- -------------------------------------------------------------------------------
Message to Shareholders
Dear Valued Shareholder:
We are pleased to send you the Oak Associates Funds' annual report for the year
ended October 31, 1998. These past twelve months have been volatile, but
generally rewarding for investors, and Oak Associates shareholders have
benefited from solid performance. The following pages detail the Funds' past
performance, along with a discussion of our outlook on the markets and economy
for the year ahead. We encourage you to read them to help you stay informed
about your mutual fund investment.
1998 Highlights
Performance -- The past twelve months saw White Oak Growth continuing to receive
favorable media attention due to its long-term performance, especially a strong
5-year annualized return. And Pin Oak's year-to-date performance, compared to
its peers, has resulted in renewed attention from both the press and new
investors at a time when most small and mid-cap funds are struggling.
Asset growth -- As of October 31, 1998, we have grown to a $865 million fund
company, up from $393 million in assets a year ago.
Service Enhancements -- We have made extensive improvements to our web site,
toll-free telephone service, and shareholder communications materials -- all
implemented with an eye on containing Fund expenses.
Tax Efficiency -- As a result of our buy-and-hold strategy and low portfolio
turnover, neither of the Oak Associates Funds had a capital gains distribution
in 1998.
New for 1999
New Red Oak Technology Select Fund* -- In an effort to take advantage of growth
opportunities in the technology sector and to provide shareholders with a
broader array of investment products, the Oak Associates Funds are expected to
introduce the Red Oak Technology Select Fund on December 31, 1998, at an initial
price of $10 per share.
The Fund will seek long-term capital growth by investing primarily in common
stocks of companies which rely extensively on technology in their product
development or operations, or which may be experiencing growth in sales and
earnings driven by technology related products and services.
Improvements at www.oakassociates.com -- In January, we will be enhancing our
web site to offer shareholders expanded Fund information, portfolio manager
commentary and shareholder account access. We encourage you to visit the site
and watch for these upcoming improvements.
1
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Message to Shareholders (concluded)
As always, we thank you for choosing the Oak Associates Funds as part of your
investment portfolio. We appreciate the confidence you have placed in us, and
will strive to continue providing superior investment results and shareholder
services.
Sincerely,
/s/ James D. Oelschlager /s/ Douglas S. MacKay
[PHOTO] [PHOTO]
James D. Oelschlager Douglas S. Mackay
Chief Investment Officer Assistant Portfolio Manager
Portfolio Manager
To Receive a Red Oak Technology Select Investment Kit
Visit our web site at www.oakassociates.com, or call 1-888-462-5386 and
press option #1. Red Oak is expected to be available on December 31, 1998,
at an initial price of $10 per share.
*Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission, and is subject to completion or amendment.
These securities may not be sold nor may offers to buy be accepted prior to the
time the registration statement becomes effective. This shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any state in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities law of
any such state.
2
<PAGE>
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Manager's Discussion of Fund Performance
October 31, 1998
The Year in Review
After a strong first half, the markets endured one of the worst corrections in
recent history, falling more than twenty percent from peak to trough and
reminding investors that things do not always go up in a straight line. The
third quarter correction was painful, but not entirely unexpected, given the
eight great years we have enjoyed since the Persian Gulf War. Fortunately, we
have had a strong rebound from third quarter lows and believe the worst is
behind us.
We would like to make a few points to put the recent correction into
perspective.
The third quarter correction was precipitated by concerns about Russia, Asia,
and Latin America, but proved related to simpler matters; highly leveraged
investments and complex derivative securities. All investors would be wise to
read all they can about the rise and fall of Long Term Capital, a New York based
hedge fund. Things that were never supposed to go wrong did. Mathematically
oriented investment models, known as black boxes in our business, failed, and
sent the markets into a liquidity-driven tailspin. It didn't help that the
leverage employed in this case was nearly one hundred to one. At Oak Associates,
we avoid leverage and steer clear of derivatives, as both have an uncanny way of
forcing short-term action at the least appropriate times.
The recent correction also brought about a significant decline in the valuation
of small cap stocks. Investing in this area of the market does entail higher
risk, but at current levels, valuations appear to be very low. Many stocks in
the Pin Oak Aggressive Stock Portfolio recently sold for as little as ten times
earnings in spite of their strong results and remain at significant discounts to
their long-term growth rates. To us, the main issue is not one of fundamentals,
but of narrow liquidity in an under-served sector of the market. The situation
appears to be improving. Several small cap funds have reopened their doors to
shareholders and we have seen sizeable interest in the Pin Oak portfolio, more
than we have in quite a long time.
We would like to make one final point. Market timing is a loser's game in the
long-run. Short-term trading does not preserve capital, it consumes it. A famous
financial commentator once pointed out that no college dorm or hospital wing has
ever been endowed by a market timer. Corrections are an inevitable occurrence in
investing, and we find that grinding through them is the best path to long-term
investment success.
Our Investment Approach
We believe investing is more of an art form built from experience than a science
built on numbers. Our approach is relatively straightforward. With a keen eye on
interest rates, we try to identify long-term trends in the economy. We then
position our assets in key industries executing on these trends, and allow
things to run their course, making changes rarely and only as needed.
3
<PAGE>
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Manager's Discussion of Fund Performance (continued)
October 31, 1998
In the current environment, we believe that strong, growth industries offer the
most fertile ground for successful investment ideas. Our emphasis at this time
remains on three primary sectors - health care, financial services and
technology. These industries have common elements, a history of innovation and
credit for improving our overall living standards. We believe this trend will
continue, offering investors in these sectors superior returns in the years
ahead.
While valuation is an important element of our investment approach, it is but
one part, and perhaps not as important to us as others. We have learned from
years of investing that good stocks can be both cheap and expensive based on
earnings numbers. On average, we attempt to buy great companies at reasonable
prices, but try not to be religious about anything. In our experience, the key
has been knowing when we have found a winner, and having the courage to hold
onto it during irrational, short-term market fluctuations.
Our View of the Economy Today
We believe the young, "new economy" is both alive and well. Characterized by
strong, productivity-driven growth, large numbers of good paying jobs, low
inflation, and massive technological advancement, we believe the new economy is
here to stay. This economy will experience its moments of peril, but we think
the long-run positive outcomes will prove inevitable.
We are pleased about Federal Reserve Chairman Alan Greenspan's decision to lower
interest rates not once, but twice. We feel further rate cuts may be likely if
signs of a credit crunch persist. With inflation dead, Greenspan should not risk
grounding this young economy with restrictive interest rates.
As mentioned before, pricing power in the economy remains non-existent. Some
industries with the greatest declining prices, like technology, also happen to
be the healthiest. Time and time again, we have heard how Wal-Mart rarely grants
suppliers price increases, which forces these suppliers to grow through their
own productivity gains. In an economy where profits cannot be achieved through
price increases, tech-related capital expenditures will remain a priority item.
We believe this theme has been a driving force behind the health of the American
consumer and the rapid climb of the United States to the top of the global
economic food chain. This trend will be reinforced by the availability of cheap
imports from troubled overseas economies.
Our Two Cents on the Internet
Over the past two decades, the personal computer industry has grown
dramatically, driven by the growth of new applications and the resulting need
for greater and greater speed. Today, the Internet is driving a whole new class
of communications-oriented applications, spawning entire new industries and
reinvigorating competition in
4
<PAGE>
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Manager's Discussion of Fund Performance (continued)
October 31, 1998
industries once believed to be near monopolies, such as telecommunications and
broadcasting. Regulators in Washington D.C. are struggling with decisions on how
to deregulate many industries, increase competition, and bring lower prices to
consumers.
As with the Industrial Revolution, the Internet will create great wealth for a
new class of Carnegies, Mellons and Rockefellers. In fact, the process has
already begun. Unlike the Industrial Revolution, the average individual will
benefit not only as a consumer, but perhaps as an investor as well, thanks to
mutual funds and greater public access to the financial markets.
Looking Ahead
The markets have done very well during the past decade, and based on our
positive outlook for interest rates and the economy, we have every reason to
believe that they will continue to do well in the future.
We point out, however, that markets never move upward in a straight line and it
would be wrong of us to leave the impression that this is the case. Corrections
do happen, and at some point they may last longer and prove to be deeper than
the one we just experienced.
In summary, we remain positive because we are positive. At some point or
another, every investment we make ties back to our belief that we are riding the
coattails of a tremendous new economy. Although fluctuations will occur along
the way, we see continued upward growth for investors with a long-term time
horizon.
White Oak Growth Stock Portfolio
The White Oak Growth Stock Portfolio's performance was solid once again in 1998,
gaining 16.48% for the twelve months ending October 31, 1998. On an annualized
basis since the inception date of August 3, 1992, the Fund has risen 22.08% per
year, compared to a 19.22% annualized gain for the Standard & Poor's 500
Composite Index. Because of White Oak's successful performance over both the
three and five year time periods, along with outstanding tax efficiency and
lower than average operating expenses, it continues to attract favorable media
attention and new investors. Cash flow into the Fund during the year was
positive and steady, and because of the large capitalization of the companies we
invest in, putting the money to work in the existing stock positions was not a
problem.
Performance during the year was broad-based across our favorite sectors, with
several companies doing extremely well. Top performers included Pfizer and Merck
among drug stocks, Morgan Stanley Dean Witter and MBNA in the financial area,
Cisco Systems in networking, Microsoft in software, Ascend Communications in
telecommunications equipment, and Sun Microsystems in computer hardware. A few
holdings - Bankers Trust, Ciena and Parametric Technology - were disappointing
performers, but have rallied well during the latter part of the year. We are
holding onto or adding to these positions in the belief that their long-term
fundamentals appear sound.
5
<PAGE>
- -------------------------------------------------------------------------------
Manager's Discussion of Fund Performance (continued)
October 31, 1998
Valuations in large cap stocks seem expensive compared to small caps,
particularly in technology. We think that some premium is justified with the
belief that the big will only get bigger, and companies like Cisco are going to
continue to dominate in their high growth areas. We continue to add to positions
that have excellent growth potential on a three to five year time horizon, and
are selling only when we believe valuations have become excessive, or a better
growth opportunity exists. This has resulted in portfolio turnover of only 6%
for the year, which in turn has led to no short or long-term capital gain
distribution for the calendar year 1998.
<TABLE>
<CAPTION>
Annualized Annualized Annualized
One Year 3 Year 5 Year Inception to
Return Return Return Date
-------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
White Oak Growth Stock Portfolio(1) 16.48% 23.86% 26.53% 22.08%
S&P 500 Composite Index 22.00% 25.99% 21.30% 19.22%
Lipper Growth Average 9.61% 17.97% 15.66% 15.51%
</TABLE>
Comparison of Change in the Value of a $25,000 Investment in the White Oak
Growth Stock Portfolio, versus the S&P 500 Composite Index, and the Lipper
Growth Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------------------------------
8/31/92 Oct 92 Oct 93 Oct 94 Oct 95 Oct 96 Oct 97 Oct 98
------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
White Oak Growth Stock Portfolio 25,000 27,055 28,026 31,456 47,835 58,039 78,039 90,900
S&P 500 Composite Index 25,000 25,381 29,158 30,283 38,281 47,499 62,746 76,550
Lipper Growth Average 25,000 25,928 30,562 31,210 38,363 45,537 58,123 63,709
</TABLE>
(1) These figures represent past performance. Past performance is no guarantee
of future results. The investment return and principal value of an investment
will fluctuate, so an investor's shares, when redeemed, may be worth more or
less than their original cost.
Pin Oak Aggressive Stock Portfolio
The Pin Oak Aggressive Stock Portfolio gained 12.85% for the one-year period
ending October 31, 1998. Pin Oak has performed extremely well in a market that
was exceptionally poor for small and mid-cap stocks. While other small and
mid-cap mutual funds have been showing negative 1998 performance, Pin Oak's
year-to-date returns have gained recognition in several media "Top Performers"
lists. The annualized return since the Fund's inception
6
<PAGE>
- -------------------------------------------------------------------------------
Manager's Discussion of Fund Performance (concluded)
October 31, 1998
of August 3, 1992, was 13.43%, compared to 19.22% for the Standard & Poor's 500
Composite Index for the same period.
Many of the smaller cap holdings in the Fund performed quite well, such as
International Network Services in networking consulting, Express Scripts in
pharmaceutical management, Xilinx in semiconductors, and Mutual Risk in
insurance. Larger cap holdings, which were purchased as smaller cap stocks and
held due to their continuing growth prospects, also helped boost performance.
These include Cisco Systems in networking and Ascend in telecommunications
equipment.
Aspect Telecommunications, Ciena and Atmel were stocks whose valuations fell
considerably during the year. We continue to hold these stocks, believing they
will remain leaders in their product areas, have healthy long-term prospects,
and are attractively valued.
Pin Oak's portfolio turnover for the last twelve months was a low 10%, and the
Fund had no short or long-term capital gains distribution.
<TABLE>
<CAPTION>
Annualized Annualized Annualized
One Year 3 Year 5 Year Inception to
Return Return Return Date
-------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Pin Oak Aggressive Stock
Portfolio(1) 12.85% 8.23% 11.72% 13.43%
S&P 500 Composite Index 22.00% 25.99% 21.30% 19.22%
Lipper Small Cap Average (13.76)% 9.13% 9.95% 13.25%
</TABLE>
Comparison of Change in the Value of a $25,000 Investment in the Pin Oak
Aggressive Stock Portfolio, versus the S&P 500
Composite Index, and the Lipper Small Cap Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------------------------------
8/31/92 Oct 92 Oct 93 Oct 94 Oct 95 Oct 96 Oct 97 Oct 98
------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pin Oak Aggressive Stock Portfolio 25,000 27,343 33,566 30,854 46,068 45,427 51,755 58,406
S&P 500 Composite Index 25,000 25,381 29,158 30,283 38,281 47,499 62,746 76,550
Lipper Small Cap Average 25,000 26,577 34,459 35,045 43,137 52,114 66,075 56,983
</TABLE>
(1) These figures represent past performance. Past performance is no guarantee
of future results. The investment return and principal value of an investment
will fluctuate, so an investor's shares, when redeemed, may be worth more or
less than their original cost.
7
<PAGE>
- -------------------------------------------------------------------------------
Report of Independent Public Accountants
To the Shareholders and Board of Trustees of
Oak Associates Funds:
We have audited the accompanying statements of net assets of the Pin Oak
Aggressive Stock Portfolio and White Oak Growth Stock Portfolio of the Oak
Associates Funds (the "Trust") as of October 31, 1998, and the related
statements of operations, changes in net assets, and financial highlights for
the periods presented. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian and the application of
alternative auditing procedures with respect to unsettled securities
transactions. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Pin Oak Aggressive Stock Portfolio and White Oak Growth Stock Portfolio of the
Oak Associates Funds as of October 31, 1998, and the results of their
operations, changes in their net assets, and financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
November 20, 1998
8
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
For a Share Outstanding Throughout the Periods Ended October 31,
<TABLE>
<CAPTION>
Net Realized and Net
Asset Net Unrealized Distributions Distributions Asset
Value Investment Gains or from Net from Value
Beginning Income (Losses) on Investment Capital End of
of Period (Loss) Securities Income Gains Period
---------- ---------- ------------ ------------- ------------- ------
- ------------------------------------------------------------------------------------
Pin Oak Aggressive Stock Portfolio
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998(1) $19.46 (0.15) 2.65 -- -- $21.96
1997 $17.08 (0.11) 2.49 -- -- $19.46
1996 $17.32 (0.09) (0.15) -- -- $17.08
1995 $11.60 (0.08) 5.80 -- -- $17.32
1994 $12.62 (0.06) (0.96) -- -- $11.60
1993 $10.28 (0.05) 2.39 -- -- $12.62
1992(2) $10.00 -- 0.28 -- -- $10.28
<CAPTION>
Ratio of Ratio of Ratio of Net
Net Expenses to Income (Loss)
Net Assets Ratio of Income Average Net to Average Net
End of Expenses to (Loss) to Assets Assets Portfolio
Total Period Average Average (Excluding (Excluding Turnover
Return (000) Net Assets Net Assets Waivers) Waivers) Rate
------ ---------- ----------- ---------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1998(1) 12.85 % $41,444 1.00% (0.79)% 1.14% (0.93)% 10.04%
1997 13.93 % $31,681 0.99% (0.75)% 1.23% (0.99)% 17.30%
1996 (1.39)% $23,738 0.96% (0.62)% 1.47% (1.13)% 31.65%
1995 49.31 % $15,652 0.98% (0.70)% 1.65% (1.37)% 49.28%
1994 (8.08)% $9,624 0.96% (0.62)% 1.74% (1.40)% 48.88%
1993 22.76 % $9,079 0.98% (0.48)% 2.07% (1.57)% 68.32%
1992(2) 11.57 % $4,127 1.00%* 0.03 %* 4.06%* (3.03)%* 4.00%
</TABLE>
<TABLE>
<CAPTION>
Net Realized and Net
Asset Net Unrealized Distributions Distributions Asset
Value Investment Gains or from Net from Value
Beginning Income (Losses) on Investment Capital End of
of Period (Loss) Securities Income Gains Period
---------- ---------- ------------ ------------- ------------- ------
- ------------------------------------------------------------------------------------
White Oak Growth Stock Portfolio
- ------------------------------------------------------------------------------------
1998(1) $29.29 (0.05) 4.86 -- (0.06) $34.04
1997 $21.88 0.03 7.49 (0.04) (0.07) $29.29
1996 $18.08 0.05 3.80 (0.05) -- $21.88
1995 $11.92 0.04 6.15 (0.03) -- $18.08
1994 $10.64 0.02 1.28 (0.02) -- $11.92
1993 $10.33 0.05 0.32 (0.06) -- $10.64
1992(2) $10.00 0.02 0.33 (0.02) -- $10.33
<CAPTION>
Ratio of Ratio of Ratio of Net
Net Expenses to Income (Loss)
Net Assets Ratio of Income Average Net to Average Net
End of Expenses to (Loss) to Assets Assets Portfolio
Total Period Average Average (Excluding (Excluding Turnover
Return (000) Net Assets Net Assets Waivers) Waivers) Rate
------ ---------- ----------- ---------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1998(1) 16.48 % $830,219 1.00% (0.22)% 1.07% (0.29)% 6.16%
1997 34.46 % $362,404 0.98% 0.06 % 1.14% (0.10)% 7.90%
1996 21.33 % $ 26,109 0.95% 0.23 % 1.50% (0.32)% 8.07%
1995 52.07 % $ 10,495 0.97% 0.29 % 2.06% (0.80)% 22.43%
1994 12.24 % $ 5,942 0.97% 0.19 % 2.24% (1.08)% 37.42%
1993 3.59 % $ 5,539 0.97% 0.54 % 2.71% (1.20)% 27.48%
1992(2) 14.30 % $ 3,195 1.00%* 0.74 %* 4.78%* (3.04)%* --
</TABLE>
* Annualized
(1) The information set forth in this table for the period prior to February 27,
1998 is the financial data of the Pin Oak Aggressive Stock Fund and the White
Oak Growth Stock Fund, respectively, each a series of the Advisors' Inner Circle
Fund. See Note 1 of Notes to Financial Statements regarding reorganization of
the Oaks Associates Funds.
(2) The Pin Oak Aggressive Stock Portfolio and the White Oak Growth Stock
Portfolio commenced operations on August 3, 1992.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
- -------------------------------------------------------------------------------
Statement of Net Assets
October 31, 1998
Market
PIN OAK AGGRESSIVE Value
STOCK PORTFOLIO Shares (000)
- ------------------ ------ ------
Common Stocks 95.5%
Aircraft 3.6%
Gulfstream Aerospace* 33,600 $ 1,487
-------
1,487
-------
ATM Machines 2.5%
Diebold 32,600 1,017
-------
1,017
-------
Banks 4.1%
MBNA 75,000 1,711
-------
1,711
-------
Computer Communications
Equipment 21.9%
3Com* 60,375 2,177
Cisco Systems* 95,400 6,010
Xylan* 55,300 885
-------
9,072
-------
Computer-Aided Design Software 9.9%
Parametric Technology* 79,000 1,313
Synopsys* 62,029 2,807
-------
4,120
-------
Computers & Services 6.7%
International Network Services* 65,700 2,792
-------
2,792
-------
Computer Hardware 4.5%
Compaq Computer 58,500 1,850
-------
1,850
-------
Insurance 2.8%
Mutual Risk Management
Limited 34,732 1,174
-------
1,174
-------
Managed Health Care Services 9.4%
Express Scripts Cl A* 40,000 3,908
-------
3,908
-------
Semi-Conductors/Electronics 14.3%
Atmel* 53,400 617
Linear Technology 30,500 1,819
Maxim Integrated Products* 59,400 2,120
Xilinx* 30,800 1,375
-------
5,931
-------
Shares/ Market
PIN OAK AGGRESSIVE Par Value
STOCK PORTFOLIO (000) (000)
- ------------------ ------- ------
Semi-Conductors/Capital Equipment
Manufacturing 5.0%
Applied Materials* 59,500 $ 2,064
-------
2,064
-------
Telecommunications Equipment 10.8%
Ascend Communications* 48,900 2,360
Aspect Telecommunications* 75,300 1,139
Ciena* 55,800 959
-------
4,458
-------
Total Common Stocks
(Cost $26,558) 39,584
-------
Repurchase Agreement 6.7%
Morgan Stanley
(4.75%, dated 10/30/98,
matures 11/02/98, repurchase
price $2,783,070
(collateralized by U.S.
Treasury Bill, par
value $2,874,720, 0.00%,
01/07/99, market value:
$2,852,075)) 2,782 2,782
-------
Total Repurchase Agreement
(Cost $2,782) 2,782
-------
Total Investments 102.2%
(Cost $29,340) 42,366
-------
Other Assets and Liabilities, Net (2.2%) (922)
-------
Net Assets
Portfolio Shares (unlimited authorization
--no par value) based on 1,886,980
outstanding shares of beneficial
interest 28,621
Accumulated net realized loss on
investments (203)
Net unrealized appreciation on invesments 13,026
-------
Total Net Assets 100.0% $41,444
=======
Net Asset Value, Offering & Redemption
Price Per Share $ 21.96
=======
*Non-income producing security
Cl-Class
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
- -------------------------------------------------------------------------------
Statement of Net Assets
October 31, 1998
Market
WHITE OAK GROWTH Value
STOCK PORTFOLIO Shares (000)
- ---------------- ------ ------
Common Stocks 97.6%
Banks 15.6%
BankAmerica 608,600 $34,956
Bankers Trust New York 101,800 6,394
Citigroup 922,250 43,403
MBNA 1,949,625 44,476
--------
129,229
--------
Computer Communications Equipment 9.2%
3Com* 835,100 30,116
Cisco Systems* 735,750 46,352
--------
76,468
--------
Computer-Aided Design Software 4.4%
Parametric Technology* 2,180,800 36,256
--------
36,256
--------
Computer Hardware 8.5%
Compaq Computer 1,332,700 42,147
Sun Microsystems* 492,700 28,700
--------
70,847
--------
Financial Services 0.8%
First Data 235,100 6,230
--------
6,230
--------
Insurance 3.7%
American International
Group 364,999 31,116
--------
31,116
--------
Medical Instruments 5.6%
Medtronic 713,500 46,377
--------
46,377
--------
Pharmaceuticals 16.8%
Lilly Eli & Co. 620,000 50,181
Merck 336,700 45,539
Pfizer 404,500 43,408
--------
139,128
--------
Prepackaged Software 0.5%
Microsoft* 37,200 3,938
--------
3,938
--------
Securities Broker 4.8%
Morgan Stanley, Dean
Witter, Discover 622,175 40,286
--------
40,286
--------
Semi-Conductor Capital Equipment
Manufacturing 5.6%
Applied Materials* 1,354,200 46,974
--------
46,974
--------
Shares/ Market
WHITE OAK GROWTH Par Value
STOCK PORTFOLIO (000) (000)
- ---------------- ------- ------
Semi-Conductors/Electronics 10.4%
Intel 507,200 $ 45,236
Linear Technology 691,200 41,213
--------
86,449
--------
Telecommunications Equipment 11.7%
Ascend Communications* 931,700 44,955
Ciena* 1,116,200 19,185
Northern Telecom Limited 54,600 2,338
Tellabs* 554,000 30,470
--------
96,948
--------
Total Common Stocks
(Cost $731,147) 810,246
--------
Repurchase Agreement 1.7%
J.P. Morgan
(4.77%, dated 10/30/98,
matures 11/02/98, repurchase
price $14,259,010 (collateralized
by U.S. Treasury Bond,
par value $8,888,000,
11.75%, 11/15/14, market
value: $14,538,895)) 14,253 14,253
--------
Total Repurchase Agreement
(Cost $14,253) 14,253
--------
Total Investments 99.3%
(Cost $745,400) 824,499
--------
Other Assets and Liabilities, Net 0.7% 5,720
--------
Net Assets
Portfolio Shares (unlimited authorization
--no par value) based on 24,388,882
outstanding shares of beneficial
interest 757,077
Accumulated net realized loss on
investments (5,957)
Net unrealized appreciation on invesments 79,099
--------
Total Net Assets 100.0% $830,219
========
Net Asset Value, Offering & Redemption
Price Per Share $ 34.04
========
*Non-income producing security
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
- -------------------------------------------------------------------------------
Statement of Operations (000)
<TABLE>
<CAPTION>
Pin Oak White Oak
Aggressive Stock Growth Stock
Portfolio Portfolio
---------------- ------------
11/01/97 11/01/97
to 10/31/98 to 10/31/98
---------------- ------------
<S> <C> <C>
Investment Income:
Dividends .......................................... $ 28 $ 3,465
Interest ........................................... 47 1,234
-------- --------
Total Investment Income ......................... 75 4,699
-------- --------
Expenses:
Investment Advisory Fees ........................... 260 4,460
Investment Advisory Fee Waiver ..................... (49) (410)
Administration Fees ................................ 54 755
Custodian Fees ..................................... 4 46
Transfer Agent Fees and Expenses ................... 45 678
Professional Fees .................................. 11 89
Trustee Fees ....................................... 1 9
Registration Fees .................................. 18 223
Printing ........................................... 7 159
Insurance and Other Fees ........................... 1 16
-------- --------
Total Expenses .................................. 352 6,025
-------- --------
Net Investment Loss ............................. (277) (1,326)
-------- --------
Net Realized Gain (Loss) on Securities Sold ........ 1,175 (5,957)
Net Unrealized Appreciation of Investment Securities 2,886 56,368
-------- --------
Net Realized and Unrealized Gain on Investments . 4,061 50,411
Net Increase in Net Assets Resulting From Operations $ 3,784 $ 49,085
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets (000)
<TABLE>
<CAPTION>
Pin Oak White Oak
Aggressive Stock Growth Stock
Portfolio Portfolio
--------------------------- --------------------------
11/01/97 11/01/96 11/01/97 11/01/96
to 10/31/98 to 10/31/97 to 10/31/98 to 10/31/97
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) .......................... $ (277) $ (224) $ (1,326) $ 88
Net Realized Gain (Loss) on Securities Sold ........... 1,175 (74) (5,957) 898
Net Unrealized Appreciation of Investment Securities .. 2,886 3,097 56,368 15,492
--------- --------- --------- ---------
Net Increase in Net Assets Resulting From Operations 3,784 2,799 49,085 16,478
--------- --------- --------- ---------
Distributions to Shareholders:
Net Investment Income ................................. -- -- -- (137)
Realized Capital Gains ................................ -- -- (848) (108)
--------- --------- --------- ---------
Total Distributions ................................ -- -- (848) (245)
--------- --------- --------- ---------
Capital Share Transactions (in dollars):
Shares Issued ......................................... 25,022 19,483 699,743 374,802
Shares Issued in Lieu of Cash Distributions ........... -- -- 802 238
Shares Redeemed ....................................... (19,043) (14,339) (280,967) (54,978)
--------- --------- --------- ---------
Increase in Net Assets From Capital Share
Transactions .................................... 5,979 5,144 419,578 320,062
--------- --------- --------- ---------
Total Increase in Net Assets ................. 9,763 7,943 467,815 336,295
--------- --------- --------- ---------
Net Assets:
Beginning of Period ................................ 31,681 23,738 362,404 26,109
--------- --------- --------- ---------
End of Period ...................................... $ 41,444 $ 31,681 $ 830,219 $ 362,404
--------- --------- --------- ---------
Shares Issued and Redeemed:
Issued ................................................ 1,173 1,002 20,843 13,049
Issued in Lieu of Cash Distributions .................. -- -- 29 10
Redeemed .............................................. (914) (763) (8,854) (1,881)
--------- --------- --------- ---------
Net Increase in Share Transactions .................... 259 239 12,018 11,178
--------- --------- --------- ---------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
October 31, 1998
1. Organization:
The Oak Associates Funds (the "Trust") is organized as a Massachusetts business
trust under an Agreement and Declaration of Trust dated November 6, 1997. The
Trust is registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company with two portfolios, Pin Oak
Aggressive Stock Portfolio and White Oak Growth Stock Portfolio (the "Funds").
The assets of each portfolio are segregated, and a shareholder's interest is
limited to the portfolio in which shares are held. The Funds' prospectus
provides a description of each Fund's investment objectives, policies and
strategies.
On February 25, 1998, the shareholders of the Advisors' Inner Circle White Oak
Growth Stock Fund and the Pin Oak Aggressive Stock Fund (the "Oak Funds") voted
to approve a tax-free reorganization of the Oak Funds through a transfer of all
assets and liabilities to the Oak Associates Funds White Oak Growth Stock
Portfolio and Pin Oak Aggressive Stock Portfolio. The reorganization took place
on February 27, 1998.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by
the Funds.
Security Valuation--Investments in equity securities, which are traded on a
national exchange (or reported on the NASDAQ national market system), are
stated at the last quoted sales price if readily available for such equity
securities on each business day; other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt
obligations exceeding sixty days to maturity for which market quotations
are readily available are valued at the most recently quoted bid price.
Debt obligations with sixty days or less remaining until maturity may be
valued at their amortized cost, which approximates market value.
Federal Income Taxes--It is each Fund's intention to qualify as a regulated
investment company by complying with the appropriate provisions of the
Internal Revenue Code of 1986, as amended. Accordingly, no provisions for
Federal income taxes are required.
Security Transactions and Related Income--Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date, and interest income
is recognized on the accrual basis. Costs used in determining realized
gains and losses on the sales of investment securities are those of the
specific securities sold during the respective holding period.
Net Asset Value Per Share--The net asset value per share of each Fund is
calculated on each business day by dividing the total value of each Fund's
assets, less liabilities, by the number of shares outstanding.
Expenses--Expenses that are directly related to one of the Funds are
charged to that Fund. Other operating expenses of the Trust are prorated to
the Funds on the basis of relative daily net assets.
Repurchase Agreements--Securities pledged as collateral for repurchase
agreements are held by the custodian bank until maturity of the repurchase
14
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements (continued)
October 31, 1998
agreements. Provisions of the repurchase agreements and procedures adopted
by the Board of Trustees require that the market value of the collateral,
including accrued interest thereon, is sufficient in the event of default
by the counterparty. If the counterparty defaults and the value of the
collateral declines or if the counterparty enters an insolvency proceeding,
realization of the collateral by the Portfolio may be delayed or limited.
Distributions to Shareholders--Distributions from net investment income are
declared and paid to Shareholders on a quarterly basis, as applicable. Any
net realized capital gains on sales of securities are distributed to
Shareholders at least annually.
Distributions from net investment income and net realized capital gains are
determined in accordance with U.S. Federal income tax regulations, which
may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. In accordance with the Statement of Position 93-2, Pin
Oak Aggressive Stock Portfolio and White Oak Growth Stock Portfolio
reclassed $276,718 and $1,326,182, respectively from Net Investment Income
to Paid In Capital in the Statement of Net Assets. This reclassification,
which has no impact on the net asset value of the Funds is primarily
attributable to net operating losses and differences in the computation of
distributable income under federal income tax rules versus generally
accepted accounting principles.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
3. Transactions with Affiliates:
Certain officers of the Trust are also officers of SEI Investments Mutual Funds
Services (the "Administrator") and/or SEI Investments Distribution Co. (the
"Distributor"). Such officers are paid no fees by the Trust for serving as
officers of the Trust.
4. Administration, Shareholder Servicing and Distribution Agreements:
The Trust and the Administrator are parties to an Administrative Agreement dated
February 27, 1998, under which the Administrator provides management and
administrative services for an annual fee of 0.15% of the average daily net
assets of each of the Funds up to $250 million, 0.12% on the next $200 million,
0.10% on the next $200 million, and 0.08% of such assets in excess of $650
million. There is a minimum annual fee of $50,000 per fund.
DST Systems, Inc. (the "Transfer Agent") serves as the transfer agent and
dividend distributing agent for the Funds under a transfer agency agreement with
the Trust.
The Trust and the Distributor are parties to a Distribution Agreement dated
February 27, 1998. The
15
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements (continued)
October 31, 1998
Distributor receives no fees for its distribution services under this agreement.
5. Investment Advisory and Custodian Agreements:
The Trust and Oak Associates, ltd. (the "Adviser") are parties to an Investment
Advisory Agreement dated February 27, 1998, under which the Adviser receives an
annual fee equal to 0.74% of the average daily net assets of each Fund. The
Adviser has voluntarily agreed to waive all or a portion of its fees (and to
reimburse the Funds' expenses if necessary) in order to limit operating expenses
to not more than 1.00% of the average daily net assets of each of the Funds. Fee
waivers and expense reimbursements are voluntary and may be terminated at any
time.
First Union National Bank acts as custodian (the "Custodian") for the Funds.
Fees of the Custodian are being paid on the basis of the net assets of the
Funds. The Custodian plays no role in determining the investment policies of the
Funds or which securities are to be purchased or sold by the Funds.
6. Investment Transactions:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the year ended October 31, 1998, are as follows:
Pin Oak White Oak
Aggressive Growth
Stock Stock
Portfolio Portfolio
(000) (000)
---------- ---------
Purchases
Government $ -- $ --
Other 8,018 453,776
Sales
Government $ -- $ --
Other 3,458 35,537
At October 31, 1998, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Funds
at October 31, 1998, are as follows:
Pin Oak White Oak
Aggressive Growth
Stock Stock
Portfolio Portfolio
(000) (000)
---------- ---------
Aggregate gross unrealized
appreciation $18,033 $152,989
Aggregate gross unrealized
depreciation (5,007) (73,890)
------- --------
Net unrealized
appreciation $13,026 $ 79,099
======= ========
7. Capital Loss Carryforwards:
The capital loss carryforwards at October 31, 1998, for federal income tax
purposes are as follows:
Expires Expires Expires
2004 2005 2006
------- ------- -------
Pin Oak Aggressive
Stock Portfolio $129,749 $73,224 $ --
White Oak Growth
Stock Portfolio $ -- $ -- $5,956,896
The capital loss carryforwards will be used to offset future net realized gains,
if any, and such gains so offset will not be distributed.
16
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
October 31, 1998
8. Shareholder Voting Results (Unaudited):
There was a Special Meeting of The Advisors' Inner Circle Fund on February 25,
1998 to approve an Agreement and Plan of Reorganization and Liquidation between
the Advisors' Inner Circle Fund and the Oak Associates Funds on behalf of the
White Oak Growth Stock Fund and the Pin Oak Aggressive Stock Fund. The results
were as follows:
White Oak Growth Stock Portfolio
Shares % of % of
Voted Voted Total
------ ----- -----
For 6,419,978 91.97% 47.86%
Against 265,663 3.81% 1.98%
Abstain 294,461 4.22% 2.19%
--------- ------ -----
Total 6,980,102 100.00% 52.03%
Pin Oak Aggressive Stock Portfolio
Shares % of % of
Voted Voted Total
------ ----- -----
For 1,066,439 98.26% 63.69%
Against 12,232 1.13% 0.73%
Abstain 6,660 0.61% 0.40%
--------- ------ -----
Total 1,085,331 100.00% 64.82%
17
<PAGE>
- -------------------------------------------------------------------------------
Notice to Shareholders (Unaudited)
For shareholders that do not have an October 31, 1998 tax year end, this notice
is for informational purposes only. For shareholders with an October 31, 1998
tax year end, please consult your tax advisor as to the pertinence of this
notice. For the fiscal year ended October 31, 1998, each portfolio is
designating the following items with regard to distributions paid during the
year.
<TABLE>
<CAPTION>
Long Term Mid Term
(20% Rate) (28% Rate) Ordinary
Capital Gain Capital Gain Income Tax-Exempt Total Qualifying
Fund Distribution Distribution Distributions Interest Distributions Dividends(1)
---- ------------ ------------ ------------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pin Oak Aggressive Stock Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
White Oak Growth Stock Portfolio 100.00% 0.00% 0.00% 0.00% 100.00% 0.00%
</TABLE>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction and is reflected as a percentage of "Ordinary
Income Distributions."
18
<PAGE>
[LOGO]
P.O. Box 419441
Kansas City, MO 64141-6441
Distributor:
SEI Investments Distribution Co.
Investment Adviser:
[LOGO]
To open an account,
receive account information,
make inquiries or request
an investment kit:
Call Toll Free
1-888-4OAK-FUND
(1-888-462-5386)
www.oakassociates.com
OAK-F-020-08000
ANNUAL
REPORT
------
OCTOBER 31, 1998
[LOGO]
WHITE OAK GROWTH
PIN OAK AGGRESSIVE
Advised by
OAK ASSOCIATES, ltd.
www.oakassociates.com
