File No. 333-71325
File No. 811-09211
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. 2 |X|
Post-Effective Amendment No. __ |_|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 2 |X|
HARVEST FUNDS (formerly, The RISA Investment Trust)
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(Exact Name of Registrant as Specified in Charter)
112 Ballymeade Drive, Wilmington, DE 19810
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 545-4050
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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 RISA FUND
Institutional Class Shares
PROSPECTUS DATED OCTOBER 1, 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
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RISK/RETURN SUMMARY......................................................... 1
ADDITIONAL INVESTMENT INFORMATION........................................... 4
INVESTMENT RISKS............................................................ 4
MANAGEMENT OF THE FUND...................................................... 6
PRICING OF FUND SHARES...................................................... 6
PURCHASE OF SHARES.......................................................... 7
SHAREHOLDER ACCOUNTS........................................................ 8
REDEMPTION OF SHARES........................................................ 8
DISTRIBUTION PLAN........................................................... 9
DIVIDENDS, DISTRIBUTIONS AND TAX INFORMATION................................ 10
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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," as described below.
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.
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
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 the Fund's Portfolio with 25 to 35 Names
o Portfolio Reviewed Continuously
o Continually Seeking Growth at an Attractive Price
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.
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The Labor Research Service of South Africa researches and continually
monitors approximately 250 companies which comprise the universe of New
South Africa Companies. Companies must meet more than half of the above
criteria in order to be approved as New South Africa Companies. Companies
not already approved will be submitted to the Labor Research Service for
evaluation. If the company is not approved, the portfolio manager will not
purchase its shares or will remove existing shares from the portfolio.
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 additional risks not
associated with investments in U.S. securities.
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o The Fund is subject to foreign currency risk, which is the risk that
the U.S. dollar value of 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. Generally, when
interest rates rise, the market prices of debt obligations go down. 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
The following table describes the fees and expenses that you may pay if you buy
and hold Institutional Class shares of the Fund.
Shareholder Fees (paid directly from your investment) The RISA Fund
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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
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(as a percentage of average net assets)
Management Fee............................................ 1.25%
Distribution (12b-1) Fees................................. 0.25%
Other Expenses............................................ 1.25% (2)
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Total Annual Fund Operating Expenses ............. 2.75% (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
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$483 $853
If you didn't redeem your shares at the end of these periods, your costs
would be:
1 year 3 years
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$278 $853
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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 net 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 total
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
total 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 foreign issuers often are
less liquid and more volatile than securities of comparable U.S. issuers.
Because the Fund invests primarily in South Africa, it will be subject to
foreign investment risks which include possible political and economic
instability, seizure or nationalization of foreign holdings or the adoption of
governmental restrictions that adversely affect or restrict the payment of
principal and interest on securities to investors located outside of South
Africa.
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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 such as South Africa generally
will be more volatile than the markets of more mature economies; however, such
markets may provide higher rates of return to investors.
Furthermore, 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. Additionally, there is less government
supervision and regulation of exchanges, brokers and issuers in South Africa
than there is in the U.S.
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 which are financial instruments that derive
their performance, at least in part, from the performance of an underlying
asset, 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 or 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
(1) the failure to predict accurately the direction of stock prices, interest
rates, currency movements and other economic factors; (2) 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; (3) the potentially unlimited loss from
investing in futures contracts; and (4) 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.
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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
identified and corrected by January 1, 2000. At this time, 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. Issuers in
countries outside the U.S., such as South Africa, present a greater Year 2000
risk than domestic issuers.
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.
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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 ("NYSE") 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 valued daily in U.S. dollars at the foreign currency
exchange rates prevailing at the close of trading each day. 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. Additionally, if an event were to occur after the value of a
portfolio security was established on a foreign exchange, but before the Fund's
net asset value per share was determined, which was likely to materially change
the net asset value, then the security would be valued using fair value
considerations by the Trustees or their delegates.
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 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)
441-7764 to arrange for payment by wire transfer.
To Open an Account. Send a completed application form by regular mail to
The RISA Fund, c/o PFPC Inc., P.O. Box 8950, Wilmington, DE 19899, or by express
mail to The RISA Fund, c/o PFPC Inc., 400 Bellevue Parkway, W3-F400-01-03,
Wilmington, DE 19809. An application form accompanies this Prospectus.
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) 441-7764 for
instructions and to make specific arrangements before each wire transfer.
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Minimum Initial Investment. The minimum initial investment in the Fund is
$5,000, 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 in good order by the Fund 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 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.
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, W3-F400-01-03, Wilmington, DE 19809
or calling (800) 441-7764.
Shareholder Statements. The Fund will mail a statement at least quarterly
showing all purchases, redemptions and balances in your account. 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
Fund 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 $5,000 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 $5,000 and will be allowed
60 days in which to increase their account balance to $5,000 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) 441-7764. 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: The RISA Fund, c/o PFPC Inc., P.O. Box 8950,
Wilmington, DE 19899-9752, or by
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express mail to The RISA Fund, c/o PFPC Inc., 400 Bellevue Parkway,
W3-F400-01-03, Wilmington, DE 19809. The instructions should include the name of
the Fund, 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) 441-7764 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 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
receipt of redemption instructions but in no event later than 7 days following
such receipt. Amounts redeemed by wire from the Fund are normally wired on the
next business day after receipt of redemption instructions. In no event are
redemption proceeds wired later than 7 days following such receipt. 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 you 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)
441-7764.
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 Investment Company Act of 1940. 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
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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.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan in accordance with Rule 12b-1
under the Investment Company Act of 1940 with respect to the distribution of
Institutional Class shares. The Plan allows the Fund to pay distribution fees
for the sale and distribution of these shares. Because these fees are paid out
of the Fund's assets on an on-going basis, over time these fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges.
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 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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THE RISA FUND
The Fund's Statement of Additional Information ("SAI"), dated October 1,
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
1-800-441-7764.
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
INDEPENDENT ACCOUNTANTS
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 OCTOBER 1, 1999
This Statement of Additional Information ("SAI"), which is not a
prospectus, describes The RISA Fund, a series of Harvest Funds. The SAI should
be read in conjunction with The RISA Fund's current Prospectus dated October 1,
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
W3-F400-01-03
Wilmington, DE 19809
(800) 441-7764
<PAGE>
TABLE OF CONTENTS
Page
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FUND HISTORY AND CAPITAL STOCK............................................ 3
INVESTMENT STRATEGIES AND RISKS........................................... 3
INVESTMENT RESTRICTIONS................................................... 10
MANAGEMENT OF THE FUND.................................................... 11
INVESTMENT ADVISORY AND OTHER SERVICES.................................... 13
ALLOCATION OF PORTFOLIO BROKERAGE......................................... 14
DISTRIBUTION OF FUND SHARES............................................... 15
PURCHASE OF SHARES........................................................ 15
REDEMPTIONS............................................................... 16
TAXATION ................................................................. 16
CALCULATION OF PERFORMANCE DATA........................................... 18
FINANCIAL STATEMENTS...................................................... 20
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FUND HISTORY AND CAPITAL STOCK
Harvest Funds 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, Harvest Funds 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 Harvest Funds which the
Trustees may, from time to time, establish, shall have no preemptive rights. The
shares 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 Harvest Funds. On any matter submitted to a
vote of shareholders, all shares of Harvest Funds 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
Harvest Funds, then only the shareholders of the affected series shall be
entitled to vote on the matter. Harvest Funds' 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 Harvest Funds
as required by the Investment Company Act of 1940 (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 has adopted liquidity guidelines
and delegated 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, (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 by the
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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 the
Fund's 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
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<PAGE>
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 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,
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<PAGE>
although such contracts tend to minimize the risk of loss 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 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.
Risks Associated with 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
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Fund may be required to make 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 Fund engages in futures
strategies 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
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against the price of the underlying security declining. The 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
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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.
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 Associated with Options Transactions. 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, purchase the securities of any one
issuer if, immediately after and as a result of such purchase,
more than 5% of the Fund's total assets would be invested in the
securities of such issuer, or the Fund would own or hold 10% or
more of the outstanding voting securities of such issuer, except
that this 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 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
-10-
<PAGE>
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.
MANAGEMENT OF THE FUND
Under Delaware law, Harvest Funds' 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 Harvest Funds. The Trustees and executive officers of
Harvest Funds, their ages and their principal occupations for the past five
years are listed below. The address of each such person is c/o Harvest Funds,
112 Ballymeade Drive, Wilmington, DE 19810. Trustees who are "interested
persons" as defined in the Investment Company Act are designated with an
asterisk (*).
<TABLE>
<CAPTION>
Position and Office Principal Occupation
Name Age with Harvest Funds During the Past Five Years
---- --- ------------------- --------------------------
<S> <C> <C> <C>
Oliver St. C. Franklin* 53 Chairman of the Board of President, RISA Investment
Trustees Advisers, 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
Chief Financial Officer Investment Advisers, LLC
(1997-Present); Senior Vice Pres.
& Portfolio Manager, Newbold's
Asset Management (12/88 - 6/95)
Carolyn B. Lewis 62 Trustee Consultant, The CBL Group (5/98-
Present); Assistant Director, U.S.
Securities and Exchange
Commission (9/85-3/97)
James L. McDonald 51 Trustee International Policy Analyst, Bread
for the World, (5/98-Present);
Professorial Lecturer, American
University (6/91-8/98)
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Position and Office Principal Occupation
Name Age with Harvest Funds During the Past Five Years
---- --- ------------------- --------------------------
<S> <C> <C> <C>
Denzil Newman 46 Vice President Director and Chief Investment
Officer, African Harvest Asset
Managers (Pty.) Ltd. (1/98-Present);
Fund Manager, Syfrets Managed
Assets (1993-1997); Fund Manager,
Southern Asset Management (1986-
1993)
Norman Van Horn 52 Treasurer Vice President, Director of
Accounting, PFPC Inc.
Marie Levinsky 33 Secretary Vice President/Compliance, RISA
Investment Advisers, LLC (1998-
Present); Marketing Associate,
Newbold's Asset Management
(11/92-9/95)
</TABLE>
Compensation of Trustees and Officers
The Fund pays each Trustee, who is not an "interested person" a $1,000 fee
for each Board of Trustees meeting attended plus 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 September 30, 2000.
<TABLE>
<CAPTION>
Compensation Table
- --------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Person Aggregate Pension or Estimated Annual Total
Position Compensation Retirement Benefits upon Compensation
from Registrant Benefits Accrued Retirement from Registrant
as Part of Fund and Fund Complex
Expenses Paid to Trustees
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oliver St. C. Franklin -0- -0- -0- -0-
Trustee
O. Sam Folin -0- -0- -0- -0-
Trustee
Carolyn B. Lewis $4,000 -0- -0- $4,000
Trustee
James L. McDonald $4,000 -0- -0- $4,000
Trustee
</TABLE>
-12-
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser
Harvest Funds, 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 September 30, 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.
Administrator, Transfer Agent, Accounting Agent and Custodian
PFPC Inc., ("PFPC") 400 Bellevue Parkway, Wilmington, DE 19809, serves as
Administrator, Transfer 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 SEC and state
securities authorities. PFPC performs certain budgeting and financial reporting
and compliance monitoring activities. 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 Harvest Funds. For
administration and accounting services, the Fund has agreed to pay PFPC a fee,
payable monthly and based upon the Fund's average daily net assets, at the
following annual rates:
-13-
<PAGE>
.135% of the Fund's first $250 million of average daily net assets
.10% of the Fund's next $250 million of average daily net assets
.08% of the Fund's next $250 million of average daily net assets
.06% of the Fund's average daily net assets in excess of $750 million
The minimum monthly fee payable to PFPC for administration and accounting
services is $9,500.
For transfer agency services, the Fund has agreed to pay PFPC a monthly
service fee based upon the number of shareholder accounts and transactions. The
Fund's minimum monthly fee service fee is $2,500, exclusive of transaction
charges, out-of-pocket expenses and miscellaneous fees.
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 in
turn 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.
Independent Accountants
The accounts of Harvest Funds are audited each year by
PricewaterhouseCoopers LLP, independent certified public accountants.
Shareholders receive unaudited semi-annual and audited annual reports of Harvest
Funds 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 Harvest
Funds. 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.
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.
-14-
<PAGE>
DISTRIBUTION OF FUND SHARES
Principal Underwriter
BOE Securities, Inc., a registered broker-dealer firm located at 225 South
15th Street, Suite 928, Philadelphia, PA 19102, (the "Distributor") serves as
the principal underwriter of the Fund's shares pursuant to a Distribution
Agreement with Harvest Funds. Under the terms of the Distribution Agreement, the
Distributor agrees to assist in securing purchasers for shares of the Fund. The
Investment Adviser will pay the Distributor $12,000 per annum 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 Harvest Funds or the Fund's shareholders
for losses arising in connection with the sale of Fund shares.
The Distribution Agreement became effective on September 30, 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.
Distribution Plan
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act. Under the Plan, the Fund pays a monthly
fee to the Distributor for undertaking marketing activities and incurring
distribution expenses to promote the sale of Institutional Class shares.
Payments made under the Plan are not tied to the distribution expenses actually
incurred by the Distributor, and such payments may exceed the Distributor's
expenses. Expenses incurred by the Distributor pursuant to the Plan may include,
but are not limited to, commissions paid to broker-dealers who have executed
selling agreements with the Distributor, advertising expenses and the costs of
printing and distributing the Fund's prospectuses and reports used for sales
purposes. The maximum fee which may be paid to the Distributor under the Plan
shall not exceed 0.25% per annum of the average daily net assets of the Fund's
Institutional Class shares. The Board of Trustees has determined that there is a
reasonable likelihood that the Plan will benefit the Institutional Class
shareholders by increasing the assets of the Institutional Class, which could
lead to economies of scale and certain operating efficiencies.
Under its terms, the Plan remains in effect so long as its continuance is
specifically approved at least annually by vote of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan. A quarterly report of the amounts expended by the Distributor pursuant to
the Plan and the purposes for such expenditures must be provided to the Board of
Trustees for their review. The Plan may not be amended to increase materially
the amount to be paid under the Plan without the approval of a majority of the
outstanding Institutional Class shares.
-15-
<PAGE>
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 "Redemption
of 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 trading on 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 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
-16-
<PAGE>
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.
Passive Foreign Investment Companies
If the Fund purchases shares in certain foreign investment 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 disposition of such shares even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest 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 satisfy its distribution requirement and to avoid imposition of the 4%
excise tax. The Fund will make the appropriate tax elections, if possible, and
take any additional 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
-17-
<PAGE>
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:
Yield = 2 [(a-b/cd +1)(6) - 1]
where
a = dividends and interest earned during the period.
-18-
<PAGE>
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
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 Harvest Funds.
-19-
<PAGE>
FINANCIAL STATEMENTS
THE RISA FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 8, 1999
ASSETS:
Cash........................................................ $100,000
Deferred offering costs..................................... 41,448
--------
TOTAL ASSETS............................................ 141,448
LIABILITIES:
Offering costs payable...................................... 41,448
--------
TOTAL LIABILITIES....................................... 41,448
NET ASSETS....................................................... $100,000
========
SHARES OUTSTANDING............................................... 10,000
NET ASSET VALUE PER SHARE........................................ $10.00
NET ASSETS CONSISTED OF THE FOLLOWING AT JULY 8, 1999:
Paid-in-capital............................................. $100,000
--------
NET ASSETS.............................................. $100,000
========
Notes to Financial Statements are an integral part of this Statement.
The RISA Fund
Notes to Financial Statements
1. Organization
The RISA Fund (the "Fund") is an open-end management investment company. The
Fund was established as a Delaware business trust under a Declaration of Trust
dated December 30, 1998. The Fund is authorized to offer an unlimited number of
shares of beneficial interest with a par value of $0.001. The Fund currently
offers one series.
Certain costs incurred and to be incurred in connection with the initial
offering of shares of the Fund, estimated at $41,448 will be paid initially by
the Fund's Adviser, RISA Investment Advisers, LLC. The Fund will reimburse the
Adviser for such costs, which will be deferred and amortized by the Fund over
the period of benefit, not to exceed 12 months from the date the Fund commences
operations. The Fund has no operations to date, other than the sale to RISA
Investment Advisers, LLC of 10,000 shares on July 8, 1999.
-20-
<PAGE>
2. Organizational Costs
The Fund incurred organizational expenses of $34,651, comprised of $6,000 for
auditing, and $28,651 for legal and consulting. The full amount of
organizational expenses were assumed by RISA Investment Advisers, LLC, and the
Fund is not required to reimburse RISA Investment Advisers, LLC.
3. Agreements
Pursuant to an advisory agreement between the Fund and RISA Investment Advisers,
LLC, RISA Investment Advisers, LLC will manage the Fund's business and
investment affairs. As compensation under the Advisory Agreement, RISA
Investment Advisers, LLC will receive from the Fund an advisory fee, which is
computed daily and paid monthly, equal to 1.25% of the Fund's average daily net
assets on an annualized basis. The adviser has voluntarily agreed to waive its
fees and, if necessary, reimburse expenses for the period July 8, 1999 to
December 31, 2000, exceeding the annual rate of 2.00% of average daily net
assets
The Adviser will supervise the activities of the Fund's Sub-Adviser, African
Harvest Asset Managers Ltd., an affiliate of the Investment Adviser. 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.
Pursuant to an Administrative and Accounting Service agreement, the Fund retains
PFPC Inc. ("PFPC"), an indirect wholly-owned subsidiary of PNC Bank N.A., as
Administrator and Accounting Service Agent. In addition, PFPC Trust Company
serves as the Fund's custodian and PFPC serves as transfer and dividend
disbursing agent.
Pursuant to a Distribution Agreement, BOE Securities, Inc. ("BOE"), a registered
broker-dealer firm, serves as the Distributor of the Fund's shares. Under the
terms of the Distribution Agreement BOE agrees to assist in securing purchasers
for shares of the Fund. BOE will receive $12,000 per annum from RISA Investment
Advisers, LLC for distribution of shares of the Fund plus reimbursement of
out-of-pocket expenses.
Report of Independent Accountants
To the Shareholder and Board of Trustees of The RISA Fund:
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The RISA Fund (the
"Fund") at July 8, 1998, in conformity with generally accepted accounting
principles. The financial statements are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
July 19, 1999
-21-
<PAGE>
PART C
OTHER INFORMATION
Item 23. EXHIBITS
(a) ARTICLES OF INCORPORATION:
(i) Agreement and Declaration of Trust dated December 30,
1998 - Incorporated by reference to the Trust's
Registration Statement filed on January 28, 1999.
(ii) Certificate of Trust dated December 30, 1998 - Both
incorporated by reference to the Trust's Registration
Statement filed on January 28, 1999.
(iii) Certificate of Amendment dated September 2, 1999 to the
Certificate of Trust is filed herewith.
(b) BY-LAWS:
Incorporated by reference to the Harvest Fund'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 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
Registration Statement filed on January 28, 1999.
(e) UNDERWRITING CONTRACTS:
(i) Distribution Agreement with BOE Securities Inc. is filed
herewith.
(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.
<PAGE>
(iii) Form of Administration Agreement with PFPC Inc. - To be
filed by amendment.
(i) LEGAL OPINION:
Legal opinion of Pepper Hamilton LLP is filed herewith.
(j) OTHER OPINIONS:
Consent of PricewaterhouseCoopers LLP, the Harvest Fund's
independent accountants, is filed herewith.
(k) OMITTED FINANCIAL STATEMENTS:
Not Applicable.
(l) INITIAL CAPITAL AGREEMENTS:
Subscription Agreement for initial issuance of shares to
RISA Investment Advisers, LLC is filed herewith.
(m) PLANS UNDER RULE 12b-1:
Distribution Plan and Form of Selling Dealer Agreement are
filed herewith.
(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 Harvest Funds (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.
-2-
<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
-3-
<PAGE>
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" and to the Adviser's Form ADV
as filed with the SEC (File No. 801-56613).
Sub-adviser - African Harvest Asset Managers (Proprietary) Limited:
Reference is made to the Sub-adviser's Form ADV as filed
with the SEC (File No. 801-56309).
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 Registrant'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
Not applicable.
-4-
<PAGE>
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. 2 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 7th day of September, 1999.
HARVEST FUNDS
By: /s/ 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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Oliver St. C. Franklin* Chairman of the Board of September 7, 1999
- --------------------------- Trustees
Oliver St. C. Franklin
O. Sam Folin Trustee, President and September 7, 1999
- --------------------------- Chief Financial Officer
O. Sam Folin
Carolyn B. Lewis* Trustee September 7, 1999
- ---------------------------
Carolyn B. Lewis
James L. McDonald* Trustee September 7, 1999
- ---------------------------
James L. McDonald
</TABLE>
*By: O. Sam Folin
----------------------
O. Sam Folin
Attorney-in-Fact (Pursuant to Powers of Attorney filed herewith)
-5-
<PAGE>
EXHIBITS TO PRE-EFFECTIVE AMENDMENT NO. 2
Exhibit No. Description
- ----------- -----------
5 Powers of Attorney
23(a) Certificate of Amendment to Certificate of Trust
23(e) Distribution Agreement with BOE Securities, Inc.
23(i) Legal Opinion of Pepper Hamilton LLP
23(j) Consent of PricewaterhouseCoopers LLP
23(l) Subscription Agreement
23(m) Distribution Plan and Form of Selling Dealer Agreement
-6-
POWER OF ATTORNEY
The undersigned Trustees of The RISA Investment Trust, a Delaware business
trust (the "Trust"), do hereby constitute and appoint O. Sam Folin, President
and Chief Financial Officer of the Trust and Brian S. Vargo, Esquire their true
and lawful agents and attorneys-in-fact, in their name, place and stead, to file
the Trust's Registration Statement on Form N-1A, including all exhibits, or
amendments thereto, with the United States Securities and Exchange Commission,
as such attorneys-in-fact may, from time to time, determine in each of their
sole discretion to be necessary, desirable or appropriate and, to the fullest
extent to which the undersigned might perform the same, to engage in all other
acts and deeds which may be necessary, desirable or appropriate to effect the
foregoing filings upon such terms as such attorneys-in-fact may approve in each
of their sole discretion.
This Power-of-Attorney shall be binding upon each of the Trustees and shall
expire when revoked in writing by a Trustee.
The undersigned Trustees hereby execute this Power of Attorney as of this
21st day of July, 1999.
Name Title
---- -----
Oliver St. C. Franklin Chairman of the
- ----------------------------- Board of Trustees
Oliver St. C. Franklin
O. Sam Folin Trustee
- -----------------------------
O. Sam Folin
Emma Chappell Trustee
- -----------------------------
Dr. Emma Chappell
Carolyn B. Lewis Trustee
- -----------------------------
Carolyn B. Lewis
James L. McDonald Trustee
- -----------------------------
James L. McDonald
EXHIBIT 23(a)
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF TRUST
Pursuant to Title 12, ss.3810(b) of the Delaware Code, THE RISA INVESTMENT
TRUST, a Delaware business trust, (the "Trust") hereby executes the following
Certificate of Amendment:
1. The name of the Trust is THE RISA INVESTMENT TRUST.
2. The Trust hereby amends and restates paragraph 1 of its Certificate of Trust
dated December 30, 1998 to read in its entirety as follows:
1. NAME. The name of the business trust formed hereby is "HARVEST FUNDS."
3. This Certificate of Amendment of the Certificate of Trust has been duly
adopted by a majority of the Trustees.
4. This Certificate of Amendment shall be effective upon filing.
IN WITNESS WHEREOF, the undersigned Trustee has executed this Certificate
on the 2nd day of September, 1999.
By: /s/ Oliver St. C. Franklin
--------------------------------
Oliver St. C. Franklin, Chairman
EXHIBIT 23(e)
HARVEST FUNDS
BOE SECURITIES, INC.
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of September 7,
1999, between HARVEST FUNDS, a Delaware business trust (the "Trust"), having its
principal place of business in Wilmington, Delaware, and BOE SECURITIES, INC., a
corporation organized under the laws of the Commonwealth of Pennsylvania (the
"Distributor"), having its principal place of business in Philadelphia,
Pennsylvania.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company;
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest ("Shares"), par value $0.01 per share, and has registered
the offer and sale of the Shares under the Securities Act of 1933 (the "1933
Act");
WHEREAS, the Trust is further authorized to issue separate series of Shares
("Series"), each Share of a Series shall represent an undivided interest in the
assets, subject to the liabilities, allocated to such Series, and each Series
shall have a separate investment objective and separate investment policies;
WHEREAS, as of the date of this Agreement, the Trust has established one
Series, The RISA Fund, issuing an "Institutional" class of Shares (subject to no
sales or distribution charges), and the Trust may establish additional Series
and/or classes of Shares in the future;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, the Trust wishes to employ the services of the Distributor for the
purpose of selling and distributing the Trust's Shares, such employment to take
effect as of the date first written above; and
WHEREAS, the Distributor wishes to provide distribution services to the
Trust as set forth below;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, intending to be legally bound the parties agree as follows:
1. Sale of Shares. During the term of this Agreement, the Trust grants to
the Distributor the right to sell on its behalf Shares of each Series listed on
Schedule A hereto, subject to the registration requirements of the 1933 Act and
the laws governing the sale of securities in various states (the "Blue Sky
Laws"), under the terms and conditions set forth herein. In connection
therewith, the Distributor (i) shall have the right to sell, as agent on behalf
of the Trust, Shares authorized for issuance and registered under the 1933 Act
and qualified for sale under Blue Sky Laws; and (ii) shall sell such Shares only
in compliance with the terms set forth in the Trust's then currently effective
registration statement, with any Plan of Distribution as may be in effect from
time to time for any Series, and with any limitations as may be imposed from
time
<PAGE>
to time by the Board of Trustees of the Trust. The Distributor is not obligated
to sell any specific number of Shares.
2. Selling Dealer Agreements. Subject to the supervisory authority of the
Trust's Board of Trustees, the Distributor may enter into selling dealer
agreements with selected dealers and others ("Selling Dealers") for the
provision of distribution services related to the sale of Shares as well as
other shareholder services as may be agreed by the affected parties upon terms
and conditions consistent with the provisions of this Agreement. In entering
into such selling agreements, the Distributor will act only on its own behalf,
as principal. Each agreement with a Selling Dealer shall provide that such
Selling Dealer shall act as principal and not as agent of the Trust.
3. Sale of Shares by the Trust. The rights granted to the Distributor shall
be non-exclusive in that the Trust reserves the right to sell its Shares to
investors on applications received and accepted by the Trust. Further, the Trust
reserves the right to issue Shares in connection with (a) the merger or
consolidation of the assets of, or acquisition by the Trust through purchase or
otherwise, with any other investment company, trust or personal holding company;
(b) the payment or reinvestment of dividends or distributions; or (c) any offer
of exchange permitted by Section 11 of the 1940 Act.
4. Shares Covered by this Agreement. This Agreement shall apply to all
Shares of all Series of the Trust listed upon Schedule A.
5. Public Offering Price. Except as otherwise noted in the Trust's current
Prospectus (the "Prospectus") or Statement of Additional Information (the "SAI")
with respect to each Series and each class of Shares, all Shares sold to
investors by the Distributor or the Trust will be sold at the public offering
price without a sales load. The public offering price for all accepted
subscriptions will be the net asset value per Share, determined in the manner
described in the Trust's current Prospectus or SAI with respect to the
applicable Series or class. The Trust shall in all cases receive the net asset
value per Share on all such sales.
6. Suspension of Sales. If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further orders
for Shares shall be processed by the Distributor except such unconditional
orders placed with the Distributor before it had knowledge of the suspension. In
addition, the Trust reserves the right to suspend sales and the Distributor's
authority to process orders for Shares on behalf of the Trust if, in the
judgment of the Trust, it is in the best interests of the Trust to do so.
Suspension will continue for such period as may be determined by the Trust. In
addition, the Trust and Distributor reserve the right to reject any purchase
order.
7. Solicitation of Sales. In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts, consistent
with its other business, to secure purchasers for Shares of the Trust. This
shall not prevent the Distributor from entering into like arrangements
(including arrangements involving the payment of underwriting commissions) with
other issuers.
8. Authorized Representations. The Distributor is not authorized by the
Trust to give any information or to make any representations other than those
contained in the appropriate registration statements, Prospectuses or SAI's
filed with the Securities and Exchange Commission under the 1933 Act (as those
registration statements, Prospectuses and SAI's may be amended from time to
time), or contained in shareholder reports or other material that may be
prepared by or on behalf of the Trust for the Distributor's use. This shall not
be construed to prevent the Distributor from preparing and distributing, in
compliance with applicable laws and regulations, sales literature or other
material as it may deem appropriate. Distributor will furnish or cause to be
furnished copies of such sales literature or other material to the President of
the Trust or his designee and will provide that designee with a reasonable
opportunity to
2
<PAGE>
comment on it. Distributor agrees to take appropriate action to cease using such
sales literature or other material to which the Trust reasonably objects as
promptly as practicable after receipt of the objection.
9. Registration of Shares. The Trust agrees that it will take all actions
necessary to register Shares under the 1933 Act (subject to necessary approval,
if any, of its shareholders) and qualify Shares for sale in such states as
determined by the Trust's Board of Trustees so that there will be available for
sale the number of Shares the Distributor may reasonably be expected to sell.
The Trust will at all times keep the Distributor advised of all States in which
the Shares are qualified for sale. The Trust shall furnish to the Distributor
copies of all information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the distribution
of Shares of each Series of the Trust.
10. Repurchase of Shares. The Distributor as agent and for the account of
the Trust may repurchase Shares offered for resale to it and redeem such Shares
at their net asset value.
11. Expenses, Compensation and Reimbursement.
(a) The Trust shall pay all fees and expenses:
(i) in connection with the preparation, setting in type and filing
of any registration statement, Prospectus and SAI under the 1933
Act, and any amendments thereto, for the registration of the
Shares;
(ii) in connection with the qualification of Shares for sale in the
various states in which the Trust's Board of Trustees shall
determine it advisable to qualify such shares for sale
(including registering the Trust or Series as a broker or
dealer, or any officer of the Trust as agent or salesperson, in
any state);
(iii) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Trust in their
capacity as such; and
(iv) of preparing, setting in type, printing and mailing
Prospectuses, SAI's, and any supplements thereto, sent to
existing shareholders.
(b) The Distributor shall pay costs of:
(i) advertising and sales literature used in connection with the
offering of Shares for sale to the public including, but not
limited to the following: public relations services, sales
presentations, media charges, preparation, printing and mailing
of advertising and sales literature, data processing necessary
to support a distribution effort, printing and mailing
prospectuses and distribution and shareholder servicing
activities of brokers/dealers and other financial institutions;
and
(ii) filing fees required by regulatory authorities for sales
literature and advertising materials and any additional
out-of-pocket expenses incurred in connection with these and any
other costs of distribution.
(c) In addition to the services described above, Distributor will provide
services including assistance in the production of marketing and
advertising materials for the sale of the Shares and their review for
compliance with applicable regulatory requirements.
3
<PAGE>
(d) In connection with the services to be provided by the Distributor
under this Agreement, the Distributor shall receive:
(i) from the Trust, in connection with the sale and distribution of
the Shares, such payments as shall be authorized to be paid by
the Trust pursuant to any Plan of Distribution that may be
adopted by the Trust in accordance with Rule 12b-1 under the
1940 Act;
(ii) from the Trust's investment adviser, RISA Investment Advisers,
LLC ("RISA Advisers"), reimbursement for fees and expenses
incurred by the Distributor in connection with the sale and
distribution of Shares to include, without limitation, the fees
and expenses detailed in Section 11(b) above; and
(iii) from RISA Advisers, a distribution fee in the amount of $1,000
per month, payable monthly in arrears on the fifteenth (15th)
day after the end of each calendar month.
12. Indemnification.
(a) The Trust agrees to indemnify and hold harmless the Distributor and
each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933
Act (each an "Indemnified Person" for purposes of this Section 12(a))
against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss,
liability, claim, damages, or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person
acquiring any Shares, based upon the 1933 Act or any other statute or
common law, alleging any wrongful act of the Trust or any of its
employees or representatives, or based upon the grounds that the
registration statements, Prospectuses, SAI's, shareholder reports or
other information filed or made public by the Trust (as from time to
time amended) included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in
order to make the statements not misleading. However, the Trust does
not agree to indemnify any Indemnified Person or hold it harmless to
the extent that the statement or omission was made in reliance upon,
and in conformity with, information furnished to the Trust in writing
by or on behalf of any Indemnified Persons. In no case (i) is the
indemnity of the Trust in favor of any Indemnified Person to be deemed
to protect any Indemnified Person against any liability to the Trust
or its security holders to which any Indemnified Person would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement,
or (ii) shall the Trust be liable under its indemnity agreement
contained in this Section 12(a) with respect to any claim made against
any Indemnified Person unless such person shall have notified the
Trust in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the
nature of the claim shall have been served upon such person or after
such person shall have received notice of service on any designated
agent. However, except to the extent the Trust is harmed thereby,
failure to notify the Trust of any claim shall not relieve the Trust
from any liability which it may have to any Indemnified Person against
whom such action is brought other than on account of its indemnity
agreement contained in this Section 12(a). The Trust shall be entitled
to participate at its own expense in the defense, or, if it so elects,
to assume the defense of any suit brought to enforce any claims, but
if the Trust elects to assume the defense, the defense shall be
conducted by counsel
4
<PAGE>
chosen by it and satisfactory to each Indemnified Person who is a
defendant in the suit. In the event the Trust elects to assume the
defense of any suit and retain counsel, each Indemnified Person who is
a defendant in the suit shall bear the fees and expenses of any
additional counsel retained by them. If the Trust does not elect to
assume the defense of any suit, it will reimburse each Indemnified
Person who is a defendant in the suit, for the reasonable fees and
expenses of one counsel retained by them. The Trust agrees to notify
the Distributor promptly of the commencement of any litigation or
proceedings against the Trust or any of its officers or Trustees in
connection with the issuance or sale of any of the Shares.
(b) The Distributor also covenants and agrees that it will indemnify and
hold harmless the Trust and each of its trustees and officers and each
person, if any, who controls the Trust within the meaning of Section
15 of the 1933 Act (each an "Indemnified Person" for purposes of this
Section 12(b)), against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any
alleged loss, liability, damages, claim or expense and reasonable
counsel fees incurred in connection therewith) arising by reason of
any person acquiring any Shares, based upon the 1933 Act or any other
statute or common law, alleging any wrongful act of the Distributor or
any of its employees or representatives, or alleging that the
registration statements, Prospectuses, SAI's, shareholder reports or
other information filed or made public by the Trust (as from time to
time amended) included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in
order to make the statements not misleading, insofar as the statement
or omission was made in reliance upon, and in conformity with,
information furnished in writing to the Trust by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in
favor of any Indemnified Person to be deemed to protect any
Indemnified Person against any liability to which such person would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement,
or (ii) shall the Distributor be liable under its indemnity agreement
contained in this Section 12(b) with respect to any claim made against
any Indemnified Person unless such person shall have notified the
Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the
nature of the claim shall have been served upon such person or after
such person shall have received notice of service on any designated
agent. However, failure to notify the Distributor of any claim shall
not relieve the Distributor from any liability which it may have to
any Indemnified Person against whom the action is brought other than
on account of its indemnity agreement contained in this Section 12(b).
In the case of any notice to the Distributor, it shall be entitled to
participate, at its own expense, in the defense, or, if it so elects,
to assume the defense of any suit brought to enforce any claims, but
if the Distributor elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to each Indemnified
Person who is a defendant in the suit. In the event the Distributor
elects to assume the defense of any suit and retain counsel, each
Indemnified Person who is a defendant in the suit, shall bear the fees
and expenses of any additional counsel retained by them. If the
Distributor does not elect to assume the defense of any suit, it will
reimburse each Indemnified Person who is a defendant in the suit for
the reasonable fees and expenses of one counsel retained by them. The
Distributor agrees to notify the Trust promptly of the commencement of
any litigation or proceedings against it in connection with the issue
and sale of any of the Shares.
5
<PAGE>
13. Liability of the Distributor. The Distributor shall not be liable for
any damages or loss suffered by the Trust in connection with the matters to
which this Agreement relates, except for damage or loss resulting from the
willful misfeasance, bad faith, reckless disregard or gross negligence on the
Distributor's part in the performance of its duties under this Agreement.
14. Acts of God, etc. The Distributor shall not be liable for any delays or
errors occurring by reason of circumstances not reasonably foreseeable and
beyond its control, including but not limited to acts of civil or military
authority, national emergencies, work stoppages, fire, flood, catastrophe, acts
of God, insurrection, war, riot or failure of communication or power supply. In
addition, in the event of equipment breakdowns which are (i) beyond the
reasonable control of the Distributor and (ii) not primarily attributable to the
failure of the Distributor to reasonably maintain or provide for the maintenance
of such equipment, the Distributor shall, at no additional expense to the Trust,
take reasonable steps in good faith to minimize service interruptions but shall
have no liability with respect thereto.
15. Effectiveness, Termination, etc. This Agreement shall become effective
as of the date first written above, and unless terminated as provided herein,
shall continue in force for two (2) years from the date of its execution and
thereafter from year to year, provided continuance is approved at least annually
by either (i) the vote of a majority of the trustees of the Trust, or by the
vote of a majority of the outstanding voting securities of the Trust, and (ii)
the vote of a majority of those trustees of the Trust who are not interested
persons of the Trust and who are not parties to this Agreement or interested
persons of any party, cast in person at a meeting called for the purpose of
voting on the approval. This Agreement shall automatically terminate in the
event of its assignment. As used in this Section 15, the terms "vote of a
majority of the outstanding voting securities," "assignment" and "interested
person" shall have the respective meanings specified in the 1940 Act and the
rules enacted thereunder as now in effect or as hereafter amended. In addition
to termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated without the payment of any penalty by
vote of a majority of the trustees of the Trust who are not interested persons
of the Trust, or by vote of a majority of the outstanding voting securities of
the Trust, on not more than sixty (60) days' written notice to the Distributor.
This Agreement may be terminated by the Distributor upon not less than sixty
(60) days' prior written notice to the Trust.
16. Amendment. The Distributor and the Trust shall regularly consult with
each other regarding the Distributor's performance of its obligations and its
compensation under the foregoing provisions. In connection therewith, the Trust
shall submit to the Distributor, at a reasonable time in advance of filing with
the SEC, copies of any amended or supplemented registration statement of the
Trust (including exhibits) under the 1933 Act and the 1940 Act and, of a
reasonable time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or service offered by the
Trust. Any change in such materials that would require any change in
Distributor's obligations under this Agreement shall be subject to the
Distributor's approval, which shall not be unreasonably withheld. In the event
that a change in such documents or in the procedures contained therein increases
the cost or potential liability to the Distributor in performing its obligations
hereunder by more than an insubstantial amount, the Distributor shall be
entitled to receive reasonable compensation therefor.
This Agreement may be amended at any time by mutual consent of the parties,
provided that such consent of the Trust shall have been approved (i) by the
Trustees of the Trust, or by a vote of a majority of the outstanding voting
securities of the Trust, and (ii) by vote of a majority of the Trustees of the
Trust who are not interested persons of the Distributor or of the Trust cast in
person at a meeting called for the purpose of voting on such amendment.
6
<PAGE>
17. Notice. Any notice given by a party under this Agreement shall be given
in writing addressed and hand delivered or sent by registered or certified mail,
postage prepared, to the other party to this Agreement at the address designated
by such party for receipt of notices. Until further notice pursuant to this
Agreement, each party's address for receipt of notices shall be the address set
forth on the signature page of this Agreement.
18. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
19. Governing Law. To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws (without regard,
however, to laws as to conflicts of law) of the Commonwealth of Pennsylvania.
20. Shareholder Liability. Distributor acknowledges that it has received
notice of and accepts the limitations of liability set forth in the Trust's
Agreement and Declaration of Trust. Distributor agrees that the Trust's
obligations hereunder shall be limited to the Trust and its assets, and that
Distributor shall have recourse solely against the assets of the Series with
respect to which the Trust's obligations hereunder relate and shall have no
recourse against the assets of any other Series or against any shareholder,
Trustee, officer, employee, or agent of the Trust.
21. Compliance with Laws. The Distributor represents that it is registered
as a broker-dealer under the 1934 Act and a member in good standing of the NASD
and agrees to maintain such registration and membership throughout the terms of
this Agreement. The Distributor shall comply with all applicable provisions of
the 1940 Act, the 1933 Act, the 1934 Act and other Federal and state laws in
connection with the sale of the Shares.
22. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed in two
counterparts, each of which taken together shall constitute one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HARVEST FUNDS
By: /s/ Oliver St. C. Franklin
--------------------------------
Oliver St. C. Franklin, Chairman
BOE SECURITIES, INC.
By: /s/ Bufus Outlaw
--------------------------------
Bufus Outlaw, President
Agreement to expense reimbursement
and payment of monthly distribution fee to
BOE Distributors, Inc. as Distributor:
RISA INVESTMENT ADVISERS, LLC
as Investment Advisor
By: /s/ O. Sam Folin
-------------------------------
O. Sam Folin, Managing Director
Date: September 7, 1999
-----------------
8
<PAGE>
DISTRIBUTION AGREEMENT
SCHEDULE A
HARVEST FUNDS
Series and Class Listing
The RISA Fund
- - Institutional Class Shares
EXHIBIT 23(i)
September 7, 1999
Harvest Funds
112 Ballymeade Drive
Wilmington, DE 19810
Re: Registration Statement on Form N-1A
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Harvest Funds (the "Trust"), a business trust
formed and existing under the Delaware Business Trust Act (the "DBTA") and
registered as an open-end management company under the Investment Company Act of
1940 (the "1940 Act"), in connection with the offer and sale by the Trust to the
public of an indefinite number of shares of beneficial interest, $0.01 par value
per share, of the Institutional Class of the RISA Fund series of shares of the
Trust (the "RISA Fund Shares").
As counsel to the Trust, you have requested that we render the opinion set
forth in this letter, and we are furnishing this opinion letter pursuant to Item
23(i) of Form N-1A under the 1933 Act.
The Trust's Agreement and Declaration of Trust dated as of December 30,
1998, (the "Trust Agreement") authorizes the Trust to issue an unlimited number
of shares of beneficial interest, $0.01 par value per share, of the Trust (the
"Shares"), authorizes the Board of Trustees of the Trust to designate series and
classes of Shares and to allocate Shares among the series and classes so
designated, and authorizes the Trust to issue Shares without issuing
certificates representing such Shares.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of (i) the Trust's Registration Statement on Form N-1A (1933
Act Registration No. 333-71325 and 1940 Act File No. 811-09211) filed with the
U.S. Securities and Exchange Commission (the "Commission") on January 28, 1999,
Pre-Effective Amendment No. 1 thereto filed with the Commission on March 23,
1999, and Pre-Effective Amendment No. 2 thereto which is being filed with the
Commission on September 7, 1999 (the "Registration Statement"),
<PAGE>
The RISA Investment Trust
Page 2
September 7, 1999
(ii) the Trust's Notification of Registration on Form N-8A filed with the
Commission on January 28, 1999 under the 1940 Act, (iii) the Certificate of
Trust of the Trust dated December 30, 1998, as amended by a Certificate of
Amendment dated September 2, 1999, both as filed with the Delaware Secretary of
State pursuant to the DBTA, (iv) the Trust Agreement, (v) the Trust's By-Laws,
(vi) certain resolutions of the Board of Trustees relating to the designation
and the offer, sale and issuance of the RISA Fund Shares, and (vii) such other
documents as we have deemed necessary or appropriate for purposes of rendering
the opinion set forth in this letter.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, and the authenticity of all
documents submitted to us as certified or photostatic copies. As to any facts
material to the opinion expressed in this letter that we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Trust. In addition, we have assumed
that (i) the Trust will remain a validly subsisting business trust under the
DBTA, registered as an open-end management company under the 1940 Act, (ii) the
registration under the 1933 Act of the offer and sale of an indefinite number of
the RISA Fund Shares will become and remain effective, (iii) the Trust will
offer, sell and issue the RISA Fund Shares in compliance with Section 5(b) of
the 1933 Act and the 1940 Act and as described in the Registration Statement,
and (iv) the Trust will timely file a notice pursuant to Rule 24f-2 under the
1940 Act and pay in full the fee due in connection therewith with respect to the
RISA Fund Shares sold in each fiscal year hereafter.
The law covered by this opinion letter is limited to the laws of the State
of Delaware and the federal laws of the United States of America.
We have rendered the opinion set forth in this letter with respect to laws
and regulations presently in effect. We assume no obligation to advise you of
any changes in law or regulation that may hereafter occur, whether such changes
are retroactively or prospectively applied, or to update this opinion letter in
any fashion to reflect any facts or circumstances that hereafter come to our
attention.
Based upon and subject to the foregoing examination, information,
assumptions and qualifications, we are of the opinion that the RISA Fund Shares,
when sold and issued, will be legally outstanding, fully-paid, and
non-assessable shares of beneficial interest of the Trust.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the reference to this firm in the
prospectus filed as part of the Registration Statement. In giving this consent,
we do not admit that we are in the category of
<PAGE>
The RISA Investment Trust
Page 3
September 7, 1999
persons whose consent is required under Section 7 of the 1933 Act and the rules
and regulations of the Commission thereunder.
As counsel to the Trust, we have furnished this opinion letter to you in
connection with the filing of the Registration Statement. Except as provided in
the immediately preceding paragraph, this opinion letter may not be used,
circulated, quoted or otherwise referred to for any purpose or relied upon by
any other person without the express written permission of this firm.
Very truly yours,
/s/ PEPPER HAMILTON LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in the Prospectus and Statement of Additional
Information constituting parts of this Pre-Effective Amendment No. 2 to the
Registration Statement (File No. 333-71325) and Amendment No. 2 to the
Registration Statement (File No. 811-09211) of The RISA Fund (the "Fund"), a
series of the Harvest Funds (formerly The RISA Investment Trust) on Form N-1A
under the Securities Act of 1933 and the Investment Company Act of 1940,
respectively, of our report dated July 19, 1999 on our audit of the statement of
assets and liabilities as of July 8, 1999 of the Fund, which is included in the
Pre-Effective Amendment to the Registration Statement. We also consent to the
reference to our Firm under the caption "Investment Advisory and Other Services
- - Independent Accountants" and "Financial Statements" in the Statement of
Additional Information.
/s/ PricewaterhouseCoopers LLC
Philadelphia, Pennsylvania
September 7, 1999
Exhibit 23(l)
SUBSCRIPTION AGREEMENT
July 8, 1999
The RISA Investment Trust
225 South 15th Street, Suite 930
Philadelphia, PA 19102
Gentlemen:
RISA Investment Advisers, LLC hereby agrees to purchase 10,000 shares of
beneficial interest (the "Shares") of The RISA Investment Trust (the "Trust") at
$10.00 per share for an aggregate purchase price of $100,000. The Trust, by its
acknowledgment below, acknowledges receipt of funds in the amount of $100,000 in
full payment of the Shares.
RISA Investment Advisers, LLC further advises that in making this purchase,
which represents the initial capital of The RISA Investment Trust, such purchase
is for investment purposes only and without any present intention of further
distributing such shares or presenting them for redemption or repurchase.
Sincerely,
RISA INVESTMENT ADVISERS, LLC
By: /s/ O. Sam Folin
-------------------------
Name: O. Sam Folin
Title: Managing Director
Attest:
The RISA Investment Trust
By: /s/ Oliver St. C. Franklin
-----------------------------
Name: Oliver St. C. Franklin
Title: Chairman
EXHIBIT 23(m)
DISTRIBUTION PLAN OF
HARVEST FUNDS
The RISA Fund
Institutional Class Shares
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Harvest Funds
(the "Trust") for Institutional class shares of The RISA Fund series (the
"Fund"). The Plan has been approved by a majority of the Trust's Board of
Trustees, including a majority of the Trustees who are not interested persons of
the Trust and who have no direct or indirect financial interest in the operation
of the Plan (the "non-interested Trustees"), cast in person at a meeting called
for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees considered the proposed
schedule and nature of payments and terms of the advisory agreement between the
Trust and RISA Investment Advisers, LLC (the "Adviser"), and the Distribution
Agreement between the Trust and BOE Securities, Inc. (the "Distributor"). The
Board of Trustees concluded that the proposed compensation of the Adviser under
the advisory agreement, and of the Distributor under the underwriting agreement
is fair and not excessive. Accordingly, the Board determined that the Plan
should provide for such payments and that adoption of the Plan would be prudent
and in the best interests of the Trust and its shareholders. Such approval
included a determination that in the exercise of their reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Trust, the Fund and its shareholders.
The Provisions of the Plan are:
1. The Fund shall pay from the assets of the Institutional shares a fee to
the Distributor for advertising, marketing and distributing the Fund's
Institutional shares. In exchange for such fee, the Distributor agrees to incur
distribution expenses with respect to the Fund's Institutional shares. For
purposes hereof, "distribution expenses" shall mean expenses incurred for
distribution activities encompassed by Rule 12b-1, including but not limited to,
the printing of prospectuses and reports used for sales purposes, expenses of
preparation of sales literature and related expenses, advertisements, and other
distribution-related expenses, as well as any distribution or service fees paid
to securities dealers or others who have executed a selling agreement with the
Trust or the Distributor, which form of selling agreement shall be approved by
the Trustees, including the non-interested Trustees.
2. The maximum aggregate fee which may be paid by the Trust to such
Distributor pursuant to Paragraph 1 herein shall be 0.25% per annum of the
average daily net assets of the Fund's Institutional shares. Said reimbursement
shall be made monthly by the Trust to the Distributor.
<PAGE>
3. It is contemplated by the Plan that the Adviser, from time to time, may
make payments to third parties out of its management fee, not to exceed the
amount of that fee, including payments of fees for shareholder servicing and
transfer agency functions. If such payments are deemed to be indirect financing
of any activity primarily intended to result in the sale of Institutional shares
within the context of Rule 12b-1 under the Act, such payments shall be
authorized by this Plan.
4. The Adviser and the Distributor shall collect and monitor the
documentation of payments made under Paragraph 1 above, and shall furnish to the
Board of Trustees of the Trust, for their review, on a quarterly basis, a
written report of the monies paid under the Plan, and shall furnish the Board of
Trustees of the Trust with such other information as the Board may reasonably
request in connection with the payments made under the Plan as to the Trust in
order to enable the Board to make an informed determination of whether the Plan
should be continued.
5. The Plan shall continue in effect for a period of more than one year
only so long as such continuance is specifically approved at least annually by
the Trust's Board of Trustees, including the non-interested Trustees, cast in
person at a meeting called for the purpose of voting on the Plan.
6. The Plan, or any agreements entered into pursuant to the Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of the Trust, or by vote of a majority of the
non-interested Trustees, on not more than sixty (60) days' written notice, and
shall terminate automatically in the event of any act that constitutes an
assignment of the management agreement between the Trust and the Adviser.
7. The Plan and any agreements entered into pursuant to the Plan may not be
amended to increase materially the amount to be spent by the Trust for
distribution pursuant to Paragraph 2 hereof without approval by a majority of
the outstanding Institutional shares.
8. All material amendments to the Plan, or any agreements entered into
pursuant to the Plan, shall be approved by the non-interested Trustees cast in
person at a meeting called for the purpose of voting on any such amendment.
9. So long as the Plan is in effect, the selection and nomination of the
Trust's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
10. This Plan shall take effect on the 1st day of October, 1999.
-2-
<PAGE>
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Trust, the Adviser and the Distributor as evidenced by their
execution hereof.
HARVEST FUNDS
By: /s/ Oliver St. C. Franklin
--------------------------------
Oliver St. C. Franklin, Chairman
RISA Investment Advisers, LLC
By: /s/ O. Sam Folin
--------------------------------
O. Sam Folin, Managing Director
BOE Securities, Inc.
By: /s/ Bufus Outlaw
--------------------------------
Bufus Outlaw, President
-3-
<PAGE>
FORM OF SELLING DEALER AGREEMENT
FOR HARVEST FUNDS
BOE Securities Inc.
225 South 15th Street. Suite 928
Philadelphia, PA 19102
Gentlemen:
We desire to enter into an Agreement with you for the sale of shares of
HARVEST FUNDS, an open-end registered investment company (hereinafter referred
to as the "Company"). You serve as the principal underwriter, as such term is
defined in the Investment Company Act of 1940, as amended, of the Company's
shares, and you are the exclusive agent for the continuous distribution of such
shares pursuant to the terms of a Distribution Agreement between you and the
Company. Unless the context otherwise requires, as used herein the terms
"Prospectus" shall mean the prospectus and related statement of additional
information (the "SAI") incorporated therein by reference, as amended and
supplemented, of each investment portfolio of the Company ("Fund") included in
the then currently effective registration statement (or post-effective amendment
thereto) of the Company, as filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Registration
Statement").
In consideration for the mutual covenants contained herein, it is hereby
agreed that our respective rights and obligations shall be as follows:
1. In all sales of Fund shares to the public, we shall act as dealer for
our own account and in no transaction shall we have any authority to act as
agent for the Company, any Fund, for you or for any other dealer.
2. All orders for the purchase of any Fund shares shall be executed at the
then current public offering price per share and all orders for the redemption
of any Fund shares shall be executed at the net asset value per share, in each
case as described in the Prospectus of such Fund. The minimum initial purchase
order and minimum subsequent purchase order shall be as set forth in the
Prospectus of such Fund. All orders are subject to acceptance or rejection by
you at your sole discretion. Unless otherwise agreed in writing, each
transaction shall be confirmed promptly in writing directly to the customer on a
fully disclosed basis and a copy of each confirmation shall be sent
simultaneously to us. We acknowledge that the Company has reserved the right, at
its discretion and without notice, to suspend the sale of shares or withdraw
entirely the sale of shares of any or all of the Funds.
3. In ordering shares of any Fund, we shall rely solely and conclusively on
the representations contained in the Prospectus of such Fund. We agree that we
shall not offer or sell shares of any Fund except in compliance with all
applicable federal and state securities laws and the rules and regulations of
applicable regulatory agencies or authorities. In connection with
<PAGE>
offers to sell and sales of shares of each Fund, we agree to deliver or cause to
be delivered to each person to whom any such offer or sale is made, at or prior
to the time of such offer or sale, a copy of the Prospectus and, upon request,
the SAI of such Fund. We further agree to obtain from each customer to whom we
sell Fund shares any taxpayer identification number certification required under
Section 3406 of the Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations promulgated thereunder, and to provide you or your designee with
timely written notice of any failure to obtain such taxpayer identification
number certification in order to enable the implementation of any required
backup withholding in accordance with Section 3406 of the Code and the
regulations thereunder. Unless otherwise mutually agreed in writing, you shall
deliver or cause to be delivered to each customer who purchases shares of any
Funds from or through us copies of all annual and interim reports, proxy
solicitations, materials, and any other information and materials relating to
such Funds and prepared by or on behalf of you, the Fund or its investment
adviser, custodian, transfer agent or dividend disbursing agent for distribution
to each such customer. You agree to supply us with copies of the Prospectus,
SAI, annual reports, proxy solicitation materials and any such other information
and materials relating to each Fund in reasonable quantities upon request.
4. We shall not make any representations concerning any Fund shares other
than those contained in the Prospectus of such Fund or in any promotional
materials or sales literature furnished to us by you or the Fund. Except as
otherwise provided in Paragraph 3 of this Agreement, we shall not furnish or
cause to be furnished to any person or display or publish any information or
materials relating to any Fund (including, without limitation, promotional
materials and sale literature, advertisements, press release, announcements,
statements, posters, signs or other similar material), except such information
and materials as may be furnished to us by you or the Fund, and such other
information and materials as may be approved in writing by you.
5. In determining the amount of any dealer reallowance payable to us
hereunder, you reserve the right to exclude any sales which you reasonably
determine are not made in accordance with the terms of the applicable Fund
Prospectuses and the provisions of this Agreement.
6. We agree to provide distribution and marketing services in the promotion
and sale of Fund shares and to furnish services and assistance to our customers
who invest in our own Fund shares. For such services, you agree to compensate us
in accordance with the current schedule of dealer compensation that you have
furnished us. We acknowledge that we will only receive compensation with respect
to those Funds that have adopted a 12b-1 plan of distribution and that we will
only receive compensation with respect to a particular Fund so long as the Rule
12b-1 plan for that Fund remains in effect. We further acknowledge that you will
provide to the Company's Board of Trustees, and the Boards of Trustees will
review, at least quarterly, a written report of the amounts expended pursuant to
this Agreement and the purposes for which such expenditures were made. In
connection with such reviews, we will furnish you or your designees with such
information as you or they may reasonably request (including, without
-2-
<PAGE>
limitation, periodic certifications confirming the provision to our customers of
the services described herein), and will otherwise cooperate with you and your
designee (including, without limitation, any auditors designated by you), in
connection with the preparation of reports to the Board of Trustees concerning
this Agreement and the monies paid or payable by you pursuant hereto, as well as
any other reports or filings that may be required by law.
7. The procedures relating to all orders and the handling thereof will be
subject to the terms of the Prospectus of each Fund and your written
instructions to us from time to time. No conditional orders will be accepted. We
agree to place orders with you immediately for the same number of shares and at
the same price as any sales by us. We shall not withhold placing orders received
from customers so as to profit ourselves as a result of such withholding by a
change in the net asset value from that used in determining the offering price
to such customers, or otherwise, provided, however, that the foregoing shall not
prevent the purchase of shares of any Fund by us for our own bona fide
investment. We agree that: (a) we shall not effect any transactions (including,
without limitation, any purchases or redemptions) in any Fund shares registered
in the name of, or beneficially owned by, any customer unless such customer has
granted us full right, power and authority to effect such transactions on his or
her behalf and (b) you, each Fund, each Transfer Agent and your and their
respective officers, directors or trustees, agents, employees and affiliates
shall not be liable for, and shall be fully indemnified and held harmless by us
from and against, any and all claims, demands, liabilities and expenses
(including without limitation, reasonable attorneys fees) which may be incurred
by you or any of the foregoing persons entitled to indemnification from us
hereunder arising out of or in connection with the execution of any transactions
in Fund shares registered in the name of, or beneficially owned by, any customer
in reliance upon any oral or written instructions believed to be genuine and to
have been given by or on behalf of us.
8. (a) We agree to pay for purchase orders of any Fund shares from us in
accordance with the terms of the Prospectus of the applicable Fund. On or before
the settlement date of each purchase order for shares of any Fund, we shall
remit to an account designated by you with the Transfer Agent an amount equal to
the then current public offering price of the shares of such Fund being
purchased. Our dealer reallowance, if any, shall be payable to us on a monthly
basis. If payment for any purchase order is not received in accordance with the
terms of the applicable Fund Prospectus, you reserve the right, without notice,
to cancel the sale and to hold us responsible for any loss sustained as a result
thereof.
9. Certificates for shares sold to us hereunder shall only be issued in
accordance with the terms of each Fund Prospectus upon our customer's specific
request and, upon such request, shall be promptly delivered to us by the
Transfer Agent unless we make other arrangements. However, in making delivery of
such share certificates to us, the Transfer Agent shall have adequate time to
clear any checks drawn for the payment of Fund shares.
10. We hereby represent and warrant to you that:
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a. we are a corporation, partnership or other entity duly organized and
validly existing in good standing under the laws of the jurisdiction in which we
were organized:
b. the execution and delivery of this Agreement and the performance of
the transactions contemplated hereby have been duly authorized by all necessary
action and all other authorization and approvals (if any) required for our
lawful execution and delivery of this Agreement and our performance hereunder
have been obtained; and
c. upon execution and delivery by us, and assuming due and valid
execution and delivery by you, this Agreement will constitute a valid and
binding agreement, enforceable against us in accordance with its terms.
11. We further represent and warrant to you that we are a member of the
NASD and, with respect to any sales in the United States, we agree to abide by
all of the rules and regulations of the NASD, including, without limitation, its
Business Conduct Rules. We agree to comply with all applicable federal and state
laws, rules and regulations. You agree to inform us, upon our request, as to the
states in which you believe the shares of the Funds have qualified for sale
under, or are exempt from the requirements of the respective securities laws of
such states, but you shall have no obligation or responsibility as to our right
to sell shares in any jurisdiction. We agree to notify you immediately in the
event of (a) our expulsion or suspension from the NASD, or (b) our violation of
any applicable federal or state law, rule or regulation arising out of or in
connection with this Agreement or which may otherwise affect in any material way
our ability to act as a dealer in accordance with the terms of this Agreement.
Our expulsion from the NASD will automatically terminate this Agreement
immediately without notice. Our suspension from the NASD for violation of any
applicable federal or state law, rule or regulation will terminate this
Agreement effective immediately upon your written notice to us of termination.
12. In the event that you breach any of the terms and conditions of this
Agreement, you will indemnify us, the Funds, and our affiliates for any damages,
losses, costs and expenses (including reasonable attorneys' fees and expenses)
arising out of or relating to such breach. In the event that we breach any of
the terms and conditions of this Agreement, we will indemnify you and your
affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees and expenses) arising out of or relating to such breach.
13. The names and addresses and other information concerning our customers
are and shall remain our sole property and neither you nor your affiliates shall
use such names, addresses or other information for any purpose except in
connection with the performance of your duties and responsibilities hereunder
and except for servicing and informational mailings relating to the Funds.
Notwithstanding the foregoing, this Paragraph 13 shall not prohibit you or any
of your affiliates from utilizing for any purposes the names, addresses or other
information concerning any of our customers if such names, addresses or other
information is obtained in any
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manner other than from us pursuant to this Agreement. The provisions of this
Paragraph 13 shall survive the termination of this Agreement.
14. By requesting expedited redemption, we agree that you, the Company, the
Transfer Agent, and your and their respective officers, directors or trustees,
agents, employees and affiliates shall not be liable for and shall be fully
indemnified and held harmless by us from and against any and all claims,
demands, liabilities and expenses (including, without limitation, reasonable
attorneys' fees) arising out of or in connection with any expedited redemption
payments.
15. Neither this Agreement nor the performance of the services of the
respective parties hereunder shall be considered to constitute an exclusive
arrangement, or to create a partnership, association or joint venture between
you and us. Neither party hereto shall be, act as, or represent itself as, the
agent or representative of the other, nor shall either party have the right or
authority to assume, create or incur any liability or any obligation of any
kind, express or implied, against or in the name of, or on behalf of, the other
party. This Agreement is not intended to, and shall not, create any rights
against either party hereto by any third party solely on account of this
Agreement. Neither party hereto shall use the name of the other party in any
manner without the other party's prior written consent, except as required by
any applicable federal or state law, rule or regulation, and except pursuant to
any promotional programs mutually agreed upon in writing by the parties hereto.
16. Except as otherwise specifically provided herein, all notices required
or permitted to be given pursuant to this Agreement shall be given in writing
and delivered by personal delivery or by postage prepaid, registered or
certified United States first class mail, return receipt requested, or by telex,
telegram or similar means of same day delivery (with a confirming copy by mail
as provided herein). Unless otherwise notified in writing, all notices sent to
you shall be given or sent to you at your offices, located at 225 South 15th
Street, Suite 928, Philadelphia, PA 19102 and all notices to us shall be given
or sent to us at our address shown below.
17. This Agreement shall become effective only when accepted and signed by
you, and may be terminated at any time by either party hereto upon fifteen (15)
days prior written notice to the other party. Notwithstanding the termination of
this Agreement all unfulfilled obligations, duties and liabilities of either
party to the other as of the date of termination including, without limitation,
all obligations of indemnification of either to the other shall remain the
responsibility of the respective party. This Agreement may be amended only by a
written instrument signed by both the parties hereto and, may not be assigned by
either party without the prior written consent of the other party. This
Agreement constitutes the entire agreement and understanding between the parties
hereto relating to the subject matter hereof and supercedes any and all prior
agreements between the parties hereto relating to the subject matter hereof.
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18. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware, without giving effect to principles
of conflicts of law.
Very truly yours,
--------------------------------------------
Name of Broker-Dealer (Please Print or Type)
--------------------------------------------
--------------------------------------------
Address
Dated:
-------------------------------------
By:
----------------------------------------
Authorized Dealer
Note:
Please sign and return both copies of this
Agreement to BOE Securities, Inc. Upon
acceptance a countersigned copy will be
returned to you for your files.
Accepted:
BOE Securities, Inc.
Date:
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By:
----------------------------------------
Authorized Signature
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