH PUTS. To maintain liquidity, the Funds may enter into puts
with respect to portfolio securities with banks or broker/dealers that, in the
opinion of the Portfolio Management Agent, or Investment Adviser with respect to
the Tax-Exempt Money Fund, present minimal credit risks. The ability of the
Funds to exercise a put will depend on the ability of the bank or broker/dealer
to pay for the underlying securities at the time the put is exercised. In the
event that a bank or broker/dealer defaults on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained by having to sell the security elsewhere.
These instruments are issued at a discount from their ``face value'' and
may exhibit greater price volatility than ordinary debt securities.
STRIPPED SECURITIES. The Funds may purchase participations in trusts that
hold U.S. Treasury and agency securities (such as TIGRs and CATs) and also may
purchase Treasury receipts and other stripped securities, which represent
beneficial ownership interests in either future interest payments or the future
principal payments on the securities held by the trust. These instruments are
issued at a discount to their ``face value'' and may (particularly in the case
of stripped mortgage-backed securities) exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors. Participations in TIGRs, CATs and other
similar trusts are not considered U.S. Government securities. Stripped
securities will normally be considered illiquid investments and will be acquired
subject to the limitation on illiquid investments unless determined to be liquid
under guidelines established by the Board of Directors.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government Obligations consist of bills,
notes and bonds issued by the U.S. Treasury. They are direct obligations of the
U.S. Government and differ primarily in the length of their maturities.
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These obligations are debt securities issued by U.S. Government- sponsored
enterprises and federal agencies.
U.S. GOVERNMENT AGENCY AND INSTRUMENTALITY OBLIGATIONS. Obligations of the
U.S. Government agencies and instrumentalities are debt securities issued by
U.S. Government-sponsored enterprises and federal agencies. Some of these
obligations are supported by: (a) the full faith and credit of the U.S. Treasury
(such as Government National Mortgage Association participation certificates);
(b) the limited authority of the issuer to borrow from the U.S. Treasury (such
as securities of the Federal Home Loan Bank); (c) the authority of the U.S.
Government to purchase certain obligations of the issuer(such as securities of
the Federal National Mortgage Association); or (d) the credit of the issuer
only. In the case of obligations not backed by the full faith and credit of the
U.S., the investor must look principally to the agency issuing or guaranteeing
the obligation for ultimate repayment.
When-issued securities (new securities that have not started trading) will
only be purchased by the Funds with the intention of actually acquiring these
instruments.
WHEN-ISSUED SECURITIES. Each Fund may purchase securities on a when- issued
basis, in which case delivery and payment normally take place within 45 days
after the date of the commitment to purchase. The Funds will make commitments to
purchase securities on a when-issued basis only with the intention of actually
acquiring the securities, but may sell them before the settlement date, if
deemed advisable. The purchase price and the interest rate that will be received
are fixed at the time of the commitment. When-issued securities are subject to
market fluctuation and no income accrues to the purchaser prior to issuance.
Purchasing a security on a when-issued basis can involve a risk that the market
price at the time of delivery may be lower than the agreed upon purchase price.
Each Fund will establish a segregated account in which it will maintain
liquid assets in an amount at least equal in value to the Fund's commitments to
purchase when-issued securities. If the value of these assets declines, the Fund
will place additional liquid assets in the account on a daily basis so that the
value of the assets in the account is equal to the amount of the Fund's
commitments.
INVESTMENT LIMITATIONS
Unless otherwise noted, the foregoing investment objectives and related
policies and activities of each of the Funds are not fundamental and may be
changed by the Board of Directors of the Company without the approval of the
shareholders, provided that the policy relating to investment company securities
is a fundamental investment policy. If there is a change in a Fund's investment
objective, shareholders should consider whether the Fund remains an appropriate
investment in light of their then current financial position and needs.
As matters of fundamental policy, which may be changed only with approval
by the vote of the holders of a majority of the Fund's outstanding voting
securities, as described in the Statement of Additional Information, no Fund
may: (1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of its investments in that industry would exceed 25% of the
current value of its total assets, provided that there is no limitation with
respect to investments (a) in the case of the Tax-Exempt Money Fund, in
municipal obligations (for the purpose of this restriction, private activity
bonds shall not be deemed municipal obligations if the payment of principal and
interest on such bonds is the ultimate responsibility of non-governmental
users), (b) in obligations of the U.S. Government, its agencies or
instrumentalities, or (c) in the case of the Money Fund, certain bank
obligations in which the Fund may invest, as set forth in this Prospectus; (2)
invest more than 5% of the current value of its total assets in the securities
of any one issuer, other than obligations of the U.S. Government, its agencies
or instrumentalities, except that up to 25% of the value of the total assets of
a Fund (other than the Money
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Fund and the Government Money Fund) may be invested without regard to this
limitation; (3) purchase securities of an issuer if, as a result, with respect
to 75% of its total assets, it would own more than 10% of the voting securities
of such issuer; or (4) borrow from banks, except that it may borrow up to 10% of
the current value of its total assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of up to 10%
of the current value of the Fund's net assets (but investments may not be
purchased while borrowings are in excess of 5%). It is also a fundamental policy
that each Fund may make loans of portfolio securities, and invest up to 10% of
the current value of its net assets in repurchase agreements having maturities
of more than seven days, variable amount master demand notes having notice
periods of more than seven days, fixed time deposits subject to withdrawal
penalties having maturities of more than seven days, and securities that are not
readily marketable. Although not a matter of fundamental policy, the Funds
consider the securities of foreign governments to be a separate industry for
purposes of the 25% asset limitation on investments in the securities of issuers
conducting their principal business activity in the same industry.
With respect to the second investment limitation set forth above, each of
the Money Fund and the Government Money Fund may invest more than 5% of its
total assets in the securities of a single issuer for a period of up to three
business days after the purchase thereof, so long as it does not make more than
one such investment at any one time.
MANAGEMENT
The Board of Directors has overall responsibility for the conduct of the
affairs of the Funds and Company. The members of the Board and their principal
occupations are as follows:
BOARD OF DIRECTORS
Edgar R. Fiedler Vice President and Economic Counsellor,
The Conference Board.
C. Gary Gerst Chairman of the Board of Directors and Trustees;
Chairman Emeritus, La Salle Partners, Ltd. (Real
Estate Developer and Manager).
John W. McCarter, Jr. Senior Vice President, Booz Allen & Hamilton, Inc.
(Consulting Firm); Director of W.W. Grainger, Inc.
and A.M. Castle, Inc.
Ernest M. Roth Consultant; Retired Senior Vice President and Chief
Financial Officer, Commonwealth Edison Company.
INVESTMENT ADVISER
The Company has entered into an Advisory Contract with Harris Trust with
respect to each of the Funds. Harris Trust, located at 111 West Monroe Street,
Chicago, Illinois, is the successor to the investment banking firm of N.W.
Harris & Co. that was organized in 1882 and was incorporated in 1907 under the
present name of the bank. It is an Illinois state-chartered bank and a member of
the Federal Reserve System. At December 31, 1994, Harris Trust had assets of
more than $13
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billion and was the largest of 14 banks owned by Harris Bankcorp, Inc. Harris
Bankcorp, Inc. is a wholly-owned subsidiary of Bankmont Financial Corp., which
is a wholly-owned subsidiary of Bank of Montreal, a publicly traded Canadian
banking institution.
As of December 31, 1994, Harris Trust managed more than $8 billion in
personal trust assets, and acted as custodian of more than $151 billion in
assets.
With respect to the Tax-Exempt Money Fund, the Advisory Contract provides
that Harris Trust shall make investments for the Fund in accordance with the
Investment Adviser's best judgment. With respect to the Government Money and
Money Funds, the Advisory Contracts provide that Harris Trust is responsible for
the supervision and oversight of the Portfolio Management Agent's performance
(as discussed below).
Because the Funds entered into new Advisory Contracts with Harris Trust on
October 20, 1993, two Advisory Contracts and related fee schedules were in
effect during the fiscal year ended December 31, 1993. Under the Advisory
Contracts then in effect for the period from January 1, 1993 to October 19,
1993, Harris Trust was entitled to receive monthly advisory fees at the annual
rate of 0.50% of the average daily net assets of each of the Funds. Under the
Funds' existing Advisory Contracts which became effective October 20, 1993,
Harris Trust is entitled to receive monthly advisory fees at the annual rate of
0.14% of the first $100 million of each Fund's average daily net assets, plus
0.10% of each Fund's average daily net assets in excess of $100 million. The
following are the advisory fees calculated under the applicable Advisory
Contract, paid to Harris Trust for each Fund as a percentage of average daily
net assets for the the fiscal year ended December 31, 1995, respectively: the
Government Money Fund, 0.11%; the Money Fund, 0.11%; and the Tax-Exempt Money
Fund, 0.11%.
The Investment Adviser had undertaken to waive the fees payable to it by
each of the Funds to the extent the payment of such fees would cause the expense
ratios of those Funds to exceed 0.75%; that undertaking terminated on December
31, 1994. The Investment Adviser may continue to voluntarily waive a portion of
its fees. No investment advisory fees were waived for the year ended December
31, 1995.
Purchase and sale orders of the securities held by the Tax-Exempt Money
Fund may be combined with those of other accounts that Harris Trust manages, and
for which it has brokerage placement authority, in the interest of seeking the
most favorable overall net results. When Harris Trust determines that a
particular security should be bought or sold for the Tax-Exempt Money Fund and
other accounts managed by Harris Trust, Harris Trust undertakes to allocate
those transactions among the participants equitably.
PORTFOLIO MANAGEMENT AGENT
Harris Trust has entered into Portfolio Management Contracts with Harris
Investment Management, Inc. (``HIM'' or the ``Portfolio Management Agent'')
under which HIM undertakes to furnish investment guidance and policy direction
in connection with the daily portfolio management of the Government Money and
Money Funds.
For the services provided by HIM, Harris Trust pays to HIM the advisory
fees it receives from the Funds other than the Tax-Exempt Money Fund. For the
fiscal years ended December 31, 1995 and 1994, Harris Trust paid fees to HIM (i)
at the rate of 0.11% and 0.11% of the average daily net assets of the Government
Money Fund, and (ii) at the rate of 0.11% and 0.11% of the average daily net
assets of the Money Fund.
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Purchase and sale orders of the securities held by each of the Funds (other
than the Tax-Exempt Money Fund) may be combined with those of other accounts
that HIM manages, and for which it has brokerage placement authority, in the
interest of seeking the most favorable overall net results. When HIM determines
that a particular security should be bought or sold for any of the Funds and
other accounts managed by HIM, HIM undertakes to allocate those transactions
among the participants equitably.
GLASS-STEAGALL ACT
The Glass-Steagall Act, among other things, generally prohibits federally
chartered or supervised banks from engaging to any extent in the business of
issuing, underwriting, selling or distributing securities, although subsidiaries
of bank holding companies such as Harris Trust and HIM are permitted to purchase
and sell securities upon the order and for the account of their customers.
It is the position of Harris Trust and HIM that they may perform the
services contemplated by the Advisory Contracts, the Portfolio Management
Contracts and this Prospectus without violation of the Glass-Steagall Act or
other applicable federal banking laws or regulations. It is noted, however, that
there are no controlling judicial or administrative interpretations or decisions
and that future judicial or administrative interpretations of, or decisions
relating to, present federal statutes and regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, as well as
future changes in federal statutes or regulations and judicial or administrative
decisions or interpretations thereof, could prevent Harris Trust or HIM from
continuing to perform, in whole or in part, such services. If Harris Trust or
HIM were prohibited from performing any of such services, it is expected that
the Board of Directors of the Company would recommend to the Funds' shareholders
that they approve new agreements with another entity or entities qualified to
perform such services and selected by the Board of Directors.
To the extent permitted by the Commission, the Funds may pay brokerage
commissions to certain affiliated persons. No such commission
payments have been made during the last fiscal year.
ADMINISTRATORS, CUSTODIAN AND TRANSFER AGENT
First Data Investor Services Group, Inc. (formerly known as The Shareholder
Services Group, Inc.) (``First Data'' or the ``Administrator'') and PFPC Inc.
(``PFPC'' or the ``Administrator and Accounting Services Agent,''),
(collectively, the ``Administrators'') serve as the Company's administrators. In
such capacity, the Administrators generally assist the Company in all aspects of
its administration and operation. PFPC also serves as the transfer and dividend
disbursing agent of the Funds (the ``Transfer Agent'').
PNC Bank, N.A. (the ``Custodian'') serves as custodian of the assets of the
Funds. PFPC and the Custodian are indirect, wholly-owned subsidiaries of PNC
Bank Corp.
As compensation for their services, the Administrators, the Custodian, and
the Transfer Agent are entitled to receive a combined fee based on the aggregate
average daily net assets of the Funds and the Company's other investment
portfolios (Harris Insight Equity Fund, Intermediate Bond Fund and Hemisphere
Free Trade Fund (``Harris Non-Money Market Funds'')), payable monthly at an
annual rate of .17% of the first $300 million of average daily net assets; .15%
of the next $300 million; and .13% of average net assets in excess of $600
million. In addition, a separate fee is charged by PFPC for certain retail
transfer agent services and for various custody transactional charges.
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DISTRIBUTOR
Funds Distributor, Inc. (the ``Distributor'') has entered into a
Distribution Agreement with the Company pursuant to which it has the
responsibility for distributing shares of the Funds. Fees for services rendered
by the Distributor will be paid by the Administrators. The Distributor bears the
cost of printing and mailing prospectuses to potential investors and any
advertising expenses incurred by it in connection with the distribution of
shares, subject to the terms of the Service Plans described below.
See ``Management'' and ``Custodian'' in the Statement of Additional
Information for additional information regarding the Company's Investment
Adviser, Portfolio Management Agent, Administrators, Custodian, Transfer Agent
and Distributor.
EXPENSES
Except for certain expenses borne by the Distributor, Harris Trust and HIM,
the Company bears all costs of its operations, including the compensation of its
directors who are not affiliated with Harris Trust, HIM or the Distributor or
any of their affiliates; advisory and administration fees; payments pursuant to
any Service Plan; interest charges; taxes; fees and expenses of its independent
accountants, legal counsel, transfer agent and dividend disbursing agent;
expenses of preparing and printing prospectuses (except the expense of printing
and mailing prospectuses used for promotional purposes, unless otherwise payable
pursuant to a Service Plan), shareholders' reports, notices, proxy statements
and reports to regulatory agencies; insurance premiums and certain expenses
relating to insurance coverage; trade association membership dues; brokerage and
other expenses connected with the execution of portfolio securities
transactions; fees and expenses of the Funds' custodian including those for
keeping books and accounts and calculating the net asset value per share of the
Funds; expenses of directors' and shareholders' meetings; expenses relating to
the issuance, registration and qualification of shares of the Funds; pricing
services; organizational expenses; and any extraordinary expenses. Expenses
attributable to each Fund are charged against the assets of that Fund. Other
general expenses of the Company are allocated among the Funds and the Harris
Non-Money Market Funds in an equitable manner as determined by the Board of
Directors.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for each Fund is determined on each day that the
New York Stock Exchange (``NYSE'') and the Federal Reserve Bank of Philadelphia
(the ``Fed'') are open for trading. For a list of the days on which the net
asset value will not be determined, see ``Determination of Net Asset Value'' in
the Statement of Additional Information. The net asset value per share of each
of the Funds is determined by dividing the value of the total assets of the Fund
less all of its liabilities by the total number of outstanding shares of the
Fund.
The net asset value per share of each class of shares of the Funds is
determined at 12:00 Noon, New York City time. Each of the Funds uses the
amortized cost method to value its portfolio securities and each attempts to
maintain a constant net asset value of $1.00 per share. The amortized cost
method involves valuing a security at its cost and amortizing any discount or
premium over the period until maturity, regardless of the impact of fluctuating
interest rates on the market value of the security.
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PURCHASE OF SHARES
Shares of any of the Funds may be purchased through authorized
broker/dealers, financial institutions and service agents (``Institutions'') on
any day the NYSE and the Fed are open for business. Individual investors will
purchase all shares directly through Institutions which will transmit purchase
orders directly to the Distributor. Institutions are responsible for the prompt
transmission of purchase, exchange or redemption orders, and may independently
establish and charge additional fees to their customers for such services, which
would reduce the customers' yield or return. The Company does not impose any
minimum initial or subsequent investment limitations. Each Institution through
which shares may be purchased may establish its own terms with respect to the
requirement of a minimum initial investment and minimum subsequent investments.
The Company reserves the right to reject any purchase order. All funds will
be invested in full and fractional shares. Checks will be accepted for the
purchase of any Fund's shares subject to collection at full face value in U.S.
dollars. Inquiries may be directed to the Company at the address and telephone
number on the cover of this Prospectus.
Purchase orders for shares of the Funds received in good order by the
Distributor before 12:00 Noon (New York City time) will be executed that day.
Institutions through which orders are placed may set earlier purchase deadlines.
Purchase orders received in good order after 12:00 Noon (New York City time)
will be executed on the next business day on which the net asset value is
calculated.
Shares of the Funds are offered continuously at the net asset value next
determined after a purchase order is effective; the net asset value is expected
to remain constant at $1.00. No sales charge is imposed.
A salesperson and any other person entitled to receive compensation for
selling or servicing shares of a Fund may receive different compensation for
selling or servicing shares of one class as compared with another class.
Orders for the shares of Funds will become effective when an investor's
bank wire order or check is converted into federal funds. Wires for purchases
will be accepted only in federal funds or other funds immediately available to
the Custodian. Wire transmissions may, however, be subject to delays of several
hours, in which event the effectiveness of the order will be delayed. Payments
transmitted by a bank wire other than the Federal Reserve Wire System may take
longer to be converted into federal funds. When payment for shares is by check
drawn on any member bank of the Federal Reserve System, federal funds normally
become available to the Fund on the business day after the check is deposited.
Checks drawn on a non-member bank or a foreign bank may take substantially
longer to be converted into federal funds and, accordingly, may delay the
execution of an order.
Depending upon the terms of the particular customer account, financial
services institutions, including Harris Trust and HIM, may charge account fees
for automatic investment and other cash management services which they provide,
including, for example, account maintenance fees, compensating balance
requirements, or fees based upon account transactions, assets, or income. This
Prospectus should be read in connection with any information received from
financial services institutions.
Each of the Funds offers two additional classes of shares, Class B Shares
and Institutional Shares, in addition to the Class A Shares described in this
Prospectus. Class B Shares and Institutional Shares each have different expense
levels which may affect performance. Investors may call 1-800-982-8782 to obtain
more information concerning Class B Shares and Institutional Shares of the
Funds.
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REDEMPTION OF SHARES
Shares may be redeemed at their next determined net asset value after
receipt of a proper request by the Distributor directly or through any
Institution. See page 21.
The Company makes no charge for redemption transactions, but an Institution
may charge an account-based service fee. Redemption orders received by an
Institution before 12:00 Noon, New York City time, (on each day that net asset
value is determined) with respect to shares of the Funds and received by the
Distributor before the close of business on the same day will be executed at
such Fund's net asset value per share next determined on that day. Redemption
orders received by an Institution after the close of the NYSE, or not received
by the Distributor prior to the close of business, will be executed at such
Fund's net asset value next determined on the next business day.
If a redemption order for shares of the Funds is received in good order by
the Distributor before 12:00 Noon (New York City time) payment will normally be
remitted the same day. In the case of a redemption request made shortly after a
recent purchase, the redemption proceeds will be distributed upon the clearance
of the shareholder's check used to purchase the Company's shares which may take
up to 15 days or more after the investment. The proceeds may be more or less
than cost and, therefore, a redemption may result in a gain or loss for federal
income tax purposes. Payment of redemption proceeds may be made in readily
marketable securities.
REDEMPTION THROUGH INSTITUTIONS
Proceeds of redemptions made through authorized Institutions will be
credited to the shareholder's account with the Institution. A redeeming
shareholder may request a check from the Institution or may elect to retain the
redemption proceeds in such shareholder's account. The Institution may benefit
from the use of the redemption proceeds prior to the clearance of a check issued
to a redeeming shareholder for the proceeds or prior to disbursement or
reinvestment of the proceeds on behalf of the shareholder.
REDEMPTION BY EXPEDITED REDEMPTION SERVICE
If shares of the Funds are held directly by the Transfer Agent in book
credit form and the Expedited Redemption Service has been elected on the
Purchase Application on file with the Transfer Agent, redemption of shares may
be requested by telephone, on any day the Company and the Transfer Agent are
open for business. The Company and its Transfer Agent will attempt to confirm
that telephone instructions are genuine and will use procedures as are
considered reasonable. In this regard the Company and its Transfer Agent require
personal identification information before accepting telephonic redemption
instructions. The shareholder will bear the risk of loss due to fraud, although
the Company and its agents may have a risk of loss if reasonable procedures are
not used. The Distributor can be reached by calling (800) 982-8782.
Upon request, proceeds of Expedited Redemptions of $1,000 or more will be
wired to the shareholder's bank indicated in the Purchase Application. If an
Expedited Redemption request is received by the Transfer Agent by 12:00 Noon
(New York City time) on a day the Company and the Transfer Agent are open for
business, the redemption proceeds will be transmitted to the shareholder's bank
that same day. A check for the proceeds of less than $1,000 will be mailed to
the shareholder's address of record, except that, in the case of investments in
the Company that have been effected through Institutions, the full amount of the
redemption proceeds will be transmitted by wire.
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Because of the high cost of maintaining small accounts, the Company
reserves the right to involuntarily redeem accounts on behalf of shareholders
whose share balances fall below $500 unless this balance conditions results a
decline in the market value of such Fund's assets. Prior to such a redemption, a
shareholder will be notified in writing and permitted 30 days to make additional
investments to raise the account balance to the specified minimum.
SERVICE PLAN
Under each Fund's Service Plan relating to Class A Shares, each Fund will
enter into a Servicing Agreement with institutions, such as banks, savings and
loan associations and other financial institutions (``Service Organizations''),
that require the Service Organization to provide certain shareholder support
services and distribution assistance in consideration of the Fund's payment of
up to 0.35% (on an annualized basis) of the average daily net asset value of the
Class A Shares, held by or for the benefit of customers of the Service
Organization (``Customers''). Services, which are provided by Service
Organizations, and are described more fully in the Statement of Additional
Information under ``Service Plans - Money Market Funds,'' include aggregating
and processing purchase and redemption orders; processing dividend payments from
the Funds on behalf of Customers; arranging for the reinvestment of dividend
payments; providing information periodically to Customers showing their
positions in shares; arranging for bank wires; responding to Customer inquiries
relating to the services provided by the Service Organization and handling
correspondence; acting as shareholder of record and nominee; and providing
distribution assistance and support services. Under the terms of the Servicing
Agreements, Service Organizations are required to provide to their Customers a
schedule of any fees that they may charge Customers in connection with their
investments in Class A Shares.
DIVIDENDS AND DISTRIBUTIONS
The Company declares as a dividend on the outstanding shares of each class
of a Fund substantially all of such Fund's net investment income at the close of
each business day to shareholders of record at 12:00 Noon (New York City time)
on the day of declaration. Shares purchased will begin earning dividends on the
day the purchase order is executed and shares redeemed will earn dividends
through the previous day, except that with respect to the Check Redemption
Service, shares redeemed will cease to earn dividends on the day the check is
charged to the Custodian's account at its Federal Reserve Bank. Net investment
income for a Saturday, Sunday or holiday will be declared as a dividend on the
previous business day to shareholders of record at 12:00 Noon (New York City
time) on that day.
Investment income for any class of shares of a Fund includes, among other
things, interest income, market and original issue discount and premium. Fund
dividends declared in and attributable to the preceding month will be paid on
the first business day of each month. Dividends are determined in the same
manner and are paid in the same amount for each Fund share, except that Class A
and Class B Shares bear the expenses of fees paid to Service Organizations. As a
result, at any given time, the net yield of Class A Shares could be up to 0.35%
lower than the net yield of Institutional Shares, and the net yield of Class B
Shares could be up to 0.25% lower than the net yield of Institutional Shares of
the Funds. Each Fund's net taxable capital gains, if any, will be distributed at
least annually (except to the extent permitted to avoid imposition of the 4%
excise tax described below). Dividends and distributions paid by any of the
Funds will be invested in additional shares of the same Fund at net asset value
and credited to the shareholder's account on the payment date or, at the
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shareholder's election, paid in cash. Dividend checks and Statements of Account
will be mailed approximately two business days after the payment date. Each Fund
forwards to the Transfer Agent the monies for dividends to be paid in cash on
the payment date.
Shareholders who redeem all their shares of any of the Funds prior to a
dividend payment will receive, in addition to the redemption proceeds, dividends
declared but unpaid. Shareholders who redeem only a portion of their shares will
be entitled to all dividends declared but unpaid on such shares on the next
dividend payment date.
FEDERAL INCOME TAXES
Each Fund (and each Harris Non-Money Market Fund) will be treated as a
separate entity for tax purposes and thus the provisions of the Internal Revenue
Code of 1986, as amended (the ``Code'') generally will be applied to each Fund
separately, rather than to the Company as a whole. As a result, net capital
gains, net investment income, and operating expenses will be determined
separately for each Fund. The Company intends to qualify each Fund as a
regulated investment company under Subchapter M of the Code. As portfolios of a
regulated investment company, each Fund will not be subject to federal income
taxes with respect to net investment income and net capital gains distributed to
its shareholders, as long as it distributes 90% or more of its net investment
income (including net short-term capital gains) each year and, in the case of
the Tax-Exempt Money Fund, as long as it distributes to its shareholders at
least 90% of its net tax-exempt income (including net short-term capital gains).
Dividends from net investment income (including net short-term capital
gains), except ``exempt-interest dividends'' (described below), will be taxable
as ordinary income. Because more than 50% of the value of the total assets of
the Tax-Exempt Money Fund at the close of each quarter of its taxable year is
expected to consist of obligations the interest on which is exempt from federal
income tax, the Tax-Exempt Money Fund expects to qualify under the Code to pay
``exempt- interest dividends.'' Dividends distributed by the Tax-Exempt Money
Fund that are attributable to interest from tax-exempt securities will be
designated by the Fund as an ``exempt-interest dividend,'' and, as such, will
generally be exempt from federal income tax.
Because substantially all of the income of each Fund will arise from
interest, no part of the distributions to shareholders is expected to qualify
for the dividends- received deduction allowed to corporations under the Code.
Distributions of net long-term capital gains, if any, will be taxable as
long-term capital gains, whether received in cash or reinvested in additional
shares, regardless of how long the shareholder has held the shares, and will not
qualify for the dividends received deductions.
In the case of the shareholders of the Tax-Exempt Money Fund, interest on
indebtedness incurred or continued to purchase or carry shares of the Fund will
not be deductible to the extent that the Fund's distributions are exempt from
federal income tax. In addition, the portion of an exempt-interest dividend
allocable to certain tax-exempt obligations will be treated as a preference item
for purposes of the alternative minimum tax imposed on both individuals and
corporations. Persons who may be ``substantial users'' (or ``related persons''
of substantial users) of facilities financed by private activity bonds should
consult their tax advisers before purchasing shares in the Tax-Exempt Money
Fund.
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The exemption of exempt-interest dividends paid by the Tax-Exempt Money
Fund for federal income tax purposes may not result in similar exemptions under
the tax law of state and local authorities. In general, only interest earned on
obligations issued by the state or locality in which the investor resides will
be exempt from state and local taxes. Shareholders should consult their advisers
about the status of dividends from the Tax-Exempt Money Fund in their own states
and localities. Each year the Company will notify shareholders of the tax status
of distributions.
Any loss realized on a sale or exchange of shares of the Fund will be
disallowed to the extent shares are acquired within the 61-day period beginning
30 days before and ending 30 days after disposition of the shares.
The Company will be required to withhold, subject to certain exemptions,
currently at a rate of 31%, from dividends paid or credited to individual
shareholders (except shareholders from the Tax-Exempt Money Fund to the extent
it distributes an exempt-interest dividend) and from redemption proceeds, if a
correct taxpayer identification number, certified when required, is not on file
with the Company or Transfer Agent.
ACCOUNT SERVICES
Shareholders receive a Statement of Account whenever a share transaction,
dividend or capital gain distribution is effected in the accounts, or at least
annually. Shareholders can write or call the Funds at the address and telephone
number on page one of this Prospectus with any questions relating to their
investment in shares of the Funds.
ORGANIZATION AND CAPITAL STOCK
Company was incorporated in Maryland on September 16, 1987 as an open-end,
diversified management investment company.
The authorized capital stock of the Company consists of 10,000,000,000
shares having a par value of $.001 per share. Currently the Company has six
portfolios in operation. The Board has authorized each of the three Money Market
Funds-to issue three classes of shares, Class A, Class B and Institutional
Shares. Only Class A and Institutional Shares are in operation as of the date of
this Prospectus. In the future, the Board of Directors may authorize the
issuance of shares of additional investment portfolios and additional classes of
shares of a single portfolio may bear different sales charges and other expenses
which may affect their relative performance. Information regarding other classes
of shares may be obtained by calling the Company at the telephone number shown
on the cover page of this Prospectus or from any institution which makes
available shares of the Funds. All shares of the Company have equal voting
rights and will be voted in the aggregate, and not by class, except where voting
by class is required by law or where the matter involved affects only one class.
A more detailed statement of the voting rights of shareholders is contained in
the Statement of Additional Information. All shares of the Company, when issued,
will be fully paid and non-assessable. The Directors, when requested by at least
10% of the Company's outstanding shares, will call a meeting of shareholders for
the purpose of voting upon the question of removal of a director or directors
and will assist in communications with other shareholders as required by Section
16(c) of the 1940 Act.
As of January 31, 1996, the holders of record of 25% or more of the
outstanding shares of the Funds were as follows: Harris Trust held of record
512,077,635 shares, equal to 95.79% of the outstanding shares of the Money
Market Fund -- Class A Shares; 214,334,587 shares, equal to 99.99% of the
outstanding shares of the Money
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Market Fund -- Institutional Shares; 255,211,536 shares, equal to 96.40% of the
outstanding shares of the Government Money Market Fund -- Class A Shares;
31,248,318 shares, equal to 99.99% of the outstanding shares of the Government
Money Market Fund -- Institutional Shares; 174,081,221 shares, equal to 90.05%
of the outstanding shares of the Tax-Exempt Money Market Fund -- Class A Shares;
and 280,623,069 shares, equal to 99.99% of the outstanding shares of the
Tax-Exempt Money Market Fund - Institutional Shares.
REPORTS TO SHAREHOLDERS
The fiscal year of the Company ends on December 31. The Company will send
to its shareholders a semi-annual report showing the investments held by each of
the Funds and other information (including unaudited financial statements)
pertaining to the Company. An annual report, containing financial statements
audited by the Company's independent accountants, will also be sent to
shareholders.
CALCULATION OF YIELD
From time to time the Funds advertise ``yield,'' ``effective yield'' and
``total return'' for Class A Shares. The Tax-Exempt Money Fund may also
advertise its ``tax-equivalent yield'' and ``total return.'' ``Total return''
refers to the amount an investment in Class A Shares of a Fund would have
earned, including any increase or decrease in net asset value, over a specified
period of time and assumes reinvestment of all dividends and distributions. The
total return of a Fund shows what an investment in the Fund would have earned
over a specified period of time (such as one, five or ten years or the period of
time since commencement of operations, if shorter) assuming the reinvestment of
all distributions and dividends by the Fund on their reinvestment dates during
the period less all recurring fees.
The yield of a class of shares in the Funds refers to the income generated
by an investment in the Fund over a seven-day period (which period will be
stated in the advertisement). The income is then ``annualized.'' That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. The ``tax-equivalent yield''
refers to the yield on a taxable investment necessary to produce an after-tax
yield equal to a Fund's tax-free yield, and is calculated by increasing the
yield shown for the Fund to the extent necessary to reflect the payment of
specified tax rates. Thus, the tax-equivalent yield for a Fund will always
exceed that Fund's yield.
From time to time the Funds advertise ``30-day average yield'' and
``monthly average yield.'' Such yields refer to the average daily income
generated by an investment in such Fund over a 30-day or monthly period, as
appropriate (which period will be stated in the advertisement).
A Fund's performance figures for a class of shares represent past
performance, will fluctuate and should not be considered as representative of
future results. The yield of any investment is generally a function of portfolio
quality and maturity, type of instrument and operating expenses.
Investors who purchase and redeem shares of any Fund through Service Agents
may be subject to service fees imposed by those entities with respect to the
cash management and other services they provide. Such fees will have the effect
of reducing the return for those investors.
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INVESTMENT ADVISER
Harris Trust & Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
PORTFOLIO MANAGEMENT AGENT
Harris Investment Management, Inc.
190 South LaSalle Street
Chicago, Illinois 60603
ADMINISTRATORS
First Data Investor Services Group, Inc.
53 State Street
Boston, Massachusetts 02109
PFPC INC.
103 Bellevue Parkway
Wilmington, Delaware 19809
DISTRIBUTOR
Funds Distributor, Inc.
One Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
PNC Bank, N.A.
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
PFPC Inc.
P.O. Box 8950
Wilmington, Delaware 19885
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
Philadelphia, Pennsylvania
LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
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