ROCHDALE INVESTMENT TRUST
ROCHDALE MAGNA PORTFOLIO
ROCHDALE ALPHA PORTFOLIO
ROCHDALE ATLAS PORTFOLIO,
SERIES OF ROCHDALE INVESTMENT TRUST
Rochdale Magna Portfolio is a large-cap domestic equity fund.
Rochdale Alpha Portfolio is a small to medium-cap domestic equity fund.
Rochdale Atlas Portfolio is a foreign equity fund.
Each Portfolio seeks to provide investors with long-term capital appreciation.
TABLE OF CONTENTS
An Overview of the Portfolios.............................................. 2
Fees and Expenses.......................................................... 5
Investment Objectives and Principal Investment Strategies.................. 6
Principal Risks of Investing in the Portfolios............................. 9
Investment Advisor......................................................... 10
Shareholder Information.................................................... 11
Pricing of Portfolio Shares................................................ 13
Dividends and Distributions................................................ 14
Tax Consequences........................................................... 14
Distribution Arrangements.................................................. 14
Financial Highlights....................................................... 15
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION DOES NOT
APPROVE OR DISAPPROVE OF THESE SHARES OR DETERMINE WHETHER THE INFORMATION IN
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS A CRIMINAL OFFENSE FOR ANYONE TO
INFORM YOU OTHERWISE.
THE DATE OF THIS PROSPECTUS IS JULY 9, 1999
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AN OVERVIEW OF THE PORTFOLIOS
ROCHDALE MAGNA PORTFOLIO
INVESTMENT GOAL
The Portfolio seeks long-term capital appreciation.
INVESTMENT STRATEGIES
The Portfolio invests primarily in equity securities of larger U.S. companies.
The Portfolio selects from the S&P 500 universe up to 50 attractively valued
companies which Rochdale considers industry leaders across both cyclical and
steady growth industry groups. As an enhanced approach to broad market
investing, the Portfolio expects over the long term to generate incremental
returns greater than the S&P 500, although there can be no assurance that the
Portfolio will do so.
PRINCIPAL RISKS
As with all funds, there is the risk that you could lose money on your
investment in the Portfolio. For example, the following risks could affect the
value of your investment:
* The stock market goes down.
* Interest rates rise, 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.
WHO MAY WANT TO INVEST
The Portfolio may be appropriate for investors who:
* Are pursuing a long-term investment goal.
* Want to create a large company foundation for their equity portfolio.
* Are seeking broad-based industry, sector, and market cycle exposure.
* Are willing to accept swings in the value of their portfolio, commensurate
with that of the broad market, with the offsetting goal of earning higher
long-term total return.
The Portfolio may not be appropriate for investors who:
* Are pursuing a short-term goal.
* Wish to have their equity allocation invested more aggressively in smaller
companies only.
* Need regular income.
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ROCHDALE ALPHA PORTFOLIO
INVESTMENT GOAL
The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests primarily in equity securities of small and medium-size
U.S. companies. Companies are selected through intensive research and due
diligence, 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 broad market, although there can be no
assurance that the Portfolio will do so. Commensurate with these higher expected
returns comes greater volatility.
PRINCIPAL RISKS
As with all funds, there is the risk that you could lose money on your
investment in the Portfolio. For example, the following risks could affect the
value of your investment:
* The stock market goes down.
* Interest rates rise, 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.
* The stocks held by the Portfolio exhibit characteristics typical of small
companies. Smaller companies are typically more volatile and less liquid
than larger companies.
WHO MAY WANT TO INVEST
The Portfolio may be appropriate for investors who:
* Are pursuing a long-term investment goal.
* Want to diversify their equity portfolio and enhance return potential by
investing in small and medium-size companies.
* Are willing to accept 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:
* Are pursuing a short-term goal.
* Need regular income.
* Wish to have their equity allocation invested in large companies only.
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ROCHDALE ATLAS PORTFOLIO
INVESTMENT GOAL
The Portfolio seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests primarily in equity securities of foreign companies,
including those in emerging markets. In selecting securities, Rochdale focuses
on those countries that appear attractively valued relative to other countries.
Rochdale then selects securities to represent each selected country's broad
market. The Portfolio invests a minimum of 40% of its assets in securities of
foreign developed markets. The Portfolio may also invest in options, futures,
and other types of derivatives, as well as country funds, as a way to
efficiently adjust its exposure to various securities, markets, and currencies.
PRINCIPAL RISKS
As with all funds, there is the risk that you could lose money on your
investment in the Portfolio. For example, the following risks could affect the
value of your investment:
* The stock market goes down.
* Interest rates rise, which can result in a decline in the equity market.
* The market undervalues the stocks held by the Portfolio.
* Adverse developments occur in foreign markets. These investments involve
greater risk, including currency fluctuation risk, which may affect the
value of securities held by the Portfolio.
* Derivatives held by the Portfolio vary from Rochdale's expectation of
movements in securities, foreign exchange, and interest rate markets.
WHO MAY WANT TO INVEST
The Portfolio may be appropriate for investors who:
* Are pursuing a long-term investment goal.
* Want to diversify their equity portfolio and enhance return potential by
investing in foreign markets.
* Are seeking access to world economic growth.
* Are willing to accept 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:
* Are pursuing a short-term goal.
* Need regular income.
* Wish to have their equity allocation invested in domestic stocks only.
* Do not want to invest in emerging markets.
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PERFORMANCE
Because the Portfolios have been operating for less than a full calendar year,
no performance data is shown.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolios.
<TABLE>
<CAPTION>
Rochdale Magna Rochdale Alpha Rochdale Atlas
Portfolio Portfolio Portfolio
-------------- -------------- --------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price)..... None None None
Maximum deferred sales charge (load)
(as a percentage of the lower of original
purchase price or redemption proceeds)............ None None None
Redemption Fee (as a percentage of amount
redeemed)*........................................ 2.00% 2.00% 2.00%
ANNUAL FUND OPERATING EXPENSES**
(expenses that are deducted from Portfolio assets)
Management Fees..................................... 1.00% 1.00% 1.00%
Distribution and Service (12b-1) Fees............... 0.25% 0.25% 0.25%
Other Expenses...................................... 1.25% 1.50% 1.75%
----- ----- -----
Total Annual Fund Operating Expenses................ 2.50% 2.75% 3.00%
----- ----- -----
Fee Reduction and/or Expense Reimbursement.......... (0.75)% (0.90)% (1.05)%
----- ----- -----
Net Expenses........................................ 1.75% 1.85% 1.95%
----- ----- -----
</TABLE>
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* The redemption fee applies only to those shares that you have held for
eighteen months or less. The fee is payable to the Portfolios and is
intended to benefit the remaining shareholders by reducing the costs of
short-term trading.
** Other expenses have been estimated for the first full fiscal year of the
Portfolios. Rochdale has contractually agreed to reduce its fees and/or pay
expenses for each Portfolio's total annual operating expenses (excluding
interest and taxes) to the net expense amounts shown. This contract has a
one-year term, renewable annually.
EXAMPLE
This Example is intended to help you compare the costs of investing in the
Portfolios with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a 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. This Example uses net annual
operating expenses for the first year and total operating expenses for three
years. Assuming the Advisor continues to reimburse the Portfolios, your actual
expenses could be lower. Although your actual costs may be higher or lower,
under the assumptions, your costs would be:
Rochdale Magna Rochdale Alpha Rochdale Atlas
Portfolio Portfolio Portfolio
-------------- -------------- --------------
If you redeem your shares:
One Year......................... $378 $388 $398
Three Years...................... $779 $582 $927
If you do not redeem your shares:
One Year......................... $178 $188 $198
Three Years...................... $779 $582 $927
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INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
ROCHDALE MAGNA PORTFOLIO
INVESTMENT OBJECTIVE
The Rochdale Magna Portfolio seeks long-term capital appreciation.
INVESTMENT PHILOSOPHY
Through investment in select large, leading U.S. companies across a wide variety
of industries, the Portfolio attempts to realize attractive long-term
performance relative to the S&P 500 universe as a whole.
The Portfolio takes an enhanced approach to broad market investing. Rochdale
believes that exposure to the most attractive companies within both the cyclical
and steady growth industries provides the best opportunity for long-term capital
appreciation in the large company asset class. In the shorter term, the market's
preference for either industry group fluctuates. Longer-term investors require
effective exposure to a wide variety of economic sectors in both cyclical and
steady growth industry groups.
INVESTMENT STRATEGY
Companies are considered cyclical or steady growth based on specific industry
characteristics. Cyclical growth companies experience greater fluctuations
related to the economy, while steady growth companies are less influenced by
economic cycles.
Rochdale employs two distinct proprietary fundamental methodologies to select
companies from the cyclical and steady growth industry groups. The fundamental
measures predictive of superior performing companies differ between these
industry groups. Steady growth companies are evaluated on earnings growth, price
momentum, and analyst sentiment. Cyclical growth companies are evaluated based
on their ability to generate cash flow growth and their price momentum, which
helps identify those companies most likely to achieve earlier market recognition
for their growth.
Rochdale's sensitivity to the different predictors between the cyclical and
steady growth industries leads the Portfolio to invest in only the most
attractive companies from these industry groups. The leading companies that are
selected from these two universes are screened further for their appropriateness
in light of expected economic and market conditions. The companies selected are
then subject to the process of portfolio optimization, a sophisticated technique
used to achieve broad economic sector diversification and managed variability in
line with the characteristics of the S&P 500.
The Portfolio invests primarily in equity securities of U.S. companies that have
a market capitalization in excess of $1 billion. The companies selected for
investment generally will have characteristics similar to companies included in
the S&P 500 Index universe. Investments in common stock are emphasized, but the
Portfolio may also buy other types of equity securities, including preferred
stocks, convertible securities, or warrants.
Although not principal investment strategies, the Portfolio may also invest in
smaller companies and in foreign securities, including those of emerging
markets, as well as sell securities short, use derivative instruments and
related investment techniques to hedge equity exposure, for investment gain, or
for other purposes considered appropriate by Rochdale to meet the Portfolio's
investment goal. Although the Portfolio is diversified, at times, as a result of
the Portfolio's strategy or due to price volatility, the Portfolio may have more
than 5% of its assets invested in a single issuer.
Under normal conditions, the Portfolio will stay fully invested in accordance
with its investment strategy. 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.
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Rochdale continuously monitors the fundamentals and business performance of each
company and will replace a company whose fundamentals change materially with a
more attractive company. Under normal market conditions, portfolio turnover is
not expected to exceed 50%. This should result in the realization and
distribution to shareholders of lower capital gains, which would be considered
tax efficient. Less frequent trading also leads to lower transaction costs,
which could contribute to performance.
ROCHDALE ALPHA PORTFOLIO
INVESTMENT OBJECTIVE
The Rochdale Alpha Portfolio seeks long-term capital appreciation.
INVESTMENT PHILOSOPHY
Through investment in select small-and medium-size companies, the Portfolio
attempts to capture the higher returns associated with faster- growing, smaller
companies in prospering economic sectors.
Long-term investment success in small and medium-size companies requires
intensive research and due diligence, as well as investor patience to realize a
company's growth potential. Rochdale's approach to small and medium-size company
research involves comprehensive analysis of each company, including earnings
growth, management interviews, and valuation.
INVESTMENT STRATEGY
Rochdale uses information from a variety of sources - including financial
statements, industry studies, and discussions with company management and their
competitors, suppliers, and customers - to assess the prospects for growth in
revenue and earnings, as well as potential stock price appreciation.
Each company selected for investment is subject to Rochdale's proprietary
research process. Rochdale evaluates key company and industry attributes within
eight categories, including business dynamics, operational practices, earnings
growth, operating environment, revenue growth, balance sheet, management
quality, and valuation. For those companies that meet Rochdale's fundamental
criteria, Rochdale develops proprietary financial models to determine the
valuation level at which it considers the stock attractively priced. The
qualities that Rochdale looks for include:
* fundamentally strong business
* sustainable competitive advantage
* above-average industry growth
* experienced management
* growing earnings
* attractive valuation
The Portfolio invests 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. Although not principal
investment strategies, the Portfolio may also invest in larger companies and in
foreign securities, including those of emerging markets, as well as sell
securities short, use derivative instruments and related investment techniques
to hedge equity exposure, for investment gain, or for other purposes considered
appropriate by Rochdale to meet the Portfolio's investment goal. Although the
Portfolio is diversified, at times, as a result of the Portfolio's strategy or
due to price volatility, the Portfolio may have more than 5% of its assets
invested in a single issuer.
Under normal conditions, the Portfolio will stay fully invested in accordance
with its investment strategy. 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.
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Once purchased, companies are monitored for changes in their fundamentals and in
industry conditions. The Portfolio will continue to own a company as long as its
revenue and earnings growth continue in line with expectations, valuation is
attractive, and industry trends remain favorable. It is anticipated that the
Portfolio's turnover will not exceed 150%, consistent with similar smaller stock
investment strategies. A higher portfolio turnover rate (100% or more) can
result in higher transaction costs and higher tax liability.
ROCHDALE ATLAS PORTFOLIO
INVESTMENT OBJECTIVE
The Rochdale Atlas Portfolio seeks long-term capital appreciation.
INVESTMENT PHILOSOPHY
Through investment in blue-chip foreign companies of select developed and
emerging foreign markets, the Portfolio attempts to achieve long-term
performance in excess of broad world markets.
The Portfolio has a unique approach to investing internationally. Rochdale's
research focuses on country selection, which empirical studies demonstrate is
the key to earning competitive international returns. The Portfolio invests in
leading companies selected from only those foreign developed and emerging
markets Rochdale identifies as most attractive, based on measures of valuation
and economic growth. Such selectivity creates a greater potential for higher
returns as compared to investing across many markets.
INVESTMENT STRATEGY
Rochdale uses its proprietary country analysis methodology, analyzing each
country's aggregate macroeconomic, company fundamental, and market sentiment
measures, to determine which foreign markets are likely to generate the highest
returns. The foreign markets most worthy of investment have:
* higher forecasted GDP
* lower valuation relative to growth
* higher equity risk premiums
* higher current account relative to GDP
* positive analyst sentiment
After identifying those countries worthy of investment, Rochdale uses a global
equity optimization process to invest in each country's leading companies across
the industries driving economic growth. This sophisticated process enables
Rochdale to develop a portfolio that captures substantially all of the combined
top-ranked countries' stock market movements with only a few companies per
selected country. The Portfolio invests in the blue-chip companies in each
country. Each company must meet Rochdale's standards for market and industry
representation, financial condition, credit rating, and liquidity. A minimum of
40% is invested in developed markets.
The Portfolio invests primarily in equity securities of foreign-domiciled,
publicly traded companies worldwide. Equity securities include common stocks,
Depositary Receipts, warrants, convertible bonds, debentures, and convertible
preferred stocks. In general, countries and companies eligible for investment
are those included in the Dow Jones World Index, excluding the U.S.
Depending on the circumstances and opportunities that might arise, and given the
volatile nature of foreign markets, the Portfolio may use country funds,
futures, derivative instruments, or other securities as deemed appropriate by
Rochdale in seeking to maximize the efficiency of its country selection process
or hedge equity or currency exposure. An investment in an underlying mutual fund
will involve payment by the Portfolio of its pro rata share of advisory and
administrative fees charged by such country fund. Although not a principal
investment strategy, the Portfolio may also sell securities short. Although the
Portfolio is diversified, at times, as a result of the Portfolio's strategy or
due to price volatility, the Portfolio may have more than 5% of its assets
invested in a single issuer.
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The Portfolio intends to be fully invested in accordance with its investment
strategy. 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
The Portfolio sells a holding of another company provides more suitable country
representation or if a country is no longer an attractive investment. Due to the
longer-term nature of the country and stock selection criteria, the Portfolio
expects to have a turnover rate of less than 100%. A lower portfolio turnover
rate should result in the realization and distribution to shareholders of lower
capital gains and lower resultant tax liability. Less frequent trading also
leads to lower transaction costs, which could contribute to performance.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIOS
The principal risks of investing in the Portfolios that may adversely affect a
Portfolio's net asset value or total return are discussed above in "An Overview
of the Portfolios." 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.
SMALL AND MEDIUM-SIZE COMPANIES RISK. Although each of the Portfolios may invest
in the securities of small and medium-size companies, the Rochdale Alpha
Portfolio will concentrate its investments in these types of securities.
Investing in securities of small and mid-capitalization companies involves
greater risk than investing in larger companies, because small companies can be
subject to more abrupt or erratic shares price changes than can larger
companies. Smaller companies typically have more limited product lines, markets,
or financial resources than larger companies, and their management may be
dependent on a limited number of key individuals. Small 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,
small company stocks, and therefore a Portfolio, may fluctuate significantly
more in value than will larger company stocks and mutual funds that focus on
them.
FOREIGN SECURITIES RISK. Although each of the Portfolios may invest in foreign
securities, the Rochdale Atlas Portfolio will concentrate its investments in the
securities of foreign companies. 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 in emerging markets.
DERIVATIVES RISK. The use of derivative instruments involves risks different
from, or greater than, the risks associated with investing directly in
securities and other more traditional investments. Derivatives are subject to a
number of risks described elsewhere in this section, including market risk,
liquidity risk, and the credit risk of the counterparty to the derivatives
contract. Since their value is calculated and derived from the value of other
assets, instruments or references, there is greater risk that derivatives will
be improperly valued. Derivatives also involve the risk that changes in the
value of the derivative may not correlate perfectly with relevant assets, rates
or indices they are designed to hedge or to closely track.
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Specific risks associated with the use of derivatives include:
CREDIT AND COUNTERPARTY RISK. If the issuer, or the counterparty to, the
derivative does not make timely principal, interest or other payment when due,
or otherwise fulfill its obligations, a Portfolio could lose money on its
investment. A Portfolio is exposed to credit risk, especially when it uses
over-the-counter derivatives (such as swap contracts) or it engages to a
significant extent in the lending of Portfolio securities or use of repurchase
agreements.
LIQUIDITY RISK. Liquidity risk exists when particular investments are difficult
to purchase or sell due to a limited market or to legal restrictions, such that
a Portfolio may be prevented from selling particular securities at the price at
which a Portfolio values them.
MANAGEMENT RISK. The Advisor may fail to use derivatives effectively. For
example, the Advisor may choose to hedge or not to hedge at inopportune times.
This will adversely affect the Portfolios' performance.
YEAR 2000 RISK. The Portfolios 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 "Y2K Problem." This situation may negatively affect the
companies in which the Portfolios invest and, by extension, the value of the
Portfolios' shares. Although the Portfolios' service providers are taking steps
to address this issue, there may still be some risk of adverse effects. To the
extent the Portfolios invest in foreign companies, there will be a greater
degree of Y2K Problem risk, because foreign countries are not as advanced in
dealing with this issue as is the U.S.
INVESTMENT ADVISOR
Rochdale Investment Management Inc. is the investment advisor to the Portfolios.
Rochdale is located at 570 Lexington Avenue, New York, NY 10022-6837. Rochdale
currently manages assets of more than $700 million for individual and
institutional investors. Rochdale provides advice on buying and selling
securities. Rochdale also furnishes the Portfolios with office space and certain
administrative services and provides most of the personnel needed by the
Portfolios. For its services, each Portfolio pays Rochdale a monthly management
fee based upon the average daily net assets of the Portfolio at the rate of
1.00% annually.
PORTFOLIO MANAGERS
Mr. Carl Acebes and Mr. Garrett R. D'Alessandro are responsible for the
day-to-day management of the Portfolios. 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, and is a Chartered
Financial Analyst. Mr. D'Alessandro joined Rochdale in 1986.
PORTFOLIO EXPENSES
Each Portfolio is responsible for its own operating expenses. Rochdale has
contractually agreed to reduce its fees and/or pay expenses of the Portfolios to
ensure that each Portfolio's aggregate annual operating expenses (excluding
interest and tax expenses) will not exceed the limits set forth in the Expense
Table. Any reduction in advisory fees or payment of expenses made by Rochdale
are subject to reimbursement by the Portfolio if requested by Rochdale in
subsequent fiscal years. This reimbursement may be requested by Rochdale if the
aggregate amount actually paid by a Portfolio toward operating expenses for such
fiscal year (taking into account the reimbursements) does not exceed the
applicable limitation on Portfolio expenses. Rochdale is permitted to be
reimbursed for fee reductions and/or expense payments made in the prior three
fiscal years. (After startup, each Portfolio is permitted to look for longer
periods of four and five years.) Any such reimbursement will be reviewed by the
Trustees. Each Portfolio must pay its current ordinary operating expenses before
Rochdale is entitled to any reimbursement of fees and/or expenses.
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SHAREHOLDER INFORMATION
HOW TO BUY SHARES
You may open a Portfolio account with $10,000. You may make add to your account
at any time with investments of at least $5,000. The minimum investment
requirements may be waived from time to time at the Advisor's discretion.
INVESTMENT ADVISORY CLIENTS OF ROCHDALE SHOULD CONTACT THEIR FINANCIAL ADVISOR
OR ROCHDALE DIRECTLY FOR INVESTMENT INSTRUCTIONS.
There are several ways to purchase shares of the Portfolios. An Application
Form, which accompanies this Prospectus, is used if you send money directly to
the Portfolios by mail or by wire. To open an account by wire, to open a
retirement plan account, or to purchase shares by overnight mail, or 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
Portfolios 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 a Portfolio, complete the Application Form and mail it with a
check (made payable to Rochdale Magna Portfolio, Rochdale Alpha Portfolio, or
Rochdale Atlas Portfolio) to the following address:
Rochdale Magna Portfolio or
Rochdale Alpha Portfolio or
Rochdale Atlas Portfolio
State Street Bank
P.O. Box 1978
Boston, MA 02105-1978
If you wish to send your check via an overnight delivery service, you should
call Rochdale at (212) 702-3500 for instructions.
You may add to your account by mailing the stub attached to your account
statement, together with your check made payable to Rochdale Magna Portfolio,
Rochdale Alpha Portfolio, or Rochdale Atlas 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 Portfolios 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 Portfolios. If you are making an initial investment in
a Portfolio, you should call (212) 702-3500 between 9:00 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 should notify the Portfolios before making any wire transfer. You should
then ask your bank to wire money to:
State Street Bank
ABA Routing Number: 01 1000028, for credit to
Rochdale Alpha Portfolio, DDA #58407768 or
Rochdale Atlas Portfolio, DDA #58407768 or
Rochdale Magna Portfolio, DDA #58407768
for further credit to [your name and account number]
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 Portfolios.
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You may buy and sell shares of the Portfolios through certain brokers (and their
agents) that have made arrangements with the Portfolios to sell their 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 Portfolios' 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 Portfolios 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 Portfolios'
prospectus.
AUTOMATIC INVESTMENT PLAN
For your convenience, the Portfolios offer an Automatic Investment Plan. Under
this Plan, after your initial investment, you authorize the Portfolio to
withdraw from your personal checking account each month an amount that you wish
to invest, which must be at least $1,000. If you wish to enroll in this Plan,
please contact the Distributor for an application. The Portfolios 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.
RETIREMENT PLANS
The Portfolios offer Individual Retirement Account ("IRA") and Roth IRA plans.
You may obtain information about opening an IRA account by contacting the
Distributor. If you wish to open another type of retirement plan, please contact
your securities dealer.
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 any other Portfolio offered
by this Prospectus on any day the Portfolios and the NYSE are open for business.
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 2.00% redemption
fee.
You may exchange your shares by sending a written request to the Portfolios. 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 in the account registration.
If your account has telephone privileges, you may also exchange your shares by
calling (212) 702-3500 between the hours of 9:00 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
Portfolios 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 Portfolios impose a redemption fee in order to reduce
the transaction costs and tax effects of a short-term investment in the
Portfolios.
12
<PAGE>
REDEMPTIONS BY MAIL
You may redeem your shares by sending a written request to the Portfolios. 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 Portfolios at the following address:
Rochdale Magna Portfolio or
Rochdale Alpha Portfolio or
Rochdale Atlas Portfolio
State Street Bank
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 9:00 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.
When you establish telephone privileges, you are authorizing the Portfolios and
their 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 Portfolios and the
Transfer Agent may 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 Portfolios 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 request telephone redemption privileges after your account is opened by
contacting the Distributor for an authorization form. You will be required to
submit the completed authorization form with a signature guarantee.
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.
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 Portfolios may delay payment of your redemption
proceeds up to 15 days from the date of purchase or until your check has
cleared, whichever occurs first.
Each Portfolio may redeem the shares in your account if the value of your
account is less than $5,000 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
$5,000 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 $5,000 before the Portfolio takes any action.
13
<PAGE>
The Portfolios have 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
Portfolios would do so except in unusual circumstances.
PRICING OF PORTFOLIO SHARES
The price of each Portfolio's 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 by the Transfer Agent with complete information and meeting all the
requirements discussed in this Prospectus.
The net asset value of each 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 Portfolios will make distributions of dividends and capital gains, if any,
annually, usually on or about December 31. Distributions are automatically
reinvested in shares of the Portfolio making the distribution. 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 Portfolios have adopted a distribution plan under Rule 12b-1. This rule
allows the Portfolios to pay distribution fees for the sale and distribution of
their shares and for services provided to their shareholders. The annual
distribution and service fee is an annual rate of 0.25% of each Portfolio's
average daily net assets, which is payable to the Advisor, as Distributor.
Because these fees are paid out of a 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 Portfolios' first year of operations.
14
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below show the performance of the Rochdale Magna Portfolio and the
Rochdale Atlas Portfolio during their past fiscal period. The Rochdale Alpha
Portfolio commenced operations on June 1, 1999, and, accordingly, has no
financial information to report. "Total return" shows much how much your
investment in a Portfolio would have increased or decreased during that period,
assuming you have reinvested all dividends and distributions. This information
has been audited by Tait, Weller & Baker, Independent Certified Public
Accountants. Their reports and the Portfolios' financial statements are included
in the Annual Reports, which are available upon request.
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
ROCHDALE ROCHDALE
MAGNA ATLAS
PORTFOLIO PORTFOLIO
--------- ---------
June 29, 1998* through March 31, 1999
-------------------------------------
Net asset value, beginning of period.................... $25.00 $25.00
------ ------
Income from investment operations:
Net investment loss................................... (0.02) --
Net realized and unrealized gain...................... 4.30 5.52
------ ------
Total from investment operations........................ 4.30 5.52
------ ------
Net asset value, end of period.......................... $29.28 $30.52
====== ======
Total return............................................ 17.12%** 20.08%***
Ratios/supplemental data:
Net assets, end of period (millions).................. $ 8.1 $ 10.1
Portfolio turnover rate................................. 47.81% 22.90%
Ratio of expenses to average net assets:
Before expense reimbursement and waivers.............. 6.19%++ 7.79%++
After expense reimbursement and waivers............... 1.60%++ 1.61%++
Ratio of net investment loss to average net assets:
Before expense reimbursement and waivers.............. (4.88)++ (6.26%)++
After expense reimbursement and waivers............... (0.29%)++ (0.08%)++
* Inception of Portfolios.
** Commencement of investment operations, October 23, 1998.
*** Commencement of investment operations, October 2, 1998.
++ Annualized.
15
<PAGE>
ROCHDALE MAGNA PORTFOLIO
ROCHDALE ALPHA PORTFOLIO
ROCHDALE ATLAS PORTFOLIO,
SERIES OF ROCHDALE INVESTMENT TRUST (THE "TRUST")
For investors who want more information about the Portfolios, the following
documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Portfolios'
investments is available in the Portfolios' annual and semi-annual reports to
shareholders. In each Portfolio's annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Portfolio's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Portfolios and is incorporated by reference into this
Prospectus.
You can get free copies of the Portfolios reports and SAI, request other
information, and discuss your questions about the Portfolios, by contacting the
Portfolios at:
570 Lexington Avenue
New York, NY 10022-6837
Telephone: 212-702-3500 (Call collect)
or by visiting our website at www.rochdale.com
You can review and copy information about the Portfolios, including the
Portfolios' reports and 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
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
(The Trust's SEC Investment
Company Act file number is 811-8685)
<PAGE>
ADVISOR
Rochdale Investment Management Inc.
570 Lexington Avenue
New York, New York 10022-6837
(212) 702-3500
--
DISTRIBUTOR
Rochdale Investment Management Inc.
570 Lexington Avenue
New York, New York 10022-6837
(212) 702-3500
--
CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust
1776 Heritage Drive
North Quincy, Massachusetts 02171
--
AUDITORS
Tait, Weller & Baker
8 Penn Center, Suite 800
Philadelphia, Pennsylvania 19103
--
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, California 94104
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
JULY 9, 1999
ROCHDALE MAGNA PORTFOLIO
ROCHDALE ALPHA PORTFOLIO
ROCHDALE ATLAS PORTFOLIO,
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 July 9, 1999, as may be
revised, of the Rochdale Magna Portfolio, the Rochdale Alpha Portfolio, and the
Rochdale Atlas Portfolio (the "Portfolios"), series of Rochdale Investment Trust
(the "Trust"). Rochdale Investment Management Inc. ("Rochdale") is investment
advisor to the Portfolios. A copy of the Portfolios' 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-17
Distributions and Tax Information....................................... B-18
Trustees and Executive Officers......................................... B-22
The Portfolios' Investment Advisor...................................... B-23
The Portfolios' Administrator........................................... B-23
The Portfolios' Distributor............................................. B-24
Execution of Portfolio Transactions..................................... B-25
Additional Purchase and Redemption Information.......................... B-27
Determination of Share Price............................................ B-29
Performance Information................................................. B-30
General Information..................................................... B-31
Financial Statements.................................................... B-31
Appendix A.............................................................. B-32
Appendix B.............................................................. B-34
B-1
<PAGE>
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 Magna Portfolio, the Rochdale Alpha
Portfolio, and the Rochdale Atlas 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
Portfolios. The Prospectus of the Portfolios 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
Each of the Portfolios has the investment objective of long-term capital
appreciation. Each Portfolio is diversified, which under applicable federal law
means that as to 75% of its total assets, not more than 5% may be invested in
the securities of a single issuer and that it may hold no more than
10%
of the voting securities of a single issuer. The following discussion
supplements the discussion of the Portfolios' investment objective and policies
as set forth in the Prospectus. There can be no assurance that the objective of
any Portfolio will be attained.
CONVERTIBLE SECURITIES AND WARRANTS
The Portfolios 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 a Portfolio's entire
investment therein).
B-2
<PAGE>
INVESTMENT COMPANIES
Each Portfolio may under certain circumstances invest a portion of its assets in
other investment companies, including money market funds. In addition to a
Portfolio's advisory fee, an investment in an underlying mutual fund will
involve payment by a Portfolio of its pro rata share of advisory and
administrative fees charged by such fund.
SECURITIES LOANS
Each 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 a Portfolio's
total assets. In connection with such loans, a 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. A Portfolio can
increase its income through the investment of such collateral. A 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 a 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. A 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
Each Portfolio may seek to hedge investments or realize additional gains through
short sales. Each Portfolio may make short sales, which are transactions in
which a 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. A 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 a 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, a 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. A Portfolio also will incur transaction costs
in effecting short sales.
B-3
<PAGE>
A 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. A 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 a 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 a Portfolio's net assets.
Whenever a 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
Each 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 Portfolios, under the supervision of the Trust's
Board of Trustees, to ensure compliance with the Portfolios' 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 a 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. A 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
to certain institutions may not reflect the actual liquidity of such
B-4
<PAGE>
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
Each 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 a Portfolio, or the purchase and repurchase prices
may be the same, with interest at a stated rate due to a Portfolio together with
the repurchase price on repurchase. In either case, the income to a 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. Each Portfolio will generally enter into
repurchase agreements of short duration, from overnight to one week, although
the underlying securities generally have longer maturities. Each 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 a 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 a
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, a 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 a 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, a 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 a 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, a 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 equal to at
least 100% of the amount invested by the Portfolio plus accrued interest, and
the Portfolio
B-5
<PAGE>
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), a 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 a
Portfolio will be unsuccessful in seeking to impose on the seller a contractual
obligation to deliver additional securities.
WHEN-ISSUED SECURITIES
Each 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, a Portfolio makes no payment to the issuer and
no interest accrues to the Portfolio. To the extent that assets of a 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, a 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 a Portfolio's net asset value or income will be adversely
affected by the purchase of securities on a when-issued basis. A Portfolio will
segregate liquid assets equal in value to commitments for when-issued
securities, which reduces but does not eliminate leverage.
FIXED-INCOME SECURITIES
Although equity securities are the primary focus for the Portfolios, they may
also hold fixed-income securities when Rochdale believes that opportunities for
long-term capital growth exist. The Portfolio's investments in corporate
fixed-income securities of domestic and foreign issuers are limited to corporate
debt securities (bonds, debentures, notes, and other similar corporate debt
instruments). Each Portfolio may invest up 25% of its assets in securities rated
B or better by Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P"), or, if unrated, are in Rochdale's view, of comparable
quality.
The market value of debt securities is influenced significantly by changes in
the level of interest rates. Generally, as interest rates rise, the market value
of debt securities decreases. Conversely, as interest rates fall, the market
value of debt securities increases. Factors which could result in a rise in
interest rates, and a decrease in market value of debt securities, include an
increase in inflation or inflation expectations, an increase in the rate of U.S.
economic growth, an expansion in the Federal budget deficit, or an increase in
the price of commodities, such as oil. In addition, the market value of debt
securities is influenced by perceptions of the credit risks associated with such
securities.
B-6
<PAGE>
Credit risk is the risk that adverse changes in economic conditions can affect
an issuer's ability to pay principal and interest. Securities rated B by Moody's
or S&P, commonly referred to as "junk bonds," are speculative and generally
involve a higher risk of loss of principal and income than higher-rated
securities. See Appendix A for a description of corporate bond ratings.
SHORT-TERM INVESTMENTS
Each Portfolio may invest in any of the following securities and instruments:
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. Each 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 a 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, each
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. Each 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 S&P, "Prime-1" or "Prime-2" by Moody's, or
similarly rated by another nationally recognized statistical rating organization
or, if unrated, will be determined by Rochdale to be of comparable quality. See
Appendix B for a description of commercial paper ratings.
FOREIGN INVESTMENTS AND CURRENCIES
The Portfolios may invest in securities of foreign issuers that are not publicly
traded in the United States. The Portfolios may also invest in Depositary
Receipts, purchase and sell foreign currency
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on a spot basis, and enter into forward currency contracts (see "Forward
Currency Contracts," below).
DEPOSITARY RECEIPTS. The Portfolios 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 Portfolios 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.
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 Portfolios 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 a
Portfolio's assets denominated in that currency. Such changes will also affect a
Portfolio's income. The value of a Portfolio's assets may also be affected
significantly by currency restrictions and exchange control regulations enacted
from time to time.
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 a
Portfolio's ability to value its portfolio holdings in foreign securities, and
could increase the costs associated with a Portfolio's operations. The
Portfolios and Rochdale are working with providers of services to the Portfolios
in the areas of clearance and settlement of trade to avoid any material impact
on the Portfolios due to the
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Euro conversion; there can be no assurance, however, that the steps taken will
be sufficient to avoid any adverse impact on a Portfolio.
MARKET CHARACTERISTICS. Rochdale expects that many foreign securities in which a
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.
Though growing, they usually have substantially less volume than U.S. markets,
and a 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 a 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 a 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 a 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 a 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 a 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.
OPTIONS AND FUTURES STRATEGIES
Each 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, a 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
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approaches. The Portfolios will not engage in such transactions for the purposes
of speculation or leverage.
OPTIONS ON SECURITIES. To hedge against adverse market shifts, a Portfolio may
purchase put and call options on securities held in its portfolio. In addition,
a 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 a 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 a Portfolio will not exceed 25% of the Portfolio's total assets. A
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.
Each 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, a Portfolio has the right to sell the securities underlying the option,
and as the holder of a call option, a 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. A 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, a Portfolio would sell an option of the same series
as the one it has purchased.
A 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, a 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. A 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, a 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, a 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, a Portfolio seeks to benefit from a decline in the
market price of the underlying security, whereas in purchasing a call option, a
Portfolio seeks to benefit from an increase in the market price of the
underlying security. If an option purchased is not sold or
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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, a 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 a 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 a
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, a 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 a 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
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.
Each Portfolio may purchase and write OTC put and call options in negotiated
transactions. The staff of the SEC 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 a Portfolio's 15% limitation on illiquid securities. However, the
staff has eased its position somewhat in certain limited circumstances. A
Portfolio will attempt to enter into contracts with certain dealers with which
it writes OTC options. Each such contract will provide that a 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
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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 a 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, a Portfolio will count as illiquid
only the initial formula price minus the option's intrinsic value.
Each 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 a Portfolio enters into repurchase agreements.
STOCK INDEX OPTIONS. In seeking to hedge all or a portion of its investment, a
Portfolio may purchase and write put and call options on stock indices listed on
securities exchanges.
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.
When a 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 a 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 a Portfolio to
engage in closing purchase transactions with respect to stock index options
depends on the existence of a liquid secondary market. Although a 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 a 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 a 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 a 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
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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 a 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, a 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, a 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 each
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. Each 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 a Portfolio is to hedge
against fluctuations in the value of its portfolio without actually buying or
selling securities. The futures contracts in which a Portfolio may invest have
been developed by and are traded on national commodity exchanges. A 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.
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 a Portfolio from
fluctuations in value of its investment securities without necessarily buying or
selling the securities. Because the value of a 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 a Portfolio upon trading a futures contract. Instead, upon entering
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into a futures contract, a Portfolio is required to deposit an amount of cash or
U.S. Government securities generally equal to 10% or less of the contract value.
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 a 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, a 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 a Portfolio is secured
by the Portfolio's ownership of underlying securities. A 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.
Each 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.
Each Portfolio intends to comply with CFTC regulations and avoid "commodity pool
operator" or "commodity trading advisor" status. These regulations require that
a 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 a 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.
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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 a Portfolio's portfolio
diverges from the securities included in the applicable stock index. It is
possible that a 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, a 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 a 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 a Portfolio is subject to the ability of
Rochdale to predict correctly movements in the direction of the market. If a
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 a 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. A Portfolio may have to sell securities at a time when it may be
disadvantageous to do so.
LIQUIDITY OF FUTURES CONTRACTS. Each 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 a Portfolio. A 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 a
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 each 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, a Portfolio would be required to make daily cash payments of
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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 a Portfolio. A 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
Each 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, a 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.
SWAP CONTRACTS
TYPES OF SWAPS. The Portfolios may use the following: (i) Long equity swap
contracts: where a Portfolio pays a fixed rate plus the negative performance, if
any, and receives the positive performance, if any, of an index or basket of
securities; (ii) Short equity swap contracts: where a Portfolio receives a fixed
rate plus the negative performance, if any, and pays the positive performance of
an index or basket of securities; (iii) Contracts for differences: equity swaps
that contain both a long and short equity component; (iv) Interest rate swap
contracts: where a Portfolio exchanges fixed interest payments for floating
payments or vice versa; (v) Currency swap contracts: where a Portfolio exchanges
one currency for another at a forward exchange rate; and (vi) other similar
contractual agreements to exchange credit obligations.
USES. The Portfolios may use swaps for (i) various reasons, including, but not
limited to traditional hedging purposes - short equity swap contracts used to
hedge against an equity risk already present in a Portfolio; (ii) anticipatory
purchase hedging purposes - where a Portfolio that anticipates significant cash
purchase transactions enters into long equity swap contracts to obtain market
exposure until such a time where direct investment becomes possible or can be
made efficiently; (iii) anticipatory redemption hedging purposes - where a
Portfolio that expects significant demand for redemptions enters into short
equity swap contracts, to allow it to dispose of securities in a more orderly
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fashion; (iv) direct investment - where a Portfolio purchases (particularly long
equity swap contracts in place of investing directly in securities; (v) risk
management - where a Portfolio uses equity swap contracts to adjust the weight
of the Portfolio to a level the Advisor feels is the optimal exposure to
individual markets, sectors and equities or where the Portfolio uses currency
swap contracts to capture inefficiencies in foreign exchange rates or to
minimize exposure to the purchase price of a foreign security held by the
Portfolio or where a Portfolio uses interest rate swap contracts to exchange a
disadvantageous interest rate (whether floating or fixed) for a different
interest rate.
LIMITATIONS ON USE. There is generally no limit on the use of swaps except to
the extent such swaps are subject to the liquidity requirement of a Portfolio.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by each
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.
A Portfolio may not:
1. Make loans to others, except (a) through the purchase of debt securities in
accordance with its investment objectives 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 and no
investments may be made while any borrowings are in excess of 5% of total
assets).
(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 a Portfolio from obtaining such short-term
credit as may be necessary for the clearance of purchases and sales
of its portfolio securities.
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.
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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 a 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.
Each Portfolio observes the following policies, which are not deemed fundamental
and which may be changed without shareholder vote. A 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.
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.
DISTRIBUTIONS AND TAX INFORMATION
DISTRIBUTIONS
Dividends from net investment income and distributions from net profits from the
sale of securities are generally made annually. Each 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 a Portfolio will be accompanied by a brief explanation of
the form and character of the distribution. In January of each year the
Portfolios will issue to each shareholder a statement of the federal income tax
status of all distributions made during the preceding calendar year.
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TAX INFORMATION
Each Portfolio is treated as a separate entity for federal income tax purposes.
Each Portfolio intends to continue to qualify and elect 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 each 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,
each 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.
Each 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.
Each Portfolio may write, purchase, or sell certain options, 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 a Portfolio's
transactions in options, futures, and foreign currency contracts. Under Section
1092 of the Code, a 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 a 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,
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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, each 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 a 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 Portfolios with their taxpayer identification
numbers or certify their exempt status in order to avoid possible erroneous
application of backup withholding. Each Portfolio reserves the right to refuse
to open an account for any person failing to certify the person's taxpayer
identification number.
If more than 50% of the value of a 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 a 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 a
Portfolio from foreign source income will be treated as foreign source income. A
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 a 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 a Portfolio even if the Portfolio is eligible and
makes the election to pass through those credits.
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The use of hedging strategies, such as entering into forward contracts, involves
complex rules that will determine the character and timing of recognition of the
income received in connection therewith by a Portfolio. Income from foreign
currencies (except certain gains therefrom that may be excluded by future
regulations) and income from transactions in forward contracts derived by a
Portfolio with respect to its business of investing in securities or foreign
currencies will qualify as permissible income under Subchapter M of the Code.
Any security or other position entered into or held by a Portfolio that
substantially diminishes the Portfolio's risk of loss from any other position
held by the Portfolio may constitute a "straddle" for federal income tax
purposes. In general, straddles are subject to certain rules that may affect the
amount, character and timing of a Portfolio's gains and losses with respect to
straddle positions by requiring, among other things, that the loss realized on
disposition of one position of a straddle be deferred until gain is realized on
disposition of the offsetting position; that a Portfolio's holding period in
certain straddle positions not begin until the straddle is terminated (possibly
resulting in the gain being treated as short-term capital gain rather than
long-term capital gain); and that losses recognized with respect to certain
straddle positions, which would otherwise constitute short-term capital losses,
be treated as long-term capital losses. Different elections are available to the
Portfolios that may mitigate the effects of the straddle rules.
Certain forward contracts that are subject to Section 1256 of the Code ("Section
1256 Contracts") and that are held by a Portfolio at the end of its taxable year
generally will be required to be "marked to market" for federal income tax
purposes, that is, deemed to have been sold at market value. Sixty percent of
any net gain or loss recognized on these deemed sales and 60% of any net gain or
loss realized from any actual sales of Section 1256 Contracts will be treated as
long-term capital gain or loss, and the balance will be treated as short-term
capital gain or loss.
Section 988 of the Code contains special tax rules applicable to certain foreign
currency transactions that may affect the amount, timing and character of
income, gain or loss recognized by a Portfolio. Under these rules, foreign
exchange gain or loss realized with respect to foreign currency forward
contracts is treated as ordinary income or loss. Some part of a Portfolio's gain
or loss on the sale or other disposition of shares of a foreign corporation may,
because of changes in foreign currency exchange rates, be treated as ordinary
income or loss under Section 988 of the Code rather than as capital gain or
loss.
Each 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.
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 a Portfolio, including the possibility that such a shareholder may
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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 Portfolios and certain shareholders therein, and, as such, is
subject to change. In particular, the consequences of an investment in shares of
a 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.
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 Portfolios. 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 dates of birth and
affiliations and principal occupations for the past five years are set forth
below.
Carl Acebes*, 8/27/46, Chairman and Trustee
570 Lexington Ave, New York, NY 10022. Chairman and Chief Investment Officer of
Rochdale.
Maxime C. Baretge, 9/18/40, Trustee
Hastings, W13, Barbados, West Indies. President, P.A. Pommares Agencies, S.A.
(luxury goods distribution).
Benedict T. Marino, 9/11/42, 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, 11/27/57, 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.
Disinterested Trustees 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 Portfolios or any other portfolio of the Trust. The
Trustees have waived these fees during the Portfolios' initial fiscal period
ended March 31, 1999. As of the date of this SAI, the Trustees and officers of
the Trust as a group owned less than 1% of each Portfolio's
outstanding shares.
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THE PORTFOLIOS' INVESTMENT ADVISOR
As stated in the Prospectus, investment advisory services are provided to the
Portfolios by Rochdale Investment Management Inc., pursuant to an Investment
Advisory Agreement ("Advisory
Agreement").
The 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 Portfolios to which the Advisory Agreement applies, and (2) a majority
of the Trustees who are not interested persons of any party to the Advisory
Agreement, in each case cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreement may be terminated at any time,
without penalty, by either Portfolio or Rochdale upon sixty days' written notice
and is automatically terminated in the event of its assignment as defined in the
1940 Act.
From inception through the fiscal period ended March 31, 1999, the Advisor
waived advisory fees and reimbursed the Magna Portfolio for expenses in the
total amount of $72,384, of which
$15,295
was its advisory fee. The Advisor also waived advisory fees and reimbursed the
Atlas Portfolio in the total amount of $99,964, of which $16,156 was its
advisory fee. These waivers and reimbursements were made pursuant to the
Advisor's undertaking to limit expenses of the Portfolios
during this period.
THE PORTFOLIOS' ADMINISTRATOR
The Portfolios have 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 Portfolios; prepare all required notice filings necessary to
maintain each Portfolio's ability to sell shares in all states where the
Portfolios currently do 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 Portfolios' servicing agents
(e.g., transfer agent, custodian, fund accountants, etc.); review and adjust as
necessary each Portfolio's daily expense accruals; and perform such additional
services as may be agreed upon by the Portfolios and the Administrator. For its
services, the Administrator will receive a monthly fee from each 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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From inception through the fiscal period ended March 31, 1999, the Magna
Portfolio accrued $30,247 in administration fees, of which $12,647 was
voluntarily waived by the Administrator. For the same period, the Atlas
Portfolio accrued $30,247 in administration fees, of which $10,776 was
voluntarily waived by the Administrator.
THE PORTFOLIOS' DISTRIBUTOR
Rochdale also acts as the Portfolios' principal underwriter in a continuous
public offering of the Portfolios' shares. The Distribution Agreement between
the Portfolios 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 to which the Distribution
Agreement applies (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 Portfolios have adopted a Distribution Plan in accordance with Rule 12b-1
under the 1940 Act. The Plan provides that each 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 Portfolios under their 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
Portfolios' shares; payments to financial intermediaries for shareholder
support; administrative and accounting services with respect to the shareholders
of the Portfolios; 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 a 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.
From inception through the fiscal period ended March 31, 1999, fees of $3,942
accrued by the Magna Portfolio pursuant to the Plan were voluntarily waived by
the Distributor. For the same period, fees of $4,040 accrued by the Atlas
Portfolio pursuant to the Plan were voluntarily waived by the Distributor.
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EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, Rochdale will determine which securities are
to be purchased and sold by each 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.
Purchases of portfolio securities for each 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 a 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 Advisory Agreement with the
Portfolios, to be useful in varying degrees, but of indeterminable value.
Portfolio transactions may be placed with broker-dealers who sell shares of a
Portfolio subject to rules adopted by the National Association of Securities
Dealers, Inc.
While it is each 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 a Portfolio, weight may also be given to the ability
of a broker-dealer to furnish brokerage and research services to the Portfolios,
other portfolios of the Trust or to Rochdale, even if the specific services were
not imputed just to the Portfolios 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, a 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
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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 a Portfolio.
Investment decisions for each 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 a 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 a Portfolio at the same time, a 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, a 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
a Portfolio is purchasing or selling, each day's transactions in such security
will be allocated between such 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 a Portfolio is concerned. In other
cases, however, it is believed that the ability of a Portfolio to participate in
volume transactions may produce better executions for the Portfolio.
The Portfolios do not place securities transactions through brokers in
accordance with any formula, nor do they effect securities transactions through
such brokers solely for selling shares of the Portfolios, although the
Portfolios 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 a Portfolio for their customers.
Subject to overall requirements of obtaining the best combination of price,
execution and research services on a particular transaction, the Portfolios may
place eligible portfolio transactions through their affiliated broker-dealer,
Rochdale Securities Corporation, under procedures adopted by the
Board of Trustees pursuant to the 1940 Act and related rules.
From inception through the fiscal period ended March 31, 1999, the Magna
Portfolio paid $5,452 in brokerage commissions to non-affiliated broker-dealers.
During that period, Rochdale Securities Corporation received brokerage
commissions from the Rochdale Magna Portfolio in the amount os $1,112
For the same period, the Atlas Portfolio paid $31,506 in brokerage commissions
to non-affiliated broker-dealers.
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ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The information provided below supplements the information contained in the
Portfolios' Prospectus regarding the purchase and redemption of Portfolio
shares.
HOW TO BUY SHARES
You may purchase shares of a 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. Each
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 as discussed in the Portfolio's Prospectus. 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.
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.
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
Portfolios may delay payment until the purchase price of those shares has been
collected or, if you redeem by telephone, until 15 days after the purchase date.
To eliminate the need for safekeeping, the Portfolios 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 Portfolios' 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 a 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 a
Portfolio's shares.
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HOW TO SELL SHARES
You can sell your Portfolio shares any day the NYSE is open for regular trading,
either directly to a 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 Portfolios 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 a 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 a 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 a Portfolio not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of Portfolio's shareholders. Under unusual circumstances, a Portfolio
may suspend redemptions, or postpone payment for more than seven days, but only
as authorized by SEC rules.
At various times, a 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.
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TELEPHONE REDEMPTIONS
To redeem by telephone, a shareholder 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 shareholders or, if
held in a joint account, from either party, or from any person claiming to be
the shareholder, the Portfolios or their 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 the latest Account Application or other
written request for services, including purchasing, exchanging or redeeming
shares of a 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 a 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 Portfolios may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that if
such procedures are used, neither the Portfolios nor their 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
Each 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 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
As noted in the Prospectus, the net asset value and offering price of shares of
each 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,
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Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. Each
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 each 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 Portfolios 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 each 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.
PERFORMANCE INFORMATION
From time to time, a 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. A Portfolio may also advertise aggregate and average
total return information over different periods of time. A 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
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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.
For the period October 23, 1998 (commencement of investment operations) through
March 31, 1999, the total return for the Magna Portfolio was 17.12%. For the
period October 2, 1998 (commencement of investment operations) through March 31,
1999, the total return for the Atlas Portfolio was 22.08%.
A 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 a 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 Portfolios will
fluctuate over time, and any presentation of a 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 a 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 Portfolios as well as the Portfolios' transfer and shareholder
service agent.
Tait, Weller & Baker, 8 Penn Center, Suite 800, Philadelphia, PA 19103, is the
independent auditor for the Portfolios.
Paul, Hastings, Janofsky & Walker LLP, 345 California Street, 29th Floor, San
Francisco, California 94104, is legal counsel to the Portfolios.
As of June 14, 1999, DLJ Securities Corp. owned of record for the benefit of its
customers 96.7%of the outstanding shares of the Magna Portfolio. As of June 14,
1999, DLJ Securities Corp. owned of record for the benefit of its customers
98.7% of the outstanding shares of the Atlas Portfolio.
FINANCIAL STATEMENTS
The annual reports to shareholders for the Portfolios for the fiscal period
ending March 31, 1999 is a separate document supplied with this SAI and the
financial statements, accompanying notes and report of independent accountants
appearing therein are incorporated by reference in this SAI.
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APPENDIX A
CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality and carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds rated Aa are judged to be high quality by all standards. Together with
the Aaa group, they comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation or protective elements may be of
greater amplitude or other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as supper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements; their future cannot
be considered well- assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B: Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any long period of time may be small.
STANDARD & POOR'S RATINGS GROUP
AAA: Debt rated AAA has the highest rating assigned by S&P to a debt obligation.
Capacity to pay interest and repay principal is extremely strong.
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AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas, it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in the higher-rated categories.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned
an actual or implied BBB rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.
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APPENDIX B
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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