ROCHDALE ALPHA PORTFOLIO,
A SERIES OF ROCHDALE INVESTMENT TRUST
Rochdale Alpha Portfolio is a mid- and small-cap equity fund. The
Portfolio seeks to provide investors with long-term capital appreciation.
The Securities and Exchange Commission has not approved or disapproved
of these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is April 14, 1999
TABLE OF CONTENTS
An Overview of the Portfolio......................................... 2
Fees and Expenses.................................................... 3
Investment Objective and Principal Investment Strategies............. 4
Principal Risks of Investing in the Portfolio........................ 5
Investment Advisor................................................... 6
Shareholder Information.............................................. 7
Pricing of Portfolio Shares.......................................... 11
Dividends and Distributions.......................................... 11
Tax Consequences..................................................... 11
Distribution Arrangements............................................ 12
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AN OVERVIEW OF THE PORTFOLIO
ROCHDALE ALPHA PORTFOLIO'S INVESTMENT OBJECTIVE
The Portfolio seeks long-term capital appreciation by investing primarily
in equity securities of mid- and small-capitalization U.S. companies.
ROCHDALE ALPHA PORTFOLIO'S PRINCIPAL INVESTMENT STRATEGIES
Companies are selected through direct research and analysis with a focus on
a company's fundamental characteristics. Companies selected are expected to
grow earnings at a rate above that of larger, more established companies,
and therefore the Portfolio expects over the long term to generate returns
greater than that of the S&P 500, although there can be no assurance that
the Portfolio will do so. Commensurate with these higher expected returns
comes greater volatility than the S&P 500. The Portfolio will possess
characteristics similar to the S&P MidCap 400 and S&P SmallCap 600 Indices.
Although the Portfolio emphasizes investment in equity securities of
domestic companies, it may invest in foreign securities, including those in
lesser developed countries (commonly referred to as "emerging markets").
The Portfolio may also invest in options, futures and other types of
derivatives.
PRINCIPAL RISKS OF INVESTING IN THE ROCHDALE ALPHA PORTFOLIO
As with all mutual funds, there is the risk that you could lose money on
your investment in the Rochdale Alpha Portfolio. For example, the following
risks could affect the value of your investment:
* The stock market goes down.
* Interest rates go up, which can result in a decline in the equity
market.
* The market undervalues the stocks held by the Portfolio.
* The stocks held by the Portfolio fail to grow their earnings as
Rochdale expected.
* Securities of medium- and small-capitalization companies exhibit
greater risk than do larger companies.
* Adverse developments occur in foreign or emerging markets. The
Portfolio may hold stocks of foreign companies as well as companies
located in emerging markets. These investments involve greater risk.
* Derivatives held by the Portfolio may vary from Rochdale's expectation
of movements in the securities and interest rates markets.
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WHO MAY WANT TO INVEST IN THE ROCHDALE ALPHA PORTFOLIO
The Portfolio may be appropriate for investors who:
* Are pursuing a long-term investment goal.
* Want to diversify their equity portfolio by investing in more
aggressive mid- and small-capitalization companies.
* Are willing to accept greater swings in the value of their portfolio
with the offsetting goal of earning higher long-term total return.
The Portfolio may not be appropriate for investors who:
* Need regular income or stability of principal.
* Are pursuing a short-term goal or investing emergency reserves.
* Wish to have their equity allocation invested in large capitalization
stocks only.
* Cannot remain in the Portfolio for a minimum of 3 to 5 years.
FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ................................. None
Maximum deferred sales charge (load)
(as a percentage of the lower of original purchase
price or redemption proceeds) ....................................... None
Redemption Fee (as a percentage of amount redeemed) .................. 2.00%*
ANNUAL FUND OPERATING EXPENSES**
(expenses that are deducted from Portfolio assets)
Management Fees....................................................... 1.00%
Distribution and Service (12b-1) Fees ................................ 0.25%
Other Expenses ....................................................... 1.25%
Total Annual Fund Operating Expenses.................................. 2.50%
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* The 2.00% redemption fee applies only to those shares that you have held
for eighteen months or less. The fee is payable to the Portfolio and is
intended to benefit the remaining shareholders by reducing short-term
trading.
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** Other Expenses are estimated for the first fiscal year of the Portfolio.
The Advisor has agreed to reduce its fees and/or pay expenses of the
Portfolio for a minimum period ending July 31, 1999, to ensure that the
Total Fund Operating Expenses will not exceed 1.95% of the Portfolio's
average daily net assets, including its current waiver of the 0.25% 12b-1
fees. The Advisor reserves the right to be reimbursed for any waiver of its
fees or expenses paid on behalf of the Portfolio within the following three
years if the Portfolio's expenses are less than the limit agreed to by the
Portfolio.
EXAMPLE
This example is intended to help you compare the costs of investing in the
Rochdale Alpha Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the time
periods indicated, that your investment has a 5% return each year and that the
Portfolio's operating expenses remain the same. Although your actual costs may
be higher or lower, under the assumptions, your costs would be:
If you redeem your shares: If you do not redeem your shares:
One Year .................. $458 One Year.......................... $253
Three Years ............... $779 Three Years....................... $799
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Portfolio seeks long-term capital appreciation through investment in mid-
and small-capitalization companies. By investing in medium- and smaller-sized
companies, the Portfolio attempts to achieve long-term performance greater than
that of larger companies. Commensurate with higher expected returns is higher
expected volatility and risk.
The Portfolio will invest primarily in equity securities of U.S. companies that
have a market capitalization less than $10 billion. The companies selected for
investment generally will have characteristics similar to companies included in
the S&P MidCap 400 and S&P SmallCap 600 Indices universe. The Portfolio may also
invest in larger companies and foreign securities, including those of lesser
developed countries.
In seeking to meet its investment goal, the Portfolio may use derivatives. In
general terms, a derivative investment is an investment contract whose value
depends on (or is derived from) the value of the underlying asset, interest rate
or index. Options and futures are examples of derivatives the Portfolio may use.
Security selection is based on intensive research and fundamental analysis.
Rochdale seeks to identify industry-dominant companies that are mispriced
relative to their long-term earnings potential and whose intrinsic value
Rochdale believes ultimately will be recognized. The characteristics Rochdale
seeks when selecting a company for the Portfolio include:
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* fundamentally strong business with a sustainable competitive advantage
in its industry
* experienced management with a successful track record of growing
earnings oab attractive valuation relative to its competitors
* above-average industry growth
In assessing companies for investment, Rochdale considers factors such as
quality of business franchise and operations, consistency and potential of
revenue and earnings, cash flow return on investment, market position, and
valuation relative to industry peers and the market as a whole. Rochdale meets
and/or has discussions with company management, their competitors, suppliers,
and customers to evaluate each company's quality of operations and commitment to
increasing shareholder value.
Though the Portfolio seeks to hold companies for many years, it is inevitable
that its composition will change over time. Rochdale is disciplined it its
research and considers it appropriate to sell a company if fundamental factors
change, expected earnings growth is not achieved, competitive forces shift,
industry growth slows, or the stock price declines beyond Rochdale's threshold.
The Portfolio intends to be fully invested in 25-50 companies. However, the
Portfolio may temporarily depart from its principal investment strategies by
making short-term investments in cash equivalents in response to adverse market,
economic or political conditions. This may result in the Portfolio not achieving
its investment objective.
Rochdale anticipates that the Portfolio will have a portfolio turnover not
exceeding 150%, consistent with similar smaller stock investment strategies. A
high portfolio turnover rate (100% or more) has the potential to result in the
realization and distribution to shareholders of higher capital gains. This may
mean that you would be likely to have a higher tax liability. A high portfolio
turnover rate also leads to higher transaction costs, which could negatively
affect the Portfolio's performance.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The principal risks of investing in the Portfolio that may adversely affect its
net asset value or total return are discussed above in "Principal Risks of
Investing in the Rochdale Alpha Portfolio." These risks are discussed in more
detail below.
MARKET RISK. The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than the price originally paid for it, or less than it was worth
at an earlier time. Market risk may affect a single issuer, industry or sector
of the economy, or the market as a whole.
MEDIUM AND SMALL COMPANIES RISK. Investing in securities of medium and small
capitalization companies involves greater risk than investing in larger
companies, because smaller companies can be subject to more abrupt or erratic
share price changes than can larger companies. Smaller companies typically have
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more limited product lines, markets, or financial resources than larger
companies, and their management may be dependent on a limited number of key
individuals. Smaller companies may have limited market liquidity, and their
prices may be more volatile. These risks are greater when investing in the
securities of newer small companies. As a result, smaller company stocks, and
therefore the Portfolio, may fluctuate significantly more in value than will
larger company stocks and mutual funds that focus on them.
FOREIGN SECURITIES RISK. The risk of investing in the securities of foreign
companies is greater than the risk of investing in domestic companies. Some of
these risks include: (1) unfavorable changes in currency exchange rates; (2)
economic and political instability; (3) less publicly available information; (4)
less strict auditing and financial reporting requirements; (5) less governmental
supervision and regulation of securities markets; (6) higher transaction costs;
and (7) greater possibility of not being able to sell securities on a timely
basis. These risks are more pronounced when investing in foreign securities of
lesser developed countries.
DERIVATIVES RISK. If the issuer of the derivative does not pay the amount due,
the Portfolio could lose money on its investment. Also, the underlying
investment or index on which the derivative is based and the derivative itself,
may not perform the way the Advisor expects it to. If that happens, the
Portfolio would get less income or gain, or its share price could decline. Using
derivatives could cause the Portfolio to experience a loss in its value and
could increase the volatility of its share price.
YEAR 2000 RISK. The Portfolio could be adversely affected if the computer
systems used by the Advisor and other service providers do not properly process
and calculate information related to dates beginning January 1, 2000. This is
commonly known as the "Year 2000 Problem." This situation may negatively affect
the companies in which the Portfolio invests and, by extension, the value of the
Portfolio's shares. Although the Portfolio's service providers are taking steps
to address this issue, there may still be some risk of adverse effects.
INVESTMENT ADVISOR
Rochdale Investment Management Inc. is the investment advisor to the Portfolio.
Rochdale's address is 570 Lexington Avenue, New York, NY 10022-6837. Rochdale
currently manages assets of more than $600 million for individual and
institutional investors, as well as two other investment portfolios, the
Rochdale Magna Portfolio and the Rochdale Atlas Portfolio. Rochdale provides
advice on buying and selling securities. Rochdale also furnishes the Portfolio
with office space and certain administrative services and provides most of the
personnel needed by the Portfolio. For its services, the Portfolio pays Rochdale
a monthly management fee based upon the average daily net assets of the
Portfolio at the annual rate of 1.00%.
PORTFOLIO MANAGERS.
Mr. Carl Acebes and Mr. Garrett R. D'Alessandro, CFA, will be responsible for
the day-to-day management of the Portfolio. Mr. Acebes has been Rochdale's
Chairman and Chief Investment Officer since its founding. Mr. D'Alessandro is
Rochdale's President, Chief Executive Officer, and Director of Research. Mr.
D'Alessandro joined Rochdale in 1986. Both Mr. Acebes and Mr. D'Alessandro are
the Portfolio Managers for two other investment portfolios.
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SHAREHOLDER INFORMATION
HOW TO BUY SHARES
INVESTMENT ADVISORY CLIENTS OF ROCHDALE SHOULD CONTACT THEIR FINANCIAL ADVISOR
OR ROCHDALE DIRECTLY FOR INVESTMENT INSTRUCTIONS.
You may open a Portfolio account with $25,000. You may make add to your account
at any time with investments of at least $10,000. The minimum investment
requirements may be waived from time to time at the Advisor's discretion.
There are several ways to purchase shares of the Portfolio. An Application Form,
which accompanies this Prospectus, is used if you send money directly to the
Portfolio by mail or by wire. To open an account by wire, to open a retirement
plan account or to purchase shares by overnight mail (such as FedEx), call
Rochdale at (212) 702-3500 for instructions. If you have questions about how to
invest, or about how to complete the Application Form, please call Rochdale at
(212) 702-3500. You may also buy shares of the Portfolio through your financial
representative. After your account is open, you may add to it at any time.
You may send money for investment by mail. If you are making an initial
investment in the Portfolio, complete the Application Form and mail it with a
check (made payable to Rochdale Alpha Portfolio) to the following address:
Rochdale Alpha Portfolio
P.O. Box 1978
Boston, MA 02105-1978
You may add to your account by mailing the stub attached to your account
statement, together with your check made payable to Rochdale Alpha Portfolio, to
the address noted above. Your account number should be written on your check.
INVESTMENT ADVISORY CLIENTS OF ROCHDALE SHOULD CONTACT THEIR FINANCIAL ADVISOR
OR ROCHDALE DIRECTLY REGARDING SUBSEQUENT INVESTMENTS.
You may purchase shares of the Portfolio by tendering payment in the form of
shares of stock, bonds or other securities. You may do this provided the
security being offered for the purchase of Portfolio shares is readily
marketable, its acquisition is consistent with the Portfolio's investment
objective, and the Advisor, at its discretion, finds it acceptable.
You may wire money to the Portfolio. Before sending a wire, you should call
Rochdale at (212) 702-3500 between 8:00 a.m. and 4:00 p.m., Eastern time, on a
day when the New York Stock Exchange ("NYSE") is open for trading, in order to
receive an account number. It is important to call and receive this account
number, because if your wire is sent without it or without the name of the
Portfolio, there may be a delay in investing the money you wire.
You will then be given further wire instructions.
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You should advise your bank to include the name of the Portfolio and your
account number with the wire. Your bank may charge you a fee for sending a wire
to the Portfolio.
AUTOMATIC INVESTMENT PLAN
For your convenience, the Portfolio offers an Automatic Investment Plan. Under
this Plan, after your initial investment, you authorize the Portfolio to
withdrawal from your personal checking account each month an amount that you
with to invest, which must be at least $1,000. If you wish to enroll in this
Plan, please call the Transfer Agent for an application. The Portfolio may
terminate or modify this privilege at any time. You may elect to terminate your
participation in the Plan at any time by notifying the Transfer Agent in
writing. Your termination letter must be received by the Transfer Agent
sufficiently in advance of the next scheduled withdrawal.
You may buy and sell shares of the Portfolio through certain brokers (and their
agents) that have made arrangements with the Portfolio to sell its shares. When
you place your order with such a broker or its authorized agent, your order is
treated as if you had placed it directly with the Portfolio's Transfer Agent,
and you will pay or receive the next price calculated by the Portfolio. The
broker (or agent) holds your shares in an omnibus account in the broker's (or
agent's) name, and the broker (or agent) maintains your individual ownership
records. The Portfolio may pay the broker (or its agent) for maintaining these
records as well as providing other shareholder services. The broker (or its
agent) may charge you a fee for handling your order. The broker (or agent) is
responsible for processing your order correctly and promptly, keeping you
advised regarding the status of your individual account, confirming your
transactions and ensuring that you receive copies of the Portfolio's prospectus.
HOW TO EXCHANGE SHARES
INVESTMENT ADVISORY CLIENTS OF ROCHDALE SHOULD CONTRACT THEIR FINANCIAL ADVISOR
OR ROCHDALE DIRECTLY FOR INSTRUCTIONS ON HOW TO EXCHANGE SHARES.
You may exchange your Portfolio shares for shares of the Rochdale Magna
Portfolio or the Rochdale Atlas Portfolio on any day the Portfolio and the NYSE
are open for business. Before making an exchange, you should obtain and read the
prospectus of the Portfolio into which the exchange is to be made. Your exchange
of shares is considered a taxable event for you. In addition, an exchange of
shares held less than 18 months is subject to a redemption fee.
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You may exchange your shares by sending a written request to the Portfolio. You
should give your account number and the number of shares or dollar amount to be
exchanged. The letter should be signed by all of the shareholders whose names
appear on the account registration.
If your account has telephone privileges, you may also exchange your shares by
calling (212) 702-3500 between the hours of 8:00 a.m. and 4:00 p.m. (Eastern
time). If you are exchanging shares by telephone, you will be subject to certain
identification procedures which are listed below under "How to Sell Shares." The
Portfolio may modify, restrict or terminate the exchange privilege at any time.
HOW TO SELL SHARES
INVESTMENT ADVISORY CLIENTS OF ROCHDALE SHOULD CONTACT THEIR FINANCIAL ADVISOR
OR ROCHDALE DIRECTLY FOR INSTRUCTIONS ON HOW TO REDEEM SHARES.
You may sell (redeem) your Portfolio shares on any day the Portfolio and the
NYSE are open for business either directly to the Portfolio or through your
investment representative. You will pay a 2.00% redemption fee if you are
redeeming shares that you purchased in the past eighteen months. This fee is
paid to the Portfolio. The Portfolio imposes a redemption fee in order to reduce
transaction costs and the effects of a short-term investment in the Portfolio.
REDEMPTIONS BY MAIL
You may redeem your shares by sending a written request to the Portfolio. You
should give your account number and state whether you want all or some of your
shares redeemed. The letter should be signed by all of the shareholders whose
names appear in the account registration. You should send your redemption
request to the Portfolio at the following address:
Rochdale Alpha Portfolio
P.O. Box 1978
Boston, MA 02105-1978
REDEMPTIONS BY TELEPHONE
If you have completed the Redemption by Telephone portion of the Account
Application, you may redeem some or all of your shares by telephone. You may
redeem by calling Rochdale at (212) 702-3500 between the hours of 8:00 a.m. and
4:00 p.m., Eastern time. Redemption proceeds will be mailed to the address that
appears on the Transfer Agent's records. You may also request that your
redemption proceeds be wired to a predesignated bank. The minimum amount that
may be wired is $1,000. Wire charges, if any, will be deducted from your
redemption proceeds. Telephone redemptions cannot be made if you notify the
Transfer Agent of a change of address within 30 days before the redemption
request. You may not use the telephone redemption for retirement accounts.
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When you establish telephone privileges, you are authorizing the Portfolio and
its Transfer Agent to act upon the telephone instructions of the person or
persons you have designated in your Account Application. Such persons may
request that the shares in your account be exchanged or redeemed. Redemption
proceeds will be transferred to the bank account you have designated on your
Account Application.
Before executing an instruction received by telephone, the Portfolio and the
Transfer Agent will use procedures to confirm that the telephone instructions
are genuine. These procedures will include recording the telephone call and
asking the caller for a form of personal identification. If the Portfolio and
the Transfer Agent follow these procedures, they will not be liable for any
loss, expense, or cost arising out of any telephone redemption or exchange
request that is reasonably believed to be genuine. This includes any fraudulent
or unauthorized request.
You may have difficulties in making a telephone redemption during periods of
abnormal market activity. If this occurs, you may make your redemption request
in writing.
AUTOMATIC WITHDRAWALS
As another convenience, you may redeem your Portfolio shares through the
Automatic Withdrawal Program. If you elect this method of redemption, the
Portfolio will send you check in a minimum of $1,000. You may choose to receive
a check each month or calendar quarter. Your Portfolio account must have a value
of at least $25,000 in order to participate in this Program. This Program may be
terminated or modified by you or the Portfolio at any time without charge or
penalty. A withdrawal under the Systematic Withdrawal Program is treated as a
redemption and is considered a taxable event for you. In addition, a withdrawal
of shares held less than 18 months is subject to a redemption fee.
Payment of your redemption proceeds will be made promptly, but not later than
seven days after receipt of your written request in proper form. If you request
a redemption in writing, your request must have a signature guarantee attached
if the amount to be redeemed exceeds $5,000. Other documentation may be required
for certain types of accounts If you did not purchase your shares with a
certified check or wire, the Portfolio may delay payment of your redemption
proceeds up to 15 days from purchase or until your check has cleared, whichever
occurs first.
The Portfolio may redeem the shares in your account if the value of your account
is less than $10,000 as a result of redemptions you have made. This does not
apply to retirement plan or Uniform Gifts or Transfers to Minors Act accounts.
You will be notified that the value of your account is less than $10,000 before
the Portfolio makes an involuntary redemption. You will then have 30 days in
which to make an additional investment to bring the value of your account to at
least $10,000 before the Portfolio takes any action.
The Portfolio has the right to pay redemption proceeds in whole or in part by a
distribution of securities from its portfolio. It is not expected that the
Portfolio would do so except in unusual circumstances.
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PRICING OF PORTFOLIO SHARES
The price of Portfolio shares is based on the Portfolio's net asset value. The
net asset value of the Portfolio's shares is determined by dividing the
Portfolio's assets, minus its liabilities, by the number of shares outstanding.
The Portfolio's assets are the market value of securities it holds, plus any
cash and other assets. The Portfolio's liabilities are fees and expenses it
owes. The number of Portfolio shares outstanding is the amount of shares which
have been issued to shareholders. The price you will pay to buy Portfolio shares
or the amount you will receive when you sell your Portfolio shares is based on
the net asset value next calculated after your order is received in proper form.
The net asset value of the Portfolio's shares is determined as of the close of
regular trading on the NYSE. This is normally 4:00 p.m., Eastern time. Portfolio
shares will not be priced on days that the NYSE is closed for trading (including
certain U.S. holidays).
DIVIDENDS AND DISTRIBUTIONS
The Portfolio will make distributions of dividends and capital gains, if any,
annually, usually on or about December 31. Because of its investment strategies,
the Portfolio expects that its distributions will consist primarily of capital
gains. Distributions are automatically reinvested in shares of the Portfolio. If
you wish to receive your distributions in cash, contact Rochdale at (212)
702-3500 before the payment of the distribution.
TAX CONSEQUENCES
Dividends are taxable to you as ordinary income. The rate you pay on capital
gain distributions will depend on how long the Portfolio held the securities
that generated the gains, not on how long you owned your Portfolio shares. You
will be taxed in the same manner whether you receive your dividends and capital
gain distributions in cash or reinvest them in additional Portfolio shares.
If you sell or exchange your Portfolio shares, it is considered a taxable event
for you. Depending on the purchase price and the sale price of the shares you
sell or exchange, you may have a gain or a loss on the transaction. You are
responsible for any tax liabilities generated by your transaction.
DISTRIBUTION ARRANGEMENTS
The Portfolio has adopted a distribution plan under Rule 12b-1. This rule allows
the Portfolio to pay distribution fees for the sale and distribution of its
shares and for services provided to its shareholders. The annual distribution
and service fee is 0.25% of the Portfolio's average daily net assets which is
payable to the Advisor, as Distributor. Because these fees are paid out of the
Portfolio's assets on an ongoing basis, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges. The Advisor does not expect to charge a distribution fee during the
Portfolio's first year of operations.
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ROCHDALE ALPHA PORTFOLIO,
A SERIES OF ROCHDALE INVESTMENT TRUST
For investors who want more information about the Portfolio, the following
document is available free upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Portfolio and is incorporated into this Prospectus.
You can get free copies of the SAI, request other information and discuss your
questions about the Portfolio by contacting the Portfolio at:
570 Lexington Avenue
New York, NY 10022-6837
Telephone: 212-702-3500 (Call collect)
You can review and copy information about the Portfolio, including the
Portfolio's SAI at the Public Reference Room of the Securities and Exchange
Commission in Washington, D.C. You can obtain information on the operation of
the Public Reference Room by calling 1-800-SEC-0330. You can get text-only
copies:
* For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-6009, or
* For a fee, by calling 1-800-SEC-0330, or
* Free of charge, from the Commission's Internet website at
http://www.sec.gov.
(Investment Company Act file no.811-8685)
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STATEMENT OF ADDITIONAL INFORMATION
APRIL 14, 1999
ROCHDALE ALPHA PORTFOLIO,
A SERIES OF ROCHDALE INVESTMENT TRUST
570 LEXINGTON AVENUE
NEW YORK, NY 10022-6837
(212) 702-3500
This Statement of Additional Information ("SAI") is not a prospectus and it
should be read in conjunction with the Prospectus dated April 14, 1999, as may
be revised, of the Rochdale Alpha Portfolio (the "Portfolio"), a series of
Rochdale Investment Trust (the "Trust"). Rochdale Investment Management Inc.
("Rochdale") is investment advisor to the Portfolio. A copy of the Portfolio's
Prospectus is available by calling the number listed above or (212) 633-9700.
TABLE OF CONTENTS
The Trust................................................................. B-2
Investment Objective and Policies......................................... B-2
Investment Restrictions................................................... B-16
Distributions and Tax Information......................................... B-18
Trustees and Executive Officers........................................... B-21
The Portfolio's Investment Advisor........................................ B-22
The Portfolio's Administrator............................................. B-22
The Portfolio's Distributor............................................... B-23
Execution of Portfolio Transactions....................................... B-23
Additional Purchase and Redemption Information............................ B-25
Determination of Share Price.............................................. B-28
Performance Information................................................... B-29
General Information....................................................... B-29
Appendix.................................................................. B-30
B-1
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THE TRUST
Rochdale Investment Trust (the "Trust") is an open-end management
investment company organized as a Delaware business trust. The Trust may consist
of various series which represent separate investment portfolios. This SAI
relates only to the Rochdale Alpha Portfolio.
The Trust is registered with the SEC as a management investment company.
Such a registration does not involve supervision of the management or policies
of the Portfolio. The Prospectus of the Portfolio and this SAI omit certain
information contained in the Registration Statement filed with the SEC. Copies
of such information may be obtained from the SEC upon payment of the prescribed
fee.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio is a mutual fund with the investment objective of long-term
capital appreciation. The following discussion supplements the discussion of the
Portfolio's investment objective and policies as set forth in the Prospectus.
There can be no assurance that the objective of the Portfolio will be attained.
CONVERTIBLE SECURITIES AND WARRANTS
The Portfolio may invest in convertible securities and warrants. A
convertible security is a fixed-income security (a debt instrument or a
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stocks in an
issuer's capital structure, but are usually subordinated to similar
non-convertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from common stock but lower than that
afforded by a similar nonconvertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation attendant upon a market price advance in
the convertible security's underlying common stock.
A warrant gives the holder a right to purchase at any time during a
specified period a predetermined number of shares of common stock at a fixed
price. Unlike convertible debt securities or preferred stock, warrants do not
pay a fixed dividend. Investments in warrants involve certain risks, including
the possible lack of a liquid market for resale of the warrants, potential price
fluctuations as a result of speculation or other factors, and failure of the
price of the underlying security to reach or have reasonable prospects of
reaching a level at which the warrant can be prudently exercised (in which event
the warrant may expire without being exercised, resulting in a loss of the
Portfolio's entire investment therein).
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INVESTMENT COMPANIES
The Portfolio may under certain circumstances invest a portion of its
assets in other investment companies, including money market funds. An
investment in a mutual fund will involve payment by the Portfolio of its pro
rata share of advisory and administrative fees charged by such fund.
SECURITIES LOANS
The Portfolio is permitted to lend its securities to broker-dealers and
other institutional investors in order to generate additional income. Such loans
of portfolio securities may not exceed one-third of the value of the Portfolio's
total assets. In connection with such loans, the Portfolio will receive
collateral consisting of cash, cash equivalents, U.S. Government securities, or
irrevocable letters of credit issued by financial institutions. Such collateral
will be maintained at all times in an amount equal to at least 102% of the
current market value plus accrued interest of the securities loaned. The
Portfolio can increase its income through the investment of such collateral. The
Portfolio continues to be entitled to the interest payable or any
dividend-equivalent payments received on a loaned security and, in addition, to
receive interest on the amount of the loan. However, the receipt of any
dividend-equivalent payments by the Portfolio on a loaned security from the
borrower will not qualify for the dividends-received deduction. Such loans will
be terminable at any time upon specified notice. The Portfolio might experience
risk of loss if the institutions with which it has engaged in portfolio loan
transactions breach their agreements with the Portfolio. The risks in lending
portfolio securities, as with other extensions of secured credit, consist of
possible delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
experience financial difficulty. Loans will be made only to firms deemed by
Rochdale to be of good standing and will not be made unless, in the judgment of
Rochdale, the consideration to be earned from such loans justifies the risk.
SHORT SALES
The Portfolio may seek to hedge investments or realize additional gains
through short sales. The Portfolio may make short sales, which are transactions
in which the Portfolio sells a security it does not own, in anticipation of a
decline in the market value of that security. To complete such a transaction,
the Portfolio must borrow the security to make delivery to the buyer. The
Portfolio then is obligated to replace the security borrowed by purchasing it at
the market price at or prior to the time of replacement. The price at such time
may be more or less than the price at which the Portfolio sold the security.
Until the security is replaced, the Portfolio is required to repay the lender
any dividends or interest that accrue during the period of the loan. To borrow
the security, the Portfolio also may be required to pay a premium, which would
increase the cost of the security sold. To the extent necessary to meet margin
requirements, the broker will retain the net proceeds of the short sale until
the short position is closed out. The Portfolio also will incur transaction
costs in effecting short sales.
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The Portfolio will incur a loss as a result of the short sale if the price
of the security increases between the date of the short sale and the date on
which the Portfolio replaces the borrowed security. The Portfolio will realize a
gain if the security declines in price between those dates. The amount of any
gain will be decreased, and the amount of any loss increased by the amount of
the premium, dividends, interest, or expenses the Portfolio may be required to
pay in connection with a short sale.
No securities will be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Portfolio's net assets.
Whenever the Portfolio engages in short sales, its custodian will segregate
liquid assets equal to the difference between (a) the market value of the
securities sold short at the time they were sold short and (b) any assets
required to be deposited with the broker in connection with the short sale (not
including the proceeds from the short sale). The segregated assets are marked to
market daily, provided that at no time will the amount segregated plus the
amount deposited with the broker be less than the market value of the securities
at the time they were sold short.
ILLIQUID SECURITIES
The Portfolio may not invest more than 15% of the value of its net assets
in securities that at the time of purchase have legal or contractual
restrictions on resale or are otherwise illiquid. Rochdale will monitor the
amount of illiquid securities held by the Portfolio, under the supervision of
the Trust's Board of Trustees, to ensure compliance with the Portfolio's
investment restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities, and the Portfolio might be
unable to sell restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemption requests
within seven days. The Portfolio might also have to register such restricted
securities in order to sell them, resulting in additional expense and delay.
Adverse market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
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to certain institutions may not reflect the actual liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the SEC under the Securities Act,
the Trust's Board of Trustees may determine that such securities are not
illiquid securities despite their legal or contractual restrictions on resale.
In all other cases, however, securities subject to restrictions on resale will
be deemed illiquid.
REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements. Under such agreements,
the seller of the security agrees to repurchase it at a mutually agreed upon
time and price. The repurchase price may be higher than the purchase price, the
difference being income to the Portfolio, or the purchase and repurchase prices
may be the same, with interest at a stated rate due to the Portfolio together
with the repurchase price on repurchase. In either case, the income to the
Portfolio is unrelated to the interest rate on the U.S. Government security
itself. Such repurchase agreements will be made only with banks with assets of
$500 million or more that are insured by the Federal Deposit Insurance
Corporation or with Government securities dealers recognized by the Federal
Reserve Board and registered as broker-dealers with the Securities and Exchange
Commission ("SEC") or exempt from such registration. The Portfolio will
generally enter into repurchase agreements of short duration, from overnight to
one week, although the underlying securities generally have longer maturities.
The Portfolio may not enter into a repurchase agreement with more than seven
days to maturity if, as a result, more than 15% of the value of its net assets
would be invested in illiquid securities including such repurchase agreements.
For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Portfolio to the seller of
the U.S. Government security subject to the repurchase agreement. It is not
clear whether a court would consider the U.S. Government security acquired by
the Portfolio subject to a repurchase agreement as being owned by the Portfolio
or as being collateral for a loan by the Portfolio to the seller. In the event
of the commencement of bankruptcy or insolvency proceedings with respect to the
seller of the U.S. Government security before its repurchase under a repurchase
agreement, the Portfolio may encounter delays and incur costs before being able
to sell the security. Delays may involve loss of interest or a decline in price
of the U.S. Government security. If a court characterizes the transaction as a
loan and the Portfolio has not perfected a security interest in the U.S.
Government security, the Portfolio may be required to return the security to the
seller's estate and be treated as an unsecured creditor of the seller. As an
unsecured creditor, the Portfolio would be at the risk of losing some or all of
the principal and income involved in the transaction. As with any unsecured debt
instrument purchased for the Portfolio, Rochdale seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
other party, in this case the seller of the U.S. Government security.
Apart from the risk of bankruptcy or insolvency proceedings, there is also
the risk that the seller may fail to repurchase the security. However, the
Portfolio will always receive as collateral for any repurchase agreement to
which it is a party securities acceptable to it, the market value of which is
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equal to at least 100% of the amount invested by the Portfolio plus accrued
interest, and the Portfolio will make payment against such securities only upon
physical delivery or evidence of book entry transfer to the account of its
Custodian. If the market value of the U.S. Government security subject to the
repurchase agreement becomes less than the repurchase price (including
interest), the Portfolio will direct the seller of the U.S. Government security
to deliver additional securities so that the market value of all securities
subject to the repurchase agreement will equal or exceed the repurchase price.
It is possible that the Portfolio will be unsuccessful in seeking to impose on
the seller a contractual obligation to deliver additional securities.
SHORT-TERM INVESTMENTS
The Portfolio may invest in any of the following securities and
instruments:
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. The
Portfolio may hold certificates of deposit, bankers' acceptances and time
deposits. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Portfolio will
be dollar-denominated obligations of domestic banks, savings and loan
associations or financial institutions which, at the time of purchase, have
capital, surplus and undivided profits in excess of $100 million (including
assets of both domestic and foreign branches), based on latest published
reports, or less than $100 million if the principal amount of such bank
obligations are fully insured by the U.S. Government.
In addition to buying certificates of deposit and bankers' acceptances, the
Portfolio also may make interest-bearing time or other interest-bearing deposits
in commercial or savings banks. Time deposits are non-negotiable deposits
maintained at a banking institution for a specified period of time at a
specified interest rate.
COMMERCIAL PAPER AND SHORT-TERM NOTES. The Portfolio may invest a portion
of its assets in commercial paper and short-term notes. Commercial paper
consists of unsecured promissory notes issued by corporations. Commercial paper
and short-term notes will normally have maturities of less than nine months and
fixed rates of return, although such instruments may have maturities of up to
one year.
Commercial paper and short-term notes will consist of issues rated at the
time of purchase "A-2" or higher by Standard & Poor's Ratings Group, "Prime-1"
or "Prime-2" by Moody's Investors Service, Inc., or similarly rated by another
nationally recognized statistical rating organization or, if unrated, will be
determined by Rochdale to be of comparable quality. These rating symbols are
described in the Appendix.
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FOREIGN INVESTMENTS AND CURRENCIES
The Portfolio may invest in up to 25% of its net assets in securities of
foreign issuers that are not publicly traded in the United States. The Portfolio
may also invest in Depositary Receipts, purchase and sell foreign currency on a
spot basis, and enter into forward currency contracts (see "Forward Currency
Contracts," below).
DEPOSITARY RECEIPTS. The Portfolio may invest in securities of foreign
issuers in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") or other
securities convertible into securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities for which
they may be exchanged. The Portfolio may also hold American Depository Shares
("ADSs"), which are similar to ADRs. ADRs and ADSs are typically issued by an
American bank or trust company and evidence ownership of underlying securities
issued by a foreign corporation. EDRs, which are sometimes referred to as
Continental Depository Receipts ("CDRs"), are receipts issued in Europe,
typically by foreign banks and trust companies, that evidence ownership of
either foreign or domestic securities. Generally, ADRs in registered form are
designed for use in U.S. securities markets. The Portfolio's 25% limitation on
investments in foreign securities does not apply to its investments in
Depositary Receipts.
RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign securities
involve certain inherent risks, including the following:
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and diversification and balance of
payments position. The internal politics of some foreign countries may not be as
stable as those of the United States. Governments in some foreign countries also
continue to participate to a significant degree, through ownership interest or
regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are affected by the
trade policies and economic conditions of their trading partners. If these
trading partners enacted protectionist trade legislation, it could have a
significant adverse effect upon the securities markets of such countries.
CURRENCY FLUCTUATIONS. The Portfolio may invest in securities denominated
in foreign currencies. A change in the value of any such currency against the
U.S. dollar will result in a corresponding change in the U.S. dollar value of
the Portfolio's assets denominated in that currency. Such changes will also
affect the Portfolio's income. The value of the Portfolio's assets may also be
affected significantly by currency restrictions and exchange control regulations
enacted from time to time.
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EURO CONVERSION. Several European countries adopted a single uniform
currency known as the "euro," effective January 1, 1999. The euro conversion,
that will take place over a several-year period, could have potential adverse
effects on the Portfolio's ability to value its portfolio holdings in foreign
securities, and could increase the costs associated with the Fund's operations.
The Portfolio and Rochdale are working with providers of services to the
Portfolio in the areas of clearance and settlement of trade to avoid any
material impact on the Portfolio due to the euro conversion; there can be no
assurance, however, that the steps taken will be sufficient to avoid any adverse
impact on the Portfolio.
MARKET CHARACTERISTICS. Rochdale expects that many foreign securities in
which the Portfolio invests will be purchased in over-the-counter markets or on
exchanges located in the countries in which the principal offices of the issuers
of the various securities are located, if that is the best available market.
Foreign exchanges and markets may be more volatile than those in the United
States. While growing, they usually have substantially less volume than U.S.
markets, and the Portfolio's foreign securities may be less liquid and more
volatile than U.S. securities. Also, settlement practices for transactions in
foreign markets may differ from those in United States markets, and may include
delays beyond periods customary in the United States. Foreign security trading
practices, including those involving securities settlement where Portfolio
assets may be released prior to receipt of payment or securities, may expose the
Portfolio to increased risk in the event of a failed trade or the insolvency of
a foreign broker-dealer.
LEGAL AND REGULATORY MATTERS. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
TAXES. The interest and dividends payable on some of the Portfolio's
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to Portfolio
shareholders.
COSTS. To the extent that the Portfolio invests in foreign securities, its
expense ratio is likely to be higher than those of investment companies
investing only in domestic securities, since the cost of maintaining the custody
of foreign securities is higher.
EMERGING MARKETS. Some of the securities in which the Portfolio may invest
may be located in developing or emerging markets, which entail additional risks,
including less social, political and economic stability; smaller securities
markets and lower trading volume, which may result in less liquidity and greater
price volatility; national policies that may restrict the Portfolio's investment
opportunities, including restrictions on investment in issuers or industries, or
expropriation or confiscation of assets or property; and less developed legal
structures governing private or foreign investment.
In considering whether to invest in the securities of a foreign company,
Rochdale considers such factors as the characteristics of the particular
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company, differences between economic trends and the performance of securities
markets within the U.S. and those within other countries, and also factors
relating to the general economic, governmental and social conditions of the
country or countries where the company is located. The extent to which the
Portfolio will be invested in foreign companies and countries and depositary
receipts will fluctuate from time to time within the limitations described in
the prospectus, depending on Rochdale's assessment of prevailing market,
economic and other conditions.
OPTIONS AND FUTURES STRATEGIES
The Portfolio may purchase put and call options, engage in the writing of
covered call options and secured put options, and employ a variety of other
investment techniques. Specifically, the Portfolio may engage in the purchase
and sale of options on securities and stock indices, index future contracts and
options on such futures, all as described more fully below. Such investment
policies and techniques may involve a greater degree of risk than those inherent
in more conservative investment approaches. The Portfolio will not engage in
such transactions for the purposes of speculation or leverage.
OPTIONS ON SECURITIES. To hedge against adverse market shifts, The
Portfolio may purchase put and call options on securities held in its portfolio.
In addition, The Portfolio may seek to increase its income in an amount designed
to meet operating expenses or may hedge a portion of its portfolio investments
through writing (that is, selling) "covered" put and call options. A put option
provides its purchaser with the right to compel the writer of the option to
purchase from the option holder an underlying security at a specified price at
any time during or at the end of the option period. In contrast, a call option
gives the purchaser the right to buy the underlying security covered by the
option from the writer of the option at the stated exercise price. A covered
call option contemplates that, for so long as the Portfolio is obligated as the
writer of the option, it will own (1) the underlying securities subject to the
option or (2) securities convertible into, or exchangeable without the payment
of any consideration for, the securities subject to the option. The value of the
underlying securities on which covered call options will be written at any one
time by the Portfolio will not exceed 25% of the Portfolio's total assets. The
Portfolio will be considered "covered" with respect to a put option it writes
if, so long as it is obligated as the writer of a put option, it segregates
liquid assets that are acceptable to the appropriate regulatory authority.
The Portfolio may purchase options on securities that are listed on
securities exchanges or that are traded over-the-counter ("OTC"). As the holder
of a put option, the Portfolio has the right to sell the securities underlying
the option, and as the holder of a call option, the Portfolio has the right to
purchase the securities underlying the option, in each case at the option's
exercise price at any time prior to, or on, the option's expiration date. The
Portfolio may choose to exercise the options it holds, permit them to expire or
terminate them prior to their expiration by entering into closing sale
transactions. In entering into a closing sale transaction, The Portfolio would
sell an option of the same series as the one it has purchased.
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The Portfolio receives a premium when it writes call options, which
increases the Portfolio's return on the underlying security in the event the
option expires unexercised or is closed out at a profit. By writing a call, the
Portfolio limits its opportunity to profit from an increase in the market value
of the underlying security above the exercise price of the option for as long as
the Portfolio's obligation as writer of the option continues. The Portfolio
receives a premium when it writes put options, which increases the Portfolio's
return on the underlying security in the event the option expires unexercised or
is closed out at a profit. By writing a put, the Portfolio limits its
opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as the Portfolio's
obligation as writer of the option continues. Thus, in some periods, the
Portfolio will receive less total return and in other periods greater total
return from its hedged positions than it would have received from its underlying
securities if unhedged.
In purchasing a put option, the Portfolio seeks to benefit from a decline
in the market price of the underlying security, whereas in purchasing a call
option, the Portfolio seeks to benefit from an increase in the market price of
the underlying security. If an option purchased is not sold or exercised when it
has remaining value, or if the market price of the underlying security remains
equal to or greater than the exercise price, in the case of a put, or remains
equal to or below the exercise price, in the case of a call, during the life of
the option, the Portfolio will lose its investment in the option. For the
purchase of an option to be profitable, the market price of the underlying
security must decline sufficiently below the exercise price, in the case of a
put, and must increase sufficiently above the exercise price, in the case of a
call, to cover the premium and transaction costs. Because option premiums paid
by the Portfolio are small in relation to the market value of the investments
underlying the options, buying options can result in large amounts of leverage.
The leverage offered by trading in options could cause the Portfolio's net asset
value to be subject to more frequent and wider fluctuations than would be the
case if the Portfolio did not invest in options.
OTC OPTIONS. OTC options differ from exchange-traded options in several
respects. They are transacted directly with dealers and not with a clearing
corporation, and there is a risk of non-performance by the dealer. However, the
premium is paid in advance by the dealer. OTC options are available for a
greater variety of securities and foreign currencies, and in a wider range of
expiration dates and exercise prices than exchange-traded options. Since there
is no exchange, pricing is normally done by reference to information from a
market maker, which information is carefully monitored or caused to be monitored
by Rochdale and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily
only by entering into a closing transaction. In the case of OTC options, there
can be no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, the Portfolio may be able
to realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when the Portfolio writes an OTC option, it generally can close out
that option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which it originally wrote the option. If a
covered call option writer cannot effect a closing transaction, it cannot sell
the underlying security or foreign currency until the option expires or the
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option is exercised. Therefore, the writer of a covered OTC call option may not
be able to sell an underlying security even though it might otherwise be
advantageous to do so. Likewise, the writer of a covered OTC put option may be
unable to sell the securities pledged to secure the put for other investment
purposes while it is obligated as a put writer. Similarly, a purchaser of an OTC
put or call option might also find it difficult to terminate its position on a
timely basis in the absence of a secondary market.
The Portfolio may purchase and write OTC put and call options in negotiated
transactions. The staff of the Securities and Exchange Commission has previously
taken the position that the value of purchased OTC options and the assets used
as "cover" for written OTC options are illiquid securities and, as such, are to
be included in the calculation of the Portfolio's 15% limitation on illiquid
securities. However, the staff has eased its position somewhat in certain
limited circumstances. The Portfolio will attempt to enter into contracts with
certain dealers with which it writes OTC options. Each such contract will
provide that the Portfolio has the absolute right to repurchase the options it
writes at any time at a repurchase price which represents the fair market value,
as determined in good faith through negotiation between the parties, but which
in no event will exceed a price determined pursuant to a formula contained in
the contract. Although the specific details of such formula may vary among
contracts, the formula will generally be based upon a multiple of the premium
received by the Portfolio for writing the option, plus the amount, if any, of
the option's intrinsic value. The formula will also include a factor to account
for the difference between the price of the security and the strike price of the
option. If such a contract is entered into, the Portfolio will count as illiquid
only the initial formula price minus the option's intrinsic value.
The Portfolio will enter into such contracts only with primary U.S.
Government securities dealers recognized by Federal Reserve Banks. Moreover,
such primary dealers will be subject to the same standards as are imposed upon
dealers with which the Portfolio enters into repurchase agreements.
STOCK INDEX OPTIONS. In seeking to hedge all or a portion of its
investment, the Portfolio may purchase and write put and call options on stock
indices listed on securities exchanges, which indices include securities held by
the Portfolio.
A stock index measures the movement of a certain group of stocks by
assigning relative values to the securities included in the index. Options on
stock indices are generally similar to options on specific securities. Unlike
options on specific securities, however, options on stock indices do not involve
the delivery of an underlying security; the option in the case of an option on a
stock index represents the holder's right to obtain from the writer in cash a
fixed multiple of the amount by which the exercise price exceeds (in the case of
a put) or is less than (in the case of a call) the closing value of the
underlying stock index on the exercise date.
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When the Portfolio writes an option on a stock index, it will segregate
liquid assets in an amount equal to the market value of the option, and will
maintain liquid assets with a value sufficient at all times to cover its
potential obligations while the option is open.
Stock index options are subject to position and exercise limits and other
regulations imposed by the exchange on which they are traded. If the Portfolio
writes a stock index option, it may terminate its obligation by effecting a
closing purchase transaction, which is accomplished by purchasing an option of
the same series as the option previously written. The ability of the Portfolio
to engage in closing purchase transactions with respect to stock index options
depends on the existence of a liquid secondary market. Although the Portfolio
generally purchases or writes stock index options only if a liquid secondary
market for the options purchased or sold appears to exist, no such secondary
market may exist, or the market may cease to exist at some future date, for some
options. No assurance can be given that a closing purchase transaction can be
effected when the Portfolio desires to engage in such a transaction.
RISKS RELATING TO PURCHASE AND SALE OF OPTIONS ON STOCK INDICES. Purchase
and sale of options on stock indices by the Portfolio are subject to certain
risks that are not present with options on securities. Because the effectiveness
of purchasing or writing stock index options as a hedging technique depends upon
the extent to which price movements in the Portfolio's portfolio correlate with
price movements in the level of the index rather than the price of a particular
stock, whether the Portfolio will realize a gain or loss on the purchase or
writing of an option on a stock index depends upon movements in the level of
stock prices in the stock market generally or, in the case of certain indices,
in an industry or market segment, rather than movements in the price of a
particular stock. Accordingly, successful use by the Portfolio of options on
stock indices will be subject to the ability of Rochdale to correctly predict
movements in the direction of the stock market generally or of a particular
industry. This requires different skills and techniques than predicting changes
in the price of individual stocks. In the event Rochdale is unsuccessful in
predicting the movements of an index, the Portfolio could be in a worse position
than had no hedge been attempted.
Stock index prices may be distorted if trading of certain stocks included
in the index is interrupted. Trading in stock index options also may be
interrupted in certain circumstances, such as if trading were halted in a
substantial number of stocks included in the index. If this occurred, the
Portfolio would not be able to close out options which it had purchased or
written and, if restrictions on exercise were imposed, might be unable to
exercise an option it holds, which could result in substantial losses to the
Portfolio. However, it will be the Portfolio's policy to purchase or write
options only on indices which include a sufficient number of stocks so that the
likelihood of a trading halt in the index is minimized.
FUTURES CONTRACTS. The Portfolio may purchase and sell stock index futures
contracts and interest rate futures contracts ("futures contracts"). The purpose
of the acquisition or sale of a futures contract by the Portfolio is to hedge
against fluctuations in the value of its portfolio without actually buying or
selling securities. The futures contracts in which the Portfolio may invest have
been developed by and are traded on national commodity exchanges. The Portfolio
may assume both "long" and "short" positions with respect to futures contracts.
A long position involves entering into a futures contract to buy a commodity,
whereas a short position involves entering into a futures contract to sell a
commodity.
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A stock index futures contract is a bilateral agreement pursuant to which
one party agrees to accept, and the other party agrees to make, delivery of an
amount of cash equal to a specified dollar amount times the difference between
the stock index value at the close of trading of the contract and the price at
which the futures contract is originally struck. No physical delivery of the
stocks comprising the index is made. Generally, contracts are closed out prior
to the expiration date of the contract.
An interest rate futures contract is a bilateral agreement pursuant to
which one party agrees to make, and the other party agrees to accept, delivery
of a specified type of debt security at a specified future time and at a
specified price. Although such futures contracts by their terms call for actual
delivery or acceptance of debt securities, in most cases, the contracts are
closed out before the settlement date without the making or taking of delivery.
The purpose of trading futures contracts is to protect the Portfolio from
fluctuations in value of its investment securities without necessarily buying or
selling the securities. Because the value of the Portfolio's investment
securities will exceed the value of the futures contracts sold by it, an
increase in the value of the futures contracts could only mitigate, but not
totally offset, the decline in the value of the Portfolio's assets. No
consideration is paid or received by the Portfolio upon trading a futures
contract. This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract that is returned to the
Portfolio upon termination of the futures contract, assuming that all
contractual obligations have been satisfied; the broker will have access to
amounts in the margin account if the Portfolio fails to meet its contractual
obligations. Subsequent payments, known as "variation margin," to and from the
broker, will be made daily as the price of the currency or securities underlying
the futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as "marking-to-market."
At any time prior to the expiration of a futures contract, the Portfolio may
elect to close a position by taking an opposite position, which will operate to
terminate the Portfolio's existing position in the contract.
Each short position in a futures contract entered into by the Portfolio is
secured by the Portfolio's ownership of underlying securities. The Portfolio
does not use leverage when it enters into long futures contracts; the Portfolio
segregates, with respect to each of its long positions, liquid assets having a
value equal to the underlying commodity value of the contract.
The Portfolio may trade futures contracts to the extent permitted under
rules and interpretations adopted by the Commodity Futures Trading Commission
(the "CFTC"). U.S. futures contracts have been designed by exchanges that have
been designated as "contract markets" by the CFTC, and must be executed through
a futures commission merchant, or brokerage firm, that is a member of the
relevant contract market. Futures contracts trade on a number of contract
markets, and, through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the exchange.
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The Portfolio intends to comply with CFTC regulations and avoid "commodity
pool operator" status. These regulations require that the Portfolio use futures
positions (a) for "bona fide hedging purposes" (as defined in the regulations)
or (b) for other purposes so long as aggregate initial margins and premiums
required in connection with non-hedging positions do not exceed 5% of the
liquidation value of the Portfolio's portfolio.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS. There are several risks in
using futures contracts as hedging devices. First, all participants in the
futures market are subject to initial margin and variation margin requirements.
Rather than making additional variation margin payments, investors may close the
contracts through offsetting transactions which could distort the normal
relationship between the index or security and the futures market. Second, the
margin requirements in the futures market are lower than margin requirements in
the securities market, and as a result the futures market may attract more
speculators than does the securities market. Increased participation by
speculators in the futures market may also cause temporary price distortions.
Because of possible price distortion in the futures market and because of
imperfect correlation between movements in stock indices or securities and
movements in the prices of futures contracts, even a correct forecast of general
market trends may not result in a successful hedging transaction over a very
short period.
Another risk arises because of imperfect correlation between movements in
the value of the futures contracts and movements in the value of securities
subject to the hedge. With respect to stock index futures contracts, the risk of
imperfect correlation increases as the composition of the Portfolio's portfolio
diverges from the securities included in the applicable stock index. It is
possible that the Portfolio might sell stock index futures contracts to hedge
against a decline in the market, only to have the market advance and the value
of securities held by the Portfolio decline. If this occurred, the Portfolio
would lose money on the contracts and also experience a decline in the value of
its portfolio securities. While this could occur, Rochdale believes that over
time the value of the Portfolio will tend to move in the same direction as the
market indices and will attempt to reduce this risk, to the extent possible, by
entering into futures contracts on indices whose movements they believe will
have a significant correlation with movements in the value of the portfolio
securities sought to be hedged.
Successful use of futures contracts by the Portfolio is subject to the
ability of Rochdale to predict correctly movements in the direction of the
market. If the Portfolio has hedged against the possibility of a decline in the
value of the stocks it holds and stock prices increase instead, the Portfolio
would lose part or all of the benefit of the increased value of its security
which it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Portfolio has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may, but will not necessarily, be at
increased prices which reflect the rising market. The Portfolio may have to sell
securities at a time when it may be disadvantageous to do so.
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LIQUIDITY OF FUTURES CONTRACTS. The Portfolio may elect to close some or
all of its contracts prior to expiration. The purpose of making such a move
would be to reduce or eliminate the hedge position held by the Portfolio. The
Portfolio may close its positions by taking opposite positions. Final
determinations of variation margin are then made, additional cash as required is
paid by or to the Portfolio, and the Portfolio realizes a loss or a gain.
Positions in futures contracts may be closed only on an exchange or board of
trade providing a secondary market for such futures contracts. Although the
Portfolio intends to enter into futures contracts only on exchanges or boards of
trade where there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular contract
at any particular time.
In addition, most domestic futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that the price of a
futures contract may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular contract, no trades may be made that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses. In such event, it
will not be possible to close a futures position and, in the event of adverse
price movements, the Portfolio would be required to make daily cash payments of
variation margin. In such circumstances, an increase in the value of the portion
of the portfolio being hedged, if any, may partially or completely offset losses
on the futures contract. However, as described above, there is no guarantee that
the price of the securities being hedged will, in fact, correlate with the price
movements in the futures contract and thus provide an offset to losses on a
futures contract.
Investments in futures contracts by their nature tend to be more short-term
than other securities investments made by the Portfolio. The Portfolio's ability
to make such investments, therefore, may result in an increase in portfolio
activity and thereby may result in the payment of additional transaction costs.
FORWARD CURRENCY CONTRACTS
The Portfolio may enter into forward currency contracts in anticipation of
changes in currency exchange rates. A forward currency contract is an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. For example, the Portfolio might purchase
a particular currency or enter into a forward currency contract to preserve the
U.S. dollar price of securities it intends to or has contracted to purchase.
Alternatively, it might sell a particular currency on either a spot or forward
basis to hedge against an anticipated decline in the dollar value of securities
it intends to or has contracted to sell. Although this strategy could minimize
the risk of loss due to a decline in the value of the hedged currency, it could
also limit any potential gain from an increase in the value of the currency.
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WHEN-ISSUED SECURITIES
The Portfolio may from time to time purchase securities on a "when-issued"
basis. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
for the when-issued securities take place at a later date. Normally, the
settlement date occurs within one month of the purchase; during the period
between purchase and settlement, the Portfolio makes no payment to the issuer
and no interest accrues to the Portfolio. To the extent that assets of the
Portfolio are held in cash pending the settlement of a purchase of securities,
the Portfolio would earn no income. While when-issued securities may be sold
prior to the settlement date, the Portfolio intends to purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time a Portfolio makes the commitment to purchase a
security on a when-issued basis, it will record the transaction and reflect the
value of the security in determining its net asset value. The market value of
the when-issued securities may be more or less than the purchase price. Rochdale
does not believe that the Portfolio's net asset value or income will be
adversely affected by the purchase of securities on a when-issued basis. The
Portfolio will segregate liquid assets equal in value to commitments for
when-issued securities, which reduces but does not eliminate leverage.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by the
Portfolio and (unless otherwise noted) are fundamental and cannot be changed
without the affirmative vote of a majority of the Portfolio's outstanding voting
securities as defined in the 1940 Act. The Portfolio may not:
1. Make loans to others, except (a) through the purchase of debt securities
in accordance with its investment objective and policies, (b) through the
lending of portfolio securities, or (c) to the extent the entry into a
repurchase agreement is deemed to be a loan.
2. (a) Borrow money, except temporarily for extraordinary or emergency
purposes from a bank and then not in excess of 10% of total assets (at the lower
of cost or fair market value; any such borrowing will be made only if
immediately thereafter there is an asset coverage of at least 300% of all
borrowings).
(b) Mortgage, pledge or hypothecate any of its assets except in connection
with any such borrowings.
3. Purchase securities on margin, participate on a joint or joint and
several basis in any securities trading account, or underwrite securities,
except that this restriction does not preclude the Portfolio from obtaining such
short-term credit as may be necessary for the clearance of purchases and sales
of its portfolio securities.
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4. Purchase or sell real estate, or commodities or commodity contracts,
except that a Portfolio may purchase or sell currencies (including forward
currency exchange contracts), futures contracts, and related options.
5. Invest 25% or more of the market value of its assets in the securities
of companies engaged in any one industry, except that this restriction does not
apply to investment in the securities of the U.S. Government, its agencies or
instrumentalities.
6. Issue senior securities, as defined in the 1940 Act except that this
restriction shall not be deemed to prohibit the Portfolio from (a) making any
permitted borrowings, mortgages or pledges, (b) entering into repurchase
transactions, or (c) engaging in options or futures transactions.
7. Invest in any issuer for purposes of exercising control or management.
8. With respect to 75% of its total assets, invest more than 5% of its
total assets in securities of a single issuer or hold more than 10% of the
voting securities of such issuer, except that this restriction does not apply to
investment in the securities of the U.S. Government, its agencies or
instrumentalities.
The Portfolio observes the following policies, which are not deemed
fundamental and which may be changed without shareholder vote. The Portfolio may
not:
9. Invest in securities of other investment companies except as provided
for in the 1940 Act.
10. Invest, in the aggregate, more than 15% of its net assets in securities
with legal or contractual restrictions on resale, securities which are not
readily marketable, and repurchase agreements with more than seven days to
maturity.
11. With respect to fundamental investment restriction 2(a) above, the
Portfolio will not purchase portfolio securities while outstanding borrowings
exceed 5% of its assets.
If a percentage restriction set forth in the prospectus or in this SAI is
adhered to at the time of investment, a subsequent increase or decrease in a
percentage resulting from a change in the values of assets will not constitute a
violation of that restriction, except with respect to borrowing and illiquid
securities, or as otherwise specifically noted.
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DISTRIBUTIONS AND TAX INFORMATION
DISTRIBUTIONS
Dividends from net investment income and distributions from net profits
from the sale of securities are generally made annually. Also, the Portfolio
expects to distribute any undistributed net investment income on or about
December 31 of each year. Any net capital gains realized through the one-year
period ended October 31 of each year will also be distributed by December 31 of
each year.
Each distribution by the Portfolio will be accompanied by a brief
explanation of the form and character of the distribution. In January of each
year the Portfolio will issue to each shareholder a statement of the federal
income tax status of all distributions made during the preceding calendar year.
TAX INFORMATION
The Portfolio will be treated as a separate entity for federal income tax
purposes. The Portfolio expects to qualify to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code (the
"Code"), provided that it complies with all applicable requirements regarding
the source of its income, diversification of its assets and timing of
distributions. It is the Portfolio's policy to distribute to its shareholders
all of its investment company taxable income and any net realized capital gains
for each fiscal year in a manner that complies with the distribution
requirements of the Code, so that the Portfolio will not be subject to any
federal income tax or excise taxes based on net income. To avoid the excise tax,
the Portfolio must also distribute (or be deemed to have distributed) by
December 31 of each calendar year (i) at least 98% of its ordinary income for
such year, (ii) at least 98% of the excess of its realized capital gains over
its realized capital losses for the one-year period ending on October 31 during
such year and (iii) any amounts from the prior calendar year that were not
distributed and on which the Portfolio paid no federal excise tax.
The Portfolio's ordinary income generally consists of interest, dividend
income and income from short sales, less expenses. Net realized capital gains
for a fiscal period are computed by taking into account any capital loss carry
forward of the Portfolio.
The Portfolio may write, purchase, or sell certain option, futures and
foreign currency. Such transactions are subject to special tax rules that may
affect the amount, timing, and character of distributions to shareholders. For
example, such contracts that are "Section 1256 contracts" will be
"marked-to-market" for Federal income tax purposes at the end of each taxable
year (i.e., each contract will be treated as sold for its fair market value on
the last day of the taxable year). In general, unless certain special elections
are made, gain or loss from transactions in such contracts will be 60% long term
and 40% short-term capital gain or loss. Section 1092 of the Code, which applies
to certain "straddles," may also affect the taxation of the Portfolio's
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<PAGE>
transactions in option, futures, and foreign currency contracts. Under Section
1092 of the Code, the Portfolio may be required to postpone recognition for tax
purposes of losses incurred in certain of such transactions.
Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. In the case of corporate
shareholders, a portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent the Portfolio designates the amount
distributed as a qualifying dividend. This designated amount cannot, however,
exceed the aggregate amount of qualifying dividends received by the Portfolio
for its taxable year. The deduction, if any, may be reduced or eliminated if
Portfolio shares held by a corporate investor are treated as debt-financed or
are held for fewer than 46 days.
Any long-term capital gain distributions are taxable to shareholders as
long-term capital gains regardless of the length of time they have held their
shares. Capital gains distributions are not eligible for the dividends-received
deduction referred to in the previous paragraph. Distributions of any ordinary
income and net realized capital gains will be taxable as described above,
whether received in shares or in cash. Shareholders who choose to receive
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share on the reinvestment date. Distributions are generally taxable
when received. However, distributions declared in October, November or December
to shareholders of record on a date in such a month and paid the following
January are taxable as if received on December 31. Distributions are includable
in alternative minimum taxable income in computing a shareholder's liability for
the alternative minimum tax.
Under the Code, the Portfolio will be required to report to the Internal
Revenue Service all distributions of ordinary income and capital gains as well
as gross proceeds from the redemption or exchange of Portfolio shares, except in
the case of exempt shareholders, which includes most corporations. Pursuant to
the backup withholding provisions of the Code, distributions of any taxable
income and capital gains and proceeds from the redemption of the Portfolio's
shares may be subject to withholding of federal income tax at the current
maximum federal tax rate of 31 percent in the case of non-exempt shareholders
who fail to furnish the Portfolio with their taxpayer identification numbers and
with required certifications regarding their status under the federal income tax
law. If the backup withholding provisions are applicable, any such distributions
and proceeds, whether taken in cash or reinvested in additional shares, will be
reduced by the amounts required to be withheld. Corporate and other exempt
shareholders should provide the Portfolio with their taxpayer identification
numbers or certify their exempt status in order to avoid possible erroneous
application of backup withholding. The Portfolio reserves the right to refuse to
open an account for any person failing to certify the person's taxpayer
identification number.
The Portfolio will not be subject to corporate income tax in the State of
Delaware as long as it qualifies as a regulated investment company for federal
income tax purposes. Distributions and the transactions referred to in the
preceding paragraphs may be subject to state and local income taxes, and the tax
treatment thereof may differ from the federal income tax treatment.
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If more than 50% of the value of the Portfolio's total assets at the close
of the taxable consists of stock or securities in foreign corporation, the
Portfolio may elect to pass through to shareholders the right to take the credit
for any foreign taxes paid by the Portfolio. If the Portfolio does not qualify
for or does not make the election, only the Portfolio and not the shareholder
may take the credit.
Generally, a credit for foreign taxes may not exceed the portion of the
shareholder's U.S. federal income tax (determined without reward to the
availability of the credit) attributable to his or her total foreign source
taxable income. For this purpose, the portion of distributions paid by the
Portfolio from foreign source income will be treated as foreign source income.
The Portfolio's gains from the sale of securities will generally be treated as
derived from U.S. sources, and certain currency fluctuation gains and losses,
including fluctuation gains from foreign currency denominated debt securities,
receivables and payables will be treated as derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
"passive income," such as the portion of dividends received from the Portfolio
which qualifies as foreign source income. In addition, the foreign tax credit is
allowed to offset only 90% of the alternative minimum tax imposed on
corporations and individuals. Because of these limitations, shareholders may be
unable to claim a credit for the full amount of their proportionate shares of
foreign income taxes paid by the Portfolio even if the Portfolio is eligible and
makes the election to pass through those credits.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts, and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Portfolio, including the possibility that such a shareholder
may be subject to a U.S. withholding tax at a rate of 30 percent (or at a lower
rate under an applicable income tax treaty) on amounts constituting ordinary
income.
In addition, the foregoing discussion of tax law is based on existing
provisions of the Code, existing and proposed regulations thereunder, and
current administrative rulings and court decisions, all of which are subject to
change. Any such charges could affect the validity of this discussion. The
discussion also represents only a general summary of tax law and practice
currently applicable to the Portfolio and certain shareholders therein, and, as
such, is subject to change. In particular, the consequences of an investment in
shares of the Portfolio under the laws of any state, local or foreign taxing
jurisdictions are not discussed herein. Each prospective investor should consult
his or her own tax advisor to determine the application of the tax law and
practice in his or her own particular circumstances.
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TRUSTEES AND EXECUTIVE OFFICERS
The Trustees of the Trust, who were elected for an indefinite term by the
initial shareholders of the Trust, are responsible for the overall management of
the Trust, including general supervision and review of the investment activities
of the Portfolio. The Trustees, in turn, elect the officers of the Trust, who
are responsible for administering the day-to-day operations of the Trust and its
separate series. The current Trustees and officers, their ages and affiliations
and principal occupations for the past five years are set forth below.
Carl Acebes*, 51, Chairman and Trustee
570 Lexington Ave, New York, NY 10022. Chairman and Chief Investment Officer of
Rochdale.
Maxime C. Baretge, 57, Trustee
Hastings, W13, Barbados, West Indies. President, P.A. Pommares Agencies, S.A.
(luxury goods distribution).
Benedict T. Marino, 55, Trustee
144 Fairmount Rd., Ridgewood, NJ 07450. President, BTM Investment Company
(private investments) since January, 1995; formerly Managing Director,
Donaldson, Lufkin, Jenrette Securities Corp. (securities and investment banking)
from 1983-1995.
Garrett R. D'Alessandro*, CFA, 40, President, Secretary and Treasurer
570 Lexington Ave., New York, NY 10022. President, Chief Executive Officer, and
Director of Research of Rochdale.
* Indicates an "interested person" of the Trust as defined in the 1940 Act.
Set forth below is the annual compensation rate payable to the
Disinterested Trustees. It is anticipated that the Trustees will waive these
fees during the Portfolio's initial fiscal period. Disinterested Trustees will
receive an annual retainer of $1,000 and a fee of $500 for each regularly
scheduled meeting. Disinterested Trustees are also reimbursed for expenses in
connection with each Board meeting attended. No other compensation or retirement
benefits are received by any Trustee or officer from the Portfolio or any other
portfolios of the Trust.
NAME OF TRUSTEE TOTAL COMPENSATION
Maxime C. Baretge $3,000
Benedict T. Marino $3,000
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THE PORTFOLIO'S INVESTMENT ADVISOR
As stated in the Prospectus, investment advisory services are provided to
the Portfolio by Rochdale Investment Management Inc., pursuant to an Investment
Advisory Agreement.
The Investment Advisory Agreement continues in effect after its initial two
year term from year to year so long as such continuation is approved at least
annually by (1) the Board of Trustees of the Trust or the vote of a majority of
the outstanding shares of the Portfolio, and (2) a majority of the Trustees who
are not interested persons of any party to the Agreement, in each case cast in
person at a meeting called for the purpose of voting on such approval. The
Agreement may be terminated at any time, without penalty, by either the
Portfolio or Rochdale upon sixty days' written notice and is automatically
terminated in the event of its assignment as defined in the 1940 Act.
Rochdale has agreed to reduce fees payable to it or reimburse the
Portfolio's operating expenses for a minimum period ending July 31, 1999 to the
extent necessary to limit the Portfolio's ratio of operating expenses to average
net assets to no more than 1.95% annually. Any such reduction of fees or payment
of expenses may be subject to reimbursement by the Portfolio within the
following three years provided that the Portfolio is able to do so and remain in
compliance with applicable expense limitations then in effect. The Trustees may
terminate this expense reimbursement arrangement at any time.
THE PORTFOLIO'S ADMINISTRATOR
The Portfolio has entered into an Administration Agreement with Investment
Company Administration LLC (the "Administrator"). The Administration Agreement
provides that the Administrator will prepare and coordinate reports and other
materials supplied to the Trustees; prepare and/or supervise the preparation and
filing of all securities filings, periodic financial reports, prospectuses,
statements of additional information, tax returns, shareholder reports and other
regulatory reports or filings required of the Portfolio; prepare all required
notice filings necessary to maintain the Portfolio's ability to sell shares in
all states where the Portfolio currently does or intend to do business;
coordinate the preparation, printing and mailing of all materials (e.g., annual
reports) required to be sent to shareholders; coordinate the preparation and
payment of Portfolio-related expenses; monitor and oversee the activities of the
Portfolio's servicing agents (e.g., transfer agent, custodian, fund accountants,
etc.); review and adjust as necessary the Portfolio's daily expense accruals;
and perform such additional services as may be agreed upon by the Portfolio and
the Administrator. For its services, the Administrator will receive a monthly
fee from the Portfolio at the annual rate of 0.10% of average daily net assets
with a minimum annual fee of $40,000.
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THE PORTFOLIO'S DISTRIBUTOR
Rochdale also acts as the Portfolio's principal underwriter in a continuous
public offering of the Portfolio's shares. The Distribution Agreement between
the Portfolio and Rochdale will continue in effect from year to year if approved
at least annually by (i) the Board of Trustees or the vote of a majority of the
outstanding shares of the Portfolio (as defined in the 1940 Act) and (ii) a
majority of the Trustees who are not interested persons of any such party, in
each case cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated without penalty by the
parties thereto upon sixty days' written notice, and is automatically terminated
in the event of its assignment as defined in the 1940 Act.
The Portfolio has adopted a Distribution Plan in accordance with Rule 12b-1
under the 1940 Act. The Plan provides that the Portfolio will pay a fee to the
Distributor at an annual rate of up to 0.25% of the average daily net assets of
the Portfolio. The fee is paid to the Distributor as reimbursement for or in
anticipation of, expenses incurred for distribution related activities. Expenses
permitted to be paid by the Portfolio under its Plan include: preparation,
printing and mailing or prospectuses, shareholder reports such as semi-annual
and annual reports, performance reports and newsletters; sales literature and
other promotional material to prospective investors; direct mail solicitation;
advertising; public relations; compensation of sales personnel, advisors or
other third parties for their assistance with respect to the distribution of the
Portfolio's shares; payments to financial intermediaries for shareholder
support; administrative and accounting services with respect to the shareholders
of the Portfolio; and such other expenses as may be approved from time to time
by the Board of Trustees.
The Plan allows excess distribution expenses to be carried forward by the
Distributor and resubmitted for payment by the Portfolio in a subsequent fiscal
year provided that (i) distribution expenses cannot be carried forward for more
than three years following initial submission; (ii) the Board of Trustees has
made a determination at the time of initial submission that the distribution
expenses are appropriate to be carried forward; and (iii) the Board of Trustees
makes a further determination, at the time any distribution expenses which have
been carried forward are resubmitted for payment, to the effect that payment at
the time is appropriate, consistent with the objectives of the Plan and in the
current best interests of shareholders.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, Rochdale will determine
which securities are to be purchased and sold by the Portfolio and which
broker-dealers are eligible to execute its portfolio transactions. Purchases and
sales of securities in the over-the-counter market will generally be executed
directly with a "market-maker" unless, in the opinion of Rochdale, a better
price and execution can otherwise be obtained by using a broker for the
transaction.
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Purchases of portfolio securities for the Portfolio also may be made
directly from issuers or from underwriters. Where possible, purchase and sale
transactions will be made through dealers (including banks) which specialize in
the types of securities which the Portfolio will be holding, unless better
executions are available elsewhere. Dealers and underwriters usually act as
principal for their own account. Purchases from underwriters will include a
concession paid by the issuer to the underwriter and purchases from dealers will
include the spread between the bid and the asked price. If the execution and
price offered by more than one dealer or underwriter are comparable, the order
may be allocated to a dealer or underwriter that has provided research or other
services as discussed below.
In placing portfolio transactions, Rochdale will use its best efforts to
choose a broker-dealer capable of providing the services necessary to obtain the
most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker-dealer can offer the services needed to obtain the most
favorable price and execution available, consideration may be given to those
broker-dealers which furnish or supply research and statistical information to
Rochdale that it may lawfully and appropriately use in its investment advisory
capacities, as well as provide other services in addition to execution services.
Rochdale considers such information, which is in addition to and not in lieu of
the services required to be performed by it under its Agreement with the
Portfolio, to be useful in varying degrees, but of indeterminable value.
Portfolio transactions may be placed with broker-dealers who sell shares of the
Portfolio subject to rules adopted by the National Association of Securities
Dealers, Inc.
While it is the Portfolio's general policy to seek first to obtain the most
favorable price and execution available, in selecting a broker-dealer to execute
portfolio transactions for the Portfolio, weight may also be given to the
ability of a broker-dealer to furnish brokerage and research services to the
Portfolio, other portfolios of the Trust or to Rochdale, even if the specific
services were not imputed just to the Portfolio and may be useful to Rochdale in
advising other clients. In negotiating commissions with a broker or evaluating
the spread to be paid to a dealer, the Portfolio may therefore pay a higher
commission or spread than would be the case if no weight were given to the
furnishing of these supplemental services, provided that the amount of such
commission or spread has been determined in good faith by Rochdale to be
reasonable in relation to the value of the brokerage and/or research services
provided by such broker-dealer. The standard of reasonableness is to be measured
in light of Rochdale's overall responsibilities to the Portfolio.
Investment decisions for the Portfolio will be made independently from
those of other client accounts or mutual funds managed or advised by Rochdale.
Nevertheless, it is possible that at times identical securities will be
acceptable for both the Portfolio and one or more of such client accounts or
other funds. In such event, the position of the Portfolio and such client
account(s) or other funds in the same issuer may vary and the length of time
that each may choose to hold its investment in the same issuer may likewise
vary. However, to the extent any of these client accounts or other funds seek to
acquire the same security as the Portfolio at the same time, the Portfolio may
not be able to acquire as large a portion of such security as is desired, or may
have to pay a higher price or obtain a lower yield for such security. Similarly,
the Portfolio may not be able to obtain as high a price for, or as large an
execution of, an order to sell any particular security at the same time. If one
or more of such client accounts or other funds simultaneously purchases or sells
the same security that the Portfolio is purchasing or selling, each day's
transactions in such security will be allocated between the Portfolio and all
such client accounts or other funds in a manner deemed equitable by Rochdale,
taking into account the respective sizes of the accounts and the amount being
purchased or sold. It is recognized that in some cases this system could have a
detrimental effect on the price or value of the security insofar as the
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Portfolio is concerned. In other cases, however, it is believed that the ability
of the Portfolio to participate in volume transactions may produce better
executions for the Portfolio.
The Portfolio does not place securities transactions through brokers in
accordance with any formula, nor does it effect securities transactions through
such brokers solely for selling shares of the Portfolio, although the Portfolio
may consider the sale of shares as a factor in allocating brokerage. However, as
stated above, broker-dealers who execute brokerage transactions may effect
purchase of shares of the Portfolio for their customers.
Subject to overall requirements of obtaining the best combination of price,
execution and research services on a particular transaction, the Portfolio may
place eligible portfolio transactions through its affiliated broker-dealer,
Rochdale Securities Corporation, under procedures adopted by the Board of
Trustees pursuant to the 1940 Act and related rules.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The information provided below supplements the information contained in the
Portfolio's Prospectus regarding the purchase and redemption of Portfolio
shares.
HOW TO BUY SHARES
You may purchase shares of the Portfolio from selected securities brokers,
dealers or financial intermediaries. Investors should contact these agents
directly for appropriate instructions, as well as information pertaining to
accounts and any service or transaction fees that may be charged by those
agents. Purchase orders through securities brokers, dealers and other financial
intermediaries are effected at the next-determined net asset value after receipt
of the order by such agent before the Portfolio's daily cutoff time. Orders
received after that time will be purchased at the next-determined net asset
value.
The public offering price of Portfolio shares is the net asset value. The
Portfolio receives the net asset value. Shares are purchased at the public
offering price next determined after the Transfer Agent receives your order in
proper form. In most cases, in order to receive that day's public offering
price, the Transfer Agent must receive your order in proper form before the
close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00
p.m., Eastern time. If you buy shares through your investment representative,
the representative must receive your order before the close of regular trading
on the NYSE to receive that day's public offering price. Orders are in proper
form only after funds are converted to U.S. funds.
If you are considering redeeming, exchanging or transferring shares to
another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Funds may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
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the purchase date. To eliminate the need for safekeeping, the Portfolio will not
issue certificates for your shares unless you request them.
The Trust reserves the right in its sole discretion (i) to suspend the
continued offering of the Portfolio's shares, (ii) to reject purchase orders in
whole or in part when in the judgment of Rochdale such rejection is in the best
interest of the Portfolio, and (iii) to reduce or waive the minimum for initial
and subsequent investments for certain fiduciary accounts, for employees of
Rochdale or under circumstances where certain economies can be achieved in sales
of the Portfolio's shares.
HOW TO SELL SHARES
You can sell your Portfolio shares any day the NYSE is open for regular
trading, either directly to the Portfolio or through your investment
representative.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE
Your investment representative must receive your request before the close
of regular trading on the NYSE to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Transfer Agent, and may charge you for its services.
SIGNATURE GUARANTEES
If you sell shares having a net asset value of $5,000 or greater, a
signature guarantee is required. Certain other transactions also require a
signature guarantee. The Funds may require additional documentation for the sale
of shares by a corporation, partnership, agent or fiduciary, or a surviving
joint owner. Contact Rochdale for details.
Signature guarantees may be obtained from a bank, broker-dealer, credit
union (if authorized under state law), securities exchange or association,
clearing agency or savings institution. A notary public cannot provide a
signature guarantee.
DELIVERY OF REDEMPTION PROCEEDS
Payments to shareholders for shares of the Portfolio redeemed directly from
the Portfolio will be made as promptly as possible but no later than seven days
after receipt by the Portfolio's Transfer Agent of the written request in proper
form, with the appropriate documentation as stated in the Prospectus, except
that the Portfolio may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the NYSE is restricted as
determined by the SEC or the NYSE is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of the Portfolio not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of the Portfolio's shareholders. Under unusual circumstances, the
Portfolio may suspend redemptions, or postpone payment for more than seven days,
but only as authorized by SEC rules.
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At various times, the Portfolio may be requested to redeem shares for which
it has not yet received confirmation of good payment; in this circumstance, the
Portfolio may delay the redemption until payment for the purchase of such shares
has been collected and confirmed to the Portfolio.
The value of shares on redemption or repurchase may be more or less than
the investor's cost, depending upon the market value of the Portfolio's
portfolio securities at the time of redemption or repurchase.
TELEPHONE REDEMPTIONS
Shareholders must have selected telephone transaction privileges on the
Account Application when opening a Portfolio account. Upon receipt of any
instructions or inquiries by telephone from a shareholder or, if held in a joint
account, from either party, or from any person claiming to be the shareholder,
the Portfolio or its agent is authorized, without notifying the shareholder or
joint account parties, to carry out the instructions or to respond to the
inquiries, consistent with the service options chosen by the shareholder or
joint shareholders in his or their latest Account Application or other written
request for services, including purchasing, exchanging or redeeming shares of
the Portfolio and depositing and withdrawing monies from the bank account
specified in the Bank Account Registration section of the shareholder's latest
Account Application or as otherwise properly specified to the Portfolio in
writing.
The Transfer Agent will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, the Portfolio may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that if
such procedures are used, neither the Portfolio nor its agents will be liable
for any loss, liability, cost or expense arising out of any redemption request,
including any fraudulent or unauthorized request.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Transfer Agent by telephone. In this event,
you may wish to submit a written redemption request, as described in the
Prospectus, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
REDEMPTIONS-IN-KIND
The Portfolio has reserved the right to pay the redemption price of its
shares, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
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the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder receives a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Trust has filed an election under SEC Rule 18f-1 committing to pay
in cash all redemptions by a shareholder of record up to amounts specified by
the rule (approximately $250,000).
DETERMINATION OF SHARE PRICE
The NYSE annually announces the days on which it will not be open for
trading. The most recent announcement indicates that it will not be open on the
following days: New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. However, the NYSE may close on days not included in that
announcement.
As noted in the Prospectus, the net asset value and offering price of
shares of the Portfolio will be determined once daily at the close of public
trading on the NYSE, normally 4:00 p.m., Eastern time, on each day the NYSE is
open for trading. It is expected that the NYSE will be closed on Saturdays and
Sundays and on New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas. The Portfolio does not expect to determine the net asset value of its
shares on any day when the NYSE is not open for trading even if there is
sufficient trading in its portfolio securities on such days to materially affect
the net asset value per share. However, the net asset value of Portfolio shares
may also be determined on days the NYSE is closed or at times other than 4:00
p.m. if the Board of Trustees decides it is necessary.
In valuing the Portfolio's assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such day.
Readily marketable securities traded only in an over-the-counter market and not
on NASDAQ are valued at the current or last bid price. If no bid is quoted on
such day, the security is valued by such method as the Board of Trustees of the
Trust shall determine in good faith to reflect the security's fair value. All
other assets of the Portfolio are valued in such manner as the Board of Trustees
in good faith deems appropriate to reflect their fair value.
The net asset value per share of the Portfolio is calculated as follows:
all liabilities incurred or accrued are deducted from the valuation of total
assets, which includes accrued but undistributed income; the resulting net
assets are divided by the number of shares of the Portfolio outstanding at the
time of the valuation; and the result (adjusted to the nearest cent) is the net
asset value per share.
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PERFORMANCE INFORMATION
From time to time, the Portfolio may state its total return in
advertisements and investor communications. Total return may be stated for any
relevant period as specified in the advertisement or communication. Any
statements of total return will be accompanied by information on the Portfolio's
average annual compounded rates of return over the most recent year and the
period from the Portfolio's inception of operations. The Portfolio may also
advertise aggregate and average total return information over different periods
of time. The Portfolio's average annual compounded rate of return is determined
by reference to a hypothetical $1,000 investment that includes capital
appreciation and depreciation for the stated periods, according to the following
formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which the
maximum sales load is deducted
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at
the end of the period
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
The Portfolio's total return may be compared to relevant domestic and
foreign indices, including those published by Lipper Analytical Services, Inc.
From time to time, evaluations of the Portfolio's performance by independent
sources may also be used in advertisements and in information furnished to
present or prospective investors in the Portfolio.
Investors should note that the investment results of the Portfolio will
fluctuate over time, and any presentation of the Portfolio's total return for
any period should not be considered as a representation of what an investment
may earn or what an investor's total return may be in any future period.
GENERAL INFORMATION
Investors in the Portfolio will be informed of the Portfolio's progress
through periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
State Street Bank & Trust Company acts as Custodian of the securities and
other assets of the Portfolio as well as the Portfolio's transfer and
shareholder service agent.
Tait, Weller & Baker, 8 Penn Center Plaza, Philadelphia, PA 19103, is the
independent auditors for the Portfolio.
Paul, Hastings, Janofsky & Walker LLP, 345 California Street, 29th Floor,
San Francisco, California 94104, is legal counsel to the Portfolio.
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APPENDIX
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have
a superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have
a strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
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Registrant incorporates herein by reference Part A of Post-Effective Amendment
No. 1 to Registrant's Registration Statement filed with the Commission on
January 29, 1999.
Registrant incorporates herein by reference Part B of Post-Effective Amendment
No. 1 to Registrant's Registration Statement filed with the Commission on
January 29, 1999.
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