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TRUST:
OAK ASSOCIATES FUNDS
FUNDS:
WHITE OAK GROWTH STOCK PORTFOLIO
PIN OAK AGGRESSIVE STOCK PORTFOLIO
INVESTMENT ADVISER:
OAK ASSOCIATES LTD.
This STATEMENT OF ADDITIONAL INFORMATION is not a prospectus and relates only
to the White Oak Growth Stock Portfolio (the "White Oak Portfolio") and Pin
Oak Aggressive Stock Portfolio (the "Pin Oak Portfolio")(each a "Portfolio"
and collectively, the "Portfolios"). It is intended to provide additional
information regarding the activities and operations of Oak Associates Funds
(the "Trust") and the Portfolios and should be read in conjunction with the
Portfolios' Prospectus dated February 27, 1998. The Prospectus for the
Portfolios may be obtained by calling 1-888-462-5386.
TABLE OF CONTENTS
THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S - 2
DESCRIPTION OF PERMITTED INVESTMENTS . . . . . . . . . . . . . . . . . . S - 2
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . S - 3
THE ADVISER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S - 5
THE ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . S - 6
THE DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S - 7
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . . . S - 7
COMPUTATION OF TOTAL RETURN. . . . . . . . . . . . . . . . . . . . . . .S - 11
PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . .S - 12
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . .S - 13
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S - 13
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . .S - 14
DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . .S - 17
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . .S - 18
LIMITATION OF TRUSTEES' LIABILITY. . . . . . . . . . . . . . . . . . . .S - 18
5% SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S - 18
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S - 19
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .S - 19
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A - 1
February 27, 1998
OAK-F-011-07
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THE TRUST
This Statement of Additional Information relates only to the White Oak Growth
Stock Portfolio (the "White Oak Portfolio") and Pin Oak Aggressive Stock
Portfolio (the "Pin Oak Portfolio") (each a "Portfolio"). Each Portfolio is
a separate series of Oak Associates Funds (the "Trust"), an open-end
investment management company established under Massachusetts law as a
Massachusetts business trust under a Declaration of Trust dated November 6,
1997. The Declaration of Trust permits the Trust to offer separate series
("portfolios") of shares of beneficial interest ("shares"). Each portfolio
is a separate mutual fund, and each share of each portfolio represents an
equal proportionate interest in that portfolio. On February 27, 1998, the
White Oak Portfolio and Pin Oak Portfolio acquired substantially all of the
assets and liabilities of the White Oak Growth Stock Fund and Pin Oak
Aggressive Stock Fund (the "AIC White Oak Fund" and the "AIC Pin Oak Fund",
respectively, and collectively the "Predecessor Funds") of the Advisors'
Inner Circle Fund. See "Description of Shares." No investment in shares of
a portfolio should be made without first reading that portfolio's prospectus.
Capitalized terms not defined herein are defined in the Prospectus offering
shares of the Portfolios.
DESCRIPTION OF PERMITTED INVESTMENTS
REPURCHASE AGREEMENTS are agreements by which a person (e.g., a Portfolio)
obtains a security and simultaneously commits to return the security to the
seller (a member bank of the Federal Reserve System or primary securities dealer
as recognized by the Federal Reserve Bank of New York) at an agreed upon price
(including principal and interest) on an agreed upon date within a number of
days (usually not more than seven) from the date of purchase. The resale price
reflects the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the underlying security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the underlying
security.
Repurchase agreements are considered to be loans by a Portfolio for purposes of
its investment limitations. The repurchase agreements entered into by a
Portfolio will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement (the
Adviser monitors compliance with this requirement). Under all repurchase
agreements entered into by a Portfolio, the custodian or its agent must take
possession of the underlying collateral. However, if the seller defaults, the
Portfolio could realize a loss on the sale of the underlying security to the
extent that the proceeds of the sale, including accrued interest, are less than
the resale price provided in the agreement including interest. In addition,
even though the Bankruptcy Code provides protection for most repurchase
agreements, if the seller should be involved in bankruptcy or insolvency
proceedings, a Portfolio may
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incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Portfolio is treated as an unsecured creditor and
is required to return the underlying security to the seller's estate.
INVESTMENT COMPANY SHARES
Each Portfolio may invest in shares of other investment companies, to the extent
permitted by applicable law and subject to certain restrictions. These
investment companies typically incur fees that are separate from those fees
incurred directly by the Portfolio. A Portfolio's purchase of such investment
company securities results in the layering of expenses, such that shareholders
would indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Portfolio
expenses. Under applicable regulations, a Portfolio is prohibited from
acquiring the securities of another investment company if, as a result of such
acquisition: (1) the Portfolio owns more than 3% of the total voting stock of
the other company; (2) securities issued by any one investment company represent
more than 5% of the Portfolio's total assets; or (3) securities (other than
treasury stock) issued by all investment companies represent more than 10% of
the total assets of the Portfolio. See also "Investment Limitations."
It is the position of the staff of the Securities and Exchange Commission
("SEC") that certain non-governmental issuers of CMOs constitute investment
companies pursuant to the Investment Company Act of 1940, as amended (the "1940
Act"), and either (a) investments in such instruments are subject to the
limitations set forth above or (b) the issuers of such instruments have received
orders from the SEC exempting such instruments from the definition of investment
company.
OPTIONS
It is an operating policy of the Portfolios not to write or purchase PUTS,
CALLS, OPTIONS or combinations thereof.
WARRANTS
A Portfolio may invest in WARRANTS in accordance with the Prospectus.
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES
The following investment limitations are fundamental policies of each
Portfolio that cannot be changed with respect to a Portfolio without the
consent of the holders of a majority of that Portfolio's outstanding shares.
The phrase "majority of the outstanding shares" means the vote of (i) 67% or
more of a Portfolio's shares
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present at a meeting, if more than 50% of the outstanding shares of a Portfolio
are present or represented by proxy, or (ii) more than 50% of a Portfolio's
outstanding shares, whichever is less.
No Portfolio may:
1. Acquire more than 10% of the voting securities of any one issuer.
2. Invest in companies for the purpose of exercising control.
3. Issue any class of senior security or sell any senior security of
which it is the issuer, except that the Portfolio may borrow from any
bank, provided that immediately after any such borrowing there is
asset coverage of at least 300% for all borrowings of the Portfolio,
and further provided that, to the extent that such borrowings exceed
5% of the Portfolio's total assets, all borrowings shall be repaid
before the Portfolio makes additional investments. The term "senior
security" shall not include any temporary borrowings that do not
exceed 5% of the value of the Portfolio's total assets at the time the
Portfolio makes such temporary borrowing. In addition, investment
strategies that either obligate the Portfolio to purchase securities
or require the Portfolio to segregate assets will not be considered
borrowings or senior securities. This investment limitation shall not
preclude the Portfolio from issuing multiple classes of shares in
reliance on SEC rules or orders.
4. Make loans if, as a result, more than 33 1/3% of its total assets
would be lent to other parties, except that the Portfolio may (i)
purchase or hold debt instruments in accordance with its investment
objective and policies; (ii) enter into repurchase agreements; and
(iii) lend its securities.
5. Purchase or sell real estate, real estate limited partnership
interests, physical commodities or commodities contracts except that
the Portfolio may purchase commodities contracts relating to financial
instruments, such as financial futures contracts and options on such
contracts.
6. Make short sales of securities, maintain a short position or purchase
securities on margin, except that a Portfolio may obtain short-term
credits as necessary for the clearance of security transactions and
sell securities short "against the box."
7. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling the Portfolio security.
8. Purchase securities of other investment companies except as permitted
by the Investment Company Act of 1940, as amended (the "1940 Act"),
the rules and regulations thereunder or pursuant to an exemption
therefrom.
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NON-FUNDAMENTAL POLICIES
The following investment limitation of each Portfolio is non-fundamental and may
be changed by the Trust's Board of Trustees without shareholder approval:
1. A Portfolio may not invest in illiquid securities in an amount
exceeding, in the aggregate, 15% of the Portfolio's net assets.
THE ADVISER
The Trust and Oak Associates Ltd. (the "Adviser") have entered into an advisory
agreement (the "Advisory Agreement"). The Advisory Agreement provides that the
Adviser shall not be protected against any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
For the fiscal years ended October 31, 1995, 1996 and 1997, the Predecessor
Funds paid the Adviser the following advisory fees:
<TABLE>
<CAPTION>
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Fees Paid Fees Waived Fees Reimbursed
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1995 1996 1997 1995 1996 1997 1995 1996 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AIC White $0 $29,362 $929,875 $53,199 $88,667 $242,259 $25,326 $0 $0
Oak Fund
- ----------------------------------------------------------------------------------------------------
AIC Pin $7,803 $44,515 $148,297 $77,724 $98,194 $72,975 $0 $0 $0
Oak Fund
- ----------------------------------------------------------------------------------------------------
</TABLE>
The continuance of the Advisory Agreement as to any Portfolio must be
specifically approved at least annually (i) by the vote of the Trustees or by a
vote of the shareholders of the Portfolio and (ii) by the vote of a majority of
the Trustees who are not parties to the Advisory Agreement or "interested
persons" of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement will terminate
automatically in the event of its assignment, and is terminable at any time
without penalty by the Trustees of the Trust or, with respect to any Portfolio,
by a majority of the outstanding shares of that Portfolio, on not less than 30
days' nor more than 60 days' written notice to the Adviser, or by the Adviser on
90 days' written notice to the Trust.
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THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator") have entered into an
administration agreement (the "Administration Agreement"). The Administration
Agreement provides that the Administrator shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which the Administration Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Administrator in the performance of its duties or from reckless disregard by
it of its duties and obligations thereunder. The Administration Agreement shall
remain in effect for a period of five years after the effective date of the
agreement and shall continue in effect for successive periods of two years
unless terminated by either party on not less than 90 days' prior written notice
to the other party.
For the fiscal years ended October 31, 1995, 1996 and 1997, the Predecessor
Funds paid the following administrative fees to the administrator:
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Administrative Fees Paid
---------------------------------------
1995 1996 1997
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AIC White Oak Fund $50,001 $50,030 $274,845
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AIC Pin Oak Fund $50,001 $50,030 $56,068
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The Trust and the Administrator have also entered into a shareholder servicing
agreement pursuant to which the Administrator provides certain shareholder
services in addition to those set forth in the Administration Agreement.
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Administrator. SEI Investments and its
subsidiaries and affiliates, including the Administrator, are leading providers
of funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors, and
money managers. The Administrator and its affiliates also serve as
administrator or sub-administrator to the following other mutual funds: The
Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK
Funds, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-,CoreFunds,
Inc., CrestFunds, Inc., CUFUND, The Expedition Funds, FMB Funds, Inc., First
American Funds, Inc., First American Investment Funds, Inc.,
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First American Strategy Funds, Inc., HighMark Funds, Marquis Funds-Registered
Trademark-, Monitor Funds, Morgan Grenfell Investment Trust, The PBHG Funds,
Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, Profit Funds
Investment Trust, Rembrandt Funds-Registered Trademark-, Santa Barbara Group of
Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional Investments Trust, SEI Institutional Managed
Trust, SEI International Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust,
STI Classic Funds, STI Classic Variable Trust, TIP Funds and TIP
Institutional Funds.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly owned subsidiary
of SEI Investments, and the Trust are parties to a distribution agreement (the
"Distribution Agreement"). The Distributor will not receive compensation for
distribution of shares of any Portfolio.
The Distribution Agreement is renewable annually. The Distribution Agreement
may be terminated by the Distributor, by a majority vote of the Trustees who are
not interested persons and have no financial interest in the Distribution
Agreement or by a majority vote of the outstanding securities of the Trust upon
not more than 60 days' written notice by either party or upon assignment by the
Distributor.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trust pays the fees for
unaffiliated Trustees.
The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during
that period. Unless otherwise noted, the business address of each Trustee
and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania
19456. Certain officers of the Trust also serve as officers of some or all
of the following: The Achievement Funds Trust, The Advisors' Inner Circle
Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, Boston 1784
Funds-Registered Trademark-, CoreFunds, Inc., CrestFunds, Inc., CUFUND, The
Expedition Funds, FMB Funds, Inc., First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds,
Marquis Funds-Registered Trademark-, Monitor Funds, Morgan Grenfell
Investment Trust, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc.,The
Pillar Funds, Profit Funds Investment Trust, Rembrandt Funds-Registered
Trademark-, Santa Barbara Group of Mutual Funds, Inc., SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI International Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable
Trust, TIP Funds and TIP Institutional Funds, open-end management investment
companies, which are managed by SEI Fund Resources or its
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affiliates and, except for Profit Funds Investment Trust, Rembrandt
Funds-Registered Trademark-, and Santa Barbara Group of Mutual Funds, Inc., are
distributed by SEI Investments Distribution Co.
ROBERT A. NESHER (DOB 08/17/46) -- Chairman of the Board of Trustees* --
Currently performs various services on behalf of SEI Investments for which Mr.
Nesher is compensated. Executive Vice President of SEI Investments, 1986-1994.
Director and Executive Vice President of the Administrator and the Distributor,
1981-1994. Trustee of The Advisors' Inner Circle Fund, The Arbor Fund, Boston
1784 Funds-Registered Trademark-, The Expedition Funds, Marquis Funds-Registered
Trademark-, Oak Associates Funds, Pillar Funds, Rembrandt Funds-Registered
Trademark-, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds,
SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI
International Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
JOHN T. COONEY (DOB 01/20/27) -- Trustee** -- 569 N. Post Oak Lane, Houston, TX
77024. Retired since 1992. Formerly Vice Chairman of Ameritrust Texas N.A.,
1989-1992, and MTrust Corp., 1985-1989. Trustee of The Advisors' Inner Circle
Fund, The Arbor Fund, The Expedition Funds, Marquis Funds-Registered Trademark-
and Oak Associates Funds.
WILLIAM M. DORAN (DOB 05/26/40) -- Trustee* -- 2000 One Logan Square,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm),
counsel to the Trust, Administrator and Distributor, Director and Secretary of
SEI Investments. Trustee of The Advisors' Inner Circle Fund, The Arbor Fund,
The Expedition Funds, Marquis Funds-Registered Trademark-, Oak Associates
Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
International Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
FRANK E. MORRIS (DOB 12/30/23) -- Trustee** -- 105 Walpole Street, Dover, MA
02030. Retired since 1990. Peter Drucker Professor of Management, Boston
College, 1989-1990. President, Federal Reserve Bank of Boston, 1968-1988.
Trustee of The Advisors' Inner Circle Fund, The Arbor Fund, The Expedition
Funds, Marquis Funds-Registered Trademark-, Oak Associates Funds, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI International Trust, SEI
Liquid Asset Trust and SEI Tax Exempt Trust.
ROBERT A. PATTERSON (DOB 11/05/27) -- Trustee** -- 208 Old Main, University
Park, PA 16802. Pennsylvania State University, Senior Vice President, Treasurer
(Emeritus). Financial and Investment Consultant, Professor of Transportation
(1984-present). Vice President-Investments, Treasurer, Senior Vice President
(Emeritus) (1982-1984). Director, Pennsylvania Research Corp.; Member and
Treasurer, Board of Trustees of Grove City College. Trustee of The Advisors'
Inner Circle Fund, The Arbor Fund, The Expedition Funds, Marquis
Funds-Registered Trademark- and Oak Associates Funds.
EUGENE B. PETERS (DOB 06/03/29) -- Trustee** -- 943 Oblong Road,
Williamstown, MA 01267. Private investor from 1987 to present. Vice
President and Chief Financial Officer, Western Company of North America
(petroleum service company) (1980-1986). President of Gene Peters and
Associates (import company) (1978-1980). President and Chief Executive
Officer of Jos. Schlitz
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Brewing Company before 1978. Trustee of The Advisors' Inner Circle Fund, The
Arbor Fund, The Expedition Funds, Marquis Funds-Registered Trademark- and Oak
Associates Funds.
JAMES M. STOREY (DOB 04/12/31) -- Trustee** -- Partner, Dechert Price & Rhoads,
from September 1987 - December 1993; Trustee of The Advisors' Inner Circle Fund,
The Arbor Fund, The Expedition Funds, Marquis Funds-Registered Trademark-, Oak
Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI
International Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
DAVID G. LEE (DOB 04/16/52) -- President and Chief Executive Officer -- Senior
Vice President of the Administrator and Distributor since 1993. Vice President
of the Administrator and Distributor, 1991-1993. President, GW Sierra Trust
Funds before 1991.
SANDRA K. ORLOW (DOB 10/18/53) -- Vice President and Assistant Secretary -- Vice
President and Assistant Secretary of the Administrator and Distributor since
1988.
KEVIN P. ROBINS (DOB 04/15/61) -- Vice President and Assistant Secretary --
Senior Vice President, General Counsel and Assistant Secretary of SEI
Investments, Senior Vice President, General Counsel and Secretary of the
Administrator and Distributor since 1994. Vice President and Assistant
Secretary of SEI Investments, the Administrator and Distributor, 1992-1994.
Associate, Morgan, Lewis & Bockius LLP (law firm), 1988-1992.
RICHARD W. GRANT (DOB 10/25/45) -- Secretary -- 2000 One Logan Square,
Philadelphia, PA 19103, Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, Administrator and Distributor.
KATHRYN L. STANTON (DOB 11/19/58) -- Vice President and Assistant Secretary --
Deputy General Counsel of SEI Investments, Vice President and Assistant
Secretary of the Administrator and Distributor since 1994. Associate, Morgan,
Lewis & Bockius LLP (law firm), 1989-1994.
ROBERT DELLACROCE (DOB 12/17/63) -- Controller and Chief Financial Officer --
Director, Funds Administration and Accounting of SEI Investments since 1994.
Senior Audit Manager, Arthur Andersen LLP, 1986-1994.
TODD B. CIPPERMAN (DOB 02/14/66) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of SEI Investments, the Administrator and
the Distributor since 1995. Associate, Dewey Ballantine (law firm) (1994-1995).
Associate, Winston & Strawn (law firm) (1991-1994).
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JOSEPH M. O'DONNELL (DOB 11/13/54) -- Vice President & Assistant Secretary --
Vice President and Assistant Secretary of SEI Investments, the Administrator
and the Distributor since 1998. Vice President and General Counsel, FPS
Services; Inc., 1993-1997. Staff Counsel and Secretary, Provident Mutual
Family of Funds, 1990-1993.
WILLIAM E. WHITE (DOB 03/09/65) -- Assistant Secretary -- Mutual Fund Product
Manager of Oak Associates, Ltd., the Adviser, since 1997. Accountant
Director, SEI Investments, 1994-1997. Lieutenant, United States Navy,
1987-1994.
- ----------------
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested"
persons of the Trust as that term is defined in the 1940 Act.
**Messrs. Cooney, Morris, Patterson, Peters and Storey serve as members of the
Audit Committee of the Trust.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
The following table exhibits anticipated Trustee compensation for the fiscal
year ended October 31, 1998.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Aggregate Compensation From Registrant Pension or Retirement Benefits
Name of Person, Position for the Fiscal Year Ended October 31, 1998 Accrued as Part of Trust Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John T. Cooney, Trustee $ 8,154 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Frank E. Morris, Trustee $ 8,154 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Robert Patterson, Trustee $ 8,154 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Eugene B. Peters, Trustee $ 8,154 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
James M. Storey, Esq., Trustee $ 8,154 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
William M. Doran, Esq., Trustee $0 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Nesher, Chairman of the Board $0 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEI Investments compensates Mr. Nesher for services he provides to
SEI Investments.
COMPUTATION OF TOTAL RETURN
From time to time the Trust may advertise total return of the Portfolios.
These figures will be based on historical earnings and are not intended to
indicate future performance.
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The total return of a Portfolio refers to the average annual compounded rate
of return to a hypothetical investment for designated time periods (including
but not limited to, the period from which that Portfolio commenced operations
through the specified date), assuming that the entire investment is redeemed
at the end of each period. In particular, total return will be calculated
according to the following formula: P (1 + T) TO THE POWER OF n = ERV, where
P = a hypothetical initial payment of $1,000; T = average annual total
return; n = number of years; and ERV = ending redeemable value, as of the end
of the designated time period, of a hypothetical $1,000 payment made at the
beginning of the designated time period.
For the fiscal year ended October 31, 1997 and for the period from August 3,
1992 (commencement of operations) through October 31, 1997, the total return for
the Portfolios was 34.46% and 23.18% for the AIC White Oak Fund, and 13.93% and
13.54% for the AIC Pin Oak Fund, respectively.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through the Transfer Agent on any day the
New York Stock Exchange is open for business. Shares of each Portfolio are
offered on a continuous basis. Currently, the Trust is closed for business when
the following holidays are observed: New Year's Day, Martin Luther King Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by a Portfolio in
lieu of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of a Portfolio's securities is not reasonably practicable,
or for such other periods as the SEC has by order
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permitted. The Trust also reserves the right to suspend sales of shares of any
Portfolio for any period during which the New York Stock Exchange, the Adviser,
the Administrator, the Transfer Agent and/or the custodian are not open for
business.
DETERMINATION OF NET ASSET VALUE
The securities of the Portfolios are valued by the Administrator. The
Administrator will use an independent pricing service to obtain valuations of
securities. The pricing service relies primarily on prices of actual market
transactions as well as trade quotations. However, the service may also use a
matrix system to determine valuations of certain securities, which system
considers such factors as security prices, yields, maturities, call features,
ratings and developments relating to specific securities. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
TAXES
The following is only a summary of certain federal income tax considerations
generally affecting the Portfolios and their shareholders, and is not
intended as a substitute for careful tax planning. Shareholders are urged to
consult their tax advisors with specific reference to their own tax
situations, including their state and local tax liabilities.
FEDERAL INCOME TAX
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986 (the "Code") and the regulations issued
thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated
herein.
Each Portfolio intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, each
Portfolio expects to eliminate or reduce to a nominal amount the federal taxes
to which it may be subject.
In order to qualify for treatment as a RIC under the Code, each Portfolio must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
a Portfolio's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock or securities, or certain other income; (ii) at the
close of each quarter of each Portfolio's taxable year, at least 50% of the
value of its total assets must
S-12
<PAGE>
be represented by cash and cash items, U.S. Government securities, securities of
other RICs and other securities, with such other securities limited, in respect
to any one issuer, to an amount that does not exceed 5% of the value of the
Portfolio's assets and that does not represent more than 10% of the outstanding
voting securities of such issuer; and (iii) at the close of each quarter of each
Portfolio's taxable year, not more than 25% of the value of its assets may be
invested in securities (other than U.S. Government securities or the securities
of other RICs) of any one issuer or of two or more issuers which the Portfolio
controls or which are engaged in the same, similar or related trades or
business.
Notwithstanding the Distribution Requirement described above, which requires
only that a Portfolio distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
each Portfolio will be subject to a nondeductible 4% federal excise tax to the
extent it fails to distribute by the end of any calendar year 98% of its
ordinary income for that year and 98% of its capital gain net income (the excess
of short- and long-term capital gains over short- and long-term capital losses)
for the one-year period ending on October 31 of that year, plus certain other
amounts.
Any gain or loss recognized on a sale or redemption of shares of a Portfolio by
a non-exempt shareholder who is not a dealer in securities generally will be
treated as a long-term capital gain or loss if the shares have been held for
more than eighteen months, will be treated as a mid-term capital gain if the
shares have been held for more than twelve, but not more than eighteen months
and otherwise generally will be treated as a short-term capital gain or loss.
If shares of a Portfolio on which a net capital gain distribution has been
received are subsequently sold or redeemed and such shares have been held for
six months or less, any loss recognized will be treated as a long-term
capital loss to the extent of the long-term capital gain distribution.
In certain cases, a Portfolio will be required to withhold, and remit to the
United States Treasury, 31% of any distributions paid to a shareholder who (1)
has failed to provide a correct taxpayer identification number, (2) is subject
to backup withholding by the Internal Revenue Service, or (3) has not certified
to that Portfolio that such shareholder is not subject to backup withholding.
If any Portfolio fails to qualify as a RIC for any taxable year, it will be
taxable at regular corporate rates. In such an event, all distributions
(including capital gains distributions) will be taxable as ordinary dividends to
the extent of the Portfolio's current and accumulated earnings and profits and
such distributions will generally be eligible for the corporate
dividends-received deduction.
S-13
<PAGE>
STATE TAXES
No Portfolio is liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by any
Portfolio to shareholders and the ownership of shares may be subject to state
and local taxes.
PORTFOLIO TRANSACTIONS
The Adviser is authorized to select brokers and dealers to effect securities
transactions for each Portfolio. Each Portfolio will seek to obtain the most
favorable net results by taking into account various factors, including price,
commission, if any, size of the transactions and difficulty of executions, the
firm's general execution and operational facilities and the firm's risk in
positioning the securities involved. While the Adviser generally seeks
reasonably competitive spreads or commissions, a Portfolio will not necessarily
be paying the lowest spread or commission available. The Adviser seeks to
select brokers or dealers that offer a Portfolio best price and execution or
other services which are of benefit to the Portfolio.
The Adviser may, consistent with the interests of the Portfolio, select brokers
on the basis of the research services they provide to the Adviser. Such
services may include analyses of the business or prospects of a company,
industry or economic sector, or statistical and pricing services. Information
so received by the Adviser will be in addition to and not in lieu of the
services required to be performed by the Adviser under the Advisory Agreement.
If, in the judgment of the Adviser, a Portfolio or other accounts managed by the
Adviser will be benefitted by supplemental research services, the Adviser is
authorized to pay brokerage commissions to a broker furnishing such services
which are in excess of commissions which another broker may have charged for
effecting the same transaction. These research services include advice, either
directly or through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing of
analyses and reports concerning issuers, securities or industries; providing
information on economic factors and trends; assisting in determining portfolio
strategy; providing computer software used in security analyses; and providing
portfolio performance evaluation and technical market analyses. The expenses of
the Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information, such services may not be used exclusively with respect
to the Portfolio or account generating the brokerage, and there can be no
guarantee that the Adviser will find all of such services of value in advising
that Portfolio. For the fiscal year ended October 31, 1997, the Portfolios
paid no directed brokerage.
It is expected that a Portfolio may execute brokerage or other agency
transactions through the Distributor, which is a registered broker-dealer, for a
commission in conformity with the 1940 Act, the Securities Exchange Act of 1934,
as amended, and rules promulgated by the SEC. Under these provisions, the
Distributor is permitted to receive and retain
S-14
<PAGE>
compensation for effecting portfolio transactions for a Portfolio on an exchange
if a written contract is in effect between the Distributor and the Portfolio
expressly permitting the Distributor to receive and retain such compensation.
These rules further require that commissions paid to the Distributor by a
Portfolio for exchange transactions not exceed "usual and customary" brokerage
commissions. The rules define "usual and customary" commissions to include
amounts which are "reasonable and fair compared to the commission, fee or other
remuneration received or to be received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time." The Trustees,
including those who are not "interested persons" of the Portfolio, have adopted
procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically.
For the fiscal year ended October 31, 1997, the following commissions were paid
on brokerage transactions, pursuant to an agreement or understanding, to brokers
because of research services provided by the brokers:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Total Dollar Amount of
Predecessor Fund Total Dollar Amount of Transactions Involving
Brokerage Commissions for Directed Brokerage
Research Services Commissions for Research
Services
- -----------------------------------------------------------------------------
<S> <C> <C>
AIC White Oak Fund $0 $0
- -----------------------------------------------------------------------------
AIC Pin Oak Fund $0 $0
- -----------------------------------------------------------------------------
</TABLE>
For the fiscal years ended October 31, 1995, 1996 and 1997, the Predecessor
Funds paid the following brokerage commissions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Predecessor Fund Total Brokerage Commissions Amount Paid to SEI Investments(1)
-------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AIC White Oak Fund $3,966 $9,810 $146,575 $0 $0 $4,963
- -----------------------------------------------------------------------------------------------------------------------------
AIC Pin Oak Fund $6,075 $5,004 $ 3,006 $0 $0 $ 341
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts paid to SEI Investments reflect fees paid in connection with
repurchase agreement transactions.
For the fiscal years indicated, the Funds paid the following brokerage
commissions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
% of Total Brokerage % of Total Brokerage
Total $ Amount of Commissions Paid to Transactions Effected
Predecessor Fund Total $ Amount of Brokerage Brokerage Commissions Paid the Affiliated Through Affiliated Brokers
Commissions Paid to Affiliated Brokers Brokers
-----------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997 1997 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIC White Oak Fund $3,966 $9,810 $146,575 $0 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
AIC Pin Oak Fund $6,075 $5,004 $ 3,006 $0 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Because neither Portfolio markets its shares through intermediary brokers or
dealers, it is not either Portfolio's practice to allocate brokerage or
principal business on the basis of sales of its shares which may be made through
such firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend a Portfolio's shares to clients, and may, when a
number of brokers and dealers can provide best net results on a particular
transaction, consider such recommendations by a broker or dealer in selecting
among broker-dealers.
The Portfolios are required to identify any securities of its "regular brokers
and dealers" (as such term is defined in the 1940 Act) which the Portfolios have
acquired during their most recent fiscal year. As of October 31, 1997, the AIC
White Oak Fund held $14,836,000 of equity securities of Morgan Stanley Group.
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<PAGE>
For the fiscal years ended October 31, 1996 and 1997, the portfolio turnover
rate for each of the Predecessor Funds was as follows:
- ---------------------------------------------------------------------
TURNOVER RATE
--------------------------
1997 1996
- ---------------------------------------------------------------------
AIC White Oak Fund 7.90% 8.07%
- ---------------------------------------------------------------------
AIC Pin Oak Fund 17.30% 31.65%
- ---------------------------------------------------------------------
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
portfolios and shares of each portfolio. Each share of a portfolio represents
an equal proportionate interest in that portfolio with each other share. Shares
are entitled upon liquidation to a pro rata share in the net assets of the
portfolio. Shareholders have no preemptive rights. All consideration received
by the Portfolio for shares of any portfolio and all assets in which such
consideration is invested would belong to that portfolio and would be subject to
the liabilities related thereto. Share certificates representing shares will
not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders incurring financial loss for that reason appears
remote because the Trust's Declaration of Trust contains an express disclaimer
of shareholder liability for obligations of the Trust and requires that notice
of such disclaimer be given in each agreement, obligation or instrument entered
into or executed by or on behalf of the Trust or the Trustees, and because the
Declaration of Trust provides for indemnification out of the Trust property for
any shareholder held personally liable for the obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his or
her own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, shall not be
liable for any neglect or wrongdoing of any such person. The Declaration of
Trust also provides that the Trust will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with actual or
threatened litigation in which they may be involved because of their offices
with the Trust unless it is determined in the manner provided in the Declaration
of Trust that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust. However, nothing in the
Declaration of Trust shall protect or indemnify a Trustee against any
S-16
<PAGE>
liability for his or her willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.
5% SHAREHOLDERS
As of February 1, 1998, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Predecessor Funds.
AIC WHITE OAK FUND.
Shareholder Number of Shares %
- ----------- ---------------- -
Charles Schwab & Co. Inc. 5,009,618.2630 35.41%
Attn: Mutual Funds / Team S
4500 Cherry Creek Dr. S Fl 3
Denver, CO 80209
National Financial Services Corp. 2,708,990.8010 19.15%
For the Exclusive Benefit
of our Customers
Attn: Teri Louie -- Omnibus -- Fl 5
200 Liberty St. 1 World Fin. Ctr.
New York, NY 10281-1003
AIC PIN OAK FUND.
Shareholder Number of Shares %
- ----------- ---------------- -
Charles Schwab & Co. Inc. 190,081.6710 11.44%
Attn: Mutual Funds / Team S
4500 Cherry Creek Dr. S Fl 3
Denver, CO 80209
The Trust believes that most of the shares referred to above were held by the
above persons in accounts for their fiduciary, agency or custodial customers.
EXPERTS
The financial statements of The Advisors' Inner Circle Fund have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference hereto in
reliance upon the authority of said firm as experts in giving said report.
FINANCIAL STATEMENTS
The financial statements, with respect to the AIC White Oak and Pin Oak Fund,
for the fiscal year ended October 31, 1997, including notes thereto and the
report of Arthur Andersen LLP thereon, are herein incorporated by reference. A
copy of The Advisors' Inner Circle Fund 1997 Annual Report to Shareholders, with
respect to the AIC White Oak Fund and AIC Pin Oak Fund, must accompany the
delivery of this Statement of Additional Information.
S-17
<PAGE>
APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
The following descriptions of corporate bond ratings have been published by
Standard & Poor's Corporation ("S&P") and Moody's Investors Service, Inc.
("Moody's"), respectively.
Debt rated AAA has the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Debt rated AA also qualities as high-quality debt. Capacity to pay principal
and interest is very strong, and differs from AAA issues only in small degree.
Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the least degree of
speculation and C the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties of major risk exposures to adverse conditions.
The rating CI is reserved for income bonds on which no interest is being paid.
Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
A-1
<PAGE>
Bonds rated Baa are considered as medium grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
S&P and Moody's, respectively.
A-1 - This is S&P's highest category and indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
PRIME-1 - Issues rated Prime-1 (or supporting institutions) by Moody's have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 - Issuers rated Prime-2 (or supporting institutions) by Moody's have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
A-2
