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Securities and Exchange Commission (“SEC”).
Notice of an application for an order under section 17(b) of the Investment Company Act of 1940 (“Act”) for an exemption from section 17(a) of the Act.
SUMMARY OF APPLICATION:
Applicants request an order to permit certain series of Harris Insight Funds Trust (“HIFT”) to acquire all of the assets and liabilities of all of the series of HT Insight Funds Inc. (“HTIF”) (the “Reorganization”). Because of certain affiliations, applicants may not rely on rule 17a-8 under the Act.
APPLICANTS: HIFT, HTIF, and Harris Trust and Savings Bank (“Harris Bank”).
FILING DATES: The application was filed on September 17, 1999, and amended and restated on January 18, 2000.
HEARING OR NOTIFICATION OF HEARING: An order granting the application will be issued unless the SEC orders a hearing. Interested persons may request a hearing by writing to the SEC's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on February 22, 2000, and should be accompanied by proof of service on applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the SEC's Secretary.
Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. HIFT and HTIF, Four Falls Corporate Center, 6th Floor, West Conshohocken, Pennsylvania, 19428-2961. Harris Bank, 111 West Monroe Street/6W, Chicago, Illinois, 60603.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Paula L. Kashtan, Senior Counsel, at (202) 942-0615, or Mary Kay Frech, Branch Chief, at (202) 942-0564 (Division of Investment Management, Office of Investment Company Regulation).End Further Info End Preamble Start Supplemental Information
The following is a summary of the application. The complete application may be obtained for a fee at the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 (telephone (202) 942-8090).
1. HTIF, a Maryland corporation, is registered under the Act as an open-end management investment company and is comprised of five series, Harris Insight Equity Fund, Harris Insight Short/Intermediate Bond Fund, Harris Insight Money Market Fund, Harris Insight Government Money Market Fund, and Harris Insight Tax-Exempt Money Market Fund (the “Acquired Funds”).
2. HIFT, a Massachusetts business trust, is registered under the Act as an open-end management investment company and is currently comprised of thirteen series. As part of the Reorganization, HIFT is organizing the following five new shell series: Harris Insight Equity Fund, Harris Insight Short/Intermediate Bond Fund, Harris Insight Money Market Fund, Harris Insight Government Money Market Fund, and Harris Insight Tax-Exempt Money Market Fund (the “Acquiring Funds,” collectively with the Acquired Fund, the “Funds”).  Applicants state that the investment objectives and policies of the Acquiring funds are substantially similar to those of the corresponding Acquired Funds.
3. Harris Bank serves as investment adviser to the Acquired Funds and is exempt from registration under the Investment Advisers Act of 1940. Harris Bank will act as the investment adviser to the Acquiring Funds. Harris Investment Management, Inc. (“HIM”), an affiliate of Harris Bank, is registered as an investment adviser under the Advisers Act, and serves as subadviser to four of the Acquired Funds and will serve as subadviser to the four corresponding Acquiring Funds. Harris Bank and HIM are each wholly-owned subsidiaries of Harris Bankcorp, Inc. Currently, Harris Bank, HIM and/or certain of their affiliates that are under common control (the “Harris Group”) hold of record, in their names or in the names of their nominees, in excess of 25% of the outstanding voting securities of each of the Acquired Funds. All of these securities are held for the benefit of others in a trust, agency, custodial or other fiduciary or representative capacity.
4. On July 29, 1999, the board of directors of HTIF (the “Board or HTIF”) and the board of trustees of HIFT, none of whom are “interested persons” as defined in section 2(a)(19) of the Act (“Disinterested Directors/Trustees”), approved the Reorganization pursuant to which the assets and liabilities of each of the Acquired Funds will be transferred to the corresponding Acquiring Fund in exchange for shares of designated classes of the corresponding Acquiring Fund (“Reorganization Plan”). Shareholders of each of the Acquired Funds will receive shares of the corresponding Acquiring Fund having an aggregate net asset value equal to the aggregate net asset value of the Acquired Fund's shares held by each shareholder, as determined on the closing date of the Reorganization, currently anticipated to occur on May 2, 2000. The value of the assets of the unds will be determined in the manner set forth in the Funds' then current prospectuses and statements of additional information. As soon as practicable after the closing date, the Acquiring Fund shares received by each Acquired Fund will be distributed pro rata to the shareholders of the Acquired Fund and each Acquired Fund will liquidate and dissolve.
5. The Acquired Funds and the Acquiring Funds fall into two categories. First, there are two non-money market funds that offer or, after the Reorganization, will offer shares in three classes (a shares, N shares and Institutional shares) (“Non-Money Market Funds”). Second, there are three Money Market Funds that offer or, after the Reorganization, will offer shares in two classes (N shares and Institutional shares) (“Money Market Funds”).
6. Class A shares of the Funds are subject to a maximum front-end sales load of 5.50%, a maximum contingent deferred sales charge (“CDSC”) of 1.00%, and a maximum .35% rule 12b-1 fee. Class N shares of the Funds are subject to a maximum .25% service fee, and class N shares of the Money Market funds have a maximum .10% rule 12b-1 fee. None of the class N shares is subject to a front-end sales charge of CDSC. Institutional shares are offered without service fees, front-end sales charges, CDSCs or 12b-1 fees. For purposes of calculating the CDSCs on class A shares, shareholders of class A shares of each of the Non-Money Market Acquired Funds will be deemed to have held the class A shares of the corresponding Acquiring Fund since the date the shareholders initially purchased the Class A shares of the Acquired Fund. Shareholders of the Acquired Funds will not incur any sales charges in connection with the Reorganization. Harris Bank assumed approximately one half of the proxy costs, and the shareholders of the Acquired Funds will pay the remainder of the Reorganization expenses, as determined by the Board of each Acquired Fund.
7. The Board of each Acquired Fund, consisting solely of Disinterested Directors, found that the Reorganization is in the best interests of the Acquired Fund, and that the interests of existing shareholders of the Acquired Fund will not be diluted as a result of the Reorganization. During its deliberations, the Board reviewed, among other things: (a) the terms and conditions of the Reorganization; (b) the investment advisory and other fees projected to be paid by the Acquiring Fund, and the projected expense ratio of the Acquiring Fund as compared to that of the Acquired Fund; (c) the investment objectives, strategies, investment risks, policies and limitations of the Acquiring Fund and their compatibility with those of the Acquired Fund; (d) the potential economies of scale to be gained from combining the assets of the Acquired Fund into the Acquiring Fund; and (e) the anticipated tax-free nature of the Reorganization.
8. The Reorganization is subject to a number of conditions precedent, including that: (a) the shareholders of each of the Acquired Funds will have approved the Reorganization Plan; (b) applicants will have received exemptive relief from the SEC; (c) a registration statement under the Securities Act of 1933 for the Acquiring Funds will have become effective; and (d) an opinion of counsel is received with respect to the tax-free nature of the Reorganization. The Reorganization Plan may be terminated by mutual written consent of the Boards of HTIF and HIFT at any time prior to the closing. Applicants agree not to make any material changes to the Reorganization Plan without prior SEC approval.
9. The definitive proxy statement was filed with the SEC on October 25, 1999. A special meeting of the shareholders of the Acquired Funds was held on November 29, 1999, at which the shareholders approved the Reorganization Plan.
Applicants' Legal Analysis
1. Section 17(a) of the Act generally prohibits an affiliated person of a registered investment company, or an affiliated person of such a person, acting as principal, from selling any security to, or purchasing any security from, the company. Section 2(a)(3) of the Act defines an “affiliated person” of another person to include: (a) any person directly or indirectly owning, controlling, or holding with power to vote 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose securities are directly or indirectly owned, controlled, or held with power to vote by the other person; (c) any person directly or indirectly controlling, controlled by, or under common control with the other person, and (d) if the other person is an investment company, any investment adviser of that company. Applicants state that the Funds may be deemed affiliated persons and thus the Reorganization may be prohibited by section 17(a).
2. Rule 17a-8 under the Act exempts from the prohibitions of section 17(a) mergers, consolidations, or purchases or sales of substantially all of the assets of registered investment companies that are affiliated persons, or affiliated persons of an affiliated person, solely by reason of having a common investment adviser, common directors, and/or common officers, provided that certain conditions set forth in the rule are satisfied. Applicants believe that they may not rely on rule 17a-8 in connection with the Reorganization because the Funds may be deemed to be affiliated for reasons other than those set forth in the rule. By virtue of the direct or indirect ownership by the Harris Group of more than 25% of the outstanding voting securities of each of the Acquired Funds, each of the Acquired Funds may be deemed an affiliated person of an affiliated person of each of the corresponding Acquiring Fund. In addition, because of this ownership, the Funds may be deemed to be under common control, and thus affiliated persons under Section 2(a)(3)(C) of the Act.
3. Section 17(b) of the Act provides that the SEC may exempt a transaction from the provisions of section 17(a) if the evidence establishes that the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair and do not involve overreaching on the part of any person concerned, and that the proposed transaction is consistent with the policy of each registered investment company concerned and with the general purposes of the Act.
4. Applicants request an order under section 17(b) of the Act exempting them from section 17(a) of the Act to the extent necessary to permit applicants to consummate the Reorganization. Applicants submit that the Reorganization satisfies the standards of section 17(b) of the Act. Applicants state that the Board of HTIF, including a majority of its Disinterested Directors, found that participation in the Reorganization is in the best interests of each of the Acquired Funds, and that the interests of the existing shareholders will not be diluted as a result of the Reorganization. Applicants also note that the exchange of the Acquired Funds' assets for shares in the Acquiring Funds will be based on the Funds' relative net asset values.
For the SEC, by the Division of Investment Management, under delegated authority.Start Signature
Margaret H. McFarland,
1. A registration statement for the five shell Acquiring Funds is expected to be filed in February, 2000, and it is anticipated that it will be declared effective on or before May 1, 2000. The Acquiring Funds are expected to commence operations upon the consummation of the Reorganization.Back to Citation
2. Prior to the implementation of the Reorganization Plan, the Acquired Funds intend to discharge substantially all of their liabilities. Each Acquiring Fund will assume all remaining liabilities of the corresponding Acquired Fund.Back to Citation
[FR Doc. 00-2449 Filed 2-3-00; 8:45 am]
BILLING CODE 8010-01-M