SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. 1 /x/
Post-Effective Amendment No. __ / /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 1 /x/
THE RISA INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
225 South 15th Street, Suite 930, Philadelphia, PA 19102
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 545-4050
O. Sam Folin, Managing Director Copy to:
RISA Investment Advisers, LLC Brian S. Vargo, Esq.
225 South 15th Street Pepper Hamilton LLP
Suite 930 3000 Two Logan Square
Philadelphia, PA 19102 Eighteenth and Arch Streets
(Name and Address of Agent for Service) Philadelphia, PA 19103
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
[If appropriate, check the following box:]
/ / This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
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The information in this Prospectus is not complete and may be changed.
We may not sell these securities until the Fund's registration statement filed
with the Securities Exchange Commission is effective. This Prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where offers or sales are not permitted.
THE RISA FUND
Institutional Class Shares
PROSPECTUS DATED ___________, 1999
This Prospectus describes Institutional Class Shares of The RISA Fund.
The investment objective of the Fund is to seek maximum total return by
investing in securities of issuers located in the Republic of South Africa
("South Africa"). The Fund will invest primarily in growth stocks of South
African companies which have demonstrated a commitment to the "new" South
Africa.
This Prospectus contains important information about the Fund. Please
read it before investing and keep it for future reference.
Like all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission, nor has the Securities
and Exchange Commission determined whether this Prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
Page
RISK/RETURN SUMMARY..........................................................1
ADDITIONAL INVESTMENT INFORMATION...........................................4
INVESTMENT RISKS.............................................................4
MANAGEMENT OF THE FUND.......................................................6
PRICING OF FUND SHARES.......................................................7
PURCHASE OF SHARES...........................................................7
SHAREHOLDER ACCOUNTS.........................................................8
REDEMPTION OF SHARES.........................................................8
DIVIDENDS, DISTRIBUTIONS AND TAX INFORMATION.................................9
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RISK/RETURN SUMMARY
Investment Objective
The Fund seeks maximum total return by investing in securities of South
African issuers.
Principal Investment Strategies
1. Under normal market conditions, the Fund will invest approximately 75%
of its total assets in publicly traded stocks of South African
companies with above average growth prospects that qualify as "New
South Africa Companies." The Fund considers a company to be domiciled
in South Africa if the company derives its revenues mainly from
business activities in South Africa or if its stock is traded
principally on a South African exchange. "New South Africa Companies"
are companies that:
o create jobs and train workers;
o encourage economic and social empowerment of the majority population;
o encourage employment equity;
o maintain quality workplace conditions;
o protect the environment;
o enforce high health and safety standards; and
o demonstrate open and effective corporate governance.
The Labor Research Service of South Africa researches and continually
monitors approximately 250 companies which comprise the universe of New
South Africa Companies. Final selection of the companies included in
this universe is made by UNITY, an association of trade union
organizations in South Africa.
The Fund's strategy for selecting growth stocks begins with a company
by company approach emphasizing fundamental stock analysis. This
encompasses industry and competitor analysis, regular management
visits, financial statement and ratio analysis, and international
comparative evaluations. The Fund seeks to reduce portfolio risk by
research rather than by diversification. For this reason, the Fund's
portfolio will be focused and will hold no more than 35 companies at a
given time, which are actively reviewed on a regular basis.
The Fund's Stock Selection Process
o Reviews 250 New South Africa Companies
o Targets 120 Businesses
o Completes Company Research and Company Visits
o Debates Each Issue Among Investment Team Members
o Maintains Model Portfolio with 25 to 35 Names
o Portfolio Reviewed Continuously
o Continually Seeking Growth at an attractive price
Research Criteria Considered by the Fund's Advisers
o Financial Position and Stability
o Competitive Advantage
o Margin Trends
o Market Share
o Earnings Quality
o Stakeholders
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Additionally, the Fund will not invest in companies which are known by
the investment adviser to be deriving more than 10% of their revenues
from tobacco, alcohol or weapons manufacture.
2. The Fund may invest up to 25% of its assets in sovereign debt issued by
the government of South Africa.
3. Additionally, the Fund is permitted to invest up to 20% of its assets
in high quality money market instruments of U.S. and South African
issuers. When adverse market or economic conditions occur, the Fund
temporarily may invest up to 100% of its assets in U.S. money market
instruments.
Principal Risks
The Fund's share price will fluctuate with changes in the market value of the
Fund's portfolio securities. You can lose money by investing in the Fund. The
following is a list of the principal risks that apply to the Fund.
1. Stocks are subject to market, economic and business risks that cause their
prices to fluctuate.
2. Investing in South African securities involves risks that are not associated
with investments in U.S. securities.
o The Fund is subject to foreign currency risk, which is the risk that
the U.S. dollar value of its investments may decline due to changes
in foreign currency exchange rates or the imposition of exchange
control regulations
o South Africa is a developing country and its economy is less
diversified and mature than the economies of developed countries.
There is a risk of economic or political instability in South Africa.
o There is less liquidity and higher volatility in the South African
securities markets than in the U.S. and less government supervision
and regulation of exchanges, brokers and issuers in South Africa.
o South African companies are not subject to the same accounting,
auditing and financial reporting standards as U.S. public companies,
and there may be less publicly available information about South
African companies than comparable U.S. companies.
o Government actions may be taken which would negatively affect the
Fund.
3. The Fund's investments in South African sovereign debt obligations are
subject to interest rate risk and credit risk. Interest rate risk is the
risk of market losses caused by changes in interest rates. Credit risk is
the risk that the borrower may default or otherwise become unable to honor
its financial obligations.
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Estimated Fund Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
The RISA Fund
Shareholder Fees (paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases................. None
Maximum Deferred Sales
Charge (Load)........................ None
Redemption Fee (as a percentage of the
amount redeemed, if applicable)...... 2% (1)
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee............................ 1.25%
Distribution (12b-1) Fees................. None
Other Expenses............................ 1.25% (2)
Total Annual Fund Operating Expenses 2.50% (3)
(1) A Redemption Fee, paid directly to the Fund, is imposed on shares
redeemed within two years of purchase.
(2) "Other Expenses" are based on estimated amounts for the current fiscal
year.
(3) For the Fund's first two years of operations, the Investment Adviser
has voluntarily agreed to waive its fees and assume certain Fund
expenses so that Total Annual Fund Operating Expenses will not exceed
2.00% of the Fund's average daily net assets.
Example: This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
1 year 3 years
$458 $779
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ADDITIONAL INVESTMENT INFORMATION
The Fund's investment objective is to seek maximum total return by
investing in the securities of South African issuers. This investment objective
may not be changed without shareholder approval. The Fund will invest in the
following:
o Equity Investments. The Fund normally invests at least 75% of its total
assets in growth stocks of New South Africa Companies. While the Fund
invests mainly in common stocks, the Fund also may invest in other
types of equity securities such as preferred stocks, debt securities
which are convertible into or exchangeable for common stock, and
warrants or rights that are convertible into common stock. The Fund's
portfolio securities generally will be traded on the Johannesburg Stock
Exchange, but also may be listed in established over-the-counter
markets in South Africa. The Fund is permitted to invest up to 15% of
its assets in illiquid securities, including restricted securities and
publicly traded stocks with limited marketability.
o Fixed Income Investments. The Fund may invest up to 25% of its assets,
from time to time, in sovereign debt obligations issued by the
government of South Africa. The sovereign debt obligations in which the
Fund invests will be investment grade.
o Money Market Investments. The Fund is permitted to invest up to 20% of
its assets as reserves to facilitate the Fund's cash flow needs (e.g.,
redemptions, expenses, and purchases of portfolio securities). The
Fund's reserves will be invested in investment grade money market
instruments of U.S. and South African issuers.
o Defensive Investments. Under adverse investment conditions, the Fund
temporarily may invest up to 100% of its total assets in high quality,
short term U.S. money market instruments. When following such a
defensive strategy, the Fund will be less likely to achieve its
investment objective.
The Fund's benchmark is the Johannesburg Stock Exchange All Shares Index
("JSE"). The Fund will not own all, or even most, of the stocks included in the
JSE, and the Fund will invest in additional companies not included in the JSE.
Based upon a market capitalization weighting, the JSE represents more than 10%
of most emerging market equity indices.
INVESTMENT RISKS
Market Risk. The prices of the securities owned by the Fund will
fluctuate in value. These fluctuations can occur because of general market and
economic conditions, perceptions regarding the industry of the issuer company or
the issuer company's particular circumstances. Changes in the value of the
Fund's portfolio securities will result in changes in the Fund's share price.
Consequently, when you sell Fund shares, they may be worth less than what you
paid for them.
The Fund will own stocks of small companies which are often subject to
wider and more abrupt fluctuations in market price than larger, more established
companies. The reason for this volatility is that these stocks typically are
traded in lower volume, and the issuers typically are more sensitive to changing
economic conditions and subject to greater changes in earnings and business
prospects.
Foreign Risk. Foreign securities markets generally are not as developed
or efficient as those in the United States. Securities of some foreign issuers
are less liquid and more volatile than securities of comparable U.S. issuers.
Because the Fund invests primarily outside of the U. S., it will be subject to
foreign investment risks which include possible political and economic
instability, seizure or nationalization of foreign holdings and adoption of
governmental restrictions which might adversely affect or restrict the payment
of principal and interest on the foreign securities to investors located outside
the country of the issuer.
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There may be less publicly available information about South African
companies than about U.S. companies, and South African companies are not subject
to accounting, auditing and financial reporting standards and requirements
comparable to those to which U.S. companies are subject. Brokerage commissions
and other transaction costs on South African securities exchanges may be higher
than in the U.S. There is generally less government supervision and regulation
of exchanges, brokers and issuers in South Africa than there is in the U.S.
South Africa is a developing country, and its economy is less
diversified and mature, and its political system is less stable, than those of
developed countries. The markets of developing countries generally are more
volatile than the markets of more mature economies; however, such markets may
provide higher rates of return to investors. Many developing countries have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and
may continue to have adverse effects on the economies and securities markets of
certain developing countries.
Foreign Currency Risk. The value of the Fund's assets as measured in
U.S. dollars will fluctuate with changes in currency rates. Currency exchange
rates may fluctuate significantly over a short period of time. They generally
are determined by the forces of supply and demand in the foreign exchange
markets and the relative merits of investments in different countries, actual or
perceived changes in interest rates and other complex factors. Currency exchange
rates also can be affected by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
Fixed Income Security Risk. The market value of fixed income
securities, such as South African government debt obligations, will change in
response to interest rate changes and other factors. During periods of falling
interest rates, the value of outstanding fixed income securities generally
rises. During periods of rising interest rates, the value of such securities
generally declines. While securities with longer maturities tend to produce
higher yields, the prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in interest rates. Changes by
recognized agencies in the credit rating of any fixed income security and in the
ability of an issuer to make payments of interest and principal also affect the
value of these investments. Changes in the value of the Fund's debt securities
will affect the net asset value of the Fund's shares.
Hedging Risk. Although not a principal investment strategy, the Fund is
permitted to invest in derivatives that are financial instruments that derive
their performance, at least in part, from the performance of an underlying
assets, index, currency or interest rate. The derivatives the Fund may use
include options and futures. While derivatives can be used effectively to
further the Fund's investment objective, under certain market conditions, they
can increase the volatility of the Fund's net asset value, decrease the
liquidity of the Fund's portfolio and make the accurate pricing of the Fund's
portfolio more difficult.
The primary risks associated with the Fund's use of futures and options
are (i) the failure to predict accurately the direction of stock prices,
interest rates, currency movements and other economic factors; (ii) the failure
as hedging techniques in cases where the price movements of the securities
underlying the options and futures do not follow the price movements of the
portfolio securities subject to the hedge; (iii) the potentially unlimited loss
from investing in futures contracts; and (iv) the likelihood of the Fund being
unable to control losses by closing its position where a liquid secondary market
does not exist. The risk that the Fund will be unable to close out a futures
position or options contract will be minimized by the Fund only entering into
futures contracts or options transactions on national exchanges and for which
there appears to be a liquid secondary market.
Year 2000 Risk. An issue has emerged regarding how the software used by
the Fund's service providers can accommodate the date "2000." Failure to address
this "Year 2000 Problem" could result in major systems failure which could
disrupt the Fund's operations. The Investment Adviser and Sub-Adviser are in the
process of working with the Fund's service providers to prepare for the Year
2000 Problem. Based on information currently available, the Adviser and the
Sub-Adviser do not expect that the Fund will incur significant operating
expenses or be required to incur material costs in order to be Year 2000
compliant. The Fund can not guarantee however, that all Year 2000 issues will be
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identified and corrected by January 1, 2000. At this time, however, there can be
no assurance that these steps will be sufficient to avoid any adverse impact on
the Fund.
Additionally, if an issuer in which the Fund invests is adversely
affected by the Year 2000 Problem, the market price of that issuer's securities
likely will decline which could seriously affect the Fund's performance.
MANAGEMENT OF THE FUND
Investment Adviser and Sub-Adviser
The Investment Adviser for the Fund is RISA Investment Advisers, LLC,
located at 225 South 15th Street, Suite 930, Philadelphia, PA 19102. The Adviser
was formed in 1997 by Sam Folin who has twenty three years of experience in the
investment industry and extensive experience consulting non-profit organizations
on governance, fund raising, planning and financial management. Mr. Folin is a
Chartered Financial Analyst and his most recent investment advisory experience
was eight years with the large cap equity firm Newbold's Asset Management ending
in 1995. As a Senior Vice President of Newbold's, he held responsibility in
investment research, portfolio management and marketing. Mr. Folin has visited
South Africa numerous times, studying and touring that country as well as
researching South African investment opportunities.
The Investment Adviser supervises the activities of the Sub-Adviser
(described below) in investing and reinvesting the Fund's assets. Although the
Adviser delegates the day-to-day decision making with respect to Fund
investments to the Sub-Adviser, the Adviser is responsible for determining the
Fund's investment policies, subject to the approval of the Board of Trustees.
For its services, the Investment Adviser is paid a monthly fee at the annual
rate of 1.25% of the Fund's average daily net assets. This fee is subject to
voluntary reductions by the Investment Adviser which the Adviser may terminate
at any time.
African Harvest Asset Managers (Proprietary) Limited, (the
"Sub-Adviser"), located at African Harvest House, Second Floor, Boundary
Terrace, #1 Mariendahl Lane, Newlands, 7700, South Africa, serves as the Fund's
sub- investment advisor pursuant to a Sub-Advisory Agreement with the Investment
Advisor. The Sub-Adviser is a subsidiary of African Harvest Ltd, which was
incorporated as a public company in South Africa in 1997. The Sub-adviser
provides investment management services to South African clients, including
union retirement funds. The Sub-Adviser will manage the Fund's portfolio
investments, for which it will receive from the Investment Adviser a monthly fee
equal to 0.55% of the Fund's average daily net assets on an annualized basis.
Portfolio Manager
Denzil Newman is principally responsible for the day-to-day management
of the Fund's investments. Since 1998, Mr. Newman has been Chief Investment
Officer and Fund Manager of the Sub-Adviser. From 1993 to 1997, he was Senior
Fund Manager at Syfrets Managed Assets Ltd. in Cape Town, South Africa. Mr.
Newman has a Bachelor of Science degree in Accounting from Southern Adventist
University in Collegedale, Tennessee and has been employed in the securities
investment field in South Africa since 1976.
PRICING OF FUND SHARES
The Fund's accounting agent, PFPC Inc., determines the net asset value
per share of the Fund as of 4:00 p.m. Eastern Time on each day that the New York
Stock Exchange is open for unrestricted trading and on which there is a purchase
or redemption of the Fund's shares. The net asset value is determined by
dividing the value of the Fund's portfolio securities, plus any cash and other
assets, less all liabilities, by the number of shares outstanding. Expenses and
fees of the Fund, including advisory and administration fees, are accrued daily
and taken into account for the purpose of determining the net asset value. Most
of the Fund's portfolio securities are quoted in foreign currency and will be
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valued daily in U.S. dollars at the foreign currency exchange rates prevailing
at the time PFPC calculates the daily net asset value per share. Although the
Fund values its assets in U.S. dollars on a daily basis, it does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
In valuing the Fund's net assets, all securities for which
representative market quotations are available will be valued at the last quoted
sales price on the security's principal exchange on that day. If there are no
sales of the relevant security on such day, the security will be valued at the
mean between the closing bid and asked price on that day, if any. Securities for
which market quotations are not readily available will be valued at their fair
market value as determined in good faith by, or under procedures established by,
the Board of Trustees. In determining fair value, the Trustees may employ an
independent pricing service.
Money market securities with less than sixty days remaining to maturity
when acquired by the Fund will be valued on an amortized cost basis by the Fund,
excluding unrealized gains or losses thereon from the valuation. This is
accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If the Fund acquires a
money market security with more than sixty days remaining to its maturity, it
will be valued at current market value until the 60th day prior to maturity, and
will then be valued on an amortized cost basis based upon the value on such date
unless the Trustees determine during such 60-day period that this amortized cost
value does not represent fair market value.
The Fund's securities are primarily listed on foreign exchanges that
may trade on days when the Fund does not price its shares. Therefore, the Fund's
net asset value may change on days when shareholders will not be able to
purchase or redeem the Fund's shares.
PURCHASE OF SHARES
After you open an account with the Fund, you may purchase shares by (a)
writing to the Fund and enclosing your check as payment or (b) by calling (800)
XXXXXXX to arrange for payment by wire transfer.
To Open an Account. Send a completed application form by regular mail
to __________, c/o PFPC Inc., P.O. Box _____, Wilmington, DE 19899, or by
express mail to __________________, c/o PFPC Inc., 400 Bellevue Parkway, Suite
108, Wilmington, DE 19809. You may request an application form by calling (800)
_______.
To Purchase by Mail. Your initial purchase may be indicated on your
application. For additional purchases, you may send the Fund a simple letter or
use order forms supplied by the Fund. Please enclose your check drawn on a U.S.
bank payable to "The RISA Fund." Please indicate the amount to be invested in
the Fund and your Fund account number.
To Purchase by Wire Transfer: Please call the Fund at (800) xxxxxxx for
instructions and to make specific arrangements before each wire transfer.
Minimum Initial Investment. The minimum initial investment in the Fund
is $100,000, but subsequent investments may be made in any amount. From time to
time, the Investment Adviser, in its sole discretion, may accept less than the
minimum initial investment amount to establish certain shareholder accounts.
Purchase Price and Timing. Shares of the Fund are offered at their net
asset value next determined after a purchase order is received in good order.
Purchase orders received by and accepted before 4:00 p.m. Eastern time, on any
Business Day of the Fund will be priced at the net asset value per share for
that Business Day. Purchase orders received and accepted after this deadline
will be priced as of the deadline on the following Business Day of the Fund. A
"Business Day of the Fund" is any day on which the NYSE and Federal Reserve Bank
are open for business. The Fund and the Distributor each reserves the right to
reject any purchase order and may suspend the offering of shares for a period of
time.
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In Kind Purchases. If accepted by the Fund, shares may be purchased in
exchange for securities that are eligible for acquisition by the Fund. Such
securities will be valued in accordance with the procedures for valuing the
Fund's assets as described under "Pricing of Fund Shares." Please contact the
Fund about the availability of this purchase method.
SHAREHOLDER ACCOUNTS
Shareholder Inquiries. Shareholder inquiries may be made by writing the
Fund, c/o PFPC Inc., 400 Bellevue Parkway, Suite 108, Wilmington, DE 19809 or
calling (800) XXXXXXX.
Shareholder Statements. The Fund will mail a statement at least
quarterly showing all purchases, redemptions and balances in the Fund.
Shareholdings are expressed in terms of full and fractional shares of the Fund
rounded to the nearest 1/1000th of a share. In the interest of economy and
convenience, the Trust does not issue share certificates.
Non-Individual Accounts. Corporations, partnerships, fiduciaries and
other non-individual investors may be required to furnish certain additional
documentation to make purchases, exchanges and redemptions.
Minimum Account Size. Due to the relatively high cost of maintaining
small shareholder accounts, the Fund reserves the right to automatically close
any account with a current value of less than $10,000 by involuntarily redeeming
all shares in the account and mailing the proceeds to the shareholder.
Shareholders will be notified if their account value is less than $10,000 and
will be allowed 60 days in which to increase their account balance to $10,000 or
more to prevent the account from being closed. Reductions in value that result
solely from market activity will not trigger an involuntary redemption.
REDEMPTION OF SHARES
Redemption Fee. The Fund imposes a redemption fee on shares redeemed
within two years of purchase. The redemption fee equals 2% of the amount
redeemed and is paid directly to the Fund. The purpose of this fee, which is not
a sale charge, is to discourage short-term trading in the Fund's shares and to
allocate the transaction costs associated with redemptions to those investors
redeeming Fund shares. Such transaction costs include brokerage commissions and
odd lot premiums, administration costs and custodian fees.
You may redeem shares by mailing instructions to the Fund or calling
the Fund at (800) XXXXXXX. The Fund will promptly mail you a check or wire
transfer funds to your bank, as described below.
To Redeem By Mail: You may send written instructions, with signature
guarantees, by regular mail to: __________________, c/o PFPC Inc., P.O. Box
____, Wilmington, DE 19899-9752, or by express mail to ___________________, c/o
PFPC Inc., 400 Bellevue Parkway, Suite 108, Wilmington, DE 19809. The
instructions should indicate the Fund from which shares are to be redeemed, the
number of shares or dollar amount to be redeemed, the Fund account number and
the name of the person in whose name the account is registered. A signature and
a signature guarantee are required for each person in whose name the account is
registered. A signature may be guaranteed by an eligible institution acceptable
to the Fund, such as a bank, broker, dealer, municipal securities dealer,
government securities dealer, credit union, national securities exchange,
registered securities association, clearing agency, or savings association.
To Redeem By Telephone: If you want to redeem your shares by telephone
you must elect to do so by checking the appropriate box of your initial
Application or by calling the Fund at (800) XXXXXXX to obtain a separate
application for telephone redemptions. In order to redeem by telephone, you must
call the Fund Monday through Friday during normal business hours of 9 a.m. to 4
p.m., Eastern time, and indicate your name, __________________, the Fund's name,
your Fund account number and the number of shares you wish to redeem. The Fund
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and will
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not be liable for any losses to a shareholder due to unauthorized or fraudulent
telephone transactions. If the Fund, the Investment Adviser, PFPC or any of
their employees fails to abide by their procedures, the Fund may be liable to a
shareholder for losses he/she suffers from any resulting unauthorized
transactions. During times of drastic economic or market changes, the telephone
redemption privilege may be difficult to implement. In the event that you are
unable to reach the Fund by telephone, you may make a redemption request by
mail.
Additional Redemption Information. You may redeem all or any part of
the value of your account on any Business Day. Redemptions are made at the net
asset value next calculated after a redemption request, in good order, is
received by the Fund. (See "Pricing Of Fund Shares.")
Redemption checks are mailed on the next Business Day of the Fund
following acceptance of redemption instructions but in no event later than 7
days following such receipt and acceptance. Amounts redeemed by wire from the
Fund are normally wired on the next business day after acceptance of redemption
instructions. In no event are redemption proceeds wired later than 7 days
following such receipt and acceptance. If the shares to be redeemed were
purchased by check, the Fund reserves the right not to make the redemption
proceeds available until it has reasonable grounds to believe that the check has
been collected (which could take up to 10 days).
Redemption proceeds exceeding $1,000 may be wired to your predesignated
bank account in any commercial bank in the United States. The receiving bank may
charge a fee for this service. Alternatively, proceeds may be mailed to your
bank or, for amounts of less than $1,000, mailed to your Fund account address of
record if the address has been established for a minimum of 60 days. In order to
authorize the Fund to mail redemption proceeds to your Fund account address of
record, complete the appropriate section of the application for telephone
redemptions or include your Fund account address of record when you submit
written instructions. You may change the account that have designated to receive
amounts redeemed at any time. Any request to change the account designated to
receive redemption proceeds should be accompanied by a guarantee of the
shareholder's signature by an eligible institution. A signature and a signature
guarantee are required for each person in whose name the account is registered.
Further documentation will be required to change the designated account when
shares are held by a corporation, partnership, fiduciary or other non-individual
investor.
For more information on redemption services, call the Fund at (800)
XXXXXXX.
Redemption Policies. Redemption payments in cash will ordinarily be
made within seven days after receipt of the redemption request in good form.
However, the right of redemption may be suspended or the date of payment
postponed in accordance with the 1940 Act. The amount received upon redemption
may be more or less than the amount paid for the shares depending upon the
fluctuations in the market value of the assets owned by the Fund. If the Board
of Trustees determines that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make a particular redemption payment in
cash, the Fund may pay all or part of the redemption price by distributing the
Fund's portfolio securities to the redeeming shareholder. Investors may incur
brokerage charges and other transaction costs selling securities that were
received in payment of redemptions.
DIVIDENDS, DISTRIBUTIONS AND TAX INFORMATION
The Fund will pay a dividend from its net investment income, if any,
once a year. Additionally, the Fund will distribute any net realized securities
gains once a year. Your distributions will be reinvested in additional Fund
shares unless you instruct the Fund otherwise.
The Fund intends to distribute substantially all of its net investment
income and net capital gains. Dividends from net investment income or net
short-term capital gains will be taxable to you as ordinary income, whether
received in cash or in additional shares. For corporate investors, dividends
from net investment income will generally qualify in
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part for the corporate dividends-received deduction. However, the portion of the
dividends so qualified depends on the aggregate qualifying dividend income
received by the Fund from domestic (U.S.) sources.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors subject
to income tax as long-term capital gains, regardless of the length of time an
investor has owned shares in the Fund. Capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
Dividends which are declared in October, November or December to
shareholders of record in such a month but which, for operational reasons, may
not be paid to the shareholder until the following January, will be treated for
tax purposes as if paid by the Fund and received by the shareholder on December
31 of the calendar year in which they are declared.
Any time you sell Fund shares, it is considered a taxable event for you
and may result in a capital gain or loss to you depending on the purchase price
and sale price of the shares you sell. You are responsible for tax liabilities
on your transactions in Fund shares.
Each year, the Fund will mail information to shareholders on the tax
status of the Fund's dividends and distributions. The Fund is required to
withhold 31% of taxable dividends, capital gains distributions, and redemptions
paid to shareholders who have not complied with Internal Revenue Service
taxpayer identification regulations. You may avoid this withholding requirement
by certifying on your account registration form your proper taxpayer
identification number and by certifying that you are not subject to backup
withholding.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. It is recommended that shareholders consult their
tax advisers regarding specific questions as to federal, state, local or foreign
taxes. The tax discussion set forth above is included for general information
only, prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in the Fund.
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[BACK COVER ]
THE RISA INVESTMENT TRUST
The Fund's Statement of Additional Information ("SAI"), dated
________, 1999, contains additional information about the Fund which
has been incorporated by reference into this Prospectus (legally the
SAI is part of the Prospectus). A copy of the SAI is available without
charge upon request by calling 1-800-
-----------.
Information about the Fund, including the SAI, can be reviewed
and copied at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. (Call 1-800-SEC-0330 for details). Reports and
other information about the Fund are also available on the Commission's
Internet site at http://www.sec.gov and copies of this information may
be obtained, upon payment of a duplicating fee, by writing to the
Public Reference Section of the Commission, Washington, D.C.
20549-6009.
INVESTMENT ADVISER
RISA Investment Advisers, LLC
225 South 15th Street, Suite 930
Philadelphia, PA 19102
SUB-INVESTMENT ADVISER
African Harvest Asset Managers (Proprietary) Limited
African Harvest House, Second Floor
Boundary Terrace
#1 Mariendahl Lane
Newlands, 7700, South Africa
DISTRIBUTOR
BOE Securities, Inc.
225 South 15th Street, Suite 928
Philadelphia, PA 19102
SHAREHOLDER SERVICES
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
LEGAL COUNSEL
Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
AUDITORS
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103
SEC File No. 811-09211
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<PAGE>
THE RISA FUND
Institutional Class Shares
STATEMENT OF ADDITIONAL INFORMATION DATED _______ , 1999
This Statement of Additional Information ("SAI"), which is not a
prospectus, describes The RISA Fund, which is a series of The RISA Investment
Trust (the "Trust"). The SAI should be read in conjunction with The RISA Fund's
current Prospectus dated _____, 1999. No investment in shares should be made
without first reading the Prospectus. You may obtain a copy of the Prospectus
without charge by contacting the Fund at the address or telephone number listed
below.
400 Bellevue Parkway
Wilmington, DE 19809
(800)___-____
<PAGE>
TABLE OF CONTENTS
FUND HISTORY AND CAPITAL STOCK ............................................ 3
INVESTMENT STRATEGIES AND RISKS ........................................... 3
INVESTMENT RESTRICTIONS ................................................... 10
MANAGEMENT OF THE FUND .................................................... 11
INVESTMENT ADVISORY AND OTHER SERVICES .................................... 12
ALLOCATION OF PORTFOLIO BROKERAGE ......................................... 13
DISTRIBUTION OF FUND SHARES ............................................... 14
PURCHASE OF SHARES ........................................................ 14
REDEMPTIONS ............................................................... 15
TAXATION .................................................................. 15
CALCULATION OF PERFORMANCE DATA ........................................... 16
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FUND HISTORY AND CAPITAL STOCK
The Trust was organized as a Delaware business trust under an Agreement and
Declaration of Trust dated December 30, 1998. The Agreement and Declaration of
Trust permits the Trustees to issue an unlimited number of shares of beneficial
interest with a $0.001 par value per share. The Board of Trustees has the power
to designate one or more series or classes of shares of beneficial interest and
to classify or reclassify any unissued shares with respect to such series.
Currently, the Trust offers only one series, The RISA Fund.
The shares of the Fund, when issued, will be fully paid and non-assessable
and within each series or class, have no preference as to conversion, exchange,
dividends, retirement or other features. The shares of the Trust which the
Trustees may, from time to time, establish, shall have no preemptive rights. The
shares of the Trust have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of trustees can
elect 100% of the trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held), then standing in his name on the books of the Trust. On any matter
submitted to a vote of shareholders, all shares of the Trust then issued and
outstanding and entitled to vote on a matter shall vote without differentiation
between separate series on a one-vote-per-share basis. Each whole share is
entitled to one vote and each fractional share is entitled to a proportionate
fractional vote. If a matter to be voted on does not affect the interests of all
series of the Trust, then only the shareholders of the affected series shall be
entitled to vote on the matter. The Trust's Agreement and Declaration of Trust
also gives shareholders the right to vote (i) for the election or removal of
trustees; (ii) with respect to additional matters relating to the Trust as
required by the Investment Company Act; and (iii) on such other matters as the
Trustees consider necessary or desirable.
INVESTMENT STRATEGIES AND RISKS
The Fund is a diversified, open-end management investment company. The
Prospectus describes the Fund's investment objective and the principal
strategies to be employed to achieve that objective. This section contains
supplemental information concerning certain types of securities in which the
Fund will invest, the Fund's investment policies and strategies, and certain
risks associated with such investments and strategies.
Illiquid and Restricted Securities
The Fund will not invest more than 15% of its net assets in illiquid
investments, which include securities for which there is no readily available
market, securities subject to contractual restrictions on resale and otherwise
restricted securities. The Board of Trustees will adopt liquidity guidelines and
delegate to the Investment Adviser and Sub-Adviser the daily function of
determining and monitoring liquidity of restricted securities. The Board of
Trustees, however, will retain sufficient oversight and be ultimately
responsible for the determinations.
Securities Lending
The Fund may lend its investment securities to approved borrowers who need
to borrow securities in order to complete certain transactions, such as covering
short sales, avoiding failures to deliver securities or completing arbitrage
operations. By lending its investment securities, the Fund attempts to increase
its income through the receipt of interest on the loan. Any gain or loss in the
market price of the securities loaned that might occur during the term of the
loan would be for the account of the Fund. The Fund may lend its investment
securities to qualified brokers, dealers, domestic and foreign banks or other
financial institutions, so long as the terms, the structure and the aggregate
amount of such loans are not inconsistent with the Investment Company Act of
1940, as amended, (the "Investment Company Act") or the Rules and Regulations or
interpretations of the U.S. Securities and Exchange Commission (the "SEC")
thereunder. At the present time, the staff of the SEC does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and approved
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<PAGE>
by the investment company's Board of Trustees. In addition, voting rights may
pass with the loaned securities, but if a material event occurs affecting an
investment on a loan, the loan must be called and the securities voted.
Repurchase Agreements
The Fund may enter into repurchase agreements. Under a repurchase
agreement, the Fund acquires a debt instrument for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the Fund to resell such debt instrument at a fixed price. The
resale price is in excess of the purchase price so that it reflects an agreed
upon market interest rate effective for the period of time during which the
Fund's money is invested. The Fund's risk is limited to the ability of the
seller to pay the agreed upon sum on the delivery date. When the Fund enters
into a repurchase agreement, it obtains collateral having a value at least equal
to the amount of the purchase price. Repurchase agreements can be considered
loans collateralized by the underlying securities. The collateral underlying a
repurchase agreement will be marked to market every business day so that the
value of the collateral is at least equal to the value of the loan, including
accrued interest earned. In evaluating whether to enter into a repurchase
agreement, the Fund's Investment Adviser and Sub-Adviser will carefully consider
the creditworthiness of the seller. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Fund may incur a
loss.
When-Issued, Forward Commitments and Delayed Settlement Securities
The Fund may invest in securities whose terms and characteristics are
already known but which have not been issued. These are so-called "when-issued"
or "forward commitments." Delayed settlements occur when the Fund agrees to buy
securities at some time in the future, making no payment until the transaction
is actually completed. The Fund engages in these transactions to buy securities
that fit with its investment objective at attractive prices, not to increase it
investment leverage. Securities purchased on a when-issued basis involve a risk
of loss if they decline in market value prior to their actual delivery to the
Fund. The Fund will establish with its custodian, a segregated account, in which
it will maintain cash or liquid securities equal in value to its obligations for
when-issued securities.
Hedging Strategies
The Fund may engage in various portfolio strategies to hedge against
adverse movements in the equity, debt and currency markets. The Fund may buy or
sell futures contracts, write (i.e., sell) covered call and put options on its
portfolio securities, purchase put and call options on securities and engage in
transactions in related options on such futures. Each of these portfolio
strategies is described below. Although certain risks are involved in options
and futures transactions, the Investment Adviser and Sub-Adviser believe that,
because the Fund will engage in options and futures transactions only for
hedging purposes, these transactions will not subject it to the risks frequently
associated with the speculative use of options and futures transactions. While
the Fund's use of hedging strategies is intended to reduce the volatility of the
net asset value of the Fund's shares, the Fund's net asset value will fluctuate.
There can be no assurance that the Fund's hedging transactions will be
effective. Also, the Fund may not necessarily be engaging in hedging activities
when movements in any equity, debt or currency market occur.
Forward Foreign Currency Exchange Contracts. The U.S. dollar value of the
assets of the Fund may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the Fund
may incur costs in connection with conversions between various currencies. The
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward contracts to purchase or sell foreign
currencies. A forward foreign currency exchange contract involves 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. These contracts are traded in the
interbank market conducted directly between currency traders (usually large
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<PAGE>
commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for such
trades.
The Fund may enter into forward foreign currency exchange contracts in
several circumstances. When the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, or when the Fund
anticipates the receipt in a foreign currency of dividends or interest payments
on a security which it holds, the Fund may desire to "lock-in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for a fixed
amount of dollars, for the purchase or sale of the amount of foreign currency
involved in the underlying transactions, the Fund will be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date on which the security is purchased or sold, or on which the
dividend or interest payment is declared, and the date on which such payments
are made or received.
Additionally, when the Fund anticipates that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it may
enter into a forward contract for a fixed amount of dollars, to sell the amount
of foreign currency approximating the value of some or all of the Fund's
securities denominated in such foreign currency. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible since the future value of securities in foreign currencies
will change as a consequence of market movements in the value of these
securities between the date on which the forward contract is entered into and
the date it matures. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. From time to time, the Fund may enter into forward
contracts to protect the value of portfolio securities and enhance Fund
performance. The Fund will not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund securities or other assets denominated in that currency.
The Fund generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for the Fund to purchase additional foreign currency on the
spot market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency that the Fund is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or loss (as described below) to the
extent that there has been movement in forward contract prices. Should forward
prices decline during the period between the Fund entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Fund will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund would suffer a loss to the extent that the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
The Fund's dealings in forward foreign currency exchange contracts will be
limited to the transactions described above. Of course, the Fund is not required
to enter into such transactions with regard to its foreign currency-denominated
securities. It also should be realized that this method of protecting the value
of portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
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<PAGE>
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.
Futures Contracts. The Fund may enter into futures contracts for purposes
of hedging, remaining fully invested and reducing transaction costs. Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Although most futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith initial margin deposit in
cash or acceptable securities with a broker or custodian to initiate and
maintain open positions in futures contracts. An initial margin deposit is
intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish initial deposit requirements
which are higher than the exchange minimums. Futures contracts are customarily
purchased and sold on initial margin that may range upward from less than 5% of
the value of the contract being traded. After a futures contract position is
opened, the value of the contract is marked to market daily. A second type of
deposit called variation margin is used to adjust the futures position account
for the daily marked to market variations. If the marked to market value
declines, additional deposits in cash are required to balance this decline
(variation margin). Conversely, if the marked to market value increases,
deposits in cash may be withdrawn from the account to the extent of the increase
(variation margin). Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Fund expects to earn
interest income on their initial margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade and use
futures contracts with the expectation of realizing profits from a fluctuation
in interest rates. The Fund intends to use futures contracts only for hedging
purposes.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Fund's exposure to market fluctuations, the use of
futures contracts may be a more effective means of hedging this exposure. While
the Fund will incur commission expenses in both opening and closing out future
positions, these costs are lower than transaction costs incurred in the purchase
and sale of the underlying securities.
The Fund will only sell futures contracts to protect securities it owns
against price declines or purchase contracts to protect against an increase in
the price of securities it intends to purchase. As evidence of this hedging
interest, the Fund expects that approximately 75% of its futures contracts
purchases will be "completed," that is, equivalent amounts of related securities
will have been purchased or are being purchased by the Fund upon sale of open
futures contracts.
Risk Factors in Futures Transactions. Positions in futures contracts may be
closed out only on an exchange which provides a market for such futures.
However, there can be no assurance that a liquid market will exist for any
particular futures contract at any specific time. Thus, it may not be possible
to close a futures position. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments to maintain its
required margin. In such situations, if the Fund has insufficient cash, it may
have to sell securities to meet daily margin requirements at a time when it may
be disadvantageous to do so. In addition, the Fund may be required to make
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delivery of the instruments underlying futures contracts it holds. The inability
to close futures positions also could have an adverse impact on the Fund's
ability to effectively hedge.
The Fund will minimize the risk that it will be unable to close out a
futures position by only entering into futures for which there appears to be a
liquid market. There can be no assurance, however, that a liquid market will
exist for a particular futures contract at any given time.
The risk of loss in trading futures contracts in some strategies can be
substantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if at the time of purchase,
10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in a total loss
of the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in excess of the amount
invested in the contract. However, because the futures strategies of the Fund
are engaged in only for hedging purposes, the Investment Adviser does not
believe that the Fund is subject to the risks of loss frequently associated with
futures transactions. The Fund would presumably have sustained comparable losses
if, instead of the futures contract, it had invested in the underlying financial
instrument and sold it after the decline.
Utilization of futures transactions by the Fund does involve the risk of
imperfect or no correlation where the securities underlying the futures
contracts have different maturities than the Fund securities being hedged. It is
also possible that the Fund could both lose money on futures contracts and also
experience a decline in value of portfolio securities. There is also the risk of
loss on margin deposits in the event of bankruptcy of a broker with whom the
Fund has an open position in a futures contract or related option.
Most futures exchanges 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 type of contract, no trades may
be made on 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. Futures contract prices have occasionally moved 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.
Options on Futures. Although the Fund is permitted to purchase and sell put
and call options on futures contracts for hedging purposes, it has no present
intention of using this technique. Investments in options involve some of the
same considerations that are involved in connection with investments in futures
contracts (e.g., the existence of a liquid market). In addition, the purchase of
an option also entails the risk that changes in the value of the underlying
security or contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the futures
contract on which it is based or the price of the securities being hedged, an
option may or may not be less risky than ownership of the futures contract or
such securities. In general, the market prices of options can be expected to be
more volatile than the market prices on the underlying futures contract or
securities.
Writing Covered Call Options. Although the Fund is permitted to write call
options, it has no present intention of doing so. The general reason for writing
call options is to attempt to realize income. By writing covered call options,
the Fund gives up the opportunity, while the option is in effect, to profit from
any price increase in the underlying security above the option exercise price.
In addition, the Fund's ability to sell the underlying security will be limited
while the option is in effect unless the Fund effects a closing purchase
transaction. A closing purchase transaction cancels out the Fund's position as
the writer of an option by means of offsetting purchase of an identical option
prior to the expiration of the option it has written. Covered call options serve
as a partial hedge against the price of the underlying security declining. The
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Fund writes only covered options, which means that so long as the Fund is
obligated as the writer of the option it will, through its custodian, have
deposited the underlying security of the option or, if there is a commitment to
purchase the security, a segregated reserve of cash or liquid securities
denominated in U.S. dollars or non-U.S. currencies with a securities depository
with a value equal to or greater than the exercise price of the underlying
securities. By writing a put, the Fund will be obligated to purchase the
underlying security at a price that may be higher than the market value of that
security at the time of exercise for as long as the option is outstanding. The
Fund may engage in closing transactions in order to terminate put options that
it has written.
Purchasing Options. While the Fund is permitted to purchase put and call
options, it has no present intention of doing so. A put option may be purchased
to partially limit the risks of the value of an underlying security or the value
of a commitment to purchase that security for forward delivery. The amount of
any appreciation in the value of the underlying security will be partially
offset by the amount of the premium paid for the put option and any related
transaction costs. Prior to its expiration, a put option may be sold in a
closing sale transaction and profit or loss from a sale will depend on whether
the amount received is more or less than the premium paid for the put option
plus the related transaction costs. A closing sale transaction cancels out the
Fund's position as purchaser of an option by means of an offsetting sale of an
identical option prior to the expiration of the option it has purchased. In
certain circumstances, the Fund may purchase call options on securities held in
its investment portfolio on which it has written call options or on securities
which it intends to purchase.
Options on Foreign Currencies. The Fund may purchase and write options on
foreign currencies for hedging purposes in a manner similar to that in which
futures contracts on foreign currencies, or forward contracts, will be utilized.
For example, a decline in the dollar value of a foreign currency in which
portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminution in the value of portfolio securities,
the Fund may purchase put options on the foreign currency. If the value of the
currency does decline, the Fund will have the right to sell such currency for a
fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Fund could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
The Fund may write options on foreign currencies for the same types of
hedging purposes. For example, where the Fund anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the anticipated decline occurs,
the option will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the Fund
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Fund to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, the Fund also may be required to forego all or a
portion of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.
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The Fund may write covered call options on foreign currencies. A call
option written on a foreign currency by the Fund is "covered" if the Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by the Custodian) upon conversion or exchange of other foreign currency held in
its portfolio. A call option is also covered if the Fund has a call on the same
foreign currency and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or liquid securities
in a segregated account with the Custodian.
The Fund may write call options on foreign currencies that are not covered
for cross-hedging purposes. A call option on a foreign currency is for
cross-hedging purposes if it is not covered, but is designed to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns or
has the right to acquire and which is denominated in the currency underlying the
option due to an adverse change in the exchange rate. In such circumstances, the
Fund collateralized the option by maintaining in a segregated account with the
Custodian, cash or liquid securities in an amount not less than the value of the
underlying foreign currency in U.S. dollars marked to market daily.
Risks of Options on Futures Contracts, Forward Contracts and Options on
Foreign Currencies. The Fund's purchase and sale of exchange-traded foreign
currency options in the U.S. is subject to the risks of the availability of a
liquid secondary market, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effect of
other political and economic events. In addition, exchange-traded options of
foreign currencies involve certain risks not presented by the over-the-counter
market. For example, exercise and settlement of such options in the U.S. must be
made exclusively through the Options Clearing Corporation ("OCC"), which has
established banking relationships in applicable foreign countries for this
purpose. As a result, the OCC may, if it determines that foreign governmental
restrictions or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or its clearing
member, impose special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of dollar
settlement prices or prohibitions, on exercise.
For the most part, the Fund's futures contracts, options on futures
contracts, forward contracts and options of foreign currencies will be traded on
foreign exchanges which would subject the Fund to the following risks. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in the Fund's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.
Portfolio Turnover
The Fund generally will not engage in trading securities for short-term
gains. However, the Adviser and the Sub-Adviser may effect portfolio
transactions without regard to holding periods if, in their judgement, such
transactions are advisable due to a change in circumstances of a particular
company or industry or in general market or economic conditions.
-9-
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted the investment restrictions set forth below, which are
fundamental policies of the Fund and cannot be changed without the approval of a
majority of the outstanding voting securities. As provided in the Investment
Company Act, a "vote of a majority of the outstanding voting securities" means
the affirmative vote of the lesser of (i) more than 50% of the outstanding
shares, or (ii) 67% or more of the shares present at a meeting if more than 50%
of the outstanding shares are represented at the meeting in person or by proxy.
The Fund may not:
1. As to 75% of its total assets, invest in the securities of any one
issuer if, immediately after and as a result of such investment, the
value of the holdings of the Fund in the securities of such issuer
exceeds 5% of the Fund's total assets, taken at market value, except
that such restriction shall not apply to cash and cash items, or
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities;
2. Invest more than 25% of its total assets (taken at market value at the
time of each investment) in the securities of issuers in any
particular industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or the South
African Goverment or their agencies or instrumentalities; utility
companies will be divided according to their services; financial
services companies will be classified according to the end-users of
their services.
3. Issue senior securities, except that the Fund may borrow money in
accordance with (7) below, purchase securities on a when-issued,
delayed settlement or forward delivery basis, sell securities short
and enter into reverse repurchase agreements;
4. Purchase or sell real estate or commodities; provided that the Fund
may invest in securities secured by real estate or interests therein
or issued by companies which invest in real estate or interests
therein;
5. Purchase any securities on margin, except that the Fund may obtain
such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities, or make short sales of
securities or maintain a short position. The payment by the Fund of
initial or variation margin in connection with futures or related
options transactions shall not be considered the purchase of a
security on margin. Also, engaging in futures transactions and related
options will not be deemed a short sale or maintenance of a short
position in securities;
6. Make loans to other persons; provided that for purposes of this
restriction the acquisition of bonds, debentures, or other corporate
debt securities and investment in government obligations, short-term
commercial paper, certificates of deposit, bankers' acceptances,
repurchase agreements and any fixed-income obligations in which the
Fund may invest consistent with its investment objective and policies
shall not be deemed to be the making of a loan;
7. Borrow amounts in excess of 20% of its total assets, taken at market
value, and then only from banks as a temporary measure for
extraordinary or emergency purposes such as the redemption of Fund
shares. Utilization of borrowings may exaggerate increases or
decreases in an investment company's net asset value. However, the
Fund will not purchase securities while borrowings exceed 5% of its
total assets, except to honor prior commitments and to exercise
subscription rights when outstanding borrowings have been obtained
exclusively for settlements of other securities transactions; or
8. Underwrite securities of other issuers.
-10-
<PAGE>
MANAGEMENT OF THE FUND
Under Delaware law, the Trust's Board of Trustees is responsible for
establishing the Fund's policies and for overseeing the management of the Fund.
The Board also elects the Fund's officers who conduct and supervise the daily
business operations of the Trust. The Trustees and executive officers of the
Trust, their ages and their principal occupations for the past five years are
listed below. The address of each such person is C/O The RISA Investment Trust,
225 South 15th Street, Suite 930, Philadelphia, PA 19102.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Name and Address Age Position and Office Principal Occupation
with the Trust During the Past Five Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oliver St. C. Franklin* 53 Chairman of the Board of President, RISA Investment Advisers,
Trustees LLC (1998-Present); Consultant
(11/96 - 7/98); Senior Vice President,
Fidelity Institutional Services,
(1/94 - 11/96)
- ------------------------------------------------------------------------------------------------------------------
O. Sam Folin* 50 Trustee, President and Managing Director, RISA Investment
Chief Financial Officer Advisers, LLC (1996-Present);
Senior Vice Pres. & Portfolio Manager
Newbold's Asset Management
(12/88 - 6/95)
- ------------------------------------------------------------------------------------------------------------------
Carolyn Lewis Trustee
- ------------------------------------------------------------------------------------------------------------------
James McDonald Trustee
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
*Trustees who are "interested persons" as defined in the Investment Company Act
of 1940.
Compensation of Trustees and Officers
The Fund pays each Trustee, who is not also an officer or affiliated
person, a $____ quarterly retainer. In addition, each unaffiliated Trustee
receives a $____ meeting fee and reimbursement for travel and other expenses
incurred while attending Board meetings. Trustees who are also officers or
affiliated persons receive no remuneration for their service as Trustees. The
Fund's officers and employees are paid by either the Adviser or the
Administrator and receive no compensation from the Fund. The following table
shows aggregate compensation that is expected to be paid to each of the Trustees
by the Fund in the fiscal year ending December 31, 1999.
-11-
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
====================================================================================================================
(1) (2) (3) (4) (5)
Name of Person Aggregate Pension or Estimated Annual Total Compensation
Position Compensation from Retirement Benefits Benefits upon from Registrant and
Registrant Accrued as Part of Retirement Fund Complex Paid
Fund Expenses to Trustees
====================================================================================================================
<S> <C> <C> <C> <C>
Oliver St. C. Franklin -0- -0- -0- -0-
Trustee
O. Sam Folin -0- -0- -0- -0-
Trustee
Trustee $_____ -0- -0- $_____
Trustee $_____ -0- -0- $_____
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser
The Trust, on behalf of the Fund, has entered into an Investment Advisory
Agreement with RISA Investment Advisers, LLC, for the provision of investment
advisory services, subject to the supervision and direction of the Board of
Trustees. Pursuant to the Investment Advisory Agreement, the Fund is obligated
to pay the Investment Adviser a monthly fee equal to an annual rate of 1.25% of
the Fund's average daily net assets. The Investment Advisor has voluntarily
agreed to waive its advisory fee and/or assume certain Fund expenses monthly so
that the Fund's total operating expenses, on an annual basis, do not exceed
2.00% of the Fund's average daily net assets.
The Investment Advisory Agreement became effective on _______, 1999 and is
effective for an initial two-year period. Such Agreement may be renewed after
its initial term only so long as such renewal and continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund, and only if the terms of the
renewal thereof have been approved by the vote of a majority of the Trustees who
are not parties thereto or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval. The Investment
Advisory Agreement will terminate automatically in the event of its assignment.
Sub-Investment Adviser
African Harvest Asset Managers (Proprietary) Limited, (the "Sub-Adviser")
an affiliate of the Investment Adviser, serves as the Fund's sub-investment
adviser. The Sub-Adviser was formed in 1997 and as of December 31, 1998 managed
over $500 million in assets. The Sub-Adviser, subject to the supervision and
approval of the Investment Adviser, provides investment advisory assistance and
the day-to-day management of the Fund's portfolio.
African Harvest Capital, an affiliate of the Sub-Adviser, owns 40% of the
equity interests of RISA Investment Advisers.
-12-
<PAGE>
Administrator, Service Agents, Accounting Agent, Custodian and Auditor
PFPC Inc., ("PFPC") 400 Bellevue Parkway, Wilmington, DE 19809, serves as
Administrator, Transfer Agent, Shareholder Servicing Agent and Dividend Paying
Agent of the Fund and also provides accounting services to the Fund.
As Administrator, PFPC supplies office facilities, non-investment related
statistical and research data, stationery and office supplies, executive and
administrative services, internal auditing and regulatory compliance services.
PFPC also assists in the preparation of reports to shareholders, prepares proxy
statements, updates prospectuses and makes filings with the Securities and
Exchange Commission and state securities authorities. PFPC performs certain
budgeting and financial reporting and compliance monitoring activities. For the
services provided as Administrator, PFPC receives an administration fee from the
Trust payable monthly at the annual rate of $_____ for the Fund.
As Transfer Agent, PFPC receives a fee from the Trust at the annual rate of
______.
As Accounting Agent, PFPC determines the Fund's net asset value per share
and provides accounting services to the Fund pursuant to an Accounting Services
Agreement with the Trust. For the services provided as Accounting Agent, PFPC
receives a fee from the Trust at the annual rate of $_____ for the Fund.
The custodian for the Fund is PFPC Trust Company, located at 200 Stevens
Drive, Lester, PA 19113, and the Fund's sub-custodian is Citibank. Citibank
employs foreign sub-custodians to maintain the Fund's foreign assets outside the
United States subject to the Board of Trustees' annual review of those foreign
custody arrangements.
The accounts of the Trust are audited each year by PricewaterhouseCoopers
LLP, independent certified public accountants. Shareholders receive unaudited
semi-annual and audited annual reports of the Trust including the annual audited
financial statements and a list of securities owned.
ALLOCATION OF PORTFOLIO BROKERAGE
The Investment Adviser and Sub-Adviser, when effecting the purchases and
sales of portfolio securities for the account of the Fund, will seek execution
of trades either (i) at the most favorable and competitive rate of commission
charged by any broker, dealer or member of an exchange, or (ii) at a higher rate
of commission charges if reasonable in relation to brokerage and research
services provided to the Fund, the Investment Adviser or the Sub-Adviser, by
such member, broker, or dealer when viewed in terms of either a particular
transaction or the Investment Adviser's overall responsibilities to the Trust.
Such services may include, but are not limited to, any one or more of the
following: information as to the availability of securities for purchase or
sale, statistical or factual information, or opinions pertaining to investments.
The Investment Adviser may use research and services provided to it by brokers
and dealers in servicing all its clients; however, not all such services will be
used by the Investment Adviser or the Sub-Adviser in connection with the Fund.
Brokerage may also be allocated to dealers in consideration of the sale of the
Fund's shares, but only when execution and price are comparable to that offered
by other brokers.
The Sub-Adviser is responsible for making the Fund's day-to-day portfolio
decisions. The Board of Trustees, however, imposes limitations on the allocation
of portfolio brokerage.
It is anticipated that the Fund's brokerage transactions involving
securities of South African issuers will be conducted primarily on the principal
stock exchanges of South Africa. Brokerage commissions and other transaction
costs on stock exchange transactions in South Africa are generally higher than
in the U.S., although the Fund will endeavor to achieve the best net results in
effecting their portfolio transactions. There is generally less government
supervision and regulation of foreign stock exchanges and brokers in South
Africa than in the U.S.
-13-
<PAGE>
Foreign equity securities may be held by the Fund in the form of ADRs,
EDRs, GDRs or other securities convertible into foreign equity securities. ADRs,
EDRs and GDRs may be listed on stock exchanges or traded in over-the-counter
markets in the U.S. or Europe, as the case may be. ADRs, like other securities
traded in the U.S., as well as GDRs traded in the U.S., will be subject to
negotiated commission rates.
DISTRIBUTION OF FUND SHARES
BOE Securities, Inc., a registered broker-dealer firm located at 225 South
15th Street, Suite 928, Philadelphia, PA 19102, serves as the Distributor of the
Fund's shares pursuant to a Distribution Agreement with the Trust. Under the
terms of the Distribution Agreement, the Distributor agrees to assist in
securing purchasers for shares of the Fund. The Distributor will receive $12,000
per annum from the Investment Adviser for distribution of shares of the Fund,
plus reimbursement of out-of-pocket expenses.
The Distribution Agreement provides that the Distributor, in the absence of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of reckless disregard of its obligations and duties under
the agreement, will not be liable to the Trust or the Fund's shareholders for
losses arising in connection with the sale of Fund shares.
The Distribution Agreement became effective in _______ 1999, and will
remain in effect an initial period of two years. Thereafter, the Distribution
Agreement continues in effect from year to year as long as its continuance is
approved at least annually by a majority of the Trustees, including a majority
of the trustees who are not parties to the Distribution Agreement or interested
persons of any such party (the "Independent Trustees"). The Distribution
Agreement terminates automatically in the event of its assignment. The
Distribution Agreement is also terminable without payment of any penalty with
respect to the Fund (i) by the Fund (by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting securities of the
Fund) on sixty (60) days' written notice to the Distributor, or (ii) by the
Distributor on sixty (60) days' written notice to the Fund.
PURCHASE OF SHARES
In Kind Purchases
At the discretion of the Fund, shares may be purchased in exchange for
securities which are eligible for acquisition by the Fund. All dividends,
interest, subscriptions, or other rights pertaining to such securities shall
become the property of the Fund and must be delivered to the Fund by the
investor upon receipt from the issuer. The Fund will not accept securities in
exchange for its shares unless (1) such securities are, at the time of exchange,
eligible to be included in the Fund's portfolio and current market quotations
are readily available for such securities; and (2) the investor represents and
agrees that the securities exchanged are not subject to any restrictions upon
their sale by the Fund under the laws of the country in which the principal
market for such securities exists.
REDEMPTIONS
Under normal circumstances, you may redeem your shares at any time, subject
to a 2% redemption fee on shares redeemed within two years of purchase. The
redemption price will be based upon the net asset value per share next
determined after receipt of the redemption request, provided it has been
submitted in the manner described in the Prospectus of the Fund. See "How to
Redeem Shares" in the Prospectus. The redemption price may be more or less than
your cost, depending upon the net asset value per share at the time of
redemption.
Payment for shares tendered for redemption is made by check within seven
days after receipt and acceptance of your redemption request by the transfer
agent, except that the Fund reserves the right to suspend the right of
redemption, or to postpone the date of payment upon redemption beyond seven
days, (i) for any period during which the New York Stock Exchange is restricted,
(ii) for any period during which an emergency exists as determined by the SEC as
a result of which disposal of securities owned by the Fund is not reasonably
-14-
<PAGE>
predictable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (iii) for such other periods as the SEC may by
order permit for the protection of Fund shareholders.
TAXATION
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code").
In order to so qualify, the Fund must, among other things (i) derive at
least 90% of its gross income from dividends, interest, payments with respect to
certain securities loans, gains from the sale of securities or foreign
currencies, or other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; (ii) distribute at least 90% of its
dividends, interest and certain other taxable income each year; and (iii) at the
end of each fiscal quarter maintain at least 50% of the value of its total
assets in cash, government securities, securities of other regulated investment
companies, and other securities of issuers which represent, with respect to each
issuer, no more than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and with no more than 25% of its
assets invested in the securities (other than those of the government or other
regulated investment companies) of any one issuer or of two or more issuers
which the Fund controls and which are engaged in the same, similar or related
trades and businesses.
To the extent the Fund qualifies for treatment as a regulated investment
company, it will not be subject to federal income tax on income and net capital
gains paid to shareholders in the form of dividends or capital gains
distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of
the Fund's "required distributions" over actual distributions in any calendar
year. Generally, the "required distribution" is 98% of the Fund's ordinary
income for the calendar year plus 98% of its capital gain net income recognized
during the one-year period ending on October 31 plus undistributed amounts from
prior years. The Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Distributions declared by the Fund during October,
November or December to shareholders of record during such month and paid by
January 31 of the following year will be taxable to shareholders in the calendar
year in which they are declared, rather than the calendar year in which they are
received.
The Fund will provide an information return to shareholders describing the
federal tax status of the dividends paid by the Fund during the preceding year
within 60 days after the end of each year as required by present tax law.
Individual shareholders will receive Form 1099-DIV and Form 1099-B as required
by present tax law during January of each year. If the Fund makes a distribution
after the close of its fiscal year which is attributable to income or gains
earned in such earlier fiscal year, then the Fund shall send a notice to its
shareholders describing the amount and character of such distribution within 60
days after the close of the year in which the distribution is made. Shareholders
should consult their tax advisors concerning the state or local taxation of such
dividends, and the federal, state and local taxation of capital gains
distributions.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action at any time, and retroactively.
Dividends and distributions also may be subject to state and local taxes.
-15-
<PAGE>
Passive Foreign Investment Companiess
If the Fund purchases shares in certain foreign investement entities,
called "passive foreign investment companies" (a "PFIC"), it may be subject to
United States federal income tax on a portion of any "excess distribution" or
gain from the disposistion of such shares even if such income is distributed as
a taxable dividened by the Fund to its shareholders. Additional charges in the
nature of intrest may be imposed on the Fund in respect of deferred taxes
arising from such distributions or gains. If the Fund were to invest in a PFIC
and elected to treat the PFIC as a "qualified electing fund" under the Code, in
lieu of the foregoing requirements, the Fund might be required to include in
income each year a portion of the ordinary earnings and the net capital gains of
the qualified electing fund, even if not distributed to the Fund, and such
amounts would be subject to the 90% and excise tax distribution requirements
described above. In order to make this election, the Fund would be required to
obtain certain annual information from the passive foreign investment companies
in which it invests, which may be difficult or not possible to obtain.
Alternatively, the Fund may make a mark-to-market election that will result
in the Fund being treated as if it had sold and repurchased all of the PFIC
stock at the end of each year. In this case, the Fund would report gains as
ordinary income and would deduct losses as ordinary losses to the extent of
previously recognized gains. The election, once made, would be effective for all
subsequent taxable years of the Fund, unless revoked with the consent of the
IRS. By making the election, the Fund could potentially ameliorate the adverse
tax consequences with respect to its ownership of shares in a PFIC, but in any
particular year may be required to recognize income in excess of the
distributions received from the PFICs owned and the proceeds from dispositions
of PFIC company stock. The Fund may have to distribute this "phantom" income
and gain to sarisfy its distibution requirement and to avoid imposition of the
4% excise tax. The Fund will make the appropriate tax elections, if possible,
and take any additonal steps that are necessary to mitigate the effect of these
rules.
Federal Tax Treatment of Forward Currency and Futures Contracts
Except for transactions the Fund has identified as hedging transactions,
the Fund is required for federal income tax purposes to recognize as income for
each taxable year its net unrealized gains and losses on forward currency and
futures contracts as of the end of each taxable year as well as those actually
realized during the year. In most cases, any such gain or loss recognized with
respect to a regulated futures contract is considered to be 60% long-term
capital gain or loss and 40% short-term capital gain or loss without regard to
the holding period of the contract. Realized gain or loss attributable to a
foreign currency forward contract is treated as 100% ordinary income.
Furthermore, foreign currency futures contracts which are intended to hedge
against a change in the value of securities held by the Fund may affect the
holding period of such securities and, consequently, the nature of the gain or
loss on such securities upon disposition.
In order for the Fund to continue to qualify for federal income tax
treatment as a regulated investment company under the Code, at least 90% of the
Fund's gross income for a taxable year must be derived from certain qualifying
income, i.e., dividends, interest, income derived from loans of securities and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other related income, including gains from options, futures and
forward contracts, derived with respect to its business investing in stock,
securities or currencies. Any net gain realized from the closing out of futures
contracts will, therefore, generally be qualifying income for purposes of the
90% requirement.
The Fund will distribute to shareholders annually any net capital gains
which have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's taxable year) on futures transactions. Such
distribution will be combined with distributions of capital gains realized on
the Fund's other investments, and shareholders will be advised on the nature of
the payment.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state and local taxes.
CALCULATION OF PERFORMANCE DATA
Current yield and total return may be quoted in advertisements, shareholder
reports or other communications to shareholders. Yield is the ratio of income
per share derived from the Fund's investments to a current maximum offering
price expressed in terms of percent. The yield is quoted on the basis of
earnings after expenses have been deducted. Total return is the total of all
income and capital gains paid to shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of the original
investment, expressed as a percentage of the purchase price. Occasionally, the
Fund may include its distribution rate in advertisements. The distribution rate
is the amount of distributions per share made by the Fund over a 12-month period
divided by the current maximum offering price.
The SEC rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by
the Fund be accompanied by certain standardized performance information computed
as required by the SEC. Current yield and total return quotations used by the
Fund are based on the standardized methods of computing performance mandated by
the SEC. An explanation of those and other methods used by the Fund to compute
or express performance follows.
As indicated below, current yield is determined by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders
during the 30-day base period. According to the SEC formula:
-16-
<PAGE>
6
Yield = 2 [(a-b +1) - 1]
cd
where
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
As the following formula indicates, the average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
annualizing the result. The calculation assumes the maximum sales load is
deducted from the initial $1,000 purchase order and that all dividends and
distributions are reinvested at the public offering price on the reinvestment
dates during the period. The quotation assumes the account was completely
redeemed at the end of each one, five and ten-year period and assumes the
deduction of all applicable charges and fees. According to the SEC formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10-year periods,
determined at the end of the 1, 5 or 10-year periods (or
fractional portion thereof).
Regardless of the method used, past performance is not necessarily
indicative of future results, but is an indication of the return to shareholders
only for the limited historical period used.
Comparisons and Advertisements
To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements regarding the Fund may
discuss yield or total return for the Fund as reported by various financial
publications. Advertisements may also compare yield or total return to yield or
total return as reported by other investments, indices, and averages. The
following publications, indices, and averages may be used:
JSE All Shares Index
JSE All Bond Index
JSE Industrial Index
-17-
<PAGE>
Lipper Mutual Fund Indices
Lipper Mutual Fund Performance Analysis
Morgan Stanley Capital International Emerging Markets Free Index
Morningstar, Inc.
The Fund may also from time to time along with performance advertisements,
present its investments, as of a current date, in the form of the "Schedule of
Investments" included in the Semi-Annual and Annual Reports to the shareholders
of the Trust.
-18-
<PAGE>
PART C
OTHER INFORMATION
Item 23. EXHIBITS
(a) ARTICLES OF INCORPORATION:
(i) Agreement and Declaration of Trust dated December 30, 1998,
and
(ii) Certificate of Trust dated December 30, 1998 - Incorporated
by reference to the Trust's Registration statement filed on
January 28, 1999.
(b) BY-LAWS:
- Incorporated by reference to the Trust's Registration statement
filed on January 28, 1999.
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITIES HOLDERS:
Not Applicable.
(d) INVESTMENT ADVISORY CONTRACTS:
(i) Form of Investment Advisory Agreement between the Registrant
and RISA Investment Advisers, LLC - Incorporated by
reference to the Trust's Registration statement filed on
January 28, 1999.
(ii) Form of Sub-Investment Advisory Agreement between RISA
Investment Advisers, LLC and African Harvest Asset Managers
(Proprietary) Limited - Incorporated by reference to the
Trust's Registration statement filed on January 28, 1999.
(e) UNDERWRITING CONTRACTS:
(i) To be filed by amendment.
(f) BONUS OR PROFIT SHARING CONTRACTS:
Not Applicable.
(g) CUSTODIAN AGREEMENTS:
To be filed by amendment.
(h) OTHER MATERIAL CONTRACTS:
(i) Form of Transfer Agent Agreement with PFPC Inc.
To be filed by amendment.
(ii) Form of Accounting Services Agreement with PFPC Inc.
To be filed by amendment.
(iii) Form of Administration Agreement with PFPC Inc.
To be filed by amendment.
<PAGE>
(i) LEGAL OPINION:
To be filed by amendment.
(j) OTHER OPINIONS:
To be filed by amendment.
(k) OMITTED FINANCIAL STATEMENTS:
Not applicable.
(l) INITIAL CAPITAL AGREEMENTS:
To be filed by amendment.
(m) PLANS UNDER RULE 12b-1:
Not Applicable.
(n) FINANCIAL DATA SCHEDULE:
Not Applicable.
(o) RULE 18f-3 PLAN:
Not Applicable.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND:
None.
ITEM 25. INDEMNIFICATION
Under the terms of the Delaware Business Trust Act and the Registrant's
Agreement and Declaration of Trust and By-Laws, no officer or trustee of the
Trust shall have any liability to the Trust or its shareholders, except to the
extent such limitation of liability is precluded by Delaware law, the Agreement
and Declaration of Trust, or the By-Laws.
Subject to the standards and restrictions set forth in the Trust's
Agreement and Declaration of Trust, the Delaware Business Trust Act, section
3817, permits a business trust to indemnify and hold harmless any trustee,
beneficial owner, or other person from and against any and all claims and
demands whatsoever. Section 3803 protects a trustee, when acting in such
capacity, from personal liability to any person other than the business trust or
a beneficial owner for any act, omission, or obligation of the business trust or
any trustee thereof, except as otherwise provided in the Agreement and
Declaration of Trust.
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<PAGE>
The Agreement and Declaration of Trust provides that the Trustees shall not
be responsible or liable in any event for any neglect or wrong-doing of any
officer, agent, employee, Manager or Principal Underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee.
Subject to the provisions of the By-Laws, the Trust, out of its assets, may
indemnify and hold harmless each and every Trustee and officer of the Trust from
and against any and all claims, demands, costs, losses, expenses, and damages
whatsoever arising out of or related to such Trustees' performance of his or her
duties as a Trustee or officer of the Trust; provided that nothing in the
Declaration of Trust shall indemnify, hold harmless or protect any Trustee or
officer from or against any liability to the Trust or any Shareholder to which
he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
The By-Laws provide indemnification for each Trustee and officer who was or
is a party or is threatened to be made a party to any proceeding, by reason of
service in such capacity, to the fullest extent, if it is determined that
Trustee or officer acted in good faith and reasonably believed: (a) in the case
of conduct in his official capacity as an agent of the Trust, that his conduct
was in the Trust's best interests; (b) in all other cases, that his conduct was
at least not opposed to the Trust's best interests; and (c) in the case of a
criminal proceeding, that he had no reasonable cause to believe the conduct of
that person was unlawful. However, there shall be no right to indemnification
for any liability arising by reason of willful duties involved in the conduct of
the Trustee's or officer's office with the Trust. Further, no indemnification
shall be made:
(a) In respect of any proceeding as to which any Trustee or officer shall
have been adjudged to be liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from
an action taken in the person's official capacity; or
(b) In respect of any proceeding as to which any Trustee or officer shall
have been adjudged to be liable in the performance of that person's
duty to the Trust, unless and only to the extent that the court in
which that action was brought shall determine upon application that in
view of all the relevant circumstances of the case, that person is
fairly and reasonably entitled to indemnity for the expenses which the
court shall determine; however, in such case, indemnification with
respect to any proceeding by or in the right of the Trust or in which
liability shall have been adjudged by reason of the disabling conduct
set forth in the preceding paragraph shall be limited to expenses; or
(c) Of amounts paid in settling or otherwise disposing of a proceeding,
with or without court approval, or of expenses incurred in defending a
proceeding which is settled or otherwise disposed of without court
approval, unless the required court approval set forth in the By-Laws
is obtained.
In any event, the Trust shall indemnify each officer and Trustee against
expenses actually and reasonably incurred in connection with the successful
defense of any proceeding to which each such officer or Trustee is a party by
reason of service in such capacity, provided that the Board of Trustees,
including a majority who are disinterested, non-party trustees, also determines
that such officer or Trustee was not liable by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of his or her duties of
office. The Trust shall advance to each officer and Trustee who is made a party
to a proceeding by reason of service in such capacity the expenses incurred by
such person in connection therewith, if (a) the officer or Trustee affirms in
writing that his good faith belief that he has met the standard of conduct
necessary for indemnification, and gives a written undertaking to repay the
amount of advance if it is ultimately determined that he has not met those
requirements, and (b) a determination that the facts then known to those making
the determination would not preclude indemnification.
The Trustees and officers of the Trust are entitled and empowered under the
Declaration of Trust and By-Laws, to the fullest extent permitted by law, to
purchase errors and omissions liability insurance with assets
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of the Trust, whether or not the Trust would have the power to indemnify him
against such liability under the Declaration of Trust or By-Laws.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Trustees, officers, the underwriter or control
persons of the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Adviser - RISA Investment Advisers, LLC: Reference is made to Part B
of this Registration Statement under "Management of the
Fund."
Sub-adviser - African Harvest Asset Managers (Proprietary) Limited:
The information required by this Item 26 will be filed by
amendment.
ITEM 27. PRINCIPAL UNDERWRITERS:
(a) Boe Securities, Inc., the distributor for the Registrant's
securities, does not currently act as distributor for any other
investment companies.
(b) Bufus Outlaw is the President and sole stockholder of Boe
Securities, Inc. Mr. Outlaw is not a Trustee or Officer of the
Fund. Additional information about Boe Securities, Inc. is
incorporated by reference to the Form BD with the Commission
pursuant to the Securities Exchange Act of 1934, as amended under
the File Number indicated:
Boe Securities Distributors, Inc. SEC File No.8-50309
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:
Each account, book or other document required to be maintained by Section
31(a) of the 1940 Act and the Rules (17 CFR 270-31a-1 to 31a-3) promulgated
thereunder, is maintained by the Registrant, except for those maintained by the
Fund's administrator, transfer agent, dividend paying agent and accounting
services agent, PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
ITEM 29. MANAGEMENT SERVICES:
There are no management related service contracts not discussed in Part A
or Part B.
ITEM 30. UNDERTAKINGS
The registrant hereby undertakes to file an amendment to this registration
statement with certified financial statements showing the initial capital
received before accepting subscriptions from more than 25 persons.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Pre-
Effective Amendment No. 1 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Philadelphia, and the State of Pennsylvania, on the 23rd day of March, 1999.
THE RISA INVESTMENT TRUST
By: O. Sam Folin
-------------------------------
O. Sam Folin, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Oliver St. C. Franklin Chairman of the Board of March 23, 1999
- --------------------------- Trustees
Oliver St.C. Franklin
O. Sam Folin Trustee, President and March 23, 1999
- --------------------------- Chief Financial Officer
O. Sam Folin
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